DUET GROUP - AnnualReports.com · DUET held its annual investor ... investment criteria, but two,...

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Highlights

2 November 2005The WA ERA released theapproved revised accessarrangement for the DBNGP.—

4 November 2005DUET held its annual investorforum and general meeting.—

24 November 2005DBP announced thecommencement of planningfor the Stage 5 expansion.—

16 December 2005UED senior debt refinancing wasfinalised.—

19 December 2005DUET declared its interimdistribution for the six monthsending 31 December 2005of 11.75 cents.—

21 February 2006DUET released its interim resultsincluding an announcement ofthe completion of the Stage 4ADBP expansion.—

12 May 2006DBP debt refinancing wascompleted.—

23 May 2006DUET released an update of theDBP Stage 5 expansion project.—

20 June 2006DUET announced its distributionfor the full year to 30 June 2006.—

6 July 2006DUET announced its proposedUS$300 million acquisition of a29% stake in Duquesne LightHoldings, an electricity utility inPittsburgh, USA.—

11 August 2006DUET acquired an initial7.7% shareholding inDuquesne Light Holdings.—

30 August 2006DUET completed its restructure and triple staple.—

5 August 2005Multinet was selected by theVictorian State Governmentto deliver natural gas to theSouth Gippsland region.—

10 August 2005The ERA approved the AlintaGasNetworks access arrangement.—

29 August 2005DUET announced its financialresults for the 12 months to30 June 2005. Distributionsof 22 cents for the full year wereannounced, ahead of the IPOPDS forecast.—

26 September 2005DUET released its annualreport for the period 1 July 2004to 30 June 2005.—

19 October 2005The Victorian ESC released itsfinal decision on the ElectricityPrice Distribution Review (EPDR)for UED.—

27 October 2005DUET announced increaseddistribution guidance to 23.5 cents. —

Cover: Dampier Bunbury Pipeline,compressor station no. 2This page: United Energy Distribution, electricity conductors

Contents

About DUET 2Chairman’s Letter 4Our Assets 8Investment Objectives and Strategy 10CEO’s Report 12Dampier Bunbury Pipeline 14Multinet 18United Energy Distribution 22AlintaGas Networks 26Environmental and Social Responsibility Management 28DUET Management and Structure 30Directors’ Profiles 34Corporate Governance Statement 38Guide to the Impact of AIFRS 48Concise Financial Report 49Remuneration Report 84Security Holder Information 85Glossary 86Directory 88

1

ProfileThe DUET Group (DUET)is a listed investmentfund managed jointlyby AMP Capital InvestorsLimited and MacquarieBank Limited. DUETactively manages itsinvestments in a number of energy utility companies.

StrategyDUET is an active investor.It invests in diversified energyutility assets with strongcompetitive positions andwhere it can achieve asignificant shareholding.This enables it to be activelyinvolved in the business bybeing able to influence keystrategic, operational andcommercial decisions.

About DUET

Dampier Bunbury Pipeline, compressor station no. 2

Key facts about DUET– Listed on the ASX in August 2004 – Market capitalisation

at 30 June 2006 – $1.17 billion– Number of security holders

at 30 June 2006 – 15,534– Total assets at 30 June 2006 –

$6.3 billion.

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Our focus remainsfirmly on regulatedand contracted utilitieswith secure revenuecharacteristics andon developing arobust asset portfolio.

Chairman’s Letter


DUET has met its financial,strategic and distributiontargetsThe last 12 months have seenDUET consolidate its positionfollowing its initial public offeringin August 2004 and thesubsequent acquisition of itsinterest in the Dampier toBunbury Pipeline (DBP). DUEThas worked closely with ourasset management teams todeliver the earnings and cashflow targets and the strategicobjectives set in 2005.

As a result, I am pleased toadvise that DUET announced adistribution for the six monthsended 30 June 2006 of 11.75 cents per stapled security,which was paid in August 2006.Including the interim distributionpaid in February 2006, DUET’sdistributions for the year ended30 June 2006 totalled 23.5 centsper stapled security, up from22 cents in 2005.

Our focus remains firmlyon regulated and contractedutilities with secure revenuecharacteristics and ondeveloping a robust assetportfolioThe energy utility sector ischaracterised by assets whichgenerate strong revenuestreams that can deliver stableand predictable operating cashflows. Portfolio diversificationacross a number of energysources and utility sectors,regional markets and regulatoryjurisdictions, and hedging of thefund’s interest rate exposuresfurther secure the performanceand the flow of distributions toDUET security holders.

The past year has seen the listingof a number of energy utilitycompanies on the AustralianStock Exchange. We believe thatDUET’s portfolio of blue chipenergy infrastructure assets onboth the east and west coasts,comprising both electricity andgas supply assets, with secureregulated or contracted revenues,places it in a strong positionrelative to these new players.

AIFRSI would like to draw your attentionto the effect that the Australianequivalents to InternationalFinancial Reporting Standards(AIFRS) have had on DUET’sfinancial result. The majorimpacts are a result of the 80-yearduration of the DUET trusts andDUET’s legal requirement todistribute all taxable income toinvestors. These two factors haveresulted in all accounting profitbeing treated as a finance cost forthe year ended 30 June 2006.

On 30 June 2006, DUET changedits constitution after receipt of aruling from the Australian TaxationOffice which will result inaccounting profit in future yearsbeing classified correctly. Thischange to the presentation ofaccounting profit for 2006 onlyhas not impacted DUET’s abilityto pay distributions to stapledsecurity holders.

We expect to secure twoattractive growth prospects in 2006/2007Complementing DUET’s solidbase of existing assets are someexciting opportunities forgrowth. During the past12 months DUET has assesseda number of growth andexpansion opportunities. Most of these have not metDUET’s return or portfolioinvestment criteria, but two,detailed below, have beenidentified as outstanding growthoptions for the fund.

Expansion of the DampierBunbury PipelineThe Dampier Bunbury PipelineStage 4 expansion is nowapproaching completion andDBP is planning for athree-phase Stage 5 expansionof the pipeline over the nextthree to four years. DBP isanticipating significant newdemand for gas transportationas the Western Australianeconomy continues to grow atrates well ahead of the nationalaverage. The Stage 5 expansionproject will be based exclusivelyon long-term contractedvolumes and tariffs from existingand new shippers. The project isforecast to generate equityreturns and cash yields that willbe accretive to DUET’s overallfinancial performance and tosecurity holder distributions.

Dear investorOn behalf of my fellow directorsI am pleased to present thisannual report for DUET whichcovers the financial year to30 June 2006.

DUET Group annual report 2006

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Acquisition of Duquesne LightShortly after 30 June 2006,DUET announced itsparticipation in a consortium thatis seeking to acquire DuquesneLight Holdings (Duquesne Light).Duquesne Light is listed on theNew York Stock Exchange andis an electricity utility based inPittsburgh, Pennsylvania in thenorth-east of the USA. Thedirectors and management ofDUET believe that thetransaction will be very positivefor DUET security holders.In FY2008, the first full year afteracquisition, we estimate theinvestment in Duquesne Lightwill provide distributionaccretion of at least 1 cent perDUET stapled security.

The focus on creating securityholder value remains the primaryassessment tool for our projectevaluations. Following regulatoryapproval of the transaction,which is expected in the first half of calendar 2007, theconsortium will provide thebalance of the equity fundsrequired for the A$4.32 billion(US$3.15 billion) enterprise valueacquisition. DUET is committingA$411 million (US$300 million) ofequity funding for the investmentand will have a 29% interest inDuquesne Light on completion.

Restructure and triple stapleIn August this year DUETchanged its structure from a dualto a triple-stapled structure. Thechange added DUET InvestmentHoldings Limited (DIHL) to theDUET structure, forming theDUET Group, and was describedin detail in the information circularwhich security holders wouldhave received in early August2006. The triple stapling tookeffect on 30 August 2006. Theobjective of the amendment wasto give DUET greater flexibility inits capital management andinvestment strategy.

DUET remains committed togrowing value for our securityholders. We will continue tomanage our portfolio of assetsto generate stable, predictableand growing distributions forour security holders.

Thank you for your ongoingsupport.

Chairman’s Lettercontinued

Yours sincerelyPhilip GarlingChairman

AMPCI MacquarieInfrastructure Management No. 1 Limited

AMPCI MacquarieInfrastructure Management No. 2 Limited

DUET Investment HoldingsLimited

The focus on creatingsecurity holder valueremains the primaryassessment tool forour project evaluations.

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DBP Financials for the year ended 30 June 2006

Revenue $223 million

EBITDA $159 million

Contribution to the DUET parent1, 2 $55.5 million

AGN Financials for the year ended 30 June 2006


EBITDA $91 million

Contribution to the DUET parent2 $11.0 million

Our Assets

Dampier Bunbury Pipeline71.8% interestDBP operates the only gas transmission pipelineconnecting the natural gas reserves of theCarnarvon and Browse basins with customersin Perth and the surrounding regions. These gasreserves together represent over 80% of Australia’stotal known gas reserves.

Natural gas provides nearly half of WesternAustralia’s total primary energy requirements.DBP provides the backbone of Western Australia’senergy infrastructure.

DBP has fully contracted the capacity for thecurrent pipeline expansion project (Stage 4)and is well advanced in its planning for the nextexpansion (Stage 5A, B and C).

AlintaGas Networks25.9% interest AGN is the largest distributor of natural gas inthe fast growing south-west region of WesternAustralia.

AGN currently supplies gas to approximately 58%of Western Australian households.

Approximately 90% of AGN’s mains are under30 years of age.

Length of pipeline mainline 1,596 kmlaterals 258 km

Maximum capacity on acquisition 635 TJ/dayStage 4 expansion additional 127 TJ/dayNext regulatory reset date Jan 2010

Length of network 12,064 kmArea of network 1,352 sq kmConnections 554,05030 June 2006 load 32 PJNext regulatory reset date Jan 2010

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Multinet Financials for the year ended 30 June 2006


EBITDA $130 million


UED Financials for the year ended 30 June 2006


EBITDA $255 million


United Energy Distribution66% interest UED’s electricity distribution area is largely urbangiving it a strategic intensity advantage. It coversaround one quarter of Victoria’s population but onlyapproximately 1% of Victoria’s land area.

UED has achieved a diverse customer base withconsumption relatively evenly spread between itsresidential, commercial and industrial customers.

Approximately 65% of UED’s distribution lines areunder 30 years of age — the projected lifespan ofUED’s assets exceeds 40 years.

Multinet Gas Holdings79.9% interestMultinet is the largest of the three gas distributorsin Victoria and distributes approximately one thirdof Victoria’s annual gas load (by customer numbers).

Gas use in Melbourne households is the highestin Australia and Multinet provides gas to 95% ofhouseholds in its distribution area.

Approximately 60% of Multinet’s mains are under30 years of age — the projected lifespan of Multinet’sassets exceeds 50 years.

Length of network 12,530 kmArea of network 1,450 sq kmConnections 609,57430 June 2006 load 7,823 GWhNext regulatory reset date Jan 2011

Length of network 9,400 kmArea of network 1,700 sq kmConnections 643,43130 June 2006 load 59.9 PJNext regulatory reset date Jan 2008

Notes

1. Economic interest was

71.8% as at 30 June 2006,

reducing to 60% as calls

are made on partly paid

equity. Results shown for

the holding company in

each asset holding group.

2. Contribution to the DUET

parent includes dividends,

distributions and interest

paid (or accrued).

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Asset mix1

for the year ended 30 June 2006

1. DBP 38%2. UED 30%3. Multinet 23%4. AGN 9%

Energy mix1


1. Gas transmission 38%2. Gas distribution 32%3. Electricity distribution 30%

Geographic mix1


1. Victoria 53% 2. Western Australia 47%

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Investment Objectives and Strategy


Note

1. Based on investment values as at 30 June 2006.

These characteristics underpinthe payment of stable andpredictable distributions tosecurity holders. Although DUET’sgeographic focus is principallyAustralia and New Zealand, weare also actively pursuinginvestments in energy utilityassets in other OECD countries,as can be seen by ourinvestment in Duquesne Light.

DUET is accumulating a portfolioof high quality energy utilityassets that are diversified bygeographic region, regulatoryregime, operator and energysource. DUET seeks significantshareholdings in those assetsto enable it to influence the keystrategic, operating andcommercial decisions affectingthe investments.

DUET is uniquely placed toparticipate in future energysector rationalisation andopportunities by virtue of its:

–access to the resources andnetworks of the AMP Groupand Macquarie Group, includingaccess to capital, deal originationand structuring expertise;

–exclusive arrangements withAMP Capital Holdings (AMPCH)and the Macquarie Group torefer new investmentopportunities in energy utilityassets in Australia and New Zealand;

–partnership approach to workingwith existing asset owners tomonetise or provide capital forexpansion of their assets; and

–flexible approach to workingwith different operators andasset owners. DUET is not tiedto a single operator.

DUET targets energy utilityassets which:

–have established historicalor contracted volume levels;

–are governed by regulatoryregimes or have long-termsupply agreements;

–have competitive positionsand sustainable cash flows; and

–are operated by capable operatorsable to manage risks andimprove operating efficiencies.

DUET invests in energy utility assetswith strong competitive positionsthat offer predictable cash flows.

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The Yarra Ranges expansionwill see 150 kilometres of newpipe pass 6,000 potentialcustomers. Construction is aheadof schedule with distributionmains completed in Yarra Glen,Wandin and Seville. Another seven towns are planned to beconnected between July 2006 and mid-2008.

The South Gippsland expansionis in its early phase but willeventually see 250 kilometres of pipeline pass 11,300 potentialcustomers. The transmissionpipeline route has been finalisedand negotiations are under waywith landowners. Construction is expected to commence atthe end of calendar 2006.

Dampier Bunbury Pipeline The first new capacity from the$433 million DBP Stage 4expansion project wascommissioned in January 2006.The project is now approachingcompletion and remains on timeand on budget. Completion isscheduled for January 2007 andadditional revenues will begenerated as each increment ofcapacity is commissioned.

This project is fundamental forthe growth of production capacityin Western Australia and is the first major expansion of thepipeline in over five years.In addition, it satisfies DUET’sundertaking to the WesternAustralian Government toexpand the pipeline, givenat the time of acquisition.

In May 2006 DBP announcedthat its Stage 5 expansion of theDampier to Bunbury Natural GasPipeline (DBNGP), to meet theState’s growing energy needs,should be developed on a stagedbasis. Construction of the firstphase – to be known as Stage 5A– is expected to commence inearly 2007 for the delivery of newgas in the first half of 2008 to meetshipper requirements.

During the year DBP completedthe refinancing of its seniordebt facilities and the capitalexpenditure facility for the Stage 4expansion project, resultingin annual interest cost savingsof $3 million p.a.

CEO’s Report DUET has a portfolio of first-class energy infrastructureassets. The portfolio comprisesinvestments in premium qualitygas and electricity distributionand transmission assets inVictoria and Western Australia,and will soon include a 29%stake in Duquesne Light,a regulated electricitytransmission and distributionutility in and around Pittsburgh,USA.

DUET, through the activemanagement of its interests, the day-to-day interaction withits asset management teams,and its participation on theboards of its asset companies,has overseen a successful yearhighlighted by strong financialperformance and a number of important milestones.

United Energy Distribution UED has performed strongly as a result of increased demandfor electricity during theunusually hot summer of2005/2006, driven mainly bydomestic air-conditioning loads.

In October 2005, Victoria’sEssential Services Commission(ESC) issued its final decision onthe 2006 Electricity DistributionPrice Review (EDPR) for UED.The commission’s finaldetermination resulted insignificantly higher tariffs andrevenues than those indicatedin its draft decision. Followingthe ESC’s final determinationthe tariffs for UED have been setuntil January 2011, giving a highdegree of certainty for UED’srevenues over this period.

During the year UED refinancedits existing debt and achieveda substantially lower margin.The full benefits of the lowerinterest costs will flow into the2006/2007 year.

Multinet Gas HoldingsMultinet initially experiencedlower than average demandbecause of the late start towinter but performed aboveexpectations in the last quarterof 2005/2006 with colder thanaverage conditions, resulting inclose to budget performancefor the year to June.

Multinet has commenced twoimportant expansion projects.In November 2004, Multinetwas awarded the $24 millionYarra Ranges project and inAugust 2005, the $50 millionSouth Gippsland project.

Alinta Gas NetworksContinued growth in populationin and around Perth hasunderpinned the expansionof the AGN gas distributionnetwork. Western Australiahas enjoyed Australia’s highestgrowth rates fuelled by risingresource prices and growthin demand from China.

In August 2005, new accessarrangements regulatingdistribution revenue wereapproved and the next resetdate for this access arrangementis 1 January 2010.

AGN continues to be wellpositioned to share in thebenefits of Western Australia’sfuture economic growth.

Duquesne LightOn 6 July 2006 a consortiumof investors including DUET(the consortium) entered intoa merger agreement for theacquisition of Duquesne LightHoldings (Duquesne Light),a publicly listed electricityutility based in Pittsburgh,Pennsylvania. The transactionis subject to approval by thePennsylvania Public UtilityCommission (PaPUC) and theFederal Energy RegulatoryCommission (FERC) whichis expected in the first halfof calendar 2007.

This is an exciting development.DUET has made an initialinvestment of A$145.3 million(US$109 million) in a placementby Duquesne Light and willcontribute the remaining equityat financial close, expected inthird quarter 2006/2007 followingregulatory approval of thetransaction. DUET has a totalcommitment to provide A$411million (US$300million) of equity finance, representinga 29% equity interest in theconsortium. The acquisition is consistent with DUET’sinvestment mandate objectives.

Duquesne Light providesessential electricity distributionand transmission to more than587,000 customers in andaround Pittsburgh. More than80% of calendar 2005 EBITDAof US$261 million was earnedfrom regulated activities.Duquesne Light has recentlyfiled a rate case applicationrequesting a total distribution

revenue increase of $144 millionp.a. and is proposing to file anapplication requesting atransmission revenue increase of $19 million with the USregulators responsible for settingthe regulated tariffs for thesebusinesses. The determinationof these rate case applicationswill take effect from 7 January2007.

The transaction will provideDUET with international portfolioexposure, with Duquesne Lightmaking up approximately 32% of the fund’s total assets.Following completion of theacquisition almost 90% of DUETearnings will be regulated orsubject to long-term contracts.

DUET will be represented onthe Duquesne Light Holdingsboard and will participate onthe Duquesne Light executivemanagement committee.In addition, the ownershipconsortium will engageUS-based asset managers to assist in the management of the investment.

Interest rate hedgingDUET’s financial strategy is tominimise volatility of distributionscaused through interest raterises. DUET’s majority-ownedasset company subsidiarieshave all hedged at least 80% of their senior debt for the periodto the next regulatory reset.In addition, in August 2006, UED and Multinet hedged theirsubordinated debt for the periodto the next regulatory reset.These hedging policies reducethe potential impact of interestrate rises affecting DUET’sprofits and distributions.

Outlook2006/2007 will be an importantperiod in the development ofthe DUET portfolio, with thefinalisation of the DuquesneLight acquisition and theapproval of the first phase of theDBP Stage 5 expansion projectexpected during the year.

In March 2007, Multinet will lodgeits gas access arrangementreview submission with theVictorian ESC and anticipatespublication of a draft decision inSeptember 2007.

The ESC has retained jurisdictionover the 2007 regulatory reviewfor Multinet prior to handover tothe national Australian EnergyRegulator (AER) who will overseefuture regulatory decisions.We anticipate that the formationof AER, which will replace anumber of state-based regulatorybodies, will lead to greaterconsistency and predictabilityin future regulatory decisions.

Subject to finalisation of therequired system specifications,UED expects to commence theroll-out of interval meters whichwill allow electricity consumptionto be recorded in 30 minuteblocks. This will enable retailers to introduce new, more flexiblerates and will give customers theability to respond to pricingsignals to enable them to reducetheir overall cost of electricity.

The strong outlook for theDUET portfolio is reflected in theprojected increase in distributionsfor the 2006/2007 year to 24 cents(minimum) per stapled security.

We will continue to selectivelytarget opportunities to invest inquality energy utility assets whichmeet our investment criteria andadd value for our security holders.

Peter BarryCEOThe DUET Group


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Dampier Bunbury Pipeline Asset descriptionThe DBNGP is the only naturalgas pipeline connecting thenatural gas reserves of theCarnarvon and Browse basins onWestern Australia’s North WestShelf with industrial, commercialand residential customers in Perth and the surroundingregions. The pipeline runs fromthe Burrup Peninsula, nearDampier, to Bunbury in the south-west of the state.

The Dampier to Kwinana sectionof the pipeline was built by theState Energy Commission of WA(SECWA) with the support ofAlcoa, and was commissioned in 1984. The extension south to Bunbury was commissioned in 1985. DUET has a 60%interest in DBP.

The group of companies whichowns and operates the pipelinetrades under the name ofDampier Bunbury Pipeline (DBP).In October 2004, DUET andconsortium partners purchasedDBP, and at 30 June 2006 DUETheld a 71.8% economic interestin DBP. DUET has a 60% votinginterest in DBP.

Revenue streamsAlmost all of DBP’s revenuecomes from gas transportationtariffs. The tariffs are charged towholesale and retail customersfor the shipping of gas along thepipeline. DBP has entered intostandard long-term contracts with the major shippers that usethe pipeline, and under thesecontracts approximately 80% of the tariff is paid on a capacityreservation basis (take-or-pay),with the remaining 20%depending on the actualthroughput on the pipeline.

Alcoa, as the foundation shipper,has an evergreen contract withtariff agreements that differ fromother shippers.

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Key investment attributesPredictable revenueDBP has entered into long-termcontracts with shippers usingthe pipeline ensuring stable andpredictable revenues, with tariffagreements in place until 2019.

Competitive positionThe DBNGP is WesternAustralia’s principal gastransmission pipeline, and theonly pipeline connecting theNorth West Shelf with industrial,commercial and residentialcustomers in Perth and thesurrounding regions. Natural gassupplies approximately 48% ofthe total primary energyconsumption in Western Australia.

Development and growth potentialNatural gas consumption inWestern Australia has increasedby 4% a year over the past 10years, and there is a major projectcurrently under way to expand thepipeline. The additional firm fullhaul capacity from the expansionhas already been pre-sold.

2006 performanceIn the year ended 30 June 2006, DBP reported revenues of $223 millionand EBITDA of $159 million. Based on its paid-up equity interest for theperiod, DBP contributed $56 million to the DUET parent.

Financial summary AGAAP AIFRS8 months to Year to

$ million 30 June 2005 30 June 2006

Total revenue 179 223

EBITDA 140 159

EBIT 94 122

Net profit after tax1 4 -4

Total assets 2,313 2,697

Net assets2 378 451

Net capex 37 286

Operational overviewIndicator 30 June 2005 30 June 2006

Throughput (full haul) PJs 159 172

Asset utilisation 89% 93%

Notes

1. Net result after tax is shown

before finance changes

attributable to security

holders for 2006 only.

2. Excluding security holder

interests classified as debt.

Key eventsStage 4 pipeline expansion projectEarly in 2005, the DBP boardannounced a commitment to the pipeline’s first expansion since 2000.

The $433 million Stage 4expansion of the pipeline willadd eight new compressors and217 kilometres of looping andwill see the average maximumpipeline capacity (T1 full haul)increase by approximately100 TJ/day to approximately630 TJ/day.

Construction of the Stage 4pipeline expansion is nowwell progressed, with thecommissioning of five newcompressor units and thefirst stage of looping beingcompleted by 30 June 2006.Other phases of the project areproceeding on schedule despiteadverse weather conditions in the second and third quarters.Construction is expected to becompleted on budget and prior to the scheduled date of1 January 2007.

Stage 5 pipeline expansion projectDBP has progresseddiscussions with a number ofshippers regarding the nextphase of expansion of thepipeline (Stage 5). DBP expectsto increase the firm, full haulcapacity by over 265 TJ/dayin three phases over the nextthree to five years. DBP plansto seek debt and equity fundingapprovals to proceed with thefirst stage of the project infirst quarter 2006/2007 and tocommence construction assoon as approvals are in place.First gas to shippers fromStage 5A is planned to beavailable progressively fromfirst quarter 2008.

Dampier Bunbury Pipelinecontinued

16 17Access arrangementDBP has entered into long-termgas transportation contractsuntil at least 2019 with major gas shippers on the pipeline.However, it is still a requirementunder the Western Australiangas regulatory regime thatproposed access arrangementrevisions are lodged with theEconomic Regulatory Authority(ERA) for its approvalapproximately every five years.During 2005, DBP preparedrevisions to the original accessarrangement that was approvedin December 2003. ERA releasedits further final decision inDecember 2005. The decisionaccepted the majority of DBP’sproposed revisions. DBP hasapplied for a review of ERA’sdecision to broaden thecontractual gas specificationand to include part haul andback haul services as referenceservices and to set referencetariffs for these services. Thereference tariffs do not presentlyapply to the existing gastransportation contracts.

DBP debt refinancingIn April 2006, DBP issued$325 million of guaranteedfloating rate notes to pay downits syndicated bank debt. In May2006, DBP refinanced thebalance of the syndicated bankdebt with the $205 million seniorcorporate facility. In addition,DBP refinanced its short-termdebt facilities, namely the$350 million capital expenditurefacility and the $25 millionworking capital facility. Bothtransactions achieved the statedaims of the refinancing, whichincluded the reduction in interestcosts, the lengthening in theweighted average tenor of DBP’stotal debt, and the minimisationof administrative requirements ofthe capital expenditure facility.


Asset descriptionMultinet is a Victorian gasdistribution company with anetwork covering 1,700 squarekilometres of the eastern andsouth-east suburbs ofMelbourne. Multinet is currentlyexpanding its geographic basethrough participation in the stategovernment’s natural gasextension program. Multinet’sdistribution network transportsgas from the high pressuretransmission network, operatedby GasNet, to residential,commercial and industrial gas users.

Revenue streamsApproximately 86% of Multinet’stotal revenue comes fromdistribution tariffs. Distributiontariffs are charged to customersfor connection to, and use of,Multinet’s distribution system.Growth in distribution revenue is driven by regulated tariffcharges and volume growth.

