TasNetworks
Corporate Plan 2014–15
Version 1.2
Table of contents
Executive summary
TasNetworks strategy
Overview of TasNetworks
Members’ expectations
Market outlook
TasNetworks value and supply chain
Our vision and purpose
Strategic goals
Shareholder outcomes
Strategic phases
Strategic focus
Key performance indicators and targets
Financial forecasts summary
Key planning assumptions
Strategic initiatives
Risks and opportunities
Our customers
Public education and engagement
Organisational structure
Version history
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Executive summary
We are excited to present our inaugural Corporate Plan for Tasmanian Networks Pty Ltd
(TasNetworks). It sets out our vision, purpose and strategic goals that we will pursue. We have
established our business to achieve different outcomes, principally to deliver lowest
sustainable prices to customers, safely and reliably. We also want our business to provide a
better future for all of our customers and the community. With care, collaboration, innovation
and hard work, we believe we can create customer value and value for Tasmania as a whole.
The vision of TasNetworks is to be:
“Trusted by our customers to deliver today and create a better tomorrow”
Our strategy identifies three strategic pillars:
•
our customers
•
our people
•
one business
to deliver sustainable returns to our shareholders.
This plan outlines the key initiatives to be implemented over the next year that will move our
new business towards achieving our strategic goals. We also outline how we will measure our
performance against these goals.
Our forecasts of financial performance are for the period from 2014–15 to 2018–19.
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We deliver electricity and telecommunications network services,
creating value for our customers, our owners and our community
How we
work
Initiatives
Strategic
measures
Strategic
goals
Customers
People
One business
“What do we
need to focus on
to achieve our
vision?
We understand our customers
by making them central
to all we do
“How do we
know when we
have achieved
it?”
• Customer net promoter score
• Lowest sustainable prices
• Culture score
• Engagement score
“What are the
enterprise wide
initiatives we
need to focus on
now?”
• ‘Voice of the Customer’
program
• Framework for predictable &
sustainable pricing
• TasNetworks culture program
• TasNetworks leadership
program
We care for
our people and
the community
We collaborate
to deliver real
value to
customers
We enable our people
to deliver value
We innovate
and are a fast
follower
We care for our assets,
delivering safe and reliable
network services
while transforming our business
• Zero harm
• Network service performance
maintained
• Sustainable cost reduction
‘One TasNetworks’ program:
• governance frameworks
• business systems
• condition- & risk-based asset
management capability
We challenge
the status quo
We are fit for
purpose
Sustainable shareholder outcomes:
• Returns on assets & equity
• Dividends
• Corporate reputation & sustainability indices
Vision
Trusted by our customers to deliver today and create a better tomorrow
Purpose
TasNetworks strategy on a page
We are one
business
Our values will be developed by our people to support our strategy, building on the strong existing values bases
Overview of TasNetworks
From 1 July 2014 the distribution business of Aurora merges with the Transend Networks
business, forming TasNetworks. TasNetworks has been established as an incorporated, State
Government-owned fully integrated electricity distribution and transmission network business.
The principal purpose of TasNetworks is to undertake the transmission and distribution of
electricity in Tasmania. TasNetworks may undertake other related activities on a case-by-case
basis with the prior written approval of the shareholders. It is expected these related activities
will largely focus on provision of telecommunications services and energy-related
technologies.
The business has been set up to achieve lowest sustainable prices for customers. We aim to
make customers central to all we do and we will change and transform the business to
achieve our goals.
In the lead up to commencement of operations on 1 July, we have developed the business
strategy, developed an organisation structure that facilitates achievement of the strategy,
recruited our people, established our brand, and begun the integration of information
technology systems. These activities are designed to make the business more efficient from
day one. We are streamlining the management structure, reducing the size of the workforce
and moving towards the Tasmanian reference point for remuneration. Based on the work
