Annual
Report
2018.
Infigen Energy
Infigen Energy 2018 Annual Report
Contents
About Infigen Energy
2018 Highlights
Safety
Chairman & Managing Director’s Report
Directors’ Report
Operating & Financial Review
Corporate Structure
Directors
Executive Directors & Management Team
Remuneration Report
Other Disclosures
Auditor’s Independence Declaration
Financial Report
Directors’ Declaration
Auditor’s Report
Governance
Additional Information
Investor Information
Glossary
Corporate Directory
2
5
7
8
11
20
21
23
25
39
41
42
73
74
81
87
87
92
94
Infigen Energy Limited
ACN 105 051 616
Infigen Energy Trust
ARSN 116 244 118
Registered office
Level 17, 56 Pitt Street
Sydney NSW 2000
Australia
+61 2 8031 9900
www.infigenenergy.com
1
Image:
Alinta Wind Farm, WA
About Infigen Energy.
Infigen (ASX: IFN) is a leading Australian Securities Exchange (ASX)
listed energy market participant delivering energy solutions to
Australian businesses and large retailers.
Infigen supplies clean energy from a combination of renewable
energy generation and firming solutions available from the broader
energy market to Australian business customers.
Infigen is a licensed energy retailer in the National Electricity
Market (NEM) regions of Queensland, New South Wales (including
the Australian Capital Territory), Victoria and South Australia.
The company has wind generation assets in New South Wales,
South Australia and Western Australia. Infigen is also developing
options for firming in the NEM to support its business strategy.
Infigen is proudly Australia’s largest listed owner of wind power
generators by installed capacity of 557MW, with a further 113MW
under construction in New South Wales and actively supports the
communities in which it operates.
For further information, please visit: www.infigenenergy.com
Image:
Alinta Wind Farm, WA
2
Infigen assets are located
across New South Wales,
South Australia and
Western Australia.
3
Infigen assets are located
across New South Wales,
South Australia and
Western Australia.
1
Asset
1 Alinta Wind Farm
2 Lake Bonney 1 Wind Farm
3 Lake Bonney 2 Wind Farm
4 Lake Bonney 3 Wind Farm
5 Capital Wind Farm
6 Capital East Solar Farm
7 Woodlawn Wind Farm
8 Bodangora Wind Farm1
Total
Under Construction
Operating wind/solar farms
1 Under Construction
Nameplate
capacity
(MW)
89.1
80.5
159.0
39.0
140.7
0.1
48.3
113.2
669.9
113.2
556.7
8
6
5
7
2
3
4
Commercial
operation
date
Jul 2006
Mar 2005
Sep 2008
Jul 2010
Jan 2010
Sep 2013
Oct 2011
1H FY19
State
WA
SA
SA
SA
NSW
NSW
NSW
NSW
Image:
Capital Wind Farm, NSW
4
Infigen Energy 2018 Annual Report
2018
Highlights.
Production sold
increased 6%
1,480
Gigawatt Hours
Net Revenue
increased 7%
$210.1
Million
Net Operating Cash Flow
increased 2%
Underlying EBITDA
increased 7%
$100.4
Million
$149.1
Million
Net Assets per Security
increased 20%
Net Profit after Tax
increased 41%
¢60
Cents
$45.7
Million
5
$210.1
$149.1
$45.7
Creates flexibility to allow Infigen to manage all assets
as one portfolio
Successful Refinance delivered a new Corporate Facility
›
›
›
Provides liquidity facilities to support execution of the
business strategy
Ensures that there is free cash flow from operations after
debt service to support growth and allow consideration
of the reintroduction of distributions
Multi-Channel Route to Market Strategy delivered
a balance of price, tenor and risk for electricity
and LGC revenue
›
Target generation sales, with electricity revenue balanced
across the portfolio:
• 21% — Run of Plant power purchase agreements
• 45% — C&I / Wholesale Contracts
• 34% — Spot market
›
Infigen enters FY19 with a strong contracted sales book for expected
production at 72% for electricity and 89% for LGCs
Bodangora Wind Farm — Expected to be delivered
on budget and due for completion 1H FY19 with the first
export to the National Electricity Market on 6 August 2018
›
Will increase Infigen’s installed capacity by 20% and expected
annual production by 24%
6
INFIGEN ENERGY 2018 ANNUAL REPORT
SAFETY
Infigen’s first priority is the safety of the people and the communities in which it operates. Infigen remains
committed to achieving its goal of zero harm.
Infigen adopts a combination of engineering solutions, as well as human practices and behaviours, to reduce
or eliminate safety risks from our operating assets. Individual responsibility for the safety of ourselves and
our colleagues is at the core of our organisational values and drives our efforts to continuously improve our
safety performance.
Safety performance - year ended 30 June
Lost Time Injury (LTI)
Lost Time Injury Frequency Rate (LTIFR)
Total Recordable Injury Frequency Rate (TRIFR)
2018
1
2.6
13.0
2017
Change
1
4.7
4.7
-
(2.1)
8.3
Infigen’s safety performance is measured on a rolling 12-month basis, in accordance with standards of Safe
Work Australia.
The one LTI was sustained by a contract worker while performing turbine service works at the Woodlawn
Wind Farm. The worker has returned to their normal duties.
Principal contractors are responsible for the management of daily operations and safety of their workers at
Infigen’s sites. Infigen however, includes contractor worker recordable injuries in its statistics. There were no
recordable injuries reported involving Infigen employees.
During the year the Lake Bonney 1 and Alinta Wind Farms achieved a significant milestone of being 10-years
LTI free.
Infigen continues to actively engage in the management of contractor safety, using methods including
workshops, monthly meetings, and audits.
7
CHAIRMAN & MANAGING
DIRECTOR’S REPORT
Dear Security holder,
We are pleased to present the full year results for
Infigen for the 2018 financial year (FY18).
Safety continues to be our highest priority. We
continued our focus on the safety at our operating
assets as well as at our Bodangora wind farm
which is under construction by contractors. The
Board and management continue to look for
opportunities to improve our systems and culture
in vigilant pursuit of our goal of zero harm. During
the year we had one LTI. We are pleased to report
that Lake Bonney 1 Wind Farm and Alinta Wind
Farm both achieved 10 years LTI free.
During FY18, the Australian energy market
continued in a state of transformational change at
both operational and policy development levels.
Against this backdrop, Infigen’s FY18 Financial
Results have been characterised by strong
financial performance and significant progress in
delivering on key elements of the strategy to
position our company to preserve existing and
grow future value for all security holders.
that
recognised
Since the FY16 AGM, Infigen has been pursuing a
the process of
strategy
transformation that is occurring in the broader
Australian energy market and the inevitable rise in
the significance of the role of renewables in the
national energy mix. This transformation is driven
by a combination of factors including:
•
•
•
•
•
•
•
the progressive retirement of the aged coal
fired fleet;
the decline in the relative price of renewable
generation;
community support for reduced carbon
emissions;
the decline in power purchase agreement
(PPA) prices available from large retailers
(and the adoption by large retailers of new
business models to meet their obligations to
meet Renewable Energy targets);
a growth in demand by commercial and
industrial customers to contract directly with
generators (especially renewable generators)
to meet their energy supply arrangements;
rising gas prices which constrains the function
of gas generation as a source of base and
intermediate load generation; and
in addition to the increase in gas prices, the
cost of black coal has also notably increased,
with both these factors flowing through to
increased wholesale costs.
Infigen’s legacy fleet of assets were originally
developed under long term PPAs which are at
various stages of maturity - with more than half
the foundation contracts having expired by 2015.
Recontracting these assets under long term run of
plant supply agreements to energy retailers would
result in substantial erosion of security holder
value based on current market prices for this
product.
Over the course of the last 18 months, Infigen has
sought to reduce the short term exposure of its
revenues and grow our proportion of revenue
under multi year contracts as well as maximise
value for our security holders. We have also
invested in additional production, introduced
strategies to manage the risks associated with
intermittent
advanced
consideration of several projects for future
investment. We have, in particular:
generation,
and
•
•
•
•
•
•
•
projects within
invested in new capacity by commercialising
certain
Infigen
development pipeline - by, in particular,
developing
at
Bodangora;
113MW windfarm
the
the
restructured our corporate debt facility to
enable the company to operate the business
as a portfolio of assets and to pursue a
business strategy involving the diversification
of our channels to market beyond large scale
retailers under long term PPA style contracts;
contracted approximately one third of our
capacity under multi year contracts to
industrial customers to
commercial and
deliver a balanced portfolio comprising one
third of our capacity contracted under long
term PPAs, one third to C&I customers and
one third available for sale in the spot market;
implemented long term service agreements
with Vestas to manage our fleet optimally
across its service life with the objective of
maximising earnings;
enhanced our capacity (human and systems)
in energy markets and project delivery;
developed a 5 Year Business Plan that
involves investment in both additional energy
in target markets as well as the ability to firm
that supply to meet customer needs; and
undertaken a process of Board renewal over
the last two years. In FY18 we were pleased
to welcome Mr Mark Chellew and Ms Emma
Stein to the Board.
8
Based on our analysis the market outlook presents
considerable opportunity for Infigen to protect
and create new value by continuing to execute our
board endorsed strategy that is reflected in our 5
Year business plan.
in Victoria,
farm project
We have continued to advance our Cherry Tree
wind
including
consideration as a Capital Lite project. A decision
on the Cherry Tree project remains under review
to take into account a range of factors including
policy decisions by governments and
the
outworkings of the Victorian government’s tender
for renewable energy. We also continue to
advance the Flyers Creek project in NSW. More
recently we have agreed a 5 year contract to
purchase the electricity of the 31 MW Kiata Wind
Farm in Victoria commencing 1 September 2018.
When coupled with the execution of firming
initiatives, this contract provides an ability for us
to commence our C&I sales strategy in Victoria.
the
contracting
funding ($10,000,000)
Following
of
successful
production from our merchant capacity in SA and
NSW we focused our attention on the options
available to us to manage the supply risks
associated with intermittent generation. The
outcome of this process has been to favour
investment in battery technology in SA in the first
instance. We were therefore pleased to receive
from the SA
grant
government and ARENA which enabled us to
invest in a utility scale battery that can deliver 52
MWh storage capacity. This capability will enable
us to confidently contract a further 18 MW of
additional capacity from our Lake Bonney plants.
It will also reduce our exposure to FCAS costs,
create value through price arbitrage, and position
us to manage the challenges of the 5 minute
settlement rule - scheduled for implementation in
2021.
of
the
timing
original
Over the course of recent months we have
examined
the
implementation of our business strategy in light of
the opportunity that has been presented to us by
Brookfield joining our register. As announced to
the market on 16 April 2018 we have been engaged
in discussion with Brookfield about how they
might assist us in accelerating the implementation
of this plan.
Central to our analysis of any proposal under
consideration is whether it would result in the
creation of additional value for existing security
holders as well as preserve their existing value and
protect their future interests.
INFIGEN ENERGY 2018 ANNUAL REPORT
Going forward, the future market will require not
only the investment in new clean sources of
generation but also the ability to manage the
supply risks associated with intermittent sources
of generation and the implications for stability of
the transmission grid of more distributed sources
of generation.
A significant challenge for any market participant
or investor in the current energy market is the
degree of policy uncertainty that has arisen. This
uncertainty is a product of the political response
to the impact of the market transformation on
consumers and has led to a stream of policy
reviews and public debates about the future of the
energy supply industry.
Virtually all reviews have concluded that Australia
would benefit from having a NEM wide framework
that addresses the issues of reliability, competitive
price and emissions. In the last year, this has
resulted in the development of the National
Energy Guarantee (NEG), which had reached an
advanced stage of consideration. However more
recently it is now apparent that the NEG is headed
for the well populated graveyard of attempts at
Australian energy policy and a further period of
policy uncertainty is likely. In any event, equally
significant to the success of any new policy
settings will be government confidence in that
policy’s capacity to deliver outcomes that are
market based. This requires governments to
refrain from sponsoring initiatives that undermine
investor confidence and heighten risk. Infigen will
continue to participate in the development of
sound policy and monitor the impact of these and
the impact of any government initiatives on the
outlook for the energy market and our business.
Infigen’s own business strategy is consistent with
its underlying objectives - namely to produce and
supply clean energy to consumers at affordable
prices within a stable grid.
It is against this backdrop that we have carefully
reviewed all our potential investment projects and
examined them for the function they would
perform, as part of our overall portfolio, within the
future energy market. As mentioned at the FY17
AGM we have examined each of our development
projects in the context of the regional energy
markets in which they are located. We have also
spent considerable
the
customer base in each of the Australian regional
markets and the extent to which our existing or
planned production profiles will require access to
firming products to meet their needs.
In
circumstances where firming capacity is required
we have examined the current options available
and the case for direct investment in various
firming options. These options include energy
storage, peaking plant, insurance products and
market derivatives.
time understanding
9
Key outcomes from any such proposal would
need to include:
•
•
•
•
enhanced value by accelerated development
of new renewable generation capacity;
reduction of risk to existing value by access to
additional firming capacity;
stronger credit metrics; and
a high degree of certainty in relation to
distribution policy
We will advise the market once the outcome of
these discussions are completed. The results of
those discussions will depend on whether we have
been able to arrive at an arrangement that we
believe is in the interests of the company and its
security holders.
The initiatives that Infigen Energy has taken over
the course of the past two years have transitioned
the company to an active energy market
participant and have created a solid foundation
upon which to capture the opportunities that the
future market offers and manage the risks it
contains.
We thank security holders for their ongoing
support and look forward to working with all our
stakeholders to deliver the strategy that we have
developed.
Sincerely,
Len Gill
Chairman
Ross Rolfe AO
Chief Executive Officer / Managing Director
10
INFIGEN ENERGY 2018 ANNUAL REPORT
OPERATING AND FINANCIAL REVIEW
This Operating and Financial Review (OFR) forms part of the Directors’ Report. The OFR contains forward
looking statements, including statements of current intention, statements of opinion and predictions as to
possible future events and future financial prospects. Such statements are not statements of fact, and there
can be no certainty of outcome in relation to the matters to which the statements relate.
1. Strategy and Growth
Infigen has transitioned from a business that
owned and operated wind generation assets and
largely sought to sell its output of both energy and
Large-Scale Generation Certificates (LGCs) to
long term off takers. It is becoming an active
energy markets participant that seeks to deliver a
range of products and solutions to Commercial
and
Industrial (C&I) Customers and energy
retailers through multiple routes to market.
The long-term growth of Infigen necessitates:
•
•
•
•
increasing the capacity to deliver firm supply
of electricity to its customer base while
associated with
risks
managing
intermittent renewable generation;
the
increasing sales at sustainable profit margins;
further diversifying the customer base; and
further enhancing its capability to service the
growing customer base.
This growth is occurring within a dynamic energy
market which is itself in a state of transition as
aging generation exits the system and consumers
more broadly are seeking clean and reliable
energy supplies at competitive prices.
to
respond
Infigen is well placed to deliver reliable energy to
customers, to invest in new firming and generation
as and when required, and to contribute to the
creation of a lower emissions economy. Infigen
will
the business and market
requirements for firm capacity and the price
signals for new sources of generation. It may do
so by acquiring, procuring or building further
firming capacity, and either building new
generation capacity on balance sheet or by
sponsoring certain projects through the Capital
Lite strategy.
Infigen’s sales diversification strategy seeks to
deliver low emissions energy to its customers,
while managing the risk of intermittent production
consistent with their requirements. Infigen’s risk
management strategies are designed to achieve
an outcome in which Infigen’s C&I Customers are
not dependent for supply and price on availability
of its (renewable and variable) fuel source and its
security holders are protected from price risk on
supply in periods where Infigen’s assets are not
generating electricity. The strategy seeks to
balance price, tenor and risk to preserve and
create value for security holders.
11
Infigen’s business strategy is designed to stabilise
and grow revenues while managing the risks
associated with delivering firm supplies of energy
to meet customer needs. To this end, Infigen has
focussed on:
•
•
•
deleveraging the balance sheet;
increasing generation capacity for sale; and
enhancing the ability to firm the product for
sale to capture contracts from valuable C&I
Customers.
The success of this strategy is demonstrated in
Infigen’s FY18 results. Importantly, it is reflected in
the contract book with which Infigen enters FY19.
So too is it evidenced by Infigen’s investment in
additional generation on balance sheet as well as
its strategy to access the supply of energy from
sources off balance sheet. In FY18 Infigen
managed the risks around delivering firm supply
to customers by accessing insurance products
from the derivatives market. More recently, it
complemented this strategy by investing in a
Battery Energy Storage System adjacent to the
Lake Bonney Wind Farm in South Australia
(BESS).
Infigen expects the BESS to be
commissioned in 2H FY19. This will enable Infigen
to manage the risks involved in contracting higher
levels of production from its Lake Bonney Wind
Farms to its customer base in South Australia.
Electricity and LGC Pricing
Current market prices for electricity and LGCs, in
part, reflect the historical RET and ongoing
regulatory uncertainty. Electricity prices were
more subdued in FY18 than FY17. The market
continues to be volatile but the fundamentals of
supply and demand which underpin price and
therefore may or may not create price signals for
new investment remain strong, even without a
resolution of the policy debate surrounding the
interaction of energy and climate policy.
The volatility in prices further demonstrates the
value of contracting with C&I Customers. Through
this market strategy, it has been possible to
capture the value in the forward curve. Infigen’s
FY18 results demonstrated this where in a period
of price decline in South Australia, Infigen’s
reduced exposure to the spot market as a result of
C&I contracting has meant that the average
electricity price received from sales in FY18 was
largely in line with FY17.
LGC prices are expected to be lower in future
periods, given the general market expectation that
there will be sufficient production of LGCs by CY
2020 to meet the RET obligations and increasing
volumes of renewable energy entering the market
after that date against a demand for LGCs which
reaches its maximum level in 2020. The level of
demand will remain static until 2030. The rate of
price decline for LGCs will be influenced by future
Government policy, the retirement profile of
thermal plant and technology solutions for
replacement capacity. In the event that the price
signals for new investment do not occur, then LGC
prices should settle at higher than the current
forward market as a substantial oversupply may
not eventuate.
Managing Risk
Infigen’s increasing C&I contract load is managed
against key metrics by which Infigen seeks to
appropriately balance revenue certainty and
value. The focus on firming Infigen’s supply to
protect against price volatility in times of non-
production of Infigen’s generating assets requires
the use of firming products. The value of physical
firming underpinned the business case for the
development of the SA battery (BESS) which was
recently announced and will be operational in 2H
FY19. The importance of the ability to supply firm
capacity and maintain system stability will
continue to evolve as part of Infigen’s overall
growth strategy.
The potential to create
additional value from the South Australian and
NSW assets
to C&I
Customers will continue to remain a key focus.
through contracting
Market and/or generation capacity expansion
Infigen’s expansion of generation capacity will be
in response to market price signals. This requires a
disciplined approach to market analysis and the
key assumptions that drive project economics in
the process of committing capital to growth
projects.
Infigen’s investment decisions have regard to a
number of factors in the NEM including without
limitation: demand; gas availability; expected coal
fired generation retirements; customers; market
liquidity; and state based policies that incentivise
new renewable generation. It was against this
criteria that Infigen has recently entered into a run
of plant power purchase agreement for electricity
in Victoria (Kiata PPA). The Kiata PPA is the first
closing of
the Capital Lite strategy. The
transaction underpins entry into the Victorian
market.
investigate the
development of the Cherry Tree Wind Farm which
would further underpin Infigen’s entry into Victoria
and focus on C&I Customers.
Infigen continues to
Infigen believes that further expansion into NSW
would likely be accretive to its business and
security holders. With this in mind, the Flyers
Creek Wind Farm (NSW - approximately 130MW)
is the next prospective development project
under consideration.
Increasing Infigen’s potential C&I Customer
base
In response to the continuing and growing
demand for energy from C&I Customers, Infigen
will
its customer service
capability.
further enhance
With further enhanced capability, Infigen would be
able to service C&I Customers with multi-sites, and
manage variability in load profile. This increased
capability will allow Infigen to increase the number
and type of C&I Customers with which it can
contract.
Financial Position
Infigen commences FY19 able to support its
growth and business ambitions. This
is
underpinned by two factors. First was the
financial close of a new syndicated corporate
facility, and the repayment of the existing Global
Facility and Woodlawn Facility
in FY18
(Refinancing), which delevered the balance sheet
and removed the cash sweep. Secondly, Infigen
continues to provide strong cash flows from
operations. A meaningful quantum of those cash
flows are available for growth and consideration
for distributions subsequent to the Refinancing.
Infigen remains in active discussions with the
Brookfield Group about the manner in which it
may be able to be a strategic investor and capital
partner as outlined to the market earlier this year.
The Regulatory and Political Environment
that
Infigen believes
the energy market
fundamentals continue to evolve to its potential
advantage, and that while policy and sentiment
are regularly debated, the reality is that Australia
is transitioning to a lower emissions electricity
future and substantial amounts of new generation
is required.
Infigen is actively engaged with policy makers,
Government and stakeholders, including energy
users to articulate the important role that clean
energy can play in the transition and the lowering
of costs for users. There is of course a risk that
regulation or law can be adverse to Infigen’s
interests and in that instance it will be ready to
respond thoughtfully to any such change.
In FY18 Infigen has been actively engaged with all
stakeholders and expects to continue this
engagement in FY19.
12
INFIGEN ENERGY 2018 ANNUAL REPORT
2. Financial Overview
Summary of Financial Performance 1
Year ended 30 June
($ million)
Revenue
Cost of sales
Net revenue
Operating expenses
Operating EBITDA
Corporate costs
Development costs
Underlying EBITDA
Gains from development transactions
Other income
EBITDA
Depreciation and amortisation
EBIT
Net finance costs
Profit before tax
Income tax benefit / (expense)
Net profit after tax
Underlying EBITDA
2018
223.8
(13.7)
210.1
(43.2)
166.8
(13.2)
(4.5)
149.1
-
0.6
149.8
(51.4)
98.3
(78.8)
19.5
26.1
45.7
2017
Change
Change %
196.7
-
196.7
(40.2)
156.4
(15.7)
(1.4)
139.3
10.4
-
149.7
(51.8)
97.9
(50.9)
47.1
(14.8)
32.3
27.1
(13.7)
13.4
(3.0)
10.4
2.5
(3.1)
9.8
(10.4)
0.6
0.1
0.4
0.4
(27.9)
(27.6)
40.9
13.4
14
-
7
(7)
7
16
(221)
7
(100)
-
-
1
-
(55)
(59)
276
41
13.4
2.5
(3.0)
(3.1)
139.3
149.1
FY17 Underlying
EBITDA
Net revenue
Operating expenses Corporate costs
Development costs
FY18 Underlying
EBITDA
1 Individual items and totals reconcile with the Financial Statements, however, may not add due to rounding of individual
components.
13
Financial Performance Commentary
Higher Underlying EBITDA (+$9.8 million)
Primarily attributable to:
Partially reduced by:
Higher net revenue (+$13.4 million)
- primarily from:
Higher operating expenses (+$3.0 million)
- primarily from:
• 6% more production sold for the year
• A 5% increase in Infigen’s electricity price
Lower corporate costs (-$2.5 million)
- primarily from:
•
Lower restructuring and transitioning costs
incurred during the year
• An increase in asset management and energy
market expenses as Infigen continues to invest in
the expansion of its internal capacity and
capability during the year (+$1.2 million)
• One-off costs (turbine O&M) were incurred, as
anticipated, with the transition of operations and
maintenance services from Suzlon to Vestas at
the Capital and Woodlawn Wind Farms during
the year (+$1.6 million). Partially offset by:
-
net savings under these new Vestas contracts,
which have lower production-linked payments
(-$0.7 million)
• An increase in FCAS net expenses due to the
underlying increase in NEM charges allocated to
market participants (+$0.7 million)
Higher development costs (+$3.1 million)
- primarily from:
•
Infigen’s continued exploration of options for
growing capacity for sale and enhancing the
capacity to contract with C&I Customers in a risk
managed manner, and improve revenue reliability
Higher Net Profit After Tax - non-underlying EBITDA items (+$3.6 million)
Primarily attributable to:
Partially reduced by:
Higher income tax benefit (+40.9 million)
- primarily from:
Higher net finance costs (+$27.9 million)
- primarily from:
• The recognition of previously
unrecognised tax losses during the year
(+$35.7 million)
• One-off fees incurred in exploring Refinancing
options and the early expense of capitalised
commitment fees during the year (+$5.1 million)
Note: an income tax expense was incurred
in the pcp
• The termination of interest rate swaps at the time
of Refinancing (+$43.3 million)
Partially offset by:
•
Lower interest expense (-$14.7 million), due in
part to a lower average debt balance throughout
the year as a result of the Refinancing
• Higher interest income (+$3.2 million) from higher
average cash balance on-hand throughout the
year
No recurring gains from development transactions
(-$10.4 million)
•
In the pcp, a gain on sale of the Manildra solar
development project and the fair value uplift on
the Bodangora Wind Farm acquisition was
recognised
14
INFIGEN ENERGY 2018 ANNUAL REPORT
Electricity revenue
Infigen continued to seek a balance between price, tenor and risk for electricity revenue through its Multi-
Channel RTM during the year. This was evidenced by the increase in C&I and wholesale contract revenue
contribution, and the decrease in net spot revenue contribution.
The revenue percentage contribution from major production sales channels is provided below.
Sales
channel
PPAs
C&I and wholesale
contracts
Net spot
Electricity price
Description
Medium to long-term contracts where Infigen has no substantial
firm delivery risk
Medium to long-term C&I contracts and short to medium-term
wholesale market contracts
Spot sales through the Australian Energy Market Operator
(AEMO)
Revenue contribution (%)
2017
2018
21
45
34
20
23
57
100
100
Infigen’s NSW prices were higher, despite a flat NSW spot price. Infigen maintained its SA prices, despite
declining SA spot prices. This was primarily due to additional C&I and wholesale contracts (entered during
the year), higher Dispatch Weighted Average electricity prices, and electricity derivatives.
