RESI OE PTY LTD

FUNCTIONAL RESPONSIBILITY AND STRUCTURE

Optima Energy Pty Ltd (Optima Energy) was incorporated under the Corporations Law in August 1998.  On the restructure of the State’s electricity businesses in October 1998 assets, liabilities and staff were transferred to the Company.  For financial statement purposes the transfers were deemed to have taken place from 1 July 1998.

Pursuant to a Ministerial Transfer Order dated 23 March 2000, the shares in Optima Energy Pty Ltd held by SA Generation Corporation were transferred to the Treasurer as a body corporate.

On 7 June 2000 Optima Energy Pty Ltd was renamed RESI OE Pty Ltd (RESI OE).

Optima Energy’s primary function was to generate, supply and sell electricity from the following generation facilities:

• Torrens Island Power Station A

• Torrens Island Power Station B

CHANGES TO AGENCY ORGANISATIONAL STRUCTURE FROM JULY 1999

On 4 May 2000 the South Australian Treasurer signed an agreement with TXU Electricity Ltd (TXU) for the disposal of the assets and liabilities of Optima Energy.  Although settlement of the transaction did not take place until 6 June 2000, the benefits and risks associated with the business were transferred as at the date of the agreement ie 4 May 2000.

To give effect to this agreement:

• Assets with a written down book value of $102.6 million, including prescribed electricity generation assets as defined by the Electricity Corporations (Restructuring and Disposal) Act 1999, were transferred to Generation Lessor Corporation.  This Corporation, a public corporation subsidiary of the Treasurer,  was established on the 29 July 1999 pursuant to the Public Corporations (Generator Lessor Corporation) Regulations 1999 (SA).  The prescribed assets were subsequently leased to TXU.

• Non-prescribed assets (net of liabilities) were sold to TXU.

SIGNIFICANT FEATURES

Total proceeds received from the disposal of non-prescribed assets was $7.5 million.

Accounting profit on disposal of Optima Energy’s non-prescribed assets was $9.7 million.

Operating Profit before income tax increased by $7.3 million to $17.5 million.

Dividends paid for the year were $43.2 million.

AUDIT MANDATE AND COVERAGE

Audit Authority

In accordance with section 31 of the Public Finance and Audit Act 1987 and subclause 13(3) of the Schedule to the Public Corporations Act 1993 the Auditor-General may at any time, and must in respect of each financial year, audit the accounts and financial statements of RESI OE Pty Ltd (formerly Optima Energy Pty Ltd).

Scope of Audit

The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial statements and internal control. This was particularly the case for a substantial part of the financial year when Optima Energy was still operating the electricity generation business.

During 1999-2000 specific areas of audit attention included:

• Review of controls and reporting mechanisms established to ensure compliance with the Electricity Trading Risk Management Framework.

• Testing of controls and a sample of transactions in relation to the completeness, accuracy, timeliness and recording of revenue and associated charges from electricity contracts and electricity pool sales.

• Testing of controls and a sample of transactions in relation to the authority, accuracy and recording of payments made for gas and oil purchases.

Audit Communications to Management

Following the completion of the audit an audit management report was forwarded to the Chief Executive Officer of Optima Energy, with copies provided to the:

• Chairman, Board of Directors Optima Energy;

• Manager, Internal Audit, Optima Energy.

A satisfactory response was received for all matters raised.

CONTROLS OPINION

As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of RESI OE Pty Ltd (formerly Optima Energy Pty Ltd) included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.

Audit formed the opinion that the controls exercised by RESI OE Pty Ltd (formerly Optima Energy Pty Ltd) in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with the law.

INTERPRETATION AND ANALYSIS OF FINANCIAL STATEMENTS

Transfer of Assets to Generation Lessor Corporation

During the year Ministerial Transfer Orders were made by the Treasurer pursuant to the Electricity Corporations (Restructuring and Disposal) Act 1999. These Orders transferred the following assets, at their book value, from Optima Energy to Generation Lessor Corporation.

Further commentary on the subsequent lease of the prescribed assets to TXU is included later in this Report under the heading Generation Lessor Corporation.

Disposal of Non-Prescribed Assets and Liabilities

During the year assets (net of liabilities) of Optima Energy were sold.  The assets (net of liabilities) sold reflected their values as at 4 May 2000, and were as follows:

Abridged Financial Statements

The results of operations for the year ended 30 June 2000 for RESI OE (formerly Optima Energy) are set out below.  The results reflect both the period during which Optima Energy generated, supplied and sold electricity, together with the impact of the transfer or sale of assets and liabilities.

Profit and Loss Statement for the year ended 30 June 2000

Balance Sheet as at 30 June 2000

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