financial report

(from left) Transend’s Lisa Eiszele, financial analyst, and Leanne Stecko, business support officer

financial report

Income statementFor the financial year ended 30 June 2009

Note2009 $’000

2008 $’000

Revenue 2(a) 145,822 131,640

Other income 2(b) 12,797 5,034

Depreciation and amortisation expenses 8,9 (58,552) (51,495)

Finance costs 3 (32,413) (10,499)

Operating and maintenance costs (47,356) (44,430)

Other expenses 2(c) (4,391) (3,713)

Profit from operating activities before superannuation actuarial gains / (losses) and gain on acqusition of business

15,907 26,537

Superannuation actuarial gains / (losses) 18 (6,684) 273

Gain on acqusition of business 17 664 -

Profit before income tax 9,887 26,810

Income tax equivalent expense 4(a) (2,655) (8,083)

Profit for the year 7,232 18,727

Theincomestatementistobereadinconjunctionwiththeaccompanyingnotestothefinancialstatementssetoutonpages33 to 57.

Transend Annual Report 09 29

Balance SheetAs at 30 June 2009

Note2009 $’000

2008 $’000

Current assets

Cash and cash equivalents 26(a) 23,775 21,499

Trade and other receivables 5 24,970 22,943

Inventories 6 423 423

Current tax assets 4(c) 5,260 -

Other assets 7 6,084 811

Total current assets 60,512 45,676

Non-current assets

Other assets 7 397 -

Intangible assets 8 3,869 1,514

Property, plant and equipment 9 1,241,180 1,259,312

Total non-current assets 1,245,446 1,260,826

Total assets 1,305,958 1,306,502

Current liabilities

Trade and other payables 10 35,681 24,825

Borrowings 11 - 408,677

Current tax liabilties 4(c) - 2,436

Provisions 12 7,149 9,293

Other liabilities 13 33,037 32,019

Total current liabilities 75,867 477,250

Non-current liabilities

Borrowings 11 488,000 -

Deferred tax equivalent liabilities 4(d) 181,269 218,390

Provisions 12 35,438 19,496

Total non-current liabilities 704,707 237,886

Total liabilities 780,574 715,136

Net assets 525,384 591,366

Equity

Issued capital 14 66,549 66,549

Reserves 15 388,338 452,192

Retained earnings 16 70,497 72,625

Total equity 525,384 591,366

Thebalancesheetistobereadinconjunctionwiththeaccompanyingnotestothefinancialstatementssetoutonpages33 to 57.

30 Transend Annual Report 09

Statement of recognised income and expenseFor the financial year ended 30 June 2009

Note2009 $’000

2008 $’000

Revaluation of property, plant and equipment 15 (91,364) 132,024

Income tax equivalent on items taken directly to equity 15, 4(b) 27,510 (39,004)

Net income recognised directly in equity (63,854) 93,020

Profitfortheyear 7,232 18,727

Total recognised income and expense for the year (56,622) 111,747

Thestatementofrecognisedincomeandexpenseistobereadinconjunctionwiththeaccompanyingnotestothefinancialstatements set out on pages 33 to 57.


Cash flow statementFor the financial year ended 30 June 2009

Note2009 $’000

2008 $’000

Cash flows from operating activities:

Receipts from customers 170,986 166,711

Payment to suppliers and employees (62,922) (62,975)

Interestandothercostsoffinancepaid (29,814) (8,376)

Income tax equivalents paid (18,610) (19,271)

Net cash provided by operating activities 26(b) 59,640 76,089

Cash flows from investing activities:

Proceeds from sale of property, plant and equipment 531 279

Payment for property, plant and equipment (124,412) (60,666)

Payment for business (15,207) -

Net cash used in investing activities (139,088) (60,387)

Cashflowsfromfinancingactivities:

Proceeds from borrowings 749,261 115,639

Repayment of borrowings (658,177) (45,000)

Return of shareholder's capital - (50,000)

Dividends paid (9,360) (15,000)

Net cash provided by financing activities 81,724 5,639

Net increase in cash and cash equivalents 2,276 21,341

Cashandcashequivalentsatthebeginningofthefinancialyear 21,499 158

Cash and cash equivalents at the end of the financial year 26(a) 23,775 21,499

Note: Allocations may not sum to whole dollars due to rounding

Thecashflowstatementistobereadinconjunctionwiththeaccompanyingnotestothefinancialstatementssetoutonpages33 to 57.


notes to the financial statementsFor the financial year ended 30 June 2009

Note Contents Page

1 Summaryofsignificantaccountingpolicies 33

2 Profitfortheyear 42

3 Finance costs 42

4 Income tax equivalents 43

5 Trade and other receivables 45

6 Inventories 45

7 Other assets 45

8 Intangible assets 45

9 Property, plant and equipment 45

10 Trade and other payables 47

11 Borrowings 47

12 Provisions 47

13 Other liabilities 47

14 Issued capital 47

15 Reserves 48

16 Retained earnings 48

17 Acquisition of business 48

18 Definedbenefitsuperannuationplan 49

19 Financial instruments 51

20 Leases 54

21 Commitments for expenditure 55

22 Contingent liabilities and contingent assets 55

23 Auditor’s remuneration 55

24 Key management personnel compensation 55

25 Related party disclosures 55

26 Notes to the cash flow statement 56

27 Economic dependency 57

28 Subsequent events 57

1. Summary of significant accounting policies

Thesignificantaccountingpoliciesthathavebeenadoptedinthepreparationofthesefinancialstatementsare listed below:

(a) Statement of compliance and basis of

preparation

Thefinancialreportisageneralpurposefinancialreportwhich has been prepared in accordance with Australian Accounting Standards and Interpretations made by the Australian Accounting Standards Board, and the requirements of the Corporations Act 2001.Thefinancialreport complies with International Financial Reporting Standards (IFRS) and Interpretations made by the International Accounting Standards Board.

Thefinancialstatementswereauthorisedforissueby the directors on 27 August 2009.

Thefinancialreporthasbeenpreparedonthebasisofhistorical cost except for the revaluation of certain non-currentassetsandfinancialinstruments.Costisbased on the fair values of the consideration given in exchange for assets.

In the application of Transend’s accounting policies, as described below, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based upon historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Inparticular,informationaboutsignificantareasofestimation uncertainity and critical judgements in applying accountingpoliciesthathavethemostsignificanteffectontheamountrecognisedinthefinancialstatementsaredescribed in note 1 (v).


Notes to the financial statements for the financial year ended 30 June 2009 (continued)

The accounting policies set out below have been applied inpreparingthefinancialstatementsforthefinancialyearended 30 June 2009 and the comparative information presentedinthesefinancialstatementsforthefinancialyearended 30 June 2008.

Allvaluesexpressedinthefinancialstatementsandnotesare expressed in Australian dollars, to the nearest thousand dollars unless otherwise stated.

(b) Acquisition of assets

All assets acquired, including property, plant and equipment, are initially recorded at their costs of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. Transend capitalises assets that meet the capitalisationthresholdof$1,000anditemsunderthislimitare treated as an expense in the current period.

(c) Adoption of new and revised

Accounting Standards

In the current year, Transend has adopted no new or revised Standards and / or Interpretations issued by the Australian Accounting Standards Board as these were not considered applicable to the operations of Transend.

Transend has not adopted the following pronouncements, which have been issued by the Australian Accounting Standards Board with application dates later than the period covered by thisfinancialreport.ThepronouncementswhichwillimpactTransend reporting are discussed below. Transend does not currently believe the adoption of any other pronouncements willhaveamaterialimpactontheconsolidatedresults,financialposition, or disclosures of Transend.

• AASB8‘OperatingSegments’(effectiveforannualperiods beginning on or after 1 January 2009, with early application permitted). Transend would need toadoptthisstandardforthe30June2010financialstatements as this standard becomes mandatory then. ThestandardisnotexpectedtosignificantlyimpactTransend but may change Transend’s disclosure in relation to segment information.

