Annual
Report
2019.
Infigen Energy
Image:
Capital Wind Farm, NSW
Front page:
Run With The Wind,
Woodlawn Wind Farm, NSW
Contents.
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About Infigen Energy
2019 Highlights
Safety
Chairman & Managing Director’s Report
Directors’ Report
Operating & Financial Review
Sustainability Highlights
Corporate Structure
Directors
Executive Directors & Management Team
Remuneration Report
Other Disclosures
Auditor’s Independence Declaration
Financial Report
Directors’ Declaration
Auditor’s Report
Additional Information
Investor Information
Glossary
Corporate Directory
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
2
Our Strategy.
We add value by firming.
We generate and source
renewable energy.
We provide customers with
reliable clean energy.
3
About Infigen Energy.
Infigen is leading Australia’s transition to a clean energy future. Infigen generates
and sources renewable energy, increases the value of intermittent renewables
by firming, and provides customers with clean, reliable and competitively priced
energy solutions.
Infigen generates renewable energy from its owned wind farms in New South
Wales (NSW), South Australia (SA) and Western Australia (WA). Infigen also
sources renewable energy from third party renewable projects under its ‘Capital
Lite’ strategy. Infigen increases the value of intermittent renewables by firming
them from the Smithfield Open Cycle Gas Turbine facility in Western Sydney,
NSW, and its 25MW/52MWh Battery at Lake Bonney, SA, where commercial
operations are expected to commence in H1FY20.
Infigen’s energy retailing licences are held in the National Electricity Market
(NEM) regions of Queensland, New South Wales (including the Australian
Capital Territory), Victoria and South Australia.
Infigen is a proud and active supporter of the communities in which it operates.
For further information, please visit: www.infigenenergy.com
Image:
Capital Wind Farm, NSW
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We are leading
Australia’s transition to
a clean energy future.
Asset
Owned Renewable Energy Assets
1
2
3
4
5
6
Alinta Wind Farm
Lake Bonney 1 Wind Farm
Lake Bonney 2 Wind Farm
Lake Bonney 3 Wind Farm
Capital Wind Farm
Capital East Solar Farm
7 Woodlawn Wind Farm
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Bodangora Wind Farm
Contracted Renewable Energy Assets
9
10
Kiata Wind Farm
Cherry Tree Wind Farm
Total Renewable Energy Assets
Firming Assets
11
12
Smithfield OCGT
SA Battery
Nameplate
capacity
(MW)
89.1
80.5
159.0
39.0
140.7
0.1
48.3
113.2
31.1
57.6
759.0
State
WA
SA
SA
SA
NSW
NSW
NSW
NSW
VIC
VIC
Commercial
Operation date
Jul 2006
Mar 2005
Sept 2008
Jul 2010
Jan 2010
Sept 2013
Oct 2011
Feb 2019
Contract start date
Sept 2018
Expected H1FY21
Acquisition /
Commercial
Operation date
123.0
NSW
Acquired May 2019
25MW/52MWh
SA
Expected H1FY20
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Image:
Capital Wind Farm, NSW
Clean power solutions for
Commercial and Industrial customers.
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8
5
6
7
11
9
10
2
12
4
3
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2019
Highlights.
Renewable
Energy Generation
increased 20%
1,775
Gigawatt Hours
Underlying EBITDA
increased 11%
$165.3
Million
Net Operating Cash
Flow increased 44%
NPAT
decreased 10%
$144.3
Million
$40.9
Million
Net Assets per
Security increased 2%
Reintroduced
distributions
¢61
Cents
¢1.0
Cent per security
for half year
7
Infigen Energy 2019 Annual Report Increased Renewable Energy Generation by 20%
Completed
Bodangora Wind Farm
adding 113MW of
new owned capacity
in NSW.
Increased electricity
volumes sold to C&I
customers by 19%
and invested in
enhanced customer
service capabilities.
Agreed terms for
the Capital Lite
development of
Cherry Tree Wind
Farm, providing
58MW of contracted
capacity in VIC
for 15 years post
completion.
Established Physical Firming Portfolio
Acquired Smithfield
OCGT facility for
$74m, a 123MW
fast-start gas fired
generator in NSW.
Constructed
the SA Battery,
which will provide
25MW/52MWh of
fast response firming
in SA.
Smithfield positions
Infigen to source
an additional 300-
400MW of renewable
energy capacity.
Delivered Capital Management Strategy
Reintroduced
distributions at
1 cent per security
per half year, paid
from free cash flow.
Investing in accretive
growth projects
that are expected to
exceed our 12% post
tax levered equity
return target.
Repaid $41.2m of
gross debt in line with
amortisation schedule.
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Safety.
SAFETY
Infigen’s first priority is the safety of the people and the communities in which it operates. Infigen is 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
Twelve-months ended
Lost Time Injury (LTI)
Lost Time Injury Frequency Rate (LTIFR)
Total Recordable Injury Frequency Rate (TRIFR)
2019
-
-
8.7
2018
1
2.6
13.0
Change
(1)
(2.6)
(4.3)
Infigen’s safety performance is measured on a rolling 12-month basis, in accordance with standards of Safe
Work Australia.
There were no recorded LTIs during the twelve-months ended 30 June 2019.
Principal contractors are responsible for the management of daily wind farm operations (including safety of
their workers), however Infigen includes contract workers in its reportable safety statistics.
There were no recordable injuries reported involving Infigen employees.
The Lake Bonney 1 and Alinta Wind Farms are 11+years LTI free.
Infigen actively engages in the management of contractor safety, using methods including workshops,
monthly meetings, and audits.
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Infigen Energy 2019 Annual Report
Our Purpose.
We are leading Australia’s transition to a clean energy future.
Our Strategy.
• Generate and source renewable energy.
• Add value via fast-start firming assets.
• Supply reliable clean energy to
Commercial and Industrial customers.
• Create security holder value by
increasing quality of earnings.
Our Sustainability Goals.
• Affordable clean energy.
• High performance organisational culture
for delivery of the business strategy.
• Strong community relations.
Our Progress to date.
• Bodangora WF and Kiata WF deliver growth in
Renewable Energy Generation.
• Smithfield OCGT and SA Battery deliver firming capacity.
• Growing electricity contracting with C&I customers.
• Reintroduced distributions at 1cps per half year.
Our Plan for Growth.
• Source 300-400MW of new
renewable energy capacity in NSW.
• Deliver Cherry Tree WF for
Capital Lite renewable growth.
• Deliver additional firming capacity
and renewable growth in SA.
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Infigen Energy 2019 Annual Report
Chairman
and Managing
Director's Report.
11
Image:
Bodangora Wind Farm, NSW
CHAIRMAN & MANAGING
DIRECTOR’S REPORT
Dear Security Holder,
We are pleased to present Infigen’s results for
Financial Year 2019 (FY19) - a transformative year
in which we have made significant progress in
positioning Infigen to manage the challenges and
capture the opportunities that arise in the evolving
energy market.
At Infigen, safety will always remain our highest
priority. In FY19, Infigen had no lost time injuries
(LTIs) and the Lake Bonney 1 Wind Farm and
Alinta Wind Farm achieved 11 years LTI free. This
result is a testament to the hard work and
diligence of our team. However, we are not
complacent. The Board and management
continue to look for opportunities and processes
to improve our systems and culture in vigilant
pursuit of zero harm. Central to our philosophy is
the application of a hierarchy of defences – with
the first line of defence in our strategy to provide
safe working conditions being to engineer or
design-out safety hazards. For example, working
at heights is one of our recognised workplace
health and safety risks. As a result, in FY19 Infigen,
in conjunction with Vestas, installed lifts at the
Lake Bonney 1 Wind Farm to improve the safety
of our workplace.
Infigen is leading Australia’s transition to a clean
energy future. Infigen’s strategy is to generate and
source low cost renewable energy, to add value to
it by firming, and to provide customers with
reliable, clean and competitively priced electricity.
Infigen believes this is the future of Australia’s
energy ecosystem and that our business model
will result in superior outcomes for customers,
communities, the environment, and our security
holders.
In FY19
milestones in the delivery of this strategy.
Infigen reached several significant
We generate and source renewable energy
In FY19 Infigen increased Renewable Energy
Generation by 20% reaching 1,775 GWh. This was
achieved by delivering several strategic projects
including:
• The construction and completion of the 113 MW
Bodangora Wind Farm in New South Wales
(NSW);
• The execution of our first Capital Lite Power
Purchase Agreement
sourcing
renewable energy from the 31 MW Kiata Wind
Farm in Victoria (VIC) for a period of five years
allowing Infigen to sell to customers without
developing the asset on our own balance
sheet; and
(PPA),
• The sale of the Cherry Tree Wind Farm
development to John Laing for $6.5 million in
cash and concurrent entry into a PPA to
acquire 100% of the renewable energy and
green products produced for 15 years. Infigen
is managing the construction process and will
farm once complete.
manage the wind
Practical completion of the wind farm is
expected in 2020 and the PPA will deliver
more renewable energy for sale to our
customers.
We add value to renewable energy by firming
is
Renewable generation
intermittent, and
production does not always correlate with
consumers demand. As a consequence, prices for
firm delivery of electricity are substantially higher
than prices for run of plant renewable PPAs.
Infigen’s strategy is to build or acquire a portfolio
of physical firming assets which, together with our
increasing renewable generation, allow us to sell
more electricity under firm contracts into these
higher priced markets. This is designed to improve
the quality and quantity of our earnings. In FY19
Infigen delivered two important projects that can
transform our ability to firm renewable generation:
• construction of the SA Battery, a 25 MW/52
MWh facility co-located with our Lake Bonney
Wind Farms.
•
the acquisition of the Smithfield OCGT in
Western Sydney, a 123 MW flexible, fast-start
generator that enables Infigen to firm its New
South Wales generation.
These physical firming assets are transformative
to our business as they allow us to contract
directly with customers to meet their energy
needs.
We provide customers with reliable,
competitively priced clean energy
Central to our purpose is the supply of clean,
reliable energy to our customers. Accordingly, we
have been pleased to continue to expand our
volume of energy (and LGCs) under contract to a
growing base of commercial and
industrial
customers in our key markets.
In FY19, Infigen increased its contracting with C&I
Customers to 768 MWh. Infigen also continued to
invest in its customer service capability. A key
achievement
in this regard has been the
implementation of an advanced customer billing
integrated multi-site
system
functionality. Continuing to grow the volumes we
sell to our C&I Customer base remains a priority
for FY20.
facilitating
12
Financial Results of our Strategy
financial
results. During
The success of this strategy is reflected in Infigen’s
FY19
the period,
Renewable Energy Generation increased 20%,
reflecting the addition of the Bodangora Wind
Farm and
the Kiata Wind Farm PPA.
Consequently, Net Revenue increased 9% to $229
million. Business Operating Costs were slightly
higher due to an increased investment in and
commitment to customer service capability,
supporting our growth in C&I Customers. In total,
Infigen delivered underlying EBITDA of $165
million, 11% higher than FY18. This result positioned
Infigen to reintroduce distributions at 1 cent per
security per half-year, and to repay $41 million of
gross debt in accordance with Infigen’s debt
amortisation schedule.
Economic and Policy Considerations in the
National Electricity Market
for
FY19 was another year of ongoing policy
confusion and uncertainty in Australia’s National
Electricity Market (NEM). Despite ratifying the
Paris Agreement, and reaching almost unanimous
the National Energy
industry support
Guarantee, the Australian Government is yet to
adopt policy settings that guide the market to
deliver both our national emissions targets and
reliable supplies of energy in the most efficient
manner. In our view this is negatively impacting
investor sentiment and market confidence across
the sector.
to
incentivise
investment
In the absence of any future pricing signals
designed
low
emissions generation, the long-term prices of
Large-Scale Generation Certificates (LGCs) - an
instrument originating from the 2003 Renewable
Energy Target – have declined over the course of
the reporting period.
in
Infigen, however, has a significant proportion of its
LGCs under medium term supply contracts to
obligated parties – hence reducing the impact of
declining prices on its revenues in the near term.
To offset the decline in revenues from the sale of
LGCs in the longer term, Infigen’s strategy relies
upon expanding the volume of renewable energy
sold and capturing the added value available in the
market for the supply of clean, reliable, “firm”
energy. This strategy is compatible with the
requirements of maintaining a stable grid as it
transforms away from large scale, base load
thermal coal plant. Renewable energy is now the
lowest cost source of new generation, with a key
challenge being how to best integrate this into the
grid.
Infigen’s business strategy is based on market
fundamentals. Infigen believes that tomorrow’s
energy leaders will firm low cost renewables and
that electrification of transport, heating, and
industrial processes will
lead to renewables
supplying a growing share of Australia’s total
energy consumption.
Apart from the importance of national policy
settings that are durable and sustainable, it is
equally critical that the market is operated in
13
accordance with clear and transparent rules.
These rules need to take account of existing
investments as well as incentivise new investment
in capital equipment across the system to
maintain stability and reliability of supply at the
lowest cost to consumers in the short and long
is
term. The magnitude of this challenge
considerable. Over the course of the last twelve
months we have seen AEMO as market operator,
the AEMC as rule maker, and the network service
providers grapple with
the challenges of
designing and implementing rules to guide the
smooth introduction of significant volumes of
new renewable generation spatially dispersed
across a grid which was designed to support
large scale base load thermal generators – some
of which have retired and the balance of which is
destined to progressively exit the system.
to market
rules and
requirements
the
Recent changes
introduction of additional
to
evaluate the impact of installing new capacity into
the network to maintain the integrity of the grid
has dramatically slowed the pace of new entrant
plant. While to date, the impact on Infigen has
been limited, we are aware that for other projects
the impact of these changes has been material -
severely impacting the economics of projects.
reach
inexorably
Infigen continues to advocate for an orderly
transition to a clean energy future. As coal fired
their planned
generators
retirement age and, prior to that, suffer from
reduced reliability, replacement generation will be
needed. Policy coherence will be a key factor in
ensuring the replacement of generation delivers
reliable, affordable and lower emissions electricity
for all Australians. Any viable, long term national
policy should, however, recognise the value that is
associated with both lower emissions as well as
higher reliability. So too must a coherent energy
policy be guided in its implementation by clear,
transparent market rules that can be readily
implemented by market participants. National
policy settings that reflect these principles should
enable the energy sector to not only deliver
reliable, affordable energy to the market, but also
offer the most efficient overall solution to the
national challenge of meeting our emissions
targets under the Paris Agreement.
Continuing to Prioritise Sustainability
never
should
undervalue
In FY19 the Hayne Royal Commission into the
financial services sector was a reminder that
businesses
the
importance of corporate culture. As Infigen’s
business transitions, we have undertaken several
initiatives to ensure that
Infigen’s corporate
culture is conducive to the long-term success of
our business strategy. These initiatives have
sought to engage all Infigen’s employees in the
process of refining our purpose, defining our
values and shaping our behaviours.
Infigen
recognises that the quality and strength of our
corporate culture will be the key determinant of
the sustained success of our business plan.
As a leader in the clean energy transition, Infigen,
in FY19, resolved to target carbon neutrality for
the entire business by FY25. Infigen already
sources all its electricity usage from renewable
sources – so Infigen is already meeting the targets
of members of RE100. Infigen is seeking to do
more and offset 100% of its scope 1 and scope 2
emissions by FY25.
Board Renewal
In FY19 we welcomed Karen Smith-Pomeroy to
the Boards, thereby completing the process of
Board renewal that commenced in mid–2017.
Karen brings a wealth of deep energy and financial
experience to complement the existing skills of
our Boards and brings to four the number of
independent, non-executive directors of our
Boards, ensuring a clear majority consistent with
ASX corporate governance best practice. The
Board now has not only access to deep
knowledge and experience in the Australian
energy market (from both producer and customer
perspectives) but also finance and corporate
governance and is well placed to guide the
company through its transition.
FY19 was a year of significant achievement for
Infigen and the business is now well positioned to
meet the challenges of Australia’s evolving energy
market. We remain focussed on the fundamentals
of our business within an evolving Australian
energy market.
We note that pressure continues to build for
delivery of more coherent national and state
policy settings. Achievement of these will provide
more favourable conditions for investor sentiment
for Infigen and across the sector.
Infigen’s strategic achievements have been made
possible by the support of our communities and
the commitment and dedication of our employees.
We thank security holders for their ongoing
support and look forward to working with all our
stakeholders as we continue to lead Australia’s
transition to a clean energy future.
Sincerely,
Len Gill
Chairman
Ross Rolfe AO
Chief Executive Officer/
Managing Director
14
Chairman’s Addendum
in
FY19 was marked by growth in our renewable
portfolio, growth
to customers,
transformative growth in our firming capacity and
delivery of increased earnings. The latter has
allowed
and
continued
reintroduction of a distribution.
reduction
sales
debt
On behalf of security holders, I would like to
acknowledge the leadership of our CEO Ross
Rolfe, the efforts of his leadership team and the
dedication of all the Infigen team in delivering
these achievements.
Len Gill
Chairman
15
DIRECTORS’ 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 their outcome.
1. Strategy and Growth
Infigen is leading Australia’s transition to a clean
energy future. Infigen generates and sources
renewable energy, adds value to renewables
in so doing, provides
through firming, and,
customers with reliable and competitively priced
clean energy.
This strategy is enabled by Infigen’s recent
investments in physical firming capacity, namely
the Smithfield OCGT located in Western Sydney,
and the SA Battery, located near Millicent, South
Australia (SA).
As Infigen has transitioned to an active energy
market participant, the business has successfully
grown its sales volumes to C&I Customers. This
has been facilitated by the growth of Infigen’s
energy market and customer service capabilities.
Increasing Contracting to Improve Quality of
Earnings
Infigen’s
increasing
The success of this business transition is evident
levels of electricity
from
contracting. Infigen is currently 75% contracted
for its expected Renewable Energy Generation in
FY20, with additional C&I Customer contracting
opportunities being pursued in NSW, SA and VIC.
its expanding
Infigen anticipates that its strategy will allow up to
75% of
renewable energy
production to be sold under firm contracts. This
additional contracting is expected to be with new
to meet
C&I Customers.
customers’ needs is enabled by the acquisition of
physical firming capacity within the
Infigen
portfolio, assets which allow Infigen to add value
by managing the risk associated with the delivery
of fixed volumes and prices from intermittent
renewable energy sources.
Infigen’s ability
The addition of physical firming capacity to the
portfolio also enables Infigen to grow the volume
of “firmed” clean energy offered to the market.
The acquisition of the Smithfield OCGT will, for
example, allow Infigen to firm the supply of energy
from not only the existing portfolio in NSW but
also enable Infigen to source a further 300-400
MW of additional renewable energy capacity in
NSW. Infigen expects to obtain access to this
additional supply under its “Capital Lite” model.
Under
low cost
intermittent renewable energy under run of plant
PPAs with third party generators. Infigen then
uses its flexible, fast start physical firming assets
to manage intermittency, enabling Infigen to sell
higher value reliable and competitively priced
Infigen buys
this model,
clean energy to customers. Accordingly, Infigen
expects that its strategy will not only allow the
volume of energy it sells to increase, but also allow
higher levels of contracting for that generation.
Infigen sells electricity through three channels to
market:
(1) C&I Customers, where Infigen sells renewable
energy in firm volumes at a fixed price to
customers contracting for reliable clean
energy;
(2) PPAs, where Infigen sells renewable energy
on a run of plant basis at a fixed price; and
(3) Merchant revenues, where Infigen sells the
energy into spot electricity markets. This
Infigen’s
energy can be produced from
its physical
renewable energy assets or
firming assets. This channel includes ancillary
revenues, costs related to energy market
participation and
is presented net of
merchant electricity purchases.
C&I sales are medium tenor contracts where
specific customers contract their electricity load
with Infigen at the agreed contract price. Infigen’s
sales through this channel therefore have limited
price and volume risk. However, Infigen must
manage the cost of firming, a factor reflected in
Infigen’s Merchant channel. C&I contracts may
have inflation (CPI) escalators.
Note: Realised C&I prices and percentage of volume will vary
based on several factors including peak vs off peak usage,
wind conditions, demand response and new C&I Customer
contracting. C&I contracts may have inflation linked pricing.
16
INFIGEN ENERGY 2019 ANNUAL REPORT
PPA sales occur under agreements where Infigen
receives a fixed price for intermittent renewable
energy production. Infigen’s sales through this
channel
risk
(depending on wind conditions) but not price and
generally no delivery risk. PPA sales contracts
generally have CPI escalators.
production
therefore
have
Note: Realised PPA prices and percentage of volume will vary
based on generation mix due to wind conditions. PPAs
generally have inflation linked pricing where Infigen assumes
2% inflation pa.