Market
NSW
SA
Electricity Spot Price
($/MWh)
Infigen’s Electricity Price
($/MWh)
2018
82.27
98.10
2017
81.22
108.66
Change
1.05
(10.56)
2018
75.16
78.32
2017
67.80
78.44
Change
7.36
(0.12)
Electricity spot price is the time weighted average of spot prices.
Infigen’s electricity price is the weighted average price of its revenue channel sales, and is net of the cost of
electricity derivatives which are used to manage the risk associated with delivering firm contracted load to
customers.
LGC Inventory and Price
As at 30 June
LGC volume
LGC inventory
($/LGC)
Year-ended 30 June
LGC inventory
Unit
2018
2017
Change
Change %
certificates
581,121
374,300
206,821
$ million
43.3
27.0
16.3
55
60
Infigen’s average LGC price
2018
70.8
2017
72.1
Change
Change %
(1.3)
(2)
An LGC represents 1 MWh generation from renewable energy generators. LGC revenue is recognised at fair
value once generated and in the same period as costs are incurred. Each LGC is concurrently recognised in
inventory until it is sold, at which time, the difference between the sale price and book value is recorded as
a component of revenue.
The increase in inventory is primarily due to an increase in contracted and forward sales with delivery dates
after 30 June 2018. Contracted LGC volume is 89% (FY19); 83% (FY20); and 49% (FY21). This is based on
current contract positions and historical production for operating facilities (plus expected production from
the Bodangora Wind Farm).
15
Operating Expenses
Year ended 30 June
($ million)
Turbine O&M
Asset management
Other direct expenses
Balance of plant
Generation expenses
Energy Markets
FCAS net expenses 1
Operating expenses
Net Finance Costs
Year ended 30 June
($ million)
Interest expense
Bank and amortisation of capitalised
commitment fees
One-off upfront and early expense of fees -
associated with the Refinancing
Unwind of discount on decommissioning
provisions
Total borrowing costs
Interest income
Net borrowing costs
Termination of interest rate swaps
Net foreign exchange gain
Net loss on change in fair value of interest rate
swaps
Net financing costs
2018
21.5
7.1
7.2
1.3
37.1
3.2
2.8
43.2
2018
32.9
3.1
5.1
0.1
41.2
(4.8)
36.4
43.3
(0.9)
-
78.8
2017
20.8
6.4
7.1
1.1
35.4
2.7
2.1
40.2
2017
47.6
2.9
-
0.1
50.7
(1.6)
49.1
-
(0.6)
2.4
50.9
Change
Change %
0.7
0.7
0.1
0.2
1.7
0.5
0.7
3.0
3
11
1
18
5
19
33
7
Change
Change %
(14.7)
(31)
0.2
5.1
-
(9.5)
(3.2)
(12.5)
43.3
(0.3)
(2.4)
27.9
7
-
-
(19)
(200)
(25)
-
(50)
(100)
55
Interest incurred on the Bodangora Wind Farm project finance facility (Bodangora PF) is capitalised to
property, plant and equipment, consistent with applicable accounting standards.
Net Operating Cash Flow
Year ended 30 June
($ million)
Operating EBITDA
Corporate and development costs
Movement in LGC inventory
Movement in other working capital
Proceeds from the sale of development asset
Non-cash items
Net finance costs paid
Net operating cash flow
2018
166.8
(17.7)
(16.4)
(2.1)
-
(0.8)
(29.4)
100.4
2017
156.4
(17.1)
(6.3)
9.6
5.1
(0.1)
(48.9)
98.7
Change
Change %
10.4
(0.6)
(10.1)
(11.7)
(5.1)
(0.7)
19.5
1.7
7
(4)
(160)
(122)
(100)
(700)
40
2
The increase in net operating cash flow was due to an increase in revenue; an increase in inventory (due to
the planned increase in contracting activity); and lower net finance costs paid.
1 Frequency control ancillary services (FCAS) charges relate to services that maintain key technical characteristics of the power
system. Reflects gross FCAS costs net of hedge payout.
16
Change
Change %
62
81
1.3
-
0.2
0.1
4
6
-
-
-
-
%
(7)
11
11
8
10
9
-
6
INFIGEN ENERGY 2018 ANNUAL REPORT
3. Review of Operations
Summary of Operational Performance
Year ended 30 June
Production
Production sold
Capacity factor1
Turbine availability2
Site availability3
Generation expenses4
Production
Unit
GWh
GWh
%
%
%
$/MWh
2018
1,549
1,480
31.8
97.1
96.6
24.0
2017
1,487
1,399
30.5
97.1
96.4
23.9
Production
Marginal loss factors
Production sold
Year ended 30 June
2018
(GWh)
2017
(GWh)
2018
2017
%
2018
(GWh)
2017
(GWh)
Alinta5
Capital
Lake Bonney 1
Lake Bonney 2
Lake Bonney 3
Woodlawn
Compensated6
316
374
199
405
103
152
0.1
%
(7)
8
10
6
8
6
338
345
181
381
95
143
Total
1,549
1,487
4
0.94515
0.93218
5
(98)
-
-
0.9475
0.9519
1.0100
0.9931
0.9144
0.8768
0.9144
0.8768
0.9144
0.8768
1.0100
0.9931
-
2
4
4
4
2
-
1
316
380
177
360
91
155
-
338
343
159
334
83
142
-
1,480
1,399
Production increased primarily due to:
•
•
higher wind resource at Capital, Woodlawn and Lake Bonney Wind Farms (+87 GWh)
improved turbine availability at Alinta and Lake Bonney Wind Farms (+7 GWh)
This was partially offset by:
•
•
lower wind resource at Alinta Wind Farm (-26 GWh), noting the pcp experienced above average
wind conditions
decreased network availability at Lake Bonney Wind Farms (-4 GWh) due to an increase in
unscheduled transmission network maintenance
1 Calculated by dividing production generated over 12 months by the amount of electricity that would have been produced if all
wind turbines had been running at full capacity for the year.
2 Indicates the percentage of time wind turbines have been available to generate electricity.
3 Indicates the percentage of time wind turbines and balance of plant have been available to generate electricity.
4 Calculated by dividing generation expenses with production. Note: Infigen previously reported operating expenses ($/MWh),
calculated by dividing operating expenses with production.
5 Marginal loss factor is not relevant to electricity sold at Alinta Wind Farm.
6 Compensated production is notional production that represents compensated revenue.
17
4. Balance Sheet
As at 30 June
Cash
Debt (drawn)
Net debt
Net assets per security
Book gearing1
Net debt / Underlying EBITDA
Underlying EBITDA / interest
Cash consists of:
$ million
$ million
$ million
$
%
ratio
ratio
2018
144.9
676.1
531.2
0.60
45.8
3.6
4.5
2017
251.8
657.3
405.5
0.50
45.5
2.9
2.9
Change
Change %
(106.9)
(42)
18.8
125.7
0.10
0.3
0.7
1.6
3
31
20
-
24
55
•
•
unrestricted cash ($94.5 million) - including cash on hand and term deposits held at call
restricted cash ($50.4 million) - held in accordance with the minimum cash requirements for the
Australian Financial Services Licence (AFSL) compliance and the Bodangora PF
The reduction in cash is primarily due to the Refinancing to deleverage Infigen.
Debt (drawn) consists of:
•
•
a corporate facility - with a drawn balance of $517.5 million (pcp: $Nil). This facility reached
financial close on 18 April 2018. The proceeds were combined with cash on-hand to repay both the
Global and Woodlawn Project Finance facilities, which had a combined drawn balance prior to
repayment of $609.2 million
the Bodangora PF - with a drawn balance of $158.6 million (pcp: $1.8 million). This facility is used to
fund the construction of the Bodangora Wind Farm
Debt (drawn) excludes capitalised commitment fees as shown in the Financial Statements of $26.0 million
(pcp $3.5 million).
5. Capital Expenditure
Year ended 30 June
($ million)
Development projects (capitalised)
Property, plant and equipment and IT equipment
Assets under construction
Capital expenditure
2018
1.9
2.6
140.6
145.1
2017
3.7
0.9
44.1
48.7
Change
Change %
(1.8)
1.7
96.5
96.4
(49)
189
219
198
Development projects underpin growth both in terms of additional new capacity for sale and development
of options to enhance the capacity to contract with C&I Customers in a risk managed manner, and improve
revenue reliability.
Property, plant and equipment expenditure for the year includes investment in an expansion of Infigen’s
energy risk management system.
Assets under construction primarily consists of the Bodangora Wind Farm project, which is due for
completion in 1H FY19. Expenditure includes capitalised finance costs incurred for the Bodangora PF.
1 Calculated as net debt (accounting for capitalised commitment fees) divided by the sum of net debt (accounting for capitalised
commitment fees) and net assets.
18
INFIGEN ENERGY 2018 ANNUAL REPORT
6. Business Risks and Mitigants
Key business risks that could affect Infigen’s operating and financial performance are described below. These
risks are not the only risks that may affect Infigen.
Risk
Description
How Infigen is equipped to manage and monitor this risk?
Operations &
Safety
Energy &
Climate Change
Policy
Demand & Price
for Electricity
and LGCs
> Loss of life or serious harm to people, or serious
> Policies are aligned to OHSAS 18001 (OHS) and ISO 14001
harm to the environment, brings significant
damage to Infigen’s stakeholders, along with
potential legal, reputation, operational and
financial implications
(Environment) Standards
> Safety performance is linked to staff remuneration
> Training and education of staff
> Changes to the regulatory environment and the
debate in relation to the energy markets’ future
design and rules may adversely affect the
commercial performance of existing assets, the
Infigen business or viability of proposed projects
> The policy debate may alter market sentiment
towards Infigen securities
> Adverse changes in the price for electricity and
LGCs arising from decreasing demand,
increasing competition, changes to the
regulatory regime or other factors could affect
Infigen’s ability to capture appropriate value
from the existing portfolio on a risk adjusted
basis
> Infigen is actively engaged with policy makers, government and
industry stakeholders, including energy users, to articulate the
important role that clean energy can play in Australia’s future
> Infigen monitors and assesses the effect of potential changes to
energy policy on Infigen’s operations and strategic planning
> The Multi-Channel RTM seeks to balance price, tenor and risk and
thereby manage earnings certainty and co-optimise production,
contract and spot exposures
> Active energy market portfolio management: Quantitative
Volumetric Hedging limits; Earnings at Risk analysis; Strategic
Portfolio balancing; daily compliance testing
> Infigen undertakes analyses using in-house expertise and external
consultancies to monitor market conditions and outlook
Operations &
production
> Variation in wind resource will result in changes
to Infigen’s electricity production level
(quantum) and generation profile (time).
Fluctuations may adversely affect Infigen’s
revenue and market sentiment
> Infigen’s 24/7 Operations Control Centre (OCC) monitors available
wind resources, Infigen’s operating assets, the market operator’s
instructions, market participants’ behaviour, NEM prices,
meteorological data, and carries out an electricity dispatch bidding
strategy accordingly
> The availability of generation assets affects
> Use of asset-backed electricity and environmental hedging
production. The failure of generation assets to
operate and be available as expected carries
significant financial and operational risk
> Infigen operates in predominately rural areas
and requires strong community and landholder
relationships to operate efficiently
> Operating costs can be adversely affected by
regulatory settings, equipment or key
component failure
products
> Service and maintenance agreements under which service
providers are paid to carry the risk of component failure subject to
certain limits, and maximise generation availability and output
through scheduled and unscheduled maintenance
> Community engagement and sponsorship program, along with
structured landholder engagement maintains positive community
relationships. Infigen’s formal Complaints Handling Policy ensures
that any negative engagement can be managed effectively
> Maintaining a broad insurance program, including an appropriate
level of business interruption insurance
> Projects may not be delivered safely, on time
> Disciplined approach to expansion and the commitment of capital
and on budget. The delivered assets may fail to
generate the expected earnings
> Failure to engage positively with landholders,
the local community and other stakeholders may
lead to the loss of Infigen’s ability to develop
further projects
> As an energy markets participant, Infigen must
retain sufficient liquidity to meet its prudential
obligations to the market, business needs,
including any ASX positions or other positions
that it has taken, and its AFSL conditions
> Availability of capital from financial institutions
supports the sustainability of the business
to growth projects
> For development projects, a formal Project Control Group is
created which monitors the project progress against the business
case and internal policy requirements
> Infigen is actively engaged with the local communities as outlined
above
> Monitoring and stress testing of cash flow and liquidity
requirements
> Regular monitoring of AFSL requirements through the Energy
Market Risk Committee
Construction &
development
projects
Capital
Management
Regulatory,
Legal &
Accounting
> Potential exposure to litigation and claims
> Adverse changes in law or regulation can
increase the cost of doing business
> Where insurable, Infigen maintains insurance to address relevant
exposures
> Regulatory, legal and accounting risks are captured through
Infigen’s Energy Risk Management framework and managed
through Infigen’s policies and procedures, as well as through
external accounting and legal advice as appropriate
Financial
Climate-Related
Considerations
> Climate change creates a risk to the costs of and
> Infigen is actively engaged with policy makers and other relevant
the way business is conducted generally
> Climate change could adversely affect wind
conditions / patterns upon which Infigen relies
for energy
> Regulations to effect changes to reduce the risk
of climate change may impose additional costs
on or affect the way business is conducted
stakeholders to articulate the important role that clean energy can
play in the transition to a lower emissions electricity future
> The medium-term financial implication from weather-related risks,
such as changes to long-term wind patterns and extreme weather
events, are considered as part of Infigen’s strategic planning (e.g.
production, revenue and cost forecasting)
19
CORPORATE STRUCTURE
Infigen comprises Infigen Energy Limited (IEL), Infigen Energy Trust (IET), Infigen Energy (Bermuda) Limited
(IEBL), and the controlled entities of IEL and IET.
The Trust comprises IET and its controlled entities.
IET is a Registered Scheme (the Scheme) and Infigen Energy RE Limited (IERL) is the Responsible Entity of
IET. The relationship of the Responsible Entity and the Scheme is governed by the terms and conditions
specified in the Constitution of IET. IET has raised the majority of the contributed equity for Infigen. IET has
also been the stapled entity through which distributions have historically been paid to security holders. During
the financial year, IET held interests in financial investments.
The stapled structure was established prior to Infigen listing on the ASX in 2005. IEBL has never been used
as an operating part of Infigen and it is expected to be de-stapled and wound up when feasible to do so.
The following diagram represents the structure of Infigen.
20
INFIGEN ENERGY 2018 ANNUAL REPORT
DIRECTORS
Appointment of New Independent Directors and Board Succession
On 21 September 2017, Mark Chellew and Emma Stein were appointed as independent non-executive
directors of IEL, IEBL and IERL.
On 31 December 2017, Mike Hutchinson retired as a director and chairman of IEL, IEBL and IERL, with Len Gill
being elected chairman of IEL, IEBL and IERL from that date. On 19 February 2018, Fiona Harris retired as an
independent non-executive director of IEL, IEBL and IERL from that date.
The following people were Directors of IEL, IEBL and IERL during the twelve months ended 30 June 2018 and
up to the date of this report (unless otherwise indicated):
Non-executive Directors
>
Len Gill (appointed Chairman effective 31 December 2017)
> Philip Green
> Mark Chellew (appointed as an independent non-executive Director on 21 September 2017)
> Emma Stein (appointed as an independent non-executive Director on 21 September 2017)
> Mike Hutchinson (retired as independent non-executive Chairman effective 31 December 2017)
>
Fiona Harris (retired as independent non-executive director on 19 February 2018)
Executive Directors
> Ross Rolfe AO
>
Sylvia Wiggins
Directors’ Meetings
The number of Board meetings and meetings of standing Committees established by the respective Boards
held during the year ended 30 June 2018, and the number of meetings attended by each Director, are set out
below.
A = Number of meetings attended as a Board/Committee member.
B = Number of meetings held during the period that the person held office during the year.
Board meetings
Committee meetings
Directors
IEL
IERL
IEBL
L Gill
M Chellew
E Stein
P Green
R Rolfe
S Wiggins
M Hutchinson
F Harris
A
12
10
10
12
12
12
5
7
B
12
10
10
12
12
12
5
7
A
11
9
9
11
11
11
5
6
B
11
9
9
11
11
11
5
6
A
11
9
9
11
11
11
5
6
B
11
9
9
11
11
11
5
6
Audit, Risk &
Compliance
IEL Nomination
& Remuneration
A
B
A
B
1
4
4
5
-
-
1
3
1
4
4
5
-
-
1
3
2
3
2
2
-
-
2
3
2
3
2
3
-
-
2
3
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 oversee or
approve specific matters or otherwise approve documentation on behalf of the Boards.
21
Non-Executive Directors
Leonard (Len) Gill
Independent Non-Executive
Chairman of IEL, IEBL and IERL
Appointed to IEL, IEBL and IERL
on 5 June 2017 and
subsequently elected Chairman
effective 31 December 2017
Member of the Nomination &
Remuneration Committee
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
Mark Chellew
Non-Executive Director of IEL,
IEBL and IERL
Appointed to IEL, IEBL and IERL
on 21 September 2017
Chairman of the Nomination &
Remuneration Committee
Member of the Audit, Risk &
Compliance Committee.
Emma Stein
Non-Executive Director of IEL,
IEBL and IERL
Appointed to IEL, IEBL and IERL
on 21 September 2017
Chairman of the Audit, Risk &
Compliance Committee
Member of the Nomination &
Remuneration Committee
Len is a professional non-executive director with a 35-plus year career
in the electricity, gas and infrastructure industries. He also provides
energy and management consultancy services.
Len is currently Deputy Chair of Family Life, a community support
services charity. His previous roles include Chairman of Alinta Energy,
Chairman of Metgasco, Non-Executive Director of Ecogen Energy Pty
Ltd, Non-Executive Director of Ampetus Energy Pty Ltd, Non-Executive
Director of WDS Limited, Non-Executive Director of Verve Energy,
Managing Director and CEO of TXU Australia, and Chairman of South
East Australian Gas Pty Ltd.
Len holds a Bachelor of Engineering (Civil) from the University of
Melbourne and is a Member of the Australian Institute of Company
Directors.
Philip is a Partner of TCI Advisory Services LLP (“TCI”), an advisor to a
substantial security holder 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.
Mark has over 30 years of experience in the building materials and
related industries, including roles such as Managing Director of Blue
Circle Cement in the United Kingdom and senior management positions
within the CSR group of companies in Australia and the United Kingdom.
Mark is the former Managing Director and Chief Executive Officer of
Adelaide Brighton Limited, a position he held for over 12 years before his
retirement from the role in May 2014. Mark has been an Independent
Non-Executive Director of Cleanaway Waste Management Limited since
March 2013 and became Chairman in September 2016. Mark is also an
Independent Non-Executive Director of Virgin Australia Holdings
Limited (appointed January 2018) and Caltex Australia Limited
(appointed April 2018).
Mark holds a Bachelor of Science (Ceramic Engineering), Masters of
Engineering (Mechanical Engineering) and Graduate Diploma
in
Management.
Emma has significant corporate and operational experience within
energy, fuel and industrial markets, and was previously the UK Managing
Director for French utility Gaz de France’s gas and electricity retailing
operations. Prior to this, Emma was Managing Director of British Fuels -
Gas, the first independent company to gain a domestic retail licence
following the deregulation of the UK's energy markets in the 1990’s.
Since moving to Australia in 2003, Emma has been an independent Non-
Executive Director on the boards of companies in the oil and gas,
resources, energy and energy
infrastructure, engineering, waste
management and facility management sectors.
Emma currently serves as a Non-Executive Director of Alumina Limited
(appointed February 2011) and Cleanaway Waste Management Limited
(appointed August 2011). Emma is a former Non-Executive Director of
Programmed Maintenance Services Limited, Transfield Services
Infrastructure Fund, Clough Limited and the DUET Group.
Emma holds tertiary qualifications in Science and a Masters of Business
Administration (MBA). Emma is an Honorary Fellow of the University of
Western Sydney and a Fellow of the Australian Institute of Company
Directors.
See page 23 for further information on Executive Directors.
22
INFIGEN ENERGY 2018 ANNUAL REPORT
EXECUTIVE DIRECTORS & MANAGEMENT TEAM
Ross Rolfe AO
Managing Director of IEL, IEBL
and IERL
Appointed as Non-Executive
Director to IEL, IEBL and IERL
on 9 September 2011 and
Executive Director on 17
November 2016
Sylvia Wiggins
Executive Director of IEL, IEBL
and IERL
Appointed as Non-Executive
Director to IEL, IEBL and IERL
on 18 April 2016 and Executive
Director on 8 May 2017
Paul Simshauser
Executive General Manager -
Corporate Development
Since November 2017
Ross took on the Managing Director / CEO role and initiated the
transition of the business from an asset owner to an energy markets
participant.
Ross has over 30 years’ experience in the Australian energy and
infrastructure sectors in senior management, government and strategic
roles, including in business capital restructuring.
Ross is currently Chairman of the North Queensland Airport Group and
a Board member of the Northern Australia Infrastructure Facility.
Ross has held the position of Director General of a range of Queensland
Government Departments,
including Premier and Cabinet, State
Development, Co-ordinator General of Environment and Heritage. Ross
has also held the positions of Chief Executive Officer of Alinta Energy
and Stanwell Corporation. Prior Board roles include Chairman of CS
Energy and WDS Limited, and a non-executive director of Evans & Peck,
Infigen Energy, Transurban Queensland, CMI Limited, and Thiess Pty Ltd.
Ross was an inaugural member of the Board of Infrastructure Australia.
Ross was admitted as an Officer in the Order of Australia in 2008 and
received the Centenary of Federation Medal in 2001.
Sylvia provides leadership in ensuring Infigen creates and preserves
security holder value with specific focus on finance, commercial and
compliance as Infigen executes its strategy and operates as an active
energy market participant. Sylvia’s experience in developing, executing
and managing strategic planning, investment, commercial negotiations,
and capital management in a number of international investment and
advisory firms has been critical in Infigen transitioning its capital
structure to better support the business strategy for growing customer
numbers and volumes at sustainable profit margins, and enable it to
execute the capital “lite” strategy.
Sylvia has over 20 years’ experience as a chief executive officer,
executive and senior investment banker across a broad range of
businesses, including energy, infrastructure, defence and structured
finance areas. Sylvia previously established her own advisory firm and
worked at the Alinta Energy and was the inaugural Chief Executive
Officer of Global Investments Limited.
Sylvia is an external member of the Department of Defence’s
Independent Assurance Review and holds Bachelors of Laws and
Jurisprudence from the University of New South Wales.
Paul is responsible for the execution of the Multi-Channel Route to
Market strategy and devising energy supply options to underpin the
business growth.
Paul leads risk management, IT, and people and culture.
Paul has over 25 years’ experience in energy markets, including roles in
systems development, environmental markets trading, strategic and
business planning, mergers and acquisitions and corporate affairs. Paul’s
previous roles include Director-General of the Queensland Department
of Energy & Water Supply, and Chief Economist & Group Head of
Corporate Affairs at AGL Energy Ltd.
Paul holds Bachelor Degrees in Economics and in Commerce, has a
Master’s Degree in Accounting & Finance, and a PhD in Economics. Paul
is an FCPA and a Fellow of the Australian Institute of Company
Directors.
23
Owen Sela
Executive General Manager -
Energy Markets
Since May 2017
Owen is in charge of Infigen’s energy markets trading function and
developing commercial and industrial customer initiatives.
Owen’s experience
in commercial development and contract
negotiations underpins developing investment proposals in each region
of the NEM and introducing energy firming strategies to supplement
Infigen’s portfolio.
Owen has over 18 years’ energy industry experience having held
positions at CS Energy as Executive General Manager Strategy and
Commercial, and at Alinta Energy as General Manager Contracts.
Owen holds a BA of Computer Science from the Griffith University.
Tony Clark
Executive General Manager -
Operations & Projects
Since February 2017
Tony oversees the delivery of operational performance through
demonstrable strong availability of Infigen’s generation assets that are
located across Australia and operated from Infigen’s 24/7 Operations
Control Centre in Sydney.
Linked to the business growth of Infigen’s portfolio under Tony’s
leadership is also the construction of new assets. Tony’s first project at
Infigen was to deliver the Bodangora Wind Farm near Wellington, NSW.
Tony has over 20 years’ experience in the power sector having headed
up operations and development roles at ERM Power and Stanwell
Corporation, and held responsibility for the detailed design and
construction of power projects with ABB Engineering Construction.
Tony holds Master degrees in Commercial Law from the Melbourne
University, Business Administration from the Deakin University, and
Engineering from the Queensland University of Technology.
24
INFIGEN ENERGY 2018 ANNUAL REPORT
REMUNERATION REPORT
Dear Security holder,
On behalf of the Board, I am pleased to present the 2018 Remuneration Report.
Remuneration for 2018
This year has been one of transformation for Infigen, with management achieving a number of strategic
objectives notwithstanding the decline in energy prices and the corresponding decline in our share price.
Prime amongst these objectives was the successful refinancing of the legacy corporate debt facilities and the
construction of the Bodangora Wind Farm.
This has resulted in STI outcomes for the key management personnel of Infigen of between 78% and 100% of
maximum against the scorecard. In addition the Board has exercised discretion to increase the STI outcome
for the Executive Director Finance & Commercial by 30% for her outstanding performance in leading the
successful debt refinancing project.
There were no LTI grants due for testing during FY18 for the current executive KMP (none having tenure of 3
years).
Director and Committee fees were reviewed by the NRC and remained unchanged in FY18. The Board has
agreed that Director and Committee Fees will not be reviewed again until the Board is satisfied that further
progress has been made in the delivery of strategic objectives contained within the Company’s 5 Year
Business Plan.
Strategic context of remuneration
Infigen’s Board and management are committed to repositioning Infigen to meet the challenges and grasp
the opportunities presented by the transformation occurring in the Australian energy market. Infigen’s
challenge is compounded by the fact that power purchase agreements entered into at the time that its assets
were developed have expired or are progressively expiring over the period to 2030 and the market is no
longer offering new long term PPAs on terms that support our required returns.
