Annual Report 2011-12 6 September 2012 This Annual Report provides information about the financial and non-financial performance of the Bulk Water Supply The Hon Mark McArdle MP Authority (trading as ) for 2011-12. Minister for Energy and Water Supply PO Box 15216 It has been prepared in accordance with the Financial City East QLD 4002 Accountability Act 2009, the Financial and Performance Management Standard 2009 and the Annual Report Guidelines The Hon Tim Nicholls MP for agencies. Treasurer and Minister for Trade Level 9, Executive Building The report records the significant achievements against the 100 George St strategies and activities detailed in the organisation’s Strategic Qld 4000 and Operational Plans.

This report has been prepared for the Minister for Energy and Dear Ministers Water Supply, to submit to Parliament. It has also been prepared 2011-12 Seqwater Annual Report to meet the needs of Seqwater’s customers and stakeholders, which include the Commonwealth and local governments, I am pleased to present the Annual Report 2011-12 and industry and business associations and the community. financial statements for the Queensland Bulk Water Supply Authority (QBWSA), trading as Seqwater. This report is publicly available and can be viewed and downloaded from Seqwater’s website at I certify that this Annual Report complies with: www.seqwater.com.au/public/news-publications/annual-reports. • the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, and

• the detailed requirements set out in the Annual Report requirements for Queensland government agencies.

A checklist outlining the annual reporting requirements can be accessed at www.seqwater.com.au/public/news-publications/ annual-reports.

Yours sincerely

Phil Hennessy Chairman contents

Report from the Chairman and the Chief Executive Officer 2 About Seqwater 6 Role and functions 6 Our values 6 Strategic and operational planning 7 Summary of major assets 8 Seqwater as part of the SEQ Water Grid 9

Financial summary for 2011-12 The year in review 10 Achieving our goals 10 Key Performance Indicator summary 11 Financial summary for 2011-12 21 Looking forward 21 Governance 22 Responsible ministers 22 Legislative and policy requirements 22 Related entities 22 Organisational structure 22 The Seqwater Board 24 Contact Board role 26 Board committees 26 Queensland Bulk Water Authority, trading as Seqwater. Board attendance 27 ABN: 75450239876 Board remuneration 27 Board performance evaluation 27 Registered Office Organisational review 28 240 Margaret Street, Brisbane QLD 4000 Compliance 28 PO Box 16146, City East QLD 4002 Risk management 28 T 07 3035 5500 Internal audit 28 F 07 3229 7926 Workforce planning and retention 29 E [email protected] Industrial/Employee Relations Framework 30 W www.seqwater.com.au Workplace Health and Safety 30 Conduct and ethics 31 Additional information 31 Seqwater Annual Report 2011-12 Financial Report 32 ISSN 1837-4549 Glossary 98 © (Queensland Bulk Water Supply Authority) 2012.

The Queensland Government is committed to providing accessible services to Queenslanders from all culturally and linguistically diverse backgrounds. If you have difficulty in understanding the Annual Report, please contact us and we will arrange an interpreter to effectively communicate the report to you.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 1 Report from the Chairman and the Chief Executive Officer

Phil Hennessy CHAIRMAN Peter Borrows CEO

The 2011-12 financial year was one of consolidation The announcement by the State Government in April 2012 to and recovery. further rationalise government-owned water entities, will create one of Australia’s largest and most diverse water While our key focus remained the ongoing supply of safe and authorities. reliable bulk drinking water for our region and ensuring we continued to plan for the future, the year was marked by five Over 2012-13, Seqwater will merge with bulk water transport key bodies of diverse and significant work. These included authority LinkWater and functions of the the successful Seqwater-WaterSecure merger into the new Water Grid Manager and Queensland Water Commission, to Seqwater, the ongoing recovery work undertaken following the form a single regional bulk water supply company. January 2011 flood and implementation of recommendations of As in previous years and in different iterations, the new the Queensland Floods Commission of Inquiry. It also included Seqwater strongly embraced the opportunities new assets, working closely with the Queensland Competition Authority on skills and ideas presented from driving innovation to identifying identifying business and cost efficiencies and, importantly, the operational efficiencies and cost savings. ongoing implementation of Seqwater’s asset management and planning framework for both catchment and built assets.

The Seqwater-WaterSecure merger combined the traditional water sources of catchments and dams with desalination and purified recycled water into the same business for the first time in South East Queensland (SEQ).

2 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Delivering South East Queensland’s Seqwater also moved forward on the planning and implementation of its Dam Safety Upgrade Program which saw water supply upgrade works commence at , the second On behalf of the SEQ Water Grid and working closely with SEQ largest dam supplying the Sunshine Coast. Construction on Water Grid partners, including the region’s distribution and water a new water treatment plant for Kilcoy and the surrounding retailers, Seqwater produced almost 260,000 million litres of community also got underway. safe drinking water for distribution to residents and businesses across the region. This included more than 3,400 million litres of Queensland Floods Commission of Inquiry desalinated water and more than 5,600 million litres of purified recycled water to the region’s key power stations. Seqwater committed a significant amount of resources during the year to assist the work of the Commission of Inquiry. We As part of our overall management of water quality and, to have been diligent in implementing recommendations from both strengthen community confidence, we completed more than the interim and final reports, with the Commission adopting 300,000 water quality tests with the results again demonstrating many of the recommendations made by Seqwater in its various the high quality of drinking water provided continued to exceed submissions to the Inquiry. the Australian Drinking Water Guidelines (2011). The majority of the recommendations as they relate to Seqwater have already been completed, with the remainder Securing the region’s future water supply in progress. These undertakings have included finalising A regionally significant infrastructure project reached the establishment of a new Flood Operations Centre (FOC), completion with the finalisation of the Stage 3 which was already in the planning stages prior to the January upgrade project, with the dam’s recreational areas re-opened 2011 floods, and successfully implementing a region-wide, in December 2011. After three years of construction, Hinze Dam automated public notification service for dam releases using is now the region’s third largest water storage behind Wivenhoe the nationally recognised Australian Early Warning Network and Somerset dams and a critical asset in the water security service. In addition, and over and above recommendations in the of the region. The upgrade significantly increased the capacity Commission’s final report, Seqwater has significantly increased of the dam and now provides flood mitigation benefits for more the number of flood engineers and flood officers available to than 3000 additional homes below the dam wall. operate the FOC during future flood events.

Our manufactured water assets have now been successfully Seqwater had always taken the view that the operation of operating for more than two years with the Western Corridor during the January 2011 flood event and release Recycled Water Scheme progressing to project closeout over strategies adopted by its engineers significantly mitigated the past year. The Gold Coast Desalination Plant is expected to the flood. Our view was supported by the independent expert reach final project closeout in late 2012. retained by the Commission who concluded that, in light of the information available at the time and allowing for the limits The new , the first dam constructed in South of the strategies in the Wivenhoe manual, our flood engineers East Queensland in 20 years, was handed over to Seqwater achieved close to the best possible flood mitigation result for on 1 July 2011, six months ahead of schedule. Originally it the January event. was thought it would take between three and four years for Wyaralong Dam to fill, however the unprecedented rainfall In relation to flood management, over the 2011-12 wet season of early 2011 saw the dam fill almost immediately after Seqwater successfully managed a number of flood events from construction was completed and it remains close to capacity. Wivenhoe, Somerset, North Pine and Leslie Harrison dams.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 3 Report from the Chairman and the Chief Executive Officer

Working in partnership with the community Managing financial performance

The watershed and immediate catchments surrounding and Seqwater’s financial performance has continued to achieve impacting on the region’s drinking water supply dams account further efficiencies and consolidation in 2011-12. Our regional for about 1.4 million hectares. In contrast with other capital city approach to bulk water management, including the integrated water authorities in Australia, including Melbourne and Sydney, management of our catchment and built infrastructure, has Seqwater owns very little land around its dams, managing continued to help deliver value for our owners and the broader around 65,000 hectares or less than 5 per cent of the total community. Substantial work in supporting the Queensland watershed and catchment area. As a result, Seqwater continues Competition Authority’s regulatory reviews was also to proactively engage with both the broader SEQ community, as undertaken with additional efficiencies and savings identified as well as its catchment communities, to help manage the region’s part of the process. In addition, as part of an efficiency drive by drinking water catchments from an environmental and water the State Government, Seqwater also undertook an extensive quality perspective. efficiency review of both operating and capital costs with further savings identified. Working in partnership with SEQ Catchments, Healthy Waterways and a range of local catchment care groups, Seqwater delivered a range of riparian rehabilitation and Building capacity and capability re-vegetation projects across the region. The year also saw Developing the knowledge, skills and capacity of its workforce the signing of a landmark agreement with ENERGEX and SEQ remains vital to the success of a modern water authority. Catchments for Seqwater to provide environmental offsets Seqwater continued to invest in capacity building by partnering to ENERGEX’s infrastructure program. The agreement will with Registered Training Organisations for the first time to involve large scale planting of native trees in key drinking deliver accredited courses in water industry operations. We water catchments to improve raw water quality and enhance also introduced the organisation’s inaugural graduate and catchment biodiversity, including increasing koala habitat. traineeship program to address future skills shortage and a Seqwater also maintained a range of Community Reference maturing workforce. Groups to assist with its business planning, the development of As an extension of our internal staff LIFE Awards, Seqwater catchment management plans and natural asset monitoring. launched the 25+ Club this financial period, recognising staff Almost 19,000 school students and community groups with over 25 years of service to Seqwater and its previous undertook site and asset tours or presentations as part of incarnations. A total of 53 staff have now been inducted into the Water Grid Community Education Program delivered by this Club, between them amassing an impressive 1645 years of Seqwater. A new interpretative centre at Hinze Dam as part of industry experience. the dam upgrade project attracted almost 65,000 visitors alone, Safety again was a major workforce focus with the introduction since its opening in December 2011. of a Fit4Work program including random drug and alcohol Seqwater recreation facilities again proved a major drawcard testing for the first time. Since its launch in January 2012 more during the year, with more than two million local, interstate and than 150 tests have been undertaken with no positive results. international visitors to our campsites and dams.

4 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Seqwater is now rated amongst the best of the Queensland As we look ahead to the next financial year and the further water industry for injury management with the organisation’s logical consolidation of the water industry, Seqwater looks performance almost 60 per cent under the industry benchmark forward to being part of a dynamic new era of water delivery for monthly claim costs. The performance resulted in a significant in South East Queensland. We believe the organisation and reduction in WorkCover premiums for 2012 and its safety team its staff are well placed to make a significant and lasting have been nominated by WorkCover Queensland for an injury contribution to the success of the new entity. management award with the winners announced in October.

Looking ahead

Since its establishment in 2008 from 17 separate entities, Seqwater and its staff have consistently demonstrated a determined resilience to rise above the many challenges of delivering bulk water, catchment and recreation services Phil Hennessy across a diverse and vast region. Chairman The upcoming water industry reform will once again provide us with the opportunity to harness our collective skills and knowledge to ensure the continued supply and security of high- quality water to residents, whilst delivering cost efficiencies and environmental benefits to the region.

Seqwater’s performance and achievements over the year have again been driven by the commitment, professionalism and Peter Borrows enthusiasm of our staff. Our achievements would not have been Chief Executive Officer realised without their contributions.

We would like to thank our staff, as well as those in organisations we have collaborated with, for their dedication and efforts in helping the organisation achieve its vision of Water for Life, not only over the past year but since Seqwater was established.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 5 About seqwater

Role and functions Seqwater aspires to create Water for LIFE, as caretaker of Our vision water, infrastructure and catchments throughout South East Queensland to sustain a high-quality bulk water supply for Water for LIFE – water and current and future generations. catchments sustaining current and As an organisation we provide climate-resilient bulk water future generations. supply services, in accordance with regulated standards. We are responsible for ensuring South East Queensland’s natural resources and infrastructure supply fit-for-purpose bulk water safely and sustainably. We work in partnership with government, industry and communities to maximise the many Our values values of these resources. We take an integrated approach to water management in order Our Water for LIFE values underpin all to supply water to the community via the South East Queensland business activity to achieve our vision. (SEQ) Water Grid. We also supply to smaller communities in the region that are not connected to the Grid and more than 1200 irrigator customers. L Leadership Seqwater assets are located from the New South Wales border, We are leading the way by working together and to the base of the Toowoomba ranges and north to Gympie. supporting each other to create opportunities and We manage recreation facilities which currently provide more develop knowledge we can share with the industry. than 50 per cent of the green space for South East Queensland. More than 2 million people visited Seqwater managed recreation facilities over 2011-12. I Integrity We are ethical and demonstrate integrity and Additionally, Seqwater works collaboratively with other respect for our workmates, industry colleagues land owners across the region to influence water quality and community. outcomes achieved from more than 1.4 million hectares of land which directly impact on Seqwater’s drinking water and irrigation storages. F Future We are the custodians of South East Queensland’s water supply assets and we manage our business with future generations in mind.

E Excellence We are dedicated to achieving excellence through innovation, continuous improvement, quality, sustainability, safety and cost effectiveness.

6 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Strategic and operational planning Our goals

The Seqwater Strategic Plan 2011-12 to 2015-16 outlines Goal 1 our long-term direction, vision and goals and explains our Regulators and customers have confidence and trust in the organisation’s strategy and targeted outcomes in more detail. quality, security, efficiency and reliability of their water supply. Increasingly, the principles of business sustainability underpin our planning, implementation and reporting. Goal 2 Communities in our region gain the maximum sustainable value A Seqwater operational plan is developed annually and outlines from their catchment and water cycle assets – natural and built. specific key initiatives and service delivery objectives through programs of work that maintain the long-term direction for Goal 3 the business, while responding to changes in our business Communities and businesses have confidence and trust in the environment. The plan aligns the delivery of these key initiatives readiness and resilience of people, processes and assets to and programs with budgets and performance targets. cope with and respond to critical events. We report to our responsible ministers on performance against the operational plan on a quarterly basis, through the Goal 4 Queensland Treasury and the Department of Energy and Water Seqwater staff and partners have the know-how and capability Supply (DEWS). to efficiently and effectively deliver organisational outcomes.

Our approach Our strategic plan recognises the current model of regional water supply in South East Queensland is substantially different from the past. This offers the distinct opportunity to balance the management of catchment-based and climate-resilient assets to provide a reliable water supply and deliver other benefits to the region.

The Seqwater-WaterSecure merger has resulted in a shift from an initial focus on water supply security and efficiency to a whole-of-system management focus, which considers both whole-of-catchment management as well as water cycle management issues. Central to this new approach are business sustainability principles.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 7 Summary of major assets

During 2011-12, we were responsible for managing the following assets:

26 dams

46 operational water Seqwater major assets treatment plants, including 7 recreational Water Treatment Plants water treatment plants (WTP) 1 Algester WTP N 2 Amity Point WTP 3 WTP* 50 weirs 4 Banksia Beach WTP 5 Beaudesert WTP 34 6 Boonah Kalbar WTP Lake Macdonald Dam 14 ground-water bore 7 WTP* Noosa 8 Caboolture WTP 9 Canungra WTP 7 fields and aquifers 10 Capalaba WTP Borumba Dam 11 Chandler WTP Nambour 12 Dayboro WTP 20 22 The Western Corridor 13 Dunwich WTP 14 East Bank (Mt Crosby) WTP Maroochydore 21 Recycled Water 15 Enoggera WTP 27 Scheme, including 16 Esk WTP 17 Ewen Maddock WTP 17 Caloundra three advanced water 18 Forest Lake WTP Ewen Maddock Dam 19 Hinze Dam WTP* 28 treatment plants 20 Image Flat WTP

21 Jimna WTP 23 and more than 200 46 22 Kenilworth WTP 24 Bribie kilometres of large- 23 Kilcoy WTP Island 24 Kilcoy (Lake Somerset) WTP 4 25 diameter underground 25 Kirkleagh WTP* 8 pipeline 26 Kooralbyn WTP 27 Landers Shute WTP 41 28 Linville WTP 29 Lowood WTP Redcliffe The Gold Coast 30 WTP* 12 31 Molendinar WTP Sidling Creek Dam 16 Desalination Plant 32 WTP* 35 37 33 Mudgeeraba WTP Wivenhoe Dam 34 Noosa WTP 35 North Pine WTP Brisbane 45 36 North Stradbroke Island WTP 3 2 37 Petrie WTP 38 Atkinson Dam Lake Manchester 15 38 Point Lookout WTP 29 Dam 11 39 Rathdowney WTP 13 North 14 10 Stradbroke 40 Runcorn WTP Clarendon Dam 44 Island 41 Somerset Dam (Township) WTP 43 Leslie Harrison 42 South Maclean WTP 40 Dam 36 18 1 43 Sunnybank WTP Ipswich 44 West Bank (Mt Crosby) WTP 45 Wivenhoe Dam WTP* 46 Woodford WTP

* Recreation Water Treatment Plant. 42

Gold Coast Wyaralong Dam 31 6

Bromelton Weir 5 Moogerah Dam 32 19 9 Hinze Dam

26 33

Little Nerang Dam Maroon Dam 30 39

8 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Seqwater as part of the SEQ Water Grid

Seqwater works State-owned bulk water authorities collaboratively with partner water entities Seqwater is the single supplier of bulk drinking water to LinkWater and the SEQ the SEQ Water Grid. It stores and treats water from dams, Water Grid Manager as weirs and borefields; as well as water from the Gold Coast Desalination Plant and the Western Corridor Recycled Water part of the SEQ Water Scheme. Seqwater is also responsible for managing the Grid, which manages catchments which surround its water sources. South East Queensland’s water supplies through a connected network of drinking water pipelines and a coordinated supply- LinkWater is the network controller for the potable bulk water transport network. Water is transported from treatment plants and chain management storage reservoirs through bulk pipelines and into the distribution approach. The connected system. LinkWater monitors and operates the system from its centralised network control centre and also maintains bulk water SEQ Water Grid assets infrastructure across the region. allow water to be moved across the region to where it is needed most.

Seqwater also has strong working relationships and agreed operating The SEQ Water Grid Manager owns the urban water entitlements in South East Queensland and is responsible for managing the protocols with the SEQ Water Grid. It purchases services to store, treat, produce three distribution retail and transport bulk water from Seqwater, WaterSecure and LinkWater. It then sells treated water to council-owned retail companies – Unity Water, distribution businesses and industry customers. Queensland Urban Utilities and Allconnex.

Council-owned retail authorities

Unitywater is the distribution and retail Queensland Urban Utilities is the Allconnex Water is the distribution business for the Sunshine Coast and distribution and retail business for and retail business for the Gold Morton Bay areas. The council-owned Brisbane, Scenic Rim, Ipswich, Somerset Coast, Logan and Redland areas. business sells and delivers drinking water and Lockyer Valley areas. The council- The council-owned business sells and to customers and collects, transport and owned business sells and delivers drinking delivers drinking water to customers and treats wastewater and sewage. water to customers and collects, transport collects, transport and treats wastewater and treats wastewater and sewage. and sewage.

South East Queensland households and businesses

The diagram above represents the SEQ Water Grid supply chain at 30 June 2012.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 9 The year in review

The Luggage Point Alliance and Western Pipeline Alliance were also granted Final Completion for their section of the Western Seqwater’s planning and Corridor Recycled Water Scheme.

operation this reporting period As part of our Dam Safety Upgrade Program, various projects has focused on the appropriate have either commenced or are in the planning phase. This upgrade program will continue to be rolled out over the coming management and integration of financial year to ensure ongoing dam safety and compliance with both its natural and built assets legislation. The year also saw the development of our Natural Asset Management Plans in partnership with our catchment to maximise fit-for-purpose communities to ensure a more consistent approach to managing water supply for South East the land around our key drinking water and irrigator storages. Queensland. We committed substantial resources to implementing recommendations from the Queensland Floods Commission of Inquiry’s interim and final reports. The Commission adopted many of the recommendations proposed by Seqwater in its submissions Seqwater’s planning and operation this reporting period has to the Inquiry. Many actions required by Seqwater have already focused on the appropriate management and integration of been completed, including the introduction of an early warning both its natural and built assets to ensure fit-for-purpose water system that notifies subscribed community members of dam supply for South East Queensland. releases. This system was operated effectively during the 2011-12 wet season. Over this period Seqwater sent The Seqwater–WaterSecure merger on 1 July 2011 presented 14,000 emails, 26,000 SMS and almost 2500 voice messages a range of opportunities to enhance our ability to provide advising of gate releases and spilling dams. an efficient and reliable water supply from both traditional and modern water sources. This has permeated all areas An interim review of the Wivenhoe, Somerset and North Pine of the business, from operations through to our community dams manual of operations was also completed and approved education programs. by the Dam Safety Regulator ahead of the 2011-12 wet season.

Significant resources and energy were also directed into We will continue to dedicate staff and resources to ensure repairing our assets damaged by the January 2011 flood with the full achievement of all relevant recommendations to best all priority work finalised by 31 July 2011. prepare the region for any future major flood events.

We accepted ownership of Wyaralong Dam this financial year, the first dam to be constructed in South East Queensland in more than Achieving our goals 20 years. This asset will provide water security to accommodate future population growth and extreme weather events. We have developed a comprehensive strategic plan that clearly articulates the direction we need to take our business to achieve The Hinze Dam Stage 3 Upgrade was completed in December its vision of Water for LIFE – water and catchments sustaining 2011 and the project met all regulatory obligations including current and future generations. This plan provides guidance for increasing drinking water and flood mitigation capacity and us to meet the following long-term future challenges: improving dam safety during flood events. The upgrade Æ significantly increased the capacity to 310,000 megalitres, Æ Water supply efficiency making Hinze Dam the region’s third largest drinking water ÆÆ Whole-of-system management storage. To offset the loss of native vegetation areas resulting from the upgrade, Seqwater acquired land to create a wildlife ÆÆ Business sustainability corridor connecting Springbrook and Lamington National Parks, ÆÆ Collaboration amongst the regional water grid entities and ensuring safe access to conservation zones for native animals. the wider community

A number of asset delivery milestones were reached this year ÆÆ Population growth including practical completion of the Banksia Beach Water Treatment Plant and borefields in February 2012. ÆÆ Business integration.

10 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Four goals were identified that address our core business ÆÆ Managed 42 Hazard Analysis and Critical Control Point drivers and key performance indicators (KPIs) have been (HACCP) plans and associated procedures to ensure the developed for each of these goals. We reviewed activity on production of safe drinking water from our water treatment a quarterly basis and measured it against these KPIs. facilities for the South East Queensland community

ÆÆ Developed and implemented our Cyanobaterial Key Performance Indicator Summary Management Plan to manage the risk posed from cyanobacteria (blue-green algae) to recreational activities A summary of our performance against our goals follows. and to drinking water supplies Goal 1 Water Supply, Quality and Security ÆÆ Maintained compliance with the Recycled Water Management Regulators and customers have confidence and trust in the Plan for the Western Corridor Recycled Water Scheme, in quality, security, efficiency and reliability of their water supply. order to maintain production of high quality water suitable for augmentation of drinking water supplies and other uses

Highlights ÆÆ Managed 24 gated dam releases from Wivenhoe, Somerset, ÆÆ Supplied more than 259,500 megalitres of treated drinking North Pine and Leslie Harrison dams during 2011-12 water to the SEQ Water Grid (including more than 3,400 megalitres of desalinated water) and more than 5,600 ÆÆ Developed Natural Asset Management Plans to be delivered megalitres of purified recycled water to power stations in partnership with our catchment communities

ÆÆ Maintained compliance with the Australian Drinking Water ÆÆ Initiated and developed business-wide engineering Guidelines 2011 to provide safe drinking water to South East standards Queensland ÆÆ Completed full suite of risk assessments for our catchments ÆÆ Completed more than 300,000 water quality tests to meet including raw water quality management framework regulatory requirements and ensure community confidence ÆÆ Structured maintenance programs completed and consistent across natural and built assets

KPI Definition Measurement Annual Target Comments G1.1 Extent of achievement of Number of material 0 This target was met with Drinking water quality regulated water quality breaches at conventional all water treatment plants water treatment and and the desalination plant manufactured water plants achieving compliance of regulated water quality with health and aesthetic parameters [based on parameters. Australian Drinking Water Guidelines]1 G1.2 Extent of achievement of Compliance with Public 0 breaches This target was met with Recycled water quality regulated water quality Health Regulations for all purified recycled water manufactured water2 complying with the required standards.

1 Based on the Grid Customer Confidence Report parameters. Includes Tugun desalination plant. 2 Refers to Bundamba, Luggage Point and Gibson Island Advanced Water Treatment Plants.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 11 The year in review

KPI Definition Measurement Annual Target Comments G1.3 Variable costs per megalitre $/ML Western Corridor $502 This target was affected by Water supply variable produced for each water Recycled Water Scheme production volumes being costs supply source3 60% less than budgeted Targets are the cumulative volumes, impacting on YTD result for the end of energy costs. Due to these each quarter uncontrollable impacts this target is no longer a reliable Variable costs are the indicator of performance. direct costs of treating water. These costs include $/ML Gold Coast $678 This target was affected by chemicals and energy. Desalination Plant production volumes being 62% For manufactured water less than budgeted volumes, treatment plants the costs impacting on chemical and also include sludge and energy costs. Due to these waste disposal uncontrollable impacts this target is no longer a reliable indicator of performance. $/ML Catchment Sourced $64 This target was met when the Drinking Water uncontrollable impact of an increase in electricity prices is taken into account. Information regarding this price increase was not available at the time the budget was prepared. G1.4 Degree of accuracy with Variance analysis of total $22,000 - This target was met with Water supply fixed budget forecasts for total fixed operating expenses $26,900 fixed operating costs 8% operating costs fixed operating expenses for for Western Corridor below budget, however this each water supply source3 Recycled Water Scheme target is no longer a reliable Targets are the cumulative ($000) indicator of performance result for the end of each given the uncontrollable quarter and represent a YTD impacts of decreased range of +/-10% production volumes. The expenses include Variance analysis of total $13,700 - This target was affected employee costs, water fixed operating expenses $16,700 by lower than anticipated quality, monitoring and for Gold Coast Desalination production volumes which environmental expenses, Plant affected costs. Due to these repairs and maintenance ($000) uncontrollable impacts this and other operating target is no longer a reliable expenses. Corporate indicator of performance. overheads, interest and Variance analysis of total $67,400 - This target was met with depreciation are not fixed operating expenses $82,400 operational expenditure included in the fixed for Catchment Sourced within the budgeted range. operating expenses Drinking Water ($000)

3 Quarterly updates will be considered as YTD interim reports. Compliance with this KPI will be measured over a 12 month period.

12 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 KPI Definition Measurement Annual Target Comments G1.5 Degree of accuracy with Variance analysis of This target was met Corporate overhead budget forecasts for total corporate overheads with allocated corporate expenses corporate overheads for allocated for Western +/- 10% overheads 9.6% below each water source Corridor Recycled Water budget. Scheme Variance analysis of This target was met corporate overheads with allocated corporate +/- 10% allocated for Gold Coast overheads 2% below budget Desalination Plant at year end. Variance analysis of This target was not met corporate overheads due in part to the full allocated for Catchment capitalisation of Hinze Sourced Drinking Water Dam extending beyond the forecast date of June 2011, +/- 10% This resulted in lower than budgeted depreciation and interest costs. A reduction in land tax costs also contributed to the variance. G1.6 Availability and reliability of Number of grid incidents ‹4 This target was met noting Water supply reliability our treatment assets declared by Seqwater that there was one incident in generates a supply failure4 the January quarter. This occurred at the Kilcoy Water Treatment Plant due to inadequate pump isolation procedures during maintenance activities. Investigation and remedial actions have since been carried out.

4 excludes water quality incidents unless caused by asset failure, planned shutdowns and short duration supply failures that do not require downstream customers to source alternate supplies. Includes failures from chemical or parts unavailability and all other supply failures despite alternate water supply sources being available.

Goal 2 Catchment and Water Cycle Sustainability ÆÆ Completed the connections process for new industrial Communities in our region gain the maximum sustainable value customers to access water produced by the Western from their catchment and water cycle assets – natural and built. Corridor Recycled Water Scheme ÆÆ Accepted handover for operational control of Wyaralong and Highlights Hinze dams ÆÆ Developed alternative operating scenarios and models for the Gold Coast Desalination Plant and Western Corridor ÆÆ Completed all scheduled sub-regional planning for water Recycled Water Scheme (including decommissioning) to treatment plants enhance water security and decrease costs ÆÆ Completed full suite of Asset Management Plans for both ÆÆ Established first stage of economic framework for natural natural and built assets catchment investment ÆÆ Continued development and maturing of Asset Management Framework

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 13 The year in review

ÆÆ Underwent the internationally recognised Aquamark • ­ 2,000 trees and shrubs planted on 15 erosion process assessment sponsored by the Water Services remediation sites on both Seqwater land and private Association of Australia (WSAA). Results demonstrated land in the Wivenhoe and Mid-Brisbane catchments a 50 per cent improvement in the organisation’s asset • ­ 10,000 trees planted by Brisbane City Council 2 Million management processes since the last assessment in 2008 Trees Program on Seqwater land at Mt Crosby under a ÆÆ Hosted more than two million visitors across all recreation third draft agreement facilities • ­1000 trees planted on two hectares of private land by ÆÆ Provided water education and site tour services to almost Lake Baroon Catchment Care Group using Seqwater 19,000 people, including 27 international groups. The new funding Hinze Dam Interpretive Centre had approximately 35,000 • Flood Response Riparian Erosion Restoration also visitors in the first two months of opening, with more than undertaken at around 20 sites in the Wivenhoe and 65,000 visitors since November 2011 mid-Brisbane catchments on both Seqwater and ÆÆ Continued provision of a community engagement program private land to support operations and infrastructure projects with more ÆÆ Continued success in improving native vegetation and than 350 community contacts and meetings over the year, regeneration through our Weed Management Program, including the ongoing work of the Leslie Harrison Community in particular: Reference Group (CRG) and the Banksia Beach CRG • ­ Three hectares of smothering Broad Leaf Pepper ÆÆ Managed approximately 250 events at our recreation sites trees were removed from North Pine Dam, resulting ranging from major charity events such as the Ride to in visible native regeneration Conquer Cancer, Oxfam Trailwalker and Kokoda Challenge, mountain biking events including the MTB QLD State • ­ Large numbers of Honey Locust were observed on Championships, birthday parties, weddings, cross-country the high water line around Wivenhoe Dam, following running, endurance horse-riding, fishing competitions, January 2011 floods. More than 2000 mature trees rogaining, triathlons and water-ski racing have since been treated, significantly reducing the available seed for future germination. ÆÆ Responded to more than 1,350 recreation enquiries through the recreation email enquiry service • ­ The fight against ‘Cabomba’ is ongoing with an integrated approach on the four infested dams ÆÆ Successfully managed new recreation facilities at involving five techniques. Research is ongoing into Wyaralong Dam (Mt Joyce Recreation Park) which opened new methodology, in tandem with early detection and to the public in July 2011 and Hinze Dam, which re-opened prevention programs to reduce the risk to both human in December 2011 safety and water quality. ÆÆ As part of the Hinze Dam upgrade, acquired 264 hectares ÆÆ Continued success with lungfish and general fish recovery of land, creating a wildlife corridor that will ensure safe actions. Modifications to dam operations and ongoing access to conservation zones for native animals maintenance, has reduced fish strandings substantially. ÆÆ Worked with Gold Coast City Council to use 50 hectares Over the 2011-12 wet season, 12 fish rescues were of land within the Numinbah Valley Conservation area for conducted across gated dams with almost 95 per cent of revegetation works, involving two-for-one replacement of all fish potentially impacted being rescued and returned to five flora species of National Environmental Significance water unharmed.