Other revenue, approximately14% of Multinet’s total revenue,comes from the provision ofregulated services such asmeter reading, mains andservices provision, and meterdata management.

Key investment attributesRegulated revenueMultinet’s distribution businessprovides predictable, regulatedrevenues. The accessarrangements which regulatedistribution tariffs apply for fiveyears. The next reset date forMultinet’s access arrangementis 1 January 2008.

Established commercialpositionMultinet is an established gasdistributor within its service areaand receives revenues for eachenergy consumer connected to its distribution network,irrespective of which retailer sells the gas to that customer.

Revenue baseMultinet’s top 250 gas userscollectively account for onlyaround 2% of total distributionrevenue. As a result, thepotential for a negative impacton revenue from the loss of amajor user is very low.

Multinet

18 192006 performance In the year ended 30 June 2006, Multinet reported revenue of$172 million and EBITDA of $130 million. During the period, Multinetcontributed $34 million to the DUET parent.

Financial summary AGAAP AIFRSYear to Year to


Distribution revenue 144 147Total revenue 159 172EBITDA 120 130EBIT 77 85Net profit after tax 15 23

Total assets 1,191 1,283Net assets 208 201Net capex 35 52

The 2005 calendar year was one of the warmest in the last 40 years.A measure of the weather impact is effective degree days of whichthere were 1,167 in 2005, the lowest since these records began,reflecting high median temperatures. This reduced demand forgas for residential heating in the September quarter in 2005, whichwas partially offset in the June quarter when temperatures were below average.

Operational overview Year to Year toNetwork connections 30 June 2005 30 June 2006

Tariff V residential 619,946 626,317Tariff V business 16,955 16,840Tariff D 255 274Total 637,156 643,431

Usage – TJ

Tariff V 44,207 46,111Tariff D 14,430 13,776Total 58,637 59,887

Distribution network statistics

Priority emergency response 97% 99%Number of unplanned outages (> five consumers) 32 20Publicly reported gas leaks (per 1,000 consumers) 18 9.9


Multinetcontinued

Key events Yarra Ranges extension project In November 2004, Multinet wasselected by the Victorian StateGovernment to deliver naturalgas to nine townships in theYarra Valley region. The projectwill include the construction of new distribution networks,including 150 kilometres ofsupply and distribution mains,passing 6,000 potential newcustomers. Currently a total of 1,123 properties have beenconnected and are usingnatural gas. The project isahead of schedule and remainswithin budget.

South Gippsland extensionprojectIn early August 2005, Multinettendered for, and won, theSouth Gippsland gas extensionproject. This project is also part of the Victorian StateGovernment’s natural gasextension program, and willbring reticulated gas to fivetowns in the South Gippslandregion. The project will involvefurther expansion of Multinet’snetwork including constructionof approximately 265 kilometresof transmission, supply anddistribution mains, passing11,300 houses and businesses.

Multinet is anticipating receipt of the permit for the transmissiongas pipeline component in Julywith the distribution licence tofollow shortly after. Design hasbeen completed for three of thefive towns and land acquisition is currently progressing onschedule.

These projects are expected topromote significant economicactivity within these twogeographic regions. Multinetcurrently expects that bothprojects will exceed connectionforecasts and that they will becompleted ahead of schedule.

Pipeworks project Multinet’s program to upgradeselected low-pressure pipes in the network commenced in2003 and continued through the 2005/2006 financial year.The program aims to replacemore than 500 kilometres ofexisting cast iron and steel pipemains with polyethylene pipesand includes approximately24,500 customerconnections/renewals.

The project is scheduled forcompletion by 2008 and, for the year ended 30 June 2006,156 kilometres of pipe havebeen replaced and work isproceeding ahead of schedule.

20 21


Natural gas extension projectsYarra Ranges South Gippsland

Total budget $24 million $50 millionTowns 9 5City gates 2 3Transmission pipeline n/a 20 kmSupply mains 30 km 60 kmDistribution mains 120 km 185 kmProperties passed 6,000 11,300

The pipeworks project is asubset of a longer-term programto replace all low pressure castiron pipe over the next 26 years.The key drivers of this programare to reduce asset maintenance,improve supply reliability, reducegreenhouse gas emissions andimprove public safety.

Eastlink project In October 2004, the VictorianState Government awarded theConnectEast Group the right to design, finance, construct and operate the Eastlink tollroad for a concession periodof about 39 years, including a construction period ofapproximately four years. This project required Multinet to relocate assets along the pathof the toll road. This work is fullyfunded by the ConnectEastconsortium and was completedon 30 June 2006.

Asset descriptionUED’s electricity distributionnetwork covers 1,450 squarekilometres of south-eastMelbourne and the MorningtonPeninsula. The distributionnetwork transports electricityfrom the high voltagetransmission network toresidential, commercial andindustrial electricity users. UED’sdistribution area is largely urbanand, although geographicallysmall (about 1% of Victoria’sland), it accounts for around onequarter of Victoria’s population.

DUET holds a 66% interest in UED.

Revenue streamsApproximately 90% of UED’stotal revenue comes fromnetwork tariffs. Network tariffsare charged for use of UED’sdistribution network and for theuse of the transmission grid. Thetariffs are charged to electricityretailers, who pass these costson to their customers. Growth innetwork tariff revenue is drivenby volume growth and regulatednetwork tariff charges.

Other revenue, approximately10% of UED’s total revenue,comes from services whichUED provides to its customers,such as relocating assetsat the request of our customers,building new or extendingexisting distribution networks,providing public lighting to localcouncil areas, and pole rental.

Key investment attributesRegulated revenueUED’s distribution businessproduces predictable, regulatedrevenues. The price determinationswhich regulate the majority ofthese revenues apply for periodsof five years.

Established commercial positionUED is an established electricitydistributor within its service areaand receives revenues for eachconsumer connected to itsdistribution network, irrespectiveof which retailer sells theelectricity to that customer.

Diverse consumer baseEnergy consumption in UED’sdistribution area is quite evenlyspread across residential,commercial and industrial usersmaking UED less vulnerable tovariations in energy use in anyone of these areas.

2006 performance In the year ended 30 June 2006,UED reported a revenue of$412 million and EBITDA of$255 million. During the period,UED contributed $58 million to theDUET parent. The reduction indistribution revenue comparedwith 2004/2005 reflects the tariffreduction imposed by the regulatorin its final determination whichtook effect from 1 January 2006.Notwithstanding the lowerregulated revenue base, UEDgenerated cash flow and earningsin 2005/2006 similar to theprevious year’s level.

United Energy Distribution

22 23


2006 performance Financial summary AGAAP AIFRS

Year to Year to$ million 30 June 2005 30 June 2006

Distribution revenue 381 367Total revenue 423 412EBITDA 260 255EBIT 185 183Net profit after tax 23 24Total assets 1,989 2,066Net assets 46 75Total capex 93 101

The 2005 calendar year was one of the warmest in the last 40 years.There were 1,167 effective degree days in 2005, the lowest since theserecords began, reflecting high median temperatures. This reduceddemand for electricity for heating in winter and increased demand forair-conditioning in summer.

Operational overview Year to Year to30 June 2005 30 June 2006

Network connections

Small (residential and unmetered) 551,616 554,661Medium size business 51,751 52,858Commercial and industrial 1,910 2,055Total 605,277 609,574

Electricity load – GWh

Small tariff 2,946 2,982Medium tariff 1,506 1,504Large tariff 3,115 3,337Total electricity load 7,566 7,823

Distribution network statistics

Overhead (km) 10,163 10,165Underground (km) 2,198 2,365% Underground 18.0 18.9Maximum demand (MW) 1,572 1,632SAIFI (Number of interruptions) 0.9 1.14MAIFI (Number of interruptions) 1.3 1.52SAIDI (Minutes) 65 76CAIDI (Minutes) 54 54

Key events2006 EDPRIn October 2005, Victorian ESCissued its final decision on the2006 EDPR for UED. The ESC’sfinal determination resulted insignificantly higher tariffs andrevenues than those indicated inits earlier draft decision. Thedraft decision indicated an initialreduction in revenues of 22.7%.In the final decision, the ESCimposed a 14.7% reduction,and retained the CPI – Xformula at X=2.5%.

The final determination alsoset a price for meter services.The determination providedfor meter services revenue ofapproximately $70 million overthe 2006/2010 period. Theoverall price reduction whendistribution revenue andmeter services are combinedis CPI – 15.6% in the first year,followed by adjustments ofCPI – 1.4% for each subsequentyear. UED unsuccessfullyappealed two secondaryaspects of the final decisionrelating to the determinationof relevant operating costsand the calculation of serviceincentive payments.

UED’s regulated revenue baseis now set through to January2011, providing stable revenuesand predictable distributionsto DUET.

Interval metering UED has been planning toimplement the installation ofinterval meters as per the ESC’srequirements. This will involvethe replacement of the old stylemeters with the new intervalmeters on a set timetableand will require a significantenhancement of the UEDinformation systems to processthe increased amount of data.

The new interval meters willallow electricity to be recordedin 30 minute blocks and henceenable retailers to introduce newmore flexible rates and allowcustomers to respond to pricingsignals so as to reduce theiroverall cost of electricity.

Recently the VictorianGovernment indicated that theyare planning to change thespecification of the new intervalmeters to require the use oftwo-way (smart) meters. UEDis currently anticipating receiptof formal advice to change itsplans to adopt these newmeters and has commencedinvestigations into the supplyand implementation of thenew equipment.

United Energy Distributioncontinued

24 25These “smart” meters will havethe capacity for UED to remotelyread the meters and potentiallyto provide customers withpricing information on a real timebasis, enabling innovativepricing schemes to reduce peakpower consumption and costs.Other benefits of smart meterscan include rapid detection ofoutages, enhanced monitoringof quality of supply, detectionof meter tampering, remoteconnection of electricityservices, information on moresuitable electricity pricing plansand a point in time display ofgreenhouse gas emissions.

Should the government proceedwith its plan, commencing in2008, UED will be progressivelyinstalling more than 630,000smart meters together withthe necessary infrastructureand IT systems required tosupport them.

Bushfire mitigationUnder Victorian law, UED isrequired to prepare a bushfiremitigation plan each year andcarry out inspections of overheadelectricity lines in bushfire areasand on private property. Theplans must outline a maintenanceregime to inspect and repairelectricity infrastructure tominimise the risk of powerlinesstarting fires. Accordingly, eachyear, UED’s management teamidentifies the bushfire mitigationmeasures required for UED’snetwork infrastructure sites.Each site is inspected regularlyto determine the maintenanceand mitigation activities to beundertaken when the bushfireseason begins. The programaims to achieve a bushfiremitigation index of zero for the duration of the declaredbushfire season.

Operating services agreementThe operating servicesagreement with Alinta AssetManagement became due forrenewal on 1 July 2006. However,due to the delay caused by theappeal of the ESC decision,Alinta Asset Managementand UED agreed to delay thecommencement of therenegotiation. The renegotiationis currently under way and isanticipated to be completedin first half of 2006/2007.

Debt refinancingIn October 2005, UED issued$500 million of guaranteedfloating rate notes to refinance its$320 million US144A guaranteednotes. The balance was used topay down some of its syndicatedbank debt. In December 2005,UED refinanced the balance ofits syndicated bank debt with anew syndicate of banks via the$250 million senior corporatefacility, the $200 million capitalexpenditure facility and the $25million working capital facility. The transactions generated asignificant reduction in interestcosts to the company, as well as specifically providing greaterflexibility to UED to meet itsgrowth and regulatory capitalexpenditure requirements.


Asset descriptionAGN owns, operates and holdsdistribution licences for four gasdistribution systems (GDS) inWestern Australia. These GDSnetworks supply natural gas to residential, commercial andindustrial customers inmetropolitan Perth, Geraldton,Bunbury, Busselton andKalgoorlie–Boulder andliquefied petroleum gas (LPG)to Albany.

AGN’s customers representapproximately 58% of WesternAustralian households and arange of commercial customers– all supplied gas through its fourGDS networks. AGN’s networksinclude 12,064 kilometres ofunderground pipelines coveringan area of approximately 1,352 square kilometres.

Revenue streamsMost of AGN’s revenue isderived from the largest of itsnetworks – the mid-west andsouth-west GDS coveringgreater metropolitan Perth.Approximately 95% of AGN’stotal revenue comes fromdistribution tariffs. Distributiontariffs are charged to customersfor connection to, and use of,AGN’s distribution system.Growth in distribution revenueis driven by regulated tariffcharges, changing customerdemand and volume growthfrom new connections. Pricesare set within a regulatoryframework as network tariffsby ERA.

Key investment attributesPredictable revenueAGN’s distribution businessprovides predictable, regulatedrevenues. The new accessarrangements, finalised inAugust 2005, regulatedistribution tariffs for its largestGDS until 31 December 2009.The next reset date for thisaccess agreement is 1 January2010. The distribution licencesfor AGN’s GDS are in forceuntil 2021.

Competitive positionAGN is the largest gasdistributor in Western Australia,with new connection growthaveraging around 4% p.a. over the last 10 years.

Diverse consumer baseGas consumption in AGN’sdistribution areas ispredominantly for large industrialand residential purposes.Together, these two user groupsaccount for more than 80% oftotal network throughput.

Favourable economic conditionsAGN’s strong Western Australianindustrial connection baseprovides exposure to one ofAustralia’s strongest regionaleconomies. AGN continuesto see significant residentialcustomer growth as a result of the strong economic growth.AGN is also well positioned totake advantage of the broaderflow-through benefits from the current resources boom.

AlintaGas Networks

26 27Key eventsAccess arrangementThe mid-west and south-westGDS is a covered pipeline for thepurposes of the National GasCode (NGC). The NGC allowsthird parties to negotiate accessto the GDS within an independentregulatory framework, or accessarrangement. Regulatoryapproval for accessarrangement to the mid-westand south-west GDS is generallyrenegotiated every five years.

The current access arrangementwas approved by ERA on10 August 2005, and coversthe period from 1 January 2005to 31 December 2009. The nextregulatory reset date is1 January 2010.

Operating service agreementThe operating serviceagreement with Alinta AssetManagement was subject to aprice review six months afterthe access arrangement wasfinalised. AGN and Alinta AssetManagement have agreed onthe terms of the price review.


2006 performanceDUET owns 25.9% of Alinta Network Holdings Pty Limited (whichowns 100% of AGN) and equity accounts this stake. In the year ended30 June 2006, ANH contributed $11 million to the DUET parent.

Financial summary (update) AGAAP AIFRSYear to Year to


DUET share of net profit 4.1 5.7Dividend distribution received 4.7 3.8Subordinated debt interest 7.3 7.3

Operational overviewNetwork connections 531,901 554,050Usage – TJ 31,132 32,339Priority emergency response 99% 100%Identified leaks (number per km) 0.26 0.25Number of unplanned outages (> five consumers) 5 9Publicly reported gas leaks (number per 1,000 consumers) 0.75 0.67

DUET recognises that itsinfrastructure investmentsinvolve both environmental andsocial responsibilities as a resultof essential services providedby such assets.

DUET’s environmentalresponsibility arises from theimpact (both positive andnegative) on natural resourcesby the operations of DUET andits investments. DUET’s socialresponsibility arises from theimpact (both positive andnegative) on the community,customers, employees andinvestors by the operationsof DUET and its investments.DUET has formalised itsenvironmental and socialresponsibility managementwith the adoption of a boardpolicy which is outlined below.In general, it is DUET’s policy toensure its assets comply withthe regulatory framework andthe minimum standards underwhich an asset operates.DUET’s environmental andsocial responsibilities aremanaged throughout theinvestment process as follows:

Asset selection Environmental and socialresponsibilities are reviewedas part of the acquisition duediligence process. Where theyexist, regulatory obligations areviewed as minimum standardsfor environmental and socialresponsibility management postacquisition. The policy outlineskey steps to be undertakenduring the due diligence phase,including engaging anappropriate environmentalexpert consultant to identifyissues and obligations relatingto the asset (where relevant).

Ongoing asset management DUET’s ability to control orinfluence the ongoingenvironmental and socialresponsibility management ateach asset differs, based onits level of investment and theregulatory framework thatgoverns those issues.Importantly, the regulatoryframework is not controlled byDUET or its assets. DUET doesexert influence wherever possiblevia its board representation.Regular asset board reportingenables compliance withenvironmental requirements tobe monitored and environmentaland social responsibility issuesto be identified.

Stakeholder reporting In recognition of the importanceof environmental and socialresponsibility management, it isDUET’s policy to report annuallyon environmental and socialresponsibility management,including a summary of itspolicy and key responsibilities,current initiatives being taken byDUET and/or controlled assets,and a statement on regulatorycompliance during thereporting period.

Key environmental and socialresponsibility factors Following a review of thespecific regulatory requirementsand agreements related to eachasset, DUET has identified itskey environmental and socialresponsibility factors as:

–construction impactmanagement

–safety of supply –reliability of electricity and

gas supply –commitment to service –management of assets

containing polychlorinatedbiphenyls (PCBs)

–oil and chemical spill response–electric and magnetic field

management and enquiries –noise management –recycling and waste

management –flora and fauna management –occupational health and safety –community relations.

Environmental and socialresponsibility-relatedinitiatives at DUET assetsduring FY2006 Examples of notableenvironmental and socialresponsibility-related initiativesundertaken at assets in whichDUET invests during the pastfinancial year include:

AlintaGas Networks – Western AustraliaPublic Transport Authority (PTA)Southern River pipeline As part of a project to cross theCanning River with a DN100 mmHP gas pipeline, it wasnecessary to create a crossingdesign that did not affect theexisting footbridge or any newareas of previously undisturbedriverbank or the riverbed.The project included a fullreinstatement of all parts ofthe crossing and we have alsoundertaken to make a $10,000contribution to the Swan RiverTrust for their general riversrevegetation program.

Environmental and SocialResponsibility Management

28 29Preston River pipeline The expansion and maintenanceof the gas distribution network to bring natural gas to newcustomers and ensure reliabilityof supply to existing ones hasresulted in the need to make a number of pipeline crossingsof the Preston River. In order toachieve the goal of minimisingthe impact on the environmentand various local residents, aconsultation process has beenundertaken with interestedparties including local Aboriginalgroups and the Department ofMain Roads. The crossing hasbeen undertaken by boringunder the river at a locationand depth acceptable to allthe parties.

In undertaking the maintenanceand expansion of the WesternAustralian gas distributionnetwork, DUET’s contractorAlinta Asset Management and all its subcontractors rigorouslyfollow the environmentalrequirements of currentlegislation as it applies to theworks program. Generally thisincludes, but is not limited to,those requirements of theapplicable local shire/council,the Department of Environment(DoE), the Department ofConservation and LandManagement (CALM), theRoadside ConservationCommittee (RCC), the UtilityProviders Code of Practice(UPCOP) and all other relevantgovernment regulations coveringWorkplace Health, Safety andEnvironment. No excessiveclearing, damage to significantflora or fauna, creation ofexcessive noise or dumping ofwaste materials on the works sitemay occur without prior approvalby AAM Gas Distribution WestEngineering Services and otherrelevant authorities. All work isto be conducted in accordancewith relevant and applicableAustralian and industry standards.

Contributing to statedevelopment and energy needs Although DBNGP is currentlyoperating near full capacity,there is demand for greaternatural gas supply fromcustomers using the pipeline.To satisfy this demand, DampierBunbury Pipeline is undertakingan initial $433 million project toexpand the pipeline.

The Stage 4 expansion ofthe DBNGP is the largest gaspipeline expansion projectundertaken in Australia to dateand will necessarily take placein some of the country’s most

remote locations. This hasrequired both complexengineering design andconstruction techniques and theadoption of environmental bestpractice standards which aimto minimise the constructionimpact on the environment andensure effective rehabilitation.Importantly, the entire projecthas been undertaken withminimal interruption of supplyto existing customers.

As the pipeline covers more than1,700 kilometres, the expansionproject has also createdsignificant regional developmentopportunities for WesternAustralia, including theemployment of up to 320personnel in regional areas over a 12-month period.The expansion of the DBNGPwill support in excess of $3 billionin major project investment in regional Western Australia,specifically, the state’ssouth-west.

The first compressor wascommissioned in January andproject completion is scheduledfor January 2007.

Despite the large increase tocapacity being delivered by the Stage 4 expansion project,the market is still asking formore. Accordingly, an additionalexpansion is currently being planned.

Delivering reliable gas supply to new customersHaving won selection by theVictorian State Government,Multinet is currentlyimplementing a project to bringnatural gas to new customers inthe Yarra Ranges and Gippsland.The new distribution networkswill culminate in over 400kilometres of new supply anddistribution mains bringingnatural gas to potentially 17,300households.

Natural gas is a competitivelypriced, safe, reliable fuel whichprovides instant and controllableheat for households in cooking,heating and hot water. Researchhas shown that natural gas is aclear winner in reducinggreenhouse gas emissions in theresidential sector. The emissionsfrom a ducted space heater areone third of those produced byusing coal generated electricity.

The Yarra Ranges extensionproject is well under way and1,060 properties have beenconnected so far.

The Gippsland expansionproject is still in the early phasesof planning with permits for thetransmission pipeline componentbeing sought and land for thepipeline being acquired.

Advanced interval meter roll-outUED is actively participating inthe evaluation of the proposedadvance interval meter roll-outthat is designed to reduce peakdemand and consumption,resulting in an overall reductionin energy bills and greenhousegas emissions. The proposedprogram would see everycustomer provided with aninterval meter over four years(starting in 2008) which willenable them to reduce theirenergy bill through more evenspreading of consumptioncoupled with the reduction inoverall consumption.

Climate changeUED, Multinet and AGN werepart of a major climate changestudy undertaken by theAustralian Greenhouse Office.The study sought to understandthe impact of climate changeon the weather patternsexperienced by the underlyingbusiness, its implications andpotential strategies that needto be addressed. The report‘Climate Change Impacts andRisk Management’ is availablefrom the Australian GreenhouseOffice website. Participationin this study highlights theongoing commitment toenvironmental managementand a long-term sustainablebusiness environment.

Environmental and socialresponsibility-relatedregulatory requirements DUET is not aware of anysignificant breaches of relevantenvironmental and socialresponsibility-related regulatorystandards by its assets duringthe year ended 30 June 2006.


As at 30 June 2006 DUETconsisted of two stapledregistered managedinvestment schemes:

–Diversified Utility and EnergyTrust No. 1 (DUET 1); and

–Diversified Utility and EnergyTrust No. 2 (DUET 2).

DUET 1 and DUET 2 wereestablished on 26 June 2003as wholesale unit trusts andwere subsequently registered asmanaged investment schemeswith ASIC on 16 June 2004.

Each stapled security consistedof one unit in DUET 1 and oneunit in DUET 2. Units in DUET 1and DUET 2 are stapled together so that one cannot be transferred, or otherwisedealt with, without the other.Essentially, the stapled securitiesare treated as one security.

The responsible entity ofDUET 1 is AMPCI MacquarieInfrastructure ManagementNo. 1 Limited (RE1). Theresponsible entity of DUET 2 isAMPCI Macquarie InfrastructureManagement No. 2 Limited(RE2). Both responsible entitiesare jointly owned (50:50) by AMPCapital Holdings Limited(AMPCH) and Macquarie BankLimited (Macquarie). AMPCHalso owns 100% of AMP CapitalInvestors Limited (AMP Capital),the responsible entity of thePOWERS Trust.

On 31 August 2006 DUETunderwent a restructuring,adding a third stapled entity,DUET Investment HoldingsLimited (DIHL), to DUET 1 andDUET 2. Diversified Utility andEnergy Trusts security holdersapproved in principle this typeof restructure at last November’sgeneral meeting. Details ofthe restructure were sent toDUET security holders in aninformation circular in earlyAugust 2006.

The purpose of the restructureis to provide DUET with greaterflexibility in its capitalmanagement and investmentstrategy. DUET intends tocontinue to hold its equityinterest in Duquesne Lightthrough DIHL, and DUET mayhold other future non-Australianinvestments through DIHL.RE1 has an agreement toprovide management servicesto DIHL.

DUET Managementand Structure

Multinet Group

RE1 RE2

DUET stapledsecurity holders

POWERS Trust POWERS holders

AMPCI

AGN GroupUED Group DBP Group

66.0% 79.9% 25.9% 71.8%1

Notes

1. Falling to 60% as Alinta and

Alcoa pay up their partly

paid equity.as at 30 June 2006

DUET structure

DUET 1 DUET 2

30 31Assets ownershipand managementDUET’s current assets are:

–66.0% interest in United EnergyDistribution;

–79.9% interest in Multinet GroupHoldings;

–25.9% interest in AlintaGasNetworks;

–71.8%1 interest in the DampierBunbury Pipeline; and

–7.7% of Duquesne LightHoldings shares.

The balance of the equity inUnited Energy Distribution,Multinet Group Holdings andAlintaGas Networks is held byAlinta Limited. In the case of theDampier Bunbury Natural GasPipeline, Alinta Limited andAlcoa of Australia Limited are theminority interest holders.

The Australian assets are held bythe wholly owned subsidiaries ofUnited Energy DistributionHoldings Pty Limited (UED),Multinet Group Holdings PtyLimited (MGH), Alinta NetworkHoldings Pty Limited (ANH) andDBNGP Trust, respectively (eachan asset holding company).

Alinta Asset Management(AAM), a wholly ownedsubsidiary of Alinta Limited,provides operating andmaintenance services to theassets on a day-to-day basisunder separate operatingservices agreements.

Duquesne Light Holdings(Duquesne Light) is listed on theNew York Stock Exchange andDUET holds approximately 7.7%of its shares. This stake wasacquired as part of the proposal,by a consortium of which DUETis a participant, to acquire all ofDuquesne Light. Assuming allapprovals and other conditionsare met, transaction completionis expected in the first half ofcalendar 2007 and DUET willemerge with a 29% indirectinterest in Duquesne Light.

Pacific Indian Energy ServicesPty Limited (PIES), a companywhich is jointly owned by UED,MGH and ANH, provides day-to-day management services toUED, MGH and ANH under the management servicesagreements with each of the companies. AMP Capitalprovides financial services to UED and MGH.

