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ANNUAL REPORT 2011
www.infigenenergy.com
CONTENTS
COrpOraTE DirECTOry
DISCLAIMER
This publication is issued by Infigen Energy Limited
(IEL), Infigen Energy (Bermuda) Limited (IEBL) and
Infigen Energy RE Limited as responsible entity for
Infigen Energy Trust (collectively Infigen). Infigen
and its respective related entities, directors, officers
and employees (collectively Infigen Entities) do
not accept, and expressly disclaim, any liability
whatsoever (including for negligence) for any loss
howsoever arising from any use of this publication
or its contents. This publication is not intended
to constitute legal, tax or accounting advice or
opinion. No representation or warranty, expressed
or implied, is made as to the accuracy, completeness
or thoroughness of the content of the information.
The recipient should consult with its own legal,
tax or accounting advisers as to the accuracy and
application of the information contained herein and
should conduct its own due diligence and other
enquiries in relation to such information.
The information in this publication has not been
independently verified by the Infigen Entities. The
Infigen Entities disclaim any responsibility for any
errors or omissions in such information, including the
financial calculations, projections and forecasts. No
representation or warranty is made by or on behalf
of the Infigen Entities that any projection, forecast,
calculation, forward-looking statement, assumption
or estimate contained in this publication should or
will be achieved. None of the Infigen Entities or any
member of the Infigen Energy group guarantees the
performance of Infigen, the repayment of capital or a
particular rate of return on Infigen stapled securities.
IEL and IEBL are not licensed to provide financial
product advice. This publication is for general
information only and does not constitute financial
product advice, including personal financial product
advice, or an offer, invitation or recommendation in
respect of securities, by IEL, IEBL or any other Infigen
Entities. Note that, in providing this publication, the
Infigen Entities have not considered the objectives,
financial position or needs of the recipient.
The recipient should obtain and rely on its own
professional advice from its tax, legal, accounting
and other professional advisers in respect of the
recipient’s objectives, financial position or needs.
All amounts expressed in dollars ($) in this
Annual Report are Australian dollars, unless
otherwise specified.
Design and production by Dupree Design Group
www.dupree.com.au
Printed on paper manufactured using Elemental Chlorine
Free (ECF) pulp sourced from certified, well managed forests
and made carbon neutral.
C023640
INFIGEN ENERGY
Level 22, 56 Pitt Street
Sydney NSW 2000
Australia
T: +61 2 8031 9900
www.infigenenergy.com
DIRECTORS
Michael Hutchinson (Non-Executive Chairman)
Miles George (Managing Director)
Douglas Clemson (Non-Executive Director)
Philip Green (Non-Executive Director)
Fiona Harris (Non-Executive Director)
Ross Rolfe (Non-Executive Director)
COMPANY SECRETARY
David Richardson
ANNUAL GENERAL MEETING
Infigen Energy’s 2011 Annual General Meeting will be held
at the InterContinental Hotel Sydney, 117 Macquarie Street,
Sydney, NSW, Australia on 11 November 2011.
IFN STAPLED SECURITIES
Each stapled security in Infigen Energy, tradable on the
Australian Securities Exchange under the ‘IFN’ code,
comprises:
— one share of Infigen Energy Limited, an Australian public
company;
— one share of Infigen Energy (Bermuda) Limited, a
company incorporated in Bermuda; and
— one unit of Infigen Energy Trust, an Australian registered
managed investment scheme.
RESPONSIBLE ENTITY FOR INFIGEN ENERGY TRUST
Infigen Energy RE Limited
Level 22, 56 Pitt Street
Sydney NSW 2000
T: +61 2 8031 9900
REGISTRY
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
T: 1300 554 474 (within Australia)
T: +61 2 8280 7111 (outside Australia)
F: +61 2 9287 0303
Email: infigen@linkmarketservices.com.au
www.linkmarketservices.com.au
AUDITOR
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 2650
2
Specialist Renewable Energy Business
4
Financial & Operational Highlights
6 Chairman’s & Managing Director's Report
12 United States
16 Australia
23
Sustainability
26
Infigen Board
28
Infigen Management
30 Corporate Structure
31 Corporate Governance Statement
42 Directors’ Report
58 Auditor’s Independence Declaration
59
Financial Statements
64 Notes to Financial Statements
123 Directors’ Declaration
124
Independent Auditor’s Report
126 Additional Investor Information
130 Glossary
133 Corporate Directory
Cover picture by Stephen Cooper, The Daily Telegraph
infigen’s vision
is to be the
leading specialist
renewable energy
business in the
markets in which
we operate
specialist renewable
energy business
developer
Site identification
& landowner
negotiations
Community consultation,
Aboriginal cultural heritage,
environmental assessment
& project planning
Wind monitoring,
project feasibility
& investment
evaluation
owner
Whole of life
asset & investment
management
Risk management
& revenue
assurance
Managing sale
of electricity &
environmental products
operator
Safety risk
management – actively
pursuing zero harm
Bidding &
dispatching into
electricity market
Optimising generation
productivity through
24 x 7 Operations
Control Centre
2
InfIgen energy AnnuAl report 2011
specialist renewable
energy business
Site mobilisation
& foundations
Design, supplier
negotiations &
connection
Electrical works, wind
turbine installation
& commissioning
Ongoing
stakeholder
engagement
Sustaining pipeline
for growth
& investment
Assessing acquisition
& divestment
opportunities
Managing operating
risks & costs
Sustaining plant
availability through
reliability centred
maintenance
Exploring
opportunities to
refurbish or re‑power
3
financial &
operational highlights
production
from continuing
operations
increased to
4,667
gwh
1,597mw
total capacity
(GWh)
(GWh)
5,000
5,000
4,000
4,000
4,049
3,948
4,216
4,087
4,667
4.2
4,299
3,000
3,000
2,000
2,000
1,000
1,000
0
0
FY08
FY09
FY09
FY10
FY11
FY10
(MW)
2,000
1,500
1,000
500
Lake Bonney 3
39
784
AUS
508
US
1,089
AUS
469
US
1,089
0
FY10
FY11
4
InfIgen energy AnnuAl report 2011
revenue – australia
(AUD’m)
150
73.6
FY09
104.9
117.2
FY10
FY11
revenue – usa
(USD’m)
200
142.2
140.6
150
FY09
FY10
FY11
debt & tax equity3
Class a Tax EquiTy
DEbT
3 IFN equity ownership basis
$268m
total revenue
20.8%
reduction
in total debt
5
05001,0001,5002,0002,5003,0003,500(AUD’m)FY09FY101,6488961,423784FY115751,252 chairman’s & managing
director’s report
“Our priorities for the year
include further improvement
in the availability and
performance of our assets and
the achievement of operational
cost containment strategies”
In November 2010, the Children’s
Investment Fund (TCI), a substantial
and long time securityholder of Infigen
Energy, nominated one of their partners,
Philip Green, as a director. Philip was
duly appointed to the Board as a
non‑executive director of Infigen Energy.
During 2011 the Board was further
diversified and strengthened with
the appointment of Fiona Harris
and Ross Rolfe AO as independent
non‑executive directors. Ms Harris will
succeed Mr Clemson as chair of the
Board Audit, Risk and Compliance
Committee. There are no plans for
further board membership changes
in the coming year.
A number of changes were made in
management. Chris Baveystock was
appointed as the Group’s Chief Financial
Officer. Craig Carson was appointed as
Chief Executive Officer of the Group’s
US business, based in Dallas, Texas.
Scott Taylor returned from the US and
commenced as Group General Manager
of the Group’s Australian business, based
in Sydney, New South Wales.
I am confident that these changes
will benefit Infigen as we address
the challenges and opportunities
that lie ahead.
Business Highlights
The Group has faced continued difficult
business conditions during the year.
The Group’s global debt facility
entered into cash sweep, whereby all
surplus cash from relevant assets is
used to repay debt. Notwithstanding
depressed wholesale electricity and
renewable energy certificate prices,
and some market scepticism, the Group
Chairman‘s report
Dear Securityholders,
On behalf of the Boards it is my
pleasure to present your 2011 annual
report. This is my first annual report
as Chairman.
Board and Management Changes
During the year there were a
number of changes to the Board.
These included the resignation
of my predecessor Graham
Kelly and the retirement of Tony
Battle. Graham had served as an
independent non‑executive director
from October 2008 and as Chairman
from November 2008. Tony had served
as an independent non‑executive
director since September 2005.
Doug Clemson, also an independent
non‑executive director since
September 2005, and chair of the
Board Audit, Risk and Compliance
Committee, has decided to
retire at the forthcoming Annual
General Meeting.
The Group owes much to these
three men. Under Graham’s leadership
they comprised the core that
initiated and steered the process
of internalisation of the Group’s
management from its former external
manager. Mr Battle and Mr Clemson
carried heavy responsibilities as
the independent directors under
the former external management
structure since the IPO in 2005.
I add my personal appreciation of
their guidance, support and counsel
since my joining the Board in 2009.
6
InfIgen energy AnnuAl report 2011
comfortably met the facility’s leverage
ratio covenant during the year. The
Board is confident that under reasonable
operating and market assumptions
Infigen will continue to meet its leverage
ratio covenant for the duration of the
facility term, such that the debt facility’s
favourable terms remain available to
the Group.
During the year we also used operating
experience to downgrade the wind
energy assessment and to update the
outlook for operating costs for much
of the portfolio of wind farms. We
believe this has redressed some of
the assumptions that were advanced
in connection with the acquisition or
commissioning of these wind farms
under the former external management.
These parameters remain under
continued monitoring and, in the case
of operating costs, active management.
Despite favourable facility terms,
Group net debt of $949 million at
30 June 2011 remains higher than
might now be thought desirable.
We were therefore pleased to be able
to sell the Group’s German wind farms
late in the financial year, on terms
much more favourable that had been
offered in 2010. This has enabled
prudent debt reduction.
During the year the Board took the
view that it was inappropriate, while the
cash sweep was in effect and the Group
remained unprofitable, to continue to
pay distributions. This position will be
reviewed during FY14 in the light of
then‑prevailing conditions.
Our new 48.3 MW Woodlawn Wind Farm,
located near our 140.7 MW Capital Wind
Farm, outside Bungendore in New South
Wales, has progressed well during the
year – safely, on time and within budget.
Currently all 23 turbines are exporting
power and final commissioning testing
is nearing completion. Its $115 million
construction cost is supported by
a $55 million project finance facility.
Despite the challenging environment and
history, the Group’s financial performance
for the year saw revenue from continuing
operations increase by 1 percent
to $267.6 million. Earnings from
continuing operations before interest,
taxes, depreciation and amortisation
(EBITDA) decreased marginally to
$145.6 million as the business incurred
higher post‑warranty operating costs –
although active management saw these
increases contained below expectations.
The statutory net loss of $61.0 million
compared with a statutory loss of
$74.4 million in the prior year. Both
years included one off items that
contributed to the losses. The sale
of the German wind farms resulted in
a book loss of $31.1 million this year.
Infigen moves into FY12 with $149 million
of cash, of which $105 million was held
by the group of companies excluded
from Infigen’s global debt facility.
Outlook
In Australia, Infigen looks to a gradual
return to long‑term average wind
conditions and to some uplift in prices
for wholesale electricity and renewable
energy certificates, to support a
modest strengthening of the position
of its continuing businesses in the
coming year.
We also look forward to the
introduction of a price on carbon
alongside the continuation of the
Renewable Energy Target obligations
on electricity retailers and large
electricity consumers. These
measures, together with improving
economic conditions across Australia,
should restore the returns for past
investments in renewable energy assets
and create conditions for the further
investments needed to meet Australia’s
targets and needs.
Infigen will continue to sustain the
value in its 1,500 MW development
pipeline, but does not presently
expect to commence further wind
farm construction in the coming year.
We will continue to work closely with
property owners and communities to
ensure that our development plans
address bona fide community issues.
We will continue to monitor reputable
research into community issues
relevant to renewable energy.
To sustain value in our US business
we have increased our efforts towards
improving operating practices, and
containing operating cost increases.
We expect recovery in the broader US
market to continue to be slow, such that
improved returns from existing assets
and any new investment opportunities
may be some time off. In the meantime,
our 86 percent contracted offtake
revenue provides some insulation
against the continuing electricity market
weakness.
The Woodlawn Wind Farm is on
schedule to reach practical completion
before the end of 2011. This will
contribute to FY12 earnings and its
net cash flow will supplement cash
balances held outside the global
debt facility group.
I would like to thank the Managing
Director, Miles George, his senior
management team and all Infigen
staff for their contributions to the
business during the year. I also thank
Holger Marg and our European business
team for their efforts during the year
and through the German asset sale
process, and I wish them well for the
future as we now part company.
Finally, I would like to thank
securityholders for your
continued support.
Your Directors look forward to
welcoming you to our Annual
General Meeting to be held at
11am on 11 November 2011 at the
InterContinental Hotel, 117 Macquarie St,
Sydney.
Yours sincerely
Michael Hutchinson
Chairman
7
chairman’s & managing
director’s report
managing DireCtor‘s report
Dear Securityholders,
The 2011 financial year was a turbulent
one for Infigen Energy and you as
securityholders, as reflected in the
substantial decline in our security
price during the period. Despite the
turbulence, Infigen’s management
team remained focused on the key
controllable objectives of improving
operational performance and addressing
strategic challenges. Pleasingly, our full
year financial and operational outcome
was in line with market guidance.
This reflected the capacity of Infigen’s
business to withstand difficult electricity
and renewable energy market conditions
during the year. I am also happy to say
that we are now operating more safely
with a significant improvement in our lost
time injury frequency rate. We continue
to strive for our goal of zero harm.
We made good progress developing
and improving our commercial,
technical and engineering capabilities.
The revenue and cost outcomes
were achieved in challenging market
conditions, and nascent post‑warranty
operating environments in the US and
in Australia. Achieving FY11 operational
performance at the upper end of our
guidance and comfortably satisfying
our debt facility leverage ratio covenant
has demonstrated the robustness of our
business.
We continue to be the largest owner‑
operator of wind farm capacity in
Australia. We also maintain a strong
position in the US, controlling the largest
wind energy business that operates
independently of an integrated utility in
that country.
Key Milestones
In July 2010 Infigen commissioned stage
3 of its Lake Bonney Wind Farm in South
Australia. This added 39 MW to our
operating capacity in Australia to reach a
total of 508 MW.
Construction began at our 48.3 MW
Woodlawn Wind Farm located near our
140.7 MW Capital Wind Farm, outside
Bungendore in New South Wales. The
Woodlawn Wind Farm comprises 23
Suzlon S88 2.1 MW turbines and is
being constructed by Suzlon under
an engineering, procurement and
construction contract.
By the end of the financial year
Woodlawn Wind Farm was exporting
electricity generated from the first
turbines connected to the grid. The
project is progressing within budget and
on time to achieve practical completion
in the December quarter of 2011.
Woodlawn Wind Farm will provide
enough renewable energy to power
approximately 23,000 homes and assist
in meeting New South Wales’ growing
electricity demand.
In the US, we had a welcome return to
long term mean (P50) wind conditions
in FY11. Craig Carson, our new US
CEO, has settled into the role and is
improving operating practices throughout
the US business. This included further
development of commercial, technical
and engineering capability. The
restructuring and rebranding of Infigen’s
US asset management business was
completed in March 2011. Operations
were rationalised whilst investments
in people and technical capability
are continuing.
During the year, the Australian
development team continued to
advance selected projects in the wind
and solar development pipeline towards
a construction‑ready status. While new
investment signals remained weak,
further necessary work was carried out to
preserve the option value of the pipeline.
Solar farm sites developed for the Infigen
and Suntech Power proposal under the
Commonwealth Government’s Solar
Flagships Program received development
approvals from the NSW Department of
Planning. These sites remain prospective
and we will continue to explore
alternative commercial opportunities to
progress their development.
Late in the year we sold our portfolio
of German wind farm assets for an
enterprise value of €154.6 million.
This resulted in considerable
deleveraging and is a further step
towards simplifying Infigen’s business.
The majority of the sale proceeds were
applied to debt repayment in early
July 2011, resulting in Infigen amortising
$154 million under the global debt
facility.
On 15 June this year we celebrated
Global Wind Day in Australia by opening
our Capital Wind Farm for public tours.
We had over 300 visitors pass through
the site, and Infigen employees and
senior management took the opportunity
to explain the workings of a modern
wind farm. The day was very successful
and many visitors contacted us after the
event to express their thanks. We hope
to provide more visitors with similar
opportunities in the future as part of
our commitment to fostering a positive
relationship with the communities in
which we operate.
FY11 Operational and Financial Review
Infigen’s FY11 production results
reflected a return to long term mean
(P50) wind conditions in the US and new
capacity additions as well as availability
improvements in Australia. Production
in the US increased 13 percent to
3,332 GWh while in Australia production
increased 17 percent to 1,335 GWh.
Total production was at the upper end
of the guidance range provided at the
beginning of the year, although Australian
wind energy conditions remained below
long term mean expectations.
Revenue from continuing operations
increased 1 percent to $267.6 million.
The US and Australian businesses
reported revenue increases of 7 percent
and 12 percent respectively in local
currency terms to reach the upper ends
of the guidance ranges provided.
8
InfIgen energy AnnuAl report 2011
A significant appreciation of the
Australian dollar against the US dollar
resulted in a 5 percent decrease in
Australian currency revenue for the US.
Average prices achieved in the US and
Australia were 3 percent and 5 percent
lower respectively, despite greater
reductions in wholesale spot electricity
and renewable energy certificate (REC)
prices in both countries. This outcome
reflects Infigen’s highly contracted
position in the US, stronger average
PPA prices in Australia, and improved
revenue management for RECs created in
Australia.
Operating costs increased 9 percent to
$100.5 million. There were new costs
associated with the Lake Bonney 3 Wind
Farm commissioned at the beginning of
the year. There were also increased costs
related to the Capital Wind Farm, which
operated for a full year in FY11 compared
with eight months in FY10. In addition,
as wind farms progressively transition
off warranty, there are increased costs
associated with replacing component
parts and undertaking turbine service
and maintenance activities. In the US
and Australia 46 percent and 25 percent
of the wind farm capacity were out of
warranty respectively in FY11. We are
continuing to implement improved
operating practices including predictive
and preventative maintenance and supply
chain initiatives to contain these costs.
Our objective is to lead best industry
practice in post‑warranty operating cost
management.
Operating earnings before interest, taxes,
depreciation and amortisation (EBITDA)
decreased marginally to $167.1 million.
We reduced corporate costs by
$3.1 million to $18.7 million.
FY11 statutory net loss was $61.0 million
compared with a statutory net loss of
$74.4 million in the prior year. Both years
included one off items that contributed
to the losses, with the sale of our German
wind farms this year resulting in a book
loss of $31.1 million.
9
chairman’s & managing
director’s report
Infigen’s balance sheet remains sound.
Our global debt facility is in cash sweep,
whereby all surplus cash from existing
operating assets is used to repay debt.
The inflexibility of the cash sweep is offset
by the benefit of the facility’s low margin,
long tenor, and no scheduled repayments
or refinancing requirement. In the current
market environment it is considered
desirable to retain the benefits of the
facility. During the year we generated
$49.6 million surplus operating cash flow
and received $170 million proceeds from
the sale of the German wind farms. Most
of these funds were used to repay debt
under the global debt facility.
On 10 June 2011 we drew down $33
million of a $55 million project finance
facility for our Woodlawn Wind Farm. By
the end of the year there were sufficient
funds available for draw down under that
facility to meet the project’s outstanding
capital expenditure commitments.
Infigen moves into FY12 with $149 million
of cash, of which $105 million was held
by the group of companies excluded
from Infigen’s global debt facility. This
capital provides a material liquidity
buffer and a source of some cash to fund
opportunities that meet our stringent
investment criteria.
Outlook
We expect the wholesale electricity
and REC markets in Australia and the
US to remain subdued throughout
FY12. Management remains focused
on improving operational and financial
performance through improved operating
practices.
In Australia wholesale electricity market
prices have improved gradually from the
lows of the first half of FY11. A number
of fundamental factors are still expected
to result in subdued wholesale pricing
for FY12 and into the medium term.
These include lower electricity demand
from milder weather, lower economic
activity and fuel switching, and increased
supply of gas and hydro generation.
In Queensland the gas industry is
ramping up production ahead of the
commencement of processing for LNG
exports. This has led to more gas fired
generation. Hydro generation has also
increased as a result of recent weather
patterns. These supply and demand
factors contribute to lower wholesale
electricity prices. The introduction of
carbon pricing will be a positive factor
for Infigen, increasing the electricity
component of Infigen’s future merchant
revenues.
Australia’s expanded Renewable Energy
Target (RET) scheme was enacted
in August 2009 and has received
continuing expressions of support from
all major political parties since that time.
Australia’s three largest utilities account
in aggregate for approximately three
quarters of all obligations to purchase
RECs under the scheme. Over the past
two years these three utilities have taken
full advantage of the opportunity to
acquire and reserve significant portions
of the REC surplus to meet their future
obligations under the scheme, until
around 2014. A REC supply‑demand
imbalance is currently expected beyond
2014. At that time the current REC
surplus will be exhausted, obligations
under the scheme will begin to increase
more rapidly, and the current paucity of
renewable energy capacity investment
is expected flow through to supply
shortages.
Stability in RET policy remains critical to
underpin investment and contracting
decision making for the medium and
long term. We were pleased to hear
Prime Minister Julia Gillard reiterate the
Government‘s commitment to the RET
when she visited the Capital Wind Farm
earlier this year.
Infigen remains well placed to benefit
from opportunities to meet the mandated
demand for annual increments in the
uptake of renewable energy. Increases
in bundled electricity and REC prices are
required to achieve return hurdles for the
new investments needed to meet the
RET targets to 2030. Infigen’s existing
merchant assets are expected to benefit
from these price increases. We have a
number of key competitive advantages,
including an established operating
base with efficient scale, no fuel price
exposure, and an ability to enter into
long term contracts with firm pricing.
We also have an advanced pipeline of
development assets providing scope to
capture early mover advantages.
In the US Infigen’s wind farms are largely
contacted for an average remaining term
of approximately 14 years. Our business
there has limited exposure to recent
fluctuations in wholesale electricity prices
caused by the expansion of the shale
gas industry and weakened economic
conditions. While we expect wholesale
price weakness to continue in the short
to medium term, there are a number
of factors that are expected to lead to
upward price pressure in the medium
to long term. These include reduced
investment in new electricity generation
capacity and continuing retirement of
aging coal fired power stations. Prospects
for LNG export opportunities can also lift
US domestic gas prices towards higher
export parity prices.
Infigen remains on track to repay
$250 million of global debt facility
borrowings across FY11 and FY12.
We expect to continue to meet the
associated leverage ratio test based on
reasonable assumptions.
Our priorities for the year include
further improvements in the availability
and performance of our assets and
the achievement of operational cost
containment strategies. We are targeting
the completion of Woodlawn Wind
Farm on time and within budget. Our
development pipeline remains a key
strategic asset for preservation, and
we are progressing selected projects
in anticipation of improved market
conditions beyond FY12. We will look
to maximise revenue through new and
enhanced channels to market.
10
InfIgen energy AnnuAl report 2011
I would like to thank all Infigen staff for
their contributions to the business during
the year and say farewell and best wishes
to our former European colleagues.
I would also like to thank all the members
of the communities in which we operate
for their continuing strong support. We
aim to share the economic benefits of
our industry with local communities by
sourcing products and services locally
and providing direct employment locally,
where possible.
Finally, I would like to thank
securityholders for your ongoing support.
I look forward to meeting with you at the
Annual General Meeting and reporting
further on the performance of the
business at that time.
Yours sincerely
Miles George
Managing Director
Picture by Stephen Cooper
The Daily Telegraph
11
Buena Vista (38.0 MW)
Combine Hills (20.5 MW)
Crescent Ridge (40.8 MW)
GSG (80.0 MW)
Mendota (51.7 MW)
Allegheny Ridge 1 (80.0 MW)
Bear Creek (14.2 MW)
Jersey Atlantic (4.4 MW)
Cedar Creek (200.3 MW)
Caprock (80.0 MW)
Blue Canyon (37.1 MW)
Aragonne Mesa (90.0 MW)
Sweetwater 1–5 (302.4 MW)
Kumeyaay (50.0 MW)
united states
number of
wind farms
18
number
of turbines
1,178
installed
capacity (mw)
1,089
long term
capacity factor
35%
production
(gwh)
3,332
proDuCTion (GWh)
CapaCiTy FaCTor (%)
35
3,332
34
3,174
30
2,950
Fy09
Fy10
Fy11
GWh
3,400
3,300
3,200
3,100
3,000
2,900
2,800
2,700
%
36
35
34
33
32
31
30
29
12
InfIgen energy AnnuAl report 2011
OVERVIEW OF THE US BUSINESS
Infigen Energy is the 8th largest owner and operator of
wind farms in the United States, with an equity interest of
1,089 MW of net generating capacity. The portfolio of assets
is geographically diverse, with wind farms located in the
Northeast, Midwest, Texas, the Southwest, California and
the Pacific‑Northwest.
Approximately 86 percent of Infigen’s production is sold
through long term power purchase agreements, with the
balance sold into the merchant electricity markets.
Headquartered in Dallas, Texas, Infigen employs more
than 100 people in the US. Safety, financial, technical and
management resources are maintained in Dallas, while
operations, maintenance and technical staff are located at
each of the wind farms.
BUSINESS PERFORMANCE
During FY11 the US wind farms experienced a general
improvement in wind conditions consistent with our long
term mean energy production estimate (P50), and improved
site availability. This resulted in an improved capacity factor
outcome of 35 percent (up from 30 percent) and a 13 percent
increase in production to 3,332 GWh compared with FY10.
Infigen’s US wind farms also reported 10 percent higher
revenue to US$145.3 million resulting largely from the
increase in production.
The operating EBITDA margin decreased from 59.5 percent
to 55.5 percent reflecting lower average wholesale electricity
prices in the markets where Infigen sells its generation on
a merchant basis, and higher costs as wind farms continue
to transition off warranty into a higher operating cost
environment. Post‑warranty operating costs were managed
below our original expectations through improved operating
and maintenance practices and more efficient supply chain
management. Further investment in Infigen’s commercial,
engineering and technical capabilities are expected to
improve the life cycle operating performance of the assets.
Infigen has a higher proportion of assets operating in a
post‑warranty environment relative to our peers. During
FY11, 46 percent of the operating capacity of wind farms in
Infigen’s US business had completed the original warranty
arrangement and are now under direct operational control
and management by Infigen employees. Service and
maintenance for post‑warranty wind farms is undertaken
by the original equipment manufacturers (OEMs) and third
parties for 19 percent of those assets and by Infigen directly
for 81 percent. The remaining assets will progressively
come under Infigen’s direct control until FY15, when all will
have exited warranty coverage. In some cases, Infigen has
negotiated an extension of the OEM warranties where it
makes commercial and operational sense for the asset.
13
united states
In the US, tax‑based incentive schemes are the primary form
of incentive to promote renewable energy investment. Under
these schemes Infigen participates in partnerships to gain
access to third party capital and to derive the benefits from
the incentives available. It is through such partnerships that
Infigen holds interests in 18 wind farm projects in the US.
RENEWABlE ENERGY IN THE US: INDUSTRY OVERVIEW
Despite significant economic challenges, the US wind
industry capacity grew by 5.1 GW during calendar year 2010,
increasing the overall installed capacity base to more than
40 GW. After an historic 2009, when more than 10 GW was
added, the dual impacts of the global financial crisis and the
lack of direction on US long term energy policy materially
slowed the growth rate of wind capacity. The timing of
economic recovery and resolution of political debate over
renewable subsidies will have a significant impact on a
nascent domestic wind turbine manufacturing industry and
resumption of the level of wind farm development activity
seen in recent years.
As seen in other industrialised regions of the world, the
global financial crisis reduced demand for most goods and
services and by association, demand for electricity. In the US,
this demand reduction was most evident in industrial loads
that disappeared from certain regions such as the Midwest
when auto manufacturers closed or scaled down operations
in the face of bankruptcy threats. Demand is also affected by
energy efficiency and peak demand response technologies
embraced by large customers who are paid to curtail during
peak demand periods.
Natural gas prices have decreased significantly over recent
years following dramatic advances in technology associated
with the fracking of shale gas formations in Texas, Louisiana
and Pennsylvania. Shale gas development has substantially
increased domestic gas supply in the US contributing to
downward pressure on gas prices and on electricity prices.
14
InfIgen energy AnnuAl report 2011
FEDERAl AND STATE GOVERNMENT SUPPORT OF ClEAN
ENERGY
The primary support mechanism for renewable energy in
the US has been the Production Tax Credit (PTC) program,
whereby companies that generate electricity from renewable
energy, are eligible for tax credits which provide a unit
generation benefit (currently US$22 per MWh) for the first ten
years of a each renewable energy facility‘s operation. All of
Infigen’s US wind farms benefit from this incentive.
In addition, Renewable Portfolio Standards (RPS) programs
apply for 37 states, and are based on a fixed quantity system,
whereby a renewable energy generator such as a wind farm is
issued with RECs, which can be sold to energy retailers who
are required to surrender them to a state based regulator.
Infigen’s wind farms typically produce and sell RECs bundled
with the sale of electricity.
In February 2009, the US Congress passed the American
Recovery and Reinvestment Act (ARRA), an economic stimulus
bill, which included several provisions to spur development of
wind energy in the slow economic climate. Measures included
a three‑year extension of the PTC program through to 2012,
and the option to elect a 30 percent Investment Tax Credit
(ITC) in place of the PTC program. The current PTC program
is approved through to the end of 2012 at which time,
Congress must authorise an extension for this program to
continue. Infigen’s existing wind farms will continue to benefit
from the PTC regardless of the extension outcome that will
apply only to new assets.
The US Treasury’s grant program is an alternative to the PTC
and ITC programs and provides upfront cash incentives for
projects that commence construction before the end of 31
December 2011. This subsidy and the ITC were specifically
designed to encourage development and protect jobs
in the wake of the global financial crisis. Businesses that
formerly generated US taxable income saw profits diminish,
and as a result interest in the use of the PTC program
declined dramatically. The ITC and grant programs have
been successful in maintaining some momentum in new
development activity, especially in areas where RPS provided
mandated demand for the renewable projects.
Ways to appropriately encourage investment in clean energy
are currently being debated in the US, and the outlook is
positive that the country will continue to support further
investment at both the federal and state levels.
asset management
exCellenCe in asset management & operation
The wind energy industry in the US is facing the challenge of a rapid
transition to a post-warranty environment. After the warranty expires
the costs of service and maintenance, the risks of component failure
and unscheduled maintenance are borne by wind farm owners rather
the turbine manufacturers. Infigen’s assets are at the forefront of this
transition, with 46 percent of assets out of warranty compared to
approximately 25 percent for the rest of the US wind industry.
To meet this challenge, Infigen is focused on developing world class
asset management capabilities in the US. The team’s primary focus
is on further developing preventive and predictive maintenance
programs to improve turbine reliability and reduce component
failures and unscheduled maintenance.
Infigen is further developing its supply chain management expertise
and capabilities, including:
— sourcing of materials, parts and services from alternative suppliers
to the turbine manufacturers
— competitive tendering for service and maintenance in an
increasingly competitive market
— optimising spare parts inventory
— upgrading Infigen’s computerised maintenance management
system
Infigen is also building its commercial capabilities in the key areas
of asset management, financial control, regulatory affairs and risk
management.
investment in people & operations Control Centre
Infigen is investing in the training and development of its people
based on the belief that talented and motivated people ultimately
drive the performance of our business. That is particularly evident in
the US Operations Control Centre (OCC).
The OCC oversees the operation of 1,178 wind turbines, balance of
plant equipment, electrical interconnection facilities and electricity
market activities across the US, 24 hours a day, 365 days a year.
Staffed with 10 real-time operators utilising four SCADA systems,
the OCC monitors and controls plant performance in every weather
condition, troubleshoots operating issues, and calls out maintenance
crews to return turbines to service.
To improve the capabilities of the OCC, Infigen has implemented
a rigorous operator training and development plan. The training
covers generation fundamentals, electricity system operations,
problem recognition and troubleshooting. All operators are
also being trained for certification to the requirements of the
Government’s North American Electric Reliability Corporation
(NERC) by the end of calendar year 2011.
The results of this development program have been very promising.
The OCC has contributed to significantly improving turbine reliability
as well as operator and maintenance response times.
