From the Chair and Chief Executive Officer

The past year has brought opportunities, challenges and significant achievements for Essential Energy as we continue our commitment for a better energy future.

Changing customer expectations are accelerating as the transition to net zero gathers momentum. It is important to our customers that we increase our support for renewables, replace assets with more resilient options and provide relief to communities in crisis situations. We are responding with an integrated approach to help our customers and their communities navigate and benefit from the energy transition.

Our Corporate Strategy has sustainability at its heart. Over the past year we have continued to improve our connections processes, including for renewables – from connecting household solar panels to large-scale generation facilities. Our network battery trial with AGL near Port Macquarie is increasing the amount of rooftop solar generation local customers can export to the network. This is the first of many batteries we expect to have on our network. We are also exploring ways to improve the capacity of the network without significant infrastructure investment. This will allow customers with solar panels and other renewables to export more energy into the network and enable improved efficiencies for new major connections to the network, while we maintain a safe and reliable power supply.

We are now offering Stand Alone Power Systems (SAPS) as an alternative to grid supply for some remote customers. In an Australian-first, we are trialling a hydrogen-supported SAPS, which is supplying a 100 per cent standalone solution for heritage accommodation in a National Park, and providing insights into renewable supply options in sensitive environments.

More than 200 customers from Tea Gardens, Ivanhoe and Tibooburra are using smart energy management devices to monitor their energy use and solar generation through our Smart Energy Communities trial. The devices will help these customers make informed choices about their energy use. The trial will also provide Essential Energy with a deeper understanding of emerging needs and options for affordable and reliable electricity supply.

We are supporting the adoption of electric vehicles (EVs) by making it easier for EV charging providers to connect to our network. Our online mapping tool is helping providers to see where the network has capacity for EV charging infrastructure.

We are also responding in a coordinated way to ensure we continue to provide safe and reliable power as extreme weather events become more common. 2022 was the wettest year on record for many parts of New South Wales (NSW), with widespread flooding across inland regions significantly impacting our customers and their communities. These conditions limited our ability to access the network and to complete maintenance work. Combined with the impacts of COVID-19 and bushfires, this meant we commenced 2022-23 with a major backlog of maintenance tasks. A huge effort from our employees, and in particular our field teams, took the backlog from more than 11,000 maintenance tasks on 1 July 2022 to fewer than 2,400 on 30 June 2023, and we thank everyone for their contributions.

Our 2024-29 Regulatory Proposal and Tariff Structure Statement (TSS), submitted to the Australian Energy Regulator in January 2023, outlines how we will operate, maintain and invest in our network over the five years from 1 July 2024. The proposal was informed by consultation with more than 400 people, to identify customer and stakeholder priorities. There is investment of $317 million identified for building network and community resilience to extreme weather events.

It also includes $171 million in new systems and technologies to allow customers to export and access more renewable energy, reducing greenhouse gas emissions by approximately 160,000 tonnes of carbon dioxide equivalent over the regulatory period.

The safety of our employees, contractors, customers and communities is a core value. Our safety performance continued to improve during 2022-23, with no Major Lost Time Injuries (LTIs) and decreasing Serious Claim Frequency Rate (SCFR) and Total Recordable Injury Frequency Rate (TRIFR) compared with the previous year. Reporting of near miss incidents reflected an improving safety culture, where employees trust the incident review process to identify improvements and prevent serious incidents in the future.

We continue to build an inclusive, supportive and growth-oriented workforce that reflects the communities we serve. As the skills we need are evolving, we remain committed to providing training and education. In 2023, 99 apprentices, 25 trainees and 11 graduates joined our organisation, bringing the total number in Early Talent Pathway roles to 192 apprentices, 25 trainees and 17 graduates (at 30 June 2023).

We are committed to addressing the challenges around diversity and inclusion in our industry and workforce. Energy is the third most male-dominated industry in Australia after mining and construction. Importantly, we are able to allocate 30 per cent of all Early Talent Pathway roles to female applicants, and 10 Aboriginal and Torres Strait Islander Identified roles for field operations and business support, having gained exemption under section 126 of the Anti-Discrimination Act 1977 (NSW).

We are proud to have completed our first Reconciliation Action Plan (RAP), in November 2022, with outcomes such as growing career opportunities for Aboriginal and Torres Strait Islander people, strengthening engagement with Aboriginal and Torres Strait Islander businesses, increasing recognition of the many First Nations on whose land we work and live, and celebrating the culture, art and stories of Aboriginal and Torres Strait Islander employees and communities. We look forward to continuing our journey towards reconciliation with our second RAP.

Essential Energy is committed to improving employee benefits and gender representation in the workforce. Essential Energy’s proposed policy for parental leave provides increased flexibility and will foster a more equal division of paid care, with all parents receiving 26 weeks – improving the family work-life balance and recognising diversity of family and parenting needs.

In the face of continuing societal, industry and organisational challenges over recent years – COVID-19 pandemic, bushfires and floods – it was pleasing to see our employee engagement levels continuing to grow this year, building on improvements and stability over recent years. The percentage of engaged employees increased to 40 per cent in 2023, up from 33 per cent in 2022 and 15 per cent in 2018. Essential Energy is committed to improving as an organisation that all employees can be proud of.

Building strong relationships with our communities is fundamental to our business. Our Customer Advocacy Group has been providing valuable insights for more than 25 years and, through our new Essential People’s Panel, we are talking directly to residential and small business customers about their most pressing issues and concerns.

Our organisational and employee giving programs continue to support regional, rural and remote communities. The combined effort of employees and the organisation over the year provided more than $726,000 to community groups, stakeholders and charities. We particularly thank employees for their generous giving to the charities supported by our Essential Giving Program.

Despite the challenges of 2022-23, Essential Energy’s financial performance (page 58 of Annual Report 2022-23 PDF) continued to be strong. The net loss after tax of $8.1 million was largely due to higher depreciation and interest costs following revaluation of assets and higher interest rates and inflation.

Essential Energy carries Property, Plant and Equipment as well as Intangible Assets at fair value in its financial statements. In the 2022-23 financial year the business increased these assets by $873.7 million. The increase was driven by the delivery of the Company’s capital expenditure program as well as a valuation increase of $650 million. The valuation increase is primarily a result of the regulatory framework for electricity distributors, whereby assets are indexed for inflation, which was high during 2022-23 and is likely to continue in 2023-24.

In the 2022-23 financial year shareholder distributions of $105.8 million were made, including Government Guarantee Fees and Income Tax Expense.

We sincerely thank all employees for their hard work and dedication across 2022-23, as well as Essential Energy’s shareholders and stakeholders for their ongoing support. As we keep working together, Essential Energy will continue to play a leading role in helping regional and rural communities transition to a net zero economy – underpinned by an energy supply that continues to be accessible, reliable and resilient.