Merchant revenue includes spot electricity sales
and purchases, with their respective Dispatch
Weighted and Load Weighted Average prices,
purchases of third-party renewable volumes via
our Capital Lite projects, hedge costs and benefits,
and net revenues relating to Infigen’s firming
assets, the SA Battery and Smithfield OCGT. These
diversified sources of revenue enable Infigen to
sell
to C&I
Customers contracting for firm load. In FY20,
Infigen’s Merchant revenue will be influenced by
the inclusion of Smithfield OCGT and the SA
Battery (once fully commissioned), partly offset
by higher firming costs due to increase C&I
contracting.
renewable energy
intermittent
Infigen’s increased volume and contracted sales
will be dependent upon sourcing additional
renewable generation. This is expected to be
achieved through Infigen’s Capital Lite strategy.
To this end, Infigen is actively engaged with a
number of developers to enter into PPAs to supply
additional energy to Infigen. The time of delivery
of such electricity will be dependent upon entry
into the PPAs and the timeline for development
and construction of any associated greenfields
renewable project. The price at which Infigen can
contract new C&I Customers will be dependent
upon a number of factors including the wholesale
market price at the time of the new contract,
contract tenor, contract load and shape, the
region in which the customer operates and other
bespoke contract terms which affect risk and
therefore price.
17
in 2003. The value of LGCs
In addition to its electricity sales, Infigen generates
revenue from the sale of LGCs. LGCs originated
with Australia’s Renewable Energy Target (“RET”)
established
is
determined by market-based trading, which takes
into account their supply, demand and a legislated
surrender obligation each calendar year to 2030.
As more utility scale renewable generation enters
the market, supply of LGCs increase, and LGC
prices are likely to decline accordingly. The impact
of declining LGC prices on Infigen’s future revenue
is moderated by our contracted position over the
short to medium term. In the longer run, Infigen’s
strategy is designed to offset declining LGC
revenues by increased sales of firm, higher value,
energy to our growing customer base.
Infigen’s Strategy
Results
is Delivering Financial
The success of Infigen’s strategy is evident in the
FY19 results. Underlying EBITDA was $165 million,
an increase of 11% over FY18. Of Infigen’s $229
million of Net Revenue, 79% came
from
contracted revenue sources of sales to C&I
Customers, PPAs and LGCs. This outcome
supported Infigen’s reintroduction of distributions
at 1 cent per security per half-year, which is
expected to be sustainable throughout the cycle.
Financial Position
long-term growth
Infigen’s financial position is able to support the
business’
strategy. The
Corporate Facility has the flexibility and terms
appropriate for Infigen during its transition to an
active energy market participant. During FY19,
Infigen repaid $34 million of the principal of the
Corporate Facility consistent with the scheduled
amortisation. As at 30 June 2019 $484 million was
outstanding under the Corporate Facility with $119
million of amortisation scheduled prior to maturity
in April 2023. In addition, Infigen repaid $7 million
of Bodangora Facility borrowings, a facility that is
scheduled to be amortised in full by its maturity in
2034.
Capital Lite Development and Acquisition
Infigen’s development pipeline consists of several
high-quality projects with opportunities to create
security holder value. These projects include:
(1) Flyers Creek Wind Farm: a c140 MW project
located 20km south of Orange, NSW, with the
potential
approximately
generate
450 GWh per year.
to
(2) Woakwine Wind Farm: a c300 MW project
located near Lake Bonney, SA, with the
potential to connect into the Victorian grid.
(3) Capital 2 Wind Farm: a c100 MW expansion
adjacent to the Capital Wind Farm at Lake
George, NSW.
Subject to confirming the feasibility of these
projects, Infigen intends to evaluate projects on an
owned or Capital Lite basis. This approach allows
Infigen to crystallise the value of its development
pipeline, ensure access to renewable energy at
market competitive rates, preserve its own capital,
renewable energy and
and partner with
infrastructure investors seeking an experienced
project developer and energy market participant.
Infigen believes the future of the NEM is low cost
renewable energy, supported by physical firming
assets such as batteries, gas peakers and
hydroelectric facilities. As the NEM evolves,
Infigen expects the value of its development
pipeline to be realised. The pace of this
development and the sequencing of particular
projects will depend upon the relative merits of
each project in terms of the competitiveness of its
price and ability
the greatest
contribution to company value.
to provide
through
Accordingly, Infigen is also seeking to increase its
Renewable Energy Generation
the
acquisition of renewable energy through PPAs
from third party project owners and developers,
as was the case for the Kiata Wind Farm. This
approach allows Infigen to maximise the value of
the physical firming capacity it has acquired and
achieve
in electricity
volumes and contracting.
In assessing each
“Capital Lite” opportunity we assess the extent to
which it is competitive with our own development
projects and complementary to the production
profile of our existing generation portfolio and the
needs of our customers.
its targeted
increases
Operational Highlights
Infigen’s
fleet of owned operating assets
continued its strong performance with the overall
fleet performance exceeding budgeted availability
and production targets. Total turbine availability
was 97.3%.
During FY19, Infigen’s fleet expanded, with the
commencement of
commercial operations
occurring at Bodangora Wind Farm in February
2019. General Electric
turbine
manufacturer’s operations team is now fully
mobilised
and
providing
maintenance services for this wind farm. Under the
terms of this full-service agreement, GE provides
an availability guarantee until the 20th year of
operations.
operation
(GE),
and
the
FY19 was also the first full year of the Vestas
service and maintenance agreements which are
relevant to all of Infigen’s wind farms except
Bodangora. These agreements contain pain-
share/gain-share mechanisms and availability
targets which are unchanged throughout the life
of the agreements which operate until the 20th
year of commercial operations of each wind farm.
The long-term incentives incorporated in both the
Vestas and GE agreements create alignment for
operational performance.
Infigen undertook a number of capital upgrades to
its wind farms outside the O&M agreements with
a focus on both energy efficiency and safety. For
example, Infigen completed a key capital safety
upgrade, installing lifts at Lake Bonney 1 Wind
Farm. In FY19 and FY20 Infigen has partnered with
Vestas on turbine self-forecasting models with the
objective of improving dispatch efficiency in the
five minute settlement market
National Energy Policy and Energy Market
Rules
Infigen continues to engage with the Federal and
State Governments and relevant regulators that
influence the operation of the markets in which
remain
actively participates. We
Infigen
committed to working constructively with all
stakeholders to deliver an efficient transition to a
future energy market that offers affordable,
reliable, clean supplies of energy to Australian
consumers. Central to the ability of the energy
market to achieve this transition at the lowest cost
to the consumer is the emergence of a coherent
and consistent national energy policy that is
informed by economics and engineering.
It is important to note that a viable, long term
national policy needs to contemplate the system
as a whole. Generation,
transmission and
distribution networks and retail function as an
ecosystem. Hence it is important that the market
can make commercial assessments of the most
viable long-term investment response to market
opportunities – without fear that the economics of
projects will be undermined by new policy
initiatives of government that defy the gravity of
market principles. Uniform, nationally consistent
policy that is designed to enable a healthy market-
based response to customer needs will ensure
long term competitiveness of the supply of energy
– given the quality and abundance of our
resources.
industry participants
Infigen will continue to work with government
policy makers,
and
regulators to deliver a stable, market based, policy
environment which is underpinned by transparent
rules. If this can be achieved Australia is well
placed to deliver a world class energy industry
that realises the potential value of its abundant
and infinite supply of renewable energy as well as
prudently utilise our significant, but finite, supply
of thermal fuels to support a globally competitive
domestic economy.
18
INFIGEN ENERGY 2019 ANNUAL REPORT
Outlook
In FY20, Infigen will continue to deliver its business
strategy and, in particular, will be focused on:
(1)
Increasing the volumes of renewable energy
sourced under the Capital Lite model. The
Smithfield OCGT acquisition enables 300-
400 MW of additional renewable energy
capacity in NSW to be sourced from third
parties.
(2) Increasing the
levels of C&I Customer
contracting. Infigen’s strategy will allow up to
75% of Infigen’s expanding renewable energy
production to be sold under firm contracts.
This level is expected to be progressively
achieved. Infigen has invested in enhanced
billing and customer service capabilities to
facilitate this growth.
(3) Managing construction of the Cherry Tree
Wind Farm where practical completion is
anticipated in calendar year 2020, which will
deliver new renewable energy for sale to our
customers in FY21.
(4) Complete commissioning of the SA Battery.
(5) Progressing Flyers Creek Wind Farm, NSW,
towards financial close.
As Infigen transitions to an active energy market
participant directly serving C&I Customers, it is
necessary to invest in its people and systems. As
a result, in FY20, Business Operating Costs are
expected to increase modestly compared to FY19.
This reflects the net result of higher operating
costs associated with the growing energy markets
business, lower Development Costs, and slightly
higher head office costs. As previously advised,
Asset Operating Costs will be higher reflecting a
full year of production from Bodangora Wind
Farm, the costs of the SA Battery and the
operating costs of Smithfield OCGT (which are
expected to be in line with levels disclosed to the
market upon acquisition in May 2019). While
inherent forecast uncertainty for
noting the
Infigen
renewable
production of
energy,
anticipates production sold
from renewable
energy assets to be higher than FY19, reflecting
the full year contributions from Bodangora Wind
Farm and the Kiata Wind Farm PPA.
19
2. Financial Overview
Summary of Financial Performance 1
Year ended 30 June
($ million)
Net revenue
Asset operating costs
Business operating costs
Underlying EBITDA
Other income
Depreciation and amortisation expense
Impairment of development assets
Net gain on changes in fair value of financial instruments
EBIT
Net finance costs
Profit before tax
Income tax (expense) / benefit
Net profit after tax
Underlying EBITDA
2019
229.3
(41.4)
(22.7)
165.3
-
(54.6)
(9.9)
6.5
107.3
(45.9)
61.4
(20.5)
40.9
19.3
(1.4)
(1.7)
149.1
INFIGEN
2018
Change Change %
9
(3)
(8)
11
(100)
(6)
-
-
9
42
215
(178)
(10)
210.1
(40.0)
(21.0)
149.1
0.6
(51.4)
-
-
98.3
(78.8)
19.5
26.1
45.7
19.3
(1.4)
(1.7)
16.2
(0.6)
(3.1)
(9.9)
6.5
9.1
32.9
41.9
(46.6)
(4.7)
165.3
FY18 Underlying EBITDA
Net Revenue
Asset Operating Costs
Business Operating Costs
FY19 Underlying EBITDA
1 Individual items and totals reconcile with the Consolidated Financial Statements, however, may not add due to rounding of
individual components.
20
INFIGEN ENERGY 2019 ANNUAL REPORT
Financial Performance Commentary
Increase in Underlying EBITDA (+$16.2 million)
Primarily attributable to:
Partially reduced by:
Higher Net Revenue (+$19.3 million)
- primarily due to:
Higher Asset Operating Costs (+$1.4 million)
- primarily due to:
•
14% more production sold from Owned
Renewable Energy Assets, including
the commencement of production at
Bodangora Wind Farm (+220 GWh)
• Compensated revenue of $10.1 million,
primarily relating to liquidated
damages for construction delays at
Bodangora Wind Farm
Partially offset by:
•
3% decrease in LGC revenue
•
The Bodangora Wind Farm which
commenced commercial operations in
February 2019 (+$2.0 million)
Partially offset by:
• Not incurring prior year one-off Turbine O&M
costs associated with the transition from
Suzlon to Vestas (-$1.6 million)
Higher Business Operating Costs (+$1.7 million):
• Higher Corporate Costs incurred in relation to
the expansion of internal capacity and
capability and the pursuit of growth
opportunities during the year (+$2.6 million)
Partially offset by:
•
Lower Development Costs compared to the
prior year (-$0.8 million)
Lower Net Profit After Tax - Non-underlying EBITDA items (-$20.9 million)
Primarily attributable to:
Partially offset by:
Higher Income Tax Expense (+$46.6 million):
Lower Net Finance Costs (-$32.9 million):
• Higher Profit before Tax noting previously
• Costs incurred in the prior year relating to the
unrecognised tax losses ($35.7 million) were
brought to account in the prior year which
created an Income Tax Benefit in that year,
leading to the substantial year on year
change
Impairment of Development Assets
(+$9.9 million):
• An impairment charge was recognised for
certain development assets (held directly on
balance sheet and through investment in
associates) to reflect increased costs and
risks in realising the value of certain
development projects
refinancing of the previous facilities with the
Corporate Facility in April 2018 (-$48.4 million),
consisting of:
-
-
termination of interest rate swaps
(-$43.3 million)
non-recurring advisor fees and the early
expense of capitalised commitment fees
(-$5.1 million)
were not incurred in the current year
Partially offset by:
•
•
•
Higher Interest Expense (+$7.3 million),
primarily a result of expensing all interest
under the Bodangora Facility from February
2019 onwards (i.e. commencement of
Bodangora Wind Farm commercial operations)
Higher bank and commitment fees
amortisation (+$4.2 million)
Lower Interest Income due to a lower average
cash balance and interest rate during the year
(+$2.6 million)
21
Net Revenue
Infigen presents Net Revenue on a contracted and uncontracted basis. Contracted Revenue includes
electricity revenue via PPAs, electricity revenue from C&I Customers, and contracted LGC revenue.
Uncontracted Revenue includes remaining electricity sales, sold via the Merchant channel, and remaining LGC
revenue. Uncontracted Revenue is subject to price risk.
Year ended 30 June
($ million)
Contracted Revenue
Uncontracted Revenue
Compensated Revenue
Net Revenue
Electricity Revenue
2019
2018
Change Change %
182.0
37.2
10.1
229.3
161.6
48.4
0.1
210.1
20.4
(11.1)
10.0
19.3
13
(23)
n.m.
9
The table below outlines the components of Infigen’s Electricity Revenue sales channels.
Sales channel
Description
PPAs
C&I Customers
Merchant
Contracted sales from Owned Renewable Energy
Assets where Infigen sells at a fixed price based on
run-of-plant production
Contracted sales under medium to long-term C&I
contracts and short to medium-term wholesale
contracts, where Infigen sells at a fixed price and a
firm volume
Uncontracted sales to spot electricity markets. This
occurs when Infigen’s electricity generation is greater
than C&I Customer and PPA needs
Electricity purchases from spot electricity markets.
This occurs when Infigen’s electricity generation is
lower than C&I Customer needs
Net settlement of buy-side hedges and net results of
electricity product sales
Revenue contribution (%)
2019
22
2018
21
51
45
27
34
100
100
PPAs
The increase in electricity sold under PPAs is primarily attributable to the commencement of commercial
operations at the 113 MW Bodangora Wind Farm in February 2019, of which 60% of production is sold under
PPA until 31 December 2030.
Year ended
30 June
PPAs
C&I Customers
2019
489
Electricity Sold
(GWh)
PPA Electricity Price
($/MWh)
2018
Change Change %
2019
2018
Change Change %
407
82
20
52.9
54.8
(1.9)
(4)
The increase in electricity sold to C&I Customers reflects Infigen’s continuing strategy to improve the quality
and quantity of revenue received under C&I Customer contracts.
Year ended
30 June
Electricity Sold
(GWh)
C&I Customers Electricity Price
($/MWh)
2019
2018
Change Change %
2019
2018
Change Change %
C&I Customers
768
647
120
19
78.4
78.3
0.2
-
22
INFIGEN ENERGY 2019 ANNUAL REPORT
Merchant
Infigen’s overall Merchant revenue remained steady, but was affected by:
• An increase in electricity sold to spot electricity markets – primarily Bodangora Wind Farm
generation being excess to C&I Customer and PPA needs; and
•
Lower received price when higher volumes were sold to C&I Customers.
Smithfield OCGT was acquired in late May 2019 and had only a minor revenue contribution for the year.
Year ended 30 June
($ million)
Merchant
Net Revenue contribution
2019
31.9
2018
32.2
Change
Change %
(0.3)
(1)
Infigen’s Electricity Supply and Demand profile
The graphic below displays the sources of supply and demand for Infigen’s electricity generation for the year
end 30 June 2019.
Electricity Supply and Demand
FY18 vs FY19
2,000
1,500
716
1,778
489
1,000
h
W
G
1,480
673
407
647
768
500
-
248
193
FY18 Supply
FY18 Demand
FY19 Supply
FY19 Demand
Merchant Purchases
Total Electricity Generation
C&I
PPA
Merchant Sales
23
LGC Revenue and Price
The average LGC price decreased by 15% from the prior year compared to the market decrease of 35%. Infigen
was partially protected from the market decline by its contracted LGC position. Infigen’s contracted LGC
position will continue as an important (partial) mitigant against potential over-supply and/or declining prices.
Contracted LGC revenue for the year ended 30 June 2019 was 95% (2018: 85%).
The spot value of an LGC as at 30 June 2019 was $41.6 (30 June 2018: $77.8).
Year ended 30 June
LGC average price ($)
2019
60.9
2018
70.8
Change
Change %
(9.9)
(15)
The percentage of the expected LGCs created and sold on a contracted basis and weighted average price
for future periods is: 100% and $54 (FY20); 40% and $46 (FY21): 30% and $41 (FY22): 20% and $51 (FY23)
and 20% and $54 (FY24) respectively. This is based on existing contracted positions, historical production
for existing wind farms, and LGCs purchased by Infigen from its Contracted Renewable Energy Assets.
These numbers assume that LGCs are sold to Sydney Desalination Plant at the rate of 1 LGC for each MWh
used to operate the facility in FY20. No assumptions are made in relation to the operation of the facility
(and accordingly LGC sales to Sydney Desalination Plant beyond the minimum LGC sales) in following
financial years.
Asset Operating Costs
Year ended 30 June
($ million)
Turbine O&M
Asset management
Other direct expenses
Balance of plant
Owned Renewable Energy Assets
Firming assets
FCAS net expense
Total
2019
20.5
7.6
7.8
2.4
38.2
0.2
3.0
41.4
2018
21.5
7.1
7.2
1.3
37.1
-
2.8
40.0
Change Change %
(1.1)
0.5
0.6
1.1
1.1
0.2
0.1
1.4
(5)
7
8
85
3
-
5
4
Infigen’s wind farms incur FCAS charges from the Australian Electricity Market Operator. These charges relate
to services (performed by market participants) that maintain key technical characteristics of the power
system. FCAS net expense reflects gross charges net of hedge payouts.
Business Operating Costs
Year ended 30 June
($ million)
Corporate costs
Development costs
Total
2019
19.0
3.7
22.7
2018
16.5
4.5
21.0
Change Change %
2.6
(0.8)
1.7
15
(18)
8
Business operating costs includes energy markets costs of $5.1 million which had been incorporated within
Asset operating costs in the prior year (2018: $3.2 million).
24
INFIGEN ENERGY 2019 ANNUAL REPORT
Net Finance Costs
Year ended 30 June
($ million)
Interest expense – external borrowings
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 loss / (gain)
Net financing costs
2019
2018
Change Change %
40.2
7.3
-
0.1
47.6
(2.3)
45.3
-
0.6
45.9
32.9
3.1
5.1
0.1
41.2
(4.8)
36.3
43.3
(0.9)
78.8
7.3
4.2
22
136
(5.1)
(100)
-
6.4
2.6
9.0
(43.3)
1.5
(32.9)
-
16
53
25
(100)
173
(42)
Interest incurred on the Bodangora Facility in the current and prior year was capitalised to property, plant
and equipment to the extent it related to the construction of the Bodangora Wind Farm. In the current year,
the interest portion incurred subsequent to the completion of the Bodangora Wind Farm (i.e. on the
Bodangora Facility) is included in interest expense.
Net Operating Cash Flow
Year ended 30 June
($ million)
Underlying EBITDA
Movement in LGC inventory
Movement in other working capital
Non-cash items
Net finance costs paid
Net operating cash flow
2019
2018
Change Change %
165.3
16.1
0.9
(0.3)
(37.7)
144.3
149.1
(16.4)
(2.1)
(0.8)
(29.4)
100.4
16.2
32.5
3.0
0.5
(8.3)
43.8
11
198
143
63
(28)
44
The increase in net operating cash flow was primarily due to the contribution from Bodangora Wind Farm
and the timing of receipts from the sale of LGCs.
