YARRA VALLEY ANNUAL REPORT WATER

2018-19 OUR PURPOSE TO PROVIDE EXEMPLARY WATER AND SANITATION SERVICES THAT CONTRIBUTE TO THE HEALTH AND WELLBEING OF CURRENT AND FUTURE GENERATIONS

ACKNOWLEDGEMENT OF TRADITIONAL OWNERS Yarra Valley Water proudly acknowledges Aboriginal and have with the lands and waters, and recognise and value that Torres Strait Islander peoples as Australia’s first peoples and the Traditional Owner groups have cared for and protected the people of the Kulin Nations as the original custodians of them for thousands of generations. the land and water on which we rely and operate. We pay our We also recognise and value the continuing rich cultures and deepest respects to their Elders past, present and future. contribution of Aboriginal and Torres Strait Islander peoples We acknowledge the continued cultural, social and spiritual and communities to the Victorian community. connections that Aboriginal and Torres Strait Islander peoples OUR ASSETS 3 CLASS A RECYCLED WATER PLANTS 137 WATER PRESSURE REDUCING STATIONS 1 WASTE TO ENERGY FACILITY 105 SEWAGE PUMPING STATIONS

$5.1B INFRASTRUCTURE 10,057 AND OTHER ASSETS KM OF WATER MAINS 44 WATER SERVICE RESERVOIRS 9,807 KM OF SEWER MAINS 65 WATER PUMPING STATIONS 10 532 SEWAGE TREATMENT KM OF RECYCLED PLANTS WATER MAINS

YARRA VALLEY WATER ANNUAL REPORT 2018-19 1 KEY STATISTICS

2M POPULATION SERVED

764,589 RESIDENTIAL PROPERTIES

57,145 BUSINESS CUSTOMERS

2 YARRA VALLEY WATER ANNUAL REPORT 2018-19 INTRODUCTION 4 CONTENTS About us 7 A message from the Chair and the Managing Director 8 1 Our strategic context 10

2018-19 HIGHLIGHTS 14 Key initiatives 16 2 Overview of 2018-19 performance 36

DELIVERING VALUE 40 OUR LEADERSHIP 42 OUR PEOPLE AND CULTURE 50 LIVEABILITY OUTCOMES 58 3 Resilient and liveable cities and towns 58 Customer and community outcomes 62 Water for Aboriginal cultural, spiritual and economic values 66 ENVIRONMENTAL OUTCOMES 68 Climate adaptation and variability 68 Bulk entitlements report 69 Greenhouse gas emissions and net energy consumption 71 Other statutory obligations 73

OUR PERFORMANCE 76

FINANCIAL REPORT 82 4 5 DISCLOSURE INDEX 134

YARRA VALLEY WATER ANNUAL REPORT 2018-19 3 1

4 YARRA VALLEY WATER ANNUAL REPORT 2018-19 INTRODUCTION

YARRA VALLEY WATER ANNUAL REPORT 2018-19 5 6 YARRA VALLEY WATER ANNUAL REPORT 2018-19 1 ABOUT US INTRODUCTION Yarra Valley Water delivers essential water and sanitation services to two million people. We are one of Australia’s largest water utilities with more than 30% of Victoria’s population relying on us 24 hours a day, seven days a week.

We manage an extensive network plants. We plan to build on these energy generation activities of approximately $5 billion worth to meet our target of using 100% renewable energy by 2025. of assets across more than 4,000 We have a globally recognised culture and a highly engaged workforce. In 2018-19 our staff maintained their focus on our square kilometres. Our service area purpose: to provide exemplary water and sanitation services covers most of Melbourne’s northern that contribute to the health and wellbeing of current and and eastern suburbs, extending to future generations. As we get closer to the final year of our 2020 Strategy, work is underway on our next strategy to Wallan in the north and Warburton address the challenges and opportunities of the next decade. in the east. We are a statutory corporation, incorporated under the With Melbourne’s north comprising some of Australia’s Water Act 1989 and our activities are overseen by an fastest growing suburbs, we anticipate serving an additional independent Board of Directors appointed by the State 600,000 people by 2036. Accordingly, we are a future- Government of Victoria. focused organisation, working to anticipate the future needs Our obligations regarding the performance of our functions of our customers and taking a restorative approach to the and the exercise of our statutory powers are defined in environment we rely on to provide our services. the Statement of Obligations, issued by the Minister for We buy bulk water from Melbourne Water which we provide Water in accordance with Section 4I (2) of the Water to our customers. We also take their sewage away, most of Industry Act 1994. We are required to monitor compliance which we send to Melbourne Water’s Eastern or Western with the obligations set out in the Statement, report on Treatment plants. The rest we treat at our ten regional non-compliance and take remedial action in relation to treatment plants, several of which produce recycled water for non-compliance. use in homes, sports fields and public spaces. Recycled water During the 2018-19 financial year, we were accountable is a key initiative to help save precious drinking water and to the Minister for Water, the Hon Lisa Neville MP. maintain a secure water supply for the future – and we will continue to focus on expanding its use in the community. The Essential Services Commission (ESC) is our economic regulator. The ESC’s role includes regulating prices, In a Victorian first, we generate our own renewable energy service standards and market conduct across the Victorian from food waste at our waste to energy plant - ReWaste water industry. - in Wollert. We also create our own solar energy at our staff carpark in Mitcham and at three of our sewage treatment

YARRA VALLEY WATER ANNUAL REPORT 2018-19 7 A MESSAGE FROM THE CHAIR AND THE MANAGING DIRECTOR We are pleased to present Yarra Valley Water’s Annual Report for the financial year ending 30 June 2019, in accordance with the Financial Management Act 1994.