DUET managementThe DUET responsible entitiesare jointly owned by AMPCHand Macquarie, giving DUETaccess to the combinedinfrastructure expertise andinvestment managementresources of the MacquarieGroup and AMPCI.

The board of each responsibleentity consists of five directors,three directors beingindependent of AMPCH andMacquarie (six independentdirectors in total), and onerepresentative of each ofAMPCH and Macquarie(common to each of theresponsible entities and DIHL).

The DIHL board consists of fivedirectors, three directors beingindependent of AMPCH andMacquarie and sourced from the RE1 and RE2 boards.

The Macquarie Group and theAMP Capital Group have eachseconded experienced staff withexpert knowledge of, andexperience in, the energy utilitysector to the DUETmanagement team, and willsupply other resources to theresponsible entities as required.

AMP Capital is the preferredadviser for debt and debtadvisory work in relation tocertain assets owned by DUET,and Macquarie and MacquarieEquity Capital Markets Limitedare the preferred advisers foracquisitions/divestitures andadditional equity raising,respectively, in relation to DUET.

Notes

1. Falling to 60% as calls are

made on partly paid equity.

Multinet Group

DUET stapledsecurity holders

AMPCI

AGN GroupUED Group DBP Group

7.7% 66.0% 79.9% 25.9% 71.8%1

Duquesne Light

POWERS Trust

POWERS holders

as at 31 August 2006

DUET structure

DIHL

RE1 (manager) RE2 (responsible entity)

DUET 1 DUET 2


FundingThe funding structure of DUETand the ranking of variousstakeholders in its existingassets are illustrated in thediagram below.

The POWERS Trust has lentfunds to DUET 1 and DUET 2under the First OnlendingAgreements (FOLAs). DUET 1and DUET 2, in turn, have onlentthese funds to the asset holdingcompanies under the SecondOnlending Agreements (SOLAs).

Senior lenders are paid interestand repaid principal as a firstpriority. Subject to paymentobligations and covenants owedto senior lenders being met,DUET 1 and DUET 2 receivedistributions from the assetholding companies viapayments of interest on theSOLAs and payments ofinterest and dividends on equitysecurities. In turn, DUET 1 andDUET 2 meets its paymentobligations to the POWERSTrust (and ultimately POWERSHolders) under the FOLAs.Once payment obligations to thePOWERS Trust are met, residualfunds are available to be paid asstapled security distributions.

Relationship of POWERS Trustwith DUETThe POWERS Trust, a sub-trustof DUET 1 and DUET 2, is aregistered managed investmentscheme which was establishedin June 2003 to raise$415 million for the purpose ofproviding financing to DUET 1and DUET 2. A subsequentissue of $155 million of POWERSwas made in December 2004 forthe purpose of providing fundingfor the acquisition of DUET’sinterest in the DBNGP. POWERSare preferred, cumulative,exchangeable, redeemable resetunits in the POWERS Trust.

There are two classes of units inthe POWERS Trust: POWERSordinary units (which arenot quoted on the ASX) andPOWERS, which are preferredunits of the POWERS Trust(which are quoted on the ASX).DUET 1 and DUET 2 own all thePOWERS ordinary units.

AMPCI is the responsible entityof the POWERS Trust. Underthe FOLAs the POWERS Trusthas onlent DUET 1 and DUET 2funds raised from the issueof POWERS. An amount of$405 million has been onlentto assist DUET 1 and DUET 2to provide shareholdersubordinated funding to eachof the UED, Multinet andAGN groups and $150 millionto provide shareholdersubordinated funding to the DBP Group.

DUET Managementand Structurecontinued

Proceeds of FOLA

Stapled securities

Subordinated debt

Senior debt

DUET stapled security holders

POWERS holders via POWERS Trust

Equity

Funds providers

Funds flow

DUET

Capital structure ofasset owing groups

Senior lenders

DUET’s funding structure

32 33Key features of the relationshipbetween the POWERS Trust andDUET are as follows:

Repayment of FOLAsThe ability of the POWERSresponsible entity to meet itsobligations to POWERS holders(including redemption on their10-year maturity) depends onpayments under the FOLAsbeing made by DUET 1 andDUET 2.

Exchange of POWERSPOWERS holders may requestthe POWERS responsible entityto exchange some or all of theirPOWERS by giving an exchangenotice in certain circumstances,including:

–on a POWERS reset date; or

–where an exchange eventoccurs.

An exchange event is theoccurrence of any of thefollowing events:

–termination of, or winding up of,the POWERS Trust or of DUET 1or DUET 2, change of control via an informal scheme ofarrangement of DUET 1 or DUET 2, sale by either of RE1 orRE2 of all or substantially all ofDUET’s assets, delisting ofPOWERS or acceleration of atleast two of the SOLAs if thereare outstanding POWERSdistributions; or

–non-payment of a POWERSdistribution for more than 20business days, a takeover ofDUET or delisting of DUET from ASX.

If the POWERS responsibleentity receives an exchangenotice it must, at its option, do one of the following:

–redeem the POWERS for thePOWERS redemption amountfor exchange, so that they maybe exchanged into DUETstapled securities;

–arrange a third party to acquirethe POWERS for the POWERSRedemption Amount; or

–redeem and cancel thePOWERS for the POWERSRedemption Amount.

To the extent that exchange inthe above circumstances resultsin the issue of stapled securities,the stapled securities will beissued at a discount of 5%(or as otherwise determined inaccordance with the POWERSTerms) to a volume weightedaverage price of stapledsecurities over a 20 businessday period preceding the dateof exchange (or other relevanttrigger date).

Distribution stopperWhilst any POWERS are stilloutstanding, payments ofinterest and principal to thePOWERS trust under the FOLAswill have priority over paymentof income and capital toInvestors. DUET cannot makeany cash distributions to DUETsecurity holders if POWERSdistributions have not been paidto POWERS holders.

SecurityDUET 1 and DUET 2 havegranted security over their loansto, and interests in, the assetholding companies to thePOWERS trust to secure itsloans under the FOLA.

Restrictions on issuersDUET has agreed to certainother restrictions. These includean obligation not to allow aprepayment of, or amendmentto, the SOLAs, or to waivecompliance with the SOLAsunless the POWERS responsibleentity has agreed.

TakeoverIf a takeover bid is made for thestapled securities DUET mustuse all reasonable endeavoursto ensure that there is anequivalent takeover offer madeto POWERS holders.


DUET is managed jointly (50:50)by AMPCH and Macquarie.

DUET’s management teamhas expert knowledge of, andexperience in, the energy utilitysector, and the responsibleentities will have access tothe combined infrastructureexpertise and investmentmanagement resources ofthe Macquarie Group and theAMP Capital Group.

Each of the responsible entitiesand DIHL has an experiencedboard of directors, a majorityof whom are independent fromDUET, the AMP Capital Groupand the Macquarie Group.

Philip is the AMPCH appointeddirector of the responsibleentities and DIHL, and is thechairman of each of thesecompanies. Philip is responsiblefor the overall infrastructurebusiness of AMPCI. He has over 20 years’ experience ininfrastructure development andinvestment, and was previouslychief executive officer of TenixInfrastructure.

Philip was also a long-term seniorexecutive with Lend LeaseCorporation, culminating inhis role as CEO of Lend LeaseCapital Services, thedevelopment capital andinfrastructure investment anddevelopment arm of Lend Lease.He also spent two years inSingapore implementingthe company’s Asianinfrastructure strategy.

Philip is a director of theAustralian Council forInfrastructure Developmentand is a member of the BartonGroup, a Federal Governmentinitiated group aimed atdeveloping the Australianenvironment industry. He isalso a director of severalinfrastructure companies inwhich AMPCI invests, includingthe RiverCity Motorway Group,and of SCEGGS Darlinghurstschool. Philip holds theAdvanced Diploma from theAustralian Institute of CompanyDirectors.

Directors’ Profiles Philip Garling B.Build FAIB, FAICD, FIE (Aust), AFAIMChairmanAMPCI Macquarie InfrastructureManagement No. 1 LimitedAMPCI Macquarie InfrastructureManagement No. 2 LimitedDUET Investment HoldingsLimited

34 35

John Roberts joined Macquariein 1991. He is based in Sydneyand is the global head of theInvestment Banking Groups’Funds business and joint headof Macquarie’s CorporateFinance division. Prior to hisreturn to Sydney in 2003, Johnled the Infrastructure Fundsgroup in London and wasresponsible for Macquarie’sInvestment Banking Groupactivities in Europe, as wellas being head of Macquarie’sLondon office. John is currentlya member of several Investmentcommittees and boards ofMacquarie-managed vehicles.

Michael served in the AustralianParliament for 17 years, andheld a number of senior positionsin both government andopposition. He was Ministerfor Tourism, Communicationsand the Arts in the Keatinggovernment. He is currently acouncillor of the City of Sydney,and a director of MacquarieAirports (appointed 2003),Country Energy (appointed 2002),and of Michael Lee ConsultingPty Limited. He is alsochairman of the Central CoastCampuses Board.

Douglas has broad financialand general managementexperience as a chief executiveofficer, chief financial officerand senior executive. Doughas worked in financial services,publishing and media, IT andmanufacturing sectors withorganisations including NVPhilips (in Australia, UK andthe Netherlands), Hill SamuelAustralia, NM Rothschild & SonsAustralia, Goodman Fielder,John Fairfax Holdings,IBM Global Services andthe Thomson Corporation.He has considerable experiencein strategy and corporatedevelopment plus large-scaleacquisitions and financing.He also has broad experience inbusiness development in China,Japan and South East Asia.Doug is currently chairman ofMikoh Corporation Ltd and adirector of the Cape Grim WaterCompany, SISS21 and FindEngine Australia as well asbeing retained by several largeprivate companies in anadvisory capacity.

John RobertsLLBDirectorAMPCI Macquarie InfrastructureManagement No. 1 LimitedAMPCI Macquarie InfrastructureManagement No. 2 LimitedDUET Investment HoldingsLimited

The Hon. Michael Lee BSc, BEng (Hons1), FIE (Aust)Independent director AMPCI Macquarie InfrastructureManagement No. 1 Limited

Douglas James HalleyBCom, MBAIndependent directorAMPCI Macquarie InfrastructureManagement No. 1 LimitedDUET Investment HoldingsLimited

Emma’s operational utilitiesexperience includes assetmanagement, stakeholdermanagement (regulators,consumer watchdogs, andgovernments), internationalbusiness operations, strategydevelopment andimplementation, acquisitionintegration, separation andchange management. Emma isa non-executive director of ARCEnergy (a Perth Basin oil and gasexploration and productioncompany), Integral Energy andthe Growth CentresCommission. Formerly, shewas a non-executive directorof Merlin Petroleum Limited(an Australian oil and gasexploration and productioncompany) and its wholly ownedsubsidiary Merlin Energy and aUK non-executive director forCofathec Heatsave Ltd and anexecutive UK board director forGaz de France Energy. Emma isalso a member of the Strategyand Resources boardcommittee of the University ofWestern Sydney and a NSWAmbassador for the Guides.

Ron is principal and chiefexecutive of Finlay Consulting.He has over 30 years’experience in property,construction, development andinfrastructure projects, includingas project manager or facilitatorof major infrastructure projectsin Australia and overseas forboth public and private sectororganisations. Ron is currently adirector and company secretaryof BAA Australia Pty Ltd (holderof significant interests in airportsin Melbourne, Launceston, Perthand the Northern Territory) anddirector and chair of the NewSouth Wales TransportInfrastructure DevelopmentCorporation. Ron has beeninvolved in major localgovernment PPP projects for thecouncils in both Liverpool andParramatta. He has also servedon various public and privatesector boards including theDarling Harbour Authority andthe Central Sydney PlanningCommittee. Ron was themanaging partner of CorrsChambers Westgarth from 1990until 1993, having practised as asolicitor and partner with the firmsince 1976.

Directors’ Profilescontinued

Emma Stein BSc Hons Physics, MBAIndependent director AMPCI Macquarie InfrastructureManagement No. 1 LimitedDUET Investment HoldingsLimited

Ron FinlayLLB Independent director AMPCI Macquarie InfrastructureManagement No. 2 LimitedDUET Investment HoldingsLimited

36 37

Eric joined the Lend LeaseGroup in 1963 as a cadetengineer and during his 42-yearcareer with Lend Lease held anumber of senior executive andsubsidiary board positions in theAustralian Operations. Eric hasextensive experience in design,construction and projectmanagement, generalmanagement and investmentand funds management. Ericmanaged the MLC PropertyPortfolio during the 1980s andwas the founding Fund Managerof Australian Prime PropertyFund. Eric is a director ofMacquarie Global Property FundAdvisors, the GPT Group andEureka Funds Management. He is also a council member ofthe Aloysius College Council.

Duncan has broad experiencein the mining, metals and autoindustries where his focus areasincluded mergers, acquisitionsand divestments, businessanalysis and corporate planning.Duncan was a member of thesenior management teams atFord and Chrysler until 1979within the finance, marketingand production divisions inBrazil, Argentina, Australia andEurope. In 1980 Duncan joinedCRA Limited, and was mostrecently responsible foracquisitions and divestments,corporate strategy and businessdevelopment. After CRA mergedwith RTZ in 1995, Duncanbecame managing director,energy developments, in the re-named Rio Tinto, responsiblefor the management ofacquisitions and divestments.Duncan is currently a directorof the responsible entities ofthe trusts comprised in theMacquarie Global InfrastructureFund and a director ofHaileybury College, Melbourne.

Christine is a qualified solicitorand has worked in the bankingindustry for 23 years, including14 years in funds managementperforming a general counsel/company secretarial andcompliance function for listedand wholesale infrastructureand other specialised fundsmanaged by the MacquarieBank Group.

Eric GoodwinBEng, MIE (Aust) Independent director AMPCI Macquarie InfrastructureManagement No. 2 Limited

Duncan SutherlandBA, MBA Independent directorAMPCI Macquarie InfrastructureManagement No. 2 Limited

Christine WilliamsMA, LLB (Syd)Company secretary

Legal frameworkDUET is a triple stapledstructure. The entitiescomprised in DUET are twoAustralian registered managedinvestment schemes and anAustralian public company:

– DUET 1;

– DUET 2; and

– DUET Investment HoldingsLimited (DIHL).

The units of DUET 1 and DUET 2 and DIHL shares arestapled together and quotedas one on the Australian StockExchange. As a result thesecurities cannot be tradedseparately.

RE1 and RE2 are theresponsible entities (each aResponsible Entity) of DUET 1and DUET 2 respectively. TheResponsible Entities are owned50% by AMPCH and 50% by Macquarie BankLimited. Currently the onlybusiness of the ResponsibleEntities is to manage DUET. The Responsible Entities areresponsible for the overallcorporate governance of DUETand the protection ofunitholders’ interests.

DIHL is an Australian publiccompany advised by RE1 in itspersonal capacity. Under theterms of the ManagementServices Agreement appointingRE1 as manager, RE1 makesrecommendations to DIHLin respect of prospectiveinvestments and advises onthe day-to-day business affairsof DIHL.

The Corporations Act, ASXListing Rules, the DUETconstitutions, the shareholders’agreement between AMPCHand Macquarie Bank Limitedand the general law regulate theworkings of DUET and theessential practices,responsibilities and duties of theResponsible Entities and theirofficers. The ResponsibleEntities must exercise theirfunctions diligently and in thebest interests of unitholders.

The Responsible Entities/Manager and their officersmanage the assets of DUETand are responsible for allinvestment decisions withabsolute discretion as to theexercise of the ResponsibleEntities’/Manager’s powers in accordance with the DUETconstitutions and theCorporations Act.

The Responsible Entities/Manager also undertake theadministrative functions ofDUET including preparation of DUET 1 and DUET 2 andDIHL financial statements andDUET consolidated financialstatements, preparation ofnotices and reports to membersand monitoring of registryservices provided byComputershare InvestorServices Pty Limited (ABN 48 078 279 277) and custodialservices provided by TrustCompany of Australia Limited(ABN 59 004 027 749) (inrespect of DUET 1) andPerpetual Trustee CompanyLimited (ABN 42 000 001 007)(in respect of DUET 2).

DIHL and the ResponsibleEntities (RE1 as responsibleentity of DUET 1 and in itspersonal capacity as managerof DIHL), have entered into aStapling Deed which governsco-operation, investment policyand the making of investments,capital raising, borrowings,financial reporting, continuousdisclosure and certain otheradministrative matters for thestapled entities with a view toensuring consistency in themanagement of DUET.

The Macquarie and AMPgroups have each secondedexperienced staff with expertknowledge of, and expertise in,the energy utility sector to theDUET management team andprovide other resources to theResponsible Entities/Manager.

DUET was restructured inAugust 2006 to include DIHLas the third stapled entity byway of an in-specie distribution.The corporate governancestructure for RE1 and RE2 haveessentially been replicatedby DIHL. This corporategovernance statement hasbeen prepared for therestructured DUET Group but itapplies equally to the situationwhere DUET was a dual stapledstructure during 2006.

Corporate GovernanceStatement

38 39DUET’s approach tocorporate governanceThe boards are committed toDUET seeking to achievesuperior financial performanceand long-term prosperity, while meeting stakeholders’expectations of sound corporategovernance practices. Thisstatement outlines DUET’s maincorporate governance practicesas at 30 June 2006. Unlessotherwise stated, they reflectthe practices in place throughoutthe financial year ending onthat date.

The boards determine thecorporate governancearrangements for DUET. As withall its business activities, DUETis proactive in respect ofcorporate governance and putsin place those arrangementswhich it considers are in the bestinterests of DUET and itsunitholders and consistent withits responsibilities to otherstakeholders. It actively reviewsAustralian and internationaldevelopments in corporategovernance.

ASX Corporate GovernanceStandardsThe ASX Corporate GovernanceCommittee has CorporateGovernance Principles andBest Practice Recommendations(the Standards) which aredesigned to maximise corporateperformance and accountabilityin the interests of shareholdersand the broader economy.The Standards encompassmatters such as boardcomposition, committeesand compliance procedures.

Details of the Standards can be viewed at:www.asx.com.au/supervision/governance/index.htm. TheStandards are not prescriptive,however listed entities (includingDUET) are required to disclosethe extent of their compliancewith the Standards, and toexplain why they have notadopted a Standard if theyconsider it inappropriate in their particular circumstances.

DUET’s corporate governancepolicies are consistent with the Standards, except whenspecifically stated in thisstatement.

DUET CorporateGovernance StatementPrinciple 1:Lay solid foundations formanagement and oversightResponsibility for corporategovernance and the internalworkings of DUET rests with theResponsible Entities and DIHL.The board of each ResponsibleEntity and DIHL has adopted a formal charter of directors’functions and matters to bedelegated to management.

These charters are anenhancement of boardresponsibilities previouslydisclosed in DUET CorporateGovernance Statements, havingregard to the recommendationsin the Standards.

An outline of the board charterfor the DUET entities is set outbelow:

– Setting objectives, goals andstrategic direction formanagement, with a view tomaximising investor wealth.

– Monitoring the implementationof the principal investmentpolicy of DUET 1, DUET 2 andDIHL in respect of investments.

– Approving and monitoring theprogress of major capitalexpenditure, capitalmanagement and acquisitionsand divestures.

– Adopting an annual budget.

– Approval of the shareholdernominated Chief ExecutiveOfficer (CEO) and review of theperformance of the CEO and,where appropriate, removing the CEO.

– Approval of the shareholdernominated Chief FinancialOfficer (CFO) and the ChiefOperating Officer (COO) andparticipating in the review of theperformance of the CFO andCOO and, where appropriate,removing the CFO and COO.

– Appointing and removing thecompany secretary.

– Monitoring seniormanagement’s performance andimplementation of strategy, andensuring appropriate resourcesare available.

– Reviewing and ratifying systemsof risk management, complianceand codes of conduct.

– Approving and monitoringfinancial and other reporting.

– Setting the highest businessstandards and codes for ethicalbehaviour.

Full board meetings are heldregularly and at least bi-monthly,and other meetings are called asrequired. Directors are providedwith board reports in advance ofboard meetings, which containsufficient information to enableinformed discussion of allagenda items.

Each non-executive director of the Responsible Entities andDIHL has received a letter ofappointment which details thekey terms of their appointment.This letter includes all of therecommended matters in theStandards.

What you can find on ourwebsite www.duet.net.au:

– a summary of the RE1, RE2 and DIHL Board Charters.


Corporate GovernanceStatementcontinued

Principle 2:Structure the board to add value

1.CompositionAMPCI Macquarie Infrastructure Management No. 1 Limited board of directors is comprised as follows1:

Philip Garling – ChairmanExecutive (appointed by AMPCH – 17 February 2004)Director and Chairman

John Roberts – DirectorExecutive (appointed by Macquarie – 14 May 2004)Director

Michael Lee – DirectorIndependent (appointed 16 June 2004)Director

Doug Halley – DirectorIndependent (appointed 13 February 2006)Director

Emma Stein – DirectorIndependent (appointed 16 June 2004)Director

AMPCI Macquarie Infrastructure Management No. 2 Limited board of directors is comprised as follows1:

Philip Garling – ChairmanExecutive (appointed by AMPCH – 17 February 2004)Director and Chairman

John Roberts – DirectorExecutive (appointed by Macquarie – 14 May 2004)Director

Ron Finlay – DirectorIndependent (appointed 16 June 2004)Director

Eric Goodwin – DirectorIndependent (appointed 16 June 2004)Director

Duncan Sutherland – DirectorIndependent (appointed 16 June 2004)Director

DUET Investment Holdings Limited board of directors is comprisedas follows1:

Philip Garling – ChairmanExecutive (appointed by RE2 – 29 June 2006)Director and Chairman

John Roberts – DirectorExecutive (appointed by RE1 – 29 June 2006)Director

Doug Halley – DirectorIndependent (appointed by RE2 – 29 June 2006)Director

Emma Stein – DirectorIndependent (appointed by RE1 – 12 July 2006)Director

Ron Finlay – DirectorIndependent (appointed by RE1 and RE2 – 4 August 2006)Director

Notes

1. Profiles of these directors,

are on pages 30 to 33 of

this report.

40 41


2.Appointment to the boards of the DUET EntitiesThe following has been adoptedby the boards in relation toboard membership:

– Each Responsible Entity boardcomprises one directorappointed by AMPCH, onedirector appointed by Macquarieand three independent directors.The AMP Capital and Macquarieappointees are on the board ofeach Responsible Entity.Different independent directorsare on the board of eachResponsible Entity.

Under the DIHL Constitution,RE1 in its personal capacity hasbeen issued with an A SpecialShare (and has rights underthe Management ServicesAgreement) which entitles itto appoint the directorsconstituting up to 40% of theDIHL board. RE2 as responsibleentity of DUET 2 has been issuedwith a B Special Share whichentitles it to appoint director(s)constituting up to 40% of theDIHL board. RE1 and RE2 (intheir capacity as responsibleentity of DUET 1 and DUET 2respectively) have each beenissued with a C Special Share,which entitles them to jointlyappoint director(s) constitutingup to 20% of the DIHL board.Further details are provided onpage 42 of this report.

– Each board is to comprise amaximum of five directors.

– Each independent director mustsatisfy the independence criteria(summarised below).

– Each board is to be comprisedof directors with an appropriaterange of qualifications andexperience.

– Any nominee of AMPCH orMacquarie may be removed by AMPCH or Macquarie,respectively.

– To ensure the board has thebenefit of regular new input and to avoid the potential forloss of objectivity over time,independent directors will retireafter nine years.

– The chairperson of each boardwill be the nominee directorappointed by AMPCH for thefirst three years fromestablishment of DUET andthereafter on each thirdanniversary the chairperson may be rotated such that theshareholder appointing thechairperson is not theshareholder appointing theDUET CEO. The shareholderappointing the chairperson will ensure that the person is of appropriate stature to act as chairperson.

The importance of havingappropriately independentdirectors determined byobjective criteria isacknowledged as beingdesirable to protect investorinterests and optimise thefinancial performance of DUETand returns to investors.

In determining the status of adirector, the shareholders andboards of the ResponsibleEntities have adopted thefollowing standards ofindependence.

An independent director is a director of the ResponsibleEntity or DIHL who is not amember of management (a non-executive director) andwho qualifies as an externaldirector in accordance withChapter 5C of the CorporationsAct and who meets the following criteria:

– Is not a substantial shareholderof Macquarie, AMP Limited(AMP), DUET or a companyholding more than 10% of thevoting securities of Macquarie,AMP or DUET.

– Is not an officer of, or otherwiseassociated directly or indirectlywith, a substantial shareholderof the Responsible Entity or asubstantial shareholder holdingmore than 10% of the votingsecurities of Macquarie, AMP or DUET.

– Has not, within the last threeyears, been:

– employed in an executivecapacity by the ResponsibleEntity, DIHL, a MacquarieGroup entity or an AMP Groupentity; or

– a director of any such entityafter ceasing to hold any suchemployment.

– Is not a principal or employee of a professional adviser to theResponsible Entity, DIHL, DUET,Macquarie, AMP or other fundsmanaged by the MacquarieGroup or the AMP Group orwhere billings, in aggregate,exceed 5% of the adviser’s or consultant’s total revenues.

(A director who is a principal or employee of a professionaladviser will not participate in anyconsideration of the possibleappointment of the professionaladviser and will not participate in the provision of any service by the professional adviser to DUET 1 or DUET 2, theMacquarie Group or the AMP Group.)

– Is not a significant supplier orcustomer of the ResponsibleEntity, DIHL, DUET, theMacquarie Group, the AMPGroup or other funds managedby the Macquarie Group or theAMP Group, or an officer of orotherwise associated directly or indirectly with, a significantsupplier or customer.

(A significant supplier is definedas one whose revenues fromDUET, the Macquarie Group,the AMP Group and other fundsmanaged by the MacquarieGroup or the AMP Group exceed5% of the supplier’s totalrevenue. A significant customeris one whose amounts payableto DUET, the Macquarie Group,the AMP Group and other fundsmanaged by the MacquarieGroup or the AMP Group exceed5% of the customer’s totaloperating costs.)