• AASB101‘PresentationofFinancialStatements’andAASB2007-8‘AmendmentstoAustralianAccountingStandards arising from AASB 101’ (effective for annual periods beginning on or after 1 July 2009,

with early application permitted). Revisions to this statement will bring presentation distinctions between comprehensive income and changes in equity, so that equity changes are limited to transactions with owners such as capital raised and dividends. Although other presentation changes will occur, no change to reportedfinancialresultsorpositionareexpected.

• AASB3‘BusinessCombinations(2008)’,AASB127‘ConsolidatedandSeparateFinancialStatements’andAASB2008-3‘AmendmentstoAustralianAccountingStandards arising from AASB 3 and AASB 127’ (effective for annual periods beginning on or after 1 July 2009, with early application permitted). The revisions alter the accounting treatment to be used for business combinations entered into after the standard isfirstapplied,includingthemeasurementoffairvalue,identificationofacquiredassetsandrecognitionof goodwill attributable to minority interest.

• Interpretation18‘TransfersofAssetsfromCustomers’ provides guidance on the accounting for contributions from customers in the form of transfers of property, plant and equipment (or cash to acquire or construct it). Interpretation 18 will become mandatoryforthe30June2010financialstatements,therefore will be applied prospectively to transfers of assets from customers received on or after 1 July 2009. Therefore no adjustments will be required on adoption and no changes in accounting policy are expected which will impact future transfers.

The following standards are either largely concerned with disclosuresorarenotexpectedtosignificantlyaffectanyamountsrecognisedinthefinancialstatements:

• AASB2007-10‘FurtherAmendmentstoAustralianAccounting Standards arising from AASB 101’ (effective for annual reporting periods begining on or after 1 January 2009). This amending standard changes theterm‘generalpurposefinancialreport’to‘generalpurposefinancialstatements’andtheterm‘financialreport’to‘financialstatements’whererelevant,in Australian Accounting Standards (including Interpretaions) to better align with International Financial Reporting Standards (IFRS) terminology.

• AASB2008-5‘AmendmentstoAustralianAccountingStandards arising from the annual improvement project’ (applies retrospectively (with some exceptions) to annual reporting periods beginning on or after 1 January 2009). This standard amends 25 different standards and is equivalent to the International

1. Summary of significant accounting policies (continued)



Accounting Standards Board (IASB) standard improvements to IFRSs issued in May 2008. The amendements largely clarify the required accounting treatment where previous practice has varied, although some new or changed requirements are introduced.

• AASB2008-6‘FurtherAmendmentstoAustralianAccounting Standards arising from the Annual Improvements Project’ (applies retrospectively to annual reporting periods beginning on or after 1 July 2009). This makes amendemnents to accounting standard AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards and AASB 5 Non-current Assets Held for Sale and Discontinued Operations to include requirements relating to a sale plan involving the loss of control of a subsidiary. The amendments require all the assets and liabilities of such a subsidiary to be classifiedasheldforsaleandclarifythedisclosuresrequired when the subsidiary is part of a disposal group thatmeetsthedefinitionofadiscontinuedoperation.

• AASB2009-2‘AmendmentstoAustralianAccountingStandards - Improving Disclosures about Financial Instruments (applies to annual reporting periods beginning on or after 1 January 2009). This standard amends AASB 7 Financial Instruments: Disclosures to require enhanced disclosures about fair value measurements and liquidity risk.

• AASB2009-4‘AmendmentstoAustralianAccountingStandards arising from the Annual Improvements Process’ (applies to annual reporting periods beginning on or after 1 July 2009). Introduces amendments into Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its standards.

• AASB2009-5‘FurtherAmendmentstoAustralianAccounting Standards arising from the Annual Improvements Process’ (applies to annual reporting periods beginning on or after 1 January 2010). Introduces amendments into Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its standards. A number of the amendments are largely technical, clarifying particular terms, or eliminating unintended consequences.

• AASB2009-6andAASB2009-7‘AmendmentstoAustralian Accounting Standards’ (AASB 2009-6 is applicable to annual reporting periods beginning on or after 1 January 2009 that end on or after 30 June 2009. AASB 2009-7 is applicable to annual reporting periods beginning on or after 1 July 2009). The Standards only makes editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB.

(d) Borrowing costs

Borrowing costs are recognised on an effective yield basis and include interest and amortisation of discounts or premiums relating to borrowings. Borrowing costs are expensed as they are incurred unless they relate to qualifying assets. Qualifying assets are assets that take more than 12 months to commission for their intended use. As funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate (Note 3).

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents are carried at face value of the amounts deposited. The carrying amounts of cash and cash equivalents approximate net fair value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

(f) Comparative amounts

Wheretherehasbeenreclassificationofitemsinthefinancialstatements,theprioryearcomparativeshavealsobeenreclassifiedtoensurecomparabilitywiththecurrentreportingperiodanddetailsofthereclassificationare disclosed, where applicable, in the relevant note to the financialstatements.

In addition, the comparative income statement has been re-presented to conform with the current year’s presentation.

(g) Employee benefits

Provisionsmadeinrespectofemployeebenefitsthatareexpected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisionsmadeinrespectofemployeebenefits,whicharenot expected to be settled within 12 months, are measured at the present value of estimated future cash outflows to be




made in respect of the employees’ services provided up to the balance date. These amounts are discounted using rates attached to Commonwealth bonds at balance date, which closely match the terms of the related liabilities.

Salaries, annual and long service leave

Provisionismadeforbenefitsaccruingtoemployeesinrespect of salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably. The provision represents the amount that Transend has an obligation to pay resulting from employees’ services provided up to the balance date.

Adjustments to these provisions are included in the cost of labour and charged directly to capital jobs or cost centres, and correspondingly, the provisions absorb the cost when employeesutilisetheirbenefits.Anannualadjustmentismade to the provisions in order to represent the fair value of the provision at year-end.

Sick leave

Noprovisionforsickleaveisallowedforinthefinancialstatementsassickleaveisnon-vestingandemployeebenefitsonly exist when an employee becomes sick.

Workers compensation

Transend is insured by an external organisation for liabilities arising from workers compensation claims.

Superannuation

Contributionstodefinedcontributionsuperannuationplansare expensed when incurred.

Fordefinedbenefitsuperannuationplans,thecostofprovidingbenefitsisdeterminedusingtheProjectedUnitCredit Method, with actuarial valuations being carried out at each reporting date. Actuarial gains and losses are recognised directly in the operating and maintenance costs in the period in which they occur and are presented in the income statement.

Past service cost is recognised immediately to the extent that thebenefitsarealreadyvestedandotherwiseisamortisedonastraight-linebasisovertheaverageperioduntilthebenefitsbecome vested.

Thedefinedbenefitobligationrecognisedinthebalancesheetrepresentsthepresentvalueofthedefinedbenefitobligation, adjusted for unrecognised past service costs,

net of the fair value of the plan assets. Any asset resulting from this calculation is limited to past service costs, plus the present value of available refunds and reductions in future contributions to the plan (note 18).

Amounts disclosed for key management personnel in post employmentbenefitsrelatingtodefinedbenefitshavebeenallocated based upon the weighted average of annual salaries effective at reporting date.

(h) Financial assets

Financialassetsareclassifiedintothefollowingspecificcategories:‘Loansandreceivables’.

Theclassificationdependsonthenatureandpurposeofthefinancialassetsandisdeterminedattimeofinitialrecognition.

Loans and receivables

Loans and receivables comprise trade receivables, loans and other receivables which are recorded at amortised cost using the effective interest rate method less impairment. Interest income is recognised by applying the effective interest rate.

Trade receivables are generally settled within prescribed periods. To ensure the carrying amount of accounts receivable approximates their fair value, an allowance for doubtful debts is, if required, raised at year-end after assessing the collectability of outstanding debts (note 5). Bad debts are written off in the year in which they are identified.

Financialassets,otherthanthoseatfairvaluethroughprofitor loss, are assessed for indicators of impairment at each balance date. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversedthroughprofitorlosstotheextentthecarryingamount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not occurred

Effective interest method

The effective interest method is a method of calculating the amortisedcostofafinancialassetandofallocatinginterestincome over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life

ofthefinancialasset,or,whereappropriate,ashorterperiod.