25
12
14
20
-
-
-
(2)
%
8
-
(5)
3
(6)
(3)
(4)
-
3. Review of Operations
Renewable Energy Generation
Summary of Operational Performance
Year ended 30 June
Production generated
Production sold
Renewable Energy Generation 1
Capacity factor2
Turbine availability 3
Site availability 4
Unit
GWh
GWh
GWh
%
%
%
Generation expenses 5
$/MWh
Production from Owned Renewable Energy Assets
2019
1,740
1,684
1,775
31.1
97.3
96.6
23.6
2018
Change
Change %
1,549
1,480
1,480
31.8
97.1
96.6
24.0
191
204
295
0.7
0.2
-
(0.4)
Generated
Marginal loss factors
Sold
Year ended 30 June
2019
(GWh)
2018
(GWh)
Alinta 6
Bodangora
Capital
Lake Bonney 1
Lake Bonney 2
Lake Bonney 3
Woodlawn
Compensated
342
224
359
200
371
97
147
0.4
316
-
374
199
405
103
152
0.1
Total
1,740
1,549
%
8
-
(4)
-
(8)
(6)
(4)
300
12
2019
2018
%
0.9475
0.9487
0.9819
-
-
-
1.0100
1.0163
(1)
0.9144
0.8906
0.9144
0.8906
0.9144
0.8906
3
3
3
1.0100
1.0163
(1)
-
-
0.9564
0.9452
-
1
2019
(GWh)
2018
(GWh)
342
220
364
184
339
90
149
-
316
-
380
177
360
91
155
-
1,684
1,480
14
Production generated from Owned Renewable Energy Assets increased primarily due to:
• Commencement of production at Bodangora Wind Farm (+224 GWh)
• Higher wind resource and wind farm production availability at Alinta Wind Farm (+26 GWh)
compared to the prior year
This was partially offset by:
•
•
Lower net production at Lake Bonney Wind Farms (-39 GWh). The Lake Bonney Wind Farms
experienced a reduction in network availability due to above average transmission network
maintenance during the year
Lower wind resource at Capital and Woodlawn Wind Farms (-20 GWh) compared to the prior year
1 Electricity generation from owned and contracted renewable energy generation assets after the applicable marginal loss
factors.
3
2 Calculated by dividing production generated from Owned Renewable Energy Assets during the period by the amount of
electricity that would have been produced if the generation assets had been running at full capacity during the period.
Indicates the percentage of time wind turbines have been available to generate electricity from Owned Renewable Energy
Assets.
Indicates the percentage of time wind turbines and balance of plant have been available to generate electricity from Owned
Renewable Energy Assets.
4
5 Calculated by dividing generation expenses with production generated from Owned Renewable Energy Assets. Excludes
Bodangora Wind Farm whilst it was still under construction.
6 Marginal loss factor is not relevant to electricity sold at Alinta Wind Farm.
26
INFIGEN ENERGY 2019 ANNUAL REPORT
Firming assets
Year ended 30 June
Smithfield OCGT
>
Production sold
> Capacity factor
Unit
2019
2018
Change
Change %
GWh
%
2.5
1.73
-
-
2.5
1.73
-
-
Smithfield OCGT is a fast-start gas fired electricity generation facility where capacity utilisation is expected
to be in the range of 2-8%, with significant variations in output expected from month-to-month and year-to-
year. Smithfield OCGT complements Infigen’s renewable energy portfolio and its economic contribution to
Infigen is not directly related to production. As a physical firming asset, Smithfield OCGT enables Infigen to
increase the volume of renewable energy it supplies to its C&I Customers.
4. Balance Sheet
As at 30 June
Cash
Debt (drawn)
Net debt
Net assets per security
Book gearing 1
Net debt / LTM underlying EBITDA
LTM underlying EBITDA / LTM interest
Cash consists of:
$ million
$ million
$ million
$
%
ratio
ratio
2019
103.7
639.1
535.4
0.61
46.9
3.2
4.1
2018
144.9
676.1
531.2
0.60
45.8
3.6
4.5
Change
Change %
(41.2)
(37.0)
4.2
0.01
1.1
(0.3)
(0.4)
(28)
(5)
1
2
2
(9)
(9)
• Unrestricted cash - $95.6 million (2018: $94.5 million), including cash on hand and term deposits
held at call
• Restricted cash - $8.0 million (2018: $50.4 million), which is held in accordance with the minimum
cash requirements for Australian Financial Services Licence (AFSL) compliance. The prior year
balance included the minimum cash requirements of the Bodangora Facility
Debt (drawn) consists of:
•
•
The Corporate Facility - $483.8 million (2018: $517.5 million). During the year, principal repayments
of $33.7 million were made by Infigen in accordance with the facility terms
The Bodangora Facility - $155.3 million (2018: $158.6 million). During the year, $4.1 million of
drawdowns occurred, and $7.5 million of subsequent fixed semi-annual repayments were made in
accordance with the facility terms
Debt (drawn) excludes capitalised commitment fees of $19.6 million (2018: $26.0 million) as shown in the
Consolidated Financial Statements.
1 Calculated as Net Debt (accounting for capitalised commitment fees) divided by the sum of Net Debt (accounting for
capitalised commitment fees) and Net Assets.
27
5. Capital Expenditure
Year ended 30 June
($ million)
Development projects (capitalised)
Property, plant and equipment and IT equipment
Assets under construction
Total capital expenditure
2019
2018
Change
Change %
5.1
79.4
66.5
151.0
1.9
2.6
140.6
145.1
3.2
76.8
(74.1)
5.9
169
n.m.
(53)
4
Development projects create the opportunity to increase Infigen’s Renewable Energy Generation for sale -
volume growth enables contracted sales growth. A realised development project creates value for security
holders, releasing value on balance sheet. The Capital Lite transaction in respect of the Cherry Tree Wind
Farm exemplified this, when in December 2018 the development was sold for $6.5 million and Infigen entered
into a PPA to acquire 100% of the renewable energy and green products (currently LGCs) produced for 15
years once constructed (using third party capital).
Property, plant and equipment expenditure includes the acquisition price of the Smithfield OCGT in May 2019
for $74.0 million.
Capitalised expenditure on assets under construction primarily consists of:
•
SA Battery due for completion in H1 FY20. During the year $30.4 million was paid (net of grants
received).
• Bodangora Wind Farm which commenced commercial operations in February 2019. During the year
$44.9 million was spent (inclusive of capitalised interest), with the total life to date spend (inclusive
of capitalised interest) of $234.5 million, which was in line with the original budget.
28
INFIGEN ENERGY 2019 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
> Loss of life or serious harm to people, or
serious harm to the environment, brings
significant damage to Infigen’s
stakeholders, along with potential legal,
reputation, operational and financial
implications
> Policies are aligned to AS4801 (Occupational Health &
Safety Management System), ISO18001 (Health & Safety
Management Standard) and ISO14000 (Environmental
Management)
> The KPIs used for determining STI payments include a
gateway hurdle (a fatality) and moderating factors
(serious safety incidents) as preconditions used to
determine events which automatically trigger Board
consideration to rerate the STI pool for the whole
organisation, a team or individual
Energy &
Climate Change
Policy
> Direct government intervention may reduce
market confidence in the energy markets
and alter market sentiment towards Infigen
securities
> 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
> Training and education of staff
>
Infigen is actively engaged with policy makers,
government and industry stakeholders, including energy
users, to articulate the important role that clean energy
will play in Australia’s future
Infigen monitors and assesses the effect of potential
changes to energy policy on Infigen’s operations and
strategic planning
Demand & Price
for Electricity
and LGCs
> 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 seeks to balance price, tenor and risk and
thereby manage earnings certainty and co-optimise
production, contract and spot exposures
> Adherence to the Energy Risk Portfolio Policy which
includes: volumetric hedge portfolio limits; limits for
earnings at risk; and targets for the duration and
modified duration of hedges
Infigen undertakes analyses using in-house expertise
and external consultancies to monitor market conditions
and outlook
>
> 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
> C&I Customer contracting increases the risk
of not having production to meet fixed price
contract obligations at times of high
electricity spot prices which may result in
losses on fixed price firm supply contracts
> The availability of generation assets affects
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
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
> Use of asset-backed electricity and environmental
>
hedging products
Infigen’s firming assets lessen the reliance on
purchasing from the spot electricity market to fulfil its
C&I Customer contract obligations
> 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 programs,
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
Operations &
production
29
Risk
Description
How Infigen is equipped to manage and monitor this risk
Construction &
development
projects
> Projects may not be delivered safely, on
> Disciplined approach to expansion and the commitment
time and on budget. The delivered assets
may fail to generate the expected earnings
>
> Grid instability may lead to stricter
regulatory power system stability
requirements, additional costs associated
with grid connections, and increased
government regulation – thereby increasing
the cost and risk to realising the value of the
delivered assets
> 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
>
of capital to growth projects
Infigen monitors and assesses the effect of potential
enhanced grid stability requirements on its construction
and development projects (including from an
impairment of carrying value perspective), as well as the
effect on energy markets
> 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
Capital
Management
> 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
Regulatory,
Legal &
Accounting
> Potential exposure to litigation and claims
> Adverse changes in law or regulation can
increase the cost of doing business
Financial
Climate-Related
Considerations
> Climate change creates a risk to the costs of
and 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
> Monitoring and stress testing of cash flow and liquidity
requirements
> Regular monitoring of AFSL requirements
> Regular monitoring by the Treasury Risk Committee
> Adherence to the Infigen Treasury Policy which includes
requirements to identify, measure, and manage liquidity
risk – and includes a funding strategy which requires
consideration of the quantum, duration, and maturity
profile of committed debt facilities
> Where insurable, Infigen maintains insurance to address
relevant exposures
> Regulatory, legal and accounting risks are captured
through Infigen’s Enterprise Risk Management and
Compliance framework and managed through Infigen’s
policies and procedures, as well as through external
accounting and legal advice as appropriate
>
Infigen is actively engaged with policy makers and other
relevant stakeholders to articulate the important role
that clean energy will 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)
30
INFIGEN ENERGY 2019 ANNUAL REPORT
SUSTAINABILITY
HIGHLIGHTS
As Infigen delivers its strategy, it is committed to
sustainable partnerships with its stakeholders. To
ensure continued alignment with stakeholders
through its business transition, an employee led
working group was established to review Infigen’s
corporate purpose and values. The outcome was
a purpose statement that has been endorsed by
Management and the Boards “We are leading
Australia’s transition to a clean energy future”. We
believe this statement reflects the underlying
relationship between our corporate strategy and
Australia’s
ecosystem.
Furthermore, Infigen is pleased to report the
following
and
achievements.
commitments
sustainability
evolving
energy
Targeting Carbon Neutrality by FY25
Infigen sourced 100% of its office and wind farm
electricity from renewables.
Infigen
adopted a target of carbon neutrality for its entire
business by FY25.
In FY19,
substantially
As a renewable energy business, the introduction
of complementary firming assets is not expected
to
Infigen’s carbon
increase
emissions. Following the acquisition of the
Smithfield OCGT which allows Infigen to source
300-400 MW of new renewable energy capacity
in NSW, Infigen’s business is expected to generate
emissions of 0.02t CO2/MWh, a level that is 2-3%
of its peer group average in the NEM.
Infigen believes C&I Customers can have reliable
and competitively priced clean energy. We are
demonstrating that this is possible by targeting
carbon neutrality ourselves: offsetting all Scope 1
and Scope 2 emissions by FY25.
Adoption of two United Nations Sustainable
Development Goals
to
Infigen has adopted Goal 7 and Goal 13 of the
United Nations Sustainable Development Goals
(UNSDG). These goals align with our corporate
purpose and existing sustainability commitments
and provide
evaluate
a benchmark
sustainability priorities within the context of
international policy objectives. Goal 7 of the
UNSDGs is “to ensure access to affordable, reliable
sustainable and modern energy for all”. This goal
is focused on increasing the quality of global
energy systems via lowering costs, increasing
reliability and providing sustainable energy
production. Infigen’s strategy directly furthers this
goal.
Goal 13 of the UNSDGs is “to take urgent action to
combat climate change and
impacts”.
Australia’s NEM continues to rank amongst the
most carbon intensive in the developed world.
Infigen’s strategy enables significant growth of
renewable energy generation.
its
31
The acquisition of the Smithfield OCGT allows
Infigen to firm an additional 300-400 MW of low
cost intermittent renewable energy capacity. This
business model also has substantially lower CO2
emissions than other participants in the NEM.
Promoting ‘Green the Team’
In FY19, a group of employees approached
Management with a proposal to offset the carbon
emissions related to staff private electricity
consumption. The initiative, called “Green the
Team”, proposed that Infigen purchase carbon
offsets in the wholesale market for those staff that
wanted to offset their home-based carbon
emissions and staff pay Infigen directly for this.
This mechanism is cheaper than other retail
options for consumers. Infigen is proud of the
initiative shown by our staff. In recognition of the
values of our staff and their hard work, Infigen has
agreed to meet 50% of the cost of any staff
member that wants to participate in this personal
emissions reduction program. Infigen estimates
that the initiative will cost approximately $5,000
per annum, and we expect the majority of our staff
to participate.
Creating
Performance
a Culture
that Values High
Infigen’s people strategy targets a workplace
culture that values high performance. We seek to
build strong, enduring relationships with our
employees based on trust and mutual respect.
Whilst acknowledging individual accountability,
we value diversity of opinion as we strive for both
continuous improvement and the achievement of
collective results. The pie chart shows the factors
considered in the employee experience matrix.
Prioritising Employee Engagement
Infigen seeks to attract, develop and retain a
motivated high performance team. For this to
occur, there needs to be an alignment between
the personal values and expectations of our
employees with Infigen’s brand, purpose, values
and culture. We conducted a detailed employee
engagement survey in December 2018.
A Pulse survey will be run in September 2019 to
track our progress against key indicators, followed
by a detailed survey in March 2020.
+ 16 eNPS
100% of respondents ‘strongly agree’ or ‘agree’
with the question “Members in our team respect
each other's differences, cultures and
background”
95% of respondents ‘strongly agree’ or ‘agree’
with the question “I feel diversity is respected in
the workplace” (5% were neutral, and importantly,
no one disagreed)
Embracing diversity and inclusion
Infigen’s Nomination & Remuneration Committee
(NRC) approved four Diversity Objectives for the
period 1 July 2017 to 30 June 2019. The Diversity
Objectives and outcomes are as follows:
Two-year Diversity Objectives to 30 June 2019
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 was 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 were nine
females and 20 males, excluding Non-Executive
Directors)
> Maintaining an environment where flexible work
arrangements are supported
> Workforce participation of females decreased by 2%.
> Voluntary employee turnover over the two years was 13%
(37% females and 63% males).
> Number of females in the workforce increased from 26 to
30, and number of males increased from 39 to 49.
> 35% of new hires over the two year period were female.
> The Board composition is three females and four males
(Five Non-Executive and two Executive Directors)
2.
Implement an emerging leader mentor program to
attract, develop and retain emerging leaders.
• Over the two-year period Infigen contributed in excess of
$198,000 to enable scholarships through:
> The Career Trackers indigenous scholarship program.
> 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).
Infigen currently provides professional development
support to five employees participating in either post
graduate studies or further tertiary education.
• Priority will be given in FY20 to develop a mentor program
for emerging leaders.
3.
Implement a lesbian, gay, bisexual, transgender and
intersex (LGBTI) Diversity and Inclusion Plan.
This objective was postponed as it was determined that
inclusion should not be defined in isolation, but rather in the
broad context of diversity within the workplace. To that end
we will invite the employee working group that is currently
working on defining the organisation Purpose and Values to
help define inclusion within this context.
4. Achieve gender pay equity within each occupational
group.
>
Infigen has been measuring pay equity between females
and males since 2014. As at 30 June 2019 there was pay
equity across 69% of the organisation.
> Pay gaps range from 20-25% in two occupational
categories (favouring 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.
Over the past two years the workforce (including
Non-Executive Directors) has increased by 22%.
As Infigen’s business grows, we have introduced
new roles to deliver the company’s strategic
objectives.
Infigen’s 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 2019. Recruitment decisions continue to
be based on merit and external recruiters are
required to present a shortlist that is ethnically and
gender diverse.
Infigen employs 22 engineers, of whom there are
12 males and 10 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.
32
INFIGEN ENERGY 2019 ANNUAL REPORT
Females
categories:
in the workforce by occupational
• $1,250 for RWTW volunteers who assisted on
the day.
• $3,750 for the Southern Tablelands Athletics
Club. This was to provide the youth of Tarago
and the local area with the opportunity to
participate in Little Athletics and to promote a
healthy lifestyle.
In February 2019, Infigen commenced commercial
operations at Bodangora Wind Farm. At the peak
of the construction phase the site employed over
140 people. On an ongoing operations basis the
project has directly created seven local jobs. 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
made a contribution of $254,000 to the NSW
Biodiversity Conservation Trust. In February 2019
Infigen awarded the third round of the Bodangora
Wind Farm Community Benefit Fund of $25,000
taking the total funding distributed to local
community groups during the construction phase
of the project to $150,000. Direct investment into
the community will be approximately $3 million
over the life of the wind farm.
Sustainability Risk Management
Infigen analyses remuneration to verify that any
pay equity gaps that may exist are not the result
of gender. Infigen does not believe that any
gender based pay equity gaps currently exist and
will continue to monitor this on an ongoing basis.
In FY20, Infigen will retain its gender diversity
objectives and in addition will initiate an internal
discussion of broader
forms of employee
inclusion. The objective will be to ensure that the
organisation values are representative of the
diversity of the community we operate in.
Completed Board Renewal
Infigen completed its Board renewal with the
appointment of Karen Smith-Pomeroy as an
independent director
in December 2018. Ms
Smith-Pomeroy brings a wealth of experience in
and governance, with
risk management
substantial experience in energy, infrastructure
and finance. She is also a member of the Audit,
Risk and Compliance Committee.
Conduct in the Community
During FY19,
Infigen continued to support
community advocacy and industry groups with
over $338,000 on events, engagement, advocacy,
donations and projects.
Infigen hosted the Run with the Wind (RWTW)
open day at Woodlawn Wind Farm for the seventh
year to raise funds for the local community and
organisations, including:
33
Infigen considers sustainability risks to be core
risks and as such evaluates them within its
Enterprise Risk Management framework which has
been developed in accordance with International
Standard ISO 31000. Management prepares risk
management analysis reporting to the Audit, Risk
& Compliance Committee at each meeting. The
Board also
importance of
observing high standards of corporate conduct
and have adopted a formal Code of Conduct
which
and
contractors to maintain high ethical standards in
their business activities.
requires directors, employees
recognises
the
Infigen’s Corporate Governance Statement
in
information, except
Infigen’s Corporate Governance Statement (CGS)
describes
Infigen’s governance performance
against the corporate governance principles and
recommendations (third edition) issued by the
ASX Corporate Governance Council. In FY19,
Infigen complied with these Principles and
including disclosure of
Recommendations,
relevant
to
Recommendation 2.4 regarding maintaining a
majority of independent directors on the Infigen
Boards. Due to the Board renewal programme,
which was completed in December 2018, there
was a period during July-December 2018 where
there were an equal number of independent and
non-independent Directors on the Infigen Boards.
Following completion of the Board renewal
programme, there has been a majority of
Independent Directors on the Boards. Further
information is available in Infigen’s Corporate
Governance Statement.
relation
CORPORATE STRUCTURE
Infigen comprises Infigen Energy Limited (IEL), Infigen Energy Trust (IET) and the controlled entities of IEL
and IET.
On a standalone basis, 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 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 year, IET held interests in
financial investments.
The previous stapled structure included the now de-stapled Infigen Energy (Bermuda) Limited (IEBL). IEBL
was never used as an operating part of Infigen. Accordingly, it was unstapled on 22 November 2018 after
security holder approval at the 16 November 2018 AGM. IEBL is now a subsidiary of IEL, and is expected to
be wound up in due course.
The following diagram represents the structure of Infigen.
34
INFIGEN ENERGY 2019 ANNUAL REPORT
DIRECTORS
The following people were Directors of IEL, IEBL and IERL during the year ended 30 June 2019 and up to the
date of this report (unless otherwise indicated):
Non-Executive Directors
•
•
•
Len Gill
Philip Green
Emma Stein
• Mark Chellew
• Karen Smith-Pomeroy (appointed as an independent Non-Executive Director of IEL and IERL on 12
December 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 2019, 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 year that the person held office
Directors
IEL
IERL
IEBL
Audit, Risk &
Compliance
IEL Nomination
& Remuneration
Board meetings
Committee meetings
L Gill
M Chellew
E Stein
P Green
K Smith-Pomeroy
R Rolfe
S Wiggins
A
18
18
18
18
7
18
18
B
18
18
18
18
7
18
18
A
16
16
16
16
7
16
16
B
16
16
16
16
7
16
16
A
B
A
B
A
B
9
9
9
9
-
9
9
9
9
9
9
-
9
9
-
6
6
3
2
-
-
-
6
6
6
2
-
-
4
4
4
-
-
-
-
4
4
4
-
-
-
-
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.
