Principle 1: Lay solid foundations for management and oversight

Responsibilities of the Board: The Snowy Hydro Board is principally responsible for strategic oversight of Snowy Hydro, guiding its strategies and policies to optimise performance and create shareholder value, and ensuring that its business objectives are aligned with shareholder expectations. Snowy Hydro’s Board Charter sets out the role and responsibilities of the Board. The Charter is reviewed regularly by the Board and is available on Snowy Hydro’s website.

In carrying out this principal function, the Board is responsible for:

• providing strategic direction, including approving the Corporate Plan and annual budget;
• oversight of effective management and control of Snowy Hydro, including the composition, performance and remuneration of the Executive team and the appropriateness of people management systems;
• the appointment and removal of the CEO;
• oversight of adequacy of people resources to ensure sufficient depth of resources and appropriate succession planning;
• approving the overall treasury policy of Snowy Hydro, including dividend payout ratio and payments pursuant to that policy;
• approving any capital expenditure exceeding $10 million;
• approving and monitoring the management of Snowy Hydro's base case assumptions pertaining to new investments and capital, including the progress of any major capital expenditures, acquisitions or divestitures; establishing processes and controls to maintain the integrity of financial accounting and reporting;
• oversight and review of the principal risks facing Snowy Hydro, including ensuring that appropriate standards of accountability, risk management and corporate governance are in place;
• monitoring the implementation of strategy, and the operational and financial position and performance of Snowy Hydro;
• reporting to the Shareholder on their stewardship of Snowy Hydro on a regular and timely basis; and
• reviewing and, to the extent necessary, amending the Board and Committee Charters regularly.

The Board comprises nine Directors, with eight Non-Executive Directors and one Executive Director being the CEO and Managing Director. A brief summary of the qualifications and experience of each Director is set out in the “Directors Report” section of the Annual Report. The Board meets at least ten times a year, and more frequently when required, to consider and provide management with guidance on strategic matters and issues. The Board met twelve times in FY2019.

Delegations to Standing Committees: While the Board retains ultimate responsibility for strategy and oversight of effective management of Snowy Hydro, it may delegate certain powers to standing Committees or the CEO and Managing Director as it considers appropriate. The Board has established six Committees, as set out in the diagram above, to assist the Board in discharging its responsibilities:

• the Audit and Compliance Committee provides advice to the Board on risks relating to audit, financial reporting, financial and business risk management, corporate management frameworks and certain compliance matters;
• the Portfolio Risk Committee provides advice to the Board on risks pertaining to the Company’s energy trading activities (including credit risk management), treasury functions, trading operations and corporate and strategic activities;
• the Safety, Operations and Environment Risk Committee provides advice to the Board on risks pertaining to the operations of the generation, hydraulic and communication assets of the Company, workplace health and safety and environmental practices, including water release obligations;
• the People and Culture Committee provides advice to the Board on risks pertaining to the Company’s human resources. In particular, the Committee will advise the Board on the remuneration and performance measurement policy, organisational development practices, Board performance, and succession planning and remuneration of the Chief Executive Officer and Managing Director;
• the 2.0 Committee provides advice to the Board on risks pertaining to the delivery of the Snowy 2.0 Project including project management, environmental, technical design and construction, procurement, legal and stakeholder related risks; and
• the 2.0 Funding Committee provides advice to the Board on risks pertaining to the development and execution of the funding strategy for the Snowy 2.0 Project.

Each standing Committee has a documented and Board approved charter setting out its role and responsibilities, membership requirements and the powers delegated to it by the Board. All Committee charters are reviewed regularly, with changes subject to Board approval.

The Chair of each Committee reports to the Board at the Board’s next meeting on any matters arising from the Committee’s duties and responsibilities. The Board also receives copies of the minutes of all Committee meetings. This ensures that all Directors have oversight of, as well as the opportunity to discuss matters being considered by the Committees.

Delegations to Management: The Board has delegated authority over the day to day management of Snowy Hydro’s operations to the CEO and Managing Director (CEO and MD). Specific limits on the authority delegated to the CEO and MD are set out governed by a Delegations of Authority framework that has been approved and is reviewed regularly by the Board.

The CEO together with the Executive management team is responsible to the Board for the development and implementation of strategy and the overall management and performance of the Group. The CEO reports at least monthly to the Board on the progress being made by the Group in all aspects of the business.

Board Appointments: In accordance with Snowy Hydro’s Constitution, Directors are appointed by the Commonwealth (in its capacity as sole shareholder), with the terms of office determined at the time of appointment. A Director is eligible for reappointment at the time of expiry of his or her term of office. The Board assesses forecast vacancies, recruitment needs and continuity as part of its annual Board review, and makes skills-based recommendations to the shareholder on reappointments and/or new appointments, taking into account the current skills mix and experience of the Board and the strategic needs of the Company.

