hydro generation assets increased because of the higher level of operation of those assets this year. Depreciation also increased because of increases to the asset base following completion of some capital works at Torrens Island Power Station and the West Kiewa Power Station. 

Merchant Operations’ primary objective is to make sure that AGL’s generation assets are available when required, particularly during periods of peak customer demand. Business unit performance is assessed by measuring the commercial availability and start reliability of the generation assets. This year, AGL again met or exceeded international benchmarks of good practice. All generator units at the Torrens Island Power Station were available to operate almost 100% of the time. Start reliability at the Somerton Power Station was above 97% and at AGL’s hydro assets was approximately 99%. 

The high levels of operating performance reflect AGL’s commitment to maintaining and upgrading the generation assets. During the year, a centralised asset management team was established to implement the British Standards Institution publicly available standard (PAS55) to optimise the management and maintenance of the generation assets. This followed a benchmarking exercise with selected international organisations that have successfully adopted a ‘shared service’ approach to asset management. The shared services approach centralises and makes efficient use of the expertise across Merchant Operations to review and align asset management strategies. 

During the year, a four-year program to refurbish all four generators at the West Kiewa Power Station was successfully completed. 

At the Torrens Island Power Station, work continued on the $40 million, four-year long, program to upgrade the generator controls systems, with the commissioning of the first two generator units in B Station. The remaining two units are on schedule for completion in the coming year, as is work on the development of a single point of control for both A and B Stations. 

High rainfall throughout the year has resulted in a significant increase in all dam storage levels with Eildon and Dartmouth at 86% and 64% of capacity at year end compared with 25% and 32% respectively at the end of last year. 

## Engaging the communities in which we live and work 

‘AGL has done more for our community than provide an energy source – they’ve helped make our community a better place to live.’ – Bill Gebhardt, AGL Hallett 2 Wind Farm landowner and local farmer. 

Engaging with regional communities makes sense for AGL. What matters to our community matters to us. AGL’s community, and our neighbours are our customers or potential customers. 

AGL has been constructing wind farms in the mid north region of South Australia for six years. The construction projects have boosted the local economy and provided employment to many local residents. 

The increased storage levels means that the Eildon Power Station is now capable of generating full output capability of 120 MW, up 45 MW on last year. An even greater recovery in generation capability was the Dartmouth Power Station, which had been unable to operate for several years because of low dam levels. At 30 June 2011, generation capability had been restored to 135 MW. The return of Dartmouth Power Station provides additional fast start capability and generation output that will continue to increase as dam storage increases. 

Merchant Operations is committed to achieving an injury free work place. Torrens Island Power Station has now achieved 10 years without a Lost Time Injury (LTI). Overall Merchant Operations recorded one lost time injury for the year. Over the year the Lost Time Injury Frequency Rate (LTIFR) fell from 2.0 to 1.2. 

Merchant Operations continued to implement its major recruitment program at Torrens Island Power Station as a part of its long-term operational succession plan. Currently, the Torrens Island and Hydro sites employ 20 apprentices. 

## Energy Services 

Energy Services assists business customers make their businesses more energy efficient. It also manages the HC Extractions LPG facility at Kurnell, in New South Wales. HC Extractions produces LPG and naptha by processing refinery off-gases from the adjacent Caltex oil refinery, with all production sold back to Caltex. 

Operating EBIT increased by 2.9% from $17.3 million to $17.8million. Improved earnings from new energy projects was offset by a reduction in contribution from HC Extractions as a result of a fall in LPG production volumes. 

On 9 March 2011, AGL announced plans to construct a co- generation facility for Qenos Pty Limited at its Altona plant in Victoria. The plant will have an energy capacity of 20.6 MW and a high pressure steam capability of 88 tonnes per hour. When completed, it will reduce CO$_{2}$ emissions by approximately 100,000 tonnes per annum. 

Other projects completed during the year included the installation of solar panels on the Panda House at Adelaide Zoo and at the Flemington Racecourse headquarters of the Victoria Racing Club. 

An independent economic impact assessment completed last year confirmed that $88 million had been spent locally on goods and services as a result of the wind farms built in the area. In addition to jobs created during construction, there will be 30 full time employees who will maintain the four wind farms for the next 25 years. 

Additionally, AGL has donated more than $175,000 to clubs, schools, associations and community groups in the region. Through AGL’s arrangements with landowners, local families receive a diversified source of income, whether the growing season was good or bad. 

Beyond the financial, AGL has engaged with the community through school tours, presentations, information days and the AGL Information Centre in Burra. 