Accordingly, the business model is shifting from an infrastructure fund to an energy company.
Our share price has fallen over the past 12 months in line with price forecasts for electricity. This is because
high levels of merchant exposure in our portfolio has resulted in the market closely correlating our share price
with the forecast price of electricity and LGCs.
Our strategy is to reduce reliance of our revenue on the spot market for electricity and demonstrate that the
quality of our earnings can be improved by diversifying our channels to market supported by a balanced
contracting strategy.
In the future market participants will be required to manage the technical challenges presented by increasing
levels of intermittent generation. Infigen needs to become an active participant in the energy market with the
capability to manage the risks involved in contracting to deliver firm supplies of electricity in a changing
market.
In pursuing this strategy this year the following has been actioned:
>
>
>
>
>
refinancing the legacy corporate debt facility;
advancing the construction of the 113 MW Bodangora Wind Farm;
implementation of the Multi-Channel Route to Market Strategy by securing valuable new C&I
Customers that will protect future revenues and provide revenue stability;
advancing several projects within our development pipeline with a view to increasing the amount of
energy that we can supply to customers and exploring a range of potential investments to enable us
to manage the risks associated with production from intermittent generation; and
implemented an asset management strategy that will see our assets managed under long term
contract by Vestas. The arrangements with Vestas are designed to stabilise our cost structure going
forward, ensure that the assets are managed to preserve production levels to the end of their
expected service life and incentivise Vestas to ensure that the assets are available to maximise Infigen
earnings.
Looking ahead, the NEM is continuing to undergo significant change that will require the Board and
management to remain vigilant and responsive to new opportunities that will preserve and create security
holder value.
The Board anticipates that the remuneration structure will remain both structured and dynamic to reward
planned outcomes, the capture of otherwise unforeseen opportunities and the management of risks that
protect existing and creates new security holder value. In this context, we set out below remuneration review
outcomes for 2018.
25
Remuneration changes
It is within this strategic context that Infigen’s remuneration structure was reviewed by the Board during the
year, with consideration given to:
> whether the remuneration arrangements appropriately incentivise and reward management to
deliver the Board endorsed strategy; and
>
the relative competitiveness of the remuneration arrangements with industry peers.
The review resulted in three key changes:
>
>
>
the previous deferral of 50% of the STI was not competitive in our object of attracting and retaining
talent. While deferral of part of the STI is an important part of our structure, the Board has agreed to
reduce this to 20% of the STI awarded to be delivered in cash in FY18;
the Board decided to rebalance the remuneration mix to increase the potential short term incentive
available for achieving transformational near term goals and reduce the mix of long term incentive.
For FY19 and beyond, the split between STI and LTI will be 65:35 (50:50 previously). The Board
believes this split between STI and LTI better reflects the relative importance of achieving
transformational short-term goals (that will generate long term benefits) that are the foundations of
an enduring and sustainable business model that positions the company to protect existing and
create new value for our security holders. The total quantum of at-risk remuneration is unchanged;
and
The Operational Performance condition of the FY19 LTI has been updated to assess progress in
implementing the Company’s 5 Year Business Plan to preserve and create security holder value while
managing risk. Further detail in relation to the Operational Performance condition for FY19 will be
provided in the Notice of Meeting ahead of Infigen’s AGM.
The Board believes that these changes will result in Infigen’s remuneration framework remaining market
competitive and will continue to appropriately motivate and reward executives to deliver Infigen’s business
strategy.
Yours faithfully
Mark Chellew
Chairman
Nomination & Remuneration Committee
26
INFIGEN ENERGY 2018 ANNUAL REPORT
KMP SUMMARY REPORT FOR FINANCIAL PERIOD ENDING 30 JUNE 2018
Executives
R Rolfe
S Wiggins
P Simshauser
O Sela
T Clark
Diversity
Workforce
Composition
30 June 2018
30 June 2011
Position
Managing Director / CEO
Executive Director -Finance & Commercial
EGM Corporate Development
EGM Energy Markets
EGM Operations & Projects
Male
58%
69%
Female
42%
31%
The Board adopted the Infigen Energy Diversity and Inclusion
Policy in June 2011. Infigen sets and monitors progress against
annual diversity objectives, which include gender diversity targets.
More detailed information relating to diversity and inclusion
objectives and achievements can be found in the Governance
section of the Annual Report on page 81 and the online ESG
Report.
KMP Remuneration Mix in FY18
Remuneration Framework
The remuneration framework is
designed to strike the right balance
between performance and rewards
for preserving, creating and
delivering long term security holder
value. The key features are:
> Fixed Remuneration
> Short Term Incentive paid in cash
with 20% deferred for 12 months
> Long Term Incentive with market
based and operational
performance conditions
> Clawback mechanisms
embedded within the deferred
STI and LTI grants
> Tailored incentives designed to
attract and retain talent such as
project incentives and
diminishing deferred payments.
Remuneration received by Executive KMP during FY18
This table includes the full year actual remuneration received by each KMP, other than P. Simshauser who commenced employment on
27 November 2017. Comparison to FY17 total remuneration is distorted by the pro-rata payments received by KMP in that year.
KMP
Fixed
remun-
eration
Maximum
STI
opportu-
nity
FY18
FY18 Awarded STI Vested LTI
Total
Cash
Deferred
($)
($)
($)
($)
($)
($)
R Rolfe2
S Wiggins2
836,500
464,000
345,216
86,304
700,000
350,000
364,000
91,000
P Simshauser3
289,719
118,000
73,632
18,408
O Sela2
T Clark2
418,000
139,500
97,092
24,273
392,000
111,500
80,280
20,070
2,636,219
1,183,000
960,220
240,055
-
-
-
-
-
-
1,268,020
1,155,000
381,759
539,365
492,350
Perfor-
mance
related
%
34%
39%
24%
23%
20%
FY171
Total
Perfor-
mance
related
($)
890,768
159,571
-
270,823
176,207
%
29%
33%
0%
20%
24%
3,836,494
1,497,369
1 Total payments are Pro-rated for part year employment as these KMP commenced employment in FY17.
2 FY17 Deferred STI will vest when the first trading window opens following the release of the FY18 financial results.
3 Commenced employment on 27 November 2017.
27
Relationship between performance and incentive payments
FY18 KPIs
FY18 STI Assessment
Financial Performance (50%)
EBITDA $149.1 million was substantially over budget
Strategic Objectives (50%)
KPIs related to the implementation of the 5 Year Business Plan to establish a platform for the continued value accretive transition of the business.
Objectives included:
Infigen has:
> Create a capital structure
to support Infigen’s
business strategy;
Implement the Multi-
Channel Route to Market
Strategy;
>
> Expanding the sourcing
of energy supply within
the portfolio;
> Construction of the
Bodangora Wind Farm;
> Other strategic projects.
> Diversified its sales channels to enhance the predictability and stability of revenues in a risk managed
manner, which is a crucial element of the business strategy.
> Refinanced its corporate debt to create a capital structure that allows the business to operate as a
single portfolio of assets which thereby supports the following priorities:
−
−
−
Achieve appropriate value from the existing portfolio;
Support growth in response to demand based price signals; and
Enable the Boards’ to consider the reintroduction of sustainable distributions to security holders
> Achieved our preferred diversification for sale of production across key sales channels;
> Progressed the firming of production through physical, financial and contractual solutions;
> Continued construction of Bodangora Wind Farm on budget and on track for commercial operation in
2018;
> Achieved an orderly transition of Operations and Maintenance from Suzlon to Vestas (Capital and
Woodlawn Wind Farms) effective 31 December 2017; and
> Progressed investment cases from Infigen’s development pipeline projects.
A fatality will automatically trigger Board consideration to rerate the STI Pool. The Board may also take into consideration
Moderating Factors not foreseen or adequately addressed in setting the FY18 KPIs to rerate the STI.
FY18 LTI Terms and Conditions
Performance Period
Performance Conditions
1 July 2017 to
30 June 2020
50%
50%
IFN TSR performance compared to ASX
200 peer group excluding financial services,
real estate and the materials & resources
sectors
Vesting Scale
50th to 75th Percentile of peer group
Operational Performance Condition
measures progress in implementing the 5
Year Business Plan and business strategy
The primary assessment is based on a Matrix that rewards
achievement in delivering Revenue Diversity and Growth
targets. The Board has discretion to adjust the vesting
outcome (both upwards and downwards).
Diminishing Deferred Payment
Both R Rolfe and S Wiggins are entitled to a one off diminishing deferred payment, payable on 18 November 2019 subject to the conditions
summarised below. This arrangement was structured so as to provide two highly experienced executives with confidence to forgo their
significant existing Executive, Board and advisory roles to deliver the Board strategy irrespective of whether a change in control event occurred
in the short term and before the value to be created through the company strategy could be realised. This formula diminishes to zero by 18
November 2019. As at the reporting date the residual value is approximately half its starting value.
Ross Rolfe
Sylvia Wiggins
Commencement
date
17 Nov 16
8 May 17
Payment
date
18 Nov 19
18 Nov 19
Terms
Commencement
Value ($ million)
$3.0
$2.0
Annual cap
($ million)
$1.0
$0.8 1
Residual Value at
30 June 2018 ($ million)
$1.5
$1.1
> Payable on the Payment Date regardless of whether the executive
remains employed by Infigen, except if the employment is terminated for
cause, or where the employment is terminated for any reason and Infigen
subsequently discovers the employment could have been terminated for
cause or the executive resigns (but not including where they resign due
to a material adverse change) in all cases before the Payment Date.
> The Deferred Payment is reduced by the fixed remuneration, STI
payments or awards, vested LTI payments, payment in lieu of notice or
severance/redundancy payments received by the executive prior to the
Payment Date (subject to the Annual Cap).
> The Annual Cap is the maximum amount by which the Deferred Payment
may be reduced for each year (or part thereof) between the
Commencement Date and Payment Date.
The Board retains discretion to reduce the Deferred Payment in certain
circumstances related to the executive’s conduct.
Assuming the executive’s employment continues until 17 November 2019 and they have received aggregate payments and
awards of equivalent value to the Deferred Payment subject to the Annual Cap, then the executive would not receive any
Deferred Payment on the Payment Date.
1 Pro-rated for any part thereof.
28
INFIGEN ENERGY 2018 ANNUAL REPORT
STATUTORY REMUNERATION REPORT
1. Remuneration of KMP
The remuneration framework for KMP comprises
three components:
>
>
>
fixed pay;
STI, which is a variable payment linked to
achieving specified performance measures
over a 12-month period; and
LTI, which is a payment linked to meeting
specified performance hurdles over a 3-year
period.
Remuneration is benchmarked against industry
peers within utilities, electricity generation and
infrastructure, having regard to the advice of
external advisers.
1.1.
Fixed Pay
Fixed pay comprises a cash salary and
offer
superannuation.
than
remuneration
superannuation salary sacrifice.
Infigen
packaging
other
does
not
1.2.
Short Term Incentives
STI is an at-risk performance-related component
of remuneration. STIs are subject to performance
against key performance indicators (KPIs) aligned
with strategy and annual budgets. KPIs are set
annually and reviewed during the year and where
appropriate changed to maintain alignment with
the business strategy.
The Nomination & Remuneration Committee
(NRC) determines the KPIs for the KMP and
reviews the KPI achievement. The NRC determines
the CEO’s STI payment, reviews and approves
payments made to KMP and the aggregate
amount of STI payments.
The FY18 KPIs were structured to ensure all
employees continue to respond to a changing
energy market to preserve and create security
holder value. The 5 Year Business Plan underpins
the implementation of the business strategy,
which forms the basis of the FY18 KPIs. The 5 Year
Business Plan has three primary work streams:
1. diversifying our customer base to improve
stability while
revenue certainty and
maximising earnings from existing assets;
2. expanding the sourcing of energy supply
within the Infigen portfolio in response to
market signals and enhancing
Infigen’s
capacity to deliver firm products to its
customers; and
3. creating a capital structure to support
Infigen’s business strategy.
The FY18 KPI achievements have been set out in
the Executive KMP summary report tables on
page 28.
29
The FY18 KPIs included a gateway hurdle and
moderating factors as preconditions used to
determine events which automatically trigger
Board consideration to rerate downwards the STI
pool for the whole organisation, a team or
individual.
In FY18 the gateway hurdle was classified as a
fatality, which would automatically trigger Board
consideration to rerate the STI Pool. The Board
determined that this was particularly important as
Infigen commenced the high-risk activity of
constructing the Bodangora Wind Farm.
Moderating factors address matters not foreseen
or adequately addressed in setting the FY18 KPIs.
Moderating factors may be used to determine
team or individual STI outcomes irrespective of
the overall achievement against the FY18 KPIs.
Examples of moderating factors were: any serious
safety incidents, serious regulatory or contract
breaches, and actions that result in reputational
damage to Infigen.
The Board determined that neither the ‘gateway
hurdle’ or any ‘moderating factors’ occurred
during the year. Consequently, no adjustment to
the STI opportunity was applied.
When settling the STI payments for the KMP in
FY18, the Board set the STI pool for KMP at
$1,183,000. The aggregate amount of actual STI
payments awarded to KMP was $1,200,275 (101%).
Individual STI payments awarded to KMP were
between 78% and 130% of the maximum STI
opportunity.
individual STI
payments, the NRC had regard to the specific KPIs
established at the beginning of the year,
achievement against those targets, and the
achievements of management in responding to
emerging threats and opportunities in the delivery
of the revised business strategy.
In determining
The Board has discretion under the Infigen Short
Term Incentive Plan to apply a performance factor
adjustment (positive or negative) of up to 30% of
the STI Payment achievement subject to the
into
employee’s performance, which
consideration amongst other things the manner
and substance in which the KPIs were achieved
and the employee’s performance throughout the
year.
takes
1.2.1. Short Term Incentive Deferral
During the year the NRC undertook an external
market review of at-risk remuneration including
STI Deferral. The Board determined that while STI
deferral is important, Infigen’s previous policy of
50% deferral in equity was not reflective of
broader market practice by comparably sized
companies and served to diminish the value of the
remuneration offered. It was therefore considered
appropriate to reduce the quantum deferred for 12
months to 20% of the KMP FY18 STI.
The deferred STI will be paid in cash at the end of
the deferral period provided the employee has not
resigned or had their employment terminated for
cause prior to the payment date. The deferred
payment may be reduced or forfeited if the STI
payment was associated with a materially adverse
financial misstatement, or if the achievement of a
personal KPI proves in hindsight to have been
materially overstated.
The deferral condition will continue to include a
clawback mechanism that complements the LTI
clawback provision. These provisions enable
forfeiture of some or all deferred STI and/or
unvested LTI performance rights if a previously
vested LTI grant was associated with a materially
adverse financial misstatement.
remuneration
The Board believes that this change will result in
remaining
Infigen’s
market competitive and will continue
to
appropriately motivate and reward executives to
deliver Infigen’s business strategy.
framework
In FY17 deferred STIs to the value of $298,051 were
awarded in the form of 398,362 performance
rights at a security price of $0.7482. Infigen
intends to issue 398,362 securities following the
release of the FY18 financial results to satisfy
vesting obligations in relation to these deferred
STI amounts. It is not presently intended to
clawback any STI deferred securities. Recipients of
such securities will incur a taxation liability and
therefore may sell some securities to fund the tax
liability. Any sales are subject to
Infigen's
Securities Trading Policy and applicable law,
including insider trading laws.
1.3.
Long Term Incentives
LTIs are awarded as future rights to acquire IFN
securities. Each vested performance right will
entitle the participant to receive one security, or a
cash amount equivalent to the market price of a
security, on the vesting date. Settlement in cash or
securities is determined by the Board in its
absolute discretion.
The number of rights granted is based on the LTI
amount divided by the reference price for Infigen
securities, being the volume-weighted average
ASX market price in the last five trading days of
the prior financial year. For rights granted in FY18
the reference price was $0.7482.
LTI grants comprise two equal tranches, each
subject to a different performance condition.
Vesting of each tranche is contingent on achieving
the relevant performance hurdle.
Performance Conditions
FY16 & FY17
FY18
Tranche 1
Relative TSR
Relative TSR
Tranche 2
EBITDA /
Capital
Progress in implementing
the revised business
strategy
1.3.1. FY16 & FY17 LTI Grant
The Tranche 1 performance condition is relative
Total Shareholder Return (TSR). The Tranche 2
operational performance condition is a test of the
cumulative growth in the ratio of earnings before
interest, taxes, depreciation and amortisation
(EBITDA) to capital base.
The 3-year performance period of the FY16 Grant
is from 1 July 2015 to 30 June 2018. In the event
that no performance rights vest after the initial 3-
year performance period, then the FY16 LTI grant
will be subject to a single re-test on 30 June 2019,
after which all unvested rights will lapse.
The 3-year performance period of the FY17 Grant
is from 1 July 2016 to 30 June 2019. In the event
that no performance rights vest after the initial 3-
year performance period, then the FY17 LTI grant
will be subject to a single re-test on 30 June 2020,
after which all unvested rights will lapse.
1.3.2. FY18 LTI Grant
The Tranche 1 performance condition is TSR.
As outlined in the 2017 Notice of AGM, the Tranche
2 operational performance condition was changed
to measure progress in implementing the revised
business strategy to increase sustainable value
through de-risking revenue and achieving prudent
growth.
The 3-year performance period of the FY18 Grant
is from 1 July 2017 to 30 June 2020, after which all
unvested rights will lapse.
1.3.3. TSR Performance Condition
TSR measures the change in value of a security
plus cash distributions notionally reinvested in
that security. For any portion of the FY16 and FY18
Tranche 1 performance rights to vest, the TSR of
IFN securities must outperform that of the median
company in the S&P/ASX 200 index (excluding
financial services, real estate and the materials and
resources sector).
The NRC last reviewed the peer group in June
2017. The analysis
included peer group
performance compared to a range of Indices since
June 2011 and demonstrated that the current peer
group had historical returns that were higher than
all but the ASX Utilities Sector. The NRC
concluded that there were too few relevant
utilities sector companies to form a viable industry
peer group for TSR benchmarking.
Following the rerating of the IFN security price in
FY16, the Board amended the vesting scale of the
TSR performance condition for the FY17 Tranche 1
performance rights so that vesting would occur
progressively from 25% to 75% of the relevant
peer group performance. It was the Board’s
intention that the FY17 vesting scale would apply
to the FY17 grant only.
30
INFIGEN ENERGY 2018 ANNUAL REPORT
Table 1: Tranche 1 TSR Performance Rights Vest Progressively as Follows
Percentile ranking
Below the
25th percentile
Equal to
the 25th
percentile
Between the
25th and 50th
percentile
Equal to the
50th percentile
0% vesting
0% vesting
0% vesting
25% vesting
0% vesting
25% vesting
An additional
1% of awards
vest for each
percentile
increase
50% vesting
FY16
g
n
i
t
s
e
v
s
d
r
a
w
A
FY17
f
o
e
g
a
t
n
e
c
r
e
P
FY18
0% vesting
0% vesting
0% vesting
50% vesting
Between the
76th and 95th
percentile
Above the
95th percentile
An additional
1.25% of the
award vests for
each percentile
increase
100% vesting
100% vesting
100% vesting
Between the
50th and 75th
percentile
An additional
2%
of the award
vests for each
percentile
increase
An additional
2%
of the award
vests for each
percentile
increase
An additional
2%
of the award
vests for each
percentile
increase
1.3.4. Operational Performance Condition
FY16 & FY17 LTI Grant
The annual target used in respect of all LTI grants up to and including FY17 is a specified ratio of EBITDA to
capital base over the year. The capital base is measured as equity (net assets) plus net debt. Both the EBITDA
and capital base are measured on a proportionately consolidated basis to reflect Infigen’s economic interest
in all investments.
The annual target for each financial year is established by the Board no later than the time of the release of
Infigen’s annual financial results for the preceding financial year. The targets are set with reference to Infigen’s
annual budgets. They are confidential to Infigen. However, each year's target and the performance against
that target are disclosed retrospectively.
The FY17 LTI is the only outstanding LTI grant using the EBITDA / Capital Base measure. The initial three-year
performance measurement period of the FY17 LTI grant will end 30 June 2019. As previously disclosed the
EBITDA/Capital Base measure has proven to be unduly sensitive to wind conditions and to external market
trends in energy and Large-scale Generation Certificate prices.
The Board decided in FY18 to replace the operational performance condition to measure progress in
implementing the revised business strategy to increase sustainable value through de-risking revenue and
achieving prudent growth.
Relevant metrics for the last four financial years and current period are provided in the table below.
Table 2: Five Year Financial Performance
Closing security price
EBITDA
Capital Base
EBITDA to capital base
Target
Unit
30 June 2014
30 June 2015
30 June 2016
30 June 2017
30 June 2018
$
$ ‘000
$ ‘000
%
%
0.24
0.32
1.00
0.73
0.66
176,682
186,583
120,196
143,412 1
149,102
1,733,099
1,639,635
1,021,051
1,019,834
1,153,062
10.19
10.03
11.38
10.83
11.77
10.00
14.06
12.49
12.9
11.46
1 Underlying EBITDA adjusted for inclusion of profit on sale of the Manildra solar farm development project.
31
Table 3: Tranche 2 EBITDA Performance Rights in FY16 and FY17 Vest Progressively as Follows
Infigen’s EBITDA performance
FY16 & FY17 Grant
Percentage of Tranche 2 Performance Rights that vest
0% - 90%
Nil
90% ≤ 110% of the cumulative target
For every 1% increase between 90% and 110% of EBITDA
target, 5% of the Tranche 2 performance rights will vest
FY18 LTI Grant
The primary assessment will be based on a matrix
that rewards achievements in delivering specific
targets set out in the 5 Year Business Plan. The
targets are Revenue Diversity, as measured by the
proportion of energy sales delivered through
direct commercial and
industrial customer
channels, and Growth, as measured by Energy
Sold volume (GWh). The matrix is aligned with and
directly reflects Infigen’s business strategy to
deliver a range of products and solutions to
different customers: balance risk; price and tenor;
secure longer-term revenue stability; and growth.
The Board has discretion to adjust the vesting
outcomes (both upwards and downwards)
including in the following circumstances:
a) outperformance in value creation which is not
reasonably captured by the operational
performance condition;
b) misstatements or misrepresentations that
warrant a downward adjustment;
c)
in the event of a significant corporate
transaction which the Board considers has
affected the achievability of the performance
conditions;
d) where strict applicability of the matrix
parameters would lead to an outcome that
does not satisfactorily reflect the sustainable
economic value created for Infigen or its
security holders over the performance period
including where this results in a vesting
outcome that was not fair or reasonable (to
either the LTI participants or Infigen) in all the
circumstances; or
e) where the vesting outcome is considered
inappropriate because absolute TSR
is
negative.
The NRC will regularly review performance against
the revised business strategy, strategic objectives
approved by the Board and when other events
occur (whether in management control or not)
that might have an effect on the delivery of the
business strategy and security holder value
creation. The NRC will maintain a scorecard that
will be used to inform discussion and the exercise
of discretion when determining the vesting
outcome at
the performance
measurement period.
the end of
1.3.5. FY16
Long
Term
Incentive
Performance
The initial 3-year performance period for the FY16
LTI grant ended on 30 June 2018. Infigen’s TSR
performance for the 3-year measurement period
was 146.9%, placing Infigen at 94.845% of the
comparator group. This will result in 99.8% of the
Tranche
1 performance rights vesting. The
Tranche 2 operational performance condition of
the FY16 LTI grant also passed the performance
test as at 30 June 2018 resulting in 100% of the
Tranche 2 performance rights vesting. Vesting of
both tranches will occur when the first IFN
employee trading window opens after 1 July 2018.
A total of 2,103,333 securities in relation to the
FY16 LTI are expected to be issued by Infigen prior
to the trading window opening following the
release of the FY18 financial results. None of the
current KMP participate in the FY16 LTI grant.
1.4.
Infigen Energy Equity Plan Rules
Performance rights and options are governed by
the rules of the Infigen Energy Equity Plan
approved by security holders in 2009 and 2011.
The Infigen Energy Equity Plan includes provisions
under which the Board may exercise discretion to
accelerate the vesting of any performance rights
or options in the event of a change in control of
Infigen. In exercising its discretion, the Board
would intend to have regard to the performance,
duration of the performance period and the nature
of the relevant transaction.
1.5.
Separation Benefits
The Board intends to continue to limit any future
separation benefits to a maximum of 12 months’
fixed remuneration.
32
INFIGEN ENERGY 2018 ANNUAL REPORT
2.
Infigen Energy - Executive KMP Statutory Remuneration Details
2.1.
Statutory Remuneration Data for the Year Ended 30 June 2018
The Statutory Remuneration Data table below shows the accounting expense amounts that reflect a portion
of possible future remuneration arising from prior and current year LTI grants. The year on year comparison
is distorted by the management restructure that occurred in FY17, resulting in pro-rata payments received by
incoming and former KMP.
