#1TERRITORY GENERATION 2021-22 ANNUAL REPORT Powering the NT#2ii ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 FRONT COVER: Image 1 - Electrical Apprentice, Brieanna McSweeny, at Owen Springs Power Station Image 2 OMT Mechanical, David Lewis, at Katherine Power Station. ABOVE: Yulara Power Station from the air with Uluru in the background. Acknowledgement of Country Territory Generation acknowledges the Traditional Custodians and Elders of the country on which we work and live, and recognise their continuation of cultural, spiritual and educational practices. We pay our respect to the Elders past, present and emerging. Aboriginal and Torres Strait Islander readers are advised that the following report may contain images and names of people who have died. 2021-22 financial year highlights Welcome Territory Generation is the Northern Territory's largest electricity producer and we are committed to supporting government renewable energy targets. Using gas, diesel and renewable technologies, we generate electricity for the Territory's major population centres and support the reliable operation of the power systems. We supply wholesale electricity, capacity for meeting demand load and Essential System Services, including frequency and voltage control, network support and black start services. We are focused on supporting the Northern Territory's power systems through the transition to lower costs and renewables in line with Northern Territory Government policies. The 2021-22 annual report of Power Generation Corporation (trading as Territory Generation) summarises operations and achievements for the financial year 2021-22. The annual report is tabled in the Northern Territory Parliament as a reporting mechanism for Territory Generation's Shareholding Minister, Portfolio Minister and the Northern Territory Parliament. As per sections 41 and 44 of the Government Owned Corporations Act 2001 (the Act), the report includes information about Territory Generation's: . primary services and responsibilities significant activities of the year, major project highlights, key achievements and outcomes financial management and performance in compliance with the Act. The report also provides information for stakeholders who have an interest in the provision of electricity generation services in the Northern Territory. This is Territory Generation's eighth annual report following structural reforms to the Northern Territory electricity industry. 670% Increase Take 5s (See page 11) 1,053 Safety conversations across 8 power stations (See page 11) IMPROVED SYSTEM Mobile safety reporting (See page 11) 25 Engineers on credentialling program (See page 23) T 1,536 GWh electricity produced ($ $16.9M Net profit after tax (See page 6) (See page 26) $8.47M Dividend declared (See page 26) $286.8M Electricity sales (See page 26) 1#32 I ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 3 Contents LETTER TO THE SHAREHOLDER CHAIR'S MESSAGE CHIEF EXECUTIVE OFFICER'S MESSAGE OUR BUSINESS WHERE WE OPERATE OUR POWER STATIONS 3 4 LO 5 18 6 OUR STRATEGIC DIRECTION 10 SAFETY OUR NUMBER - ONE PRIORITY 11 12 Lead OMT Yulara, Matthew Hinchey, at Yulara Power Station. OUR BOARD OUR EXECUTIVE LEADERSHIP TEAM 13 OUR PERFORMANCE 14 Letter to the shareholder OUR PEOPLE 16 MAJOR PROJECTS 18 Treasurer Parliament of the Northern Territory OUTAGES AND WORKS 20 Darwin NT 0800 OUR ASSETS 22 Dear Treasurer INTERNAL PROJECTS 23 ENVIRONMENT & SUSTAINABILITY 25 On behalf of the people and Board of Power Generation Corporation (trading as Territory Generation), we are pleased to present our eighth annual report, for the year ended 30 June 2022, in accordance with sections 41 and 44 of the Government Owned Corporations Act 2001. OUR FINANCES 26 GLOSSARY 64 The Channel Island Power Station turbine hall. DENNIS BREE Chair GERHARD LAUBSCHER Chief Executive Officer#4ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Chair's message Territory Generation's business continues to be shaped by the Northern Territory Government's policy of achieving 50 percent renewables by 2030 and net zero emissions by 2050. We remain focused on providing system stability as solar enters our market, and see that as one of our key roles. Our fleet transition continues, underpinned by a strategy of investing in more efficient thermal generation assets. We purchased our first mobile gas turbine in 2021. The TM2500 is smaller than existing Channel Island plant but reacts more quickly to load changes and is also hydrogen capable. Contracts have been signed and work is underway for the construction of Darwin-Katherine battery, which will support increased renewable penetration and strengthen the system. We are all excited about this fantastic advance. The Territory Government has lifted the moratorium on Territory Generation being involved in solar in the Top End. We are now investigating ways in which this can be used to reduce costs and ensure continued system stability. We are again able to pay a dividend to the Territory Government and continue to manage costs that we can control effectively. Finally, thank you to our staff. The pandemic meant that the past financial year was an extraordinary time for everyone, but you responded magnificently, following the required protocols in a highly professional, community-minded way. Despite all the interruptions caused by the pandemic, you remained dedicated to providing power to Territorians and to maintaining safety as the core of our business. Thank you. DENNIS BREE C DANCER 911 Katherine Power Station's K3 open cycle gas turbine undergoing routine maintenance. Chief Executive Officer's message Despite the disruption of COVID-19, I am incredibly proud to report Territory Generation's strong performance in the 2021-22 financial year, especially in plant availability, reliability and Health & Safety. Undoubtedly, COVID-19 has been one of the most unsettling events in modern times. I thank our workforce for the flexibility and resilience demonstrated throughout the pandemic while delivering reliable electricity production. We have proven that we can adapt to varied working environments while keeping safety at the core of everything we do. Risk management has been a critical improvement to our organisation over the past 24 months. Through our focus on de-risking the business, we have reduced eight 'very high' rated risks to only one. We have also implemented numerous organisational and process changes to allow our work management, asset management and project management functions to mature. These changes have enhanced our operational performance and helped the business deliver safe, reliable, efficient energy and system services. As a result, we have successfully delivered the operational and financial commitments made in our 2021-22 Statement of Corporate Intent to our government shareholder. Being the largest producer of wholesale generation in the Northern Territory, we know our role in supporting the security of the power systems we operate in is critical. The power systems continue to change with increasing renewable energy penetration via behind-the-meter solar and the connection of utility-scale solar generation. As a generator, we developed a Fleet Transition Plan, which aims to assist with meeting the future requirements of the power system by providing more flexible, smaller, fast- start generation with hydrogen capability. We have taken the first steps in this transition by purchasing the TM2500 gas turbine and starting the large-scale battery energy storage system in the Darwin-Katherine grid. These projects are expected to reduce CO2 emissions by approximately 58,000 tonnes per annum. Testament to our continued emphasis on and commitment to our environment, social licence to operate, and robust governance framework, this goes well beyond reducing our direct emissions impact it is how we responsibly conduct and run our business. In support of the Government's Darwin-Katherine Electricity System Plan we continue to be the conduit, enabling more private investment in renewable energy in the Northern Territory. We are also building our longer-term strategy to create a brighter future for the business and determine how we can further participate in renewable generation. The most satisfying investment is in our people. A strong technical team is critical to our success, and we continue to invest in quality training packages to support our people to grow professionally and personally, which results in greater satisfaction in their work. We have also invested in our engineers by offering them a supported pathway to obtain their chartered status. We are creating opportunities for early career starters to enter the workforce and grow through our graduate and shining apprenticeship program. I sincerely appreciate the exceptional efforts of all our teams in driving the business forward and their commitment to operational and safety excellence. Finally, I thank our Board of Directors, Shareholding Minister and Portfolio Minister for their continuing confidence and support in Territory Generation. GERHARD LAUBSCHER 5#56 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 7 Our business Territory Generation is a Northern Territory Government Owned Corporation (GOC) which began operations on 1 July 2014 after the restructuring of the electricity industry in the Northern Territory. In the last financial year, Territory Generation produced 1,536 GWh of electricity using gas, diesel and solar technologies. We are the largest mass market and commercial electricity producer in the Northern Territory, owning ~603 MW of installed capacity and contracting an additional 5.1 MW from independent power producers, including 4 MW solar from Uterne in Alice Springs and 1.1 MW reclaimed gas produced by LMS Energy from the Shoal Bay landfill site. WHOLESALE ELECTRICITY SUPPLY Electricity Capacity to supply peak load ESSENTIAL SYSTEM SERVICES 1 001 Generator testing/ commissioning services Network support services BA M Frequency control services, including inertia System strength services 介 Capacity security services Electricity system services GOVERNANCE AND OPERATING STRUCTURE Territory Generation is governed by the Government Owned Corporations Act 2001 and the Power Generation Corporation Act 2014. Territory Generation was incorporated to provide sustainable financial returns to the Northern Territory Government. At the start of the 2021-22 financial year, Territory Generation's Shareholding Minister was the Treasurer, the Hon Michael Gunner, and the Portfolio Minister was the Minister for Essential Services, the Hon Eva Lawler. In May 2022, following a change of cabinet, Minister Lawler became the Treasurer and the Hon Selena Uibo our Portfolio Minister. Dennis Bree is the non-executive Chair of the Territory Generation Board of Directors. Richard Galton and Adjunct Professor Christine Charles are non- executive board members. The three directors are members of the Audit and Risk Committee and the People, Safety and Environment Committee. David Braines-Mead is an independent member of the Audit and Risk Committee, bringing expert financial knowledge. The Northern Territory Auditor-General audits Territory Generation's financial statements. RISK AND SAFETY MANAGEMENT Territory Generation continues to strive towards a zero-harm workplace with an inclusive behavioural safety culture where safety is always our highest priority and at the core of everything we do. Territory Generation manages risks through its Risk Management Framework, Risk Management Policy, Risk Register, Risk Matrix, and Risk Assessment Guide, supported by regular risk reviews, reporting, and management. We continuously enhance our risk management system by focusing on risk mitigation and using the Risk Matrix to assess risk levels based on 'Likelihood' and 'Consequence'. We are exposed to a wide range of risks, including process safety, health and occupational safety, cyber risks, competition, disruptive technology, information technology, security, natural disasters, pandemics, operational risks and compliance risks. Our corporate culture and mindset focus is on risk mitigation through risk-driven projects. Risk forms the basis of justifying any project at Territory Generation. Project managers must seek approval for projects via our Project Management Office. As part of this process, they must identify the risks their project will mitigate and assess the efficacy of this mitigation. The Hon Selena Uibo with Acting Owen Springs Station Manager, Hal Ruger. AUDITS, COMPLIANCE AND LEGAL OBLIGATIONS Territory Generation is always striving to improve the way we operate. We maintain a general compliance and audit program encompassing internal and external audits and action recommendations to improve our processes and procedures and reduce risk. We always meet our regulatory obligations on time, including delivering regulatory reports. Our business is subject to legal requirements, including Commonwealth and Northern Territory legislation, Regulations, Rules, Licensing, Standards and Codes, and we comply with part 9 of the Information Act 2002. We have also completed all recommendations and actions assigned to us by the Utilities Commission report on the 2019 Alice Springs system black. Territory Generation is monitoring the ongoing amendments being enacted to the Security of Critical Infrastructure Legislation to ensure compliance with our regulatory obligations. We also revised and updated our Cyber Incident Response Plan to align with mandatory cyber incident reporting obligations. In addition, we are updating our Risk Management Program to set out the risks and mitigation strategies for our critical infrastructure assets. OWEN SPRINGS POWER STATION DSPS Viter VISITOR TGen TO CONNECT CONNI Voltage control services Black start services#68 Where we operate ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Territory Generation owns and operates eight power stations and 65 generating units in the Northern Territory. These are located at Channel Island, Weddell and Katherine (the Darwin-Katherine interconnected system); Tennant Creek; Ron Goodin and Owen Springs (the Alice Springs power system); Kings Canyon and Yulara. Darwin Liquid Natural Gas 500km north-west of Darwin Inpex 890km west of Darwin Channel Island Power Station Blacktip field (100km offshore) Wadeye Bonaparte Gas Pipeline. Darwin Shoal Bay Renewable Energy Facility Weddell Power Station Pine Creek Power Station Katherine Power Station Our power stations Engine Total capacity (MW) Darwin-Katherine region Channel Island Power Station (CIPS) 4 heavy industrial gas turbines (2 dual fuel), 279 3 aeroderivative gas turbines (2 dual fuel), 1 steam turbine Weddell Power Station (WPS) 3 aeroderivative gas turbines 129 Katherine Power Station (KPS) 4 industrial gas turbines (dual fuel) 37 Alice Springs region McArthur River mine Ron Goodin Power Station (RGPS) 8 reciprocating sets 44 (6 dual fuel, 2 diesel), 1 gas turbine (dual fuel) Owen Springs Power Station (OSPS) 13 reciprocating sets 77 (10 gas, 3 dual fuel), 1 industrial gas turbine (dual fuel) Sadadeen Valley Battery energy storage system (BESS) 5 Amadeus Gas Pipeline Daly Waters to MacArthur River Gas Pipeline Power station owned by Territory Generation Territory Generation power purchase agreement Other power station Gas supply source City/town Existing gas pipeline ■■■ Transmission line Northern Gas Pipeline Tennant Creek Power Station Palm Valley to Alice Springs Gas Pipeline Ron Goodin Power Station Alice Springs (Sadadeen Valley) Uterne Mereenie Gas Field Kings Canyon Power Station Yulara Power Station Owen Springs Power Station Dingo Dingo Palm Valley Gas Field Gas Field Gas Pipeline Tennant Creek region To Mt Isa Tennant Creek Power Station (TCPS) 11 reciprocating sets 20 (5 gas, 6 diesel), 1 industrial gas turbine (dual fuel) Yulara-Kings Canyon region Yulara Power Station (YPS) 10 reciprocating sets 11 (4 gas, 5 diesel, 1 dual fuel) Kings Canyon Power 3 reciprocating sets 1 Station (KCPS) (diesel) and 1 solar panel Description CIPS is Territory Generation's largest power station and the main source of electricity for the Darwin-Katherine Interconnected system. The first units were commissioned at CIPS in 1986. CIPS is a natural gas fired station, with diesel fuel back-up capability. WPS connects to the Darwin-Katherine grid and consists of two open cycle gas turbines commissioned in 2008, with a third commissioned in 2014. KPS has been operational since 1987. The station contains four open cycle gas turbines. RGPS was commissioned in 1973 and remains a source of electricity for the Alice Springs area. RGPS has been kept operational to provide more capacity to the Alice Springs system. OSPS uses the latest dual fuel and gas spark reciprocating technology. OSPS services the Alice Springs community. The Sadadeen Valley BESS is a grid-connected modular lithium iron phosphate battery system which has been in operation since 2018 to support the Alice Springs power system. TCPS services the Tennant Creek township and surrounding communities as far as Ali Curung. YPS services the Ayers Rock Resort and the Yulara township. The Yulara Energy Transition Initiative will result in a significant change in the asset base in the near future. KCPS is the only commercial source of electricity in the Kings Canyon area, servicing the Kings Canyon Resort and domestic customers. 