35
Non-Executive Directors
Leonard (Len) Gill
Independent Non-Executive
Chairman of IEL and IERL
Appointed to IEL 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
and IERL
Appointed to IEL and IERL on 18
November 2010
Member of the Audit, Risk &
Compliance Committee
Emma Stein
Non-Executive Director of IEL
and IERL
Appointed to IEL 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 40-plus year career in the
electricity, gas and infrastructure industries. He also provides energy and
management consultancy services.
Len is currently a Non-Executive Director 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. 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.
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.
36
INFIGEN ENERGY 2019 ANNUAL REPORT
Mark Chellew
Non-Executive Director of IEL
and IERL
Appointed to IEL and IERL on
21 September 2017
Chairman of the Nomination &
Remuneration Committee
Member of the Audit, Risk &
Compliance Committee.
Karen Smith-Pomeroy
Non-Executive Director of IEL
and IERL
Appointed to IEL and IERL on
12 December 2018
Member of the Audit, Risk &
Compliance Committee
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 was appointed an Independent Non-
Executive Director of Cleanaway Waste Management Limited in 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.
Karen is an experienced non-executive director, with involvement in several
market sectors including energy, property and financial services. She has
significant experience as a senior executive in the financial services sector
and in excess of 10 years working directly with energy businesses.
Karen has specific expertise in risk and governance, deep expertise in credit
risk and specialist knowledge of a number of industry sectors, including
energy and infrastructure.
Karen is currently a Non-Executive Director of Kina Securities Limited,
Stanwell Corporation Limited, Queensland Treasury Corporation (Capital
Markets Board), and a former Non-Executive Director of CS Energy Ltd and
Tarong Energy Corporation Ltd.
Karen holds accounting qualifications and is a Graduate of the Advanced
Risk Management Course Wharton College, University of Pennsylvania,
USA. Karen is also a Fellow of the Institute of Public Accountants, Fellow of
the Financial Services Institute of Australasia, and a Graduate of the
Australian Institute of Company Directors.
37
Executive Directors & Management Team
Ross Rolfe AO
Managing Director of IEL and
IERL
Appointed as Non-Executive
Director to IEL and IERL on
9 September 2011 and Executive
Director on 17 November 2016
Sylvia Wiggins
Executive Director – Finance &
Commercial of IEL and IERL
Appointed as Non-Executive
Director to IEL and IERL on 18
April 2016 and Executive
Director on 8 May 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 Airports Group.
Ross has held the position of Director General of a range of Queensland
Government Departments, including Premier and Cabinet, State
Development, and 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 also
previously a Board member of the Northern Australia Infrastructure Facility
and 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 for 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
UNSW.
Paul Simshauser AM
Executive General Manager –
Energy Markets
Paul is responsible for the execution of the Multi-Channel Route to Market
strategy and devising energy supply options to underpin the business
growth.
Since November 2017
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 Masters
Degree in Accounting & Finance, and a PhD in Economics. Paul is an FCPA
and a Fellow of the Australian Institute of Company Directors.
38
INFIGEN ENERGY 2019 ANNUAL REPORT
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 Masters degrees in Commercial Law from the University of
Melbourne, Business Administration from Deakin University, and
Engineering from the Queensland University of Technology.
39
REMUNERATION REPORT
Dear Security Holder,
On behalf of the Board, I am pleased to present
the 2019 Remuneration Report.
At this time last year, I explained that the
Remuneration policies have been structured to
remunerate our people appropriately for their
the Board
towards executing
contribution
approved business strategy –
re
is,
that
positioning Infigen to meet the challenges and
grasp
the
transformation occurring in the Australian energy
market. Accordingly, the business model is shifting
from an infrastructure fund to an energy company.
the opportunities presented by
Our strategy is to reduce reliance of our revenue
on the spot market and improve the quality of our
earnings. We seek to achieve this by diversifying
our channels to market through a balanced and
risk managed contracting strategy. Infigen is,
therefore, progressively evolving into an active
in the energy market with the
participant
capability to manage the risks
in
contracting to deliver firm supplies of electricity in
a changing market that is increasingly dominated
by intermittent renewable generation.
involved
Within this strategic context the Board announced
adjustments to the remuneration framework that
were implemented throughout the 2018 and 2019
financial periods. These adjustments emphasised
the importance of achieving transformational
shorter to medium term goals, that are the
foundations of an enduring and sustainable
business model, that will generate long term
benefits by positioning the company to protect
existing and create new value for our security
holders.
The Board would like to thank security holders for
the favourable support received at the 2018 AGM
for these adjustments. No additional changes were
made to KMP remuneration throughout FY19.
This has been a defining year in terms of execution
of the business strategy – one in which we
continued to build out from Infigen’s legacy asset
base by both increasing our supply of green
energy for sale as well as investing in firming plant
to enable us to reliably supply our growing
customer base. Key milestones included:
>
>
>
Invested in firming capacity through the
acquisition of the Smithfield OCGT as well
as development and construction of the SA
Battery;
Increased the reliability and quality of
earnings so that 73% of electricity revenue
was from contracted sales;
Reached practical completion of
Bodangora Wind Farm;
the
>
>
>
Increased the volume of green energy
within the Infigen portfolio via the Capital
Lite strategy (Kiata Wind Farm and, from
2020, the Cherry Tree Wind Farm);
Enhanced our customer service and billing
capability; and
Implemented the third limb of our capital
the
management strategy – namely,
reintroduction of distributions to security
holders.
These strategic achievements are reflected in the
STI outcomes of the key management personnel
of between 90% and 130% of the maximum
opportunity.
In accordance with Infigen’s Securities Trading
Policy, employees and Directors were not
permitted to trade Infigen securities throughout
the year. These trading restrictions prevented
vesting of the FY17 Deferred STI and FY16 LTI
grants and prevented Directors from acquiring
Infigen securities towards meeting the
any
minimum-security
guidelines. All
holding
employee trading windows for Infigen securities
are at the discretion of the Infigen Boards.
Infigen Board firmly believes that the
The
successful execution of our strategy will depend,
in large measure, on the commitment of a highly
skilled workforce served by an experienced
leadership team that have a depth of industry
knowledge and the capability to identify and
execute strategic opportunities within, what is, an
increasingly complex market. Infigen’s ability to
attract and retain talented people within an
emerging renewables market is paramount.
The Board was encouraged by the results of a staff
engagement survey that was conducted in FY19.
The survey confirmed that there are very high
levels of staff commitment to the company and its
purpose. The Board has full confidence in the
leadership team and endorses the initiatives the
CEO has implemented to ensure alignment of the
organisational culture and values with the delivery
of Infigen’s strategic objectives.
Looking ahead, the Board intends to replicate the
FY19 LTI Operational Performance condition
within the FY20 LTI grant. The performance
scorecard has been updated to reflect targets as
at 30 June 2022. Consistent with past practice,
commercial-in-confidence targets and metrics will
not be disclosed in advance, the Board will
disclose the assessment criteria taken
into
consideration when determining the vesting
outcome. Throughout the year the Nomination
and Remuneration Committee (NRC) intend to
consider the FY21 LTI Operational Performance
Condition within the context of the business
transition and maturity of the business strategy.
40
INFIGEN ENERGY 2019 ANNUAL REPORT
The appointment of Karen Smith-Pomeroy to the
Board ends the Board and Management renewal
process that began in 2017. We are pleased to now
have in place a full Board that offers a broad range
of skills and experience. The composition of the
Board is designed to ensure that the Company has
access to a deep body of knowledge and history
with the Australian energy market from both a
generation, fuel and customer perspective – as
well as, of course, broader skills in finance and
governance.
In FY20, following the stabilisation of the new
Board, the Board will undertake an (independently
conducted) review of leadership, governance and
performance to ensure that Infigen is served by a
Board and Management team that is functioning
as effectively as possible in the interests of
creating value for our security holders.
Yours faithfully
Mark Chellew
Chairman
Nomination & Remuneration Committee
41
KMP SUMMARY REPORT FOR FINANCIAL PERIOD ENDING 30 JUNE 2019
Executives
R Rolfe
S Wiggins
P Simshauser
T Clark
Position
2019 Staff Engagement
Managing Director / CEO
Executive Director - Finance & Commercial
EGM Energy Markets
EGM Operations & Projects
The Board monitors
organisation culture
and includes People
& Culture metrics
within Short and
Long-Term
Incentives
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.
KMP Remuneration Mix in FY19
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 Sustainability Highlights section of
the Annual Report and the online ESG Report.
+16
eNPS
Gender
Diversity
Age
Diversity
42
INFIGEN ENERGY 2019 ANNUAL REPORT
Remuneration received by Executive KMP during FY19
This table includes the full year actual remuneration received by each KMP.
Fixed remun-
eration
STI
opportunity
FY19
FY19 Awarded STI
($)
($)
($)
Cash
Deferred
($)
856,500
622,500
597,600
149,400
728,000
471,500
377,200
94,300
KMP
R Rolfe
S Wiggins
P Simshauser1
492,000
266,500
277,160
69,290
T Clark2
O Sela 3
404,000
177,000
127,440
31,860
238,975
-
-
-
2,719,475
1,537,500 1,379,400
344,850
Vested
LTI
Other
Payments
Total
Perfor-
mance
related
FY18
Total
Perfor-
mance
related
($)
($)
($)
-
-
-
1,603,500
1,199,500
838,450
80,000
643,300
%
47%
39%
41%
37%
($)
1,268,020
1,155,000
381,759
492,350
14,336
253,311
-
539,365
94,336
4,538,061
3,836,494
-
-
-
-
-
-
%
34%
39%
24%
20%
23%
Relationship between performance and incentive payments
FY19 KPIs
FY19 STI Assessment
Financial Performance (50%)
Underlying EBITDA $165.3
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:
> An effective Capital Management
>
strategy and structure;
> Deliver a balanced portfolio for
electricity sales over a 5 year
forward period;
> Expanding the sourcing of energy
supply within the portfolio;
>
Implement a firming strategy;
> Construction of the SA Battery;
> Other strategic projects.
Implemented a Capital Management strategy. Balancing accretive growth, returns to security
holders and continued balance sheet improvement.
> Development and construction of the SA Battery
> Acquired the Smithfield OCGT
>
>
Increased customer base and contracted revenues
Invested in enhanced customer service and billing capability to better service customers with
multiple sites
> Achieved practical completion of the 113 MW Bodangora Wind Farm
>
Increased MWh available for sale through the Capital Lite strategy (Kiata and Cherry Tree Wind
Farms)
See Table 1 Progress towards delivering Infigen’s strategic objectives since January 2017
The FY19 KPIs included a Gateway hurdle where in the event of a fatality the Board would automatically consider rerating the STI Pool. The
Board could also take into consideration Moderating Factors not foreseen or adequately addressed in setting the FY19 KPIs to rerate the STI.
FY19 LTI Terms and Conditions
Performance Period
Performance Conditions
Vesting Scale
1 July 2018 to
30 June 2021
50%
50%
Infigen TSR performance compared to ASX
200 peer group excluding financial services,
real estate and the materials & resources
sectors
Condition
Performance
Operational
measures progress in implementing the 5
Year Business Plan and business strategy
50th to 75th Percentile of peer group
Performance will be assessed against a scorecard
setting out the strategic objectives, quantifiable
measures and Board assessment criteria that will be
used for determining the amount of Tranche 2
performance rights that will vest.
Diminishing Deferred Payment
Both R Rolfe and S Wiggins were entitled to a one off diminishing deferred payment, payable on 18 November 2019. Payment was
subject to a formula that reduced the benefit to zero when payments of fixed remuneration, STI payments or awards and vested LTI
payments exceeded the diminishing deferred payment amount. Once these executives receive their FY19 STI payments in September
2019, no diminishing deferred payment will be payable.
1 FY18 is Pro-rated for part year employment commencing 27 November 2017.
2 T Clark received a Project Incentive which was a cash-settled incentive relating to the construction of the Bodangora
Wind Farm. The Board offered Mr Clark the Project Incentive at the commencement of his employment in substitution of
an FY17 LTI grant.
3 O Sela resigned effective 18 January 2019. Other Payments are eligible termination payments.
43
STATUTORY REMUNERATION REPORT
1. Remuneration of KMP
The remuneration framework for KMP comprises
three components:
1.
fixed pay;
2. STI, which is a variable payment linked to
achieving specified performance measures
over a 12-month period; and
3. LTI, which is a variable 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.
remuneration
than
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 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 FY19 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 was
approved by the Board in August 2017 and
underpins the implementation of the business
strategy, which forms the basis of the FY19 KPIs.
The 5 Year Business Plan has three primary work
streams:
1.
2.
diversifying our customer base to improve
stability while
revenue certainty and
maximising earnings from existing assets
expanding the sourcing of energy supply
within the Infigen portfolio in response to
Infigen’s
market signals and enhancing
capacity to deliver firm products to its
customers; and
3.
creating a capital structure to support
Infigen’s business strategy.
Table 1 illustrates the progress made towards
delivering Infigen’s strategic objectives since mid
FY17 (i.e.
following the restructure of the
Executive Leadership Team and the change in
business strategy).
The FY19 KPIs included a gateway hurdle and
moderating factors as preconditions used to
determine events which automatically trigger
Board consideration to rerate the STI pool for the
whole organisation, a team or individual.
In FY19 the gateway hurdle was classified as a
fatality, which would automatically trigger Board
consideration to rerate the STI pool.
Moderating factors address matters not foreseen
or adequately addressed in setting the FY19 KPIs.
Moderating factors may be used to determine
team or individual STI outcomes irrespective of
the overall achievement against the FY19 KPIs.
Examples of moderating factors were: any serious
safety incidents, serious regulatory or contract
breaches, actions that result
in reputational
damage to Infigen or conversely progress made to
deliver projects that would defend, preserve or
increase security holder value that were not within
the scope of the KPIs.
The Board determined that neither the ‘gateway
‘moderating factors’
hurdle’ or any negative
occurred during the year. Consequently, no
downward adjustment to the STI opportunity was
applied.
In determining
Individual STI payments awarded to KMP in FY19
were between 90% 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.
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
employee’s performance, which
into
consideration amongst other things the manner
and substance in which the KPIs were achieved
and the employee’s performance throughout the
year.
takes
44
INFIGEN ENERGY 2019 ANNUAL REPORT
Deleveraging
Table 1: Progress towards delivering Infigen’s strategic objectives since January 2017
Financial Year 2018
Strategic Objectives
$149.1 million
Underlying EBITDA
$517.5 million
Corporate Debt
556.7 MW + 113.2 MW under construction
Nil
$161.6 million
> 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:
o Achieve appropriate value from the
Financial Year 2017
$139.3 million
$655.5 million
Corporate Debt
556.7 MW
Nil
$133.9 million
> Raised new equity capital ($151 million) to
Renewable Energy Generation
Firming Capacity
Contracted Revenue
Create a capital structure to
support Infigen’s business
strategy
Global Facility at the optimal time; and
> Reduced total borrowings by $88.6 million.
> Positioned itself to refinance its existing
$1.8 million
Bodangora Facility
$158.6 million
Bodangora Facility
support its growth strategy;
existing portfolio;
o Support growth
in response to
demand-based price signals; and
o Enable the Boards’ to consider the
sustainable
reintroduction
distributions to security holders.
of
Implement the Multi-Channel
Route to Market Strategy
> Restructured company to introduce energy
markets team to implement trading and
retailing capability in terms of human and
systems capacity
> Achieved our preferred diversification
for sale of production across key sales
channels; and
> Diversified sales channels to enhance
the predictability and
stability of
revenues in a risk managed manner,
which is a crucial element of the business
strategy.
Expanding the sourcing of
energy supply within the
portfolio
> Reached Financial Close on Bodangora
Wind Farm (113MW of new capacity).
Other strategic projects
> Developed an implementation plan for the
revised business strategy to position Infigen
to respond to challenges in the market and
capture opportunities that may arise;
> Executed fleet-wide service agreements to
stabilise long term operating costs; and
in management
to
transition of the business strategy.
> Invested
support
45
> Progressed the firming of production
and
financial
through
physical,
contractual solutions;
> Continued construction of Bodangora
Wind Farm on budget and on track for
commercial operation in 2018; and
> Progressed
> Achieved an orderly
investment cases
from
Infigen’s development pipeline projects.
transition of
Operations and Maintenance
from
Suzlon to Vestas (Capital and Woodlawn
Wind Farm) effective 31 December 2017.
$155.3 million
Bodangora Facility
89 MW Contracted Assets
Financial Year 2019
$165.3 million
$483.8 million
Corporate Debt
669.9 MW Owned Assets
148 MW
$182.0 million
> Implemented a Capital Management strategy enabling Infigen to respond to market
dynamics, capture emergent opportunities and manage risk inherent in the Australian
energy market. The Capital Management strategy balances accretive growth, returns
to security holders and continued balance sheet improvement. In FY19 this was
demonstrated by:
o Accretive investment: SA Battery and Smithfield OCGT;
o Returns to security holders: 1 cps for 2HY19, sustainable through the cycle for each
HY; and
o Continued deleveraging.
> Infigen has also advised that it expects that growth on installed generation for sale will
come through the Capital Lite strategy (Kiata Wind Farm and Cherry Tree Wind Farm)
committed in FY19 and the growth of Firming Assets to support the growth of the
reliable revenue from C&I sales will come from assets on balance sheet (SA Battery and
Smithfield OCGT).
> Increase in contracted revenues, delivering stable and reliable revenue outcomes:
o 73% of Electricity Revenue from medium-long term contracts
o 95% of LGC Revenue contracted
o Strong contracted sales as Infigen enters FY20: 75% of renewable energy
generation and 100% of expected LGC Production
> Development and construction of the SA Battery and acquisition of the Smithfield
OCGT will facilitate growth in MWh for sale through longer dated C&I and wholesale
contracts which aim to deliver reliable and sustainable revenue; and
> Invested in enhanced customer service and billing capability to enable Infigen to better
service customers with multiple sites.
> Achieved Practical Completion of the 113 MW Bodangora Wind Farm;
> Increased MWh available for sale through the Capital Lite strategy by:
o entry into 5 year PPA as an electricity offtaker with the 31 MW Kiata Wind Farm
located in Victoria; and
o entry into a 15 year PPA in respect of the 58 MW Cherry Tree Wind Farm
development project in Victoria.
> Acquisition of 123 MW Smithfield OCGT; and
> Progressed development of Flyers Creek Wind Farm.
> Development and construction of SA Battery;
> Updated Strategy to reflect execution to date and refine direction based on evolving
market conditions and Infigen’s successful acquisition of renewable energy and firming
assets.
> The Smithfield OCGT acquisition positions Infigen to source an additional 300-400 MW
of renewable energy capacity and grow long-term contracting levels to approximately
75%; and
> Committed to target carbon neutrality for the entire business by FY25.
1.2.1.
Short Term Incentive Deferral
In FY19 20% of the KMP’s STI payment was
deferred for 12 months. Deferred STI is paid in cash
at the end of the deferral period provided the
employee has not
their
employment terminated for cause prior to the
payment date.
resigned or had
The deferred payment is subject to a Clawback
provision.
Infigen issued 398,362 securities following the
release of the FY18 financial results to satisfy
vesting obligations of the FY17 deferred STI. As at
30 June 2019 these performance rights have not
vested as no employee trading window has
forfeiture
opening during
conditions remain during this period, effectively
creating a two-year deferral.
the period. The
1.3. Clawback
awards.
Infigen currently has a modified form of Clawback
right in respect of LTI performance rights and
deferred STI
Infigen’s Clawback
provisions are broader than a traditional malus
provision. These Clawback provisions apply to
current employees and former employees that are
not deemed a ‘Bad Leaver’ upon termination of
employment. The Clawback provision allows
forfeiture of some or all deferred STI and/or
unvested LTI performance rights if a previously
vested LTI grant or STI payment was associated
with a materially adverse financial misstatement,
or if a Final Investment Decision has materially
overstated the projected financial performance of
the relevant asset or investment.
1.4. Long Term Incentives
LTIs are awarded as future rights to acquire
Infigen 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 FY19
the reference price was $0.6697.