ÆÆ Planted approximately 165,000 trees, shrubs and seedlings ÆÆ Designed and implemented five research programs aligned as part of revegetation work, involving: with the strategic direction of the business, and reached the first year milestone of University of Queensland/Griffith • ­ Approximately 130,000 seedlings planted at Wyaralong University/Seqwater tri-party agreement Dam following construction of this new dam ÆÆ Continued to support the Australian Water Recycling Centre • ­ 20,000 trees planted under four new Nature Refuge of Excellence as host organisation Agreements with the Department of Energy and Water Supply (formerly DERM) and an Energex/Seqwater/ SEQ Catchments offset agreement

14 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 KPI Definition Measurement Annual Target Comments G2.1 Natural watershed and Status of watershed 10 The targets were met Natural watershed and storage condition and condition and storage watersheds with data collection and storage condition water quality assessed water quality1 according to and storages compilation completed against an appropriate Seqwater Board approved measured for 10 watersheds and standard scorecard [by priority storages. *subject to unforeseen according to incidents SEQ WGM “Grid 12”]. No decline The targets were met. in those A thorough assessment indicators has been undertaken on that are best trending of the indicators practice for the eight watersheds management- and storages measured based2 (e.g. during 2010-11. These land use). have shown no evidence of decline during 2011-12. This has established a strong baseline for subsequent reporting periods. G2.2 Assessment of treatment % reduction in residual No decline in The targets were met. Infrastructure plant capability to achieve risks for high risk residual risk During 2011-12, the condition and capability targeted performance criteria across all WTPs. for catchment- scorecard risk assessment (includes conventional and based water process for catchment- manufactured WTPs) treatment based conventional water plants. treatment plants was Establishment completed for 2010-11 and of baseline 2011-12 periods. These scorecard risk demonstrated no increase assessment in residual risk for those for assets since the 2010 manufactured assessment. water assets A baseline scorecard risk and dam assessment has been infrastructure, completed for manufactured including water assets and dam targets for infrastructure including future years. targets for future years.

1 All data for the storage indicators is collected and analysed annually while for the watershed indicators data are collected on 2-10 year timeframes with analyses based on annual updates, as available. Key to the analysis and generation of storage condition assessment scorecards is that for any indicator, only those sites with data for that indicator over at least six months contribute to the assessment of that indicator. 2 the Best Management Practice indicators that are being monitored are: Percent of grazing properties with property management plans; Percent of grazing properties with greater than 90% median long term ground cover; Percent of agricultural properties on ‹30% slope; Percent of woody and forestry vegetation areas under protection regime; Percent of sewered residential properties; relevant storage indicators.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 15 The year in review

Goal 3 Critical Event Capability and Response ÆÆ Developed draft Readiness Plans for the Western Corridor Communities and businesses have confidence and trust in the Recycled Water Scheme and the Gold Coast Desalination Plant readiness and resilience of people, processes and assets to to ensure these assets are ready to operate when required cope with and respond to critical events. ÆÆ Continued to enhance flood management and flood reporting through the revision of the Manual of Operations Highlights for Wivenhoe, Somerset and North Pine dams; the ÆÆ Developed and implemented early warning notification recruitment of additional flood engineers and flood officers; system to notify subscribed residents when flood releases additional rain gauges in the catchment to enhance data are being made. Over this period Seqwater sent 14,000 collection; flood training and proactive management of emails, 26,000 SMS and almost 2500 voice messages risks to avoid escalation of incidents advising of gate releases and spilling dams. ÆÆ Establishment of a long-term study to optimise the flood ÆÆ Managed and delivered a well-structured flood recovery operations of Wivenhoe, Somerset and North Pine dams program ÆÆ Remediation works across five major sites and more than ÆÆ Committed significant resources to supporting 40 minor sites the Queensland Floods Commission of Inquiry and implementing recommendations ÆÆ A range of flood resilience projects for dams, weirs and watercourses ÆÆ Established new Flood Operations Centre to manage rain events during the 2011-12 wet season ÆÆ Managed Wivenhoe Dam at a reduced Full Supply Level of 75 per cent for the 2011-12 wet season ÆÆ The Luggage Point Alliance and Western Pipeline Alliance reached Final Completion as part of the Western Corridor ÆÆ Implemented and used disaster recovery initiative Recycled Water Scheme ÆÆ Completed Business Continuity plans

ÆÆ Received approval for the Emergency Response Plan

KPI Definition Measurement Annual Target Comments G3.1 State of readiness of Availability and Initial report This target was met. Critical event systems, people and quality of the on analysis of The majority of recommendations readiness assets to respond readiness plans and recommendations from the CoI have been implemented to a range of critical predictive models from the within prescribed timeframes, with events Commission of the remainder in progress (further Inquiry. detail within this Annual Report). Approved risk Final risk readiness plans for readiness plan for manufactured water assets are on manufactured water track to be submitted by 30 September assets. 2012 and Draft Plans were submitted Review of current by end March 2012 as per System readiness status and Operating Plan (SOP) requirements. predictive models. Completed implementation of a dual Recommendations data centre model, coupled with a dual on improvements redundancy network to join all CBD and performance locations, and a multi-linked network measures. to remote and regional sites as part of ICT Disaster Recovery. Developed Business Continuity Policy, Manual and Plans.

16 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 KPI Definition Measurement Annual Target Comments G3.2 Assessment of Outcomes of Initial report The majority of recommendations Operational the operational scenario testing of on analysis of from the CoI have been implemented resilience for critical resilience model the resilience and recommendations within prescribed timeframes, with events in response to review of response from the the remainder in progress (further non typical stress to real situations Commission of detail within this Annual Report). factors modelled Inquiry (Col). In the absence of the announcement (lead) and actual Stage 1 Resilience of the bulk water industry restructure (lag) framework/model. and the emphasis on rationalisation of Scenario resources, the resilience framework testing plan and activities would have been continued recommendations in the June quarter and the annual on performance target would have been met. Given measures. this, the Resilience Framework target is no longer a reliable indicator of performance.

Goal 4 organisational Knowledge, Capability, ÆÆ Hinze Dam Stage 3 Upgrade consultation program named Safety and Performance winner of the Marketing & Communications category of the Seqwater staff and partners have the know-how and capability 2012 International Water Association Project Innovation to efficiently and effectively deliver organisational outcomes. Awards (PIA), Asia Pacific Regional Awards. Virtual tour suite of programs named Honour Awardee for the same category

Highlights ÆÆ Fit 4 Work (drug and alcohol) initiative launched with 150 ÆÆ Introduced graduate and traineeship certification programs tests taken, recording no positive results to address future skills shortage and maturing workforce ÆÆ Partnered with Registered Training Organisations to ÆÆ Introduced the Walk in my shoes program to help increase develop and deliver Certificates II, III and IV in Water skills base by giving staff the opportunity to work in Industry Operations to form an integrated development different business areas for a day pathway for our operators

ÆÆ Held the inaugural School Summer Safety Day at ÆÆ Developed engineering team and capability for the newly Wivenhoe Dam attended by more than 550 people established Technical Warranty and Development group in partnership with various organisations including Lifesaving Queensland, Hannah’s Foundation, ÆÆ Developed and delivered the Water’s Edge Adaptive Commission for Children and local council Leadership Development Program for over 80 leaders as part of professional development program ÆÆ Recorded improved stream line (organisational survey) results with best participation rate to date of 85.4 per ÆÆ Developed the new strategic plan for 2011-12 to 2015-16 cent. This ranks Seqwater above the industry and national to reflect new business opportunities arising from natural average. Results also showed Seqwater’s organisational and built assets climate to be above average, with 11 out of our 12 leadership ÆÆ Celebrated Mt Crosby’s East Bank Pumping Station 120 indicators now above the Australian average while all 12 year anniversary of our climate indicators are now above the Australian average, some significantly so ÆÆ Commenced work to support professional development towards staff gaining Registered Professional Engineers of ÆÆ Launched 25+ Club as part of LIFE values to recognise Queensland (RPEQ) and Chartered Professional Engineers staff with 25 years or more service to Seqwater. 53 staff (CPEng) accreditation members were inducted into the club, with a combined 1645 years of experience between them

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 17 The year in review

ÆÆ Redeveloped and launched intranet The Spring as a more ÆÆ Developed records management framework in preparation efficient and engaging communication tool for staff for implementation of electronic document and records management system (eDRMS) ÆÆ Monthly Operational Report launched and made available to all staff to ensure communication of business progress ÆÆ Launch and implementation of the Seqwater diversity policy focusing on the recruitment of employees from indigenous backgrounds and/or those with disabilities

KPI Definition Measurement Annual Target Comments G4.1 Assessment Annual audit Framework option This target was met. The Process Organisational of Seqwater’s assessment. Capability Assessment [PCA] pilots capability and safety status against Implementation of for the Organisational Development a recognised framework – pilot. Group, Business Services and capability Technical Warranty and Development framework and Group have been successfully measures completed. Stage 2 of the Aquamark Asset Management Framework (AMF) performance improvement project was completed. Extent to which staff Employee 95% This target was met with an average are engaged and Availability of 96.76% for the year. informed Retention Rate 90% This target was met with an average of 97.14% for the year.

Streamline results Improvement This target was met with improved against baseline. participation rates and results. Further information contained within this annual report. Streamline results Baseline This target was met with a baseline about organisational established for measurement established for direction and organisational organisational direction with integration direction and the inclusion of new questions integration. relating to the clarity, confidence and understanding of staff about Seqwater’s future direction and goals. Extent to which staff Streamline Improvement This target was met with improved are contributing to a results about staff against baseline for results in the safety indicator putting safe and productive satisfaction with streamline survey. Seqwater significantly above the work environment safety Australian average in the survey company’s database. Increased usage of Improvement This target was met. Average page intranet against baseline views per day have almost doubled usage. from the baseline data since the intranet’s launch.

18 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 KPI Definition Measurement Annual Target Comments G4.1 Extent to which staff LTIFR [Lost Time 5 This target was slightly exceeded with Organisational are contributing to a Injury Frequency Continuing activities an annual result of 6, however it should capability and safety safe and productive Rates] to establish LTIFR be noted this rate decreased over the work environment baseline for year with no LTIs in the March quarter. Seqwater based Seqwater’s injury management is on new WSAA now rated amongst the best of the guidelines. Queensland water industry with the organisation’s performance almost 60 per cent under the industry benchmark for monthly claim costs. Lost Time Injury 0 Seqwater adopts a conservative view [LTIs] of safety and believes no injuries are “acceptable”. There were 5 LTIs in this financial period but it should be noted no LTIs were reported for the March quarter. Number of WHS 1000 This target was met with 1009 hazards hazards identified identified and recorded in the financial and recorded in year. Seqwater WHS information system All WHS incidents 95% This target was met with 97.6% of (Accidents and WHS incidents recorded as per Near misses) are procedure requirements. reported as per the Seqwater Accidents/ Incidents Notification Procedure requirements Percentage of 85% This target was met with 94.6% worksite WHS inspections conducted as per the inspections schedule. conducted as per the schedule 51

1. The reported data for each quarter will have a one month lag. The data for each quarter will be based on the following months June – August [September], September – November [December], December – February [March], March – May [June].

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 19 The year in review

KPI Definition Measurement Annual Target Comments G4.1 Extent to which staff Seqwater staff 100% This target was met noting the Organisational are contributing to a attend statutory following results from the end of year capability and safety safe and productive WHS training as training audit: work environment necessary. ÆÆ staff who had not completed training Statutory training in the September, December and is WH&S training March quarters completed the specifically identified required statutory training by and required by the end of the June quarter and, legislation; pending completion of that training, e.g. Confined Spaces those staff members did not undertake duties for which relevant training had not been completed;

ÆÆ for the 12 month period of the Operational Plan only one staff member had not completed the annual statutory WH&S training due to being on sick leave at the scheduled training time (and as noted above there are no operational or safety exposures resulting from this). Extent to which staff Learning and 85% This target was on track to be met are skilled Development however due to restrictions placed needs are identified on travel and expenditure some in MAP and programs that required interstate implemented as travel were cancelled in the last per a negotiated quarter. The overall result achieved training schedule was 75%, noting this would have been 95% except for these cancellations. Due to these uncontrollable impacts, this KPI target is no longer a reliable indicator of performance. Extent to which Number of 100% This target was on track to be met sustainability is completed with business sustainability projects embedded in the actions in plans generally on schedule however the business supporting business scope of a number of initiatives sustainability has been reduced due to pending industry restructure and restrictions on recruitment and contract resource acquisition. Due to these uncontrollable impacts, this KPI target is no longer a reliable indicator of performance.

20 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 KPI Definition Measurement Annual Target Comments G4.2 Return on Assets Return on Assets 4% This target has been met and Financial (EBIT/Total Assets) (EBIT/Total Assets) exceeded with an annual return on performance assets of 4.09%.

Net Margin Net Margin 39% This target has been met. (EBIT/Total (EBIT/Total Revenue) Revenue) G4.3 Degree of accuracy + / - % variance + / - 10 % This target was substantially met with Budget achievement with budget analysis fixed costs slightly under budget by for fixed costs forecasts 12% at the end of the financial year. This is due mainly to reprioritised projects which were originally included in the budget for immediate expenditure. G4.4 Development of Measure and Measure and This target has been met and Business efficiency measure for business targets defined for targets defined an Economic Value KPI with efficiency and implementation in corresponding measures and targets productivity 2012-13 has been developed and included in the Strategic Plan 2012-13 to 2016-17.

Financial summary for 2011-12 Looking forward Total revenue Key financial ratios The State Government announced in June 2012 that Seqwater $690.8 million Return on assets (before tax) will merge with Linkwater and parts of the SEQ Water Grid -0.99% Manager in a restructure of the water industry in South East Net loss (before tax) Queensland.

$64.5 million Return on assets (after tax) This single organisation will provide a streamlined approach to -0.72% managing bulk water supply and catchments across the region. Net loss (after tax) We look forward to meeting the opportunities and challenges $46.9 million Interest coverage the new entity will bring.

0.81 times Seqwater will work with its partner organisations to ensure Debt/total assets a successful transition while continuing to provide a climate- resilient water supply, safely and sustainably for South East 77% Queensland.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 21 GOVERNANCE GOVERNANCE

Legislative and policy requirements Seqwater is a statutory authority We have complied with all legislative and policy requirements and was created under the in the preparation and publication of this annual report. These include the: South East Queensland Water ÆÆ Financial Accountability Act 2009 (Restructuring) Act 2007. ÆÆ Financial and Performance Management Standard 2009

ÆÆ Public Sector Ethics Act 1994

ÆÆ South East Queensland Water (Restructuring) Act 2007

Responsible ministers ÆÆ State Water Authorities – Governance Framework

The Queensland Government has appointed two ministers to act ÆÆ Public Interest Disclosure Act 2010 as responsible for our organisation. ÆÆ The Hon. Tim Nicholls MP Treasurer and Minister for Trade Related entities ÆÆ The Hon. Mark McArdle MP Minister for Energy and Water In June 2012, Seqwater applied to the Australian Securities and Supply Investments Commission for voluntary deregistration of its non- In line with these ministerial responsibilities we have operating subsidiary South East Queensland Water Corporation corresponding relationships with Queensland Treasury Pty Ltd. ASIC will complete formalities for deregistration early in and the Department of Energy and Water Supply. These the next financial year. relationships cover reporting, oversight and the regulation of our catchment, storage and water treatment and Organisational structure manufactured water business activities. Our leadership structure for 2011-12 is outlined below. We also have regulatory relationships with Queensland Health, Office of the Water Supply Regulator, Office of the Dam Safety Board Regulator and relevant departments in regards to the delivery Chief Executive Officer of major water projects. Executive General Manager – Water Delivery

Executive General Manager – Asset Delivery

Executive General Manager – Technical Warranty and Development

Executive General Manager – Business Services

Executive General Manager – Organisational Development

Each Executive General Manager leads a distinct business group: Water Delivery The Water Delivery group is responsible for managing and operating all dams, water treatment plant assets, infrastructure maintenance delivery, land and water quality, monitoring and catchment support services such as recreation.

22 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Asset Delivery Executive Leadership Team The Asset Delivery group is responsible for delivery of asset The following executives comprised the Executive Leadership management services for the catchment-based asset portfolio. Team (ELT) for 2011-12: This includes asset policy, asset strategy, portfolio planning Peter Borrows, Chief Executive Officer (both natural and built), infrastructure asset planning, the Capital Works Program, and managing delivery of the Annual Peter is our first Chief Executive Officer and prior to this was Asset Investment Plan. the Chief Executive Officer of SEQWater Corporation. Peter has held other senior roles including head of the engineering departments at Brisbane and Ipswich city councils. Business Services The Business Services group is responsible for finance Jim Pruss, Executive General Manager, Water Delivery and procurement, information technology, compliance and Jim has previously led both the former Operations and governance services, risk management, economic regulation Sustainable Water and Asset Delivery groups within our and pricing, legal services, records management and property organisation.He was formerly with the Redland Shire Council and facilities management. where he was General Manager Water and Waste.

Organisational Development Alex Fisher, Executive General Manager, Asset Delivery Alex brings extensive knowledge and leadership experience The Organisational Development group is responsible for across several industry areas including water, construction and organisational and culture change, strategic relations and engineering services. She previously worked as the Executive communications, employee relations, enterprise bargaining, Director, Government Development Projects within the organisational design, leadership development and team Department of Infrastructure and Planning. building functions, learning and development, business process improvement and workplace health and safety. Bill Andrew, Executive General Manager, Organisational Development Technical Warranty and Development Bill has more than 20 years experience in organisational and Technical Warranty and Development is responsible for cultural change and strategic planning. managing the integration of drought-resilient manufactured Prior to joining Seqwater, Bill was General Manager water assets and processes into Seqwater and ensuring that Organisational Development for CS Energy, and before that, the infrastructure is in a constant state of readiness to respond General Manager Organisational Development for CSIRO to the needs of the region. The group is also responsible for (Division of Sustainable Ecosystems). delivering research, science and technology outcomes for Bill has also worked with a range of public and private sector improved catchment and water cycle management. companies throughout Australia and New Zealand in a consulting capacity, including BHP Billiton, Brisbane City Council, Bougainville Copper, ANZ Bank, Taronga North and CSIRO.

Sam Romano, Executive General Manager – Business Services Sam was previously WaterSecure’s Acting Chief Executive Officer, and prior to that Chief Financial Officer. Having more than 20 years experience in the finance and accounting sector, Sam has worked in large private and public organisations.

Cedric Robillot, Executive General Manager – Technical Warranty and Development Cedric has extensive experience in water research, intellectual property and technology. He was previously WaterSecure’s Chief Technical Officer and Acting Chief Operating Officer. Prior to joining WaterSecure, he worked for 10 years in the biomedical field, co-founding a biotechnology company where he provided technology leadership in the development of new diagnostic platforms and managed the intellectual property portfolio.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 23 GOVERNANCE

Phil Hennessy Leeanne Kay Bond Leith Boully Thomas Fenwick

The Seqwater Board He is also a Member of the Infrastructure Australia Advisory Council and a Member of the Senate of the University of Our board for 2011-12 comprised a Chairman and six board Queensland. members appointed by the responsible ministers. Leeanne Kay Bond GAICD, BE (Chem), MBA, FIE Aust., RPEQ The Board is committed to providing effective governance and strategic direction to ensure our long-term success. Appointed as a Member of the Board on 4 February 2008, Leeanne is a chemical engineer with experience in business In line with the provisions of the South East Queensland Water management, projects, design and proposals for a number of (Restructuring) Act 2007 Board members are appointed for a international engineering and project management organisations period of three years. on projects across the hydrocarbons, minerals processing, Board members are also directors of Seqwater’s three subsidiary infrastructure, water and power industry sectors. She consults entities – South East Queensland Water Corporation Pty Ltd, to industry through her company Breakthrough Energy Pty Ltd. South East Queensland (Gold Coast) Desalination Company Pty Leeanne is currently a Director of South East Queensland Ltd and Western Corridor Recycled Water Pty Ltd. In June 2012, Water Corporation Pty Ltd, South East Queensland (Gold Coast) Seqwater applied to the Australian Securities and Investments Desalination Company Pty Ltd, Western Corridor Recycled Commission for voluntary deregistration of its non-operating Water Pty Ltd, Australian Water Recycling Centre of Excellence subsidiary South East Queensland Water Corporation Pty Ltd. Ltd, Liquefied Natural Gas Ltd and Coffey International Limited. ASIC will complete formalities for deregistration early in the next She is also a director of the not-for-profit Gem and Jewellery financial year. Institute of Australasia Limited. Leanne has previously served as Seqwater is also the sole member of the ‘not-for-profit’ a Director of Tarong Energy Corporation Limited, as Chairperson company, Australian Water Recycling Centre of Excellence of the Advisory Board for the Brisbane City Limited, and four Seqwater board members – Leith Boully, Council, Deputy Chairperson of the Board of Professional Leeanne Bond, David McDougall and Scott Standen – serve as Engineers in Queensland and President of Engineers Australia directors of that entity. (Queensland Division).

Phil Hennessy BBus (Accountancy), FCA Leith Boully BRuSci, Dip.Bus.Stud, FAICD, FAIM, FIAMA Phil was appointed as Chairman of the Board of Seqwater Appointed as a Member of the Board on 1 October 2009, Leith on 1 October 2009. His professional expertise is focused on has 20 years experience at local, state and national levels in corporate reconstruction, where he has experience across a natural resource management, particularly water. wide range of market sectors and has undertaken numerous Leith is a Director of South East Queensland Water Corporation restructuring related assignments and viability reviews for Pty Ltd, South East Queensland (Gold Coast) Desalination lenders, creditors and other stakeholders. He has been involved Company Pty Ltd and Western Corridor Recycled Water Pty in many of Queensland’s largest and high-profile insolvencies. Ltd. She is Chair of the Australian Water Recycling Centre of Phil is a Director of South East Queensland Water Corporation Excellence Ltd, Wide Bay Water Corporation, Healthy Waterways Pty Ltd, South East Queensland (Gold Coast) Desalination Ltd, the Great Barrier Reef Marine Park Authority’s Catchment Company Pty Ltd and Western Corridor Recycled Water Pty and Coastal Development Reef Advisory Committee, Brisbane Ltd. He is the Queensland Chairman of KPMG. Phil is Chair of Riverprize National Panel, Glennie School Council and Boully the Mater Hospital Foundation, Director of Starlight Children’s Pastoral Co Pty Ltd. Foundation and Chair of the Premier of Queensland Export Awards Judging Panel.

24 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Ian Fraser David McDougall Scott Standen

She is also a Board Member of Infrastructure Queensland, David McDougall BEcon, MBA, Affiliate ICAA Murrumbidgee Irrigation Limited and Queensland State Rural David was appointed as a Member of the Board on 1 July 2011, Leasehold Land Ministerial Advisory Council. Leith is an Adjunct following the Seqwater-WaterSecure merger. David has more Professor, School of Agriculture and Food Sciences, University of than 30 years experience in project and structured finance, Queensland and was a founding member of the Wentworth Group mergers and acquisitions, valuations, capital raising and of Concerned Scientists. providing strategic advice to governments and corporations. David retired as a partner of KPMG in 2012. David’s work Thomas David Fenwick BE (Hons), FIE Aust. as a Partner of KPMG and a Director of a major Australian Appointed as a Member of the Board on 4 February 2008, Thomas investment bank has assisted in skilling him in the areas of is a Director of South East Queensland Water Corporation domestic and international corporate finance, strategy and Pty Ltd, South East Queensland (Gold Coast) Desalination organisational structuring. Company Pty Ltd and Western Corridor Recycled Water Pty With a Masters of Business Administration, David has Ltd. He was a Director of the former company, Queensland experience across a range of industries including natural Water Infrastructure Pty Ltd and was a Member of the Dispute resources, transport, utilities, telecommunications, property, Resolution Board for the Gateway Motorway Upgrade. tourism and leisure. David’s significant experience in the natural He is also Managing Director of a private company. Thomas is resources sector includes work for SA Water, CS Energy, Tarong a former Director-General of the Queensland Department of Energy, and Singapore Power. Natural Resources, and the Department of Primary Industries. He is a Director of South East Queensland Water Corporation Pty Among his past appointments he has been a Commissioner for Ltd, South East Queensland (Gold Coast) Desalination Company Queensland on the Murray Darling Basin Commission. Pty Ltd, Western Corridor Recycled Water Pty Ltd and Australian Ian Harley Fraser BComm., FCA, FAICD Water Recycling Centre of Excellence Ltd. David is also a Director of the not-for-profit Teen Challenge Care (Qld) Inc. Appointed as a Member of the Board on 4 February 2008, Ian has over 40 years business experience, particularly as a senior audit Scott Standen LLB, LLM, MBA and corporate advisory partner of KPMG. He retired on 30 June Scott was appointed as a Member of the Board on 1 July 2011, 2004 after 27 years as a partner. following the Seqwater-WaterSecure merger. Scott is a Ian is a Director of South East Queensland Water Corporation corporate lawyer of over 20 years experience. Pty Ltd, South East Queensland (Gold Coast) Desalination Scott is a Director of South East Queensland Water Corporation Company Pty Ltd, Western Corridor Recycled Water Pty Ltd Pty Ltd, South East Queensland (Gold Coast) Desalination and Wilson HTM Investment Group Ltd. Ian is a member of the Company Pty Ltd, Western Corridor Recycled Water Pty Ltd Queensland Institute of Medical Research Finance and Audit and Australian Water Recycling Centre of Excellence Ltd. He is Committee and Investment Committee. a director of GRT Lawyers, a specialist corporate legal practice in the resources and technology industries. He practises exclusively in corporate law, including capital markets, mergers and acquisitions and corporate governance.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 25 GOVERNANCE

Board role As at 30 June 2012 the Committee members were:

The Board is responsible for the way we perform our functions ÆÆ Mr Ian Fraser, Audit Committee Chairman and exercise our powers under the South East Queensland Water ÆÆ Mr Phil Hennessy (Restructuring) Act 2007. ÆÆ Mr Tom Fenwick The Board’s role includes: ÆÆ Ms Leith Boully ÆÆ setting the strategy and direction for our organisation, as well providing the governance framework for the ÆÆ Mr Scott Standen organisation through the endorsement of financial, All Board members receive Committee papers and are invited to administrative and operational policies attend Committee meetings.

ÆÆ ensuring we perform our functions and exercise our powers The Audit Committee has observed the terms of its charter and in a proper, effective and efficient way operates in alignment with the Queensland Treasury’s Audit ÆÆ ensuring strategic and operational planning objectives are, Committee Guidelines. as far as practicable, achieved Major Projects Taskforce ÆÆ being accountable to the responsible ministers for our The Major Projects Taskforce provides strategic advice to the performance Board regarding the implementation of our major projects, ÆÆ reviewing the annual performance of the Chief Executive work programs and strategies. In doing this, the Taskforce: Officer. ÆÆ reviews and recommends to the Board the rationale and principles for the prioritisation of the Annual Asset Board committees Investment Plan and Capital Works Program

To assist in fulfilling its duties the Board has two committees ÆÆ monitors the progress of and identifies risks (and risk – the Audit Committee and the Major Projects Taskforce. Each mitigation strategies) to the successful implementation committee has a formal charter that sets out committee roles, of our major projects responsibilities and authority. Minutes of all meetings are ÆÆ reviews and recommends to the Board the rationale and provided at Board meetings. principles for the work programs and strategies being undertaken pursuant to the Strategic Plan. Audit Committee As at 30 June 2012, the Major Projects Taskforce committee The Audit Committee assists the Board to: members were: ÆÆ assess and contribute to the audit planning processes, ÆÆ Mr Tom Fenwick, Chairman taking into account the financial and operational environment in which it operates and its performance ÆÆ Ms Leeanne Bond management framework ÆÆ Ms Leith Boully ÆÆ assess, oversee and enhance our corporate governance, including our systems of internal control ÆÆ Mr David McDougall

ÆÆ review our financial statements and oversee the external audit of these statements

ÆÆ evaluate the quality and facilitate the practical discharge of the internal audit function particularly in the areas of planning, monitoring and reporting

ÆÆ oversee the actioning of external audit recommendations

ÆÆ oversee and appraise our financial and operational reporting processes.

26 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Board attendance

Our board met on 18 occasions throughout the year.

The number of meetings attended by each Board member, along with meeting and attendance details of the Audit Committee and the Major Projects Taskforce, is outlined in the following table.

Board and Committee Meetings

Board Member Board meetings Audit Committee meetings Major Projects Taskforce meetings Held Attended Held Attended Held Attended P Hennessy 18 18 5 4 not member L Bond 18 18 not member 4 4 I Fraser 18 17 5 5 not member T Fenwick 18 17 5 4 4 4 L Boully 18 18 5 4 4 3 D McDougall 18 17 not member 4 3 S Standen 18 17 5 5 not member

Board remuneration We also make employers contributions to Board members’ nominated superannuation funds and reimburse travel expenses Board members are paid for their participation on our for Board member travel to and from meetings. For Board Board, Committees and Taskforces. Board members are members located outside Brisbane, overnight accommodation not remunerated for their role as directors of Seqwater’s is arranged, when required, for meeting attendance. subsidiaries or for their role as directors of the Australian Water Recycling Centre of Excellence Ltd. Further details about the remuneration for each Board member can be found within the notes to the financial statements. Remuneration is as nominated by our responsible ministers and outlined in the following table. Board performance evaluation Role Per annum In late 2011, the Board commissioned Directors Australia Pty Chairman of the Board $100,000 Ltd to conduct an independent and objective Board performance Board members $45,000 evaluation. The evaluation included a survey of Board members, review of Board governance documentation and interviews with Audit Committee Chair $7,623 Board members and executive management. The results of the Audit Committee members $4,356 evaluation were positive and confirmed that:

Taskforce Chair $5,445 ÆÆ the Board is performing well; and Taskforce members $4,356 ÆÆ there is a sound governance framework in place which is overseen by a Board comprised of a diverse set of professionals who collectively bring a broad level of skills, experience and networks to the Board and wider organisation.

The report made several recommendations for improvement of various governance documents and these recommendations have either been completed or are in the process of being completed.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 27 GOVERNANCE

Organisational review mitigated and monitored and aligns with the business’s policies and structures. Risk management is used to ensure that we From 1 July 2011, following a decision made by the then understand our strategic, corporate and operational risks, Queensland Government, Seqwater and WaterSecure merged. having regard to short and long-term goals and to ensure these This merger created a single source bulk water provider for South risks are consistently managed. East Queensland and a substantial amount of work has continued post-merger on integrating systems, including the updating of Risks are captured and grouped into the following categories: policies and procedures to reflect the expanded business. ÆÆ Strategic risks are identified as part of the strategic planning process and are focused on the strategic values Compliance and goals. These risks tend to be long-term in nature and impact on the future direction of Seqwater Our dedicated compliance function is responsible for rolling ÆÆ Corporate risks are focused on risks that impact the whole out a Compliance Program that observes, and implements, the of the business, are financial and non-financial in nature Australian Standard AS 3806-2006 Compliance Programs. and impact the whole of Seqwater’s operating environment During 2011-12, our Compliance Program built on the completion of ÆÆ Group and Team risks are focused on each specific the identification and assessment of compliance obligations across operating environment, are operational in nature and do not all of our functions. The program, a key Governance Framework directly impact on other groups’ operating objectives component, continued to review the adequacy of our compliance systems and controls, monitor and report on those controls and ÆÆ Site risks are specific to dams and water treatment plants review the effectiveness of the overall Compliance Program. taking into account health and safety, water quality and water quantity The compliance function is part of the Business Services group and reports regularly to senior management, the Chief Executive ÆÆ Project risks are short-term in nature; these risks are Officer, the Audit Committee and the Board. specially focused on project delivery risks.