done to date, we anticipate a smooth and efficient transition.
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Members’ expectations and Tasmanian Government objectives
The (draft) Members’ Draft Statement of Expectations outlines, as the owners of the
business, the Members’ broad policy expectations and requirements for TasNetworks.
It includes the Tasmanian Government objective, to:
‘Promote efficient investment in and efficient operation of, electricity network services
to secure a stable and sustainable price path for power that can provide relief to
customers and help grow the economy and attract investment.’
We must also deliver our services reliably and safely. These expectations have been taken
into consideration in preparing this plan.
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Market outlook
TasNetworks faces a number of challenges as it balances the delivery of safe, reliable and efficient network
services against customer expectations in regard to electricity prices.
The condition of the network assets has benefited from an extensive renewal program over the past
decade, and security of the system has improved in many areas across the state. TasNetworks will inherit a
three billion dollar asset base providing network capacity and security, and a customer base that cannot
afford sustained increases in electricity prices.
A large portion of network prices for distribution customers have traditionally been based on energy usage,
and usage has fallen in recent times. However, there are still requirements for network expenditure to
renew assets and securely meet forecast peak demand, and to safely operate the network. TasNetworks
will operate within a subdued economic environment in Tasmania. Our latest forecasts (May, 2014) show
that annual electricity consumption is expected to return to growth, but at a modest annual average rate of
0.76%, which is much lower than other NEM states. We will need to better position the business to respond
to the changed role of an electricity network that may deliver less electricity but must still provide safe and
reliable services and capacity to meet peak demand.
Traditional pricing and revenue models are unlikely to support sustainable network services or predictable
price paths for customers. Consistent with the Government’s Objective, an important goal in our Corporate
Plan is to establish a sustainable and predictable price path for our customers.
The four largest energy users account for more than half the energy consumed in Tasmania. TasNetworks
therefore remains vulnerable to the loss of a major customer and a key focus will be to work with these
customers to understand how we can support the sustainability of their operations.
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Market outlook: electricity consumption
In Tasmania, annual electricity consumption peaked in 2009–10 at almost 11,000 GWh. Since then, it has trended
down. Looking ahead, the latest forecasts (May, 2014) show that annual consumption under the medium forecast
over the 10-year period to 2022–23 is expected to increase by an annual average of 0.76% due to economic
growth, but at a much lower rate compared with other NEM states. The figure below shows the actual and a range of
medium, high and low forecasts of electricity consumption in Tasmania 2005 – 2023 (GWh).
13000
Energy (GWh)
12000
11000
10000
9000
8000
Year
Actual
High growth
Medium growth
Low growth
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Winter maximum demand forecast
In Tasmania, the maximum demand for electricity occurs in winter. The medium forecast winter maximum
demand is a driver of requirements for network capacity to meet peak demand. The transmission and
distribution Annual Planning Reports, released at the end of June, provide more information on the impact
on peak demand growth on future system security and reliability requirements.
2400
Maximum demand (MW)
2200
2000
1800
1600
1400
1200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Year
Actual, 10% POE corrected
High growth
Medium growth
Low growth
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The TasNetworks value and supply chain
Transmission, distribution and telecommunications
services and customer engagement
Energy
 Hydro
 Gas
 Wind
Strategic
Asset
Management
Team
New generation
customers
Wind
Solar
Basslink
• Connection
• Non regulated
Customer
Engagement &
Network
Operations Team
Price
Availability
Reliability
Responsiveness
• Safety
• Innovative
solutions
• Industrial
• Business
• Residential
Revenues
$
Retailers
$
Metering data
• Accuracy
• Timeliness
• Content
customers
Strategy and business support services
