Contents Energy gas... · Web viewA new approach to gas retailing The new gas retailer is quite different to traditional gas retailers in the Australian market and we would like to

Weston Energy, AER Application for Retail Gas Authorisation

Weston EnergyApplication to Australian Energy RegulatorFor Retailer Authorisation

Public version, for public exhibition as part of the application process

Weston Energy, Chris McPherson30 July 2016

Page 1Weston Energy AER Gas Retailer Application _ public version


1. Contents

Table of Contents1. Contents...............................................................................................................................................................2

2. Executive summary and overview........................................................................................................................4

2.1. Proposed next steps...................................................................................................................................5

3. Overview of the new gas retailer.........................................................................................................................6

3.1. Overview of the business model.................................................................................................................6

3.2. Information on the company......................................................................................................................6

3.3. Information on the management team......................................................................................................6

3.4. Information on our ability to meet the AER key requirements for a new gas retailer................................7

3.5. Overview information on the organisational and technical capacity..........................................................8

3.6. Information on Gas and Electricity authorisation.......................................................................................9

3.7. Information on Registration with the Australian Energy Market Operator..............................................10

3.8. Confidentiality..........................................................................................................................................10

4. General Particulars.............................................................................................................................................11

5. Organisational and technical capacity................................................................................................................12

5.1. Executive Summary of the organisational and technical capability..........................................................12

5.2. Organisational and technical capability – specific details.........................................................................13

6. Financial Capacity...............................................................................................................................................20

6.1. Specific information on financial capability..............................................................................................21

7. Suitability criterion.............................................................................................................................................23

8. Public attachments.............................................................................................................................................26

8.1. Chris McPherson: Overview of Skills and capability..................................................................................26

8.2. Overview of Weston Aluminium (WAPL)..................................................................................................27

9. Confidential Appendix........................................................................................................................................29

10. Confidential Attachment 1: Organisational chart.........................................................................................30

11. Confidential Attachment 2: Business plans.................................................................................................31

11.1. Overview of the new gas business............................................................................................................31

11.2. Business development plan......................................................................................................................31

11.3. Financial estimates...................................................................................................................................33

11.4. Set up requirements.................................................................................................................................34

11.5. Prudential (Bank Guarantees)...................................................................................................................34

11.6. Set-up cost estimates...............................................................................................................................35

11.7. Customers.................................................................................................................................................36

11.8. Timeframes..............................................................................................................................................37

12. Confidential Attachment: External assurance letter – risk and compliance strategies................................38

13. Confidential attachment: CFO going concern letter.....................................................................................41



14. Confidential attachment: Auditors letter....................................................................................................42

15. Confidential attachment: Bank Guarantees.................................................................................................43

16. Confidential attachment: Cash-flow positive...............................................................................................44

17. Confidential attachment: CFO declaration re management disqualifications and bankruptcies..................45

18. Confidential attachment: Audited accounts for the parent entity Weston Aluminium...............................46

19. Confidential attachment: Supplementary information requested by Alison Crowe....................................47



2. Executive summary and overview

A new approach to gas retailingThe new gas retailer is quite different to traditional gas retailers in the Australian market and we would like to explain how the new retailer will work and why this is a valuable addition to the Australian gas markets. We believe that it provides a new and creative way for large gas users to buy gas at the wholesale market price, utilising the newly created STTM gas markets.This offering was recently tested by another retailer and proved to be very successful and very well received by Australian manufacturers and large gas users.

Overview of the proposed new gas retailer:- A new gas retailer that sell gas at the wholesale hub price (plus a margin)- Catering to large informed business buyers (a small number of C&I customers)- Offering a new choice for large manufacturers and large gas users.- This is essentially a managed STTM user facility - delivering similar benefits to being an STTM User (and

direct market customer), without the cost, workload or internal gas trading capability and risks. - It utilises the new gas markets to create new user choices. Bringing now choices and dynamics to

Australian gas markets.

A new gas retailing modelThe new gas retailer (Weston Energy) will retail gas to large industrial users at the wholesale hub price plus a small handling fee. This approach is analogous to a ‘pool pass through’ in electricity world or a managed wholesale purchasing capability. This enables large users to buy gas from the hub at the wholesale market price. This proved to be a much cheaper way to buy gas in 2015.This approach also provides much greater flexibility in term of gas volume and gas flexibility.

The benefit for customers it this provides a new approach to accessing wholesale hub priced gas without the need to set up an internal gas trading team. It is well suited to the medium to large customers, those who spend $500,000 to $5m on gas (100-500 TJ/y).

A new choice for gas buyers, with proven customer supportThis new approach to selling gas was previously offered by Go Energy, prior to their closure. (The Go Energy business was placed into administration recently through mishandling of the electricity book). The gas wholesale price offering was very well received by large customers who greatly appreciated a new alternative in gas purchasing in the Australian market. This alternative purchasing model enabled them to save substantial money on their gas cost in 2015. This approach also provided substantial more flexibility in gas volume and enabled them to avoid TOP (Take or Pay penalties), which are a substantial risk and concern for large gas users.

The previous gas customers of Go energy have encouraged us to start a new gas retailer that sells gas using this wholesale price model. They are actively supporting the development of this new gas retailer. Weston Aluminium are providing the corporate and financial backing and many of the previous customers will be the foundation customers for this new retailer.

A different risk profile.This gas business model has no market risk for the retailer, the retailer buys gas from the wholesale market and on-sells gas at the wholesale price plus a processing fee. This approach carries a much lower market risk for the retailer than the traditional approach.



The gas users carries the market price risk under this model and we have rigorous and comprehensive systems in place to make sure that they understand this risk, are capable of managing it and understand what it means for their business. The target customers are the top 20 to 200 gas users, companies for whom energy is a critical input and cost component. Companies for whom a new approach to buying lower priced gas is critical to their long term profitability and survival. Companies who are large enough and sophisticated enough to understand and manage commodity price risk. (Many of them already manage other variable priced commodities and energy’s)

The new gas markets creating new customer choicesThis new approach has been facilitated by the creation of the new gas markets on the east coast of Australia. This represents a genuine new alternative for large gas buyers. The objective of the Government and the ACCC in creating the new gas markets was to enable new choices like this. This is one of the first of the new gas solutions, in action.