Role of the Company Secretary: The Company Secretary holds office on terms and conditions determined by the Board, with his/her appointment or removal to be made or approved by the Board. The Company Secretary is accountable to the Board through the Chairman on all matters relating to the proper functioning of the Board and has a management reporting line to the CEO.

Board evaluation: The Board has a formal process for evaluating the performance and effectiveness of the Board, supporting Committees and individual directors. This process is documented in the Snowy Hydro Annual Board Plan. The Board Chair facilitates this process, with support from the People and Culture Committee, on an annual basis with the outcomes used to inform any improvements to charters, processes or performance. In accordance with the GBE Governance and Oversight Guidelines, the Board will engage an external party every two years to conduct this evaluation.

Principle 2: Structure the Board to be effective and add value

The Snowy Hydro Board has in place a robust annual review process to ensure its corporate governance practices remain fit for purpose, effective and aligned with the Company’s strategic objectives, and complies with the GBE Guidelines. This process, which is documented in the Annual Board Plan, includes consideration of the ongoing adequacy of the governance structure, an assessment of the effectiveness of Board, Committee and Director performance, and an assessment of Board skills and diversity requirements in the context of Snowy Hydro’s strategic objectives.

Establishment of a Nomination Committee: Snowy Hydro has established a Board People and Culture Committee, with responsibility for making recommendations to the Board on performance and remuneration matters, including Board composition, performance and remuneration and management performance and remuneration. The People and Culture Committee assists the Board Chair in the facilitation of the annual review process set out above.

The People and Culture Committee is chaired by a Non-Executive Director and comprises three Non-Executive Directors including the Board Chair. The responsibilities of the People and Culture Committee are formally documented in its Charter, which is available on the Snowy Hydro website. The People and Culture Committee met five times in FY2019 to consider performance and remuneration matters, including Board and Committee performance and Board renewal related matters.

Maintenance of a Board skills matrix: The Snowy Hydro Board is committed to ensuring that it continues to attract and retain highly skilled Directors who bring an appropriate mix of skills, experience, expertise and diversity to Board decision making. The Board has developed a matrix of required Board skills and experience, taking into account the Company’s desire to ensure a diverse range of backgrounds, experience, qualifications and gender is maintained and monitored by the Board on a continuous basis. This skills matrix informs succession planning for Board vacancies or reappointments and subsequent recommendations made to the Shareholder in relation to such appointments. Given the complex and diverse nature of Snowy Hydro Group’s operations, the requisite core Board skills are categorised into the following five key areas:

• Leadership, Governance, and Regulatory and Government Policy;
• Business, Finance, Strategy and Risk;
• Energy, Operations, Infrastructure and Construction;
• Retail, Digital and Innovation; and
• Community, Safety and People.

Director independence: Snowy Hydro considers a Director to be independent if he/she is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered judgment, and is also independent of management. As at the date of this statement, the Board considers all Non-Executive Directors are independent and have remained so throughout the term of their appointment.

The Board Charter sets out the criteria by which the Board assesses the independence of each Director in light of any disclosed interests. An assessment of independence is made at any time a Director discloses any new interest or relationship. The Board, through the Chairman, evaluates the materiality of any declared interest or relationship that could be perceived to compromise the independence of a Director on a case-by-case basis having regard to the Director’s circumstances. Further, Directors are cognisant of their ongoing obligations to keep the Board and any Committee informed of an interest which could potentially conflict with the interests of the Group.

Where a Director has a declared material personal interest and/or may be presented with a potential material conflict of interest in a matter being presented to the Board or a Committee, the Director does not receive copies of Board/Committee reports relating to the matter and generally recuses himself/herself from the Board or Committee meeting at the time the matter is being considered. Consequently, the Director also does not vote on the matter. Any disclosures made by a Director at a meeting are minuted.

Majority independent Board & Chair: As at 30 June 2019, the Board comprised eight Non-Executive Directors and one Executive Director, being Snowy Hydro’s Group CEO and Managing Director, Paul Broad. The Board is chaired by an independent Non-Executive Director, Noel Cornish.

Induction & Ongoing Education: Snowy Hydro maintains a comprehensive induction program for new Directors which includes a program of formal induction sessions with Snowy Hydro’s CEO and Executives, site visits of the Company’s key operational sites, and extensive reading material via Snowy Hydro’s Board portal to allow new Directors to gain an understanding of the Company’s corporate plan, financial performance, corporate governance framework and strategic issues. Ongoing education for Directors is delivered through individual briefings and presentations made by Executives, and semiannual site visits to key operational locations.