15
Alinta (89.1 MW)
Woodlawn (48.3 MW)
Capital (140.7 MW)
Lake Bonney 1–3 (278.5 MW)
australia
number of
wind farms
5
number
of turbines
233
capacity
(mw)
508
long term
capacity factor
34%
production
(gwh)
1,335
proDuCTion (GWh)
CapaCiTy FaCTor (%)
1,335
30
1,137
29
30
875
Fy09
Fy10
Fy11
GWh
1,600
1,400
1,200
1,000
800
600
400
200
0
%
35
34
33
32
31
30
29
28
27
26
16
InfIgen energy AnnuAl report 2011
OVERVIEW OF THE AUSTRAlIAN BUSINESS
In Australia, Infigen owns, operates and develops renewable
energy assets, with wind farms currently being at the core
of its business. Infigen is the largest owner‑operator of wind
farms with over 28 percent of the country’s operating capacity
at the end of FY11. The generating assets comprise five wind
farms located in South Australia (SA), New South Wales (NSW)
and Western Australia (WA). In addition, Infigen has the
Woodlawn Wind Farm (48.3 MW) under construction in New
South Wales and a well developed pipeline of wind and solar
development projects in targeted growth areas throughout
Australia.
Infigen generates revenue from selling electricity and
environmental products such as Large‑scale Generation
Certificates (LGCs), also known as renewable energy
certificates (RECs) produced by its wind farms. Approximately
58 percent of Infigen’s production is sold under long
term contracts with the remainder sold into the wholesale
electricity pool and REC spot markets.
BUSINESS GROWTH & PERFORMANCE
During FY11 the Australian business increased its operating
capacity to 508 MW with the commissioning of the Lake
Bonney 3 Wind Farm (39 MW) in early July 2010. Increased
capacity together with a full twelve months production
from the Capital Wind Farm (140.7 MW) and improved site
availability (97.3 percent up from 94.2 percent) resulted
in a 17 percent increase in production to 1,335 GWh. The
aggregate capacity factor of 30.1 percent for the year was
below the long term mean estimate of 34 percent primarily
due to lower than average wind conditions during the
financial year.
Infigen’s Australian business reported 12 percent higher
revenue at $117.2 million resulting largely from the increase
in production, offset by lower average prices. The revenue
outcome was reasonable given the challenging market
conditions which included a period of record low wholesale
electricity prices and low REC prices. The yearly average spot
price for SA in FY11 was $32.49 compared to the 10 year
average of $43.44. Infigen effectively managed its REC sales
program by retaining RECs on balance sheet through periods
of low prices and selling them as market prices improved.
The operating EBITDA margin decreased from 80.8 percent
to 73.4 percent reflecting the lower average prices, and
higher operating costs as wind farms began to transition
into a higher cost post‑warranty environment. Post‑warranty
operating costs are being managed through improved
operating and maintenance practices. Costs were also
incurred to build the necessary capability to effectively
manage risks and opportunities associated with operating in
Australia’s dynamic electricity market.
At the beginning of the year Infigen commenced construction
of its sixth Australian wind farm, Woodlawn. By the end of the
financial year it had commenced exporting electricity into the
grid during the pre‑commission testing phase.
17
australia
WHAT IS THE RET SCHEME?
In August 2009 the Commonwealth Government
implemented an enhanced Renewable Energy Target
(RET) scheme. The scheme is designed to encourage
investment in, and switching to renewable energy sources
through mandated annual increments in the renewable
proportion of Australia’s electricity supply, rising to achieve
a level of 20 percent by 2020. The expanded RET scheme
is supported by all major political parties.
Electricity retailers and large users of electricity (liable
entities) are required to purchase Renewable Energy
Certificates (RECs) and surrender them each year to
evidence compliance with the annual targets. Australia’s
three major electricity retailers account for around three
quarters of the market for RECs. Failure to surrender
sufficient RECs results in a penalty, currently set at $65/
MWh of shortfall. The penalty is not tax deductible.
The target and penalty mechanism is intended to provide
a financial incentive for investment in renewable energy
technologies to meet the targets. RECs created by
renewable energy generators are sold under contract or
in environmental product markets to meet the current and
future compliance requirements of the liable entities.
During FY11 Infigen invested in the development of its
people and system capabilities, including a 24 x 7 Operations
Control Centre (OCC), its energy markets function, and asset
management and maintenance systems.
Infigen also advanced the most prospective projects in its
development pipeline while our investment in a proposal to
the Federal Government’s Solar Flagships Program created
broader opportunities in solar photovoltaic (PV) asset
development.
RENEWABlE ENERGY IN AUSTRAlIA: INDUSTRY OVERVIEW
Investment in renewable energy in Australia is underpinned
by the Commonwealth Government’s Renewable Energy
Target (RET) legislation. This mandates increasing annual
increments for the uptake of renewable energy to reach
20 percent of all electricity generation by 2020.
Since 2001, the RET scheme has stimulated major regional
investments in renewable energy generation. At the end of
2010, the aggregate investment in large‑scale renewable
energy generation stood at around $9 billion1. Wind energy is
currently the most cost effective and fastest growing large‑
scale renewable energy generation source in Australia.
In June 2010 the Government made enhancements to the
RET scheme to create a separate Large‑scale Renewable
Energy Target (LRET) scheme, whereby satisfaction of 90
percent of the RET is quarantined for large scale renewable
electricity production.
18
InfIgen energy AnnuAl report 2011
Prior to the LRET adjustment coming into effect a
large oversupply of RECs generated from less efficient
small scale renewable systems resulted in weak REC
prices during the first half of FY11. The large electricity
retailers (liable entities) companies took advantage of the
opportunity to acquire and reserve significant portions of
the REC surplus for their future obligations. Developers
of large scale renewable energy projects put their
developments on hold as the combination of electricity
and REC prices was insufficient to justify investment in new
projects.
The LRET target has been increased for calendar years
2012 and 2013 to help absorb the oversupply, and REC
prices have recovered somewhat. Infigen expects REC
prices to remain around current levels during FY12 and
then improve steadily in the medium term as the surplus
is exhausted around 2014 and annual increments in the
mandated target increase. The current supply‑demand
imbalance may still lead to some short term price volatility.
Following a long period of uncertainty, the future
stability of RET policy is critical to underpin investment
and contracting decision making for the medium and
long term.
Wholesale electricity market prices have improved
gradually from the lows of the first half of FY11. A number
of fundamental factors are still expected to result in
subdued wholesale pricing for FY12 and in the medium
term. In Queensland, gas fired generation output has
increased significantly over the last 12 to 18 months due
to an excess supply of fuel as coal seam gas producers
ramp up production in preparation for an LNG export
market from 2014. Water inflow into reservoirs after the
recent floods, together with weather patterns returning
to mild La Nina conditions have resulted in increased
availability of hydro generation. Fuel switching from
electricity to gas and a significant uptake of heavily
subsidised residential scale renewable energy technologies
have contributed to lower energy consumption.
Customers have responded to rising retail electricity prices
(predominantly attributable to increasing network costs) by
reducing consumption. The mild La Nina weather pattern
is also contributing to lower demand during peak periods
limiting high price events in the market.
Where Do We sell?
The generation from our Australian wind farms is sold:
1. to electricity retailers at contracted prices;
2. to sophisticated industrial and commercial
customers at contracted prices; or
3. to the wholesale market at spot prices.
AUSTRAlIAN GOVERNMENT’S PROPOSED ClIMATE
CHANGE PlAN1
In July 2011, the Commonwealth Government released
its climate change plan. The scientific view that the world’s
climate is changing is widely accepted and the two major
political parties in Australia have stated policies that seek
to reduce Australia’s carbon emissions to 5 percent below
2000 levels by 2020. The recent trend of rising temperatures
and more extreme weather events is expected to have a
detrimental economic effect globally, and particularly in
Australia.
The Commonwealth Government’s climate change plan
promotes a reduction in carbon pollution by putting a price
on carbon. This is expected to drive further investment in
lower emission and cleaner energy technologies, while the
primary driver for renewable energy generation remains the
RET scheme.
The plan also includes transitional assistance to facilitate
the retirement of 2,000 MW of the most polluting coal fired
generation, further encouraging investment in renewable
and other sources of cleaner energy generation.
Under the Government’s plan around 500 of the biggest
polluters in Australia will need to buy and surrender to the
Government a permit for every tonne of carbon pollution
they produce. For the first three years, the carbon price will
be fixed, before moving to an emissions trading scheme in
2015. In the fixed price stage, starting on 1 July 2012, the
carbon price will start at $23 a tonne, rising at 2.5 percent a
year in real terms. From 1 July 2015, the carbon price will be
set by the market, with a price floor of $15.
The Government expects that the RET, together with the
carbon price, will result in approximately $20 billion2 of
investment in renewable energy by 2020.
IMPlICATIONS FOR INFIGEN
The Government has stated that it has secured sufficient
support for the draft plan legislation to pass in both houses
of parliament, so there appears to be a strong likelihood
of the legislation being enacted.
It is expected that wholesale electricity prices will rise
under the plan, starting in July 2012. This should provide
an improved price signal for new investment in renewable
energy generation as well as providing a benefit for Infigen’s
existing market exposed (merchant) generation. A positive
overall outcome is expected for Infigen in the medium term.
1 Securing a Clean Energy Future: The Australian Government’s Climate
Change Plan, Commonwealth of Australia, July 2011
2 Office of the Renewable Energy Regulator
19
australia
WooDlaWn WinD Farm
Constructing New Capacity in NSW
— Capacity: 48.3 MW
— Capacity Factor: 39%
— Generation: approximately 160 GWh
— Turbines: 23 x 2.1 MW Suzlon S88
— Tonnes of CO2 avoided:
approximately 150,000 tonnes p.a.
— Construction jobs created: >150
Infigen first successfully exported
electricity to the grid from the
Woodlawn Wind Farm in June 2011.
The construction of Woodlawn Wind
Farm has created more than 150 direct
jobs and many more indirect jobs in
Australia, including the fabrication of
towers, operations and maintenance
buildings, switch rooms and electrical
equipment. Infigen has provided
on-site apprentices with valuable work
experience and the development has
also benefited the local community
through increased economic activity.
The wind farm is scheduled to be
completed in the December quarter
of 2011.
20
InfIgen energy AnnuAl report 2011
development pipeline
Western
Australia
Walkaway WF 2 & 3 (400 MW)
Northern
Territory
AUSTRALIA
South
Australia
Queensland
New South
Wales
Forsayth WF (70–80 MW)
Cloncurry SF (3–6 MW)
Nyngan SF (80–100 MW)
Bodangora WF (100 MW)
Moree SF (50 MW)
Capital II WF (70–100MW)
Capital SF (35–50 MW)
Mildura SF (100–180 MW)
Woakwine WF (450 MW)
ACT
Victoria
Flyers Creek WF (115 MW)
Manildra SF (30–50 MW)
Cherry Tree WF (30–50 MW)
Development Pipeline
Tasmania
Development pipeline
Developing Wind Farms and Solar Farms
The Australian development team has
been involved in the development of
Infigen’s six Australian wind farms. During
the year the development team continued
to advance the most prospective projects
in the wind and solar development
pipeline towards a construction ready
status and carried out work necessary to
sustain the option value of the rest of the
pipeline.
Progress continued on the solar PV
development pipeline, which includes
six solar farms of which four have been
granted planning approvals.
The development team and development
pipeline provide a platform for
growth and optionality to Infigen. This
positions Infigen to secure a share
of the estimated 7,000 MW of new
renewable energy generation required
to be built in Australia in order to meet
the Government’s 20 percent by 2020
renewable energy target.
21
australia
TECHNOlOGY AND COSTS
At the end of FY11, 1,779 MW1 of wind capacity was installed
in Australia, of which over 28 percent was owned by Infigen.
The amount of wind generation capacity in Australia has
increased by an average of 30 percent a year over the
past decade.
Solar PV generation capacity was added in more than 100
countries during 2010 confirming its status as the world’s
fastest growing power‑generation technology. The market
was driven by falling costs, new applications, strong investor
interest, and continued strong policy support.
Suntech (NYSE:STP), a partner of Infigen in the Solar
Flagships bid, moved into first place among all solar PV
manufacturers, up from second place in 20092. It became the
first Chinese firm to establish a US manufacturing presence
opening a facility in Arizona in October 2010. The Infigen
Suntech consortium is seeking to advance its Australian solar
PV projects during FY12 and beyond.
Renewable energy continued to grow strongly worldwide
and supplied an estimated 19.4 percent of global electricity
production in 20102. Among all renewables, global wind
power capacity increased the most in calendar year 2010,
up by 38 GW3 from 2009 to 197 GW. Global installed capacity
of solar PV increased by 16.6 GW to 39.5 GW4 by the end
of the 2010 calendar year.
OPERATIONS CONTROl CENTRE
Building Our Core Competencies
The ability to monitor and plan the operation
of all assets as well as to react and respond
appropriately to pricing events in the
National Electricity Market (NEM) is critical
to maximising sustainable returns. Since
it became functional on a 24 x 7 basis in
March 2011, Infigen’s Australian Operations
Control Centre (OCC) has monitored and
analysed data5 from our wind farms and the
Australian Energy Market Operator (AEMO),
and controlled our maintenance scheduling
and bidding and dispatch systems to
maximise revenue performance.
The OCC monitors asset performance
24 hours a day and works closely with the
asset management team to guarantee
centralised business communication and
effective response to faults and emergencies.
This assisted in improving site availability to
97.3 percent in FY11.
5 Data analytics capability has been designed within
Infigen in co-operation with its external customers. It
uses Supervisory Control and Data Acquisition (SCADA)
systems to link with AEMO and Bidding Systems
22
InfIgen energy AnnuAl report 2011
1 Electricity Statement of Opportunities 2011
2 Renewables 2011: Global Status Report, REN21
3 Global Wind Report: Annual market update 2010, Global Wind Energy
Council, April 2011
4 Global Market Outlook for Photovoltaics until 2015, European Photovoltaic
Industry Association, May 2011
sustainability
OUR PURPOSE, VISION AND VAlUES
As a specialist renewable energy business Infigen exists
to deliver attractive and sustainable returns to our
investors.
Our vision is to be the leading specialist renewable
energy business in the markets in which we operate.
In delivering on our vision we are inspired and
motivated by a core value relating to sustainability.
Sustainability is fundamental to Infigen’s purpose
and encompasses environmental, social and
economic responsibility.
— Environmental: we will pursue the efficient
deployment of renewable energy technology
and adopt practices that minimise harm to the
environment, which may be directly or indirectly
affected by Infigen’s operations
— Social: we take actions (or refrain from actions) to
protect the quality of life and wellbeing of individuals
and communities touched by Infigen’s activities
— Economic: we aim to deliver performance that
maximises risk adjusted returns for our investors over
the long term
Infigen continues to fund projects to enhance local community
infrastructure and landscape including road upgrades and tree
planting as noted below. Infigen also has a proud tradition
of actively supporting local communities, charities, festivals,
schools and sporting organisations through sponsorship,
and through employee participation at community events.
COMMUNITY
It is important for Infigen to engage with and support the
communities in which it operates. Infigen is involved with
local communities during the planning and development
stages of new projects, and then through the life of each
wind farm. Construction of Woodlawn Wind Farm directly
created more than 150 jobs, and the facility will continue to
stimulate additional trade for local businesses throughout
its life‑cycle.
Infigen is committed to ongoing community consultation
through regular engagement and a clear flow of information.
This ensures that any concerns can easily be raised and
then addressed. Infigen firmly believes that energy from
wind turbines is safe, reliable and cost‑effective. This view
is supported by industry research, peer reviewed medical
research and academic expert studies. Australia has some
of the most stringent wind farm noise guidelines in the world
and Infigen continues to comply with these.
COMMUNITY PARTICIPATION IN OUR ACTIVITIES
For the first time in 2011, Australia and Infigen took part
in the celebration of the Global Wind Day organised by
the European and Global wind energy bodies.
The local community was invited to visit the Capital
Wind Farm, enter a wind turbine and chat to the Infigen
team about how the wind farm is managed. Visitors also
learned about the composition of turbines and how wind
power is turned into electricity. Over 300 visitors joined
in the celebrations.
23
sustainability
SAFETY
The Infigen team consists of approximately 170 people
managing 24 wind farms in Australia and the US. Safety is
Infigen’s first priority and is reflected in the goal of zero lost
time from incidents and injuries, or ‘zero harm’. Infigen’s
Safety and Sustainability Committee monitors monthly
progress on the safety performance of all assets in Australia
and the US with all employees held accountable for safety
performance in their respective area of responsibility.
From 1 July 2010 to 30 June 2011, the rolling 12 month
Total Reportable Incident Rate (TRIR) and Lost Time Injury
Frequency Rate (LTIFR) for the Group (direct employees and
contractors’ employees) are shown in the table below.
Infigen Energy Group
FY10
FY11
1 per 1,000,000 working hours
TRIR1
26.5
25.9
lTIFR1
12
3.4
The material improvement in the LTIFR reflects efforts
to improve the performance of our service providers in
particular, with progress made towards our target of zero
harm. The steady TRIR reflects ongoing diligence in the
recording of all incidents and a need to maintain focus on
reducing the frequency of all incidents.
ENSURING ECONOMIC SUSTAINABIlITY
Supporting education is recognised as one of the key
elements to economic sustainability.
24
InfIgen energy AnnuAl report 2011
Infigen provides trainee and apprenticeship opportunities
during construction and the ongoing operation of our wind
farms and solar projects.
Infigen also continues to sponsor schools, youth programs
and activities, and is a proud sponsor of the University of
NSW Co‑Op Scholarship Program. This Program provides
engineering students with the opportunity to apply and
complement the knowledge and skills they have gained
through their studies with hands‑on experience in the
workplace.
In the US Infigen supports a local college
“extern program” providing 4 to 6 students who have
completed the college wind energy curriculum with some
practical experience. Students are mentored by the Infigen
team and learn day‑to‑day work activities, putting their
classroom knowledge to practical use. During the 4 to 6
month externships they learn how to operate, maintain
and repair wind turbines.
PROTECTION AND REHABIlITATION OF THE ENVIRONMENT
Actively pursuing protection and improvement of the
environment is fundamental to long term community
support. During the construction of Woodlawn Wind Farm,
Infigen worked with the principal contractor to minimise
the removal of trees and disturbance of habitat, and
planted more than 1,000 new trees and shrubs.
Infigen supports local fire and police services. In the US,
Infigen continues to support the fantastic work of Portage
Volunteer Fire Company, Maryneal, Roscoe Volunteer
and Lake Sweetwater Fire Departments, as well as the
Illinois Police Association. In Australia, Infigen funded
the purchase of a fire truck for Taylors Creek Rural Fire
Service and pays for the mains power to the fire shed,
while continuing to support local fire services in Walkaway,
Western Australia.
The development process involves committing to obligations
under environmental management programs. These 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 actions may have on flora and fauna habitat.
Infigen takes environmental protection very seriously.
The approach to the Woodlawn Wind Farm development is
an example. During the construction phase, Infigen worked
with the principal contractor to minimise the removal of
trees and disturbance of habitat. In consideration of the
requirement to remove some trees, Infigen planted more than
1,000 new trees and shrubs with the help of a local organic
nursery. Each type of plant was picked to contribute to native
biodiversity creating a wildlife corridor giving shelter and
food for animals for years to come.
Infigen is in the process of planning and implementing the
Bird and Bat Management Program for Woodlawn Wind Farm
as part of the overall program of managing the interface with
the existing habitat. The program incorporates comprehensive
monitoring of habitat, minimising identified risks and reporting
to appropriate environment protection authorities.
ENVIRONMENT
Recognising the need for sustainability including security
of energy supply, Australia is following the lead of the EU,
US and China to reduce our reliance on fossil fuels, and
to reduce the emissions intensity of our economy. As a
renewable energy specialist, Infigen is well‑positioned in
Australia and the US to contribute to the transition from
fossil fuel based electricity generation to renewable energy.
Infigen is particularly conscious of the carbon emissions
generated by its business activities.
For the third consecutive year, Infigen has collected data on its
emissions in Australia, and fulfilled our reporting requirements
under the National Greenhouse & Energy Reporting Act
(NGER) for the 12 months ended 30 June 2010. Due to timing
constraints on the collection and verification of data we report
this information one year behind our financial results.
We also participated for the fourth time in the Carbon
Disclosure Project – the only independent global system
through which thousands of companies report their
greenhouse gas emissions and assessment of climate
change risk and opportunity.
Infigen’s reported production of greenhouse gases, energy
used and energy produced in Australia in FY10 is shown in
the table below.
Infigen’s level of emissions in Australia is quite small and is
far outweighed by the positive contribution of our renewable
energy generation to avoid over one million tonnes of
greenhouse gas emissions annually (based on average
National Electricity Market intensity).
All of our wind and solar farm developments undergo
comprehensive environmental assessments before being
granted development approval.
NATIONAl GREENHOUSE & ENERGY REPORTING ACT
The primary driver for the NGER is to underpin the
introduction of an emissions trading scheme in the future.
NGER requires organisations that produce or consume energy
above a threshold, or emit carbon dioxide above a threshold,
to report to the Department of Climate Change and Energy
Efficiency on their activities.
Infigen’s obligation to report is driven by its high level
of electricity generation.
GHG Emissions
Energy
Scope 1
(tCO2–e)
Scope 2
(tCO2 –e)
Total of
Scope 1 & 2
(tCO2–e)
Energy
Consumed
(GJ)
Energy
Produced
(GJ)
13
2,671
2,684
12,023
3,904,233
25
infigen board
MICHAEl HUTCHINSON
Non‑Executive Chairman
MIlES GEORGE
Managing Director
Mike was appointed an
independent non‑executive
director of Infigen Energy in June
2009 and subsequently elected
Chairman on 12 November 2010.
He is a member of the Audit, Risk
& Compliance Committee and
the Nomination & Remuneration
Committee.
Mike was formerly an international
transport engineering consultant
and has extensive experience in
the transport and communications
sectors, including as a senior
official with the Australian
Government.
Mike is currently an independent
non‑executive director of the
Australian Infrastructure Fund Ltd
and EPIC Energy Holdings Ltd.
Miles is the Managing Director
of Infigen Energy, having
previously been the Chief
Executive Officer since 2007.
Miles was appointed Managing
Director in January 2009.
Miles has over 20 years
experience in the infrastructure
and energy sectors, and in
particular renewable energy
development and investment.
Since 2000, Miles has been
involved in development and
investment in wind energy
projects in Australia, including
playing a key role in the
development of Infigen’s first
wind farm at Lake Bonney in
South Australia. Miles jointly led
the team which established the
business now known as Infigen
Energy in 2003. Subsequently
he jointly led the team which
structured and implemented the
Initial Public Offer and listing
of Infigen’s business on the
ASX in 2005.
26
InfIgen energy AnnuAl report 2011
DOUGlAS ClEMSON
Non‑Executive Director
PHIlIP GREEN
Non‑Executive Director
FIONA HARRIS
Non‑Executive Director
Philip Green is a Partner of
The Children’s Investment Fund
Management (UK) LLP (TCI),
a substantial securityholder
of Infigen Energy.
Infigen Energy announced the
appointment of Philip Green
as a non‑executive Director of
Infigen Energy Limited, Infigen
Energy (Bermuda) Limited
and Infigen Energy RE Limited
on 19 November 2010.
Philip joined TCI in 2007 and
his responsibilities include TCI’s
global utility, renewable energy
and infrastructure investments.
Prior to joining TCI, Philip led
European Utilities equity research
at Goldman Sachs, Merrill Lynch
and Lehman Brothers over a
12 year period.
Fiona was appointed an
independent non‑executive
director of Infigen Energy
in June 2011. Fiona is a
member of the Audit, Risk
& Compliance Committee
and since the end of the period
has also been appointed a
member of the Nomination
& Remuneration Committee.
Fiona is Chairman of Barrington
Consulting Group and National
Director of the Australian
Institute of Company Directors.
For the past sixteen years
she has been a professional
non‑executive director.
Fiona is currently a Director
of Altona Mining Limited,
Aurora Oil & Gas Limited and
Sundance Resources Limited.
Doug was appointed an
independent non‑executive
director of Infigen Energy
in September 2005. He is
Chairman of the Audit, Risk
& Compliance Committee
and a member of the Nomination
& Remuneration Committee.
Doug 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 operation of important
power generation, transportation
and infrastructure projects
in this region.
Doug’s previous directorships
include General and Cologne
Reinsurance, Electric Power
Transmission Group, ABB Australia
and New Zealand, and Smiths
Industries.
27
infigen management
a Bachelor of Arts in History from
the University of Cambridge with
additional certificate as Chartered
Accountant from the Institute of
Chartered Accountants England
& Wales (ICAEW).
BRAD HOPWOOD
General Manager – Corporate
Finance
Brad is the General Manager –
Corporate Finance for Infigen
Energy, with responsibility for
managing the sources and
uses of capital for the business,
corporate activity and projects,
and the group‘s tax function.
Brad has worked with Infigen
Energy since 2006 and been
responsible for tax, corporate
finance and corporate structure
matters, as well as the group‘s
activities in Europe. 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.
MIlES GEORGE
Managing Director
Miles is the Managing Director of
Infigen Energy, having previously
been the Chief Executive Officer
since 2007. Miles was appointed
Managing Director in January
2009. Miles has over 20 years
experience in the infrastructure
and energy sectors, and in
particular renewable energy
development and investment.
Since 2000, Miles has been
involved in development and
investment in wind energy
projects in Australia, including
playing a key role in the
development of Infigen’s first
wind farm at Lake Bonney in
South Australia. Miles jointly led
the team which established the
business now known as Infigen
Energy in 2003. Subsequently
he jointly led the team which
structured and implemented the
Initial Public Offer and listing of
Infigen’s business on the ASX
in 2005.
GEOFF DUTAIllIS
Chief Operating Officer
Geoff is the Chief Operating
Officer of Infigen Energy, with
responsibility for the business
and operational activities of
Infigen Energy in Australia and
the US. Geoff joined Infigen
Energy in 2005 following
playing an instrumental role
in the process of preparing
Infigen for its Initial Public Offer
in 2005. Geoff has extensive
experience in the development
and project management of
major projects, having had
leadership roles on a number
of landmark developments
while working at Lend Lease for
almost 19 years in Australia and
Europe. Geoff holds a Bachelor
of Engineering (Civil) (Hons)
from the University of NSW with
post‑graduate qualifications from
the Australian Graduate School
of Management, Cambridge
International Land Institute (UK)
and the Australian Institute of
Company Directors.
CHRIS BAVEYSTOCK
Chief Financial Officer
Chris is the Chief Financial
Officer of Infigen Energy, with
responsibility for managing of
the financial risks of the business
while being responsible for
financial control and compliance.
Chris acted as Infigen Energy‘s
interim Chief Financial Officer
from December 2010 until his
appointment as Chief Financial
Officer in March 2011. Chris has
over 20 years of experience as
a finance executive in mergers
and acquisitions, acquisition
integration, financing, project
evaluation and review, bids
and tenders, and all facets
of reporting. His most recent
roles were as Chief Financial
Officer to the Tenix Group,
and subsequently a number of
senior finance roles at Transfield
Services, including Group
Financial Controller. Chris holds
28
InfIgen energy AnnuAl report 2011
this page: Scott Taylor, Craig Carson
opposite page:
Chris Baveystock, Miles George, Geoff Dutaillis, Brad Hopwood
CRAIG CARSON
Chief Executive Officer – US
Craig joined Infigen Energy in
2010 and has responsibility for all
of Infigen’s activities in the US.
Craig has more than 25 years
of leadership and senior
management experience in the
energy industry. Prior to joining
Infigen Energy, Craig was Vice
President, US Cogeneration
at BP Alternative Energy,
where he had full profit and
loss responsibility for BP’s US
Cogeneration business unit. Craig
previously was responsible for
the engineering, construction,
operations and asset management
for BP Wind Energy. Prior to
joining BP, Craig held senior
positions with ConocoPhillips
and SkyGen Energy, and served
in the US Navy. Craig holds a BS
in Mechanical Engineering from
the University of Illinois at Chicago
and an MBA from Northwestern
University’s Kellogg School
of Management.
SCOTT TAYlOR
Group General Manager – Australia
Scott is the Group General
Manager of Infigen Energy’s
Australian business.
Scott is accountable for the
operational performance of the
assets, commercial performance
of the business and continued
growth in the Australian energy
market. Scott previously
managed Infigen Energy’s US
wind energy business and was
also involved in a number of line
management, business transition,
and strategy development roles
both in Australia and the US since
late 2006. Prior to joining Infigen
Energy Scott has held a number
of senior management roles at
Queensland Rail, Tarong Energy,
Energex, and Comalco Smelting.
Scott is a Graduate and facilitator
with the Australian Institute of
Company Directors, Fellow of
the Risk Management Institute
of Australia and Industry Fellow
of the University of Queensland
(UQ) Business School. Scott
holds a Bachelor Degree of
Science (UNSW), and post
graduate degrees in Information
Systems (UC) and Business
Administration (UQ).
29
corporate structure
The Infigen Energy group (Infigen) consists of the following entities:
— 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 stapled security, tradable on the
Australian Securities Exchange under the ‘IFN’ code.
Infigen Energy RE Limited (IERl) is the Responsible Entity of IET.
The current stapled structure of the Infigen group was established immediately prior to listing on the Australian Securities Exchange
in 2005 and currently cannot be materially simplified due to Infigen’s corporate debt facility.
The following diagram represents the structure of the Infigen Energy group, including the entities and assets within the corporate
debt facility.
Infigen Energy Securityholders
stapled securities
units
shares
shares
Infigen Energy
Trust
Infigen Energy
Limited
Infigen Energy
(Bermuda) Limited
responsible entity
Infigen Energy
RE Limited
Infigen Energy
Holdings Pty Limited
Operating Wind Farms
Woodlawn
Wind Farm
Development
Assets
entities and assets within the corporate debt facility
30
InfIgen energy AnnuAl report 2011
corporate governance statement
32
Introduction – Structure of the Infigen Energy group
32 ASX Principles and Recommendations
33 ASX Principle 1:
Lay solid foundations for management and oversight
34 ASX Principle 2:
Structure the Board to add value
36 ASX Principle 3:
Promote ethical and responsible decision-making
37 ASX Principle 4:
Safeguard integrity in financial reporting
39 ASX Principle 5:
Make timely and balanced disclosure
39 ASX Principle 6:
Respect the rights of shareholders
40 ASX Principle 7:
Recognise and manage risk
41 ASX Principle 8:
Remunerate fairly and responsibly
3131
31
corporate governance statement
INTRODUCTION – STRUCTURE OF THE INFIGEN ENERGY GROUP
This statement outlines Infigen Energy group’s corporate governance framework as at 30 September 2011. A copy of this statement
and other relevant documents and summaries can also be accessed from the Corporate Governance section on Infigen’s website
at www.infigenenergy.com.
The Infigen Energy group (Infigen) comprises:
— 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. IEBL was
established and included in the group’s stapled structure in 2005 to provide flexibility regarding potential investment ownership
structures. IEBL has not been utilised for that purpose since it was established and Infigen aims to wind-up this entity when it is
feasible to do so.
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 are quoted on the ASX under the market code ‘IFN’.
Interaction between the roles of IEL, IEBL and IERL
The Boards of IEL, IEBL and IERL (the IFN Boards) are responsible for the governance and management of Infigen.
The IEL Board, in consultation and agreement with the IEBL and IERL Boards, formulates and approves the strategic direction,
investment objectives and goals of Infigen in accordance with the terms of the stapling deed of 16 September 2005 (Stapling Deed).
In practice, IEL was responsible for conducting the day-to-day operations of Infigen during the year. IEL will continue to consult and
exchange information with and seek the agreement of IEBL and IERL when making relevant decisions in relation to Infigen.
The Stapling Deed sets out the details of the relationship between IEL, IEBL and IERL in respect of Infigen. The Stapling Deed
provides, to the extent permitted by law, for cooperation and alignment between these entities. It is by operation of the Stapling
Deed that the Boards of IEL, IEBL and IERL are together responsible for overseeing the rights and interests of securityholders in
Infigen, as well as being accountable to securityholders for the overall corporate governance and management of Infigen.
ASX PRINCIPLES AND RECOMMENDATIONS
The ASX Corporate Governance Council (ASX CGC) has issued a guideline setting out corporate governance Principles and
Recommendations. The ASX Listing Rules require listed entities to include a statement in their annual report disclosing the extent
to which they have followed the Principles and Recommendations within the ASX CGC guideline during the reporting period.
This Corporate Governance Statement is structured with reference to the second edition of the ASX CGC guideline released on
30 June 2010. Relevant information required to be included in this Statement by the ASX CGC guideline has been included unless
specifically indicated otherwise.
32
InfIgen energy AnnuAl report 2011
ASX PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OvERSIGHT
Companies should establish and disclose the respective roles and responsibilities of Board and management.