(i) Financial instruments issued

Debt and equity instruments

Debtandequityinstrumentsareclassifiedaseitherliabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially at fair value and subsequently at the higher of the amount recognised as a provision and the amount initially recognised less cumulative amortisation in accordance with Transend’s revenue recognition policy note 1(t).

Other financial liabilities

Otherfinancialliabilities,includingborrowings,arerecordedinitially at fair value, net of transaction costs. Subsequent toinitialrecognition,otherfinancialliabilitiesaremeasuredat amortised cost using the effective interest rate method, with any difference between the initial recognised amount andtheredemptionvaluebeingrecognisedintheprofitand loss over the period of the borrowing using the effective interest rate method.

Hedging

Transend’s policy is to only enter into designated and effective foreign exchange hedging instruments for currency exposures whicharegreaterthan$500,000andcreateanexposurefor22 days or more. Transend applies hedge accounting and accounts for hedges as cash flow hedges where the instrument is initially recorded at fair value and changes in the fair value of the hedging instrument and hedge item are deferred in equity throughout the hedge term to the extent that the hedge is an effective hedge. As the hedged item will relate to therecognitionofanon-financialasset,thegainsandlossespreviously deferred in equity are transferred from equity and included in the initial measurement of the costs of the asset.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or nolongerqualifiesforhedgeaccounting.Anycumulativegain or loss deferred in equity at that time remains in equity, and is recognised when the forecast transaction is ultimately recognisedinprofitorloss.Whenaforecasttransactionisnolonger expected to occur, the cumulative gain or loss that was deferredinequityisrecognisedimmediatelyinprofitorloss.

Compliance with policies and exposure limits are reviewed on an ongoing basis and any breaches are reported in a timely manner to the Board. Compliance is also reviewed by Transend’s internal auditors in accordance with Transend’s internal audit program.

Transendentersintoderivativefinancialinstrumentstomanage its exposure to foreign exchange rate risk via forward foreign exchange contracts. Forward foreign currency contracts are not entered into for speculative purposes.

See Note 19 for further detail of the Financial Instruments held by Transend at balance date.

(j) Foreign currency transactions

Foreign currency transactions are translated to Australian dollars at the rates of exchange ruling at the dates of the transactions.

(k) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the AustralianTaxationOffice(ATO).Inthesecircumstancesthe GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

Cash flows are included in the cash flow statement on a gross basis. The GST components of cash flows arising from investingandfinancingactivities,whichisrecoverablefrom,orpayableto,theATOareclassifiedasoperatingcashflows.

(l) Impairment of assets

At each reporting date, Transend reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If an indication of impairment exists, the recoverable amount of the asset is estimated to determine the extent of any impairment losses. Where the asset does not generate cash flows that are independent from other assets, Transend estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangibleassetswithindefiniteusefullivesandintangibleassets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired.




Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessmentsofthetimevalueofmoneyandtheriskspecificto the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the Income Statement immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment lossisrecognisedinprofitorlossimmediately,unlesstherelevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(m) Income tax

Under the National Tax Equivalents Regime (NTER) Transend is required to make income tax equivalent payments to the State Government. The charge for current incometaxexpenseisbasedontheprofitfortheyearadjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance date.

Current tax equivalent is calculated by reference to the amount of income tax equivalent payable or recoverable inrespectofthetaxableprofitorlossfortheperiodusingthe legislated income tax rate. Current tax equivalent is recognised as a liability (asset) to the extent that it is unpaid (recoverable).

Deferred tax equivalent is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between thecarryingamountofassetsandliabilitiesinthefinancialstatements and the corresponding tax base of those items.

In principle, deferred tax equivalent liabilities are recognised for all taxable temporary differences. Deferred tax equivalent assets are recognised to the extent that it is probable that sufficienttaxableamountswillbeavailableagainstwhichdeductible temporary differences and tax offsets can be utilised. However, deferred tax equivalent assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities, whichaffectsneithertaxableincomenoraccountingprofit.

Deferred tax equivalent assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates and laws enacted at the reporting date. The measurement of deferred tax equivalent liabilities and assets reflects the tax consequences that would follow from the manner in which Transend expects at reporting date to recover or settle the carrying amount of its assets and liabilities.

Deferred tax equivalent assets and liabilities are offset when they relate to income tax equivalents levied by the same taxation authority and where Transend intends to settle its current tax equivalent assets and liabilities on a net basis.

Current and deferred tax equivalent for the period is recognised as an expense or income in the income statement except when it relates to items taken directly to equity, in which case the deferred tax equivalent is also recognised directly in equity.

(n) Intangible assets

Computersoftwareidentifiedasintangibleassetsarerecorded at cost less accumulated amortisation and impairment (note 8). Amortisation is charged on a straight-line basis over the estimated useful life of three years. The estimated useful lives and amortisation methods are reviewed annually for appropriateness.

(o) Inventories

Inventories are carried at the lower of cost and net realisable value, with, if required, an allowance being maintained for loss on disposal of surplus stores (note 6). Inventories are not held for resale and are used in the maintenance and construction of the transmission system. Costs are assigned to inventory by the method most appropriate to each particular classofinventory,withthemajoritybeingvaluedonafirstinfirstoutbasis.Inventoryisvaluedatnetrealisablevaluewhere it has been determined that inventory is surplus to requirements. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.




(p) Leased assets

Leasesareclassifiedasfinanceleaseswheneverthetermsof the lease transfer substantially all the risks and rewards ofownershiptoTransend.Allotherleasesareclassifiedasoperating leases.

Assetsheldunderfinanceleasesareinitiallyrecognisedattheir fair value or, if lower, at amounts equal to the present value of the minimum lease payments determined at the inception of the lease. The corresponding liability to the lessorisincludedinthebalancesheetasafinanceleaseobligation.Leasepaymentsareapportionedbetweenfinancecharges and a reduction of the lease liability to achieve a constant rate of interest during the term of the lease. Finance charges are charged directly against income, unless they directly relate to a qualifying asset, in which case they are capitalised in accordance with Transend’s borrowing costs policy (note 1d). Finance leased assets are amortised on a straight-line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an expense on a straight-line basis as this reflects the pattern in which economicbenefitsoftheleasedassetareconsumed.

(q) Payables

Trade payables and other accounts payable, including accruals for accounts not yet billed, are recognised when an obligation to make future payment has occurred for goods received or services provided (note 10).

(r) Property, plant and equipment

Network assets

The network assets (including transmission lines and substations) are measured at fair value based upon the depreciated optimised replacement cost (DORC) methodology.

The gross replacement cost of modern equivalent assets is determined for each class of asset and consequentially optimised for over-design, over-capacity and redundant assets. The DORC value is derived from the gross optimised replacement cost after allowing for depreciation, which is calculated using the remaining useful life and the assigned useful life of each class of asset.

Management sought an independent valuation of Transend’s network assets in service from Sinclair Knight Merz Pty Ltd (SKM) with an effective date of 30 June 2006.

Current valuation basis

During the year Transend reviewed its basis for estimating the current replacement cost of network assets and adopted the use of longer term cost indices to estimate the cost of primary factors that influence the replacement values of network assets. Refer note 1 (v).

The 2006 valuation has been inflated to 30 June 2009 values byapplying‘Long-termaverageannualnetworkassetcostescalation rate (LAACER)’ in Tasmania which was sourced from SKM. LAACER represents SKM’s recommendation of appropriate cost escalation components for use within capital project cost projections for the period 2004–05 to 2014–15 inclusiveandarespecifictotheoperatingenvironmentfacedby Transend. The rates are based on the most up-to-date information available in April 2009.

Asset Class DescriptionLAACER

June 2004 – June 2015

Substations 2.50%

Switching stations 2.50%

Power transformers 3.30%

Transmission lines 3.60%

Underground cables 4.40%

Weather stations 2.90%

Strategic spares 3.30%

Basslink system protection scheme 2.90%

Basslink connection assets at george town 2.50%

Allowance is also made for assets completed and transferred to completed works, assets retired from use, and for depreciation of the assets since the last valuation. Assets completed and transferred to completed works during the year to 30 June 2009 are valued at cost.