Principle 3: Instil a culture of acting lawfully, ethically and responsibly

Snowy Hydro expects all Directors, employees and contractors to comply with both the letter and the spirit of the law. It promotes and expects high standards of integrity, transparency and professionalism in all of Snowy Hydro’s dealings. Above all, it strives to be a safe, ethical and environmentally responsible company.

Values and Code of Conduct: Snowy Hydro actively fosters a culture of ethical conduct. Its corporate values of Safety, Decency, Ownership, Agility, Courage and Teamwork underpin its success and provide guidance on its expectations of its Directors and employees.

Snowy Hydro’s Board is committed to the promotion of ethical, honest and responsible decision-making and the observance of their fiduciary duties. Directors are required to act in good faith and in the best interests of Snowy Hydro, having prime regard to the interests of the Shareholder but also considering the interest of employees, customers and other parties with whom Snowy Hydro is engaged; and to abide by Snowy Hydro’s Code of Conduct.

Whistleblower / Reportable Conduct Policy: The Code of Conduct is supported by other key policies including the Reportable Conduct Policy which provides mechanisms to raise genuine concerns regarding actual, unethical, unlawful or undesirable conduct, without fear of reprisal and with the support and protection of Snowy Hydro. The Reportable Conduct program includes an independently operated Whistleblower Hotline service to allow for anonymous reporting.

Any breaches of the Code of Conduct or Reportable Conduct Policy are reported to the Board via the Audit and Compliance Committee. In the event that a Director is the subject of a reportable conduct allegation, the Board Chair will engage with remaining Directors to appoint an external party to investigate the allegation.

Principle 4: Safeguard the integrity of corporate reports

Snowy Hydro has robust processes and controls in place to verify and maintain the integrity of its corporate reports. These internal controls cover financial, operational and compliance risk, and take the form of appropriate financial delegations, financial planning and reporting, compliance with appropriate procurement standards, and internal audit practices.

Audit and Compliance Committee: the Board has established an Audit and Compliance Committee, with the primary function of assisting the Board through its oversight and review of financial reporting, financial management, frameworks for risk management, compliance and corporate management, and auditor independence and performance. The role and responsibilities of the Audit and Compliance Committee are documented in its Board approved Charter which is available on the Snowy Hydro website.

As at 30 June 2019, the Audit and Compliance Committee comprised three Non-Executive Directors, all of whom were highly financially literate and possessed significant experience. The Committee is chaired by Ms Joycelyn Morton, a highly experienced Director with over 39 years of experience in finance and taxation.

The Audit and Compliance Committee meets four times a year. Chief Executive Officer and Managing Director, Chief Financial Officer, Financial Controller, Executive Officer - Risk, Head of Internal Audit, the external auditor and other management representatives may attend meetings at the discretion of the Committee. The Committee meets privately with the Australian National Audit Office and the external auditor on general matters concerning external audit and other related matters, including the half-year and full-year financial reports. The Committee also meets privately with the Head of Internal Audit on an as needs basis on matters concerning the internal audit plan and findings.

The Committee provides regular reports to the Board through its minutes and through verbal updates from the Committee Chair following each meeting. Collectively, these reports address all matters relevant to the Committee's responsibilities including:

• an assessment of whether external reporting is consistent with Committee members' information and knowledge, and if this external reporting is adequate for shareholder needs;
• recommendations for changes to management processes supporting external reporting;
• the Committee's policies and procedures for the selection and appointment of the external auditor and for the rotation of external audit engagement partners;
• recommendations for the appointment or removal of an external auditor; and
• an assessment of the performance and independence of internal and external auditors in relation to matters within the Committee's responsibility.

CEO and CFO Declarations: Prior to the adoption of the financial reports, the Board received and considered a written statement from the Chief Executive Officer and Managing Director and the Chief Financial Officer to the effect that:

• the financial records of the Corporation and the consolidated entity have been properly maintained;
• the statements comply with accounting standards and any other requirements prescribed by the Corporations Act and PGPA Act, and present fairly the entity’s financial position, financial performance and cash flows; and
• the integrity of the financial statements is founded on a sound system of risk management and internal control which is operating effectively.

Principle 5: Make timely and balanced disclosure

Snowy Hydro recognises the importance of ensuring its Shareholder is provided with timely and meaningful disclosures of any material information impacting the Company. Accordingly, Snowy Hydro keeps its Shareholder Ministers and their departments informed of any significant developments on an ongoing basis.

