Manager Logistics Manager Procurement Category Managers Category Managers Logistics Managers Procurement Officers Inventory Officers Logistics Officers Asset Management Div Networks Div Our team is growing to meet the challenges and opportunities ahead We are focused on continuous improvement in our processes and capability We value our partnerships with suppliers and look forward to working together 36

1. 18 June
2015
Networks NSW
Supplier Forum 2015
Industry Partners Briefing

2. Networks NSW2
Safety Message – Evacuation Procedure
 If the “Whoop Whoop” alarm siren sounds, everyone is to evacuate the
building.
 DO NOT use the lifts.
 Proceed to the clearly marked green exit signs, located at:
 two side passageways of this room OR
 back of this room (then proceed downstairs)
 These lead to the emergency exits from the building:
1. main entry from which you came in (Reservoir St)
2. the opposite end (Wrights Lane)
3. if you are in the tea & coffee area, the double doors near the toilets
will take you out to Mary St

3. Networks NSW
Networks NSW Industry Partners Briefing
 Objectives of this briefing
 Highlight recent achievements and ongoing reforms of Networks NSW
including the Procurement & Logistics Improvement Program
 Explain the future of NNSW and the Joint Venture
 Introduce key personnel from Networks NSW, Ausgrid, Endeavour Energy
and Essential Energy
 Provide a networking forum and build relationships
 Gather feedback from NNSW key suppliers
3

4. Networks NSW
Agenda
Networks NSW Overview John Hardwick1
4
Future of NNSW & Joint Venture Daniel Lucas2
NNSW Procurement & Logistics Improvement Program Kate Gunton3
Ausgrid Procurement Trevor Armstrong4
Endeavour Energy Procurement Rod Howard5
Essential Energy Procurement Gary Humphreys6
Open Forum All/Panel7
Networking and Light Refreshments All8

5. 1
Networks NSW Overview
Networks NSW
5

6. Networks NSW6
Networks NSW Overview – Strategic Objectives
To be of service to our communities by efficiently distributing
electricity to our customers in a way that is safe, reliable and
sustainable.
 Safety – Improve safety performance for employees, contractors
and the community
 Reliability – Maintain the reliability, security and sustainability of
the network
 Improvement – Deliver forecast improvement in performance,
productivity and efficiency

7. Networks NSW7
Network NSW
operations
Networks NSW Operations
7

8. Networks NSW
Networks NSW Overview – Statement of Business Ethics
8

9. Networks NSW
STANDING COUNCIL
ON ENERGY AND RESOURCES
AUSTRALIAN
COMPETITION &
CONSUMER
COMMISSION
AUSTRALIAN
ENERGY
REGULATOR
AUSTRALIAN ENERGY
MARKET COMMISSION
AUSTRALIAN
ENERGY MARKET
OPERATOR
“The AEMC is an independent national body with two roles, as
statutory rule maker for the energy market and expert advisor for
federal, state and territory governments.”
Networks NSW Overview – Regulatory Framework
9

10. Networks NSW
Networks NSW Overview – Regulatory Determination Background
 The Australian Energy Regulator (AER) is the independent
national regulator for electricity networks in Australia (except
WA and NT)
 The AER, every five years, issues a regulatory determination for
each network using a four step process:
 Initial Proposal from the network – May 2014;
 A Draft Determination by the AER – November 2014;
 A Revised Proposal by the network – January 2015;
 A Final Determination by the AER – April 2015.
 The AER’s Final Determination is subject to legal appeals.
 A legal appeal was lodged on 21 May 2015.
10

11. Networks NSW
AER Final Decision – Dashboard compared to DNSP Revised Proposals
Ausgrid Endeavour
Energy
Essential
Energy
Network Revenue (33%) (28%) (31%)
Operating Expenditure (25.6%) (16.9%) (30%)
Capital Expenditure (14.8%) No change (6.8%)
Customer Benefits FY16 reduction in average electricity bills
Residential (8%) (5.3%) (11.9%)
Small Business (8%) (5.3%) (11.9%)

12. Networks NSW
AER Final Determination – AER criticisms of NSW networks
 Too many employees.
 Restrictive enterprise agreements.
 Insufficient outsourcing
(eg: AER propose Local Service Agents for Essential Energy small depots).
 Lack of forced redundancy
12

13. Networks NSW
AER Final Determination – NNSW issues of concern
 Limited evidence of AER safety risk assessment.
 Reliability and robustness of benchmarking.
 Retrospective revenue cuts of $870m for 2014/15 financial year.
 Cuts to operating expenditure.
 Disproportionate cuts to operating expenditure at Essential
Energy.
 Major storm response capability – a transitional issue.
 Skills retention.
13