9#710 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Our strategic direction Territory Generation has a crucial role in supporting and contributing to the provision of sustainable energy solutions for the Northern Territory as part of the transition to 50% renewables by 2030 and net zero emissions by 2050. We will continue to transition our fleet to provide support services for renewable energy and deliver safe, reliable and cost-effective electricity essential services. FL R S T OUR VALUES FOCUS: We focus our efforts on delivering a safe, reliable and cost-efficient operation we are all proud to be a part of. INTEGRITY: We are open and honest with our words and actions: OUR VISION To be the Northern Territory's trusted and respected energy services business. This means: • • Running our business safely is recognised as our highest priority We are known for being reliable, available and responsible • We exceed the expectations of our stakeholders We are recognised for technical excellence for energy services in the Territory We are cost effective with other relevant players in the market We are an employer of choice OUR PURPOSE We safely, reliably and responsibly provide: • "to do and say the right thing" Electricity on sustainable terms . RESPECT: We show respect for our teammates, the environment, and the communities in which we work. SAFETY: We conduct our business and our roles with a strong focus on avoiding injury to our people or damage to assets and the environment. Safety is not negotiable. TEAMWORK: We are one team with aligned goals working together to achieve Territory Generation's vision. Essential system services which facilitate system reliability and the adoption of renewable energy. We contribute to the provision of sustainable energy solutions for the Northern Territory as part of the transition to 50% renewables by 2030 and net zero emissions by 2050. OUR OBJECTIVES • Safety: We have an embedded behavioural based safety culture, where safety is at the core of everything we do People and Capability: We have a culture that attracts, retains and develops highly skilled people aligned with our vision and values Plant Operations: We operate our plant safely, reliably and responsibly every day Finance: We achieve our agreed controllable SCI outcomes; We monitor and report the impact of uncontrollable events against our SCI; We have an accepted and transparent understanding of the cost of system services Sustainability: We ensure sustainability by effectively managing our social, environmental and economic performance Stakeholders and Customers: We are a trusted supplier delivering safe and reliable products and services. Safety - our number one priority G ЭХ At Territory Generation, safety is driven by genuine care and concern for people and the environment. From a health, safety and environment (HSE) perspective, the safety and wellbeing of every person who enters a Territory Generation site is our number one priority. This goes beyond ensuring that our employees, contractors and vendors return home safely at the end of each day and extends to culture, the environment and outside to the wider community. TAKE 5 A Take 5 is a task-based risk assessment tool completed by staff before work starts to ensure hazard identification and control. During the financial year, the Take 5 process and booklet were refreshed based on feedback from the workforce. Take 5 completion was then embedded as a safety process, required before the start of every operational job. 4,465 Take 5s were completed during the financial year, an increase of more than 670% from the previous year. Take 5s are critical to safety as they reduce operational risks by helping refocus staff on the job at hand. They empower critical thinking about the work environment and allow staff to take personal responsibility for safety. SAFETY MANAGEMENT SYSTEMS During the 2021-22 financial year, the Safety team reviewed Territory Generation's safe systems of work, completing a gap analysis and aligning our safety management system towards best-practice ISO45001 Occupational Health and Safety (OH&S). Maintaining this management system means we are proactively improving occupational health and safety, eliminating hazards and minimising HSE risk. We are continually improving HSE performance. MYHUB Our incident management and reporting system was refreshed during the financial year following consultation with staff. The new-look, user-friendly MyHub includes a mobile phone app to allow incidents, hazards and near-misses to be reported from the field, in real time. Upgraded reporting details allow us to mitigate risks for the future. We promote proactive reporting as part of our continuous improvement drive to strengthen our safety culture, and have a no-blame policy. 2018-19 2019-20 2020-21 2021-22 Injuries and Illnesses Lost Time Injuries (LTI) 0 0 0 1 Lost Time Injury Frequency Rate (LTIFR) 0.0 0.0 0.0 0.28 (industry bench mark 1.3) Incident Reporting Safety Conversations 986 882 1,009 1,053 PERMIT TO WORK The Permit to Work (PTW) system sets out safety procedures for day-to-day works, electrical and mechanical work permit processes, and high-voltage testing. The PTW system is under review as a continuous improvement initiative in consultation with end users. Several supporting procedures are included in the PTW refresh project scope, including gas type B, electrical safety and hazardous area. The review will ensure the system is enhanced and continues to meet best practice as an effective safe system of work. On conclusion of the review, all operational staff and contractors will be retrained in the updated system. STOP THE JOB Every person on a Territory Generation site has the authority to stop work that could cause personal harm or damage to plant and equipment. Anyone can 'stop the job' when a potential hazard is identified. Controls must then be put in place to minimise the identified risk or hazard. 11#812 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Our Board Dennis Bree Independent Non-Executive Chair BE, MAICD Dennis is a civil engineer whose whole career has been in the Territory. Dennis was involved in the recovery from Cyclone Tracy, focusing on structural design with GHD, after which he joined the Commonwealth Government. He focused on water and sewerage, particularly in remote areas and then moved into management roles with the Northern Territory Department of Transport and Works and then Power and Water Authority. Dennis was Executive Director Operations at Power and Water Authority and was responsible for generation as well as other business units. Dennis has been Deputy Chief Executive of various departments and Chief Executive of the Department of Business. Dennis has also been Chief of Staff to two Chief Ministers and two Leaders of the Opposition. He was also a senior advisor to the former Chief Minister Michael Gunner. In his private life, Dennis has been very involved in rugby union and was President of the Northern Territory Rugby Union for ten years and a Director of the Australian Rugby Union for four years. Christine Charles Independent Non-Executive Director BA(Hons), ADJUNCT PROF MAICD Christine is Managing Director and co-founder of D4G and an experienced board chair and non-executive director. She brings substantial board and management experience, focused on highly regulated environments and realising the business benefits of managing regulatory, sovereign, community and environmental risks. Having held positions in the community, public and private sectors and academia, Christine has broad knowledge across various sectors. Several years in an executive role with Newmont Mining and specialist work have given her a thorough understanding of the resources and energy industry. After heading the South Australian Cabinet Office, Christine was Chief Executive Officer of the South Australian Human Services Department from 1997 to early 2002. She worked for the World Health Organisation in Japan and several non-government organisations within Australia. Christine sits on the boards of Transformations in Mining Economies CRC and the Sustainable Minerals Institute and chairs the boards of the Resources and Skills Alliance and the Centre for Social Responsibility in Mining. She has previously chaired the Northern Territory Green Energy Task Force and the Northern Territory Mining Board. Richard Galton Independent Non-Executive Director BE, MBA Richard graduated as a civil engineer from the University of Sydney in 1972 and started his career with the New South Wales Department of Main Roads. Richard focused on planning, design and construction of motorway and bridge construction projects in Sydney, London and Wollongong for a decade before he was seconded to the Northern Territory in 1982 to manage road network development. Richard then completed a Master of Business Administration while working in senior management roles within the Northern Territory Public Sector. Since 1994, Richard has held executive roles in a broad range of Northern Territory Government agencies, including Work Health, Infrastructure, ICT, Economic and Regional Development, Primary Industry, Fisheries and Resources. He also served a period as Executive Director Technical with Power and Water Authority as it commenced the transition to a government owned corporation in 2002. Our Executive Leadership Team (Front left to right) Hieu Nguyen, Gerhard Laubscher and Maria Walters. (Back left to right) John Greenwood, Minh Tran and Eddie Mallan. Gerhard Laubscher Chief Executive Officer MTechEng FIEAust CPEng Eng Exec NER APEC Engineer IntPE(Aus), MAICD Gerhard is a seasoned leader with global experience across various industries. He has held CEO and Board Director roles in public and private sectors with accountability for all business functions. His passion is to improve business and develop leadership teams that are inspired, resilient and deliver value with an uncompromising approach to safety. John Greenwood General Manager Operations & Maintenance GradDip(Leadership&Mgt), MAICD, MIML John is an accomplished senior executive with management experience gained across roles in both New Zealand and Australia. He experienced in service delivery, asset management and capital works delivery in the electrical supply industry. Prior to joining Territory Generation, John was CEO of an electricity utility contractor based in the South Island of New Zealand. Maria Walters General Manager Finance and Business Services BBusCom, FCPA, GAICD Maria has gained significant experience across her career in the power generation industry. She brings strong technical accounting, strategic and analytical skills as well as extensive experience and knowledge of the business services functions. Maria has held key board positions on several external boards over a number of years. Eddie Mallan General Manager Commercial Adv Dip HospMan, BComm, MBA, Grad Dip WHS, GAICD Eddie is an experienced executive who has a history of working in a range of industries, including ports, mining, supply chain, logistics, mass manufacturing and technology. He is skilled in negotiation, business planning, operations management, strategic sourcing and business improvement, and has experience in both the private and public sectors. Hieu Nguyen General Manager Legal Governance & People; General Counsel and Company Secretary BSc, LLB, LLM, GAICD Hieu is an executive with legal, governance and human resource experience in private and government enterprises. He has held various board and committee positions and been involved in large commercial contractual negotiations during his career. Hieu was instrumental in the establishment of Territory Generation's Business Services unit, which included eight functions at the time of its development. Minh Tran General Manager Assets & Engineering Dip Proj Mgt, BEng (Electrical and Electronics), MEM, MAppFin, FIEAust, CPEng, NER, APEC Engineer, IntPE(Aus) Minh is a highly qualified engineering leader with over 12 years of experience in the power generation industry. He has successfully managed information technology, operational technology, project management and engineering teams. Minh is passionate about developing high performing teams and leading the energy transition. 