– Has no material contractualrelationship with RE1, RE2,DIHL, or the Macquarie Groupor the AMP Group other thanas a director of RE1 or RE2 or a director of another MacquarieGroup or AMP Group relatedresponsible entity and/or specialpurpose vehicle board.

– Is not a director of more thantwo Macquarie Group or twoAMP Group related responsibleentity or special purposevehicle boards.

– Has no other interest orrelationship that could interferewith the director’s ability to actin the best interests of theResponsible Entity, DIHL,DUET, and independently frommanagement of the MacquarieGroup and the AMP Group.

The standards of independencewhich have been applied aresubstantively similar to, but arenot the same as, those whichare suggested in the Standards.The principal area of differenceis that the criteria are designedto achieve independence fromboth DUET, the AMP Group and the Macquarie Group. The directors believe that theadoption of these independencecriteria better reflects the truenature of independence in thepresent circumstances anddoes not materially prejudiceunitholders.

The following guidelines applyto director selection andnomination:

– Integrity;

– Particular expertise (sector andfunctional) and the degree towhich they complement the skill set of the existing boardmembers;


– Reputation and standing in the market; and

– In the case of prospectiveindependent directors actual (as prescribed by the abovedefinition) and perceivedindependence from theMacquarie and AMP Groups.

The boards have not appointeda nomination committee. Theboards do not consider such a committee appropriate incircumstances where there areonly two shareholders and it hasadopted independence criteriaset out above. It is consideredthat this process is sufficientlytransparent to justify notappointing a nominationcommittee.

DIHL Special SharesThe procedure for appointing the board of DIHL reflects theinherent requirements of thestapling which exists betweenshares in DIHL and units inDUET 1 and DUET 2 and theManagement ServicesAgreement (between DIHLand RE1).

As noted above, under the DIHLConstitution, RE1 in its personalcapacity has been issued withan A Special Share (and hasrights under the ManagementServices Agreement) whichentitles it to appoint the directorsconstituting up to 40% of theDIHL board. RE2 as responsibleentity of DUET 2 has beenissued with a B Special Sharewhich entitles it to appointdirector(s) constituting up to40% of the DIHL board. RE1 and RE2 (in their capacity asresponsible entity of DUET 1 andDUET 2 respectively) have eachbeen issued with a C SpecialShare, which entitles them tojointly appoint director(s)constituting up to 20% of theDIHL board.

None of the A, B, or C SpecialShares has any economicinterest, which means that theholders of those shares are notentitled to any dividends and are only entitled to the paid upcapital of those shares on awinding up of DIHL.

Of the present DIHL board:

– the RE1 appointed directors areJohn Roberts and Emma Stein;

– the RE2 appointed directors arePhil Garling and Doug Halley;

– the RE1 and RE2 jointlyappointed director is Ron Finlay.

The rationale for this approach is that in the stapled structure:

(i) The provisions of the staplingdeed between RE1 (asresponsible entity of DUET 1and manager of DIHL), RE2 (as responsible entity of DUET 2)and DIHL, and also the practicaloperation of the boards of theResponsible Entities and DIHL,are designed to ensure that thereis consistent management andimplementation across each ofthe three entities whichcomprise the DUET Group.

(ii)The DIHL board has a sufficientquorum of independentdirectors to vote on transactionswith MBL Group and AMPGroup companies.

(iii)Under the Corporations Act (in respect of RE1 and RE2 asresponsible entity) and theManagement ServicesAgreement if security holders are not satisfied with theperformance of the ResponsibleEntities and manager, RE1, theycan be removed by ordinarysecurity holder resolution.

3.ChairmanThe initial chairman of eachboard is Philip Garling. Philip isan executive of AMPCH and thedirector appointed by AMPCH,and as such does not satisfy theindependence recommendationof the Standards. The jointventure arrangements requirethe Responsible Entities’Chairman to be an executiveChairman given DUET 1 andDUET 2 are externally managedtrusts and Macquarie andAMP branded.

In June 2007 and on eachsubsequent third anniversary,the right to appoint the chairmanwill be rotated between AMPCHand Macquarie so that the partywho has not appointed theincumbent chairman mayappoint the chairman for thenext three years, provided theCEO is also rotated.

The appointing shareholder isrequired to ensure that thechairman is of appropriatestature for a listed entity.

The Board Charters for each ofthe Responsible Entities providethat all independent directorswill meet at least once per yearin the absence of managementand at other times as theydetermine.

4.Independent professionaladviceThe directors of the ResponsibleEntities and DIHL are entitled toobtain independent professionaladvice at the cost of the relevanttrust subject to the estimatedcosts being first approved by the chairman as reasonable.

42 43


Principle 3:Promote ethical andresponsible decision makingDirectors of the ResponsibleEntities and DIHL, and allseconded staff, contractors andconsultants of the ResponsibleEntities and DIHL, performingwork for DUET, are required toact in accordance with the DUETCode of Conduct (Code)adopted by the board of eachResponsible Entity and DIHL.The Code is based on the Codeof Conduct established byMacquarie. The Code sets outprinciples and standards for thedirectors and executives inrespect of practices necessaryto maintain confidence inDUET’s integrity, and theresponsibility and accountabilityof individuals for reporting andinvestigating reports of unethicalbehaviour. The Code includeswhistleblower, anti-corruptionand dealing with governmentsand anti-money launderingpolicies. The Code alsoencompasses principles forcompliance with legal and otherobligations to DUET’sstakeholders, including securityholders, employees, customers,and the broader financial andother communities in whichDUET operates.

The Code of Conduct isperiodically reviewed andupdated and the updated codeadopted by the ResponsibleEntity and DIHL boards. TheCode is distributed to alldirectors and staff andreinforced at induction andother training programs.

A policy on securities dealings is in place under which directorsof the Responsible Entities, DIHL and staff involved in themanagement of DUET arerestricted in their ability to deal in DUET securities. Securitytrading by DUET directors,officers and staff is permittedonly during four week specialtrading windows following therelease of DUET’s half-yearlyand yearly financial results andfollowing the annual generalmeeting or lodgement with ASIC and ASX of a disclosuredocument for a capital raising.

When trading cannot takeplace during the tradingwindows following resultsannouncements, pendingdisclosure of significanttransactional activity beingundertaken by DUET, a specialfour-week trading window mayapply following an ASX releasein respect of the transaction.

Special arrangements will applyfor the trading by associates ofthe Responsible Entities andDIHL of DUET securities issuedin connection with performancefees. Standing instructions mustbe given to a Macquarie Groupbroker during a designateddirectors and staff tradingwindow to sell at above adesignated price with thetrade to take place at any timein accordance with theinstructions. Any instructionsgiven will be on the basis thatChinese Walls are operatingwith the broker at all timesduring the currency of theinstruction. Alternatively, thesecurities will be placed in ablind trust with an externalbroker during a trading windowwith irrevocable instructions tosell at above a designated pricewith the trade to take place atany time in accordance withinstructions.

What you can find on ourwebsite:

– a summary of the Code ofConduct; and

– a summary of the mainprovisions of the securities(windows) trading policy.

Principle 4:Safeguard integrityin financial reporting

1. Audit and Risk CommitteesEach of the Responsible Entitiesand DIHL has appointed anAudit and Risk Committeecomprising only independentdirectors and complying with therequirements of the Standards.They are currently comprisedas follows:

AMPCI Macquarie InfrastructureManagement No. 1 LimitedAudit and Risk Committee:

Doug Halley – Director(Committee Chairman)Independent (attended two of three meetings held – appointed 13 February 2006)

Michael Lee – DirectorIndependent (attended two of three meetings held)

Emma Stein – DirectorIndependent(attended three of three meetings held)

AMPCI Macquarie InfrastructureManagement No. 2 LimitedAudit and Risk Committee:

Duncan Sutherland – Director(Committee Chairman)Independent (attended three of three meetings held)

Ron Finlay – DirectorIndependent (attended three of three meetings held)

Eric Goodwin – DirectorIndependent(attended three of three meetings held)

DUET Investment HoldingsLimited Audit and RiskCommittee:

Doug Halley – Director(Committee Chairman)Independent

Emma Stein – DirectorIndependent

Ron Finlay – DirectorIndependent

DIHL held no meetings as at30 June 2006 (as it was onlyincorporated on 29 June 2006).The qualifications of the membersof the Audit and Risk Committeecan be found on the DUETwebsite and later in this report.

2.Audit and RiskCommittee ChartersIn establishing their Auditand Risk Committees, theResponsible Entities and DIHLhave each established a charterwhich sets out each Audit andRisk Committee’s role,responsibilities, composition,structure and membershiprequirements. The charter is thesame for each of the companies.

The responsibilities of the Auditand Risk Committee under eachcharter are to:

– Review and report to the boardson the financial statements andrelated notes, and on theexternal auditor’s audit of thefinancial statements and thereport thereon.

– Recommend to the boards theappointment and removal of theexternal auditors, review theterms of their engagementincluding arrangements for therotation of external auditpartners, and the scope andquality of the audit.

– Monitor auditor independence.The Audit and Risk Committeemeets with the external auditorsat least twice a year and morefrequently if required.


Details of the risk monitoringduties of the Audit and RiskCommittee, together witha discussion of auditorindependence, are set out in thePrinciple 7 commentary below.

3.Senior Executive ReportingEach Responsible Entity andDIHL requires representationletters from the CEO (orequivalent) and the CFO (orequivalent) in relation to thefinancial statements of eachentity and the consolidatedDUET financial statements.The letters are required to state:

a. The financial reports of eachof DUET 1, DUET 2, DIHL andthe consolidated financialstatements of DUET as the casemay be, present a true and fairview, in all material respects,of the relevant entity’s financialcondition and operational resultsand are in accordance withrelevant accounting standards.

b.The statement given inparagraph (a) is founded on a sound system of riskmanagement and internalcompliance and control whichimplements the policies adoptedby the relevant board.

c. The relevant company’s riskmanagement and internalcompliance and controlsystems, to the extent that theyrelate to financial reporting, areoperating effectively at 30 June2006, in all material respects.

The statements provide areasonable, but not absolute,level of assurance and do notimply a guarantee againstadverse events or more volatileoutcomes arising in the future.

The CEO of DUET is Peter Barry.

The COO of DUET is David Bartholomew.

The CFO of DUET is Bruce Berry.

Directors of the ResponsibleEntities and DIHL haveresponsibility for signing theconsolidated DUET financialstatements on behalf of DUET 1,DUET 2 and DIHL andaccordingly the DUET CEO andCFO provide representationletters for the consolidatedfinancial statements.


– the Audit and Risk CommitteeCharters for DUET; and

– procedures for selection andappointment of the externalauditor and for rotation ofexternal audit engagementpartners.

Principle 5:Make timely and balanced disclosureIt is DUET’s policy to providetimely, open and accurateinformation to all stakeholders,including stapled securityholders, regulators and the widerinvestment community. Underthe terms of the Stapling Deed,DUET 1, DUET 2 and DIHL areobliged to exchange relevantinformation and co-ordinate ASXreleases and financial reporting.

Each of the Responsible Entitiesand DIHL has developedpolicies and procedures (whichare part of the communicationspolicy referred to below) inrelation to disclosure andcompliance with ASX ListingRules disclosure requirements.

The procedures include dealingwith potentially price sensitiveinformation which includesreferral to the CEO and companysecretary/general counsel for adetermination as to disclosurerequired. The ASX liaison personis the Responsible Entities’ and DIHL’s company secretary.


– a summary of policies andprocedures in relation todisclosure adopted by theResponsible Entities.

Principle 6:Respect the rights of shareholdersDUET has developed a securityholder communications policy.The cornerstone of this policy is the delivery of timely andrelevant information asdescribed below.

Stapled security holders receivean annual report and financialstatements and a half-yearlyupdate which keep theminformed of DUET’sperformance and operations.Newsletters may also be sent to stapled security holders fromtime to time.

DUET’s policy is to lodgemarket-sensitive informationwith the ASX and place suchinformation on its website,including annual and interimresult announcements andanalyst presentations, as soonas practically possible. DUET’swebsite (www.duet.net.au)includes recent announcements,presentations, past and currentreports to security holders,answers to frequently askedquestions and a summary of keyfinancial data since inception.Investors may also register toreceive email copies of DUET’ssignificant ASX announcements.

44 45


Domestic investor roadshowsare held regularly throughoutAustralia. Internationalroadshows are also held forinstitutional unitholders. Wherethey contain new information,analyst and roadshowpresentations are released to the ASX and included on theDUET website.

DUET also produces an analystpackage which is updatedannually. This comprehensiveguide aims to providetransparency of DUET’sinvestments and structure. The analyst package is availableon request and consists of afinancial modelling tool thatsummarises the historicalfinancial performance of theunderlying investments of DUET.

Meetings of the three DUETentities are convened at leastonce a year, usually in lateOctober or early November. Inthe case of DUET 1 and DUET 2,which are not required under the Corporations Act to hold an AGM, these will be informalannual meetings unless there is formal business to beconsidered. An AGM for DIHLwill be held at the same time.

Presentations by the Chairmanand CEO at the investormeetings are webcast.

For formal meetings anexplanatory memorandum onthe resolutions is included withthe Notice of Meeting. Unlessspecifically stated in the Noticeof Meeting, all DUET stapledsecurity holders are eligible tovote on all resolutions. In theevent that DUET stapledsecurity holders cannot attendformal meetings they are ableto lodge a proxy in accordancewith the Corporations Act. Proxyforms can be mailed, emailed or lodged by facsimile.

The auditor attends unitholdermeetings and is available toanswer unitholder questions.

What you can find on our website:

– a description of thearrangements DUET has topromote communication withsecurity holders.

Principle 7:Recognise and manage riskThe Responsible Entities andDIHL have formalised riskmanagement policies.Compliance with these policiesis monitored by each board’sAudit and Risk Committee.

Risks are managed through the risk management frameworkin place and include:

– Investment risk.

– Regulatory and reporting risks.

– Financial risks (such as liquidity,interest rate, currency,investment, credit).

– Legal risk (such as contractenforceability, covenants,litigation).

– Compliance risk.

– Operational risks (such aspeople, processes,infrastructure, technology,systems outsourcing andgeographic coverage).

– Environmental and socialresponsibilities including OH&S risks.

– Project risks.

– Asset performance risks.

– Reputation risks (such asinvestor relations, mediamanagement).

– Strategic risks.

As part of its risk monitoringduties each Audit and RiskCommittee is required to:

a.Enquire of management, and the external auditor, aboutsignificant risks or exposuresand assess the stepsmanagement has taken tominimise such risks to DUET.

b.Consider and review with theexternal auditor:

– the adequacy of DUET’sinternal controls includingcomputerised informationsystem controls and security.

– any related significant findingsand recommendations of theexternal auditor on the matterof internal controls togetherwith management’s responsesthereto.

c.Monitor and review (at leastannually) the effectiveness of DUET’s operational riskmanagement framework and compliance with key riskmanagement policies.

d.Review the scope of any internalaudit to be conducted and theindependence of any internalaudit team.

The Responsible Entities andDIHL are subject to periodicreview conducted by Macquarieand AMP Operational RiskReview (internal audit) area.

The Responsible Entities andDIHL require representationletters from management (see Principle 4 – Paragraph 3) to address risk managementand internal controls.

The Audit and Risk Committeehas adopted a policy whichincludes the following to ensurethe independence of theexternal auditor:

– the external auditor must remainindependent from the DUETGroup at all times and mustcomply with ProfessionalStatement F.1 pertaining tofinancial independence, andbusiness and employmentrelationships;

– the external auditor mustmonitor its independence andreport to the board every sixmonths that it has remainedindependent;

– significant permissible non-auditassignments awarded to theexternal auditor must beapproved in advance by theAudit and Risk Committee (or itsChairman between meetings);

– all non-audit assignments areto be reported to the Audit andRisk Committee every sixmonths; and

– the DUET audit engagementpartner and review partner mustbe rotated every five years.

The auditor attends DUETannual general meetings andis available to answer securityholder questions on the conductof the audit, and the preparationand content of the auditor’sreport.

What you can find on our website:

– a description of DUET’s riskmanagement policies andframework;

– a description of DUET’s auditorindependence policy; and

– a description of DUET’senvironmental and social(including OH&S) responsibilitymanagement policy.

Principle 8:Encourage enhancedperformanceIn order to ensure that thedirectors and senior executivesof the Responsible Entities andDIHL are properly performingtheir duties, the ResponsibleEntities and DIHL haveimplemented the following:

– A formal annual performanceself-assessment of the Board,the Audit and Risk Committee,and individual directors.

– The DUET CEO is initially aMacquarie employee and theDUET CFO and COO are initiallyAMP Capital employees eachseconded to the ResponsibleEntities and DIHL as required.The CEO’s performance isassessed in September andMarch each year as part ofMacquarie’s formal employeeperformance evaluation processand the CFO and COO’sperformance are assessed aspart of AMPCI’s performanceappraisal process. In addition,the Responsible Entities’ boardsprovide annual feedback inrespect of each of these officersas part of their performanceappraisals.

– A formal induction programfor directors and executives.

– Access by directors andexecutives to continuingeducation to update andenhance their skills andknowledge.

The procedure for evaluationof each board’s performance is:

– Directors are given theopportunity to discuss individualperformance and feedback onperformance with the chairmanand the chairman speaks witheach director separately todiscuss individual performanceand the effectiveness of eachboard and board committeesas a whole.

– The boards as a whole discussand analyse board andcommittee performance duringthe year including suggestionsfor change or improvement,based on the chairman’sfeedback from his separatediscussions with each director.

Principle 9:Remunerate fairly and responsiblyA formal Remuneration Reportwith more details in respect ofthe following information canalso be found on page 84 of this report.

1.Remuneration of Directors and Executives RE1 in its capacity asresponsible entity of DUET 1 andmanager of DIHL, and RE2 in itscapacity as responsible entity ofDUET 2 are entitled to be paid afee for discharging theirmanagement functions.

One of the responsibilities of theResponsible Entities is to makeavailable employees (includingsenior executives) to dischargetheir obligations to DUET. Thismeans that DUET is not liable forexpenses referable to staff anddirectors. The independentdirector fees are paid by theResponsible Entities and DIHL in their personal capacity. Theyare not paid by DUET. In thecase of the Macquarie andAMPCH executive directors,remuneration earned inconnection with their roles asdirectors on the boards of theResponsible Entities are paidby Macquarie and AMPCHrespectively.

For the financial year ended 30 June 2006, the non-executivedirectors of the ResponsibleEntities were each entitled to adirector’s fee of $60,000 perannum.

Save as disclosed in theRemuneration Report, none of the Responsible Entities’ or DIHL’s directors, executivesor staff are entitled to DUEToptions or securities or toretirement benefits as part oftheir remuneration package.

DUET holds its investmentsthrough interests in specialpurpose project vehicles. Mostof these vehicles have their owninternal management which ispaid for at the vehicle level.Where Responsible Entity staffare required to serve as directorson the boards of these vehiclesor are seconded to them fromtime to time, any fees in respectof these arrangements are paidto DUET.

2.Remuneration of the ManagerUnder the terms of the DUETconstitutions and DIHLManagement ServicesAgreement, base andperformance fees are payableby DUET to the ResponsibleEntities.

The base fee is calculated as1% p.a. of the net investmentvalue of DUET at the end of eachquarter.

For the purposes of calculatingthe base fee, the net investmentvalue of DUET is:


46 47– the volume weighted averagemarket capitalisation over thelast 20 ASX trading days of eachquarter; plus

– borrowings; plus

– firm commitments for futureinvestments; less

– cash or cash equivalents.

A performance fee is payable byDUET half-yearly in arrears if theperformance of DUET stapledsecurities exceeds theperformance of the S&P/ASX200 Industrials AccumulationIndex (Benchmark Index) for the period, having made up for any underperformance inprevious years.

The performance fee is 20% ofthe return above the benchmarkreturn for the period.

Under the DUET constitutionsand DIHL Management ServicesAgreement, independentdirectors of the ResponsibleEntities and DIHL, acting in theinterests of DUET stapledsecurity holders, have thediscretion as to whether or notthe performance fee is appliedfor a subscription in new DUETstapled securities. The decisionwhether to accept or reject thatapplication will be made by theindependent directors acting inthe interests of DUET stapledsecurity holders. The issue pricefor the new DUET stapledsecurities is the volumeweighted average trading priceof all DUET stapled securitiestraded on the ASX during thelast 10 business days of therelevant financial year when theinstalment is paid.

The Responsible Entities arealso entitled to receive expensesand services fees. All expensesincurred by the ResponsibleEntities in relation to the properperformance of their duties inrespect of DUET are payable orreimbursable out of the assets of DUET to the extent that suchreimbursement is not prohibitedby the Corporations Act. This includes routine ongoingexpenses of DUET such as thecost of acquiring assets andmanaging them, as well asproduct disclosure statementcosts, registry, audit, insurance,compliance costs and other expenses.

3. Remuneration CommitteeThe boards of the ResponsibleEntities and DIHL do notconsider it necessary orappropriate to constitute a

remuneration committee.Given the payment of themanagement fee (and the fact that any change to thedetermination of that fee wouldrequire unitholder approval) and the Responsible Entity’sand DIHL’s lack of exposure to remuneration expenses, a remuneration committee is not justified.

Principle 10: Recognise the legitimateinterests of stakeholdersThe Code of Conduct adoptedby the Responsible Entities and DIHL (see Principle 3)establishes a code of conductwhich amongst other thingsaddresses matters relevant tothe Responsible Entity’s andDIHL’s compliance with its legalobligations to stakeholders.

The Code of Conduct coversthose areas which the boards of the Responsible Entities andDIHL consider relevant to theoperations of DUET. There is acompliance procedure in placeto ensure the Code of Conductis adhered to and a formalcomplaints handling procedurehas been implemented.


– a summary of the Code ofConduct.

Specific Issues related to DUETTransactions with Macquarieand AMP Group companiesMacquarie, AMPCH and theirrespective related entitiesundertake various transactionswith, and perform variousservices for, DUET from time to time. In particular, AMPCI has been appointed as financialadviser for debt and debtadvisory work in relation toDUET, and Macquarie Groupcompanies have beenappointed as financial advisersfor acquisitions/divestitures and additional equity raising in relation to DUET.

The Responsible Entities andDIHL have adopted protocolsto ensure that any transactionsbetween DUET and AMP orMacquarie Group companiesare not considered by theAMPCH or Macquarienominated directors. Anytransactions between DUETand AMP Group or MacquarieGroup companies must be onarm’s length terms and will bereviewed by the independentdirectors. Macquarie and/orAMPCH directors, as the casemay be, do not vote or, unlessinvited by the independent

directors, participate indiscussion on related partymatters.

All Macquarie Group and AMPGroup transactions involvingDUET and its controlled entitiesare tested by reference towhether they meet marketstandards. In particular, feesand mandate terms andconditions are subject to thirdparty review unless theindependent directorsdetermine otherwise on thebasis of appropriate marketinformation or practice.

Foreign exchange transactionswhere commissions to MBLGroup companies are less than$100,000 are transacted withreference to independent pricingchecks and arrangements andbenchmarked annually.However, in the case of foreignexchange transactions requiringstrict confidentiality, MBL mustbe used, subject to independentdirector approval.

Compliance CommitteeUnder the Corporations Actmanaged investments regime,the Responsible Entities arerequired to register aCompliance Plan for each trustwith the Australian Securitiesand Investments Commission(ASIC). The Compliance Plansoutline the measures undertakento ensure compliance with theCorporations Act and each trust constitution. It is theCompliance Committee’sresponsibility to monitor RE1and RE2’s compliance with theCompliance Plans and report itsfindings to the boards or ASIC if necessary.

The Compliance Committee iscurrently comprised as follows:

Ray KellermanChairman – External

Fiona Dixon – External

Peter Barry – Macquarie

Compliance officers have beenappointed to DUET and they areresponsible for reviewing andmonitoring the efficiency ofcompliance systems on anongoing basis so thatappropriate complianceprocedures, staff education and Compliance Committeereporting arrangements are in place to enable observanceof the Compliance Plans.


– the Compliance Plans for DUET 1 and DUET 2.


What are AIFRS?In 2002 the AustralianGovernment voted in favour of harmonising Australianaccounting standards withInternational Financial ReportingStandards, with effect from2005. Following this decision,the Australian AccountingStandards Board issued a newset of accounting standards,Australian equivalents toInternational Financial ReportingStandards (AIFRS). These arenow used by all Australianreporting entities in place of theprevious accounting standards(AGAAP). AIFRS has resulted intwo types of changes:

– changes in the bases on whichaccounts are prepared; and

– changes in the way individualbalances are measured.

The financial report for the yearended 30 June 2006 includesthe first set of full year financialstatements prepared underAIFRS. Comparative figurespresented in the financialstatements also comply with AIFRS.

What has this meant forDUET? Classifications of unitsUnits in DUET 1 and DUET 2were classified as financialliabilities between 1 July 2005and 30 June 2006 under AIFRS.The profit of DUET for thatperiod has been expressed as a financing cost. This meansthat in order to gain a consistentview of DUET’s result period on period, this financing costattributable to security holdersmust be added back to DUET’sreported profit.

Accounting for stapledgroupsUnder AIFRS, stapled groupsmust identify one of the stapledentities as the accountingparent. DUET has identifiedDUET 1 for this purpose.

Scope of impactThe adoption of AIFRS has not affected DUET’s businessstrategy, the underlying value of DUET and its assets, thecash flows of the group or thetax payable by DUET or DUET’sinvestors.

Guide to the Impact of AIFRS


DUET Concise financial reportYear ended 30 June 2006

Concise Financial

ReportYear ended 30 June 2006

48 49

Contents

Directors’ Report 50Auditor’s Independence Declaration 55Income Statement 56Balance Sheet 57Statement of Changes in Equity 58Cash Flow Statement 59Discussion and Analysis of Results 60Notes to the Financial Statements 62Statement by the Directors of the Responsible Entities 82Independent Audit Report 83

The financial report was authorised for issue by the directors on the 28 August 2006. The responsible entities have the power to amend and reissue the financial report.