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.
c.
Performance Conditions
FY17
FY18 & FY19
Tranche 1
Relative TSR
Relative TSR
Tranche 2
EBITDA /
Capital
Progress in implementing
the revised business
strategy
1.4.1. 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 FY17 Grant
is from 1 July 2016 to 30 June 2019. The Tranche 1
performance condition was not achieved and has
now entered a final twelve-month retest period
ending 30 June 2020. 100% of the Tranche 2
performance rights will vest.
1.4.2. FY18 LTI Grant
The Tranche 1 performance condition is TSR.
The Tranche 2 operational performance condition
was changed to a revenue diversity and growth
matrix that rewards achievements in delivering
specific targets set out in the 5 Year Business Plan.
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.
1.4.3. FY19 LTI Grant
The Tranche 1 performance condition is TSR.
As outlined in the 2018 Notice of AGM and
Supplementary announcement of 19 October
2018, the Tranche 2 operational performance
condition was changed to a strategic objectives
scorecard to measure progress in implementing
the
increase
sustainable value through de-risking revenue and
achieving prudent growth.
revised business strategy
to
The 3-year performance period of the FY19 Grant
is from 1 July 2018 to 30 June 2021, after which all
unvested rights will lapse.
The Board has discretion to adjust the vesting
outcomes under each performance condition
(both upwards and downwards) including in the
following circumstances:
a. a fatality occurring any time prior to the
vesting date;
b. where
Infigen experiences a significant
negative security holder experience, including
where the absolute TSR is negative and the
Board considers the vesting outcome is
inappropriate;
if the Board determines that the operational
performance condition outcome does not
satisfactorily reflect the sustainable economic
value created for Infigen and its security
holders during the performance measurement
period;
d. a significant corporate transaction eventuates
that the Board considers has affected, or will
materially affect, the achievability of a
performance condition or the continued
applicability of the performance condition;
if there have been material misstatements or
such
misrepresentations
adjustments.
that warrant
e.
46
INFIGEN ENERGY 2019 ANNUAL REPORT
1.4.4. 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 FY18 and FY19 Tranche 1 performance rights to vest, the TSR of Infigen 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).
Following the rerating of Infigen’s 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. This vesting scale only applies to the FY17 grant.
Table 2: 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
Between the
50th and 75th percentile
Between the
76th and 95th
percentile
Above the
95th percentile
FY17
g
n
i
t
s
e
v
s
d
r
a
w
A
FY18
&
FY19
f
o
e
g
a
t
n
e
c
r
e
P
0% vesting
25% vesting
An additional 1% of
awards vest for
each percentile
increase
50% vesting
0% vesting
0% vesting
0% vesting
50% vesting
An additional 2%
of the award vests for
each percentile
increase
An additional 2%
of the award vests for
each percentile
increase
100% vesting
100% vesting
1.4.5. Operational Performance Condition
FY17 LTI Grant
The annual target used in respect of all LTI grants up to and including FY17 was 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 was 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 3: Five Year Financial Performance
Closing security price
Underlying EBITDA
Capital Base
EBITDA to Capital Base
Target
Unit
30 June 2015
30 June 2016
30 June 2017
30 June 2018
30 June 2019
$
$ ‘000
$ ‘000
%
%
0.32
1.00
0.73
0.66
0.475
186,583
120,196
143,412 1
149,102
165,257
1,639,635
1,021,051
1,019,834
1,153,062
1,187,113
11.38
10.83
11.77
10.00
14.06
12.49
12.9
11.46
13.92
13.16
Table 4: Tranche 2 EBITDA Performance Rights in FY17 Vest Progressively as Follows
Infigen’s EBITDA performance
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
1 Underlying EBITDA adjusted for inclusion of profit on sale of the Manildra solar farm development project
47
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 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 end of the performance measurement period.
The Board will disclose the assessment criteria taken into consideration when determining the vesting
outcome as at 30 June 2020.
FY19 LTI Grant
The operational performance condition will assess progress in implementing the business plan to preserve
and create Infigen security holder value while managing risk. Performance will be assessed against a scorecard
setting out the strategic objectives, quantifiable measures and Board assessment criteria that will be used for
determining the amount of Tranche 2 performance rights that will vest.
Each strategic objective will be assessed separately and then aggregated to determine the final vesting
percentage. This is to be overlaid with the Board’s qualitative assessment of how the company has performed
in implementing the company’s strategy. The Board may exercise discretion when assessing individual and
team performance in delivering the strategic objectives.
The Table below illustrates the five strategic objectives and performance assessment criteria included within
the scorecard. Specific targets and other metrics that are commercial-in-confidence have not been disclosed,
however the Board will disclose the assessment criteria taken into consideration when determining the
vesting outcome as at 30 June 2021.
Table 5: Criteria included within the FY19 Operational Performance Scorecard
Strategic objective
Performance assessment criteria
Preservation and creation of Security
Holder value while managing market risk
Successful implementation of the Multi-Channel Route to Market Strategy which seeks to
balance tenor, price and risk for revenue received from electricity and Large-scale
Generation Certificates. This includes specific targets for contracted revenue streams.
Capital management
Prudent investment
The further development and implementation of a capital management strategy which
supports the execution of the broader business strategy, including target financial ratios
to be achieved within a defined period.
Growth in capacity and firming capability is to be undertaken in a disciplined manner that
creates value by meeting a defined equity hurdle rate and/or by materially reducing risk.
Develop and maintain a high-
performance culture
Implementation of a People and Culture strategy that recognises and values high
performance, as well as being results oriented and emphasizing accountability. Targets
include achievement of specific human resource related metrics.
Transformational business opportunities
Operating in a dynamic energy market involves identifying, exploring and implementing
initiatives to preserve and create security holder value.
48
INFIGEN ENERGY 2019 ANNUAL REPORT
1.4.6. FY17 LTI Performance
The initial 3-year performance period for the FY17 LTI grant ended on 30 June 2019. The Tranche 1
performance condition was not achieved and has now entered a final twelve month retest period ending 30
June 2020. The Tranche 2 operational performance condition of the FY17 LTI grant passed the performance
test as at 30 June 2019. This will result in 100% of the Tranche 2 performance rights vesting.
1.5.
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.
1.6. Separation Benefits
The Board intends to continue to limit any future separation benefits to a maximum of 12 months’ fixed
remuneration.
Infigen Energy – Executive KMP Statutory Remuneration Details
1.7. Statutory Remuneration Data for the Year Ended 30 June 2019
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.
Table 6: Statutory Remuneration Data for Executive KMP
Short-term employee benefits
Post
employ-
ment
benefits
Other
long-term
employee
benefits
Deferred
STI
Share-
based
payments
Executive
Year
STI payable
in current
period
Other
pay-
ments1
Term-
ination
payments
Total of
short-term
employee
benefits
Super-
annuation
LSL
accrual
Cash
Settled2
Equity
settled3
Total
($)
($)
($)
($)
($)
($)
($)
($)
($)
Salary
($)
R Rolfe
S Wiggins
P Simshauser
O Sela 4
T Clark
Total
remuneration
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
835,969
597,600
816,451
345,216
707,469
377,200
679,951
364,000
471,469
277,160
275,381
73,632
226,617
-
397,951
97,092
-
-
-
-
-
-
-
-
383,469
127,440
80,000
371,951
80,280
-
- 1,433,569
20,531
5,397
86,304 306,427 1,852,228
- 1,161,667
20,049
2,600
- 222,391 1,406,707
- 1,084,669
20,531
4,619
91,000 118,982 1,319,801
- 1,043,951
20,049
2,143
-
51,030 1,117,173
748,629
20,531
1,471
18,408
47,314
836,353
349,013
14,338
716
14,336
240,952
12,359
-
495,043
20,049
1,255
-
-
-
15,684
379,751
-
253,311
46,511
562,858
590,909
20,531
2,489
20,000
39,332
673,331
452,231
20,049
1,196
-
15,725
489,201
-
-
-
-
-
FY19
2,624,993
1,379,400
80,000
14,336 4,098,728
94,483 13,976 215,782 512,055 4,935,024
FY18
2,541,685
960,220
-
- 3,501,905
94,534
7,910
- 351,341 3,955,690
1 The Board substituted Mr Clark’s participation in the FY17 LTI Grant with a one-off Project Incentive payable for the
delivery of the Bodangora Wind Farm
2 20% of the FY18 STI is deferred for 12 months and will be cash settled
3 Includes FY17 deferred STI settled in Infigen securities
4 Resigned effective 18 January 2019
49
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 Infigen 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 7: 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
R Rolfe
S Wiggins
P Simshauser
T Clark
Grant
FY17
FY18
FY181
FY19
Total
FY18
FY1817
FY19
Total
FY18
FY19
Total
FY18
FY19
Total
FY18
($)
71,848
65,439
85,104
-
222,391
49,361
1,669
-
51,030
15,684
-
15,684
15,725
-
15,725
FY19
($)
119,747
118,342
29,922
38,416
306,427
89,267
587
29,128
118,982
30,858
16,456
47,314
28,438
10,894
39,332
FY20
($)
-
118,661
-
65,397
184,058
89,507
-
49,585
139,092
30,942
28,013
58,955
28,515
18,546
47,061
FY21
($)
-
-
-
65,219
65,219
-
-
49,449
49,449
-
27,937
27,937
-
18,495
18,495
1.8. Unvested Performance Rights
The table below provides details of outstanding performance rights relating to Infigen securities that have
been granted to Executive KMP (FY17, FY18 and FY19 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 8: 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
FY181
FY19
369,230 23 Nov 17
620,156 23 Nov 17
170,409 23 Nov 17
500,224 28 Nov 18
S Wiggins
FY18
467,790 23 Nov 17
P Simshauser
T Clark
FY181
FY19
FY18
FY19
FY18
FY19
3,342 23 Nov 17
379,274 28 Nov 18
157,712 11 Dec 17
214,275 28 Nov 18
149,025 23 Nov 17
141,855 28 Nov 18
($)
0.5189
0.4577
0.6750
0.4677
0.4577
0.6750
0.4677
0.4611
0.4677
0.4577
0.4677
($) 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
233,955
30 Jun 21
30 Jun 21
214,124
30 Jun 20
30 Jun 20
-
-
15 Sep 19
2,256
-
-
15 Sep 19
177,386
30 Jun 21
30 Jun 21
72,725
30 Jun 20
30 Jun 20
100,216
30 Jun 21
30 Jun 21
68,214
66,346
30 Jun 20
30 Jun 20
30 Jun 21
30 Jun 21
1 Relates to the FY17 deferred STI that should have vested in or around September 2018, however an employee trading
window did not open throughout FY19. Vesting will not occur until an employee trading window is opened
2 Rounded down to 4 decimal places. Small variations in the ‘Value of Performance Rights granted at grant date will occur
-
-
-
-
-
-
-
50
INFIGEN ENERGY 2019 ANNUAL REPORT
Table 9: 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 Executive KMP over the period
1 July 2018 to 30 June 2019. No performance rights vested during the year ending 30 June 2019 as an
employee trading window did not open during the year.
R Rolfe
S Wiggins
P Simshauser
O Sela 1
T Clark
Balance at30 June 2018
Granted
Vested
Lapsed
Balance at 30 June 2019
1,159,795
471,132
157,712
261,664
149,025
500,224
379,274
214,275
-
141,855
-
-
-
-
-
-
-
-
261,664
-
1,660,019
850,406
371,987
-
290,880
2. Executive KMP Employment Contracts
The base salaries (excluding superannuation guarantee payments) for Executive KMP as at 30 June 2019 are
as follows:
R Rolfe
S Wiggins
P Simshauser
T Clark
As at 30 June 2019
$835,969
$707,469
$471,469
$383,469
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
> 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 Energy 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 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.
Diminishing
Deferred Payment
> Both R Rolfe and S Wiggins were entitled to a one off diminishing deferred payment, payable on
18 November 2019.
> Payment was subject to a formula that reduced the benefit to zero when payments of fixed remuneration,
STI payments or awards and vested LTI payments exceeded the diminishing deferred payment amount.
> Once these executives receive their FY19 STI payments in September 2019, no diminishing deferred
payment will be payable.
1 Unvested performance rights lapsed on 18 January 2019
51
3. 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.
Annual Board fees have remained set at the current value since 1 July 2008, Chairman fees were adjusted on
1 July 2012, and Committee fees were adjusted on 1 July 2016.
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.
3.1. Board/Committee Fees
Aggregate annual fees payable to Non-Executive Directors during 30 June 2019 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
$10,000
3.2. Remuneration of Non-Executive Directors for the Year Ended 30 June 2019
The nature and amount of each element of fee payments to each Non-Executive Director of Infigen for the
years ended 30 June 2018 and 30 June 2019 are set out in the table below.
Non-Executive Directors
Year
Fees
IERL
($)
IEL & IEBL2
($)
L Gill3
M Chellew4
E Stein 5
P Green6
K Smith-Pomeroy7
M Hutchinson8
F Harris9
Total Remuneration
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
114,735
87,067
61,689
47,691
67603
51,784
-
-
34,647
-
-
57,488
-
45,068
278,674
289,098
114,735
87,067
81,689
57,691
77,603
54,553
-
-
34,647
-
-
57,488
-
51,735
308,674
308,534
Superannuation
($)
20,531
15,644
13,621
10,011
13,794
10,102
-
-
6,583
-
-
10,024
-
8,047
54,529
53,828
Total
($)
250,000
189,778
157,000
115,393
159,000
116,439
-
-
75,877
-
-
125,000
-
104,850
641,877
651,460
1 No Committee fees are paid to the Chairman of the Infigen Boards
2 IEBL was unstapled from IEL and IET on 22 November 2018 and de-listed from the Official List of the ASX at the close of
business 26 November 2018. IEBL is now a wholly-owned subsidiary company of IEL and is expected to be wound up in
due course
3 L Gill was appointed as a Chairman of IEL 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 and IERL
4 M Chellew was appointed as a Non-Executive Director of IEL and IERL on 21 September 2017. Mr Chellew became a member
of the ARCC on 24 Oct 2017 and Chairman of the NRC on 1 January 2018
5 E Stein was appointed as a Non-Executive Director of IEL and IERL on 21 September 2017. Ms Stein became Chairman of
the ARCC on 24 Oct 2017 and a member of the NRC on 22 March 2018
6 P Green was appointed as a Non-Executive Director of IEL and IERL on 18 November 2010. Mr Green is a partner of TCI
Advisor Services LLP which is an advisor to a substantial shareholder of Infigen. Since being appointed, Mr Green has
elected to receive no Director fees
7 K Smith-Pomeroy was appointed as a Non-Executive Director of IEL and IERL on 12 December 2018. Ms Smith-Pomeroy
became a member of the ARCC on 12 December 2018
8 Non-Executive Director fees are for the period 1 July 2017 to 31 December 2017
9 Non-Executive Director fees are for the period 1 July 2017 to 19 February 2018
52
INFIGEN ENERGY 2019 ANNUAL REPORT
4. Guideline for Minimum Security Holdings for Non-Executive Directors
Non-Executive Directors who receive payment of Director Fees from Infigen are encouraged to acquire
Infigen securities equivalent to the after-tax value of one year’s Director base fee. The acquisition of the
relevant amount of Infigen securities should be completed within 3 years of being appointed and
subsequently elected as a Non-Executive Director. The acquisition of Infigen securities under this guideline is
subject to Infigen’s Securities Trading Policy and sufficient trading windows being open during the relevant
period.
Because of the confidential, material and price sensitive nature of information relating to certain projects
undertaken this year, some of which have now been disclosed to the market, Infigen employees and Directors
were not permitted to trade Infigen securities throughout the year. These trading restrictions prevented
Directors from acquiring any Infigen securities towards meeting the minimum-security holding guidelines.
Table 10: Infigen Security Holdings of Non-Executive Directors and Executive KMP
Infigen security holdings of Non-Executive Directors and KMP, including held by their personally related
parties, over the period 1 July 2018 to 30 June 2019 are set out in the table below.
Balance at 30 June 2018
Acquired during FY19
Sold during the year
Balance at 30 June 2019
L Gill
M Chellew
E Stein
P Green
K Smith-Pomeroy
R Rolfe
S Wiggins
P Simshauser
T Clark
64,220
-
-
-
-
130,869
12,173
-
60,869
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64,220
-
-
-
-
130,869
12,173
-
60,869
5. 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 a remuneration advisor during the year to provide market practice
information and options in relation to the FY19 LTI. 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.
53
OTHER DISCLOSURES
Company Secretary
Subsequent Events
There were no transactions or events of a material
or unusual nature, not otherwise dealt with in this
Directors’ 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.
is
David Richardson was appointed Company
Secretary of IEL and IERL on 26 October 2005.
the General Manager Corporate
David
Governance & Company Secretary of Infigen 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
Infigen declared a distribution of one cent per
security in relation to the six-months ended 30
June 2019 (30 June 2018: Nil). A Distribution
Reinvestment Plan (DRP) was also made available
to security holders as part of the distribution, with
the last date for DRP elections being 1 July 2019.
Further details regarding distributions are set out
in Note B7 and 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 16 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.
54
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 56.
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
Instrument
(ASIC) Corporations
Commission
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.
INFIGEN ENERGY 2019 ANNUAL REPORT
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 (ARCC) 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. Furthermore, approval is required to be
obtained from ARCC Chairman and ARCC prior to
the engagement of these services, to the extent
the expected value of these services is above the
dollar threshold set by the ARCC.
Non-audit services provided during the financial
year consist of taxation related services (including
general compliance and advisory) and transaction
and advisory services. Fees paid or payable to the
auditor for these services during the financial year
are summarised in the below table.
Non-audit services
Taxation related services
Transaction and advisory services
30 June 2019
89,627
155,976
245,603
On behalf of the Directors of IEL and IERL:
Leonard Gill
Chairman
Ross Rolfe AO
Chief Executive Officer / Managing Director
55
I
p,wc
Auditor's Indep endence De clqration
As lead auditor for the audit of Infigen Enerry Group and Infigen Energy Trust Group for the year
ended 3o June zorg,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 zool in
relation to the audit; and
(b) no contraventions ofanyapplicable code ofprofessional conduct in relation to the audit.
This declaration is in respect of Infigen Energy Group and Infigen Energy Trust Group and the entities
they controlled during the period.
il,,
CraigThomason
Partner
PricewaterhouseCoopers
Sydney
zz August zorg
PricewqterhouseCoopers,ABN ge 78o 4Sg 757
One InternationalTowers Sydney,Watermans Quay, Barangaroo, GPO BOX 265o, SYDNEY NSW zoot
T : +6t z 8266 oooo, F: +6t z 8266 9999, tuww.pwc.com.au
Icuel n, ;?SQ, t6g Macquarie Street, Parramatta NSW zt5o, PO Box ttg5 Parramatta NSW ztz4
T: +6t z 9659 2476, F: +6t z 8266 9999,utDto.puc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
56
INFIGEN ENERGY 2019 ANNUAL REPORT
FINANCIAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS OF:
Comprehensive Income
Financial Position
Changes in Equity
Cash Flows
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 Security
B7. Distributions
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. Inventories
G7. Contingent Liabilities
G8. Events Occurring After the Reporting Period
57
58
59
60
61
62
62
63
64
64
66
67
67
68
70
70
71
71
72
73
74
74
74
75
76
77
77
78
78
79
79
81
81
83
85
86
86
87
88
89
89
90
90
90
Consolidated Statements of Comprehensive Income
for the year ended 30 June
($’000)
Revenue and other income
Revenue
Other income
Total revenue and other income
Expenses
Depreciation and amortisation expense
Asset operating costs
Interest expense
Cost of sales
Corporate costs
Impairment of intangible development assets
Other finance costs
Development costs
Share of net loss of equity accounted investments
Impairment of financial assets
Responsible entity expenses
Profit / (loss) before income tax
Income tax (expense) / benefit
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 / (loss)
Net profit / (loss) attributable to:
−
−
Equity holders of the parent
Equity holders of the other stapled entities
Total comprehensive income / (loss) attributable to:
−
−
Equity holders of the parent
Equity holders of the other stapled entities
Basic and diluted earnings per security from net profit
attributable to:
−
−
Equity holders of the parent
Stapled security holders of Infigen
B6
B6
INFIGEN
TRUST
Note
2019
2018
2019
2018
B2
B3
B1
B4
G2
B5
257,506
9,332
266,838
(54,555)
(41,356)
(40,151)
(28,169)
(19,544)
(9,068)
(8,066)
(3,681)
(852)
-
-
61,396
(20,505)
40,891
223,755
6,338
230,093
(51,444)
(40,002)
(32,866)
(13,688)
(16,471)
-
(51,601)
(4,459)
(33)
-
38,797
38,797
-
30,161
30,161
-
-
-
-
(1)
-
-
-
-
-
-
-
-
(4)
-
-
-
-
-
-
(127,680)
(713)
(133,697)
(698)
19,529
26,144
45,673
(89,597)
(104,238)
-
-
(89,597)
(104,238)
(20,282)
20,609
46,834
92,507
-
(89,597)
-
(104,238)
40,795
96
40,891
20,513
96
20,609
cents
4.3
4.3
45,999
(326)
45,673
92,833
(326)
92,507
cents
4.8
4.8
-
(89,597)
(89,597)
-
(104,238)
(104,238)
-
(89,597)
-
(104,238)
(89,597)
(104,238)
cents
(9.4)
-
cents
(10.9)
-
The above consolidated statements of comprehensive income should be read in conjunction with the
accompanying notes.
