AWB Limited - 2003 Annual Report

pool management
services
AWB National Pool
AWB, through its wholly owned subsidiary AWBI, manages the
AWB National Pool. Integrated services are provided by AWB to
AWBI for a fee under a commercial services agreement. Both the
AWB and AWBI Boards have negotiated and approved this
agreement, with independent legal advice provided to each Board.
AWB National Pool provides growers with a unique grain marketing
and risk management system. All AWB National Pool participants
enjoy the value of revenues generated from strong customer
relationships and international sales, arbitrage and blending
opportunities, logistics and supply chain efficiencies, research and
development, physical pricing strategy and sophisticated derivative
management programs.
The Remuneration Model
AWB is remunerated for pool management services through a
performance based system introduced in 2001. To provide an
objective and tangible measurement of its performance, AWB has
also implemented an assessment model called the Wheat Industry
Benchmark (WIB). The WIB acts as a “competing manager”
generating a theoretical outcome for each seasonal pool against
which actual performance can be measured.
Remuneration is made via a two tiered payment structure. Firstly,
there is a base fee, calculated at 1.5% of Gross Pool Value (GPV)
(subject to a cap of $A61.8 million, and a floor of $A46.4 million –
CPI indexed) which, depending on GPV, covers the majority of
operating costs. Secondly, there is an Out Performance Incentive
which is calculated as 20% of AWB National Pool returns achieved
above the WIB and a hurdle (currently set at $US5 per tonne).
Pool participants receive 80% of the revenue achieved above this
level. The Out Performance Incentive is capped at 1.5% of GPV.
AWB manages two to three seasonal Pools at any one time, and
receives proportional remuneration from each of those Pools during
the financial year.
For the now finalised 2001/02 AWB National Pool, AWB achieved
$329 million in additional value over and above the WIB. Under the
remuneration structure, AWB received $28.3 million (spread across
two financial years), with the remainder going to Pool participants.
Total remuneration earned by AWB for its Pool Management
Services for the 2002/03 financial year was $23.3 million, which
included remuneration from two seasonal pools, as per below:
($million) For the year ended September 2003 For the year ended September 2002
2001/02 Pool 2002/03 Pool Total 2001/02 Pool Total
Base Fee 6.0 41.8 47.8 54.0 54.0
Out performance 14.0 15.3 29.3 14.3 14.3
Administration costs – (53.8) (53.8) (50.9) (50.9)
Total Pool 20.0 3.3 23.3 17.4 17.4
Management Services (EBIT)
25
20
($m)
15
10
5
0 INNOVATION FOCUS The TO leading DELIVER agribusiness NEW OPPORTUNITIES
in Australia.
2000 2001 2002 2003
NPBT – Pool Management Services
11