if you’re not directly supporting the customer, you’re supporting someone who is
Strategy & Stakeholder Relations Team; People & Performance Team; Company
Secretary & Legal Services Team; Finance & Business Services Team
•
•
•
•
Fixed charges
Variable charges
Connection
Non regulated
AEMO
Value drivers
Value drivers
•
•
•
•
Transmission
direct connect
load customers
• Major industry
Distribution
customers
$
(two-way energy
flows)
Revenues
Works and
Service
Delivery
Team
Energy
$$$
Existing
generation
customers
Value drivers
• Price
• Reliability
• Service /
Responsiveness
• Safety
• Innovative
solutions
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Our vision and purpose
The vision of TasNetworks is to be:
“Trusted by our customers to deliver today and create a better tomorrow”
The vision
puts achieving customer trust at its heart
recognises that we are an enabler of customer outcomes, today and in the future
recognises that we are part of creating a better future: we can create customer value
and value to Tasmania as a whole
• allows us to achieve customer trust in many different ways, through provision of a
range of services
Underpinning the vision statement, there are three pillars to our strategy: customers;
people; one business.
These themes reflect the core strategic objectives of TasNetworks that will enable our
vision to be delivered and achieve sustainable returns to our shareholders and ultimately
the State of Tasmania.
Our purpose is to deliver electricity and telecommunications network services, creating
value for our customers, our owners and our community.
•
•
•
•
•
•
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Strategic goals
To deliver our vision and shareholder outcomes, our strategic goals (or ‘pillars’) are
that:
• We understand our customers by making them central to all we do
• We enable our people to deliver value
•
We care for our assets, delivering safe and reliable network services while transforming
our business (one business)
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Shareholder outcomes
We seek to deliver sustainable shareholder outcomes and these will be measured
in terms of:
•
•
•
•
Return on assets
Return on equity
Dividends
Corporate reputation and sustainability indices
For some measures, we will develop targets as the business commences operations.
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Strategic phases
Transform
Business
Stakeholder value
Build
Understanding
Set
Foundation
Building from a
strong legacy
Transition
Build Capability
Transform Practices
When
To June 2014
July – December 2014
December 2014 onwards
Focus
Recruitment, IT integration,
accommodation, brand
establishment
Safe and reliable operation of the
network
Drive TasNetworks cultural change
Drive efficiency, reduce costs, improve
customer outcomes
Key
milestones
Org design, recruitment complete
Public education campaign
IT integration
Agree vision and first Corporate Plan
Establish values and supporting
behaviours
Operate the business with 1,000
people
Transmission revenue proposal
review by AER & draft decision
Finalise stage 2 transformation plan
Transmission revenue decision
Enterprise agreement renegotiated
Strategy for future prices and customer
outcomes
… and more
Strategic focus
•
Safety of our people and the community, while reliably providing network services, is
fundamental to the TasNetworks business and remains our immediate priority
•
We care for our assets to ensure they deliver safe and reliable network services
•
We will transform our business with a focus on:
o
the customer, and a strong commitment to delivering services they value
o
an engaged workplace with strong cultural qualities and people who will be great
ambassadors for TasNetworks
o
a high performing culture with clear accountabilities for deliverables
o
an appropriate approach to the management and allocation of risk
o
a well run, efficient business, that delivers sustainable returns to the Tasmanian
community and is resilient to future challenges.
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Key performance indicators and targets
Some of our strategy measures and targets are under development, however we have outlined
the intent to measure performance in our areas of strategic focus.
Customers:
We understand our customers by making them central to all we do
Key Performance Indicator
Performance Measure
Target 2014–15
Customer engagement and service
Customer net promoter score
Measure baseline performance and
establish future target
Prices for customers
Lowest sustainable prices
Develop targets
People:
We enable our people to deliver value
Key Performance Indicator
Culture and people engagement
Performance Measure