14. Networks NSW
AER Final Determination – Changes in capital programs
Changes in capital programs 2009/14 period v’s
2014/19 period ($2013/14):
4.40
3.13
9.00
2.45
1.60
3.32
-44%
-49%
-63%
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
Essential Endeavour Ausgrid
CAPEX($b2013/14,real)
CAPEX COMPARISONS
2009/14 AER approved
2014/19 AER approved
% reduction
14
Actual Expenditure
7.0
2.8
3.5

15. Networks NSW
AER Final Determination – Changes in operating programs
Changes in operating programs 2009/14 period v’s
2014/19 period ($2013/14):
2.34
1.73
3.00
1.74
1.29
2.10
-26%
-25%
-30%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%$-
$1
$1
$2
$2
$3
$3
$4
Essential Endeavour Ausgrid
OPEX($b2013/14,real)
OPEX COMPARISONS
2009/14 AER approved
2014/19 AER approved
% reduction
15
Actual Expenditure
2.9
1.5
2.3

16. 2
Future of NNSW and Joint Venture
Networks NSW
16

17. Networks NSW
De-merging network governance and NNSW organisation structures
 On 3 June 2015 the NSW Legislative Council passed a bill to
allow transactions to transfer some of the State’s electricity
network assets to the private sector.
 The NSW Government will deliver on the policy it took to the
recent election to lease 49% of the State’s electricity networks
and use the proceeds to build new infrastructure.
 Our working assumption on the transaction sequence is
Transgrid (100%), Ausgrid and then Endeavour Energy (50.4%)
 Essential Energy will become a stand-alone State Owned
Corporation.
17

18. Networks NSW
Ausgrid &
Endeavour Energy
50.4%
Networks NSW Operations
18
Transgrid
100%

19. Networks NSW
COO COO COO
Group
Finance
Network
Strategy
People and
Services
DCEO DCEO DCEO
Chief
Engineer
Network
Development
Network
Operations
HSE
People and
Services
Finance
and
Compliance
ICT
Chief
Engineer
Network
Development
Network
Operations
HSE
People and
Services
Finance
and
Compliance
ICT
Chief
Engineer
Network
Development
Network
Operations
HSE
People and
Services
Finance
and
Compliance
ICT
CEO
Group
Control
Regulation
Strategy
and
Performance
Group PMO
Asset
Strategy
Asset
Programs
Technology
&
Innovation
P/F/L and
Procurement
Human
Resources
Technical
Training
Corp
Comms
Audit
GovernanceHSE
Chief
Engineer
Network
Development
Network
Operations
HSE
People and
Services
Finance and
Compliance
ICT
Chief
Engineer
Network
Development
Network
Operations
HSE
People and
Services
Finance and
Compliance
ICT
Chief
Engineer
Network
Development
Network
Operations
HSE
People and
Services
Finance and
Compliance
ICT
Current Future
Board
Secretary
Transforma
tion
New Executive (Level 2)
19
CEO
Transition to stand-alone organisation structures

20. Networks NSW
De-merging network governance and NNSW organisation structures
 Joint Venture procurement
 All current Joint Venture (JV) procurement projects will be completed with an
aim to finalise them by end of 2015
 Contracts established under the JV have been established with the individual
network businesses and will remain in place when stand-alone businesses
are re-established
 Transition work is underway to ensure that all suppliers with contracts
established via the JV will be notified of the relevant contacts in each
business
20

21. 3
NNSW Procurement & Logistics Improvement
Program
Networks NSW
21

22. Networks NSW
Joint Venture Procurement Program
Completed JV projects
 Aerial Patrol & Analysis
 Audit Services
 Legal Services
 Conduits
 Contract Labour Hire
 Security Services
 Overhead Line Fittings
 Timber Poles
 Concrete Poles
 Cables
 Power Transformers
 Traffic Management
Services
In market / evaluation
 End-User Computing
Hardware
 Street Lamps &
Luminaires
 Telecommunication
Carriage Services
 Electricity Meters
 Electricity Supply
 Vegetation Management
Services
22
Coming to completion
 Multi-Function Print
Devices
 End-User Computing
Services
 Metering Services
 Fleet Services

23. Networks NSW
Common Procurement Framework established
A common procurement framework has been established across the
three network businesses with key principles of:
Commercially
Focused
Governance
Focused
Adaptable
Integrated
Practical
Change
Aware
Drives value for money and achieves sustainable benefits
Embeds effective controls and approvals to manage risk, probity
and compliance
Guides network business Sourcing activities of varying complexity
and value
Integrates seamlessly with interdependent business processes
Is efficient and easy to use
Considers change management implications and benefits of
proposed amendments
23