In 2011-12, we have undertaken a range of compliance activities This ‘whole of business’ approach allows Seqwater to consider including: all risks that can materially impact all facets of our operations. Each group applies the enterprise risk management framework ÆÆ a program refresh and health check to ensure the program when carrying out risk assessments at corporate and operational continues to develop in adherence with the Australian levels. The underlying principle of the framework is that Standard prime responsibility for controlling and mitigating risks on a ÆÆ providing assistance and regular updates of new and day-to-day basis lies with the relevant management of each changing compliance obligations operational area. Under this approach, line managers play a key role in identifying and assessing the risks associated with ÆÆ reviewing, providing assistance and reporting on key their business, including the development and monitoring of compliance risks across the business. mitigating controls. This ensures that all staff play an important During 2012-13, our focus will be on the full integration of role in the identification and reporting of risks, promoting an compliance into our business process to ensure operational active risk management culture. areas have a strong awareness of our compliance obligations and that current and developing systems, processes and controls align with compliance requirements. Internal audit Seqwater’s internal audit function is designed to add value Risk management and improve the organisation’s operations by providing independent and objective assurance and advice for continuous Risk management continues to be an important part of improvement. It assists the organisation in meeting its Seqwater’s governance and 2011-12 has seen us evolve and objectives through a systematic and disciplined approach to improve our enterprise risk management framework. The evaluating and improving the effectiveness of risk management, framework ensures risks are appropriately identified, assessed, control and governance processes.

28 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 An Internal Audit Charter has been developed to define objectives Workforce Profile and set out the purpose of the internal audit function including authority, responsibilities and objectives. The charter is Permanent retention rate 89% approved by the Board and the Audit Committee and has been Permanent separation rate 12.4% prepared in accordance with the requirements of the Financial Accountability Act 2009. In 2010, we established and implemented the Workforce Plan, which was designed to match our workforce to our organisation’s The scope of work under the Internal Audit Charter includes current and future business needs. In 2012-13 further work will ensuring risks are appropriately identified and managed and be conducted on improving the Workforce Plan as it is a crucial that resources are acquired economically, used efficiently risk mitigation strategy. and adequately protected. Responsibilities of the internal audit function include developing and implementing a flexible Our biggest immediate workforce planning challenge is with annual audit plan using appropriate risk-based methodology. retirement age employees within the Water Delivery group. With The scope of work is aligned with the organisation’s strategic over 40 per cent of the group’s workforce aged 50 years or over, plan and takes into consideration Queensland Treasury’s there are significant knowledge retention risks associated with Audit Committee Guidelines. the impending retirement of staff in the group. We have been investigating methods to retain the skills and knowledge held Internal audit is an advisory function, having an independent by older, experienced workers and to ensure that Seqwater’s status within Seqwater. Internal audit derives its independence employees can manage their transition to retirement. from the Audit Committee to which it has unrestricted access. Phased retirement options are a useful workforce planning Review and examination of internal audit outcomes are and retention initiative, enabling managers to retain mature- undertaken to identify opportunities for improvement and to be age employees who have significant talent, knowledge, skills kept informed of future requirements. The size and frequency of and experience and who may otherwise decide to leave the the audits depend on factors such as effectiveness of controls workplace. It also provides these employees with the capacity and organisational risks. to better balance work and other life challenges. It is anticipated that the phased retirement initiative will be implemented in the Activities conducted during 2011-12 include audits completed on latter half of 2012. Information Technology, Business Continuity Plans, Compliance, Fraud and Procurement. In line with our Strategic Plan and to address a potential skill shortage as identified through workforce planning, the Seqwater Workforce planning and retention Graduate and Trainee Programs were launched in January 2012. The programs were established to deliver our organisational This financial year has continued to represent a period of goal of attracting and developing skilled and committed people both change and consolidation. Following the Seqwater- to our business. WaterSecure merger, and the Queensland Floods Commission The Trainee Program was implemented in the Water Delivery of Inquiry final report, our key workforce planning and retention group with the specific purpose of establishing a pool of skilled objective has been integrating the businesses and providing operational staff that are job ready to back fill positions where clarity and support to staff, while ensuring critical skills a retirement or resignation occurs. As part of the program the are maintained to meet the organisation’s operational and trainees complete a Certificate II level qualification relevant to legislative requirements. operations. The Graduate Program was specifically limited to Ongoing recruitment activity saw us finish the year with 508.2 engineering graduates, as workforce planning indicated that the full time equivalent employees. This was within workforce business would experience a shortage in this critical skill area planning objectives and budget, which allowed for a maximum in coming years. Seqwater will be monitoring the programs and Full Time Equivalent (FTE) of 533.4. the development of the trainees and graduates throughout 2012 to assess the success and value of the programs.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 29 GOVERNANCE

A succession planning process has been developed to identify survey company’s database on all 12 of the work climate and prepare capable employees to undertake critical roles indicators and on 11 of the 12 leadership indicators. Seqwater as they become available through implementing a number of is committed to continuous improvement and as a result, our strategies to capture and transfer knowledge. By creating a leaders and teams are responding to their survey feedback by supply of suitable employees to fill identified key positions, we developing and implementing plans for further improvement. are addressing the impact of staff turnover including retirements and providing existing staff with career opportunities and professional development, a key factor in staff retention. Industrial/Employee Relations Framework We strive to have an open, consultative approach with staff, Efficient and effective achievement of Seqwater’s purpose particularly when implementing any workplace changes. This and goals depends on the capabilities of our employees. includes resolving all issues through appropriate consultative The development of business-critical behaviours, attitudes mechanisms. A Joint Consultative Committee meets regularly, and capabilities is therefore essential for organisational which includes union and management representation. performance and requires a systematic approach to the identification of learning and development needs and the We consult with staff, principal unions, Queensland Treasury, provision of appropriate opportunities to address these the Department of Energy and Water Supply, the Public Service needs. For these reasons, Seqwater has designed a learning Commission and other SEQ Water Grid participants on key framework to facilitate the optimisation of its people capability. employee and industrial relations matters. The framework will identify the learning and development The current Seqwater Enterprise Bargaining Agreement needs and enabling requirements for each role to inform the 2009-2012 expired as at 30 June 2012. The State Government establishment of employee development plans. Implementation Departments Certified Agreement 2009 which covers former of the framework has commenced and will continue in 2012-13. WaterSecure staff is due to expire on 31 July 2012. Leadership development has also been a priority in 2011-12 As at 30 June 2012 we are working on finalising the replacement with Seqwater providing a structured Leadership Development agreements for all affected staff. Program for over 80 leaders. This adaptive leadership program blended transactional and transformational learning to provide leaders with improved knowledge and leadership skills through Workplace Health and Safety opportunities for reflection and learning from experiences. The program focused on the core concepts of purpose, systems, We are committed to establishing and maintaining a safe authority, accountability, role, change, coaching and feedback. working environment. All our policies place priority on the safety and welfare of our staff. These policies include Occupational In addition, we have established a development pathway that Health and Safety, Risk Management and Rehabilitation. includes a wide variety of on-the-job learning opportunities complemented by formal qualifications such as Certificates Our Be Healthy, Be Wealthy program continued during 2011-12, II, III and IV and a Diploma in Water Industry Operations. This with workplace health checks, a flu vaccination program, skin pathway and associated learning programs will up-skill our checks, and various health and wellbeing awareness programs. current operations staff and equip them with the skills required Comparison across the 2009 to 2012 data showed substantial to effectively and efficiently operate our assets. improvements in a range of areas including weight loss in individuals, improvements in cholesterol, blood pressure, As well as supporting the development of our staff, we are physical activity and nutrition. committed to improving the culture and quality of the work environment. We demonstrate this commitment through our In addition the Fit4Work program was launched in 2011 with annual organisational improvement process and staff survey the provision of training on fatigue and stress management called stream line. Established in 2010, the stream line process and alcohol and other drugs, the rollout of a voluntary represents an important opportunity for our staff to have their alcohol and other drugs self-testing program, mandatory say about improving the way we work in Seqwater. In our 2012 random alcohol and other drugs testing and corporate safety survey, we achieved a survey response rate of 85.4 percent – Fit4Work procedures. our highest response rate to date. We are proud that Seqwater Fit4Work is about coming to work in a physically, mentally and has scored above the Australian average in the external emotionally fit state through managing the workplace health and safety issues of stress and fatigue and alcohol and other drugs.

30 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 To date, 150 staff, contractors and visitors across 22 sites Conduct and ethics have been randomly tested for alcohol and other drugs with no positive test results returned. We have adopted a Code of Conduct that affirms the organisation’s commitment to high standards of integrity, Seqwater has been nominated by WorkCover for a Q-Comp professionalism and accountability. The Code is based on the Return to Work Award for rehabilitation and return-to-work Public Sector Ethics Act 1994 principles contained in clause 4(2) performance. Our final return-to-work rate for workplace which are: injuries is 100 per cent and we are committed and proactive in the rehabilitation of our injured staff with an average of 4.5 days ÆÆ integrity and impartiality for a first return-to-work for lost time injuries, compared to the ÆÆ promoting the public good water industry average of 23 days. ÆÆ commitment to the system of governance Workplace Health and Safety Committees representing all work areas continue to operate and provide valuable feedback on ÆÆ accountability and transparency. occupational health and safety issues for staff. The Code of Conduct guides the standards of behaviour expected Details of performance against key indicators are provided of all staff as well as contractors and consultants engaged by monthly to the Board including lost time injury frequency rates, our organisation. All employees, contractors and consultants medical treatment injuries, minor injuries, and near miss have access to the Code of Conduct, which is available on our incidents. Reporting also includes the proactive workplace health intranet and at all established work sites. and safety programs being undertaken within our organisation. All employees and consultants engaged for three months or In August 2011 a safety management system accreditation audit more are required to attend a half-day induction session. was conducted for Margaret St. The areas assessed during the During the induction, time is allocated for discussion and audit were found to be generally effective and Margaret St was understanding of the Code of Conduct. All employees, granted Safety Management System certification toAS/ NZ 4801. contractors and consultants are required to answer a Ongoing surveillance audits will be periodically conducted to questionnaire and complete an Acknowledgement Form to verify continuous effectiveness of the management system. confirm they have read and understand the Code of Conduct.

Safety has now been incorporated into Seqwater’s procurement The Code of Conduct is supported by our four Water for LIFE processes through a robust tender evaluation process. In organisational values: Leadership, Integrity, Future, Excellence. partnership with Seqwater’s Workplace Health and Safety An initiative to support the integration of these values within team, tenderers’ workplace health and safety performance is the organisation has been the establishment of an award reviewed and evaluated in order to ensure that contractors will scheme, which recognises staff who demonstrate the values be compliant with legislative and Seqwater requirements. The in an outstanding way as part of their work. All staff are invited new Maintenance and Minor Works Panel now have the Permit to to nominate individual staff members or a whole team for the Work included in the contract performance review and this will annual Water For LIFE Values Award to recognise and reward be monitored through the Supplier Portal once it comes online. outstanding commitment to the Seqwater Water for LIFE values. We have reviewed our ‘Permit To Work’ process, a documented To reinforce the importance of safety in the workplace, Seqwater permit system used to control high risk works being undertaken will incorporate the Safe for LIFE values awards into the LIFE on Seqwater sites. This system assigns specific responsibilities value awards. to people undertaking these type of activities to ensure that they are suitably supervised and that tasks are performed by competent workers, as well as alert others to the fact that such Additional information work is being performed. Information on our Carer’s Charter, Recordkeeping, Seqwater will implement an improved system of works control Consultancies and Overseas Travel can be accessed online at called Site Access and Works Control (SAWCS) in the coming www.seqwater.com.au/public/news-publications/annual-reports. months, a system which has been in development for about the last 18 months and will result in considerably better safety outcomes due to its simplicity and rigour.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 31 FINANCIAL report

FINANCIAL REPORT for the year ended 30 June 2012

Contents Queensland Bulk Water Supply Authority General Information ...... 33 General Information Abbreviations...... 34 This financial report covers the Queensland Bulk Water Supply Authority (trading as Seqwater). The Queensland Bulk Water Supply Authority is a Statutory Body under the Financial Accountability Act 2009, Statement of Comprehensive Income ...... 35 the Statutory Bodies Financial Arrangements Act 1982 and has been established under the South East Statement of Financial Position...... 36 Queensland Water (Restructuring) Act 2007. The Queensland Bulk Water Supply Authority expires at the end of 99 years from when it was established on 16 November 2007. The State is the successor in law at the expiry Statement of Changes in Equity...... 37 date of the Queensland Bulk Water Supply Authority. Statement of Cash Flows...... 38 The Queensland Bulk Water Supply Authority is controlled by the State of Queensland which is the ultimate parent. Index to notes to the financial statements...... 40 The head office and principal place of business of the Queensland Bulk Water Supply Authority is: Certificate of Queensland Bulk Water Supply Authority for the year ended 30 June 2012 ...... 94 240 Margaret Street, Brisbane QLD, 4000 Independent audit report to the Board of Queensland Bulk Water Supply Authority...... 95 A description of the nature of the Queensland Bulk Water Supply Authority’s operations and its principal activities is included in the notes to the financial statements.

32 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012

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Queensland Bulk Water Supply Authority General Information This financial report covers the Queensland Bulk Water Supply Authority (trading as Seqwater). The Queensland Bulk Water Supply Authority is a Statutory Body under the Financial Accountability Act 2009, the Statutory Bodies Financial Arrangements Act 1982 and has been established under the South East Queensland Water (Restructuring) Act 2007. The Queensland Bulk Water Supply Authority expires at the end of 99 years from when it was established on 16 November 2007. The State is the successor in law at the expiry date of the Queensland Bulk Water Supply Authority. The Queensland Bulk Water Supply Authority is controlled by the State of Queensland which is the ultimate parent. The head office and principal place of business of the Queensland Bulk Water Supply Authority is: 240 Margaret Street, Brisbane QLD, 4000 A description of the nature of the Queensland Bulk Water Supply Authority’s operations and its principal activities is included in the notes to the financial statements.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 33

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Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Abbreviations Statement of Comprehensive Income for the year ended 30 June 2012

AASB Australian Accounting Standards Board Notes 2012 2011 AASBs Australian Accounting Standards $000 $000 ABF Accumulation Benefit Fund Income from continuing operations APG Accounting Policy Guidelines Water services 6 671,833 352,202 ATO Australian Taxation Office Grants and contributions 7 13,349 1,726 AWRCoE Australian Water Recycling Centre of Excellence Limited Other revenue 8 5,654 5,037 Total income from continuing operations 690,836 358,965 BCC Brisbane City Council

CAPM Capital Asset Pricing Model Expenses from continuing operations CGU Cash Generating Unit Employee expenses 9 61,927 51,077 CSO Community Service Obligation Supplies and services 10 153,778 88,365 DBF Defined Benefit Fund Depreciation and amortisation 11 150,670 43,004 Revaluation decrement 12 42,170 - DTA Deferred Tax Asset Finance/borrowing costs 13 331,655 146,656 DTL Deferred Tax Liability Other expenses 14 15,144 15,408 EGM Executive General Manager Total expenses from continuing operations 755,344 344,510 GCDP Gold Coast Desalination Plant Operating result from continuing operations GSCs Grid Service Charges before income tax (64,508) 14,455 Income tax credit / (expense) 15 17,569 (3,881) GST Goods and Services Tax Operating result from continuing operations (46,939) 10,574 LinkWater Queensland Bulk Water Transport Authority

NTER National Tax Equivalent Regime Other comprehensive income PRW Purified Recycled Water Increase in asset revaluation surplus 2,892 - QCA Queensland Competition Authority Total comprehensive (loss) / income (44,047) 10,574 QTC Queensland Treasury Corporation QWC Queensland Water Commission The accompanying notes form part of these statements. QWI Queensland Water Infrastructure Pty Ltd RAB Regulatory Asset Base SEQ South East Queensland SEQWater South East Queensland Water Corporation Pty Limited SEQDC South East Queensland (Gold Coast) Desalination Company Pty Ltd SVS State Valuation Services WACC Weighted Average Cost of Capital WaterSecure Queensland Manufactured Water Authority WCRW Western Corridor Recycled Water Pty Ltd WCRWS Western Corridor Recycled Water Scheme WGM South East Queensland Water Grid Manager WTP Water Treatment Plant

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34 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012

Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Abbreviations Statement of Comprehensive Income for the year ended 30 June 2012

AASB Australian Accounting Standards Board Notes 2012 2011 AASBs Australian Accounting Standards $000 $000 ABF Accumulation Benefit Fund Income from continuing operations APG Accounting Policy Guidelines Water services 6 671,833 352,202 ATO Australian Taxation Office Grants and contributions 7 13,349 1,726 AWRCoE Australian Water Recycling Centre of Excellence Limited Other revenue 8 5,654 5,037 Total income from continuing operations 690,836 358,965 BCC Brisbane City Council

CAPM Capital Asset Pricing Model Expenses from continuing operations CGU Cash Generating Unit Employee expenses 9 61,927 51,077 CSO Community Service Obligation Supplies and services 10 153,778 88,365 DBF Defined Benefit Fund Depreciation and amortisation 11 150,670 43,004 Revaluation decrement 12 42,170 - DTA Deferred Tax Asset Finance/borrowing costs 13 331,655 146,656 DTL Deferred Tax Liability Other expenses 14 15,144 15,408 EGM Executive General Manager Total expenses from continuing operations 755,344 344,510 GCDP Gold Coast Desalination Plant Operating result from continuing operations GSCs Grid Service Charges before income tax (64,508) 14,455 Income tax credit / (expense) 15 17,569 (3,881) GST Goods and Services Tax Operating result from continuing operations (46,939) 10,574 LinkWater Queensland Bulk Water Transport Authority

NTER National Tax Equivalent Regime Other comprehensive income PRW Purified Recycled Water Increase in asset revaluation surplus 2,892 - QCA Queensland Competition Authority Total comprehensive (loss) / income (44,047) 10,574 QTC Queensland Treasury Corporation QWC Queensland Water Commission The accompanying notes form part of these statements. QWI Queensland Water Infrastructure Pty Ltd RAB Regulatory Asset Base SEQ South East Queensland SEQWater South East Queensland Water Corporation Pty Limited SEQDC South East Queensland (Gold Coast) Desalination Company Pty Ltd SVS State Valuation Services WACC Weighted Average Cost of Capital WaterSecure Queensland Manufactured Water Authority WCRW Western Corridor Recycled Water Pty Ltd WCRWS Western Corridor Recycled Water Scheme WGM South East Queensland Water Grid Manager WTP Water Treatment Plant

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 35

Queensland Bulk Water Supply Authority Statement of Financial Position Queensland Bulk Water Supply Authority as at 30 June 2012 Statement of Changes in Equity for the year ended 30 June 2012 Notes 2012 2011 $000 $000 Notes Asset Current assets Accumulated revaluation Contributed Cash and cash equivalents 23 122,641 69,563 losses surplus equity Total Trade and other receivables 19 77,195 39,552 $000 $000 $000 $000 Inventories 20 3,907 2,317 Other 21 9,964 12,587 Balance as at 1 July 2010 (68,504) 274,479 223,898 429,873 Operating result from continuing Total current assets 213,707 124,019 operations 10,574 - - 10,574

Non current assets Total other comprehensive income: Property, plant and equipment 16,40 6,136,881 2,840,862 - (decrease) in asset revaluation Intangible assets 17 40,690 8,157 surplus - (11,832) - (11,832) Deferred tax assets 22 139,634 13,513 Transactions with owners as owners Total non current assets 6,317,205 2,862,532 - contributed equity 36 - - 123,684 123,684 Total assets 6,530,912 2,986,551 Balance as at 30 June 2011 (57,930) 262,647 347,582 552,299

Current liabilities Balance as at 1 July 2011 (57,930) 262,647 347,582 552,299 Trade and other payables 26 54,820 30,120 Operating result from continuing Employee benefits 25 6,008 5,311 operations (46,939) - - (46,939) Interest bearing liabilities 24 80,415 29,864 Transfer revaluation surplus as a Other 27 35,726 24,215 result of disposal of non current asset 28 (314) - - (314) Total current liabilities 176,969 89,510 Total other comprehensive income: Non current liabilities - increase in asset revaluation Trade and other payables 26 682 816 surplus 28 - 2,578 - 2,578 Employee benefits 25 8,595 7,530 Transfer revaluation surplus as a Interest bearing liabilities 24 4,957,492 2,113,065 result of disposal of non current asset 28 - 314 - 314 Deferred tax liabilities 22,40 308,852 223,331 Transactions with owners as owners Other 27 373,204 - - contributed equity 3(p),36 - - 197,180 197,180 Total non current liabilities 5,648,825 2,344,742 Balance as at 30 June 2012 (105,183) 265,539 544,762 705,118 Total liabilities 5,825,794 2,434,252 Net assets 705,118 552,299 The accompanying notes form part of these statements. Equity Contributed equity 36 544,762 347,582 Asset revaluation surplus 28 265,539 262,647 Accumulated losses 40 (105,183) (57,930) Total equity 705,118 552,299

The accompanying notes form part of these statements.

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36 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012

Queensland Bulk Water Supply Authority Statement of Financial Position Queensland Bulk Water Supply Authority as at 30 June 2012 Statement of Changes in Equity for the year ended 30 June 2012 Notes 2012 2011 $000 $000 Notes Asset Current assets Accumulated revaluation Contributed Cash and cash equivalents 23 122,641 69,563 losses surplus equity Total Trade and other receivables 19 77,195 39,552 $000 $000 $000 $000 Inventories 20 3,907 2,317 Other 21 9,964 12,587 Balance as at 1 July 2010 (68,504) 274,479 223,898 429,873 Operating result from continuing Total current assets 213,707 124,019 operations 10,574 - - 10,574

Non current assets Total other comprehensive income: Property, plant and equipment 16,40 6,136,881 2,840,862 - (decrease) in asset revaluation Intangible assets 17 40,690 8,157 surplus - (11,832) - (11,832) Deferred tax assets 22 139,634 13,513 Transactions with owners as owners Total non current assets 6,317,205 2,862,532 - contributed equity 36 - - 123,684 123,684 Total assets 6,530,912 2,986,551 Balance as at 30 June 2011 (57,930) 262,647 347,582 552,299

Current liabilities Balance as at 1 July 2011 (57,930) 262,647 347,582 552,299 Trade and other payables 26 54,820 30,120 Operating result from continuing Employee benefits 25 6,008 5,311 operations (46,939) - - (46,939) Interest bearing liabilities 24 80,415 29,864 Transfer revaluation surplus as a Other 27 35,726 24,215 result of disposal of non current asset 28 (314) - - (314) Total current liabilities 176,969 89,510 Total other comprehensive income: Non current liabilities - increase in asset revaluation Trade and other payables 26 682 816 surplus 28 - 2,578 - 2,578 Employee benefits 25 8,595 7,530 Transfer revaluation surplus as a Interest bearing liabilities 24 4,957,492 2,113,065 result of disposal of non current asset 28 - 314 - 314 Deferred tax liabilities 22,40 308,852 223,331 Transactions with owners as owners Other 27 373,204 - - contributed equity 3(p),36 - - 197,180 197,180 Total non current liabilities 5,648,825 2,344,742 Balance as at 30 June 2012 (105,183) 265,539 544,762 705,118 Total liabilities 5,825,794 2,434,252 Net assets 705,118 552,299 The accompanying notes form part of these statements. Equity Contributed equity 36 544,762 347,582 Asset revaluation surplus 28 265,539 262,647 Accumulated losses 40 (105,183) (57,930) Total equity 705,118 552,299

The accompanying notes form part of these statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 37

Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Statement of Cash Flows Statement of Cash Flows for the year ended 30 June 2012 for the year ended 30 June 2012 2012 2011 2012 2011 Notes $000 $000 Notes $000 $000

Cash flows from operating activities Cash flows from operating activities Inflows: Inflows: Receipts from water services 653,151 367,024 Receipts from water services 653,151 367,024 CSO received 1,034 1,783 CSO received 1,034 1,783 Interest received 3,059 2,605 Interest received 3,059 2,605 Other revenue 5,219 5,070 Other revenue 5,219 5,070 GST collected 91,663 37,065 GST collected 91,663 37,065 Outflows: Outflows: Payments to suppliers and employees (216,466) (138,244) Payments to suppliers and employees (216,466) (138,244) Finance and borrowing costs (293,021) (149,185) Finance and borrowing costs (293,021) (149,185) QWC & QCA levies (7,805) (7,978) QWC & QCA levies (7,805) (7,978) GST paid (88,612) (36,830) GST paid (88,612) (36,830) Other (2,811) (1,955) Other (2,811) (1,955) Net cash provided by (used in) operating activities 23(b) 145,411 79,355 Net cash provided by (used in) operating activities 23(b) 145,411 79,355

Cash flows from investing activities Cash flows from investing activities Inflows: Inflows: Proceeds from sale of plant and equipment 660 671 Proceeds from sale of plant and equipment 660 671 Receipts from Council for assets acquisition adjustment - 741 Receipts from Council for assets acquisition adjustment - 741 Outflows: Outflows: Payments for acquisition of WaterSecure 3(p) (2,539,692) - Payments for acquisition of WaterSecure 3(p) (2,539,692) - Payments to QWI for Wyaralong Dam 3(a) (373,427) - Payments to QWI for Wyaralong Dam 3(a) (373,427) - Payments for property, plant and equipment (34,917) (129,789) Payments for property, plant and equipment (34,917) (129,789) Payments for intangibles (653) (659) Payments for intangibles (653) (659) Net cash provided by (used in) investing activities (2,948,029) (129,036) Net cash provided by (used in) investing activities (2,948,029) (129,036)

Cash flows from financing activities Cash flows from financing activities Inflows: Inflows: Borrowings 26,769 116,108 Borrowings 26,769 116,108 Contributed equity 3(p),36 - 123,684 Contributed equity 3(p),36 - 123,684 Loan drawdown for acquisition of WaterSecure 2,555,500 - Loan drawdown for acquisition of WaterSecure 2,555,500 - Loan drawdown for payment to QWI for Wyaralong Dam and Loan drawdown for payment to QWI for Wyaralong Dam and Councils 3(a) 373,427 2,433 Councils 3(a) 373,427 2,433 Outflows: Outflows: Borrowing redemptions (100,000) (223,684) Borrowing redemptions (100,000) (223,684) Net cash provided by (used in) financing activities 2,855,696 18,541 Net cash provided by (used in) financing activities 2,855,696 18,541 Net increase (decrease) in cash and cash equivalents 53,078 (31,140) Net increase (decrease) in cash and cash equivalents 53,078 (31,140) Cash and cash equivalents at the beginning of the financial 69,563 100,703 Cash and cash equivalents at the beginning of the financial 69,563 100,703 Cashyear and cash equivalents at the end of the financial year 122,641 69,563 Cashyear and cash equivalents at the end of the financial year 122,641 69,563 25(a) 25(a)

The accompanying notes form part of these statements. The accompanying notes form part of these statements.