Directors’ Report

AMPCI Macquarie Infrastructure ManagementNo. 1 Limited is the Responsible Entity ofDiversified Utility and Energy Trusts No. 1 (DUET 1).AMPCI Macquarie Infrastructure ManagementNo. 2 Limited is the Responsible Entity ofDiversified Utility and Energy Trusts No. 2 (DUET 2).The Responsible Entities submit the followingreport on the financial report of Diversified Utilityand Energy Trusts (DUET or the DUET Group), forthe year ended 30 June 2006.

The units of DUET 1 together with units of DUET 2are issued as stapled securities in DUET.

UIG 1013 “Consolidated Financial Reports inrelation to Pre-Date of Transition StaplingArrangements” requires one of the stapled entitiesof an existing stapled structure to be identified asthe parent entity for the purpose of preparingconsolidated financial reports. In accordance withthis requirement, DUET 1 has been identified as the parent of the consolidated group comprisingDUET 1, DUET 2 and the entities they controlacting as Diversified Utility and Energy Trusts(DUET or the DUET Group).

AMPCI Macquarie Infrastructure ManagementNo. 1 Limited is a joint venture between AMPCapital Holdings Limited (AMPCH), a wholly ownedsubsidiary of AMP Limited, and Macquarie BankLimited (MBL).

Principal ActivitiesThe principal activity of DUET 1, DUET 2 and theDUET Group is investment in energy utility assets.The investment policy of DUET 1, DUET 2 and theGroup is to invest funds in accordance with theprovisions of the Trust Constitutions and thegoverning documents of the individual entitieswithin the DUET Group.

DirectorsThe following persons held office as directors ofAMPCI Macquarie Infrastructure ManagementNo. 1 Limited during the year and up to the dateof this report:

Philip Garling

John Roberts

Emma Stein

Dr Paul Moy(resigned 4 October 2005)

The Hon Michael Lee

Doug Halley(appointed 14 February 2006)

Gregory Osborne(alternate for John Roberts; resigned 26 August 2005)

Mervyn Peacock(alternate for Philip Garling; resigned 7 March 2006)

Stephen Mentzines(alternate for John Roberts; appointed 26 August 2005)

The following persons held office as directors ofAMPCI Macquarie Infrastructure ManagementNo. 2 Limited during the year and up to the dateof this report:

Philip Garling

John Roberts

Ron Finlay

Eric Goodwin

Duncan Sutherland

Gregory Osborne(alternate for John Roberts; resigned 25 August 2005)

Mervyn Peacock(alternate for Philip Garling; resigned 7 March 2006)

Stephen Mentzines(alternate for John Roberts; appointed 26 August 2005)

Review and Results of OperationsThe performance for the year ended 30 June 2006was as follows:

1 July 2005 1 July 2004– 30 June 2006 – 30 June 2005

$’000 $’000

Revenue from continuing activities 819,792 772,018

Net profit from continuing activities after income tax expense and before finance costs to security holders and minority interest 68,097 89,738

Net profit from continuing activities after income tax expense and finance costs attributable to security holders and minority interest 12,892 89,738

Net result attributable to security holders* – 76,707

Basic earnings per security – 22.96c

* Due to the finite life and present entitlement clauses contained within

the DUET 1 and DUET 2 Trust Constitutions, upon adoption of

AASB 132 on 1 July 2005, the units in DUET 1 and DUET 2 were

classified as debt for accounting purposes. The Trust Constitutions

of both DUET 1 and DUET 2 were amended on 30 June 2006 such

that the finite life clauses were removed and present entitlement

clauses were amended. Accordingly the units in DUET 1 and DUET 2

are classified as equity for accounting purposes from 30 June 2006.

However, as the units were classified as debt from the period 1 July

2005 to 30 June 2006, the interim and final distributions declared, as

well as the income which accrued to the units in the Trust, have been

accounted for as an expense and presented in the income statement

for the period as a finance cost to security holders, in accordance

with AASB 132.

50 51

–United Energy Distribution Holdings Pty Limitedand its controlled entities (UEDH)UEDH distributed 7,823 GWh of electricity duringthe year.

The Essential Services Commission (ESC)produced its final regulatory determination for theperiod 2006 to 2010. This determination sets theframework for prices from 2006 to 2010 and therevised framework applied from 1 January 2006.

UEDH commenced its roll out of interval meters in2006. The roll out of interval meters is based on astrategy outlined by the ESC. The ESC is reviewingthe current strategy and has announced itsintention to increase the scope and complexity of the strategy. The renewed strategy is expectedto be implemented in 2008 or 2009.

–Multinet Group Holdings Pty Limited and itscontrolled entities (MGH)MGH distributed 59.9 PJ of gas during the year.Multinet is continuing with its program of pipereplacement in order to update its gasdistribution system.

–DBNGP Trust and its controlled entities (DBP)DBP transported 270.8 PJ of gas for the year.DBP continued with the Stage 4 expansionproject during the year, with $359.8 million of theapproved capital budget of $433.2 million incurredat 30 June 2006.

During the year, DBP applied to the Gas ReviewBoard for a review of the Economic RegulationAuthority (ERA) decision to draft and approve itsown revisions to the access arrangement. Theapplication seeks to review the following aspectsof the ERA’s revised access arrangement:

–the proposed gas quality specification containedin the terms and conditions of access forreference services;

–the requirement to include part-haul and back-haulservices as reference services; and

–the requirement to include reference tariffs forback-haul and part-haul reference services.

Several parties have sought to be made parties tothe application. The hearing of the application isscheduled for early 2007. In addition, Verve Energyapplied for a review of the ERA’s decision. Itsapplication focuses on reference tariff issues andthe terms and conditions of the reference services.

In April and May 2006, DBP completed a$1,230 million refinancing of its senior debtfacilities, with the exception of the $550 millionof floating rate notes negotiated in April 2005.The refinancing successfully delivered on DBP’sobjectives of improved pricing and general termsand conditions.

–ANHDUET’s share of Alinta Network Holdings PtyLimited’s (ANH) profit for the year was $5.7 million.

Significant Changes in State of AffairsThere have been no significant changes to the stateof affairs of each of the existing businesses DUETholds an interest in.

DistributionsThe distribution for the year ended 30 June 2006was 23.50 cents per stapled security (2005: 22.00 cents per stapled security).

An interim distribution for the year ended 30 June 2006 of 11.75 cents per stapled securitywas paid on 16 February 2006 (2005: 13.50 centsper stapled security). This consisted of 5.875 centsper unit from DUET 1 (2005: 6.75 cents per unit)and 5.875 cents per unit from DUET 2 (2005: 6.75 cents per unit).

A final distribution of 11.75 cents per stapledsecurity will be paid on 17 August 2006 (2005: 8.50 cents per stapled security). This consists of5.875 cents per unit from DUET 1 (2005: 4.25 centsper unit) and 5.875 cents per unit from DUET 2(2005: 4.25 cents per unit).

Events Occurring After Balance Sheet Date–Acquisition of Duquesne Light Holdings

On 6 July 2006, DUET announced that a DUET andMacquarie Infrastructure Partners (MIP) ledconsortium had executed a Merger Agreement (MA)to acquire 100% of Duquesne Light Holdings (DLH)for US$20 per share. DLH is a publicly listed energybusiness based in Pittsburgh, Pennsylvania USA.The transaction has a total equity market value ofapproximately US$1.59 billion.

DLH provides essential electricity distribution andtransmission to more than 587,000 customers inand around Pittsburgh. More than 80% of calendar2005 EBITDA of US$261 million was earned fromregulated activities. DLH has recently filed a ratecase application requesting a total distributionrevenue increase of $144 million and is proposingto file an application requesting a transmissionrevenue increase of $19 million with the USregulators responsible for setting the regulatedtariffs for these businesses. The determination ofthese rate case applications will take effect from7 January 2007.

DUET’s commitment under the MA is to provideUS$300 million of equity finance, representing a29% equity interest in the consortium. This is thelargest single equity position in the consortium andDUET will appoint a director to the Board of themerger vehicle.


Directors’ Reportcontinued

Of the total committed, on 11 August 2006, DUET(along with other consortium members) contributedUS$141 million (A$188 million) to subscribe for8.836 million DLH shares under a placementequivalent to 9.9% of DLH’s post placementshare capital. DUET contributed US$109 million(A$145.3 million). On 10 July 2006, DUETcompleted placement of 64 million stapledsecurities at $2.60 per stapled security toinstitutional and sophisticated investors raisinga total of $166.4 million.

The transaction is conditional on obtainingDLH shareholder and regulatory approvals.Shareholders are expected to vote on the proposalbefore the end of October 2006. Regulatoryapproval and financial completion are expected in the first quarter of calendar year 2007.

The remainder of DUET’s investment will be fundedby cash and an entitlement issue expected to beearly next year DUET has signed an equityunderwriting agreement with Macquarie BankLimited (MBL) for the equity required under theentitlement offer.

Upon completion, DUET’s investment in DLH willbe accounted for as an associate in accordancewith Note 1(l) to the full financial report.

–DUET RestructureOn 4 August 2006, DUET announced a proposalto change its current structure. The change willadd an Australian company, DUET InvestmentHoldings Limited (DIHL), to the stapled structure.The purpose of the restructure is to give DUETgreater flexibility in its capital management andinvestment strategy. Unitholders approved such arestructure, in principle, at the General Meeting on4 November 2005.

As part of the Restructure, DIHL shares will bedistributed to unitholders and stapled to the existingDUET units. This stapling will create a Triple StapledSecurity made up of one DIHL share, one unit inDUET 1 and one unit in DUET 2. The restructure hasno financial impact on the DUET Group.

–DUET DividendA final distribution of 11.75 cents per stapledsecurity was paid by DUET on 17 August 2006. This consists of a distribution of 5.875 cents per unitfrom DUET 1 and 5.875 cents per unit from DUET 2.

A portion of stapled security holders participated inDUET’s Distribution Reinvestment Plan paid on17 August 2006. Of the distribution declared,$7.6 million will be reinvested in DUET.

With the exception of the above, the directorsare not aware of any matter or circumstance nototherwise dealt with in the financial report that hasoccurred since the period end that has significantlyaffected the operations of DUET 1, DUET 2, and theDUET Group or the state of their affairs in periodssubsequent to the year ending 30 June 2006.

Likely Developments and Expected Resultsof OperationsFurther information on likely developments relatingto the operations of DUET 1, DUET 2 and the DUETGroup in future years and the expected results ofthose operations has not been included in this reportbecause the directors of the Responsible Entitiesbelieve it would be likely to result in unreasonableprejudice to the Trusts and the DUET Group.

Indemnification and Insurance of Officersand AuditorsDuring the year the Responsible Entities paid apremium to insure the officers of the ResponsibleEntities. So long as the officers of the ResponsibleEntities act in accordance with the Constitutionsand the law, the officers remain indemnified out ofthe assets of the Trusts and the DUET Groupagainst any losses incurred while acting on behalfof the Trusts and the DUET Group. The auditors of the Trust and the DUET Group are in no wayindemnified out of the assets of the Trusts and the DUET Group.

Fees Paid to the Responsible Entity and AssociatesFees paid to the Responsible Entity and itsassociates out of DUET 1 and the DUET Group’sproperty are disclosed in Note 31 in the fullFinancial Statements. No fees were paid byDUET 1 or the DUET Group to the directors of the Responsible Entity during the year.

The Responsible Entity does not hold any stapledsecurities in DUET at the date of this financialreport (30 June 2005: nil).

Interests in the Trusts and the DUET GroupIssued During the Financial YearThe movement in securities on issue in the Trust andthe DUET Group during the year is set out below:


’000 ’000

Securities on issue at the beginning of the year 421,963 223,763

Securities issued during the year 4,606 198,200

Securities on issue at the end of the year 426,569 421,963

Value of Assets 30 June 2006 30 June 2005$’000 $’000

Value of assets at 30 June 6,300,296 5,858,560

52 53

Environmental Regulations–UEDH

UEDH is subject to significant environmentalregulation under the Environmental Protection Act1970 (Vic). UEDH adheres to environmentalmanagement principles using compliance withISO 14001 for proactive planning, sustainabledevelopment and self assessment for continuousimprovement. UEDH did not receive any noticesfrom the Environmental Protection Agency (EPA) for violation of the Act during the period.

An Environmental Site Assessment (ESA) hasbeen conducted at a property owned by UEDH.The ESA noted slightly raised levels of copper inthe above ground spoil but this was within thetolerances of NEPMA requirements. Asbestoswas found in soil samples from the site andTetrachlroroethene, a Dense Non-Aqueous PhaseLiquid (DNAPL) was also found. The reportindicates that the Tetrachloroethene may haveflowed from a neighbouring property. At the timeof reporting, progress continues on developing a site Environmental Management Plan andcompleting an Asbestos Quantitative RiskAssessment for the site.

–MGHMGH is subject to significant environmentalregulation under the Environmental Protection Act1970 (Vic). MGH adheres to environmentalmanagement principles using compliance withISO 14001 for proactive planning, sustainabledevelopment and self assessment for continuousimprovement. MGH did not receive any noticesfrom the Environmental Protection Agency forviolation of the Act during 2004, 2005 or to the date of signing this report in 2006.

–DBPBoth the DBP Licence and DBP Access Licenceplace requirements on the DBP Group as operatorof the pipeline. Environmental obligations areidentified and managed through the DBP Group’sEnvironmental Management Plan, which sets out procedures for necessary restoration workassociated with operations and construction.

The directors are not aware of any materialbreaches to the environmental regulationsdiscussed above.

Directors’ and Other Staff Holdings of Stapled SecuritiesThe aggregate number of DUET stapled securitiesand POWERS units held directly, indirectly orbeneficially by directors or their director relatedentities at the date of this financial report are:

Stapled Stapled securities Securities in securities Securities in

in DUET POWERS in DUET POWERS2006 2006 2005 2005

Director

Philip Garling 55,000 1,800 55,000 1,800

John Roberts 1,349,768 – 1,187,658 –

Emma Stein 23,000 – 23,000 –

Dr Paul Moy – – – –

The Hon Michael Lee – – – –

Douglas Halley 10,000 – – –

Ron Finlay – – – –

Duncan Sutherland 80,000 – 80,000 –

Eric Goodwin 20,407 – 17,956 –

Refer to Note 31 in the full Financial Statements for further details.

Employees of MBL and AMPCH (including those who are directors) associated with the management of DUET, also hold stapled securities in DUET at the date of this report.


Auditor’s Independence DeclarationA copy of the Auditor’s Independence Declarationas required under section 327C of the CorporationsAct 2001 is set out on page 55.

Rounding of Amounts in the Directors’ Reportand the Financial ReportThe Trust, a registered scheme, and the DUETGroup, are of a kind referred to in Class Order98/0100, issued by the Australian Securities andInvestments Commission, relating to the “roundingoff” of amounts in the directors’ report and financialreport. Amounts in the directors’ report andfinancial report have been rounded off to thenearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

This report is made in accordance with a resolutionof directors of AMPCI Macquarie InfrastructureManagement No. 1 Limited and AMPCI MacquarieInfrastructure Management No. 2.

Philip GarlingDirectorSydney

28 August 2006

John RobertsDirectorSydney

28 August 2006

Directors’ Reportcontinued

Auditor’s Independence Declaration

Auditor’s Independence Declaration to the Directors of the Responsible Entities of Diversified Utility and Energy Trust No. 1 and Diversified Utility and Energy Trust No. 2

In relation to our audit of the financial report of Diversified Utility and Energy Trust No. 1, Diversified Utilityand Energy Trust No. 2 and the DUET Group for the year ended 30 June 2006, to the best of ourknowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Michael S PerryPartner

28 August 2006

Liability limited by a scheme approved under Professional Standards Legislation


54 55

2006 2005Note $’000 $’000

Revenue from continuing operations 2 819,792 772,018Share of net profit of associates accounted for using the equity method 5,686 5,028Operating expenses 2 (261,640) (243,109)Depreciation and amortisation expense 2 (135,648) (129,162)Finance costs excluding cost attributable to security holders and minority interests 2 (301,955) (268,780)Other expenses 2 (38,511) (21,221)Total expenses from continuing activities (737,754) (662,272)Net profit from continuing activities before income tax expense and finance costs attributable to security holders and minority interests 87,724 114,774Income tax expense (19,627) (25,036)Net profit from continuing activities after income tax expense and before finance costs attributable to security holders and minority interests 68,097 89,738Finance costs attributable to unitholders* (56,401) –Finance costs attributable to minority interests 1,196 –Net profit 12,892 89,738Attributable to:DUET Security Holders – 76,707Minority Interests 12,892 13,031

12,892 89,738Basic earnings per stapled security 4 – 22.96c

The above Income Statement should be read in conjunction with the accompanying notes.

* Due to the finite life and present entitlement clauses contained within the DUET 1 and DUET 2 Trust Constitutions, upon adoption of AASB 132 on 1 July 2005, the units in

DUET 1 and DUET 2 were classified as debt for accounting purposes. The Trust Constitutions of both DUET 1 and DUET 2 were amended on 30 June 2006 such that the

finite life clauses were removed and present entitlement clauses were amended. Accordingly the units in DUET 1 and DUET 2 are classified as equity for accounting

purposes from 30 June 2006. However, as the units were classified as debt from the period 1 July 2005 to 30 June 2006, the interim and final distributions declared, as

well as the income which accrued to the units in the Trust, have been accounted for as an expense and presented in the income statement for the period as a finance cost

to security holders, in accordance with AASB 132.

Income StatementYear ended 30 June 2006

30 June 2006 30 June 2005Note $’000 $’000

Current assetsCash and cash equivalents 295,999 188,343Receivables 75,124 62,996Inventories 11,223 11,414Non-current assets classified as held for sale 2,293 –Other 39,295 76,776Total current assets 423,934 339,530Non-current assetsReceivables 81,929 79,882Investment in associated entities using equity accounting method 27,078 23,474Property, plant and equipment 3,707,415 3,336,232Deferred tax assets 10,204 15,014Intangible assets 1,997,756 2,015,152Derivative Financial Instruments 51,740 –Other 240 49,276Total non-current assets 5,876,362 5,519,030Total assets 6,300,296 5,858,560Current liabilitiesPayables 231,149 161,402Distribution payable 50,123 35,868Interest bearing liabilities 3 27,500 22,750Provisions 2,573 7,734Current tax liabilities 2,509 –Other 12,525 10,411Total current liabilities 326,379 238,165Non-current liabilitiesInterest bearing liabilities 3 4,274,769 4,091,488Deferred tax liabilities 548,846 519,479Derivative Financial Instruments 64,744 –Provisions 15,588 16,498Retirement benefit obligations 240 6,789Other – 10,129Total non-current liabilities excluding minority interests classified as debt 4,904,187 4,644,383Total liabilities excluding minority interests classified as debt 5,230,566 4,882,548Net assets excluding minority interests classified as debt 1,069,730 976,012Non-current liability attributable to minority interestsMinority interests units 123,269 –Total non-current liability attributable to minority interests 123,269 –Net assets 946,461 976,012EquityDUET security holders’ interestContributed equity 921,795 910,822Reserves 26,214 –Undistributed (losses)/profit (71,461) (46,206)Total DUET security holders’ interest 876,548 864,616Minority interest 69,913 111,396Total equity 946,461 976,012

The above Balance Sheet should be read in conjunction with the accompanying notes.

Balance SheetAs at 30 June 2006

56 57



$’000 $’000

Total equity at the beginning of the financial year 976,012 475,580Adjustments on adoption of AASB 132 and AASB 139, net of tax to*:Equity (910,822) –Retained profits 46,206 –Reserves (9,040) –Minority interest (51,531) –Total equity at 1 July 50,825 475,580Changes in the fair value of cash flow hedges, net of tax 46,365 –Net income recognised directly in equity 46,365 –Profit for the year 12,892 89,738Total recognised income and expense for the year 59,257 89,738Transactions equity holders in their capacity as equity holders:Transfer of net assets attributable to security holders from liability to equity 850,297 –Contributions of equity, net of transaction costs – 466,996Dividend paid and provided for to parent equity holders – (91,413)Dividends and distributions provided for or paid to minority interests (10,326) (10,837)Increased interest in subsidiaries obtained during the year (3,592) –Minority interest on acquisition of subsidiary – 45,948Total equity at the end of the financial year 946,461 976,012Total recognised income and expense for the year is attributable to:Parent shareholders – 76,707Minority interest 12,892 13,031

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

* Due to the finite life and present entitlement clauses contained within the DUET 1 and DUET 2 Trust Constitutions, upon adoption of AASB 132 on 1 July 2005, the units in

DUET 1 and DUET 2 were classified as debt for accounting purposes. The Trust Constitutions of both DUET 1 and DUET 2 were amended on 30 June 2006 such that the

finite life clauses were removed. Accordingly the units in DUET 1 and DUET 2 are classified as equity for accounting purposes from 30 June 2006.

Statement of Changes in EquityYear ended 30 June 2006

2006 2005$’000 $’000

Cash flows from operating activitiesReceipts from customers (including GST) 863,691 827,273Payments to suppliers and employees (including GST) (335,332) (295,279)Income tax received/(paid) – 5,280Interest received 18,457 13,081Dividends received 3,923 4,674Net cash flows from operating activities 550,739 555,029Cash flows from investing activitiesPayments for software (5,137) –Payment for purchase of controlled entities, net of cash acquired – (1,845,845)Payments for purchase of property, plant and equipment (432,674) (166,068)Costs associated with purchase of controlled entities – (19,523)Proceeds from sale of non-current assets 1,526 1,713Net cash flows from investing activities (436,285) (2,029,723)Cash flows from financing activitiesProceeds from issue of units – 417,433Proceeds from minority interest 91,162 56,378Payments for capital raising costs – (17,580)Proceeds from issue of reset preference shares (POWERS) – 155,000Proceeds from borrowing from external parties 2,386,800 2,572,050Repayment of borrowings from external parties (2,084,333) (1,181,293)Borrowings from bridge financing – 514,000Repayment of bridge financing facility – (514,000)Finance costs paid (309,340) (329,096)Dividends paid to minority interest (18,142) (10,225)Distributions paid (74,717) (54,758)Net cash flow from financing activities (8,570) 1,607,909Net increase/(decrease) in cash assets held 105,884 133,215Cash assets at the beginning of the period 188,343 55,128Effects of exchange rate changes on cash and cash equivalents 1,772Cash assets at the end of the period 295,999 188,343

The above Cash Flow Statement should be read in conjunction with the accompanying notes.

Cash Flow StatementYear ended 30 June 2006

58 59


Discussion and Analysis of Results

Financial PerformanceOperating PerformanceThe net profit before finance costs attributable tosecurity holders and minority interests for DUETand its consolidated entities for the year ended30 June 2006 is a profit of $68.1 million (2005:$89.7 million). The net profit after finance costsattributable to DUET security holders for the yearended 30 June 2006 is nil (2005: $76.7 million).

Revenue (refer Note 2)The total revenue for the year was $819.8 million(2005: $772.0 million), comprising the following:

–Distribution revenue of $514.2 million (2005: $524.6 million). The decrease for the current year reflects the decrease in revenue for UEDH of $14.2 million and the increase inrevenue for MGH of $3.1 million.

–Metering revenue of $27.2 million (2005: $27.9 million).

–Transportation revenue of $206.6 million (2005: $177.4 million). The increased revenue is due to the full year impact of DBP during the year offset by a decrease in revenue from the Alcoa exempt contract. In the prior year only eight months of DBP was included.

–Other sales revenue of $28.9 million (2005:$13.2 million) mainly due to increased customercontribution revenue and additional governmentincentives.

–Interest income of $7.3 million (2005: $7.3 million).

–Other revenue of $34.0 million (2005: $20.0 million).The increased revenue is predominately related to customer contribution revenue at DBP.

Share of net profit of associatesShare of net profit of associates accounted forusing the equity method for the year was$5.7 million (2005: $5.0 million). This represents the Group’s 25.9% share of the net profits after taxgenerated by Alinta Network Holdings Pty Limited.

Total revenue and share of associates’ profits wasoffset by the following operating expensesrecognised during the year:

Operating expenses (refer Note 2)Operating expenses of $261.6 million were incurredduring the year (2005: $243.1 million) and includedthe following:

–Operating fees of $222.5 million (2005: $225.6 million). The decrease for thecurrent year primarily reflects the decrease inUEDH of $6.1 million offset by an increase in DBPdue to the current year containing a full year ofexpenses for DBP.

–Other operating expenses of $39.1 million (2005: $17.5 million). The increase for the currentyear primarily reflects the other operating expensesfrom DBP.

Other expenses (refer Note 2)Other expenses of $38.5 million were incurredduring the year (2005: $21.2 million) and includedthe following:

–Impairment of properties held for sale $3.5 million(2005: nil). This relates to a write down of land held for resale at DBP.

–Management fees of $19.8 million (2005: $8.2 million). The increase for the currentyear reflects management fees being paid to the Responsible Entities based on 1% of the net investment value of DUET. A performance fee of $8.8 million was paid to the ResponsibleEntities (2005: nil).

Depreciation and amortisation expense(refer Note 1(h), (i), Note 2)

–Amortisation of intangible assets was $25.4 million(2005: $26.6 million) for the year.

–Depreciation of property, plant and equipment was$110.2 million (2005: $102.6 million). This consistedof $32.6 million from DBP, $24.9 million from MGHand $52.7 million from UEDH.

Finance costs (refer Note 1(j), Note 2 and Note 3)–Finance costs of $302.0 million (2005: $268.8 million)

were incurred during the year. This includes$22.8 million (2005: $13.5 million) of amortisationof borrowing costs. The increase predominantlyrelates to borrowing costs associated with DBPof $30.5 million.

Income Tax–Under the Income Tax Assessment Acts, DUET 1

and DUET 2 are not liable for income tax providedthat the taxable income is fully distributed tostapled security holders each year.

–Income tax in relation to the assets consolidated by DUET has been brought to account using thebalance sheet approach.

Minority Interests–Minority equity interests in the net result of

$12.9 million represents the net results of DBP,UEDH and MGH attributable to minority interests(2005: $13.0 million).