The components of major assets that have materially different useful lives are accounted for as separate assets, and are depreciated separately.

The carrying amounts of Transend’s assets are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of Transend’s assets exceeds the recoverable amount, the assets are written down to the lower amount. Fair value, based upon the DORC methodology, is a reasonable approximation of recoverable amount and therefore no write down is considered necessary.

The cost of network assets constructed includes the cost of contracted services, materials, direct labour costs and an




appropriate portion of overhead costs. Costs incurred on an asset subsequent to the initial acquisition are capitalised when the original capacity of an asset has been enhanced, or the life of an asset has been extended.

Communications assets

The communications assets (including bearer, multiplexers, site infrastructure assets) are measured at fair value based upon the depreciated replacement cost (DRC) methodology. Replacement costs have been established by reference to the cost of modern equivalent assets and adjusting these to reflect current capacity, age, design and estimated remaining useful life.

Land and buildings

Land and buildings are carried in the balance sheet at fair value, less any subsequent accumulated depreciation and impairment loss where applicable. In June 2007 management sought an independent valuation of land and buildings by Brothers and Newton Pty Ltd. The valuation was undertaken according to International Valuation Standards which provided a market appraisal valuation at 1 July 2006 based on discounted cash flows or capitalisation of net income as appropriate. The valuation has been inflated to 30 June 2009 values by applying escalation factors based upon the Australian Bureau of Statistics Consumer Price Index (weighted average of eight capital cities).Theescalationfactorforthe2009financialyearwas2.46 per cent (2008: 4.2 per cent).

Other plant and equipment

Other plant and equipment includes motor vehicles, computerequipmentandnon-separablesoftware,officefurniture and equipment. These assets are stated at cost less accumulated depreciation and impairment.

Capital works in progress

Capital works in progress are recognised at cost (including borrowing costs).

Disposal of assets

The gain or loss on the disposal of assets is calculated as the difference between the carrying amount of the asset at the time of disposal (less cost of disposal) and the proceeds ondisposalandisincludedinthenetprofitintheyearof disposal. Any revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings.

Revaluations of non-current assets

Any revaluation increase arising on revaluation of network assets or land and buildings is credited to the asset revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised asanexpenseinprofitorloss,inwhichcasetheincreaseis credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arisingontherevaluationischargedasanexpenseinprofitor loss to the extent that it exceeds the balance, if any, held in the asset revaluation reserve in relation to a previous revaluation of that asset.

Useful lives and depreciation

Depreciation is provided on property, plant and equipment and is based on the straight-line method so that assets are written off over their useful lives (note 9). The estimated useful lives, residual values, depreciation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in the current and future periods. Depreciation on revalued network assets ischargedtoprofitorloss.

The useful lives assigned to Transend’s assets are listed below:

Transmission lines 60 yrs

Underground cables 40 yrs

Substation switch bays 50 yrs

Communications 10–40 yrs

Substation establishment 60 yrs

Capacitors 45 yrs

Transformers 45 yrs

Control and protection schemes 15 yrs

Buildings 80 yrs

Other plant and equipment 3–10 yrs

(s) Provisions

Provisions are recognised when Transend has a present obligation that can be measured reliably and it is probable thattherewillbefuturesacrificeofeconomicbenefits. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When an amount to settle a provision is expected to be recovered from a third party, the receivable is recognised when it is virtually certain that the recovery will be received and the amount can be measured reliably.




(t) Revenue recognition

Revenues are recognised at fair value of the consideration received or receivable net of the amount of GST payable to the ATO.

Rendering of prescribed services

Prescribed services are recognised in the income statement at the amount allowed by Transend’s revenue cap determination. Any amounts received in excess of this allowance are deferred as a liability on the basis that the amount is effectively returned to customers at large through future price reductions and recognised as income in future periods.

Rendering of non-prescribed services

Revenue is recognised in the income statement in proportion to the stage of completion of the transaction at balance date where appropriate.

Interest

Interest revenue is recognised as it accrues on a time proportionate basis that takes into account the effective yield onthefinancialasset.

Asset sales

Profitorlossonsaleisrecognisedintheincomestatementwhensignificantrisksandrewardsofownershipofthegoodshave been passed to the buyer.

Rental income

Rental income is recognised in the income statement on a straight-line basis over the term of the lease.

Customer contributions

Transend’s policy is to treat contributions from customers that relate to capital projects as revenue. Where capital works are incomplete, the portion of customer contributions received in advance for the incomplete works is included as a liability in the balance sheet.

(u) Segment reporting

Transend owns and operates the electricity transmission system in Tasmania. Revenue earned and costs incurred are associated with the performance of that function. The reporting of information by segment is not required forthe2009financialyearasTransendoperateswithinasingle business and single geographic segment.


(v) Critical accounting judgements,

estimates and assumptions

Asnotedinnote1(a),thepreparationofthefinancialstatements requires management to make judgements, estimates and assumptions that affect the reported amounts inthefinancialstatements.Managementhasidentified the following critical accounting policies for which significantjudgements,estimatesandassumptionsaremade.Actual results may differ from these estimates under different assumptions and conditions and may materially affectthefinancialresultsorthefinancialpositionreportedin future periods.

Defined benefits plan

Various acturial assumptions are required when determining Transend’s post employment obligations. These assumptions and the relative carrying amounts are disclosed in note 18.

Employee entitlements

Management judgement is applied in determining the following key assumptions used in the calculation of long service leave at reporting date:

- future increases in salaries and wages;

- future oncost rates; and

- experience of employee departures and periods of service.

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable thatfuturetaxableprofitswillbeavailabletoutilisethosetemporary differences.

Revaluation of property, plant and equipment

As described in note 1(r), the replacement cost of network assets is influenced by the cost of primary factors such as price of oil, labour, metals, construction costs and foreign exchange rates. Transend has adopted the use of longer term indices (LAACER) to estimate the current replacement cost of network assets. In prior years, short-term indices were used for this purpose. The change has been recognised prospectively as a change in accounting estimate.

As a result of this change, the carrying values of networks assetswererevalueddownwardsby$93millionon 1 July 2008. This has reduced the depreciation charges in thecurrentfinancialyearbyapproximately$4.5millionandit is expected that the reduction in depreciation would be similar in future years.



Impairment

Transend assesses impairment of all assets at each reporting date. If an impairment trigger exists, an estimate of the recoverable amount of each of the cash generating units is made. Further details on the value in use calculations and adjustments for impairment are disclosed in note 1 (l).

2. Profit for the year

2009 $’000

2008 $’000

(a) Revenue

Revenue consists of the following items:

Prescribed services 144,223 130,120

Interest received – bank deposits 44 9

Rental and lease income 1,555 1,511

145,822 131,640

(b) Other income

Other income consists of the following items:

Income from external work 12,786 4,947

Other 11 87

12,797 5,034

(c) Other expenses

Profit/(loss)beforeincometaxequivalents has been arrived at after charging/(crediting) the following expenses:

(Gain)/loss on disposal of property, plant and equipment (53) 63

Insurance 785 746

Inventory expensed - 65

Operating lease rental expenses 554 250

Cost of external work 3,105 2,589

4,391 3,713


2009 $’000

2008 $’000

(d) Employee benefits

expenses *

Postemploymentbenefits:

Definedbenefitplan 9,266 1,785

Definedcontributionplan 1,549 1,181

10,815 2,966

TerminationBenefits 696 424

Otheremployeebenefits 23,049 17,704

34,560 21,094

* These benefits are split between the income statement line item operating and maintenance costs and amounts capitalised as property, plant and equipment.