24. Networks NSW
Contract Delivery – HSE Whole of Life
• Safety is our priority for workers, members of the public, and industry partners
• A consistent approach to safety is being adopted for the evaluation of our
contractor and service partners, and forms the basis for the award of contracts
• This approach includes an increased focus on key safety risks during the
tender evaluation process, awarding of contracts, and operational monitoring
(including audit and compliance)
• The purpose is to work with our industry partners to establish a demonstrated
capability / capacity in the identification, assessment, and effective mitigation of
the safety risks and hazards associated with working in and around our
networks
• Will provide a better and more informed outcome for all stakeholders involved

25. Networks NSW
Approved Materials List (AML) Policy
 A common policy across Networks NSW has been developed for
the Approved Materials List
 Purpose
 To control materials & equipment used on the electricity distribution network
in order to safely and reliably manage, maintain and operate the network in
accordance with the Electricity Supply Act
 Scope
 Sets out the process for the approval of materials and equipment that are
permitted for use on the network by Accredited Service Providers (ASP) and
NSW Network Service Providers (NSP)
 The policy and AML will be available on each network business
website
25

26. Networks NSW
Approved Materials List (AML) Policy
 How it works
 The tender process will inform the AML
 Product approval review periods will be aligned to the contract lifecycle
 Removal or addition of suppliers to the AML in intervening periods will be
based on safety or operational needs of the businesses
 Applications outside of a tender process will be subject to an application or
processing fee
 The number of suppliers added to the AML will be based on the risk
assessment (criticality of items) at a category level and at the discretion of
the network businesses
 A suitable transition period will be provided for existing suppliers who are not
awarded a contract
26

27. 4
Ausgrid Procurement
Networks NSW
27

28. Networks NSW
Australia’s largest electricity network
• 1.6 million customers - households
and businesses
• Our network covers 22,275 sq km
– 30,000 substations
– 48,000km of power lines and
– 500,000 power poles
• Building our network today would
cost an estimated $38 billion
• Owned by the NSW Government
28

29. Networks NSW29
Future reforms and challenges
Commercial in Confidence
Safety &
Wellbeing
Efficiency Customer
focus
AER Enterprise
Agreement
Long-term
lease
Workforce
planning

30. Procurement
Logistics
1 Main warehouse
7 Satellite stores
12 Pole yards
22 Regional depots
11,210 SKUs and
spares
$98m Inventory
50 Logistics & Print
shop staff
Suppliers
2,534 Suppliers
36 Suppliers: 80%
spend
1,206 Active contracts
$4.7bn Total contract
value
1,200 Contracts
General
$780m Spend
4 Portfolios
280 Categories
200,000 Invoices
30,000 Purchase
Orders
58 Procurement &
Inventory control staff

31. Networks NSW31
Achievements - Ausgrid
Fleet savings of
$41.4 millionVehicle total reduced by 1,026
Includes tolls,
parking, energy costs
This year’s discretionary
spend saving of $1.5
million
Savings of $4 billion over
the past 3 years
Reform & management-led savings
Labour savings of
$150 million per year
1,250 FTE reduction, incl.
labour hire

32. Networks NSW32
Priority actions and plans
Top operating expenditures
Vegetation management $40 million p.a.
Telecommunications services $14 million p.a.
Pole inspection $ 9 million p.a.
Top capital expenditures
Underground cable laying $100-125 million p.a. (2015-2017)
$45-50M (2018-2019) per year
Pole Replacement $55-60 million p.a. = 5,000 poles per year
Civil construction $40 million p.a.
(depots & substations) 10 to 15 major sites over the next 5 years

33. Networks NSW33
Procurement and Logistics – future initiatives
To Date Jul-Dec 2015 Jan-Jun 2016 Jul-Dec 2016 Jan 2017 +
► JV sourcing
► Analytics &
spend cube
► Assessing
contracts
► New team
► Quick wins
► Pipeline
► Category
planning
► Category
initiatives
► Supplier tiering
► Supplier
development
and
scorecarding
► Spend under
management
► Driving
contracts &
relationships
► Framework
development
► Team skill
evaluation
► Capability &
upskilling
► Policy training
► Standard
contracts
► Standard
procurement
across Ausgrid
► Consistent
approach to
suppliers
► Maturing
contracting
► Integrated
supplier
engagement
► Contract
management
continuous
improvement
► Regional focus
► Gap analysis ► Tendering
► Implementat’n
► Purchasing
system
► Sourcing
system
► Tighter spend
& contract
compliance
► Contract mgt
system
► Supplier portal
► E-sourcing use
► Inventory
baseline
► Stock
reduction
► Depot
optimisation
► Network
review
► Site
rationalisation
Category &
Supplier
Strategy
Procurement
Framework
IT systems
Logistics