Continuous disclosure: Under the PGPA Act, and as a GBE, Snowy Hydro has continuous disclosure obligations to its Shareholder Ministers. Accordingly, on an ongoing basis, the Company discloses performance against the Corporate Plan, financial outcomes, progress of strategic initiatives such as Snowy 2.0, and any significant issues including through quarterly progress reports, the annual report, the annual corporate planning process, correspondence to Shareholder Ministers on out of cycle developments, and regular meetings between the Snowy Hydro Chair and CEO and Shareholder Departments. Snowy Hydro also responds promptly to requests from Shareholder Departments.

Principle 6: Respect the rights of shareholders

As outlined in Principle 5, Snowy Hydro engages regularly with its Shareholder and provides the information requested or required by the Shareholder to exercise its rights.

Governance information: Snowy Hydro’s website includes a dedicated corporate governance section setting out the Company’s governance structure and providing an overview of the responsibilities of the Board, Committees and Executive management. The governance section also includes links to the Charters for the Board and Board Committees. The website also includes details of Snowy Hydro’s leadership, being the Board of Directors and the Executive management team, and recent annual reports.

In addition, Snowy Hydro has published its Statement of Corporate Intent which sets out its corporate purpose, objectives and values, and provides an overview of the Company’s operations and key performance metrics. The Statement of Corporate Intent is reviewed and approved annually by the Board prior to submission to the Shareholder and publication on the website.

Shareholder communication: Snowy Hydro’s Board, Executive team and senior management communicate regularly with its Shareholder to ensure a ‘no surprises’ approach. In addition to the formal reporting outlined in Principle 5, this includes frequent engagement with Shareholder offices and Departments, and invitations for Shareholder Ministers and Departments to attend Board meetings.

Principle 7: Recognise and manage risk

Snowy Hydro’s Board and management are committed to maintaining a robust and effective risk management framework that proactively identifies and manages risks applicable across the Company. Snowy Hydro’s Risk Management Policy sets out its objectives for maintaining and continuously improving a strategic and consistent enterprise-wide approach to risk management that is integrated into organisational processes and underpinned by a risk-aware culture.

Establishment of risk committees: The Board has ultimate accountability for the management of risks affecting Snowy Hydro and ensuring that effective risk management practices are in place across the business. The Board is assisted in fulfilling these duties by the Audit and Compliance Committee, which monitors the effectiveness of Snowy Hydro's risk identification and management framework. All other Board committees (comprising the Safety, Operations and Environmental Risk, Portfolio Risk, People and Culture, Snowy 2.0 and Snowy 2.0 Funding committees) support the Board in the management of key risk areas including regulatory compliance, energy trading, safety, environmental, operational and people-related risks.

Review of risk management framework: Management is accountable for the risk management framework and has implemented internal controls to identify, evaluate and manage significant risks in relation to Snowy Hydro’s business. Management provides standing reports to each Committee on the risks pertaining to their Charter, including material movements and/or identification of new significant risks. The risk reports inform activities including the annual internal audit plan, and special reports requested by respective Committees on new or significant sources of risk.

Internal Audit function: The effectiveness of the risk management framework is regularly assessed through self-reviews as well as via independent and objective assurance provided by Snowy Hydro’s Internal Audit function. Internal Audit operates in accordance with an annual internal audit plan that is tailored to address key internal and external risks applicable to the business. This plan is reviewed and approved annually by the Audit and Compliance Committee of the Board, and audit results are incorporated into the continuous improvement of the risk management framework and supporting controls.

Principle 8: Remunerate fairly and responsibly

Remuneration Committee: The Board has established a People and Culture Committee to assist the Board in discharging its responsibilities in relation to appropriate and responsible remuneration, having regard to the performance of the Company, individual performance, statutory requirements and current market practice. Further details on the People and Culture Committee, including its composition and Charter requirements are set out under Principle 2.

Directors’ remuneration: The Remuneration Tribunal determines the remuneration and travel allowances payable to Non-Executive Directors. Full details of Directors’ remuneration are included in the Remuneration report.

Executives’ remuneration: The remuneration of the Executives is considered by Snowy Hydro’s People and Culture Committee and, subject to the Committee’s recommendation, reviewed and approved by the Board. Advice is sought every two years from independent specialised remuneration consultants on the structure of remuneration packages applying in the external market; and the quantum of increases that have occurred in comparable Australian companies over the previous 12 months. This assists in ensuring that Executive remuneration is in line with market practice, and that Snowy Hydro is competitively placed to attract and retain the necessary talent for these roles. Full details of Executives’ remuneration are included in the Remuneration report