13#914 Our performance ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 For the 2021-22 financial year, Territory Generation developed key performance indicators (KPIs) to define our strategic direction. Six key objective areas were identified, covering Safety, People and Culture, Plant Operations, Finance, Sustainability, and Stakeholders and Customers. KPI measures with corresponding targets were allocated to each objective area. Achievement of KPI targets demonstrates alignment with our strategic direction of ensuring the safe, reliable and responsible operation of our plant and driving continuous improvement across the business. Objective KPI measure Finance Target Actual Achievement of budgeted outcomes EBITDA/current ratio/ROA/ROE/ debt to equity ratio/EBIT Capital program delivered within approved base currency budget • Debt to equity <= previous year 1.72x • 1.61x Revenue growth > operating expenditure growth . Controllable costs <= previous year $28.4M • Dividend declared Project completion within +/- 10% of approved budget • 9.63% 8.29% • $30.6M . $8.47M -10% Objective KPI measure Safety Target Actual Products are costed in accordance with the agreed documented methodology and system control technical code as applied Documented methodology approved Approved Report lead indicators. Increase safe act observations Increase in incident and hazard reporting Reporting increased Sustainability Monthly allocated targets exceeded or met Targets exceeded and safety interaction reporting rates and improve quality No reportable environmental harm incidents Target = 0 0 Lost time injury frequency rate (LTIFR) People and Culture Employee engagement survey outcomes Number of people - Full Zero LTIFR recorded 1 LTIFR recorded: Fingertip injury An ongoing overall reduction in CO₂ Continuous reduction on prior year emissions Darwin-Katherine Energy Storage System constructed and commissioned Constructed and commissioned No reduction on prior year emissions due to higher than expected demand Construction in progress with commissioning targeted 2023 Engagement survey result > = 60% 62% FTE SCI and cap FTE SCI and cap Stakeholders & Customers WESAS negotiated and approved Time Equivalent (FTE) Compliance training provided Training completed on time > = 90% 98% Plant Operations Critical plant availability across portfolio Total average > = 88% 92% (excludes Ron Goodin Power Station) Operating expenditure (less energy) as a percentage of total revenue Achieve Budget 33% 31% Operating expenditure (less energy) per sent out MWh generated Start reliability Achieve <= Budget $63/MWh $59/MWh Achieve > Target 95% across all sites 97% Identify new technologies and develop proposals to meet stakeholder requirements Customer and stakeholder plan Approved by Board and Shareholder Two proposals presented to the Board Customer and Stakeholder plan approved to meet benchmark Approved by Board and submitted to the Shareholder Two proposals presented Plan approved System Average Interruption Duration Index (SAIDI) for generation Target 10-year average Target achieved 15#1016 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Our people Graduate Mechanical Engineer, Steven Sawyer, with Graduate Electrical Engineer, Aidan Routledge, at Weddell Power Station. Our people are critical to the Territory in many ways. While generating units power the grids, it's Territory Generation's people who power the continued safe, reliable and cost-effective electricity services to the Territory. If the pandemic has taught us anything, it's that our people cannot be overvalued. We strive to support and develop our staff to be the best they can be. LEADERSHIP DEVELOPMENT PROGRAM Territory Generation has developed a leadership program designed to support our staff to develop leadership skills. The four program focus areas are emerging leaders, upcoming leaders, leadership diversity and inclusiveness, and 360-degree communications. The program is being delivered by a local business and includes monthly face-to-face sessions and coaching sessions. Territory Generation believes in a diverse and inclusive workforce that represents the communities in which we operate. Staff from diverse groups are therefore included in the leadership program and succession planning. CAREERS, RECRUITMENT AND APPRENTICESHIPS Territory Generation strives to recruit locally and give Territorians a pathway to a rewarding career. During the 2021-22 financial year, three Territory Generation staff members and one hosted apprentice completed their apprenticeships. We currently have six hosted apprentices, including one who started in 2022. In the first half of 2022, Territory Generation recruited two local engineering graduates - one electrical engineer and one mechanical engineer. Both are from the Northern Territory. We are investing time, resources and effort into developing our graduates to become the next generation of technical leaders. Their progress is supported by a structured graduate program designed by Engineers Australia. SUCCESSION PLANNING Succession planning is under development with a focus on identifying necessary training. Emerging leaders are being identified and moved into what are considered "critical roles" when key members of our team go on holiday or leave the business. EMPLOYEE ENGAGEMENT The Northern Territory Public Service-wide employee engagement People Matter survey collated feedback on aspects of its workforce, including human resources, safety and bullying. From the survey results, Territory Generation identified areas for improvement and implemented a range of tailored initiatives. Our 'Pulse' staff engagement survey was then rolled out in April 2022 to assess and track progress achieved from the People Matter survey. These results showed improvements from the People Matter Survey and highlighted new areas where attention can now be focused. RECOGNITION In May 2022, Territory Generation staff were recognised at the GTNT Group Awards, with electrical apprentices Brieanna McSweeny and Kalina Price being awarded Outstanding Apprentice of the Year Stage 3 and Hot100 Commendation respectively. Territory Generation was also very proud to receive the Host Business of the Year award at this event. In total, we received five finalist nominations at the 2022 GTNT awards. This significant achievement is reflective of the dedication and commitment of our apprentices and supervisors and the calibre of our apprentice program. Administration Assistant, Shirley Ballesteros, at Channel Island Power Station. ENTERPRISE AGREEMENT Enterprise agreement negotiations began in March 2022. An offer is expected in the new financial year. The negotiations have been carried out in good faith and with mutual respect. FTE AND DIVERSITY We continue to focus on full-time equivalent (FTE) employees in line with Northern Territory Government requirements, while delivering safe, reliable and cost-effective electricity services. We remain focused on achieving a diverse workforce, as highlighted by our improved Equal Employment Opportunity (EEO) results in the 2021-22 financial year. SPECIAL MEASURES Territory Generation has implemented a Special Measures Plan which provides priority recruitment consideration of Aboriginal and Torres Strait Islander candidates. The aim of the Special Measures Plan is to improve diversity and inclusion in our business and increase participation of suitably qualified and experienced Aboriginal and Torres Strait Islander candidates. 17#1118 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 19 Major projects 2021-22 has seen Territory Generation reach key milestones on major projects designed to improve our system reliability into the future. Our Fleet Transition Plan maps a gradual transition to assets that are flexible, renewable-capable, fast-starting, and mobile to complement the existing power systems. Forecasts estimate the transition will significantly reduce carbon emissions and optimise costs. It is being carried out in a cost-effective and staged process that will not impact electricity supply. DARWIN-KATHERINE BATTERY ENERGY STORAGE SYSTEM The Darwin-Katherine battery energy storage system (BESS) is a strategically important project that supports the transition to 50 percent renewables and the needs of the power system of the future. Once operational, the ~35MVA BESS will be online continuously, replacing some gas-fired generation at Channel Island Power Station and strengthening the system to support increased solar. Reduced gas operating and maintenance costs will deliver annual savings of about $9.8 million and carbon emissions of 58,000 tonnes. The tender for the $45 million BESS was awarded in late 2021, with other supporting tender awards following in the first half of 2022 and works commencing towards the end of the financial year. The BESS is expected to be operational in 2023. TM2500 The second new major asset to support the Darwin-Katherine power system is a TM2500 gas aero-derivative turbine. The agile, fast-start, hydrogen-capable TM2500 was transported by sea and road from the United Arab Emirates via Darwin Port to Channel Island Power Station. Installation works and commissioning will commence in 2023, with much of the civil, mechanical and electrical works to be sourced from local and interstate contractors. The TM2500 can run on different fuel sources to allow flexibility for plant operators. It will renew 22 megawatts to the power system and can start in less than 10 minutes under local requirements. The TM2500 is expected to be operational in 2023. The unit will provide additional capacity and dispatch flexibility. YULARA ENERGY TRANSITION INITIATIVE Orders have been placed for four new diesel generators for Yulara power station to replace aged gas generators, historically operated on compressed natural gas, which is no longer supplied. In this unit size range, diesel generation also provides more flexibility than gas to operate in support of high penetration renewables in the future. In addition, a 30-month study of regional and remote community microgrids is under way at Kings Canyon, Yulara and Tennant Creek. The study, which is funded by a $2.8 million grant from the Federal Government, is examining the use of a combination of solar, battery and diesel, plus the possibility of biofuels, hydrogen and waste-to-energy generation. Territory Generation is working with key stakeholders, including Indigenous organisations, tourism operators and mining companies, to deliver successful outcomes. An artist's impression of the Darwin- Katherine battery energy storage system being installed at Channel Island Power Station (image supplied by Hitachi Energy). OMT Mechanical, Matthew Blankenspoor, with Mechanical Apprentice, Asinate Bradbury, at Tennant Creek Power Station. RENEWABLE GENERATION AND EMISSION REDUCTION An important development the 2021-22 financial year was the lifting of the Northern Territory Government's moratorium on Territory Generation being involved in renewable energy in the Top End. We're exploring renewable options in all our power systems and are moving towards including renewable equipment in our fleet transition. We're also exploring options to develop a clear pathway to net zero emissions, including collaborating with the Department of the Chief Minister's Major Projects group to consider how Territory Generation can help to introduce a hydrogen economy. We're working with a range of proponents on demand management, generation and storage opportunities. Many exciting ideas are being considered. A TM2500 (image supplied by General Electric). 03 TM2500 TM2500#1220 Outages and works 21 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Territory Generation's outage planning program is critical to our business. We forecast and conduct outages and works to maintain our generating units and ensure the delivery of safe, reliable and cost-effective electricity services. Our outage planning scope includes machine replacements, upgrades, maintenance, repairs, and improvements. Darwin-Katherine interconnected system CHANNEL ISLAND AND WEDDELL GAS SUPPLY Gas for Channel Island and Weddell power stations is supplied by Power and Water Corporation from Eni's Blacktip field. In the event Blacktip is unavailable, emergency gas has been supplied by Darwin LNG. However, as production at Darwin LNG is forecast to slow, INPEX has been contracted by PWC as an additional emergency supplier. INPEX gas from the Ichthys field is export quality, which means it has been stripped of inert gases and has approximately 17 per cent more energy content. We carried out crucial trials at Channel Island and Weddell power stations to test if our machinery could handle the transition to higher- energy gas and back again. Both trials were deemed successful. CHANNEL ISLAND C8 is a Siemens aero-derivative turbine which was scheduled for a mid-life overhaul and hot section exchange at 35,000 hours. In 2020, we removed the turbine for transport and repair by Siemens in Abu Dhabi and replaced it with a lease unit. 132 KV CABLE REPLACEMENTS PROGRAM Replacement of the ageing 132 KV cables from the generator set-up at Channel Island Power Station are now 90% complete with only C1 installation remaining. The works were postponed until 2022 to align with Power and Water Corporation switch yard works. WEDDELL The W2 annual outage in May found the engine to be unserviceable. It was replaced with the on-hand spare Weddell engine. A new engine will replace the W3 engine at Weddell Power Station later in 2022 when its service hours have been consumed. Procurement of a new Weddell engine has been completed and delivery is anticipated before 30 June. Southern region OWEN SPRINGS OSO3 is one of three MAN 10.9 mW medium-speed reciprocating dual-fuel engines that provide inertia and improve the security of the Alice Springs power system. Its 16,000-hour service was completed in July 2021. Work included the removal of all cylinder heads and replacement of pilot injector tubes, required because the other two MANS had already been upgraded. Heads were pressure tested and refitted back onto the engine. All pilot injectors and gas valves were then installed. All the work was done. by our own team. KINGS CANYON KCO2 is one of three engines at the Kings Canyon Power Station. KC01 and KCO2 are 400 kW QSX15 Cummins diesel engines and KC03 is a 200 kW QSL9 Cummins diesel engine. KC02 was replaced with the original KC03 after its scheduled overhaul, which was completed in December 2021 by contractors and internal personnel. TENNANT CREEK TC19 is one of three Jenbachers installed at Tennant Creek Power Station in 2017. TC19, TC20 and TC21 are spark-fired engines rated at 1.8 MW. The TC19 head was replaced in September 2021 at the due 10,000 hours by internal personnel and contractors. Graduate Mechanical Engineer, Steven Sawyer, inspects Weddell W2. ial Controls Electrical and maintenance works at Ron Goodin Power Station.