58
INFIGEN ENERGY 2019 ANNUAL REPORT
Consolidated Statements of Financial Position
for the year ended 30 June
($’000)
Note
2019
2018
2019
2018
INFIGEN
TRUST
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Receivables
Investments accounted for using the equity method
Derivative financial instruments
Total assets
Current liabilities
Payables
Distribution payable
Borrowings
Derivative financial instruments
Provisions
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained losses
Total equity
Attributable to:
Equity holders of the parent
Contributed equity
Reserves
Retained losses
Equity holders of the other stapled entities
Contributed equity
Retained losses
Total equity
D2
G6
E5
C1
C2
B5
E5
B7
D3
E5
D3
E5
D4
G4
103,681
20,317
27,157
3,502
154,657
991,815
101,321
14,400
2,828
500
11,738
1,122,602
1,277,259
18,689
9,566
53,513
12,115
3,903
97,786
565,902
19,090
11,179
596,171
693,957
583,302
914,223
(69,146)
(261,775)
583,302
2,305
(69,146)
(234,026)
(300,867)
911,918
(27,749)
884,169
583,302
144,898
14,935
43,327
2,080
205,240
896,431
115,320
26,376
3,512
1,244
10,691
1,053,574
1,258,814
18,254
-
41,219
3,250
3,504
66,227
608,880
2,981
9,033
620,894
687,121
571,693
918,870
(47,816)
(299,361)
571,693
2,305
(47,816)
(274,821)
(320,332)
916,565
(24,540)
892,025
571,693
442
10,000
-
-
10,442
-
-
-
548,517
-
-
548,517
558,959
1,411
9,566
-
-
-
10,977
-
-
-
-
10,977
547,982
911,918
-
(363,936)
547,982
439
-
-
-
439
-
-
-
645,790
-
-
645,790
646,229
698
-
-
-
-
698
-
-
-
-
698
645,531
910,304
-
(264,773)
645,531
911,918
-
(363,936)
547,982
910,304
-
(264,773)
645,531
-
-
-
-
-
-
547,982
645,531
The above consolidated statements of financial position should be read in conjunction with the accompanying
notes.
59
Consolidated Statements of Changes in Equity
for the year ended 30 June
INFIGEN
Attributable to:
($’000)
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
Opening balance – 2019
Net profit 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
Distributions paid or provided for
Securities issued - Infigen Energy
Equity Plan
Recognition of share-based payments
De-stapling of IEBL securities
IEBL de-stapling transfer of retained
losses
Closing balance – 2019
Contributed
equity
2,305
-
-
-
-
-
2,305
2,305
-
-
-
-
-
-
-
-
Equity holders of the parent Equity holders
of the other
stapled
entities
889,444
(326)
Retained
losses
(320,820)
45,999
Total
(410,070)
45,999
Total equity
479,374
45,673
-
46,834
-
46,834
Reserves
(91,555)
-
46,834
46,834
45,999
92,833
(326)
92,507
-
-
-
2,907
2,907
(3,095)
(47,816)
-
(274,821)
(3,095)
(320,332)
(47,816)
-
(20,282)
(274,821)
40,795
(320,332)
40,795
-
(20,282)
(20,282)
40,795
20,513
-
-
(1,048)
-
-
-
-
-
-
-
-
-
(1,048)
-
-
-
892,025
892,025
96
-
96
(9,566)
1,614
-
(6,261)
6,261
(3,095)
571,693
571,693
40,891
(20,282)
20,609
(9,566)
1,614
(1,048)
(6,261)
6,261
2,305
(69,146)
(234,026)
(300,867)
884,169
583,302
($’000)
Opening balance – 2018
Net loss for the year
Total comprehensive income for the
year
Transactions with equity holders
Securities issued - Infigen Energy Equity
Plan
Closing balance – 2018
Opening balance – 2019
Net loss for the year
Total comprehensive income for the
year
Transactions with equity holders
Distributions paid or provided for
Securities issued - Infigen Energy Equity
Plan
Closing balance – 2019
Contributed
equity
907,397
-
-
2,907
910,304
910,304
-
-
-
1,614
911,918
TRUST
Reserves
-
-
-
-
-
-
-
-
-
-
-
Retained
losses
(160,535)
(104,238)
Total
746,862
(104,238)
(104,238)
(104,238)
-
2,907
(264,773)
645,531
(264,773)
(89,597)
645,531
(89,597)
(89,597)
(89,597)
(9,566)
-
(9,566)
1,614
(363,936)
547,982
The above consolidated statements of changes in equity should be read in conjunction with the accompanying
notes.
60
INFIGEN ENERGY 2019 ANNUAL REPORT
Consolidated Statements of Cash Flows
for the year ended 30 June
($’000)
Note
2019
2018
2019
2018
INFIGEN
TRUST
Cash flows from operating activities
Receipts from customers and compensation claims
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Income tax paid
Net cash inflow
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Proceeds from sale of development assets
(intangibles)
Gain on disposal of investments
Government grants received
Payments for equity accounted investments
Net cash outflow
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of new borrowings transaction costs
Payment for interest rate derivatives termination
Loans provided to related parties
Repayment of loan by a related party
Net cash outflow
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
G3
C2
C1
271,002
(88,997)
2,278
(40,023)
-
144,260
201,678
(71,857)
5,421
(34,796)
-
100,446
(154,489)
(6,271)
(143,016)
(602)
6,500
-
-
5,900
(108)
(148,468)
644
-
(68)
(143,042)
4,148
(41,219)
-
-
-
-
(37,071)
681,800
(663,636)
(28,444)
(55,230)
-
-
(65,510)
(41,279)
144,898
(108,106)
251,786
62
1,218
103,681
144,898
-
-
4
(1)
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
439
-
442
-
-
36
(5)
-
31
-
-
-
-
-
-
-
-
-
-
-
(189,921)
184,814
(5,107)
(5,076)
5,515
-
439
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
61
A REPORT OVERVIEW
Infigen comprises Infigen Energy Limited (IEL) and Infigen Energy Trust (IET), and their controlled entities.
The Trust comprises IET and its controlled entities.
IEL is determined to be the parent entity of Infigen.
One share in IEL and one unit in IET have been stapled together to form a single Infigen stapled security 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.
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 applicable, in
the Consolidated Financial Statements.
De-stapling of Infigen Energy (Bermuda) Limited
On 22 November 2018, Infigen Energy (Bermuda) Limited (IEBL) was removed from the Official List of ASX
following security holder approval of Infigen’s simplified corporate structure at the 16 November 2018 AGM.
Trust information
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 with the Scheme is governed by the Constitution of IET.
Statement of compliance
As permitted by Australian Securities and Investments Commission (ASIC) Corporations Instrument 2015/843, this
report consists of the Consolidated Financial Statements and accompanying notes of both Infigen and the Trust
for the year ended 30 June 2019 (the reporting period).
As permitted by ASIC Class Order 13/1050, the Consolidated Financial Statements treat IEL as the ‘parent’ of the
stapled entities.
A1 Basis of Preparation
Infigen and the Trust are for-profit entities for the purpose of preparing the Consolidated Financial Statements.
These Consolidated Financial Statements have been prepared in accordance with the Corporations Act 2001,
Australian Accounting Standards, and International Financial Reporting Standards (IFRS).
These Consolidated Financial Statements have been prepared on the basis of the legislative and regulatory regime
that existed as at 30 June 2019 and at the date of this report. Changes to the regulatory regime could affect the
carrying values of assets.
These Consolidated Financial Statements have been prepared on the going concern basis using the historical cost
conventions modified by the revaluation of financial assets and liabilities (including derivative financial instruments)
measured at fair value, where applicable.
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current
financial year amounts.
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 (Rounding in Financial/Directors’ Reports) Instrument
2016/191.
62
INFIGEN ENERGY 2019 ANNUAL REPORT
A2 New and Amended Accounting Standards
Adopted standards
Except for those summarised in the following table, new and amended accounting standards adopted during the
reporting period did not result in changes to the accounting policies, or retrospective adjustments to the financial
results, of Infigen or the Trust.
AASB 15 Revenue from Contracts with Customers (effective for the financial year commencing 1 July 2018)
Nature of change
Effect on financial statements
> The application of AASB 15 did not have a material
change on
recognition, and
the presentation,
measurement of revenue for Infigen or the Trust
> AASB 15 replaced 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
Standards not yet adopted
Except for those summarised in the following table, new and amended accounting standards available for early
adoption, but not yet adopted, are not anticipated to have a material effect on the accounting policies or the
financial results of Infigen or the Trust.
AASB 16 Leases (effective for the financial year commencing 1 July 2019)
Nature of change
Effect on financial statements
Infigen intends to apply the modified retrospective
approach
Infigen has completed an indicative assessment of the
effect of AASB 16, and estimates the following effects on
Infigen’s consolidated statement of financial position as at
1 July 2019:
ROU assets
Lease liabilities
$40.8 million
$30.8 million
>
Infigen is not anticipating that the adoption of the
standard will affect its ability to comply with debt
covenants
> Short-term
leasing costs and non-lease component
expenditure will continue to be charged against EBITDA
> The actual financial effect on the results for FY20 will be
contingent on any new leases entered into, or any lease
modifications that occur during the reporting period
> The Trust’s financial results are not expected to be
affected by AASB 16
> AASB 16, which replaces AASB 117 Leases,
removes the distinction between operating and
finance leases for lessees. The accounting for
lessors will not change significantly
>
>
> AASB 16 requires the recognition of a right-of-use
(ROU) asset (representing the right to use the
underlying leased asset) and associated lease
liability (representing the obligation to make lease
payments) for all contractual arrangements that
meet the definition of a lease
> The ROU asset will be depreciated over the lease
term on a straight-line basis, and interest expense
will be charged on the lease liability
> EBITDA will increase as the operating lease cost
currently charged against EBITDA under AASB 117
will be replaced with a depreciation and interest
charge, which are currently excluded from EBITDA
(although included in net profit before tax)
cash paid under
> Operating cash flows will increase as the element
of
lease arrangements,
attributable to the repayment of principal, will be
recognised within the financing cash flows. The net
increase/decrease in cash and cash equivalents will
remain the same
> A full retrospective or a modified retrospective
approach is permitted on adoption. The latter
option measures the lease liability at the present
value of future lease payments on the initial date of
application, while the ROU asset is measured as if
AASB
the
16 had been
commencement of the
lease. The difference
between the ROU asset and lease liability, adjusted
for deferred tax, is recognised as an adjustment to
opening retained earnings, therefore there is no
requirement
restatement of comparative
information
applied
from
for
63
B RESULTS
B1 Segment Information
Infigen generates and sources renewable energy, increases the value of intermittent renewables by
firming, and provides customers with clean, reliable and competitively priced energy solutions.
Revenues are derived from various market channels in Australia. Because of Infigen’s performance
from a geographic and product perspective, Australia has been identified as Infigen’s sole reportable
segment.
Only Infigen’s (and not the Trust’s) segment information is provided to the chief operating decision-makers, who
are deemed to be the Board of Directors (Board). Accordingly, only Infigen’s segment information has been
disclosed in this note.
The Board 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)
Note
Net revenue
Asset operating costs
Business operating costs
Share of net loss of equity accounted investments
Underlying EBITDA
Other income
Depreciation and amortisation expense
Impairment of development assets
Net gain on change in fair value of financial instruments
Earnings before interest and tax
Net finance costs
Profit before tax
Income tax (expense) / benefit
Net profit after tax
B5
INFIGEN
2019
229,337
(41,356)
(22,705)
(19)
165,257
47
(54,555)
(9,901)
6,487
107,335
(45,939)
61,396
(20,505)
40,891
2018
210,067
(40,002)
(20,930)
(33)
149,102
644
(51,444)
-
-
98,302
(78,773)
19,529
26,144
45,673
Underlying EBITDA per security (cents)
17.3
15.6
Infigen presents net revenue on a contracted and uncontracted basis which is disclosed below. Contracted revenue
includes electricity revenue via Power Purchase Agreements (PPAs), electricity revenue from Commercial &
Industrial (C&I) Customers, and contracted Large-scale Generation Certificates (LGCs) revenue. Uncontracted
revenue includes remaining electricity sales, and remaining LGC revenue. Uncontracted revenue is subject to price
risk.
($’000)
Contracted revenue
Uncontracted revenue
Compensated revenue
Note
B2
INFIGEN
2019
182,006
37,208
10,123
229,337
2018
161,560
48,414
93
210,067
64
INFIGEN ENERGY 2019 ANNUAL REPORT
The reconciliations of segment information to the statement of comprehensive income are disclosed in the
following tables.
Net revenue reconciliation
($’000)
Revenue
Cost of sales
Business operating costs reconciliation
($’000)
Corporate costs
Development costs
Management fee revenue
Net finance costs reconciliation
($’000)
Interest income
Foreign exchange gain
Interest expense
Other finance costs
Impairment of development assets reconciliation
($’000)
Impairment of development assets (intangibles)
Impairment of development assets (equity accounted investments)
Note
B2
Note
B3
Note
B3
B4
Note
C2
INFIGEN
2019
257,506
(28,169)
229,337
2018
223,755
(13,688)
210,067
INFIGEN
2019
19,544
3,681
(520)
22,705
INFIGEN
2019
2,278
-
(40,151)
(8,066)
(45,939)
2018
16,471
4,459
-
20,930
2018
4,834
860
(32,866)
(51,601)
(78,773)
INFIGEN
2019
9,068
833
9,901
2018
-
-
-
65
B2 Revenue
Revenue is recognised at an amount which reflects the consideration expected to be received
when control of a good or service is transferred to the counterparty.
Revenue type
Description
Energy and
environmental
products
Incorporates:
Electricity
> Electricity generated from Infigen’s own generation assets (after applying marginal loss factors). Infigen
is assessed as the principal because it controls the electricity before delivery to the National Electricity
Market (NEM). Revenue is recognised at the spot price achieved when the unit of electricity passes to
the NEM, which is when the performance obligation is considered to be satisfied
> Electricity sold to Infigen’s C&I customers under medium to long-term contracts at a fixed price and firm
volume. Where the contract is a retail supply agreement:
-
-
Infigen is assessed as the principal because it controls the electricity before delivery to the customer
Revenue is recognised at the contract price once the unit of electricity is delivered to the customer,
which is when the performance obligation is considered to be satisfied
The electricity supplied to the customer is purchased from the NEM and recorded as a component
of cost of sales within the consolidated statements of comprehensive income
-
> Net settlement from PPAs, which are accounted for as electricity derivative contracts, and where Infigen
is either the generator or the off-taker
> Net settlement from electricity derivative contracts such as ASX futures and options, and which are short
to medium-term in nature
LGCs
> An LGC represents 1 MWh of 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
Compensated
revenue
Includes:
> Liquidated damages as compensation for revenue losses caused by construction delays
> Proceeds arising from compensation claims made against the Australian Electricity Market Operator
(AEMO) and/or maintenance service providers
Revenue
($’000)
Energy and environmental products
Compensated revenue
Note
INFIGEN
2019
247,383
10,123
257,506
2018
223,662
93
223,755
Income recorded in accordance with UIG Determining whether an Asset Contains a Lease is $32,979,000 (2018:
$30,295,000). This amount is included within the energy and environmental products revenue disclosure above.
Further disaggregation of revenue is provided in Note B1.
66
INFIGEN ENERGY 2019 ANNUAL REPORT
B3 Other income
($’000)
Interest income
Net gain on change in fair value of financial instruments
Management fee revenue
Foreign exchange gains
Unwind of discount on related party loan receivables
Other
B4 Other finance costs
($’000)
Bank fees and amortisation of capitalised commitment fees
Unwind of discount on decommissioning provisions
Foreign exchange losses
Termination of interest rate swaps (A)
Fees incurred in relation to exploring refinance options (A)
Early expense of capitalised commitment fees (A)
INFIGEN
TRUST
2019
2,278
6,487
520
-
-
47
9,332
2018
4,834
-
-
860
-
644
6,338
2019
4
-
-
-
38,793
-
38,797
INFIGEN
2019
7,305
131
630
8,066
-
-
-
8,066
2018
36
-
-
1
30,124
-
30,161
2018
3,092
123
-
3,215
43,295
2,707
2,384
51,601
(A) These finance costs were incurred as a result of the early refinancing of the Global Facility and the Woodlawn
Project Finance (PF) Facility in the prior year.
67
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.
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.
68
INFIGEN ENERGY 2019 ANNUAL REPORT
Income tax
($’000)
Current tax
Deferred tax
Previously unrecognised tax losses brought to account
Income tax expense / (benefit)
Deferred tax expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
Reconciliation of accounting profit to tax expense / (benefit):
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
INFIGEN
2019
26,554
(6,049)
-
20,505
2018
811
8,700
(35,655)
(26,144)
4,109
(10,158)
(6,049)
(32,485)
5,530
(26,955)
61,396
18,418
2,049
-
38
19,529
5,859
3,198
(35,655)
454
20,505
(26,144)
33%
49%
-
-
Sundry items
Income tax expense / (benefit)
Effective tax rate
Tax paid / payable
Deferred tax assets
($’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:
Income
Equity
2018
Income
Equity
2019
35,080
-
107,618
(28,535)
-
(3,203)
(15,921)
(1,024)
8,517
79,083
9,362
2017
72,538
20,993
3,490
(196)
-
(1,092)
-
2,202
1,869
3,294
97,021
31,681
(15,921)
112,781
(30,651)
8,517
90,647
(64,699)
(8,085)
-
(3,922)
(4,849)
(4,913)
-
4,232
-
-
(3,831)
(338)
(69,548)
(12,998)
(3,831)
(28)
5,836
5,035
(741)
28
-
-
-
-
-
(63,712)
(7,963)
(4,572)
-
(76,247)
Deferred tax liabilities
(76,706)
(5,530)
(4,169)
(86,405)
10,158
Net deferred tax
20,315
26,151
(20,090)
26,376
(20,493)
8,517
14,400
Deferred tax assets expected to be recovered after more than 12 months from 30 June 2019 are $14,400,000
(2018: $26,376,000).
The above two tables contain certain disclosure in accordance with Part A of the Voluntary Tax Transparency
Code.
Unrecognised tax losses
($’000)
Unused tax losses for which no deferred tax asset has been recognised
Tax benefit at 30%
INFIGEN
2019
118,851
35,655
2018
118,851
35,655
69
B6 Earnings per security
Basic earnings per security (Basic EPS) is calculated by dividing net profit for the year by the
Weighted Average Number of Securities (WANOS) outstanding during the year. Basic EPS is
then adjusted to account for the WANOS issued under the Infigen Energy Equity Plan during the
year 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)
Infigen EPS:
- Basic (cents)
- Diluted (cents)
B7 Distributions
INFIGEN
TRUST
2019
2018
2019
2018
40,795
40,891
45,999
45,673
(89,597)
-
(104,238)
-
956,163
957,745
952,938
956,915
956,163
957,745
952,938
956,915
4.3
4.3
4.3
4.3
4.8
4.8
4.8
4.8
(9.4)
(9.4)
(10.9)
(10.9)
-
-
-
-
Security holder distributions which have been declared, and that are yet to be paid on or before
the end of the reporting period, are recorded as a payable in the consolidated statements of
financial position. The distribution payable for the six-months ended 30 June 2019 was declared
on 20 June 2019 and is scheduled to be paid by the Trust on 27 September 2019.