A team with strong financial capability and strong gas capability.One of these customers (Weston Aluminium) has offered to provide the financial support and operational capability to enable the development of a new gas retailer. Weston has a strong gas industry background and knowledge, as the developers of the Queensland Hunter Gas Pipeline project. They are a very large company (Circa $50m) with strong financial support, strong operational capability, and STTM user knowledge and experience.Chris McPherson is a very experienced gas industry expert with 25+ year’s experience in senior gas and energy industry roles. Chris was one of the first gas traders in the Australian market (Energy 21). Previous roles include gas trading manager (Energy 21/Origin), gas purchasing manager (Orica), gas pricing manager (EA) and gas sales manager (Origin).Chris McPherson and Weston working together we can provide the gas market knowledge, operational capability and financial capability for a new gas retailer.

A team that meets the requirements of a new gas retailer.The proposed team of Chris McPherson and Weston Aluminium (energy team) has the Gas market capability, operational capability and financial strength required for a new gas retailer.

A note on the Go Energy Administration and RoLR event.Chris McPherson will be the GM of the new Weston energy business, Chris has many years’ experience in the Australian gas markets. Chris was commissioned by Go Energy in 2014 to help create a new gas business based on Chris’s suggestion of the new hub-price-pass-through approach. Chris project managed the development of this new gas retail offering during 2014 and early 2015. Chris McPherson was an independent energy consultant. Chris was not an employee of Go Energy Go Energy management team ran the gas business after Chris helped to establish it.

Since the administration of the Go Energy business Chris has been approached by a number of the large gas users who were buying gas under this arrangement, encouraging Chris to help them find a way to get the product back. They were saving considerable money on their gas and are strongly encouraging Chris to develop another gas retailer that offers the product.

2.1. Proposed next steps.

The purpose of this document is to receive a preliminary review of the Application for a new gas retailer authorisation. We would appreciate any feedback on additional information that is needed or areas of clarification that you would like enhanced.Our intention is to formally submit the application once this has been completed



3. Overview of the new gas retailer

3.1. Overview of the business model

Weston energy will be a boutique gas retailer that sells gas at the wholesale hub price to large industrial gas users.

This will be a small boutique C&I offering with a small number of sophisticated customers. This is not a SME or RES offering, this is not a mass market offeringThe gas retail business is expected to start small (10 – 20 customers) and grow slowly over timeThis will be offered to customers in the STTM hub markets (NSW, Qld and SA), it is not expected to be offered in Vic or Tas,.

This is a new approach based on a proven mo0del that has been used in the electricity markets. This retail offering has also been tested and proven in the gas markets with another new retailer in 2015. The customers who have purchased gas under this approach have been very pleased to have a gas alternative with greater flexibility and a different pricing structure.

3.2. Information on the companyWeston Energy is a wholly owned subsidiary of Weston Aluminium Pty Ltd (WAPL).

The Weston Aluminium business was founded in 1996 and operates a 40,000ton capacity SecondaryAluminium processing facility at Mitchell Ave Weston NSW. The plant situated on 25 acres of land, is a substantial employer and a significant user of energy, in this region. WAPL is a large, well capitalized company with sales revenue of about $25 million per year.

QHGP (Queensland Hunter Gas Pipeline) is a large private gas project to build a gas pipeline from Qld to Sydney. The owners of WAPL are also the principles of QHGP. They have considerable experience in large gas projects and a substantial knowledge of the Australian gas markets.

More information on WAPL can be found in section 8.2 of this document, or at the Weston Aluminum web site. www.westonal.com.au

3.3. Information on the management team

Chris McPhersonChris McPherson will be the project manager for the development of this new gas retailer and the GM for the gas retail business once it is operational. Chris has 25 years’ experience in the Australian energy industry covering all aspects of energy markets and energy business. Previous roles include energy trading manager, energy sales manager, energy pricing manager, global energy procurement, and strategic energy consulting.

Additional information on Chris’ experience and capability can be found in the public information appendix

Garbis Simonian

BA.LLB (Hons) Sydney University 1979


http://www.westonal.com.au/


Garbis Simonian is founder and Managing Director of Weston Aluminium Pty Ltd, an industrial services company providing innovative solutions to the aluminium and steel industries. Garbis serves as Managing Director of Hunter Gas Pipeline, developer of the QHGP (Queensland Hunter Gas Pipeline), and the Founding Chairman of Industrial Ecology Networks Australia (AIEN) Pty Ltd, a non-profit organisation promoting Circular Economy. Garbis is past President of the Australian Council of Recyclers (ACOR) 2011-2015, past Chairman of Hunter Major Gas Users Group and former Director of MacQuarie Energy Pty Ltd.

3.4. Information on our ability to meet the AER key requirements for a new gas retailer

This section seeks to map the proposed new gas retailer with the key requirement for a new gas retailer as outlined in the AER Retailer Authorisation Guideline.

(Restatement of the requirement from the AER retailer Authorisation Guidelines 2014)Entry criteria Applicants for a retailer authorisation must demonstrate their capacity to meet the obligations of an energy retailer under the Retail Law and the Retail Rules. We assess applications against the entry criteria set out under the Retail Law,4 and must be satisfied the applicant: has the necessary organisational and technical capacity to operate as a retailer has the financial resources, or access to resources, to operate as a retailer is a suitable person to hold a retailer authorisation.

Executive summary of the Weston Energy capability against these key criteria.(More information is provided on the following pages.)