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38 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012

Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Statement of Cash Flows Statement of Cash Flows for the year ended 30 June 2012 for the year ended 30 June 2012 2012 2011 2012 2011 Notes $000 $000 Notes $000 $000

Cash flows from operating activities Cash flows from operating activities Inflows: Inflows: Receipts from water services 653,151 367,024 Receipts from water services 653,151 367,024 CSO received 1,034 1,783 CSO received 1,034 1,783 Interest received 3,059 2,605 Interest received 3,059 2,605 Other revenue 5,219 5,070 Other revenue 5,219 5,070 GST collected 91,663 37,065 GST collected 91,663 37,065 Outflows: Outflows: Payments to suppliers and employees (216,466) (138,244) Payments to suppliers and employees (216,466) (138,244) Finance and borrowing costs (293,021) (149,185) Finance and borrowing costs (293,021) (149,185) QWC & QCA levies (7,805) (7,978) QWC & QCA levies (7,805) (7,978) GST paid (88,612) (36,830) GST paid (88,612) (36,830) Other (2,811) (1,955) Other (2,811) (1,955) Net cash provided by (used in) operating activities 23(b) 145,411 79,355 Net cash provided by (used in) operating activities 23(b) 145,411 79,355

Cash flows from investing activities Cash flows from investing activities Inflows: Inflows: Proceeds from sale of plant and equipment 660 671 Proceeds from sale of plant and equipment 660 671 Receipts from Council for assets acquisition adjustment - 741 Receipts from Council for assets acquisition adjustment - 741 Outflows: Outflows: Payments for acquisition of WaterSecure 3(p) (2,539,692) - Payments for acquisition of WaterSecure 3(p) (2,539,692) - Payments to QWI for Wyaralong Dam 3(a) (373,427) - Payments to QWI for Wyaralong Dam 3(a) (373,427) - Payments for property, plant and equipment (34,917) (129,789) Payments for property, plant and equipment (34,917) (129,789) Payments for intangibles (653) (659) Payments for intangibles (653) (659) Net cash provided by (used in) investing activities (2,948,029) (129,036) Net cash provided by (used in) investing activities (2,948,029) (129,036)

Cash flows from financing activities Cash flows from financing activities Inflows: Inflows: Borrowings 26,769 116,108 Borrowings 26,769 116,108 Contributed equity 3(p),36 - 123,684 Contributed equity 3(p),36 - 123,684 Loan drawdown for acquisition of WaterSecure 2,555,500 - Loan drawdown for acquisition of WaterSecure 2,555,500 - Loan drawdown for payment to QWI for Wyaralong Dam and Loan drawdown for payment to QWI for Wyaralong Dam and Councils 3(a) 373,427 2,433 Councils 3(a) 373,427 2,433 Outflows: Outflows: Borrowing redemptions (100,000) (223,684) Borrowing redemptions (100,000) (223,684) Net cash provided by (used in) financing activities 2,855,696 18,541 Net cash provided by (used in) financing activities 2,855,696 18,541 Net increase (decrease) in cash and cash equivalents 53,078 (31,140) Net increase (decrease) in cash and cash equivalents 53,078 (31,140) Cash and cash equivalents at the beginning of the financial 69,563 100,703 Cash and cash equivalents at the beginning of the financial 69,563 100,703 Cashyear and cash equivalents at the end of the financial year 122,641 69,563 Cashyear and cash equivalents at the end of the financial year 122,641 69,563 25(a) 25(a)

The accompanying notes form part of these statements. The accompanying notes form part of these statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 39 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

Index to notes to the financial statements 1. Reporting entity The Queensland Bulk Water Supply Authority (the “Entity”) is a Queensland Statutory Body under the 1. Reporting entity...... 41 South East Queensland Water (Restructuring Act) 2007 with a limited life of 99 years from establishment. The address of the Entity’s registered office is 240 Margaret Street, Brisbane QLD. 2. Basis of preparation...... 41 As set out in the South East Queensland Water (Restructuring) Act 2007 the Entity must carry out its 3. Significant accounting policies...... 44 functions as a commercial enterprise. The Entity meets the definition of a for profit entity for the purposes 4. Determination of fair values...... 56 of the accounting standards. 5. Financial risk management...... 57 The financial statements include the value of all revenues, expenses, assets, liabilities and equity of the 6. Water services...... 59 Entity and the entities that it controls, where these are material. 7. Grants and other contributions ...... 59 Australian Water Recycling Centre of Excellence Limited (AWRCoE) transferred to the Entity on 1 July 2011. This subsidiary is a not for profit public company, limited by guarantee, that was incorporated for 8. other revenue...... 59 the purpose of establishing and operating a centre of excellence in water recycling (initially funded 9. employee expenses...... 59 through a Commonwealth Government grant). Transactions of AWRCoE were not considered material 10. Supplies and services...... 60 and therefore not included in the financial statements. 11. Depreciation and amortisation...... 60 The Entity is primarily involved in the supply of water services and carrying out water activities. Refer to Note 34 for controlled entities. 12. Revaluation decrement ...... 60

13. Finance/borrowing costs...... 61 2. Basis of preparation 14. other expenses ...... 61 (a) Statement of compliance 15. Income tax...... 61 The financial statements are general purpose financial statements which have been prepared in 16. property, plant and equipment...... 62 accordance with: 17. Intangible assets...... 66 • applicable Australian Accounting Standards (AASBs) (including Australian Interpretations) 18. Impairment testing for cash generating unit ...... 68 adopted by the Australian Accounting Standards Board (AASB); 19. trade and other receivables...... 69 • the Financial and Performance Management Standard 2009; 20. Inventories...... 70 • Queensland Treasury’s Financial Reporting Requirements for Queensland Government 21. other current assets ...... 70 Agencies to the extent relevant; and 22. tax assets and liabilities...... 70 • other authoritative pronouncements. 23. Cash and cash equivalents ...... 72 The financial statements were authorised for issue by the Board on 27 August 2012. 24. Interest bearing liabilities...... 73 (b) Going concern 25. employee benefits...... 75 The financial statements have been prepared on a going concern basis. The preparation of the financial statements on a going concern basis is appropriate on the basis that there is a reasonable 26. trade and other payables...... 78 expectation that the Entity will be able to pay its debts as and when they fall due for at least the 27. other liabilities ...... 78 next twelve months from the date of signing these financial statements for the following reasons: 28. Asset revaluation surplus by class ...... 79 • the Queensland Government remains committed to providing ongoing support to the Entity. 29. Financial Instruments ...... 80 This commitment was recently reaffirmed in a letter from the Hon. Tim Nicholls MP, Treasurer and Minister for Trade, issued to the Entity dated 17 August 2012. The Treasurer reaffirmed 30. operating leases...... 83 that “the Government remains strongly committed to ensuring that Seqwater remains solvent 31. Capital and other commitments ...... 83 and able to deliver essential services in a sustainable and cost effective manner”. The 32. Contingencies...... 84 Government’s support includes facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Arrangements Act 33. Segment reporting ...... 85 1982 (refer to Note 38); 34. Controlled entities...... 85 • as at 30 June 2012, the Entity has access to a redraw facility from QTC amounting to $530 35. Key management personnel and remuneration ...... 85 million (refer to Note 24) and a working capital facility from QTC amounting to $60 million (refer 36. Related parties ...... 90 to Note 23(d)) of which $0 has been drawn at 30 June 2012, and has a cash balance of $123 million at 30 June 2012 (refer to Note 23(a)); 37. Auditor’s remuneration...... 91 the Entity has a contract with the WGM for the supply of water services into the water grid. The 38. economic dependency...... 91 • contract provides for the payment of water services provided to the grid as determined by the 39. Subsequent events...... 92 QCA in its role as the Price Regulator (refer Note 36); 40. prior period adjustments...... 93 • in a letter dated 9 August 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply, approved the 2012-13 Grid Service Charges (GSCs) to be paid to the Entity for the provision of declared water services; and

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40 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

Index to notes to the financial statements 1. Reporting entity The Queensland Bulk Water Supply Authority (the “Entity”) is a Queensland Statutory Body under the 1. Reporting entity...... 41 South East Queensland Water (Restructuring Act) 2007 with a limited life of 99 years from establishment. The address of the Entity’s registered office is 240 Margaret Street, Brisbane QLD. 2. Basis of preparation...... 41 As set out in the South East Queensland Water (Restructuring) Act 2007 the Entity must carry out its 3. Significant accounting policies...... 44 functions as a commercial enterprise. The Entity meets the definition of a for profit entity for the purposes 4. Determination of fair values...... 56 of the accounting standards. 5. Financial risk management...... 57 The financial statements include the value of all revenues, expenses, assets, liabilities and equity of the 6. Water services...... 59 Entity and the entities that it controls, where these are material. 7. Grants and other contributions ...... 59 Australian Water Recycling Centre of Excellence Limited (AWRCoE) transferred to the Entity on 1 July 2011. This subsidiary is a not for profit public company, limited by guarantee, that was incorporated for 8. other revenue...... 59 the purpose of establishing and operating a centre of excellence in water recycling (initially funded 9. employee expenses...... 59 through a Commonwealth Government grant). Transactions of AWRCoE were not considered material 10. Supplies and services...... 60 and therefore not included in the financial statements. 11. Depreciation and amortisation...... 60 The Entity is primarily involved in the supply of water services and carrying out water activities. Refer to Note 34 for controlled entities. 12. Revaluation decrement ...... 60

13. Finance/borrowing costs...... 61 2. Basis of preparation 14. other expenses ...... 61 (a) Statement of compliance 15. Income tax...... 61 The financial statements are general purpose financial statements which have been prepared in 16. property, plant and equipment...... 62 accordance with: 17. Intangible assets...... 66 • applicable Australian Accounting Standards (AASBs) (including Australian Interpretations) 18. Impairment testing for cash generating unit ...... 68 adopted by the Australian Accounting Standards Board (AASB); 19. trade and other receivables...... 69 • the Financial and Performance Management Standard 2009; 20. Inventories...... 70 • Queensland Treasury’s Financial Reporting Requirements for Queensland Government 21. other current assets ...... 70 Agencies to the extent relevant; and 22. tax assets and liabilities...... 70 • other authoritative pronouncements. 23. Cash and cash equivalents ...... 72 The financial statements were authorised for issue by the Board on 27 August 2012. 24. Interest bearing liabilities...... 73 (b) Going concern 25. employee benefits...... 75 The financial statements have been prepared on a going concern basis. The preparation of the financial statements on a going concern basis is appropriate on the basis that there is a reasonable 26. trade and other payables...... 78 expectation that the Entity will be able to pay its debts as and when they fall due for at least the 27. other liabilities ...... 78 next twelve months from the date of signing these financial statements for the following reasons: 28. Asset revaluation surplus by class ...... 79 • the Queensland Government remains committed to providing ongoing support to the Entity. 29. Financial Instruments ...... 80 This commitment was recently reaffirmed in a letter from the Hon. Tim Nicholls MP, Treasurer and Minister for Trade, issued to the Entity dated 17 August 2012. The Treasurer reaffirmed 30. operating leases...... 83 that “the Government remains strongly committed to ensuring that Seqwater remains solvent 31. Capital and other commitments ...... 83 and able to deliver essential services in a sustainable and cost effective manner”. The 32. Contingencies...... 84 Government’s support includes facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Arrangements Act 33. Segment reporting ...... 85 1982 (refer to Note 38); 34. Controlled entities...... 85 • as at 30 June 2012, the Entity has access to a redraw facility from QTC amounting to $530 35. Key management personnel and remuneration ...... 85 million (refer to Note 24) and a working capital facility from QTC amounting to $60 million (refer 36. Related parties ...... 90 to Note 23(d)) of which $0 has been drawn at 30 June 2012, and has a cash balance of $123 million at 30 June 2012 (refer to Note 23(a)); 37. Auditor’s remuneration...... 91 the Entity has a contract with the WGM for the supply of water services into the water grid. The 38. economic dependency...... 91 • contract provides for the payment of water services provided to the grid as determined by the 39. Subsequent events...... 92 QCA in its role as the Price Regulator (refer Note 36); 40. prior period adjustments...... 93 • in a letter dated 9 August 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply, approved the 2012-13 Grid Service Charges (GSCs) to be paid to the Entity for the provision of declared water services; and

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 41 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

2. Basis of preparation (continued) 2. Basis of preparation (continued) • forecasts have been prepared for the Entity based on the current Grid Service Charge (ii) Impairment methodology (refer to Note 18). The forecasts support the Board’s expectation that the Entity The Entity assesses impairment at each reporting date by evaluating conditions specific to will be able to pay its debts as and when they fall due for at least the next twelve months from the Entity that may lead to impairment of assets. Where an impairment trigger exists, the the date of signing these financial statements. recoverable amount of the asset is determined. Value-in-use calculations performed in If for any reason the Entity is unable to continue as a going concern, it would impact on the Entity’s assessing recoverable amounts incorporate a number of key assumptions (refer to Note 3(h) ability to realise assets at their recognised values and to extinguish liabilities in the normal course and Note 18). of business at the amounts stated in the financial statements. (iii) Income tax and utilisation of tax losses (c) Basis of measurement The Entity is subject to the NTER. During the year ended 30 June 2012, $0 of tax losses The financial statements have been prepared on an accrual basis and are based on historical costs were utilised (2011: $0) with tax losses carried forward at 30 June 2012 amounting to except for the following: $43,386,269 (2011: $33,635,244). A DTA of $13,015,881 (refer to Note 22) has been recognised in relation to these carry forward tax losses as it is considered probable that • financial instruments at fair value through profit or loss are measured at fair value; and future taxable profits will be generated against which the tax losses could be utilised. • land, buildings and infrastructure assets are measured at fair value. A DTA of $112,104,534 for the carried forward tax losses transferred from WaterSecure has The methods used to measure fair values are discussed further in Note 4. not been recognised because the probability requirement in AASB 112 Income Taxes could (d) Presentation currency and comparatives not be satisfied (refer to Note 22 (c)). The financial statements are presented in Australian dollars, which is the Entity’s functional (iv) Fair value currency. Amounts included in the financial statements have been rounded to the nearest $1,000 Fair values have been determined for measurement and/or disclosure purposes (refer Note unless disclosure of the full amount is specifically required. 4) and where applicable, further information about the assumptions made in determining fair Comparative information has been restated where necessary to be consistent with disclosures in values is disclosed in the notes specific to that asset or liability. the current reporting period: Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 • the 2010-11 comparative information is related to Seqwater’s activities only. The current Property, Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for reporting period includes new transactions as a consequence of the transfer of WaterSecure the Queensland Public Sector. Where the Board considers that there are indicators that and Wyaralong Dam on 1 July 2011 (refer Note 3(a), 3(p)); and period-end carrying values materially differ to their fair values, valuations are more frequent • financial statement opening balances and comparative figures have been restated to adjust for than the prescribed policy (refer Note 16). the following (refer Note 40): (v) Provision for impairment of receivables o a prior period allocation of a previous valuation between classes of land and buildings; A provision for impairment of receivables has been made at year end (refer to Note 19). and (vi) Interest bearing liabilities o to reflect the write down of infrastructure assets as at their transfer dates. Loans have been provided to the Entity under the South East Queensland Water (e) Use of estimates and judgements (Restructuring) Act 2007. These are perpetual interest-only loans that will expire at the end The preparation of financial statements requires management to make judgements, estimates and of the Entity’s existence. The interest payable is recognised as a current liability and the assumptions that affect the application of accounting policies and the reported amounts of assets, principal amounts are recognised as non current liabilities. liabilities, revenues and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following: (i) Acquisitions pursuant to the South East Queensland Water (Restructuring) Regulation 2011 made under the South East Queensland Water (Restructuring) Act 2007 (Qld) On 1 July 2011, all matters relating to WaterSecure and its subsidiaries transferred to the Entity at their carrying values recorded in the financial report as at 30 June 2011 (refer to Note 3(p) and 16). The Entity also acquired Wyaralong Dam from QWI on 1 July 2011, which included the assets, liabilities, exclusions, instruments and any legal proceedings associated with Wyaralong Dam construction (refer to Note 3(a) and 16).

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42 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

2. Basis of preparation (continued) 2. Basis of preparation (continued) • forecasts have been prepared for the Entity based on the current Grid Service Charge (ii) Impairment methodology (refer to Note 18). The forecasts support the Board’s expectation that the Entity The Entity assesses impairment at each reporting date by evaluating conditions specific to will be able to pay its debts as and when they fall due for at least the next twelve months from the Entity that may lead to impairment of assets. Where an impairment trigger exists, the the date of signing these financial statements. recoverable amount of the asset is determined. Value-in-use calculations performed in If for any reason the Entity is unable to continue as a going concern, it would impact on the Entity’s assessing recoverable amounts incorporate a number of key assumptions (refer to Note 3(h) ability to realise assets at their recognised values and to extinguish liabilities in the normal course and Note 18). of business at the amounts stated in the financial statements. (iii) Income tax and utilisation of tax losses (c) Basis of measurement The Entity is subject to the NTER. During the year ended 30 June 2012, $0 of tax losses The financial statements have been prepared on an accrual basis and are based on historical costs were utilised (2011: $0) with tax losses carried forward at 30 June 2012 amounting to except for the following: $43,386,269 (2011: $33,635,244). A DTA of $13,015,881 (refer to Note 22) has been recognised in relation to these carry forward tax losses as it is considered probable that • financial instruments at fair value through profit or loss are measured at fair value; and future taxable profits will be generated against which the tax losses could be utilised. • land, buildings and infrastructure assets are measured at fair value. A DTA of $112,104,534 for the carried forward tax losses transferred from WaterSecure has The methods used to measure fair values are discussed further in Note 4. not been recognised because the probability requirement in AASB 112 Income Taxes could (d) Presentation currency and comparatives not be satisfied (refer to Note 22 (c)). The financial statements are presented in Australian dollars, which is the Entity’s functional (iv) Fair value currency. Amounts included in the financial statements have been rounded to the nearest $1,000 Fair values have been determined for measurement and/or disclosure purposes (refer Note unless disclosure of the full amount is specifically required. 4) and where applicable, further information about the assumptions made in determining fair Comparative information has been restated where necessary to be consistent with disclosures in values is disclosed in the notes specific to that asset or liability. the current reporting period: Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 • the 2010-11 comparative information is related to Seqwater’s activities only. The current Property, Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for reporting period includes new transactions as a consequence of the transfer of WaterSecure the Queensland Public Sector. Where the Board considers that there are indicators that and Wyaralong Dam on 1 July 2011 (refer Note 3(a), 3(p)); and period-end carrying values materially differ to their fair values, valuations are more frequent • financial statement opening balances and comparative figures have been restated to adjust for than the prescribed policy (refer Note 16). the following (refer Note 40): (v) Provision for impairment of receivables o a prior period allocation of a previous valuation between classes of land and buildings; A provision for impairment of receivables has been made at year end (refer to Note 19). and (vi) Interest bearing liabilities o to reflect the write down of infrastructure assets as at their transfer dates. Loans have been provided to the Entity under the South East Queensland Water (e) Use of estimates and judgements (Restructuring) Act 2007. These are perpetual interest-only loans that will expire at the end The preparation of financial statements requires management to make judgements, estimates and of the Entity’s existence. The interest payable is recognised as a current liability and the assumptions that affect the application of accounting policies and the reported amounts of assets, principal amounts are recognised as non current liabilities. liabilities, revenues and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following: (i) Acquisitions pursuant to the South East Queensland Water (Restructuring) Regulation 2011 made under the South East Queensland Water (Restructuring) Act 2007 (Qld) On 1 July 2011, all matters relating to WaterSecure and its subsidiaries transferred to the Entity at their carrying values recorded in the financial report as at 30 June 2011 (refer to Note 3(p) and 16). The Entity also acquired Wyaralong Dam from QWI on 1 July 2011, which included the assets, liabilities, exclusions, instruments and any legal proceedings associated with Wyaralong Dam construction (refer to Note 3(a) and 16).

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 43 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies 3. Significant accounting policies (continued) The accounting policies set out below have been applied consistently to all periods presented in these (d) Inventories financial statements. Inventories are measured at the lower of cost and net realisable value. Cost is assigned on a (a) Asset acquisition weighted average basis and includes expenditure incurred in acquiring the inventories and bringing The acquisition of Wyaralong Dam from QWI has been determined by the Entity to be acquisitions them to their existing condition. of assets and liabilities to be dealt with in accordance with AASB 116 Property, Plant and Net realisable value is the estimated selling price in the ordinary course of business, less the Equipment. This standard requires that for assets acquired, the Entity must recognise items of estimated costs of completion and selling expenses. property, plant and equipment at cost. In circumstances where a group of assets is acquired, the (e) Property, plant and equipment cost of individual assets is determined by allocating the cost of the group of acquired assets (i) Recognition and measurement between the identified assets in the group based on their relative fair values at the acquisition date. The transfer of liabilities is being accounted for in accordance with AASB 139 Financial Each class of property, plant and equipment is initially recognised at cost. Assets acquired in Instruments: Recognition and Measurement. exchange for other non-monetary assets or assets acquired at a nominal consideration are initially recognised at cost. On initial recognition, all costs incurred in purchasing or Assets and liabilities transferred from QWI on 1 July 2011 $000 constructing the asset and getting it ready for use are capitalised to the value of the asset. Assets – Property, plant and equipment 373,427 The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and Liabilities – QTC Loans 373,427 the costs of dismantling and removing the items and restoring the site on which they are (b) Financial instruments located. Non-derivative financial instruments Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for Non-derivative financial instruments comprise trade and other receivables, cash and cash the Queensland Public Sector. equivalents, loans and borrowings and trade and other payables. Plant and equipment is measured at cost. Separately identified components of assets are Non-derivative financial instruments are recognised initially at fair value plus any attributable measured on the same basis as the assets to which they relate. transaction costs. Subsequent to initial recognition, non-derivative financial instruments are recognised if the Entity becomes a party to the contractual provisions of the instrument. Financial Items of property, plant and equipment with a cost or other value equal to or in excess of the assets are derecognised if the Entity’s contractual rights to the cash flows from the financial assets following thresholds are recognised for financial reporting purposes in the year of acquisition: expire or if the Entity transfers the financial asset to another party without retaining control or Land $1 substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Entity’s obligations specified in the contract expire or are discharged or cancelled. Building $10,000 Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short- Infrastructure $10,000 term highly liquid investments with original maturities of three months or less and bank overdrafts. Plant and Equipment $5,000 Bank overdrafts are reported as part of short-term borrowings in current liabilities in the balance sheet. Items with lesser value are expensed in the year of acquisition. The QTC Redraw Facility is treated in accordance with AASB 139 Financial Instruments: Land improvements are to be included in the class Building or Infrastructure based on their Recognition and Measurement, Application Guidance AG 62 (Debt restructure) (refer to Note 24). proximity to the asset to which they relate. Financial instruments are classified and measured as follows: The Entity operates on a commercial basis, with the primary objective being the generation • Cash and cash equivalents - held at fair value through profit or loss; of cash inflows. Where there is no market price for the asset, fair value is either the depreciated replacement cost or the net present value of the cash flows from the asset. • Receivables - held at amortised cost; If the asset does not generate cash inflows independent from the assets or group of assets • Payables - held at amortised cost; and then the fair value will be either the sum of the depreciated replacement cost of the group of • Borrowings - held at amortised cost. assets or the net present value of the cash flows from the group of assets. The Entity does not enter transactions for speculative purposes, nor for hedging. Apart from cash Where an item of property, plant and equipment is revalued, the entire class of property, and cash equivalents, the Entity holds no financial assets classified at fair value through profit or plant and equipment to which the asset belongs is revalued. loss. Net revaluation increments in respect of each non-current asset are recognised in other (c) Receivables comprehensive income and asset revaluation surplus, except to the extent that it reverses a Receivables are recognised initially at fair value, usually based on the transaction cost or face previous decrement recognised as an expense for that asset in profit or loss. In this instance value. Subsequent measurement is at amortised cost using the effective interest method, less an the reversal portion of the increment is recognised as revenue in profit or loss. Net allowance for any impairment of receivables. Short term receivables with no stated interest rate are revaluation decrements in respect of each asset are recognised as an expense in profit or measured at the original invoice amount where the effect of discounting is immaterial. An loss, except to the extent that it reverses a previous increment for that asset and a positive allowance for impairment of receivables is established when there is objective evidence that the balance exists in the asset revaluation surplus for that asset. In this instance, the reversal Entity will not be able to collect all amounts due. The amount of the allowance is the difference portion of the decrement is recognised in other comprehensive income and asset revaluation between the asset’s carrying amount and the present value of estimated future cash flows, surplus. discounted at the effective interest rate. Bad debts are written off as incurred.

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44 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies 3. Significant accounting policies (continued) The accounting policies set out below have been applied consistently to all periods presented in these (d) Inventories financial statements. Inventories are measured at the lower of cost and net realisable value. Cost is assigned on a (a) Asset acquisition weighted average basis and includes expenditure incurred in acquiring the inventories and bringing The acquisition of Wyaralong Dam from QWI has been determined by the Entity to be acquisitions them to their existing condition. of assets and liabilities to be dealt with in accordance with AASB 116 Property, Plant and Net realisable value is the estimated selling price in the ordinary course of business, less the Equipment. This standard requires that for assets acquired, the Entity must recognise items of estimated costs of completion and selling expenses. property, plant and equipment at cost. In circumstances where a group of assets is acquired, the (e) Property, plant and equipment cost of individual assets is determined by allocating the cost of the group of acquired assets (i) Recognition and measurement between the identified assets in the group based on their relative fair values at the acquisition date. The transfer of liabilities is being accounted for in accordance with AASB 139 Financial Each class of property, plant and equipment is initially recognised at cost. Assets acquired in Instruments: Recognition and Measurement. exchange for other non-monetary assets or assets acquired at a nominal consideration are initially recognised at cost. On initial recognition, all costs incurred in purchasing or Assets and liabilities transferred from QWI on 1 July 2011 $000 constructing the asset and getting it ready for use are capitalised to the value of the asset. Assets – Property, plant and equipment 373,427 The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and Liabilities – QTC Loans 373,427 the costs of dismantling and removing the items and restoring the site on which they are (b) Financial instruments located. Non-derivative financial instruments Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for Non-derivative financial instruments comprise trade and other receivables, cash and cash the Queensland Public Sector. equivalents, loans and borrowings and trade and other payables. Plant and equipment is measured at cost. Separately identified components of assets are Non-derivative financial instruments are recognised initially at fair value plus any attributable measured on the same basis as the assets to which they relate. transaction costs. Subsequent to initial recognition, non-derivative financial instruments are recognised if the Entity becomes a party to the contractual provisions of the instrument. Financial Items of property, plant and equipment with a cost or other value equal to or in excess of the assets are derecognised if the Entity’s contractual rights to the cash flows from the financial assets following thresholds are recognised for financial reporting purposes in the year of acquisition: expire or if the Entity transfers the financial asset to another party without retaining control or Land $1 substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Entity’s obligations specified in the contract expire or are discharged or cancelled. Building $10,000 Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short- Infrastructure $10,000 term highly liquid investments with original maturities of three months or less and bank overdrafts. Plant and Equipment $5,000 Bank overdrafts are reported as part of short-term borrowings in current liabilities in the balance sheet. Items with lesser value are expensed in the year of acquisition. The QTC Redraw Facility is treated in accordance with AASB 139 Financial Instruments: Land improvements are to be included in the class Building or Infrastructure based on their Recognition and Measurement, Application Guidance AG 62 (Debt restructure) (refer to Note 24). proximity to the asset to which they relate. Financial instruments are classified and measured as follows: The Entity operates on a commercial basis, with the primary objective being the generation • Cash and cash equivalents - held at fair value through profit or loss; of cash inflows. Where there is no market price for the asset, fair value is either the depreciated replacement cost or the net present value of the cash flows from the asset. • Receivables - held at amortised cost; If the asset does not generate cash inflows independent from the assets or group of assets • Payables - held at amortised cost; and then the fair value will be either the sum of the depreciated replacement cost of the group of • Borrowings - held at amortised cost. assets or the net present value of the cash flows from the group of assets. The Entity does not enter transactions for speculative purposes, nor for hedging. Apart from cash Where an item of property, plant and equipment is revalued, the entire class of property, and cash equivalents, the Entity holds no financial assets classified at fair value through profit or plant and equipment to which the asset belongs is revalued. loss. Net revaluation increments in respect of each non-current asset are recognised in other (c) Receivables comprehensive income and asset revaluation surplus, except to the extent that it reverses a Receivables are recognised initially at fair value, usually based on the transaction cost or face previous decrement recognised as an expense for that asset in profit or loss. In this instance value. Subsequent measurement is at amortised cost using the effective interest method, less an the reversal portion of the increment is recognised as revenue in profit or loss. Net allowance for any impairment of receivables. Short term receivables with no stated interest rate are revaluation decrements in respect of each asset are recognised as an expense in profit or measured at the original invoice amount where the effect of discounting is immaterial. An loss, except to the extent that it reverses a previous increment for that asset and a positive allowance for impairment of receivables is established when there is objective evidence that the balance exists in the asset revaluation surplus for that asset. In this instance, the reversal Entity will not be able to collect all amounts due. The amount of the allowance is the difference portion of the decrement is recognised in other comprehensive income and asset revaluation between the asset’s carrying amount and the present value of estimated future cash flows, surplus. discounted at the effective interest rate. Bad debts are written off as incurred.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 45 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (ii) Subsequent costs (f) Intangible assets Costs incurred subsequent to the initial asset purchase are capitalised when the expenditure (i) Recognition of intangible assets improves the condition of the asset beyond its originally assessed standard of performance Intangible assets that are acquired by the Entity are initially measured at cost. or capacity. Outlays that do not meet the criteria for recognition as an asset are expensed in Items of intangible assets with a cost or other value equal to or in excess of the following the financial year. thresholds are recognised for financial reporting purposes in the year of acquisition: (iii) Depreciation Land easement $1 Land is not depreciated as it has an unlimited useful life. Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net Software purchased $100,000 cost or revalued amount of each asset, less its estimated residual value, progressively over Other intangible $100,000 its estimated useful life. Items with a lesser value are expensed in the year of acquisition. Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which Where there is an active and liquid market, intangible assets are carried at a revalued they relate and are depreciated accordingly. amount, otherwise they are carried at cost after initial recognition. If revalued, the same rules apply as to those for property, plant and equipment. Intangible assets have not been Any expenditure that increases the originally assessed capacity or service potential of an revalued. asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the Major spares purchased specifically for particular assets are capitalised and depreciated on profit or loss. the same basis as the asset to which they relate. Intangible assets are subject to amortisation and impairment testing. The estimated useful lives applied for the current and comparative periods are as follows: (ii) Amortisation Class of Fixed Asset Depreciation Rate Useful Life Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. Buildings 1.25% - 2.5% 40 - 80 years The estimated useful lives applied for the current and comparative periods are as follows: Infrastructure

Dams and weirs 0.667% - 10% 10 - 150 years Class of Intangible Asset Amortisation Rate Useful Life Water treatment plants 1% - 20% 5 - 100 years Land easements 0.667% - 1.43% 70 – 150 years Pipelines and others 1% - 33.33% 3 - 100 years Software purchased 20% 5 years Plant and equipment Other intangible 2.5% 40 years Motor vehicles and boats 10% - 33.33% 3 - 10 years

Recreation facilities 1.67% - 33.33% 3 - 60 years (g) Leased assets Other equipment 10% - 33.33% 3 - 10 years A distinction is made between finance leases which effectively transfer from the lessor to the

lessee substantially all the risks and benefits incidental to ownership of the leased assets, and Depreciation methods, useful lives and residual values are reviewed at each reporting date. operating leases under which the lessor effectively retains all such risks and benefits. Gains and losses on disposals are determined by comparing proceeds with the carrying Where a non-current asset is acquired by means of a finance lease, the asset is recognised at the amount. These gains and losses are included in profit or loss. lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding liability is established at the same amount. Lease payments are allocated between the principal component and the interest expense. The fair value of the asset is depreciated over the term of the lease. Operating lease payments are charged to profit or loss in the period in which they are incurred. Restoration obligations under leases are provided for over the life of the lease. Plant and equipment subject to a finance lease is amortised on a straight line basis over the shorter of the lease term and their useful lives unless it is reasonably certain that the Entity will obtain ownership by the end of the lease term.

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46 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (ii) Subsequent costs (f) Intangible assets Costs incurred subsequent to the initial asset purchase are capitalised when the expenditure (i) Recognition of intangible assets improves the condition of the asset beyond its originally assessed standard of performance Intangible assets that are acquired by the Entity are initially measured at cost. or capacity. Outlays that do not meet the criteria for recognition as an asset are expensed in Items of intangible assets with a cost or other value equal to or in excess of the following the financial year. thresholds are recognised for financial reporting purposes in the year of acquisition: (iii) Depreciation Land easement $1 Land is not depreciated as it has an unlimited useful life. Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net Software purchased $100,000 cost or revalued amount of each asset, less its estimated residual value, progressively over Other intangible $100,000 its estimated useful life. Items with a lesser value are expensed in the year of acquisition. Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which Where there is an active and liquid market, intangible assets are carried at a revalued they relate and are depreciated accordingly. amount, otherwise they are carried at cost after initial recognition. If revalued, the same rules apply as to those for property, plant and equipment. Intangible assets have not been Any expenditure that increases the originally assessed capacity or service potential of an revalued. asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the Major spares purchased specifically for particular assets are capitalised and depreciated on profit or loss. the same basis as the asset to which they relate. Intangible assets are subject to amortisation and impairment testing. The estimated useful lives applied for the current and comparative periods are as follows: (ii) Amortisation Class of Fixed Asset Depreciation Rate Useful Life Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. Buildings 1.25% - 2.5% 40 - 80 years The estimated useful lives applied for the current and comparative periods are as follows: Infrastructure

Dams and weirs 0.667% - 10% 10 - 150 years Class of Intangible Asset Amortisation Rate Useful Life Water treatment plants 1% - 20% 5 - 100 years Land easements 0.667% - 1.43% 70 – 150 years Pipelines and others 1% - 33.33% 3 - 100 years Software purchased 20% 5 years Plant and equipment Other intangible 2.5% 40 years Motor vehicles and boats 10% - 33.33% 3 - 10 years

Recreation facilities 1.67% - 33.33% 3 - 60 years (g) Leased assets Other equipment 10% - 33.33% 3 - 10 years A distinction is made between finance leases which effectively transfer from the lessor to the

lessee substantially all the risks and benefits incidental to ownership of the leased assets, and Depreciation methods, useful lives and residual values are reviewed at each reporting date. operating leases under which the lessor effectively retains all such risks and benefits. Gains and losses on disposals are determined by comparing proceeds with the carrying Where a non-current asset is acquired by means of a finance lease, the asset is recognised at the amount. These gains and losses are included in profit or loss. lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding liability is established at the same amount. Lease payments are allocated between the principal component and the interest expense. The fair value of the asset is depreciated over the term of the lease. Operating lease payments are charged to profit or loss in the period in which they are incurred. Restoration obligations under leases are provided for over the life of the lease. Plant and equipment subject to a finance lease is amortised on a straight line basis over the shorter of the lease term and their useful lives unless it is reasonably certain that the Entity will obtain ownership by the end of the lease term.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 47 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) (f) Intangible assets (i) Recognition of intangible assets Intangible assets that are acquired by the Entity are initially measured at cost. Items of intangible assets with a cost or other value equal to or in excess of the following thresholds are recognised for financial reporting purposes in the year of acquisition: Land easement $1 Software purchased $100,000 Other intangible $100,000 Items with a lesser value are expensed in the year of acquisition. Where there is an active and liquid market, intangible assets are carried at a revalued amount, otherwise they are carried at cost after initial recognition. If revalued, the same rules apply as to those for property, plant and equipment. Intangible assets have not been revalued. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the profit or loss. Intangible assets are subject to amortisation and impairment testing. (ii) Amortisation Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives applied for the current and comparative periods are as follows:

Class of Intangible Asset Amortisation Rate Useful Life Land easements 0.667% - 1.43% 70 – 150 years Software purchased 20% 5 years Other intangible 2.5% 40 years

(g) Leased assets A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of the leased assets, and operating leases under which the lessor effectively retains all such risks and benefits. Where a non-current asset is acquired by means of a finance lease, the asset is recognised at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding liability is established at the same amount. Lease payments are allocated between the principal component and the interest expense. The fair value of the asset is depreciated over the term of the lease. Operating lease payments are charged to profit or loss in the period in which they are incurred. Restoration obligations under leases are provided for over the life of the lease. Plant and equipment subject to a finance lease is amortised on a straight line basis over the shorter of the lease term and their useful lives unless it is reasonably certain that the Entity will obtain ownership by the end of the lease term.