INFIGEN
TRUST
2019
2018
2019
2018
Distributions paid and payable:
Cents per security (half-year ended 30 June)
Total amount ($’000) (half-year ended 30 June)
1.00
9,566
-
-
1.00
9,566
-
-
70
INFIGEN ENERGY 2019 ANNUAL REPORT
C OPERATING ASSETS
C1 Property, plant and equipment
This section comprises in-use property, plant and equipment and assets under construction.
In-use property, plant and equipment primarily consists of wind turbines and associated plant from
the 670 MW of installed renewable generation assets across New South Wales (NSW), South
Australia and Western Australia. It also includes the 123 MW Smithfield Open Cycle Gas Turbine
(OCGT) facility in NSW, which was acquired in May 2019.
During the year, the 113.2 MW Bodangora Wind Farm was transferred from assets under construction
to in-use property, plant, and equipment following the commencement of its commercial operations.
Assets under construction at 30 June 2019 includes the SA Battery located in South Australia.
Movements in carrying values
($’000)
Opening balance
Additions
Government grants received
Capitalised interest
Depreciation expense
Transfers to in-use property, plant &
equipment
Transfers to intangible assets
Closing balance
Cost
Accumulated depreciation
Net book value
Accounting treatment
In-use property,
plant & equipment
INFIGEN
2019
Assets under
construction
693,950
79,395
-
-
(49,692)
238,465
(818)
961,300
1,479,753
(518,453)
961,300
202,481
68,887
(5,900)
3,519
-
(238,465)
(7)
30,515
30,515
-
30,515
Total
896,431
148,282
(5,900)
3,519
(49,692)
-
(825)
991,815
1,510,268
(518,453)
991,815
2018
Total
799,937
136,950
-
6,237
(46,630)
-
(63)
896,431
1,365,192
(468,761)
896,431
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. Owned Renewable Energy Assets and associated plant are depreciated over 25 years with the
exception of the newly constructed Bodangora Wind Farm which is depreciated over 30 years. The Smithfield
OCGT (a firming asset) is depreciated over 20 years. Other items of plant and equipment are depreciated over a
period of between three and 20 years.
Assets under construction represents direct construction costs relating to Owned Renewable Energy Assets and
Firming Assets not ready for use and, where applicable, include interest incurred on construction facility
borrowings. Assets under construction are transferred to in-use property, plant and equipment once the asset is
ready for commercial use.
Decommissioning provision
Obligations exist to decommission Infigen’s renewable generation and firming assets at the end of their useful
economic lives. Decommissioning includes removal of wind turbines, firming assets, 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 2019 the provision balance is $10,648,000 (2018: $8,448,000).
71
C2
Intangible assets
Infigen recognises three types of intangible assets: licences and development rights, development
assets, and goodwill.
Intangible asset
Description and accounting treatment
Licences and
development rights
>
Certain licences and development rights are required to construct and operate Infigen’s
owned generation assets. These include costs incurred on obtaining project approvals, land
leases, and connection rights
> Measurement is at cost less accumulated amortisation and impairment. Amortisation is
calculated on a straight-line basis over the expected useful life of the assets to which the
licences and development rights are attached
Development assets
> Development assets represent expenditure incurred prior to the commencement of an asset’s
construction
Goodwill
> Goodwill is recognised upon the acquisition of certain businesses. It represents the excess of
the acquisition cost over the fair value of the share of net identifiable assets, liabilities, and
contingent liabilities of the acquired business
Movements in carrying values
($’000)
Opening balance
Additions
Disposals
Transfers from plant and equipment
Transfers from other assets
Transfers - other
Amortisation expense
Impairment expense
Closing balance
INFIGEN
2019
Licences and
development
rights
Development
assets
70,883
21
-
825
-
-
(4,863)
-
29,301
5,111
(6,500)
-
1,041
(566)
-
(9,068)
Goodwill
15,136
-
-
-
-
-
-
-
Total
115,320
5,132
(6,500)
825
1,041
(566)
(4,863)
(9,068)
2018
Total
118,279
2,019
-
63
-
-
(5,041)
-
66,866
19,319
15,136
101,321
115,320
Balance
Cost
Accumulated amortisation and impairment
Net book value
Key changes during the reporting period
118,572
(51,706)
66,866
19,319
-
19,319
15,136
-
15,136
153,027
(51,706)
101,321
162,163
(46,843)
115,320
On 18 December 2018, Infigen sold its Cherry Tree Wind Farm development project which had a carrying value of
$6.5 million prior to the sale. The sale has been recognised in the disposals line in the table above.
Impairment – accounting treatment
All intangible assets are assessed for indicators of impairment on a semi-annual basis. Where indicators exist,
impairment testing is undertaken.
For development assets and goodwill (indefinite useful life intangible assets), impairment testing is undertaken at
least annually, or more frequently if indicators of impairment have been identified.
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 and development rights and goodwill are allocated to Infigen’s single cash-generating-unit (CGU) 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
72
INFIGEN ENERGY 2019 ANNUAL REPORT
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 2019 is 10.2% (2018: 11.7%).
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 and 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.
Impairment testing results
The process of bringing the Cherry Tree Wind Farm to financial close indicated potential impairment of Infigen’s
development assets, which required testing of intangible asset carrying values. Changes to the requirements of
network owners and regulators as well as conditions in certain regions of the NEM had increased the cost and risk
to realising the value of certain projects within Infigen’s development pipeline.
The testing resulted in a total impairment charge to development assets (both intangibles and equity accounted
investments) of $9.8 million for the year ended 30 June 2019.
There was no other impairment as a result of the testing described above - which used the following sensitivity
ranges: discount rate (+/-1%); market prices (+/-10%); and renewable generation production (+/-5%).
C3 Commitments
Certain contracted expenditure not recognised as a liability at the reporting date is disclosed in
the following table.
Commitment type
Description
Capital expenditure
Renewable generation and firming assets capital expenditure, including spare parts and IT
projects
> Long-term contractual agreements for specific, and scheduled, service and
Repairs and maintenance
maintenance of Owned Renewable Energy Assets
> Components of certain Firming Assets
Long-term contractual agreements for the transmission of electricity generated to the
NEM
Non-cancellable operating leases relate to Owned Renewable Energy Assets and Firming
Assets. Certain leases contain additional renewal option terms. Certain leases also contain
contingent rental components (based on generation or revenue of the associated
generation assets) and CPI escalation clauses
Transmission services
Land payments
Committed amounts
($’000)
Capital expenditure
Repairs and maintenance
Transmission services
Operating leases (including land payments):
- Not later than 1 year
- Later than 1 year and not later than 5 years
- Later than 5 years
Total
73
INFIGEN
2019
2,118
163,581
56,835
5,249
20,086
47,895
73,230
2018
30,590
159,096
46,548
4,588
18,165
35,260
58,013
295,764
294,247
D CAPITAL STRUCTURE
D1 Capital management
Infigen seeks a flexible capital structure that supports the preservation and creation of security
holder value in a changing energy market.
To maintain or adjust its capital structure, Infigen may adjust its level of borrowings, issue or buy back securities,
and adjust the quantum of security holder distributions.
The ratio of Net Debt to Underlying EBITDA is a measure which assesses Infigen’s capital structure, and is
monitored on a regular basis. It is calculated as Net Debt (gross debt less cash) divided by Underlying EBITDA (on
a 12-month look-back basis). As at 30 June 2019 Net Debt to Underlying EBITDA was 3.2 (30 June 2018: 3.6).
Distributions are paid to Infigen security holders when determined by the Board having regard to Infigen’s capital
management policy which seeks to balance returns to security holders, value accretive investments and
deleveraging. Infigen declared a distribution of one cent per security in relation to the six-months ended 30 June
2019 (30 June 2018: Nil). A Distribution Reinvestment Plan (DRP) was also made available to security holders as
part of the distribution, with the last date for DRP elections being 1 July 2019.
As at 30 June 2019, the parent entity (IEL) had franking credits of $6,228,093 (30 June 2018: $6,228,093).
D2 Cash and cash equivalents
Unrestricted cash includes cash on hand and term deposits held at call with financial institutions.
Restricted cash is held in accordance with the minimum cash requirements for Australian Financial
Services Licence (AFSL) compliance and the requirements of the Bodangora Facility.
($’000)
Unrestricted cash
Restricted cash
INFIGEN
TRUST
2019
95,648
8,033
2018
94,501
50,397
103,681
144,898
2019
442
-
442
2018
439
-
439
74
INFIGEN ENERGY 2019 ANNUAL REPORT
D3 Borrowings
Infigen has two secured borrowing facilities: the Corporate Facility and the Bodangora Facility.
Key changes during the reporting period
The Bodangora Facility converted from a construction facility to a term facility upon commencement of
commercial operations at the Bodangora Wind Farm in February 2019.
Carrying values and movements
INFIGEN
2019
2018
45,000
8,513
53,513
438,750
146,791
585,541
(19,639)
565,902
619,415
650,099
-
(33,750)
-
4,148
(7,469)
-
6,387
-
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
619,415
650,099
($’000)
Current
Corporate Facility
Bodangora Facility
Non-current
Corporate Facility
Bodangora Facility
Capitalised commitment fees
Total borrowings
Movement in borrowings
Opening balance
Corporate Facility (drawdowns)
Corporate Facility (repayments)
Global Facility and Woodlawn PF (repayments)
Bodangora Facility (drawdowns)
Bodangora Facility (repayments)
Other movements:
Additions to capitalised commitment fees
Expense of capitalised commitment fees
Net foreign currency exchange differences
Closing balance
75
Specific details of Infigen’s borrowing facilities are summarised in the following table.
Facility ($’000)
Corporate Facility
- Facility A
- Facility B
Available
Drawn
Maturity Repayment terms
483,750
118,750
483,750
118,750
Apr 2023
365,000
365,000
Apr 2023
- Facility C (Working Capital)
20,000
-
Apr 2023
Bodangora Facility
155,304
155,304
Sep 2034
> 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
> Repaid in full at maturity
> Repaid in full at maturity
> Term facility
> Semi-annual fixed repayments in
accordance with the repayment schedule
Total
659,054
639,054
The Corporate Facility contains an additional $60,000,000 facility (not included in the above table) 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, $26,764,000 of bank guarantees and letters of credit had been issued under
this facility.
Covenants
The Corporate Facility contains a leverage and a debt service ratio covenant covering Infigen’s operating assets
(excluding Bodangora Wind Farm and the Smithfield OCGT related entities).
The Bodangora Facility contains a debt service ratio covenant.
All financial covenants had been complied with during the financial year.
Accounting treatment
Borrowings are initially recognised at fair value (net of commitment fees), and subsequently measured at
amortised cost, using the effective interest method. Transaction costs in respect of a borrowing are expensed over
the expected term of the borrowing. Borrowings are classified as current liabilities, unless there is an unconditional
right to defer settlement of the liability for at least 12 months after the reporting date.
D4 Contributed equity
An IEL share and an IET unit are stapled together to form a single Infigen stapled security. Infigen’s
contributed equity consists of such stapled securities issued to security holders. Security holders are
entitled to receive declared distributions, vote at security holders’ meetings, and receive a
proportional share of proceeds in the event of winding up of Infigen.
Key changes during the reporting period
On 22 November 2018, IEBL was removed from the Official List of the ASX following implementation of the
simplification of Infigen’s corporate structure as approved by security holders on 16 November 2018.
Securities - issued and fully paid
2019
2018
2019
2018
INFIGEN
TRUST
Carrying amount ($’000)
Opening
Securities issued – Infigen Energy Equity Plan
De-stapling of IEBL securities
Closing balance
Number (thousands)
Opening
Securities issued - Infigen Energy Equity Plan
Closing balance
Accounting treatment
918,870
1,614
(6,261)
914,223
954,060
2,502
956,562
915,963
2,907
-
918,870
950,259
3,801
954,060
910,304
1,614
-
911,918
954,060
2,502
956,562
907,397
2,907
-
910,304
950,259
3,801
954,060
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.
76
INFIGEN ENERGY 2019 ANNUAL REPORT
E
Financial Risk Management
This section details 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.
This section also details those financial assets and liabilities recognised and measured on a recurring
fair value basis, their fair value classifications, and the methodologies used to determine fair value.
E1 Financial Risk Summary
Risk type
Definition
Exposures
Mitigation methods
>
>
>
>
>
Infigen’s sales channels seek to balance
price, tenor and risk, thereby managing
earnings certainty and co-optimising
production, contract, and spot exposures
Adherence to the Energy Risk Portfolio
Policy which includes: volumetric hedge
portfolio limits; limits for earnings at risk;
and targets for the duration and modified
duration of hedges
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 $95.6 million of unrestricted cash
and a $20.0 million working capital facility
(nil drawn at 30 June 2019)
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 period is the
carrying amount of financial assets (net of
any allowances for losses) in the
consolidated statement of financial position
Expected credit loss provision for 30 June
2019 is nil (2018: nil)
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
Electricity derivative
contracts (including
PPAs accounted for as
derivative financial
instruments)
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
Credit risk
The risk of financial
loss from a
counterparty to a
financial instrument
failing to discharge
an obligation
>
>
Variable rate
borrowings
Interest rate
derivatives
>
Payables
> Distribution
payable
>
Borrowings
> Derivative financial
liabilities
>
>
Cash and cash
equivalents
Trade receivables
(including the
Trust’s related party
loan receivable
disclosed at Note
G2)
> Derivative financial
assets
77
E2 Market Risk - Electricity Price
Sensitivity analysis - electricity derivative contracts
The following table discloses the sensitivity of net profit before tax and 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. The fair value of Infigen’s electricity derivative contracts not
designated as cash flow hedges are recorded in net profit before tax, whilst those designated as cash flow hedges
are recorded in other comprehensive income.
($’000)
Net profit before tax - increase / (decrease):
Electricity forward price +10%
Electricity forward price -10%
Other comprehensive income - increase / (decrease):
Electricity forward price +10%
Electricity forward price -10%
E3 Market Risk - Interest Rate
Net borrowings exposure
INFIGEN
2019
2018
16,046
(16,046)
(18,807)
18,807
-
-
(13,959)
13,959
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 $9,773,000 and an average capped rate of 5.79%.
($’000)
2019
2020
2021
2022
2023
2024
INFIGEN
Interest rate swaps (Corporate Facility)
Interest rate swaps (Bodangora Facility)
Fixed debt (Bodangora Facility)
Total
Weighted average fixed rate
(excluding margin)
Sensitivity analysis
384,900
66,772
77,652
374,825
65,984
76,735
529,324 517,544
335,812
62,296
72,447
470,555
299,437
58,901
68,498
426,836
206,548
55,342
64,358
326,248
-
51,712
60,136
111,848
2.65%
2.65%
2.66%
2.67%
2.72%
3.24%
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.
($’000)
Net profit before tax - increase / (decrease):
+ 100 bps
- 100 bps
Other comprehensive income - increase / (decrease):
+ 100 bps
- 100 bps
INFIGEN
2019
2018
(435)
435
(249)
249
16,167
(16,167)
19,830
(19,830)
78
INFIGEN ENERGY 2019 ANNUAL REPORT
E4 Liquidity Risk
The following table discloses the undiscounted cash flow maturities of financial liabilities and derivative financial
instruments.
Borrowings represent the contracted cash flows (including principal and interest payments) under the Corporate
Facility and Bodangora Facility and have been determined by reference to the interest rate forward curves as at
the reporting date.
Derivative financial instruments are presented on a net cash basis as they are settled on a net basis.
($’000)
2019
Borrowings
Payables
Interest rate swaps (net settled)
Electricity derivatives (net settled)
2018
Borrowings
Payables
Interest rate swaps (net settled)
Electricity derivatives (net settled)
2019
Amounts due to related parties
2018
Amounts due to related parties
Less than
1 year
86,634
18,689
6,565
5,501
117,389
85,787
18,254
2,260
894
107,195
1,411
698
1 to 5 years
Over 5 years
Total
INFIGEN
558,165
-
15,726
-
573,891
651,227
-
2,682
-
653,909
143,437
-
3,174
-
146,611
159,355
-
642
-
159,997
788,236
18,689
25,465
5,501
837,891
896,369
18,254
5,584
894
921,101
TRUST
-
-
-
-
1,411
698
E5 Fair Value of Financial Assets and Liabilities
Financial assets and liabilities recognised and measured on a recurring fair value basis are shown in the following
table. An explanation of fair value levels is provided in the following commentary.
($’000)
Current assets
Electricity derivative contracts
Non-current assets
Electricity derivative contracts
Electricity derivative contracts
Current liabilities
Electricity derivative contracts
Electricity derivative contracts
Interest rate derivative contracts
Non-current liabilities
Interest rate derivative contracts
Fair value level
2019
2018
INFIGEN
3
2
3
2
3
2
2
3,502
3,502
71
11,667
11,738
511
4,991
6,613
12,115
19,090
19,090
2,080
2,080
1,007
9,684
10,691
14
880
2,356
3,250
2,981
2,981
Amounts in the above table have not been offset as no legally enforceable right of set-off presently exists.
79
Reconciliation of Level 3 financial assets and liabilities
($’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
2019
10,884
2018
-
(706)
10,884
10,178
10,884
Financial assets and liabilities are classified and grouped into three levels according to the degree of which their
calculation inputs are observable. Level 1 is completely observable (requiring no estimate and judgement) and
Level 3 is unobservable (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 Level 2 and 3 fair values. 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 by Infigen to estimate the fair value of its financial assets and
liabilities.
Instrument
Fair value level
Fair value methodology
Electricity derivative
contracts
Interest rate derivative
contracts
Electricity derivative
contracts
2
2
3
Accounting treatment
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 (sourced from
independent external price curves)
> Estimation of electricity volumes (sourced from independent
consultants’ assessments of wind resource and availability)
> Discount rates ranging from 9% to 12%
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, in accordance with applicable accounting standards and Infigen’s accounting policies. Infigen has
assessed that their carrying values approximate their fair values.
80
INFIGEN ENERGY 2019 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
2019
2018
Ownership interest
* #
Australia
Australia
Australia
Bermuda
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Bermuda
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%
100%
Name of entity
Parent entity
Infigen Energy Limited
Other stapled entities
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 (Bermuda) Limited1
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
1 Previously part of the stapled Infigen entities
81
Ownership interest
Name of entity
Key Country of incorporation
2019
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 (NSW) Power Holdings Pty Limited
Infigen Energy RE Limited
Infigen Energy Services Holdings Pty Limited
Infigen Energy Services Pty Limited
Infigen Energy Smithfield Holdings 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 BESS Pty Limited
*
*
*
*
*
*
*
*
*
*
*
*
*
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
Smithfield Land Holdings Pty Limited
Smithfield Power Generation Pty Ltd
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
Australia
Australia
USA
USA
USA
Australia
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
Australia
Australia
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%
100%
100%
100%
100%
100%
2018
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%
82
INFIGEN ENERGY 2019 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.
Key changes during the reporting period
During the year ended 30 June 2019, the removal of Renewable Power Ventures Pty Ltd and Walkaway Wind
Power Pty Limited from the Cross-Guarantee Group became effective.
Financial information of the Cross-Guarantee Group
Consolidated Statement of Comprehensive Income
($’000)
Revenue
Unrealised foreign exchange gain / (loss)
Impairment of financial assets
Operating expenses
Depreciation and amortisation expense
Related party payable forgiven
Other finance costs
Profit before income tax
Income tax (expense) / benefit
Net (loss) / profit for the year
CROSS-GUARANTEE GROUP
2019
2018
-
9,987
(80,000)
(2,211)
(2,018)
(1,446)
(4)
(75,692)
(4,649)
(80,341)
74,618
(3,202)
-
(16,798)
(23,157)
16,091
(728)
46,824
25,800
72,624
Other comprehensive income that may not be reclassified to net profit:
Changes in the fair value of cash flow hedges, net of tax
Total comprehensive (loss) / income for the year, net of tax
-
(80,341)
510
73,134
83
Consolidated Statement of Financial Position
($’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
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
2019
2018
8,608
-
-
8,608
658,724
147,182
-
93,607
30,266
929,779
938,387
110
1,368
7,189
8,667
773,574
73,559
312,274
61,671
52,918
1,273,996
1,282,663
10,257
10,257
1,155
1,155
1,243,179
-
1,243,179
1,253,436
(315,049)
2,305
-
(317,354)
(315,049)
1,426,893
4,062
1,430,955
1,432,110
(149,447)
2,305
(23,005)
(128,747)
(149,447)
84
INFIGEN ENERGY 2019 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
Retained losses
Net profit for the year
Total comprehensive income
Additional disclosure
IEL
2019
8,608
838,326
846,934
10,257
1,148,681
1,158,938
2,305
(314,309)
(312,004)
(68,929)
(68,929)
2018
-
886,128
886,128
-
1,129,204
1,129,204
2,305
(245,380)
(243,075)
31,480
31,124
IEL has a net asset deficiency of $312,004,000 at 30 June 2019 (2018: $243,075,000). This is principally due to
$841,326,000 (2018: $849,712,000) of undiscounted long-term funding provided by IET. When combined with IET
as the other stapled entity, 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.