8 YARRA VALLEY WATER ANNUAL REPORT 2018-19 In a year shaped by climate-related We recognise the challenge of striving towards our breakthrough targets, and have identified where we need to sharpen our focus: challenges for the water industry, we 1 ›› Keeping up with customer expectations around modern, INTRODUCTION have made very good progress against flexible service – we are close to achieving our target and our performance targets. are working on a range of activities to improve it

The targets we pursue are guided by our Statement of Obligations, ›› Contractor safety performance – while we’re pleased with the policy directions set out in the State Government’s Water for Yarra Valley Water’s safety performance results, we are Victoria policy and Letter of Expectations, and our 2020 Strategy. focused on working with our contractors to further improve their performance across the board Our priority areas in 2018-19 included addressing the impacts of climate change, improving customer and community outcomes, ›› Water conservation – water use increased this year arising delivering flat bills, providing water for Aboriginal cultural, from hotter and drier weather. We are working to ensure spiritual and economic value, contributing to resilient and liveable alternative water sources are available for non-drinking towns and cities, and demonstrating leadership and financial purposes and prioritising early detection and resolution of sustainability. These priorities strongly align with Yarra Valley leakage in our network. While Melburnians have retained Water’s 2020 Strategy, which targets breakthrough performance sensible water use behaviours since the Millennium Drought, across a range of areas. Highlights for the year included: we are partnering with the other Melbourne water authorities to deliver a strategic customer behaviour change plan to help ›› $250M invested in water and sewerage infrastructure to save more water. improve services and support growth Our 2020 Strategy comes to an end next year after seven years ›› Significant improvement in service response with a 39% and guiding the business. We are committed to finishing the strategy 9% improvement in response times for water and sewerage powerfully and setting Yarra Valley Water up well for our next faults respectively and a satisfaction rating of 94% for era. Our new strategy will further embed our focus on customers customers experiencing emergency works and expanding the business to add value for the communities ›› Delivering a plan to keep bills flat with a long-term price path we serve. It needs to carefully reflect the ongoing societal and below the inflation rate environmental change we continue to face and anticipate the challenges and opportunities of the future. Making efficiencies ›› Launching our Community Rebate Scheme, a world-leading where we can and upholding the United Nations Sustainable innovation to voluntarily return funds to customers where we Development Goals (SDGs) will also underpin our future direction. don’t meet any of our stretch commitments on an annual basis We exceeded our financial target this year: net profit after tax of ›› Expanding our renewable energy production through food $111.7 million was $40.5 million above budget and a $23.2 million waste to energy and investment in solar installations, keeping increase since last year. This was driven primarily by developer us on track to achieve our aspiration of generating all of our related revenue growth, and higher customer demand due to hot own energy from renewables by 2025. and dry weather leading to increased water sales. This has flowed 2018-19 was the first year of our current Price Submission through as an increased community dividend back to the State. customer commitments and we focused on meeting the seven Wholesale charges were above budget in line with the growth key outcomes customers told us they expect and value. We’re in customer demand, and we achieved our operating expenditure proud of our efforts to meet ambitious targets associated with target while managing increased emergency maintenance these outcomes and pleased to have achieved five out of seven volumes driven by weather conditions. Lower than budgeted targets (our Price Submission commitments are measured from finance charges were realised through strong management of our April 2018 to March 2019), especially against the backdrop of debt portfolio, taking advantage of the low interest rates available a hotter and drier year which put extra strain on delivering water in the market and reducing our costs in the short and long term. and sewerage services. More detail on the significant outcomes we’ve achieved this Planning for the future amidst rapid change and uncertainty year is presented in the 2018-19 Highlights section of this has become our new normal. Our city is experiencing significant report. A high-performing culture is the key to accomplishing population growth, the community we serve is growing and great outcomes. Our achievements in 2018-19 were made becoming more diverse, and our climate continues to be hotter possible thanks to our committed employees who reflect the and drier. This year saw Melbourne’s largest desalinated water diverse community we serve, and our partners who help us order to date as a direct result of reduced rainfall and increased deliver our services. The governance, oversight and leadership demand due to population growth. We were pleased that our price our Board provides is also critical to our success. We thank our path reflecting real reductions in bills has helped offset the cost to Board members for the insight and diligence they have brought customers associated with the desalination water order. to their roles and their important contribution over the last year. In the face of change and growth, strategic investment is required now. We’re investing to ensure the Northern Growth Corridor expands with the requisite water and sanitation services to contribute to a healthy, liveable and sustainable city. We are running an innovative trial to test the viability of digital water Sue T O’Connor meters – saving water in our network and identifying leaks early Chair for customers are both paramount as part of our wider water conservation efforts. We’re also acutely aware of the persistent cost of living challenges our customers face and we continue to increase investment in our WaterCare programs to reach customers needing support, and to focus on productivity to Patrick J McCafferty keep pressure off bills. Managing Director