#1322 22 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 23 Internal projects Several internal projects were carried out in the 2021-22 financial year. Internal projects are largely staff and process focused, designed to support the continued provision of safe, reliable and cost-effective electricity services to the Territory. S.FL. 110,000 LT COMBUSTIBLE LIQUID Tank 4 Our assets LH COMBUSTI Diesel tanks at Owen Springs Power Station. As a major supplier of electricity to the Northern Territory, Territory Generation uses a combination of gas, diesel and solar technologies to generate power. Asset management is key to ensuring reliability, availability and safety. ENGINEER CREDENTIALLING PROGRAM In the first half of 2022, Territory Generation partnered with Engineers Australia to offer our engineers access to a new Engineering Workforce Credentialling (EWC) program, the first of its kind in the Territory. The EWC program supports our engineers in accelerating the attainment of their chartered credentials and provides opportunities to develop their skills locally and reach the top of their profession. Engineers Australia Chartership is a globally recognised accreditation that is a mark of excellence, demonstrating the highest level of professionalism in an engineering area of practice. It is also a significant personal achievement. The partnership demonstrates Territory Generation's commitment to engineering excellence and forms part of our retention program. All 25 of our fully qualified engineers will have access to the program and we anticipate across-the-board credentialling by the end of 2022. PROJECT MANAGEMENT OFFICE The Project Management Office (PMO) has matured Territory Generation's portfolio management function and oversight of project delivery over the past 12 months, resulting in improved accuracy and effectiveness for our budget capital spend. The PMO is focused on completing the right projects and enhancing project capability and delivery. The PMO has developed and implemented the Enterprise Project System, which is a digital platform to manage all aspects of project delivery, reporting and approvals. BUSINESS WORKFLOW IMPROVEMENTS Territory Generation invested in the Nintex workflow automation platform to save time, reduce reliance on physical signatures, automate routine tasks and make the most of our ICT infrastructure. Employee onboarding and offboarding were the first processes enhanced during the financial year with several more processes in development, including for travel and procurement. Besides the significant time savings and reduced manual labour, this project also satisfies a strategic initiative for the business. ROC RELOCATION The Remote Operations Centre, known as the ROC, was relocated from Territory Generation's head office in Berrimah to Channel Island in November 2021. The merge resulted in improved collaboration between ROC and Channel Island staff, who now work more closely together and skill share, meaning they have increased their operational ability. In time, the upskilling will lead to greater work satisfaction and improved efficiency. GENERATION OUTPUT Our generation sent outs for the 2021-22 financial year were 1.35 TWh, an increase on 2020-21 sent outs. This has resulted in increased sales primarily driven by the delay in new entrants joining the market and warmer than average temperatures across the Territory. ASSET MANAGEMENT AND RELIABILITY Territory Generation is committed to an industry-best practice asset management system consistent with our vision, values and objectives and in alignment with International Standards Organisation (ISO) 55000 for asset management. We are focused on developing and implementing asset management systems that optimise the return on investment in new and legacy assets. SUSTAINING CAPITAL We continue to invest about $20-25 million a year to upgrade and replace machinery and equipment as part of our Sustaining Capital Program. This helps to ensure our assets are always fit for purpose and operate as efficiently as possible. FUEL COSTS The rising costs of gas and diesel have presented a challenge this past financial year. As a percentage of our revenue, gas cost has been lowered through the more efficient use of turbines. Australian-developed Plexos software has become a key tool in assessing the consequences and benefits of our work. It improves the accuracy and clarity of our business predictions, which helps to reduce the impacts of increasing fuel prices and support efficient investment decisions. Operator, Gary Flatt at the Channel Island ROC.#1425 24 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Environmentally friendly transport at Channel Island Power Station. Environment & sustainability Territory Generation is committed to environmental stewardship and focuses on managing and minimising impacts to the environment. We work hard to balance our responsibility to provide electricity to our customers with our environmental, social and economic obligations. AMO14 CO₂ REDUCTION Territory Generation has focused on emissions reduction as a key indicator in our Statement of Corporate Intent. During the 2021-22 financial year, we commenced additional planning for long term emissions reduction to support the goal of net zero emissions by 2050. This strategic view looks at opportunities, including the direct reduction of emissions through renewable and enabling technologies, and the use of emissions offsets over the short and long term. WASTE DISCHARGE LICENCE RENEWAL We also commenced the renewal process for our Channel Island Power Station waste discharge licence via the Environment Protection Authority (EPA) This two-year waste discharge licence is in place to ensure the safe and responsible discharge of 'wastewater' produced during electricity generation into Darwin Harbour. Territory Generation maintains onsite metering and sampling points in the harbour and reports the results of our comprehensive monitoring to the EPA each year. Wastewater is treated in two separate systems and discharged from the cooling tower and water settling ponds to stormwater drainage systems that flow into Darwin Harbour. ENVIRONMENT, SOCIAL AND GOVERNANCE REPORT The 2021-22 financial year marked the second annual collation of our Environment, Social and Governance (ESG). This internal report addresses environmental, social and governance principles, processes and procedures in relation to specific investment, decision-making and risk assessment activities. The ESG shows Territory Generation's commitment to zero harm to the environment and demonstrates our social responsibility and transparency within the communities we operate. We understand that developing our people and staying conscious of the desires of our community and stakeholders are fundamental to our sustainability. The ESG Report is also key to disclosing environmental, social and corporate governance data. As with all disclosures, its purpose is to shed light on Territory Generation's ESG activities while improving transparency. 25#1526 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Our finances Territory Generation is proud to report on a net profit after tax of $16.9 million, $10.6 more than budgeted. 2021-22 is our fourth consecutive profitable financial year. This strong financial result was achieved through effective cost control measures across the business, bolstered by slower than forecast uptake of renewables being connected to the grid and higher temperatures in the north. Total revenue from electricity sales was $286.8 million, a significant increase from the previous financial year. The total cost of energy was $227.9 million. Closing cash holdings were $67.1 million. Territory Generation spent $47.3 million on capital projects compared with $42.2 million in 2020-21. In consultation with the Shareholding Minister, the Territory Generation Board recommended a dividend of $8.47 million be paid to the Northern Territory Government on 24 November 2022. A dividend of $5.43 million was declared for 2020-21 and paid in the 2021-22 financial year. We continue to look at how we can safely, reliably and responsibly deliver efficiencies as the Northern Territory transitions to 50 per cent renewables by 2030 and net zero emissions by 2050. 7 Day OMT, Paul Fuller, inspecting a V12 diesel unit at Yulara Power Station. .00: Financial statements DIRECTORS' REPORT DIRECTORS' DECLARATION INDEPENDENT AUDIT OPINION STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME له نیا له 31 32 37 STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS 38 39 40 NOTES TO THE FINANCIAL STATEMENTS 41 27 27#1628 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 29 29 Directors' report The directors present their report together with the financial report of Power Generation Corporation (the Corporation) for the year ended 30 June 2022 and the Auditor's report thereon. This report is to be read in conjunction with the financial statements of the Corporation. Directors The following persons were directors of the Corporation during the financial year and up to the date of this report, unless otherwise stated: Mr Dennis Bree (Chair) Ms Christine Charles Mr Richard Galton Non-executive Director Non-executive Director Non-executive Director The number of directors' meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of the Corporation during the financial year are: Board Audit & Risk Committee People, Safety & Environment Committee Meeting attendance Held Attended Held D Bree C Charles R Galton Principal activities Attended Held Attended 12 12 4 4 3 3 12 12 4 4 3 3 12 12 4 4 3 3 The principal activities of the Corporation are to safely, reliably and efficiently generate electricity and to provide system stability and associated services supporting the Northern Territory Governments' transition to 50 per cent renewable energy by 2030 and net zero emissions by 2050. Review of operations The Corporation recorded a Net Profit After Tax of $16.9 million (2021: Net Profit After Tax $10.9 million). During the financial year, the Corporation invested $47.3 million (2021: $42.2 million) in its capital investment program. Overall profit is consistent with the previous year as the Corporation continues to benefit from increased efficiencies and through process improvements and continued tightly managed costs. The Corporation's operations are subject to environmental regulations under Commonwealth and Territory legislation. The Board believes that the Corporation has adequate systems in place for the management of its environmental requirements and is not aware of any breach of these environment requirements as they apply to the Corporation. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Corporation during the financial year. Going concern The policy environment supports and accelerates the expected increase in penetration of renewables through government's target of 50 per cent renewable by 2030 and net zero emissions by 2050. Territory Generation's role through this transition will be to ensure our generators are available and reliable while keeping. the costs of transition as low as possible. The Corporation has carried out an assessment of the going concern assumption. This includes assessing: (i) Forward cash flow projections (ii) Funding sources (iii) Compliance with debt covenants (iv) The continuity of key customers and suppliers (v) The impact of current economic conditions (vi) Forward forecasts and budgets For the year ended 30 June 2022, the Corporation recorded a Net Profit After Tax of $16.9 million compared to a Net Profit After Tax of $10.9 million for the 2020-21 financial year. The Corporation is forecast to continue to make profits over the next 4 years as reported in the Statement of Corporate Intent 2022-23. All debt maturing in 2021-22 and in subsequent years of the SCI period is anticipated, to the extent required, to be replaced by new long term debt. Based on the above assessment performed, there are no material uncertainties that casts significant doubt about the Corporation's ability to continue as a going concern. The Corporation continues to work towards being sustainable and has the continued support of its sole shareholder, the Treasurer. Accordingly, the financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. Dividends The Corporation declared and paid a dividend of $5.43 million during the financial year. Since the end of the financial year, the Directors have declared a dividend of $8.47 million (2021: $5.43 million) to be paid by 24 November 2022. Future developments The Corporation continues to contribute to the development of the Interim Northern Territory Electricity Market (I-NTEM) arrangements. Consultations continue on the structure of the electricity market, as well as reliability standards and ancillary charges. The continuous growth in solar penetration continues to impact the Corporation's business as the use of solar energy in most of the major markets reduces market share. The Corporation continues to supply the majority of essential services to the system, potentially leading to increased costs per megawatt hour if overheads are absorbed over a smaller market. The Corporation has commenced periodic reviewing of strategy, with a focus area being renewable generation, particularly in relation to the Darwin-Katherine power system, with a view to identifying how the Corporation will support the Governments objective to achieve 50% Renewable generation by 2030. In May 2020, the Northern Territory Government announced that the Corporation will deliver a large-scale battery for the Darwin-Katherine Interconnect System. In addition to contributing to the 50% renewable target, the major benefits of this project will include increased stability and reliability of power supply and reduced carbon emissions for the Northern Territory. The project is progressing well and is expected to be operational in mid 2023. Plans to close Ron Goodin Power Station have been delayed to ensure system security and reliability in the region. Critical maintenance activities deferred as part of closure planning have been completed. In 2020-21, the Corporation made it's first investment into our future energy fleet in the Darwin-Katherine region and will see smaller, modular and more flexible and renewable fuel capable gas turbines introduced to Channel Island Power Station. Significant stakeholder engagement, supporting studies and other enabling works towards the Yulara Power Station energy transition initiative have continued during 2021-22. The program will transition power generation in Yulara to a greener and more sustainable supply. In Alice Springs, building works began in June 2021 for a new single circuit transmission line and substation for a contractor. Construction was completed in early 2022, with energisation and commissioning planning well progressed. Apart from the above, there are no developments affecting the operations of the Corporation that, in the opinion of the directors, are likely to significantly impact the Corporation during future financial years.