Entry criteria Weston Energy capability

the necessary organisational and technical capacity to operate as a retailer

Management with 25+ years experience in the Australian gas markets. Senior management roles in large gas retailing and trading companies Current STTM user and gas market customer 20+ years Business experience in business compliance, credit management, risk

management, invoicing, credit control, and other retail functions Direct experience in large gas pipeline projects Many of the AEMO capabilities are currently in place (Austraclear, IT connections,

credit support, etc)

has the financial resources, or access to resources, to operate as a retailer

A substantial company, 20 + years’ experience, $25m+ turnover. Substantial assets, & financial backing Current credit assurances in place with AEMO, ample capability to

increase these to the level required of a retailer Our customers will provide credit guarantees to Weston energy to mirror

the credit support Weston Energy provides to AEMO (further reducing the risk)

Current Austraclear account

is a suitable person to hold a retailer authorisation

Reputable Australian business managers, with many years business experience

Senior management roles with Australian energy companies Recent AEMO review and approval of management for STTM user

registration No material business breeches, convictions or matters of concern

3.5. Overview information on the organisational and technical capacity

Gas market knowledge Chris McPherson is a leading gas markets consultant and expert with 20+ years in



& capability gas markets trading, gas pricing, gas sales, gas procurement, and gas consulting.QHGP (Queensland Hunter Gas Pipeline) are a sister company to Weston Aluminium (WAPL), their leading knowledge and capability in new gas projects is embedded in the WAPL business and people.Weston Aluminium are an STTM User, they have the knowledge, capability and systems in place to operate as an STTM user.WAPL are a previous customer of this product. They have direct experience in this business from the customer side.

Gas Operations capability

Weston Aluminium (WAPL) operate as an STTM user and have all of this operational capability in place. This retail offering is effectively an expansion of this capability to include other large users (to offer a managed STTM user offering to these companies).WAPL have an extensive finance, billing, receivables and customer management capability as part of the WAPL business. This existing capability will be expanded to operate the new gas business with existing competent people and systems.

AEMO registration is in place (STTM User) and can be expanded Austraclear membership is in place AEMO bank guarantees are in place, and can be increased Gas network contracts are in place (Jemena) and will be expanded to

other networks Risk management systems are in place Gas forecasting systems are in place AEMO IT systems are in place

Risk management and controls

Market Price Risk:This new gas retailer model carries a much lower risk for the retailer. The retailer carries no market price risk (the customer buys gas at the variable market price). Therefore the risk of losses and margin calls is significantly lower than for a traditional retailer.

We ensure that the clients are fully aware of the market price risk and fully prepared to manage this risk. We will provide them with risk management documents, papers and external advice systems for the clients, to ensure that they are fully appraised of this risk. (Chris McPherson has built these before for a previous retailer). This helps them and their advisors to expertly manage the gas price risk. We do not manage it for them, we make sure that they have the knowledge, skills and people to manage it properly themselves.

Credit Risk:Customers will be required to provide 3m of bank guarantees to the retailer, to mirror the prudentials that the new retailer will provide to AEMO. These backing guarantees further reduce the financial risk for the retailer and AEMO.

Operational RiskWe have developed a full set of internal risk management systems and procedures, appropriate for a new gas retailer with a hub priced offering. We have the combined expertise and experience to create and implement appropriate risk systems, cash flow management systems, debtor control systems, and payment systems.

Other relevant operational and technical capabilities:AEMO AEMO have been consulted in this process and are supportive of the concept. They are



keen to encourage new customer choices that utilize the newly created gas markets

Austraclear WAPL have Austraclear account in place today as part of the STTM User capability

Network contracts WAPL have a direct Jemena contract in place today as part of the STTM User capability. A second contract for Weston Energy is in progress.This can be expanded to include the other gas networks, Chris McPherson has direct experience in this through previous projects

AEMO bank guarantees

AEMO bank guarantees are in place today as part of the STTM User capability.These can readily be expanded to cover the increased pruduntials through retailing gas for other large users. WAPL have the financial capability to support this increase in pruduntialsThe business will get mirror prudentials from customers to back the guarantees.

Payment systems WAPL has a large financial team with many years’ experience in professional payments, debtor management, creditor management and cash flow management.

3.6. Information on Gas and Electricity authorisation(extract from the AER Retailer Authorization Guidelines Dec14)Dual fuel, gas or electricity You should specify whether you are seeking a retailer authorisation to sell gas or electricity. You will need to submit two applications if you wish to be a dual fuel retailer.10 Where the same information is required under each application, it need only be provided once. However, some information will be specific to your ability to retail gas or to retail electricity and should be provided in the relevant application. A separate risk management strategy, for example, should be provided for each activity. Successful dual fuel applicants will be issued with separate authorisations for the retail of electricity and gas. If you wish to sell a form of energy not covered by your authorisation, you must apply for a separate authorisation.11 An authorisation cannot be changed to authorise the selling of another form of energy.

Gas AuthorisationThis application is for a gas retail authorisation.

The primary purpose of the business will be the sale of gas utilising the hub price pass through model.The business would like the future capability to sell both electricity and gas. The authorisation guidelines require a separate application for gas and for electricity. This application is the gas retailing application. An electricity retailing application is likely to be submitted later in the year.

3.7. Information on Registration with the Australian Energy Market Operator



Registration with the Australian Energy Market Operator If you intend to purchase energy through the wholesale market you may apply to us for a retailer authorisation before applying for registration with AEMO. However, we would expect you to have initiated this process before, or at the same time as, you apply for retailer authorisation. Unless you intend to sell energy in an embedded network you will not be able to sell energy until you hold the appropriate AEMO registration.

Weston Aluminium is already registered with AEMO as a self-contracting user.The key components such as Austraclear membership, IT systems and Gas Network company contracts.

A new application is in process with AEMO for registration of Weston Energy as a retailer.(The correct process is to apply for a new registration as a retailer rather than upgrade the current registration)Many of the component parts and requirements are in place as a result of the previous WAPL registration.

3.8. ConfidentialityWe understand that it is a requirement of the application process that the information is made available to the public as part of the public consultation process.

Two versions of the application will be provided. 1. The confidential version will include an appendix containing the information that request not be made public.2. The non-confidential version will not include this appendix.



4. General Particulars.

Required information—general particulars You should provide the following information in your retailer authorisation application: - 1 Your legal name. - 2 Your trading name if different to your legal name. - 3 ABN or ACN. - 4 A registered business address and address for correspondence. - 5 A nominated contact person, including their position in the organisation and contact details. - 6 The form of energy for which a retailer authorisation is sought. - 7 The date you intend to commence retailing energy. - 8 The nature and scope of the operations proposed. - 9 The jurisdictions in which you intend to retail energy. - 10 The type of customers you intend to supply (for example, small customers, small market offer customers or large customers

as defined in s. 5 of the Retail Law).