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. Such delegation is
non-exclusive. The Board Charters are reviewed by the IFN Boards annually. A summary of the Board Charters is available in the
Corporate Governance section on Infigen’s website at www.infigenenergy.com.
In acquitting their responsibilities, the Boards, amongst other things:
— contribute to and approve Infigen’s corporate strategy;
— evaluate and approve material capital expenditure, acquisitions, divestitures and other material corporate transactions of Infigen;
— approve material Infigen policies, including Infigen’s Code of Conduct, Health and Safety Policy, Conflicts of Interest Policy,
Securities Trading Policy, Continuous Disclosure Policy and Risk Management Policy;
— approve the annual Infigen budget and all accounting policies, financial reports and material reporting by Infigen;
— 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 managers;
— monitor the performance of the business and management team, in particular, the CEO and other key management personnel;
— consider recommendations of Board Committees, such as the Audit, Risk & Compliance Committee and Nomination &
Remuneration Committee;
— determine Infigen’s distribution policy;
— approve the appointment and terms of appointment of the external auditor;
— consider, approve and monitor the effectiveness of Infigen’s overall risk management and control framework, including
through regular reporting to the Board from the Audit, Risk & Compliance Committee and regular updates (as required)
from management on significant risk issues;
— review the performance and effectiveness of Infigen’s corporate governance policies and procedures and consider any
amendments to those policies and procedures;
— monitor Infigen’s compliance with ASX continuous disclosure requirements;
— subject to the constituent document of the relevant Infigen entity, approve the appointment of Directors to the relevant
Board and members 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 Infigen.
The Boards have delegated detailed review and consideration of some of these responsibilities to their respective Committees
(refer Principle 2). The Board Charters also set out the specific powers and responsibilities of the Chair and the CEO (refer
Principle 2).
Each IFN Board acts independently in exercising its separable responsibilities for each entity. Where there are joint responsibilities
the Boards co-operate as provided for in the Stapling Deed. Where appropriate, this is given effect by concurrent Board and
Committee meetings to address relevant matters.
The Board Charters also include an outline of the responsibilities of each Director. To assist Directors understand Infigen’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. Similarly, senior executives, including the CEO and Chief Financial Officer (CFO), have
formal letters of employment governing their rights and responsibilities as executives within the Infigen group.
Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives
The Nomination & Remuneration Committee of the IEL Board has the primary responsibility for setting the key performance
indicators against which the performance of the CEO and other senior managers are evaluated.
At the commencement of the 2011 financial year (and at other relevant times for new senior managers), individual key performance
indicators were set for senior managers against which their performance would be evaluated. The key performance indicators
included a mix of business performance measures and personal performance measures for each senior manager. At the conclusion
of the financial year, the review of the performance of senior managers is initially undertaken by the CEO and recommendations
made to the Nomination & Remuneration Committee. The Nomination & Remuneration Committee undertakes a review of the
performance of the CEO and considers the recommendations from the CEO regarding the performance of senior managers.
The outcome of the Committee’s review is then considered by the IEL Board.
The Remuneration Report within the Directors’ Report sets out Infigen’s remuneration framework, including the key performance
conditions that are assessed in determining the remuneration of the CEO and other senior managers.
33
corporate governance statement
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
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, the size
and operations of the group and relevant corporate governance standards. It is intended that each of the IFN Boards will comprise
Directors with a diverse range of skills, expertise and experience.
With reference to the criteria set out in Recommendation 2.1, the IFN Boards have assessed the independent status of each Director.
The IFN Boards comprised a majority of Independent Directors throughout the 2011 financial year. There are four Independent
Directors and two Non-Independent Directors currently on each of the IFN Boards.
When reviewing the independence of a Director who may have a separate contractual relationship with Infigen and/or is an affiliate
of a business that has a contractual relationship with IEL, the materiality threshold to be applied to the cost or fees for the good
or service being provided is 5% of the revenue of IEL for the prior financial year.
During the financial year and up to the date of this report, the changes to the IFN Boards are set out in the table below.
Current Directors
Position
M Hutchinson
Independent Chair
D Clemson
Independent Non-Executive Director
Non-Executive Director1
Independent Non-Executive Director
M George
Executive Director2
Former Directors
Position
P Green
F Harris
R Rolfe
IEL Board
Appointment Dates
IEBL Board
IERL Board
18/6/09
9/9/05
18/6/09
14/9/05
18/6/09
9/9/05
18/11/10
18/11/10
18/11/10
9/9/11
1/1/09
9/9/11
1/1/09
9/9/11
1/1/09
Resignation/Retirement Dates
Independent Non-Executive Director
21/6/11
21/6/11
21/6/11
G Kelly3
A Battle4
Independent Non-Executive Director
12/11/10
12/11/10
12/11/10
Independent Non-Executive Director
18/11/10
18/11/10
18/11/10
1 Mr Green is a Partner of The Children’s Investment Fund Management (UK) LLP which has a substantial shareholding of IFN securities.
2 Mr George is Managing Director and Chief Executive Officer of Infigen.
3 Mr Kelly resigned as a Director.
4 Mr Battle retired as a Director at the close of the 2010 Annual General Meeting.
Throughout the financial year, the Independent Directors or Non-Executive Directors have met to consider relevant matters,
as appropriate, in the absence of Non-Independent Directors or the Executive Director, respectively.
Directors are entitled to seek independent professional advice, collectively or on an individual basis (including, but not limited to,
legal, accounting and financial advice), at Infigen’s expense on any matter connected with the discharge of their responsibilities,
in accordance with the procedures set out in the Board Charters.
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 IEL, IERL and IEBL.
Recommendation 2.2: The chair should be an independent Director
The Chair of each of the IFN Boards throughout the financial year was an Independent Director.
Recommendation 2.3: The roles of chair and chief executive officer should not be exercised by the same individual.
Throughout the financial year, the roles of Chair and CEO were exercised by different people for Infigen. At no stage was the Chair
a former CEO of Infigen or any related party of Infigen.
34
InfIgen energy AnnuAl report 2011
Nomination Committee
Recommendation 2.4: The Board should establish a nomination committee
The IEL Board established a Nomination & Remuneration Committee in February 2007. In addition to its remuneration and general
human resource responsibilities, that Committee is responsible for advising the IFN Boards on the composition of the Boards and
their Committees, as well as reviewing the performance of the Boards, their Committees and individual Directors. The Committee
met nine times throughout the 2011 financial year and the attendance of the Committee members at Committee meetings is
outlined in the Directors’ Report. The Committee was composed solely of Independent Directors. The Committee sought advice
from independent advisers, as necessary.
The Nomination & Remuneration Committee Charter sets out the Committee’s roles and responsibilities, composition, membership
requirements and operational procedures. A summary of the Charter is available on Infigen’s website. The Charter is reviewed
annually by the Committee and the Board.
The IEL Nomination & Remuneration Committee will from time to time carry out, on behalf of IEBL and IERL, similar activities as the
Committee is authorised by its Charter to carry out for IEL. Accordingly, the IEL Nomination & Remuneration Committee will provide
advice and recommendations regarding relevant nomination and remuneration matters to the Boards of IEBL and IERL. It is intended
that the Boards of IEBL and IERL may rely on those activities, advice and recommendations as if the IEL Nomination & Remuneration
Committee was a committee of the IEBL and IERL Boards.
The ASX Principles indicate that the Committee should have at least three members. Up until 18 November 2010, the Committee
had at least three members. For the remainder of the 2011 financial year and up to 4 August 2011, the Committee only had two
members, being the only two Independent Directors during that period. On 4 August 2011, a further Independent Director was
appointed to the Committee following appointment of that Director to the Boards.
The search for additional IFN Board Directors involved the identification of the skills and experience of the remaining Directors
on the IFN Boards and those skill and experience areas that required strengthening and/or complementing. An external recruitment
adviser undertook a search on behalf of the IFN Boards, including focusing on candidates with energy industry and financial
expertise. Candidates were short-listed by the external recruitment adviser in conjunction with the IFN Boards, interviewed initially
by the external recruitment adviser and subsequently by the then current IFN Board Directors, followed by further referee and
background reviews undertaken by the external recruitment adviser. The Boards took advantage of the availability of a highly
qualified female candidate to start the process of introducing gender diversity to their membership.
The skills, experience and areas of expertise of the current IFN Board Directors are set out in the table below. The IFN Boards are
aiming to achieve a mix of skills and experience relating to the energy industry and associated areas of infrastructure, financing
and government and regulatory affairs.
Directors
Skills, experience, areas of expertise
Mike Hutchinson
Doug Clemson
Philip Green
Fiona Harris
Ross Rolfe
Miles George
Engineering, communications, transportation, government, regulation, infrastructure, energy networks,
wind energy
Accounting, corporate and project financing, power development, construction and generation,
transportation, infrastructure projects
Engineering, accounting, global utilities, renewable energy and infrastructure
Commerce, accounting, governance, energy utilities, resources, mining exploration and development
Energy generation (including renewable generation), development and financing, government, energy
retail, infrastructure, resources, manufacturing
Engineering, renewable energy development, financing, infrastructure
Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board, its Committees
and individual Directors.
The Nomination & Remuneration Committee undertook its annual review of the membership and performance of the IFN Boards,
their respective Committees and individual Directors. Recommendations were subsequently made to the IFN Boards. Individuals
do not participate in the review of their own performance, nor participate in any vote regarding their election, re-election or
Committee membership. In view of the recent changes to the Boards’ composition, the next review will be undertaken in late-2012.
In relation to Directors who are due for re-election at the Annual General Meeting, the Nomination & Remuneration Committee
provides a recommendation to the IEL and IEBL Boards.
For new Directors, induction arrangements make available to the new Director sufficient information and advice to allow them
to participate fully and actively in Board decision-making at the earliest opportunity.
35
corporate governance statement
ASX PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAkING
Companies should actively promote ethical and responsible decision-making
Code of Conduct
Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code as to:
— the practices necessary to maintain confidence in the company’s integrity
— the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
— the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
The IFN Boards have 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 Infigen’s activities;
and
— employees are aware of their responsibilities to Infigen under their contract of employment and act in the interests of Infigen,
including in an ethical and professional manner.
The Code of Conduct requires Directors and employees, among other things, to:
— avoid conflicts of interest between their personal interests and those of Infigen and its securityholders;
— not take advantage of opportunities arising from their position for personal gain or in competition with Infigen; and
— comply with the Securities Trading Policy and other corporate policies.
The Code of Conduct requires Directors and employees to report any actual or potential breach of legal requirements, the Code of
Conduct or other Infigen policies. Infigen promotes and encourages ethical behaviour and provides protection for those who report
violations. A summary of the Code of Conduct is available on Infigen’s website.
Infigen recognises that it has a number of legal and other obligations to non-securityholder stakeholders, including employees,
financiers, suppliers and the broader community. The objectives of the Code include assuring all stakeholders that Infigen will
conduct its affairs in accordance with ethical values and practices. The Code of Conduct specifically requires all employees to act
lawfully, diligently, fairly and with honesty, integrity and respect.
Infigen aims to provide a work environment in which all employees may excel regardless of race, religion, age, disability, gender,
sexual preference or marital status. In this regard, Infigen maintains policies relating to workplace practices, including occupational
health and safety.
Securities Trading Policy
The IFN Boards have adopted a Securities Trading Policy which regulates the manner in which Directors and employees may 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 Infigen.
The policy specifies trading windows as the periods during which trading in IFN securities can occur. Trading is prohibited despite a
window being open if the relevant person is in possession of non-public price-sensitive information regarding Infigen. The CEO and
other key management personnel are required to pre-notify the Company Secretary (who in turn notifies the Chair) of any proposed
trading by them in IFN securities, as well as the details of any subsequently completed trades. All trading by Directors in IFN
securities is advised to the market in accordance with the Listing Rules.
A summary of Infigen’s Securities Trading Policy is available on Infigen’s website.
Diversity Policy
Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or a summary of that
policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity
and for the board to assess annually both the objectives and progress in achieving them.
The IFN Boards have adopted a Diversity Policy which includes requirements for Infigen to establish measurable objectives for
achieving gender diversity and to assess annually both the objectives and progress in achieving them. During preparation of the
policy, the Board and management actively sought input from all employees to help define the meaning and value of diversity as it
related to Infigen.
At Infigen, we respect those differences that people bring to the organisation that have an influence on individual identities and
perspectives, including gender, ethnicity, religious beliefs, age, sexuality, disability and family responsibilities. We aim to promote
a culture that encourages diversity, where our employees benefit from exchanging ideas and learning from each other in order to
capture the benefits of diverse backgrounds, experiences and perspectives.
Infigen is developing strategies and programs to monitor and promote diversity within the workplace. Processes will also be
implemented to monitor, review and report to the Nomination & Remuneration Committee and the IFN Boards regarding diversity
within Infigen.
A summary of the Diversity Policy is available on Infigen’s website.
36
InfIgen energy AnnuAl report 2011
Recommendation 3.3: Companies should disclose in each annual report the measurable objectives for achieving gender
diversity set by the board in accordance with the diversity policy and progress towards achieving them.
The IFN Diversity Policy includes requirements for Infigen to establish measurable objectives for achieving gender diversity.
Infigen will report the measurable objectives for achieving gender diversity and the progress towards achieving those objectives
in its 2012 Annual Report.
Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the board.
The relevant information for Infigen as at the date of this report is as follows:
Women employees within Infigen
Women in senior executive positions
Women on the IFN Boards
Proportion
24%
10%
17%
Recommendation 3.5: Companies should provide the information indicated in the Guide to reporting on Principle 3.
The information indicated in the Guide to reporting on Principle 3 has been included in this Corporate Governance Statement
other than in relation to the measurable objectives for achieving gender diversity and the progress towards achieving those
objectives. This information will be reported in Infigen’s 2012 Annual Report.
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 Committee
Recommendation 4.1: The board should establish an audit committee
The IFN Boards have each established an Audit, Risk & Compliance Committee. These are responsible for advising their respective
Board on internal controls and appropriate standards for the financial management of Infigen. In practice the Committees generally
hold concurrent meetings. The IFN Boards have delegated the responsibility for overseeing the establishment and maintenance
of Infigen’s system of internal control to the Audit, Risk & Compliance Committees.
The Committees oversee the financial reporting process, the systems of internal control and risk management, the audit process and
Infigen’s processes for monitoring compliance with laws and regulations.
The Audit, Risk & Compliance Committees undertake reviews of business risks to Infigen through its risk management processes
aimed at ensuring risks are identified, assessed and properly managed. The Committees also monitor compliance by Infigen with
its various licensing and other obligations, including specific obligations associated with managed investment scheme requirements.
On behalf of the IFN Boards, the Committees review the competence of the external auditor and any non-audit services proposed to
be provided to Infigen by the external auditor to ensure external audit independence is maintained.
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
— has at least three members.
Throughout the 2011 financial year, each Audit, Risk & Compliance Committee of the IFN Boards comprised only Non-Executive
Directors, with a majority being Independent Directors. The Chair of the Committees, Mr Clemson, was not the Chair of the
IFN Boards.
Up until 18 November 2010, the Committee had at least three members. Following the retirement of a Committee member, from
18 November 2010 to 23 February 2011, the Committee only had two members. A review was subsequently undertaken by the IFN
Boards and on 23 February 2011 an additional Non-Executive Director was appointed to each Audit, Risk & Compliance Committee.
On 21 June 2011, a further Independent Director was appointed to each Committee. Each Committee currently comprises four
Non-Executive Directors, with three being Independent Directors.
There were nine formal Audit, Risk & Compliance Committee meetings held during the 2011 financial year. All Committee members
attended each meeting whilst they were members of the Committee.
All Committee members possessed the requisite financial expertise and experience necessary to undertake the responsibilities of
the Audit, Risk & Compliance Committees. All members have an understanding of the energy industry. Three members possess
accounting qualifications. Further details of the experience and qualifications of each Committee member are set out in the
Directors’ Report.
37
corporate governance statement
Recommendation 4.3: The audit committee should have a formal charter
The IFN Boards have adopted a Charter for each of the Audit, Risk & Compliance Committees that sets out the role and
responsibilities, composition, structure, membership requirements and other relevant procedures for the Committees. A summary
of the Charter is available in the Corporate Governance section on Infigen’s website.
The Committees meet periodically and report to the IFN Boards following each Committee meeting, including in respect of
recommendations of the Committees that require IFN Board consideration.
Audit Governance
Infigen’s external auditor is PricewaterhouseCoopers, appointed by securityholders at the 2006 Annual General Meeting. 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 for the 2011 financial year was Darren Ross and the current audit review partner is Michael O’Donnell.
The external auditor routinely attends 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. The Committees’ Chair liaises with the auditor outside formal meetings. 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 it has maintained its
independence and has complied with applicable independence standards. The 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 Annual Report.
Restrictions on non-audit services by the external auditor
The external auditor is not permitted to carry out certain types of non-audit services for Infigen, 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.
For all other non-audit services, any use of the external audit firm must 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 invoiced by the external auditor in respect of each of the two most recent financial years
for audit and other services is provided in Note 9 accompanying the Financial Statements in the Annual Report.
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InfIgen energy AnnuAl report 2011
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
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.
Infigen has adopted a Continuous Disclosure Policy which is periodically reviewed. That policy aims to ensure that all
securityholders and potential investors have equal and timely access to material information concerning Infigen unless it falls
within the scope of the exemptions contained in Listing Rule 3.1A.
A Disclosure Committee comprised of the CEO and other senior managers operates pursuant to the Continuous Disclosure
Policy. In addition, the IFN Boards are actively and frequently involved in discussing disclosure obligations and reviewing
disclosure material in respect of significant Infigen matters. Each Board meeting includes explicit consideration of any
potentially disclosable information.
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 that is or may be
material, making disclosures to the ASX and issuing media releases and other written public statements on behalf of Infigen.
From time to time Infigen conducts analyst and investor briefings and in these situations the following protocols apply:
— no price sensitive information will be disclosed at those 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 other
than through an appropriate ASX/market announcement; and
— if any price sensitive information is inadvertently disclosed, it will be immediately released to the ASX/market and placed
on Infigen’s website.
A summary of the Continuous Disclosure Policy is available in the Corporate Governance section on Infigen’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
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.
Infigen does not currently have a formal communications policy, however an extensive program of information is made available
to securityholders and potential investors throughout the year, including via ASX/market releases, direct mailing, electronic alerts,
briefings, presentations and via Infigen’s website. A summary of a policy will be available on Infigen’s website when completed.
Notwithstanding, consistent with Infigen’s Continuous Disclosure Policy, Infigen is committed to communicating with
its securityholders effectively and promptly to provide ready access to information relating to Infigen. Infigen’s website
(www.infigenenergy.com) provides access to information for securityholders and other potential investors, including:
— the Board, management and corporate governance framework and policies;
— the portfolio of operating assets and development pipeline;
— copies of all market announcements and media releases from Infigen;
— Annual Reports, other half and full year financial reporting, and relevant investor information regarding distributions and taxation;
— information regarding sustainability and renewable energy, including our commitment to safety, the environment and the
communities in which we participate;
— a link to the website of Infigen’s security registry, Link Market Services Limited; and
— a subscriber facility where participants receive updated information alerts regarding Infigen.
Infigen 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 of detailed information in respect of the major
achievements, financial results and strategic direction of Infigen.
Advance notice of significant group briefings and details regarding the various methods to access and participate in these briefings
are circulated broadly. Records are kept in relation to investor and analyst briefings.
Securityholders are encouraged to attend and participate in general meetings of Infigen, particularly the Annual General Meeting.
Infigen provides securityholders with details of proposed meetings and meeting materials well in advance of the relevant dates.
Infigen’s external auditor attends the Annual General Meeting and is 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.
39
corporate governance statement
ASX PRINCIPLE 7: RECOGNISE AND MANAGE RISk
Companies should establish a sound system of risk oversight and management and internal control.
Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks
and disclose a summary of those policies.
Infigen has adopted a Risk Management Policy consistent with International Standard ISO 31000. Infigen is committed to ensuring
that its system of risk oversight, management and internal control is consistent with its business strategy and sound commercial
practice. Infigen aims to ensure its culture and processes facilitate realisation of Infigen’s business objectives in tandem with
appropriate identification and management of business risks.
In relation to occupational health and safety risks, Infigen has established regional safety and sustainability committees to ensure
implementation of appropriate safety procedures and a system of ongoing environmental and safety improvement programs.
The IFN Boards are ultimately responsible for overseeing and managing the material risks of Infigen. The Audit, Risk & Compliance
Committees assist the Boards in this role. In accordance with their Charters, the role of the Audit, Risk & Compliance Committees
includes reviewing the system for identifying, managing and monitoring the key risks of Infigen and obtaining reports from the Risk
Manager and other senior managers regarding the status of any key risk exposures or incidents. This enables the Committees to
ensure the IFN Boards are informed of all material business risks. The Audit, Risk & Compliance Committees have also implemented
a robust internal audit program.
A summary of Infigen’s Risk Management Policy is available on Infigen’s website.
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.
Infigen’s Risk Manager is responsible for the development and maintenance of an Enterprise Risk Management (ERM) framework
consistent with International Standard ISO 31000. The Audit, Risk & Compliance Committees receive routine and exception reports
on material business risks. The Risk Management Policy and ERM framework define the processes and responsibilities for managing
business risks. As part of the ERM framework, all senior managers prepare and maintain functional risk registers. A principal aim of
the ERM framework is to engage management to accept direct accountability for the identification and management of the business
risks and the corresponding internal controls within their areas of responsibility. Senior managers regularly monitor the effectiveness
of the controls implemented to manage the business risks identified.
The material risks for Infigen’s business, including operational, financial and strategic risks, are listed within an over-arching Top Risks
register for the group. This Top Risks register is populated by an assessment of the business risks identified within the functional
risk registers, project specific registers (eg. construction projects) and site specific risk registers for operating assets. These material
business risks are actively monitored and managed. The Top Risks register is reviewed and updated by the Risk Manager and a senior
management committee. The updated risk register is subsequently reported to and reviewed by the Audit, Risk & Compliance
Committees. This process involves confirmation of the effectiveness of Infigen’s management of its material business risks.
Internal Audit
The IFN Boards have overall responsibility for Infigen’s systems of internal control, supported by the Audit, Risk & Compliance
Committees and management. The IFN Boards and Committees are assisted by Infigen’s Internal Audit function in assessing the
adequacy of the internal control system. The Audit, Risk & Compliance Committees have adopted a Charter for the Internal Audit
function.
On an annual basis, and following a risk-based assessment of the group, the Internal Audit Manager prepares and presents
an Internal Audit Plan to the Audit, Risk & Compliance Committees. The annual Internal Audit Plan aims to review the adequacy
and effectiveness of the relevant internal control systems identified in the plan. Following completion of each Internal Audit
review undertaken throughout the year, the Internal Audit Manager presents a report of the findings and recommendations at
the subsequent meeting of the Audit, Risk & Compliance Committees. The Internal Audit Manager regularly liaises with the
external auditor and also provides copies of Internal Audit reports to the external auditor.
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.
The CEO and CFO have provided written assurance to the IFN Boards 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 during the 2011 financial year. The written assurance is based
on senior management reviews and sign-off, as well as enquiry by the CEO and CFO as appropriate.
40
InfIgen energy AnnuAl report 2011
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.
Information regarding the policies and principles which are applied to determine the nature and amount of remuneration paid
to the Directors and management of Infigen are set out in detail in the Remuneration Report.
Remuneration Committee
Recommendation 8.1: The Board should establish a remuneration committee
The IEL Board has established a Nomination & Remuneration Committee. The Committee met nine times throughout the 2011
financial year.
The members of the Nomination & Remuneration Committee and their attendance at Committee meetings are listed in the
Directors’ Report.
The IEL Board has adopted a Charter for the Nomination & Remuneration Committee that sets out the Committee’s roles and
responsibilities, composition, membership requirements and operational procedures. A summary of the Charter is available
on Infigen’s website. Further information regarding the responsibilities of the Committee is outlined in the response to
Recommendation 2.4.
Recommendation 8.2: The remuneration committee should be structured so that it:
— consists of a majority of independent directors
— is chaired by an independent chair
— has at least three members.
Throughout the 2011 financial year, the IEL Nomination & Remuneration Committee was composed solely of Independent
Directors and was chaired by an Independent Director. During the 2011 financial year, the Committee held nine meetings.
Up until 18 November 2010, the Committee had at least three members. Following the retirement of the prior Chair of the
Committee, from 18 November 2010 to 4 August 2011, the Committee only had two members. On 4 August 2011, a further
Independent Director was appointed to the Committee. The Committee currently comprises three Independent Directors.
Recommendation 8.3: Companies should clearly distinguish the structure of Non-Executive Directors’ remuneration from
that of Executive Directors and senior executives
The remuneration structure and amounts paid to Non-Executive Directors, the Managing Director and senior executives for the
2011 financial year are set out in detail in the Remuneration Report.
Non-Executive Directors are not provided with retirement benefits, other than statutory superannuation, and do not receive
options or other equity incentives or bonus payments.
41
DIrectors’ report
In respect of the year ended 30 June 2011, the Directors submit the following report for the Infigen Energy group (Infigen).
DIRECTORS
The following people 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), during the whole of the financial year and up to
the date of this report:
— Michael Hutchinson
— Douglas Clemson
— Miles George
The following people were appointed as Directors of IEL, IEBL and IERL during the financial year and continue in office at the date
of this report:
— Philip Green (appointed 18 November 2010)
— Fiona Harris (appointed 21 June 2011)
The following people were Directors of IEL, IEBL and IERL from the beginning of the financial year until their resignation/retirement:
— Graham Kelly (resigned on 12 November 2010)
— Anthony Battle (retired on 18 November 2010)
FURTHER INFORMATION ON DIRECTORS
The particulars of the Directors of Infigen at or since the end of the financial year and up to the date of the Directors‘ Report are set
out below.
Name
MICHAEL HUTCHINSON
Non-Executive Chairman of IEL,
IEBL and IERL
Appointed to IEL, IEBL and IERL
on 18 June 2009
Member of the Audit, Risk &
Compliance Committee
Chairman of the Nomination &
Remuneration Committee
DOUGLAS CLEMSON
Non-Executive Director of IEL,
IEBL and IERL
Appointed to IEL and IERL
on 9 September 2005
Appointed to IEBL on
14 September 2005
Chairman of the Audit, Risk &
Compliance Committee
Member of the Nomination &
Remuneration Committee
Particulars
Mike was appointed an independent non-executive director of Infigen Energy in
June 2009 and subsequently elected Chairman in November 2010. He is a member
of the Audit, Risk & Compliance Committee and Chairman of the Nomination &
Remuneration Committee.
Mike was formerly an international transport engineering consultant and has extensive
experience in the transport and communications sectors, including as a senior official
with the Australian Government.
Mike is currently an independent non-executive director of the Australian Infrastructure
Fund Ltd. Mike has previously been an independent non-executive director of EPIC
Energy Holdings Ltd, Hastings Funds Management Ltd, Westpac Funds Management
Ltd, Pacific Hydro Ltd, OTC Ltd, HiTech Group Australia Ltd, the Australian Postal
Corporation and the Australian Graduate School of Management Ltd.
Doug 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
operation 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.
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InfIgen energy AnnuAl report 2011
Name
PHILIP GREEN
Non-Executive Director of IEL,
IEBL and IERL
Appointed to IEL, IEBL and IERL
on 18 November 2010
Member of the Audit, Risk &
Compliance Committee
FIONA HARRIS
Non-Executive Director of IEL,
IEBL and IERL
Appointed to IEL, IEBL and IERL
on 21 June 2011
Member of the Audit, Risk &
Compliance Committee
Member of the Nomination &
Remuneration Committee
MILES GEORGE
Executive Director of IEL, IEBL
and IERL
Appointed to IEL, IEBL and IERL on
1 January 2009
Particulars
Philip was appointed a non-executive director of Infigen Energy in November 2010.
He is a member of the Audit, Risk & Compliance Committee.
Philip is a Partner of The Children’s Investment Fund Management (UK) LLP (TCI),
a substantial securityholder of Infigen Energy. Philip joined TCI in 2007 and his
responsibilities include TCI’s global utility, renewable energy and infrastructure
investments.
Prior to joining TCI, Philip led European Utilities equity research at Goldman Sachs,
Merrill Lynch and Lehman Brothers over a 12 year period. Philip is a UK Chartered
Accountant (ACA) and has a Bachelor of Science (Hons) in Geotechnical Engineering.
Fiona was appointed an independent non-executive director of Infigen Energy in
June 2011. Fiona is a member of the Audit, Risk & Compliance Committee and
since the end of the period has also been appointed a member of the Nomination
& Remuneration Committee.
Fiona is Chairman of Barrington Consulting Group and National Director of the
Australian Institute of Company Directors. For the past sixteen years she has been
a professional non-executive director.
Fiona is currently a Director of Altona Mining Limited, Aurora Oil & Gas Limited and
Sundance Resources Limited. Fiona has previously been a Director of listed companies
Territory Resources Limited and Vulcan Resources Limited.
Fiona holds a Bachelor of Commerce degree and is a Fellow of the Institute of
Chartered Accountants in Australia and the Australian Institute of Company Directors.
Miles is the Managing Director of Infigen Energy, having previously been the Chief
Executive Officer since 2007. Miles has over 20 years experience in the infrastructure
and energy sectors, and in particular renewable energy development and investment.
Since 2000 Miles has been involved in development and investment in wind energy
projects in Australia, including a key role in the development of Infigen’s first wind farm
at Lake Bonney in South Australia.
Miles jointly led the team which established the business now known as Infigen Energy
in 2003. Subsequently he jointly led the team which structured and implemented the
Initial Public Offer and listing of Infigen’s business on the ASX in 2005.
Following listing, Miles continued to work on the development and financing of Infigen’s
wind farm investments in Australia, the US and Europe. He was subsequently appointed
as Chief Executive in 2007 and Managing Director in 2009.
Miles holds degrees of Bachelor of Engineering and Master of Business Administration
(Distinction) from the University of Melbourne.
43
DIrectors’ report
DIRECTORS’ INTERESTS IN IFN STAPLED SECURITIES
One share in each of IEL and IEBL and one unit in IET have been stapled together to form a single stapled security, tradable on the
Australian Securities Exchange under the ‘IFN’ code. IERL is the Responsible Entity of IET. The table below lists the current and former
Directors of IEL, IEBL and IERL during the financial year as well as showing the relevant interests of those Directors in IFN stapled
securities during the financial year.
Current
Directors
Role
IFN Stapled Securities Held1
Balance
1 July 2010
Acquired during
the year
Sold during
the year
Balance
30 June 2011
M Hutchinson2
D Clemson
P Green3
F Harris4
M George
Independent Chairman
Independent Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Executive Director
0
140,000
n/a
n/a
500,000
Former
Directors
G Kelly5
A Battle6
Role
Independent Chairman
Independent Non-Executive Director
10,000
42,634
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
140,000
0
0
500,000
n/a
n/a
1 If the person was not a Director for the whole period, movements in securities held relates to the period whilst the person was a Director.
2 M Hutchinson appointed as a Non-Executive Director of IEL, IEBL and IERL on 18 June 2009 and subsequently elected as Chairman of each entity on
12 November 2010.
3 P Green appointed as a Non-Executive Director of IEL, IEBL and IERL on 18 November 2010. Mr Green is a Partner of The Children’s Investment Fund
Management (UK) LLP which has a substantial shareholding of IFN securities. Mr Green has advised Infigen that he does not have a relevant interest in those
IFN securities.
4 F Harris appointed as a Director of IEL, IEBL and IERL on 21 June 2011.
5 G Kelly resigned as Chairman and a Director of IEL, IEBL and IERL on 12 November 2010.
6 A Battle retired as a Director of IEL, IEBL and IERL on 18 November 2010.
DIRECTORS’ MEETINGS
The number of Infigen Board meetings and meetings of standing Committees established by the Infigen Boards held during the year
ended 30 June 2011, and the number of meetings attended by each Director, are set out below.
Board Meetings
Committee Meetings
IEL
IEBL
IERL
Current Directors
M Hutchinson
D Clemson
P Green
F Harris
M George
Former Directors
G Kelly
A Battle
A
17
17
12
1
17
2
3
B
17
17
12
1
17
4
5
A = Number of meetings attended.
A
17
17
12
1
17
2
3
B
17
17
12
1
17
4
5
A
17
17
11
1
17
2
3
B
17
17
12
1
17
4
5
Audit, Risk
& Compliance
B
A
IEL Nomination
& Remuneration
B
A
9
9
2
1
n/a
n/a
4
9
9
2
1
n/a
n/a
4
9
9
n/a
n/a
n/a
2
3
9
9
n/a
n/a
n/a
3
3
B = Number of meetings held during the time the Director held office or was a member of the committee during the year.