#1730 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Subsequent events In July 2022, the Directors declared a final dividend of $8.47 million payable by 24 November 2022 (2021: $5.43 million). Aside from the dividend declaration, there has been no item, transaction or event of a material and unusual nature which has arisen since 30 June 2022 that is likely to significantly affect the operations, the results of those operations or the state of affairs of the Corporation in future financial years. Indemnification and insurance of directors and officers INDEMNIFICATION The Northern Territory Government has indemnified the directors of the Corporation from and against all liabilities incurred or arising out of conduct as a director of the Corporation, acting in good faith in compliance with any direction or request made by the Shareholding Minister or the Portfolio Minister of the Corporation or the Board of the Corporation pursuant to the Deed of Indemnity executed by the Northern Territory Government. The Corporation has, subject to the prohibition in the Government Owned Corporations Act 2001, provided an indemnity to the directors of the Corporation from and against civil liability unless the liability arises out of conduct involving a lack of good faith. Liability for costs and expenses incurred by the directors in defending a proceeding, whether civil or criminal, is covered by the Corporation where judgement is given in favour of the directors or the directors are acquitted. INSURANCE PREMIUMS The following insurance policies were purchased to cover the directors and officers of the Corporation: Rounding off Amounts in the financial report have been rounded to the nearest thousand dollars, unless otherwise stated. This report is made in accordance with a resolution of directors. Dated at Darwin this 27th day of September 2022. DENNIS BREE Chair Directors' declaration In the opinion of the directors of the Corporation: (a) The financial statements and notes of the Corporation are in accordance with the Government Owned Corporations Act 2001, including: (i) giving a true and fair view of the financial position of the Corporation as at 30 June 2022 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards. (b) There are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. Dated at Darwin this 27th day of September 2022. MR DENNIS BREE Chair • Personal Accident Insurance • Directors' and Officers' Liability" 31#1832 52 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 33 Opinion Auditor-General Independent Auditor's Report to the Board of Directors Power Generation Corporation Page 1 of 5 I have audited the financial report of Power Generation Corporation (the Corporation), which comprises the statement of financial position as at 30 June 2022, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes to the financial report including a summary of significant accounting policies, and the Directors' declaration. In my opinion, the accompanying financial report of Power Generation Corporation is in accordance with Australian Accounting Standards and the Government Owned Corporations Act 2001, including: • giving a true and fair view of the Corporation's financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and ■ complying with Australian Accounting Standards. Basis for Opinion I conducted my audit in accordance with Australian Auditing Standards. My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of my report. I am independent of the Corporation in accordance with the Government Owned Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to my audit of the financial report in Australia. I have also fulfilled my other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Key Audit Matters Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the financial report of the current period. These matters were addressed in the context of my audit of the financial report as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. Key Audit Matter Audit scope response to the Key Audit Matter Carrying value of property, plant and equipment and calculation of impairment Property, plant and equipment totalling $343.656 million, as disclosed in Note 10 to the financial statements, represents a significant balance. A net asset impairment of $5.319 million disclosed in the statement of profit or loss and other comprehensive income represents a significant balance. My audit procedures included but were not limited to: • obtaining an understanding of the key controls associated with the preparation of the valuation models used to assess the recoverable amount of the assets within each cash generating unit; • assessing the consistency of the forecast cash flow to the Board approved five year financial plan documented within the latest Statement of Corporate Intent; Auditor-General Key Audit Matter Significant management judgement is applied in determining the value in use of property, plant and equipment and any related impairment adjustment attributable to each cash generating unit. The valuation of property, plant and equipment is a key audit matter due to the complexity in the evaluation of the recoverable amount of the assets which requires significant judgement in determining the key assumptions supporting the expected future cash flows of the Corporation, the utilisation of the relevant assets and the useful lives of property, plant and equipment. The utilisation and useful life of each asset can change significantly as a result of technical innovations or other events. Page 2 of 5 Audit scope response to the Key Audit Matter ■ checking, on a sample basis, the mathematical accuracy of the cash flow forecast and impairment model and the appropriateness of the inclusion of the specific cash flows in accordance with the Accounting Standards; performing sensitivity analyses to stress test the key assumptions used in the valuation model around key drivers such as growth rates and discount rates and considering the impact on the recoverable amount from changes in these key assumptions especially in view of the impact of the current economic conditions on the cash flow projections and growth rates; reviewing the useful lives of assets as determined by management; reviewing the qualifications and independence of the specialists appointed by the Corporation to undertake the Weighted Average Cost of Capital calculation; and ■ reviewing the Corporation's framework for determining the recoverable amount relevant to each cash generating unit. Estimation and valuation of Decommissioning The provision associated with the Ron Goodin Power Station decommissioning of $5.771 million, as disclosed in Note 15 to the financial statements, represents a significant balance. The estimation of future decommissioning costs requires significant judgement as decommissioning is an evolving activity and there is limited historical precedent against which to benchmark estimated future costs. Provision My audit procedures included but were not limited to: ■ assessing the annual review and confirmation of the estimated costs of decommissioning determined by the Corporation's contractor engaged for the project, • reviewing the consistency in the application of the current year's principles and assumptions to the prior year and to the Corporation's accounting policy, as described in Note 1(q) to the financial statements; * reviewing the calculation of the present value of expected future payments of the provision using a pre-tax discount rate that reflect current market assessment of time value of money and the risks specific to the liability, and ■ checking the mathematical accuracy of the provision calculation and the correct treatment of the movement in the Corporation's books. Level 9 Northern Territory House 22 Mitchell Street Darwin 0800 Tel 08 8999 7155 Fax 08 8999 7144 Level 9 Northern Territory House 22 Mitchell Street Darwin 0800 Tel: 08 6999 7155 Fax: 08 6999 7144#1934 4 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 35 Key Audit Matter Recoverability of deferred tax assets Auditor-General The deferred tax assets of $19.060 million, as disclosed at Note 11 to the financial statements, represents a significant balance in the Corporation's financial statements. Recognition of the deferred tax assets is influenced by management's assessment of the ability of the Corporation to realise the asset. Unbilled Revenue Estimate at year end Unbilled generation revenue of $19.922 million, as disclosed in Note 7 to the financial statements, represents an estimate of the value of electricity generated and sent out however not billed as at 30 June 2022. Management's estimate is based upon information provided by the market operator. Other Information Page 3 of 5 Audit scope response to the Key Audit Matter My procedures included but were not limited to: confirming the accounting treatment applied by the Corporation was consistent with the accounting and taxation advice received and provided by the Corporation and previously subject to audit assessment; and re-performing the testing on the recoverability of the deferred tax assets and ascertaining that the Corporation's recognition of deferred tax assets attributable to impairment losses is reasonable. My procedures included but were not limited to: recalculating the unbilled revenue based on the preliminary settlement statements obtained from the market operator, • reviewing the final settlement obtained from the market operator against the preliminary settlement at year end reviewing the reconciliation between the information provided by the market operator and the Supervisory Control and Data Acquisition (SCADA) system readings; and performing a trend analysis of the unbilled revenue. The Directors are responsible for the other information. The other information obtained at the date of this auditor's report is information included in the Corporation's Annual Report for the year ended 30 June 2022, but does not include the financial report and my auditor's report thereon. My opinion on the financial report does not cover the other information and accordingly I do not express any form of assurance conclusion thereon. In connection with my audit of the financial report, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this auditor's report, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. Auditor-General Page 4 of 5 Responsibilities of the Directors for the Financial Report The Directors of the Corporation are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Government Owned Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Corporation's ability to continue as a going concem, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Corporation or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report My objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also: * identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for the auditor's opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal controls as they apply to the Corporation. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. * conclude on the appropriateness of the Directors' use of the going concem basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify the opinion. My conclusions are based on the audit evidence obtained up to the date of the auditor's report however, future events or conditions may cause the Corporation to cease to continue as a going concern. Level 9 Northem Territory House 22 Mitchell Street Darwin 0000 Tel: 080999 7155 Fax: 08 8999 7144 Level&Northern Territory House 22 Mitchell Street Darwin 0800 Tel: 08 8999 7155 Fax: 08 8999 7144#2036 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Statement of profit or loss and other comprehensive income for the year ended 30 June 2022 Auditor-General Page 5 of 5 evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. From the matters communicated with those charged with governance, I determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. I describe these matters in my report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Puj Julie Crisp Auditor-General for the Northern Territory Darwin, Northern Territory 27 September 2022 Revenue Cost of energy Gross profit Other income Administrative expenses Other expenses Impairment expenses Finance costs Profit before income tax Income tax expense Profit for the year Level 9 Northern Territory House 22 Mitchell Street Darwin 0800 Tel: 0880497155 Fax 08 5999 7144 OTHER COMPREHENSIVE INCOME Other comprehensive income Total other comprehensive income for the year Total comprehensive income for the year 2022 2021 Note $'000 $'000 3 291,318 264,896 227,883 214,601 63,435 50,295 3 13,507 4,093 4 29,096 27,837 11,096 3,873 4 5,319 74 4 7,533 7,114 23,898 15,491 5 6,967 4,632 16,931 10,859 16,931 10,859 The above statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes. 37#2138 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Statement of financial position As at 30 June 2022 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Property, plant and equipment Intangible assets Deferred tax asset Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Deferred income Current tax payable Employee provisions Lease Liabilities Total current liabilities 2022 2021 Note $'000 $'000 Statement of changes in equity for the year ended 30 June 2022 6 67,122 58,567 7 23,983 27,332 89 29,147 30,325 BALANCE AT 1 JULY 2021 Profit for the year 1,520 121,772 1,232 117,456 Other comprehensive income 10 10 342,671 985 323,414 11 19,060 362,716 986 19,725 344,125 Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity Asset revaluation Note Contributed equity $'000 Revaluation Retained earnings/ Total reserve (deficit) equity $'000 $'000 $'000 21, 22, 23 213,593 107 (76,427) 16,931 137,273 16,931 16,931 16,931 Dividend paid or provided Balance at 30 June 2022 21, 22, 23 213,593 107 (5,430) (64,926) (5,430) 148,774 484,488 461,581 BALANCE AT 1 JULY 2020 12 36,515 29,300 18 5,002 3,333 Profit for the year 13 5,535 Other comprehensive income 14 12,698 11,825 Total comprehensive income for the year 19 600 60,350 691 45,149 Transactions with owners in their capacity as owners: Contributions of equity Non-current liabilities Other payables Employee provisions 12 310 14 1,070 1,421 Other provisions 15 5,771 5,900 Deferred tax liabilities 16 2,273 1,534 Deferred income 18 35,389 38,722 Lease liabilities 19 861 1,272 Borrowings 17 230,000 230,000 Total non-current liabilities 275,364 279,159 Total liabilities Net assets EQUITY 335,714 324,308 148,774 137,273 Contributed equity 21 213,593 213,593 Reserves 22 107 Retained earnings/(deficit) 23 (64,926) 107 (76,427) Total equity 148,774 137,273 The above statement of financial position should be read in conjunction with the accompanying notes. Asset revaluation Dividend paid or provided Balance at 30 June 2021 21, 22, 23 213,593 107 (83,337) 10,859 130,363 10,859 21, 22, 23 213,593 10,859 10,859 (3,950) (3,950) 107 (76,427) 137,273 The above statement of changes in equity should be read in conjunction with the accompanying notes. 39#2240 Statement of cash flows for the year ended 30 June 2022 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest received Payments to suppliers and employees Interest paid Income taxes paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Payments for property, plant and equipment Payments for intangibles Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in debt Dividends paid Grant received Equity received Principal repayment of lease liabilities Net cash flows (used in)/from financing activities ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 2022 2021 Note $'000 $'000 305,278 262,290 136 105 (244,645) (7,282) (29) (224,893) (6,972) 24 53,458 30,529 (432) (39,659) (41,727) (380) (40,471) (42,247) (520) Notes to the financial statements for the year ended 30 June 2022 CORPORATE INFORMATION Power Generation Corporation (the Corporation) trading as Territory Generation was established on 29 May 2014 under the Power Generation Corporation Act 2014 (PGC Act). The Corporation is declared to be a Government Owned Corporation for the purposes of the Government Owned Corporations Act 2001 (GOC Act). The Board of Directors is responsible to the Shareholding Minister for the financial performance of the Corporation. The financial report was authorised for issue by the directors on 27 September 2022. 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) New, revised or amending accounting standards and interpretations adopted The Corporation has adopted all of the new, revised or amending accounting standards and interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and are mandatory for the current reporting period. No new, revised or amending accounting standard or interpretation has been adopted earlier than the application date as stated in the standard. Revised standards, amendments to standards and interpretations that are applicable to future periods have been issued by the AASB. None of these are expected to have a material impact on future reporting periods, either because the Corporation does not conduct the types of transactions addressed by the pronouncements or because of the extent to which they may impact the Corporation is not expected to be material. (b) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the GOC Act, as appropriate for profit oriented entities. The financial statements comprise Power Generation Corporation's financial statements as an individual entity. For the purpose of preparing financial statements, the Corporation is a for-profit entity. Historical Cost Convention The financial statements have been prepared under the historical cost convention. Cost is based on the fair values of the consideration given in exchange for the assets. Certain assets are carried at their fair value, where the fair value is lower than the historical cost. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Corporation's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2. (c) Foreign currency translation The financial statements are presented in Australian dollars, which is the Corporation's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at financial year-end exchange rates are recognised in profit or loss. (d) Revenue Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Corporation recognises revenue when performance obligations under relevant customer contracts are completed. Performance obligations may be completed at a point in time or over time. Electricity sales Revenue is recognised upon billing, as there is a right to invoice when the customers have consumed the performance obligation of electricity supply. Electricity sales revenue is recognised on measurement of electrical consumption at the metering point, as derived from the information provided by the Market Operator. The transaction price is the contracted price for the electricity consumed during the period. Electricity sales are billed monthly in arrears with 30 day payment terms. At each balance date, sales and receivables include an amount of sales delivered to customers but not yet billed and recognised as accrued income. (5,430) 30,000 (3,950) 1,669 (671) (1,307) (4,432) 24,743 Net increase in cash and cash equivalents 8,555 13,026 Cash and cash equivalents at the beginning of the period 58,567 45,541 Cash and cash equivalents at the end of the period 6 67,122 58,567 The above statement of cash flows should be read in conjunction with the accompanying notes. 41#2342 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 43 Unbilled revenue Unbilled revenue is recognised to the extent that the performance obligation has been completed and the revenue can be measured reliably. Therefore, the Corporation has recognised the estimate of the amount of electricity consumed but yet to be billed. Refer Note 2 for further details. Interest Interest revenue is accrued on a time basis using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the carrying amount of the financial asset. Government grants Government grants are recognised upon receipt. Grants related to purchase or construction of assets are treated as deferred income and allocated to the income statement over the useful lives of the related assets while grants related to expenses are treated as other income in the income statement. Other revenue Other revenue includes fees for services provided to customers. These fees charged for providing ongoing services are recognised as income over the period the service is provided. (e) Income tax equivalents The Corporation is required to make income tax equivalent payments to the Northern Territory Government based on taxable income. It is not liable to pay Commonwealth tax that would be payable were it not a Government Owned Corporation. Income tax equivalent payments are made pursuant to section 33 of the GOC Act and are based on rulings under the National Tax Equivalent Regime (NTER). The NTER gives rise to obligations which reflect in all material aspects those obligations for taxation which would be imposed by the Income Tax Assessment Act 1936 and 1997. Current tax The income tax expense for the period is the tax payable on that period's taxable income based on the applicable income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted. The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. (f) Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when: • it is expected to be realised or intended to be sold or consumed in the normal operating cycle; • it is held primarily for the purpose of trading; • • it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is current when: . it is expected to be settled in the normal operating cycle; • it is held primarily for the purpose of trading; • it is due to be settled within 12 months after the reporting period; or • there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. (g) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (h) Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are normally settled within 30 days and are carried at amounts due. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. The Corporation recognises an allowance for expected credit losses (ECLs) for trade and other receivables. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Corporation expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the loan contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade and other receivables, the Corporation applies a simplified approach in calculating ECLs. Therefore, the Corporation does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Corporation has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. The Corporation considers a trade and other receivables in default when contractual payments are past agreed contract terms, and for receivables not under an agreement, 30 days past due. However, in certain cases, the Corporation may also consider a financial asset to be in default when internal or external information indicates that the Corporation is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Corporation. A trade and other receivables is written off when there is no reasonable expectation of recovering the contractual cash flows. (i) Inventories Inventories are carried at the lower of cost and net realisable value using the weighted average cost method, and are impaired accordingly to take into account obsolescence. (j) Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The Corporation capitalises assets when the asset's life is greater than one year, and the cost is greater than $10,000. All assets recognised by the Corporation on 1 July 2014 from structural separation of Power and Water Corporation were recognised at fair value. The condition of the assets was assessed and estimates of the remaining useful lives of all assets were calculated. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost of the item can be measured reliably. Expenditure on existing assets is capitalised if: • • . the service capacity is significantly increased; the useful life has increased significantly and permanently from original expectations; there has been a significant increase in efficiency or performance; a component on the fixed asset register has been replaced; or it represents an item of major periodic maintenance where the cyclical inspections are greater than one year and the new asset will be recognised as a component of the parent asset. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria is met. Refer to significant accounting judgements, estimates and assumptions (Note 2) and other provisions (Note 15) for further information about the recognised decommissioning provision. Depreciation is calculated using the time basis and output/ service basis to allocate the cost of the assets, net of their residual values, over their estimated useful lives as follows: Asset class Depreciation method Effective life Buildings Time basis 10 to 40 years Plant and equipment Time basis 2 to 40 years Prime movers Output/service basis 22,000 to 60,000 equivalent operating hours The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater that its estimated recoverable amount (Note 1(m)). An item of property, plant and equipment is derecognised upon disposal or where there is no future economic benefit to the Corporation. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.#2444 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Capital work in progress (CWIP) represents assets which are under construction/development and have not been completed for their intended use. As such, CWIP is recognised in the balance sheet as an asset but is not depreciated. Once the assets have been completed and are available for intended use, they will be capitalised to one of the above asset classes and depreciation will commence. Where an asset is acquired at no cost or for nominal value, the cost is recorded at fair value as at the acquisition date. (k) Leases Right of use assets Corporation as a lessee: The Corporation leases office buildings and motor vehicles. Lease contracts are typically made for fixed periods of 4 to 10 years, but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants. The Corporation does not provide residual value guarantees in relation to leases. The Corporation has elected to recognise payments for short-term leases and low value leases as expenses on a straight-line basis, instead of recognising a right-of-use asset and lease liability. Short- term leases are leases with a lease term of 12 months or less with no purchase option. Low value assets are assets with a fair value of $10,000 or less when new and not subject to a sublease arrangement comprising mainly of photocopiers. Recognition and measurement The Corporation assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Corporation recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets, except for short-term leases and leases of low-value assets. The Corporation recognises right-of-use assets at the commencement date of the lease (the date the underlying asset is available for use). Right-of-use assets are initially measured at the amount of initial measurement of the lease liability, adjusted by any lease payments made at or before the commencement date and lease incentives, any initial direct costs incurred, and estimated costs of dismantling and removing the asset or restoring the site, if any. Right-of-use assets are amortised on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows: Asset class Buildings Motor vehicles Effective life 5 to 10 years 4 to 7 years If ownership of the leased asset transfers to the Corporation at the end of the lease term or the cost reflects the exercise of a purchase option, amortisation is calculated using the estimated useful life of the asset. The right-of-use assets are subsequently measured at fair value which approximates costs except for those arising from leases that have significantly below-market terms and conditions principally to enable the Corporation to further its objectives and are also subject to impairment. The right-of-use assets are subject to remeasurement principles consistent with the lease liability including indexation and market rent review that approximates fair value and only revalued where a trigger or event may indicate their carrying amount does not equal fair value. Lease liabilities At the commencement date of the lease where the Corporation is the lessee, the Corporation recognises lease liabilities measured at the present value of lease payments to be made over the lease term. Lease payments may include fixed payments (including in substance fixed payments) less any lease incentives receivable and payments of penalties for terminating the lease, if the lease term reflects the entity exercising the option to terminate. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for the Corporation's leases, the weighted average incremental borrowing rate is used as the incremental borrowing rate. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (such as changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. (I) Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The amortisation method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Software Significant costs associated with software are amortised on a straight-line basis over their estimated useful lives. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Software has a useful life of 2-10 years. (m) Impairment of non-financial assets At each reporting date, the Corporation reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For impairment testing, assets are grouped together into the smallest of assets that generates cash inflows from group continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUS). For Territory Generation each region is not connected and therefore meets the criteria to be identified as a separate CGU. The recoverable amount of an asset or CGU is the greater of its value-in-use and its fair value less costs to sell. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill (if applicable), and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (n) Trade and other payables These amounts represent liabilities for goods and services provided to the Corporation prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. (o) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Where the Corporation has the discretion to refinance or roll over an obligation for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. (p) Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred, including: interest on bank overdrafts interest on short-term and long-term borrowings • interest on finance leases • unwinding of discounts on provisions. (q) Provisions Provisions are recognised when the Corporation has a present (legal or constructive) obligation as a result of a past event, it is probable the Corporation will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Decommissioning A decommissioning provision is raised when there is the existence of a present obligation that can be reliably measured. Reliable measurement is taken at the point a reasonable expectation of the remaining useful life of the asset can be determined. The provision is measured as the present value of expected future payments. The expected future payments are discounted to present value using an appropriate discount rate. 45#2546 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 47 (r) Employee benefits Short term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in non- current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. (s) Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on their highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. (t) Issued capital The GOC Act requires the Corporation to have share capital to be held by one shareholder only, being the Shareholding Minister, who holds the share on behalf of the Northern Territory Government. The Corporation's constitution specifies the share capital to be one share. No value is assigned to this share. (u) Goods and Services Tax (GST) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. (v) Dividends Dividends are recognised when declared and at the point in time they become payable to the Government. (w) Cost of energy Cost of energy is recognised as those costs directly attributable to the energy sold and includes the costs of electricity generation, materials and associated network connection expenses. Electricity generation costs are those direct costs including generator operation and maintenance, employee expenses, direct facility costs and the contracted purchase price of electricity from third party suppliers. (x) Rounding of amounts The Corporation is of a kind referred to in the Australian Securities and Investments Commission (ASIC) Instrument 2016/191 (for rounding in Financial/Directors' reports), issued by ASIC, in relation to "rounding off". Amounts in this report have been rounded off in accordance with that ASIC Instrument to the nearest thousand dollars, or in certain cases the nearest dollar. (y) Going concern The policy environment supports and accelerates the expected increase in penetration of renewables through the government's target of 50 per cent renewable by 2030 and net zero emissions by 2050. Territory Generation's role through this transition will be to ensure our generators are available and reliable while keeping the costs of transition as low as possible. While factors above will affect the future operation of the Corporation, the Corporation is forecasting continued profits over the next four years. For the year ended 30 June 2022, the Corporation recorded net profit after tax of $16.9 million compared to $10.9 million in 2021-22. Accordingly, the financial statements have been prepared on a going concern basis which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Unbilled revenue The Corporation recognises an estimate of the amount of electricity consumed but yet to be billed. The estimate is derived from information provided by the Market Operator to all market participants. Refer to Note 7 for more information. Expected credit losses of trade and other receivables The Corporation uses a provision matrix to calculate ECLS for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by location, customer type). The provision matrix is initially based on the Corporation's historical observed default rates. The Corporation will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward- looking estimates are analysed. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Corporation's historical credit loss experience and forecast of economic conditions may also not be representative of customer's actual default in the future. The information about the ECLs on the Corporation's trade and other receivables is disclosed in Note 7. Provision for obsolescence of inventories The provision for obsolescence of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent consumption experience, the ageing of inventories and other factors that affect inventory obsolescence. Refer to Note 8 for more information. Estimation of useful lives of assets The Corporation determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non- strategic assets that have been abandoned or sold will be written off or written down. Refer to Note 10 for more information. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised. The Corporation has not derecognised its Deferred Tax Asset balance during the financial year based on its assessment of future taxable profit. This assessment may change in response to future unexpected events and other factors. Refer to Note 11 for more information. Employee benefits provision As discussed in Note 1(r), the liability for employee benefits expected to be settled more than 12 months from the reporting date is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Refer to Note 14 for more information. Decommissioning provision The Corporation has recognised a decommissioning provision based on internal and external assessment of the decommissioning of Ron Goodin Power Station (RGPS) and engines at Tennant Creek Power Station (TCPS). This assessment may be subject to future unexpected events and as such may change in response to other factors. The provision is measured at the present value of the estimated future payment using a discount rate. Refer to Note 15 for more information. RGPS remains operational as a result of the system black in order to provide additional support to the Alice Springs system. Work is underway to determine if it has an ongoing role in the system due to demand growth and maximum temperatures. Key assumptions used in the calculation of the provision: decommissioning cost estimates provided by an external expert adjusted for CPI management estimates on the expected remaining useful life Impairment loss and Impairment reversal The Corporation has recognised an impairment loss based on an assessment of the recoverable amount of its assets. Determining the recoverable amount requires estimates of the future cash flow, discount rates and other internal and external factors. Refer to Note 10 for more information. Other key assumptions used in the calculation of the recoverable amounts: • inflation was calculated using CPI rates as per the 2021-22 Statement of Corporate Intent (SCI) ⚫ growth rates of between 0.0% and 1.99% beyond 2025 were used • market share for each region is detailed in the 2021-22 SCI and has been assumed based on publicly available information.#2648 3. REVENUE 4. Revenue recognised over time Electricity sales Deferred grant income Other income recognised at a point in time Other income Interest income EXPENSES Profit/(loss) before income tax includes the following specific expenses: (a) ADMINISTRATIVE EXPENSES Employee benefits expense Depreciation and amortisation Other administrative costs Total administrative expenses (b) DEPRECIATION AND AMORTISATION Included in cost of energy: Property, plant and equipment Intangible assets Not included in cost of energy: Property, plant and equipment Intangible assets ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 2022 2021 2022 2021 $'000 $'000 5. INCOME TAX EQUIVALENT EXPENSE $'000 $'000 287,985 261,563 3,333 3,333 291,318 264,896 13,371 3,988 136 105 13,507 4,093 11,827 12,534 2,138 2,640 15,131 12,663 29,096 27,837 (a) INCOME TAX EXPENSE Current tax expense Adjustment recognised for prior periods Deferred income tax Movement in deferred tax assets Movement in deferred tax liabilities Total deferred tax expense Income tax expense 5,563 (273) 665 3,374 739 1,531 1,404 4,905 6,967 4,632 (b) RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Net profit before tax 23,898 15,491 6. 19,908 19,004 274 20,182 275 19,279 2,032 2,593 106 2,138 47 2,640 Total depreciation and amortisation 22,320 21,919 IMPAIRMENT OF ASSETS Impairment expense 5,319 74 Total net impairment of assets 5,319 74 (d) FINANCE COSTS Interest and finance charges (e) Total finance costs EMPLOYEE BENEFITS EXPENSE 7,533 7,114 7,533 7,114 * Employee benefits expense 36,029 33,036 Total employee benefits expense 36,029 33,036 * Includes all employee-related costs, including those costs that form part of cost of energy and part of administrative expenses. Tax expense at the statutory income tax rate of 30% 7,169 4,647 Tax effect of amounts which are not deductible/(taxable) in calculating taxable income (202) 258 Adjustment recognised for prior periods (273) Current equivalent tax expense 6,967 4,632 CASH AND CASH EQUIVALENTS Cash at bank Cash and cash equivalents 67,122 67,122 58,567 58,567 A $20 million overdraft facility has been approved from 1 July 2021 and is available to manage short term operational cash requirements. 49#2750 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 2022 2021 2022 2021 7. TRADE AND OTHER RECEIVABLES $'000 $'000 10. PROPERTY, PLANT, EQUIPMENT AND INTANGIBLES $'000 $'000 Trade receivables Less: expected credit losses Other receivables Unbilled generation Interest receivable Other receivables Total current receivables Impairment of receivables No trade receivables are considered to require allowance for expected credit losses. 8. INVENTORIES Stores and spares Less: Provision for obsolescence Fuel stocks Total inventories 898 6,252 (a) SUMMARY 898 6,252 Property, plant and equipment Land Less: accumulated impairment 19,922 18,373 43 7 3,120 2,700 23,983 27,332 1,326 1,326 (479) (472) 847 854 Buildings 69,985 69,726 Less: accumulated depreciation and impairment (33,158) (30,537) 36,827 39,190 Plant and equipment 489,004 488,839 Less: accumulated depreciation and impairment (259,550) (238,477) 229,454 250,362 Right of use assets 28,624 30,842 Less: accumulated amortisation (2,928) (3,148) 3,371 3,489 (1,951) (1,486) 1,420 2,002 25,696 27,694 3,451 29,147 2,631 30,325 Assets under construction- net of accumulated impairment of $2,364 million (2021: $68 thousand) 74,123 31,006 Movement in the provision for obsolescence: Opening provision for obsolescence 3,148 2,672 Additional provisions recognised during the period (220) 476 Closing provision for obsolescence 2,928 3,148 9. OTHER CURRENT ASSETS Prepayments 1,520 1,232 Total other current assets 1,520 1,232 Prepaid costs greater than $10,000 are recorded in the balance sheet and released over the relevant period. Total property, plant and equipment Intangibles Less: accumulated amortisation and impairment Total intangibles Total property, plant, equipment and intangibles 342,671 323,413 5,736 (4,751) 5,237 (4,251) 985 986 343,656 324,399 51#2852 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Reconciliations of the movement in carrying amounts at the beginning and end of the financial year are set out below: Impairment losses were applied to the assets on a pro-rata basis in the following regions: Land and buildings Plant and equipment Right of Assets under Intangibles use construction Total Darwin-Katherine Region $'000 $'000 $'000 $'000 $'000 $'000 Alice Springs Region 2022 2021 $'000 $'000 1,327 (b) RECONCILIATIONS Net Carrying amounts Opening balance at 1 July 2020 40,912 250,417 1,309 2,322 Adjustments 9 25 (1) 678 7,920 (31) 302,880 679 Tennant Creek Region Yulara Region Kings Canyon Region Total 1,703 2,289 74 5,319 74 Additions 11 181 260 42,825 43,277 Capitalisation 1,421 18,219 (19,640) Disposals (415) (29) (444) Impairment reversal Nil impairment reversals have been applied. Impairment of assets (Note 4c) Depreciation expense (Note 4b) Closing balance at 30 June 2021 (2,310) 40,043 (6) (18,058) 250,362 (68) (322) (1,228) 986 2,002 31,006 (74) (21,919) 324,399 2022 2021 11. DEFERRED TAX ASSETS $'000 $'000 Opening balance at 1 July 2021 40,043 250,362 986 2,002 31,006 324,399 Deferred tax asset comprises temporary differences attributable to: Adjustments (93) 93 Additions 292 185 46,867 47,344 Amounts recognised in profit and loss: Capitalisation 258 841 287 (1,386) Employee provisions Disposals (433) (32) (465) Other provisions Impairment of assets (Note 4c) (495) (2,460) (2,364) (5,319) Depreciation expense (Note 4b) (2,132) Closing balance at 30 June 2022 37,674 (19,055) 229,454 (380) (735) (22,302) 985 1,420 74,123 343,656 Obsolete stock provision Deferred grant income Tax losses carried forward Deferred tax assets 4,089 3,952 1,158 1,313 878 945 12,117 12,617 818 898 19,060 19,725 Assets Land and buildings $'000 Plant and equipment $'000 Right of under Movements: Intangibles use construction Total Opening deferred tax assets 19,725 23,099 $'000 $'000 $'000 $'000 Credited/(charged) to profit or loss (665) (3,374) Net carrying amounts Closing deferred tax assets 19,060 19,725 At 30 June 2021 40,043 At 30 June 2022 37,674 250,363 229,454 986 985 2,002 1,420 31,006 74,123 324,399 343,656 Impairment loss Wholesale prices approved by the Shareholding Minister and the continuing loss of market share triggered the impairment of assets. An additonal impairment loss of $5.3 million (2021: $0.1 million) was recognised as the carrying amounts of the assets exceeded their recoverable amounts. Deferred tax liabilities- refer Note 16 Net deferred tax assets Unrecognised deferred tax assets 2,273 1,534 16,787 18,191 Deferred tax assets have not been recognised in respect of impairment losses, or on the reversal of previously impaired assets under construction, because it is not probable that future taxable profit will be available against which the Corporation can utilise the benefits. Impairment losses 30,439 29,912 30,439 29,912 53 35#2954 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 2022 2021 2022 2021 12. TRADE AND OTHER PAYABLES $'000 $'000 16. DEFERRED TAX LIABILITIES $'000 $'000 Deferred tax liability comprises temporary differences attributable to: Current Trade creditors Other creditors and accruals Energy accruals Non-current Other non-current payables 13,290 12,860 12,370 6,162 10,855 10,278 36,515 29,300 The policy of the Corporation is to settle current trade payables within 30 days. The Corporation has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. 13. CURRENT TAX PAYABLE 14. Provision for income tax Current tax payable EMPLOYEE PROVISIONS Current Employee benefits 5,535 5,535 310 310 Amounts recognised in profit or loss: Property, plant and equipment Interest Deferred tax liabilities Movements: Opening deferred tax liability Charged/(credited) to profit or loss Movement to deferred tax assets Closing deferred tax liabilities 17. BORROWINGS Non-current Northern Territory Government loans- unsecured 2,260 1,532 13 2 2,273 1,534 1,534 3 739 1,531 2,273 1,534 230,000 230,000 230,000 230,000 The loans have been classified as non-current as the Corporation has the discretion to roll over the maturing loans for at least twelve months after the reporting period. Refer to Note 1(0) Borrowings, Note 25(f) Interest rate risk and Note 25(h) Liquidity risk. 12,698 12,698 11,825 11,825 18. DEFERRED INCOME Non-current Employee benefits 1,070 1,421 1,070 1,421 Employee benefits include amounts for recreation leave, long service leave and related on costs. It is expected that recreation leave earned should be settled within 12 months. 15. OTHER PROVISIONS Decommissioning Opening decommissioning provision 5,900 5,356 Additional/(reversal) of provisions (129) 544 Closing decommissioning provision 5,771 5,900 The decommissioning provision has been recognised due to the existence of a present obligation for the rectification of the operating site at Ron Goodin Power Station which is coming to the end of its useful life, and for the disposal of Tennant Creek Power Station old engines. The decommissioning provision has been adjusted for the time value of money based on its estimated future payments. Current Non-current 5,002 35,389 40,391 3,333 38,722 42,055 The Corporation received a $50 million capital grant toward the construction of Alice Springs and Tennant Creek power stations in 2016-17. Construction was completed during the 2018-19 year. Accordingly, a portion of the deferred income was realised and allocated to statement of profit or loss and other comprehensive income during the year. Refer to Note 1(d). In 2021-22 the Corporation received a $1.7 million micro-grid grant towards options analysis for future technologies in Yulara. The grant monies are expected to be utilised in the 2022-23 financial year. 55#3056 19. LEASE LIABILITIES Leasing arrangements ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 2022 2021 $'000 $'000 22. RESERVES The Corporation leases motor vehicles and buildings throughout the Northern Territory. The lease terms vary between 1 and 10 years. The Corporation lease liabilities consisted of: Current Lease liabilities 600 691 Non-current Lease liabilities Total Balance at beginning of the year 2022 2021 $'000 $'000 107 107 Movement for the year 107 Balance at end of the year A parcel of land in Alice Springs that was allocated to the Corporation upon separation from Power and Water Corporation was revalued from its originally allocated value of $1 to $107,000 based on its fair value from its long term lease arrangement. 23. RETAINED EARNINGS 861 1,272 1,461 1,963 Retained earnings /(deficit) at beginning of the year Total comprehensive income (loss) for the year Dividends paid Retained earnings/(deficit) at end of the year The following table presents liabilities under leases for 2021-22: Balance at 1 July 2021 1,963 2,362 Additions 186 551 RECONCILIATION OF PROFIT AFTER INCOME TAX Interest expenses 78 134 24. TO NET CASH FROM OPERATING ACTIVITIES Payments Balance at 30 June 2022 (766) (1,084) 1,461 1,963 Fair value The fair value of the finance lease liabilities is approximately equal to their carrying value. 