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48 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (f) Intangible assets (h) Impairment (i) Recognition of intangible assets (i) Financial assets Intangible assets that are acquired by the Entity are initially measured at cost. A financial asset is assessed at each reporting date to determine whether there is any Items of intangible assets with a cost or other value equal to or in excess of the following objective evidence that it is impaired. A financial asset is considered to be impaired if thresholds are recognised for financial reporting purposes in the year of acquisition: objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Land easement $1 An impairment loss in respect of a financial asset measured at amortised cost is calculated Software purchased $100,000 as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Other intangible $100,000 Significant financial assets are tested for impairment on an individual basis. The remaining Items with a lesser value are expensed in the year of acquisition. financial assets are assessed collectively in groups that share similar credit risk Where there is an active and liquid market, intangible assets are carried at a revalued characteristics. amount, otherwise they are carried at cost after initial recognition. If revalued, the same rules All impairment losses are recognised in profit or loss. An impairment loss is reversed if the apply as to those for property, plant and equipment. Intangible assets have not been reversal can be related objectively to an event occurring after the impairment loss was revalued. recognised. For financial assets measured at amortised cost, the reversal is recognised in Subsequent expenditure is capitalised only when it increases the future economic benefits profit or loss. embodied in the specific asset to which it relates. All other expenditure is recognised in the (ii) Non-financial assets profit or loss. The carrying amounts of the Entity’s non-financial assets, other than inventories and DTA Intangible assets are subject to amortisation and impairment testing. are reviewed at each reporting date to determine whether there is any indication of (ii) Amortisation impairment. If any such indication exists then the asset’s recoverable amount is estimated. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful The recoverable amount of an asset or cash-generating unit is the greater of its value in use lives of intangible assets from the date that they are available for use. and its fair value less costs to sell. In assessing value in use, the estimated future cash flows The estimated useful lives applied for the current and comparative periods are as follows: are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the

purpose of impairment testing, assets are grouped together into the smallest group of assets Class of Intangible Asset Amortisation Rate Useful Life that generates cash inflows from continuing use that are largely independent of the cash Land easements 0.667% - 1.43% 70 – 150 years inflows of other assets or groups of assets (the “cash-generating unit”). Software purchased 20% 5 years An impairment loss is recognised if the carrying amount of an asset or its cash-generating Other intangible 2.5% 40 years unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss unless the asset is carried at a revalued amount. When the asset is measured at a revalued

amount, the impairment loss is offset against the asset revaluation surplus of the relevant (g) Leased assets asset to the extent available. A distinction is made between finance leases which effectively transfer from the lessor to the Impairment losses recognised in respect of cash-generating units are allocated first to lessee substantially all the risks and benefits incidental to ownership of the leased assets, and reduce the carrying amount of any goodwill allocated to the units and then to reduce the operating leases under which the lessor effectively retains all such risks and benefits. carrying amount of the other assets in the unit (group of units) on a pro rata basis. Where a non-current asset is acquired by means of a finance lease, the asset is recognised at the Impairment losses recognised in prior periods are assessed at each reporting date for any lower of the fair value of the leased property and the present value of the minimum lease indications that the loss has decreased or no longer exists. An impairment loss is reversed if payments. The corresponding liability is established at the same amount. Lease payments are there has been a change in the estimates used to determine the recoverable amount. An allocated between the principal component and the interest expense. The fair value of the asset is impairment loss is reversed only to the extent that the asset’s carrying amount does not depreciated over the term of the lease. exceed the carrying amount that would have been determined, net of depreciation or Operating lease payments are charged to profit or loss in the period in which they are incurred. amortisation, if no impairment loss had been recognised. Restoration obligations under leases are provided for over the life of the lease. (i) Assets under construction Plant and equipment subject to a finance lease is amortised on a straight line basis over the shorter Assets under construction (work in progress) are carried at cost and not depreciated until they of the lease term and their useful lives unless it is reasonably certain that the Entity will obtain reach service delivery. ownership by the end of the lease term. Interest costs on borrowings specifically financing assets under construction are capitalised. (j) Payables Trade creditors are recognised upon receipt of the goods or services ordered and are measured at the agreed purchase/contract price, gross of applicable trade and other discounts. Amounts owing are unsecured and are generally settled on 30 day terms.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 49 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) (k) Employee benefits Employer superannuation contributions, annual leave and long service leave are regarded as employee benefits. Payroll tax and workers’ compensation insurance are a consequence of employing employees and are not counted in an employee’s total remuneration package. They are not employee benefits and are recognised separately as employee related expenses. (i) Wages, salaries, annual leave and sick leave Liabilities for short-term employee benefits for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to the reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Entity expects to pay as at the reporting date, including applicable related on-costs. For those entitlements not expected to be paid within 12 months, the liabilities are classified as non-current liabilities and recognised at their present value, calculated using yields on fixed rate Commonwealth Government Bonds of similar maturity. Non-vesting sick leave is recognised as an expense as it is taken. (ii) Long service leave The long service leave provision represents the present value of the estimated future cash outflows to be made resulting from employees’ services provided to balance date. The current provision is calculated using the simplified approach whereby a net factor of 0.95 is applied to the long service leave amount of the employees with 3 or more years of service in order to estimate the present value. This approach is an approximation process to recognise the probable liability that will eventuate for staff that have achieved the 7 years of service. (iii) Superannuation schemes QSuper The Entity currently contributes to the QSuper defined benefit and accumulation superannuation funds. Where there is a surplus or deficit in financial position of a defined benefit superannuation fund, the employer sponsors, to the extent permissible under the trust deed of the superannuation fund, can recognise an asset for the surplus or must recognise a liability for the deficit. However, as responsibility for the funding of the QSuper defined benefit superannuation fund is assumed at a whole-of-Government level, no asset or liability is required to be recognised by the Entity. Local Government Superannuation Scheme (LG Super) The Entity contributes to LG Super (incorporating City Super) for employees under both defined benefit scheme and accumulation superannuation scheme. The Entity has no liability to or interest in LG Super other than the payment of the statutory contribution. Any amount by which either scheme is over or under funded would only affect future benefits and is not an asset or liability of the Entity. Accordingly, there is no recognition in the financial statements of any over-or-under funding of LG Super (refer to Note 25). (iv) Key management personnel and remuneration Key management personnel and remuneration disclosures are made in accordance with section 5 of the Financial Reporting Requirement for Queensland Government Agencies issued by Queensland Treasury. Refer to note 35 for the disclosures on key management personnel and remuneration.

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50 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (k) Employee benefits (l) Revenue Employer superannuation contributions, annual leave and long service leave are regarded as Revenue is measured at fair value of the consideration or contribution received or receivable. All employee benefits. revenue is stated net of the amount of GST. Payroll tax and workers’ compensation insurance are a consequence of employing employees and (i) Water services are not counted in an employee’s total remuneration package. They are not employee benefits and There is a contract with the WGM that provides Grid Service Charges revenue to the Entity are recognised separately as employee related expenses. up to 30 June 2020 (refer to Note 2(b) and 36). (i) Wages, salaries, annual leave and sick leave Revenue from the WGM is accrued monthly based on the Market Rules and the Entity’s Liabilities for short-term employee benefits for wages, salaries and annual leave represent Water Grid Services contract. It includes the capital charge, fixed and variable operating present obligations resulting from employees’ services provided to the reporting date and are costs incurred for the month and other specific allowable costs identified in the contract. calculated at undiscounted amounts based on remuneration wage and salary rates that the The charges for rural irrigation water are calculated based on two part tariff charges. Part A Entity expects to pay as at the reporting date, including applicable related on-costs. relates to fixed costs based on water allocation volume and applied quarterly in advance and For those entitlements not expected to be paid within 12 months, the liabilities are classified Part B represents the charge for water used based on meter readings for the previous as non-current liabilities and recognised at their present value, calculated using yields on quarter. These charges are accrued on a monthly basis. fixed rate Commonwealth Government Bonds of similar maturity. (ii) Government grants and subsidies Non-vesting sick leave is recognised as an expense as it is taken. Government grants and subsidies are recognised initially as deferred income when there is (ii) Long service leave reasonable assurance that they will be received and that the Entity will comply with the The long service leave provision represents the present value of the estimated future cash conditions associated with the grant. Grants and subsidies that compensate the Entity for outflows to be made resulting from employees’ services provided to balance date. The expenses incurred are recognised in profit or loss on a systematic basis in the same periods current provision is calculated using the simplified approach whereby a net factor of 0.95 is in which the expenses are recognised. applied to the long service leave amount of the employees with 3 or more years of service in The Entity receives CSO payments from the Queensland Government. The Rural Water order to estimate the present value. This approach is an approximation process to recognise payment is for the provision of rural irrigation water to rural irrigators. The Water Planning the probable liability that will eventuate for staff that have achieved the 7 years of service. Development payment is for activities to ensure compliance with regulatory and policy areas (iii) Superannuation schemes of resource management. The CSO payments are recognised on a monthly accrual basis. QSuper (iii) Services The Entity currently contributes to the QSuper defined benefit and accumulation Revenue for a service is recognised upon the delivery of the service to the customers. superannuation funds. Where there is a surplus or deficit in financial position of a defined (iv) Finance income benefit superannuation fund, the employer sponsors, to the extent permissible under the Finance income comprises interest income on funds invested. Interest income is recognised trust deed of the superannuation fund, can recognise an asset for the surplus or must as it accrues in profit or loss, using the effective interest method. recognise a liability for the deficit. However, as responsibility for the funding of the QSuper (m) Finance/borrowing costs defined benefit superannuation fund is assumed at a whole-of-Government level, no asset or liability is required to be recognised by the Entity. Finance/borrowing costs comprise: Local Government Superannuation Scheme (LG Super) • interest expense on bank overdrafts, short-term and long-term borrowings; The Entity contributes to LG Super (incorporating City Super) for employees under both • unwinding of the discount on provisions; defined benefit scheme and accumulation superannuation scheme. The Entity has no liability • amortisation of discounts or premiums relating to borrowings; and to or interest in LG Super other than the payment of the statutory contribution. Any amount • ancillary administration charges. by which either scheme is over or under funded would only affect future benefits and is not an asset or liability of the Entity. Accordingly, there is no recognition in the financial Finance/borrowing costs are recognised in profit or loss using the effective interest method and are statements of any over-or-under funding of LG Super (refer to Note 25). expensed in the period in which they arise. Finance/borrowing costs that are not settled in the period in which they arise are added to the carrying amount of the borrowing. (iv) Key management personnel and remuneration Finance/borrowing costs directly attributable to the acquisition, construction or production of assets Key management personnel and remuneration disclosures are made in accordance with that necessarily take a substantial period of time to prepare for their intended use or sale, are section 5 of the Financial Reporting Requirement for Queensland Government Agencies added to the cost of those assets, until such time as the assets are substantially ready for their issued by Queensland Treasury. Refer to note 35 for the disclosures on key management intended use or sale. personnel and remuneration.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 51 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) (n) Income tax The Entity has been a participant in the NTER from the date of establishment. As a result an “equivalent” or “notional income tax” liability is payable to Queensland Treasury for payment into the consolidated fund. Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (o) Goods and services tax Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

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52 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (n) Income tax (p) Contributed equity The Entity has been a participant in the NTER from the date of establishment. As a result an On 1 July 2011, all matters relating to WaterSecure and its subsidiaries transferred to the Entity at “equivalent” or “notional income tax” liability is payable to Queensland Treasury for payment into their carrying values recorded in the financial report as at 30 June 2011 (refer to Note 2e(i)), which the consolidated fund. Income tax expense comprises current and deferred tax. Income tax included the following: expense is recognised in profit or loss except to the extent that it relates to items recognised • Assets and liabilities of WaterSecure, South East Queensland (Gold Coast) Desalination directly in equity, in which case it is recognised in equity. Company Pty Ltd (SEQDC) and Western Corridor Recycled Water Pty Ltd (WCRW) (refer to Current tax is the expected tax payable on the taxable income for the period, using tax rates Note 22(c)); enacted or substantively enacted at the reporting date and any adjustment to tax payable in • Instruments that applied to WaterSecure, SEQDC and WCRW; respect of previous years. • Employees of WaterSecure; Deferred tax is recognised using the balance sheet method, providing for temporary differences • Shares held by WaterSecure in SEQDC and WCRW and WaterSecure’s interest in the between the carrying amounts of assets and liabilities for financial reporting purposes and the AWRCoE; and amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business • Any pending legal proceedings by or against WaterSecure, SEQDC and WCRW. combination and that affects neither accounting nor taxable profit; and differences relating to Assets and liabilities transferred from WaterSecure on 1 July $000 investments in subsidiaries to the extent that they probably will not reverse in the foreseeable 2011 future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted Total assets 3,367,428 by the reporting date. Total liabilities 3,170,248 A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at Net assets 197,180 each reporting date and are reduced to the extent that it is no longer probable that the related tax The increase in net assets of $197,180 million has been accounted for as an increase in benefit will be realised. contributed equity as disclosed in the Statement of Changes in Equity. (o) Goods and services tax The Entity has applied the accounting treatment of Interpretation 1038 Contribution by Owners Revenue, expenses and assets are recognised net of the amount of GST, except where the Made to Wholly-Owned Public Sector Entities to the equity proceeds received (refer to Note 36). amount of GST incurred is not recoverable from the ATO. In these circumstances, the GST is (q) New and revised accounting standards recognised as part of the cost of acquisition of the asset or as part of the expense. The Entity did not change any of its accounting policies during 2011-12. Australian accounting Receivables and payables are stated with the amount of GST included. The net amount of GST standard changes applicable for the first time for 2011-12 have had minimal effect on the Entity’s recoverable from, or payable to, the ATO is included as a current asset or liability in the balance financial statements, as explained below. sheet. AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] became cash flows arising from investing and financing activities which are recoverable from, or payable to, effective from reporting periods beginning on and after 1 January 2011. Given the Entity’s existing the ATO are classified as operating cash flows. financial instruments, there was only a minor impact on the Entity’s financial instruments note (note 29), in relation to disclosures about credit risk. That note no longer needs to disclose amounts that best represent the maximum exposure to credit risk where the carrying amount of the instruments already reflects this. As this was the case with all the Entity’s receivables as at 30 June 2012 (and as at 30 June 2011), receivables are not included in the credit risk disclosure in this year’s financial statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 53 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) As the Entity held no collateral or other credit enhancements in respect of these financial AASB 9 Financial Instruments (December 2010) and AASB 2010-7 Amendments to Australian instruments, and did not renegotiate the terms of any financial assets, during the reporting periods Accounting standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, presented in these financial statements, there were no other changes required to the Entity’s 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and interpretation financial instruments note arising from the amendments to AASB 7 Financial Instruments: 2,5,10,12,19 & 127] become effective from reporting period beginning on or after 1 January 2013. Disclosures. The main impacts of these standards on the Entity are that they will change the requirement for the AASB 1054 Australian Additional Disclosures became effective from reporting periods beginning on classification, measurement and disclosures associated with financial assets. Under the new or after 1 July 2011, given the Entity’s previous disclosure practices, AASB 1054 had minimal requirements, financial assets will be more simply classified according to whether they are impact on the Entity. measured at amortised cost or fair value. Pursuant to AASB 9, financial assets can only be measured at amortised cost if two conditions are met. One of these conditions is that the asset AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman must be held within a business model whose objective is to hold assets in order to collect Convergence Project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, contractual cash flows. The other condition is that the contractual terms of the assets give rise on AASB 132 & AASB 134 and Interpretation 2, 112 & 113] also became effective from reporting specified dates to cash flows that are solely payments of principal and interest on the principle period beginning on or after 1 July 2011. The only potential implication for the Entity from this amount outstanding. amending standard was the deletion from AASB 101 Presentation of Financial Statements of the requirement for disclosure of commitments. However, Treasury Department’s Financial Reporting The Entity has commenced reviewing the measurement of its financial assets against the new Requirements require continuation of commitments disclosures, so this deletion from AASB 101 AASB 9 classification and measurement requirement. However, as the classification of financial has no impact on the Entity’s commitments note (Note 31). assets at the date of initial application of AASB 9 will depend on the facts and circumstances existing at that date, the Entity’s conclusions will not be confirmed until closer to that time. At this The Entity is not permitted to early adopt a new or amended accounting standard ahead of the stage, and assuming no change in the types of transactions the Entity enters into, it is not expected specified commencement date unless approval is obtained from the Treasury Department. that any of the Entity’s financial assets will be meet the criteria in AASB 9 to be measured at Consequently, the Entity has not applied any Australian accounting standards and interpretations amortised cost. Therefore, as from the 2013-14 financial statements, all of the Entity’s financial that have been issued but are not yet effective. The Entity applies standards and interpretations in assets are expected to be required to be measured at fair value, and classified accordingly (instead accordance with their respective commencement dates. of the measurement classifications presently used in note 3(b) and 29). The same classification will At the date of authorisation of the financial report, the expected impacts of new or amended be used for net gains/losses recognised in the Statement of Comprehensive Income in respect of Australian accounting standards with future commencement dates are as set out below. those financial assets. In the case of the Entity’s current receivables, as they are short-term in AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other nature, the carrying amount is expected to be a reasonable approximation of fair value. Comprehensive Income [AASB 1,5,7,101,112,120,121,132,133,134,1039 & 1049) applies as from A revised version of AASB 119 Employee Benefits applies from reporting periods beginning on or reporting periods beginning on or after 1 July 2012. The only impact for the Entity will be that, in the after 1 January 2013. The revised AASB 119 is generally to be applied retrospectively. Given the Statement of Comprehensive Income, items within the “Other Comprehensive Income” section will Entity’s circumstances, the only implications for the Entity are that the revised standard clarifies the need to be presented in different sub-sections, according to whether or not they are subsequently concept of “termination benefits”, and the recognition criteria for liabilities for termination benefits re-classifiable to the operating result. Whether subsequent re-classification is possible depends on will be different. If termination benefits meet the timeframe criterion for “short-term employee the requirements of criteria in the accounting standard/interpretation that relates to the item benefits”, they will be measured according to the AASB 119 requirements for “short-term employee concerned. benefits”. Otherwise, termination benefits will need to be measured according to the AASB 119 AASB 13 Fair Value Measurement applies from reporting periods beginning on or after 1 January requirements for “other long-term employee benefits”. Under the revised standard, the recognition 2013. AASB 13 sets out a new definition of “fair value”, as well as new principles to be applied and measurement of employer obligations for “other long-term employee benefits” will need to be when determining the fair value of assets and liabilities. The new requirements will apply to all of accounted for according to most of the requirements for defined benefit plans. the Entity’s assets and liabilities (excluding leases) that are measured and/or disclosed at fair value The revised AASB 119 includes changed criteria for accounting for employee benefits as “short or another measurement based on fair value. The potential impacts of AASB 13 relate to the fair term employee benefits”, requirements for the measurement of employer liabilities/assets arising value measurement methodologies used, and financial statement disclosures made in respect of, from defined benefit plans, and the measurement and presentation of changes in such such assets and liabilities. liabilities/assets. Given the Entity’s circumstances, those changes to AASB 119 have no material The Entity has commenced reviewing its fair value methodologies (including instructions to valuers, impact on the Entity. data used and assumptions made) for all items of property, plant and equipment measured at fair All other Australian accounting standards and interpretations with future commencement dates are value to determine whether those methodologies comply with AASB 13. To the extent that the either not applicable to the Entity’s activities, or have no material impact on the Entity. methodologies don’t comply, changes will be necessary. While the Entity is yet to complete this review, no significant changes are anticipated, based on the fair value methodologies presently used. Therefore, at this stage, no consequential material impacts are expected for the Entity’s property, plant and equipment as from 2013-14. AASB 13 will require an increased amount of information to be disclosed in relation to fair value measurements for both assets and liabilities. To the extent that any fair value measurement for an asset or liability uses data that is not “observable” outside the Entity, the amount of information to be disclosed will be relatively greater.

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54 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) As the Entity held no collateral or other credit enhancements in respect of these financial AASB 9 Financial Instruments (December 2010) and AASB 2010-7 Amendments to Australian instruments, and did not renegotiate the terms of any financial assets, during the reporting periods Accounting standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, presented in these financial statements, there were no other changes required to the Entity’s 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and interpretation financial instruments note arising from the amendments to AASB 7 Financial Instruments: 2,5,10,12,19 & 127] become effective from reporting period beginning on or after 1 January 2013. Disclosures. The main impacts of these standards on the Entity are that they will change the requirement for the AASB 1054 Australian Additional Disclosures became effective from reporting periods beginning on classification, measurement and disclosures associated with financial assets. Under the new or after 1 July 2011, given the Entity’s previous disclosure practices, AASB 1054 had minimal requirements, financial assets will be more simply classified according to whether they are impact on the Entity. measured at amortised cost or fair value. Pursuant to AASB 9, financial assets can only be measured at amortised cost if two conditions are met. One of these conditions is that the asset AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman must be held within a business model whose objective is to hold assets in order to collect Convergence Project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, contractual cash flows. The other condition is that the contractual terms of the assets give rise on AASB 132 & AASB 134 and Interpretation 2, 112 & 113] also became effective from reporting specified dates to cash flows that are solely payments of principal and interest on the principle period beginning on or after 1 July 2011. The only potential implication for the Entity from this amount outstanding. amending standard was the deletion from AASB 101 Presentation of Financial Statements of the requirement for disclosure of commitments. However, Treasury Department’s Financial Reporting The Entity has commenced reviewing the measurement of its financial assets against the new Requirements require continuation of commitments disclosures, so this deletion from AASB 101 AASB 9 classification and measurement requirement. However, as the classification of financial has no impact on the Entity’s commitments note (Note 31). assets at the date of initial application of AASB 9 will depend on the facts and circumstances existing at that date, the Entity’s conclusions will not be confirmed until closer to that time. At this The Entity is not permitted to early adopt a new or amended accounting standard ahead of the stage, and assuming no change in the types of transactions the Entity enters into, it is not expected specified commencement date unless approval is obtained from the Treasury Department. that any of the Entity’s financial assets will be meet the criteria in AASB 9 to be measured at Consequently, the Entity has not applied any Australian accounting standards and interpretations amortised cost. Therefore, as from the 2013-14 financial statements, all of the Entity’s financial that have been issued but are not yet effective. The Entity applies standards and interpretations in assets are expected to be required to be measured at fair value, and classified accordingly (instead accordance with their respective commencement dates. of the measurement classifications presently used in note 3(b) and 29). The same classification will At the date of authorisation of the financial report, the expected impacts of new or amended be used for net gains/losses recognised in the Statement of Comprehensive Income in respect of Australian accounting standards with future commencement dates are as set out below. those financial assets. In the case of the Entity’s current receivables, as they are short-term in AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other nature, the carrying amount is expected to be a reasonable approximation of fair value. Comprehensive Income [AASB 1,5,7,101,112,120,121,132,133,134,1039 & 1049) applies as from A revised version of AASB 119 Employee Benefits applies from reporting periods beginning on or reporting periods beginning on or after 1 July 2012. The only impact for the Entity will be that, in the after 1 January 2013. The revised AASB 119 is generally to be applied retrospectively. Given the Statement of Comprehensive Income, items within the “Other Comprehensive Income” section will Entity’s circumstances, the only implications for the Entity are that the revised standard clarifies the need to be presented in different sub-sections, according to whether or not they are subsequently concept of “termination benefits”, and the recognition criteria for liabilities for termination benefits re-classifiable to the operating result. Whether subsequent re-classification is possible depends on will be different. If termination benefits meet the timeframe criterion for “short-term employee the requirements of criteria in the accounting standard/interpretation that relates to the item benefits”, they will be measured according to the AASB 119 requirements for “short-term employee concerned. benefits”. Otherwise, termination benefits will need to be measured according to the AASB 119 AASB 13 Fair Value Measurement applies from reporting periods beginning on or after 1 January requirements for “other long-term employee benefits”. Under the revised standard, the recognition 2013. AASB 13 sets out a new definition of “fair value”, as well as new principles to be applied and measurement of employer obligations for “other long-term employee benefits” will need to be when determining the fair value of assets and liabilities. The new requirements will apply to all of accounted for according to most of the requirements for defined benefit plans. the Entity’s assets and liabilities (excluding leases) that are measured and/or disclosed at fair value The revised AASB 119 includes changed criteria for accounting for employee benefits as “short or another measurement based on fair value. The potential impacts of AASB 13 relate to the fair term employee benefits”, requirements for the measurement of employer liabilities/assets arising value measurement methodologies used, and financial statement disclosures made in respect of, from defined benefit plans, and the measurement and presentation of changes in such such assets and liabilities. liabilities/assets. Given the Entity’s circumstances, those changes to AASB 119 have no material The Entity has commenced reviewing its fair value methodologies (including instructions to valuers, impact on the Entity. data used and assumptions made) for all items of property, plant and equipment measured at fair All other Australian accounting standards and interpretations with future commencement dates are value to determine whether those methodologies comply with AASB 13. To the extent that the either not applicable to the Entity’s activities, or have no material impact on the Entity. methodologies don’t comply, changes will be necessary. While the Entity is yet to complete this review, no significant changes are anticipated, based on the fair value methodologies presently used. Therefore, at this stage, no consequential material impacts are expected for the Entity’s property, plant and equipment as from 2013-14. AASB 13 will require an increased amount of information to be disclosed in relation to fair value measurements for both assets and liabilities. To the extent that any fair value measurement for an asset or liability uses data that is not “observable” outside the Entity, the amount of information to be disclosed will be relatively greater.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 55 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

4. Determination of fair values A number of the Entity’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Property, plant and equipment The fair value of land, buildings and infrastructure is measured as follows: • where there is an active and liquid market for assets similar in type and condition, the fair value of an asset is its price in that market; and • where there is no market price for the assets, fair value is either the depreciated replacement cost or the net present value of the cash flows from the asset. (b) Trade and other receivables and payables The fair value of trade and other receivables and payables approximates their nominal value less estimated credit adjustments. (c) Prepayments The fair value of prepayments is represented by the book value as the period of time to consumption is short and there are no rates involved in the calculation. (d) Borrowings The fair value of borrowings, which is determined for disclosure purposes, is determined by reference to published price quotations in an active market and reflects the value of the debt if the Entity repaid it in full at balance date. As it is the intention of the Entity to hold its borrowings for their full term, no adjustment provision is made in these accounts.

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56 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

4. Determination of fair values 5. Financial risk management A number of the Entity’s accounting policies and disclosures require the determination of fair value, for Overview both financial and non-financial assets and liabilities. Fair values have been determined for measurement The Entity’s activities expose it to a variety of financial risks including credit risk, liquidity risk, and interest and/or disclosure purposes based on the following methods. Where applicable, further information about rate risk. Exposure to financial risks is managed in accordance with the Entity’s approved policies on the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. financial risk management. These policies focus on managing the volatility of financial markets and seek (a) Property, plant and equipment to minimise potential adverse effects on the financial performance of the Entity. The Entity measures risk The fair value of land, buildings and infrastructure is measured as follows: exposure using a variety of methods as follows: • where there is an active and liquid market for assets similar in type and condition, the fair value Risk Exposure Measurement Method of an asset is its price in that market; and Credit risk Ageing analysis • where there is no market price for the assets, fair value is either the depreciated replacement Liquidity risk Maturity analysis cost or the net present value of the cash flows from the asset. (b) Trade and other receivables and payables Interest rate risk Sensitivity analysis The fair value of trade and other receivables and payables approximates their nominal value less Credit risk estimated credit adjustments. Credit risk exposure refers to the situation where the Entity may incur a financial loss as a result of (c) Prepayments another party to a financial instrument failing to discharge their obligations. The Entity has a substantial The fair value of prepayments is represented by the book value as the period of time to concentration of credit risk to a single debtor, being the WGM. consumption is short and there are no rates involved in the calculation. The Entity is exposed to credit risk through its investments with the QTC and deposits held with banks. (d) Borrowings The QTC Cash Fund is an asset management portfolio that invests with a wide variety of high credit rating counterparts. Deposits are capital guaranteed. Other investments are held with highly rated and The fair value of borrowings, which is determined for disclosure purposes, is determined by regulated financial institutions and whilst not capital guaranteed the likelihood of a credit failure is reference to published price quotations in an active market and reflects the value of the debt if the considered remote. Entity repaid it in full at balance date. As it is the intention of the Entity to hold its borrowings for their full term, no adjustment provision is made in these accounts. Liquidity risk Liquidity risk refers to the situation where the Entity may encounter difficulty in meeting obligations associated with financial liabilities. The Entity is exposed to liquidity risk through its trading in the normal course of business and borrowings from the QTC for asset acquisitions and capital works. The Entity manages its exposure to liquidity risk by maintaining sufficient cash deposits and undrawn facilities, both short and long term, to cater for unexpected volatility in cash flows. Market risk The Entity does not trade in foreign currency and is not materially exposed to commodity price ranges. The Entity is exposed to interest rate risk through its borrowings from QTC and cash deposited in interest bearing accounts. The Entity manages its portfolio by setting, monitoring and adjusting the terms and duration of its loan portfolio as allowed under its commercial financing contract with QTC. Interest rate risk The Entity is exposed to interest rate risk through its borrowings and investment with QTC and cash deposited in interest bearing accounts. The risk in borrowing is effectively managed through QTC’s capacity to issue securities with variable terms allowing an appropriate duration for debt of the Entity. Interest rate risk in other areas is mitigated. The Entity relies on QTC’s management of its debt portfolios and on interest rate immunisation provided by the QWC in its calculation of the WACC that sets the Entity’s earning rate.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 57 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

5. Financial risk management (continued) Capital management The Entity must give the responsible Ministers an estimate of its net profit for the year, and a recommendation on the amount of annual return to be paid. The recommendation is to be provided to Ministers between 1 and 15 May prior to the end of the financial year. Before the end of the financial year, the responsible Ministers must either approve the recommendation or direct the Entity to pay another amount (though not more than the estimated net profit previously advised) as decided under section 53 of the South East Queensland Water (Restructuring) Act 2007. The return must be paid within 6 months after the end of the financial year. Annual return payable in 2012 is $0 (2011: $0) 2012 2011 Note $000 $000 Total borrowings 24 5,039,351 2,144,768 Total assets (excluding cash and cash equivalents) 6,408,271 2,916,988 Gearing ratio 79% 74%

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58 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

5. Financial risk management (continued) Capital management 2012 2011 The Entity must give the responsible Ministers an estimate of its net profit for the year, and a $000 $000 recommendation on the amount of annual return to be paid. The recommendation is to be provided to 6. Water services Ministers between 1 and 15 May prior to the end of the financial year. Before the end of the financial year, the responsible Ministers must either approve the recommendation or direct the Entity to pay another Water services - WGM 669,382 350,184 amount (though not more than the estimated net profit previously advised) as decided under section 53 of Water sales - Irrigators 2,451 2,018 the South East Queensland Water (Restructuring) Act 2007. The return must be paid within 6 months Total 671,833 352,202 after the end of the financial year.