Additional meetings of committees of Directors were held during the year, but these 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.
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InfIgen energy AnnuAl report 2011
COMPANY SECRETARIES
The names and particulars of the Company Secretaries of Infigen at or since the end of the financial year are set out below.
Name
DAvID RICHARDSON
Company Secretary of IEL, IEBL
and IERL
Appointed 26 October 2005
Particulars
David is the Company Secretary of Infigen Energy and is responsible for the company
secretarial, risk management, insurances, corporate compliance and internal audit
functions, as well as corporate governance across the group.
David joined Infigen Energy as Company Secretary in 2005. David was previously
a Company Secretary within the AMP Group, including AMP Capital Investors,
Financial Services and Insurance divisions, as well as prior financial services sector
and regulator positions.
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.
CATHERINE GUNNING
Alternate Company Secretary of IEL,
IEBL and IERL
Appointed 18 June 2009
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 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.
Catherine is currently on maternity leave.
PRINCIPAL ACTIvITIES
Infigen Energy is a specialist renewable energy business with interests in a pipeline of Australian renewable energy developments
and 24 operating wind farms across Australia and the United States. With a total installed capacity in excess of 1,600 MW (on an
equity interest basis), the business currently generates over 4,200 GWh of renewable energy per year.
Infigen has six wind farms in Australia with a total capacity of 550 MW and plans to expand its renewable energy business through
the delivery of projects from its Australian development pipeline. As a fully integrated renewable energy business in Australia,
Infigen develops, builds, owns and operates energy generation assets and directly manages the sale of the electricity that is
produced to a range of customers in the wholesale market.
Infigen’s US business comprises 18 wind farms with a total installed capacity of 1089 MW (on an equity interest basis) and includes
an asset management business.
DISTRIBUTIONS
In respect of the half year period ended 31 December 2010, the Infigen Board declared an FY11 interim distribution of 1 cent
per stapled security that was paid on 17 March 2011.
On 14 June 2011, Infigen advised that no FY11 final distribution would be paid and that distributions would be suspended for
FY12 and FY13. This initiative will maximise the capital available to Infigen to fund future opportunities.
Further details regarding distributions paid by Infigen are set out in Note 24 to the Financial Statements.
REvIEw OF OPERATIONS
During the year ended 30 June 2011, based on Infigen’s economic interest, Infigen recorded revenues from continuing operations
of $285.3 million compared to $282.6 million in FY10, representing an increase of approximately 1%.
Infigen recorded a net loss for FY11 of $61.0 million compared to a net loss for FY10 of $74.4 million.
A further review of the operations of Infigen and the results of those operations for the year ended 30 June 2011 is included in
the attached Financial Statements and accompanying Notes.
CHANGES IN STATE OF AFFAIRS
In the first quarter of FY11, construction commenced on Infigen’s sixth wind farm in Australia, the 48 MW Woodlawn Wind
Farm in New South Wales comprising 23 turbines. By 30 June 2011, all turbines had been erected and were undergoing the
commissioning process. Practical Completion for the wind farm is planned for the second quarter of FY12.
On 21 March 2011, Infigen completed a transaction with its joint venture development partner, National Power Partners (NPP),
in relation to the ownership of certain wind farm development projects in its Australian wind energy development pipeline.
Under the terms of the transaction, Infigen acquired the remaining 50% interest in four development projects from NPP that it
did not already own (Flyers Creek, Bodangora, Cherry Tree, Woakwine) and sold its 50% interest in the Glen Innes development
project and approximately 100 MW of other development projects to NPP which were previously being jointly developed.
45
DIrectors’ report
In June 2011, all conditions precedent under a $55 million project financing facility for the Woodlawn Wind Farm were satisfied
and draw down under the facility commenced.
On 29 June 2011, Infigen disposed of its portfolio of 12 wind farms in Germany for a total enterprise value of €154.6 million.
Other changes in the state of affairs of the consolidated entity are referred to in the Financial Statements and accompanying Notes.
SUBSEqUENT EvENTS
On 6 July 2011, $154,264,000 of Global Facility debt was repaid in relation to the disposal of Infigen’s German 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, Infigen has complied with all significant environmental regulations applicable to its operations.
INDEMNIFICATION AND INSURANCE OF OFFICERS
Infigen has agreed to indemnify all Directors and Officers against losses incurred in their role as Director, Alternate Director, Secretary,
Executive or other employee of Infigen 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 Infigen will meet the full
amount of any such liabilities costs and expenses (including legal fees). Infigen has not been advised of any claims under any of the
above indemnities.
During the financial year Infigen paid insurance premiums for a Directors’ and Officers’ liability insurance contract which provides
cover for the current and former Directors, Alternate Directors, Secretaries and Executive Officers of Infigen 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 INFIGEN
No person has applied for leave of the Court to bring proceedings on behalf of Infigen, or to intervene in any proceedings to which
Infigen is a party, for the purpose of taking responsibility on behalf of Infigen for all or part of those proceedings. Infigen was not
a party to any such proceedings during the year.
FORMER PARTNERS OF THE AUDIT FIRM
No current Directors or Officers of Infigen have been Partners of PricewaterhouseCoopers at a time when that firm has been the
auditor of Infigen.
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 9 to the Financial Statements.
AUDITOR’S INDEPENDENCE DECLARATION
Infigen’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 to the nearest thousand dollars, unless otherwise indicated.
46
InfIgen energy AnnuAl report 2011
REMUNERATION REPORT
Dear Securityholder,
We are pleased to present the 2011 Remuneration Report.
Since the internalisation of Infigen and its transition to a standalone operating business, your directors have continued to
develop the alignment of executive and senior management pay with securityholder interests.
It continues to be appropriate to reward key executives and senior management with market-competitive packages of fixed
remuneration plus at-risk components that reflect both short term achievements and long-term Group performance.
The alignment of executive and senior management remuneration with securityholder interests meant that there was again no
vesting or payout during the year for any Long Term Incentives (LTI) granted under the Performance Rights and Options (PR&O)
plan. Senior executive base salaries were not increased in FY11. Non-Executive Directors’ fees have been held constant. Senior
management numbers were reduced.
Further progress has been made towards embedding a performance-based culture. Six-monthly performance reviews link
incentives to key financial, strategic and operational performance indicators.
Although the current security price does not adequately reflect the intrinsic value of the business, we believe that providing
a material part of executive and senior management remuneration with the potential to acquire Infigen securities is appropriate.
Securityholder and executive interests are better aligned. But we are also mindful of dilution. Fewer equity-related grants were
made in FY11 than in prior years.
Equity-related grants made to executives and senior managers must be reported as part of executives’ remuneration, and expensed.
This is despite receipt being wholly at risk, deferred for 3-4 years and vesting remaining dependent on the performance of the
Group. This statutory reporting means that an executive’s reported remuneration will often significantly exceed what was actually
received. This year we have provided supplementary commentary and tables to provide a clearer explanation of executives’
“take-home pay” in addition to the statutory disclosures.
Your directors are currently further reviewing the remuneration structure, drawing advice from a recently appointed independent
adviser. We are mindful of market trends in executive remuneration whilst also ensuring that remuneration structures serve the
business as an effective incentive, reward and retention tool in an increasingly competitive employment market in the renewable
energy sector.
Looking ahead, we have decided to change the variable pay components for FY12. There will be some rebalancing of long and
short term incentive elements. Half of executive and senior managements’ FY12 Short Term Incentive (STI) payments will be
expressed in securities and deferred for 12 months (subject to necessary securityholder approval at the 2011 AGM). We will then
settle deferred STI in securities under the terms of the PR&O plan. This deferral and settlement in securities will provide further
alignment between executive remuneration and securityholder interests.
We have also decided to cap any future executive and senior management separation benefits to a limit of 12 months’ base
remuneration. We will, however, need to seek securityholder approval for potential rights in excess of this limit that have
already accrued as a result of prior grants and contract arrangements.
We hope you find this year’s Report to be useful. As always, we welcome feedback on ways to clarify and improve the
information provided.
Yours faithfully
Michael Hutchinson
Chairman
Nomination & Remuneration Committee
47
DIrectors’ report
Remuneration Report – Executive Summary
The Nomination & Remuneration Committee has:
— monitored the implementation of a Human Resources Plan and alignment of the organisation structure;
— reviewed senior management achievement against FY10 Key Performance Indicators (KPIs);
— supervised the setting of FY11 KPIs for Key Management Personnel (KMP) and other senior management;
— monitored internal and external remuneration relativities;
— monitored the performance management program;
— approved short and long-term incentive opportunities for senior management;
— reviewed Board/Committee and Managing Director performance;
— evaluated workplace diversity and implemented a workplace Diversity Policy;
— retained Guerdon Associates as its adviser; and
— assessed legislative and other proposed regulatory changes to determine the effect on potential termination and retirement
benefits payable to employees.
Significant matters to note for director, executive and senior management FY11 remuneration are:
— remuneration of KMP was not increased during the year;
— no increase in fees was paid to non executive directors;
— no LTI vested;
— deferred payments were put in place to retain selected senior management and KMP;
— FY11 LTI grants were awarded to fewer people than for FY09 and FY10; and
— senior management numbers were reduced.
Remuneration Framework
Infigen’s remuneration framework aims to ensure remuneration:
— is commensurate with an individual’s contribution, position and responsibilities;
— is fair and reasonable given market standards;
— is linked with Infigen’s strategic goals and business performance;
— rewards those employees who deliver consistently high performance;
— attracts and retains high performing individuals; and
— is aligned with the interests of securityholders.
48
InfIgen energy AnnuAl report 2011
A. REMUNERATION OF NON-EXECUTIvE DIRECTORS
Non-Executive Director fees are determined by the Infigen Boards within the aggregate amount approved by securityholders.
The approved aggregate fee pool for IEL and IEBL is $1,000,000.
The fee paid to Directors varies with individual Board and committee responsibilities. Non-Executive Director fees are reviewed
periodically. Fees were not adjusted during the year.
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 or retirement benefits.
Board/Committee Fees
Aggregate annual fees payable to Non-Executive Directors during the year ended 30 June 2011 are set out below.
Board/Committee
Infigen Boards
Infigen Audit, Risk & Compliance Committees
IEL Nomination & Remuneration Committee
Role
Chairman
Non-Executive Director
Chairman
Member
Chairman
Member
Fee (pa)
$210,000
$125,000
$18,000
$9,000
$12,000
$6,000
Remuneration of Non-Executive Directors for the years ended 30 June 2010 and 2011
The nature and amount of each element of fee payments to each Non-Executive Director of Infigen for the years ended 30 June 2010
and 2011 are set out in the table below.
Non-Executive Directors
Year
M Hutchinson
D Clemson
P Green1
F Harris2
G Kelly3
A Battle4
Total Remuneration
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
Short-term
benefits
Fees
($)
Post-employment
benefits
Superannuation
($)
179,969
128,440
136,697
136,697
–
–
3,783
–
73,574
201,539
51,630
133,945
445,653
600,621
13,865
11,560
12,303
12,303
–
–
340
–
5,903
14,461
4,667
12,055
37,078
50,379
1 P Green was appointed a Non-Executive Director of Infigen Energy on 18 November 2010. Mr Green is a partner of The Children’s Investment Fund
Management LLP which is a substantial shareholder of Infigen Energy. Throughout FY11 Mr Green elected to receive no Director fees.
2 F Harris was appointed a Non-Executive Director of Infigen Energy on 21 June 2011.
3 G Kelly resigned as a Director on 12 November 2010.
4 A Battle retired as a Director on 18 November 2010.
Total
($)
193,834
140,000
149,000
149,000
–
–
4,123
–
79,477
216,000
56,297
146,000
482,731
651,000
49
DIrectors’ report
B. REMUNERATION OF SENIOR MANAGEMENT
The remuneration framework for the management team (including KMP) comprises three components:
— fixed pay;
— a Short Term Incentive, which is payment linked to achieving specified performance measured over a 12 month period; and
— a Long Term Incentive, which is payment linked to meeting specified performance hurdles over a 3 or 4 year period.
Fixed Pay
Fixed pay is cash salary and benefits, including superannuation, and, for some senior managers, a temporary and deferred payment
of cash. Infigen does not presently offer remuneration packaging other than superannuation salary sacrifice.
The temporary deferred pay was introduced in FY11 to either attract or retain specific personnel during a period of instability.
It applies to some Australian based KMP and senior managers. It does not apply to the Chief Executive Officer (CEO) or Chief
Operating Officer (COO). The deferred cash payment vests in February 2012, with a further payment to one senior manager vesting
in February 2013.
Fixed pay is benchmarked against industry peers. Market levels of remuneration are monitored on an annual basis, but there is
no requirement or expectation that any adjustments will be made to fixed pay.
The only adjustments to fixed pay in FY11 were to recognise changed responsibilities and accountabilities for some senior managers.
STI and LTI opportunities were expressed as a percentage of fixed remuneration. (The Board has decided that in future the three
components will be specified separately. That is, incentive payments will no longer be tied to the level of fixed pay. This will provide
for increased flexibility in aligning future remuneration amendments with Group performance and challenges).
Short Term Incentives (STIs)
The STI is an at-risk performance related component of remuneration. STIs are subject to performance and to the achievement
of key performance indicators (KPIs). KPIs are set annually and reviewed during the year. KPI objectives are set in alignment with
overall strategy, budget, and individual accountabilities.
KPIs for the Managing Director are determined by the Board.
The Board determines the aggregate amount of STI payments, the amount of the Managing Director’s STI payment, and reviews
proposed payments for key senior managers.
Financial goals determine 30% of the maximum KPI assessment and typically relate to keeping within tight cost budgets. Strategic
goals determine 20-30% of the KPI assessment. Operational goals determine 40-50% of the assessment.
An employee must meet a minimum performance standard before any STI is paid.
Much of the short term business performance of the Group depends heavily upon variable external conditions. These include wind
conditions and commodity market prices for electricity and renewable energy certificates. Therefore some KPIs are linked to short-term
organisational, process and systems improvements in order to reward success in creating the pre-conditions for long term value
creation. They include, for example, measures to reduce revenue volatility, to enhance the value of the development pipeline and to
optimise cash and debt management. These KPIs sit alongside others that measure safety, cost containment, budget achievement,
project delivery, and risk management.
Incentive payments have been paid annually in cash. From FY12 and beyond the Board has decided that a portion of STI payments
will be deferred for 12 months. The deferral will apply where individual amounts exceed a threshold (initially $50,000) and will be
50% of the STI amount. The deferred STI will be paid in IFN securities. Payment of the deferred STI will be subject to continued
employment and performance. The deferred payment will be forfeited if there is a materially adverse financial restatement.
The maximum STI opportunity for KMP, expressed as a percentage of base salary, is set out below.
KMP
Chief Executive Officer (CEO)
Chief Operating Officer (COO)
Chief Financial Officer (CFO)
General Manager Corporate Finance
Maximum STI
64%
57%
30%
30%
50
InfIgen energy AnnuAl report 2011
Long Term Incentives (LTIs)
KMP and senior managers in positions that directly affect the long term value of Infigen securities are eligible for LTIs.
LTIs are awarded as future rights to acquire IFN securities. The rights vest after 3 or 4 years, subject to performance hurdles.
The Managing Director’s grant is subject to securityholder approval on award.
The LTI rights granted to KMP in FY11 were based on the following proportions of base salary:
KMP
Chief Executive Officer (CEO)
Chief Operating Officer (COO)
Chief Financial Officer (CFO)
General Manager Corporate Finance
LTI
105%
77%
77%
30%
The number of rights granted is based on the LTI value, divided by a reference price for IFN securities. This is typically the volume
weighted average ASX market closing price in the last five trading days of the prior financial year.
As in prior years, LTI grants comprise two equal tranches, each subject to a different performance test. Vesting of each tranche
is contingent on achieving the relevant performance hurdle.
The two performance hurdles are Relative Total Shareholder Return (TSR) and a financial performance test. The financial
performance test is a test of growth in the ratio of earnings before interest, taxes, depreciation and amortisation (EBITDA)
to capital base.
Tranche 1
Tranche 2
Performance Rights
Relative TSR
EBITDA/Capital
Both hurdles are measured over a 3 year period. The performance period of the FY11 grant is 1 July 2010 to 30 June 2013.
Any rights that do not vest after 3 years may vest after 4 years, subject to a further re-test, after which unvested rights will lapse.
TSR performance condition: TSR measures the growth in the price of securities plus cash distributions notionally reinvested in
securities. In order for the Tranche 1 performance rights to vest, the TSR of IFN must outperform that of the median company in
the S&P/ASX 200 (excluding financial services and the materials/resources sector).
Tranche 1 performance rights will vest progressively as follows:
Infigen’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%
EBITDA/Capital Base performance condition: the annual target will be 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 IFN’s economic interest in all investments.
The annual target for FY11 has been set to reflect the performance expectations of Infigen’s business and prevailing market
conditions. The annual target for each subsequent financial year will be established by the Board no later than the time of the
release of Infigen’s annual financial results for the preceding financial year.
The prospective targets remain confidential to Infigen. However each year‘s target, and the performance against that target,
will be disclosed retrospectively.
The EBITDA/Capital Base performance condition rewards the management in sustaining and delivering capital efficiency
performance over an extended period.
51
DIrectors’ report
Relevant metrics for the previous five financial year periods are provided in the table below.
Closing security price
Revenue1 (m)
EBITDA from operations1 (m)
EBITDA to capital base2 (actual)
EBITDA to capital base2 (target)
30 June 2007
$1.95
$171.9
$126.5
n/a
n/a
30 June 2008
$1.645
$254.3
$193.0
n/a
n/a
30 June 2009
$1.15
$303.8
$215.2
0.31%
6.59%
30 June 2010
$0.715
$263.8
$171.9
9.24%
19.22%
30 June 2011
$0.35
$267.6
$167.1
(2.28%)
11.29%
1 Revenue and EBITDA from operations figures exclude the results of discontinued operations in the year of disposal and the year prior to disposal. 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. On 6 April 2010, the French asset portfolio was sold for a net loss on sale, including
interest rate swap settlements, foreign exchange losses realised and advisory costs, of $12.9 million. On 29 June 2011, the German asset portfolio was sold for
a net loss on sale of $31.1 million resulting in a further deleveraging of the business.
2 EBITDA to capital base measure used within the PR&O Plan established in FY09.
The Board has decided that from FY12 it will amend the Tranche 2 vesting hurdle to provide for progressive vesting of rights over
a performance range.
PR&O Plan rules: Performance rights and options are governed by the rules of the PR&O Plan that was approved by securityholders
in 2009. They provide that the Board may exercise discretion to accelerate the vesting of any performance rights or options awarded
in the FY11 grant in the event of a change in control of Infigen. The Board has decided that any exercise of this discretion will have
regard to performance and the nature of the relevant transaction.
Plan participants are prohibited from hedging their exposure to Infigen’s security price associated with the plan.
If sufficient total rights were to be granted for their potential vesting to become material relative to the 15% annual limit on the Board’s
authority to place securities without securityholder approval, the Board would seek specific securityholder approval.
Separation benefits
The Board has decided to limit any future separation benefits to a maximum of 12 months fixed remuneration. The terms of some prior
year LTI grants could lead to a contractual commitment to higher payments through accelerated vesting on retirement or redundancy.
Infigen will seek limited securityholder approval to address these cases.
Infigen Energy – Executive remuneration details
In accordance with the Corporations Act 2001, the following persons were key management personnel and/or the five highest paid
relevant group executives and/or company executives (Executives) of the Infigen Energy group during the financial year:
M George
G Dutaillis
C Baveystock
B Hopwood
D Griffin
D Richardson
G Dover
A George
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
General Manager Corporate Finance
General Manager Development
Company Secretary
Chief Financial Officer (resignation effective 31 December 2010)
General Manager, Energy Markets Australia (employment ceased on 13 May 2011)
TABLE 1: Actual remuneration received by Executives
The following table summarises the actual remuneration Executives received in FY11. Because no LTI grants vested in FY11 the
only remuneration actually received was in the form of cash payments, including salary, superannuation, STI and termination
benefits. This information shows more clearly the actual remuneration received. This is considerably less than the payments
shown in the statutory tables.
Executive
M George
G Dutaillis
D Richardson
New to FY11 Report
B Hopwood
D Griffin
C Baveystock
Year
FY11
FY10
FY11
FY10
FY11
FY10
FY11
FY11
FY11
Salary
($)
550,000
550,000
370,000
370,000
255,000
250,000
288,800
306,000
186,154
STI paid
in current
period
($)
224,180
–
148,185
–
58,725
–
82,649
81,091
–
Retention
($)
–
220,000
–
160,000
–
52,500
–
–
–
Super-
annuation
($)
15,199
14,461
15,199
14,461
15,199
14,461
15,199
15,199
13,733
Total
Equity
vested
actual
during remuneration
received
($)
the year
($)
–
–
–
–
–
–
–
–
–
789,379
784,461
533,384
544,461
328,924
316,961
386,648
402,290
199,887
52
InfIgen energy AnnuAl report 2011
TABLE 2: Statutory Remuneration Data of Executives for the years ended 30 June 2011 and 2010
The Statutory Remuneration Data table below shows accounting expensed amounts that reflect a portion of possible future
remuneration arising from prior and current year LTI grants.
Short-term employee benefits
Post
employ-
ment
benefits
Other
long-term
employee
benefits
Share-based
payments2,3
Executive
M George
G Dutaillis
D Richardson
Salary
$
550,000
550,000
370,000
370,000
255,000
250,000
Year
FY11
FY10
FY11
FY10
FY11
FY10
STI paid
in current
period
$
224,180
0
148,185
0
58,725
220,000
0
160,000
0
0
52,500
New to FY11 Report
B Hopwood4
D Griffin5
C Baveystock6
FY11
FY11
FY11
288,800
306,000
186,154
82,649
81,091
0
Retention
Payment1
$
0
Termin-
ation
Payments
$
0
Non
monetary
benefits
$
0
Total of
short-term
employee
benefits
$
774,180
Super-
annuation
$
15,199
Equity
settled
$
771,103
Cash
Total
Settled
$
$
0 1,571,115
LSL
accrual
$
10,633
9,178
12,876
6,174
6,606
4,172
647,215
397,652
336,552
95,819
95,917
0 1,440,854
943,912
0
0
0
0
0
0
0
887,187
431,349
417,050
513,450
472,410
200,351
770,000
518,185
530,000
313,725
302,500
14,461
15,199
14,461
15,199
14,461
0
0
0
0
0
0
0
0
371,449
387,091
186,154
15,199
15,199
13,733
7,772
947
464
119,030
69,173
0
FY11 1,955,954
594,830
FY11
FY10
FY11
FY10
304,365
42,888
173,654
185,000
370,000
0
301,731
0
160,000
0
0 2,550,784
89,728
39,298 1,452,777
0 4,132,587
0
0
0
0
474,542
173,654
692,172
530,000
13,284
7,231
11,399
14,461
0
-26,702
2,898
26,702
0 -502,931
6,174
336,552
0
0
0
0
461,124
210,485
200,640
887,187
0
0
0
0
0
0
0
0
0
127,289
0
205,441
0
0
0
0
0
0
0
Total
Remuneration
of current
Executives
Former
Executives
A George7
G Dover8
Total
Remuneration
including new
and Former
Executives
FY11 2,445,319
939,449
0
332,730
0 3,717,498
114,411
39,298
923,144
FY10
1,713,654
0
592,500
0
0 2,306,154
65,075
28,595 1,442,938
0 4,794,351
0 3,842,763
1 Retention payments were the final retention payments made in accordance with the separation agreement with B&B.
2 Share based payments includes Performance Rights and Options for FY09 Grant and Performance Rights only for FY10 and FY11 Grants.
3 When an employee ceases to participate in the PR&O Plan due to the termination of employment, a negative value for share based payments appears in FY11
due to the expense that was previously recognised in relation to these performance rights or options being reversed.
4 B Hopwood became a KMP on 1 February 2011.
5 D Griffin is a relevant group executive from 1 July 2010.
6 C Baveystock became a KMP on 14 March 2011.
7 A George was retrenched on 13 May 2011 following a restructure of the Australian Business Unit.
8 G Dover resigned effective 31 December 2010.
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DIrectors’ report
TABLE 3: Remuneration Components as a Proportion of Total Remuneration
The proportions of fixed remuneration to performance-based remuneration for FY11 are set out below.
Performance-based
remuneration
Executive
M George
G Dutaillis
B Hopwood
D Griffin
A George
D Richardson
C Baveystock
G Dover3
Fixed
remuneration1
Cash STI
Share-based Termination
Payments
payments2
37%
42%
61%
68%
69%
64%
100%
98%
14%
16%
16%
17%
9%
14%
0%
150%
49%
42%
23%
15%
-6%
22%
0%
-250%
28%
102%
Total
100%
100%
100%
100%
100%
100%
100%
100%
1 Fixed remuneration consists of salary, non-monetary benefits, superannuation and long service leave.
2 Share-based payments refer to the value of performance rights and options relating to IFN securities.
3 The termination payment shown in this table represent the percentage of all payments made to G Dover in FY11 and is not a percentage of annual salary.
G Dover‘s termination payment inclusive of statutory benefits was equal to 55% of his annual base salary at the date of termination.
54
InfIgen energy AnnuAl report 2011
TABLE 4: Value of Remuneration that Vests in Future Years
Remuneration amounts provided in the table 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 Payments’. The minimum value of remuneration that may vest is nil.
This year we have provided additional information to illustrate the difference in value of these LTI grants when comparing the
accounting value and the current market value. The accounting value relies upon the value of the security at the time the grant was
made. The accounting standards are used for the purpose of providing for the LTI liability within the financial statements.
The current market value demonstrates the deterioration in the grant value aligned to the decreased security price and is further
illustration of how Executive remuneration is aligned to the securityholder experience. It should also be observed that no securities
will vest if the performance hurdles are not met. In the event that the performance hurdle is not achieved the right to these securities
will lapse.
Maximum value of remuneration
which is subject to vesting
in accordance with AASB 2
‘Share Based Payments‘
Current market value of
remuneration which is subject
to vesting (VWAP 5 trading
days prior to 30 June 2011)
FY10
($)
646,555
646,555
336,209
336,209
100,863
100,863
0
95,819
95,819
FY11
($)
646,555
124,548
771,103
336,209
61,444
397,653
100,863
18,168
119,031
29,576
39,597
69,173
95,819
95,819
FY12
($)
138,670
166,977
305,647
72,109
82,375
154,484
21,633
24,357
45,990
39,651
53,086
92,737
20,551
20,551
FY13
($)
166,520
166,520
82,150
82,150
24,290
24,290
52,941
52,941
0
FY10
($)
168,682
168,682
106,331
106,331
31,899
31,899
0
30,304
30,304
FY11
($)
168,682
70,010
238,692
106,331
34,538
140,869
31,899
10,212
42,111
16,625
22,258
38,883
30,304
30,304
FY12
($)
38,617
93,860
132,477
24,343
46,304
70,647
7,303
13,691
20,994
22,289
29,840
52,129
6,938
6,938
FY13
($)
93,604
93,604
46,178
46,178
13,654
13,654
29,759
29,759
0
Executive
Grant
M George
G Dutaillis
B Hopwood
D Griffin
D Richardson
FY09
FY11
Total
FY09
FY11
Total
FY09
FY11
Total
FY10
FY11
Total
FY09
Total
Legacy Performance Rights
Performance rights granted in prior years (FY09 and FY10) were granted in the same 2-tranche structure with the same performance
hurdles as those granted in FY11.
No performance rights in relation to IFN securities vested or became exercisable in FY11. All performance rights held as at
30 June 2011 are unvested and are not exercisable.
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. This will be 31 December 2012 for Tranche 1
and 30 June 2012 for Tranche 2 for the FY09 grant; 30 June 2013 for the FY10 grant (both tranches) and 30 June 2014 for the FY11
grants (both tranches). Any performance rights which do not vest after each single retest period will then lapse.
Infigen no longer employs six employees who participated in the FY09 Grant and one employee who participated in the FY10 Grant.
Their performance rights under the FY09 and FY10 Grants have lapsed.
55
DIrectors’ report
TABLE 5: Outstanding Performance Rights
The table below provides details of outstanding performance rights relating to IFN securities that have been granted to Executives
(FY09, FY10 and FY11 Grants). The performance rights are valued as at the deemed grant date.
Granted
number
1,112,925
807,128
578,721
398,182
173,616
117,736
164,935
121,986
256,604
Grant date
27/03/2009
30/09/2010
27/03/2009
30/09/2010
27/03/2009
30/09/2010
27/03/2009
30/09/2010
30/09/2010
Value per
performance
right
($)
0.6255
0.5675
0.6255
0.5675
0.6255
0.5675
0.6255
0.5675
0.5675
Total value of
performance
rights granted
($)
696,135
458,045
361,990
225,968
108,597
66,815
103,167
69,227
145,623
Estimated vesting date
Tranche 2
Tranche 1
30/06/2012
31/12/2011
30/06/2013
30/06/2013
31/12/2011
30/06/2012
30/06/2013
30/06/2013
31/12/2011
30/06/2012
30/06/2013
30/06/2013
31/12/2011
30/06/2012
30/06/2012
30/06/2012
30/06/2013
30/06/2013
Executive
M George
G Dutaillis
B Hopwood
D Richardson
D Griffin
Legacy Options
Options over IFN securities awarded to participants in the Performance Rights & Options Plan for the FY09 Grant. These were
granted under the same 2-tranche/performance hurdle structure applying to the FY11 LTI grants.
No options relating to IFN securities vested or were exercised during the year. All options held at 30 June 2011 are unvested
and are not exercisable.
Six employees who participated in the FY09 Grant are no longer employed by Infigen. Their options under the FY09 Grant
have lapsed.
TABLE 6: Outstanding Options
The table below provides details of outstanding options relating to IFN securities which have been granted to executives.
The options are valued as at the deemed grant date.
Executive
M George
G Dutaillis
B Hopwood
D Richardson
Granted
number
5,053,908
2,628,032
788,410
748,989
Value per
option
($)
Grant
date
Total value
of options
granted
($)
Exercise
price
per option
($)
Estimated vesting date
Tranche 21
Tranche 1
Expiry date
of vested
options
27/03/2009
27/03/2009
27/03/2009
28/03/2009
0.209
0.209
0.209
0.209
1,056,267
549,259
164,778
156,539
0.897
0.897
0.897
0.897
31/12/2011
31/12/2011
31/12/2011
31/12/2011
30/06/2012
30/06/2012
30/06/2012
30/06/2012
31/12/2013
31/12/2013
31/12/2013
31/12/2013
1 Three year performance measurement period ended 30 June 2011. These Options are now in the 12 month retest period.
56
InfIgen energy AnnuAl report 2011
EXECUTIvE EMPLOYMENT CONTRACTS
The base salaries for Executives as at 30 June 2011, in accordance with their employment contract, are as follows:
M George
G Dutaillis
C Baveystock
B Hopwood
D Griffin
D Richardson
$550,000
$370,000
$300,000
$300,000
$306,000
$255,000
Employment contracts relating to the Executives contain the following conditions:
Duration of contract
— Open-ended
Notice period to terminate the contract
— For M George and G Dutaillis, their employment is able to be terminated by either
Termination payments provided under
the contract
party on 6 months’ written notice. For B Hopwood, C Baveystock, D Griffin and D
Richardson, their employment is able to be terminated by either party on 3 months’
written notice. Infigen may elect to pay an amount in lieu of completing the notice
period, calculated on the base salary as at the termination date.
— 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.
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, 30 August 2011
Miles George
Director
57
auDItor’s InDepenDence DeclaratIon
Auditor’s Independence Declaration
As lead auditor for the audit of Infigen Energy Limited for the year ended 30 June 2011, I declare that
to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Infigen Energy Limited and the entities it controlled during the year.