Culture score
Engagement score
Target 2014–15
Measure baseline performance and
establish future targets
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Key performance indicators and targets
One business:
We care for our assets, delivering safe and reliable network services while
transforming our business
Key
Performance
Indicator
Zero harm
Performance Measure
Number of LifeSafe observations
Percent LifeSafe participation
Number of significant incidents
Number of reportable incidents
Network service
performance
Meet network planning standards
Outcomes under service target performance incentive schemes
• Transmission loss of supply event > 1.0 system minutes
• Transmission loss of supply event > 0.1 system minutes
• Average transmission circuit outage rate – lines
– transformers
• Distribution system average interruption duration index (SAIDI)
• Distribution system average interruption frequency index (SAIFI)
Target 2014–15
≥ 1,500 observations (10% increase
from 2013-14)
≥ 20%
≤ 10 (LEOY 2013-14 = 13)
≤ 16 (LEOY 2013-14 = 18)
Network planning requirements met
No net penalties as measured by
service target performance incentive
schemes
≤ 2 events
≤ 15 events
≤ 31
≤ 12
≤ 302 minutes
≤ 1.97 events
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Key performance indicators and targets
One business:
We care for our assets, delivering safe and reliable network services while
transforming our business
Key Performance
Indicator
Sustainable cost
reduction
Performance Measure
Efficient operating and capital expenditure
Target 2014–15
• Achieve targeted $8 million cost reduction
• Operating and capital costs within budget
• Efficient delivery of program of work:
o on time
o on or under budget
• Develop future efficiency targets
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Key performance indicators and targets
Sustainable shareholder outcomes
We seek to deliver sustainable shareholder outcomes.
Key Performance Indicator
Financial sustainability
Shareholder returns
Reputation
Performance Measure
Target 2014–15
Return on assets
> 8.4 %
Return on equity
> 10.7 %
Dividends
Equity withdrawals
Pass through of Transend and
Aurora Energy dividends
$20 million
Corporate reputation and sustainability
indices
Measure baseline performance
and establish future target
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Financial forecasts - summary
•
Total assets ~ $3 billion
•
Total revenue (regulated and unregulated) ~ $593 million in 2014-15
•
Capital expenditure program $189 million in 2014-15, forecast five year average of
$179 million per annum
•
Profit before tax ~ $ 167 million in 2014-15
•
Projected returns to government as per below
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Key planning assumptions
•
•
•
•
•
•
•
Transmission prescribed revenue is based on the transmission revenue proposal for
2014-15 to 2018-19.
Distribution use of system revenues are based on the 2014-15 Pricing Proposal for
distribution services, and the distribution revenue allowance in years two and three. The
fourth and fifth years are based on year three forecasts adjusted for CPI.
Opex and capex programs of work were prepared on a bottom-up build against the
background of risk, safety, customer requirements and revenue decisions. We have
factored in $8 million in immediate opex savings arising from merger efficiencies. We are
targeting ongoing real cost reductions in our operating costs, with our operating costs
rising by CPI less 0.5% per annum from 2015-16.
Accounting for distribution and transmission regulated assets are aligned and re-valued to
their regulated asset base (RAB). This is a significant change from the current accounting
policy of Transend for transmission assets (being Depreciated Optimised Replacement
Cost) and generates a reduction to the transmission opening asset value.
All large major industrial customers continue existing operations.
Telecoms, NBN and other non-regulated services continue to be provided, similar to
current levels.
The cost of subsidising solar feed-in tariffs is recognised by the shareholders as noncommercial activity. TasNetworks will therefore not seek to pass these costs on to our
customers.
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Strategic initiatives: Our Customers
We understand our customers by making them central to all we do
Strategic initiatives 2014-15
Specific activities
‘Voice of the customer’ program
Develop and implement customer engagement framework
Understand and analyse customer value drivers
Develop and articulate customer capital contribution strategy
Framework for predictable and sustainable pricing
Develop a framework for predictable and sustainable customer
pricing:

Enhance energy forecasting capabilities

Develop and implement TasNetworks tariff strategy

Influence regulatory frameworks for pricing

Participate in development of State’s Energy Strategy
Develop and monitor rolling 10 year capital and operating plans
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Strategic initiatives: Our People
We enable our people to deliver value
Strategic initiatives 2014-15
Specific activities
TasNetworks values
Work with employees to develop TasNetworks values to support vision
TasNetworks culture program
Measure baseline culture and desired culture
TasNetworks engagement program
Measure baseline employee engagement
Implement internal engagement program
Engage employees to achieve successful new enterprise agreement
TasNetworks leadership program
Implement TasNetworks leadership program
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Strategic initiatives: One Business
We care for our assets, delivering safe and reliable network services while transforming our business
Strategic initiatives 2014-15
Specific activities
Develop and implement transformation plan
Develop plan to realise the benefits of the merged network business
Implement the transformation plan and achieve agreed milestones
Effective governance frameworks
Develop and implement frameworks, policies and procedures that
support efficient business activities and considered risk-taking
Efficient and effective business systems
In line with transformation plan, review business systems that are critical
in delivering customer value
Asset management capability
Integrate and align frameworks for condition- and risk-based asset
management and network planning
Safe and reliable network services
Implement TasNetworks zero harm program
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Risks and opportunities
Key business risks and opportunities
Customers
People
One
business
Operating the network in a safe, reliable and secure
manner



Achieving sustainable revenue outcomes that are
supported by our customers

Managing customer pricing and anticipating changes
in demand

Mitigating loss of large customers and attracting new
customers

Managing the business in a changing regulatory and
political environment

Integrating people, systems, processes and culture in
a seamless manner to fully realise the benefits of the
merger



Building a high-performance constructive business
culture



Realising growth opportunities such as through
emerging technologies

Establishing an appropriate capital structure


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Our customers
TasNetworks has a diverse customer base, ranging from large industrial and generation customers
connected to the transmission system, to business and residential customers connected via the
distribution system. We also provide a range of customers with telecommunication services.
Customers connected via the distribution network
Number of installations
(as at Nov 2013)
Business – large (> 150 MWh pa)
2,532
Business – medium (50 – 150 MWh pa)
4,133
Business – small (< 50 MWh pa)
36,339
Residential
234,498
TOTAL
277,502
Generation customers connected to the transmission
network
Total installed capacity
Hydro Tasmania
2,270 MW provided by 29 hydro
power stations of which 2,255 MW
is provided by 25 power stations
connected to the transmission
network
Musselroe Wind Farm
168 MW
Tamar Valley Power Station
383 MW
Woolnorth Bluff Point Wind Farm
65 MW
Woolnorth Studland Bay Wind Farm
75 MW
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Our customers (continued)
Load customers connected to the
transmission network
Description
Bell Bay Aluminium
Aluminium smelter
Copper Mines of Tasmania
Underground mine and primary ore processing plant
Forestry Tasmania
Connection to a timber processing and veneer plant
Grange Resources Tasmania
Open cut mine at Savage River and iron ore pelletizing plant at Port
Latta
Gunns
Woodchip mill
Hellyer Mill Operations
Underground mine and primary ore processing plant
Norske Skog
Pulp and newsprint mill
Nyrstar
Zinc smelter
MM Group Rosebery
Underground mine and primary ore processing plant
TEMCO
Ferromanganese and silicomanganese smelter
Timberlink
Timber sawmill and processing plant
Other networks connected
Description
Basslink
Market network service provider with converter stations in Victoria and
Tasmania and a 400 kV undersea direct current cable
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Public education and engagement
We have an ongoing role in engaging with Tasmanians about the electricity industry and TasNetworks’ role
and future plans.
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Organisational structure
We will operate the business with approximately 1000 employees, structured in the following
teams.
CEO
Lance Balcombe
Company Secretary
and General Counsel
Phillippa Bartlett
GM Strategy and
Stakeholder Relations
Bess Clark
GM Strategic Asset
Management
Wayne Tucker
GM Works and
Services Delivery
Natasha Brown
GM Customer
Engagement and
Network Operations
Mike Paine
GM Finance and
Business Services
GM People and
Performance
Ross Burridge
Justine McDermott
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Conclusion
TasNetworks’ operations commence in July 2014. We will focus on delivering safe and
reliable services to customers.
We will care for our assets and begin to transform our business to achieve our vision and
strategic objectives.
We will do this by making customers central to all we do, developing an engaged workplace
and high performing culture and delivering sustainable returns to shareholders.
We are excited about the challenges and opportunities ahead, and look forward to working
with our customers, our owners and our community to deliver our vision, to be:
“Trusted by our customers to deliver today and create a better tomorrow”
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