THE CITIPOWER AND POWERCOR NETWORKS ARE MANAGED BY A JOINT MANAGEMENT TEAM AND WORKFORCE. THE COMBINED MANAGEMENT HAS FACILITATED THE REALISATION OF CROSS-BUSINESS SYNERGIES AND INTEGRATION BENEFITS, AND THE CONTINUAL IMPROVEMENT OF BUSINESS DELIVERY SYSTEMS AND PROCESSES. THEIR STRATEGY IS TO MAINTAIN A FOCUS ON THE CORE BUSINESS OF ELECTRICITY DISTRIBUTION, TO TARGET NETWORK INVESTMENTS SO AS TO CONSISTENTLY OUTPERFORM REGULATORY TARGETS, AND TO ACHIEVE PROFITABLE GROWTH IN UNREGULATED MARKETS.

CitiPower has succeeded in maintaining its excellent reputation among customers and regulators in 2008. Along with its sister company Powercor, it was recognised for its strong performances across a range of measures in the comparative report on the State's five electricity distributors released by the Essential Services Commission (ESC) in October.

CitiPower's total distribution revenue was $206.5 million, excluding passthrough transmission revenue. Sales volume rose to 6,099 GWh from 6,079 GWh for 2007. Of this 0.4% increase, approximately 0.5% was due to favourable weather conditions and approximately -0.1% was due to a slight decrease in underlying sales.

Customer numbers across the CitiPower network continued to increase during the year, to 301,771 at the end of 2008 from 299,342 the previous year, in turn leading to growth in overall consumption.

99.99%

NETWORK
AVAILABILITY RATING

Powercor again bettered the targets set by Victoria's energy regulator, the ESC for network reliability in 2008. The network implemented an escalation and communications plan during severe State-wide storms in April 2008, which led to positive comments from a government enquiry into the management of key services during widespread emergencies.

For the second successive year, Powercor was the only Victorian electricity business to achieve a complete "green light" health rating from the ESC. The rating, which encompasses a number of performance measures, was released in conjunction with the Commission's comparative performance report for 2007. The report revealed a slight increase in the number and duration of power outages across the State due to factors beyond the company's control such as bushfires and the effects of major storms.

In January and February 2009, the CitiPower and Powercor networks were forced to implement load shedding due to factors beyond their control associated with extreme high temperatures. Like ETSA Utilities in South Australia, they also continued to perform extremely well thanks to the skill and commitment of their employees.

In February 2009 Victoria suffered the worst bushfires in Australia's history. This occurred in the midst of extreme high temperature and wind conditions. While CitiPower and Powercor's networks were not significantly affected by the fires, the asset businesses dispatched maintenance crews to assist with the repair of electricity infrastructure in neighbouring areas.

Total distribution revenue for the Powercor network was $409.8 million, excluding pass-through transmission revenue. Electricity sales volume for Powercor was 10,510 GWh up from 10,299 GWh in 2007. This represents an increase of 2.1% during the year of which approximately 0.8% was due to favourable weather conditions and approximately 1.6% was due to an increase in underlying sales.

Customer numbers across the Powercor network increased during the year to 683,610 from 673,496 at the end of 2007. The network reached a new record peak demand in March of 2,207.0MW.

TOTAL REVENUE 4.4% ABOVE 2007

EBITDA 2.3% ABOVE 2007

99.97% NETWORK AVAILABILITY RATING

CitiPower and its sister company Powercor celebrated in October 2008 the milestone of one million connected customers, linking the occasion with International Customer Service Week. Internal events and external promotion activities affirmed the business's commitment to the provision of customer service and cemented their reputation as a strong and stable essential service provider.

CitiPower and Powercor were successful in winning five awards at the 2008 Australian Service Excellence Awards conducted by the Customer Service Institute of Australia (CSIA). The categories won included Large Business (State Award), Customer Charter (State and National awards) and Customer Service Executive of the Year. These awards recognise our significant and sustained Powerful Customer Service campaigns undertaken over a number of years. CitiPower and Powercor also participate in the CSIA's annual accreditation program for compliance with the International Customer Service Standard.

CitiPower and Powercor's monthly mass market customer satisfaction surveys continue to illustrate strong performance, with a 2008 overall result of 81% satisfaction rating exceeding the target of 80%. CitiPower and Powercor's retailer satisfaction result came in at 89% against a target of 80% whilst the Major Customer result was 86% against a target of 78%.The success this year has been attributed to a series of focused campaigns that have developed improvement plans to raise satisfaction levels for each customer segment.

The Energy and Water Ombudsman (Victoria) in its 2007/2008 annual report highlighted that CitiPower and Powercor were the only distribution businesses to achieve a reduction in complaints received compared with the previous year.

In addition to its regulated distribution revenues, Powercor derives additional non-distribution and non-regulated revenue from other sources, including the provision of public lighting, meter data, connection services, and of back office and engineering and construction services to external clients.

The Powercor Network Services business unit enjoyed steady returns in the unregulated market in 2008, consolidating on a recent period of rapid growth. Its entry in to the Queensland market has also produced some revenue stream potential.