PricewaterhouseCoopers
Darren Ross
Partner
30 August 2011
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
58
InfIgen energy AnnuAl report 2011
Liability limited by a scheme approved under Professional Standards Legislation.
financial statements
for the year ended 30 june 2011
60 Consolidated statements of comprehensive income
94
Note 17 – Borrowings
61
62
Consolidated statements of financial position
97
Note 18 – Provisions
Consolidated statements of changes in equity
98
Note 19 – Institutional equity partnerships classified
63
Consolidated cash flow statements
Notes to the FiNaNcial statemeNts
Note 1 – Summary of accounting policies
64
78
Note 2 – Segment information
79
Note 3 – Revenue
80
Note 4 – Other income
80
Note 5 – Expenses
81
Note 6 – Discontinued operations
83
86
Note 7 – Income taxes and deferred taxes
Note 8 – Key management personnel remuneration
88
Note 9 – Remuneration of auditors
88
Note 10 – Trade and other receivables
89
Note 11 – Inventory
89
Note 12 – Derivative financial instruments
90
Note 13 – Investments in associates
91
Note 14 – Property, plant and equipment
92
Note 15 – Intangible assets
94
Note 16 – Trade and other payables
as liabilities
100
Note 20 – Contributed equity
100
Note 21 – Reserves
102
Note 22 – Retained earnings
102
Note 23 – Earnings per security/share
103
Note 24 – Distributions paid
104
Note 25 – Share-based payments
106
107
Note 26 – Commitments for expenditure
Note 27 – Contingent liabilities and contingent assets
108
Note 28 – Leases
109
Note 29 – Subsidiaries
111
Note 30 – Acquisition of businesses
112
Note 31 – Related party disclosures
112
Note 32 – Subsequent events
113
Note 33 – Notes to the cash flow statement
114
Note 34 – Financial risk management
121
Note 35 – Interest in joint ventures
122
Note 36 – Parent entity financial information
5959
consolidated statements
of comprehensive income
for the year ended 30 june 2011
Revenue from continuing operations
Income from institutional equity partnerships
Other income
Operating expenses
Corporate costs
Other expenses
Depreciation and amortisation expense
Interest expense
Finance costs relating to institutional equity partnerships
Other finance costs
Significant non-recurring items
Share of net losses of associates accounted for using the equity method
Net loss before income tax expense
Income tax benefit/(expense)
Loss from continuing operations
Loss from discontinued operations
Net loss for the year
Other comprehensive income – movements through equity
Changes in the fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations
Total comprehensive loss for the year, net of tax
Net loss for the year is attributable to stapled security holders as:
Equity holders of the parent
Equity holders of the other stapled entities (non-controlling interests)
Other non-controlling interests
Note
3
4
4
5
5
5
5
5
13
7
6
21(b)
21(a)
Total comprehensive loss for the year is attributable to stapled security holders as:
Equity holders of the parent
Equity holders of the other stapled entities (non-controlling interests)
Other non-controlling interests
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.
23
23
23
23
2011
$’000
285,319
61,638
21,183
(104,528)
(18,650)
(3,119)
(136,302)
(87,873)
(45,224)
(6,918)
–
(552)
(35,026)
9,017
(26,009)
(34,985)
(60,994)
46,643
(45,517)
(59,868)
(60,090)
(904)
(60,994)
–
(60,994)
(58,964)
(904)
(59,868)
–
(59,868)
(3.3)
(3.3)
(7.9)
(7.9)
2010
$’000
(Restated)1
282,567
63,579
29,055
(96,047)
(21,808)
(12,099)
(136,228)
(90,998)
(54,347)
(8,112)
(9,658)
(85)
(54,181)
(12,473)
(66,654)
(7,707)
(74,361)
(7,043)
(41,195)
(122,599)
(71,236)
(3,385)
(74,621)
260
(74,361)
(119,474)
(3,385)
(122,859)
260
(122,599)
(7.9)
(7.9)
(8.9)
(8.9)
The above statements of comprehensive income should be read in conjunction with the accompanying Notes to the
Financial Statements.
60
InfIgen energy AnnuAl report 2011
consolidated statements
of financial position
as at 30 june 2011
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total current assets
Non-current assets
Receivables
Derivative financial instruments
Investment in associates
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
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
Equity holders of the parent
Contributed equity
Reserves
Retained earnings
Equity holders of the other stapled entities (non-controlling interests)
Contributed equity
Reserves
Retained earnings
Total equity
Note
33(a)
10
11
10
12
13
14
7
15
16
17
12
7
18
16
17
12
18
7
19
20
21
22
20
21
22
2011
$’000
304,875
49,585
9,070
363,530
10,587
1,595
765
2,460,112
95,672
316,459
2,885,190
3,248,720
43,200
209,465
34,976
4,348
3,422
295,411
173
1,042,952
66,693
290
65,449
1,175,557
1,136,976
2,607,944
640,776
2,305
(187,440)
87,020
(98,115)
759,337
–
(20,446)
738,891
640,776
2010
$’000
(Restated)1
219,891
53,352
3,204
276,447
13,666
–
3,543
3,110,894
97,327
393,038
3,618,468
3,894,915
52,699
88,355
59,573
2,394
2,627
205,648
485
1,334,285
98,284
239
64,766
1,498,059
1,469,280
3,172,987
721,928
2,305
(189,185)
147,110
(39,770)
781,240
–
(19,542)
761,698
721,928
1 Refer to Note 1(a) for further information regarding the restatement.
The above statements of financial position should be read in conjunction with the accompanying Notes to the Financial Statements.
61
consolidated statements
of changes in equity
for the year ended 30 june 2011
Total equity at 1 July 2009
Adjustment on restatement
(net of tax)
Restated total equity at
1 July 2009
Net loss for the year
Changes in the fair value of
cash flow hedges, net of tax
Exchange differences on
translation of foreign operations
and movement in fair value
Adjustment on restatement
(net of tax)
Restated total comprehensive
loss for the year
Transactions with equity holders
in their capacity as equity holders:
Purchase of securities
– on market buyback
Acquisition of non-controlling
interests of subsidiaries
Recognition of share-based
payments
Distributions paid
Total equity at 30 June 2010
Net loss for the year
Changes in the fair value of
cash flow hedges, net of tax
Exchange differences on
translation of foreign operations
and movement in fair value
Total comprehensive income
for the year
Transactions with equity holders
in their capacity as equity holders:
Recognition of share-based
payments
Contributions of equity, net of
transaction costs
Distributions paid
Total equity at 30 June 2011
21(d)
20, 24
20, 24
Contributed
equity
$’000
862,113
Note
Reserves
$’000
(148,828)
Retained
earnings
$’000
(Restated)1
199,088
Other non-
Total
$’000
(Restated)1
912,373
controlling Total equity
$’000
(Restated)1
920,176
interests
$’000
7,803
1(a)
–
–
3,101
3,101
–
3,101
862,113
(148,828)
202,189
915,474
7,803
923,277
21(b)
21(a)
1(a)
–
–
–
–
–
–
(73,763)
(73,763)
260
(73,503)
(7,043)
(41,195)
–
–
(7,043)
(41,195)
–
(858)
(858)
–
–
–
(7,043)
(41,195)
(858)
(48,238)
(74,621)
(122,859)
260
(122,599)
20
(41,933)
–
21(c)
–
5,797
–
–
(41,933)
–
(41,933)
5,797
(8,063)
(2,266)
21(d)
20, 24
–
(36,635)
783,545
2,084
–
(189,185)
–
–
127,568
2,084
(36,635)
721,928
21(b)
21(a)
–
–
–
–
–
–
(60,994)
(60,994)
46,643
(45,517)
–
–
46,643
(45,517)
1,126
(60,994)
(59,868)
619
–
619
981
(22,884)
761,642
–
–
(187,440)
–
–
66,574
981
(22,884)
640,776
–
–
–
–
–
–
–
–
–
–
–
2,084
(36,635)
721,928
(60,994)
46,643
(45,517)
(59,868)
619
981
(22,884)
640,776
1 Refer to Note 1(a) for further information regarding the restatement.
The above statements of changes in equity should be read in conjunction with the accompanying Notes to the Financial Statements.
62
InfIgen energy AnnuAl report 2011
consolidated cash flow statements
for the year ended 30 june 2011
Cash flows from operating activities
Loss for the period
Adjustments for:
Interests in institutional equity partnerships
(Gain)/loss on revaluation for fair value through profit
or loss financial assets – financial instruments
Loss on sale of investments
Depreciation and amortisation of non-current assets
Foreign exchange gain
Amortisation of share based expense
Amortisation of borrowing costs capitalised
Increase in current tax liability
(Decrease)/increase 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
Other financial assets classified as operating activities
Increase/(decrease) in liabilities:
Current payables
Non-current payables
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds on sale of controlled entities
Proceeds on sale of investment
Payment for property, plant and equipment
Payment for intangible assets
Payment for investments in controlled and jointly controlled entities
Payments in relation to potential and completed sales of overseas assets
Payment for investments in associates
Loans to related parties (associates)
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Payment for securities buy back
Proceeds from borrowings
Repayment of finance leases
Repayment of borrowings
Distributions paid to institutional equity partners
Distributions paid to security holders
Net cash outflow from 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
Cash and cash equivalents at the end of the financial year
1 Refer to Note 1(a) for further information regarding the restatement.
Note
2011
$’000
2010
$’000
(Restated)1
(60,994)
(74,361)
(16,414)
(3,497)
31,132
146,329
(7,320)
619
787
1,933
(9,569)
(15,122)
–
(2,507)
(313)
65,064
169,707
–
(71,448)
(14,160)
–
(5,653)
–
–
78,446
–
32,742
(3,709)
(41,094)
(17,646)
(21,903)
(51,610)
91,900
219,891
(6,916)
304,875
(9,232)
1,207
13,568
150,561
(193)
2,084
5,611
346
3,957
3,714
13,927
1,681
(1,277)
111,593
93,916
450
(122,621)
(15,641)
(5,170)
–
(4,560)
(1,499)
(55,125)
(42,696)
20,525
(2,580)
(151,026)
(14,714)
(36,635)
(227,126)
(170,658)
399,275
(8,726)
219,891
6(e)
21(d)
6(e), 6(i)
33(b)
17(a)
17(a)
17(a)
19
24
33(a)
The above consolidated cash flow statements should be read in conjunction with the accompanying Notes to the Financial Statements.
63
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies
The principal accounting policies adopted in the preparation of the consolidated financial report are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
Stapled security
The shares of Infigen Energy Limited (‘IEL’) and Infigen Energy (Bermuda) Limited (‘IEBL’) and the units of Infigen Energy Trust, (‘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 the consolidated financial statements of IEL, which comprises IEL and its controlled entities, IET
and its controlled entities and IEBL, together acting as Infigen.
Summarised financial information relating to the parent entity, Infigen Energy Limited, is presented in note 36.
(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
To align current and prior period presentation, some prior period balances have been reclassified to conform with current
year presentation.
Discontinued Operations
The Group disposed of its assets in Germany in June 2011. In the prior year, the Group disposed of its assets in France in April 2010.
As a consequence of these disposals, for the years ended 30 June 2011 and 2010, the Group’s previously held interests in Germany
and France are classified as discontinued operations respectively.
Furthermore, under AASB 5, Non-current Assets Held for Sale and Discontinued Operations, the comparative information has been
restated in respect of the results of the operations relating to assets in Germany.
Voluntary change in accounting policy – Revenue Recognition
Renewable Energy Certificates (‘RECs’) are generated and held for sale in the ordinary course of business. RECs cost a nominal amount
to register plus a share of production costs. RECs constitute a government grant as defined in AASB 120(3) as they are assistance from
the Government in the form of transfers of resources. The Australian Accounting Standards provide a choice to recognise the grant
either at cost (generally the nominal amount noted above) or at fair value. If the grant is recognised at fair value, the credit should
be recognised immediately in the statement of comprehensive income.
Historically, the Group recognised RECs that had been generated at cost. Under this method the Group grossed up the balance sheet
to recognise inventories at cost with an equal and opposite provision in deferred revenue until the time of sale. However, as a result
of increasing REC generation, this policy would result in material period-on-period variations to revenue arising from movements
in inventory levels rather than actual production and price movements.
Consequently, the Directors have elected to change the Group’s accounting policy to recognise RECs at fair value with immediate
recognition in the statement of comprehensive income in accordance with AASB120. By recognising the grants at fair value,
income is recognised in the same period as the costs incurred, for which the grants are intended to compensate. The revised policy
results in more relevant information of the economic outcome in relation to the generation of RECs in the period. As the change
in accounting policy is voluntary, the effect of the change has been applied retrospectively.
Under the revised policy, RECs continue to be held on the balance sheet as inventory. AASB102 requires inventory to be held at the
lower of cost and net realisable value at the end of each reporting period. Hence, where the market value of RECs falls, inventory
is reduced and an expense is recorded through the statement of comprehensive income. Where the circumstances that caused
the inventory to be written-down have changed, the write-down will be reversed. Upon sale, the difference between the sale price
and the book value of the inventory is recorded through the statement of comprehensive income as a component of revenue.
The table below summarises the effect of the change in accounting policy and the exclusion of the discontinued operations on
the prior corresponding year comparatives.
64
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
Effect of Restatements: Income statement for the year ended 30 June 2010
Revenue from continuing operations
Income from institutional equity partnerships
Other income
Operating expenses
Corporate costs
Other expenses
Depreciation and amortisation expense
Interest expense
Finance costs relating to institutional
equity partnerships
Other finance costs
Significant non-recurring items
Share of net losses of associates accounted
for using the equity method
Net loss before income tax expense
Income tax (expense)/benefit
Loss from continuing operations
(Loss)/profit from discontinued operations
Net loss for the period
Other comprehensive income
– movements through equity
Changes in the fair value of cash flow
hedges, net of tax
Exchange differences on the translation
of foreign operations and movement
in fair value of net investment hedges
Total comprehensive income/(loss) for
the period, net of tax
Net loss for the period is attributable
to stapled security holders as:
Equity holders of the parent
Equity holders of the other stapled entities
(non-controlling interests)
Non-controlling interest
Total comprehensive loss is attributable
to stapled security holders as:
Equity holders of the parent
Equity holders of the other stapled entities
(non-controlling interests)
Non-controlling 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)
30 June 2010
$’000
314,342
63,579
21,380
(104,764)
(21,808)
(12,099)
(146,658)
(93,864)
(54,347)
(8,231)
(9,658)
(85)
(52,213)
(12,321)
(64,534)
(8,969)
(73,503)
(7,043)
(41,195)
(121,741)
(70,378)
(3,385)
(73,763)
260
(73,503)
(118,616)
(3,385)
(122,001)
260
(121,741)
(7.7)
(7.7)
Discontinued
operations
$’000
(30,549)
–
7,675
8,717
–
–
10,430
2,866
–
119
–
–
(742)
(520)
(1,262)
1,262
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Change in
accounting
policy
$’000
(1,226)
–
–
–
–
–
–
–
–
–
–
–
(1,226)
368
(858)
–
(858)
–
–
30 June 2010
(Restated)
$’000
282,567
63,579
29,055
(96,047)
(21,808)
(12,099)
(136,228)
(90,998)
(54,347)
(8,112)
(9,658)
(85)
(54,181)
(12,473)
(66,654)
(7,707)
(74,361)
(7,043)
(41,195)
(858)
(122,599)
(858)
–
(858)
–
(858)
(858)
–
(858)
–
(858)
(0.2)
(0.2)
(71,236)
(3,385)
(74,621)
260
(74,361)
(119,474)
(3,385)
(122,859)
260
(122,599)
(7.9)
(7.9)
65
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
Effect of Restatements: Balance sheet as at 30 June 2010
Total current assets
Non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Institutional equity partnerships classified
as liabilities
Total liabilities
Net assets
Equity holders of the parent
Retained earnings
Equity holders of the other stapled entities
(minority interests)
Retained earnings
Total equity
30 June
2010
$’000
276,447
Change in
accounting
policy
$’000
–
30 June
2010
(Restated)
$’000
276,447
30 June
2009
$’000
465,608
Change in
accounting
policy
$’000
–
30 June
2009
(Restated)
$’000
465,608
3,618,468
3,894,915
–
–
3,618,468
3,894,915
3,924,235
4,389,843
–
–
3,924,235
4,389,843
55,903
208,852
(3,204)
(3,204)
52,699
205,648
65,972
210,934
(4,430)
(4,430)
61,542
206,504
63,805
1,497,098
1,469,280
3,175,230
719,685
961
961
64,766
1,498,059
50,012
1,691,671
1,329
1,329
51,341
1,693,000
–
(2,243)
2,243
1,469,280
3,172,987
721,928
1,567,062
3,469,667
920,176
–
(3,101)
3,101
1,567,062
3,466,566
923,277
144,867
(42,013)
2,243
2,243
147,110
(39,770)
190,587
66,819
3,101
3,101
193,688
69,920
(19,542)
761,698
719,685
–
–
2,243
(19,542)
761,698
721,928
8,501
845,554
920,176
–
–
3,101
8,501
845,554
923,277
(b) Consolidated accounts
UIG 1013: Consolidated Financial Reports in relation to Pre-Date-of-Transition Stapling Arrangements require 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 2011.
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 non-controlling interests.
While stapled arrangements occurring before 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) have been treated as minority interests under the
principles established in AASB Interpretation 1002.
66
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(c) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of IEL as at 30 June 2011 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.
The Group applies a policy of treating transactions with non-controlling interests as transactions with a shareholder. Purchases from
non-controlling 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.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and
balance sheets respectively.
(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.
(iii) Associates
Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated financial
statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates
includes goodwill (net of any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-
acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s income statement, while
in the consolidated financial statements they reduce the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other long-term
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the
associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
(d) 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.
67
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(e) 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(o)). 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.
(f) 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.
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.
(g) 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.
(h) 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. Revenue generated in advance of the asset being
ready for use on a commercial basis is capitalised as a component of property, plant and equipment.
(i) Property, plant and equipment
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.
The Group’s policy is to provide for the future costs relating to the decommissioning of wind turbines and associated plant if
the amounts, net of residual values or scrap values, are expected to result in an outflow of economic benefits. The net costs of
decommissioning wind turbines and associated plant are reviewed at the end of each annual reporting period.
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.
Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives.
Wind turbines and associated plant
Fixtures and fittings
Computer equipment
25 years
10-20 years
3-5 years
68
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(j) 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 hedges).
At the inception of the hedging transaction the Group documents 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 overseas businesses is recognised in the income statement. 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.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. 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.
(k) 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.
(l) Segment reporting
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of IEL.
69
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(m) 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 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.
(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 is
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.
(n) Income tax
Current tax
Current tax expense 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 expense 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 recognised for
deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise
those temporary differences and losses. However, deferred tax assets and liabilities are not recognised 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 recognised in relation to taxable
temporary differences arising from goodwill.
Deferred tax liabilities are recognised 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 recognised 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.
70
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(n) Income tax 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 7.
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.
(o) 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) Development assets
Development assets represent development costs incurred prior to commencement of construction for wind farms. Development
assets are not amortised, but are transferred to plant and equipment and depreciated from the time the asset is held ready for use
on a commercial basis.
(p) 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.
71
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(p) Leased assets continued
(i) Group as lessee continued
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(u) for the accounting policy in respect of lease income from operating leases.
(q) 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 has estimated 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.
(r) 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.
(s) Provisions
Provisions are recognised when the consolidated group has a present legal or constructive obligation as a result of past events, it is
probable an outflow of resources will be required to settle the obligation, and the amount of the provision can be measured reliably.
Provisions are not recognised for future operating losses.
The amount recognised as a provision is management’s 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.
(t) 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.
(u) 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 recognises 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.
72
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(u) Revenue recognition continued
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 have 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) Renewable Energy Certificates (RECs)
In accordance with AASB 120 revenue from the sale of RECs is recognised at fair value when they are generated. RECs held in
inventory are valued at the lower of cost and net realisable value.
Change in accounting policy
Historically the Group recognised RECs using the cost option once the REC was generated and deferred the recognition of the fair
value of the REC until the time of sale. From 1 July 2010 this policy was changed to recognise the RECs at fair value at the point of
the REC being generated. This voluntary change in accounting policy results in more relevant information of the economic outcome in
relation to the generation of RECs in the period. Note 1(a) provides more information regarding the change in accounting policy and
the resulting retrospective adjustments.
(iv) Production Tax Credits (PTCs)
PTCs are recognised as revenue when generated by the underlying wind farm assets and used to settle the obligation to Class A
institutional investors.
(v) Accelerated tax depreciation credits and operating tax gains/(losses)
The tax losses as a result of accelerated tax depreciation credits on wind farm assets are used to settle the obligation to Class A
institutional investors when received. The associated income is recognised over the life of the wind farm to which they relate.
(vi) Government grants
Grants from 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.
(vii) 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.
(v) 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.
(w) 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.
73
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(x) Earnings per security/share
Basic earnings per security/share is calculated by dividing the profit attributable to equity holders of the Group, 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 security/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.
(y) 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 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. 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. These instruments
are included in level 2 (refer to Note 34).
The carrying amounts 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.
(z) 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.
(aa) 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 25.
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.
74
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(aa) Employee benefits continued
(iii) Share-based payments continued
The fair value at grant date is independently determined using market prices and a model that takes into account the exercise price,
the term of the option, the effect 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 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 effect 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 effect of the revision to original estimates, if any, is
recognised in the income statement with a corresponding adjustment to equity.
(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.
(ab) 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 non-
controlling interests. Refer 1(c) for further details of the Group’s accounting policy for consolidation.
(ac) 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.
(ad) New accounting standards and UIG interpretations
Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2011 reporting
periods. The Group’s assessment of the effect of these new standards and interpretations is set out below.
(i) AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
(effective from 1 January 2015)
AASB9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the Group’s
accounting for its financial assets. The standard is not applicable until 1 January 2015 but is available for early adoption. AASB 9 only
permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not
held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised
directly in profit or loss. The Group has not yet decided when to adopt AASB 9 and has not assessed the effect.
(ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective from 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning
on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for government-related
entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies
the definition of a related party. The Group has applied the amended standard from 1 July 2011. The changes to AASB 124 will not
have any effect on the financial statements of the Group.
75
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(ad) New accounting standards and UIG interpretations continued
(iii) AASB 2009 14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement
(effective from 1 January 2011)
In December 2009, the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction. The amendment removes an unintended consequence of the interpretation related to voluntary
prepayments when there is a minimum funding requirement in regard to the entity’s defined benefit scheme. It permits entities to
recognise an asset for a prepayment of contributions made to cover minimum funding requirements. The Group does not have any
defined benefit arrangements therefore the amendment is not expected to have any effect on the Group’s financial statements.
The Group intends to apply the amendment from 1 July 2011.
(iv) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian
Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier
differential reporting regime applies to all entities that prepare general purpose financial statements. The Group is listed on the ASX
and is not eligible to adopt the new Australian Accounting Standards – Reduced Disclosure Requirements. The two standards will
therefore have no effect on the financial statements of the entity.
(v) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets
(effective for annual reporting periods beginning on or after 1 July 2011)
Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010 introduce additional disclosures in respect of risk
exposures arising from transferred financial assets. The amendments will affect particularly entities that sell, factor, securitise, lend or
otherwise transfer financial assets to other parties. They are not expected to have any significant effect on the Group‘s disclosures.
The Group intends to apply the amendment from 1 July 2011.
(vi) AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets
(effective from 1 January 2012)
In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities
and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of
deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover
or settle the carrying amount of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a
rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The Group has no
investment property and therefore the amendment will have no effect on the financial statements of the entity.
(vii) IFRS 10, IFRS 11 and IFRS 12 and revised IAS 28 and IAS 27 – Consolidations, joint arrangements and associated disclosures
(effective for annual reporting periods commencing from 1 January 2013)
In May 2011, the IASB issued IFRS 10, IFRS 11 and IFRS 12 and revised IAS 28 and IAS 27 – Consolidations, joint arrangements and
associated disclosures. IFRS 10 replaces all of the guidance on control and consolidation in IAS 27 Consolidated and separate financial
statements, and SIC-12 Consolidation – special purpose entities. The core principle that a consolidated entity presents a parent and its
subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation.
IFRS 10 introduces a single definition of control that applies to all entities. It focuses on the need to have power, rights or exposure
to variable returns and the ability to use its power to affect those returns before control is present. Power is the current ability to direct
the activities that significantly influence returns. Returns must vary and can be positive, negative or both.
IFRS 11 deals with joint arrangements. The accounting treatment for joint arrangements will depend on the contractual rights and
obligations of participants rather than on the legal structure of the joint arrangement. The standard distinguishes between joint
operations and joint ventures:
— A joint operation gives the parties that have joint control of the arrangement rights to the assets and obligations for the liabilities
relating to the arrangement. This will be reflected in the accounting treatment, which is consistent with the current accounting for
joint operations.
— A joint venture gives parties that have joint control of the arrangement rights to the net assets of the arrangement. Joint ventures
must be accounted for using the equity method; proportionate consolidation of joint ventures will no longer be permitted.
IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 and IFRS 11 and replaces the
disclosure requirements currently found in IAS 27, IAS 28 and IAS 31. There are a number of new disclosures that are not currently
required, for example information about each subsidiary that has a material non-controlling interest, details of risks associated with
consolidated structured entities and information about interests in unconsolidated structured entities.
IAS 27 is renamed Separate financial statements and is now a standard dealing solely with separate financial statements. It does not
introduce any significant changes. Amendments to IAS 28 provide clarification that an entity continues to apply the equity method
and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice
versa. The amendments also introduce a “partial disposal” concept. At the time of writing, the AASB has not yet issued equivalent
Australian standards.
76
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(ad) New accounting standards and UIG interpretations continued
(vii) IFRS 10, IFRS 11 and IFRS 12 and revised IAS 28 and IAS 27 – Consolidations, joint arrangements and associated disclosures
(effective for annual reporting periods commencing from 1 January 2013) continued
The changes arising from IFRS 10 are not expected to have any effect on the financial statements of the Group. The changes arising
from IFRS 11 are expected to alter the way the Group consolidates its interest in joint ventures. The Group presently applies the
method of proportional consolidation when accounting for its jointly controlled arrangements in the US. Under IFRS11, the Group’s
jointly controlled interests will need to be accounted for using the equity method. The changes will need to be applied in the financial
statements for the year ending 30 June 2014, with adjustments made to comparative period figures. The Group is currently assessing
the effect of the changes to IFRS 10, IFRS 11, IFRS12, IAS 27 and IAS 28.
(ae) Critical accounting estimates and judgments
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 effect 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. Some of the estimates and assumptions that may 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(i) 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(q). 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 effect 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. The Group is required to make assessments in relation to the
recoverability of future tax losses which have been recognised as deferred tax assets.
(af) Parent entity financial information
The financial information for the parent entity, Infigen Energy Limited, disclosed in note 36, has been prepared on the same basis as
the consolidated financial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Infigen Energy
Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the
carrying amount of these investments.
(ii) Tax consolidation legislation
Infigen Energy Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Infigen Energy Limited, and the controlled entities in the tax consolidated group 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 tax amounts, Infigen Energy Limited 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.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Infigen Energy
Limited for any current tax payable assumed and are compensated by Infigen Energy Limited for any current tax receivable and
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Infigen Energy Limited under the tax
consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities‘
financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year.
The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the Group.
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.
77
notes to the financial statements
for the year ended 30 june 2011
1. summary oF accouNtiNg policies CONTINUED
(af) Parent entity financial information continued
(iii) Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation,
the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.
2. segmeNt iNFormatioN
(a) Segment information provided to the Board of Directors
Management has determined the operating segments based on the reports reviewed by the Board of Directors of IEL that are used
to make strategic decisions.
The Board considers the business primarily from a geographic perspective and has identified two reportable segments. The reporting
segments consist of the wind farm and generation business held within each geographical area.
The segment information provided to the Board of Directors for the operating segments for the year ended 30 June 2011 is as follows:
Year ended 30 June 2011
Statutory revenue
Revenue – non-controlling interests
Segment revenue (economic interest basis)
Segment EBITDA from Operations (economic interest)
Other income
Corporate costs
Development costs
EBITDA (economic interest basis)
Year ended 30 June 2010
Statutory revenue
Revenue – non-controlling interests
Segment revenue (economic interest basis)
Segment EBITDA from Operations (economic interest)
Corporate costs
Development costs
EBITDA (economic interest basis)
Australia
$’000
US
$’000
117,170
86,011
150,409
81,118
104,926
84,830
158,922
87,022
Total
$’000
285,319
(17,740)
267,579
167,129
758
(18,650)
(3,671)
145,566
282,567
(18,719)
263,848
171,852
(21,808)
(959)
149,085
The Board of Directors assesses the performance of the operating segments based on a measure of EBITDA (Segment EBITDA).
This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs,
legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event. Furthermore, the
measure excludes the effects of equity-settled share-based payments and unrealised gains/losses on financial instruments.
Interest income and expenditure are not allocated to segments, as this type of activity is driven by the corporate treasury function,
which manages the cash position of the Group. The Board of Directors reviews segment revenues on a proportional basis, reflective
of the economic ownership held by the Group.
A reconciliation of Segment EBITDA to operating profit before income tax and discontinued operations is provided as follows:
Segment EBITDA
Non-controlling interests proportionally consolidated for segment reporting
Income from institutional equity partnerships
Other income
Other income relating to discontinued operations
Expenses relating to potential sale of overseas assets
Depreciation and amortisation expense
Interest expense
Finance costs relating to institutional equity partnerships
Other finance costs
Significant non-recurring items
Net loss before income tax expense and discontinued operations
78
InfIgen energy AnnuAl report 2011
2010
$’000
(Restated –
refer Note 1(a))
149,085
14,135
63,579
29,055
448
(11,140)
(136,228)
(90,998)
(54,347)
(8,112)
(9,658)
(54,181)
2011
$’000
145,566
13,662
61,638
20,425
–
–
(136,302)
(87,873)
(45,224)
(6,918)
–
(35,026)
notes to the financial statements
for the year ended 30 june 2011
2. segmeNt iNFormatioN CONTINUED
(a) Segment information provided to the Board of Directors continued
A summary of assets by operating segment is provided as follows:
Year ended 30 June 2011
Current assets
Non-current assets
Total
Year ended 30 June 2010
Current assets
Non-current assets
Total
3. reveNue
Australia
$’000
273,056
1,231,817
1,504,873
157,697
1,184,227
1,341,924
From continuing operations
Sale of energy and environmental products1
Lease of plant and equipment2
Compensation for revenues lost as a result of O&M providers
not meeting contracted turbine availability targets
Asset management services
Grant revenue
From discontinued operations (Note 6)
Sale of energy and environmental products1
US
$’000
Germany
(Discontinued)
$’000
90,474
1,653,373
1,743,847
78,399
2,178,431
2,256,830
–
–
–
40,351
255,810
296,161
2011
$’000
45,645
233,323
1,478
4,624
249
285,319
24,351
24,351
Total
$’000
363,530
2,885,190
3,248,720
276,447
3,618,468
3,894,915
2010
$’000
(Restated –
refer Note 1(a))
49,076
210,440
14,816
8,235
–
282,567
41,763
41,763
1 Includes revenue from the sale of electricity and from the generation of environmental certificates. The Group generates environmental certificates (including
RECs) and sells them under contractual arrangements and on market. As described in note 1(a) there was a voluntary change in accounting for RECs during the
year ended 30 June 2011. REC revenue is now recognised at fair value when generated. Accordingly the corresponding figures have been restated.
2 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 and environmental certificates to one customer, is classified as lease income. Refer Note 1(u) for further information.
79
notes to the financial statements
for the year ended 30 june 2011
4. other iNcome
From continuing operations:
Income from institutional equity partnerships (note 19)
Value of production tax credits offset against Class A liability
Value of tax losses offset against Class A liability
Benefits deferred during the period
Other
Interest income: Related parties (note 31(c))
Interest income: Institutions
Net foreign exchange gains
5. expeNses
From continuing operations:
Loss before income tax has been arrived at after charging the following expenses:
Other expenses:
Development costs
Loss on sale of investment
Expenses relating to non-viable projects
Expenses relating to potential sale of overseas assets
– costs of hedging expected foreign currency proceeds
Expenses relating to potential sale of overseas assets – other costs
Depreciation and amortisation expense:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance costs relating to institutional equity partnerships:
Allocation of return on outstanding Class A liability1
Movement in residual interest (Class A)1
Movement in non-controlling interest (Class B)1
Other finance costs:
Fair value losses on financial instruments2
Bank fees and loan amortisation costs
Significant non-recurring items:
Transition-related expenses3
2010
$’000
(Restated –
refer Note 1(a))
85,413
49,414
(71,248)
63,579
8,314
7,007
13,734
29,055
2010
$’000
(Restated –
refer Note 1(a))
316
643
–
8,041
3,099
12,099
120,387
15,841
136,228
57,377
(7,396)
4,366
54,347
1,207
6,905
8,112
9,658
9,658
2011
$’000
81,939
14,936
(35,237)
61,638
7,936
5,927
7,320
21,183
2011
$’000
1,341
314
1,464
–
–
3,119
121,271
15,031
136,302
46,950
(6,317)
4,591
45,224
5,141
1,777
6,918
–
–
1 Refer Note 19 for further details.
2 Included within fair value losses on financial instruments is an expense of $8,638,000 relating to the termination of an interest rate swap with an early termination
option. The terminated interest rate swap had previously been hedge accounted with an unrealised loss taken to reserves. This was subsequently reversed upon
termination.