3. Finance costs

Note

Borrowing costs incurred duringthefinancialyear 33,887 11,502

Borrowing costs capitalised duringthefinancialyear 9 (1,474) (1,003)

Netfinancingcosts 32,413 10,499

Weighted average capitalisation rate on funds borrowed 7.86% 7.15%



4. Income tax equivalents

2009 $’000

2008 $’000

(a) Recognised in profit

or loss

Income tax equivalent expense/(income) comprises:

Current income tax expense 10,941 16,622

Adjustments recognised in the current year in relation to the current tax equivalent of prior years 288 (20)

Net increase/(decrease) in deferred tax equivalent liability (8,574) (8,519)

Total income tax equivalent expense/(income) 2,655 8,083

Numerical reconciliation between income tax equivalent expense and pre-tax net profit

Profitbeforeincometaxequivalent 9,887 26,810

Income tax equivalent calculated at 30% (2008: 30%) 2,966 8,043

Decrease in income tax equivalent expense due to:

Investment allowance (52) -

Adjustment to tax base of assets (565) -

Superannuation - (29)

Increase in income tax equivalent expense due to:

Non-deductible expenses 18 103

Under/over provided in prior years 288 (34)

Income tax equivalent expenseonpre-taxnetprofit 2,655 8,083

Note2009 $’000

2008 $’000

(b) Deferred tax

equivalent recognised

directly in equity

Property revaluations 15 27,510 (39,004)

(c) Current tax

equivalent assets

and liabilities

Current tax equivalent payable (receivable) (5,260) 2,436

(d) Deferred tax

equivalent balances

Deferred tax equivalent assets comprise:

Temporary differences 12,839 8,640

Deferred tax equivalent liabilities comprise:

Temporary differences 194,109 227,030

Net deferred tax equivalent liabilities 181,269 218,390



4. Income tax equivalents (continued)

(e) Movement in temporary differences during the financial year

Balance 1 July 08

$’000

Prior year under/over

provision $’000

Recognised in income

$’000

Recognised in equity

$’000

On acquisition of business

$’000

Balance 30 June 09

$’000

Gross deferred tax equivalent liabilities:

Property, plant and equipment (227,030) (284) 7,220 27,510 - (192,584)

Accrued Revenue - - (1,524) - - (1,524)

(227,030) (284) 5,696 27,510 - (194,108)

Gross deferred tax equivalent assets:

Employeebenefits 8,267 - 3,083 - 1,353 12,703

Provisions - - - - - -

Other items 372 (31) (205) - - 136

8,640 (31) 2,878 - 1,353 12,839

Net deferred tax equivalent liabilities: (218,390) (315) 8,574 27,510 1,353 (181,269)

Balance 1 July 07

$’000

Prior year under/over

provision $’000

Recognised in income

$’000

Recognised in equity

$’000

Balance 30 June 08

$’000

Gross deferred tax equivalent liabilities:

Property, plant and equipment (196,155) 5 8,124 (39,004) (227,030)

(196,155) 5 8,124 (39,004) (227,030)

Gross deferred tax equivalent assets:

Employeebenefits 8,156 2 110 - 8,268

Provisions 2 - (2) - -

Other items 92 - 280 - 372

8,250 2 388 - 8,640

Net deferred tax equivalent liabilities: (187,905) 7 8,512 (39,004) (218,390)



5. Trade and other receivables

2009 $’000

2008 $’000

Current

Trade receivables 23,362 22,379

Goods and services tax recoverable 1,608 564

24,970 22,943

The average credit period for trade receivables is 25 days. No interest is charged on trade receivables and no trade receivable amounts are impaired or aged past due date.

6. Inventories

Current

Stores (valued at cost) 423 423

7. Other assets

Current

Prepayments 894 706

Other 203 105

TUOS under recoveries 4,987 -

6,084 811

Non-current

Prepayments 397 -

6,481 811

8. Intangible assets

Computer software – at cost

Gross carrying amount

Balance at 1 July 9,983 8,562

Additions 5,009 1,421

Balance at 30 June 14,992 9,983

Amortisation and impairment losses

Balance at 1 July (8,469) (8,209)

Amortisation expense * (2,654) (260)

Balance at 30 June (11,123) (8,469)

Carrying amount

Balance at 30 June 3,869 1,514

* Amortisation expense is included in the line item depreciation and amortisation expenses in the income statement.

9. Property, plant and equipment

2009 $’000

2008 $’000

Network Assets

Transmission lines – at fair value 969,868 923,389

Accumulated depreciation (489,952) (373,461)

Depreciated optimised replacement cost 479,916 549,928

Transmission substations – at fair value 1,146,751 985,308


Depreciated optimised replacement cost 566,605 573,237

Communications Assets

Communications assets – at fair value 14,462 -

Accumulated depreciation (1,022) -

Depreciated replacement cost 13,440 -

Easements – at fair value 59,803 58,079

Land

Land at fair value 14,894 12,611

Buildings

Buildings at fair value 9,981 9,351

Accumulated depreciation (830) (512)

Depreciated value 9,151 8,839

Other plant and equipment

Other plant and equipment – at cost 24,119 21,660


Depreciated value 9,548 6,905

Capital works in progress – at cost 87,823 49,713

1,241,180 1,259,312



9. Property, plant and equipment (continued)

Reconciliation of the movement in property, plant and equipment during the financial year

ended 30 June 2009:

Note

Transmission lines at fair

value $’000

Transmission substations at fair value

$’000

Easements at fair value

$’000

Land at fair value

$’000

Communications at fair value

$’000

Buildings at fair value

$’000

Other plant &

equipment at cost $’000

Capital works in

progress at cost

$’000Total $’000

Carrying amount at beginning of financial year 549,928 573,237 58,079 12,611 - 8,839 6,905 49,713 1,259,312

Additions during the year - - - - - - - 108,459 108,459

Finance costs capitalised 3 - - - - - - - 1,474 1,474

Acquisitions through purchase of business 17 - - - 1,080 14,462 - 568 3,961 20,071

Disposals - (11) - - - - (470) - (481)

Transfers to non-current assets 13,193 56,241 289 851 - 385 4,825 (75,784) -

Net revaluation increments/(decrements) (58,861) (34,923) 1,435 352 - 240 - - (91,757)

Depreciation charge for the year (24,344) (27,939) - - (1,022) (313) (2,280) - (55,898)

Carrying amount at end of financial year 479,916 566,605 59,803 14,894 13,440 9,151 9,548 87,823 1,241,180

Carrying amount of assets had they been recognised under the cost model

Balance at 30 June 2009 285,588 436,908 9,968 8,979 13,440 6,445

Reconciliation of the movement in property, plant and equipment during the financial year

ended 30 June 2008:

Note

Transmission lines at fair

value $’000

Transmission substations at fair value

$’000

Easements at fair value

$’000

Land at fair value

$’000

Buildings at fair value

$’000

Other plant &

equipment at cost $’000

Capital works in

progress at cost

$’000Total $’000

Carrying amount at beginning of financial year 461,770 522,711 58,478 12,026 8,296 6,502 40,669 1,110,452

Transfers between classes 8,168 (4,521) (3,647) - - - - -

Additions during the year - - - - - - 66,052 66,052

Finance costs capitalised 3 - - - - - - 1,003 1,003

Disposals - - - - - (294) - (294)

Transfers to non-current assets 19,285 33,935 945 76 244 3,526 (58,011) -

Net revaluation increments/(decrements) 82,648 47,560 2,303 509 314 - - 133,334

Depreciation charge for the year (21,943) (26,448) - - (15) (2,829) - (51,235)

Carrying amount at end of financial year 549,928 573,237 58,079 12,611 8,839 6,905 49,713 1,259,312

Carrying amount of assets had they been recognised under the cost model

Balance at 30 June 2008 283,790 397,090 9,679 7,048 6,247



10. Trade and other payables

2009 $’000

2008 $’000

Current

Trade payables 21,344 23,170

Accrued expenses 1,309 957

Refundable advances 11,761 -

Accrued interest 1,267 698

35,681 24,825

The average credit period for trade payables is 13 days.

11. BorrowingsAll loans are secured by assets of the company. Transend’s long-term debt matures in July 2014.

For more information about Transend’s exposure to risk in relation to Financial Instruments, see notes 1(i) and 19. FordetailsonTransend’sundrawnfinancingfacilities, see note 19.