YARRA VALLEY WATER ANNUAL REPORT 2018-19 9 OUR STRATEGIC CONTEXT

2020 STRATEGY OUR PURPOSE IS TO PROVIDE EXEMPLARY WATER AND SANITATION SERVICES THAT CONTRIBUTE TO THE HEALTH AND WELLBEING OF CURRENT AND FUTURE GENERATIONS

EXTRAORDINARY EXEMPLARY EVERY CENT PERFORMANCE SERVICE COUNTS

WE ARE HARMONY WITH THE THRIVING SAFE ENVIRONMENT COMMUNITIES

We make a unique contribution to principles of integrated reporting – our Planet, People and Prosperity Report assesses our impact in terms of human, society, articulated in our statement social and environmental capital. of purpose. We are further guided by the Victorian Government’s Letter Our purpose keeps us focused on what is important: providing of Expectations, which focuses on: exemplary water and sanitation services that contribute to ›› climate change the health and wellbeing of current and future generations. Six strategic commitments, discussed in the 2018-19 ›› customer and community outcomes Highlights section, and our seven Price Submission customer ›› water for Aboriginal cultural, spiritual and economic values service commitments, further underpin our purpose. These commitments, when achieved collectively, are aimed ›› resilient and liveable cities and towns at delivering extraordinary results for our customers, ›› leadership and culture stakeholders, owners and staff, and for the community. ›› financial sustainability In recent years, we have examined the way we contribute ›› recognising recreational values. to society in positive and negative ways. We measured that contribution not only in financial terms but using the These values and outcomes align well with our strategic commitments.

10 YARRA VALLEY WATER ANNUAL REPORT 2018-19 1 INTRODUCTION

SUSTAINABLE DEVELOPMENT GOALS

OUR SEE NEXT PAGE FOR PURPOSE OVERVIEW OF SUSTAINABLE & 2020 DEVELOPMENT GOALS MINISTER’S LETTER OF STRATEGY EXPECTATIONS

CLIMATE PRICE SUBMISSION CHANGE CUSTOMER COMMITMENTS CUSTOMER & COMMUNITY OUTCOMES

WATER FOR ABORIGINAL CULTURAL, SPIRITUAL & ECONOMIC VALUES CUSTOMERS EXPECT CUSTOMERS VALUE

RESILIENT & LIVEABLE FAIR ACCESS CITIES AND TOWNS SAFE DRINKING WATER & ASSISTANCE FOR ALL

LEADERSHIP RELIABLE WATER WATER AVAILABILITY & CULTURE & SEWERAGE SERVICES & CONSERVATION

FINANCIAL TIMELY RESPONSE MODERN FLEXIBLE SUSTAINABILITY & RESTORATION SERVICE

RECREATIONAL CARE FOR & PROTECT VALUES THE ENVIRONMENT

THE SUSTAINABLE DEVELOPMENT GOALS the provision of safe, reliable drinking water and sanitation services, and by making investment decisions that The Sustainable Development Goals (SDGs) have been agreed optimise value and resilience for the community, including to by the member states of the United Nations, as a universal future generations. call to action and a pathway to end poverty, protect the planet and ensure all people enjoy peace and prosperity. Yarra Valley Our roles and responsibilities also extend into other realms, Water was an inaugural signatory to the SDGs in the water including the impact on the environment from our operations, industry, and they provide a lens for us to look at how we can our impacts on household affordability, and our contribution ensure our contribution is making the greatest impact. to addressing inequality. We are also impacted by the areas raised by the SDGs; for example SDG13, where the significant Our activities interact with the priority areas identified by the changes in weather patterns affect water supply reliability. SDGs in a range of important ways. We play a fundamental role in the liveability and prosperity of Melbourne, through

YARRA VALLEY WATER ANNUAL REPORT 2018-19 11 PRICE SUBMISSION SUSTAINABLE 2020 STRATEGY CUSTOMER COMMITMENTS LETTER OF EXPECTATIONS DEVELOPMENT GOALS

›› Safe drinking water

›› Reliable water ›› Water quality complaints and sanitation ›› Customer satisfaction ›› Timely response EXEMPLARY and restoration ›› Billing payment issues SERVICE ›› Modern flexible service

›› Emission reductions ›› Care for and protect ›› Adaptation to climate change the environment and variability ›› Water availability and ›› Integrated water management HARMONY WITH THE conservation ENVIRONMENT ›› Water efficiency

›› Customer community engagement ›› Payment management and hardship ›› Fair access and ›› Engagement of assistance for all Aboriginal communities THRIVING ›› Engagement of Traditional Owners COMMUNITIES ›› Aboriginal inclusion plan