Table 4: Statutory Remuneration Data for Executive KMP
Short-term employee benefits
Executive
Year
Salary
STI
payable in
current
period
Other pay-
ments
Termination
payments
Total of
short-term
employee
benefits
Post
employ-
ment
benefits
Other
long-term
employee
benefits
Share-
based
payments
Super-
annuation
LSL accrual
Equity
settled1
Total
($)
($)
($)
($)
($)
($)
($)
($)
($)
R Rolfe
FY18
816,451
345,216
-
FY172
497,691
127,500
125,000
S Wiggins
FY18
679,951
364,000
FY172
103,802
50,000
P Simshauser 3
FY18
275,381
73,632
O Sela
FY17
FY18
-
-
397,951
97,092
-
-
-
-
-
FY172
180,678
50,000
25,000
T Clark
FY18
371,951
80,280
FY172
124,717
43,050
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
M George
C Baveystock
B Hopwood
S Wright
Total
remuneration
-
-
-
-
349,884
52,650
-
305,027
-
-
-
-
349,884
70,650
FY18
2,541,685
960,220
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,161,667
20,049
2,600
222,391
1,406,707
750,191
13,077
1,216
-
764,484
1,043,951
20,049
2,143
51,030
1,117,173
153,802
3,269
1,034
-
158,105
349,013
14,338
716
15,684
379,751
-
-
-
-
-
495,043
20,049
1,255
46,511
562,858
255,678
9,808
603
5,568
271,657
452,231
20,049
1,196
15,725
489,201
167,767
8,440
-
-
541
-
-
-
176,748
-
-
-
-
-
-
402,534
19,616
12,161
179,069
613,380
509,331
814,358
19,616
-
-
-
-
-
-
-
-
-
(128,901)
705,073
-
-
420,534
19,616
11,350
108,921
560,421
3,501,905
94,534
7,910
351,341 3,955,690
-
-
-
-
-
-
314,442
266,750
62,500
845,760
1,489,452
9,808
- 1,004,735
2,503,995
FY17
2,226,125
660,600
212,500 1,355,091 4,454,316
103,250
26,905 1,169,392 5,753,863
1 Includes deferred STI granted in the period.
2 Messrs Rolfe, Sela and Clark and Ms Wiggins were employed for part of FY17.
3 Commenced employment on 27 November 2017.
33
2.2. Value of Remuneration that May Vest in Future Years
Remuneration amounts provided in the table below refer to the maximum value of performance rights relating
to IFN securities. These amounts have been determined at grant date by using a pricing model and amortised
in accordance with AASB 2 ‘Share Based Payments’. The minimum value of remuneration that may vest is nil.
Table 5: Remuneration that May Vest in Future Years
Maximum value of remuneration which is subject to vesting in accordance with AASB 2 'Share
Based Payments'
Executive
Grant
R Rolfe
S Wiggins
P Simshauser
O Sela
T Clark
FY17
FY18
FY181
Total
FY18
FY181
Total
FY18
Total
FY17
FY18
FY181
Total
FY18
Total
FY17
($)
-
-
-
-
-
-
-
-
-
6,313
-
-
6,313
-
-
FY18
($)
71,848
65,439
85,104
222,391
49,361
1,669
51,030
15,684
15,684
23,274
19,674
3,563
46,511
15,725
15,725
FY19
($)
119,747
109,065
29,922
258,734
82,269
587
82,856
28,481
28,481
23,274
32,790
1,252
57,316
26,208
26,208
FY20
($)
-
109,363
-
109,363
82,494
-
82,494
28,560
28,560
-
32,880
-
32,880
26,281
26,281
2.3. Unvested Performance Rights
The table below provides details of outstanding performance rights relating to IFN securities that have been
granted to Executive KMP (FY17 and FY18 grants). The performance rights are valued as at the grant date
even though the grant was based on the volume weighted average price of the five trading days up to
30 June in the year prior to the grant.
Table 6: Unvested Performance Rights
Executive
Grant
Granted
number
Grant
date
Value per
performance
right at grant
date2
Value of
performance
rights granted
at grant date
Potential Vesting Dates
R Rolfe
FY17
FY18
369,230 23 Nov 17
620,156 23 Nov 17
FY181
170,409 23 Nov 17
S Wiggins
FY18
467,790 23 Nov 17
P Simshauser
O Sela
FY181
FY18
FY17
FY18
FY181
3,342 23 Nov 17
157,712 11 Dec 17
68,082
23 Mar 17
186,448 23 Nov 17
7,134 23 Nov 17
T Clark
FY18
149,025 23 Nov 17
($)
0.5189
0.4577
0.6750
0.4577
0.6750
0.4611
0.7764
0.4577
0.6750
0.4577
($) LTI Tranche 1 LTI Tranche 2 Deferred STI
191,596
30 Jun 19
30 Jun 19
283,867
30 Jun 20
30 Jun 20
-
-
115,026
-
-
15 Sep 18
214,124
30 Jun 20
30 Jun 20
-
2,256
-
-
15 Sep 18
72,725
30 Jun 20
30 Jun 20
52,861
30 Jun 19
30 Jun 19
85,344
30 Jun 20
30 Jun 20
-
-
-
4,815
-
-
15 Sep 18
68,214
30 Jun 20
30 Jun 20
-
1 FY17 deferred STI.
2 Rounded down to 4 decimal places. Small variations in the ‘Value of Performance Rights granted at grant date’ will occur.
34
INFIGEN ENERGY 2018 ANNUAL REPORT
Table 7: Change in Number of Performance Rights Held by Executive KMP throughout the Year.
Set out below is the change in the number of performance rights held by KMP over the period 1 July 2017 to
30 June 2018.
Balance at 30 June 2017
Granted
Vested
Balance at 30 June 2018
R Rolfe
S Wiggins
P Simshauser
O Sela
T Clark
-
-
-
68,082
-
1,159,795
471,132
157,712
193,582
149,025
-
-
-
-
-
1,159,795
471,132
157,712
261,664
149,025
3. Executive KMP Employment Contracts
The base salaries (excluding superannuation guarantee payments) for Executive KMP as at 30 June 2018 are
as follows:
R Rolfe
S Wiggins
P Simshauser
O Sela
T Clark
As at 30 June 2018
$816,451
$679,951
$459,951
$397,951
$371,951
Employment contracts relating to Executive KMP contain the following conditions:
Duration of contract
> Open-ended
Notice period for
either party to
terminate the
contract
Termination
payments provided
under the contract
Termination for
Material Adverse
Change
> R Rolfe 12 months’ written notice by Infigen or 6 months’ by R Rolfe
> S Wiggins 12 months’ written notice by Infigen or 6 months’ by S Wiggins
> P Simshauser 6 months’ written notice by either party
> O Sela 6 months’ written notice by either party
> T Clark 3 months’ written notice by either party
> Upon termination, any accrued but untaken annual and long-service (but not sickness or personal)
leave entitlements, in accordance with applicable legislation, are payable. In the event of
redundancy, a severance payment is payable under the Infigen Group Redundancy Policy equivalent
to 4 weeks base salary for each year of service (or part thereof), up to a maximum of 36 weeks.
> Both R Rolfe and S Wiggins may terminate their employment immediately where a material adverse
change to the powers, duties, responsibilities, authority and/or status of the executive’s role has
occurred without the executive’s consent, provided the executive has notified Infigen in writing of
such change within one month (with their reasons for such change), and Infigen has failed to remedy
this within one month of receiving notice from the executive of such change.
> In the event that Infigen does not remedy the material adverse change, the executive will be entitled
to a severance payment of 12 months’ Fixed Remuneration or the maximum amount permitted by
Part 2D.2.2 of the Corporations Act 2001 (Cth) if this is a lower amount.
> The executive will not be a “Bad Leaver” under the Infigen Energy Equity Plan and is not entitled to
notice of termination or severance payments under the Infigen Energy Group Redundancy policy.
> Termination benefits are subject to the condition that they will not exceed the amount permitted by
Part 2D.2.2 of the Corporations Act 2001 (Cth) without security holder approval.
35
Diminishing
Deferred Payment
> Both R Rolfe and S Wiggins are entitled to a one off diminishing deferred payment, payable on
18 November 2019.
> The maximum value of the diminishing deferred payment as at the executive’s commencement date
was:
- R Rolfe
- S Wiggins
$3,000,000
$2,000,000
> Payable on the Payment Date regardless of whether the executive remains employed by Infigen or
not, except if the employment is terminated for cause or where the employment is terminated for
any reason and Infigen subsequently discovers that the employment could have been terminated
for cause or the executive resigns (but not including where they resign due to a material adverse
change) in all cases before the Payment Date.
> No deferred payment will be made at the Payment Date if the executive has received aggregate
remuneration (including awards) equal to the value of the diminishing deferred payment from their
employment with Infigen (subject to the Annual Cap) prior to the Payment Date.
> The Annual Cap is the maximum amount by which the Deferred Payment may be reduced for each
year (or part thereof) between the Commencement Date and Payment Date. The Annual Cap is:
- R Rolfe
- S Wiggins
$1,000,000 pa
$800,000 pa (Pro-rated in the final year)
> The Board also has discretion to reduce the amount of the deferred payment for material
underperformance or other conduct of the executive which would make it unreasonable for the
executive to receive the deferred payment.
4. Remuneration of Non-Executive Directors
Non-Executive Director Fees are determined by the Boards within the aggregate amount approved by
security holders. 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. Director fees were not
adjusted during the year and no change is proposed for FY19.
Non-Executive Directors receive a cash fee for service inclusive of statutory superannuation. Non-Executive
Directors do not receive any performance-based remuneration or retirement benefits other than statutory
superannuation contributions.
4.1. Board/Committee Fees
Aggregate annual fees payable to Non-Executive Directors during the year ended 30 June 2018 are set out
below.
Board / Committee
Infigen Boards
Infigen Audit, Risk & Compliance Committees
IEL Nomination & Remuneration Committee
Role
Annual Fee
Chairman1
Non-Executive Director
Chairman
Member
Chairman
Member
$250,000
$125,000
$24,000
$12,000
$20,000
$10,000
1 No Committee fees are paid to the Chairman of Infigen Boards.
36
INFIGEN ENERGY 2018 ANNUAL REPORT
4.2. Remuneration of Non-Executive Directors for the Year Ended 30 June 2018
The nature and amount of each element of fee payments to each Non-Executive Director of Infigen for the
years ended 30 June 2017 and 30 June 2018 are set out in the table below.
Fees
Super-
annuation
Related party
payment
Non-Executive Directors
Year
L Gill1
M Chellew2
E Stein 3
P Green 4
R Rolfe5
S Wiggins5
M Hutchinson6
F Harris 7
Total Remuneration
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
IERL
($)
87,067
4,391
47,691
-
51,784
-
-
-
-
23,039
-
67,074
57,488
103,581
45,068
68,388
289,098
266,473
IEL & IEBL
($)
87,067
4,391
57,691
-
54,553
-
-
-
-
33,902
-
93,727
57,488
126,803
51,735
95,362
308,534
354,185
($)
15,644
834
10,011
-
10,102
-
-
-
-
5,410
-
14,306
10,024
19,616
8,047
15,250
53,828
55,416
Total
($)
189,778
9,616
115,393
-
116,439
-
-
-
-
62,351
-
625,107
125,000
250,000
104,850
179,000
651,460
($)
-
-
-
-
-
-
-
-
-
-
-
450,000
-
-
-
-
-
450,000
1,126,074
1 L Gill was appointed as a Chairman of IEL, IEBL and IERL on 1 January 2018 and is a member of the NRC. Committee fees were
discontinued when Mr Gill was appointed Chairman of IEL, IEBL and IERL.
2 M Chellew was appointed as a Non-Executive Director of IEL, IEBL and IERL on 21 September 2017. Mr Chellew became a member
of the ARCC on 24 October 2017 and Chairman of the NRC on 1 January 2018.
3 E Stein was appointed as a Non-Executive Director of IEL, IEBL and IERL on 21 September 2017. Ms Stein became Chairman of the
ARCC on 24 October 2017 and a member of the NRC on 22 March 2018.
4 P Green was appointed as a Non-Executive Director of IEL, IEBL and IERL on 18 November 2010. Mr Green is a partner of TCI
Advisor Services LLP which is an adviser to a substantial shareholder of the Infigen group. Since being appointed, Mr Green has
elected to receive no Director fees.
5 Fees payable to Mr Rolfe and Ms Wiggins in FY17 relate to the period when they were Non-Executive Directors.
6 Non-Executive Director fees are for the period 1 July 2017 to 31 December 2017.
7 Non-Executive Director fees are for the period 1 July 2017 to 19 February 2018.
37
5. Guideline for Minimum Security Holdings for Non-Executive Directors
Non-Executive Directors who receive payment of Director fees from Infigen are encouraged to acquire IFN
securities equivalent to the after-tax value of one year’s Director base fee. The acquisition of the relevant
amount of IFN securities should be completed within 3 years of being appointed and subsequently elected
as a Non-Executive Director. The acquisition of IFN securities under this guideline is subject to Infigen’s
Securities Trading Policy and sufficient trading windows being open during the relevant period. Due to the
Company undertaking material projects throughout FY18, including refinancing of the Global Facility, there
were limited opportunities during the period for Non-Executive Directors to acquire IFN securities (including
no opportunity to date for Non-Executive Directors appointed in FY18).
Table 8: IFN Security Holdings of Non-Executive Directors and Executive KMP
IFN security holdings of Non-Executive Directors and KMP, including held by their personally related parties,
over the period 1 July 2017 to 30 June 2018 are set out in the table below.
Balance at 30 June 2017
Acquired during FY18
Sold during the year Balance at 30 June 2018
L Gill
M Chellew1
E Stein 2
P Green
R Rolfe
S Wiggins
P Simshauser
O Sela
T Clark
M Hutchinson3
F Harris 4
-
-
-
-
130,869
12,173
-
-
60,869
316,521
121,739
64,220
-
-
-
-
-
-
-
-
13,479
-
-
-
-
-
-
-
-
-
-
-
-
64,220
-
-
-
130,869
12,173
-
-
60,869
N/A
N/A
6. Remuneration Adviser
To ensure the NRC is provided with advice and, as required, remuneration recommendations, free from undue
influence by members of the KMP to whom the recommendations may relate, the engagement of the
remuneration advisor is based on an agreed set of protocols to be followed by the remuneration advisor,
members of the NRC and members of KMP. The protocols require:
>
>
>
the remuneration advisor to be appointed by independent directors;
no other services are provided to management; and
reports with recommendations are only received by Non-Executive Directors.
The NRC engaged the services of remuneration advisors during the year to provide market practice
information and options in relation to the LTI and STI Deferral and Executive KMP remuneration
benchmarking. No advice was provided that falls within the definition of a remuneration recommendation of
the Corporations Act 2001, Chapter 1, Part 1.2, Division 1, section 9B (1)(a) and (b).
The Board was satisfied that the advice received was free from the undue influence of the KMP.
1 M Chellew was appointed as a Non-Executive Director of IEL, IEBL and IERL on 21 September 2017.
2 E Stein was appointed as a Non-Executive Director of IEL, IEBL and IERL on 21 September 2017.
3 Ceased to be Chairman and a Non-Executive Director on 31 December 2017, movements in IFN securities relate to the period up
to that date.
4 Ceased to be a Non-Executive Director on 19 February 2018.
38
INFIGEN ENERGY 2018 ANNUAL REPORT
OTHER DISCLOSURES
Company Secretary
David Richardson was appointed Company
Secretary of IEL, IERL and IEBL on 26 October
2005. David is the General Manager Corporate
Governance & Company Secretary of Infigen
Energy and is responsible for the company
secretarial, insurance, corporate compliance and
internal audit functions.
David was previously a Company Secretary within
the AMP Group, including AMP Capital Investors,
Financial Services and Insurance divisions, as well
as holding prior financial services sector and
regulatory positions.
David holds a Diploma of Law, Bachelor of
Economics, Graduate Diploma
in Company
Secretarial Practice and is a Graduate of the AICD
Company Directors Course. David is a Member of
the Governance Institute of Australia and the
Australian Institute of Company Directors.
Distributions
No distribution for the financial year ended 30
June 2018 has been paid or declared.
Further details regarding distributions are set out
in Note D1 to the Financial Report.
Principal Activities
The principal activities of Infigen and the Trust are
set out in the Operating and Financial Review
commencing on page 11 of this report.
Changes in State of Affairs
In the opinion of the Directors there were no
significant changes in the state of affairs of Infigen
that occurred during the financial year other than
those included in this Directors’ Report.
Subsequent Events
On 14 August 2018 Infigen signed an agreement
with Tesla Motors Australia Pty Ltd to develop a
25 MW / 52 MWh Battery Energy Storage System
(BESS) adjacent to the Lake Bonney Wind Farm in
South Australia, with an estimated project cost of
$38,000,000. The South Australian Government
and the Australian Renewable Energy Agency
have agreed to commit $5,000,000 each in grant
funding ($10,000,000 in total). The BESS is
expected to commence operations in 2H FY19.
39
Since the end of the reporting date, in the opinion
of the Directors, there were no other transactions
or events of a material or unusual nature not
otherwise dealt with in this report, likely to affect
significantly the operations or affairs of Infigen or
the Trust in future financial periods.
Environmental Regulations
To the best of the Directors’ knowledge, Infigen
has complied with all significant environmental
regulations applicable to its operations.
Indemnification and Insurance of Officers
Infigen has agreed to indemnify (to the extent
permitted by law) all Directors and Officers
against losses or liabilities incurred in their role as
Director, Alternate Director, Secretary, Executive,
or other employee of Infigen. Infigen has not been
advised of any claims under the aforementioned
indemnity.
Current and former Directors and Officers are
covered under a liability insurance contract, which
is held, and premiums paid, by Infigen during the
financial year.
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 financial year.
Extraordinary General Meeting
In March 2018,
Infigen received notices to
requisition a general meeting of shareholders of
IEL and unitholders of IET from two security
holders (‘Requisitioning Security Holders’) in order
to amend the constitutions of both those entities,
so as to require security holder approval in relation
to certain financing arrangements.
On 9 April 2018 the requisitions were officially
withdrawn by the Requisitioning Security Holders.
The Requisitioning Security Holders subsequently
sold their securities in Infigen.
The non-audit services provided also do not
undermine the general principles relating to
auditor independence as set out in the APES 110
Code of Ethics for Professional Accountants as
they did not involve reviewing or auditing the
auditor’s own work or acting in a management or
decision-making capacity for Infigen.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration
as
the
required under section 307C of
Corporations Act 2001 is set out on page 41.
Rounding
All figures are presented in Australian Dollars with
all values rounded off to the nearest thousand
dollars, unless otherwise stated, in accordance
with the Australian Securities and Investments
Commission
Instrument
(ASIC) Corporations
2016/191.
Approval of Directors’ Report
Pursuant to section 298(2) of the Corporations
Act 2001, this report is made in accordance with
resolutions of the Directors of IEL and the
Directors of IERL, the responsible entity of IET.
Non-Audit Services
In accordance with internal policy, Infigen and the
Trust only engage the auditor for non-audit
services where the services will not compromise
the auditor’s
is
believed the auditor is best equipped to provide
the services when considering their experience,
expertise, and knowledge of Infigen and the Trust.
independence and where
it
The Board has considered the Audit Risk and
Compliance Committee’s advice and the non-
audit services provided by the auditor and is
satisfied that the provision of these services by the
auditor
is compatible with, and did not
compromise the general standard of auditor
independence imposed by the Corporations Act
2001.
Non-audit services provided during the financial
year consist of taxation related services (including
general compliance and advisory) and transaction
and advisory services
in
connection with the Refinancing). Fees paid or
payable to the auditor for these services during
the financial year are summarised in the below
table.
(including
those
Non-audit services
30 June 2018
Taxation related services
Transaction and advisory services
91,179
396,946
488,125
On behalf of the Directors of IEL and IERL:
Len Gill
Chairman
Ross Rolfe AO
Chief Executive Officer / Managing Director
40
Auditor’s Independence Declaration
As lead auditor for the audit of Infigen Energy Group and Infigen Energy Trust Group for the year
ended 30 June 2018, 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 Group and Infigen Energy Trust Group and the entities
it controlled during the period.
Marc Upcroft
Partner
PricewaterhouseCoopers
Sydney
27 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
41
FINANCIAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS OF:
Comprehensive Income
Financial Position
Changes in Equity
Cash Flow
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A. REPORT OVERVIEW
A1 Basis of Preparation
A2 New and Amended Accounting Standards
B. RESULTS
B1. Segment Information
B2. Revenue
B3. Other Income
B4. Other Finance Costs
B5. Taxation
B6. Earnings per Stapled Security
C. OPERATING ASSETS
C1. Property, Plant and Equipment
C2. Intangible Assets
C3. Commitments
D. CAPITAL STRUCTURE
D1. Capital Management
D2. Cash and Cash Equivalents
D3. Borrowings
D4. Contributed Equity
E. FINANCIAL RISK MANAGEMENT
E1. Financial Risk Summary
E2. Market Risk - Electricity Price
E3. Market Risk - Interest Rate
E4. Liquidity Risk
E5. Fair Value of Financial Assets and Liabilities
F. GROUP STRUCTURE
F1. Controlled Entities
F2. Deed of Cross Guarantee
F3. Parent Entity Disclosure
G. OTHER DISCLOSURES
G1. Share-Based Payments
G2. Related Party Transactions
G3. Cash Flow Information
G4. Reserves
G5. Auditor’s Remuneration
G6. Inventory
G7. Contingent Liabilities
G8. Events Occurring after the Reporting Period
43
44
45
46
47
47
48
49
49
50
50
51
51
53
53
53
54
56
56
56
56
57
58
59
59
60
60
61
61
63
63
65
67
68
68
69
70
71
71
71
72
72
42
INFIGEN ENERGY 2018 ANNUAL REPORT
Consolidated Statements of Comprehensive Income
for the year ended 30 June
INFIGEN
TRUST
Note
2018
2017
2018
2017
B2
B3
B4
G2
B5
($’000)
Revenue and other income
Revenue
Other income
Total revenue and other income
Expenses
Other finance costs
Depreciation and amortisation expense
Operating expenses
Interest expense
Cost of sales
Corporate costs
Impairment of financial assets
Development costs
Responsible entity expenses
Share of net loss of equity accounted investments
Profit / (loss) before income tax
Income tax benefit / (expense)
Net profit / (loss) for the year
Other comprehensive income that may be reclassified to
profit or loss:
Changes in the fair value of cash flow hedges, net of tax
Total comprehensive income
Net profit / (loss) attributable to:
−
−
Equity holders of the parent
Equity holders of the other stapled entities
Total comprehensive income attributable to:
−
−
Equity holders of the parent
Equity holders of the other stapled entities
Basic and diluted earnings per stapled security from net profit
attributable to:
Equity holders of the parent
Stapled security holders of Infigen
B6
B6
(4,459)
(1,429)
-
(133,697)
223,755
6,338
230,093
(51,601)
(51,444)
(43,237)
(32,866)
(13,688)
(13,236)
-
-
(33)
19,529
26,144
45,673
46,834
92,507
45,999
(326)
45,673
92,833
(326)
92,507
cents
4.8
4.8
196,664
12,610
209,274
(5,430)
(51,763)
(40,240)
(47,644)
-
(15,710)
-
(8)
47,050
(14,786)
32,264
-
30,161
30,161
-
31,905
31,905
-
-
-
-
-
(4)
-
(698)
-
-
-
-
-
-
(20)
-
-
(665)
-
(104,238)
31,220
-
-
(104,238)
31,220
20,248
52,512
-
-
(104,238)
31,220
32,305
(41)
-
(104,238)
32,264
(104,238)
52,553
(41)
-
(104,238)
52,512
(104,238)
cents
4.0
4.0
cents
(10.9)
-
-
31,220
31,220
-
31,220
31,220
cents
3.9
-
The above consolidated statements of comprehensive income should be read in conjunction with the
accompanying notes.
43
Consolidated Statements of Financial Position
as at 30 June
INFIGEN
TRUST
Note
2018
2017
2018
2017
($’000)
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Receivables
Investments accounted for using the equity method
Derivative financial instruments
Total assets
Current liabilities
Payables
Borrowings
Derivative financial instruments
Provisions
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained losses
Total equity
Attributable to:
Equity holders of the parent
Contributed equity
Reserves
Retained losses
D2
G6
E5
C1
C2
B5
E5
D3
E5
D3
E5
D4
G4
144,898
14,935
43,327
2,080
251,786
12,416
26,951
1,551
205,240
292,704
896,431
115,320
26,376
3,512
1,244
10,691
799,937
118,279
20,315
3,475
1,209
2
1,053,574
943,217
1,258,814
1,235,921
19,786
83,252
28,118
2,146
133,302
570,600
44,264
8,381
623,245
756,547
479,374
18,254
41,219
3,250
3,504
66,227
608,880
2,981
9,033
620,894
687,121
571,693
918,870
(47,816)
(299,361)
571,693
2,305
(47,816)
(274,821)
439
-
-
-
439
-
-
-
645,790
-
-
645,790
646,229
698
-
-
-
698
-
-
-
-
5,515
24
-
-
5,539
-
-
-
746,432
-
-
746,432
751,971
5,109
-
-
-
5,109
-
-
-
-
698
5,109
645,531
746,862
915,963
(91,555)
(345,034)
479,374
910,304
-
(264,773)
645,531
907,397
-
(160,535)
746,862
2,305
910,304
907,397
(91,555)
(320,820)
-
(264,773)
645,531
-
(160,535)
746,862
(320,332)
(410,070)
Equity holders of the other stapled entities
Contributed equity
Retained losses
Total equity
916,565
(24,540)
892,025
571,693
913,658
(24,214)
889,444
479,374
-
-
-
-
-
-
645,531
746,862
The above consolidated statements of financial position should be read in conjunction with the accompanying
notes.