1 Your legal name. Weston Energy Pty Ltd

2 Your trading name if different to your legal name. 3 ABN or ACN. 47 142 392 738

4 A registered business address and address for correspondence.

Suite 18, 809-811 Pacific Hwy, Chatswood NSW 2067P: +61 2 9413 3345 F: +61 2 9413 3364

5 A nominated contact person, including their position in the organisation and contact details.

Chris McPherson, GM t) 0439 652 119 e)[email protected] Simonian, director, t) 02 9413 2541 e) [email protected]

6 The form of energy for which a retailer authorisation is sought.

Gas

7 The date you intend to commence retailing energy.

1/9/16

8 The nature and scope of the operations proposed. Small boutique gas retailer offering gas to a small number of C&I clients

9 The jurisdictions in which you intend to retail energy.

NSW, Qld, SA

10 The type of customers you intend to supply (for example, small customers, small market offer customers or large customers as defined in s. 5 of the Retail Law).

Large Customers (as defined in s.5 of the retail law)

Large C&I customers, who are sophisticated enough to understand and manage gas market price risk via wholesale price gas product.


mailto:[email protected]


5. Organisational and technical capacityThis sections addresses all of the application questions in relation to organisational technical capability.

OverviewThe business plan for Weston energy is to be a boutique gas retailer to a small number of large sophisticated clients. It is intended that the business will have 20-50 customers and 50-100 sites. There is no intention to sell to Residential, SME gas users.The organisational and technical capability outlined below is one that is appropriate for a small retailer with a boutique offering.

5.1. Executive Summary of the organisational and technical capability

Gas market capability Chris McPherson is a leading gas markets consultant and expert with 20+ years in gas markets trading, gas pricing, gas sales, gas procurement, and gas consulting.QHGP (Queensland Hunter Gas Pipeline) are a sister company to Weston Aluminium (WAPL), their leading knowledge and capability in new gas projects is embedded in the WAPL business and people.Weston Aluminium are an STTM User, they have the knowledge, capability and systems in place to operate as an STTM user.WAPL are a previous customer of this product. They have direct experience in this business from the customer side.

Operations capability Weston Aluminium (WAPL) operate as an STTM user and have all of this operational capability in place. This retail offering is effectively an expansion of this capability to include other large users (to offer a managed STTM user offering to these companies).WAPL have an extensive finance, billing, receivables and customer management capability as part of the WAPL business. This existing capability will be expanded to operate the new gas business with existing competent people and systems.

AEMO registration is in place (STTM User) a second registration for Weston energy as a retailer is in progress

Austraclear membership is in place AEMO bank guarantees are in place, and can be increased Gas network contracts are in place (Jemena) and will be expanded to

other networks Risk management systems are in place Gas forecasting systems are in place AEMO IT systems are in place

Agreements with market participants

WAPL has a number of relevant agreements already in place by virtue of the fact that Weston Aluminium is an STTM user.

AEMO registration is in place (STTM User) a second registration for Weston energy as a retailer is in progress

Austraclear membership is in place AEMO bank guarantees are in place, and can be increased Gas network contracts are in place (Jemena) and will be expanded to

other networks



5.2. Organisational and technical capability – specific details

Required information—organisational and technical capacity You must provide the following information in your authorisation application:

1 Details of your (or any related party’s) previous experience as an energy retailer including: 1.1 The date and location of previous operations 1.2 The form/s of energy sold 1.3 The scale of operations (including the number and size of customers) 1.4 A description of how the retail activities were conducted.

WAPL have not been involved in energy retailing previouslyThe GM has been

5.2.1. Details of any other relevant retail or energy market experience.

2 Details of any other relevant retail or energy market experience.

Chris McPherson has worked as a senior manager in energy retailing organisations before:- Energy trading manager, Energy 21/Origin energy, [2002-2004]- Energy Pricing Manager, Energy Australia [2001 – 2002]- Energy Trading Manager, Westpac Bank [199-2001]- Energy Trader, Energy 21 [1996-1999]

Chris McPherson recently created a new gas retail business based on this model for Go Energy.The new retail business was created during 2004 as a contract project management role. The business operated successfully during 2015. (Go energy went into receivership in 2016 through failures in the electricity business).

Chris McPherson has worked for the past 10 years as a senior energy industry consultant advising large energy users on energy procurement, energy markets, energy trading and energy projects. Previous examples include:- Building gas trading and risk systems for Country Energy- Business development for new gas producers- Gas procurement advice for many of the large gas users (Australian Paper, NSW health, Nat Starch)- Advice on innovative foundation gas deals (Dow, Simplot, Brickworks, Orora)

Garbis Simonian has substantial experience in the Australian gas markets. Garbis was a director and financier for the Queensland Hunter Gas Pipeline (QHGP). This is a very large project developing a gas pipeline from Qld to NSW.Garbis also serves, as The Executive Director of Hunter Energy Pty Ltd, the Director of Macquarie Energy Pty Ltd & as the Chairman of the Hunter Gas Users Group.

5.2.2. Previous energy market experience3 Where you do not have previous energy market experience, how you intend to bring this experience into your business.

Chris McPherson has substantial experience in senior executive roles in a number of large energy companies. Chris will project manage the development of the business and General Manage the business once it is up and running.

Garbis will act as a director of Weston Energy, bringing his senior energy experience to oversee the development and management of the business.



Chris McPherson has substantial experience as a commodity trader and energy trader with Australian energy companies and Australian banks. This commodity trading and risk management experience will help enable Weston energy to expertly manage the gas market positions, risks and exposures.

4 An organisation chart showing the structure of your organisation.

Information provided in the confidential attachments section, as Attachment 1.

5.2.3. The number of employees5 The number of employees, broken down by business unit or other relevant classification.

6 Employees (as shown in the organisation chart) Plus external advisory, audit and compliance We suggest that this is appropriate for our initial target of 20 – 50 customers. As the business grows in coming years, the number of employees can grow.



5.2.4. Officer Qualifications6 A summary of qualifications, technical skills and experience of your officers, and the relevance of those skills and experience to meeting the requirements of the retailer authorisation.