›› Diversity and inclusion ›› Board performance review EXTRAORDINARY PERFORMANCE

›› Water bills ›› Financial indicators EVERY CENT COUNTS

›› Health and safety

WE ARE SAFE

12 YARRA VALLEY WATER ANNUAL REPORT 2018-19 1 INTRODUCTION

LISTENING TO OUR CUSTOMERS AND UNDERSTANDING THEIR NEEDS IS THE FOUNDATION FOR PROVIDING EXEMPLARY SERVICE

YARRA VALLEY WATER ANNUAL REPORT 2018-19 13 2

14 YARRA VALLEY WATER ANNUAL REPORT 2018-19 2018-19 HIGHLIGHTS

YARRA VALLEY WATER ANNUAL REPORT 2018-19 15 WE PROVIDE EXEMPLARY SERVICE

16 YARRA VALLEY WATER ANNUAL REPORT 2018-19 We put our customers and community at the centre of everything we do, from sustaining high quality drinking water and sanitation services to the long-term 2 planning required for the rapid 2018-19 HIGHLIGHTS population growth we’re experiencing.

OUR APPROACH More information about the quality of our drinking water, and what we do to ensure the quality and meet customer We strive to resolve faults and service interruptions quickly needs, is contained in our Water Quality Annual Report. and simply, and focus on ensuring all interactions with our customers are positive, consistent and constructive. RELIABLE WATER AND SEWERAGE SERVICES We can’t provide exemplary service without listening to our Our intention is to significantly reduce service failures year customers and understanding their needs, so we involve on year so customers can enjoy continuity of supply. During customers and communities in planning at an early stage, 2018-19 we met our target of less than 0.96% of customers and continually gauge their views, feedback and expectations. experiencing three or more unplanned water or sewerage Our long-term planning addresses the dual challenges of service interruptions. To help us achieve this goal, we targeted a hotter, drier climate and significant population growth. high failure areas of the network and: We are proactively navigating these challenges to ensure our ›› renewed 68km of aging and poor performing water mains assets and systems are adaptable and resilient. We are also working with the water industry to reduce costs and select ›› renewed 59km of aging and poor performing the best solutions for the whole of Melbourne as well as our sewerage pipes customers. Our focus on the future and our commitment to ›› inserted 560 water valves to reduce the potential number continuous improvement make a positive contribution to our of customers impacted by a supply interruption customers’ lives. ›› inspected 217km of sewerage pipes to assess their KEY INITIATIVES condition and identify potential blockages ›› inspected 539 house connection sewer branches to check SAFE DRINKING WATER the integrity of the pipes Providing safe drinking water to our customers is our ›› renewed 1,843 house connection sewer branches most important deliverable. It is also our customers’ most fundamental expectation of us. We achieved 100% ›› developed a new approach for fixing leaking hydrants. compliance with the Safe Drinking Water Regulations 2015 We anticipate the next few years will continue to be and delivered on our commitment to provide safe and pleasant challenging in this space as a changing climate means hotter drinking water. and drier conditions which lead to increased bursts and leaks. In 2018-19 we focused on installing an additional three chlorinators to ensure we continue to maintain a multi-barrier TIMELY RESPONSE AND RESTORATION approach to water quality. We also installed real-time Customers have told us they expect a fast response and monitoring equipment across our network to further effective restoration of their service when it is interrupted understand chlorine penetration. – dissatisfaction sets in when the interruption goes beyond four hours. We exceeded our target of 91.1%, restoring water and sewerage services within four hours for 93.9% of customers.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 17 WE PROVIDE EXEMPLARY SERVICE CONTINUED

The seasonal challenge of attending to and fixing emergency PROACTIVE FAULT SMS COMMUNICATION bursts and leaks remains as prevalent as ever, against a Our research tells us that customers expect to receive backdrop of ongoing climate change, and we actively worked relevant and up to date information if their water or across our supply chain to ensure we had a dynamic and sewerage services are impacted. We launched proactive SMS protective approach to responding to increasing maintenance communications to: volumes that met customer expectations. We changed contract conditions, changed processes and procedures, ›› update customers who report a fault so they know when increased training, established a jeopardy management it will be investigated, when we’ve repaired it, and when function and finalised our centralised approach to fault their local area will be reinstated management by establishing the Service Response division. ›› notify or remind residential customers when their water Since October 2018, our Service Response division has has been turned off due to an emergency or when we need enabled a more customer driven and bespoke approach to repair an issue. to service response. The division is the result of a cross The solution was developed using human-centred design functional working group charged with reimagining the service principles and delivered collaboratively by a dedicated team faults process and followed extensive customer journey from across the business including our maintenance service mapping to meet the challenges posed by sustained dry provider. Before launching, it was prototyped with customers conditions, which led to increased service failures. In a short using an innovative online focus group and will continue to be amount of time, the division has demonstrated a significant refined based on customer feedback. improvement in our customers’ experience of water and sewerage faults. In 2018-19 we: MODERN FLEXIBLE SERVICE ›› shifted all fault calls to our Service Response division, Providing a modern, flexible service is highly valued by our moving from the former model where our Customer Care customers and is a key service outcome outlined in our Price centre handled both account and fault calls. The Service Submission. To support this, we introduced a discount for Response division is located alongside our operations and customers receiving email bills and paying by direct debit maintenance staff which enables far greater context and from their bank account, started investigating the viability visibility of issues within our network and translates into of digital water meters, and continued our customer centred better information for our customers approach to improve the way we deal with customer contacts ›› evolved our online faults map to provide greater detail and and enquiries. clarity for customers around different fault types, clearer Our success measure is that more than 86% of customers are descriptions and expected resolution times satisfied with their most recent interaction. While the target ›› established a proactive escalation plan with our was not met – 82% of customers are satisfied with their maintenance contractor for more complex faults most recent interaction – we expect to see improvements as we build on the work done this year, and work to better ›› transitioned the management of fault related social media understand and resolve customers’ issues across all to our Service Response division – putting the customer touchpoints by following through on our promises. at the centre means we can respond instantly with the right information. To help us improve, we: These improvements have been further bolstered by working ›› commenced journey mapping satisfaction and pain points closely with our maintenance contractor to improve their at various touchpoints throughout the customer lifecycle KPI performance. As part of this, we implemented a ‘beyond to identify priority areas for improvement induction’ onboarding process, where our staff work closely ›› focused on the significance of complaints as a driver for with new contractors on significant projects for the first few continuous improvement months to enrol them in the Yarra Valley Water way – our customer experience vision, safety and efficiency values. ›› introduced a post call survey in our Customer Care centre to capture and address immediate customer feedback By the end of the 2018-19 year, customer satisfaction with our response to service faults had reached 94%. ›› developed a Complaint Handling Framework with the goal of elevating it to a national benchmark for the water industry. As part of our world-leading commitment to voluntarily return funds to customers via our Community Rebate Scheme if we don’t meet our stretch commitments, we will return $1.5 million to customers in 2019-20.