44
INFIGEN ENERGY 2018 ANNUAL REPORT
Consolidated Statements of Changes in Equity
for the year ended 30 June
INFIGEN
Attributable to:
($’000)
Opening balance - 2017
Net profit / (loss) for the year
Changes in the fair value of cash flow
hedges, net of tax
Total comprehensive income / (loss) for
the year
Transactions with equity holders
Securities issued - Infigen Energy Equity
Plan
Recognition of share-based payments
Securities issued (capital raise), net of
transaction costs
Closing balance - 2017
Opening balance - 2018
Net profit / (loss) for the year
Changes in the fair value of cash flow
hedges, net of tax
Total comprehensive income / (loss) for
the year
Transactions with equity holders
Securities issued - Infigen Energy Equity
Plan
Recognition of share-based payments
Closing balance - 2018
Contributed
equity
2,305
-
-
-
-
-
-
Equity holders of the parent
Retained
losses
(353,125)
32,305
Equity holders
of the other
stapled entities
737,836
(41)
Total
(457,271)
32,305
Total equity
280,565
32,264
-
20,248
-
20,248
Reserves
(106,451)
-
20,248
20,248
32,305
52,553
(41)
52,512
-
(5,352)
-
-
-
-
-
7,297
(5,352)
-
7,297
(5,352)
-
144,352
144,352
2,305
(91,555)
(320,820)
(410,070)
889,444
479,374
2,305
-
-
-
-
(91,555)
-
46,834
(320,820)
45,999
(410,070)
45,999
889,444
(326)
479,374
45,673
-
46,834
-
46,834
46,834
45,999
92,833
(326)
92,507
-
-
-
2,907
2,907
-
2,305
(3,095)
(47,816)
-
(274,821)
(3,095)
(320,332)
-
892,025
(3,095)
571,693
($’000)
Opening balance - 2017
Net profit for the year
Total comprehensive income
Transactions with equity holders
Securities issued - Infigen Energy Equity
Plan
Securities issued - capital raising, net of
transaction costs
Closing balance - 2017
Opening balance - 2018
Net loss for the year
Total comprehensive income
Transactions with equity holders
Securities issued - Infigen Energy Equity
Plan
Closing balance - 2018
Contributed
equity
755,748
-
-
7,297
144,352
907,397
907,397
-
-
2,907
910,304
TRUST
Reserves
-
-
-
-
-
-
-
-
-
-
-
Retained
losses
(191,755)
31,220
31,220
-
-
Total
563,993
31,220
31,220
7,297
144,352
(160,535)
746,862
(160,535)
(104,238)
(104,238)
746,862
(104,238)
(104,238)
-
2,907
(264,773)
645,531
The above consolidated statements of changes in equity should be read in conjunction with the
accompanying notes.
45
Consolidated Statements of Cash Flow
for the year ended 30 June
($’000)
Note
2018
2017
2018
2017
INFIGEN
TRUST
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Net cash inflow
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Payment for acquisition of controlled entity
Payments for equity accounted investments
Gain on disposal of investments
G3
201,678
(71,857)
5,421
(34,796)
100,446
(143,016)
(602)
-
(68)
644
208,346
(60,805)
1,634
(50,505)
98,670
(39,237)
(3,656)
(5,765)
(47)
-
Net cash outflow
(143,042)
(48,705)
-
-
36
(5)
31
-
-
-
-
-
-
-
-
107
-
107
-
-
-
-
-
-
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of new borrowings transaction costs
Payment for interest rate derivatives termination
Securities issued - capital raising, net of transaction costs
Repayment of loan by a related party
Loans provided to related parties
Net cash (outflow) / inflow
Net (decrease) / increase in cash and cash equivalents
Opening cash and cash equivalents
Effects of exchange rate changes on the balance of cash
held in foreign currencies
Closing cash and cash equivalents
681,800
(663,636)
(28,444)
(55,230)
-
-
-
(65,510)
(108,106)
251,786
1,825
(88,499)
-
-
144,352
-
-
57,678
107,643
147,602
1,218
(3,459)
144,898
251,786
-
-
-
-
-
184,814
(189,921)
(5,107)
(5,076)
5,515
-
439
-
-
-
-
144,352
8,011
(147,360)
5,003
5,110
405
-
5,515
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
46
INFIGEN ENERGY 2018 ANNUAL REPORT
A REPORT OVERVIEW
Infigen comprises Infigen Energy Limited (IEL),
Infigen Energy Trust (IET),
Infigen Energy
(Bermuda) Limited (IEBL) and the controlled
entities of IEL and IET.
The Trust comprises IET and its controlled entities.
IEL is determined to be the parent entity of Infigen.
One share in each of IEL and IEBL and one unit in
IET have been stapled together to form a single
stapled security and listed on the Australian
Securities Exchange (ASX) under the code “IFN”.
They cannot be traded separately and can only be
traded as stapled securities.
IEL is incorporated and domiciled in Australia. IET
was established in and is domiciled in Australia.
IEBL is incorporated in Bermuda.
Inter-entity balances and transactions (except
unrealised losses that provide evidence that the
asset(s) being transferred are
impaired) are
eliminated.
The acquisition method of accounting is used to
account for business combinations by Infigen and
the Trust.
Non-controlling interests in the results and equity
of controlled entities are shown separately, where
financial
applicable,
statements.
consolidated
the
in
Trust information
IET is a Registered Scheme (the Scheme) and
Infigen Energy RE Limited
the
Responsible Entity of IET. The relationship of the
Responsible Entity with the Scheme is governed
by the terms and conditions specified in the
Constitution of IET.
(IERL)
is
A1 Basis of Preparation
Infigen and the Trust are for-profit entities for the
financial
purpose of preparing consolidated
statements.
These consolidated
financial statements are
general purpose financial statements, and have
been prepared
the
Corporations Act 2001, Australian Accounting
Standards and International Financial Reporting
Standards (IFRS).
in accordance with
These consolidated financial statements have
been prepared on the basis of the legislative and
regulatory regime that existed as at 30 June 2018
and at the date of this report. Changes to the
regulatory regime could affect the carrying values
of assets and future renewable energy project
developments.
These consolidated financial statements have
been prepared on the going concern basis using
the historical cost conventions modified by the
liabilities
revaluation of financial assets and
(including derivative
instruments)
measured at fair value, where applicable.
financial
All figures are presented in Australian Dollars with
all values rounded to the nearest thousand dollars,
unless otherwise stated, in accordance with the
ASIC Corporations Instrument 2016/191.
Critical accounting estimates and judgements
The preparation of financial statements requires
estimation and judgement. The areas involving a
higher degree of estimation or judgement are
discussed
the
consolidated financial statements:
following notes
the
to
in
Note
Nature of estimate and judgement
B5
Taxation - recoverability of deferred assets
C2
E5
Intangible Assets - estimation of recoverable
amounts
Fair Value of Financial Assets and Liabilities -
estimating the fair value of derivatives
Statement of compliance
As permitted by Australian Securities and
Investments Commission (ASIC) Corporations
Instrument 2015/843, this report consists of the
consolidated
and
accompanying notes of both Infigen and the Trust.
statements
financial
As permitted by ASIC Class Order 13/1050, the
consolidated financial statements treat IEL as the
‘parent’ of the stapled entities.
47
A2 New and Amended Accounting Standards
New and amended accounting standards adopted by Infigen or the Trust during the year did not require
changes to its accounting policies or retrospective adjustments to financial results.
Certain new accounting standards not yet adopted by Infigen or the Trust are summarised in the following
table.
There are no other new or amended accounting standards that may have a material effect on Infigen or the
Trust.
Accounting standard
Nature of change
Effect on financial statements
The application of AASB 15 is not expected
to have a material effect on the financial
results of Infigen or the Trust, however some
additional disclosure will be required
Based on contractual arrangements currently
in place, assets and liabilities are expected
to increase by $2.6 million and $3.0 million
respectively upon adoption
Infigen will use the modified retrospective
approach of adoption
The Trust’s financial results are not expected
to be affected by AASB 16 because the Trust
has no contractual arrangements that meet
the definition of a lease under AASB 16
AASB 15 Revenue from
Contracts with Customers
(effective for the
financial year
commencing 1 July
2018)
AASB 16 Leases
(effective for the
financial year
commencing 1 July
2019)
AASB 15 replaces AASB 118 Revenue and AASB
111 Construction Contracts
It is based on the principle that revenue is
recognised when control of a good or service
transfers to a customer. The previous revenue
recognition principle focused on the transfer of
significant risks and rewards of ownership
In addition, AASB 15 requires new and
expanded disclosures related to the nature,
amount, timing and uncertainty of revenue and
cash flows arising from customers and key
judgements made
AASB 16 replaces AASB 117 Leases
Under AASB 16, the distinction between
operating and finance leases is removed for
lessees. Contractual arrangements that meet
the definition of a lease under the new standard
will be recognised on the balance sheet
Specifically, a right-of-use asset and associated
lease liability for the lease payments is
recognised on the balance sheet. Interest
expense will be recognised in the income
statement using the effective interest rate
method and the right-of-use asset will be
depreciated
Only finance leases are recognised on balance
sheet under AASB 117
The accounting for lessors will not change
significantly
A full retrospective or a modified retrospective
approach is permitted on adoption
48
INFIGEN ENERGY 2018 ANNUAL REPORT
B RESULTS
B1 Segment Information
Infigen is a business actively participating in the Australian energy market. It is a developer, owner, and
operator of generation assets delivering energy solutions to Australian businesses and large retailers.
Revenues are derived from various channels to market within Australia. As a result of Infigen’s
performance from a geographic and product perspective, Australia has been identified as Infigen’s sole
reportable segment.
Only Infigen’s segment information is provided to chief operating decision-makers, defined to be the Board
of Directors. Accordingly, only Infigen’s segment information has been disclosed in this section.
The Board of Directors assesses the performance of the operating segment using statutory earnings before
interest, tax, depreciation and amortisation (EBITDA), adjusted to exclude certain significant non-cash and
one-off items that are unrelated to the operating performance of Infigen (Underlying EBITDA). Since
Infigen operates in a single segment, the assets and liabilities are those disclosed in the consolidated
statements of financial position.
The segment information provided to the Board for the operating segment together with a reconciliation of
Underlying EBITDA to net profit after tax is disclosed in the following table.
($’000)
Revenue
Cost of sales
Operating expenses
Corporate costs
Development costs
Share of net loss of equity accounted investments
Other
Underlying EBITDA
Other income
Gains from development transactions
EBITDA
Depreciation and amortisation expense
Earnings before interest and tax
Net finance costs
Profit before tax
Income tax benefit / (expense)
Net profit after tax
Note
B2
B5
INFIGEN
2018
223,755
(13,688)
210,067
(43,237)
(13,236)
(4,459)
(33)
-
2017
196,664
-
196,664
(40,240)
(15,710)
(1,429)
(8)
13
149,102
139,290
644
-
149,746
(51,444)
98,302
(78,773)
19,529
26,144
45,673
-
10,390
149,680
(51,763)
97,917
(50,867)
47,050
(14,786)
32,264
Underlying EBITDA per stapled security (cents)
15.6
17.3
The reconciliation of net finance costs to the statement of comprehensive income for the purposes of the
above segment information is disclosed in the following table.
Note
B3
B3
B4
INFIGEN
2018
4,834
860
(32,866)
(51,601)
(78,773)
2017
1,633
574
(47,644)
(5,430)
(50,867)
($’000)
Interest income
Foreign exchange gain
Interest expense
Other finance costs
49
B2 Revenue
Revenue is recognised when it can be reliably measured and payment is probable. Measurement is at the
fair value of the consideration received or receivable.
Revenue type
Description
Energy and
environmental
products
Incorporates:
Electricity
> Electricity generated from Infigen’s own generation (after applying marginal loss factors), sold on the
National Electricity Market (NEM) at the spot price
> Electricity sold to commercial & industrial (C&I) customers under medium to long-term contracts.
Where the contracted arrangement is an energy retail supply agreement, Infigen purchases the
electricity volume consumed by these customers from the NEM at spot price. These purchases are
recorded as cost of sales within the consolidated statements of comprehensive income
> Net receipts and payments from Power Purchase Agreements (PPAs) which are accounted for as
electricity derivative contracts, and which are medium to long-term in nature
> Net receipts and payments from electricity derivative contracts such as ASX futures and options, and
which are short to medium-term in nature
Large-scale Generation Certificates (LGCs)
> An LGC represents 1 MWh generation from renewable energy generators. LGC revenue is
recognised at fair value once generated and in the same period as costs are incurred. Each LGC is
concurrently recognised in inventory until it is sold, upon which time, the difference between the sale
price and book value is recorded as a component of revenue
Lease income
> Electricity and LGCs from Infigen’s own generation, sold under certain long-term contracts to one
customer that has regard to actual production outcomes. Classification of this income is consistent
with UIG 4 Determining whether an Asset Contains a Lease
Compensated
revenue
> Compensated revenue includes insurance proceeds and proceeds arising from compensation claims
made against the Australian Electricity Market Operator (AEMO) or maintenance service providers
Revenue balances
($’000)
Energy and environmental products
Lease income
Compensated revenue
B3 Other Income
($’000)
Interest income
Foreign exchange gains
Gain on sale of development assets
Fair value gain on acquisition of controlled entity
Other
Unwind of discount on related party loan receivables
INFIGEN
2018
2017
193,367
30,295
93
163,486
32,342
836
223,755
196,664
INFIGEN
TRUST
2018
4,834
860
-
-
644
-
2017
1,633
574
4,625
5,765
13
-
6,338
12,610
2018
36
1
-
-
-
2017
107
879
-
-
-
30,124
30,161
30,919
31,905
50
INFIGEN ENERGY 2018 ANNUAL REPORT
B4 Other Finance Costs
($’000)
Bank and amortisation of capitalised commitment fees
Net loss on change in fair value of derivative financial instruments
Unwind of discount on decommissioning provisions
Termination of interest rate swaps (A) (B)
Fees incurred in relation to exploring refinance options (A)
Early expense of capitalised commitment fees (A)
INFIGEN
2018
3,092
-
123
3,215
43,295
2,707
2,384
51,601
2017
2,917
2,392
121
5,430
-
-
-
5,430
(A) These finance costs were incurred as a result of the early refinancing of the Global Facility and the
Woodlawn Project Finance (PF) Facility during the year. Refer to Note D3 for details of the refinancing.
(B) The difference between the termination of interest rate swaps expense of $43,295,000 and the total cash
paid for the termination of the interest rate swaps of $55,230,000 (as shown in the statement of cash
flows), represents the change in fair values of ineffective hedges recognised in prior period’s net profit /
(loss).
B5 Taxation
Infigen is subject to income tax in Australia and jurisdictions where it has foreign operations.
Under current legislation, the Trust is not subject to income tax as unit holders are presently entitled to
the income of the Trust.
Key principles
Income tax expense consists of current tax expense and deferred tax expense. Income tax is recognised in
the consolidated statements of comprehensive income, except to the extent that it relates to items
recognised directly in equity.
Current tax expense represents the expected tax payable on the taxable income for the year, in accordance
with current tax rates, and any adjustments to the previous financial years’ tax payable.
Deferred tax expense is recognised in respect of temporary differences between an asset or liability’s carrying
value in the consolidated financial statements and tax value.
Deferred tax is not recognised on the initial recognition of goodwill.
Deferred tax assets, including those arising from unused tax losses, are only recognised to the extent it is
probable future taxable profits will be available. During the financial year, $118,851,000 of previously
unrecognised tax losses were brought to account, resulting in $35,655,000 of additional deferred tax assets
being recognised in the consolidated statement of financial position as at 30 June 2018.
Deferred tax liabilities are recognised for all temporary differences.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset, they relate to
income tax levied by the same tax authority, and Infigen intends to settle on a net basis or realise the asset
and settle the liability simultaneously.
Significant estimate and judgement is required in assessing the timing and level of future taxable profits.
This includes assumptions about a variety of general economic and business conditions outside Infigen’s
control. The assumptions and projected cash flows used in this assessment are consistent with those used in
assessing potential impairment of intangible assets detailed in Note C2. Changes in the underlying conditions
outside Infigen’s control could have an impact on future taxable profits and the utilisation of deferred tax
assets.
Tax consolidation
IEL (as head entity) and its wholly-owned Australian resident entities form the Tax Consolidated Group which
is taxed as a single entity. Tax Consolidated Group members fund and share tax with IEL whilst continuing
to account for their own current and deferred tax amounts. The members are identified at Note F1.
51
Income tax
($’000)
Current tax
Deferred tax
Previously unrecognised tax losses brought to account
Income tax (benefit) / expense
Deferred tax expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
Reconciliation of accounting profit to tax (benefit) / expense
Profit before income tax
Income tax expense calculated at 30%
Non-deductible expenses of IET, IEBL and intercompany interest
Previously unrecognised tax losses brought to account
Sundry items
Income tax (benefit) / expense
Effective tax rate
Tax paid / payable
Deferred tax assets
INFIGEN
2018
811
8,700
(35,655)
(26,144)
(32,485)
5,530
(26,955)
19,529
5,859
3,198
(35,655)
454
2017
10,648
4,138
-
14,786
(5,249)
9,387
4,138
47,050
14,115
638
-
33
(26,144)
14,786
49%
-
31%
-
($’000)
Unused tax losses
Derivative financial
instruments
Unrealised foreign
exchange losses
Deferred tax assets
Depreciation
Inventory
Derivative financial
instruments
Other
INFIGEN
Attributable to:
Attributable to:
2016
Income
Equity Acquisition
2017
Income
Equity
2018
83,810
(11,272)
-
30,025
2,242
(11,274)
481
3,009
-
114,316
(6,021)
(11,274)
(59,913)
(6,186)
-
3,720
(4,786)
(1,899)
-
(2,702)
(9,387)
-
-
-
-
-
-
-
-
-
-
-
-
72,538
35,080
-
107,618
20,993
(3,203)
(15,921)
1,869
3,490
(196)
-
3,294
97,021
31,681
(15,921)
112,781
(64,699)
(8,085)
(4,849)
(4,913)
-
-
(69,548)
(12,998)
-
-
(3,831)
(3,831)
(4,940)
(3,922)
4,232
(338)
(28)
(4,940)
(76,706)
(5,530)
(4,169)
(86,405)
Deferred tax liabilities
(62,379)
Net deferred tax
51,937
(15,408)
(11,274)
(4,940)
20,315
26,151
(20,090)
26,376
Deferred tax assets expected to be recovered after more than 12 months from 30 June 2018 are $26,376,000
(2017: $20,315,000).
The above two tables contain certain disclosure in accordance with Part A of the Voluntary Tax Transparency
Code.
Unrecognised tax losses
($’000)
Unused tax losses for which no deferred tax asset has been recognised
Tax benefit at 30%
INFIGEN
2018
2017
118,851
237,703
35,655
71,311
52
INFIGEN ENERGY 2018 ANNUAL REPORT
B6 Earnings per Stapled Security
Basic earnings per share (Basic EPS) is calculated by dividing net profit for the year by the Weighted
Average Number of Securities (WANOS) outstanding during the period. Basic EPS is then adjusted to
account for the WANOS issued under the Infigen Energy Equity Plan during the period to calculate Diluted
EPS.
Net profit attributable to:
- Parent equity holders ($’000)
- Stapled security holders ($’000)
WANOS:
- Basic (thousands)
- Diluted (thousands)
Parent entity EPS:
- Basic (cents)
- Diluted (cents)
Stapled security EPS:
- Basic (cents)
- Diluted (cents)
INFIGEN
TRUST
2018
2017
2018
2017
45,999
45,673
32,305
32,264
(104,238)
-
31,220
-
952,938
956,915
804,644
811,375
952,938
956,915
804,644
811,375
4.8
4.8
4.8
4.8
4.0
4.0
4.0
4.0
(10.9)
(10.9)
-
-
3.9
3.9
-
-
C OPERATING ASSETS
C1 Property, Plant and Equipment
This section contains in-use property, plant and equipment and assets under construction. In-use
property, plant and equipment primarily consists wind turbines and associated plant from the 557
megawatts of installed generation capacity across New South Wales (NSW), South Australia, and Western
Australia. Assets under construction primarily consists of Bodangora Wind Farm, a 113 MW wind
generation asset located in central-western NSW, and scheduled for completion in 1H FY19.
Movements in carrying values
($’000)
Opening balance - 1 July
Additions
Capitalised interest
Acquisitions and revaluations
Disposals
Depreciation expense
Transfers (to) / from intangible assets
Closing balance - 30 June
Cost
Accumulated depreciation
Net book value
In-use property,
plant & equipment
738,023
2,620
-
-
-
(46,630)
(63)
693,950
1,162,711
(468,761)
693,950
INFIGEN
2018
Assets under
construction
61,914
134,330
6,237
-
-
-
-
202,481
202,481
-
202,481
Total
799,937
136,950
6,237
-
-
(46,630)
(63)
896,431
1,365,192
(468,761)
896,431
2017
Total
783,819
43,811
-
16,472
(38)
(46,516)
2,389
799,937
1,222,068
(422,131)
799,937
53
Accounting treatment
In-use property, plant and equipment is measured at cost, less accumulated depreciation and impairment.
Initial cost includes directly attributable acquisition expenditure. Subsequent costs are capitalised if it is
probable they result in a flow of future economic benefits to Infigen, and they can be reliably measured. Other
costs are expensed as incurred.
In-use plant and equipment depreciation is calculated on a straight-line basis over the estimated useful life of
the relevant asset. Operating wind farms and associated plant is depreciated over 25 years. Bodangora Wind
Farm, currently under construction, is anticipated to be depreciated over 30 years. Other items of plant and
equipment are depreciated between three and 20 years.
Assets under construction represents direct construction costs relating to generation assets not ready for
use, including interest incurred on construction facility borrowings. Assets under construction are transferred
to in-use property, plant and equipment once the generation asset is ready for commercial use.
Decommissioning provision
Obligations exist to decommission Infigen’s wind farms at the end of their useful economic lives.
Decommissioning includes removal of turbines, associated plant, and restoration of land.
A decommissioning provision is estimated by discounting the future decommissioning expenditure to its
present value. A discount rate that considers the current market rates, adjusted for the uncertainty of the
expenditure is used. The provision is reviewed, and adjusted where necessary, at the end of each financial
year.
The provision is recognised as a non-current liability in the consolidated statement of financial position. At
30 June 2018 the provision balance is $8,448,000 (2017: $7,877,000).
C2
Intangible Assets
The table below discloses three types of intangible assets held by Infigen.
Intangible asset
Description and accounting treatment
Licences and
development rights
> Certain licences and development rights are required to construct and operate Infigen’s wind
farms. These include costs incurred on obtaining project approvals, land leases, and
connection rights
> Measurement is at cost less accumulated amortisation and impairment. Amortisation is
calculated on a straight-line basis over the expected useful life of the wind farm to which the
licences and development rights are attached
Development assets
> Development assets represent expenditure incurred prior to the commencement of a
generation asset’s construction
Goodwill
> Goodwill is recognised upon the acquisition of certain businesses. It represents the excess of
the acquisition cost over the fair value of the share of net identifiable assets, liabilities, and
contingent liabilities of the acquired business
54
INFIGEN ENERGY 2018 ANNUAL REPORT
Movements in carrying values
INFIGEN
2018
2017
($’000)
Opening balance - 1 July
Additions
Transfers from / (to) plant and equipment
Amortisation and impairment expense
Disposals
Licences and
development
rights
Development
assets
75,525
109
63
(4,814)
-
27,618
1,910
-
(227)
-
Goodwill
Total
Total
15,136
118,279
122,671
-
-
-
-
2,019
63
(5,041)
-
3,656
(2,389)
(5,247)
(412)
Closing balance - 30 June
70,883
29,301
15,136
115,320
118,279
Balance
Cost
Accumulated amortisation and impairment
Net book value
Impairment
117,726
(46,843)
70,883
29,301
15,136
-
-
162,163
(46,843)
160,308
(42,029)
29,301
15,136
115,320
118,279
The carrying value of development assets and goodwill is tested for impairment annually.
The carrying value of licences and development rights is assessed annually for indicators of impairment.
Where indicators of impairment exist, impairment testing is undertaken.
Impairment testing is undertaken by comparing an intangible asset’s carrying and recoverable amounts.
Impairment losses are recognised when carrying amounts are higher than recoverable amounts. Losses are
recognised in the consolidated statement of comprehensive income.
Licences, development rights, and goodwill are allocated to cash-generating-units (CGUs) for impairment
testing because they do not generate cash flows independent from other assets. Recoverable amounts are
determined as the higher of value-in-use or fair value less costs to sell.
Value-in-use is calculated by estimating and discounting future cash flows of Infigen’s operating assets over
their estimated economic useful life to their present value. In-house expertise is combined with historic
operating data, electricity and LGC prices, market rates, and independent consultants’ assessments of wind
resource and availability. Price forecasts use market observable and third-party assessments of forward
pricing. Where a power purchase agreement exists, the contract price is used.
A post-tax discount rate is used to discount future cash flow projections to their present value. The equivalent
pre-tax rate at 30 June 2018 is 11.7% (2017: 11.6%).
The recoverable amount of development assets is measured using internal valuations. These valuations
reference recent transactions where available and adjusted for any differences such as nature, location, size
and consider the current and/or expected future market demand for these development assets.
Significant estimate and judgement is required in forecasting an intangible asset’s discounted future cash
flows. Changes in underlying estimates and judgements may cause a variation to recoverable amounts.
Sensitivity testing was performed when calculating the recoverable amounts of intangible assets. The
following sensitivity ranges were used: discount rate (+/- 1%); market prices (+/-10%); and production
(+/- 5%). The testing did not indicate an impairment.
55
C3 Commitments
Contracted expenditure not recognised as a liability at the reporting date is disclosed in the following
table.
Commitment type
Description
Bodangora Wind Farm construction, wind farm spare parts, and IT projects
Long-term contractual agreements for specific, and scheduled, service and maintenance of
wind farm turbines
Long-term contractual agreements for the transmission of electricity from Infigen’s generation
assets to the NEM
Non-cancellable operating leases with terms equating to at least the useful economic lives of
the associated generation assets, and containing additional renewal option terms. Certain
leases contain contingent rental components (based on generation or revenue of the
associated generation assets) and CPI escalation clauses
Capital expenditure
Repairs and maintenance
Transmission services
Generation asset land
payments
Committed amounts
($’000)
Capital expenditure
Repairs and maintenance
Transmission services
Operating leases:
- Not later than 1 year
- Later than 1 year and not later than 5 years
- Later than 5 years
Total
D CAPITAL STRUCTURE
D1 Capital Management
INFIGEN
2018
2017
30,590
159,096
46,548
4,588
18,165
35,260
58,013
294,247
148,738
113,458
53,749
4,108
18,608
38,719
61,435
377,380
Infigen seeks a flexible capital structure that supports the preservation and creation of security holder
value in a changing energy market.
In order to maintain or adjust its capital structure, Infigen may adjust its level of borrowings, issue or buy back
securities, and / or consider the reintroduction of distributions.