Current

At amortised cost

Overnight borrowings - 13,677

Term borrowings - 395,000

- 408,677

Non-current

At amortised cost

Term borrowings 488,000 -

488,000 -

Total Borrowings 488,000 408,677

12. Provisions

Note

2009 $’000

2008 $’000

Current

Annual leave 3,390 2,516

Long service leave 2,475 1,810

Definedbenefitssuperannuation 18 1,035 4,613

Employee bonus 249 354

7,149 9,293

Non-current

Long service leave 1,322 1,004

Definedbenefitssuperannuation 18 34,116 18,492

35,438 19,496

42,587 28,789

13. Other liabilities

Current

Income received in advance 33,037 31,206

TUOS over recoveries (Residues) - 813

33,037 32,019

14. Issued capital

Balance at beginning of financialyear 66,549 336,549

Distributions to shareholders by way of reduction in equity - (270,000)

Four ordinary shares, fully paid 66,549 66,549

Noshareswereissuedduringthe2009(2008:Nil)financialyear. Fully paid ordinary shares have no par value and carry one vote per share and equal right to dividends. Transend does not have a limited amount of authorised capital and all shares currently issued are held in trust for the Crown in Right of the State of Tasmania.

In 2008, Shareholder’s equity was reduced as a result of a returntoshareholdersinDecember2007($50,000,000)andthe transfer of debt in June 2008 originating with Hydro Tasmania($220,000,000)treatedasareturntoshareholdersin accordance with AASB Interpretation 1038.



17. Acqusition of business

On 1 November 2008, Transend acquired all of the business operations of Hydro Tasmania Telecommunications Business (HTTB) for$15.8millionandnameditTransendCommunicationsServices(TCS).TCSoperatesthetelecommunicationsassetsthatprovide communications services to the Tasmanian Electricity Supply Industry and various external parties. In the eight months to30June2009,TCScontributed$0.7millionprofit.Iftheacqusitionhadoccurredon1July2008,managementestimatesthatthetotalexternalrevenueforTSCwouldhavebeenapproximately$6.2millionandthenetprofitofapproximately$1million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acqusition would have been the same if the acqusition occurred on 1 July 2008.

The following net assets were acquired:

Note

Pre-acqusition carrying amounts

$’000

Fair value adjustments

$’000

Fair value on acquisition

$’000

Property, plant and equipment 9 19,764 307 20,071

Other assets 140 - 140

Deferred tax equivalents assets 4 1,353 - 1,353

Other liabilities (611) - (611)

Provisions (4,508) - (4,508)

Total fair value at acquisition date 16,138 307 16,445

Consideration paid§ 15,781

Discount on acquisition 664

§ Includes due dilligence and other costs, directly attributable to the acqusition amounting to $0.4 m and stamp duty charges of $0.6 m payable on reporting date to the State Revenue Office.

Pre-acquisition carrying amounts were determined based upon applicable accounting standards immediately before the acqusition. The values of assets and liabilties on acquisition are their estimated fair values (see note 1 for methods used in determining fair values).

15. Reserves

2009 $’000

2008 $’000

Asset revaluation reserve


Revaluation increment/(decrement) (91,364) 132,024

Deferred tax liability arising on revaluations 27,510 (39,004)

Balance at end of financialyear 388,338 452,192

The revaluation reserve relates to revaluation increments and decrements arising from property, plant and equipment, measured at fair value in accordance with applicable Australian Accounting Standards. The reserve can be used to pay dividends only in limited circumstances.

16. Retained earnings

2009 $’000

2008 $’000


Netprofitfortheyear 7,232 18,727

Dividends paid during the year * (9,360) (15,000)

Balance at end of financialyear 70,497 72,625

* Relating to dividends declared and paid for the previous financial year. Refer to note 28 for details in respect to dividends for 2008–09 financial year.



Amounts included in the balance sheet

arising from Transend’s obligation in respect

of its defined benefit plan

Note2009 $’000

2008 $’000

Present value of definedbenefitobligations 46,510 28,992

Contributions tax liability * 3,317

Totaldefinedbenefitobligation 46,510 32,309

RBF contributory scheme assets (11,359) (9,204)

Deficit/(surplus) 35,151 23,105

Movements in net liabilities

Net liability/(asset) in balance sheet at end of prior year 23,105 22,230

Increase in liability through purchase of business 3,619 -

Employeebenefitsexpense recognised in income statement # 2(d) 9,266 1,785

Actual employer contributions (839) (910)

Net liability/(asset) 35,151 23,105

Current net liability 12 1,035 4,613

Non-current net liability 12 34,116 18,492

35,151 23,105

# Employee benefits expense is included in the operating and maintenance cost and superannuation actuarial gains/(losses) line items in the income statement.

18. Defined benefit superannuation plan

TheRetirementBenefitsFund(RBF)isadefinedbenefitfundwhichpayslumpsumandpensionbenefitstomembersupon retirement (which are calculated as a multiple of the member’sfinalaveragesalary).TheRBFhascontributorymembers, compulsory preserved members and pensioners.

The key assumptions that were used to determine these amounts are set out in a report prepared by the State’s Actuary(Mercer),dated8July2009.Comparativefiguresfor 2008 are based on the valuation report prepared by the previous State Actuary. The key assumptions were:

2009 %

2008 %

Discount rate (net of tax) 5.70 6.50

Salary rate 4.50 4.50

Expected return on plan assets (net of tax) 7.00 7.00

Inflation (pensions) 2.50 2.50

Tax rate for employer contributions * 14.36

Tax rate for discount rate * 2.25

The expected return on plan assets (net of tax) has been based on the expected long-term returns for each of the major asset classed in which the plan invests.

The plan assets comprise:

Australian equities 20 25

Overseas equities 13 20

Fixed interest securities 11 12

Property 31 38

Other 25 7

Note: Allocations may not sum to 100% due to rounding

* The previous State Actuary included an allowance for contributions tax liability, on the basis that it was required by the accounting standard AASB 119. The currect Actuary (Mercer) view this as not required due to; The employer share of the benefits is untaxed, so very little, if any, contributions tax is expected to be payable in respect of employer contributions; and the current version of AASB 119 does not make any mention of contributions tax. Accordingly, Mercer have made no allowance for contributions tax.



Defined benefit obligations inclusive of

contributions tax for disclosure purposes

2009 $’000

2008 $’000

Totaldefinedbenefitobligationatend of prior year 32,309 31,733

Increase in liability through purchase of business 3,619 -

Employer service costs plus operating costs 1,383 1,073

Interest costs 1,842 1,643

Actual participants’ contributions 524 386

Actual operating costs (admin and insurance) (103) (103)

Actualbenefitpaymentpluscontributions tax (1,306) (1,392)

Expecteddefinedbenefitobligation at year end 38,268 33,340

Actuarial (gain)/loss on liabilities 8,242 (1,031)

Actualtotaldefinedbenefitobligations at year end 46,510 32,309

The funded status:

Funded 11,359 9,843

Unfunded 35,151 22,466

Total 46,510 32,309

Profit and loss results

2009 $’000

2008 $’000

Employer service cost 1,383 909

Contribution tax expense * 164

Total employer service cost 1,383 1,073

Interest cost 1,842 1,643

Expected return on plan assets (643) (658)

Recognised actuarial (gains)/losses 6,684 (273)

Expense recognised 9,266 1,785

* The previous State Actuary included an allowance for contributions tax liability, on the basis that it was required by the accounting standard AASB 119. The currect Actuary (Mercer) view this as not required due to; The employer share of the benefits is untaxed, so very little, if any, contributions tax is expected to be payable in respect of employer contributions; and the current version of AASB 119 does not make any mention of contributions tax. Accordingly, Mercer have made no allowance for contributions tax.

Employeebenefitsexpenseisincludedintheoperatingand maintenance cost and superannuation actuarial gains / (losses) line items in the income statement.