Chris McPherson GM

Chris has 25 years’ experience in the Australian energy industry covering all aspects of energy markets and energy business. Previous roles include energy trading manager, energy sales manager, energy pricing manager, global energy procurement, and strategic energy consulting.Chris holds a bachelor of business and an MBA degreeChris is an AFMA dealer in energy markets and has previous AFSL accreditation as an AFSL Responsible Manager

Garbis SimonianDirector

Garbis Simonian is an entrepreneur and senior business executive with 35+ years experience.He has substantial experience in the Australian gas markets and energy industry.Garbis was a director and financier for the Queensland Hunter Gas Pipeline (QHGP). This is a very large project developing a gas pipeline from Qld to NSW.Garbis also serves, as The Executive Director of Hunter Energy Pty Ltd, the Director of Macquarie Energy Pty Ltd & as the Chairman of the Hunter Gas Users GroupGarbis has a BA - LLB (Hons), from Sydney University,

Nobby MatsuiFinancial Controller

Nobby Matsui commenced his career with Tomen Corporation where he established himself as a distinguished metals trader. During his 13 years of service at Tomen, Nobby had various leadership roles in Aluminium and Copper Trading, including Nonferrous Metals Manager at Tomen's Hong Kong office. In 1994 Nobby joined Mino Metal, as the trading manager, in Australia, before taking up his current position, in 1996, with Weston Aluminium, as the Deputy Managing Director. Nobby Graduated in 1981 with a Bachelor of Resource Engineering from Waseda University, Tokyo, Japan.

Doris Lee Doris is an experienced financial operator with many years experience in finance and accounting large corporations

Chris McClungGas Operator

Chris is a Qualified EngineerChris is trained and experienced in gas nominations, AEMO gas systems, Gas market reconciliations and invoicing, gas price risk management.

5.2.5. Third party staff7 Where you may be relying on a third party to provide staff and resources to meet the technical requirements of your retailer authorisation or to perform retail roles (such as operating phone centres or billing), you must: 7.1 State all functions and activities you propose to outsource. 7.2 Provide a summary of the third party’s experience in, and knowledge of, the relevant area. 7.3 Provide evidence of the third party’s technical capacity to meet relevant obligations. 7.4 Provide evidence of controls in place to ensure the third party’s compliance with the Retail Law and Retail Rules.

N/AInternal staff have the necessary skills and experience to operate the gas retailer.External advisors will be used for auditing and independent accreditation.



5.2.6. Business Plan8 A business plan, including but not limited to, strategic direction and objectives, forecast results and detailed assumptions on how you calculated these forecasts.

A copy of the detailed business plan is provided as a confidential appendix, as Attachment 2.

5.2.7. Compliance strategy9 Details of your compliance strategy: 9.1 Demonstrating your knowledge and understanding of the obligations imposed on authorized retailers under the Retail Law and Retail Rules and applicable statutory, industry and technical requirements of the jurisdictions in which you intend to operate.19 9.2 Outlining how applicable retailer authorisation obligations and statutory, industry and technical requirements will be met (including how compliance breaches will be identified and remedied). 9.3 Including complaint and dispute resolution procedures, developed in accordance with Australian Standard AS ISO 10002-2006 (Customer satisfaction—Guidelines for complaints handling in organisations). 9.4 Demonstrating that any gaps in the skills and / or knowledge of staff have been identified and that appropriate steps have been taken to fill those gaps (for example, through recruitment or training).

Compliance policyA compliance strategy, policy and procedures have been developed.They are provided as a confidential attachment (a separate Document: Weston Energy Compliance SPP), as Attachment 3.

Compliance OverviewWeston Energy have read and understood the AER Compliance Procedures and GuidelinesWe understand the compliance obligations required of a new gas retailer. We have compliance strategies in place and are implementing appropriate compliance system, consistent with the scale and risk of this gas retailing business.Weston Aluminium has an exemplary role in compliance with strict EPA regulations, rules and laws over a 20+ year history. We have an exceptionally strong compliance culture, team, systems and capability. This proven compliance capability will be expanded to ensure compliance of the Weston Energy gas retailer with the Retail Law, Retail rules and Retail Regulations.

Compliance systems appropriate to the business.We note than many of the compliance requirements relate to protection of retail customers and smaller customers. Because Weston energy will be selling gas to a small number of large C&I customers, many of these compliance systems and reporting requirements may be less relevant. AS per AS 3806 we will establish policies, systems and procedures appropriate for the business and the risks. These will include all of the gas reporting and compliance requirements, but it is expected that the retail and SME components will be inactive.

Compliance systems incorporated in the WAPL compliance frameworkThe compliance systems for Weston Energy are incorporated in the existing wider compliance policies, systems and procedures of WAPL.The gas retail compliance Policies, Systems and Procedures have been built in accordance with the twelve compliance principles set out in the standard AS 3806.



5.2.8. Risk Strategy10 A copy of your risk management strategy covering both operational and financial risks.

A risk strategy, policy and procedures have been developed.They are provided as a confidential attachment (separate Document), as Attachment 4.Please see the separate document: WestonEn Risk SPP

Risk management CapabilityWeston Energy have the skills and experience necessary to create and implement a professional risk management strategy, policy and procedures.

Weston Energy is a different variation on a gas retail business, the retailer does not carry wholesale market price risk. The retailer charges gas to the customers based on the daily wholesale market price (hub price) plus a retailing margin.Under this model the gas market risk to the retailer is zero. The main residual risk to be managed are operational risk and credit risk.

The AER application covers all types of gas retail, so we would like to illustrate that we have the experience and qualifications to run a conventional gas retailing business and develop risk polices and procedures appropriate to a conventional gas retailing business. (even though this is not our intended approach).

Gas risk strategy experience:Chris has previously developed gas trading and risk management systems for Westpac bank, Energy 21 and Country Energy.Weston Aluminium have many years experience in development and implementation of risk control systems.