Net debt to Underlying EBITDA ratio is a measure of Infigen’s capital structure and is monitored on a regular
basis. It is calculated as net debt (gross debt less unrestricted cash) divided by Underlying EBITDA (on a 12-
month look-back). Net debt to Underlying EBITDA was 3.6 (2017: 2.9).
No distributions were paid or declared in relation to the financial year (2017: Nil). The parent entity (IEL) has
franking credits of $6,228,093 at the end of the reporting date (2017: $6,228,093).
D2 Cash and Cash Equivalents
Unrestricted cash includes cash on hand and term deposits held at call with financial institutions.
Restricted cash is held in accordance with the minimum cash requirements for the Australian Financial
Services Licence (AFSL) compliance and the Bodangora Wind Farm project finance facility (Bodangora
PF).
($’000)
Unrestricted cash
Restricted cash
INFIGEN
TRUST
2018
94,501
50,397
2017
211,332
40,454
144,898
251,786
2018
439
-
439
2017
5,515
-
5,515
56
INFIGEN ENERGY 2018 ANNUAL REPORT
D3 Borrowings
Infigen has two secured borrowing facilities: a syndicated corporate facility (Corporate Facility) and the
Bodangora project finance facility (Bodangora PF).
Key changes during the financial year
The Corporate Facility reached financial close on 18 April 2018. The proceeds of the Corporate Facility and
existing cash on hand were used to repay existing facilities (Global Facility and the Woodlawn project finance
facility (Woodlawn PF)). Interest rate derivative contracts associated with the repaid facilities were
terminated when the borrowings were repaid.
The Bodangora PF was further drawn by $156,800,000 during the financial year to fund the ongoing
construction of the Bodangora Wind Farm.
Carrying values and movements
INFIGEN
2018
33,750
7,469
-
-
41,219
483,750
151,156
-
-
634,906
(26,026)
608,880
650,099
653,852
525,000
(7,500)
(656,136)
156,800
(27,273)
4,747
609
2017
-
-
78,500
4,752
83,252
-
1,825
543,028
29,253
574,106
(3,506)
570,600
653,852
742,490
-
-
(88,499)
1,825
-
1,556
(3,520)
650,099
653,852
($’000)
Current
Corporate Facility
Bodangora PF
Global Facility
Woodlawn PF
Non-current
Corporate Facility
Bodangora PF
Global Facility
Woodlawn PF
Capitalised commitment fees
Total borrowings
Movement in borrowings
Opening balance - 1 July
Corporate Facility (drawdowns)
Corporate Facility (repayments)
Global Facility and Woodlawn PF (repayments)
Bodangora PF (drawdowns)
Other movements
Additions to capitalised commitment fees
Expense of capitalised commitment fees
Net foreign currency exchange differences
Closing balance - 30 June
57
Specific details of Infigen’s borrowings as at the reporting date are summarised in the following table.
Facility
($’000)
Corporate Facility
- Facility A
- Facility B
Available
Drawn
Maturity Repayment terms
537,500
517,500
152,500
365,000
152,500
365,000
Apr 2023
Apr 2023
> Amortised over term of facility
> Some repayment may be required but only
from operating cash flows after April 2021 if
certain leverage levels are not met
> Repayment of all outstanding at maturity
> Repaid in full at maturity
Apr 2023
Sep 2034 > Converts to a term facility after construction
phase (expected 1H FY19)
- Facility C (Working Capital)
20,000
-
Bodangora PF
162,725
158,625
> Semi-annual fixed repayments commencing
31 December 2018 of term facility in
accordance with the repayment schedule
Total
700,225
676,125
The Corporate Facility contains an additional $60,000,000 facility available for providing bank guarantees
and letters of credit, and/or to fund cash collateral posting requirements of up to $20,000,000. At the
reporting date, $4,536,000 of bank guarantees and letters of credit have been issued under this facility. Under
the Bodangora PF, $4,100,000 remains available to fund the ongoing construction of the Bodangora Wind
Farm.
Covenants
The Corporate Facility contains a leverage and a debt service ratio covenant, which operate in respect of the
financial performance and balance sheet of Infigen’s operating assets (excluding the Bodangora Wind Farm).
The Bodangora PF does not incorporate specific financial covenants during the Bodangora Wind Farm
construction. Upon conversion of the Bodangora PF to a term facility a debt service ratio covenant applies.
All financial covenants had been complied with during the financial year.
Accounting treatment
Borrowings are initially recognised at fair value (net of commitment fees), and subsequently measured at
amortised cost, using the effective interest method. Transaction costs in respect of a borrowing are expensed
over the expected term of the borrowing. Borrowings are classified as current liabilities, unless there is an
unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
D4 Contributed Equity
One share in each of IEL and IEBL and one unit in IET have been stapled together to form a single stapled
security. Security holders are entitled to receive declared distributions, vote at securityholders’ meetings,
and receive a proportional share of proceeds in the event of winding up of Infigen.
Stapled securities issued and fully paid
Carrying amount ($’000)
Opening - 1 July
Securities issued - Infigen Energy Equity Plan
Securities issued - capital raise (April 2017)
Transaction costs - capital raise (April 2017)
Closing balance
Number (thousands)
Opening - 1 July
Securities issued - Infigen Energy Equity Plan
Securities issued - capital raise (April 2017)
Closing balance - 30 June
Accounting treatment
INFIGEN
2018
915,963
2,907
-
-
918,870
950,259
3,801
-
954,060
2017
764,314
7,297
151,017
(6,665)
915,963
772,469
8,108
169,682
950,259
TRUST
2018
907,397
2,907
-
-
910,304
950,259
3,801
-
954,060
2017
755,748
7,297
151,017
(6,665)
907,397
772,469
8,108
169,682
950,259
Securities on issue are classified as contributed equity. Incremental costs directly attributable to the issue of
new securities are deducted from the proceeds from the issue of securities.
58
INFIGEN ENERGY 2018 ANNUAL REPORT
E
Financial Risk Management
This section discloses Infigen’s financial risk management activities. Effective financial risk management
underpins Infigen’s strategic business objectives, and includes the use of financial instruments. Infigen’s
business activities and use of financial instruments expose it to various risks which the Board seeks to mitigate
to levels it determines appropriate by implementing specific policies and procedures.
E1 Financial Risk Summary
Risk type
Definition
Exposures
Mitigation methods
Electricity derivative contracts
(including PPAs accounted for
as derivative financial
instruments)
> The Multi-Channel RTM seeks to balance price,
tenor, and risk, thereby managing earnings
certainty and co-optimising production, contract,
and spot exposures
Market risk -
Electricity
The risk of
fluctuations in the
fair value or future
cash flows of a
financial instrument
because of changes
in electricity price
> Active energy market portfolio management:
Quantitative Volumetric Hedging limits; Earnings
at Risk analysis; strategic portfolio balancing;
and daily compliance testing
Infigen undertakes analyses using in-house
expertise and external consultancies to monitor
market conditions and outlook
Infigen does not manage the fair value risk for
electricity derivative contracts, as it does not
affect the cash flows of the business
Interest rate derivative contracts to manage
exposure to variable rate borrowings
>
>
>
> Monitoring of hedge ratio
>
Infigen does not manage the fair value risk for
interest derivative contracts, as it does not affect
its cash flows
> Speculative trading is prohibited
> Monitoring and stress testing of cash flow and
liquidity requirements
> Consideration of refinancing options, and where
appropriate, completion of refinancing in
advance of maturity
> Access to $94.5 million of unrestricted cash and
a $20.0 million working capital facility (nil drawn
at 30 June 2018)
Issue securities
>
> Established and regularly monitored
counterparty credit rating and limit requirements
> Counterparty collateral held (where appropriate)
>
Infigen’s maximum exposure to credit risk at the
end of the reporting date is the carrying amount
of financial assets (net of any allowances for
losses) in the consolidated statement of financial
position
Market risk -
Interest rate
Liquidity risk
The risk of
fluctuations in the
fair value or future
cash flows of a
financial instrument
because of changes
in market interest
rates
The risk of not
meeting obligations
of financial liabilities
Variable rate borrowings
Interest rate derivatives
> Payables
> Borrowings
> Derivative financial
liabilities
Credit risk
The risk of financial
loss from a
counterparty to a
financial instrument
failing to discharge
an obligation
> Cash and cash equivalents
> Trade receivables
(including the Trust’s
related party loan
receivable disclosed at
Note G2)
> Derivative financial assets
59
E2 Market Risk - Electricity Price
Sensitivity analysis - electricity derivative contracts
The following table discloses the sensitivity of Infigen’s other comprehensive income to a 10% change in
electricity contract market futures prices (as it affects financial electricity instruments, including PPAs which
are accounted for as electricity derivative contracts, and other electricity derivative contracts such as ASX
futures and options) while holding all other variables constant. 10% is considered appropriate given industry
standard benchmarks and historic volatility. Infigen’s electricity derivative contracts are designated as cash
flow hedges. Their fair value movements are recorded in other comprehensive income.
($’000)
Other comprehensive income - increase / (decrease):
Electricity forward price +10%
Electricity forward price -10%
E3 Market Risk - Interest Rate
Net borrowings exposure
INFIGEN
2018
(13,959)
13,959
2017
(1,224)
1,224
The following table discloses the weighted average fixed rate of interest rate derivatives and fixed debt (both
excluding margin) as at the reporting date and the next five reporting dates. Interest rate caps (which are
out of the money) as at the reporting date are excluded from the below disclosure. As at the reporting date,
the interest rate caps have a notional value of $11,200,000 and an average capped rate of 4.88%.
($’000)
Interest rate swaps (Corporate Facility)
Interest rate swaps (Bodangora PF)
Fixed debt (Bodangora PF)
Total
2018
2019
412,300
79,302
79,313
570,915
402,104
71,004
80,477
553,585
INFIGEN
2020
2021
2022
2023
374,825
65,984
76,735
517,544
335,812
62,296
72,447
470,555
299,437
58,901
68,498
426,836
206,548
55,342
64,358
326,248
Weighted average fixed rate (excluding margin)
2.44%
2.61%
2.65%
2.66%
2.67%
2.72%
Sensitivity analysis
The following table discloses the sensitivity of net profit before tax and other comprehensive income to a 100
basis points (bps) change in interest rates while holding all other variables constant. The effect on net profit
is due to the exposure to variable rate borrowings offset by movements in the fair value of the ineffective
portion of derivatives designated as cash flow hedges. The effect on other comprehensive income is due to
the effective portion of fair value movements of derivatives designated as cash flow hedges.
($’000)
Net profit before tax - increase / (decrease):
+ 100 bps
- 100 bps
Other comprehensive income - increase / (decrease):
+ 100 bps
- 100 bps
INFIGEN
2018
(249)
249
19,830
(19,830)
2017
1,280
(1,280)
21,351
(21,351)
60
INFIGEN ENERGY 2018 ANNUAL REPORT
E4 Liquidity Risk
The following table discloses the undiscounted cash flow maturities of financial liabilities and derivative
financial instruments.
Borrowings represent the contracted cash flows (including principal and interest payments) under the
Corporate Facility and Bodangora PF (2017: Global Facility, Woodlawn Facility, and Bodangora PF) and have
been determined by reference to the interest rate forward curves as at the reporting date.
Derivative financial instruments are presented on a net cash basis as they are settled on a net basis.
($’000)
INFIGEN
2018
Borrowings
Payables
Interest rate swaps (net settled)
Electricity derivatives (net settled)
2017
Borrowings
Payables
Interest rate swaps (net settled)
Electricity derivatives (net settled)
TRUST
2018
Amounts due to related parties
2017
Amounts due to related parties
1 to 5 years
Over 5 years
Total
Less than
1 year
85,787
18,254
2,260
894
651,227
-
2,682
-
159,355
-
642
-
107,195
653,909
159,997
103,597
19,786
21,975
2,105
421,863
-
47,419
888
198,329
-
(514)
-
147,463
470,170
197,815
698
5,101
-
-
-
-
896,369
18,254
5,584
894
921,101
723,789
19,786
68,880
2,993
815,448
698
5,101
E5 Fair Value of Financial Assets and Liabilities
Financial assets and liabilities recognised and measured at fair value on a recurring basis are disclosed in the
following table. An explanation of fair value levels is provided in the following commentary.
($’000)
Current assets
Electricity derivative contracts
Electricity derivative contracts
Non-current assets
Electricity derivative contracts
Electricity derivative contracts
Interest rate derivative contracts
Current liabilities
Foreign currency derivative contracts
Electricity derivative contracts
Electricity derivative contracts
Interest rate derivative contracts
Non-current liabilities
Electricity derivative contracts
Interest rate derivative contracts
Fair value level
2018
2017
INFIGEN
2
3
2
3
2
2
2
3
2
2
2
-
2,080
2,080
1,007
9,684
-
10,691
-
14
880
2,356
3,250
-
2,981
2,981
1,551
-
1,551
-
-
2
2
509
2,105
-
25,504
28,118
888
43,376
44,264
Amounts have not been offset as no legally enforceable right of set-off presently exists.
61
Reconciliation of Level 3 financial assets and liabilities
($’000)
Opening balance - 1 July
Net movement in fair value of new instruments recognised in other comprehensive
income during the year
Closing balance - 30 June
There were no transfers between the fair value levels during the year.
Fair value levels
INFIGEN
2018
-
10,884
10,884
2017
-
-
-
Financial assets and liabilities are classified and grouped according to the degree in which their calculation
inputs are observable - Level 1 being completely observable (requiring no estimate and judgement) and Level
3 being unobservable (and requiring significant estimate and judgement). The levels are summarised as
follows:
Level 1: measurement is derived from quoted market prices in active markets for identical assets or liabilities;
Level 2: measurement is derived from inputs not traded in active markets, but calculated with significant
inputs from observable market data; and
Level 3: measurement is derived from significant inputs based on non-observable market data.
Significant estimate and judgement is required in assessing the fair value of financial assets and liabilities
that use Level 2 or 3 measurements. The assumptions used in making these significant estimates is often
based on long-term future events, and may therefore be subjective. Changes in the underlying estimates and
judgements may cause a variation to the carrying values.
The following table summarises the methods used to estimate fair value.
Instrument
Fair value level
Fair value methodology
Electricity derivative
contracts
Interest rate derivative
contracts
Electricity derivative
contracts
Accounting treatment
2
2
3
Calculates the present value of estimated future cash flows accounting for
market forward prices
Discounts the present value of the estimated future cash flows using the
applicable observable market yield curves having regard to timing of cash
flows
Uses a discounted cash flow methodology which reflects differences in
contract price and long-term forecast energy pool prices (not observable in
the market), estimation of electricity volumes, the discount rate, and related
credit adjustments
Financial assets and liabilities recognised and measured at fair value on a recurring basis, consist of derivative
financial instruments.
Fair value gains or losses relating to designated effective hedges are recognised in other comprehensive
income and held in a separate hedging reserve in equity. Fair value gains or losses on derivatives designated
as ineffective hedges are recognised in net profit.
The portion of the derivative contracts expected to be settled within 12 months are classified as current assets
or liabilities, and those that are not, are classified as non-current assets or liabilities.
Other financial assets and liabilities (including cash, receivables, payables, and borrowings) are not measured
at fair value, but in accordance with applicable accounting standards and Infigen’s accounting policies. Infigen
has assessed that their carrying values approximate their fair values.
62
INFIGEN ENERGY 2018 ANNUAL REPORT
F GROUP STRUCTURE
F1 Controlled Entities
Controlled entities that form the Cross-Guarantee Group are marked as [#] and those that form the Tax
Consolidated Group are marked as [*]. Additional disclosure is located at Note F2 and B5 respectively.
Key
Country of incorporation
2018
2017
Ownership interest
* #
Australia
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
Batchelor Solar Pty Limited
BBWP Holdings (Bermuda) Limited
Bluff Solar Farm Pty Limited
Bodangora Wind Farm Pty Limited
Bogan River Solar Farm Pty Ltd
Bowen Solar Farm Pty Limited
BWF Finance Pty Limited
BWF Holdings Pty Limited
Capital East Solar Pty Limited
Capital Solar Farm Pty Limited
Capital Wind Farm (BB) Trust
Capital Wind Farm 2 Pty Limited
*
*
*
*
*
*
*
*
*
*
*
Capital Wind Farm Holdings Pty Limited
* #
Cherry Tree Wind Farm Pty Ltd
CREP Land Holdings Pty Limited
CS CWF Trust
Flyers Creek Wind Farm Pty Ltd
Infigen Energy (Malta) Limited
Infigen Energy (US) Pty Limited
Infigen Energy (US) 2 Pty Limited
Infigen Energy Custodian Services Pty Limited
Infigen Energy Development Holdings Pty Limited
Infigen Energy Development Pty Ltd
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 Finance (Australia) Pty Limited
Infigen Energy Finance (Germany) Pty Limited
Infigen Energy Finance (Lux) S.à.r.l
Infigen Energy Germany Holdings Pty Limited
Infigen Energy Germany Holdings 2 Pty Limited
Infigen Energy Germany Holdings 3 Pty Limited
Infigen Energy Holdings Pty Limited
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
63
Bermuda
Australia
Australia
Bermuda
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Malta
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Luxembourg
Australia
Australia
Australia
Australia
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%
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Ownership interest
Name of entity
Key
Country of incorporation
2018
Infigen Energy Holdings S.à.r.l.
Infigen Energy Investments Pty Limited
Infigen Energy Markets Pty Limited
Infigen Energy Niederrhein Pty Limited
Infigen Energy NT Solar Holdings Pty Limited
Infigen Energy NT Solar Pty Limited
Infigen Energy RE Limited
Infigen Energy Services Holdings Pty Limited
Infigen Energy Services Pty Limited
Infigen Energy T Services Pty Limited
Infigen Energy US Corporation
Infigen Energy US Holdings LLC
Infigen Energy US Development Corporation
Infigen Energy US Holdings Pty Limited
Infigen Energy US Partnership
*
*
*
*
*
*
*
*
*
*
Lake Bonney Holdings Pty Limited
* #
Lake Bonney 2 Holdings Pty Limited
Lake Bonney Wind Power Pty Limited
Lake Bonney Wind Power 2 Pty Limited
Lake Bonney Wind Power 3 Pty Limited
Manton Solar Pty Limited
NPP LB2 LLC
NPP Projects I, LLC
NPP Projects V, LLC
NPP Walkaway Pty Limited
NPP Walkaway Trust
Renewable Energy Constructions Pty Limited
Renewable Power Ventures Pty Ltd
RPV Investment Trust
Walkaway (BB) Pty Limited
Walkaway (CS) Pty Limited
Walkaway Wind Power Pty Limited
Woakwine Wind Farm Pty Ltd
Woodlawn Wind Pty Ltd
WWCS Finance Pty Limited
WWCS Holdings Pty Limited
WWP Holdings Pty Limited
Subsidiaries of the Trust
CS Walkaway Trust
Walkaway (BB) Trust
*
*
*
*
*
*
*
*
*
*
*
* #
*
*
*
* #
*
*
*
*
* #
Luxembourg
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
Australia
USA
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2017
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
64
INFIGEN ENERGY 2018 ANNUAL REPORT
F2 Deed of Cross Guarantee
Certain Infigen entities are party to a deed of cross guarantee made in accordance with the terms of ASIC
Corporations (Wholly-owned Companies) Instrument 2016/785 (Cross-Guarantee Group). Cross-
Guarantee Group members are granted relief from the requirement to prepare and lodge individual
audited financial reports and legally guarantee the liabilities and obligations of each other.
Changes during the year
On 17 April 2018, a revocation deed was lodged with ASIC to remove Renewable Power Ventures Pty Ltd and
Walkaway Wind Power Pty Limited from the Cross-Guarantee Group. Under the terms of the ASIC
Corporations (Wholly-owned Companies) Instrument 2016/785, the deed becomes effective six months from
the lodgement date. Accordingly, these two entities continue to be included in the financial information of
the Cross-Guarantee Group for the financial year 2018.
Financial information of the Cross-Guarantee Group
Consolidated statement of comprehensive income
($’000)
Revenue
Related party payable forgiven
Operating expenses
Unrealised foreign exchange (loss) / gain
Depreciation and amortisation expense
Interest expense
Other finance costs
Profit before income tax
Income tax benefit / (expense)
Net profit for the year
Other comprehensive income that may not be reclassified to net profit:
Changes in the fair value of cash flow hedges, net of tax
Total comprehensive income for the year, net of tax
CROSS-GUARANTEE GROUP
2018
2017
74,618
16,091
(16,798)
(3,202)
(23,157)
-
(728)
46,824
25,800
72,624
73,588
-
(15,399)
2,708
(23,146)
(18,160)
(282)
19,309
(7,141)
12,168
510
73,134
-
12,168
65
Consolidated statement of financial position
($’000)
Current assets
Cash and cash equivalents
Receivables
Inventories
Total current assets
Non-current assets
Receivables
Shares in controlled entities
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Derivative financial instruments
Total current liabilities
Non-current liabilities
Payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained losses
Total equity
CROSS-GUARANTEE GROUP
2018
2017
110
1,368
7,189
8,667
773,574
73,559
312,274
61,671
52,918
-
16,280
7,106
23,386
810,229
73,559
332,937
45,774
55,150
1,273,996
1,282,663
1,317,649
1,341,035
1,155
-
1,155
563
509
1,072
1,426,893
4,062
1,430,955
1,432,110
(149,447)
2,305
(23,005)
(128,747)
(149,447)
1,558,543
3,999
1,562,542
1,563,614
(222,579)
2,305
(23,513)
(201,371)
(222,579)
66
INFIGEN ENERGY 2018 ANNUAL REPORT
F3 Parent Entity Disclosure
IEL is the parent of the Infigen stapled structure and for the purposes of preparing Infigen’s consolidated
financial statements.
The following table discloses IEL’s financial information, which has been prepared on a basis consistent with
Infigen’s consolidated financial statements.
($’000)
Assets
Current assets
Non-current assets
Liabilities
Current liabilities
Non-current liabilities
Equity
Issued capital
Reserves
Retained losses
Net profit for the year
Total comprehensive income
Additional disclosure
IEL
2018
-
886,128
886,128
-
1,129,204
1,129,204
2,305
-
(245,380)
(243,075)
31,480
31,124
2017
-
728,716
728,716
-
1,003,627
1,003,627
2,305
(356)
(276,860)
(274,911)
324
324
IEL has a net asset deficiency of $243,075,000 at 30 June 2018 (2017: $274,911,000). This is principally due
to $849,712,000 (2017: $659,791,000) of undiscounted long-term funding provided by IET. When combined
with the other stapled entities, IEL has positive net current assets and net total assets.
IEL is part of the Cross-Guarantee Group, the parties of which, legally guarantee the liabilities and obligations
of each other. Additional disclosure is located at Note F2.
The Trust
IET is the parent of the Trust for the purposes of preparing the Trust’s consolidated financial statements. IET’s
controlled entities contain no material assets or liabilities. The Trust’s consolidated financial information
shown in the consolidated financial statements therefore reflect IET standalone financial information.
67
G OTHER DISCLOSURES
This section contains additional required information not disclosed in previous sections of these consolidated
financial statements.
G1 Share-Based Payments
Performance rights are granted to certain Infigen employees eligible under the Infigen Energy Equity Plan
(Equity Plan). The Equity Plan comprises a deferred short-term incentive (Deferred STI) and long-term
incentive (LTI) component. They are collectively known as share-based payments (SBP).
STI is subject to key performance indicators (KPIs) aligned with strategy, annual budgets, and employees’
individual objectives. Where part of the STI payment is deferred as performance rights, the Deferred STI is
measured over 12 months and has a two-year vesting period.
LTI is subject to two separate and equally weighted conditions, both of which are measured over three years.
The financial year 2016 (FY16) and financial year 2017 (FY17) performance rights contain a one-year re-test.
(i) Total Shareholder Return (scaled market hurdle) - Infigen’s security price relative to the ASX200
(excluding financial services, real-estate investment trusts, and the materials/resources sectors); and
(ii) Operational Performance (internal hurdle) - as disclosed in the 2017 Notice of AGM, this hurdle was
modified for the FY18 performance rights to account for specific revenue diversity and growth
targets set by the Board. The Board has discretion to adjust vesting outcomes in circumstances
including where actual value creation has not been reasonably reflected by the performance
condition.
The previous hurdle (as applied to the FY17 and FY16 performance rights) was a cumulative growth
in Infigen’s EBITDA to Capital Base multiple against an internally set target.
Performance rights vest as either stapled securities or cash, as determined by the Board. The cash equivalent
is the market security price at the vesting date. Performance rights are measured at fair value at grant date
and are expensed over the vesting period.
Judgement is required in determining the fair value. Infigen uses an internal model with inputs including:
exercise price; market price; term of the performance right; and security price at grant date.
SBP expense recognised during the financial year
($’000)
LTI
Deferred STI
Write-back prior year’s LTI expense allocation
INFIGEN
2018
319
199
(88)
430
2017
827
455
(204)
1,078
Movement in number of performance rights outstanding during the financial year
Equity Plan
FY15 LTI
FY16 LTI
FY16 DSTI
FY17 LTI
FY17 DSTI
FY18 LTI
Total
Opening balance
1 July
3,205,128
2,632,626
882,717
841,614
-
-
7,562,085
Granted
Vested
Lapsed /Forfeited
Closing balance
30 June
-
-
-
369,230
398,362
1,717,459
2,485,051
(3,205,128)
-
-
-
(527,188)
2,105,438
(882,717)
-
-
-
-
(677,975)
-
-
(4,087,845)
(1,205,163)
-
532,869
398,362
1,717,459
4,754,128
2,485,051 performance rights were granted for the financial year (2017: 1,879,133). The weighted average
security price at grant date was $0.68 (2017: $0.87). The fair value of these performance rights at grant date
was $1,247,000 (2017: $1,411,000).
68
INFIGEN ENERGY 2018 ANNUAL REPORT
G2 Related Party Transactions
The related party transactions and balances of Infigen and the Trust are disclosed below.
Infigen
Key Management Personnel (KMP) remuneration for the year-ended 30 June is disclosed in the following
table.