18 YARRA VALLEY WATER ANNUAL REPORT 2018-19 TRIALLING DIGITAL WATER METERS We hosted 40 Chamber members on a Best Practice tour 2 of our waste to energy plant in Wollert in April and held a 2018-19 HIGHLIGHTS To find new efficiencies in our water supply network and business breakfast for 80 high-value commercial customers use technology to reduce leaks, we are trialling digital water in June. This event provided the opportunity to update meters across Melbourne in partnership with City West Water key customers on our strategy, pricing, major projects and and South East Water. future direction. We are installing approximately 1,000 digital water meters We also actively participated in events delivered by the at properties in Vermont South in mid 2019. The objectives Australian Industry Group to engage on urban water issues. of the year-long trial are to fine tune the roll out procedure, confirm the benefits and value for customers, and assess the National grease trap standards for plumbing industry capabilities of the technology. Overlaying this is the need for a In 2018-19, we headed up the Water Services Association consistent approach across Melbourne in order to benefit from of Australia (WSAA) Committee for grease trap/interceptor potential economies of scale, share learnings and ensure a sizing for commercial premises. Historically each water utility broadly consistent approach across the city. had their own grease trap specifications which created an extra layer of complexity for business owners, plumbers and SERVICING COMMERCIAL CUSTOMERS installers. This work led to a uniform grease trap standard Aligning with customer needs across Australia making it easier for customers, plumbers Historically, our approach to servicing business customers and installers. has been transactional and product based. Adopting customer Commercial plumbing referral service trialled at the centre principles, we aligned around the customer to Guided by customer at the centre principles, we reassessed provide a holistic, end-to-end service to commercial and high the merit of providing customers with recommendations for value residential customers. licensed plumbers to assist with complex plumbing needs. Our newly created Commercial Customer Care team Many of our customers have specialist trade waste and considers all facets of customer needs to add value to their backflow prevention plumbing needs, and in order to meet our business operations. The team has been skilled up in water requirements, have increasingly sought referrals for licensed efficiency to further help businesses identify possible issues plumbers from us. and pinpoint where savings can be made. To address this gap, we are currently trialling a commercial Our customer research findings show that businesses value plumbing referral service to provide cost effective and and increasingly want face to face service from us and this timely trade waste and backflow prevention plumbing year we expanded our customer service channels accordingly solutions. Early responses indicate a successful trial and – as well as the traditional phone, email and live chat options, satisfied customers. we increased face to face contact. Engagement with business customers In 2018-19, we worked closely with businesses through the Victorian and Melbourne Chambers of Commerce (CC), which brings together Victoria's most influential companies, business leaders and government representatives. Our CC memberships gives us access to events supporting growth through networking and professional development.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 19 WE WORK IN HARMONY WITH THE ENVIRONMENT

20 YARRA VALLEY WATER ANNUAL REPORT 2018-19 The water we supply is harvested from the environment and the treated wastewater we discharge goes back into it, meaning working in harmony with nature is at the 2 very core of our business. 2018-19 HIGHLIGHTS

OUR APPROACH Achieving these goals requires cumulative effort on many fronts and this year we: We are committed to doing more than just minimising our impact on our natural ecosystems – the quality of the water ›› installed 100kW solar panel systems at each of our we supply, and the sustainability of our business, depend on it. Healesville, Upper Yarra and Whittlesea sewage treatment plants – each plant consumes in excess of 95% of the solar Our approach to environmentally-sound business practices energy produced by the panels with the excess returned includes ambitious approaches to ensuring environmental to the grid water flows, reducing greenhouse gas emissions and nutrient discharge, and operating resilience in the face of ›› installed 1,080 solar panels at our Mitcham head office climate change. staff car park which will generate close to 30% of our onsite energy needs Our 2020 Strategy commits us to ensuring that our environmental impact never exceeds the carrying capacity of ›› formed Zero Emissions Water Ltd (ZEW) with 13 other nature; pursuing a restorative approach where the planetary water corporations, to source 25% of our future energy or local carrying capacity of nature is exceeded; and redefining needs at a cheaper wholesale rate from a large-scale solar the possibilities in sustainable water and sanitation services. farm under construction in north west Victoria.