Annual return payable in 2012 is $0 (2011: $0) 7. Grants and other contributions 2012 2011 CSO 1,368 1,396 Note $000 $000 Government grant 11,382 - 24 Total borrowings 5,039,351 2,144,768 Other grants 599 330

Total assets (excluding cash and cash equivalents) 6,408,271 2,916,988 Total 13,349 1,726 Gearing ratio 79% 74%

8. Other revenue

Investment revenue 3,059 2,605

Consulting revenue 741 523 Lease revenue 1,048 913 Other 806 996 Total 5,654 5,037

9. Employee expenses Wages and salaries 45,088 37,708 Annual leave expenses 4,171 3,583 Long service leave expenses 1,452 872 Employer superannuation contribution 5,625 4,687 Workers' compensation premium 277 130 Payroll tax 2,723 2,175 Other employee related expenses 2,591 1,922 Total 61,927 51,077

The number of employees including both full time employees and part time employees measured on a full time equivalent basis as at 30 June are: 2012 2011 Number of employees 506 442

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 59 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

Note 2012 2011 $000 $000 10. Supplies and services Labour hire expenses 8,044 4,371 Consultancies and contractors 18,631 11,904 Operation contractors 44,304 - Energy 13,633 9,036 Information technology and communications 5,973 4,100 Repairs and maintenance 23,026 24,746 Supplies and consumables 38,794 33,474 Other expenses 1,373 734 Total 153,778 88,365

11. Depreciation and amortisation Buildings 480 763 Infrastructure 144,305 38,476 Plant and equipment 4,022 2,492 Intangibles 1,863 1,273 Total 150,670 43,004

12. Revaluation decrement Land 39,323 - Buildings 2,847 - Infrastructure - - Total 16 42,170 -

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60 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

Note 2012 2011 2012 2011 $000 $000 $000 $000 10. Supplies and services 13. Finance/borrowing costs Labour hire expenses 8,044 4,371 Interest paid or payable to QTC 315,322 127,300 Consultancies and contractors 18,631 11,904 Competitive neutrality fee 15,879 18,885 Operation contractors 44,304 - Other financial costs 454 471 Energy 13,633 9,036 Total 331,655 146,656 Information technology and communications 5,973 4,100 Repairs and maintenance 23,026 24,746 Supplies and consumables 38,794 33,474 14. Other expenses Other expenses 1,373 734 Insurance 5,294 2,394 Total 153,778 88,365 Internal audit fees 331 147 External audit fees 193 142 QWC & QCA levies 7,805 7,978 11. Depreciation and amortisation Rates and taxes 1,161 3,004 Buildings 480 763 Other 360 1,743 Infrastructure 144,305 38,476 Total 15,144 15,408 Plant and equipment 4,022 2,492 Intangibles 1,863 1,273 15. Income tax Total 150,670 43,004 The difference between income tax expense provided in the financial statements and the prima facie income tax expense is reconciled as follows: 12. Revaluation decrement (Loss) / profit before income tax (64,508) 14,455 Land 39,323 - Prima facie income tax thereon at 30% (19,353) 4,337 Buildings 2,847 - Less: Infrastructure - - Tax impact of transferred council provision for employee benefits recognised 152 152 Total 16 42,170 - Income tax underprovided in prior year - 1,254 Other - 155 Add: Recognition of tax base on fixed assets 667 - Depreciation difference on transferred council assets 1,262 1,077 Non deductible expenses 7 28 Total income tax (credit) / expense (17,569) 3,881

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 61 62 Queensland Bulk Water Supply Authority FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 JUNE 30 ENDED YEAR THE FOR REPORT FINANCIAL Notes to and forming part of the Financial Statements 2011-12

16. Property, plant and equipment

2012 Land Buildings Infrastructure Plant and Work in Total Water equipment progress Dams and treatment Pipelines weirs plants and other Note $000 $000 $000 $000 $000 $000 $000 $000 Cost Balance at 1 July 2011 520,090 20,091 1,590,116 696,567 69,510 17,593 446,799 3,360,766 Asset classes reclassification (3,155) (8,548) 369 7,601 - 578 - (3,155) Acquisitions – WaterSecure 3(p) 17,226 - - 1,719,144 1,118,229 2,508 399,302 3,256,409 Acquisitions 45,122 - 319,151 - - 4073 40,562 408,908 Disposal (103) (469) - - - (1,055) - (1,627) Transfer between classes 4,606 3,625 440,490 370,445 396 7701 (827,263) - Revaluation increments - 12,243 - - - - - 12,243 Revaluation decrements (41,837) (2,992) (44,829) Balance at 30 June 2012 541,949 23,950 2,350,126 2,793,757 1,188,135 31,398 59,400 6,988,715 Depreciation and impairment losses Balance at 1 July 2011 - (2,482) (391,850) (116,331) (2,870) (6,371) - (519,904) Asset classes reclassification - 681 (127) (333) - (221) - - Acquisitions – WaterSecure 3(p) - - - (131,169) (46,028) (683) - (177,880) Disposal - 63 - - - 596 - 659 Revaluation - (5,902) - - - - (5,902) Depreciation for the year - (480) (20,770) (103,756) (19,779) (4,022) - (148,807) Balance at 30 June 2012 - (8,120) (412,747) (351,589) (68,677) (10,701) - (851,834) Carrying amount at 30 June 2012 541,949 15,830 1,937,379 2,442,168 1,119,458 20,697 59,400 6,136,881

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Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

16. Property, plant and equipment (continued)

2011 Land Buildings Infrastructure Plant and Work in Total Water equipment progress Dams and treatment Pipelines and weirs plants other $000 $000 $000 $000 $000 $000 $000 $000 Cost Balance at 1 July 2010 520,150 19,983 1,589,808 679,638 69,480 14,694 348,366 3,242,119 Asset classes reclassification - - 37 (254) - 217 - - Acquisitions as per transfer notices - - - (741) - - - (741) Acquisitions - - - - - 2,217 118,346 120,563 Disposal - - - - - (1,175) - (1,175) Transfer between classes (60) 108 271 17,924 30 1,640 (19,913) - Balance at 30 June 2011 520,090 20,091 1,590,116 696,567 69,510 17,593 446,799 3,360,766 Depreciation and impairment losses Balance as at 1 July 2010 - (1,719) (376,603) (94,291) (1,678) (4,497) - (478,788) Asset classes reclassification - - 5 (8) - 3 - - Disposal - - - - - 615 - 615 Depreciation for the year - (763) (15,252) (22,032) (1,192) (2,492) - (41,731) Balance at 30 June 2011 - (2,482) (391,850) (116,331) (2,870) (6,371) - (519,904) Carrying amount at 30 June 2011 520,090 17,609 1,198,266 580,236 66,640 11,222 446,799 2,840,862

31 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

16. Property, plant and equipment (continued)

2011 Land Buildings Infrastructure Plant and Work in Total Water equipment progress Dams and treatment Pipelines and weirs plants other $000 $000 $000 $000 $000 $000 $000 $000 Cost Balance at 1 July 2010 520,150 19,983 1,589,808 679,638 69,480 14,694 348,366 3,242,119 Asset classes reclassification - - 37 (254) - 217 - -

ANNUAL REPORT 2011-12 REPORT ANNUAL SEQWATER AS TRADING AUTHORITY SUPPLY WATER BULK QUEENSLAND Acquisitions as per transfer notices - - - (741) - - - (741) Acquisitions - - - - - 2,217 118,346 120,563 Disposal - - - - - (1,175) - (1,175) Transfer between classes (60) 108 271 17,924 30 1,640 (19,913) - Balance at 30 June 2011 520,090 20,091 1,590,116 696,567 69,510 17,593 446,799 3,360,766 Depreciation and impairment losses Balance as at 1 July 2010 - (1,719) (376,603) (94,291) (1,678) (4,497) - (478,788) Asset classes reclassification - - 5 (8) - 3 - - Disposal - - - - - 615 - 615 Depreciation for the year - (763) (15,252) (22,032) (1,192) (2,492) - (41,731) Balance at 30 June 2011 - (2,482) (391,850) (116,331) (2,870) (6,371) - (519,904) Carrying amount at 30 June 2011 520,090 17,609 1,198,266 580,236 66,640 11,222 446,799 2,840,862

63 31 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

16. Property, plant and equipment (continued) 16. Property, plant and equipment (continued) Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Infrastructure assets Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for the Queensland Public (a) Dams and weirs Sector. Plant and equipment and work in progress are measured at cost. An income based approach to fair value was undertaken as at 30 June 2010. An income approach The Board has adopted the following policies in respect of the measurement of fair value: assumes the amount for which assets could be exchanged between knowledgeable and willing parties in Frequency of an arm’s length transaction. Class Method of measurement of fair value measurement * The same assumptions that have been applied to determining the recoverable amount for impairment Land Independent valuation – market value 5 years testing (refer to Note 18) are used for the income based approach, apart from the following assumptions Independent valuation – market value / which are considered to be more appropriate in the context of the income approach: Buildings depreciation replacement cost 5 years Dams and weirs Board adopted valuation – income approach 5 years • the WACC has been increased by 0.80% to take into account an independent third party’s Water treatment (arm’s length purchase) approach to the Gamma component of the WACC calculation; plants Depreciation replacement cost 5 years • cash flows have been adjusted to reflect potential synergies that an independent third party Infrastructure Pipelines and other Depreciation replacement cost 5 years may derive from the acquisition of the Entity’s assets; and

*Valuations are more frequent where the Board considers that there are indicators that period-end carrying values • future capital expenditure and related revenues have been included in the cash flows (in materially differ to their fair values. accordance with Accounting Standards these are excluded for the purpose of determining the recoverable amount for impairment testing). Land The income based valuation results in a value of the Entity as a whole. After deducting other non current Land was valued by an independent valuer, State Valuation Services, at 1 October 2011 with an effective assets, the remaining value has been apportioned to individual infrastructure assets (Dams and Weirs) on date of 30 June 2012. The independent valuations were performed using the fair value principle by the basis of their carrying values as at 30 June 2010. Additions since the time of valuation have been reference to observable prices in an active market as well as recent market transactions on an arm’s recorded at cost. length basis. The carrying values of land were revalued as at the effective dates of those valuations to (b) Water treatment plants reflect the fair values determined by the independent valuers. Additions since the time of the independent Water treatment plants were valued by an independent valuer, Cardno Limited, as at 1 July 2008 using a valuations have been recorded at cost. depreciated replacement cost approach consistent with the requirements of Australian Accounting Land with a total value of $62,703,628 (as valued by State Valuation Services) representing reserve land Standards. The carrying values of water treatment plants were revalued as at the effective date of those or land subject to a Deed of Grant in Trust , is not included in the carrying value of land. That land is valuations to reflect the fair values determined by the independent valuer. Additions since the time of the retained by the Crown, however, the economic benefit of the land accrues to the Entity and the land is independent valuation have been recorded at cost. administered by the Entity on behalf of the Department of Natural Resources and Mines. A write down of water treatment plants - infrastructure assets as at their transfer dates has restated A prior period allocation of a previous valuation between the classes of land and buildings has restated financial statement opening balances and comparative figures (refer Note 40). financial statement opening balances and comparative figures (refer Note 40). (c) Pipelines and other infrastructure

Pipelines and other infrastructure were valued by an independent valuer, Cardno Limited, as at 1 July Buildings 2008 using a depreciated replacement cost approach consistent with the requirements of Australian Office buildings and rental properties were valued by an independent valuer, State Valuation Services Accounting Standards. The carrying values of pipelines and other infrastructure were revalued as at the with an effective date of 30 June 2012. The independent valuations were performed using the fair value effective date of those valuations to reflect the fair values determined by the independent valuer. principles: Additions since the time of the independent valuation have been recorded at cost. • where an ‘active liquid market” is available for an asset, that market price represents the best evidence of an assets fair value; and Plant and equipment • where an “active liquid market” for the asset does not exist, the best indication of its fair value is All plant and equipment is measured at cost less accumulated depreciation in accordance with its” depreciated replacement cost”. Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector. Additions since the time of the independent valuations have been recorded at cost. A prior period allocation of a previous valuation between the classes of land and buildings has restated Work in progress financial statement opening balances and comparative figures (refer Note 40). Work in progress is measured at cost. Borrowing costs of $11,058,107 have been capitalised during the year (2011: $23,047,839).

32 33

64 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

16. Property, plant and equipment (continued) 16. Property, plant and equipment (continued) Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Infrastructure assets Plant and Equipment and Queensland Treasury’s Non-Current Asset Policies for the Queensland Public (a) Dams and weirs Sector. Plant and equipment and work in progress are measured at cost. An income based approach to fair value was undertaken as at 30 June 2010. An income approach The Board has adopted the following policies in respect of the measurement of fair value: assumes the amount for which assets could be exchanged between knowledgeable and willing parties in Frequency of an arm’s length transaction. Class Method of measurement of fair value measurement * The same assumptions that have been applied to determining the recoverable amount for impairment Land Independent valuation – market value 5 years testing (refer to Note 18) are used for the income based approach, apart from the following assumptions Independent valuation – market value / which are considered to be more appropriate in the context of the income approach: Buildings depreciation replacement cost 5 years Dams and weirs Board adopted valuation – income approach 5 years • the WACC has been increased by 0.80% to take into account an independent third party’s Water treatment (arm’s length purchase) approach to the Gamma component of the WACC calculation; plants Depreciation replacement cost 5 years • cash flows have been adjusted to reflect potential synergies that an independent third party Infrastructure Pipelines and other Depreciation replacement cost 5 years may derive from the acquisition of the Entity’s assets; and

*Valuations are more frequent where the Board considers that there are indicators that period-end carrying values • future capital expenditure and related revenues have been included in the cash flows (in materially differ to their fair values. accordance with Accounting Standards these are excluded for the purpose of determining the recoverable amount for impairment testing). Land The income based valuation results in a value of the Entity as a whole. After deducting other non current Land was valued by an independent valuer, State Valuation Services, at 1 October 2011 with an effective assets, the remaining value has been apportioned to individual infrastructure assets (Dams and Weirs) on date of 30 June 2012. The independent valuations were performed using the fair value principle by the basis of their carrying values as at 30 June 2010. Additions since the time of valuation have been reference to observable prices in an active market as well as recent market transactions on an arm’s recorded at cost. length basis. The carrying values of land were revalued as at the effective dates of those valuations to (b) Water treatment plants reflect the fair values determined by the independent valuers. Additions since the time of the independent Water treatment plants were valued by an independent valuer, Cardno Limited, as at 1 July 2008 using a valuations have been recorded at cost. depreciated replacement cost approach consistent with the requirements of Australian Accounting Land with a total value of $62,703,628 (as valued by State Valuation Services) representing reserve land Standards. The carrying values of water treatment plants were revalued as at the effective date of those or land subject to a Deed of Grant in Trust , is not included in the carrying value of land. That land is valuations to reflect the fair values determined by the independent valuer. Additions since the time of the retained by the Crown, however, the economic benefit of the land accrues to the Entity and the land is independent valuation have been recorded at cost. administered by the Entity on behalf of the Department of Natural Resources and Mines. A write down of water treatment plants - infrastructure assets as at their transfer dates has restated A prior period allocation of a previous valuation between the classes of land and buildings has restated financial statement opening balances and comparative figures (refer Note 40). financial statement opening balances and comparative figures (refer Note 40). (c) Pipelines and other infrastructure

Pipelines and other infrastructure were valued by an independent valuer, Cardno Limited, as at 1 July Buildings 2008 using a depreciated replacement cost approach consistent with the requirements of Australian Office buildings and rental properties were valued by an independent valuer, State Valuation Services Accounting Standards. The carrying values of pipelines and other infrastructure were revalued as at the with an effective date of 30 June 2012. The independent valuations were performed using the fair value effective date of those valuations to reflect the fair values determined by the independent valuer. principles: Additions since the time of the independent valuation have been recorded at cost. • where an ‘active liquid market” is available for an asset, that market price represents the best evidence of an assets fair value; and Plant and equipment • where an “active liquid market” for the asset does not exist, the best indication of its fair value is All plant and equipment is measured at cost less accumulated depreciation in accordance with its” depreciated replacement cost”. Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector. Additions since the time of the independent valuations have been recorded at cost. A prior period allocation of a previous valuation between the classes of land and buildings has restated Work in progress financial statement opening balances and comparative figures (refer Note 40). Work in progress is measured at cost. Borrowing costs of $11,058,107 have been capitalised during the year (2011: $23,047,839).

32 33

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 65 66 Queensland Bulk Water Supply Authority FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 JUNE 30 ENDED YEAR THE FOR REPORT FINANCIAL Notes to and forming part of the Financial Statements 2011-12

17. Intangible assets

2012 Software Other Software work in Land easements purchased intangibles progress Total $000 $000 $000 $000 $000 Cost Balance at 1 July 2011 - 5,942 5,002 - 10,944 Transfer in - WaterSecure 29,457 860 - - 30,317 Acquisitions - - - 1,093 1,093 Disposal - (1,030) - - (1,030) Transfers between classes 3,173 1,075 - (1,093) 3,155 Balance at 30 June 2012 32,630 6,847 5,002 - 44,479 Amortisation Balance as at 1 July 2011 - (2,193) (594) - (2,787) Transfer in - WaterSecure - (140) - - (140) Disposal - 1,001 - - 1,001 Amortisation for the year (356) (1,328) (179) - (1,863) Balance at 30 June 2012 (356) (2,660) (773) - (3,789) Carrying amount at 30 June 2012 32,274 4,187 4,229 - 40,690

34

Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 17. Intangible (continued)

2011 Software Other Software work in Land easements purchased intangibles progress Total $000 $000 $000 $000 $000 Cost Balance at 1 July 2010 - 5,435 5,558 - 10,993 Acquisitions - - - 659 659 Disposal - (152) (556) - (708) Transfers between classes - 659 - (659) - Balance at 30 June 2011 - 5,942 5,002 - 10,944 Amortisation Balance as at 1 July 2010 - (1,248) (971) - (2,219) Disposal - 149 556 - 705 Amortisation for the year - (1,094) (179) - (1,273) Balance at 30 June 2011 - (2,193) (594) - (2,787) Carrying amount at 30 June 2011 - 3,749 4,408 - 8,157

35 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 17. Intangible (continued)

2011 Software Other Software work in Land easements purchased intangibles progress Total $000 $000 $000 $000 $000 Cost Balance at 1 July 2010 - 5,435 5,558 - 10,993 Acquisitions - - - 659 659 Disposal - (152) (556) - (708) Transfers between classes - 659 - (659) - Balance at 30 June 2011 - 5,942 5,002 - 10,944

ANNUAL REPORT 2011-12 REPORT ANNUAL SEQWATER AS TRADING AUTHORITY SUPPLY WATER BULK QUEENSLAND Amortisation Balance as at 1 July 2010 - (1,248) (971) - (2,219) Disposal - 149 556 - 705 Amortisation for the year - (1,094) (179) - (1,273) Balance at 30 June 2011 - (2,193) (594) - (2,787) Carrying amount at 30 June 2011 - 3,749 4,408 - 8,157

67 35 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

18. Impairment testing for cash generating unit The carrying amount of assets, including intangibles (refer Notes 16 and 17), allocated to the CGU are set out below: Note Carrying amount Recoverable Entity of assets amount Surplus $000 $000 $000 CGU 16,17 6,177,571 Less remaining deferred government grant 27 (384,586) Impairment Assessment 5,792,985 6,567,841 774,856

The Board has adopted the following methodologies and assumptions for impairment testing: • the Entity assumes that all revenues from the WGM will be paid in accordance with the Grid Contract Document; • the Entity has a single CGU for the purposes of impairment testing because it receives the majority of its revenue from one customer – the WGM; • the recoverable amount of the CGU was estimated based on the value in use and was determined with the assistance of independent experts; • the recoverable amount has been adjusted by the remaining amount of deferred government grant income (refer Note 27). AASB 136 Impairment, implies that the assumptions used in determining the recoverable amount are consistent with determining the carrying amount in relation to the calculation of impairment (‘like for like’ basis). The government grant was received for the purpose of reducing the cost of constructing WCRW’s assets; • the discount rate has been calculated by an independent expert using the WACC and CAPM framework. The Board has adopted a target gearing level of 70% consistent with advice from an independent expert with the assumption that surplus cash will be applied to debt repayment in the first instance and dividends thereafter, in accordance with the Board adopted Cash Management Policy; • the WACC provided by the QCA on non-drought assets assumes interest rate immunisation. This impacts both the earning rate and the impairment rate on non-drought assets because of reduced risk. This continues for the life of the model; • the model makes provision each year for receipt of a return on working capital in line with normal regulatory practice as part of the revenues received by the Entity; • cash flows are projected utilising the building blocks methodology recommended by the QCA, the Price Regulator, for both drought related and non-drought related assets and applied to the RAB. The prices used to determine revenues are based on a rate of return that is set by the QCA. Cash inflows are nominal cash flows incorporating inflation of 2.5% per annum; • cash inflows incorporate net revenue generated from regulated revenue as well as other revenue sources including hydro electric power generating revenue. These other revenue sources relate directly to the CGU based on management’s best estimate of future cash flow having regard to historical performance and contractual cash flows as well as expectations about possible variations in the amount and timing of those future cash flows; • cash flow forecasts are estimated for a period of 40 years using the building block approach, and then extrapolated in perpetuity utilising the Gordon’s Growth Model; • the pricing mechanism is based on the RAB which assumes a remaining useful life for depreciation purposes of 60 years for the initial tranche of assets and specific depreciation periods relating to drought assets, all transferred assets from local governments and state entities and ongoing capital expenditure post 1 July 2008; and • expenditure necessary to maintain or sustain the performance of the assets has been taken into account when estimating the net future cash flows as it is deemed maintenance in nature. The values assigned to the key assumptions represent the Entity’s assessment of future trends in the water industry and are based on both external sources and internal sources (historical data).

36

68 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

18. Impairment testing for cash generating unit 18. Impairment testing for cash generating unit (continued) The carrying amount of assets, including intangibles (refer Notes 16 and 17), allocated to the CGU are Inherent uncertainty set out below: The above estimates are particularly sensitive to changes in the prices set by the Price Regulator on Note Carrying amount Recoverable water assets. The bulk of the Entity’s revenues are determined annually by the Price Regulator under the Entity of assets amount Surplus provisions of the Market Rules. The current methodology includes provision to: $000 $000 $000 • retain the treatment of capital returns via a WACC rate for non-drought assets and a cost of debt CGU 16,17 6,177,571 return for drought assets; Less remaining deferred government • set a maximum allowable revenue for operating expenditure, including overheads, non-variable grant 27 (384,586) water treatment costs and allowable costs;

Impairment Assessment 5,792,985 6,567,841 774,856 • recover budgeted variable operating costs on a $ per ML basis, reflecting plant production costs for chemicals and electricity; and The Board has adopted the following methodologies and assumptions for impairment testing: • include capital expenditure into the RAB. • the Entity assumes that all revenues from the WGM will be paid in accordance with the Grid Contract Budget forecasts have been used as the basis for the modelling of cash flows for impairment testing Document; purposes as they are the most reasonable assumptions available at this time. • the Entity has a single CGU for the purposes of impairment testing because it receives the majority of In a letter dated 9 August 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply, its revenue from one customer – the WGM; approved the 2012-13 Grid Service Charges (GSCs) to be paid to the Entity for the provision of declared • the recoverable amount of the CGU was estimated based on the value in use and was determined water services. with the assistance of independent experts; In a letter dated 17 July 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply, • the recoverable amount has been adjusted by the remaining amount of deferred government grant confirmed that the QCA will not be required to investigate the GSCs for 2013-14, this will be a matter for income (refer Note 27). AASB 136 Impairment, implies that the assumptions used in determining the the Government, with support from the Interdepartmental Committee who will provide advice on a long- recoverable amount are consistent with determining the carrying amount in relation to the calculation term economic regulatory model for the SEQ water sector. of impairment (‘like for like’ basis). The government grant was received for the purpose of reducing There is inherent uncertainty with what form the pricing mechanism may take post 30 June 2013. the cost of constructing WCRW’s assets; • the discount rate has been calculated by an independent expert using the WACC and CAPM framework. The Board has adopted a target gearing level of 70% consistent with advice from an independent expert with the assumption that surplus cash will be applied to debt repayment in the 2012 2011 first instance and dividends thereafter, in accordance with the Board adopted Cash Management $000 $000 Policy; 19. Trade and other receivables • the WACC provided by the QCA on non-drought assets assumes interest rate immunisation. This Current impacts both the earning rate and the impairment rate on non-drought assets because of reduced Trade debtors 18,798 789 risk. This continues for the life of the model; Less: Provision for impairment (79) (49) • the model makes provision each year for receipt of a return on working capital in line with normal regulatory practice as part of the revenues received by the Entity; 18,719 740

• cash flows are projected utilising the building blocks methodology recommended by the QCA, the Price Regulator, for both drought related and non-drought related assets and applied to the RAB. The Other receivables - WGM 57,343 38,420 prices used to determine revenues are based on a rate of return that is set by the QCA. Cash inflows Other receivables - other 1,133 392 are nominal cash flows incorporating inflation of 2.5% per annum; 58,476 38,812 • cash inflows incorporate net revenue generated from regulated revenue as well as other revenue Total 77,195 39,552 sources including hydro electric power generating revenue. These other revenue sources relate directly to the CGU based on management’s best estimate of future cash flow having regard to historical performance and contractual cash flows as well as expectations about possible variations in the amount and timing of those future cash flows; • cash flow forecasts are estimated for a period of 40 years using the building block approach, and then extrapolated in perpetuity utilising the Gordon’s Growth Model; • the pricing mechanism is based on the RAB which assumes a remaining useful life for depreciation purposes of 60 years for the initial tranche of assets and specific depreciation periods relating to drought assets, all transferred assets from local governments and state entities and ongoing capital expenditure post 1 July 2008; and • expenditure necessary to maintain or sustain the performance of the assets has been taken into account when estimating the net future cash flows as it is deemed maintenance in nature. The values assigned to the key assumptions represent the Entity’s assessment of future trends in the water industry and are based on both external sources and internal sources (historical data).

36 37

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 69 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

22. Tax assets and liabilities (continued) 2012 2011 (b) Movement in temporary differences during the year $000 $000 Recognised 20. Inventories in profit or Acquired 2011 loss in equity 2012 Chemicals 1,196 1,185 $000 $000 $000 $000 Renewable energy certificates 1,430 - Property, plant and equipment (222,765) 10,224 (95,697) (308,238) Other 1,281 1,132 Borrowings (566) 113 - (453) Total 3,907 2,317 Provision for employee benefits 2,690 668 - 3,358 Superannuation 5 - - 5 21. Other current assets Tax losses 10,091 2,925 - 13,016 Deposit paid 7,972 11,166 Government grant 293 3,841 118,790 122924 Prepayments 1,992 1,421 Accrued expenses 368 (86) 22 304 Total 9,964 12,587 Other items 66 (115) (85) (134) Total (209,818) 17,570 23,030 169,218 22. Tax assets and liabilities (a) Recognised deferred tax assets and liabilities Recognised Deferred tax assets and liabilities are attributable to the following: in profit or Acquired 2010 loss in equity 2011 2012 Assets Liabilities Net $000 $000 $000 $000

$000 $000 $000 Property, plant and equipment (206,194) (4,739) (11,832) (222,765) Property, plant and equipment - (308,238) (308,238) Borrowings (678) 112 - (566) Borrowings - (453) (453) Provision for employee benefits 2,065 625 - 2,690 Provision for employee benefits 3,358 - 3,358 Superannuation 5 - - 5 Superannuation 5 - 5 Tax losses 9,993 98 - 10,091 Tax losses 13,016 - 13,016 Government grant 320 (27) - 293 Government grant 122,924 - 122,924 Accrued expenses 297 71 - 368 Accrued expenses 304 - 304 Other items 87 (21) - 66 Other items 27 (161) (134) Total (194,105) (3,881) (11,832) (209,818) Total tax assets (liabilities) 139,634 (308,852) (169,218)

(c) Tax losses 2011 Assets Liabilities Net A DTA is recognised for unused tax losses to the extent that it is probable that future taxable profits will

$000 $000 $000 be available against which they can be utilised. DTA are reviewed at each reporting date and are Property, plant and equipment - (222,765) (222,765) reduced to the extent that it is no longer probable that the related tax benefit will be realised. Borrowings - (566) (566) The Board has decided not to recognise a DTA for the tax losses transferred to the Entity from Provision for employee benefits 2,690 - 2,690 WaterSecure on 1 July 2011 on the basis it is not probable that the related tax benefit will be realised. Superannuation 5 - 5 The resulting entry is an adjustment to the opening balances for the acquisition of WaterSecure, the DTA is reduced by $112,104,534 and the contributed equity is also reduced by $112,104,534. Tax losses 10,091 - 10,091 Government grant 293 - 293 On 28 September 2011 the NTER granted approval to the Entity to utilise the transferred NTER losses from WaterSecure. Utilisation of the WaterSecure tax losses to offset future taxable income is subject to Accrued expenses 368 - 368 the relevant loss limitation factors. As at 30 June 2012, the balance of these tax losses carried forward is Other items 66 - 66 $373,681,897. Should the probability requirement in AASB 112 Income Taxes be satisfied in future Total tax assets (liabilities) 13,513 (223,331) (209,818) reporting periods, a DTA will be recognised and bought to account.

38 39

70 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

22. Tax assets and liabilities (continued) 2012 2011 (b) Movement in temporary differences during the year $000 $000 Recognised 20. Inventories in profit or Acquired 2011 loss in equity 2012 Chemicals 1,196 1,185 $000 $000 $000 $000 Renewable energy certificates 1,430 - Property, plant and equipment (222,765) 10,224 (95,697) (308,238) Other 1,281 1,132 Borrowings (566) 113 - (453) Total 3,907 2,317 Provision for employee benefits 2,690 668 - 3,358 Superannuation 5 - - 5 21. Other current assets Tax losses 10,091 2,925 - 13,016 Deposit paid 7,972 11,166 Government grant 293 3,841 118,790 122924 Prepayments 1,992 1,421 Accrued expenses 368 (86) 22 304 Total 9,964 12,587 Other items 66 (115) (85) (134) Total (209,818) 17,570 23,030 169,218 22. Tax assets and liabilities (a) Recognised deferred tax assets and liabilities Recognised Deferred tax assets and liabilities are attributable to the following: in profit or Acquired 2010 loss in equity 2011 2012 Assets Liabilities Net $000 $000 $000 $000

$000 $000 $000 Property, plant and equipment (206,194) (4,739) (11,832) (222,765) Property, plant and equipment - (308,238) (308,238) Borrowings (678) 112 - (566) Borrowings - (453) (453) Provision for employee benefits 2,065 625 - 2,690 Provision for employee benefits 3,358 - 3,358 Superannuation 5 - - 5 Superannuation 5 - 5 Tax losses 9,993 98 - 10,091 Tax losses 13,016 - 13,016 Government grant 320 (27) - 293 Government grant 122,924 - 122,924 Accrued expenses 297 71 - 368 Accrued expenses 304 - 304 Other items 87 (21) - 66 Other items 27 (161) (134) Total (194,105) (3,881) (11,832) (209,818) Total tax assets (liabilities) 139,634 (308,852) (169,218)

(c) Tax losses 2011 Assets Liabilities Net A DTA is recognised for unused tax losses to the extent that it is probable that future taxable profits will

$000 $000 $000 be available against which they can be utilised. DTA are reviewed at each reporting date and are Property, plant and equipment - (222,765) (222,765) reduced to the extent that it is no longer probable that the related tax benefit will be realised. Borrowings - (566) (566) The Board has decided not to recognise a DTA for the tax losses transferred to the Entity from Provision for employee benefits 2,690 - 2,690 WaterSecure on 1 July 2011 on the basis it is not probable that the related tax benefit will be realised. Superannuation 5 - 5 The resulting entry is an adjustment to the opening balances for the acquisition of WaterSecure, the DTA is reduced by $112,104,534 and the contributed equity is also reduced by $112,104,534. Tax losses 10,091 - 10,091 Government grant 293 - 293 On 28 September 2011 the NTER granted approval to the Entity to utilise the transferred NTER losses from WaterSecure. Utilisation of the WaterSecure tax losses to offset future taxable income is subject to Accrued expenses 368 - 368 the relevant loss limitation factors. As at 30 June 2012, the balance of these tax losses carried forward is Other items 66 - 66 $373,681,897. Should the probability requirement in AASB 112 Income Taxes be satisfied in future Total tax assets (liabilities) 13,513 (223,331) (209,818) reporting periods, a DTA will be recognised and bought to account.