($)
Short-term employee benefits
Post-employment benefits (superannuation)
Other long-term benefits and SBP expense
Write-back prior year’s LTI expense allocation
Total
INFIGEN
2018
2017
4,099,537
148,362
359,251
(88)
4,607,062
5,074,974
158,666
1,325,198
(203,904)
6,354,934
Ms S Wiggins (Executive Director - Finance & Commercial) was appointed an Executive Director of Infigen
on 8 May 2017. Prior to this, Pipionem Partners (of which Ms Wiggins is Managing Director), provided financial
advisory services to Infigen on normal commercial terms and conditions. No amounts were paid to Pipionem
Partners during the financial year (2017: $450,000).
Mr M George, former Managing Director of Infigen, is the director of Hillview Court Enterprises. Infigen was
party to a contract (based on normal commercial terms and conditions) with Hillview Court Enterprises for
the provision of consultancy services during the financial year. The aggregate amount of the services
provided by Hillview Court Enterprises for the year ended 30 June 2018 was $64,604 (2017: $62,500).
Mr P Green, a non-executive director of Infigen, is a partner of TCI Advisory Services LLP (TCI), an advisor to
an entity which has a substantial shareholding of Infigen stapled securities. Mr P Green has advised Infigen
that he does not have a relevant interest in those Infigen stapled securities.
Infigen has an outstanding loan balance of $1,019,156 from RPV Developments Pty Ltd at 30 June 2018 (2017:
$1,019,156). RPV Developments Pty Ltd is treated as an equity accounted investment by Infigen.
The Trust
The Trust pays the Responsible Entity a fee for managerial and administrative services, excluding amounts
attributable to KMP remuneration. Fees paid for the year-ended 30 June 2018 were $698,126 (2017: $665,109).
The Trust has non-interest bearing loan receivables / (payables) from / (to) related parties that form part of
the long-term funding arrangements of the stapled structure, as disclosed in the following table.
($’000)
Receivables
Infigen Energy Limited
Infigen Energy (Bermuda) Limited
Infigen Energy Holdings Pty Limited
Infigen Energy (US) 2 Pty Limited
Total undiscounted value
Total discounted value (carrying value)
Payables
Infigen Energy RE Limited (carrying value)
TRUST
2018
2017
849,712
691
14,010
30,009
894,422
645,790
659,791
691
201,000
30,009
891,491
746,432
(698)
(5,101)
The Trust has discounted its loan receivables to their net present value resulting in an unwinding income of
$30,124,000 for the year-ended 30 June 2018 (2017: $30,919,000). An impairment charge was recognised at
30 June 2018 of $133,697,000 (2017: $Nil). The undiscounted face value (accounting for accumulated
impairment charges) of these loans is $894,422,000 at 30 June 2018 (2017: $891,491,000). The forecast
undiscounted cash flows of Infigen’s operating assets support the carrying value as they exceed the
undiscounted face values.
69
G3 Cash Flow Information
Reconciliation of net profit to net cash inflow from operating activities
INFIGEN
TRUST
($’000)
Net profit for the year
Adjustments
Early termination of interest rate swaps
Depreciation and amortisation
Fair value gain on acquisition of controlled entity
Unwind of discount on related party loan receivables
Impairment of financial assets
Impairment of development assets
Unrealised foreign exchange (gain) / loss
Amortisation of share based payments expense
Amortisation of borrowing costs, and one-off upfront and early
expense of fees associated with the Refinancing
Share of profits of equity accounted investments
Accretion of decommissioning provisions
Income tax (benefit) / expense
Net cash inflow/(outflow) from operating activities before
changes in working capital
Changes in working capital
(Increase) / decrease in receivables and inventory
(Decrease) / increase in payables
Net cash inflow from operating activities
Net debt reconciliation
($’000)
Opening balance - 1 July 2017
Cash flows
Other non-cash movements
Closing balance - 30 June 2018
2018
45,673
43,295
51,444
-
-
-
227
(735)
430
7,456
33
123
2017
2018
32,264
(104,238)
2017
31,220
-
51,763
(5,765)
-
-
-
(346)
1,078
1,505
8
121
-
-
-
(30,124)
133,697
-
(1)
-
-
-
-
-
-
-
-
(30,919)
-
-
843
-
-
-
-
-
(26,144)
14,786
121,802
95,414
(666)
1,144
(19,556)
(1,800)
100,446
1,622
1,634
98,670
-
697
31
(24)
(1,013)
107
Borrowings due:
Cash
within 1 year
after 1 year
251,786
(106,888)
-
(83,252)
42,033
-
(574,106)
(60,197)
(603)
Total
(405,572)
(125,052)
(603)
144,898
(41,219)
(634,906)
(531,227)
70
INFIGEN ENERGY 2018 ANNUAL REPORT
G4 Reserves
Infigen’s three reserves accounts are summarised in the following table.
Reserve
Hedging reserve
Acquisition reserve
SBP reserve
Carrying values
($’000)
Hedging reserve
Acquisition reserve
SBP reserve
Description and accounting treatment
Records fair value movements in cash flow hedges to the extent the cash flow hedges are deemed
effective. The balance is reclassified to net profit when the hedged expense is recognised. Ineffective
portions of cash flow hedges are recognised in net profit immediately.
Records the acquisition of non-controlling interests in entities over which Infigen already exerted
control. The carrying value is the difference between the purchase consideration and the amount by
which the non-controlling interest is adjusted.
Recognises the SBP expense. Amounts are transferred to contributed equity upon the performance
rights vesting.
INFIGEN
2018
4,460
(47,675)
(4,601)
(47,816)
2017
(42,374)
(47,675)
(1,506)
(91,555)
G5 Auditor’s Remuneration
PricewaterhouseCoopers (PwC) continue to act as the independent auditor and has provided audit and
other services to Infigen and the Trust during the financial year. Fees paid or payable to PwC for services
provided are disclosed in the following table.
Amounts paid or payable
($)
Audit and other assurance services
Audit of financial statements
Audit of subsidiaries’ financial statements
Other assurance services
Non-audit services
Taxation related services
Transaction and advisory services
Total auditor’s remuneration
G6
Inventory
INFIGEN
TRUST
2018
2017
2018
2017
184,000
161,000
30,000
375,000
91,179
396,946
488,125
863,125
196,000
162,000
32,000
390,000
73,435
372,193
445,628
835,628
18,857
20,000
-
-
-
-
18,857
20,000
-
-
-
18,857
-
229,393
229,393
249,393
One LGC represents 1 MWh of generation from renewable energy generators.
INFIGEN
2018
43,327
581,121
2017
26,951
374,300
LGCs
Carrying value ($’000)
Volume
71
G7 Contingent Liabilities
Contingent liabilities not recognised in the consolidated statement of financial position primarily comprise
financial guarantees for AEMO, counterparties and for certain grid connections.
($’000)
Letters of credit
The Trust
INFIGEN
2018
14,156
2017
7,964
The Trust had no contingent liabilities as at 30 June 2018 (2017: Nil).
G8 Events Occurring after the Reporting Period
On 14 August 2018 Infigen signed an agreement with Tesla Motors Australia Pty Ltd to develop a 25 MW / 52
MWh Battery Energy Storage System (BESS) adjacent to the Lake Bonney Wind Farm in South Australia,
with an estimated project cost of $38,000,000. The South Australian Government and the Australian
Renewable Energy Agency have agreed to commit $5,000,000 each in grant funding ($10,000,000 in total).
The BESS is expected to commence operations in 2H FY19.
There were no other transactions or events of a material or unusual nature, not otherwise dealt with in this
report, likely to affect significantly the operations or affairs of Infigen or the Trust in future financial periods.
72
INFIGEN ENERGY 2018 ANNUAL REPORT
DIRECTORS’ DECLARATION
In the opinion of the Directors of Infigen Energy Limited and the Directors of the Responsible Entity of Infigen
Energy Trust, Infigen Energy RE Limited (collectively referred to as ‘the Directors’):
a)
the financial statements and notes of Infigen and the Trust set out on pages 43 to 72 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 Infigen’s and the Trust’s consolidated financial position as at
30 June 2018 and of their performance for the year ended on that date;
b) there are reasonable grounds to believe that both Infigen and the Trust will be able to pay their debts
as and when they become due and payable; and
c)
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 of 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 and IERL:
Leonard Gill
Chairman
Ross Rolfe AO
Chief Executive Officer / Managing Director
73
Independent auditor’s report
To the stapled security holders of Infigen Energy Limited and the unit holders of Infigen Energy Trust
Report on the audit of the financial reports
Our opinion
In our opinion:
The accompanying financial reports of Infigen Energy Limited (“the Company” or “IEL”) and its
controlled entities (together “Infigen” or “the Group”), and Infigen Energy Trust and its controlled
entities (together “Trust”) are in accordance with the Corporations Act 2001, including::
(a)
giving a true and fair view of the financial positions of Infigen and Trust as at 30 June 2018 and
their financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The financial reports of Infigen and Trust comprises:
•
•
•
•
•
•
the consolidated statements of financial position as at 30 June 2018
the consolidated statements of comprehensive income for the year then ended
the consolidated statements of changes in equity for the year then ended
the consolidated statements of cash flow for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group and the Trust in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial reports in Australia. We have also fulfilled our
other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
74
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of Infigen and Trust, their accounting processes and controls and the industry in which they
operate.
The structure of Infigen is commonly referred to as a 'stapled group.' In a stapled group the securities
of two or more entities are 'stapled' together and cannot be traded separately. In the case of Infigen,
the shares in IEL have been stapled to the units in Trust. For the purposes of consolidation accounting,
IEL is 'deemed' the parent and the consolidated report reflects the consolidation of IEL and its
controlled entities, and Trust.
75
Materiality of the Group
Audit scope of the Group
Key audit matters
•
Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
•
Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
Infigen
− Recoverability of the net
deferred tax asset
− Recoverability of
development assets
− Valuation of electricity
derivatives
Trust
− Recoverability of related
party receivables
•
These are further described in
the Key audit matters section of
our report.
•
For the purpose of our audit of
the Group we used overall
materiality of $4.0 million,
which represents
approximately 2.5% of
earnings before interest, tax,
depreciation and amortization
(EBITDA) of Infigen.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
• We chose EBITDA because, in
our view, it is the benchmark
against which performance is
most commonly measured. It
also closely represents
operating cash flow and
underlying earnings. EBITDA
is a generally accepted
benchmark.
• We chose a 2.5% threshold
based on our professional
judgement, noting it is within
the range of commonly
acceptable thresholds.
76
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial reports for the current period and were determined separately for Infigen and
Trust. Relevant amounts listed for each part of the stapled group represent balances as they are
presented in the financial reports and should not be aggregated. The key audit matters were addressed
in the context of our audit of the financial reports as a whole, and in forming our opinions thereon, and
we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure are made in that context.
Key audit matter
How our audit addressed the key audit matter
Recoverability of the net deferred tax asset
Refer to note B5
Infigen - $26.4m
Trust - the KAM is not applicable as the Trust distributes any income at the end of each year and is
taxed in the hands of the unitholders as a Trust Distribution
The recognition and measurement of deferred tax
assets was a key audit matter as there was significant
judgement required by Infigen in assessing whether
there will be sufficient future taxable profits to utilise
the available tax losses. Additional tax losses have been
recognised as deferred tax assets during the year.
We obtained the Group’s model for forecast taxable
income supporting the recognition of the deferred tax
asset and assessed whether the key assumptions were
consistent with the Group’s strategy.
We tested selected inputs used in the model regarding
production, pricing and expenses. We also checked the
consistency of the forecast taxable income with the
Board approved budgets.
We assessed the contributing factors for recognition of
previously unrecognised tax losses by evaluating
Infigen’s assessment.
Recoverability of development assets
Refer to note C2
Infigen - $29.3m
Trust - the KAM is not applicable as the Trust does not invest in development assets
Australian Accounting Standards require an annual
assessment of whether there should be an impairment
of a development asset. This requirement is based on
development assets not being ready for use, and
classified as an intangible asset.
There were significant judgements made by Infigen
during the impairment assessment about the future
results of the business and the wider
economic environment in which Infigen operates.
We evaluated Infigen’s estimate of the recoverable
amount in order to challenge Infigen’s assumptions.
Specific work included:
•
•
Evaluated the appropriateness of existing
approvals for the continuing development of
projects.
Assessed the valuation model developed by
Infigen to evaluate the recoverable value of the
projects.
77
Key audit matter
How our audit addressed the key audit matter
As these assets are in the early stages of their lifecycle,
there was a degree of estimation in assessing whether
the future earnings expected to be generated are
greater than the current value.
•
•
Enquired of management as to their
knowledge of events or conditions that would
indicate that the carrying value of these
assets would no longer be recoverable.
Evaluated the adequacy of disclosures in the
financial report in light of the requirements of
the Australian Accounting Standards.
Valuation of electricity derivatives
Refer to note E5
Infigen - $11.9m
Trust - the KAM is not applicable as the Trust does not hold any derivatives
The valuation of the electricity derivatives was a key
audit matter as there was significant judgement and
estimation required by Infigen in developing the key
assumptions and overall valuation of these financial
instruments.
The key area of judgment related to Group’s estimation
of the fair value of certain derivatives within the
Group’s portfolio, particularly Level 3 instruments,
which are valued by the Group via internal models
applying an industry accepted methodology and using
key inputs that are not based on observable market
data.
We obtained a selection of the valuation models
developed by Infigen and considered the methodology
and key assumptions used.
We tested the selection of internally derived inputs and
compared the unobservable inputs to our knowledge
and understanding of the industry.
We performed sensitivity analysis over certain key
assumptions in the selected models by adjusting the
discount rates and prices. In this sensitivity analysis of
the models, we found that they resulted in an
immaterial change to the values assigned.
We obtained and evaluated management’s hedge
documentation of new significant hedge relationships
for compliance with AASB 9 Financial Instruments.
We assessed the disclosure in the financial statements
and evaluated the completeness and accuracy thereof,
with particular consideration given to requirements
of AASB 9 Financial Instruments and AASB 7
Financial Instruments: Disclosures.
78
Recoverability of the related party receivables
Refer to note G2
Infigen - the KAM is not applicable as Infigen’s related party receivable is immaterial
Trust - $645.8m
The existence of the related party receivables was a
key audit matter because of the size of the balance in
the Trust’s statement of financial position.
We agreed a sample of transactions relating to the
receivables of Trust to source documentation
and to the corresponding liability in the accounting
records of the relevant related counterparty.
We considered whether there were any factors
indicating the receivables may not be fully recoverable.
Other information
The directors of IEL and the directors of Infigen Energy RE Limited, the Responsible Entity of Trust,
collectively referred to as “the directors”, are responsible for the other information. The other
information comprises the information included in the annual report for the year ended 30 June 2018,
including the Directors' Report, Governance, Investor Information, Glossary and Corporate Directory,
but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial reports, the directors are responsible for assessing the ability of Infigen
and Trust to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate Infigen
or Trust or to cease operations, or have no realistic alternative but to do so.
79
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 25 to 38 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the remuneration report of Infigen Energy Limited for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Marc Upcroft
Partner
Sydney
27 August 2018
80
INFIGEN ENERGY ANNUAL REPORT 2018
GOVERNANCE
Infigen Management’s Approach to ESG
Corporate Governance Statement
Infigen’s purpose is to offer Australian industries
the supply of energy from clean sources of
generation at affordable prices to assist them in
reducing the impact of their activities on the
global climate. Infigen believes that the business
strategy must withstand changes to energy and
climate change policies that often result from
political debate, media and public interest.
Infigen has a goal of “zero harm” to people. It aims
to attract and engage skilled and talented people,
who are collectively motivated to achieve
business success.
In adhering to responsible corporate governance
Infigen has the following goals:
1. Ensuring safety of our people and communities
2. Responsible conduct in communities and the
environment
3. Promoting wellbeing and diversity in the
workplace
4. Contributing to energy security
Corporate Governance Framework
Infigen has adopted policies and procedures to
adhere to the Principles and Recommendations of
the ASX Corporate Governance Council guideline
(Third edition).
Infigen’s policy framework
Board Charters
Code of Conduct
Communications Policy
Community Engagement Policy
Complaints Handling Policy
Conflicts of Interest Policy
Continuous Disclosure Policy
Diversity and Inclusion Policy
Finance Policies
Health, Safety and Environment Policies
Human Resources Policies
Information Security Policy
Risk Management Policy
Privacy Policy
Securities Trading Policy
Whistleblower Policy
81
Infigen’s Corporate Governance Statement (CGS)
sets out the corporate governance framework and
the extent to which Infigen followed the Principles
and Recommendations for the financial year
ended 30 June 2018. The CGS 2018 was approved
by
at
and
www.infigenenergy.com/CGS.
available
Board
the
is
in
except
relation
Infigen complied with
the Principles and
Recommendations within the ASX CGC guideline
during FY18, including disclosure of relevant
information,
to
Recommendation 2.4 regarding maintaining a
majority of independent Directors on the Infigen
Boards. Due to the ongoing Board renewal
program, there were two periods within the
reporting period where there were an equal
number of independent and non-independent
Directors on the Infigen Boards, rather than a
majority of
independent Directors. For the
remainder of the reporting period there was a
majority of independent Directors on the Infigen
Boards (i.e. at no time during the reporting period
were there a majority of non-independent
Directors on the Board).
ESG Risks
risks
Material ESG
Infigen’s
stakeholders are managed within and as a sub-set
of the broader business risks framework (refer to
page 19). ESG risks relate to:
relevant
to
> Operations and safety
> Energy and climate change policy
> Construction and development projects
> Financial climate-related considerations
> People and culture
The Boards delegate authority for day-to-day
business decisions to management, who seek to
manage ESG risks, which, if not considered and
managed, could result in significant reputational,
environmental or social impacts.
The Boards of Infigen recognise the importance of
observing high standards of corporate practice
and business conduct, and have adopted a formal
Code of Conduct, which requires directors and
employees to maintain high ethical standards in all
of their business activities.
One of the objectives of the Code of Conduct is to
ensure that all persons dealing with Infigen,
including employees, security holders, suppliers,
customers, competitors and the community in
general, can be assured that Infigen will conduct
its affairs in accordance with ethical values and
practices.
Infigen follows the guidelines, best practices and
standards outlined in:
> Australian National Wind Farm
Commissioner’s Observations and
Recommendations
> Community Consultative Committee
Guidelines (relevant to New South Wales)
ISO 14001 (Environment) Standards
ISO 31000 (Risk Management) Standards
>
>
> New Zealand Standard 6808:2018,
Acoustics - Wind Farm Noise (relevant to
Victoria)
> OHSAS 18001 (Occupational Health and
Safety Standard)
> Task Force on Climate-related Financial
Disclosures
> The Safe Work Australia’s Code of Practice
> The Clean Energy Council’s Community
Engagement Guidelines
> SA EPA Wind Farm Noise Guidelines
(relevant to South Australia, New South
Wales, Western Australia)
Following these guidelines and standards helps
ensure compliance with the federal and state
legislation which govern the activities to supply
energy.
Ethical and Responsible Decision-Making
equal
bullying,
Infigen’s Code of Conduct sets out processes for
regarding safety,
employees and directors
workplace
employment
opportunity, sexual harassment, confidentiality, IT
security, conflicts of
interest, and securities
trading. Infigen encourages ethical behaviour and,
in accordance with Infigen’s Whistleblower Policy,
provides protection for those who raise genuine
concerns and report any actual or potential
breach of legal requirements, the Code of Conduct
or other Infigen business policies.
Infigen’s Securities Trading Policy regulates the
manner in which directors and employees can
trade in IFN stapled securities and other financial
products relating to the performance of IFN
stapled securities, and to ensure that their
investment activity is conducted in a manner that
is lawful and avoids conflicts of interests between
their personal interests and the interests of Infigen.
Continuous Disclosure
Infigen is committed to providing equal and timely
access to material information concerning Infigen
to all investors. The Continuous Disclosure Policy
is designed to ensure that material price sensitive
information arising from any part of the business
is notified to the ASX in a complete, balanced and
timely manner.
Board Oversight
Infigen’s Boards operate in accordance with the
respective Constitutions and Bye-Laws of IEL,
IERL and IEBL. The Boards have adopted formal
Board Charters which detail the Boards’ functions
and responsibilities. The Charters set out clear
expectations of Directors and the Boards to act
honestly, fairly and diligently in all respects in
accordance with applicable laws, as well as acting
in the best interests of Infigen.
Infigen recognises that independent directors
have an important role in assuring security holders
that the Boards act in the best interests of Infigen
and independently of management.
A Director will be considered independent if they
are not a member of management and if they are
free of any interests or relationships that could
materially
to
constructively challenge and
independently
contribute to the work of the Board.
interfere with
their ability
Due to the appointment and retirement of
independent Directors during FY18, there were
two periods during the year where there were an
independent and non-
equal number of
independent Directors, with a majority of
independent Directors for the remainder of the
reporting period. From
1 July 2017 until the
appointment of Ms Stein and Mr Chellew as
Directors on 21 September 2017, there were three
independent
non-independent
Directors on each of the Infigen Boards. Upon
Ms Harris retiring on 19 February 2018, the Infigen
Boards were again reduced to three independent
and three non-independent Directors, and that
was the position for the remainder of the reporting
period. For the period 21 September 2017 to
19 February 2018,
there was a majority of
independent Directors on each Infigen Board.
three
and
The Board is undertaking a process in FY19 to
identify a suitably qualified and experienced
candidate to be appointed as an independent
Director on each of the Infigen Boards. Upon
successful completion of that process, the Infigen
Boards will have a majority of independent
Directors.
Board Committees
following
The Boards have established the
standing committees: an Audit, Risk & Compliance
Committee (ARCC) for each of IEL, IERL and IEBL
and a Nomination & Remuneration Committee
(NRC). The ARCCs oversee the implementation
and ongoing management of systems of internal
control and risk management at Infigen, ensuring
that management has processes in place to
identify, assess and properly manage risks. In
addition to its nomination, succession and general
human resource responsibilities, the NRC
is
responsible for monitoring and recommending the
level of remuneration for Directors, as well as
providing advice in relation to the level of
for other Key Management
remuneration
Personnel. The Committee Charters detail the
responsibilities of each Committee and how they
exercise their authority.
During FY18 the ARCCs comprised at least three
members, all of whom were Non-Executive
Directors and a majority of whom were
independent Directors. The Chair of the ARCCs
throughout the period was an
independent
Director.
The NRC was comprised of three Non-Executive
Directors throughout the reporting period, a
majority of whom were independent Directors.
82
INFIGEN ENERGY 2018 ANNUAL REPORT
The Chair of the NRC throughout the period was
an independent Director.
The number of ARCC and NRC meetings during
FY18 and the attendance of Committee members
at those meetings is provided in the Directors’
Report (page 21).
Board Renewal and Performance
The Boards, with the assistance of the NRC,
regularly assess the skills required by Directors to
competently discharge the Boards’ obligations to
consider the strategic direction of Infigen, review
potential candidates for appointment to the
Boards, provide confirmation of the Directors to
retire annually by rotation, and have oversight of
the Boards’ regular performance evaluation
process.
to
fill casual vacancies
During FY18 two independent Directors retired
and two further independent Directors were
(and
appointed
subsequently elected as Directors by security
holders at the AGM on 22 November 2017). A new
Board Chairman was also elected. With such
change occurring at Board level during FY18, it
was considered that it would be more productive
to defer the performance evaluation of the Board
to the following year.
Responsibilities of Management
The Boards have reserved certain matters for
approval as set out in the Board Charters. In
addition to delegating specific responsibilities to
Board Committees, the Boards also determine
delegations to management, approve relevant
delegation
business
and
developments for consistency with the Enterprise
Risk Management framework for Infigen. That
framework
International
is consistent with
Standard ISO 31000 and is monitored by the
ARCC.
review
limits
The CEO has been granted authority for those
matters not reserved for the Boards or a Board
Committee. Infigen’s management committees
assist in the exercise of the CEO’s delegated
authority. The CEO and other senior management
report to the Boards at each Board meeting. In
addition to regular reporting from management,
the Boards have access to management as well as
external advisors when required.
Stakeholder engagement
received
from our
Infigen places a high priority on addressing
stakeholders.
feedback
Maintaining an effective and collaborative
relationship with suppliers and contractors,
emergency services, landowners, and the local
community
important to ensuring ethical
business conduct and that people and the
environment are not harmed by Infigen’s activities.
is
identified within
Stakeholders are
management framework taking
stakeholders’
influence on Infigen’s operations and reputation.
the
risk
into account
Infigen and their
interests
in
83
Infigen’s stakeholders
Full-time and part-time employees
Executive and non-executive Directors
Security holders and fund managers
Analysts and brokers
Lenders
Potential investors and financiers
Employees and directors
>
>
Investor community
>
>
>
>
Customers
>
>
> Wholesale electricity market participants
Suppliers
>
>
>
Commercial and industrial customers
Electricity retailers
Service and maintenance contractors
Energy and Financial modelling consultants
Engineering, procurement and construction
contractors
Legal and investment advisors
Transmission & distribution network operators
Emergency services
Federal and state governments
Energy regulators
Energy markets operator
Financial services industry regulators
Planning authorities
Environment & heritage authorities
Local councils
>
>
>
Government and regulators
>
>
>
>
>
>
>
Community & non-government organisations
>
>
>
>
>
>
Landowners & neighbours
Community consultation committees
Traditional owners
Local councils
Social & environmental interest groups
Social media
An extensive program of information is made
available to our stakeholders throughout the year,
including via ASX/market releases, direct mailing,
electronic alerts, briefings, presentations and via
Infigen’s website.
In addition to encouraging stakeholders to utilise
Infigen’s website to access investor information
and disclosures, the annual reports provide
stakeholders with detailed information in respect
of the major achievements, financial results and
the strategic direction of Infigen.
Notice of significant group briefings and details
regarding the various methods to access and
participate in those briefings is circulated broadly.