Gas trading experience:Chris McPherson (GM of the business) has worked as a senior gas trader, gas salesman and gas pricing manager for a number of large energy companies. He has the qualifications and experience to professionally run a gas trading division and a gas retailing businesses.Past Roles & Experience include:

- Senior gas and energy trader (Energy 21 / Origin Energy)- Energy trading manager (Westpac bank)- Energy pricing manager (Energy Australia)- Energy sales manager (Origin Energy)- Currency and commodity trader (ANZ McCaughans)- AFMA dealer accreditation for energy markets- MBA

Gas retail experience:Chris worked as a gas retail manager for Origin energy selling gas to large users.Chris has worked a senior consultant in the energy industry advising large clients on gas procurement and gas pricing.Chris has worked on business development for three new gas companies (Gippsland Gas, Lakes Oil and Advent energy).Weston Aluminium have 20+ years experience in commodity retailing.

Conventional gas retailing capabilityThe business has senior management experience in running both a conventional electricity and gas retailer and trading operation, as well as the wholesale pass through approach.



5.2.9. External review and assurance of risk & compliance strategies

11 Evidence that your risk management and compliance strategies have been subject to an external assurance process (for example, an external audit).

Please see the confidential appendix for the external assurance letter, as Attachment 5.

5.2.10. Additional retail information12 Any additional information which demonstrates your ability to manage risk and operate in accordance with the Retail Law objective, particularly the long term interests of consumers (for example, copies of any retail contracts that you have developed).

Weston Energy will not be selling gas to retail customers (as defined in the gas rules).Our customers will be large C&I corporations.

A gas supply contract has been developed for these large customers.T can be provided on request.

5.2.11. Energy ombudsman13 Evidence of any membership, or steps taken to obtain membership, of a recognised energy industry ombudsman scheme in the jurisdiction/s in which you intend to retail energy to small customers.

Weston Energy does not intend to retail gas to small customers (as defined in the gas rules).Our customers will be large C&I corporations

5.2.12. Agreements in place14 Evidence of any agreements / arrangements in place with key market players within the jurisdictions in which you intend to operate. This includes, but is not limited to, distribution businesses and AEMO. Where agreements / arrangements have not been finalised, you should provide details of any negotiations or steps that have occurred to date and when you expect agreements / arrangements to be completed. If you are intending only to on sell energy you should provide details of the back-up arrangements you have made in case your business fails.

WAPL has a number of relevant agreements already in place by virtue of the fact that Weston Aluminium is an STTM user.

AEMO AEMO registration is in place (STTM User) a second registration for Weston energy as a retailer is in progress

Austraclear Austraclear membership is in placeJemena gas networks AEMO bank guarantees are in place, and can be increasedGas industry professional contacts

Chris McPherson and Garbis Simonian have extensive professional contacts in the gas production and distribution industries



5.2.13. Additional information

15 Any additional information that will help us assess your organisational and technical capacity

This a small boutique gas retailer with a different business model and approach.Management have direct experience in establishing and running this business model previously.We have a proven capability to build and run a professional gas retail business



6. Financial CapacityThis section provides information on the financial capability of Weston Energy to operate as a gas retailer.

(Restatement of the requirement from the AER retailer Authorisation Guidelines 2014)Financial capacity criterion We must be satisfied that prospective retailers have (or have access to) adequate financial capacity to support their planned retail operations. Our assessment of financial capacity will therefore be informed by your business plan (see “Business plans” above) and approach to managing financial risk (see “Compliance and risk management strategies” above). In making our assessment we focus particularly on your current financial position (information requirements 1-7 below) and your projected financial position, specifically whether you have the financial capacity to meet your proposed business activities (information requirement 8 below). If your business is not expected to be immediately profitable you should have enough cash at hand to meet all expected costs under the business plan or be able to demonstrate you can access the required support, for example, through a bank guarantee or a deed of guarantee from a related party. In addition to the normal costs of operating a business (for example, staffing, insurance, accommodation) an energy retailer can expect to face a number of other major costs including: purchasing energy in wholesale energy markets procuring and paying for network services, and meeting any credit support requirements providing retail supply services, in particular customer support and billing services participating in ombudsman (or similar) schemes. Your costings should also take into account circumstances where your cash flow is put under short term pressure, for example, by high wholesale prices. You should have sufficient reserves to meet such cash peaks. Our assessment of financial viability is a one-off entry test designed to satisfy us that your authorisation application meets the entry criteria specified in the Retail Law. It should not be taken as an endorsement of your ongoing financial viability or profitability.

Executive summary of the financial capabilityWAPL are a very large corporation (in the order of $25m turnover) and have been operating in Australia for many years. WAPL are prepared to provide the strong financial backing required to support the development of a new gas retailer. WAPL already have bank guarantees in place for AEMO, these can readily be expanded.

Risk. This variable price offering carries a much lower risk for the retailer than a traditional gas offer. The end customer carries the variable price risk, not the retailer. The risk of losses for the retailer is much lower.

Guarantees. Customers will be required to provide 3m of bank guarantees to the retailer, to mirror the prudentials that the new retailer will provide to AEMO. These backing guarantees further reduce the financial risk for the retailer and AEMO.

Financial Capability to sustain the business during the establishment phase.Weston energy is staffed dominantly by the existing salary staff of Weston Aluminium. Therefore Weston energy has the ability to establish the retail business and continue operations for a sustained period, even if the customer come onboard more slowly than anticipated. Weston Energy has a large buffer against delayed customer numbers.Weston energy could theoretically operate for a number of years with low or no customers, without creating financial stress for the parent company.



6.1. Specific information on financial capability

Required information—financial resources You must provide the following information in an application for authorisation:

6.1.1. Financial StatementsExisting businesses 1 Copies of your audited financial reports for the past 12 months (note, we may ask for the previous two years’ reports, if necessary). This information should include: 1.1 All financial statements required by the accounting standards. 1.2 Notes to financial statements (disclosure required by the regulations, notes required by the accounting standards, and any other information necessary to give a true and fair view). 2 Evidence of long and / or short term credit rating/s (if available).

(You must provide an auditor’s independence declaration under section 307C of the Corporations Act 2001 to meet this requirement.)

These are provided as a separate attachment to accompany the confidential (non public) version of the applicationas Attachment 6.

6.1.2. Start-up businessesStart-up businesses 3 Details and evidence of your current financial position, for example, interim financial statements.

Not applicable. This is a new division for an existing well established company.