3 As a consequence of terminating agreements associated with the former external manager in 2009, Infigen Energy has undertaken transition programs in
Australia and the US. During the year ended 30 June 2011, the Group did not incur an expense (2010: $9,658,000) in relation to the transition program in the US.
80
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
6. DiscoNtiNueD operatioNs
(a) Details of disposed operations
Sale of German portfolio
During the year ended 30 June 2011, Infigen sold its portfolio of wind farms in Germany. The sale was agreed on 11 June 2011
and settlement occurred on 29 June 2011.
Sale of French portfolio
During the year ended 30 June 2010, Infigen sold its portfolio of wind farms in France. The sale and settlement occurred
simultaneously in April 2010.
(b) Financial performance
The results of the discontinued operations for the years ended 30 June 2011 and 30 June 2010, respectively, through to disposal
are presented below:
Germany
$’000
24,351
872
(28,418)
(3,195)
(658)
(3,853)
Revenue (Note 3)
Other income
Expenses
(Loss)/profit before income tax
Income tax (expense)/benefit
(Loss)/profit after income tax of
discontinued operations
Loss on sale of subsidiary after
income tax
(Loss)/profit from
discontinued operations
30 June 2011
Total
$’000
24,351
872
(28,418)
(3,195)
(658)
(3,853)
(31,132)
(31,132)
(34,985)
(34,985)
(c) Major classes of assets and liabilities of the German disposed entities
Cash
Receivables
Investment in associate
Property, plant and equipment
Intangibles
Other assets
Total assets
Payables
Deferred tax liabilities
Finance leases
Total liabilities
Net assets attributable to discontinued operations
Germany
$’000
30,549
639
(30,446)
742
520
1,262
–
1,262
30 June 2010
France
$’000
11,214
15
(6,235)
4,994
(1,038)
3,956
(12,925)
(8,969)
Total
$’000
41,763
654
(36,681)
5,736
(518)
5,218
(12,925)
(7,707)
As at
29 June 2011
$’000
5,049
8,348
372
191,848
24,837
1,445
231,899
1,537
527
35,167
37,231
194,668
81
notes to the financial statements
for the year ended 30 june 2011
6. DiscoNtiNueD operatioNs CONTINUED
(d) Cash flow information of the German disposed entities
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Net cash inflow/(outflow)
(e) Details of the sale of the German entities
Consideration received:
Cash received from sale
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
Less: Transaction costs
Proceeds on sale of subsidiary, net of cash disposed
Less: Estimated interest rate swap close out costs
Net cash to be received from sale
30 June 2011
$’000
14,440
(7,053)
(5,027)
2,360
30 June 2010
$’000
11,564
(49,058)
25,969
(11,525)
As at
29 June 2011
$’000
163,536
(194,668)
(31,132)
–
(31,132)1
176,574
(5,049)
(1,818)
169,707
(6,171)
163,536
1 Loss on sale after income tax comprises loss on disposal of investment in German entities of $23,143,000, estimated financing costs of $6,171,000 and
transaction costs of $1,818,000.
(f) Contingent liability relating to the German disposed entities
Under the terms of the sale the Group was required to place a cash sum of EUR 5.1m (or approx $6.3m) in an escrow account
as collateral for a potential reimbursement obligation. All or part of the escrowed funds may be retained by the Group upon the
satisfaction of certain conditions. Refer to note 27 for further details.
(g) Major classes of assets and liabilities of the French disposed entities
Cash
Receivables
Property, plant and equipment
Intangibles
Other assets
Total assets
Trade creditors
Deferred tax liabilities
Derivative financial instruments
Total liabilities
Net assets attributable to discontinued operations
82
InfIgen energy AnnuAl report 2011
As at
6 April 2010
$’000
2,296
2,673
83,763
20,778
4,598
114,108
1,473
342
5,452
7,267
106,841
notes to the financial statements
for the year ended 30 june 2011
6. DiscoNtiNueD operatioNs CONTINUED
(h) Cash flow information of the French disposed entities
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Net cash (outflow)/inflow
(i) Details of the sale of the French entity
Consideration received:
Cash received from sale
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
Less: Transaction costs
Less: Interest rate swap close out costs
Proceeds on sale of subsidiary, net of cash disposed
30 Jun 2010
$’000
7,651
(3,841)
(6,609)
(2,799)
30 Jun 2009
$’000
12,358
(14,819)
5,045
2,584
6 April 2010
$’000
93,916
(106,841)
(12,925)
–
(12,925)1
104,027
(2,296)
(2,363)
(5,452)
93,916
1 Loss on sale after income tax comprises loss on disposal of investment in French entities of $5,110,000, financing costs of $5,452,000 and transaction costs
of $2,363,000.
7. iNcome taxes aND DeFerreD taxes
(a) Income tax expense
Current tax
Deferred tax
Income tax (benefit)/expense is attributable to:
(Loss)/profit from continuing operations
Loss from discontinued operations (Note 6(a))
Aggregate income tax expense
Deferred income tax expense included in income tax (benefit)/expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
2010
$’000
(Restated –
refer Note 1(a))
(4,143)
17,134
12,991
12,473
518
12,991
(5,366)
22,500
17,134
2011
$’000
(10,741)
2,382
(8,359)
(9,017)
658
(8,359)
(1,128)
3,510
2,382
83
2010
$’000
(Restated –
refer Note 1(a))
(54,181)
(7,189)
(61,370)
(18,411)
20,632
932
432
218
2,591
(195)
(109)
6,901
12,991
(3,619)
(3,288)
(6,907)
notes to the financial statements
for the year ended 30 june 2011
7. iNcome taxes aND DeFerreD taxes CONTINUED
(b) Numerical reconciliation of income tax (benefit)/expense to prima facie tax payable:
Loss from continuing operations before income tax expense
Loss from discontinued operations before income tax expense (Note 6)
Income tax benefit calculated at 30% (2010: 30%)
Increase/(decrease) in tax benefit due to:
Tax losses not recognised as an asset
Non-deductible expenses resulting from sale of foreign assets
Amortisation of intangibles
Non-deductible interest expense
Unrealised foreign exchange movement
Sundry items
Difference in overseas tax rates
Assessable (income)/expense recognised on internal reorganisation
Income tax (benefit)/expense
2011
$’000
(35,026)
(34,327)
(69,353)
(20,806)
7,385
8,932
–
–
(3,312)
(45)
–
(513)
(8,359)
(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
2,783
2,827
5,610
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
(299,837)
89,951
(272,174)
81,652
(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 29.
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.
84
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
7. iNcome taxes aND DeFerreD taxes CONTINUED
(f) Current tax liabilities
Income tax payable attributable to:
Australian entities in the Group
Overseas entities in the Group
2011
$’000
–
4,348
4,348
Opening
balance
$’000
Charged
to Income
$’000
Charged
to Equity
$’000
Acquisitions/
disposals
$’000
Year ended 30 June 2011
Gross deferred tax assets:
Unused revenue tax losses
Effect of hedge movements
Unrealised foreign
exchange loss
Gross deferred tax liabilities:
Depreciation
Unrealised foreign
exchange gains
Other
Year ended 30 June 2010
Gross deferred tax assets:
Unused revenue tax losses
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
64,265
26,739
6,323
97,327
(52,598)
(9,958)
(2,210)
(64,766)
58,782
168
23,120
1,877
4,395
88,342
(45,192)
(2,647)
(2,233)
60
(50,012)
6,281
(2,577)
(2,576)
1,128
2,416
(5,369)
(1,084)
(4,037)
5,483
(168)
–
4,446
(4,395)
5,366
(7,406)
–
(8,366)
(6,728)
(22,500)
–
(11,909)
9,126
(2,783)
–
2,827
–
2,827
–
–
3,619
–
–
3,619
–
2,647
641
–
3,288
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
–
–
–
–
–
–
527
527
–
–
–
–
–
–
–
–
–
4,458
4,458
2011
$’000
–
95,672
95,672
–
65,449
65,449
2010
$’000
1,585
809
2,394
Closing
balance
$’000
70,546
12,253
12,873
95,672
(50,182)
(12,500)
(2,767)
(65,449)
64,265
–
26,739
6,323
–
97,327
(52,598)
–
(9,958)
(2,210)
(64,766)
2010
$’000
–
97,327
97,327
–
64,766
64,766
85
notes to the financial statements
for the year ended 30 june 2011
8. Key maNagemeNt persoNNel remuNeratioN
Details of key management personnel
The following Directors were Key Management Personnel (KMP) of Infigen during the 2011 financial year ending 30 June 2011:
— Michael Hutchinson (appointed Chairman 12 November 2010)
— Miles George
— Douglas Clemson
— Philip Green (appointed 18 November 2010)
— Fiona Harris (appointed 21 June 2011)
— Anthony Battle (retired 18 November 2010)
— Graham Kelly (resigned 12 November 2010)
Other KMP of Infigen were:
Name
M George
G Dutaillis
C Baveystock2
B Hopwood
G Dover1
1 Resigned 31 December 2010
2 Appointed 14 March 2011
Role
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
General Manager – Corporate Finance
Chief Financial Officer
2011
2010
Key management personnel remuneration
The aggregate remuneration of KMP of Infigen for the years ended 30 June 2011 and 2010 is set out below:
Short-term employee benefits
Post-employment benefits (superannuation)
Other long-term benefits and share-based incentive expense allocation3
Total
2011
$
2,987,792
107,809
816,599
3,912,200
2010
$
2,430,622
93,762
1,341,845
3,866,229
3 Other long-term benefits and share-based incentive expense allocations are subject to performance rights vesting in the future.
Rights, options and awards held over Infigen securities
Performance rights and options over Infigen securities were granted to certain KMP in year ended 30 June 2009 under the
Performance Rights & Options (PR&O) Plan. During the year ended 30 June 2011 Performance Rights were granted to KMP under the
PR&O Plan.
No performance rights or options over Infigen securities vested or became exercisable in the years ended 30 June 2011 and 2010.
No Infigen securities were acquired by KMP as a result of the exercise of options during the year ended 30 June 2011 and 2010.
Performance rights and options held by KMP over Infigen securities over the period 1 July 2010 to 30 June 2011 are set out below.
The expense recognised in relation to the performance rights and options under the PR&O Plan is recorded within corporate costs.
86
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
8. Key maNagemeNt persoNNel remuNeratioN CONTINUED
Set out below are summaries of the number of performance rights granted:
M George
G Dutaillis
B Hopwood
G Dover
Balance at
1 July 2009 and
1 July 2010
1,112,925
578,721
173,616
578,721
Granted
807,128
398,182
117,736
–
Vested
–
–
–
–
Other changes
–
–
–
(578,721)
Balance at
30 June 2011
1,920,053
976,903
291,352
–
Refer to the table titled ‘Outstanding Performance Rights‘ in the Directors’ report for further details of the balances held at
30 June 2011.
There has been no change in options granted during year ended 30 June 2011.
Set out below are summaries of options granted:
M George
G Dutaillis
B Hopwood
G Dover
Balance at
1 July 2009 and
1 July 2010
5,053,908
2,628,032
788,410
2,628,032
Granted
–
–
–
–
Vested
–
–
–
–
Other changes
–
–
–
(2,628,032)
Balance at
30 June 2011
5,053,908
2,628,032
788,410
–
All options held on 30 June 2011 were granted on 27 March 2009 and expire on 31 December 2013 if not vested previously in
accordance with the performance conditions relating to the options. The exercise price is $0.897.
Security holdings in Infigen
No Infigen securities were granted as remuneration to KMP during the years ended 30 June 2011 and 2010. Security holdings of
KMPs, including their personally related parties, in Infigen securities over the period 1 July 2009 to 30 June 2011 are set out below.
There was no movement in security holdings of KMP during the year ended 30 June 2011.
Set out below are summaries of security holding of KMP in Infigen:
M Hutchinson
D Clemson
P Green1
F Harris
A Battle
G Kelly
M George
G Dutaillis
C Baveystock
B Hopwood
G Dover
Balance at
1 July 2009 and
1 July 2010
–
140,000
–
–
42,634
10,000
500,000
641,820
–
10,000
10,000
Acquired
during 2011
–
–
–
–
–
–
–
–
–
–
–
Sold
during 2011
–
–
–
–
–
–
–
–
–
–
–
Balance at
30 June 2011
–
140,000
–
–
N/A
N/A
500,000
641,820
–
10,000
N/A
1 Mr Green is a partner of The Children’s Investment Fund Management (UK) LLP which has a substantial shareholding of Infigen securities. Mr Green has advised
Infigen that he does not have a relevant interest in those Infigen securities.
Loans to key personnel and their personally related entities from Infigen
No loans have been made by Infigen to KMP or their personally related parties during the years ended 30 June 2011 and 2010. There
are no other transactions with KMP.
87
notes to the financial statements
for the year ended 30 june 2011
9. remuNeratioN oF auDitors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices
and non-related audit firms:
PricewaterhouseCoopers Australia
(i) Audit and other assurance services
Audit and review of the financial statements
Total remuneration for audit and other assurance services
(ii) Taxation services
Tax advice
Total remuneration for taxation services
(iii) Other services
Other services
Total remuneration PWC Australia
Non-PWC audit firms
(i) Other assurance services
Audit and review of subsidiaries’ financial statements
Total remuneration for other assurance related services
Total auditors’ remuneration
10. traDe aND other receivables
Current
Trade receivables
Amounts due from related parties – associates (Note 31(c))
Prepayments (Note 10(f))
Other receivables
Non-current
Amounts due from related parties – associates (Note 31(c))
Prepayments (Note 10(f))
2011
$
2010
$
1,329,132
1,329,132
1,399,618
1,399,618
38,000
38,000
69,000
69,000
1,436,132
310,190
310,190
1,746,322
2011
$‘000
33,906
399
12,424
2,856
49,585
819
9,768
10,587
–
–
63,500
63,500
1,463,118
337,778
337,778
1,800,896
2010
$‘000
32,425
328
16,376
4,223
53,352
1,171
12,495
13,666
(a) Past due but not impaired
As at 30 June 2011, trade receivables of $2,812,400 (2010: $2,033,000) were past due but not impaired. Refer to Note 34(b) 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.
(b) Impairment of trade receivables
There were no impaired trade receivables for the Group in 2011 or 2010.
(c) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group.
88
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
10. traDe aND other receivables CONTINUED
(d) Foreign exchange and interest rate risk
Information about the Group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is
provided in Note 34.
(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 34 for more
information on the risk management policy of the Group and the credit quality of the Group’s trade receivables.
(f) Prepayments
Included within current prepayments is $11,551,000 (2010: $15,149,000) of prepaid operational expenses. Included within non-current
prepayments is $9,768,000 (2010: $12,296,000) of prepaid operational expenses.
11. iNveNtory
Inventory – Environmental Certificates
12. Derivative FiNaNcial iNstrumeNts
Non-current assets
At fair value: Interest rate swaps – cash flow hedges
Current liabilities
At fair value: Interest rate swaps – cash flow hedges
Non-current liabilities
At fair value: Interest rate swaps – cash flow hedges
Refer to Note 34 for further information.
2011
$‘000
9,070
9,070
2011
$‘000
1,595
1,595
34,976
34,976
66,693
66,693
2010
$‘000
3,204
3,204
2010
$‘000
–
–
59,573
59,573
98,284
98,284
89
notes to the financial statements
for the year ended 30 june 2011
13. iNvestmeNts iN associates
Year ended 30 June 2011
In March 2011, the Group completed a transaction with renewable energy project developer National Power Partners (‘NPP’) in
relation to the ownership of certain wind farm development projects in its Australian wind energy development pipeline. Under
the terms of the transaction, the Group acquired the remaining 50% interest in Bodangora (NSW), Flyers Creek (NSW), Cherry Tree
(VIC) and Woakwine (SA) development projects which it did not already own. These 50% interests comprised ordinary shares in
development entities. Those ordinary shares were acquired for nominal cash consideration (refer to Note 30).
As part of the transaction, NPP acquired the Group’s interests in the 54MW Glen Innes development project in NSW and
approximately 100MW of other development projects which were previously being jointly developed (‘NPP Acquired Projects’).
In connection with the above transactions, the Group acquired development rights of $7,240,000 relating to Bodangora, Flyers
Creek, Cherry Tree and Woakwine development projects, which were paid for by the assignment of receivables to NPP of $450,000,
offset of loans and payables by NPP to the Group of $2,447,000, exchange of the Group’s interests in the NPP Acquired Projects for
$1,389,000, disposal of development rights in the NPP Acquired Projects for $1,851,000 and a cash payment of $1,103,000.
The Group has a non-controlling 50% interest in Infigen Suntech Australia Pty Ltd. The Group incurred $1,400,000 in connection with
this development.
Year ended 30 June 2010
The Group acquired interests in a pipeline of development projects in Australia and New Zealand, which included interests in shares
in various entities, development rights and land. These interests ranged from 32% to 50%, depending on the entity, each of which
has been treated as an associate. The Group paid $4,560,000 for the interests in the shares in these development entities and has
equity accounted its interests.
(a) Movements in carrying amounts
Carrying amount at the beginning of the financial year
Additions during the year
Share of loss after income tax
Transferred to intangible assets
Disposal of carrying value of investments
Carrying amount at the end of the financial year
2011
$‘000
3,543
1,400
(552)
(2,237)
(1,389)
765
(b) Summarised financial information of associates
The Group’s share of the results of its associates and its aggregated assets (including goodwill) and liabilities are as follows:
Assets
Liabilities
Revenues
Loss
1,290
738
–
(552)
(c) Contingent liabilities of associates
There were no contingent liabilities relating to associates at the end of the financial year.
2010
$‘000
–
4,560
(85)
–
(932)
3,543
408
572
–
(85)
90
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
14. property, plaNt aND equipmeNt
At 1 July 2009
Cost or fair value
Accumulated depreciation
Net book value
Year ended 30 June 2010
Opening net book value
Additions
Transfers
Disposals
Depreciation expense
Net foreign currency exchange differences
Closing net book value
At 30 June 2010
Cost or fair value
Accumulated depreciation
Net book value
Year ended 30 June 2011
Opening net book value
Additions
Transfers
Disposals
Depreciation expense
Net foreign currency exchange differences
Closing net book value
At 30 June 2011
Cost or fair value
Accumulated depreciation
Net book value
Assets under
construction
$’000
Plant &
Equipment
$’000
359,780
–
359,780
359,780
91,765
(415,858)
–
–
–
35,687
35,687
–
35,687
35,687
58,232
2,413
–
–
–
96,332
96,332
–
96,332
3,286,428
(249,995)
3,036,433
3,036,433
10,454
415,858
(83,763)
(134,026)
(169,749)
3,075,207
3,442,706
(367,499)
3,075,207
3,075,207
10,287
–
(191,848)
(130,325)
(399,541)
2,363,780
2,772,542
(408,762)
2,363,780
Total
$’000
3,646,208
(249,995)
3,396,213
3,396,213
102,219
–
(83,763)
(134,026)
(169,749)
3,110,894
3,478,393
(367,499)
3,110,894
3,110,894
68,519
2,413
(191,848)
(130,325)
(399,541)
2,460,112
2,868,874
(408,762)
2,460,112
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.
In year ended 30 June 2010 the Group had certain assets with net book value of $39,742,000 which were accounted for under finance
leases. In the year ended 30 June 2011 these were sold as part of the sale of the Group’s German portfolio. Refer Notes 6 and 28.
91
notes to the financial statements
for the year ended 30 june 2011
15. iNtaNgible assets
At 1 July 2009
Cost
Accumulated amortisation and impairment
Net book value
Year ended 30 June 2010
Opening net book value
Additions
Acquisitions through business combinations
Disposals
Amortisation expense (i)
Net foreign currency exchange differences
Closing net book value
At 30 June 2010
Cost
Accumulated amortisation and impairment
Net book value
Year ended 30 June 2011
Opening net book value
Additions
Transfers
Disposals
Amortisation expense (i)
Net foreign currency exchange differences
Closing net book value
At 30 June 2011
Cost
Accumulated amortisation and impairment
Net book value
Goodwill
$’000
Development
assets
$’000
Project-related
agreements and
licences
$’000
27,455
–
27,455
27,455
–
–
–
–
(998)
26,457
26,457
–
26,457
26,457
–
–
(6,381)
–
(1,607)
18,469
18,469
–
18,469
–
–
–
–
9,127
6,320
–
–
–
15,447
15,447
–
15,447
15,447
13,406
(1,449)
(1,851)
–
–
25,553
25,553
–
25,553
427,331
(25,626)
401,705
401,705
–
6,275
(20,778)
(16,535)
(19,533)
351,134
390,731
(39,597)
351,134
351,134
3,236
(964)
(18,456)
(16,004)
(46,509)
272,437
316,076
(43,639)
272,437
Total
$’000
454,786
(25,626)
429,160
429,160
9,127
12,595
(20,778)
(16,535)
(20,531)
393,038
432,635
(39,597)
393,038
393,038
16,642
(2,413)
(26,688)
(16,004)
(48,116)
316,459
360,098
(43,639)
316,459
(i) Amortisation expense is included in the line item Depreciation and Amortisation Expense in the statement of comprehensive income.
92
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
15. iNtaNgible assets CONTINUED
(a) 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
2011
$‘000
15,136
–
3,333
18,469
2010
$‘000
15,136
7,135
4,186
26,457
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections
based on financial projections approved by management covering the life of the wind farm.
(b) 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 resources,
availability, prices and operating expenses. In performing these calculations for each CGU, the Group has applied pre-tax discount
rates in the range of 9% – 11% (2010: 8% – 10%). The discount rates used reflect specific risks relating to the relevant countries in
which they operate.
In determining future cash flows, the Group uses long-term mean energy production estimates to reflect the currently 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 some 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.
(c) 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.
(d) Development assets
Development assets represent the cost of licenses and wind farm development costs incurred prior to commencement of
construction for wind farms. When a wind farm is constructed, the development assets relating to that wind farm are capitalised
with the cost of constructing wind farms upon completion. Development assets are not amortised but are reclassified and
depreciated over the effective life of the eventuating asset as property, plant and equipment when they become ready for use.
93
notes to the financial statements
for the year ended 30 june 2011
16. traDe aND other payables
Current
Trade payables and accruals
Interest payable
Goods and services and other taxes payable
Deferred income
Other (i)
Non-current
Other
2010
$’000
(Restated –
refer Note 1(a))
33,224
102
10,144
916
8,313
52,699
485
485
2011
$’000
26,661
1,433
6,739
5,747
2,620
43,200
173
173
(i) Includes employee benefits and an accrual for annual leave. The entire obligation for annual leave is presented as current because
the Group does not have an unconditional right to defer payment. The prior year balance includes other non-recurring expenses
related to the US transition process.
17. borrowiNgs
Current
Secured
At amortised cost:
Global Facility (i)
Finance lease liabilities (Note 28)
Non-current
Secured
At amortised cost:
Global Facility (i)
Project finance debt – Woodlawn (ii)
Capitalised loan costs
Finance lease liabilities (Note 28)
(a) Reconciliation of borrowings
Opening balance
Finance lease repayments
Finance leases disposed
Debt repayments
Draw down from project financing (ii)
Draw down from Global Facility
Other financing arrangements
Net loan costs capitalised
Net foreign currency exchange differences
Closing balance
94
InfIgen energy AnnuAl report 2011
2011
$‘000
2010
$‘000
209,465
–
209,465
85,817
2,538
88,355
1,021,457
32,742
(11,247)
1,042,952
–
1,042,952
1,422,640
(3,709)
(35,167)
(41,094)
32,742
–
–
(1,312)
(121,683)
1,252,417
1,308,757
–
(11,676)
1,297,081
37,204
1,334,285
1,649,104
(2,580)
–
(151,026)
–
17,905
2,620
5,583
(98,966)
1,422,640
notes to the financial statements
for the year ended 30 june 2011
17. borrowiNgs CONTINUED
(b) Capitalised borrowing costs
Borrowing costs capitalised during the financial year
Weighted average capitalisation rate on funds borrowed
2011
$’000
1,948
6.0%
2010
$’000
5,152
6.6%
Where borrowing costs are directly attributable to the construction of a qualifying asset, they are capitalised as part of the cost
of that asset.
(c) Borrowings by currency
The total value of funds that have been drawn down by currency, converted to AUD at the year end rate, are presented in the
following table:
As at 30 June 2011
Australian dollars
Euro – debt
Euro – finance lease
US dollars
Gross debt
Less capitalised loan costs
Total debt
As at 30 June 2010
Australian dollars
Euro – debt
Euro – finance lease
US dollars
Gross debt
Less capitalised loan costs
Total debt
Total Borrowings
(Local curr ‘000)
Total Borrowings
(AUD ’000)
655,219
133,175
–
458,281
649,048
139,935
27,722
464,460
655,219
180,454
–
427,991
1,263,664
(11,247)
1,252,417
649,048
200,609
39,742
544,917
1,434,316
(11,676)
1,422,640
On 6 July 2011, the Group repaid $154,264,000 of Global Facility debt in relation to the disposal of German assets.
A breakdown of the value of the Group’s drawn down funds by currency prior to and following this repayment is presented in the
following table:
Opening balance
1 July 2011
(Local curr ‘000)
Repayments
6 July 2011
(Local curr ‘000)
Total
Borrowings
(Local curr ‘000)
Total
Borrowings
(AUD ‘000)
As at 6 July 2011
Australian dollars
Euro
US dollars
Gross debt
Less capitalised loan costs
Total debt
655,219
133,175
458,281
77,936
16,725
57,379
577,283
116,450
400,902
577,283
157,792
374,325
1,109,400
(11,247)
1,098,153
95
notes to the financial statements
for the year ended 30 june 2011
17. borrowiNgs CONTINUED
(i) Global Facility
The Group’s corporate debt facility (the Global Facility) is a fully amortising, multi-currency facility that matures in 2022. The Global
Facility is a syndicated facility among a group of Australian and international lenders.
The Global Facility delineates between those Infigen group entities that comprise the Global Facility borrower group (Borrower Group)
and those Infigen group entities that are not within the Borrower Group. The latter are generally referred to as “Excluded Companies”.
In broad terms, the Borrower Group comprises IEL and substantially all of its subsidiaries, with the exception that none of the following
fall within the Borrower Group:
— IET or IEBL
— Infigen Energy Holdings Pty Limited and its subsidiaries, which primarily include the Group’s Australian development pipeline
project entities
— Woodlawn Wind Pty Limited (which owns Woodlawn wind farm)
— the US wind farm entities (which own the US wind farms) and the institutional equity partnerships which own the US wind farm
entities
For clarity, the wholly-owned subsidiaries of IEL that are entitled to returns, including cash distributions, from the US wind farm entities,
or institutional equity partnerships (refer Note 19), are included within the Borrower Group.
Excluded Companies
Excluded Companies are quarantined from the Global Facility. Excluded Companies:
— are not entitled to borrow under the Global Facility;
— must deal with companies within the Global Facility on arm’s length terms; and,
— are not subject to, or the subject of, the representations, covenants or events of default applicable to the Borrower Group.
Amounts outstanding under the Global Facility
The amounts outstanding under the Global Facility are in Euro, United States dollars and Australian dollars. The base currency of the
Global Facility is the Euro.
Principal repayments under the Global Facility
Subsequent to 30 June 2010 and for the remaining term of the Global Facility (expiring December 2022), all surplus cash flows of the
Borrower Group, after taking account of working capital requirements, are used to make repayments under the Global Facility on a
semi-annual basis (Cash Sweep). The net disposal proceeds of any disposals by Borrower Group entities must also be applied to make
repayments under the Global Facility.
During the year ended 30 June 2011 repayments of $41,094,000 were made. On 6 July 2011, $154,264,000 of Global Facility debt
was repaid following the disposal of the Group’s German assets.
Interest payments
The Group pays interest each six months based on Euribor (Euro drawings), BBSY (Australian dollar) or LIBOR (United States dollar),
plus a margin. It is the Group’s policy and a requirement of the Global Facility to use financial instruments to fix the interest rate for
a portion of the borrowings (refer Note 34).
Financial covenants
During the period of the Cash Sweep, the only financial covenant that applies under the Global Facility is a leverage ratio covenant.
This covenant is based on the results of each twelve month period ending 30 June or 31 December and is as follows:
— Through to June 2016: not more than 8.5 times;
— July 2016 to June 2019: not more than 6.0 times;
— July 2019 to expiry of facility (December 2022): not more than 3.0 times.
The leverage ratio is determined by taking the quotient of Net Debt and EBITDA of entities that are within the Borrower Group.
EBITDA represents the consolidated earnings of the Borrower Group entities before finance charges, unrealised gains or losses on
financial instruments and material items of an unusual or non-recurring nature. In the US this is represented by the cash distributions
to Infigen from the wind farm entities. Distributions to Infigen, from the wind farm entities, can vary materially from the US reported
EBITDA as a result of Institutional Equity Partnerships (Refer to Note 19).
96
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
17. borrowiNgs CONTINUED
Review events
A review event would occur if the shares of IEL were removed from the official list of the Australian Securities Exchange or were
unstapled from units of IET and shares of IEBL. Such an event would require assessment of the effect on the Global Facility and,
if necessary, agreement of an action plan.
Security
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 Infigen Energy Limited); and
— the direct subsidiaries of the borrowers, which are holding entities of each operating wind farm in Infigen’s portfolio (other than
Woodlawn wind farm).
Global Facility lenders have no security over Excluded Companies.
(ii) Project finance facility – Woodlawn Wind Pty Ltd
Woodlawn Wind Pty Ltd, the Infigen entity which owns the Woodlawn Wind Farm, is the borrower under an AUD $55 million project
finance facility that matures in September 2014. The lender is Westpac Banking Corporation.
Amounts outstanding under the project finance facility
The amounts outstanding under the project finance facility are denominated in AUD to match the underlying currency of operations.
The amounts outstanding during the construction phase represent a percentage of completion basis.
Principal repayments under the project finance facility
The borrower is required to make debt repayments on a quarterly basis.
Interest payments
Interest is payable quarterly based on BBSY (Australian dollar) plus a margin.
Interest obligations have been hedged at a fixed rate of 4.48% plus the margin for the period to maturity in September 2014.
Security
The lender under the Project finance facility have security over the shares in, and assets and undertaking, of Woodlawn Wind Pty Ltd.
18. provisioNs
Current
Employee benefits
Non-current
Employee benefits
2011
$’000
3,422
3,422
290
290
2010
$’000
2,627
2,627
239
239
Employee benefits
The current provision for employee benefits includes provision for short term incentives and long service leave. For long service
leave it covers all unconditional entitlements where employees have completed the required period of service and also those where
employees are entitled to pro-rata payments in certain circumstances.
97
notes to the financial statements
for the year ended 30 june 2011
19. iNstitutioNal equity partNerships classiFieD as liabilities
Nature of institutional equity partnerships
Infigen is a Class B member in twelve (12) US limited liability companies (LLCs) that directly or indirectly own the US wind farms. The
Group owns between 50% and 100% of the Class B membership interests in these LLCs. Each of these LLCs also has one or more
Class A members (institutional investors), and where the Group does not own 100% of the Class B interests, one or more other Class B
members. These LLCs are referred to as institutional equity partnerships (IEPs).
The Group’s relationship with the Class A institutional investors and other Class B members is established through a LLC operating
agreement. That operating agreement contains rules by which the cash flows and tax benefits, including Production Tax Credits (PTCs)
and accelerated depreciation, generated by the wind farms are allocated between the Class A and Class B members during the life of
the wind farms.
The Class A institutional investors purchase their partnership interests for an upfront cash payment. This payment is fixed so that the
investors, from 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.
Pursuant to the allocation rules specified in the LLC operating agreement, all operating cash flow is allocated to the Class B members
until the earlier of a fixed date, or when the Class B members recover the amount of invested Class B 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 members.
After the Reallocation Date, the Class A institutional investors retain a non-controlling interest for the duration of their membership in
the LLC. The Group also has an option to purchase the Class A institutional investors’ residual interests at fair market value.
Recognition of institutional equity partnerships
The Group either controls or jointly controls the strategic and operating decisions of institutional equity partnerships. Notes 29 and 35
provide further details of controlled and jointly controlled partnerships.
Classification of institutional equity partnerships
Class A institutional investors’ and Class B members’ investments in institutional equity partnership structures are classified as liabilities
in the financial statements of the Group as the partnerships have limited lives and the allocation of income earned is governed by
contractual agreements over the life of the investment. The following should be noted:
— Should future operational revenues from the US wind farms be insufficient, there is no contractual obligation on the Group to repay
the liabilities.