Earnings per Stapled Security (refer Note 4)–The basic earnings per stapled security before

finance costs attributable to unitholders andminority interest for the Group was 16.03 cents per stapled security (2005: 22.96 cents per stapledsecurity). The basic earnings per stapled securityafter finance costs is nil (2005: 22.96 cents perstapled security).

–The weighted average number of shares on issueused in the calculation of the earnings per stapledsecurity is 424.6 million (2005: 334.1 million).

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Financial PositionAssets

–At 30 June 2006, total assets of DUET were$6,300.3 million (2005: $5,858.6 million).

–Property, plant and equipment of $3,707.4 million(2005: $3,336.2 million) included $5.4 million ofland (2005: $7.4 million), $5.6 million of buildings(2005: $10.2 million), $3,318.6 million of plant andequipment (2005: $3,235.2 million), $11.9 millionof other property, plant and equipment (2005: $12.8 million) and $366.0 million of plant and equipment in the course of construction (2005: $70.7 million). The increased property,plant and equipment at 30 June 2006 comparedto 30 June 2005 primarily reflects fixed assetsacquired as part of the DBP Stage 4expansion project.

–Intangible assets of $1,997.8 million (2005: $2,015.2 million) comprise $108.5 millionof intellectual property (2005: $114.9 million),$1,035.4 million of distribution licences (2005: $1,035.4 million), $825.0 million of goodwill(2005: $825.0 million) and $28.9 million of softwareassets (2005: $39.8 million).

Liabilities–At 30 June 2006, total liabilities excluding

minority interests classified as debt of DUET were $5,230.6 million (2005: $4,882.5 million).

–The increase in liabilities is largely additionalinterest bearing liabilities (refer to Note 3).

–Minority interest units classified as debt were$123.3 million (2005: nil).

Equity–At 30 June 2006, total equity of DUET was

$946.5 million (2005: $976.0 million).

–$69.9 million represents the net assets of DBP,UEDH and MGH attributable to minority interests(2005: $111.4 million).

–Contributed equity is $921.8 million (2005:$910.8 million). The increase is due to additionalstapled securities issued as part of the distributionreinvestment plan.

–Reserves are $26.2 million (2005: nil). Thisrepresents cash flow hedges measured inaccordance with IFRS.

Net Asset Backing–The net asset backing per stapled security at

30 June 2006 is $2.22 (2005: $2.31).

Statement of Cash FlowsNet Cash Flows from Operating Activities

–Cash flows from operating activities havedecreased $4.3 million from $555.0 million in theprior year to $550.7 million in the current year.

–The decrease reflects the operating revenue and payments to suppliers and is due to timing.

Net Cash Flows from Investing Activities–Cash outflows from investing activities have

decreased $1,593.4 million from $2,029.7 million in the prior year to $436.3 million in the current year.

–The decrease predominantly reflects paymentsassociated with the DBP acquisition in the prioryear offset by increased payment for fixed assetsassociated with the Stage 4 expansion at DBP.

Net Cash Flows from Financing Activities–Net cash flows from financing activities have

decreased $1,616.5 million from cash inflows of$1,607.9 million in the prior year to cash outflows of $8.6 million in the current year.

–Cash flows in the prior year included borrowingsfrom external parties associated with DBPacquisition and the proceeds from DUET’s and POWER’s capital raising.


Notes to the Financial StatementsYear ended 30 June 2006

Note 1. Summary of SignificantAccounting Policies

The significant accounting policies which have beenadopted in the preparation of the financial statementsare stated to assist in a general understanding of thisgeneral purpose financial report.

(a) Basis of PreparationThe concise financial report has been prepared as if DUET were a disclosing entity required to complywith the Corporations Act 2001 and AccountingStandard AASB 1039 Concise Financial Reports.The concise financial report has been derived fromthe DUET full financial report for the year. Otherinformation included in the concise financial reportis consistent with DUET’s full financial report. Theconcise financial report does not, and cannot beexpected to, provide as full an understanding of the financial performance, financial position and,financing and investing activities of DUET as the full financial report.

The accounting policies adopted in preparing thefinancial report have been consistently applied toall the periods presented, unless otherwise stated.

Application of AASB 1 First-time Adoption ofAustralian Equivalents to International FinancialReporting StandardsThis financial report is the first DUET 1, DUET 2 and the DUET Group financial report to beprepared in accordance with Australian Equivalentsto International Financial Reporting Standards(AIFRS). AASB 1 First-time Adoption of AustralianEquivalents to International Financial ReportingStandards has been applied in preparing thesefinancial statements.

Financial statements of DUET 1, DUET 2 and theDUET Group until 30 June 2005 had been preparedin accordance with previous Australian GenerallyAccepted Accounting Principles (AGAAP). AGAAPdiffers in certain respects from AIFRS. Whenpreparing the DUET 1, DUET 2 and the DUETGroup financial report for the year ended 30 June2005, management has amended certainaccounting, valuation and consolidation methodsapplied in the previous AGAAP financial statementsto comply with AIFRS. The comparative figures arerestated to reflect these adjustments.

DUET 1, DUET 2 and the DUET Group have takenthe exemption available under AASB 1 to applyAASB 132 and AASB 139 from 1 July 2005. DUEThas applied previous AGAAP in the comparativeinformation on financial instruments within thescope of AASB 132 and AASB 139.

Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRS onequity and its net profit are given in Note 8.

Standards, interpretations and amendments to be published that are not yet effectiveCertain new standards, amendments andinterpretations to existing standards have beenpublished that are mandatory for the Group foraccounting periods beginning on or after 1 July2006 or later periods but which the Group has notyet adopted. The significant ones are as follows:

–AASB 139 (Amendment, Financial GuaranteeContracts (effective from 1 July 2006))This amendment requires issued financialguarantees to be initially recognised at their fairvalue and subsequently measured at the higher of the unamortised balance of the related feesreceived that have been deferred and theexpenditure required to settle the commitment at the balance sheet date. This amendment is not expected to have a material impact. Thisamendment will be applied from 1 July 2006.

–AASB 7 Financial Instruments: Disclosures, anda complementary amendment to AASB 101Presentation of Financial Statements – CapitalDisclosures (effective 1 July 2007)AASB 7 introduces new disclosures to improve theinformation about financial instruments. It requiresthe disclosure of qualitative and quantitativeinformation about exposure to risks arising fromfinancial instruments, including specified minimumdisclosures about credit, liquidity and market risk.This amendment will be applied from 1 July 2007.

Historical cost conventionThese financial statements have been preparedunder the historical cost convention, as modifiedby the revaluation of financial assets and liabilities(including derivative instruments) at fair valuethrough the Income Statement.

Stapled SecurityThe units of DUET 1 and DUET 2 are combined and issued as stapled securities in DUET. The unitsof the Trusts cannot be traded separately. Thisfinancial report consists of the consolidatedfinancial statements of DUET 1, which comprisesDUET 1, DUET 2 and the entities they control,together acting as DUET.

(b) Consolidated AccountsUIG 1013 Consolidated Financial Reports inrelation to Pre-Date-of-Transition StaplingArrangements requires one of the stapled entitiesof an existing stapled structure to be identified as the parent entity for the purpose of preparingconsolidated financial reports. In accordance with this requirement DUET 1 has been identifiedas the parent of the consolidated group comprisingDUET 1 and DUET 2 and the entities they controlacting as Diversified Utility and Energy Trusts(DUET or the Group).

62 63

(c) Principles of ConsolidationThe consolidated financial statements incorporatethe assets and liabilities of the entities controlled by DUET 1 and DUET 2 at 30 June 2006, includingthose deemed to be controlled by DUET 1 byidentifying it as the parent of DUET on transition toAIFRS, and the results of those controlled entitiesfor the period then ended. The effects of alltransactions between entities in the consolidatedentity are eliminated in full. Minority interests in the results and equity are shown separately in the Income Statement and the Balance Sheetrespectively. Minority interests are those interestsin partly owned subsidiaries which are not helddirectly or indirectly by DUET 1 or DUET 2.

Where control of an entity is obtained during afinancial period, its results are included in theIncome Statement from the date on which controlcommences. Where control of an entity ceasesduring a financial period, its results are included forthat part of the period during which control existed.

(d) Segment ReportingA business segment is a group of assets andoperations engaged in providing products orservices that are subject to risks and returns thatare different to those of other business segments.A geographical segment is engaged in providingproducts or services within a particular economicenvironment and is subject to risks and returns thatare different from those of segments operating inother economic environments.

(e) Revenue RecognitionRevenue is recognised for the major businessactivities as follows:

–Distribution electricity revenueDistribution electricity revenue earned from the use of the distribution network is recognised whenelectricity and related services are provided.Accrued distribution electricity revenue isdetermined having regard to the period since acustomer’s last billing date and the customer’sprevious consumption patterns. Distributionelectricity revenue includes the cost oftransmission services charged by the transmissioncompanies, which is passed onto the customers.

–Distribution gas revenueDistribution gas revenue earned from the use of thedistribution network is recognised when gas andrelated services are provided. Accrued distributiongas revenue is determined having regard to theperiod since a customer’s last billing date and the customer’s previous consumption patterns.

–Gas transmission revenueGas transmission revenue is brought to accountwhen gas is transported for a shipper inaccordance with the terms and conditions of the haulage contract.

–Asset salesThe net proceeds on disposal of assets is broughtto account at the date when control passes to thepurchaser, usually when an unconditional contractof sale is signed.

–Interest revenueInterest revenue is recognised to the extent that it isprobable that the economic benefits will flow to thegroup and the revenue can be reliably measured.Interest income is brought to account on anaccruals basis using the effective interest method.

–Dividend and distribution revenueDividend and Trust distributions are recognisedas income on the date the share or unit becomesex-dividend or ex-distribution.

–Other revenueOther operating revenue is brought to account as it is earned and is recognised when the goods andservices are provided.

–Customer contributionsNon-refundable contributions and in kind assetsreceived from customers towards the cost ofextending or modifying the electricity or gasdistribution networks, whether on existing or newassets, are recognised as revenue and an assetonce control is gained of the contribution, or asset.

(f) Income TaxThe income tax expense or benefit for the periodis the tax payable on the current period’s taxableincome based on the income tax rate adjusted bychanges in deferred tax assets and liabilitiesattributable to temporary differences between thetax bases of assets and liabilities and their carryingamounts in the financial statements, and to unusedtax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expectedto apply when the assets are recovered or liabilitiesare settled, based on those tax rates which areenacted or substantively enacted for eachjurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxabletemporary differences arising from the initialrecognition of an asset or a liability. No deferred taxasset or liability is recognised in relation to thesetemporary differences if they arose in a transaction,other than a business combination, that at the timeof the transaction did not affect either accountingprofit or taxable profit or loss.

Deferred tax assets are recognised for deductibletemporary differences and unused tax losses if it is probable that future taxable amounts will beavailable to utilise those temporary differencesand losses.


Notes to the Financial Statements continuedYear ended 30 June 2006

Note 1. Summary of SignificantAccounting Policies continued

(f) Income Tax continuedDeferred tax assets and liabilities are notrecognised for temporary differences between thecarrying amount and tax bases of investments incontrolled entities where the parent entity is able tocontrol the timing of the reversal of the temporarydifferences and it is probable that the differenceswill not reverse in the foreseeable future.

Income tax has not been brought to account inrespect of DUET 1 and DUET 2 as pursuant to the Income Tax Assessment Acts, the Trusts arenot liable for income tax to the extent that theirtaxable income (including any assessable realisedcapital gains) is fully distributed to their unitholderseach year.

Some subsidiaries of the Group are liable forincome tax and have implemented the taxconsolidation legislation to their wholly ownedgroups.

(g) Impairment of AssetsAssets that have an indefinite useful life are notsubject to amortisation and are tested annuallyfor impairment, or more frequently if events orchanges in circumstances indicate that they mightbe impaired. Assets that are subject to amortisationare reviewed for impairment whenever events orchanges in circumstances indicate that the carryingamount may not be recoverable. An impairmentloss is recognised for the amount by which theasset’s carrying amount exceeds itsrecoverable amount.

The recoverable amount of an asset is the netamount expected to be recovered through thecash inflows and outflows arising from itscontinued use and subsequent disposal. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. In determining recoverable amount, theexpected net cash flows are discounted to theirpresent value using a market determined, assetspecific, risk adjusted rate.

The decrement in the carrying amount isrecognised as an expense in the net profit or loss in the reporting year in which the recoverableamount write down occurs.

(h) Property, Plant and EquipmentProperty, plant and equipment is stated at cost lessaccumulated depreciation and any impairmentvalue. The cost of plant and equipmentconstructed by the consolidated entity includes thecost of materials and direct labour and a proportionof fixed and variable overheads.

–DepreciationDepreciation is calculated on a straight line basisto write off the net cost or revalued amount of eachitem of property, plant and equipment (excludingland) over its expected useful life to theconsolidated entity. Estimates of remaining usefullives are made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives are as follows:

Category Useful life

Buildings 6 to 40 years

Plant and equipment 1 to 60 years

Motor vehicles 4 to 10 years

Office equipment 3 to 15 years

Furniture, fixtures and fittings 1 to 12 years

Where items of plant and equipment haveseparately identifiable components which aresubject to regular replacement, those componentsare assigned useful lives distinct from the item ofplant and equipment to which they relate.

Major spares purchased specifically for particularplant are capitalised and depreciated on the samebasis as the plant to which they relate.

Assets in the course of construction are not subjectto depreciation until they are put into use.

–ImpairmentThe carrying values of plant and equipment arereviewed for impairment when events or changes incircumstances indicate the carrying value may notbe recoverable. If any such indication exists andwhere the carrying values exceed the estimatedrecoverable amount, the assets or cash-generatingunits are written down to their recoverable amount.Refer Note 1(g).

(i) Intangible Assets(i) GoodwillGoodwill represents the excess of the purchaseconsideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or securities in a controlled entity.Goodwill is not amortised but is tested forimpairment annually, or more frequently if eventsor changes in circumstances indicate that it mightbe impaired and is carried at cost less accumulatedimpairment losses.

(ii) Identifiable intangible assetsIdentifiable intangible assets acquired separately arecapitalised at cost and from a business combinationare capitalised at fair value as at the date ofacquisition. Following initial recognition, the costmodel is applied to the class of intangible assets.

64 65

The useful lives of these intangible assets areassessed to be either finite or indefinite. Whereamortisation is charged on assets with finite lives,this expense is taken to the income statementthrough the “depreciation and amortisationexpenses” line item. Intangible assets, excludingdevelopment costs, created within the businessare not capitalised and expenditure is chargedagainst profits in the year in which the expenditureis incurred.

Intangible assets are tested for impairment where anindicator of impairment exists, and in the case ofindefinite lived intangibles annually, either individuallyor at the cash generating unit level. Useful lives arealso examined on an annual basis and adjustments,where applicable, are made on a prospective basis.A summary of the policies applied to the Group’sintangible assets is as follows:

Licences Software Intellectual Property

Useful lives Indefinite Finite Finite

Method used Not depreciatedor revalued 3 to 5 years straight line 20 years – Straight line

Internally generated/acquired Acquired Acquired Internally generated/acquired

Impairment Annually and Amortisation method reviewed Amortisation method reviewed test/recoverable where an at each financial year-end; at each financial year-end;amount testing indicator of Reviewed annually for Indicator Reviewed annually for Indicator

impairment of Impairment of Impairmentexists

(iii) Research and development costsExpenditure on research activities undertakenwith the prospect of obtaining new scientific or technical knowledge and understanding isrecognised in the Income Statement as anexpense when it is incurred.

Development expenditure incurred on anindividual project is carried forward when its futurerecoverability can reasonably be regardedas assured.

Following the initial recognition of the developmentexpenditure, the cost model is applied requiring theasset to be carried at cost less any accumulatedamortisation and accumulated impairment losses.

Any expenditure carried forward is amortised overthe period of expected future revenue from therelated project.

The carrying value of development costs isreviewed for impairment annually when the asset isnot yet in use, or more frequently when an indicatorof impairment arises during the reporting yearindicating that the carrying value may not berecoverable.

(j) Interest Bearing Liabilities–From 1 July 2004 to 30 June 2005

Bank loans, guarantee notes and redeemablepreference shares are recognised at the amount of the net proceeds received. Interest is recognisedas an expense on an effective yield basis.

Interest bearing liabilities also comprise Preferredto Ordinary With Exchange and Reset Securities(POWERS). In accordance with AustralianAccounting Standard AASB 1033 Presentation andDisclosure of Financial Instruments, POWERS areclassified as a liability of the Trusts and not equity.These liabilities are recorded at the amount ofconsideration received at the date of issue.

The exchange and redemption features aresignificant in determining the classification ofPOWERS as a liability. POWERS holders mayrequest exchange of some or all of their POWERSinto stapled equity of DUET in certaincircumstances in accordance with the POWERSterms. If the Responsible Entity of the POWERSTrust receives a valid Exchange Notice after theDUET IPO has occurred, the Responsible Entitymust, at its option, do one of the following:

–redeem the POWERS for the redemption amountfor exchange so that the POWERS can beexchanged for DUET stapled securities; or

–arrange for a third party to acquire the POWERS for the redemption amount; or

–redeem and cancel the POWERS for theredemption amount.

In addition, the POWERS are compulsorilyredeemable on the tenth anniversary of their date of issue for an amount calculated in accordancewith the POWERS Terms.



Note 1. Summary of SignificantAccounting Policies continued

(j) Interest Bearing Liabilities continued–From 1 July 2005

Bank loans, guaranteed notes and redeemablepreference shares are recognised at cost, being fairvalue of the consideration received net of issuecosts associated with the borrowing. After initialrecognition, interest bearing loans and borrowingsare subsequently measured at amortised costusing the effective interest method. Amortised cost is calculated by taking into account any issuecosts, and any discount premium on settlement.The consolidated entity enters into derivatives oninterest bearing liabilities. The accounting policiesare as described in the Derivative financialinstruments Note 1(y) of the full financial report.

Interest bearing liabilities also comprise Preferredto Ordinary With Exchange and Reset Securities(POWERS). In accordance with AccountingStandard AASB 132 Financial Instruments:Disclosure and Presentation, POWERS areclassified as a liability of the Trusts and not equity.These liabilities are initially recorded at fair value net of transaction costs. Any difference betweenthe proceeds (net of transaction costs) and theredemption amount is recognised in the incomestatement over the period of the POWERS usingthe effective interest method.

The exchange and redemption features aresignificant in determining the classification ofPOWERS as a liability. POWERS holders mayrequest exchange of some or all of their POWERSinto stapled equity of DUET in certaincircumstances in accordance with the POWERSterms. If the Responsible Entity of the POWERSTrust receives a valid Exchange Notice after theDUET IPO has occurred, the Responsible Entitymust, at its option, do one of the following:

–redeem the POWERS for the redemption amountfor exchange so that the POWERS can beexchanged for DUET stapled securities; or

–arrange for a third party to acquire the POWERS for the redemption amount; or

–redeem and cancel the POWERS for theredemption amount.

In addition, the POWERS are compulsorilyredeemable on the tenth anniversary of their date of issue for an amount calculated in accordancewith the POWERS Terms.

(k) Earnings per Stapled SecurityBasic earnings per stapled security is determinedby dividing the profit attributable to unitholders bythe weighted average number of securities on issueduring the year.

(l) Unitholders FundsDue to the finite life and present entitlement clausescontained within the DUET 1 and DUET 2 TrustConstitutions, upon adoption of AASB 132 on1 July 2005, the units in DUET 1 and DUET 2 wereclassified as debt for accounting purposes. TheTrust Constitutions of both DUET 1 and DUET 2were amended on 30 June 2006 such that the finitelife clauses were removed and distributions wereno longer mandatory but discretionary. Accordinglythe units in DUET 1 and DUET 2 are classified asequity for accounting purposes from 30 June 2006.

However, as the units were classified as debt fromthe period 1 July 2005 to 30 June 2006, the interimand final distributions declared, as well as theincome which accrued to the units in the Trust,have been accounted for as an expense andpresented in the income statement for the periodas a finance cost to security holders, in accordancewith AASB 132.

(m) Rounding of AmountsThe Group is of a kind referred to in ClassOrder 98/0100 issued by the Australian Securitiesand Investments Commission, relating to the“rounding off” of amounts in the financial report.Amounts in the financial report have been roundedoff in accordance with that Class Order to thenearest thousand dollars, or in certain cases, to the nearest dollar.

66 67

2006 2005Note 2. Net Profit for the Year $’000 $’000

(i) Revenue from continuing operationsSales revenueDistribution revenue 514,231 524,611Metering revenue 27,204 27,910Transportation revenue 206,564 177,355New connections revenue 1,626 1,622Other sales revenue 28,933 13,217

778,558 744,715Revenue from investmentsInterest revenue 7,270 7,271

7,270 7,271Other revenueInterest 10,453 6,531Customer contributions 16,222 4,599Miscellaneous revenue 7,209 8,902

33,964 20,032Total revenue from continuing operations 819,792 772,018

(ii) Expenses from continuing operationsOperating expensesOperating fees 222,530 225,648Other operating expenses 39,110 17,461

261,640 243,109Other expensesNet loss on disposal 13,847 10,594Management fees 19,817 8,225Impairment of properties held for sale 3,469 –Other 1,378 2,402

38,511 21,221Depreciation and amortisation expenseDepreciation of property, plant and equipment 110,205 102,555Amortisation of intangible assets 25,443 26,607

135,648 129,162Finance costs excluding costs attributable to security holders and minority interestsAmortisation of borrowing costs 22,751 13,537Financing charges – related parties 2,612 2,750Interest expense

Related parties 16,299 60,841Other parties 260,293 191,652

301,955 268,780Total expenses from continuing operations 737,754 662,272



2006 2005Note 3. Interest Bearing Liabilities $’000 $’000

CurrentSecuredBank loans 10,000 –

10,000 –UnsecuredBank loans 17,500 22,750

17,500 22,750Total current interest bearing liabilities 27,500 22,750Non-currentSecuredBank loans 1,611,000 1,348,000

1,611,000 1,348,000UnsecuredBank loans 585,800 730,000Guaranteed notes 1,459,305 1,347,458Redeemable preference shares 120,396 120,396Preferred to Ordinary with Exchange and Reset Securities (POWERS) 547,240 545,634Other 206 –

4,323,947 4,091,488Capitalised borrowing costs (49,178) –Total non-current interest bearing liabilities 4,274,769 4,091,488Total interest bearing liabilities 4,302,269 4,114,238

– Financing arrangementsAt balance date the Group has access to the following lines of credit:

Used at Unused at 2006 Facility limit 30 June 30 June

DBPSenior debt

2005 seven year floating rate notes 275,000 275,000 –2005 12 year floating rate notes 275,000 275,000 –2006 seven year floating rate notes 325,000 325,000 –2006 12 year floating rate notes 325,000 325,000 –Syndicated facility 205,000 205,000 –Capital expenditure facility 350,000 206,000 144,000Working capital facility 25,000 17,500 7,500

1,780,000 1,628,500 151,500UEDHSenior Subscription Agreement 250,000 150,000 100,000Capital expenditure facility 200,000 – 200,000Bank loans – working capital facility 25,000 – 25,000

475,000 150,000 325,000MGHSenior corporate facility 455,000 411,000 44,000Capital expenditure facility 35,000 24,800 10,200Working capital facility 15,000 10,000 5,000

505,000 445,800 59,200Total 2,760,000 2,224,300 535,700

68 69

– Financing arrangementsUsed at Unused at

2005 Facility limit 30 June 30 June

DBPCapital expenditure facility 350,000 – 350,000Working capital facility 25,000 – 25,0002005 seven year floating rate notes 275,000 275,000 –2005 12 year floating rate notes 275,000 275,000 –Syndicated loan – three year 380,000 380,000 –Syndicated loan – five year 313,000 313,000 –Syndicated loan – five year 150,000 105,000 45,000

1,768,000 1,348,000 420,000UEDHSenior Subscription Agreement 428,750 320,000 108,750Capital expenditure facility 10,000 10,000 –Working capital facility 20,000 – 20,000

458,750 330,000 128,750MGHSenior corporate facility 455,000 410,000 45,000Capex facility 31,250 11,250 20,000Working capital facility 15,000 1,500 13,500

501,250 422,750 78,500Total 2,728,000 2,100,750 627,250

–Bank loansDBPThe capital expenditure facility is for the purpose of funding pipeline expansions provided certainconditions are met. The working capital facility is for the purposes of funding general businessexpenses.

The floating rate notes are publicly listed AAA debtsecurities, with credit support provided by AmbacAssurance Corporation. The notes were used torefinance the bridge facility taken out as part of the acquisition of the DBP assets.

The syndicated loan facility is provided by asyndicate of lenders under a Syndicate FacilityAgreement dated 27 October 2004 for the purposeof acquiring DBP assets. The syndicated loanfacility includes three tranches, including arevolving tranche.

The above facilities are guaranteed by DBNGPHoldings Pty Ltd (in its own capacity as trustee ofthe DBNGP Trust), DBNGP Compressor Co Pty Ltdand DBNGP (WA) Nominees Pty Ltd (in its owncapacity as trustee of DBNGP WA Pipeline Trust)and are secured by charges and mortgages.

UEDH and MGHThe capital expenditure facilities held by UEDH and MGH may be drawn at any time to fund eligiblecapital expenditure. The working capital facilitiescan be used for general business requirements.

–Guaranteed notesUEDHUS$200 million 5.45% guaranteed notes due April2016, were issued on 19 November 2003. A furtherUS$260 million 4.70% guaranteed notes due April 2011, were issued on 19 November 2003. The notes are unsecured and unsubordinatedobligations of the group. Interest is paidsemi-annually in arrears on 15 April and 15 October.The notes are redeemable in whole but not in part.Scheduled payment of principal and interest on thenotes is guaranteed by an unrelated party.

Long term currency swaps have been entered into to convert the US dollar exposure on theguaranteed notes into an Australian dollarexposure. The swaps entitle the Group to receivean agreed amount of US dollars and oblige it to payan agreed amount of Australian dollars at the dateof maturity of the guaranteed notes. The value ofthe guaranteed notes presented above is after theimpact of the amount payable under the currencyswap agreement.