20. ISSUED CAPITAL Share capital 1 Share Total share capital Refer to Note 1(t) Issued Capital. Profit after income tax expense for the year Adjustments for: 107 (76,427) (83,337) 16,931 10,859 (5,430) (3,950) (64,926) (76,427) 16,931 10,859 Depreciation and amortisation 22,320 21,919 Net loss on disposal of non-current assets 432 520 Net impairment of assets 5,319 74 Changes in assets and liabilities: Decrease/(increase) in: Trade, other receivables and other current assets 2,361 (3,645) Inventories 1,178 (3,643) Increase/(decrease) in: 21. CONTRIBUTED EQUITY Contributed equity at beginning of the year 213,593 213,593 Contributed equity during the year Trade and other payables Energy accruals Provisions Deferred income 340 1,468 578 459 393 1,219 (3,333) (3,333) Contributed equity at end of the year 213,593 213,593 Taxation liabilities 6,939 4,632 The original contributed equity of $183.593 million was the result of the capital structure of the Corporation approved Net cash flows from operating activities 53,458 30,529 by the Shareholding Minister with regard to the fair value of its acquired asset base and an appropriate debt level. An additional $30.0 million has been contributed since inception. 57 40#3158 25. FINANCIAL INSTRUMENTS (a) ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 The following table shows the Corporation's debt and interest obligations to the Northern Territory Government: FINANCIAL RISK MANAGEMENT OBJECTIVES The Corporation's activities expose it to a variety of financial risks including market risk, foreign currency risk, price risk, interest rate risk, credit risk and liquidity risk. Risk management is carried out by the senior executives under policies approved by the board of directors. These policies include identification and analysis of the risk exposure of the Corporation and appropriate procedures, controls and risk limits. The main purpose of these financial instruments is to raise finance for the Corporation's operations. The Corporation has various other financial instruments such as trade receivables and trade payables. It is the Corporation's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Corporation's financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk. The board of directors review and agree policies for managing each of these risks and they are summarised below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instruments are disclosed in Note 1 to the financial statements. Remaining loan term 0-1 year 1 to 2 years 2 to 5 years Over 5 years 2022 2021 Fixed rate loans Average interest Fixed rate rate loans Average interest rate $'000 % $'000 % 34,000 3.64 37,000 3.55 196,000 3.15 34,000 159,000 3.64 3.13 230,000 3.39 230,000 * See also Note 17. The maturity analysis of loans from Northern Territory Treasury Corporation is based on its current loans agreement. 3.31 (b) MARKET RISK Cash flow sensitivity analysis (c) (d) Recent market reforms have exposed the Corporation to competition and potential loss of market share. The Corporation is focused on developing performance and cost efficiencies across its operations in order to mitigate the business impact of increasing competition. EFFICIENCY RISK The Corporation is exposed to the risk of running its plant inefficiently to manage electricity network system integrity issues. This includes risks such as inefficient or uneconomic system dispatch, additional spinning reserve, and running inefficient plant to provide inertia to the system. FOREIGN CURRENCY RISK The Corporation undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. The Corporation manages foreign currency exposure on a case by case basis, with future foreign currency commitments also considering potential exchange rate volatility. The Corporation has the ability to enter forward exchange rate contracts, or alternatively purchase foreign currency at current rates to meet future commitments. The carrying amount of the Corporation's foreign currency denominated monetary liabilities at the reporting date was $0.0 million (2021: $0.0 million) Foreign currency contracts - cash flow hedges In order to protect against exchange rate movements and to manage the cost of construction, the Corporation at times enters into forward exchange contracts to purchase US Dollars and GBP. These contracts hedge highly probable forecast payments timed to mature, including rollover strategy, when payments are scheduled to be made. At the reporting date, there are no current hedging contracts. A reasonably possible change of 100 basis points (BP) in interest rates at the reporting date would have increased/(decreased) equity and pre-tax profit and loss by the amount shown below. This analysis assumes that all other variables remain constant. Effect in $'000 30 June 2022 30 June 2021 (g) CREDIT RISK Profit or loss 100 bp increase 100 bp decrease Equity net of tax 100 bp increase 100 bp decrease -2,300 2,300 -1,610 1,610 -2,300 2,300 -1,610 1,610 Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Corporation. The maximum exposure to credit risk at the reporting date to recognise financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Corporation does not hold any collateral. New and existing customers are evaluated for credit risk, with the Corporation actively monitoring the appropriateness of credit limits, and clear accountability for customer relationships established. Ageing analysis is regularly undertaken for all customers to understand and mitigate credit risk. (h) LIQUIDITY RISK (e) PRICE RISK (f) The Corporation manages price risk by aligning the terms of the wholesale electricity sales agreements with its market participants and fuel purchase agreements with its suppliers. As the individual agreements are considered to be commercial-in-confidence, a sensitivity on these risks is not able to be presented. INTEREST RATE RISK The Corporation's exposure to the risk of changes in market interest rates relates to the long-term debt obligations to the Northern Territory Government. The loans are interest only based on fixed interest rates and the Corporation is exposed to interest rate risk when there are interest rate resets only upon expiry and refinancing of the fixed rate terms. Liquidity risk is the risk that the Corporation will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Corporation's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Corporation's objective is to maintain cash to meet its liquidity requirements for 30 day periods. This objective was met for the period. The Corporation's existing cash resources include an approval for a $20 million overdraft, the discretion to roll over loans on maturity, and trade receivables exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months. 59 59#3260 ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 Liability maturity analysis Between Between 26. COMMITMENTS 1 year 1 and 2 and Non-derivatives 2021-22 Non-interest bearing or less 2 years 5 years Over 5 years Committed at the reporting date but not recognised as liabilities, payable: $'000 $'000 $'000 $'000 Trade and other payables 36,516 Interest bearing - fixed rate Loans from Northern Territory Treasury Corporation* 34,000 Total 70,516 Non-derivatives 2020-21 Non-interest bearing Trade and other payables Interest bearing - fixed rate Loans from Northern Territory Treasury Corporation* Total 196,000 196,000 Capital commitments - payable: Within one year One to five years More than five years Operating commitments- payable: Between Between Within one year 1 year 1 and 2 and Over 5 One to five years or less 2 years 5 years years More than five years $'000 $'000 $'000 $'000 29,300 37,000 66,300 34,000 34,000 159,000 159,000 * See also Note 17. The maturity analysis of loans from Northern Territory Treasury Corporation is based on its current loans agreement. CAPITAL RISK MANAGEMENT The Corporation's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide benefits for stakeholders. The capital structure of the Corporation consists of debt, which includes borrowings disclosed in Note 17, cash and cash equivalents and equity attributable to the equity holder of the Corporation, comprising of contributed capital and retained earnings as disclosed in Notes 21 and 23 respectively. In order to maintain or adjust the capital structure, the Corporation may adjust the amount of dividends paid to the shareholder, return capital to the shareholder, increase borrowings, reduce debt from operating cash flows or sell assets to reduce debt. Operating cash flows are used to maintain and expand the Corporation's assets, as well as to meet routine outflows of tax, dividends and servicing of debt. The Corporation's policy is to borrow centrally using facilities provided by Northern Territory Treasury Corporation to meet anticipated funding requirements. The Corporation is not subject to any externally imposed capital requirements. 27. AUDITOR'S REMUNERATION Audit services: Auditors of the Corporation- Northern Territory Auditor-General 2022 2021 $'000 $'000 22,977 176 416 23,393 176 630 680 1,470 1,587 2,100 2,267 157 169 157 169 61#3362 28. DIRECTOR AND KEY MANAGEMENT PERSONNEL DISCLOSURES Remuneration of non-executive directors Remuneration of directors is determined by the Shareholding Minister under section 24 of the GOC Act. ANNUAL REPORT 2021-22 ANNUAL REPORT 2021-22 The following table provides the details of all non-executive directors of the Corporation and the nature and amount of the elements of their remuneration: Non-executive directors Mr Dennis Bree Fees Superannuation 29. RELATED PARTY INFORMATION Total The parent entity of the Corporation is the Northern Territory Government, which at 30 June 2022 owned 100% (2021: 100%) of the issued capital of Power Generation Corporation. This single share is held by the Shareholding Minister on behalf of the Northern Territory. The Corporation has related party transactions with its parent entity (includes other agencies and departments of the Northern Territory Government). All financial transactions between the Corporation and related parties are on arm's length normal market terms. Transactions The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year. The Corporation is the predominant supplier of wholesale electricity in the Northern Territory. 2022 95,407 9,541 104,948 2021 95,407 9,064 104,471 Ms Christine Charles 2022 60,226 6,023 66,249 2021 60,226 5,722 65,948 Mr Richard Galton Total non-executive directors Sales to Purchases from Amounts Amounts owed by owed to related related related related parties parties parties parties $'000 $'000 $'000 $'000 Related party 2022 60,226 6,023 66,249 2021 60,226 5,722 65,948 The parent entity including all entities that 2021 are associated with the parent entity 2022 247,567 279,440 153,394 22,088 239,993 159,244 18,220 240,754 2022 215,859 21,587 2021 215,859 20,508 237,446 236,367 As at 30 June 2022 related party transactions of the Corporation included: • supply of gas from Power and Water Corporation; No termination benefits were paid to non-executive directors during the year. Remuneration of key management personnel Compensation levels are competitively set to attract and retain appropriately qualified and experienced senior executives. The following table shows the aggregate compensation made to key management personnel of the Corporation: • services provided by the Department of Corporate and Digital Development under a Service Level Agreement; . borrowings from the Northern Territory Treasury Corporation; • provision of wholesale electricity to Jacana Energy; and • provision of wholesale electricity and associated services to Power and Water Corporation. 30. CONTINGENT ASSETS AND LIABILITIES (i) Short-term employee benefits (ii) Post-employment benefits (iii) Long-term benefits Total compensation of key management personnel 2022 2021 $ $ (a) 1,616,429 125,423 1,767,331 123,494 (53,011) 132,673 1,688,841 2,023,498 CONTINGENT ASSETS AND LIABILITIES Various contractual disputes, including those involving ordinary routine matters to which the Corporation is a party, are pending or have been asserted against the Corporation. The wide variety and nature of the individual cases and the uncertainty of any potential liability or asset means that no value can be attributed to individual cases until the matters are resolved. 31. SUBSEQUENT EVENTS Executive officers are those officers who are involved in the strategic direction, general management or control of the business at Corporation or business division level. (i) (ii) Short-term employee benefits refer to salary and wages and annual leave paid or accrued during the financial year. Post-employment benefits refer to superannuation contributions made or accrued during the financial year. (iii) Long-term benefits refer to long service leave paid or accrued during the financial year. Other transactions with key management personnel Apart from the details disclosed in this note, no key management personnel have entered into a material contract with the Corporation since the commencement of the Corporation and there were no material contracts involving their interests existing at year end. Since the end of the financial year, the Directors have declared a dividend of $8.47 million (2021: $5.43 million) to be paid by 24 November 2022. Apart from the dividend noted in the Directors' report, there has been no item, transaction or event of a material and unusual nature which has arisen since 30 June 2022 that is likely to significantly affect the operations, the results of those operations or the state of affairs of the Corporation in future financial years. 63 30#3464 Glossary ANNUAL REPORT 2021-22 AASB Australian Accounting Standards Board BESS Battery Energy Storage System M ΕΣ LTI Lost time injury Million CCTV Closed Circuit Television MW CGUS Cash Generating Units MWh CIPS Channel Island Power Station NGER CO CO₂ Carbon dioxide NPAT Megawatt Megawatt-hour National Greenhouse and Energy Reporting Net Profit After Tax CPI Consumer Price Index NT Northern Territory DKIS Darwin-Katherine Interconnected System NTG Northern Territory Government ESS Essential system services NTEM Northern Territory Electricity Market FTE Full time equivalent NTER National Tax Equivalent Regime GCC Generation Consultative Committee OMT Operator Maintainer Technician GOC Government Owned Corporation OSPS GST Goods & Services Tax PGC Act GWh Gigawatt-hour PPA Owen Springs Power Station Power Generation Corporation Act 2014 Power Purchase Agreement HSR Health and safety committee representatives PPE Personal protective equipment HV High voltage PV Photovoltaic ICAM Incident Cause Analysis Method PWC Power and Water Corporation IMT Incident management team RGPS Ron Goodin Power Station KCPS Kings Canyon Power Station ROC Remote Operations Centre ΚΡΙ Key Performance Indicator SAMP Strategic Asset Management Plan KPS Katherine Power Station SCI Statement of Corporate Intent KRA Key Result Area TCPS Tennant Creek Power Station LED Light-emitting diode TGen Territory Generation LMS LMS Landfill Management Services Pty Ltd WHS Workplace Health and Safety (Shoal Bay) WLF Women Leaders Forum LNG Liquefied Natural Gas WPS Weddell Power Station. YPS Yulara Power Station#35TERRITORY GENERATION CONTACT US territorygeneration.com.au Building 3, Level 2, 631 Stuart Highway Berrimah NT 0828 PO Box 1721 Berrimah NT 0828 Station Manager North, Tim Danby, outside C9.