— Balances outstanding (Class A institutional investors and Class B non-controlling members) do not impact the Group’s lending
covenants.
— There is no exit mechanism by which investors can require repayment of their remaining capital and consequently there is no
re-financing risk for the IEPs.
98
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
19. iNstitutioNal equity partNerships classiFieD as liabilities CONTINUED
The following table includes the components of institutional equity partnerships classified as liabilities: Class A member liabilities;
non-controlling interests relating to Class B members and deferred revenue.
Class A members
2011
$’000
2010
$’000
Class B members
2011
$’000
2010
$’000
Total
2011
$’000
2010
$’000
879,164
(1,207)
1,016,042
(1,573)
82,445
(16,439)
96,040
(13,141)
961,609
(17,646)
1,112,082
(14,714)
(81,939)
(85,413)
(14,936)
(49,414)
46,950
(6,317)
–
(175,750)
645,965
57,377
(7,396)
–
(50,459)
879,164
–
–
–
–
4,591
(16,146)
54,451
–
–
(81,939)
(85,413)
(14,936)
(49,414)
–
–
4,366
(4,820)
82,445
46,950
(6,317)
4,591
(191,896)
700,416
57,377
(7,396)
4,366
(55,279)
961,609
Components of institutional
equity partnerships:
At 1 July
Distributions
Value of production tax credits offset
against Class A liability
Value of tax losses offset against
Class A liability1
Allocation of return on outstanding
Class A liability
Movement in residual interest (Class A)
Non-controlling interest (Class B)
Foreign exchange gain
At 30 June
Deferred revenue:
At 1 July
Benefits deferred during the period
Foreign exchange gain
At 30 June
1 This comprises the following tax-effected components:
Total taxable income before accelerated tax depreciation
Accelerated tax depreciation
Value of tax losses offset against Class A liability
507,671
35,237
(106,348)
436,560
1,136,976
454,980
71,248
(18,557)
507,671
1,469,280
2011
$’000
47,761
(62,697)
(14,936)
2010
$’000
52,949
(102,363)
(49,414)
99
notes to the financial statements
for the year ended 30 june 2011
20. coNtributeD equity
Fully paid stapled securities/shares
Opening balance
Issue of securities – Distribution reinvestment plan (i)
Capital distribution
Securities bought back on market and cancelled (ii)
Closing balance
2011
No’000
760,374
1,892
–
–
762,266
2011
$’000
783,545
981
(22,884)
–
761,642
Attributable to:
Equity holders of the parent
Equity holders of the other stapled securities (non-controlling interests)
2010
No’000
808,177
–
–
(47,803)
760,374
2011
$’000
2,305
759,337
761,642
2010
$’000
862,113
–
(36,635)
(41,933)
783,545
2010
$’000
2,305
781,240
783,545
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 stapled entities in proportion to the number of and amounts paid on the
securities held.
(i) Distribution reinvestment plan
On 14 June 2011, Infigen announced that it had suspended distributions for the years ending 30 June 2012 and 30 June 2013.
The total distribution for the financial year ended 30 June 2011 was 1.0 cent per stapled security being the amount declared for
the interim distribution and paid on 17 March 2011.
Prior to 14 June 2011, Infigen operated a distribution reinvestment plan (DRP) under which holders of stapled securities may have
elected to have all or part of their distribution entitlements satisfied by the issue of new stapled securities rather than by being paid
in cash. The stapled securities issued under the DRP were allotted based on the weighted average ‘market price’ for Infigen stapled
securities sold on the ASX over the 10 trading days ending on the trading day which was three trading days before the date that the
securities were to be allotted under the DRP (DRP Price).
(ii) On market security buy-back
Since 1 July 2010, there have been no security buy-backs.
On 5 May 2010, Infigen announced its intention to undertake a buy-back of up to 10% of its securities between the announcement
date and 30 June 2010. No securityholder approval was required for the buy-back. As at 30 June 2010, Infigen had purchased and
cancelled 47,803,000 stapled securities at an average price of $0.88 per security under that buy-back program.
21. reserves
Foreign currency translation
Hedging
Acquisition
Share-based payment
Attributable to:
Equity holders of the parent
Equity holders of the other stapled securities (non-controlling interests)
2011
$’000
(60,994)
(82,545)
(47,675)
3,774
(187,440)
(187,440)
–
(187,440)
2010
$’000
(15,477)
(129,188)
(47,675)
3,155
(189,185)
(189,185)
–
(189,185)
100
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
21. reserves CONTINUED
(a) Foreign currency translation reserve
Balance at beginning of financial year
Movements increasing/(decreasing) recognised:
Translation of foreign operations
Disposal of foreign operations
Forward exchange contracts
Deferred tax reversal
Balance at end of financial year
2011
$’000
(15,477)
(48,069)
2,552
–
–
(45,517)
(60,994)
2010
$’000
25,718
(38,314)
201
(3,438)
356
(41,195)
(15,477)
Exchange differences arising on translation of foreign controlled entities are taken to the foreign currency translation reserve,
as described in Note 1(m). The reserve is recognised in profit and loss when the net investment is disposed of.
(b) Hedging reserve
Balance at beginning of financial year
Movement increasing/(decreasing) recognised:
Interest rate swaps
Deferred tax arising on hedges
Balance at end of financial year
2011
$’000
(129,188)
58,552
(11,909)
46,643
(82,545)
2010
$’000
(122,145)
(13,950)
6,907
(7,043)
(129,188)
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(j). Amounts are recognised in profit and loss when the associated hedged transaction settles.
(c) Acquisition reserve
Balance at beginning of financial year
Acquisition of non-controlling interest of subsidiary (i)
Balance at end of financial year
2011
$’000
(47,675)
–
(47,675)
2010
$’000
(53,472)
5,797
(47,675)
(i) 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 the other non-controlling interest acquisitions.
The difference between the purchase consideration and the amount by which the non-controlling interest is adjusted has been
recognised in the acquisition reserve. In relation to the various non-controlling interests that have been purchased during the year
ended 30 June 2010 for $2,257,000 (refer Note 33(b)) the amounts in the table above have been recognised in the acquisition reserve.
(d) Share-based payment reserve
Balance at beginning of financial year
Share-based payments expense1
Balance at end of financial year
2011
$’000
3,155
619
3,774
2010
$’000
1,071
2,084
3,155
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 25 for
further detail.
101
notes to the financial statements
for the year ended 30 june 2011
22. retaiNeD earNiNgs
Balance at beginning of financial year
Net 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 (non-controlling interests)
23. earNiNgs per security/share
(a) Basic earnings per stapled security/parent entity share:
Parent entity share
From continuing operations
From discontinued operations
Total basic earnings per share
Stapled security
From continuing operations
From discontinued operations
Total basic earnings per security
(b) Diluted earnings per stapled security/parent entity share:
Parent entity share
From continuing operations
From discontinued operations
Total diluted earnings per share
Stapled security
From continuing operations
From discontinued operations
Total diluted earnings per security
2010
$’000
(Restated –
refer Note 1(a))
202,189
(74,621)
127,568
147,110
(19,542)
127,568
2011
$’000
127,568
(60,994)
66,574
87,020
(20,446)
66,574
2011
Cents per
security
2010
Cents per
security
(Restated)
(3.3)
(4.6)
(7.9)
(3.4)
(4.6)
(8.0)
(3.3)
(4.6)
(7.9)
(3.4)
(4.6)
(8.0)
(7.9)
(1.0)
(8.9)
(8.4)
(1.0)
(9.4)
(7.9)
(1.0)
(8.9)
(8.4)
(1.0)
(9.4)
(c) Reconciliation of earnings used in calculating earnings per security/share
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 shareholders
From continuing operations
From discontinued operations
Total earnings attributable to the parent entity shareholders
Earnings attributable to the stapled security holders
From continuing operations
From discontinued operations
Total earnings attributable to the stapled security holders
102
InfIgen energy AnnuAl report 2011
2010
$’000
(Restated –
refer Note 1(a))
(63,529)
(7,707)
(71,236)
(66,914)
(7,707)
(74,621)
2011
$’000
(25,105)
(34,985)
(60,090)
(26,009)
(34,985)
(60,994)
notes to the financial statements
for the year ended 30 june 2011
23. earNiNgs per security/share CONTINUED
(d) Weighted average number of shares used as the denominator
Weighted average number of securities/ shares for the purposes
of basic earnings per security/share
Weighted average number of securities/ shares for the purposes
of diluted earnings per security/share
2011
No. ’000
761,341
761,341
2010
No. ’000
799,847
799,847
24. DistributioNs paiD
Recognised amounts
Ordinary securities
2011
Cents per
security
Total
$’000
Cents per
security
2010
Total
$’000
Final distribution in respect of 2010 year of
2.0 cents per stapled security (2009: 4.50 cents)
paid in September 2010 (2009: September 2009),
100% tax deferred (2009: 100% tax deferred).
Interim distribution in respect of 2011 year of
1.0 cents (2010: nil cents) per stapled security
paid in March 2011 (2010: N/A), 100% tax deferred.
(2010: N/A)
2.0
1.0
Distributions paid in cash or satisfied by the
issue of new stapled securities under the
Distribution Reinvestment Plan during the
year ended 30 June 2011 and the year ended
30 June 2010 were as follows:
Paid in cash
Satisfied by the issue of stapled securities
15,272
4.50
36,635
7,612
22,884
–
–
36,635
21,903
981
22,884
36,635
–
36,635
On 14 June 2011, the Directors of Infigen declared the total distribution for the financial year ended 30 June 2011 to be 1.0 cent
per stapled security being the amount declared for the interim distribution and paid on 17 March 2011 (2010: 2.0 cents and paid
on 16 September 2010).
Of the $15,272,000 final distribution in respect of 2010, $627,000 (4.1%) of distributions were settled through the issue of stapled
securities under the Distribution Reinvestment Plan. Of the $7,612,000 interim distribution in respect of 2011, $354,000 (4.65%)
of distributions were settled through the issue of stapled securities under the Distribution Reinvestment Plan. No amounts in
relation to the final distribution for 2009 of $36,635,000 were settled through the issue of stapled securities.
The parent entity has franking credits of $6,228,093 for the year ended 30 June 2011 (2010: $4,408,323). The franking credits
were acquired when Walkaway Windpower Pty Ltd joined the Group’s tax consolidated group in June 2010.
On 14 June 2011, Infigen announced that it has suspended distributions for the years ending 30 June 2012 and 30 June 2013.
103
notes to the financial statements
for the year ended 30 june 2011
25. share-baseD paymeNts
(a) Employee performance rights, performance units and options plan
PR&O Plan arrangements for the FY09, FY10 and FY11 grants
In 2009 the Board determined that the most appropriate form of incentive arrangement for the Senior Managers was a long-term
incentive arrangement. Senior Managers have received a long-term incentive award under the Performance Rights & Options
Plan (’PR&O’) that encompass:
— the Senior Manager’s long-term incentive opportunity for FY09;
— the Senior Manager’s long-term incentive award for FY10; and
— the Senior Manager’s long-term incentive award for FY11.
Performance conditions of awards granted under the PR&O Plan
— The FY09 plan participants received 50% of their award in the form of performance rights and 50% in the form of options
awarded to participants in two tranches of equal value (Tranche 1 and Tranche 2).
— In FY10 and FY11 plan participants received 100% performance rights or units in two tranches of equal value (Tranche 1
and Tranche 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.
Performance rights
Performance units
Options
Period
2009
2010
2011
Tranche 1
TSR condition
Tranche 2
Operational
Performance condition
Tranche 1
TSR condition
Tranche 2
Operational
Performance condition
N/A
N/A
N/A
N/A
Tranche 1
TSR condition
TSR condition
Tranche 2
Operational
Performance condition
Operational
Performance condition
TSR condition
01 January 2009
– 31 December 2011
Operational
Performance condition
1 July 2008
– 30 June 2011
N/A
N/A
N/A
N/A
30 September 2010
– 30 June 2012
30 September 2010
– 30 June 2012
30 September 2010
– 30 June 2013
30 September 2010
– 30 June 2013
— TSR condition (applicable to Tranche 1 performance rights or units 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 Infigen will be compared to companies in the S&P/ASX 200 (excluding financial services
and the materials/resources sectors). 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 Infigen will be averaged over the 30 trading days preceding the start and end
date of the performance period.
104
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
25. share-baseD paymeNts CONTINUED
The percentage of the Tranche 1 performance rights or units and Tranche 1 options that vest are as follows:
Infigen’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%
Operational Performance condition (applicable to Tranche 2 performance rights and Tranche 2 options): the vesting of the
Tranche 2 performance rights or units and Tranche 2 options is subject to an Operational Performance condition.
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 Infigen’s economic interest in
all investments.
Set out below are summaries of performance rights and options that have been granted under the plan:
Deemed grant date
Performance rights
27 Mar 2009
30 Sept 2010 (FY10 plan)
30 Sept 2010 (FY11 plan)
Total
Performance units
29 June 2011
Total
Options
27 Mar 2009
Total
Weighted average
exercise price
Expiry
date
Exercise
price
Balance
at start of
the year
Number
Granted
during
the year
Number
Lapsed
during
the year
Number
Balance Vested and
at end of exercisable
the year
at end
Number of the year
N/A
N/A
N/A
N/A
N/A
N/A
3,423,579
–
–
3,423,579
–
470,034
2,899,464
3,369,498
(1,069,521)
(260,916)
(894,658)
(2,225,095)
2,354,058
209,118
2,004,806
4,567,982
N/A
N/A
–
126,866
126,866
–
–
126,866
126,866
31 Dec 2013
$0.897
15,546,833
15,546,833
$0.897
–
–
–
10,690,027
(4,856,806)
(4,856,806) 10,690,027
$0.897
$0.897
–
–
–
–
–
–
–
–
105
notes to the financial statements
for the year ended 30 june 2011
25. share-baseD paymeNts CONTINUED
Fair value of performance rights and options granted
Grant date
Performance rights
Performance units
Options
2009
2010
2011
Tranche 1
27 March 2009
Tranche 2
27 March 2009
Tranche 1
30 September 2010
Tranche 2
30 September 2010
Tranche 1
30 September 2010
Tranche 2
30 September 2010
0.543
0.708
0.439
0.696
0.439
0.696
N/A
N/A
N/A
N/A
0.19
0.23
0.207
0.211
N/A
N/A
N/A
N/A
The fair values of performance rights, performance units and options at grant date are determined using market prices and a
model that takes into account the exercise price, the term of the performance right, unit or option, 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, performance units and options granted include:
(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 as shares for rights and as cash for units. Vested options are exercisable until 31 December 2013.
(b) Exercise price for options: $0.897
(c) Grant dates: 27 March 2009 (FY09 plan), 30 September 2010 (FY10 plan), 30 September 2010 (FY11 plan)
(d) Expiry date of options: 31 December 2013
(e) Share price at grant date: $0.86 (FY09 plan), $0.735 (FY10 plan), $0.735 (FY11 rights plan), $0.35 (FY11 unit plan)
(f) Expected price volatility of the company’s shares: 49% (FY09 plan), 42% (FY10 plan), 42% (FY11 plan)
(g) Expected dividend yield: 8.6% (FY09 plan), 2.0% (FY10 plan), 2.0% (FY11 rights plan), 0% (FY11 unit plan)
(h) Risk free interest rate: 3.96% (FY09 plan), 4.79% (FY10 plan), 4.79% (FY11 rights plan), 4.79% (FY11 units plan)
Where performance rights, performance units and options are issued to employees of subsidiaries within the Group, the expense
in relation to these performance rights, performance units 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 issued (net of lapsed awards) under the PR&O Plan
26. commitmeNts For expeNDiture
(a) Capital expenditure commitments
Not later than 1 year
Later than 1 year and not later than 5 years
2011
$’000
619
619
2011
$’000
21,569
–
21,569
2010
$’000
2,084
2,084
2010
$’000
69,769
–
69,769
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 28 and Note 26, respectively, to the
financial statements.
106
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
26. commitmeNts For expeNDiture CONTINUED
(c) Other expenditure commitments
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2011
$’000
10,057
11,402
118
21,577
2010
$’000
12,650
28,498
41,861
83,009
Other expenditure commitments include commitments relating to operations and maintenance arrangements and connection
agreements.
27. coNtiNgeNt liabilities aND coNtiNgeNt assets
Contingent liabilities
Letters of credit
2011
$’000
49,789
49,789
2010
$’000
66,074
66,074
Letters of credit 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 letters of credit, as their combined fair value
is immaterial.
Kumeyaay warranty claim
In December 2009, the Kumeyaay Wind Farm experienced unexpected damage during a storm event and a utility power outage.
Following the storm, the initial review revealed that 45 blades on 23 of the 25 turbines were damaged, and that it was probable
the remaining blades were also affected and would need to be replaced.
By April 2010, the turbine manufacturer had replaced all 75 blades and all 25 turbines were operating. The turbine manufacturer
has not invoiced Kumeyaay Wind LLC, a Group subsidiary, for the costs of repair to the site or for the replacement of blades.
It is the Group’s view that these costs are covered under either the manufacturer’s warranty or insurance. Kumeyaay Wind LLC is
also seeking to recover payment for lost production under the manufacturer’s performance guarantee or insurance. The turbine
manufacturer has not accepted this view and, at this time, an outcome is uncertain. Kumeyaay Wind LLC has engaged external
technical advisors and legal counsel to represent it in the dispute resolution process, and, if required, through formal litigation.
Discussions continue between the management of both organisations in accordance with an agreed resolution process.
German disposal – potential reimbursement obligation and funds in escrow
Under the terms of the sale of the Group’s German assets during the year, the Group was required to place a cash sum of EUR 5.1m
(or approx $6.3m) in an escrow account as collateral for a potential reimbursement obligation. All or part of the escrowed funds
may be retained by the Group depending upon the satisfaction of certain conditions.
As at the time of sale, certification of 3 wind farms as qualifying for certain additional tariff under the German Renewable Energy Act
(as a result of technology upgrades underway at those sites) had not yet been received. If the relevant certification is not obtained by
the German statutory deadline for qualifying for the additional tariff (currently 30 September 2011), then Infigen must reimburse the
buyer of the applicable wind farm the following amount in respect of the failure to obtain that certification and hence additional tariff
for that wind farm, being EUR 2.6m, EUR 1.3m and EUR 1.3m respectively (depending upon the wind farm in question).
The certification process for these 3 wind farms is progressing and it is currently expected that certification will be obtained for all
3 wind farms prior to 30 September 2011. The escrowed funds of approx $6.3m are included as a component of Cash and Cash
Equivalents in Infigen’s statement of financial position as at 30 June 2011.
Disposal of businesses
Under the sale agreements relating to the disposal of the Group’s previously owned Spanish, French and German assets, the Group
has provided certain warranties and indemnities in favour of the buyers of those assets. No claims have been made by the relevant
buyers under these warranties and indemnities.
Under the sale agreements relating to the disposal of the Group’s interests in certain development projects and entities to National
Power Partners (‘NPP’) in March 2011, the Group has provided certain warranties and indemnities in favour of the buyers of those
assets. No claims have been made under these warranties and indemnities.
107
notes to the financial statements
for the year ended 30 june 2011
28. leases
Finance leases
Leasing arrangements
Finance leases related to wind turbine generators at the German Eifel Wind Farm and had a term of 14 years with an option to
purchase at the end of the term. These leases remained with the Eifel Wind Farm entity that was sold as part of the Group’s disposal
of German entities.
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 17)
Non-current borrowings (Note 17)
Minimum future
lease payments
2011
$’000
–
–
–
–
–
–
–
–
–
2010
$’000
4,854
19,415
23,159
47,428
(7,686)
39,742
2,538
37,204
39,742
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
2011
$’000
8,382
29,988
123,835
162,205
2010
$’000
9,221
34,826
154,408
198,455
108
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
29. subsiDiaries
Name of entity
Parent entity
* Infigen Energy Limited
Other stapled entities
Infigen Energy (Bermuda) Limited
Infigen Energy Trust
Subsidiaries of the parent and other stapled entities
Allegheny Ridge Wind Farm LLC
Aragonne Wind LLC
Aragonne Wind Investments LLC
Bodangora Wind Farm Pty Ltd
Blue Canyon 1 Member LLC
Buena Vista Energy LLC
* Capital Wind Farm 2 Pty Limited
* Capital Wind Farm Holdings Pty Limited
* Capital Wind Farm (BB) Trust
Caprock Wind LLC
Caprock Wind Investments LLC
Caprock Wind Member LLC
CCWE Holdings LLC
Cedar Creek Wind Energy LLC
Cedar Creek Wind 1 Member LLC
Cherry Tree Wind Farm Pty Ltd
Combine Hills 1 Member LLC
Crescent Ridge Holdings LLC
Crescent Ridge LLC
* CS CWF Trust
CS Walkaway Trust
Flyers Creek Wind Farm Pty Ltd
Forsayth Wind Farm Pty Limited
GSG LLC
IFN Crescent Ridge LLC
Infigen Energy Management Holdings LLC
* Infigen Energy Europe Pty Limited
* Infigen Energy Europe 2 Pty Limited
* Infigen Energy Europe 3 Pty Limited
* Infigen Energy Europe 4 Pty Limited
* Infigen Energy Europe 5 Pty Limited
* Infigen Energy Germany Holdings Pty Limited
* Infigen Energy Germany Holdings 2 Pty Limited
* Infigen Energy Germany Holdings 3 Pty Limited
Infigen Energy Verwaltungs GmbH
Infigen Energy (Niederrhein) Limited
Infigen Energy (Eifel) Ltd
Infigen Energy GmbH
Infigen Energy Holdings Sarl
Infigen Energy Germany Holdings Sarl
Country of
incorporation
2011
%
2010
%
Ownership interest**
Australia
Bermuda
Australia
USA
USA
USA
Australia
USA
USA
Australia
Australia
Australia
USA
USA
USA
USA
USA
USA
Australia
USA
USA
USA
Australia
Australia
Australia
Australia
USA
USA
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Germany
UK
UK
Germany
Luxembourg
Luxembourg
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%1
100%
100%
67%1
67%1
100%
100%
100%
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%
50%
100%
100%
100%
100%
100%
100%1
100%
100%
67%1
67%1
100%
50%
100%
75%1
75%1
100%
100%
50%
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
109
notes to the financial statements
for the year ended 30 june 2011
29. subsiDiaries CONTINUED
Ownership interest**
Country of
incorporation
Luxembourg
Luxembourg
Luxembourg
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
Australia
Australia
Australia
Australia
Luxembourg
Malta
Australia
Australia
USA
USA
USA
USA
USA
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
USA
Australia
Australia
Australia
Australia
Germany
USA
USA
USA
USA
2011
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
2010
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Name of entity
Infigen Energy Vest Holdings Sarl
Infigen Energy Gesa Holdings Sarl
Infigen Energy Nor Holdings Sarl
Infigen Energy US LLC
* Infigen Energy T Services Pty Limited
* Infigen Energy Custodian Services Pty Limited
* Infigen Energy Development Holdings Pty Limited
* 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 Markets Pty Limited
* Infigen Energy US Partnership
Infigen Energy US Corporation
* Infigen Energy (US) Pty Limited
* Infigen Energy (US) 2 Pty Limited
* Infigen Energy Finance (Australia) Pty Limited
* Infigen Energy Finance (Germany) Pty Limited
Infigen Energy Finance (Lux) SARL
Infigen Energy (Malta) Limited
* Infigen Energy Holdings Pty Limited
* Infigen Energy Niederrhein Pty Limited
Infigen Asset Management LLC
Infigen Management Services LLC
Kumeyaay Holdings LLC
Kumeyaay Wind LLC
Kumeyaay Wind Member LLC
* Lake Bonney Wind Power Pty Limited
* Lake Bonney Wind Power 2 Pty Limited
* Lake Bonney Wind Power 3 Pty Limited
* Lake Bonney Holdings Pty Limited
* Lake Bonney 2 Holdings Pty Limited
Mendota Hills LLC
* NPP LB2 LLC
* NPP Projects I LLC
* NPP Projects V LLC
* NPP Walkaway Pty Limited
* NPP Walkaway Trust
* Renewable Power Ventures Pty Ltd
RPV Investment Trust
Sonnenberg Windpark GmbH & Co. KG
Sweetwater 1 Member LLC
Sweetwater 2 Member LLC
Sweetwater 3 Member LLC
Sweetwater 4-5 Member LLC
110
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
29. subsiDiaries CONTINUED
Name of entity
* Walkaway Wind Power Pty Limited
* Walkaway (BB) Pty Limited
Walkaway (BB) Trust
* Walkaway (CS) Pty Limited
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
Windfarm Seehausen GmbH
Woakwine Wind Farm Pty Ltd
Wind Park Jersey Member LLC
Wind Portfolio I Member LLC
Wind Portfolio Holdings I LLC
Woodlawn Wind Holdings Pty Limited
* Woodlawn Wind Pty Ltd
* WWP Holdings Pty Limited
BBWP Holdings (Bermuda) Limited
* Denotes a member of the IEL tax consolidated group.
1 Class B Member interest.
Ownership interest**
Country of
incorporation
Australia
Australia
Australia
Australia
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Australia
USA
USA
USA
Australia
Australia
Australia
Bermuda
2011
%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%1
100%
100%
100%
100%
2010
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%1
100%
100%
100%
100%
30. acquisitioN oF busiNesses
Year ended 30 June 2011
(i) Transaction with National Power Partners
In March 2011, the Group completed a transaction with renewable energy project developer National Power Partners (NPP) in
relation to the ownership of certain wind farm development projects in its Australian wind energy development pipeline. Under the
terms of the transaction, the Group acquired the remaining 50% interest in the Bodangora (NSW), Flyers Creek (NSW), Cherry Tree
(VIC) and Woakwine (SA) development projects which it did not already own.
Each remaining 50% interest in the ordinary shares in the development entities was acquired at a nominal value which represented
the fair value of the acquired entity’s net assets.
In connection with the acquisition of the ordinary shares for nominal value, the Group acquired development rights of $7,240,000
relating to Bodangora, Flyers Creek, Cherry Tree and Woakwine development projects, which was paid for by the assignment of
receivables to NPP of $450,000, offset of loans and payables by NPP to the Group of $2,447,000, exchange of the Group’s interests
in the NPP Acquired Projects for $1,389,000, disposal of development rights in the NPP Acquired Projects for $1,851,000 and a
cash payment of $1,103,000.
111
notes to the financial statements
for the year ended 30 june 2011
30. acquisitioN oF busiNesses CONTINUED
Year ended 30 June 2010
(ii) Infigen Energy Markets Pty Limited
In March 2010, Infigen Energy Services Holdings Pty Limited, a subsidiary of IEL, purchased 100% of the share capital of Infigen
Energy Markets Pty Limited (formerly Alinta Energy Markets Pty Ltd) which holds a licence to sell energy to a retail customer and trade
in energy markets.
The purchase price was $11,004,000 (including a component of contingent consideration). The fair values of the net assets acquired,
$11,004,000 is provided in the table below.
The acquired business contributed revenues of $140,000 and net loss of $15,000 to the Group for the period from acquisition
to 30 June 2010. If the acquisition had occurred on 1 July 2009, revenue of $558,000 and net loss of $59,000 would have been
contributed to the Group.
Carrying value
$’000
Fair value
$’000
Purchase consideration
Cash, including associated costs
Cash paid after the end of the financial year
Contingent consideration1
Net assets/(liabilities) acquired
Intangible assets
Cash
Trade debtors and receivables
Accrued revenue
Payables
Other liabilities
Goodwill
9,640
303
1,061
11,004
6,906
6,727
1,627
1,577
(4,105)
(1,728)
11,004
–
6,727
1,627
1,577
(4,105)
(1,728)
4,098
1 Contingent consideration represents the estimated amount payable to the vendor subsequent to acquisition. Contingent consideration is based upon the
performance of Infigen Energy Markets Pty Limited over the period from acquisition to the end of the deferred consideration period on 31 December 2011.
During the year ended 30 June 2011, the contingent consideration has increased by $631,000, in accordance with the share purchase
agreement, resulting in an increase in intangible assets of $631,000.
31. relateD party Disclosures
(a) Equity interests in related parties
Details of the percentage ownership held in subsidiaries are disclosed in Note 29 to the financial statements.
(b) Key management personnel disclosures
Details of key management personnel remuneration are disclosed in Note 8 to the financial statements.
(c) Other related party transactions
At the year end the Group was owed an amount of $1,218,000 (2010: $1,499,000) from various associated entities.
The Group received interest income of $7,936,000 (2010: $8,314,000) from German entities which were disposed of on 29 June 2011.
(d) Parent entities
The parent entity in the Group is IEL.
The ultimate Australian parent entity is IEL.
The ultimate parent entity is IEL.
32. subsequeNt eveNts
On 6 July 2011, $154,264,000 of Global Facility debt was repaid in relation to the disposal of the Group’s German assets. Refer to
Note 17(c) for further information.
112
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
33. 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, four (2010: one) businesses
were acquired for a nominal value. Details of the
acquisitions made in the prior comparative period
are as follows:
Consideration
Cash paid
Cash paid after the end of the financial year
Contingent consideration deferred
Cash and cash equivalents paid
Fair value of net assets acquired
Cash
Receivables and other current assets
Intangibles
Payables
Other liabilities
Net assets acquired
Goodwill
Net cash outflow on acquisition
Total consideration
Less: cash and cash equivalent balances acquired
Less: cash paid after the end of the financial year and deferred consideration
Add: payment for non-controlling interests (Note 21(c))
Cash paid for investments in controlled entities
(c) Non-cash financing and investing activities
Distribution reinvestment plan (Note 24)
2011
$’000
2010
$’000
304,875
219,891
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
981
981
9,640
303
1,061
11,004
6,727
3,204
6,906
(4,105)
(1,728)
11,004
–
11,004
(6,727)
(1,364)
2,257
5,170
–
–
(d) Restricted cash balances
As at 30 June 2011 $23,755,291 (2010: $15,951,800) 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.
113
notes to the financial statements
for the year ended 30 june 2011
34. 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 these risks comprise cash, receivables, payables and interest bearing debt.
Risk management is carried out by the Group’s corporate treasury function under policies approved by the Board. The Group’s treasury
department 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’s
treasury policy is risk mitigation. The Group’s 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 manage potential
adverse effects on the financial performance of the Group. The Group uses derivative financial instruments to hedge certain risk
exposures. In line with the Group’s treasury policy derivatives are exclusively used for risk management purposes, not as trading
or other speculative instruments.
(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 derivatives. During 2011 and 2010, 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 derivatives. The table
below shows a breakdown of the Group’s interest rate debt and interest rate derivative 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, in order to partially protect against downside risks of increasing interest rates and to secure a greater level
of predictability for cash flows.
Under interest rate derivative contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts
calculated on agreed notional principal amounts. The fair values of interest rate derivatives 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 derivative contracts outstanding
as at reporting date:
Outstanding pay fixed \ received floating interest rate swaps
Fixed swap – Australia dollar
Fixed swap – Euro
Fixed swap – US dollar
Average contracted
fixed interest rate
2011
%
6.68
4.87
5.28
2010
%
6.74
4.87
5.28
Notional
principal amount
2011
$’000
586,248
142,432
346,480
1,075,160
2010
$’000
596,877
189,212
516,220
1,302,309
Fair value
2011
$’000
(31,895)
(16,635)
(53,139)
(101,669)
2010
$’000
(44,503)
(26,597)
(86,757)
(157,857)
Bank debt as at balance date
The table below details the total amount of debt and breakdown of fixed and floating debt the Group held at 30 June 2011.
The Global Facility debt is denominated in AUD, USD and EUR and 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 Woodlawn Project finance debt is re-priced quarterly using the 3 month BBSY (AUD) rate plus the defined facility margin.
The current floating rate debt detailed in the table below is not inclusive of the facility margin. The current average interest rate,
pre-margin across all facilities, is 5.61% (2010: 5.70%).
The current average margin across all facilities is 109 basis points (2010: 90 basis points).
114
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(i) Interest rate risks continued
Floating rate debt
AUD debt
EUR debt
USD debt
Fixed rate debt
AUD debt
EUR debt
USD debt
Total debt
Floating debt
Debt principal amount
2011
%
4.96
1.32
0.19
2010
%
5.10
1.04
0.75
2011
$’000
68,971
38,022
81,511
188,504
2010
$’000
49,551
11,396
28,697
89,644
Fixed debt
2011
%
6.68
4.87
5.28
2010
%
6.74
4.87
5.28
5.61
5.70
Debt principal amount
2010
$’000
599,497
228,955
516,220
1,344,672
1,434,316
2011
$’000
586,248
142,432
346,480
1,075,160
1,263,664
% of debt hedged
2011
%
89
79
81
83
2010
%
92
95
95
94
The table below shows the maturity profile of the interest rate swaps and interest rate caps as of 30 June 2011 and 30 June 2010.