6.1.3. Group structureExisting AND start-up businesses 4 If you are part of a group of related companies, and / or party to a partnership, joint venture or alliance agreement with another company, and you are given financial support by that entity, you should provide: 4.1 Details of the ownership structure of the group.

4.2 The contractual arrangements (e.g. alliance contracts, associate contracts, establishment contracts) that define relationships within the group—including shared resources, guarantees, revenue flows, obligations and/or responsibilities.

4.3 Consolidated audited financial statements for the group.

Weston Energy is a wholly owned subsidiary of Weston Aluminium Pty Ltd.

Weston Aluminium Pty LtdABN: 91 075 245 108Address: Suite 18,809-811 Pacific Hwy, Chatswood NSW 2067P: +61 2 9413 3345 F: +61 2 9413 3364 E: [email protected]

6.1.4. CFO going concern letter5 A written declaration from your Chief Financial Officer, Chief Executive Officer or director/s stating you are a going concern and that the officer is unaware of any factor that would impede your ability to finance your energy retailer activities under the retailer authorisation for the next 12 months. For unincorporated applicants, a written declaration should be provided by the person/s in effective control of the business.

Information provided in the confidential appendix, as Attachment 7.



6.1.5. Auditors letter6 A written declaration from an independent auditor or your principal financial institution stating that: 6.1 An insolvency official has not been appointed in respect of the business or any property of the business.

6.2 No application or order has been made, resolution passed or steps taken to pass a resolution for the winding up or dissolution of the business.

6.3 They are unaware of any other factor that would impede your ability to finance your energy retail activities under the authorisation.


6.1.6. Bank Guarantees7 Details of any bank guarantees or arrangements or process to access additional capital.

Information provided in the confidential appendix

6.1.7. Cash-flow positive8 Forecast revenue and expenses to the point where your business is cash-flow positive. This forecast should be consistent with your business plan and highlight all key assumptions and risks.

Information provided in the confidential appendix

6.1.8. Additional information9 Any additional information that will help us assess your financial capacity to operate as an energy retailer.



7. Suitability criterion This section provides evidence that the applicant is a suitable person to hold a retail authorisation.

(Restatement of the requirement from the AER retailer Authorisation Guidelines 2014)Suitability criterion An applicant must be a suitable person to hold a retailer authorisation. What is a suitable person? The question of whether a person is suitable to retail energy goes beyond an assessment of financial and organisational capacity. A person’s character or reputation is relevant to any assessment as it provides an indication (or public perception) of likely future conduct.21 We may therefore be guided in our assessment of suitability by case law on what it means to be a ‘fit and proper’ person. For example, we may look to your previous commercial dealings, as well as of other officers, associates and any other entity that exerts control over your business activities (as applicable). Any assessment will look at the degree of honesty and integrity shown in those commercial dealings and whether you are likely to contribute to the national energy retail objective. We will have particular regard to whether there has been—or may have been—improper conduct in previous commercial dealings. Prior revocation or refusal of a license or authorisation We will have regard to whether you or your company directors have previously held a license / authorisation in the energy industry (or any another industry) that has been revoked, and the reason for the revocation, and whether a previous application for a license / authorisation in any industry has been refused, and the reason for the refusal. (Information requirements 1.2-1.4) Similarly, we will consider whether you (or an associate) have previously triggered, or would likely have triggered,22 the RoLR provisions of the Retail Law or equivalent state / territory legislation. (Information requirement 1.5) Where an applicant or an associate has previously triggered a RoLR event we may grant an authorisation application on the condition they have paid part or all of the costs of that RoLR event.23 Your compliance background As part of our assessment we will consider your compliance history, and the compliance history of your associates, other businesses where your officers have held an officerCriminal convictions We may request a certified copy of a national criminal history check (no more than 12 months old) to confirm this information. (Information requirement 3)

Required information—suitability You must provide the following information in your application for authorisation:

7.1.1. Breaches or convictions1 For you and your associates, any other business where your officers have held an officer position and any other entity that exerts control over your business activities—details of: 1.1 any material failure24 to comply with regulatory requirements, laws or other obligations over the previous 10 years, including infringement notices or other enforcement action (including voluntary administrative undertakings) being taken by a regulatory body. 1.2 any previously revoked authorisations, authorities or licenses held in any industry and the reason/s for the revocation. 1.3 any failed authorisation, authority or license applications in any industry and the reason/s the application was unsuccessful. 1.4 any past or present administrative or legal actions in relation to an authorisation, authority or license in any industry. 1.5 any situation/s where you (or an associate) have previously triggered the RoLR provisions of the Retail Law or equivalent state/territory/foreign legislation, or have transferred or surrendered an authorisation or license in circumstances where if not done, triggering a RoLR event would have been likely.

Nil Breaches or convictions

7.1.2. Prosecutions2 Details of any offences or successful prosecutions under any territory, state, Commonwealth or foreign legislation (including, but not limited to, the Australian Securities and Investments Commission Act 2001 (Cth), Competition and Consumer Act 2010 (Cth)25 and the Corporations Act 2001 (Cth)) relevant to your capacity as an energy retailer, or written confirmation that no offences have been committed against, or been prosecuted under, any such legislation. This information must be provided for: your current director/s (or shadow / de facto director/s), and any other person that exerts control over your business activities if your business is unincorporated, the person/s with effective control of the business all persons who are responsible for significant operating decisions for your business. Upon request, a criminal history check conducted within the past 12 months for persons listed under information requirement 2.



Nil prosecutions7.1.3. CFO declaration

4 Written declarations from your Chief Financial Officer (or Chief Executive Officer): 4.1 that members of your management team have not been disqualified from the management of corporations; 4.2 about the record of bankruptcy of your management team (including in any overseas jurisdiction).


7.1.4. Officers names and addresses5 Full names and current residential addresses of all your officers.

Chris McPhersonGM

Christopher Clive McPherson30 Anderson rd, Glenning Valley, NSW 2261

Garbis SimonianDirector

Garbis Simonian-30 Hope St Pymble 2073 NSW

Nobby MatsuiCFO

Nobuhide Matsui 71 Chelmsford Ave Lindfield 2070 NSW

7.1.5. Probity policy6 Details of policies and procedures addressing the probity and competence of officers and any other key management staff.