Our customers support our commitment to working in WASTE TO ENERGY harmony with the environment, with 85% indicating that they have concerns about the environment and climate change. Our waste to energy facility, ReWaste, was successful in its Aboriginal and Torres Strait Islander communities consider second year of operations. It ran at full operational capacity, Yarra Valley Water’s work with the environment to be of powered itself as well as the adjacent sewage treatment critical importance. plant, diverted 33,000 tonnes of food waste from landfill and significantly reduced greenhouse gas emissions. The plant Our long-term goals are to use 100% renewable energy, have generated the equivalent of 25% of Yarra Valley Water's entire no net impact on the streams that we discharge into, and to energy needs and saved $60,000 per month on power bills. We always meet environmental flows in the streams we extract also export excess electricity back into the grid and in January water from. alone, we were able to transfer 4.5MWh of electricity to the For further detail, refer to Environmental Outcomes and power grid, with a market value of $62,400. Our Performance sections. Following the success of our first ReWaste facility, we plan to construct a second larger facility in Melbourne's east to KEY INITIATIVES process food waste to create electricity, transforming up to 150 tonnes of waste per day into 33,000 kWh of renewable ENERGY energy. When fully operational, the second facility will generate a further 30% of our energy needs. This means that Our core services are energy intensive which has significant our two ReWaste facilities will ultimately generate more than environmental and financial implications. To mitigate these half of our overall energy requirements. impacts, we pledged to reduce our greenhouse gas (GHG) emissions by 64% by 1 July 2025 – our Emissions Reduction Pledge – as well as adopting an aspiration of generating 100% of our energy needs from renewable sources by 2025.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 21 WE WORK IN HARMONY WITH THE ENVIRONMENT CONTINUED

CLIMATE RESILIENCE PLAN COMPLETED On behalf of the metropolitan water In 2018-19 we completed our Climate Resilience Plan industry, Yarra Valley Water led which sets out key actions that build our capacity, reduce our vulnerabilities and support long-term planning for an extensive research into community uncertain future. The plan focuses on adaptation to build our attitudes towards water to help resilience to climate change and complements our mitigation activities to reduce our emissions. We are currently piloting design an effective customer centric adaptive planning in three projects to gain learnings before approach to water conservation. rolling the approach into business planning right across the organisation. These insights informed a brand platform co-created with the other water retailers and Melbourne Water as part of a COMMUNITY SEWERAGE strategic customer behaviour change program that will be implemented in 2019-20. Many homes in Melbourne’s north and east were built before sewerage infrastructure was available. We are working with This year we introduced numerous community activations to local councils to provide new sustainable sewerage services raise awareness and encourage sensible water use, including: to more than 10,000 properties with septic tanks that don't ›› implementing a digital marketing campaign during summer adequately manage wastewater. Many of these septic to promote easy to action seasonal tips for saving water systems don’t meet current environmental standards and pose a potential risk to public health and local waterways. ›› giving away 1,000 water efficient showerheads to customers as a key feature of the summer digital We invested $23.7 million in new sewerage services to marketing campaign service these properties in 2018-19. We worked closely with the Donvale community to deliver sewerage services to 333 ›› trialling the ‘Yarra Valley Water Hub’ at shopping properties with poor-performing septic systems this year. centres in Broadmeadows, Preston and Greensborough to raise awareness about saving water for a growing This year we also: Melbourne, and provide support for customers facing ›› commenced construction works in Park Orchards, Yarra financial difficulty Junction, Kallista and The Patch ›› in partnership with Melbourne Museum, City West ›› continued to plan for new sewerage services in Wesburn, Water and South East Water, we offered a fun, karaoke Don Valley, Launching Place, Eltham South, Lower Plenty, inspired activity hub at the museum called Shower Lilydale and in the Dandenong Ranges at Sherbrooke Superstars, to help young children and their families have and Monbulk. shorter showers ›› installing 29 network flow and pressure monitoring devices WATER CONSERVATION in our water supply network to identify leaks which aren’t Ongoing climate change and variability, low inflows, declining visible from the surface as part of our continued efforts to water storage levels, increased water use from a growing reduce non-revenue water. population and the increased need for larger desalinated water orders have all led to a sharpened focus on water We set an ambitious target of achieving 221 litres per person conservation. Our customers have also told us that they value per day in 2018-19 – a holistic measure comprising the water saving water now so it’s available in the future. we purchase from Melbourne Water, customer consumption, non-revenue water such as that used for firefighting and This year we continued to work towards providing recycled water lost due to system leakage, bursts and leaks. 2018-19 water to over 26,000 properties as part of our program consumption measured at 233 litres per day. This higher than to bring recycled water to 100,000 homes in Melbourne’s forecast water use is due to the hotter, drier weather this year. north, continued to work on bringing recycled water to As our self-imposed target was not achieved, we will return around 5,500 new high-rise properties in Doncaster Hill and $1.5 million to customers via our Community Rebate Scheme. nearby communities, undertook active leak detection, district metering and renewed nearly 70 kilometres of water mains.