As at As at30 June 2006 30 June 2005

Note 4. Asset Backing and Performance Per Security $ $

Net asset backing of each security 2.22 2.31

1 July 2005 26 June 2004– 30 June 2006 – 30 June 2005

Earnings per security before finance costs attributable to unitholders and minority interest 16.03c 22.96cBasic earnings per security – 22.96cEarnings used in calculation of basic earnings per security – 76,707,000Earnings used in calculation of earnings per security before finance costs attributable to unitholding and minority interest 68,097,971 76,707,000Weighted average number of stapled securities used in calculating earnings per stapled security 424,594,718 334,114,416

Note 5. Distributions Paid and Payable 2006 2005The distributions were paid/payable as follows: $’000 $’000

Interim distribution paid for year ended 30 June 2006: DUET 11.75 centsper stapled security (2005: DUET 13.50 cents per stapled security) 49,822 55,544

Final distribution proposed and subsequently paid for the year ended 30 June 2005: DUET 11.75 cents per stapled security (2005: DUET 8.5 cents per stapled security) 50,123 35,869

99,945 91,413

The franked portion of distributions proposed by DUET at 30 June 2006 was 0.14 cents per stapledsecurity (2005: 0.35 cents per stapled security). There are no franking credits available for subsequentfinancial years.

Note 3. Interest Bearing Liabilities continued

MGHA$150 million 6.375% fixed rate guaranteed notesdue July 2011, were issued on 29 July 2004.A$135 million 6.5% fixed rate guaranteed notesdue July 2009, were issued on 29 July 2004.A further A$100 million floating rate guaranteednotes due July 2011, were issued on 29 July 2004at a floating interest rate with a margin abovebank bill rate. The notes are unsecured andunsubordinated obligations of the Group. Interestis paid semi-annually in arrears on 29 January and29 July (for the fixed rate notes) and quarterly on29 January, 29 April, 29 July and 29 October onthe floating rate notes. Scheduled payment ofprincipal and interest on the notes is guaranteedby an unrelated party.

– Redeemable preference sharesThe redeemable preference shares are deferredcumulative preference shares issued by UEDHthat are repayable over a term of 20 years. Interestis paid semi-annually or at any time a declarationis made by the board of directors of UEDH. Theinterest rate on the shares is 13.5%.

–POWERSThe POWERS have distributions payable in respectof each six month period ending on 1 March and1 September each year and otherwise inaccordance with the POWERS Terms. The firstdistribution payment date was 1 March 2004 andwas in respect of the period from the issue date until29 February 2004. The distribution rate in respect ofPOWERS for each distribution period until the initialreset date (1 September 2008) is a floating rate at amargin of 2.65% above the bank bill rate expressedas a percentage per annum of the face value ofeach POWERS.

70 71

Equity Equity holding holding

Country Class of 30 June 30 June Note 6. Investments in Controlled Entities of incor- shares/ 2006 2005Name of Entity Year end poration units %** %

Amistel Pty Ltd 30 June Australia Ordinary 79.9 79.9Australia Energy Finance Pty Ltd 30 June Australia Ordinary 79.9 79.9Australian Energy Fund No. 2 30 June Australia Ordinary 80.9 80.9Energy Partnership (Gas) Pty Ltd 30 June Australia Ordinary 79.9 79.9Energy Partnership (Holdings) Pty Ltd 30 June Australia Ordinary 79.9 79.9Energy Partnership Pty Ltd 30 June Australia Ordinary 79.9 79.9Energy Retail Holdings Pty Ltd 30 June Australia Ordinary 73.1 73.1Multinet Gas (DB No1) Pty Ltd 30 June Australia Ordinary 79.9 79.9Multinet Gas (DB No2) Pty Ltd 30 June Australia Ordinary 79.9 79.9Multinet Gas Distribution Partnership 30 June Australia Ordinary 79.9 79.9Multinet Gas (IE) Pty Ltd 30 June Australia Ordinary 79.9 79.9Multinet Group Holdings Pty Ltd 30 June Australia Ordinary 79.9 79.9Pacific Indian Energy Services Pty Ltd (PIES) 30 June Australia Ordinary 57.3 57.3POWERS Trust 30 June Australia Ordinary 100.0 100.0Power Partnership Pty Ltd 30 June Australia Ordinary 66.0 66.0UEIP Pty Ltd 30 June Australia Ordinary 66.0 66.0United Energy Distribution Pty Ltd 30 June Australia Ordinary 66.0 66.0United Energy Distribution Holdings Pty Ltd 30 June Australia Ordinary 66.0 66.0United Energy Finance Pty Ltd 30 June Australia Ordinary 66.0 66.0United Energy Finance Trust 30 June Australia Ordinary 66.0 66.0United Nominee Assets Pty Ltd 30 June Australia Ordinary 66.0 66.0Utilicorp Australia (Gas) Finance Pty Ltd 30 June Australia Ordinary 79.9 79.9Utilicorp Australia (Gas) Holdings Pty Ltd 30 June Australia Ordinary 79.9 79.9Utilicorp Southern Cross Pty Ltd 30 June Australia Ordinary 79.9 79.9Utilities Consulting Service Pty Ltd 30 June Australia Ordinary 66.0 66.0DUET Dampier Bunbury Pty Ltd 30 June Australia Ordinary 100.0 100.0DBNGP Trust* 30 June Australia Ordinary 71.8 87.6DBNGP Holdings Pty Ltd* 30 June Australia Ordinary 71.8 87.6DBNGP Finance Company Pty Ltd* 30 June Australia Ordinary 71.8 87.6DBNGP WA Pipeline Trust* 30 June Australia Ordinary 71.8 87.6DBNGP (WA) Nominees Pty Ltd* 30 June Australia Ordinary 71.8 87.6DBNGP (WA) Transmission Pty Ltd* 30 June Australia Ordinary 71.8 87.6DBNGP Compressor Co. Pty Ltd 30 June Australia Ordinary 71.8 87.6DBNGP (WA) Finance Pty Ltd 30 June Australia Ordinary 71.8 87.6

* DUET holds an equity interest of 60% and an economic interest in the operating results of DBP of 71.8%. This will reduce to 60% when

Alinta Limited and Alcoa of Australia Limited make their final payment on their partly paid shares.

** The equity holding is the equity holding of the DUET Group.



Note 7. Events Occurring After Reporting Date

–Acquisition of Duquesne Light HoldingsOn 6 July 2006, DUET announced that a DUETand Macquarie Infrastructure Partners (MIP) ledconsortium had executed a Merger Agreement (MA)to acquire 100% of Duquesne Light Holdings (DLH)for US$20 per share. DLH is a publicly listed energybusiness based in Pittsburgh, Pennsylvania USA.The transaction has a total equity market value ofapproximately US$1.59 billion.

DLH provides essential electricity distribution andtransmission to more than 587,000 customers inand around Pittsburgh. More than 80% of calendar2005 EBITDA of US$261 million was earned fromregulated activities. DLH has recently filed a ratecase application requesting a total distributionrevenue increase of $144 million and is proposingto file an application requesting a transmissionrevenue increase of $19 million with the USregulators responsible for setting the regulatedtariffs for these businesses. The determination ofthese rate case applications will take effect from7 January 2007.

DUET’s commitment under the MA is to provideUS$300 million of equity finance, representing a29% equity interest in the consortium. This is thelargest single equity position in the consortium andDUET will appoint two directors to the Board of themerger vehicle.

Of the total committed, on 11 August 2006, DUET(along with other consortium members) contributedUS$141 million (A$188 million) to subscribe for8.836 million DLH shares under a placementequivalent to 9.9% of DLH’s post placementshare capital. DUET contributed US$109 million(A$145.3 million). On 10 July 2006, DUETcompleted placement of 64 million stapledsecurities at $2.60 per stapled security toinstitutional and sophisticated investors raisinga total of $166.4 million.

The transaction is conditional on obtaining DLHshareholder and regulatory approvals. Shareholdersare expected to vote on the proposal before the endof October 2006. Regulatory approval and financialcompletion are expected in the first quarter ofcalendar year 2007.

The remainder of DUET’s investment will be fundedby cash and an entitlement issue expected to be early next year DUET has signed an equityunderwriting agreement with Macquarie BankLimited (MBL) for the equity required under theentitlement offer.

Upon completion, DUET’s investment in DLH willbe accounted for as an associate in accordancewith Note 1(l) to the full financial report.

–DUET RestructureOn 4 August 2006, DUET announced a proposalto change its current structure. The change willadd an Australian company, DUET InvestmentHoldings Limited (DIHL), to the stapled structure.The purpose of the restructure is to give DUETgreater flexibility in its capital management andinvestment strategy. Unitholders approved such a restructure, in principle, at the General Meetingon 4 November 2005.

As part of the Restructure, DIHL shares will bedistributed to Unitholders and stapled to the existingDUET units. This stapling will create a Triple StapledSecurity made up of one DIHL share, one unit inDUET 1 and one unit in DUET 2. The restructure hasno financial impact on the DUET Group.

–DUET DividendA final distribution of 11.75 cents per stapledsecurity was paid by DUET on 17 August 2006. This consists of a distribution of 5.875 cents per unitfrom DUET 1 and 5.875 cents per unit from DUET 2.

A portion of stapled unitholders participated inDUET’s Distribution Reinvestment Plan paid on17 August 2006. Of the distribution declared,$7.6 million will be reinvested in DUET.

With the exception of the above, the directors arenot aware of any matter or circumstance nototherwise dealt with in the financial report that hasoccurred since the period end that has significantlyaffected the operations of DUET 1, DUET 2, and theDUET Group or the state of their affairs in periodssubsequent to the year ending 30 June 2006.

Note 8. Impact of Adopting AustralianEquivalents to IFRS

(A) Impact of Adopting AIFRSThe adoption of AIFRS has resulted in adjustmentsin the following areas:

(a) Goodwill – no longer amortisedThe goodwill recognised by DUET when it acquiredDBP, UEDH and MGH is no longer amortised over a pre-determined period but subject to an annualimpairment test (or sooner where there is evidenceof impairment). The full amount of impairmentlosses are recognised in the income statement inthe year the impairment arises. Additionally, AIFRSprohibits the reversal of a previous impairment togoodwill. The effect of this change is:

(i) At 30 June 2005For DUET, intangible assets is increased by$22,645,000 and amortisation expense reduced by the same amount.

72 73

(b) Restatement of Business CombinationsOn 23 July 2003 the DUET Group acquired theUEDH and MGH businesses in Victoria. DUET haselected to apply AASB 3 Business Combinationsto these acquisitions and as a result of revaluationsof assets allowed under this standard, additionalgoodwill, deferred tax assets and deferred taxliabilities were recognised.

(i) At 1 July 2004For DUET, goodwill increased by $138,146,000,and deferred tax liabilities increased by$138,146,000.

(ii) At 30 June 2005For DUET, goodwill increased by $138,146,000,and deferred tax liabilities increased by$138,146,000.

(c) Pension plan and employee benefitsUnder AIFRS surpluses and deficits are recognised in relation to employer sponsoredpension plans. MGH and UEDH have definedbenefit superannuation plans, the obligation forthese plans is managed by AAM under a provisionfor services agreement.

(i) At 1 July 2004For DUET, other assets increased by $423,000 and other liabilities increased by $423,000.

(ii) At 30 June 2005For DUET, other assets increased by $6,789,000and other liabilities increased by $6,789,000.

(d) ProvisionsUnder AIFRS provisions can only be recognisedwhen an entity has a present obligation as a resultof a past obligating event. As a result therestructuring provision recognised in DBP wouldnot have been recognised and goodwill would have been reduced and any costs associated with restructuring would have been expensed.

(i) At 30 June 2005During the period costs previously offset againstthe provisions of $864,000 were expensed to theIncome Statement.

(e) Separately identifiable intangible assetsAASB 138 Intangible Assets requires intangibleassets that can be separately identified to berecorded as such. Purchased software meets thisdefinition and therefore has been reallocated fromPP&E to Intangibles.

(i) At 1 July 2004For DUET, intangible assets is increased by$53,640,000 and property plant and equipmentis reduced by the same amount which representsthe amortised costs of purchased software forthe group.

(ii) At 30 June 2005For DUET, intangible assets is increased by$39,838,000 and property, plant and equipmentis reduced by the same amount which representsthe amortised costs of purchased software forthe group.

(f) Other assetsAASB 138 Intangible Assets does not allow thecapitalisation of the Gas Access ArrangementReview Costs which were previously capitalisedand amortised over their life in MGH. All expenditurein relation to the Gas Access Arrangement Reviewwill be expensed as incurred. The balance of $1,109,000 was removed at 1 July 2004. At 30 June 2005 $370,000 was removed fromamortisation expense and adjusted againstother assets.

(g) Income tax – balance sheet approachUnder AIFRS a “Balance sheet approach” is usedto determine deferred tax assets and deferred taxliabilities, which requires a comparison between thecarrying amount and the tax base for each assetand liability.

(i) At 1 July 2004For DUET, intangible assets, decreased by$12,104,000 and deferred tax liability decreased bythe same amount. Deferred tax assets increased by$1,407,000 and deferred tax liability increased bythe same amount. Retained earnings decreased by$3,435,000 and deferred tax liability increased bythe same amount.

(ii) At 30 June 2005For DUET, intangible assets, decreased by$19,197,000 and deferred tax liability decreased bythe same amount. Retained earnings decreased by$8,902,000 and deferred tax liability increased bythe same amount.

(h) Business combinations and staplingarrangementsDUET was required to apply AASB 3 BusinessCombinations to account for all transactions thatresulted in a new business combination after 1 July2004. DUET was required to identify an acquirer(being DUET 1 or DUET 2) and consolidate theassets and liabilities of the other.

Under UIG 1013 Consolidated Financial Reports in relation to Pre-Date-of-Transition StaplingArrangements, DUET has identified DUET 1 whichconsolidates the remaining stapled entity. Theconsolidated financial report of the deemed parentwill represent the consolidated net assets of allentities within the DUET Group.



Note 8. Impact of Adopting AustralianEquivalents to IFRS continued

(A) Impact of Adopting AIFRS continued(i) Effect of changes made to retained earningsAll adjustments to DBP, MGH and UEDH retainedearnings in respect of the transition to AIFRSimpact the minority interest. Adjustments to ANH’sretained earnings in respect of the transition toAIFRS impact the equity accounting profits inDUET. The effects of these changes are:

(i) At 1 July 2004For DUET at 1 July 2004 minority interest wasdecreased by $1,141,000 and retained earningswas increased by the same amount.

For DUET IFRS adjustments recorded in ANH for the same period had the effect of decreasingDUET’s investment by $22,709,000 and reducingretained earnings by the same amount.

(ii) At 30 June 2005Minority interests increased by $636,000 and the offset was against retained earnings.

For DUET IFRS adjustments recorded in ANH had the effect of increasing DUET’s investment by $21,862,000 and increasing retained earnings by the same amount.

(j) Consistent accounting policiesIn accordance with AASB 1 First-time Adoption of Australian Equivalents to International FinancialReporting Standards (AASB 1), DUET is required to use the same accounting policies in its openingAIFRS balance sheet and throughout all periodspresented in its first AIFRS report. As a result,DUET 1 and DUET 2 have restated the comparativebalance sheet at 1 July 2004 for the change inaccounting policy for the measurement ofinvestments.

This change was reflected in the financial statementsfor the year ended 30 June 2005 under AGAAP butnot for reports with a period end before that date.The previous policy was to account for investmentsat net market value. The revised policy is to accountfor investments using the equity method.

(i) At 1 July 2004For DUET 1 and DUET 2, other financial assetshave decreased by $147,645,000, investments inassociated entities have increased by $90,964,000and retained earnings have decreased by$56,681,000.

74 75

(B) Reconciliation of Equity Reported Under Previous GAAP to Equity Under IFRS(i) At the date of transition to IFRS: 1 July 2004

DUET 1 GROUP

Effect of transition

Previous GAAP to IFRS IFRSNote ’000 ’000 ’000

Current assetsCash 55,128 – 55,128Receivables 58,932 – 58,932Inventories 3,369 – 3,369Other assets 37,386 – 37,386Total current assets 154,815 – 154,815Non-current assetsReceivables 79,930 – 79,930Investment in associated entities using equity accounting method i, j 45,824 (22,709) 23,115Property, plant and equipment e 1,850,979 (53,640) 1,797,339Intangible assets b, e, g 1,137,953 179,682 1,317,635Deferred tax assets g 25,791 1,407 27,198Other assets c, f 11,249 (686) 10,563Total non-current assets 3,151,726 104,054 3,255,780Total assets 3,306,541 104,054 3,410,595Current liabilitiesPayables 78,534 – 78,534Distribution and dividend payable 24,437 – 24,437Interest bearing liabilities – – –Provisions 12,295 – 12,295Total current liabilities 115,266 – 115,266Non-current liabilitiesProvisions 7,075 – 7,075Interest bearing liabilities 2,645,308 – 2,645,308Deferred tax liability b, g 36,059 130,884 166,943Retirement benefit obligations c – 423 423Total non-current liabilities excluding security holder units and minority interest classified as debt 2,688,442 131,307 2,819,749Total liabilities excluding security holder units and minority interest classified as debt 2,803,708 131,307 2,935,015Net assets excluding security holder units and minority interest classified as debt attributable to unitholders 502,833 (27,253) 475,580Non-current liability attributable to unitholders and minority interestsSecurity holder units – – –Minority interests units – – –Total non-current liability attributable to unitholders and minority interests – – –Unitholders FundsContributed unitholders funds 443,826 – 443,826Undistributed operating deficit a, f, i, j (5,387) (26,112) (31,499)Total shareholders’ interest 438,439 (26,112) (412,327)Minority interests i 64,394 (1,141) 63,253Total unitholders funds 502,833 (27,253) (475,580)



Note 8. Impact of Adopting Australian Equivalents to IFRS continued

(B) Reconciliation of Equity Reported Under Previous GAAP to Equity Under IFRS continued(ii) At the end of the last reporting period under previous GAAP – 30 June 2005

DUET 1 GROUPEffect of

transition Previous GAAP to IFRS IFRS

Note ’000 ’000 ’000

Current assetsCash 188,343 – 188,343Receivables 62,996 – 62,996Inventories 11,415 – 11,415Other assets 76,776 – 76,776Total current assets 339,530 – 339,530Non-current assetsReceivables 79,882 – 79,882Other financial assets – – –Investment in associated entities using equity accounting method i, j 45,336 (21,862) 23,474Property, plant and equipment e 3,376,070 (39,838) 3,336,232Intangible assets a, b, e, g 1,833,720 181,432 2,015,152Deferred tax assets 15,014 – 15,014Other assets c, f 42,857 6,419 49,276Total non-current assets 5,392,879 126,151 5,519,030Total assets 5,732,409 126,151 5,858,560Current liabilitiesPayables 161,402 – 161,402Distribution and dividend payable 35,868 – 35,868Interest bearing liabilities 22,750 – 22,750Provisions 7,734 – 7,734Other liabilities 10,411 – 10,411Total current liabilities 238,165 – 238,165Non-current liabilitiesProvisions 16,498 – 16,498Interest bearing liabilities 4,091,488 – 4,091,488Deferred tax liability b, g 391,629 127,850 519,479Retirement benefit obligations – 6,789 6,789Other liabilities c 10,129 – 10,129Total non-current liabilities excluding security holder units and minority interest classified as debt 4,509,744 134,639 4,644,383Total liabilities excluding security holder units and minority interest classified as debt 4,747,909 134,639 4,882,548Net assets excluding security holder units and minority interest classified as debt attributable to unitholders 984,500 (8,488) 976,012Non-current liability attributable to unitholders and minority interestsSecurity holder units – – –Minority interests units – – –Total non-current liability attributable to unitholders and minority interests – – –Unitholders FundsContributed unitholders funds 910,822 – 910,822Reserves – – –Undistributed operating deficit f, i, a, g (37,082) (9,124) (46,206)Total shareholders’ interest 873,740 (9,124) 864,616Minority interests i 110,760 636 111,396Total unitholders funds 984,500 (8,488) 976,012

76 77

(iii) Reconciliation of profit for the year ended 30 June 2005DUET 1 GROUP

Effect of transition

Previous GAAP to IFRS IFRSNote ’000 ’000 ’000

Revenue from continuing activities 772,018 – 772,018Share of net profits of associates accounted for using the equity method i 4,181 847 5,028Operating expenses d (263,466) (864) (264,330)Depreciation and amortisation expense a, f (153,412) 24,250 (129,162)Other expensesFinance costs excluding costs attributable to unitholders and minority interests (268,780) – (268,780)Total expenses from continuing activities (685,658) 23,386 (662,272)Net profit from continuing activities before income tax expense and finance costs attributable to unitholders and minority interests 90,541 24,233 114,774Income tax expense g (19,569) (5,467) (25,036)Net profit from continuing activities after income tax expense and before finance costs attributable to unitholders and minority interests 70,972 18,766 89,738Finance costs attributable to DUET unitholders – – –Finance costs attributable to minority interests – – –Changes in net assets from continuing activities after income tax expense and finance costs attributable to unitholders and minority interests 70,972 18,766 89,738Net profit attributable to minority interests i (11,254) (1,777) (13,031)Changes in net assets attributable to unitholders 59,718 16,989 76,707


Note 8. Impact of Adopting AustralianEquivalents to IFRS continued

(C) Reconciliation of Cash Flow Statement for the year ended 30 June 2005The adoption of AIFRS has not resulted in anymaterial adjustments to the Cash Flow Statement.

(D) Adoption of AASB 132 and AASB 139 on1 July 2005(a) Derivative financial instrumentsDUET Group have applied previous AGAAP in thecomparative information on financial instrumentswithin the scope of AASB 132 and AASB 139. Theadjustments on 1 July 2005 reflect the recognitionat fair value of the interest rate swaps entered intoby MGH, UEDH and DBP to hedge the interest rateexposure on their floating rate debt. Where hedgeaccounting has been applied and is considered to be effective, the fair value adjustments arerecognised in equity as a reserve. Where the hedgeis not effective, the fair value adjustments arerecognised in the income statement in the periodwhen they arise. The effect of this change on 1 July 2005 is:

For DUET, derivative financial instruments assetsincrease by $11,881,000, derivative financialinstrument liabilities increase by $113,435,000deferred tax liabilities increased by $6,186,000,deferred tax liabilities increased by $4,228,000 andreserves decreased by $9,040,000. For DUET 1and DUET 2, investment in associated entity usingequity accounting method decreased by$3,614,000. $452,000 represents the recognition of an effective hedge in other assets and payables.

(b) Capitalised finance costsUnder previous AGAAP, finance costs incurredwhen arranging borrowings were recognised as anasset on the balance sheet and amortised over thelife of the borrowing facility. Under AASB 139, suchcosts are offset against the borrowings to whichthey relate in the balance sheet and amortised overthe terms of those borrowings on an effective yieldbasis. The effect of this change on 1 July 2005 is:

For DUET, non-current other assets is reduced by $39,824,000 and non-current interest bearingliabilities reduced by $39,824,000. For DUET 1 and DUET 2, non-current other assets is reducedby $3,380,000 and non-current interest bearingliabilities reduced by $3,380,000.

(c) Unitholders funds – classified as liabilitiesDue to the finite life and present entitlement clausescontained with the DUET and DBNGP TrustConstitutions, upon adoption of AASB 132 on1 July 2005, the units in DUET Trusts and DBNGPTrust were classified as debt for accountingpurposes. As a result the income/loss whichaccrued to the units in the Trusts has beenaccounted for as an expense/income andpresented in the income statement for the periodas a finance cost/income to unitholders inaccordance with AASB 132.


78 79

DUET 1 GROUPEffect of

adoption ofIFRS AASB 132 IFRS

30 June 2005 and AASB 139 1 July 2005Note ’000 ’000 ’000

Current assetsCash 188,343 – 188,343Receivables 62,996 – 62,996Inventories 11,415 – 11,415Other assets 76,776 – 76,776Derivative financial instruments a – 11,881 11,881Total current assets 339,530 11,881 351,411Non-current assetsReceivables 79,882 – 79,882Other financial assets – – –Investment in associated entities using equity accounting method a 23,474 – 23,474Property, plant and equipment 3,336,232 – 3,336,232Intangible assets 2,015,152 – 2,015,152Deferred tax assets a 15,014 6,186 21,200Other assets b, a 49,276 (39,372) 9,904Total non-current assets 5,519,030 (33,186) 5,485,844Total assets 5,858,560 (21,305) 5,837,255Current liabilitiesPayables a 161,402 (452) 160,950Distribution and dividend payable 35,868 – 35,868Accrued expenses 22,750 – 22,750Provisions 7,734 – 7,734Other liabilities 10,411 – 10,411Derivative financial instruments a – 113,435 113,435Total current liabilities 238,165 112,983 351,148Non-current liabilitiesProvisions 16,498 – 16,498Interest bearing liabilities a 4,091,488 (133,851) 3,957,637Deferred tax liability a 519,479 4,228 523,707Retirement benefit obligations 6,789 – 6,789Other liabilities 10,129 – 10,129Total non-current liabilities excluding security holder units and minority interest classified as debt 4,644,383 (129,623) 4,514,760Total liabilities excluding security holder units and minority interest classified as debt 4,882,548 (16,640) 4,565,908Net assets excluding security holder units and minority interest classified as debt attributable to unitholders 976,012 (4,665) 971,347Non-current liability attributable to unitholders and minority interestsSecurity holder units c – 868,158 868,158Minority interests units c – 52,364 52,364Total non-current liability attributable to unitholders and minority interests – 920,522 920,522Unitholders FundsContributed unitholders funds c 910,822 (910,822) –Reserves a – (9,040) (9,040)Undistributed operating deficit c (46,206) (46,206) –Total shareholders’ interest 864,616 (873,656) (9,040)Minority interests 111,396 (51,531) 59,865Total unitholders funds 976,012 (925,187) 50,825


Note 9. Segment Information

–Segment products and locationsThe consolidated entity’s operating companies areorganised and managed separately according tothe nature of the products and services theyprovide, with each segment offering differentproducts and serving different markets. The gasdistribution segment operates in Victoria andWestern Australia and the electricity distributionsegment operates in Victoria.