Given the small boutique nature of this business and the limited management team, we feel that it is not necessary to create formal probity procedures.All of the key staff have evidenced their probity and competence as part of this application

7.1.6. Additional Information7 Any additional information that will assist us in our consideration of the character and past performance of your officers.



Supplementary information Two appendices are provided

1. Public appendix information to be included in both the publics and confidential submissions2. Confidential information, not to be included in the public submission



8. Public attachmentsAttachments to the application that provide additional information and are non confidential.These will be included in both the public and the confidential versions of the submission.

8.1. Chris McPherson: Overview of Skills and capability

Chris McPherson will project mange the development if the business and then General Manage the business once it is established.

Chris McPherson is a leading creator of new energy solutions and new gas solutions.

Chris has 25 years’ experience in the Australian energy industry covering all aspects of energy markets and energy business. Previous roles include energy trading manager, energy sales manager, energy pricing manager, global energy procurement, and strategic energy consulting.

Nowadays Chris specializes in creating new energy solutions for Australian companies. Many of the top 20 energy users in Australia, look to Chris for creative new gas solutions, renewable energy advice, energy strategy and new energy solutions.

Examples of recent projects include: Creating of a new gas retail division for an ASX listed company Renewable energy advice for NSW department of energy ( one of OEH’se) Development of new foundation gas deals (Dow, Simplot, Lakes Oil) Business development for new gas companies Large solar project advice, large wind farm advice ($10m to $200m projects)

Many of the recent new & creative foundation gas deals and gas solutions that you have seen in the financial presses were created by Chris. This includes many of the foundation gas deals between new gas producers and large energy users.

Chris’s expertise covers electricity, gas, renewable energy and carbon

Previous roles Qualifications and experience

Energy Trading Mgr (Westpac)Energy Sales Mgr (Origin)Energy Pricing Mgr (EA)Global energy Proc Mgr (Orica)Energy Consulting Mgr (Energetics)

MBABachelor of BusinessAFSL responsible Mgr energyAFMA energy dealer accreditation

Recent gas projects & experience Recent renewable energy projects

Recent energy advice

Creation of a new gas retailerFoundation gas sales dealsApplication for new gas acreageGas policy adviceGas forecastingGas strategyGas procurement

Solar project advice (NSW dept energy)Solar project advice (Unilever)Wood energy business developmentRenewable Energy tradingWave energy project workREC forecastingWind farm advice

Energy forecasting Carbon master classesCarbon trading Electricity procurementCogen analysis



Chris McPherson – Summary of Energy Experience and Qualifications

Gas advice and projects Development of a new gas retailer in Australia (GoEnergy) Foundation gas deals for Dow Chemicals, Simplot, Brickworks, Orora and others Business development for new gas explorers: Lakes Oil, Gippsland Gas and Advent energy Gas contract procurement and negotiation for multi million dollar deals Gas project sales (QHGP gas pipeline) Gas market trading experience (Origin, Energy 21) Applications for new gas acreage in NSW (CSM gas projects) Unconventional gas and tight gas projects

Renewable energy advice project management Strategic Renewable energy adviser for NSW office of environment (OEH) Large solar project advice (5+ MW, $10m project) for Unilever Sydney Water wind farm lead advisor ($200m project) Adelaide desalination plant wind farm lead advisor ($100m project) Multiple wind farm evaluation projects for large mine sites Renewable energy and carbon project advice (Hunter water) Kooragang Island wind turbine relocation project evaluation Solar leasing and financing project analysis Forward forecasting for Renewable energy prices (REC’s) REC (Renewable Energy Certificate) trading and strategy advice (Ontario TPF)

Power Purchase Agreement Advice & Experience Sydney water wind farm PPA Adelaide desalination plant wind farm PPA Sydney airport co-gen PPA Dozens of energy purchase contracts for large companies Renewable energy contracts Gas contracts and foundation customer deals

Forward energy forecasting Chris is one of Australia’s leading experts in forward forecasting of energy prices (Elec, gas, renew) Large energy projects live in tomorrows energy prices not todays, chris is a leading expert in helping to model

future energy prices and how they will impact large projects (eg solar, cogen, gas project)

Carbon advice and projects Sydney Opera house carbon neutral program Carbon credit creation projects (Veolia landfill) Carbon methodology evaluation and implementation Carbon price forecasting Carbon trading simulation game and master class (Newcastle University and UTS)

Financial Analysis and modeling Renewable energy project models, Carbon project models, Cogeneration modeling, forecasting and financial

analysis, New wave power project financial analysis Previous merchant bank experience in currency trading, energy trading and complex derivatives AFMA accreditation as an energy dealer and trader ASIC accreditation as an Authorized Representative for energy and energy derivative advice and trading

Creative new energy solutions Development of new gas fields and gas sources



8.2. Overview of Weston Aluminium (WAPL)

Weston Aluminium Pty Limited (WA), is a substantial private company involved in Australian manufacturing, recycling and energy. The Weston Aluminium business was founded in 1996 and operates a 40,000ton capacity SecondaryAluminium processing facility at Mitchell Ave Weston NSW. The plant situated on 25 acres of land, is a substantial employer and a significant user of energy, in this region. WA is a large, well capitalized company with sales revenue of about $25 million per year.

Queensland Hunter Gas Pipeline (QHGP) is a sister company to Weston, being owned and managed by the same executive management team. This substantial private gas pipeline project (Circa $1bn) is one of the east coast’s larger new energy projects. The management team who created this pipeline project and saw it through to full government approval have substantial energy market knowledge, a well-established business capability and considerable financial resources.

Weston Aluminium are providing the financial strength, energy market knowledge and operational capability to support this new gas retail business.

More information on the Weston Aluminium business can be found at www.westonal.com.au

Should you have any further question, you are very welcome to contact Garbis Simonian, Managing Director on e)[email protected] or by phone t) 041427 333 4


mailto:[email protected]

http://www.westonal.com.au/


9. Confidential AppendixThe confidential business information has been removed from the public application document.




Documents

Contents Energy gas... · Web viewA new approach to gas retailing The new gas retailer is quite different to traditional gas retailers in the Australian market and we would like to