22 YARRA VALLEY WATER ANNUAL REPORT 2018-19 The majority of our service area is included in the Yarra MELBOURNE SEWERAGE STRATEGY 2

Catchment forum. Each forum has developed a draft 2018-19 HIGHLIGHTS We completed an important piece of planning for the Strategic Directions Statement, containing a jointly agreed next half-century, the Melbourne Sewerage Strategy, in vision and strategic outcomes, a schedule of priority policies conjunction with the Victorian Government and the water and frameworks to enable IWM outcomes, and a schedule industry. The strategy sets the direction for managing of priority IWM projects, in many of which we play a lead or Melbourne’s sewerage system and goes hand-in-hand with supporting role. our planning for growth and change. This strategy mirrors The Strategic Directions Statements have been finalised and our Urban Water Strategy in terms of its importance for our endorsed by IWM forum. service planning.

The strategy recognises that, beyond protecting public INTEGRATED WATER MANAGEMENT health and the environment, we need to plan adaptively, use – UPPER MERRI CREEK resources wisely, enhance liveability and support the economy The Upper Merri Creek Integrated Water Management while ensuring the system protects intergenerational equity (IWM) planning pilot highlighted the wide-ranging benefits of and remains affordable to the broader community. We must working collaboratively with our project partners: Traditional do all this against an increasingly complex background of Custodians the Wurundjeri Woi-wurrung Cultural Heritage population growth, technological development, changing Aboriginal Corporation; local governments - Mitchell Shire customer expectations, urban densification and the need to Council, City of Whittlesea and Hume City Council; Melbourne safeguard the environment. Water and the Victorian Planning Authority. In 2018-19 we were part of an industry-wide working group By taking the time to gain insights into the collective issues to act on its key areas of focus: and opportunities associated with managing water resources ›› human health and wellbeing in this sub-catchment area, which will experience significant population growth and climate change impacts, we were able ›› enhancing the environment to have in-depth conversations with key stakeholders such as ›› leveraging resources land developers, the Merri Creek Management Committee and the community. This approach helped us to understand their ›› community stewardship preferences for how water resources can shape the future in ›› an enabling policy and regulatory environment. existing and emerging communities. The transparent process provided an evidence base for the INTEGRATED WATER MANAGEMENT (IWM) FORUMS commitments made, a collective vision for building assets and A collaborative and integrated approach is a fundamental providing services in line with community expectations, and tenet of our planning for exemplary water services that ways to measure our success. Visit uppermerricreek.com.au contribute to the health and wellbeing of current and for more details. future generations. This highly effective process of working collaboratively with We take a leading role in Department of Environment, Land, partnering organisations and creating thriving communities Water and Planning (DELWP) Integrated Water Management will be applied to other sub-catchments. (IWM) forums in the Yarra River, Dandenong Creek and Maribyrnong River catchments. These bring key agencies – including planners and local councils – together to identify, prioritise and oversee shared value projects with liveability benefits. IWM forum participants each identify opportunities to collaborate and form partnerships to deliver integrated servicing solutions and bring these to the IWM forums for consideration. The IWM forums then prioritise these opportunities using an opportunity/risk- based approach.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 23 WE SUPPORT THRIVING COMMUNITIES

24 YARRA VALLEY WATER ANNUAL REPORT 2018-19 We are committed to helping our community thrive. We have pledged to advance the UN's Sustainable Development Goals (SDGs), and are measuring our impact against these goals 2 wherever we can. 2018-19 HIGHLIGHTS