34. Networks NSW34
Procurement and Logistics – pipeline of major opportunities
►At least $260 million of opportunities in the next 12 months, more to be identified by end
of the year
The opportunity
The environment
►AER environment has us even more focused on savings and value
The team
►Procurement & Logistics team capability will be significantly upgraded
►Stimulate competition with more open market tendering and multi-stage negotiations
►Category planning, savings targets and functional specifications in our approach
Your role as our suppliers
► Present quick wins, savings, innovation, opportunities to remove time and cost in our
dealings with you
► Play an active part in our supplier development journey

35. Networks NSW35
Procurement and Logistics team
Procurement and Logistics is managed across 3 divisions within Ausgrid
Guy Ferrier
Manager
Procurement & Logistics
People & Services Div
Damon Taylor
Manager
Inventory &
Materials
Simon Bell
Manager
Indirect Goods &
Services
Paul Hartley
Manager
Network Services
Giles Curtin
Manager
Network
Equipment
David Stanfield
Manager
PMO &
Governance
Martin O’Brien
Manager
Warehouse &
Distribution
George Kowalski
Project Manager
Network Materials
. .. . . .
.
Ross Matheson
Manager
ICT Vendor &
Sourcing
Peter Eedy
Manager
Portfolio Management
Office
Network Developm’t Div
Sharron Kennedy
GM
ICT
ICT Div

36. 5
Endeavour Energy Procurement
Networks NSW
36

37. Networks NSW
Network Business Overview
Endeavour is now a network business serving
940,028 customers or 2.2 million people
Supply area covers Sydney’s Greater West, the
Illawarra and South Coast, the Blue Mountains and
the Southern Highlands
We have 2,470 staff over 19 locations
Network length :
Overhead lines = 23,412km
Underground cables = 11,617km
Number of poles :
Endeavour owned = 308,252
Average regulated revenue = $826 million
Regulated asset base = $5.6 billion
37

38. Networks NSW
INHERENT FEATURES OF ENDEAVOUR ENERGY’S FRANCHISE AREA
• Serve some of Australia’s fastest growing communities
• Land use shifting from rural and semi-rural to urban and light commercial,
driving increasing customer expectations of reliability – albeit at a slower rate
than in the past
• Peak temperatures typically higher and more sustained than those of coastal
regions and experienced more consistently
Network Business Overview
38

39. Networks NSW
Network Reform Program – Achievements and Future Challenges
39

40. Networks NSW40
Future reforms and challenges
Safety &
Wellbeing
Efficiency Customer
focus
AER Enterprise
Agreement
Long-term
lease
Workforce
planning

41. Networks NSW
Priority actions and plans
41

42. Networks NSW
PROCUREMENT
• Spend $447m Invoices 55334
• Portfolios 4 Purchase orders 13105
• Categories 49
General
• Suppliers 1637
• Suppliers: 80% spend 110
• Active contracts 305
• Total contract value $2.7b
Suppliers
• Main warehouse 1
• Pole yards 1
• Regional depots 17
• SKUs and spares 3580
• Inventory $22m
Logistics
42

43. Networks NSW
ACHIEVEMENTS
Procurement savings of
$80 million over past 3
years
Improved cycle times for
market engagements
Improvements in
category knowledge and
supplier management
43

44. Networks NSW44
Procurement and Logistics – future initiatives
To Date 2016 2017
► JV sourcing
► Analytics & spend cube
► Supplier tiering
► Revised Supplier
Management program
► Category planning
► Increased industry
engagement through RFI
and alternate bids
► Improve specification
► Driving contracts &
relationships
► Framework implemented ► Capability & upskilling
► Standard contracts
► New contract and supplier
prequalification tool
► Maturing contracting
► Integrated supplier
engagement
► Inventory baseline
► Testing of Demand
Planning initiatives
► Standardisation of process
► Stock reduction
► Forecasting provided to
suppliers
Category &
Supplier
Strategy
Procurement
Framework
Logistics

45. Networks NSW45
Procurement and Logistics – pipeline of major opportunities
►At least $108 million of opportunities in the next 12 months, more to be identified by end
of the year
The opportunity
The environment
►AER environment has us even more focused on savings and value
The team
►Procurement & Logistics team capability will continued to be enhanced
►Stimulate industry engagement through RFI and encourage alternate bids
►Category planning, savings targets and functional specifications in our approach
►Testing of most effective engagement models
►Demand forecasting improvements
Your role as our suppliers
► Innovation, opportunities to remove time and cost in our dealings with you
► Play an active part in our supplier development journey