Fair value of plan assets

Fair value of plan assets at end of prior year 9,204 9,503

Estimated employer contributions 839 910

Estimated participant contributions 524 386

Estimated operating costs (103) (103)

Estimatedbenefitspayments (1,306) (1,392)

Expected return on assets 643 658

Expected assets at year end 9,801 9,962

Actuarial gain/(loss) on assets 1,558 (758)

Fair value plan assets at year end 11,359 9,204

Estimated actual return on plan assets 643 (506)

18. Defined benefit superannuation plan (continued)



18. Defined benefit superannuation plan (continued)

History2009 $’000

2008 $’000

2007 $’000

2006 $’000

2005 $’000

2004 $’000

As determined under AASB 119

Definedbenefitobligationatfinancialyearend 46,510 32,309 31,733 26,098 24,868 19,182

Actualassetsatfinancialyearend (11,359) (9,204) (9,503) (7,881) (6,652) (5,337)

Deficit/(surplus) 35,151 23,105 22,230 18,217 18,216 13,845

Experience adjustment on liabilities (1,558) 1,686 974 1,397 828 -

Experience adjustment on assets 10,429 758 (1,087) (696) (681) -

19. Financial instruments

Financial risk management objectives

Exposures to market, interest rate and liquidity risks arise in the normal course of Transend’s business. Financial instruments and management policies are used by Transend to manage these risks in a manner that is consistent with the long-term cash flow stability and the interest rate management strategy of Transend.

Capital Management

Transend manages its capital to ensure that it is able to continue as a going concern. The capital structure consists of debt and equity. Transend’s shareholders have the capacity to compel equity transactions in accordance with the Electricity Companies Act 1997 (ECA 1997) and as a result Transend’s gearing ratio is ultimately at the discretion of the shareholders.Intheyearended30June2008,$220,000,000was returned to the shareholders under AASB interpretation 1038 as directed under ECA 1997. Until the point at which Transend is involved in the decision to make such an equity transfer, it is unable to incorporate the effects of similar transactions into its risk management processes. It is assumed that Transend will be consulted regarding future equity transfers to ensure that there is not a negative impact on working capital. Operating cash flows are used to maintain Transend’s assets, along with borrowings as detailed below under liquidity risk management.

Note2009 $’000

2008 $’000

Gearing ratio

Debt (borrowings) 11 488,000 408,677

Cash and cash equivalents 26(a) (23,775) (21,499)

Net debt 464,225 387,178

Equity (including all capital and reserves)

14, 15, 16 525,384 591,366

Net Debt to equity ratio 88% 65%

Derivatives

Derivative contracts are marked to market.

Risk Management

Transenddoesnotenterintofinancialinstrumentsforspeculative purposes. Other risks arising from Transend’s Financial Instruments are recognised and managed in the following ways:

Market Risk

Interest Rate Riskistheriskthatthevalueofafinancialinstrument will fluctuate as a result of changes in market interestrates.BorrowingsissuedatfixedratesexposeTransendto fair value interest rate risk, while borrowings issued at variable rates expose Transend to cash flow interest rate risk.

Due to its regulatory environment, Transend’s borrowings are projected under the Transend Revenue Determination (TRD). Revenue under each successive TRD incorporates a



19. Financial instruments (continued)

WACC (weighted average cost of capital) component, which is based on prevailing market interest rates. It follows that risk arising from increases (or decreases) in the fair value of borrowings is mitigated by future increase (or decrease) in revenue received by Transend.

Foreign Exchange (Forex) Risk is the risk that the value of afinancialinstrumentwillfluctuateasaresultofchangesinforeign currency exchange rates. Transend’s Forex risk arises from the purchase of goods and services from overseas parties.

Transendentersintoderivativefinancialinstrumentstomanage its exposure to Forex risk by entering into forward foreign exchange contracts.

Credit Risk

Credit risk represents the loss at reporting date able to be recognised due to the failure of counterparties to meet contractual obligations arising from the sale of Transend services.

Transend minimises counterparty risk by assessing and monitoring the creditworthiness of counterparties. Thecarryingamountoffinancialassetsrecordedinthefinancialstatements,netofanyallowancesforlosses,represents Transend’s maximum exposure to credit risk.

Where collateral (eg cash deposit) is held by Transend on behalf of counterparties, a corresponding liability is recognised. Due to the nature and volume of Transend’s regulated income from Aurora Energy Pty Ltd, Transend does not bear a material credit risk.

Liquidity Risk

Liquidity risk arises from the possibility of Transend being unable to settle a transaction on its due date. Cash flow forecasts for capital and operating expenditure are monitored to ensure that Transend has the capacity to settle transactions as and when required. Liquidity risk can also arise when a financialinstrumentrequiresexiting,butthereisnomarketto trade the instrument.

Tominimiseliquidityrisk,Transendexecutesallfinancialinstrument transactions with TASCORP. Working capital is maintained by way of overnight borrowings from TASCORP cappedat$15,000,000inaccordancewithTransend’sDebtManagement policy.

Forward foreign exchange contracts

Transend did not enter into any forward foreign exchange contracts in the year to 30 June 2009 and 2008.

Liquidity analysis

All current borrowings maturing on 15 June 2009 were rolledoverintoafiveyearfixedtermloanwithTASCORP.

Un-drawn borrowing facilities at balance date

2009 $’000

2008 $’000

Unsecured bank overdraft facility 1,000 1,000

Unsecured tape negotiation authority 100 100

Corporate MasterCard 1,085 934

TASCORP master loan facility 108,000 81,322

Transend’s TASCORP borrowings are capped at $596,000,000(2008;$490,000,000).Transend’sDebtManagement policy guides the allocation of this balance betweenfixed-termandovernightborrowings.




Interest rate exposures

Transend’sexposuretointerestrateriskonfinancialinstrumentsandcontractualmaturitythereofforfinancialliabilitiesandexpectedmaturityforfinancialassetsasat30June2009wasasfollows:

Note

Floating interest

0 to 1 year $’000

Fixed interest maturing inNon-interest

bearing $’000

Total $’000

0 to 1 year $’000

1 to 2 years $’000

2 to 5 years $’000

Financial assets

Cash and cash equivalents 26(a) 1.50% 1,332 - - - - 1,332

Other Deposits 26(a) 5.12% 22,443 - - - - 22,443

Trade and other receivables 5 n/a - - - - 24,970 24,970

Total financial assets 23,775 - - - 24,970 48,745

Financial liabilities

Trade and other payables 10 n/a - - - - 35,681 35,681

Borrowings 11 7.11% - - - 488,000 - 488,000

Total financial liabilities - - - 488,000 35,681 523,681

Net financial assets/(liabilities) 23,775 - - (488,000) (10,711) (474,936)

Interest rate exposures

Transend’sexposuretointerestrateriskonfinancialinstrumentsandcontractualmaturitythereofforfinancialliabilitiesandexpectedmaturityforfinancialassetsasat30June2008wasasfollows:

Note

Floating interest

0 to 1 year $’000

Fixed interest maturing in Non-interest

bearing $’000

Total $’000

0 to 1 year $’000

1 to 2 years $’000

Financial assets

Cash and cash equivalents 26(a) 5.75% 747 - - - 747

Other Deposits 26(a) 7.03% 20,752 - - - 20,752

Trade and other receivables 5 n/a - - - 22,943 22,943

Total financial assets 21,499 - - 22,943 44,442

Financial liabilities

Trade and other payables 10 n/a - - - 24,825 24,825

Borrowings 11 7.17% 13,677 395,000 - - 408,677

Total financial liabilities 13,677 395,000 - 24,825 433,502

Net financial assets/(liabilities) 7,822 (395,000) - (1,882) (389,060)



20. Leases

Operating leases as lessee

Non-cancellable operating lease rentals are payable as follows:

2009 $’000

2008 $’000

Less than one year 457 204

Betweenoneandfiveyears 633 204

1,090 408

Transendleasesawarehouse,twoofficebuildingsandlandunder an operating lease. The lease on the warehouse runs forafurtheroneyear.Theleasesontheofficebuildingsrunfor a period between two and three years and do not include contingent rental.

Duringthefinancialyearended30June2009,$554,000wasrecognised as an expense in the income statement in respect ofoperatingleases(2008:$250,000).