85
G OTHER DISCLOSURES
This section contains additional required information not disclosed in previous sections of the Financial
Report.
G1 Share-Based Payments
Performance rights are granted to certain Infigen employees eligible under the Infigen Energy Equity
Plan (Equity Plan). The Equity Plan consists of deferred short-term incentive (Deferred STI) and long-
term incentive (LTI) components. 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:
i.
ii.
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
Operational Performance (internal hurdle) - this hurdle was modified for the FY18 and onwards
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 FY17 and FY16 performance rights internal hurdle is a cumulative growth in Infigen’s EBITDA to Capital
Base multiple against an internally set target. They also contain a one-year re-test.
Performance rights vest as either Infigen 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 reporting period
($’000)
LTI
Deferred STI
Write-back prior year’s LTI expense allocation
INFIGEN
2019
546
70
(51)
565
2018
319
199
(88)
430
Movement in number of performance rights outstanding during the reporting period
Equity Plan
FY16 LTI
FY17 DSTI
FY17 LTI
FY18 LTI
FY19 LTI
Total
Opening balance
1 July
2,105,438
398,362
532,869
1,717,459
-
Granted
Vested
-
(1,778,724)
-
-
-
1,372,256
(50,028)
-
-
-
Lapsed
/Forfeited
Closing balance
30 June
(1,780)
(14,285)
(68,082)
(186,448)
-
324,934
334,049
464,787
1,531,011
1,372,256
4,027,037
4,754,128
1,372,256
(1,828,752)
(270,595)
1,372,256 performance rights were granted in relation to the 2019 financial year (2018: 2,485,051). The weighted
average security price at grant date was $0.47 (2018: $0.68). The fair value of these performance rights at grant
date was $463,703 (2018: $1,247,000).
Infigen securities have already been issued for the unvested FY16 LTI and FY17 DSTI, and are held in trust on behalf
of eligible employees. In accordance with the Equity Plan, these performance rights do not vest (and issued
securities released from trust) until the Infigen staff trading window opens.
86
INFIGEN ENERGY 2019 ANNUAL REPORT
G2 Related Party Transactions
The related party transactions and balances of Infigen and the Trust are disclosed below.
Infigen
Key Management Personnel (KMP) remuneration for the year-ended 30 June is disclosed in the following table.
($)
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
2019
2018
4,686,077
149,012
741,813
(51)
5,576,851
4,099,537
148,362
359,251
(88)
4,607,062
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 holding of Infigen securities. Mr P Green has advised Infigen that he does not have a
relevant interest in those Infigen securities.
Infigen has an outstanding loan balance of $1,019,156 from RPV Developments Pty Ltd at 30 June 2019 (2018:
$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 or payable for the year-ended 30 June 2019 were $712,787 (2018:
$698,126).
The Trust has non-interest bearing loan receivables / (payables) from / (to) related parties that form part of the
long-term funding arrangements of the Infigen stapled structure, as disclosed in the following table.
($’000)
Current receivables
Infigen Energy Limited
Non-current 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)
Current payables
Infigen Energy RE Limited (carrying value)
TRUST
2019
2018
10,000
-
841,326
-
14,010
30,009
895,345
548,517
849,712
691
14,010
30,009
894,422
645,790
(1,411)
(698)
The Trust has discounted its loan receivables to their net present value resulting in an unwinding income of
$38,793,000 for the year ended 30 June 2019 (2018: $30,124,000). An impairment charge was recognised at 30
June 2019 of $127,680,000 (2018: $133,697,000). The forecast undiscounted cash flows of Infigen’s operating
assets support the carrying value as they exceed the undiscounted face values.
87
G3 Cash Flow Information
Reconciliation of net profit to net cash inflow from operating activities
($’000)
Net profit / (loss) for the year
Adjustments
Early termination of interest rate swaps
Depreciation and amortisation
Unwind of discount on related party loan receivables
Impairment of financial assets
Impairment of development assets
Unrealised foreign exchange loss / (gain)
Share-based payments expense
Amortisation of borrowing costs, and one-off upfront and
early expense of capitalised commitment fees
Share of profits of equity accounted investments
Accretion of decommissioning provisions
Net fair value gain of financial instruments
Income tax expense / (benefit)
Net cash inflow / (outflow) from operating activities
before changes in working capital
Changes in working capital
(Increase) / decrease in receivables and inventory
Increase / (decrease) in payables
Net cash inflow from operating activities
Net debt reconciliation
($’000)
Opening balance - 1 July 2018
Cash flows
Closing balance - 30 June 2019
INFIGEN
TRUST
2019
2018
2019
2018
40,891
45,673
(89,597)
(104,238)
-
54,555
-
-
9,901
692
565
6,388
19
131
(6,487)
20,505
43,295
51,444
-
-
227
(735)
430
7,456
33
123
-
(26,144)
-
-
-
-
(38,793)
127,680
(30,124)
133,697
-
-
-
-
-
-
-
-
-
(1)
-
-
-
-
-
-
127,160
121,802
(710)
(666)
11,775
5,325
(19,556)
(1,800)
144,260
100,446
-
713
3
-
697
31
Cash
within 1 year
Borrowings due:
after 1 year
144,898
(41,217)
103,681
(41,219)
(12,294)
(53,513)
(634,906)
49,365
(585,541)
Total
(531,227)
(4,146)
(535,373)
88
INFIGEN ENERGY 2019 ANNUAL REPORT
G4 Reserves
Infigen’s reserves categories are summarised in the following table.
Reserve
Description and accounting treatment
Hedging reserve
Acquisition reserve
Records fair value movements in cash flow hedges to the extent the cash flow hedges are
deemed effective. The balance is reclassified to net profit when the hedged expense is
recognised. Ineffective portions of cash flow hedges are recognised in net profit immediately.
Records the acquisition of non-controlling interests in entities over which Infigen already exerted
control. The carrying value is the difference between the purchase consideration and the amount
by which the non-controlling interest is adjusted.
SBP reserve
Recognises the SBP expense. Amounts are transferred to contributed equity upon issue of
securities under the Infigen Energy Equity Plan.
Carrying values
($’000)
Hedging reserve
Acquisition reserve
SBP reserve
INFIGEN
2019
(15,821)
(47,675)
(5,650)
(69,146)
2018
4,460
(47,675)
(4,601)
(47,816)
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
($)
Audit and other assurance services
Audit of financial statements
Audit of subsidiaries’ financial statements
Other assurance services
Non-audit services
Taxation related services
Transaction and advisory services
Total auditor’s remuneration
INFIGEN
TRUST
2019
2018
2019
2018
190,000
159,000
31,000
380,000
89,627
155,976
245,603
625,603
184,000
161,000
30,000
375,000
91,179
396,946
488,125
863,125
19,487
-
-
18,857
-
-
19,487
18,857
-
-
-
-
-
-
19,487
18,857
89
G6
Inventories
One LGC represents 1 MWh of generation from renewable energy generators.
LGCs
Carrying value ($’000)
Volume (number of LGCs)
G7 Contingent Liabilities
INFIGEN
2019
27,157
513,245
2018
43,327
581,121
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
2019
32,774
2018
14,156
The Trust had no contingent liabilities as at 30 June 2019 (2018: Nil).
G8 Events occurring after the reporting period
There were no 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.
90
INFIGEN ENERGY 2019 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 Consolidated Financial Statements and accompanying notes of Infigen and the Trust set out on
pages 57 to 90 have been prepared 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 2019 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
91
ADDITIONAL INFORMATION
INVESTOR INFORMATION
Five-year financial and operating summary
30 June
Unit
2019
2018
2017
2016
2015
Safety
Total recordable injury frequency rate
Lost time injury frequency rate1
Profitability
Net Revenue
Asset operating costs
Business operating costs 2
Underlying EBITDA
Net profit/(loss)
Generation expenses 4
Financial position (as at)
Debt (drawn) 5
Cash
Net debt5
Equity
Securities on issue at the end of the year
Book gearing
Net assets per security
Net tangible assets per security
Security holder value and cash flow
Earnings per security
Net operating cash flow per security
Production
Alinta Wind Farm
Bodangora Wind Farm
Capital Wind Farm
Lake Bonney 1 Wind Farm
Lake Bonney 2 Wind Farm
Lake Bonney 3 Wind Farm
Woodlawn Wind Farm
Compensated
8.7
-
229.3
(41.4)
(22.7)
165.3
40.9
23.6
(639.1)
103.7
(535.4)
583.3
957
46.9
0.61
0.50
4.3
15.1
342
224
359
200
371
97
147
0.4
13.0
2.6
210.1
(40.0)
(21.0)
149.1
45.7
24.0
(676.1)
144.9
(531.2)
571.7
954
45.8
0.60
0.48
4.8
10.5
316
-
374
199
405
103
152
0.1
4.7
4.7
196.7
(37.5)
(19.8)
139.3
32.3
23.9
(657.3)
251.8
(405.5)
479.4
950
45.5
0.50
0.38
4.0
12.0
338
-
345
181
381
95
143
5
4.8
-
173.2
(35.6)
(17.5)
120.2
4.5
23.0
(747.6)
147.6
(600.0)
280.6
772
68.0
0.36
0.20
1.1
7.4
300
-
360
182
380
92
147
8
9.7
-
133.8
(32.7)
(17.6)
83.5
(303.6)3
22.6
(793.4)
45.2
(748.2)
260.9
768
74.0
0.34
0.17
(2.3)
4.3
323
-
320
192
392
93
125
14
$ million
$ million
$ million
$ million
$ million
$/MWh
$ million
$ million
$ million
$ million
# million
%
$
$
cps
cps
GWh
GWh
GWh
GWh
GWh
GWh
GWh
GWh
Production generated from Owned
Renewable Energy Assets
GWh
1,740
1,549
1,487
1,469
1,459
1 There were no lost time injuries in 2015 and 2016
2 Business operating costs includes energy markets costs which were incorporated within asset operating costs in prior years.
Prior year amounts have been amended to reflect this change
Includes the loss on sale of the US business
3
4 Calculated by dividing generation expenses with production generated from Owned Renewable Energy Assets. Excludes
Bodangora Wind Farm whilst it was still under construction
5 Excludes capitalised commitment fees. Prior periods have been restated for consistency purposes
98
INFIGEN ENERGY 2019 ANNUAL REPORT
Number of Securities and Holders
Infigen securities are listed and traded on the Australian Securities Exchange.
Following the un-stapling of IEBL shares on 22 November 2018, each Infigen security consists of one IEL share
and one IET unit, which, under each of their respective Constitutions, 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 IEL and/or IET from the Official List if, while the stapling arrangements
apply, the shares or units in one of these entities cease to be stapled to the shares or units in the other entity
or one of these entities issues shares or units that are not then stapled to the relevant shares or units in the
other entity.
The following additional investor information is current as at 31 July 2019.
The total number of Infigen securities on issue is 956,561,869 and the number of holders of these securities is
18,316.
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
The Childrens Investment Fund 1
Brookfield Asset Management Inc
Australian Ethical Investment Limited
Vinva Investment Management
26 Sep 08
11 Apr 18
24 May 19
13 Feb 19
1 Jul 15
11 Apr 18
24 May 19
13 Feb 19
Number of Infigen
securities advised in most
recent notice
250,453,481
86,424,171
50,478,162
49,111,948
Voting Rights
It is generally expected that General Meetings of shareholders of IEL and unitholders of IET will be held
concurrently where proposed resolutions relate to both entities. At these General Meetings of IEL and IET,
the voting rights outlined below will apply.
Voting rights in relation to General Meetings of IEL:
>
>
on a show of hands, each shareholder of IEL, 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, who is present in person, has one vote for each share they hold.
Also, each person attending 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 attending 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.
Infigen Securities that Are Restricted or Subject to Voluntary Escrow
There are currently no Infigen securities that are restricted or subject to voluntary escrow.
On-Market Security Buy-Back
There is no current on-market buy-back of Infigen securities.
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 shareholding
99
Distribution of Infigen Securities as at 31 July 2019
The distribution of securities amongst Infigen 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
868,223,889
56,128,691
10,878,987
17,904,161
3,426,141
956,561,869
Security holders
238
1,935
1,464
7,112
7,567
18,316
The number of security holders holding less than a marketable parcel of securities as at 31 July 2019 was
7,723.
Top Infigen Security Holders
The largest Infigen security holders as at 31 July 2019 are set out below.
Rank
Security holder
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
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BIF III LOGAN AGGREGATOR LP
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BNP PARIBAS NOMINEES PTY LTD - AGENCY LENDING DRP A/C
BNP PARIBAS NOMINEES PTY LTD - IB AU NOMS RETAILCLIENT DRP
UBS NOMINEES PTY LTD
BUTTONWOOD NOMINEES PTY LTD
WARBONT NOMINEES PTY LTD - UNPAID ENTREPOT A/C
RHODIUM CAPITAL PTY LIMITED - RHODIUM INVESTMENT A/C
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - GSI EDA
BNP PARIBAS NOMINEES PTY LTD - HUB24 CUSTODIAL SERV LTD DRP
ONE MANAGED INVT FUNDS LTD - SANDON CAPITAL INV LTD A/C
BRISPOT NOMINEES PTY LTD - HOUSE HEAD NOMINEE A/C
PACIFIC CUSTODIANS PTY LIMITED - IFN PLANS CTRL
CAMBROSE PTY LIMITED
BNP PARIBAS NOMS PTY LTD - DRP
OMURA INVESTMENT CO PTY LIMITED
ELATA INVESTMENT CO PTY LIMITED
INARI INVESTMENT CO PTY LIMITED
380,685,381
133,260,158
86,424,171
71,541,465
49,758,305
12,836,562
9,060,065
7,001,434
6,824,564
6,419,871
4,812,916
4,800,000
4,209,487
3,440,798
2,990,094
2,559,920
2,351,789
2,000,000
1,996,677
1,952,804
1,952,804
1,952,804
39.80
13.93
9.03
7.48
5.20
1.34
0.95
0.73
0.71
0.67
0.50
0.50
0.44
0.36
0.31
0.27
0.25
0.21
0.21
0.20
0.20
0.20
Total top security holders
Total of other security holders
Total securities
798,832,069
157,729,800
956,561,869
83.51
16.49
100.00
100
INFIGEN ENERGY 2019 ANNUAL REPORT
Key ASX Announcements
The key announcements lodged with the ASX and released to the market throughout the reporting period
are listed below.
2018
9 July
31 July
10 August
15 August
27 August
10 September
27 September
28 September
10 October
31 October
12 November
16 November
20 November
10 December
12 December
18 December
2019
10 January
31 January
11 February
21 February
12 March
10 April
30 April
10 May
23 May
6 June
11 June
17 June
20 June
Monthly Production – June 2018
Fourth Quarter FY18 Production and Revenue
Monthly Production – July 2018
Infigen Invests in Battery Energy Storage System
FY18 Full Year Results
Monthly Production – August 2018
Ceasing to be a Substantial Holder
Ceasing to be a Substantial Holder
Monthly Production – September 2018
First Quarter FY19 Production and Revenue
Monthly Production – October 2018
Presentation and Results of FY18 AGM
JP Morgan Investor Day Presentation
Monthly Production – November 2018
Appointment of New Director
Cherry Tree Wind Farm and Development Pipeline Review
Monthly Production – December 2018
Second Quarter FY19 Production and Revenue
Monthly Production – January 2019
FY19 Interim Results
Monthly Production – February 2019
Monthly Production – March 2019
Third Quarter FY19 Production and Revenue
Monthly Production – April 2019
Smithfield OCGT Acquisition and Capital Management Update
Smithfield OCGT Facility Re-Rating to 123 MW
Monthly Production – May 2019
Letter to Infigen Security Holders
Infigen Announces H2/FY19 Distribution and Appendix 3A.1
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.
101
GLOSSARY
AEMC
AEMO
AFSL
ASX
Australian Energy Market Commission; responsible for making and amending the
National Electricity Rules, National Gas Rules and National Energy Retail Rules.
Australian Energy Market Operator; responsible for operating the NEM and the
Wholesale Electricity Market (WA).
Australian Financial Services Licence.
Australian Securities Exchange Limited (ABN 98 008 624 691) or Australian
Securities Exchange as the context requires.
BOARD or BOARDS
Unless otherwise stated, the Boards of IEL and IERL.
BODANGORA
FACILITY
The Bodangora project finance facility.
CAPACITY
The maximum power that a generation asset is designed to produce.
CAPACITY FACTOR
A measure of the productivity of a generation asset, calculated by the amount of
power that a generation asset produces over a set time, divided by the amount of
power that would have been produced if the generation asset had been running at
full capacity during that same time.
C&I
Consumer & Industrial.
CONTRACTED
RENEWABLE ENERGY
ASSETS
Renewable energy assets not owned by Infigen where Infigen acquires generation
under run of plant PPAs as offtaker.
EARNINGS AT RISK
ANALYSIS
Measuring potential changes in revenue in a given period having regard to relevant
factors and varying degrees of confidence.
EBIT
EBITDA
Earnings before interest and tax.
Earnings before interest, taxes, depreciation and amortisation.
FIRMING ASSETS
Fast-start generation assets which complement Infigen’s intermittent renewable
energy assets and where economic contribution is not directly related to generation.
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
IEL
IERL
IET
IFN
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.
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 Infigen securities listed on the ASX.
INFIGEN
Infigen Energy, comprising IEL and IET and their respective subsidiary entities from
time to time.
INFIGEN SECURITY OR
SECURITY
Comprises one share in IEL and one unit in IET, stapled together to form a single
stapled security which is listed on the ASX under the code “IFN”. IEL shares and IET
units cannot be traded individually - they can only be traded as stapled securities.
LGC
LTM
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.
Last twelve months.
MLF or MARGINAL
LOSS FACTOR
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.
MW
MWh
NEM
N.M.
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.
Not meaningful.
102
INFIGEN ENERGY 2019 ANNUAL REPORT
O&M
OCC
Operations and maintenance.
Operations Control Centre. A centrally located business function within Infigen that
monitors and directs the operations of Infigen’s generation assets.
OWNED RENEWABLE
ENERGY ASSETS
Renewable energy assets owned by Infigen.
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.
RENEWABLE ENERGY
GENERATION
Electricity generation sold from Total Renewable Energy Assets post MLF.
SA BATTERY
The 25 MW/52 MWh Lake Bonney Battery Energy Storage System.
SMITHFIELD OCGT
The 123 MW Open Cycle Gas Turbine (OCGT) facility located at Smithfield, NSW,
acquired in May 2019.
TOTAL ELECTRICITY
GENERATION
TOTAL RENEWABLE
ENERGY ASSETS
Renewable Energy Generation plus generation from Firming Assets.
Owned Renewable Energy Assets and Contracted Renewable Energy Assets.
TRUST
Infigen Energy Trust (IET) and its controlled entities.
UNDERLYING EBITDA EBITDA, excluding other income and any impairment charges.
103
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)
Philip Green
(Non-Executive Director)
Mark Chellew
(Non-Executive Director)
Emma Stein
(Non-Executive Director)
Karen Smith-Pomeroy
(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 2019 Annual General Meeting will
be held on 21 November 2019.
Infigen Securities
One share in IEL and one unit in IET have been
stapled together to form a single stapled Infigen
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
for
This publication is issued by Infigen Energy
Limited (IEL) and Infigen Energy RE Limited as
responsible entity
Infigen Energy Trust
(collectively Infigen). To the maximum extent
permitted by law, Infigen and its respective related
entities, Directors, officers and employees
(collectively Infigen Entities) do not accept, and
expressly disclaim, any
liability whatsoever
(including for negligence) for any loss howsoever
arising from any use of this publication or its
contents. This publication is not intended to
constitute legal, tax or accounting advice or
opinion. No representation, warranty or other
assurance is made or given by or on behalf of the
Infigen Entities that any projection, forecast,
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 securities.
including personal
IEL is not licensed to provide financial product
advice. This publication is for general information
only and does not constitute financial product
financial product
advice,
advice, or an offer, invitation or recommendation
in respect of securities, by IEL 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.
104