Fair value
AUD$’000
Undiscounted
fair value
Up to
12 months
AUD$’000 AUD$’000
1 to
5 years
After
5 years
AUD$’000 AUD$’000
2011
AUD swaps
EUR swaps
USD swaps
AUD interest rate caps
2010
AUD swaps
EUR swaps
USD swaps
(31,895)
(16,635)
(53,139)
1,595
(100,074)
(38,023)
(18,059)
(55,638)
2,175
(109,545)
(44,503)
(26,597)
(86,757)
(157,857)
(55,333)
(28,994)
(91,952)
(176,279)
(11,052)
(7,333)
(17,078)
19
(35,444)
(10,701)
(6,496)
(43,023)
(60,220)
(18,873)
(7,459)
(32,611)
958
(57,985)
(28,594)
(15,820)
(34,885)
(79,299)
(8,098)
(3,267)
(5,949)
1,198
(16,116)
(16,038)
(6,678)
(14,044)
(36,760)
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 2011, a net gain of $3,496,988 was
recorded (2010: $1,207,000 net loss) and included in finance costs.
115
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(i) Interest rate risks continued
Sensitivity
The sensitivity to interest rate movement of net result before tax and equity has 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 reasonable as it is deemed to be flat across the
yield curve.
AUD
+100 bps
AUD
-100 bps
EUR
+100 bps
EUR
-100 bps
USD
+100 bps
USD
-100 bps
2011
AUD $’000
Effect on income
statement
Cash
Borrowings
Finance lease
Capitalised
loan cost
Derivatives
– interest
rate swaps
Derivatives
– interest
rate cap
Total income
statement
Effect on hedge
reserve
Derivatives
– interest
rate swaps
Total hedge
reserve
Total effect
on equity
AUD
EUR
USD
AUD
EUR
USD
EUR
AUD
AUD
EUR
USD
137,663
140,594
26,618
304,875
655,219
180,454
427,991
–
(11,247)
1,252,417
586,248
142,432
346,480
1,075,160
1,377
–
–
(690)
–
–
–
–
3,561
–
–
(1,377)
–
–
690
–
–
–
–
(3,561)
–
–
AUD
44,000
1,068
(1,068)
–
1,406
–
–
(380)
–
–
–
–
–
–
–
–
(1,406)
–
–
380
–
–
–
–
–
–
–
–
–
266
–
–
(815)
–
–
–
–
–
–
–
–
(266)
–
–
815
–
–
–
–
–
–
5,316
(5,316)
1,026
(1,026)
(549)
549
AUD
EUR
USD
586,248
142,432
346,480
1,075,160
26,431
–
–
(26,431)
–
–
–
9,872
–
–
(9,872)
–
–
–
22,038
–
–
(22,038)
26,431
(26,431)
9,872
(9,872)
22,038
(22,038)
31,747
(31,747)
10,898
(10,898)
21,489
(21,489)
116
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(i) Interest rate risks continued
AUD
+100 bps
AUD
-100 bps
EUR
+100 bps
EUR
-100 bps
USD
+100 bps
USD
-100 bps
2010
AUD $’000
Effect on income
statement
Cash
Borrowings
Finance lease
Capitalised
loan cost
Derivatives
– interest rate
Total income
statement
Effect on hedge
reserve
Derivatives
– interest rate
Total hedge
reserve
Total effect
on equity
AUD
EUR
USD
AUD
EUR
USD
EUR
AUD
AUD
EUR
USD
192,146
3,601
34,203
229,950
649,048
200,609
544,917
39,742
(11,676)
1,422,640
596,877
189,212
516,220
1,302,309
1,921
–
–
(496)
–
–
–
–
4,123
–
–
(1,921)
–
–
496
–
–
–
–
(4,123)
–
–
–
36
–
–
(114)
–
–
–
–
–
–
–
(36)
–
–
114
–
–
–
–
–
–
–
–
342
–
–
(287)
–
–
–
–
–
–
–
(342)
–
–
287
–
–
–
–
–
5,548
(5,548)
(78)
78
55
(55)
AUD
EUR
USD
596,877
189,212
516,220
30,215
–
–
(30,215)
–
–
–
8,495
–
–
(8,495)
–
–
–
29,577
–
–
(29,577)
1,302,309
30,215
(30,215)
8,495
(8,495)
29,577
(29,577)
35,763
(35,763)
8,417
(8,417)
29,632
(29,632)
The effect on the Group’s net result is largely due to the Group’s exposure to interest rates on its non-hedged variable rate borrowings.
The effect on hedge reserve is due to the effective portion of the change in fair value of derivatives that are designated as cash
flow hedges.
117
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(ii) Foreign exchange risk
Operational FX risk
The Group has wind farm operations in Australia and the US.
The Group generates AUD and USD revenue from these operations. The Group is exposed to a decline in value of USD versus
the AUD, decreasing the value of AUD equivalent revenue from its US wind farm operations.
Equity FX risk
The Group has an investment in its US wind farms that exceeds the value of its external USD debt. The Group is exposed to
a decline in value of USD versus the AUD, decreasing the value of AUD equivalent value of its investment in the US wind farms.
Legacy EUR debt FX risk
The Group has a legacy EUR debt position from its previous investments in Spain, France and Germany. This legacy EUR debt
is not offset with any operational EUR assets. The Group is exposed to a decline in value of AUD versus the EUR, increasing the
AUD equivalent value of its EUR debt.
The Group has a multi-currency corporate debt facility and aims to ensure that the majority of its debt and expenses are
denominated in the same currency as the associated revenues and investments. In the EUR legacy case, where this is not currently
possible, the Group monitors and hedges foreign exchange exposure by other means.
The Group’s balance sheet exposure to foreign currency risk at the reporting date is shown in the table below. This represents
the EUR and USD assets and liabilities the Group holds in AUD functional currency entities.
Foreign currency (AUD’000)
Cash
Trade receivables
Short term intercompany loans
Net investment in foreign operations
Trade payables
Bank loans
Total exposure (foreign currency ’000)
2011
2010
EUR
39,669
–
112,339
14,595
(163)
(142,778)
23,662
USD
56,654
151
421
214,835
(107)
(41,296)
230,658
EUR
147
6,992
135,654
15,441
(3,966)
(160,240)
(5,972)
USD
1,256
42
1,474
304,057
(329)
(52,550)
253,950
Sensitivity
The following table details the Group’s pre-tax sensitivity to a 10 percent 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 percent has been selected.
Consolidated
AUD’000
2011
Income statement
Foreign currency translation reserve
2010
Income statement
Foreign currency translation reserve
AUD/EUR
+ 10%
AUD/EUR
- 10%
AUD/USD
+ 10%
AUD/USD
- 10%
(907)
(1,459)
2,141
(1,544)
907
1,459
(2,141)
1,544
(1,582)
(21,483)
5,011
(30,406)
1,582
21,483
(5,011)
30,406
118
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(iii) Electricity and environment certificates (including REC) price risks
The Group has wind farm operations in Australia and the US and sells electricity and environmental certificates to utility companies,
an industrial customer and to wholesale markets in the regions it operates.
The financial risk to the Group is that a decrease in the electricity or environmental certificate price reduces revenue earned.
To mitigate the financial risks of electricity and environmental certificate prices falling, the Group has entered into power purchase
agreements and green product purchase agreements to partially contract the sale price of the electricity and environmental certificates
it produces.
In undertaking this strategy of contracting a percentage of its electricity and environmental certificate sales, the Group is willing to
forgo a percentage of the potential economic benefit that would arise in an increasing electricity and environmental certificate price
environment, to protect against downside risks of decreasing electricity and environmental certificate prices; thereby securing a
greater level of predictability of cash flows.
Sensitivity
The following table details the Group’s pre-tax sensitivity to a 10 percent change in the electricity and environmental certificate price,
with all other variables held constant as at the reporting date, for its exposure to the electricity market.
A sensitivity of 10 percent has been selected given the current level of electricity and environmental certificate prices and the volatility
observed on an historic basis and market expectations for future movement.
Consolidated
AUD $’000
2011
Income statement
2010
Income statement
(b) Credit risk
Electricity/
REC Price
+10%
Electricity/
REC Price
-10%
3,735
5,574
(3,735)
(5,574)
Credit risk refers to the risk that a 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 customers. The Group’s exposure is continuously monitored and the aggregate value of transactions are spread
among 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 generally sells electricity to large utility companies that operate in the regions Infigen has
wind farms. The utility companies are situated in Australia and in many different states of US. No one utility company or other off take
counterparty represents a significant portion of the total 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 at above investment grade. The carrying amount of financial assets, recorded in the
financial statements, represents the Group’s maximum exposure to credit risk.
Consolidated
2011
Bank deposits
Trade receivables
Other current receivables
Amounts due from related
parties (associates)
2010
Bank deposits
Trade receivables
Within
credit
terms
$’000
304,875
31,094
2,856
1,218
Past due
but not
impaired
$’000
2,812
–
–
219,891
30,392
–
2,033
Other current receivables
Amounts due from related
parties (associates)
4,223
1,499
–
–
Impaired
$’000
Description
–
–
–
–
–
–
–
–
Minimum credit rating ‘A’ grade (S&P)
Spread geographically generally with large
utility companies
Miscellaneous receivables
Loan to associated entities
Minimum credit rating ‘A’ grade (S&P)
Spread geographically generally with large
utility companies
Miscellaneous receivables
Loan to associated entities
119
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(c) Liquidity risks
The Group manages liquidity risks 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 financial assets and financial liabilities at balance sheet 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 flows.
The tables include forecast contractual repayments under the Global Facility and the Project Finance Facility. From 1 July 2010 the
Global Facility terms provide that net cash flows from the companies included in the Global Facility borrower group be applied
to repay amounts outstanding under the Global Facility. Woodlawn Wind Pty Ltd, an excluded company for the purposes of the
Global Facility, is the holder of project finance debt.
For interest rate swaps and interest rate caps, the cash flows have been estimated using forward interest rates applicable at the
reporting date.
2011
Global Facility debt
Project finance debt – Woodlawn
Interest rate swap payable
Interest rate cap receivable
Current payables
2010
Global Facility debt
Gross finance lease
Interest rate swap payable
Current payables
Up to
12 months
$’000
209,465
–
35,463
(19)
43,200
85,817
4,854
60,220
52,699
1 to
5 years
$’000
295,370
10,429
58,943
(958)
–
536,185
19,416
79,299
–
After
5 years
$’000
726,087
22,313
17,314
(1,198)
–
772,572
23,158
36,760
–
Total
contractual
cash flows
$’000
1,230,922
32,742
111,720
(2,175)
43,200
1,394,574
47,428
176,279
52,699
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
From 1 July 2009, the Group adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires disclosure of fair
value measurements by level of the following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following tables present the Group’s assets and liabilities measured and recognised at fair value at 30 June 2011.
2011
Assets
Interest rate cap
Total assets
Liabilities
Interest rate swaps
Total liabilities
2010
Liabilities
Interest rate swaps
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
–
–
–
–
–
–
1,595
1,595
101,669
101,669
157,857
157,857
–
–
–
–
–
–
Total
$’000
1,595
1,595
101,669
101,669
157,857
157,857
120
InfIgen energy AnnuAl report 2011
notes to the financial statements
for the year ended 30 june 2011
34. FiNaNcial risK maNagemeNt CONTINUED
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can
continue to generate value for securityholders and benefits for other stakeholders and to maintain an appropriate capital structure
to minimise the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of distributions or dividends paid to
securityholders, return capital to securityholders, buy back existing securities or issue new securities or sell assets.
The capital structure of the Group consists of debt finance facilities as listed in Note 17, and equity, comprising issued capital,
reserves and retained earnings as listed in Notes 20, 21 and 22.
The 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.
Through the year to 30 June 2011, the Group has had to maintain the following ratio in regard to compliance with its Global Facility:
Leverage ratio – Net Debt/EBITDA1
At year end this ratio has been comfortably met.
1 Refer to Note 17(i) – Financial Covenants.
35. iNterest 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
Sweetwater Wind 1 LLC
Sweetwater Wind 2 LLC
Sweetwater Wind 3 LLC
Blue Canyon Windpower LLC
Eurus Combine Hills 1 LLC
Sweetwater Wind 4-5 Holdings LLC
JB Wind Holdings LLC
Related wind farms
Sweetwater 1
Sweetwater 2
Sweetwater 3
Blue Canyon
Combine Hills
Sweetwater 4, Sweetwater 5
Jersey Atlantic, Bear Creek
Further information relating to these institutional equity partnerships is set out below:
Class B Interest held by Infigen
(30 June 2010 and 2011)
50%
50%
50%
50%
50%
53%
59%
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 and expenses
Revenues
Expenses
Profit before tax
2011
$’000
14,952
432,339
447,291
6,059
339,675
345,734
101,557
63,014
(49,215)
13,799
2010
$’000
16,523
571,549
588,072
6,292
446,120
452,412
135,660
71,333
(59,017)
12,316
Share of institutional equity partnerships’ commitments and contingent liabilities
The following information is included within the information contained in Notes 26 and 27.
Commitments
Contingent liabilities
26,215
–
31,902
1,090
121
notes to the financial statements
for the year ended 30 june 2011
36. pareNt eNtity FiNaNcial iNFormatioN
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Retained earnings
Profit or loss for the year
Total comprehensive income
2011
$’000
807,410
895,128
882,116
882,504
2,305
10,319
12,624
30,023
30,023
2010
$’000
777,756
866,982
881,474
884,381
2,305
(19,704)
(17,399)1
44,111
41,845
1 The separate financial statements for IEL as an individual entity present a net liability position in the year ended 30 June 2010. IEL is one component of
a stapled entity that is in a net asset position.
(b) Guarantees entered into by the parent entity
IEL has provided a guarantee over a lease in favour of American Fund US Investments LP in relation to its Dallas office which was
executed on 26 June 2009. A performance guarantee dated 31 March 2010 has also been provided by IEL in relation to a contract
to supply energy.
(c) Contingent liabilities of the parent entity
German disposal – potential reimbursement obligation and funds in escrow
Under the terms of the sale of the Group’s German assets during the year, the Group was required to place a cash sum of EUR 5.1m
(or approx $6.3m) in an escrow account as collateral for a potential reimbursement obligation. All or part of the escrowed funds may
be retained by the Group depending upon the satisfaction of certain conditions.
As at the time of sale, certification of 3 wind farms as qualifying for certain additional tariff under the German Renewable Energy Act
(as a result of technology upgrades underway at those sites) had not yet been received. If the relevant certification is not obtained
by the German statutory deadline for qualifying for the additional tariff (currently 30 September 2011), then Infigen must reimburse
the buyer of the applicable wind farm the following amount in respect of the failure to obtain that certification and hence additional
tariff for that wind farm being EUR 2.6m, EUR 1.3m and EUR 1.3m respectively (depending upon the wind farm in question).
The certification process for these 3 wind farms is progressing and it is currently expected that certification will be obtained for all
3 wind farms prior to 30 September 2011.
Disposal of businesses
Under the sale agreements relating to the disposal of the Group’s previously owned Spanish, Portuguese, French and German assets,
the parent entity has provided certain warranties and indemnities in favour of the buyers of those assets. No claims have been made
by the relevant buyers under these warranties and indemnities.
(d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2011, the parent entity had no contractual commitments for the acquisition of property, plant or equipment
(30 June 2010 – $nil).
122
InfIgen energy AnnuAl report 2011
directors’ declaration
In the opinion of the Directors of Infigen Energy Limited (‘IEL’):
(a) the financial statements and notes set out on pages 59 to 122 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 consolidated entity’s financial position as at 30 June 2011 and of its 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.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
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, 30 August 2011
Miles George
Director
123
independent auditor’s report
124
InfIgen energy AnnuAl report 2011
PricewaterhouseCoopers,ABN52780433757DarlingParkTower2,201SussexStreet,GPOBOX2650,SYDNEYNSW1171T:+61282660000,F:+61282669999,www.pwc.com.auLiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislation.Independentauditor’sreporttothemembersofInfigenEnergyLimitedReportonthefinancialreportWehaveauditedtheaccompanyingfinancialreportofInfigenEnergyLimited(thecompany),whichcomprisesthestatementoffinancialpositionasat30June2011,andthestatementofcomprehensiveincome,statementofchangesinequityandcashflowstatementfortheyearendedonthatdate,asummaryofsignificantaccountingpolicies,otherexplanatorynotesandthedirectors’declarationfortheInfigenEnergyGroup(theconsolidatedentity).Theconsolidatedentitycomprisesthecompanyandtheentitiesitcontrolledattheyear'sendorfromtimetotimeduringthefinancialyear.Directors’responsibilityforthefinancialreportThedirectorsofthecompanyareresponsibleforthepreparationofthefinancialreportthatgivesatrueandfairviewinaccordancewithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsAct2001andforsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationofthefinancialreportthatisfreefrommaterialmisstatement,whetherduetofraudorerror.InNote1,thedirectorsalsostate,inaccordancewithAccountingStandardAASB101PresentationofFinancialStatements,thatthefinancialstatementscomplywithInternationalFinancialReportingStandards.Auditor’sresponsibilityOurresponsibilityistoexpressanopiniononthefinancialreportbasedonouraudit.WeconductedourauditinaccordancewithAustralianAuditingStandards.TheseAuditingStandardsrequirethatwecomplywithrelevantethicalrequirementsrelatingtoauditengagementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialreportisfreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialreport.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialreport,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialreportinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialreport.OurproceduresincludereadingtheotherinformationintheAnnualReporttodeterminewhetheritcontainsanymaterialinconsistencieswiththefinancialreport. independent auditor’s report
125
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinions.IndependenceInconductingouraudit,wehavecompliedwiththeindependencerequirementsoftheCorporationsAct2001.Auditor’sopinionInouropinion:(a)thefinancialreportofInfigenEnergyLimitedisinaccordancewiththeCorporationsAct2001,including:(i)givingatrueandfairviewoftheconsolidatedentity’sfinancialpositionasat30June2011andofitsperformancefortheyearendedonthatdate;and(ii)complyingwithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsRegulations2001;and(b)thefinancialreportandnotesalsocomplywithInternationalFinancialReportingStandardsasdisclosedinNote1.ReportontheRemunerationReportWehaveauditedtheremunerationreportincludedinpages47to57ofthedirectors’reportfortheyearended30June2011.Thedirectorsofthecompanyareresponsibleforthepreparationandpresentationoftheremunerationreportinaccordancewithsection300AoftheCorporationsAct2001.Ourresponsibilityistoexpressanopinionontheremunerationreport,basedonourauditconductedinaccordancewithAustralianAuditingStandards.Auditor’sopinionInouropinion,theremunerationreportofInfigenEnergyLimitedfortheyearended30June2011,complieswithsection300AoftheCorporationsAct2001.PricewaterhouseCoopersDarrenRossSydneyPartner30August2011 additional investor information
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.
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 21 September 2011.
126
InfIgen energy AnnuAl report 2011
additional investor information
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 21 September 2011 is 762,265,972 and the number of holders of these stapled
securities is 25,182.
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.
IFN Stapled Securities
Substantial IFN Securityholder
The Children’s Investment Fund Management (UK) LLP
Kairos Fund Limited
Leo Fund Managers Limited
votiNg rights
Date of Notice
Number
16 June 2011 201,210,373
56,000,000
40,045,240
5 November 2009
28 May 2010
%
26.40
6.98
5.07
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 Infigen 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 IET 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 IET held by the unitholder that the person represents.
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.
oN-marKet security buy-bacK
There is no current on-market buy-back of IFN Stapled Securities.
127
additional investor information
DistributioN oF iFN stapleD securities
The distribution of IFN stapled securities amongst IFN securityholders as at 21 September 2011 is set out below.
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
Securityholders
10,189
10,332
2,217
2,251
193
25,182
Securities
4,841,827
26,528,089
16,616,728
58,619,678
655,659,650
762,265,972
As at 21 September 2011, the number of securityholders holding less than a marketable parcel of IFN stapled securities was 15,016.
tweNty largest iFN securityholDers
The 20 largest IFN securityholders as at 21 September 2011 are set out below.
IFN Securityholder
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited – A/C 3
HSBC Custody Nominees (Australia) Limited – GSCO ECA
National Nominees Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
JP Morgan Nominees Australia Limited
Bond Street Custodians Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Credit Suisse Securities (Europe) Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Weresyd Proprietary Limited
UBS Nominees Pty Ltd
Woodross Nominees Pty Ltd
Morgan Stanley Australia Securities (Nominee) Pty Ltd
Brispot Nominees Pty Ltd
Paul Frederick Bennett
CS Fourth Nominees Pty Ltd
Queensland Investment Corporation
Trevor Yuen
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total Top 20
Total of Other Securityholders
Grand Total of IFN Stapled Securities
IFN Stapled Securities Held
Number
277,213,087
58,566,533
58,305,959
54,534,445
39,032,094
35,564,299
21,657,461
11,326,756
9,694,738
7,405,000
4,911,787
4,332,311
4,173,631
3,116,937
3,010,979
2,530,278
2,239,532
2,131,398
2,129,320
1,725,951
603,602,496
158,663,476
762,265,972
Percentage
36.37%
7.68%
7.65%
7.15%
5.12%
4.67%
2.84%
1.49%
1.27%
0.97%
0.64%
0.57%
0.55%
0.41%
0.4%
0.33%
0.29%
0.28%
0.28%
0.23%
79.19%
20.81%
100%
128
InfIgen energy AnnuAl report 2011
additional investor information
Key asx aNNouNcemeNts
The key announcements lodged with the Australian Securities Exchange and released to the market throughout FY11 are listed
below. Dates shown are when announcements were made to the ASX.
2010
01/07/2010
16/08/2010
30/08/2010
11/10/2010
12/11/2010
18/11/2010
19/11/2010
23/12/2010
2011
11/01/2011
21/01/2011
11/02/2011
25/02/2011
14/03/2011
16/03/2011
18/03/2011
21/03/2011
25/05/2011
14/06/2011
14/06/2011
14/06/2011
21/06/2011
30/06/2011
16/08/2011
18/08/2011
30/08/2011
Conclusion of IFN Buy-back Program
FY10 Production and Revenue Report
FY10 Full Year Result and FY11 Guidance
Appointment of CEO of US Business
Appointment of New Chairman
IFN Annual General Meetings Presentations
IFN Board Changes
Woodlawn Project Finance Agreement Signed
Planning Approval for Proposed Nyngan Solar Farm
Planning Approval for Proposed Capital Solar Farm
First Half Production and Revenue Report
FY11 Interim Financial Results
Appointment of Chief Financial Officer
Interim Distribution and DRP Participation
Response to Media Speculation
Changes to IFN Development Pipeline
IFN Response to Equity Research Speculation
Sale of German Asset Portfolio
Woodlawn Wind Farm Update
FY11 Final Distribution and Distribution Policy Update
IFN appoints new independent director
Completion of German Asset Sale
FY11 Production and Revenue
FY11 Provisional Results
FY11 Preliminary Final Report
The above list does not include all announcements made to the ASX. A comprehensive list and full details of all publications
can be found on the Infigen website: www.infigenenergy.com, and the ASX website: www.asx.com.au.
129
glossary
ASX
CAPACITY
CAPACITY FACTOR
CARBON PRICE REGIME
CCGT
CLASS A MEMBERS
Australian Securities Exchange Limited (ABN 98 008 624 691) or Australian
Securities Exchange as the context requires
The maximum power that a wind turbine can safely produce or handle
A measure of the productivity of a wind turbine, calculated by the amount of
power that a wind turbine produces over a set time period, divided by the amount
of power that would have been produced if the turbine had been running at full
capacity during that same time interval
Policy proposed by the Australian Government under the Clean Energy Future
Climate Change Plan, which encompasses a carbon pricing mechanism of $23
per tonne commencing on 1 July 2012
Combined Cycle Gas Turbine
Holders of Class A membership interests in Institutional Equity Partnerships (IEPs)
in relation to the US wind farms
CLASS A MEMBERSHIP INTERESTS
The interests held by Class A members which have varying economic entitlements
(tax allocations and cash distributions) depending on the age of the US wind farms
CLASS B MEMBERS
Holders of Class B membership interests in Institutional Equity Partnerships (IEPs)
in relation to the US wind farms
CLASS B MEMBERSHIP INTERESTS
The interests held by Class B members which have varying economic entitlements
depending on the age of the US wind farms
CO2
CO2-e
DISTRIBUTIONS
DRP
EBITDA
FINANCIAL YEAR
GHG
GRID
GW
GWEC
GWH
HIN
IEA
IEBL
IEL
IERL
IET
IFN
Carbon dioxide
Carbon dioxide equivalent
Distributions of cash made by Infigen to securityholders in respect of their
stapled securities
Distribution Reinvestment Plan
Earnings before interest, taxes, depreciation and amortisation
A period of 12 months starting on 1 July and ending on 30 June in the next
calendar year
Greenhouse gases
The network of power lines and associated equipment required to deliver
electricity from generators to consumers, also termed ‘transmission system’
Gigawatt. One billion Watts of electricity
Global Wind Energy Council
Gigawatt hour
Holder Identification Number
International Energy Agency
Infigen Energy (Bermuda) Limited (ARBN 116 360 715)
Infigen Energy Limited (ABN 39 105 051 616)
Infigen Energy RE Limited (ACN 113 813 997) (AFSL 290 710), the responsible
entity of IET
Infigen Energy Trust (ARSN 116 244 118)
The code allocated by the ASX for the trading of listed IFN stapled securities
on the ASX
130
InfIgen energy AnnuAl report 2011
glossary
INFIGEN
Infigen Energy, comprising IEL, IEBL, IET and their respective subsidiary entities
from time to time
INFIGEN ASSET MANAGEMENT
Infigen’s US asset management business
LGC
LLC
Large-scale Generation Certificate, also known as Large-scale REC. The certificates
are created by renewable energy generators and represent 1 MWh of renewable
generation
Limited liability companies formed under US law
LLC AGREEMENT
A limited liability company agreement between the members of an LLC
LONG TERM MEAN
ELECTRICITY PRODUCTION
See P50
LRET
MW
MWh
OCC
P50
PPA
PRACTICAL COMPLETION
PRE-COMMISSIONING
PTC
REALLOCATION DATE
REC
RPP
RPS
Large-scale Renewable Energy Target – which came into force on 1 January 2011.
The rate of liability for LRET is established by the Renewable Power Percentage (RPP),
which is used to determine how many LGCs need to be surrendered each year. The RPP
for the 2011 calendar year is 5.62%. It is equivalent to 10.6 million LGCs and represents
a proportion of total estimated Australian electricity consumption for the 2011 year.
Megawatt. One million Watts of electricity
Megawatt hour
Operations Control Centre, a centrally located business function within Infigen that
monitors and directs the operations of Infigen’s wind farms
The best estimate of electricity production in a year where there is a 50% probability
that a given level of electricity production will be exceeded in any year. This may
also be referred to as Long Term Mean Electricity Production
Power Purchase Agreement
The date on which construction has been completed in accordance with the
respective delivery contract(s), typically including all regulatory requirements
Operation of the wind farm prior to practical completion, during which all aspects
are tested for performance against specified criteria
Production Tax Credit: the result of the US Energy Policy Act of 1992, a tax credit
that applies to wholesale electrical generators of wind energy facilities based upon
the amount of electricity generated in a year
The date on which tax benefits and cash distributions are shared between the Class
A Members and the Class B Members, being a date which occurs when the Class A
Members’ target return has been achieved
Renewable Energy Certificate
Renewable Power Percentage, being an annual target set by the Office of Renewable
Energy Regulator designed to achieve the target of 20% electricity consumption
in Australia by 2020 from renewable sources
Renewable Portfolio Standards. These programs apply for 37 US states, and are based
on a fixed quantity system whereby a renewable energy generator such as a wind farm
is issued with renewable energy certificates which can be onsold to energy retailers
who are required to surrender them to a state based regulator. For more information
visit: www.epa.gov
SECURITYHOLDER
The registered holder of an IFN stapled security
131
glossary
SOLAR PV
STAPLED SECURITY
UNIT
UNITHOLDER
WTG
Solar Photovoltaic
One unit in IET, one ordinary share in IEL and one ordinary share in IEBL, stapled
together to form an IFN stapled security such that the unit and those shares cannot
be traded or dealt with separately
An ordinary unit in IET
The registered holder of a Unit
Wind turbine generator
132
InfIgen energy AnnuAl report 2011
CONTENTS
COrpOraTE DirECTOry
DISCLAIMER
This publication is issued by Infigen Energy Limited
(IEL), Infigen Energy (Bermuda) Limited (IEBL) and
Infigen Energy RE Limited as responsible entity for
Infigen Energy Trust (collectively Infigen). Infigen
and its respective related entities, directors, officers
and employees (collectively Infigen Entities) do
not accept, and expressly disclaim, any liability
whatsoever (including for negligence) for any loss
howsoever arising from any use of this publication
or its contents. This publication is not intended
to constitute legal, tax or accounting advice or
opinion. No representation or warranty, expressed
or implied, is made as to the accuracy, completeness
or thoroughness of the content of the information.
The recipient should consult with its own legal,
tax or accounting advisers as to the accuracy and
application of the information contained herein and
should conduct its own due diligence and other
enquiries in relation to such information.
The information in this publication has not been
independently verified by the Infigen Entities. The
Infigen Entities disclaim any responsibility for any
errors or omissions in such information, including the
financial calculations, projections and forecasts. No
representation or warranty is made by or on behalf
of the Infigen Entities that any projection, forecast,
calculation, forward-looking statement, assumption
or estimate contained in this publication should or
will be achieved. None of the Infigen Entities or any
member of the Infigen Energy group guarantees the
performance of Infigen, the repayment of capital or a
particular rate of return on Infigen stapled securities.
IEL and IEBL are not licensed to provide financial
product advice. This publication is for general
information only and does not constitute financial
product advice, including personal financial product
advice, or an offer, invitation or recommendation in
respect of securities, by IEL, IEBL or any other Infigen
Entities. Note that, in providing this publication, the
Infigen Entities have not considered the objectives,
financial position or needs of the recipient.
The recipient should obtain and rely on its own
professional advice from its tax, legal, accounting
and other professional advisers in respect of the
recipient’s objectives, financial position or needs.
All amounts expressed in dollars ($) in this
Annual Report are Australian dollars, unless
otherwise specified.
Design and production by Dupree Design Group
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C023640
INFIGEN ENERGY
Level 22, 56 Pitt Street
Sydney NSW 2000
Australia
T: +61 2 8031 9900
www.infigenenergy.com
DIRECTORS
Michael Hutchinson (Non-Executive Chairman)
Miles George (Managing Director)
Douglas Clemson (Non-Executive Director)
Philip Green (Non-Executive Director)
Fiona Harris (Non-Executive Director)
Ross Rolfe (Non-Executive Director)
COMPANY SECRETARY
David Richardson
ANNUAL GENERAL MEETING
Infigen Energy’s 2011 Annual General Meeting will be held
at the InterContinental Hotel Sydney, 117 Macquarie Street,
Sydney, NSW, Australia on 11 November 2011.
IFN STAPLED SECURITIES
Each stapled security in Infigen Energy, tradable on the
Australian Securities Exchange under the ‘IFN’ code,
comprises:
— one share of Infigen Energy Limited, an Australian public
company;
— one share of Infigen Energy (Bermuda) Limited, a
company incorporated in Bermuda; and
— one unit of Infigen Energy Trust, an Australian registered
managed investment scheme.
RESPONSIBLE ENTITY FOR INFIGEN ENERGY TRUST
Infigen Energy RE Limited
Level 22, 56 Pitt Street
Sydney NSW 2000
T: +61 2 8031 9900
REGISTRY
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
T: 1300 554 474 (within Australia)
T: +61 2 8280 7111 (outside Australia)
F: +61 2 9287 0303
Email: infigen@linkmarketservices.com.au
www.linkmarketservices.com.au
AUDITOR
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 2650
2
Specialist Renewable Energy Business
4
Financial & Operational Highlights
6 Chairman’s & Managing Director's Report
12 United States
16 Australia
23
Sustainability
26
Infigen Board
28
Infigen Management
30 Corporate Structure
31 Corporate Governance Statement
42 Directors’ Report
58 Auditor’s Independence Declaration
59
Financial Statements
64 Notes to Financial Statements
123 Directors’ Declaration
124
Independent Auditor’s Report
126 Additional Investor Information
130 Glossary
133 Corporate Directory
Cover picture by Stephen Cooper, The Daily Telegraph
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ANNUAL REPORT 2011
www.infigenenergy.com