–Geographic segmentThe consolidated entity operates predominately inone geographical segment being Australia.

Accordingly, no geographical segment informationis presented.

–Segment accounting policiesThe Group generally accounts for intersegmentsales and transfers as if the sales or transfers wereto third parties at current market prices.

The principal activity of the DUET Group, DUET 1and DUET 2 is investment in energy utility assets.The primary basis of segment reporting isbusiness. At the date of this report DUET hasinvestments in the gas distribution, gastransmission and electricity distribution segments.

Gas Gas Electricity Eliminations/Transmission Distribution Distribution unallocated Consolidated

2006 $’000 $’000 $’000 $’000 $’000

Business SegmentsRevenueSales to external customers 206,564 159,298 403,931 230 770,023Other revenues from external customers 15,328 11,985 4,733 – 32,046Share of net profit of equity accounted investments – 5,686 – – 5,686Total segment revenue 221,892 176,969 408,664 230 807,755Non-segment revenuesInterest revenue 17,723Unallocated revenue –Total DUET Group revenue 825,478ResultsSegment result* 123,698 85,018 183,480 (2,517) 389,679Non-segment expenses

Finance costs excluding costs attributable to security holders (301,955)

Unallocated expensesNet profit from continuing activities before income tax expense and finance costs attributable to security holders and minority interests 87,724Income tax expense (19,627)Net profit from continuing activities after income tax expense and before finance costs attributable to security holders and minority interests 68,097AssetsSegment assets 2,741,615 1,283,084 2,065,780 209,818 6,300,296LiabilitiesSegment liabilities (555,344) (156,186) (242,180) (2,087) (955,797)Non-segment liabilities

Interest bearing liabilities (4,274,769)Total liabilities excluding minority interest classified as debt (5,230,566)Other segment informationAcquisition of property, plant and equipment, intangible assets and other non-current assets 348,255 56,299 107,274 40 511,868Depreciation 32,396 24,823 53,188 (201) 110,205Amortisation 794 9,916 14,733 – 25,443Equity investment in segment assets – 27,078 – – 27,078

* Segment results refer to earnings before finance costs and tax expense.


80 81

Gas Gas Electricity Eliminations/Transmission Distribution Distribution unallocated Consolidated

2005 $’000 $’000 $’000 $’000 $’000

Business SegmentsRevenueSales to external customers 177,765 157,176 419,968 (497) 754,412Other revenues from external customers 57 2,261 1,191 – 3,509Share of net profit of equity accounted investments – 5,028 – – 5,028Total segment revenue 177,822 164,465 421,159 (497) 762,949Non-segment revenuesInterest revenue 13,802Unallocated revenue 295Total DUET Group revenue 777,046ResultsSegment result* 116,521 78,519 184,827 11,528 391,395Non-segment expenses

Finance costs excluding costs attributable to security holders (268,780)

Unallocated expenses (7,841)Net profit from continuing activities before income tax expense and finance costs attributable to security holders and minority interests 114,774Income tax expense (25,036)Net profit from continuing activities after income tax expense and before finance costs attributable to security holders and minority interests 89,738AssetsSegment assets 2,334,626 1,265,481 2,040,094 218,359 5,858,560LiabilitiesSegment liabilities 436,334 130,527 174,251 49,948 791,060Non-segment liabilitiesInterest bearing liabilities 4,091,488Total liabilities excluding minority interest classified as debt 4,882,548Other segment informationAcquisition of property, plant and equipment, intangible assets and other non-current assets 24,677 39,513 101,139 425 165,754Depreciation 21,548 24,339 59,908 (240) 102,555Amortisation 816 8,678 17,115 (2) 726,607Equity investment in segment assets – 23,474 – – 23,474

* Segment results refer to earnings before finance costs and tax expense.

Note 10. Full Financial Report

Further financial information can be obtained from the full financial report which is available, free ofcharge, on request from the DUET Group. A copy may also be requested by calling Computershare on1800 009 874.


Statement by the Directors of the Responsible EntitiesOn the financial report of the Diversified Utility and Energy Trust No. 1

In the opinion of the directors of AMPCI Macquarie Infrastructure Management No. 1 Limited as theResponsible Entity for Diversified Utility and Energy Trust No. 1 and the directors of AMPCI MacquarieInfrastructure Management No. 2 Limited as the Responsible Entity for Diversified Utility and Energy TrustNo. 2, together known as the Responsible Entities, the combined consolidated concise financialstatements for Diversified Utility and Energy Trust (as defined in Note 1(b)), set out on page 62 complieswith AASB 1039 Concise Reports.

The financial statements and specific disclosures included in this concise financial report have beenderived from the full financial report for the year ended 30 June 2006.

The concise financial report cannot be expected to provide as full an understanding of the financialperformance, financial position and financing and investing activities of Diversified Utility and EnergyTrusts as the full financial report which, as indicated in Note 10, is available on request.

Signed in accordance with a resolution of the directors of AMPCI Macquarie Infrastructure ManagementNo. 1 Limited.

Philip GarlingDirector

Sydney28 August 2006

Signed in accordance with a resolution of the directors of AMPCI Macquarie Infrastructure Management No. 2 Limited.

John RobertsDirector

Sydney28 August 2006

Independent Audit Reportto the unitholders of Diversified Utility and Energy Trust No. 1 and Diversified Utility and Energy Trust No. 2

82 83

ScopeThe concise financial report and directors’ responsibilityThe concise financial report comprises the balance sheet, income statement, statement of changes inequity, cash flow statement, accompanying notes to the financial statements and the directors’ declarationfor the stapled entity comprising Diversified Utility and Energy Trust No. 1, Diversified Utility and Energy TrustNo. 2 (the “Trusts”) and Diversified Utility and Energy Trusts (the “DUET Group”), for the year ended 30 June2006. The DUET Group comprises both the Trusts and the entities it controlled during that year.

The directors of the responsible entities of the Trusts are responsible for preparing a concise financial reportthat complies with Accounting Standard AASB 1039 Concise Financial Reports, in accordance with theTrust deed and the Corporations Act 2001. This includes responsibility for the maintenance of adequateaccounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the concise financial report.

Audit approachWe conducted an independent audit on the concise financial report in order to express an opinion to theunitholders of the Trusts. Our audit was conducted in accordance with Australian Auditing Standards in orderto provide reasonable assurance as to whether the concise financial report is free of material misstatement.The nature of an audit is influenced by factors such as the use of professional judgement, selective testing,the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence.Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the concise financial report ispresented fairly in accordance with Accounting Standard AASB 1039 Concise Financial Reports.

We formed our audit opinion on the basis of these procedures, which included:

–Examining, on a test basis, the information to provide evidence supporting that the amounts and disclosuresin the concise financial report are consistent with the full financial report; and

–Examining, on a test basis, information to provide evidence supporting the amounts, discussion andanalysis, and other disclosures in the concise financial report that were not directly derived from the fullfinancial report.

We have also performed an independent audit of the full financial report of the DUET Group for the yearended 30 June 2006. Our audit report on the full financial report was signed on 28 August 2006, and was not subject to any qualification. For a better understanding of our approach to the audit of the full financialreport, this report should be read in conjunction with our audit report on the full financial report.

IndependenceWe are independent of the Trusts and have met the independence requirements of Australian professionalethical pronouncements and the Corporations Act 2001. We have given to the directors of the responsibleentities of the Trusts a written Auditor’s Independence Declaration, signed on 28 August 2006, a copy ofwhich is included in the Directors’ Report. In addition to our audit of the full and concise financial reports, we were engaged to undertake the services disclosed in the notes to the financial statements of the fullfinancial report. The provision of these services has not impaired our independence.

Audit opinionIn our opinion:

1. the concise financial report of Diversified Utility and Energy Trust No. 1, Diversified Utility andEnergy Trust No. 2 and the DUET Group complies with Accounting Standard AASB 1039 ConciseFinancial Reports.

Ernst & Young

Michael S PerryPartner

Melbourne28 August 2006Liability limited by a scheme approved under Professional Standards Legislation


Remuneration Report

DUET is not required to provide a remuneration report. However the following information on remuneration is provided in the interests of corporate governance.

DirectorsNo director of the responsible entities is remunerated by DUET. The independent directors of theresponsible entities received fees of A$60,000 for the financial year ended 30 June 2006 for acting as directors.

In the case of the Macquarie and AMPCH executive directors, remuneration earned in connection withtheir roles as directors on the boards of the responsible entities are paid by Macquarie and AMPCHrespectively.

The fees paid to the independent and non-executive directors of the responsible entities are determinedby reference to current market rates for directorships. The level of fees is not related to the performance of DUET.

None of the independent and non-executive directors of the responsible entities are entitled to DUET options or securities or to retirement benefits as part of their remuneration package.

ExecutivesThe responsible entities make available employees to discharge their duties to DUET.

The CEO of DUET is subject to profit share arrangements that apply to Macquarie Bank Limited’sexecutive directors. In accordance with these arrangements, 20% of Mr Barry’s profit share amounts eachyear are withheld and subject to restrictions. These retained profit share amounts vest after between fiveand ten years.

In order to better align the interests of management with security holders, from 2006 onwards Mr Barry’sretained profit share amounts will be invested by Macquarie Bank Limited in DUET securities.

Management feesThe responsible entities are entitled to base and performance fees for acting as responsible entity to DUET.

Base fees are calculated quarterly, with reference to the average market capitalisation of DUET over the last ten trading days of the quarter. Base fees of $10.6 million were paid or payable by DUET to theresponsible entities for the financial year ended 30 June 2006.

Performance fees are calculated six monthly, with reference to the performance of the accumulatedsecurity price of DUET compared with the performance of the S&P/ASX 200 Industrials AccumulationIndex. Performance fees of $8.8 million were paid by DUET to the responsible entities for the financial yearended 30 June 2006.

Security Holder InformationAs at 28 August 2006

84 85


Distribution of stapled securitiesTotal stapled % of issued

Investor ranges Holders securities capital

1 – 1,000 542 320,072 0.061,001 – 5,000 5,744 19,474,914 3.955,001 – 10,000 5,385 40,916,002 8.2910,001 – 100,000 4,906 106,541,988 21.59100,001 – Maximum 201 326,326,655 66.11Total 16,778 493,579,631 100.00

Investors with less than the minimum marketable parcel of stapled securities: 87

Twenty largest investors% of

Number issuedRank Investor of units capital

1 AMP Life Limited 82,900,683 16.802 Cogent Nominees Pty Limited 32,176,836 6.523 National Nominees Limited 22,797,827 4.624 JP Morgan Nominees Australia Limited 21,168,002 4.295 Macquarie Specialised Asset Management Ltd 17,592,000 3.566 Westpac Custodian Nominees Limited 14,133,979 2.867 Questor Financial Services Limited 13,923,642 2.828 Cogent Nominees Pty Limited 12,349,380 2.509 ANZ Nominees Limited 11,518,710 2.3310 Belike Nominees Pty Limited 8,090,153 1.6411 Macquarie Bank Limited 7,403,223 1.5012 Australian Executor Trustees Limited 4,827,895 0.9813 Citicorp Nominees Pty Limited 2,658,557 0.5414 UBS Wealth Management Australia Nominees Pty Ltd 2,300,331 0.4715 Queensland Investment Corporation 2,265,216 0.4616 RBC Dexia Investor Services Australia Nominees Pty Limited 2,121,321 0.4317 Argo Investments Limited 2,000,000 0.4118 Mrs Shemara Wikramanayake 1,842,987 0.3719 Cambooya Pty Limited 1,818,476 0.3720 Westpac Financial Services Limited 1,784,630 0.36Total for top 20 holders of stapled securities 265,673,848 53.83

Details of substantial stapled security holdersNumber of % of issued

stapled stapled Investor securities securities

AMP Limited 118,906,339 24.24%Macquarie Bank Limited 40,297,761 8.21%

Glossary $, A$ or cents Australian dollars or cents, as the case may beAccess arrangement An arrangement for access by the owner or operator of a pipeline which

is covered by the National Gas Code that has been approved by the relevant regulator

AER Australian Energy Regulator Authority Act 2003Alcoa Alcoa of Australia Limited (ACN 004 879 298) trading as Alcoa World

Alumina AustraliaAlinta Alinta Limited (ABN 40 087 857 001)AlintaGas Networks or AGN AlintaGas Networks Pty Limited (ABN 90 089 531 975)Alinta Networks Group or AGN Group ANH and each of its subsidiariesAMP AMP Limited (ABN 49 079 354 519)AMPCH AMP Capital Holdings Limited (ABN 69 078 651 966)AMPCI AMP Capital Investors Limited (ABN 59 001 777 591)AMP Group AMP and each of its subsidiariesANH Alinta Network Holdings Pty Limited (ABN 63 104 788 123)ANS Alinta Network Services Pty Limited (ABN 52 104 352 650)ASIC Australian Securities and Investments CommissionAsset utilisation A measure of how well the pipeline is being utilised, taking into account

the operational characteristics of the pipelineASX Australian Stock Exchange Limited (ABN 98 008 624 691)ASX listing rules The official listing rules of ASX and other rules of ASX which are applicable

to listed entities, each as amended or replaced from time to time, except tothe extent of any expressed or written waiver by ASX

Back-haul A gas transportation service on the DBNGP where the inlet point isdownstream of the outlet point

Board The board of Directors of either or both of RE1, RE2 and DIHL as the context may dictate

CAIDI Customer average interruption duration indexCorporations Act Corporations Act 2001 (Cth)CPI Consumer price indexDampier Bunbury Pipeline or DBP The trading name for the group of companies which operate the DBNGPDampier to Bunbury Natural Gas The natural gas transmission pipeline which runs from the north-west ShelfPipeline or DBNGP to Bunbury and is run by DBPDBNGP Consortium The Consortium comprising DUET, Alinta and AlcoaDBNGP Trust The trust bearing that name constituted by the deed entitled “Trust Deed —

DBNGP Trust” executed by DBNGP Holdings dated 6 September 2004DBP Group The DBNGP Trust and all its underlying subsidiariesDIHL DUET Investment Holdings Limited (ACN 120 456 573)Directors Directors of RE1, RE2 or DIHL as the context may dictateDUET 1 Diversified Utility and Energy Trust No 1 Limited (ARSN 109 363 037), a trust

formed under the DUET 1 Constitution of which RE1 is the responsible entityDUET 2 Diversified Utility and Energy Trust No 2 Limited (ARSN 109 363 135), a trust

formed under the DUET 2 Constitution of which RE2 is the responsible entityDUET Constitutions Collectively, the DUET 1 Constitution and the DUET 2 ConstitutionDUET Group Collectively, DUET 1, DUET 2 and DIHLDUET Parent DUET 1 and DUET 2 togetherEBIT Earnings before interest and taxEBITDA Earnings before interest, tax, depreciation (including abandonments)

and amortisationEDPR Electricity Distribution Price ReviewERA Economic Regulatory Authority established under the Economic Regulation

Authority Act 2003ESC Essential Services Commission (Victoria) established under the Essential

Services Commission Act 2001Financial Services Agreements The agreements between AMPCI (on the one hand) and each of UEDH and

MGH (on the other hand) dated 14 July 2003, under which AMP Capitalprovides certain financial services to these entities

FOLAs The agreements known as First Onlending Agreements between thePOWERS RE1 and RE2 (as amended), under which the proceeds received onissue of POWERS (less certain fees and transaction costs) were lent toDUET 1 and DUET 2

Full-haul A gas transportation service on the DBNGP for deliveries of gas downstreamof Compressor Station 9 on the DBNGP, but does not include back-haul

GasNet GasNet Australia GroupGDS Gas distribution systemGJ GigajouleGWh Gigawatt hourLNG Liquid Natural GasLPG Liquefied Petroleum Gas

86 87


Macquarie Macquarie Bank Limited (ACN 008 583 542)Macquarie Group Macquarie and each of its related bodies corporateMAIFI Momentary average interruption frequency indexManagement Services Agreement The agreements between PIES and each of ANH, MGH and UEDH

under which PIES provides management services to these entities’respective groups

MAOP Pipeline maximum allowable operating pressure MCE Ministerial Council on Energy MGH Multinet Group Holdings Pty Limited (ABN 83 104 036 937)Multinet MultinetGas (DB No. 1) Pty Limited (ABN 66 086 026 986) and MultinetGas

(DB No. 2) Pty Limited (ABN 57 086 230 112) trading as the Multinet GasDistribution Partnership

Multinet Group MGH and each of its subsidiariesMW MegawattNational Gas Code or NGC The National Third Party Access Code for Natural Gas Pipeline SystemsOECD The Organisation for Economic Co-operation and DevelopmentOperating Services Agreements or OSA The agreements between ANS (on the one hand) and each of UEDH, MGH

and ANH (on the other hand, amongst others) in terms of which ANS agreesto provide comprehensive management services to the aforesaid entities andin the context of DBNGP, the Operating Services Agreement between DBPGroup and ANS dated 27 October 2004

Part-haul A gas transportation service on the DBNGP for deliveries of gas upstream of Compressor Station 9 on the DBNGP, but does not include back-haul

PC Productivity Commission Performance fee The performance fee, as described in Section 6.6PIES Pacific Indian Energy Services Pty Limited (ACN 105 508 843)PJ PetajoulePOWERS Preferred, cumulative, exchangeable, redeemable reset units in the POWERS

Trust issued by the POWERS REPOWERS holder Any person recorded in the register as the holder of POWERSPOWERS RE AMPCI, in its capacity as the responsible entity of the POWERS TrustPOWERS Trust POWERS Trust (ARSN 105 094 442), a registered managed investment

scheme established under the POWERS Trust Constitution of which AMPCIis the responsible entity

Proforma Financial information from prior to DUET’s listing on ASX which has been normalised

RE1 AMPCI Macquarie Infrastructure Management No. 1 Limited (ABN 99 108013 672)

RE2 AMPCI Macquarie Infrastructure Management No. 2 Limited (ABN 15 108014 062)

Reference tariff The tariff determined for reference services by the relevant regulator from time to time

Registry Computershare Investor Services Pty Limited (ABN 48 078 279 277) or any other person providing registry services to DUET from time to time

SAIDI System average interruption duration indexSAIFI System average interruption frequency Senior debt Debt provided under the Initial Assets Senior Debt Facilities and the DBNGP

Senior Debt FacilitiesSenior lenders The lenders under the Initial Assets Senior Debt Facilities and/or the DBNGP

Senior Debt Facilities (as applicable)SOLAs Subordinated loan agreements known as Second Onlending Agreements

between the Issuers (as lenders) and the Asset Holding Entities (asborrowers), as amended

Stapled securities Units in DUET 1, DUET 2 and shares in DIHL which are stapled together(from 31 August 2006) so that one may not be transferred, or otherwise dealtwith, without the other or others and which are quoted on ASX jointly as a‘stapled security’, and are registered in the name of a person

Stapled security holders Holder of a stapled securityStapled security Units in DUET 1 and DUET 2 up to 31 August 2006T1 Tranche 1 full-haul TUOS Transmission Use of SystemUED United Energy Distribution Pty Limited (ABN 70 064 651 029), the changed

name of United Energy LimitedUED Group UEDH and each of its subsidiariesUEDH United Energy Distribution Holdings Pty Limited (ACN 104 381 660)

Directory

Directors of the responsible entitiesThe RE1 board of directors is comprised as follows:

Name and Position Executive/Independent

Philip Garling Executive Chairman (appointed by AMPCI)

John Roberts Executive Director (appointed by Macquarie)

Hon. Michael LeeDirector Independent

Doug HalleyDirector Independent

Emma SteinDirector Independent

Secretary of RE1Christine Williams

The RE2 board of directors is comprised as follows:


Philip Garling Executive Chairman (appointed by AMPCI)

John Roberts Executive Director (appointed by Macquarie)

Ron FinlayDirector Independent

Eric GoodwinDirector Independent

Duncan SutherlandDirector Independent

Secretary of RE2Christine Williams

The DIHL board of directors is comprised as follows:


Philip Garling Executive Chairman (appointed by RE2)

John Roberts Executive Director (appointed by RE1)

Doug Halley IndependentDirector (appointed by RE2)

Emma Stein IndependentDirector (appointed by RE1)

Ron Finlay IndependentDirector (appointed by RE1 and RE2)

Secretary of DIHLChristine Williams

Responsible entities

of the DUET Group

Responsible entity of

DUET 1 and manager of DIHL

AMPCI Macquarie InfrastructureManagement No. 1 Limited(ABN 99 108 013 672) (RE1)

Responsible entity of DUET 2

AMPCI Macquarie InfrastructureManagement No. 2 Limited(ABN 15 108 014 062) (RE2)

Level 7, 1 Martin PlaceSydney NSW 2000 orPO Box 4294Sydney NSW 1164

Registry

Computershare Investor Services Pty LimitedGPO Box 7115Sydney NSW 2001orLevel 360 Carrington StreetSydney NSW 2000

Telephone: + 61 2 9415 4189or 1800 009 874

Facsimile:+61 3 9473 2500

Investor relations

of the DUET Group

Level 71 Martin PlaceSydney NSW 2000orPO Box 4294Sydney NSW 1164

Telephone:Within Australia: 1800 005 049Outside Australia: +61 2 8232 4491

Facsimile:+61 2 8232 4713

Website:www.duet.net.au

This report has been printedon Novatech Premium Silkand Nordset, both EMAScertified stocks.

Novatech and Nordsetare both environmentallyresponsible papersmanufactured using ElementalChlorine Free (ECF) pulpsourced from sustainable,well managed forests.Produced by Nordland Papier,a company certified underISO14001 environmentalmanagement systemsand registered under theEU Eco-managementand Audit Scheme EMAS (Reg. No.D – 162 – 00007).

precinct.com.au

Principal photographyby Joe Vittorio.

The DUET Group comprises DiversifiedUtility and Energy Trust No. 1(ARSN 109 363 037) (DUET 1),Diversified Utility and Energy Trust No. 2(ARSN 109 363 135) (DUET 2) andDUET Investment Holdings Limited (DIHL).AMPCI Macquarie InfrastructureManagement No. 1 Limited(ABN 99 108 013 672) (RE1) is theResponsible Entity of DUET 1 and AMPCIMacquarie Infrastructure ManagementNo. 2 Limited (ABN 15 108 014 062) (RE2)is the Responsible Entity for DUET 2. RE1is the manager of DIHL. RE1 and RE2 arejointly owned by AMP Capital HoldingsLimited (ABN 69 078 651 966) (AMPCH),a wholly owned subsidiary of AMP Limited,and Macquarie Bank Limited(ABN 46 008 583 542) (Macquarie).

StaplingIn accordance with its requirements inrespect of stapled securities, ASX reservesthe right (but without limiting its absolutediscretion) to remove DUET 1, DUET 2and DIHL, or all three, from the official listof ASX if any of the securities in DUET 1,DUET 2 or DIHL cease to be stapledtogether or any equity securities are issuedby DUET 1, DUET 2, or DIHL which are notstapled to equivalent securities in otherentities, other than the A, B and C specialshares or redeemable preference shares(as those terms are defined in the DIHLconstitution).

Takeover provisions DUET 1, DUET 2 and DIHL are subject tothe takeover provisions of Chapters 6, 6A,6B and 6C of the Corporations Act andthe takeover provisions will apply to theholders of DUET stapled securities.

Performance disclaimerInvestments in DUET are not deposits withor other liabilities of Macquarie BankLimited or AMPCH, or any entity in theMacquarie Bank Group (Macquarie Group)or the AMP Group and are subject toinvestment risk, including possible delaysin repayment and loss of income andcapital invested. Neither RE1, RE2, DIHL,nor any member of the Macquarie BankGroup or the AMP Group, guarantees theperformance of DUET, the repayment ofcapital or the payment of a particular rateof return on DUET stapled securities.

Advice warningThis annual report is not an offer or invitationfor subscription or purchase of or arecommendation of securities. It does nottake into account the investment objectives,financial situation and particular needs ofthe investor. Before making an investmentin DUET, the investor or prospective investorshould consider whether such aninvestment is appropriate to their particularinvestment needs, objectives and financialcircumstances and consult an investmentadviser if necessary.

Manager feesRE1 in its capacity as responsible entityof DUET 1 and manager of DIHL, and RE2in its capacity as responsible entity ofDUET 2, are entitled to fees for so acting.Entities within the Macquarie Group RE1and RE2, their officers and directors mayhold stapled securities in DUET from timeto time.

Financial reportThe DUET consolidated financial report hasbeen prepared to enable RE1 and RE2 asResponsible Entities to comply with theirobligations under the Corporations Act andto ensure compliance with the ASX ListingRules and satisfy the requirements of theAustralian accounting standards in relationto stapled structures. The responsibility forpreparation of the concise financial reportand any financial information contained inthis annual report rests solely with thedirectors of RE1 and RE2.

Complaints handlingA formal complaints handling procedureis in place for DUET. RE1 and RE2 aremembers of the Financial IndustryComplaints Scheme. Complaints shouldin the first instance be directed to RE1and RE2. If you have any enquiriesor complaints, please contact:

Financial Industry Complaints ServicePO Box 579Collins Street WestMelbourne 8007

Telephone: 1300 78 08 08Website: www.fics.asn.au

DUET’s ongoing commitmentto your privacyWe understand the importance youplace on your privacy and are committedto protecting and maintaining theconfidentiality of the personal informationyou provide to us. DUET has adopted aprivacy policy. For further information,visit the DUET website at www.duet.net.auor contact DUET Investor Relationson 1800 005 049 or outside Australiaon +61 2 8232 4491.

Responsible entitiesAMPCI Macquarie InfrastructureManagement No.1 Limited (ABN 99 108013 672) (RE1) as responsible entity ofDiversified Utility and Energy Trust No. 1(DUET 1)andAMPCI Macquarie InfrastructureManagement No.2 Limited (ABN 15 108014 062) (RE2) as responsible entity ofDiversified Utility and Energy Trust No. 2(DUET 2)

Level 71 Martin PlaceSydney NSW 2000orPO Box 4294Sydney NSW 1164

Telephone: +61 2 8232 4491 or 1800 005 049 Fax: +61 2 8232 4713 Website: www.duet.net.au

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