Operating leases as lessor

Transend leases out part of its business premises and Transmission Lines under operating leases. The future minimum lease payments under non-cancellable leases are as follows:

Less than one year 1,424 1,480

Betweenoneandfiveyears 5,699 5,922

Greaterthanfiveyears 33,875 23,404

40,998 30,806

Duringthefinancialyearended30June2009,$1,555,000was recognised as lease and rental income in the income statement(2008:$1,511,000).

Finance leases

Transendhasnofinanceleaseliabilities.


Interest rate sensitivity analysis

A100bpsmovementinofficialinterestrateswouldnot affecttheprofitofTransendatreportingdate(2008: Increase–$3,578,000ordecrease–$3,627,000)because allfinancialliabiltiesareeithernon-interestbearingorhavefixedinterestrate.

AsignificantportionofFinancialAssetsheldby Transend are either non-interest bearing or are deposits by customers. Transend is not entitled to the interest earned on customer deposits.

Forward start loans

Transend does not have any forward start loan agreements at reportingdate(2008:$220,000,000duewithin1year).

Estimation of fair values

Except as detailed in the following table, the directors considerthatthecarryingamountoffinancialassetsandfinancialliabilitiesrecordedinthefinancialstatementsapproximates their fair values. Where not otherwise disclosed under note 1(i), the major methods and assumptions used inestimatingthefairvaluesoffinancialinstrumentsareasfollows:

Borrowings

Fair value disclosed is the market value provided by Transend’s external borrowings provider TASCORP. The market value is determined as the discounted cash flows of the instruments using the applicable yield curve.

The fair values together with the carrying amounts shown in the balance sheet are as follows:

Carrying amount

2009 $’000

Fair value 2009 $’000

Carrying amount

2008 $’000

Fair value 2008 $’000

Borrowings 488,000 495,251 408,677 408,733



24. Key management personnel compensation

Transactions with key management

personnel

The key management personnel compensation included in operating and maintenance costs and superannuation actuarial gains/losses are as follows:

2009 $

2008 $

Short-termemployeebenefits 1,942,503 2,347,788 *

Post-employmentbenefits 143,479 123,750 *

Otherlong-termbenefits 36,024 23,031

Terminationbenefits 277,467 424,482

2,399,473 2,919,051

Apart from the details disclosed in this note, no director or executive has entered into a material contract with the companysincetheendofthepreviousfinancialyearandthere were no material contracts involving directors’ or executives’ interests subsisting at year end.

* The 2008 comparatives have been amended to reflect the reclassification of $282,108 from post-employment benefits to short-term employee benefits in order to correct its categorisation.

25. Related party disclosures

Mr Ray Brown had an interest as a Consultant in thelegalfirmPageSeager.The total amount billed to Transend by Page Seager duringthefinancialyearwas: 530 46,390

InthecurrentfinancialyearpaymentstoPageSeagerrelated to professional fees associated with acqusition of an easement. In 2008, Mr Brown was a partner in Page Seager, andthepaymentstothefirmrelatedtothedirectorshipheldby Mr Brown.

All transactions with Page Seager were conducted on an arm’s length basis in the normal course of business and on commercial terms and conditions.

At balance date no amounts remained unpaid to Page Seager.

21. Commitments for expenditure

2009 $’000

2008 $’000

Capital expenditure

commitments

Plant and equipment

Within one year 89,199 45,130

One year or later and no laterthanfiveyears 24,270 17,111

113,469 62,241

Operating

expenditure

commitments

Other expenses (excluding leases disclosed in note 20)

Within one year 2,326 6,350

One year or later and no laterthanfiveyears 2,204 8

4,530 6,358

Other operating expenditure commitments relate to procurement of maintenance and facilities related services.

22. Contingent liabilities and contingent assets

Transend is unaware of any claims, or potential claims to be made against counterparties or to be brought by counterparties.

23. Auditor’s remuneration

2009 $

2008 $

The fee for auditing thefinancialstatementsandregulatoryfinancialstatements required by the Australian Energy Regulator, and payable to the Auditor–General by Transend was: 95,093 90,270



26. Notes to the cash flow statement (continued)

(b) Reconciliation of profit for the year to net

cash flows from operating activities

2009 $’000

2008 $’000

Profitfortheyear 7,232 18,727

Depreciation and amortisation of non-current assets 58,552 51,495

Borrowing & payroll costs capitalised (8,967) (6,123)

(Gain)/loss on sale of property, plant and equipment (53) 63

(Gain)/loss on revaluation of non-current assets 393 (1,329)

Gain on acqusition of business (664) -

Changes in other assets/liabilties acquired on purchase of business (471) -

Increase/(decrease) in current tax equivalent liabilities (15,954) (11,245)

Increase/(decrease) in accrued interest payable 569 279

Increase/(decrease) in refundable advances 11,761 -

(Increase)/decrease in receivables (983) (4,687)

(Increase)/decrease in inventories - 64

Increase/(decrease) in creditors and accrued expenses (1,826) 5,242

Increase/(decrease) in provisions and employee benefits 15,907 3,410

Increase/(decrease) in other liabilities (3,969) 21,096

Changes in other assets/liabilities (1,887) (903)

Net cash provided by operating activities 59,640 76,089

25. Related party disclosures (continued)

Mr Brown is the chairman of Hazell Brothers Group Pty Ltd (HBGPL).Duringthefinancialyearended30June2009,Transend contracted HBGPL to construct a stores building. In addition, the company provided a number of civil works to Transend. Total amount billed by HBGPL was $5,210,081(2008:nil)ofwhich$258,947waspayable at the reporting date.

HBGPL sucessfully tendered to construct the stores and Mr Brown did not participate in either the tendering process or the selection process.

The terms and conditions of transactions between Transend and HBGPL were no more favorable than those available, or which might reasonably be expected to be available on similar transactions to non-director related entities on an arm’s length basis.

Mr Brown is a director of Kemp & Denning Ltd (K&D). Duringthefinancialyearended30June2009,Transenddidnot transact with K&D. In 2008, Transend purchased land from K&D on an arm’s length basis in the normal course of business and on commercial terms and conditions.

Apart from the details disclosed in this note, no director or executive has entered into a material contract with the companysincetheendofthepreviousfinancialyearandthere were no material contracts involving directors’ or executives’ interests subsisting at year end.

26. Notes to the cash flow statement

(a) Reconciliation of cash and cash

equivalents

For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and 11 am cash (investments), net of outstanding bank overdrafts. Cashandcashequivalentsattheendofthefinancialyear, as show in the cash flow statement is reconciled to the related items in the balance sheet as follows:

2009 $’000

2008 $’000

Cash and cash equivalents 1,332 747

Other deposits 22,443 20,752

23,775 21,499



26. Notes to the cash flow statement (continued)

(c) Non-cash financing activities

Therewerenonon-cashfinancingactivitiesduring2008–09. In2007–08financialyear,$220,000,000ofdebtwastransferred from Hydro Tasmania (see note 14), which was not reflected in the cash flow statement.

27. Economic dependency

AsignificantvolumeofTransend’srevenueisreceivedfromAurora Energy Pty Ltd as determined by Transend’s Revenue Determination and the Transmission Pricing section of the National Electricity Rules.

28. Subsequent events

Dividends

Subsequenttotheendofthefinancialyear,theboardrecommendedadividendof$3.6minrespecttothecurrentfinancialyear(2008:$9,360,000).Thisequatestoadividendof$0.9mpershare(2008:$2,340,000).Thefinancialeffectof this recommended dividend has not been brought to accountinthefinancialstatementsforthefinancialyearended 30 June 2009. No other dividends were paid or declared during the year to 30 June 2009.

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that Transend Networks Pty Ltd will be able to pay its debts as and when they become due and payable;

(b)inthedirectors’opinion,theattachedfinancialstatementsandnotestheretoareinaccordancewiththeCorporations Act 2001,includingcompliancewithaccountingstandardsandgivingatrueandfairviewofthefinancialpositionandperformance of Transend Networks Pty Ltd.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the directors

John Lord Chairman

Launceston 27 August 2009


directors’ declaration

financial report

Documents

Transcript of financial report