46. Networks NSW
PROCUREMENT AND LOGISTICS TEAM
ACTING MANAGER,
PROCUREMENT &
LOGISTICS
GREG ROSE
PMO &
GOVERNANCE
MANAGER
NICOLE CROAK
LEAD PORTFOLIO
MANAGER
JUSTIN ROBERTS
INVENTORY
MATERIAL &
PURCHASING
MANAGER
DEBBY SOUTH
WAREHOUSE &
DISTIBUTION
MANAGER
JUSTIN JENSEN
Rizwan Ullah
Portfolio Manager
Network Services
Antonela Ilic
Portfolio Manager
Regional Services
John Mifflin
Portfolio Manager
Civil &
Construction
Luis Da Costa
Portfolio Manager
Indirects
46

47. 6
Essential Energy Procurement
Networks NSW
47

48. Networks NSW48
Essential Energy is…
Australia’s largest electricity distribution network:
• 844,244 customers
• 737,000km² serviceable area
• 191,107kms of powerlines
• 1,377,483 powerpoles
• 1,447 feeders
• 3,950 employees
• $6.8b regulated asset base
Vast geographic area, large number of assets supported by a
relatively small number of customers

49. Networks NSW
Network Reform Program – Essential Energy Achievements
49
$1.7Bcost savings
(2012-2016 forecast)
FTE
Reductions
806
Fleet
Reduced by
1004
vehicles

50. Networks NSW
AER Determination – Essential Energy’s Future Challenges
CAPEX
Reduced by
7%
from
Revised Proposal to
$2.36B
$313
in 2015/16
NETWORK
CHARGES
2015-16
reduction of approx.
11.9%
REVENUE
Reduced by
25%
from
Revised Proposal to
$5.12B
OPEX
Reduced by
30%
from
Revised Proposal to
$1.63B
WACC
Reduced by
2.11%
from Revised Proposal.
Creates 2014-19 shortfall
of
$865.6M
50

51. Networks NSW51
Future reforms and challenges
Commercial in Confidence
Safety &
Wellbeing
Efficiency Customer
focus
AER Enterprise
Agreement
Blended
Delivery
Workforce
planning

52. Networks NSW
Current initiatives
• Supplier Prequalification scheme (commencing with construction)
• Team capability increasing through new operating model
Future initiatives
• Building Supplier Relationships
• Criteria based supplier tiering (criticality / spend / dependency)
• Articulates the relationship required with our suppliers
• Enhancing supplier interaction and communications:
• Visibility of upcoming demand pipeline on our website
• Investigate e-Supplier portal
• Implementation of GC21 and MW21 contract frameworks ( within 6 months)
Essential Energy – Procurement and Logistics initiatives
52

53. Networks NSW
Slide 6 – Pipeline of major opportunities
Major Planned Market Engagements will soon be available at our website
www.essentialenergy.com.au
Portfolio Requirement
Network Equipment
& Services
• Overhead Mains Accessories (Periodic Supply)
Eg: Surge Arrestors / Fasteners
Construction &
Regional Services
• Overhead Transmission Construction Services various locations
(5 separate projects)
• Transmission Substation Construction Services various locations
(2 separate projects)
• Visual Aerial Patrols
• Asset inspection services
Indirects • Supply and Install signs & buoys (Navigable Waterways)
• Document storage and shredding
Market Testing • Ongoing Organisational Program
53

54. Networks NSW
Slide 7 – Procurement and Logistics Team
Manager, Procurement &
Logistics
TONY LEAHY
PMO & Governance
Manager
ALICE PATERSON
Lead Portfolio Manager
OWEN EGGLESTONE
Warehouse &
Distribution Manager
PETER FREW
Inventory, Materials and
Purchasing Manager
RACHEL HARWOOD
(Acting)
• Planning and reporting
• Governance and controls
• Data intelligence and
analysis
• Improvement Program
• Tender demand
management
• Supplier relationship
management
• Commercial contract
management
• Category planning
• Distribution management
• Warehouse operations
• Regional stores
operations
• Inventory management
• Ordering and fulfilment
• External sales
Portfolio Managers
KARENE SHEPHERD
JANE HACKETT
54

55. 7
Open Forum
Networks NSW
55

56. Networks NSW56
Thankyou
 A survey will be sent to you to gather feedback
 Please join us for light refreshments and an opportunity
to meet the teams