38 39

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 71 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

2012 2011 $000 $000 23. Cash and cash equivalents

(a) Cash and cash equivalents Cash on hand 3 3 Bank balances 66,950 546 Short term deposits with QTC 55,688 69,014 Cash and cash equivalents in the Statement of Cash Flows 122,641 69,563

(b) Reconciliation of cash flows from operating activities Cash flows from operating activities Profit /(Loss) for the year (46,939) 10,574 Adjustments for: Depreciation 148,807 41,731 Amortisation of intangible assets 1,863 1,273 Loss on sale of property, plant and equipment 336 1,644 Income tax expense / (credit) (17,569) 3,881 Revaluation decrement 42,170 - Doubtful debts expenses 31 9 Change in assets and liabilities Change in trade and other receivables (23,983) (8,149) Change in inventories (1,590) 56 Change in GST input tax credits receivable 450 (183) Change in repayment (571) (373) Change in trade and other payables 9,991 4,760 Change in provisions and employee benefits 1,764 2,003 Change in unearned revenue (11,233) 23,963 Change in interest payable 39,283 (2,252) Change in GST payable 2,601 418 Net cash from operating activities 145,411 79,355

(c) Funding facilities Drawn 2,955,695 118,541 Unused 11,955 5,080 Total Facility 2,967,650 123,621

The State Borrowing Program funding application is submitted annually by the Entity and is approved by the Queensland Government. The majority of this funding is for the acquisitions of WaterSecure and Wyaralong Dam. The funding facility is maintained by QTC.

(d) Credit standby arrangement Drawn - - Unused 60,000 60,000 Total Facility 60,000 60,000

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72 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

2012 2011 2012 2011 $000 $000 $000 $000 23. Cash and cash equivalents 24. Interest bearing liabilities

(a) Cash and cash equivalents Current Cash on hand 3 3 QTC - Loans interest payable 80,726 30,193 Bank balances 66,950 546 QTC - Redraw facility fees 66 47 Short term deposits with QTC 55,688 69,014 QTC - Market valuation at acquisition (377) (376) Cash and cash equivalents in the Statement of Cash Flows 122,641 69,563 Total 80,415 29,864

(b) Reconciliation of cash flows from operating activities Non current Cash flows from operating activities QTC - Loans 5,488,377 2,544,327 Profit /(Loss) for the year (46,939) 10,574 QTC - Redraw Facility (529,752) (429,752) Adjustments for: QTC - Market valuation at acquisition (1,133) (1,510) Depreciation 148,807 41,731 Total 4,957,492 2,113,065 Amortisation of intangible assets 1,863 1,273

Loss on sale of property, plant and equipment 336 1,644 The amount in the Redraw Facility offsets the Entity’s debt balance and is available for use by the Entity Income tax expense / (credit) (17,569) 3,881 at short notice (refer to Note 3(b)). Revaluation decrement 42,170 - No assets have been pledged as security for any liabilities. Doubtful debts expenses 31 9 All borrowings are in Australian dollar denominated amounts and carried at amortised cost, interest being Change in assets and liabilities expensed as it accrues, except for assets under construction. The amount of $11,058,107 (2011: Change in trade and other receivables (23,983) (8,149) $23,047,839) has been capitalised during current year. There have been no defaults or breaches of the Change in inventories (1,590) 56 loan agreement during the year. Change in GST input tax credits receivable 450 (183) Change in repayment (571) (373) Change in trade and other payables 9,991 4,760 Change in provisions and employee benefits 1,764 2,003 Change in unearned revenue (11,233) 23,963 Change in interest payable 39,283 (2,252) Change in GST payable 2,601 418 Net cash from operating activities 145,411 79,355

(c) Funding facilities Drawn 2,955,695 118,541 Unused 11,955 5,080 Total Facility 2,967,650 123,621

The State Borrowing Program funding application is submitted annually by the Entity and is approved by the Queensland Government. The majority of this funding is for the acquisitions of WaterSecure and Wyaralong Dam. The funding facility is maintained by QTC.

(d) Credit standby arrangement Drawn - - Unused 60,000 60,000 Total Facility 60,000 60,000

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 73 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

24. Interest bearing liabilities (continued) Balances of outstanding loans were as follows: Carrying amount Fair Value $000 $000 QTC – Water Infrastructure Debt Pool 198,967 221,122 QTC – CSP Pre 1 July 08 Debt Pool 538,951 614,265 QTC – CSP Post 1 July 08 Debt Pool 615,158 737,555 QTC – EMA Debt Pool 46,525 52,162 QTC – Hinze Dam debt Pool 453,728 502,124 QTC – BCC Aquifer Debt Pool 54,662 61,449 QTC – Caboolture Aquifer Debt Pool 43,969 48,890 QTC – Cedar Grove / Bromelton Debt Pool 73,360 83,636 QTC – Esk Pipeline Off-Stream Storage Debt Pool 6,635 7,511 QTC – Coominya Pipeline Off-Stream Storage Debt Pool 6,708 7,592 QTC – Enoggera WTP Upgrade Debt Pool 11,995 13,445 QTC – Fluoridation Stage 2 Debt Pool 13,654 15,136 QTC – Wyaralong Dam WTP Debt Pool 10,602 11,682 QTC – PRW Infrastructure Assets Debt Pool 1,617,642 1,817,430 QTC – PRW Loan Debt Pool 375,199 436,443 QTC – DESAL Tugun Infrastructure Assets Debt Pool 592,449 665,993 QTC – Wyaralong Dam Debt Pool 331,761 367,204 QTC – Wyaralong Dam Access Road Debt Pool 47,386 52,544 Total 5,039,351 5,716,183

Note Loans interest payable 80,726 Loans principal 5,488,377 Redraw Facility (529,752) Total 5 5,039,351

The Weighted Average Borrowing Rate for QTC borrowings as at 30 June 2012 is 6.8%. Interest payments are made quarterly in arrears at rates ranging from 6.02% to 8.55%. The fair value of the borrowings as at 30 June 2012 was determined by QTC to be $5,716,183,340 (2011: $2,261,369,215). The fair value is the amount owing on the debt if it were to be paid out at 30 June 2012. The fair value is calculated using discounted cash flow analysis and the effective interest rate (refer to Note 29(e)). No fair value adjustment was made to the carrying amount of the borrowings during the year (2011: $0). Management has no intention to repay the debt earlier than the existing term.

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74 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

24. Interest bearing liabilities (continued) Balances of outstanding loans were as follows: 2012 2011 Carrying amount Fair Value $000 $000 $000 $000 25. Employee benefits QTC – Water Infrastructure Debt Pool 198,967 221,122 Current QTC – CSP Pre 1 July 08 Debt Pool 538,951 614,265 Salaries and wages accrued 1,990 1,946 QTC – CSP Post 1 July 08 Debt Pool 615,158 737,555 Liability for long service leave 331 322 QTC – EMA Debt Pool 46,525 52,162 Liability for annual leave 3,687 3,043 QTC – Hinze Dam debt Pool 453,728 502,124 Total 6,008 5,311 QTC – BCC Aquifer Debt Pool 54,662 61,449 Non current QTC – Caboolture Aquifer Debt Pool 43,969 48,890 Liability for long service leave 6,849 5,890 QTC – Cedar Grove / Bromelton Debt Pool 73,360 83,636 Liability for annual leave 1,746 1,640 QTC – Esk Pipeline Off-Stream Storage Debt Pool 6,635 7,511 Total 8,595 7,530 QTC – Coominya Pipeline Off-Stream Storage Debt Pool 6,708 7,592 Refer to Note 9 for details of the amount of superannuation contribution paid by the Entity to the QTC – Enoggera WTP Upgrade Debt Pool 11,995 13,445 superannuation funds in respect of this year for the benefit of the employees. QTC – Fluoridation Stage 2 Debt Pool 13,654 15,136

QTC – Wyaralong Dam WTP Debt Pool 10,602 11,682 Local government superannuation scheme – LG Super QTC – PRW Infrastructure Assets Debt Pool 1,617,642 1,817,430 The Entity contributes to LG Super (incorporating City Super) for its employees. LG Super is a Multi- QTC – PRW Loan Debt Pool 375,199 436,443 employer Plan as defined in the Australian Accounting Standard AASB 119 Employee Benefits. QTC – DESAL Tugun Infrastructure Assets Debt Pool 592,449 665,993 The Queensland Local Government Superannuation Board, the trustee of LG Super, advised that LG QTC – Wyaralong Dam Debt Pool 331,761 367,204 Super was a complying superannuation scheme for the purpose of the Commonwealth Superannuation QTC – Wyaralong Dam Access Road Debt Pool 47,386 52,544 Industry (Supervision) Regulations 1994 (SIS Regulations). Total 5,039,351 5,716,183 LG Super has two elements referred to as the DBF and the ABF. The ABF is a defined contribution scheme as defined in AASB 119. The Entity has no liability to or interest in the ABF other than the Note payment of the statutory contributions as required by the SIS Regulations. Loans interest payable 80,726 The DBF is a defined benefit plan as defined in AASB 119. The Entity is not able to account for the DBF Loans principal 5,488,377 as a defined benefit plan in accordance with AASB 119 because LG Super is unable to account to the Redraw Facility (529,752) Entity for its proportionate share of the defined benefits obligation plan assets and costs. Total 5 5,039,351 Any amount by which either fund is over or under funded would only affect future benefits and contributions to the DBF, and is not an asset or liability of the Entity. Accordingly there is no recognition in the financial statements of any over or under funding of LG Super. The Weighted Average Borrowing Rate for QTC borrowings as at 30 June 2012 is 6.8%. Interest The audited general purpose financial report of LG Super as at 30 June 2011 (the most recent available) payments are made quarterly in arrears at rates ranging from 6.02% to 8.55%. which was not subject to any audit qualification, indicates that the assets of LG Super are sufficient to The fair value of the borrowings as at 30 June 2012 was determined by QTC to be $5,716,183,340 (2011: meet the vested benefits. $2,261,369,215). The fair value is the amount owing on the debt if it were to be paid out at 30 June 2012. The fair value is calculated using discounted cash flow analysis and the effective interest rate (refer to Note 29(e)). No fair value adjustment was made to the carrying amount of the borrowings during the year (2011: $0). Management has no intention to repay the debt earlier than the existing term.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 75 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

25. Employee benefits (continued) Local government superannuation scheme – LG Super (continued) The trustee of LG Super provided the Funding and Solvency Certificate for the LG Super (incorporating City Super), as prepared by the independent actuary appointed by the Queensland Local Government Superannuation Board. The Certificate confirmed that at 1 July 2011 LG Super was “solvent” as described in the SIS Regulations 9.06 and 9.15 at the effective date of the certificate, which means the Minimum Requisite Benefits, were covered by the net realisable value of the LG Super’s assets. The Benefit Certificate covers the period from 1 July 2011 to 30 June 2016.

City defined benefit fund (LG Super sub-fund) 2012 2011 $000 $000 (a) Reconciliation of the present value of the defined benefit obligation Present value of defined benefits obligations at beginning of the year 1,718 1,602 Current service cost 40 41 Interest cost 78 78 Contributions by plan participants 19 17 Actuarial losses 225 6 Benefits paid - - Taxes and premiums paid (15) (26) Present value of defined benefit obligations at end of the year 2,065 1,718 (b) Reconciliation of the fair value of plan assets Fair value of plan assets at beginning of the year 1,659 1,361 Expected return on plan assets 109 95 Actuarial gains/(losses) (35) 54 Employer contributions 80 158 Contributions by plan participants 19 17 Benefits paid - - Taxes and premiums paid (15) (26) Fair value of plan assets at end of the year 1,817 1,659 (c) Reconciliation of the assets and liabilities Defined benefit obligation (includes contributions tax provision) 2,065 1,718 Fair value of plan assets (1,817) (1,659) Net superannuation liability 248 59

44

76 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

25. Employee benefits (continued) Local government superannuation scheme – LG Super (continued) 2012 2011 The trustee of LG Super provided the Funding and Solvency Certificate for the LG Super (incorporating $000 $000 City Super), as prepared by the independent actuary appointed by the Queensland Local Government 25. Employee benefits (continued) Superannuation Board. The Certificate confirmed that at 1 July 2011 LG Super was “solvent” as described in the SIS Regulations 9.06 and 9.15 at the effective date of the certificate, which means the (d) Expense recognised Minimum Requisite Benefits, were covered by the net realisable value of the LG Super’s assets. The Service cost 40 41 Benefit Certificate covers the period from 1 July 2011 to 30 June 2016. Interest cost 78 78 Expected return on assets (109) (95) City defined benefit fund (LG Super sub-fund) Actuarial losses/(gains) 260 (48) 2012 2011 Superannuation expense/(income) 269 (24) $000 $000 (e) Plan assets (a) Reconciliation of the present value of the defined benefit obligation The percentage invested in each asset class at the reporting date: Present value of defined benefits obligations at Australian equity 24% 33% beginning of the year 1,718 1,602 International equity 24% 23% Current service cost 40 41 Fixed income 12% 11% Interest cost 78 78 Property 15% 16% Contributions by plan participants 19 17 Alternatives/Other 25% 12% Actuarial losses 225 6 Cash 0% 5% Benefits paid - - Taxes and premiums paid (15) (26) (f) Fair value of plan assets Present value of defined benefit obligations at end of the year 2,065 1,718 The fair value of plan assets excludes amounts relating to any of the Entity’s own financial instruments or any property occupied by, or other assets used by the Entity. (b) Reconciliation of the fair value of plan assets (g) Expected rate of return on plan assets Fair value of plan assets at beginning of the year 1,659 1,361 The expected return on assets assumption is determined by weighting the expected long-term return Expected return on plan assets 109 95 for each asset class by the target allocation of assets to each asset class and allowing for the Actuarial gains/(losses) (35) 54 correlations of the investment returns between asset classes. The returns used for each class are Employer contributions 80 158 net of investment tax and investment fees. An allowance for asset-based administration expenses has also been deducted from the expected return. Contributions by plan participants 19 17 Benefits paid - - (h) Actual return on plan assets Taxes and premiums paid (15) (26) Actual return on plan assets 74 149 Fair value of plan assets at end of the year 1,817 1,659 (i) Principal actuarial assumptions at the reporting date (c) Reconciliation of the assets and liabilities Defined benefit obligation (includes contributions tax Discount rate 3.5% 4.9% provision) 2,065 1,718 Expected rate of return on plan assets 7.0% 6.8% Fair value of plan assets (1,817) (1,659) Expected salary increase rate 4.0% 4.0% Net superannuation liability 248 59 (j) Historical Information

Present value of defined benefit obligation 2,065 1,718 Fair value of plan assets 1,817 1,659 Deficit in plan 248 59 Experience adjustments (gains)/losses – plan assets 35 (54) Experience adjustments (gains)/losses – plan liabilities 84 (22)

Other adjustments losses on – change in assumptions 141 28

(k) Expected contributions Expected employer contributions for 2012-13 are $37,000.

44 45

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 77 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

2012 2011 $000 $000 26. Trade and other payables Current Trade and other payables 50,751 29,103

GST receivable (1,604) (2,054) GST payable 5,673 3,071 4,069 1,017 Total 54,820 30,120

Non current Other payables 682 816 Total 682 816

27. Other liabilities Current Unearned revenue - WGM 23,891 23,920 Unearned revenue – government grant 11,382 - Unearned revenue - other 350 171 Security deposits - 21 Other payables 103 103 Total 35,726 24,215

Non current Unearned revenue – government grant 373,204 - Total 373,204 -

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78 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

2012 2011 28. Asset revaluation surplus by class

$000 $000 2012 Land Building Infrastructure Total 26. Trade and other payables $000 $000 $000 $000 Current Balance at 1 July 2011 61,116 1,397 200,134 262,647 Trade and other payables 50,751 29,103 Transfer between classes - (1,528) 1,528 - Revaluation increments - 6,197 - 6197 GST receivable (1,604) (2,054) Reversal of prior year revaluation increments (2,514) - - (2,514) GST payable 5,673 3,071 Asset revaluation on 4,069 1,017 disposal - 314 - 314 Total 54,820 30,120 Deferred tax liabilities 754 (1,859) - (1,105) Balance at 30 June 2012 59,356 4,521 201,662 265,539 Non current Other payables 682 816 2011 Land Building Infrastructure Total Total 682 816 $000 $000 $000 $000 Balance at 1 July 2010 61,116 1,397 211,966 274,479 27. Other liabilities Transfer between classes - - - - Current Revaluation increments - - - - Unearned revenue - WGM 23,891 23,920 Asset revaluation on disposal - - - - Unearned revenue – government grant 11,382 - Deferred tax liabilities - - (11,832) (11,832) Unearned revenue - other 350 171 Balance at 30 June 2011 61,116 1,397 200,134 262,647 Security deposits - 21 Other payables 103 103 Total 35,726 24,215

Non current Unearned revenue – government grant 373,204 - Total 373,204 -

46 47

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 79 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

29. Financial Instruments 29. Financial instruments (continued) (a) Categorisation of financial instruments (c) Liquidity risk The Entity has the following categories of financial assets and financial liabilities: The Entity is exposed to liquidity risk in respect of its payables and borrowings from QTC. 2012 2011 The following tables set out the liquidity risk of financial liabilities held by the Entity. It represents the Category Note $000 $000 contractual maturity of financial liabilities, calculated based on cash flows relating to the repayment of the principal amount outstanding at balance date. Financial assets Cash and cash equivalents 23 122,641 69,563 2012 Payable in Total Receivables 19 77,195 39,552 Financial liabilities <1 year 1-5 years >5 years Total 199,836 109,115 $000 $000 $000 $000 QTC borrowings - loans 342,259 1,369,982 5,180,932 6,893,173 Trade and other Financial liabilities payables 54,821 638 43 55,502 Payables 26 55,502 30,936 Total 397,080 1,370,620 5,180,975 6,948,675 Other financial liabilities – QTC 24 5,039,351 2,144,768 borrowing Total 5,094,853 2,175,704 2011 Payable in Total (b) Credit risk exposure Financial liabilities <1 year 1-5 years >5 years The maximum exposure to credit risk at balance date in relation to each class of recognised financial $000 $000 $000 $000 asset is the gross carrying amount of those assets inclusive of any provisions for impairment. QTC borrowings - loans 133,632 533,421 2,300,093 2,967,146 The following table represents the Entity’s maximum exposure to credit risk based on contractual Trade and other amounts net of any allowances: payables 30,120 740 76 30,936 Maximum exposure to credit risk Total 163,752 534,161 2,300,169 2,998,082 Category Financial liabilities (d) Market risk Guarantee 32(c) 200 200 The Entity does not trade in foreign currency and is not materially exposed to commodity price ranges. Total 200 200 The Entity is exposed to interest rate risk through borrowings and investment with QTC and cash deposited in interest bearing accounts.

Sensitivity analysis Financial Assets The following sensitivity analysis depicts the outcome to profit and loss if interest rates change by +/- The carrying amount of receivables represents the maximum exposure to credit risk. As such, 1% from the year-end rates applicable to the Entity’s financial assets and liabilities. The calculations receivables are not included in the above disclosure. assume that the rate would be held constant over the next financial year, with the change occurring at No collateral is held as security and no credit enhancements relate to financial assets held by the Entity. the beginning of that year. This is mainly attributable to the Entity’s exposure to variable interest rates No financial assets and financial liabilities have been offset in the Statement of Financial Position. on its borrowings from QTC. The method of calculating any provisional impairment for risk is based on past experience. The recognised impairment provision for receivables is $79,100 for the current year (2011: $48,566). 2012 - 1% + 1% Net carrying No financial assets have had their terms renegotiated so as to prevent them from being past due or amounts Profit Equity Profit Equity impaired, and are stated at the carrying amount as indicated. $000 $000 $000 $000 $000 Ageing past due, but not impaired, as well as impaired financial assets are disclosed in the following Cash and cash equivalents 122,641 (1,226) (1,226) 1,226 1,226 tables: QTC borrowings - loans 5,039,351 2,950 2,950 (2,740) (2,740) 2012 2011 Overall effect on profit and equity 1,724 1,724 (1,514) (1,514)

Gross Impairment Gross Impairment

Receivables $000 $000 $000 $000 2011 - 1% + 1% Not past due 76,821 - 39,240 - Net carrying Past due 31- 60 days 198 - 138 - amounts Profit Equity Profit Equity Past due 61- 90 days 18 - 43 - $000 $000 $000 $000 $000 More than 90 days 237 (79) 180 (49) Cash and cash equivalents 69,563 (696) (696) 696 696 Total 77,274 (79) 39,601 (49) QTC borrowings - loans 2,144,768 1,635 1,635 (1,635) (1,635) Overall effect on profit and equity 939 939 (939) (939)

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80 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

29. Financial Instruments 29. Financial instruments (continued) (a) Categorisation of financial instruments (c) Liquidity risk The Entity has the following categories of financial assets and financial liabilities: The Entity is exposed to liquidity risk in respect of its payables and borrowings from QTC. 2012 2011 The following tables set out the liquidity risk of financial liabilities held by the Entity. It represents the Category Note $000 $000 contractual maturity of financial liabilities, calculated based on cash flows relating to the repayment of the principal amount outstanding at balance date. Financial assets Cash and cash equivalents 23 122,641 69,563 2012 Payable in Total Receivables 19 77,195 39,552 Financial liabilities <1 year 1-5 years >5 years Total 199,836 109,115 $000 $000 $000 $000 QTC borrowings - loans 342,259 1,369,982 5,180,932 6,893,173 Trade and other Financial liabilities payables 54,821 638 43 55,502 Payables 26 55,502 30,936 Total 397,080 1,370,620 5,180,975 6,948,675 Other financial liabilities – QTC 24 5,039,351 2,144,768 borrowing Total 5,094,853 2,175,704 2011 Payable in Total (b) Credit risk exposure Financial liabilities <1 year 1-5 years >5 years The maximum exposure to credit risk at balance date in relation to each class of recognised financial $000 $000 $000 $000 asset is the gross carrying amount of those assets inclusive of any provisions for impairment. QTC borrowings - loans 133,632 533,421 2,300,093 2,967,146 The following table represents the Entity’s maximum exposure to credit risk based on contractual Trade and other amounts net of any allowances: payables 30,120 740 76 30,936 Maximum exposure to credit risk Total 163,752 534,161 2,300,169 2,998,082 Category Financial liabilities (d) Market risk Guarantee 32(c) 200 200 The Entity does not trade in foreign currency and is not materially exposed to commodity price ranges. Total 200 200 The Entity is exposed to interest rate risk through borrowings and investment with QTC and cash deposited in interest bearing accounts.

Sensitivity analysis Financial Assets The following sensitivity analysis depicts the outcome to profit and loss if interest rates change by +/- The carrying amount of receivables represents the maximum exposure to credit risk. As such, 1% from the year-end rates applicable to the Entity’s financial assets and liabilities. The calculations receivables are not included in the above disclosure. assume that the rate would be held constant over the next financial year, with the change occurring at No collateral is held as security and no credit enhancements relate to financial assets held by the Entity. the beginning of that year. This is mainly attributable to the Entity’s exposure to variable interest rates No financial assets and financial liabilities have been offset in the Statement of Financial Position. on its borrowings from QTC. The method of calculating any provisional impairment for risk is based on past experience. The recognised impairment provision for receivables is $79,100 for the current year (2011: $48,566). 2012 - 1% + 1% Net carrying No financial assets have had their terms renegotiated so as to prevent them from being past due or amounts Profit Equity Profit Equity impaired, and are stated at the carrying amount as indicated. $000 $000 $000 $000 $000 Ageing past due, but not impaired, as well as impaired financial assets are disclosed in the following Cash and cash equivalents 122,641 (1,226) (1,226) 1,226 1,226 tables: QTC borrowings - loans 5,039,351 2,950 2,950 (2,740) (2,740) 2012 2011 Overall effect on profit and equity 1,724 1,724 (1,514) (1,514)

Gross Impairment Gross Impairment

Receivables $000 $000 $000 $000 2011 - 1% + 1% Not past due 76,821 - 39,240 - Net carrying Past due 31- 60 days 198 - 138 - amounts Profit Equity Profit Equity Past due 61- 90 days 18 - 43 - $000 $000 $000 $000 $000 More than 90 days 237 (79) 180 (49) Cash and cash equivalents 69,563 (696) (696) 696 696 Total 77,274 (79) 39,601 (49) QTC borrowings - loans 2,144,768 1,635 1,635 (1,635) (1,635) Overall effect on profit and equity 939 939 (939) (939)

48 49

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 81 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

29. Financial instruments (continued) (e) Fair value 2012 2011 The recognised fair values of financial assets and liabilities are classified according to the following fair $000 $000 value hierarchy that reflects the significance of the inputs used in making these measurements: 30. Operating leases Level 1 - fair values that reflect unadjusted quoted prices in active markets for identical assets/liabilities; (a) Leases as lessee Level 2 - fair values that are based on inputs that are directly or indirectly observable for the assets/ Non-cancellable operating lease rentals are payable as follows: liabilities (other than unadjusted quoted prices); and Less than one year 864 290 Level 3 - fair values that are derived from data not observable in a market. Between one and five years 1,838 1,183 According to the above hierarchy, the fair values of each class of asset/liabilities recognised at fair value More than five years 1,622 3,602 are as follows: Total 4,324 5,075 Class Classification according to fair value hierarchy 2012 Total The Entity leases a number of office accommodations under operating leases. Lease payments are Level 1 Level 2 Level 3 carrying amount generally fixed, but with inflation escalation clauses on which contingent rentals are determined. $000 $000 $000 $000

Financial assets (b) Leases as lessor Cash and cash equivalents 122,641 - - 122,641 Non-cancellable operating lease rentals are receivable as follows: Receivables 77,195 - - 77,195 Total 199,836 - - 199,836 Less than one year 705 919 Between one and five years 1,602 1,881 Financial liabilities More than five years 1,055 1,137 Payables 55,502 - - 55,502 Total 3,362 3,937 QTC borrowings 5,716,183 - - 5,716,183 The Entity leases out its rental properties, office space, grazing land and recreation facilities. The rent for Total 5,771,685 - - 5,771,685 rental properties that is paid to the Entity is adjusted to market rent at regular intervals. Other lease payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. The carrying amounts of all financial assets and financial liabilities, except the borrowings from the QTC are representative of their fair value. The fair value of the QTC borrowings, calculated using discounted cash flow analysis and the effective interest rate, is disclosed below (refer to Note 24): 31. Capital and other commitments 2012 Notes Carrying amount Fair value Contracted but not yet provided for and payable: $000 $000 Within one year 104,676 52,640 QTC borrowings - loans 5,039,351 5,716,183 One year and no later than five years 23,503 38,133 QTC borrowings - working capital facility - - More than five years - - Total 5,039,351 5,716,183 Total 128,179 90,773

2011 Carrying amount Fair value $000 $000 QTC borrowings - loans 2,144,768 2,261,369 QTC borrowings - working capital facility - - Total 2,144,768 2,261,369

50 51

82 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

29. Financial instruments (continued) (e) Fair value 2012 2011 The recognised fair values of financial assets and liabilities are classified according to the following fair $000 $000 value hierarchy that reflects the significance of the inputs used in making these measurements: 30. Operating leases Level 1 - fair values that reflect unadjusted quoted prices in active markets for identical assets/liabilities; (a) Leases as lessee Level 2 - fair values that are based on inputs that are directly or indirectly observable for the assets/ Non-cancellable operating lease rentals are payable as follows: liabilities (other than unadjusted quoted prices); and Less than one year 864 290 Level 3 - fair values that are derived from data not observable in a market. Between one and five years 1,838 1,183 According to the above hierarchy, the fair values of each class of asset/liabilities recognised at fair value More than five years 1,622 3,602 are as follows: Total 4,324 5,075 Class Classification according to fair value hierarchy 2012 Total The Entity leases a number of office accommodations under operating leases. Lease payments are Level 1 Level 2 Level 3 carrying amount generally fixed, but with inflation escalation clauses on which contingent rentals are determined. $000 $000 $000 $000

Financial assets (b) Leases as lessor Cash and cash equivalents 122,641 - - 122,641 Non-cancellable operating lease rentals are receivable as follows: Receivables 77,195 - - 77,195 Total 199,836 - - 199,836 Less than one year 705 919 Between one and five years 1,602 1,881 Financial liabilities More than five years 1,055 1,137 Payables 55,502 - - 55,502 Total 3,362 3,937 QTC borrowings 5,716,183 - - 5,716,183 The Entity leases out its rental properties, office space, grazing land and recreation facilities. The rent for Total 5,771,685 - - 5,771,685 rental properties that is paid to the Entity is adjusted to market rent at regular intervals. Other lease payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. The carrying amounts of all financial assets and financial liabilities, except the borrowings from the QTC are representative of their fair value. The fair value of the QTC borrowings, calculated using discounted cash flow analysis and the effective interest rate, is disclosed below (refer to Note 24): 31. Capital and other commitments 2012 Notes Carrying amount Fair value Contracted but not yet provided for and payable: $000 $000 Within one year 104,676 52,640 QTC borrowings - loans 5,039,351 5,716,183 One year and no later than five years 23,503 38,133 QTC borrowings - working capital facility - - More than five years - - Total 5,039,351 5,716,183 Total 128,179 90,773

2011 Carrying amount Fair value $000 $000 QTC borrowings - loans 2,144,768 2,261,369 QTC borrowings - working capital facility - - Total 2,144,768 2,261,369

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 83 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

32. Contingencies (a) Litigation in progress A claim has been made against the Entity by a sub-contractor for damage to the amount of $9 million by reason of the wrongful repudiation of the sub-contractor’s Sub Alliance Agreement. This amount has not changed since 30 June 2010. The Entity believes it has a valid defence to the claim and as such, the claim has not been recognised.