Records are kept in relation to investor and analyst
briefings.
Infigen acts on feedback because we recognise
that the long-term sustainability of Infigen is
closely linked with the actions of our stakeholders
and their continuing support for our operations
and future developments.
When developing new projects, Infigen informs,
consults and gives the community the opportunity
to have a say in each of Infigen’s development
projects. Infigen has identified key stakeholder
groups with whom we engage to maintain
community support for projects.
Community committees are formalised to discuss
concerns and provide feedback. Establishing
community committees may not be appropriate
for all projects or operating assets, and
is
considered on a community and site basis.
Memberships
During FY18 Infigen held corporate memberships
with the following industry organisations:
> Australasian Investor Relations Association
> Australian Energy Council
> Australian Financial Markets Association
> Australian Information Security Association
Australian Institute of Energy
> Clean Energy Council
> Committee for Economic Development of
Australia
> Energy Users Association of Australia
> The Hawthorn Club
Reporting
Infigen uses the Global Reporting Initiative (GRI)
Standards and the GRI Sector Disclosure (Electric
Utilities) to disclose its governance approach, and
environmental, economic, social and general
outcomes of its operations. The latest report is
available at www.infigenenergy.com/ESG.
The ESG targets are set for each financial year in
the areas of health, safety and environment;
people and culture; and conduct
the
communities. Progress is reported to the Board
periodically in relevant reports.
in
FY18 ESG Highlights
Safety
Achieving our safety target strives for year-on-
year safety performance improvements, and we
remain committed to building the processes and
relationships with our suppliers to support the
achievement of our “zero harm” goal.
Our contractors - service and maintenance
providers at operating sites and EPC contractors
at construction sites - are responsible for safety
and day-to-day management of operations at
those sites. At the Lake Bonney 1 and Alinta Wind
Farms the service and maintenance contractors
achieved 10 years without a Lost Time Injury.
During the year, the Total Recordable Injury
Frequency Rate for the year increased to 13.0,
from 4.7 as at the end of FY17. There were no
recordable
involving direct
Infigen employees. Refer to page 7 for reported
safety performance in FY18.
injuries reported
Throughout FY18,
Infigen actively consulted,
cooperated and coordinated on safety matters
with its contractors through safety workshops,
monthly meetings, and audits. Infigen completed
the transition of maintenance service providers at
Capital and Woodlawn Wind Farms incident-free.
In FY19 the safety focus will be on critical safety
risks and the effectiveness of the mitigation
measures in place to manage those risks. Our
suppliers at the wind farms implement a range of
to
administrative controls and procedures
mitigate these high risks. During FY19 Infigen will
accommodate an ongoing program of audits
designed to monitor contractor compliance and
prepare for the transition from construction to
operations at the Bodangora Wind Farm.
Currandooley Fire
A fire occurred in the vicinity of the Capital and
Woodlawn Wind Farms on 17 January 2017. As a
result of the fire, a number of private properties in
the surrounding areas suffered loss and damage.
Infigen has fully cooperated with independent
investigations into the cause of the fire. There are
two sets of legal proceedings relating to the fire
currently underway, seeking to recover loss and
damage suffered as a result of the fire from
Infigen.
People and culture
At the core of Infigen’s culture are people who
share and embrace our values. Our commitment
to our people and
responsible corporate
governance drives the Diversity Objectives in
accordance with the ASX Corporate Governance
Principles
(ASX
Principles).
Recommendations
and
As at 30 June 2018 Infigen’s workforce included
67 employees and 4 Non-Executive Directors.
Occupational categories as at
30 June
Non-Executive Directors
Executives
Senior Management
Middle Management
Professional
Field
Support
Employees and directors
2018
2017
4
5
7
16
28
4
7
71
4
4
6
19
23
3
6
65
84
Our efforts to achieve gender balance have been
successful with an equal proportion of males and
females across the Middle Management and
Professional occupational categories as at
30 June 2018, representing 64% of employees,
and directors. Infigen employed 18 engineers
(Operations and the Operational Control Centre),
of whom an equal proportion were males and
females. This
level of gender diversity was
achieved through our engagement with the
UNSW to build brand recognition, talent pipelines
in support of graduate recruitment and initiatives
to support professional development, and career
progression.
in
The focus moving forward is on retaining and
developing our emerging leaders and attracting
talent
categories.
under-represented
Recruitment decisions will continue to be based
on merit and external recruiters are required to
present a shortlist that is ethnically and gender
diverse.
Our primary objective of measuring pay equity is
to ensure that pay gaps are not a result of gender.
Infigen regularly measures and analyses gender
pay data to determine the cause and will take
action to close the pay gap if the only possible
conclusion for the pay gap is gender. Management
are confident that gender is not a cause for the
pay gap and will continue
to monitor
remuneration in each category to ensure that we
know when a pay gap occurs and why.
Females
categories:
in the workforce by occupational
INFIGEN ENERGY 2018 ANNUAL REPORT
Infigen’s NRC has approved
for the period
Objectives
30 June 2019. Diversity Objectives and
outcomes in FY18 are as follows.
four Diversity
1 July 2017 to
the
Two-year Diversity Objectives to 30 June 2019 & FY18
outcomes
1. Maintain progress towards achieving an equal
proportion of workplace participation of females
and males by:
> Increasing the total number of females employed
(baseline as at 30 June 2017 is 26 females and 39
males including non-executive directors)
> Increasing the proportion of females in Senior and
Middle Management roles (baseline as at
30 June 2017 is nine females and 20 males
excluding non-executive directors)
> Maintaining an environment where flexible work
arrangements are supported
In FY18:
> Workforce participation of females increased by
2%.
> Voluntary employee turnover was 12% (25%
females and 75% males).
> Number of females in the workforce increased
from 26 to 30, and number of males increased from
39 to 41.
> Two roles were filled with female employees
returning from maternity leave. Of the remaining
five positions two roles were filled by female
employees and three by male employees.
2.
Implement an emerging leader mentor program
to attract, develop and retain emerging leaders.
In FY18, Infigen contributed over $103,000 to enable
scholarships through:
> The Career Trackers indigenous scholarship
program (one place available to be filled in FY19).
> The UNSW Co-op program (three students).
> The Macquarie Graduate School of Management
Women in MBA scholarship (one employee).
> The UNSW Women in Engineering program (two
students).
3.
Implement a lesbian, gay, bisexual, transgender
and intersex (LGBTI) Diversity and Inclusion Plan.
In preparation for release in FY19.
4. Achieve gender pay equality within each
occupational group.
> FY18 is the fourth year that Infigen has measured
pay equity between females and males. As at 30
June 2018 there was pay equity across 72% of the
organisation.
> Pay gaps range from 10-15% in two occupational
categories (favoring females in the first instance
and males in the other). The pay gaps were due to
the diversity of roles and experience, not gender.
When analysing the occupational groups based on
experience the pay gap narrows or disappears.
85
Carbon footprint & energy security
Infigen is a signatory to the We Mean Business
Coalition Commitments and participates in the
Australian Science Based Targets Initiative
Community of Practice. Progress in FY18 is
reported in the table below.
We Mean Business Commitments & FY18 outcomes
1.
>
>
>
Set an internal carbon price.
Infigen incorporates a carbon price in its trading
strategy and budget forecasting.
Infigen communicated policy considerations,
including the proposed National Energy Guarantee,
in investor reports.
To date Infigen has not implemented an ESG-
based criteria in its procurement policy, however, it
promotes sourcing locally where possible.
2. Commit to responsible corporate engagement in
climate policy and communicate on actions and
outcomes via public statements
>
>
>
Infigen advocates for regulation that enables
renewable energy to supply reliable affordable and
clean energy.
Infigen’s Regulatory Affairs Manager was seconded
to support the COAG’s Energy Security Board in
developing the National Energy Guarantee
Infigen reported the relevant greenhouse gas
emissions and its approach to climate change risk
management to the CDP 2017.
3. Adopt and announce a science-based emissions
reduction target via the global organisation Science
Based Targets.
> To ensure the quality of data when determining our
carbon footprint from wind farm construction, Infigen
life-cycle
committed to undertake an emissions
assessment study of the Bodangora Wind Farm.
4. Commit to implement the recommendations of the
Task Force on Climate-related Financial Disclosures.
> The recommendations relating to the governance,
strategy, risk management, and metrics and targets
have been implemented by reporting to the CDP 2017
and in the ESG Report 2017.
5. Committing to source 100% from renewable power by
2020.
> Electricity at site offices and wind farms
is
generated at the wind farm or drawn from the grid.
All electricity that is consumed from the grid is
offset by additional wind farm generation, since
renewable energy generators are not allowed
under the Renewable Energy Target legislation to
earn LGCs for generation that is offsetting energy
consumed at times of low wind resource.
Infigen consumed 100% of its office based energy
consumption from certified renewables sources.
Infigen contributed to the project of installing a
solar panel system for the Wellington Men’s Shed
as part of the Bodangora Community Benefit Fund.
>
>
technology
Our strategy in managing energy security and
climate change risks is informed and underpinned
by
scientific
knowledge
from external consultants, and
engagement with key stakeholders. We recognise
the integration of variable renewable generation in
the physical and financial markets is not without
its challenges. We examined a range of storage
developments,
and dispatchable generation options as part of our
plans for future growth and core business
strategy. We are focussed on working with policy
makers and regulatory authorities to ensure our
strategy responds to changing energy markets.
Infigen reports its electricity consumption and
production, and scope 1 and scope 2 emissions to
the Clean Energy Regulator (CER) under the
National Greenhouse and Energy Reporting Act
2007 (NGER Act). NGER reports are reviewed and
assessed by the CER for compliance with
legislative obligations. FY18 emissions reported to
the CER will be available in the ESG Report on
Infigen’s website at www.infigenenergy.com/ESG.
Conduct in the community
In July 2017 Infigen started construction of the
Bodangora Wind Farm, creating over 40 local jobs
during that stage. The construction activities of
the Bodangora Wind Farm disturbed a small
amount of native vegetation. In order to offset this
impact and as part of the project approval
conditions, Infigen has committed to make a
contribution
Biodiversity
Conservation Trust.
NSW
the
to
In FY18 Infigen awarded the first half of the
$50,000 annual fund to eight projects ranging
from supporting the local touch footy, soccer and
cricket teams, upgrading the local community
centre, supporting St John’s Ambulance, the
Senior Citizens Trust, Historical Society, and
purchasing equipment for the walking trails
maintained by the Mt Arthur Reserve Trust. Direct
investment
the community will be
approximately $3 million through the Community
Benefit Fund and the Community Enhancement
Fund.
into
In total Infigen contributed over $115,000 to 44
local community projects or organisations
sponsoring sports teams, education programs and
fundraising events. This year we had an exciting
opportunity to join a partnership funding the
construction of a new mobile tower in Cadia Valley
(near the community of the proposed Flyers Creek
Wind Farm) to improve access to mobile phone
reception and mobile data to offer a vital service
for agribusinesses and local operators.
Infigen hosted the Run with the Wind open day at
the Woodlawn Wind Farm for the sixth year to
raise funds for local community organisations.
Proceeds from this event went towards the
Tarago Landcare Group, the Tarago Rural Fire
Brigade, and purchasing training equipment for
the Goulburn Mulwaree Junior Fire Brigade. On
other operating wind farms and development
projects
Infigen held over 90 community
consultation meetings and site visits.
to
support community
Infigen continued
advocacy and industry groups with over $99,000
spent in the current financial year. In FY18 the
focus of those groups was on the proposed
National Energy Guarantee and on enhancing
wind
community
developers and operators in regional Australia.
engagement
between
86
INFIGEN ENERGY 2018 ANNUAL REPORT
ADDITIONAL INFORMATION
INVESTOR INFORMATION
Five-year financial and operating summary (Australian business unless otherwise stated)
30 June
Unit
2018
2017
2016
2015
2014
Safety
Total recordable injury frequency rate
Lost time injury frequency rate 1
Profitability
Revenue (net)
Operating costs
Corporate costs and development costs
Underlying EBITDA
Net profit/(loss)
Generation costs3
EBITDA margin
Financial position (as at)
Debt (drawn)4
Cash
Net debt4
Equity
Securities on issue at the end of year
Book gearing
Net assets per security
Net tangible assets per security
EBITDA / (net debt + equity)
Security holder value and cash flow
Earnings per security
Net operating cash flow per security
Assets and operations (as at)
Installed capacity
Under construction
Production
Alinta wind farm
Capital wind farm
Lake Bonney 1 wind farm
Lake Bonney 2 wind farm
Lake Bonney 3 wind farm
Woodlawn wind farm
Compensated
Total production (generated)
13.0
2.6
210.1
(43.2)
(17.7)
149.1
45.7
24.0
66.6
(676.1)
144.9
(531.2)
571.7
954
45.8
0.60
0.48
13.58
4.8
10.5
557
113
316
374
199
405
103
152
0.1
4.7
4.7
196.7
(40.2)
(17.1)
139.3
32.3
23.9
70.8
4.8
-
173.2
(37.4)
(15.7)
120.2
4.5
23.0
69.4
9.7
-
133.8
(34.7)
(15.6)
83.5
(303.6)2
22.6
62.4
14.4
4.8
145.4
(36.1)
(16.7)
92.6
(8.9)
21.1
63.7
(657.3)
251.8
(405.5)
479.4
(747.6)
147.6
(600.0)
280.6
(793.4)
(1,087.2)5
45.2
80.75
(748.2)
(1,006.5)5
260.9
492.15
950
45.5
0.50
0.38
15.8
4.0
12.0
557
113
338
345
181
381
95
143
5
772
68.0
0.36
0.20
13.7
1.1
7.4
557
-
300
360
182
380
92
147
8
768
74.0
0.34
0.17
8.3
(2.3)
4.3
557
-
323
320
192
392
93
125
14
765
66.95
0.645
0.315
6.25
(5.9)5
2.65
557
-
328
372
206
412
99
155
-
1,549
1,487
1,469
1,459
1,572
$ million
$ million
$ million
$ million
$ million
$/MWh
%
$ million
$ million
$ million
$ million
# million
%
$
$
%
cps
cps
MW
MW
GWh
GWh
GWh
GWh
GWh
GWh
GWh
GWh
1 There were no lost time injuries in 2015 and 2016.
2 Includes the loss on sale of the US business.
3 Calculated by dividing generation expenses with production. Note: Infigen previously reported operating expenses ($/MWh),
calculated by dividing operating expenses with production.
4 Excludes capitalised commitment fees. Prior periods have been restated for consistency purposes.
5 Includes the US business.
87
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 as an ASX listed entity
with IEL and IET, a takeover of IEBL will be regulated under Australian takeover law. However, Section 102 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 that 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.
An alternative mechanism for the compulsory acquisition of shares arises in Section 103 of the Bermuda
Companies Act. Under that section, the holder of not less than 95% of the shares may compulsorily acquire
the remainder from the remaining shareholders. The offeror must give notice to all remaining shareholders of
its intention to acquire all, and not some, of the shares on the terms set out in the notice. Dissenting
shareholders can only apply to the court within one month of the notice for a valuation of their shares. Within
one month of the valuation, the offeror may either acquire the shares at the valuation price fixed by the court
or cancel the transaction.
Number of Stapled Securities and Holders
IFN stapled securities are listed and traded on the Australian Securities Exchange.
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 cease to be stapled to the securities in the other entities or one of these entities issues
securities that are not then stapled to the relevant securities in the other entities.
The following additional investor information is current as at 31 July 2018.
The total number of IFN stapled securities on issue is 954,060,175 and the number of holders of these stapled
securities is 18,234.
Substantial Security Holders
The substantial security holders who have notified Infigen in accordance with section 671B of the Corporations
Act 2001 are set out below.
Substantial security holder
Date of initial notice
Date of most recent notice
Number of IFN stapled
securities advised in most
recent notice
The Childrens Investment Fund 1
Brookfield Asset Management
Inc
Morgan Stanley
26 Sep 2008
11 Apr 2018
3 Aug 2017
1 Jul 2015
11 Apr 2018
14 Jun 2018
250,453,481
86,424,171
56,639,727
1 Security holder acquired additional securities as part of Infigen’s equity capital raising in April 2017 but the number acquired was
such that the security holder did not need to notify Infigen of a change in the percentage in their substantial holding.
88
INFIGEN ENERGY 2018 ANNUAL REPORT
Voting Rights
It is generally expected that General Meetings of shareholders of IEL, shareholders of IEBL and unitholders of
IET will be held concurrently where proposed resolutions relate to all three 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 that are restricted or subject to voluntary escrow.
On-Market Security Buy-Back
There is no current on-market buy-back of IFN stapled securities.
Distribution of IFN Stapled Securities as at 31 July 2018
The distribution of IFN stapled securities amongst IFN security holders is set out below.
Category
100,001 and over
10,001-100,000
5,001-10,000
1,001-5,000
1-1,000
Total
Securities
877,567,442
44,334,538
10,378,016
18,198,247
3,581,932
954,060,175
Security holders
199
1,624
1,413
7,166
7,832
18,234
The number of security holders holding less than a marketable parcel of IFN stapled securities as at 31 July
2018 was 6,548.
89
Top Infigen Security Holders
The largest Infigen security holders as at 31 July 2018 are set out below.
Rank
Security holder
IFN stapled
securities held
Number
Percentage
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
20
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
BIF III LOGAN AGGREGATOR LP
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - GSCO ECA
BNP PARIBAS NOMINEES PTY LTD - AGENCY LENDER DRP A/C
BNP PARIBAS NOMS PTY LTD
BRISPOT NOMINEES PTY LTD
CS FOURTH NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
EASYTONE COMMUNICATIONS PTY LTD
AMP LIFE LIMITED
CITICORP NOMINEES PTY LIMITED - COLONIAL FIRST STATE INV A/C
MR TREVOR YUEN
ECAPITAL NOMINEES PTY LIMITED
TAPPET HOLDINGS PTY LTD
CAMBROSE PTY LIMITED
BRYN INVESTMENT CO PTY LIMITED
OWEN INVESTMENT CO PTY LIMITED
HUW INVESTMENT CO PTY LIMITED
409,513,432
96,758,507
94,851,753
86,424,171
34,842,595
31,809,001
10,178,921
9,592,946
5,874,252
4,904,757
4,607,894
4,021,000
3,944,006
3,327,576
3,291,467
2,822,963
2,387,550
2,336,521
2,000,000
1,735,743
1,735,743
1,735,743
42.92
10.14
9.94
9.06
3.65
3.33
1.07
1.01
0.62
0.51
0.48
0.42
0.41
0.35
0.34
0.30
0.25
0.24
0.21
0.18
0.18
0.18
Total top security holders
Total of other security holders
Total IFN stapled securities
818,696,541
135,363,634
954,060,175
85.81
14.19
100.00
90
INFIGEN ENERGY 2018 ANNUAL REPORT
Key ASX Announcements
The key announcements lodged with the ASX and released to the market throughout FY18 are listed below.
2017
31 July
24 August
8 September
21 September
26 September
3 October
9 October
26 October
31 October
9 November
9 November
22 November
5 December
8 December
29 December
2018
9 January
31 January
9 February
19 February
19 February
9 March
21 March
9 April
9 April
10 April
16 April
18 April
30 April
9 May
12 June
Fourth Quarter FY17 Production and Revenue
FY17 Full Year Results
Monthly Production - August 2017
Infigen Appoints New Independent Directors
Annual Report 2017
NZ Rapid Insights Conference Presentation
Monthly Production - September 2017
Appendix 4G and FY17 Corporate Governance Statement
First Quarter FY18 Production and Revenue
Australia Rapid Insights Conference Presentation
Monthly Production - October 2017
Presentations and Results of the 2017 AGM
ABC: Adelaide Brighton Strengthens Energy Supply Portfolio
Monthly Production - November 2017
Board Succession
Monthly Production - December 2017
Second Quarter FY18 Production and Revenue
Monthly Production - January 2018
FY18 Interim Results and Early Refinancing
Non-Executive Director Retirement
Monthly Production - February 2018
Resolutions Requisitioned by Security Holders
Execution of A$605M Syndicated Facility Agreement
Withdrawal of EGM Requisitions by Security Holders
Monthly Production - March 2018
Market Update - New Substantial Holder
Financial Close on A$605M Syndicated Facilities Achieved
Third Quarter FY18 Production and Revenue
Monthly Production - April 2018
Monthly Production - May 2018
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.
91
GLOSSARY
AEMO
AFSL
AGM
ARCC
ASIC
ASX
BESS
BOARD or
BOARDS
BPS
Australian Energy Market Operator; responsible for operating the NEM and the
Wholesale Electricity Market (WA).
Australian Financial Services Licence
Annual General Meeting
Audit, Risk & Compliance Committees of IEL, IERL and IEBL
Australian Securities & Investments Commission
Australian Securities Exchange Limited (ABN 98 008 624 691) or Australian Securities
Exchange as the context requires.
Battery Energy Storage System
Unless otherwise stated, the Boards of IEL, IERL and IEBL.
Basis points
CAPACITY
The maximum power that a wind turbine generator was designed to produce.
CAPACITY
FACTOR
CGS
C&I
DEVELOPMENT
PIPELINE
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 period.
Corporate Governance Statement
Commercial & Industrial
Infigen’s prospective renewable energy projects that are in various stages of
development prior to commencing construction. Stages of development include:
landowner negotiations; wind and solar monitoring; project feasibility and investment
evaluation; community consultation; cultural heritage assessment; environmental
assessment; and design, supplier and connection negotiations.
EARNINGS AT RISK
ANALYSIS
Measuring potential changes in revenue in a given period having regard to relevant
factors and varying degrees of confidence.
EBITDA
ESG
Earnings before interest, tax, depreciation and amortisation
Environmental, social and governance
FY or FINANCIAL
YEAR
A period of 12 months starting on 1 July and ending on 30 June in the next calendar
year.
GRID
GW
GWh
HSE
IEBL
IEL
IERL
IET
IFN
INFIGEN
KMP
KPI
The network of power lines and associated equipment required to deliver electricity
from generators to consumers.
Gigawatt. One billion watts of electricity.
Gigawatt hour. One billion watt hours of electricity.
Health, Safety & Environment
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 for the trading of listed IFN stapled securities on the ASX.
Infigen Energy, comprising IEL, IEBL, IET and their respective subsidiary entities from
time to time.
Key Management Personnel
Key Performance Indicator
92
INFIGEN ENERGY 2018 ANNUAL REPORT
LGC
LSL
LTI
Large-scale Generation Certificate. The certificates are created by large-scale
renewable energy generators and each certificate represents 1 MWh of generation from
renewable resources.
Long service leave
Long term incentive
MARGINAL LOSS
As electricity flows through the transmission and distribution networks, energy is lost
due to electrical priority resistance and the heating of conductors. Revenue is subject
to marginal loss factors that are fixed annually by AEMO to account for network losses.
Multi-Channel
Route to Market
Strategy
Infigen’s sales diversification strategy.
MW
MWh
NEM
NRC
O&M
OCC
OPERATING
EBITDA
Megawatt. One million watts of electricity.
Megawatt hour. One million watt hours of electricity.
National Electricity Market; the interconnected power system of five regional market
jurisdictions - Queensland, New South Wales (including the Australian Capital
Territory), Victoria, South Australia, and Tasmania.
Nomination & Remuneration Committee of IEL.
Operations and maintenance
Operations Control Centre. A centrally located business function within Infigen that
monitors and directs the operations of Infigen’s wind and solar farms.
EBITDA, excluding corporate costs, non-operating costs and non-operating income.
PPA
Power Purchase Agreement
QUANTITATIVE
VOLUMETRIC
HEDGING LIMITS
Maximum volume based trading limits, determined having regard to known historical
generation profiles and a predictable seasonality of operating performance from the
operating assets.
RET
Renewable Energy Target
RUN OF PLANT
Type of contract for the sale of electricity whereby the offtaker (customer) buys 100%
of the amount of electricity generated by the plant as generated in each trading
interval.
STI
Short term incentive
SPOT PRICE
Wholesale electricity market price
TSR
UNDERLYING
EBITDA
Total Shareholder Return; measures the change in value of a security plus cash
distributions notionally reinvested in that security.
Operating EBITDA, including corporate and development costs.
93
CORPORATE DIRECTORY
Infigen Energy
Level 17, 56 Pitt Street
Sydney NSW 2000
Australia
+61 2 8031 9900
www.infigenenergy.com
Directors
Len Gill (Non-Executive Chairman)
Mark Chellew (Non-Executive Director)
Emma Stein (Non-Executive Director)
Philip Green (Non-Executive Director)
Ross Rolfe AO (Chief Executive Officer / Managing
Director)
Sylvia Wiggins (Executive Director - Finance &
Commercial)
Company Secretary
David Richardson
Annual General Meeting
Infigen Energy’s 2018 Annual General Meeting will be
held on 16 November 2018
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 and listed on the ASX under the code “IFN”.
They cannot be traded separately and can only be
traded as stapled securities.
Responsible Entity for Infigen Energy Trust
Infigen Energy RE Limited
Level 17, 56 Pitt Street
Sydney NSW 2000
Australia
+61 2 8031 9900
Auditor
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
Barangaroo NSW 2000
Australia
Registry
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Australia
+61 1800 226 671 (toll free within Australia)
registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
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). To the
maximum extent permitted by law, Infigen and its
respective related entities, Directors, officers and
Infigen Entities) do not
employees (collectively
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, warranty or other assurance is
made or given by or on behalf of the Infigen Entities
that any projection,
forward-looking
statement or estimate contained in this publication
should or will be achieved. None of the Infigen Entities
or any member of the Infigen Group guarantees the
performance of Infigen, the repayment of capital or a
particular rate of return on Infigen stapled securities.
forecast,
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.
94
I
N
F
I
G
E
N
E
N
E
R
G
Y
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
8
Infigen Energy Limited
ACN 105 051 616
Infigen Energy Trust
ARSN 116 244 118
Registered office
Level 17, 56 Pitt Street
Sydney NSW 2000
Australia
+61 2 8031 9900
www.infigenenergy.com