(b) Insurance claims The Entity’s insurance claim in response to the January 2011 South East Queensland flood is in progress. The Entity is pursuing insurance for costs incurred to date and estimates for the restoration of asset damage due to the flood. The actual amount to be received from the underwriters is dependent on their review of the submitted claim and the ongoing completion of engineering assessments. Four insurance claims totalling $21.77 million plus prolongation costs for the Gold Coast Desalination Plant in respect of rectification work yet to be finalised. Out of the total claims, $15.18 million has been received. Insurance claims totalling $24.84 million have been submitted in respect of WCRWS-Gibson Island. The claims are in relation to professional indemnity and material damages. $5 million has been received. Insurance claims have also been submitted for the WCRWS-Eastern Pipeline for $8.5 million in relation to professional indemnity. No assets have been recognised in the financial statements for the above insurance claims.

(c) Financial Guarantees A guarantee was provided in 2010 to Stanwell Corporation Limited, in respect of the operation and maintenance agreement of the Wivenhoe Hydro Plant. The amount guaranteed was $200,000. No defaults have occurred and the Entity does not expect that the guarantee will be called upon. The guarantee is not recognised on the Statement of Financial Position as the probability of default is remote. As financial guarantee contracts are measured in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the Entity has disclosed the details of the guarantee in this note, in addition to Note 29 (b) Financial Instruments for full transparency purposes.

(d) Commission of Inquiry The Queensland Floods Commission of Inquiry delivered its Final Report on 16 March 2012 and the Entity is implementing relevant recommendations from the Commission’s Interim Report and Final Report. Certain parties have publicly stated that they are investigating the possibility of making claims in respect of the January 2011 flood against parties which include the Entity.

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84 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

32. Contingencies 33. Segment reporting (a) Litigation in progress The Entity operates in the water supply industry in the south east area of Queensland. A claim has been made against the Entity by a sub-contractor for damage to the amount of $9 million by reason of the wrongful repudiation of the sub-contractor’s Sub Alliance Agreement. This amount has not 34. Controlled entities changed since 30 June 2010. The Entity believes it has a valid defence to the claim and as such, the Country of claim has not been recognised. establishment Ownership Date ceased Parent and ultimate controlling party /incorporation interest operation (b) Insurance claims Entity Queensland Bulk Water Supply Authority Australia - The Entity’s insurance claim in response to the January 2011 South East Queensland flood is in progress. The Entity is pursuing insurance for costs incurred to date and estimates for the restoration of Subsidiary asset damage due to the flood. The actual amount to be received from the underwriters is dependent on Western Corridor Recycled Water Pty Ltd Australia 100% 31 May 2010 their review of the submitted claim and the ongoing completion of engineering assessments. South East Queensland (Gold Coast) Desalination Company Pty Ltd Australia 100% 31 May 2010 Four insurance claims totalling $21.77 million plus prolongation costs for the Gold Coast Desalination South East Queensland Water Corporation Pty Plant in respect of rectification work yet to be finalised. Out of the total claims, $15.18 million has been Limited Australia 100% 1 July 2008 received. Australian Water Recycling Centre of Excellence Insurance claims totalling $24.84 million have been submitted in respect of WCRWS-Gibson Island. The Limited Australia 100% n/a claims are in relation to professional indemnity and material damages. $5 million has been received. Insurance claims have also been submitted for the WCRWS-Eastern Pipeline for $8.5 million in relation to South East Queensland Water Corporation Pty Limited was deregistered on 15 August 2012. professional indemnity. The Queensland Bulk Water Supply Authority is controlled by the Queensland Government which is the No assets have been recognised in the financial statements for the above insurance claims. ultimate parent (refer to Note 36).

(c) Financial Guarantees 35. Key management personnel and remuneration A guarantee was provided in 2010 to Stanwell Corporation Limited, in respect of the operation and The following details for key management personnel include those positions that had authority and maintenance agreement of the Wivenhoe Hydro Plant. The amount guaranteed was $200,000. No responsibility for planning, directing and controlling the activities of the Entity during 2011-12. Further defaults have occurred and the Entity does not expect that the guarantee will be called upon. The information on these positions can be found in the body of the Annual Report under the section relating to guarantee is not recognised on the Statement of Financial Position as the probability of default is remote. Governance. As financial guarantee contracts are measured in accordance with AASB 137 Provisions, Contingent (a) Board Members and remuneration Liabilities and Contingent Assets, the Entity has disclosed the details of the guarantee in this note, in Board members’ fees include fees paid for membership of the Audit Committee and a Task Force. The addition to Note 29 (b) Financial Instruments for full transparency purposes. Board members who were paid, or were due to be paid directly or indirectly from the Entity were:

2012 2011 (d) Commission of Inquiry Salary and Superannuation Salary and Superannuation The Queensland Floods Commission of Inquiry delivered its Final Report on 16 March 2012 and the Fees Contribution Fees Contribution Entity is implementing relevant recommendations from the Commission’s Interim Report and Final $ $ $ $ Report. Phil Hennessy 69,571 44,177 67,487 46,261 Certain parties have publicly stated that they are investigating the possibility of making claims in respect Tom Fenwick 58,911 822 54,801 4,932 of the January 2011 flood against parties which include the Entity. Leeanne Bond 57,698 1,158 53,712 4,834 Leith Boully 53,667 - 58,546 - Ian Fraser 52,623 4,736 52,623 4,736 David McDougall* - 49,136 - - Scott Standen* 45,079 4,057 - - Total 337,549 104,086 287,169 60,763 * Appointed 01 July 2011.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 85 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

35. Key management personnel and remuneration (continued) (b) Key executive management personnel and remuneration Date appointed to position (Date resigned form Position Responsibilities position) Peter Borrows - Chief The CEO is responsible for the efficient, effective and Appointed 16 Executive Officer (CEO) economic administration of the Entity. November 2007 The EGM for Water Delivery is responsible for the management and operation of all dams and water treatment plant assets, infrastructure maintenance, Jim Pruss - EGM - land and water quality, water quality monitoring, as Appointed 16 Water Delivery well as catchment support services such as recreation. November 2007 The EGM for Asset Delivery is responsible for asset strategy and planning (both natural and built), infrastructure asset planning, the capital works Alex Fisher - EGM - program, managing major projects as well as research Appointed 01 Asset Delivery and development. February 2010 The EGM for Business Services is responsible for finance and procurement, information technology, compliance and regulatory services, risk management, Sam Romano - EGM - economic regulations and pricing, legal services, Appointed 01 July Business Services property and facilities management. 2011 The EGM for Organisation Development is responsible for organisational and culture change, strategic relations and communications, employee relations, Bill Andrew - EGM - enterprise bargaining, organisational design, Organisation leadership development and team building functions as Appointed 25 May Development well as workplace health and safety. 2009 The EGM of Technical Warranty and Development is responsible for the integration of operational and asset management activities across broad geographical locations and the transition of the contractual and operational relations with the WCRWS and GCDP Cedric Robillot – EGM – operators. This EGM is also responsible for delivering Technical Warranty and research, science and technology outcomes for Appointed 01 July Development improved catchment and water cycle management. 2011

Remuneration policy for the Entity’s key executive management is set by the Responsible Ministers as provided for under the State Water Authorities - Governance Arrangements for Chief and Senior Executives. The remuneration and other terms of employment for the key executive management personnel are specified in employment contracts. The contracts provide for the provision of performance related cash bonuses and other benefits including car parking. For 2011-12, remuneration of key executive management personnel was increased in accordance with State Water Authorities - Governance Arrangements for Chief and Senior Executives.

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86 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

35. Key management personnel and remuneration (continued) 35. Key management personnel and remuneration (continued) (b) Key executive management personnel and remuneration (b) Key executive management personnel and remuneration (continued) Date appointed to Remuneration packages for key executive management personnel comprise the following components: position (Date • short term employee benefits which include: resigned form o Base - consisting of base salary, allowances and leave entitlements paid and provided for the Position Responsibilities position) entire year or for the part of the year during which the employee occupied the specified Peter Borrows - Chief The CEO is responsible for the efficient, effective and Appointed 16 position. Amounts disclosed equal the amount expensed in the Statement of Comprehensive Executive Officer (CEO) economic administration of the Entity. November 2007 Income; and o Non-monetary benefits - consisting of provision of car parking with fringe benefits tax The EGM for Water Delivery is responsible for the applicable to the benefit. management and operation of all dams and water treatment plant assets, infrastructure maintenance, • long term employee benefits include long service leave accrued; Jim Pruss - EGM - land and water quality, water quality monitoring, as Appointed 16 • post employee benefits included superannuation contributions; Water Delivery well as catchment support services such as recreation. November 2007 • redundancy payments are not provided for within individual contracts of employment. Contracts of The EGM for Asset Delivery is responsible for asset employment provide only for notice periods or payment in lieu of notice on termination, regardless of strategy and planning (both natural and built), the reason for termination. infrastructure asset planning, the capital works Total fixed remuneration is calculated on a ‘total cost’ basis and includes the base and non-monetary Alex Fisher - EGM - program, managing major projects as well as research Appointed 01 benefits, long term employee benefits, post employment benefits, redundancy payments and Asset Delivery and development. February 2010 performance payments. The EGM for Business Services is responsible for This disclosure and calculation methodology is required under Queensland Treasury’s Financial finance and procurement, information technology, Reporting Requirements for Queensland Government Agencies Section 5 Addendum - Executive compliance and regulatory services, risk management, Remuneration Disclosure. Sam Romano - EGM - economic regulations and pricing, legal services, Appointed 01 July Business Services property and facilities management. 2011 The EGM for Organisation Development is responsible for organisational and culture change, strategic relations and communications, employee relations, Bill Andrew - EGM - enterprise bargaining, organisational design, Organisation leadership development and team building functions as Appointed 25 May Development well as workplace health and safety. 2009 The EGM of Technical Warranty and Development is responsible for the integration of operational and asset management activities across broad geographical locations and the transition of the contractual and operational relations with the WCRWS and GCDP Cedric Robillot – EGM – operators. This EGM is also responsible for delivering Technical Warranty and research, science and technology outcomes for Appointed 01 July Development improved catchment and water cycle management. 2011

Remuneration policy for the Entity’s key executive management is set by the Responsible Ministers as provided for under the State Water Authorities - Governance Arrangements for Chief and Senior Executives. The remuneration and other terms of employment for the key executive management personnel are specified in employment contracts. The contracts provide for the provision of performance related cash bonuses and other benefits including car parking. For 2011-12, remuneration of key executive management personnel was increased in accordance with State Water Authorities - Governance Arrangements for Chief and Senior Executives.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 87 88 Queensland Bulk Water Supply Authority FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 JUNE 30 ENDED YEAR THE FOR REPORT FINANCIAL Notes to and forming part of the Financial Statements 2011-12

35. Key management personnel and remuneration (continued) (b) Key executive management personnel and remuneration (continued)

1 July 2011 – 30 June 2012 Short term employee benefits Post Non- Monetary Long term employment Termination Total Base benefits employee benefits benefits benefits Remuneration Position $ $ $ $ $ $ P Borrows - CEO 394,576 3,283 14,294 43,203 - 455,356 J Pruss - EGM 293,098 3,283 9,064 46,065 - 351,510 A Fisher - EGM 254,821 3,283 6,948 34,594 - 299,646 S Romano - EGM 278,863 - 6,644 23,917 - 309,424 B Andrew - EGM 235,500 3,283 7,181 32,885 - 278,849 C Robillot - EGM 223,776 2,467 5,690 29,020 - 260,953 Total Remuneration 1,680,634 15,599 49,821 209,684 - 1,955,738

1 July 2010 – 30 June 2011 Short term Employee benefits Post Non- Monetary Long term employment Termination Base benefits employee benefits benefits benefits Total Remuneration Position $ $ $ $ $ $ P Borrows - CEO 440,952 522 16,185 37,073 - 494,732 J Pruss - EGM 302,150 3,056 8,600 30,814 - 344,620 A Fisher - EGM 219,665 3,056 5,766 28,543 - 257,030 H Moore - EGM 182,454 3,056 (2,534) 23,388 184,946 391,310 B Andrew - EGM 250,568 3,056 6,223 30,408 - 290,255 Total Remuneration 1,395,789 12,746 34,240 150,226 184,946 1,777,947

56

5 Keymanagement personnel and remuneration (continued) 35. toNotes and forming part of the Financial Statements 2011-12 Authority Supply Bulk Water Queensland (e) Other key management Other key transactions personnel (e) personnel management key to Loans (d) (c) Performance payments payments Performance (c) The cash performance bonuses for the 2011-12 year are yet to be determined by the Board. Board. the by be determined yet to are year 2011-12 the for bonuses performance cash The $178,810. are 2010-11 for personnel management executive key all to paid bonuses performance aggregate The year. year. the during Entity the with transactions personal conducted have personnel management key the of None 2012. June 30 at as outstanding Entity the with loans personal have personnel management key the of None

payment of the performance bonuses for the 2011-12 and 2010-11 financial year is set out below: below: out set is year financial 2010-11 and 2011-12 the for bonuses performance the of payment The Policy. Remuneration Entity’s the per as is bonuses performance cash of the calculation The Board. the by approved as targets performance individual and Entity pre-determined of achievement the to tied are payable amounts The remuneration. criteria. Performance payments of keyexecutive management are capped at 15% of total fixed performance of key satisfaction upon depending annually payable or be paid may bonuses Performance C Robillot - EGM The 2011-12 cash performance bonus is yet to be determined (2011:n/a). (2011:n/a). determined be to yet is bonus performance cash 2011-12 The EGM - Andrew B EGM - Robillot C (2011:12.00%). determined be to yet is bonus performance cash 2011-12 The EGM – Romano S EGM – A Fisher (2011:12.75%). determined be to yet is bonus performance cash 2011-12 The EGM - Pruss J CEO - Borrows P Position The 2011-12 cash performance bonus is yet to be determined (2011:11.25%). (2011:11.25%). determined be to yet is bonus performance cash 2011-12 The (2011:n/a). determined be to yet is bonus performance cash 2011-12 The (2011:11.25%). determined be to yet is bonus performance cash 2011-12 The Payment for Basis

57 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

35. Key management personnel and remuneration (continued) (c) Performance payments Performance bonuses may be paid or payable annually depending upon satisfaction of key performance criteria. Performance payments of key executive management are capped at 15% of total fixed remuneration. The amounts payable are tied to the achievement of pre-determined Entity and individual performance targets as approved by the Board. The calculation of the cash performance bonuses is as per the Entity’s Remuneration Policy. The payment of the performance bonuses for the 2011-12 and 2010-11 financial year is set out below:

Position Basis for Payment P Borrows - CEO The 2011-12 cash performance bonus is yet to be determined (2011:12.75%). J Pruss - EGM The 2011-12 cash performance bonus is yet to be determined (2011:12.00%). A Fisher – EGM The 2011-12 cash performance bonus is yet to be determined (2011:11.25%). S Romano – EGM The 2011-12 cash performance bonus is yet to be determined (2011:n/a). C Robillot - EGM The 2011-12 cash performance bonus is yet to be determined (2011:n/a). B Andrew - EGM The 2011-12 cash performance bonus is yet to be determined (2011:11.25%).

The aggregate performance bonuses paid to all key executive management personnel for 2010-11 are $178,810. The cash performance bonuses for the 2011-12 year are yet to be determined by the Board.

(d) Loans to key management personnel None of the key management personnel have personal loans with the Entity outstanding as at 30 June 2012. (e) Other key management personnel transactions None of the key management personnel have conducted personal transactions with the Entity during the year.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 89 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12

35. Key management personnel and remuneration (continued) (f) Board members’ transactions During the year, all Board Members were directors of Entity’s subsidiaries, SEQWater, WCRW and SEQDC (refer to Note 34). During the year, Leith Boully, Leeanne Bond, David McDougall and Scott Standen were Directors of AWRCoE. This is a not for profit public company, limited by Guarantee, that was incorporated for the purpose of establishing and operating a Centre of Excellence in Water Recycling. The Entity is the sole member of this company. During the year, Tom Fenwick was a Director of QWI and the Entity participated in the Wyaralong inter- agency working group with QWI and others following the 1 July 2011 transfer of the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 3(a) and 36). Phil Hennessy is a Member of the Senate of the University of Queensland and Leith Boully is an Adjunct Professor at the University of Queensland. During the year, the Entity was party to research arrangements with the University of Queensland. Phil Hennessy is Queensland Chairman of KPMG. David McDougall was a partner of KPMG until 30 June 2012. During the year, KPMG provided internal audit and advisory services to the Entity. Mr Hennessy and Mr McDougall had no involvement in the provision of these services. Leith Boully is Chair of Healthy Waterways Ltd. During the year, the Entity provided funding to Healthy Waterways Ltd pursuant to a Network Deed.

36. Related parties The Entity is controlled by the Queensland Government and as a result there are significant number of interactions with other entities controlled by the same parent (refer to Note 34). The Entity procures services from a number of Queensland Government departments on normal commercial terms. QTC, a Queensland Government owned corporation, provided loan debt funding to the Entity under normal commercial terms and conditions (refer to Note 24). The Entity received $197,180,000 contributed equity from the Queensland Government during 2011-12 (2011: $123,684,000) (refer to Note 3(p) and the Statement of Changes in Equity). The following entities have the same controlling entity as the Queensland Bulk Water Supply Authority and therefore are considered to be related parties. Transactions with these entities during the year are: • WGM - total revenue received $669,381,867 (2011:$350,184,057), receivable of $57,343,074 (2011: $38,420,227) and unearned revenue of $23,890,517 (2011:$23,919,576); • LinkWater - reimbursement of electricity costs and payment in accordance with the Gold Coast Desalination Project Alliance Agreement; • QWI - Wyaralong inter-agency working group following the 1 July 2011 transfer of the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 3(a) and 35); • QWC – determination of revenue (refer Note 18 inherent uncertainty), total levy paid $6,513,082 (2011: $7,366,667); • QCA – Price Regulator, total levy paid $1,292,000 (2011: $611,001); • SVS – independent valuer for land and buildings valuation $256,900 (2011:$0); and • Department of Employment, Economic Development and Innovation (DEEDI) - land transfer formalities to finalise prior asset transfers (via Project Direction) and management of acquisition of land and easements along pipeline corridor $5,981,233 (2011:$0). The Entity provides administrative and support services, at no cost, to AWRCoE pursuant to a Service Level Agreement. All other amounts are set out in the respective notes to the financial statements.

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90 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

35. Key management personnel and remuneration (continued) (f) Board members’ transactions 2012 2011 During the year, all Board Members were directors of Entity’s subsidiaries, SEQWater, WCRW and $000 $000 SEQDC (refer to Note 34). 37. Auditor’s remuneration During the year, Leith Boully, Leeanne Bond, David McDougall and Scott Standen were Directors of Audit services AWRCoE. This is a not for profit public company, limited by Guarantee, that was incorporated for the Auditors of the Entity: Queensland Audit Office purpose of establishing and operating a Centre of Excellence in Water Recycling. The Entity is the sole - Audit and review of financial reports 193 142 member of this company. Total 193 142 During the year, Tom Fenwick was a Director of QWI and the Entity participated in the Wyaralong inter- agency working group with QWI and others following the 1 July 2011 transfer of the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note There are no non-audit services included in this amount. 3(a) and 36). Phil Hennessy is a Member of the Senate of the University of Queensland and Leith Boully is an Adjunct 38. Economic dependency Professor at the University of Queensland. During the year, the Entity was party to research The Queensland Government remains strongly committed to ensuring that the Entity remains solvent and arrangements with the University of Queensland. able to deliver essential services in a sustainable and cost effective manner. This commitment was Phil Hennessy is Queensland Chairman of KPMG. David McDougall was a partner of KPMG until 30 June recently reaffirmed in a letter from the Hon. Tim Nicholls MP, Treasurer and Minister for Trade, issued to 2012. During the year, KPMG provided internal audit and advisory services to the Entity. Mr Hennessy the Entity dated 17 August 2012. The Government’s support includes facilitating access to funding and Mr McDougall had no involvement in the provision of these services. facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Leith Boully is Chair of Healthy Waterways Ltd. During the year, the Entity provided funding to Healthy Arrangements Act 1982 (refer to Note 2 (b)). Waterways Ltd pursuant to a Network Deed.

36. Related parties The Entity is controlled by the Queensland Government and as a result there are significant number of interactions with other entities controlled by the same parent (refer to Note 34). The Entity procures services from a number of Queensland Government departments on normal commercial terms. QTC, a Queensland Government owned corporation, provided loan debt funding to the Entity under normal commercial terms and conditions (refer to Note 24). The Entity received $197,180,000 contributed equity from the Queensland Government during 2011-12 (2011: $123,684,000) (refer to Note 3(p) and the Statement of Changes in Equity). The following entities have the same controlling entity as the Queensland Bulk Water Supply Authority and therefore are considered to be related parties. Transactions with these entities during the year are: • WGM - total revenue received $669,381,867 (2011:$350,184,057), receivable of $57,343,074 (2011: $38,420,227) and unearned revenue of $23,890,517 (2011:$23,919,576); • LinkWater - reimbursement of electricity costs and payment in accordance with the Gold Coast Desalination Project Alliance Agreement; • QWI - Wyaralong inter-agency working group following the 1 July 2011 transfer of the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 3(a) and 35); • QWC – determination of revenue (refer Note 18 inherent uncertainty), total levy paid $6,513,082 (2011: $7,366,667); • QCA – Price Regulator, total levy paid $1,292,000 (2011: $611,001); • SVS – independent valuer for land and buildings valuation $256,900 (2011:$0); and • Department of Employment, Economic Development and Innovation (DEEDI) - land transfer formalities to finalise prior asset transfers (via Project Direction) and management of acquisition of land and easements along pipeline corridor $5,981,233 (2011:$0). The Entity provides administrative and support services, at no cost, to AWRCoE pursuant to a Service Level Agreement. All other amounts are set out in the respective notes to the financial statements.

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39. Subsequent events

Restructure of the South East Queensland Bulk water businesses On 26 June 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply announced the Government’s intention to undertake further structural consolidation of the SEQ bulk water industry, including the merger of the three SEQ bulk water entities, as well as the abolition of the QWC. The Government’s intention is to facilitate the structural reforms through amendments to the South East Queensland Water (Restructuring) Act 2007 and other legislation, expected to be introduced into Parliament in late 2012. Specifically, the businesses of Seqwater, LinkWater and the WGM are expected to be aggregated into a single bulk water business. Whilst a program to commence the merger process has been initiated, the Government has yet to make some key decisions on the future institutional structure, including the financing arrangements. Furthermore, the legislation to facilitate the reforms is yet to be finalised and introduced into Parliament. The merged entity will continue to make use of the existing assets of the businesses, and continue to supply bulk water to current customers. The Entity has been advised by Government to continue on a business as usual basis. The Queensland Government’s commitment to providing ongoing support to the Entity was recently reaffirmed in a letter dated 17 August 2012 from the Hon. Tim Nicholls MP, Treasurer and Minister for Trade. The Treasurer confirmed that “the Government remains strongly committed to ensuring Seqwater remains solvent and able to deliver essential services in a sustainable and cost effective manner”. The Government’s support includes facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Arrangements Act 1982. Despite the fact that the Entity is to be merged with other SEQ bulk water entities, the infrastructure assets of the business are still to be deployed in the same way to generate revenue. It is anticipated that all assets and liabilities of the Entity will be included in the single bulk water business at the values at which they are held by the Entity. With the support provided by the Queensland Government, the Board has prepared these financial statements on a going concern basis (refer to Note 2(b)). Leith Boully, a member of the Board of the Entity, was appointed as a Board member of the interim company, the South East Queensland Bulk Water Corporation Limited on 31 July 2012.

Operating Arrangements for Western Corridor Recycled Water Scheme (WCRWS) and the Gold Coast Desalination Plant (GCDP)

In a letter dated 27 June 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply requested the Entity as the owner-operator of the Gold Coast Desalination Plant (GCDP) and the Western Corridor Recycled Water Scheme (WCRWS) to review, within a 9-week period, all options to make the plants more cost-effective and improve the return on the assets over their life.

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92 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2011-12 Notes to and forming part of the Financial Statements 2011-12

40. Prior period adjustments 39. Subsequent events Financial statement opening balances and comparative figures have been restated to adjust for a prior period allocation of a previous valuation between the classes of land and buildings. The restatement of Restructure of the South East Queensland Bulk water businesses the classification at 1 July 2010 resulted in an increase in land of $12,640,246, a decrease in buildings of On 26 June 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply announced the $17,010,781 and a decrease in accumulated depreciation of $1,271,531. Each affected financial Government’s intention to undertake further structural consolidation of the SEQ bulk water industry, statement line item for the prior year has also been restated (refer to Note 16). including the merger of the three SEQ bulk water entities, as well as the abolition of the QWC. The Government’s intention is to facilitate the structural reforms through amendments to the South East As at 1 July 2010 Queensland Water (Restructuring) Act 2007 and other legislation, expected to be introduced into As at 30 June 2010 restated Adjustments Parliament in late 2012. Specifically, the businesses of Seqwater, LinkWater and the WGM are expected to be aggregated into a $000 $000 $000 single bulk water business. Whilst a program to commence the merger process has been initiated, the Land 507,510 520,150 12,640 Government has yet to make some key decisions on the future institutional structure, including the financing arrangements. Furthermore, the legislation to facilitate the reforms is yet to be finalised and Building 36,994 19,983 (17,011) introduced into Parliament. Accumulated depreciation - Building (2,991) (1,719) 1,272 The merged entity will continue to make use of the existing assets of the businesses, and continue to supply bulk water to current customers. The Entity has been advised by Government to continue on a business as usual basis. The Queensland Financial statement opening balances and comparative figures have been restated to reflect the write Government’s commitment to providing ongoing support to the Entity was recently reaffirmed in a letter down of infrastructure assets as at their transfer dates. The prior period adjustment is due to dated 17 August 2012 from the Hon. Tim Nicholls MP, Treasurer and Minister for Trade. management’s assessment of the values transferred for infrastructure assets not being fit for purpose at the time of transfer. The restatement at 1 July 2010 resulted in an increase in accumulated depreciation The Treasurer confirmed that “the Government remains strongly committed to ensuring Seqwater of $54,557,015. Each affected financial statement line item for the prior year has also been restated remains solvent and able to deliver essential services in a sustainable and cost effective manner”. The (refer to Note 16). Government’s support includes facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Arrangements Act 1982. Despite the fact that the Entity is to be merged with other SEQ bulk water entities, the infrastructure As at 1 July 2010 assets of the business are still to be deployed in the same way to generate revenue. It is anticipated that As at 30 June 2010 restated Adjustments all assets and liabilities of the Entity will be included in the single bulk water business at the values at which they are held by the Entity. With the support provided by the Queensland Government, the Board $000 $000 $000 has prepared these financial statements on a going concern basis (refer to Note 2(b)). Infrastructure - WTPs 679,638 679,638 - Leith Boully, a member of the Board of the Entity, was appointed as a Board member of the interim Accumulated depreciation – company, the South East Queensland Bulk Water Corporation Limited on 31 July 2012. Infrastructure (WTPs) (39,734) (94,291) (54,557)

Operating Arrangements for Western Corridor Recycled Water Scheme (WCRWS) and the Gold Coast Desalination Plant (GCDP) The net impact on the Statement of Financial Position for the above adjustments resulted in a decrease in property, plant and equipment of $57,656,019, an increase in deferred tax liability of $556,274 and a In a letter dated 27 June 2012, the Hon. Mark McArdle MP, Minister for Energy and Water Supply decrease in retained earnings of $58,212,293. requested the Entity as the owner-operator of the Gold Coast Desalination Plant (GCDP) and the Western Corridor Recycled Water Scheme (WCRWS) to review, within a 9-week period, all options to As at 1 July 2010 make the plants more cost-effective and improve the return on the assets over their life. As at 30 June 2010 restated Adjustments

$000 $000 $000 Property, plant and equipment 2,820,987 2,763,331 (57,656) Deferred tax liability 206,316 206,872 556 Retained earnings (10,292) (68,504) (58,212)

2011 comparative information has been restated throughout the financial statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 93 94 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 95 96 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 97 GOVERNANCE GLOSSARY

Advanced water treatment plant Desalination An advanced water treatment plant (AWTP) is a plant where Desalination is the process of creating drinking water from water from a wastewater treatment plant that would otherwise seawater. The Gold Coast Desalination Plant uses reverse be discharged into a river is purified through a multi-barrier osmosis to desalinate seawater. process so that it complies with the approved Recycled Water Management Plan and the Australian Guidelines for Water Full supply level Recycling. There are three AWTPs in the Western Corridor The maximum normal operating level of a reservoir behind a dam. Recycled Water Scheme, located at Bundamba, Luggage Point and Gibson Island. Grid Instructions Directions issued by the SEQ Water Grid Manager to optimise Australian Drinking Water Guidelines 2011 SEQ Water Grid operating performance and water supply security. Developed by the National Health and Medical Research Council in collaboration with the Natural Resource Management January 2011 Flood Ministerial Council. The January 2011 Flood refers to the flooding which occurred across Queensland between December 2010 and January 2011. The Australian Drinking Water Guidelines 2011 incorporates the Framework for the Management of Drinking Water Quality LinkWater and provides the Australian community and the water supply The Queensland Government statutory authority responsible for industry with guidance on what constitutes good quality the management, operation and maintenance of the drinkable drinking water. bulk water pipelines and related infrastructure throughout Australian Guidelines for Water Recycling South East Queensland. The Australian Guidelines for Water Recycling are based on Purified recycled water the framework developed for the Australian Drinking Water Wastewater that has been purified to a standard that is ready for Guidelines (see above) with adaptations to manage risks to consumption under the Australian Drinking Water Guidelines 2011. human health and the environment. It outlines not only the technical issues of purified recycled water supply but also Queensland Floods Commission of Inquiry aspects such as corporate commitment, communication, The Queensland Floods Commission of Inquiry refers to training and relationships with other stakeholders and with the Commission of Inquiry established by the Queensland consumers with which Seqwater must comply. Government to enquire into the December 2010 and January Bulk water 2011 flood events. Water supplied from dam, desalination and purified sources by Raw water a Grid Service Provider to the SEQ Water Grid Manager for sale Water that has not yet been treated by a Grid Service Provider. to Grid Customers.

98 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 Reverse osmosis Treated water Reverse osmosis, the fourth barrier in the seven-barrier water Water that has undergone a cleansing process to a standard that treatment system and the second step in the advanced water is ready for consumption under the Australian Drinking Water treatment process, involves forcing filtered water through a Guidelines 2011. specially engineered membrane at high pressure to remove impurities such as dissolved salts, viruses, pesticides and most WaterSecure organic compounds. Queensland Manufactured Water Authority, supplying a new source of water to South East Queensland through its SEQ desalination plant and water recycling scheme. South East Queensland On 1 July 2011, WaterSecure and Seqwater merged to comprise one bulk water supply authority, responsible for managing SEQ Water Grid catchment-based and climate-resilient water supply assets. The SEQ Water Grid is a network of treatment facilities and connected pipelines that move water across the region to where Whole-of-Grid it is needed most. Refers to the collaboration of the organisations with unique functions that complement each other in operating the SEQ Water Grid Manager SEQ Water Grid. The SEQ Water Grid Manager owns the urban water entitlements in South East Queensland and purchases services to store, treat, produce and transport bulk water from Seqwater and LinkWater. It then sells treated water to council-owned retail distribution businesses and industry customers.

Sustainability Charter The Sustainability Charter outlines our organisation’s commitment to sustainability through:

1. working within the restorative capacity of our environment

2. nurturing confidence in the strength of our communities

3. contributing to the long-term prosperity of our regions.

The full Sustainability Charter can be viewed online at www.seqwater.com.au

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2011-12 99 NOTES

100 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 www.seqwater.com.au

This Annual Report is printed on environmentally friendly stock.