OUR APPROACH INCREASING SOCIAL CAPITAL We are committed to enhancing our Our commitment to increasing social value stems from our diverse communities’ health and purpose, to contribute to the health and wellbeing of current and future generations, and this year we continued exploring wellbeing as a part of providing water how we’re delivering social capital to our customers. A key and sanitation services. outcome from our research was the realisation that projects identified by our citizens’ jury as important to pursue, achieved We take a long-term view of our business and plan decades the largest social return on investment (SROI). The SROI in advance. We contribute to making Melbourne one of the records the multiplying value delivered to society for every world’s most liveable cities. We support local sport and dollar we spend. We found that our programs which do recreation, and contribute to clean, green urban environments more to help customers conserve water and help vulnerable that encourage community connection. We value the many customers are returning SROI ratios of 30:1 and 10:1 contributions that Aboriginal and Torres Strait Islanders respectively. This means, for each dollar we invested, we make to our community, and recognise that their cultural are returning a multiplying benefit to society. Accordingly, values and connection to Country can make us a better we have increased our activity in these two programs. water utility. WATERCARE We make sure our services are inclusive and look after the most vulnerable members of our society, reducing the stigma Our WaterCare program continued to provide holistic around financial hardship while working with others to tackle support for customers experiencing financial difficulty and the root causes of socioeconomic disadvantage. vulnerability. Through our Price Submission engagement process, customers told us they expected us to improve awareness of, and access to, our services among KEY INITIATIVES disadvantaged customer segments. To achieve this, our customers supported us receiving an additional investment of INAUGURAL SUSTAINABLE DEVELOPMENT GOALS $1.2 million a year to reach 150,000 customers over five years. REPORT PUBLISHED In 2018-19, we engaged over 35,000 customers through our We are committed to embedding the 17 Sustainable WaterCare programs and campaigns and met our primary Development Goals (SDGs) into our business planning and target – that 89% of customers who have accessed our to meaningfully measure the impacts our operations have services believe we help customers experiencing difficulty on the community and the planet, both positive and negative. paying for their water and sewerage services. Our inaugural SDG Report - Planet, People, Prosperity We support new customers every year and saw a steady 2018 - took a SDG lens to our business and describes our increase in the number of customers entering and performance and aspirations in the context of the goals. It transitioning out of the program. Overall this year: captured the ways we create and deplete value and reported against the Global Reporting Initiative Standards, International ›› we supported almost 11,793 customers - 5.5% more Integrated Reporting Framework and the United Nations than the same time last year Global Compact. We are proud that our inaugural SDG ›› we worked with more than 6,900 new customers report received a bronze award at the 2019 Australasian experiencing difficulty Reporting Awards, for presenting quality disclosures and balanced reporting. ›› 91% of customers met their agreed payment plans ›› we successfully transitioned over 4,628 customers to mainstream payments which is a 9% increase on last year.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 25 WE SUPPORT THRIVING COMMUNITIES CONTINUED

Key initiatives this year included: telecommunications industries, and increased to over 170 members this year. ›› formalising a partnership with AFL Outer East, Eastern Health and Sports and Life Training (SALT) to deliver The TCP released the following support tools to assist Leading the Change training sessions around respectful businesses and Australians alike: relationships and mental health to local communities ›› Family Violence Roundtable Report: based on the Family ›› rolling out 23 programs and campaigns to identified Violence Roundtable held this year, TCP members heard areas of need including family violence, culturally and from advocates with lived experience, to understand linguistically diverse communities, access to government how business can better support people impacted by grants and concessions, Aboriginal and Torres Strait family violence. The report comprises tools and tips for Islander communities, council and community engagement businesses and for people looking to act and make positive changes to ensure we move to a society where all people ›› working with the Department of Health and Human are free from family violence, where everyone feels safe, Services to improve the state-wide utility relief grant respected and heard and where all people are valued application process for customers. equally, systems are just, and everyone is able to thrive To build trust, we need to be visible. And with around two ›› Improving Access and Support for Consumers with million people in our service area, we recognised the need Cognitive Disabilities – A guide for retailers: this research to increase our presence in the community. To do this, we report includes a series of tailored recommendations, piloted an engagement program in local shopping centres co-designed with people who have lived experience. in the north and north east with our purpose-built Yarra By bringing together the diverse thinking of service Valley Water Hub. The Hub is led by specialist customer care providers, academia, people with lived experience and the staff who assisted customers with concessions, payment community sector the research provides solutions that can arrangements, queries around bills and water use, and saving be effective at scale. water. We spent a week each at Broadmeadows Shopping Centre, Northland Shopping Centre and Greensborough Plaza The TCP has transitioned to an independent entity, with Yarra in May, providing an easily accessible and comfortable space Valley Water continuing to provide ongoing support. for customers to liaise with us. Learnings from the pilot will determine the future potential for extending this local form CHOOSE TAP of community engagement, but the initial response has been overwhelmingly positive. Supported by 15 Victorian partners, and six domestic and international RECONCILIATION ACTION PLAN partners, our vision for Choose Tap In 2018-19 we commenced the process of developing our is to become the national vehicle for second Reconciliation Action Plan (RAP). We will embed the learnings from our first RAP into the business, which advocating tap over bottled water. involved reflecting on our progress to date, the lessons we Having founded Choose Tap, this year we assumed a have learnt and the feedback we sought from Community. stewardship role as the program expands and welcomes Our first RAP provided the foundation for a meaningful new water industry partners around the country. The Water contribution to Reconciliation and to Aboriginal and Torres Services Association of Australia (WSAA) formed a Choose Strait Islander affairs. Tap coalition, and with our new Yarra Valley Water Choose Tap For our second RAP, we reviewed our vision for Reconciliation, coordinator, we worked collaboratively at a national level to and where we should focus to work towards that vision. We reinforce positive perceptions of drinking water and undertook are collaborating with Aboriginal and Torres Strait Islander market research to inform a national campaign for roll-out Victorians and Traditional Owners to ensure it is meaningful next year. and responsive to their needs and aspirations. In 2019-20 our Choose Tap sponsored community sporting events with an focus will be implementing our second RAP. increased emphasis on women’s sport. To spread the message about the health, environmental and hip-pocket benefits of THRIVING COMMUNITIES PARTNERSHIP drinking water with the younger generation, we ran incursions 2018-19 saw the successful expansion of the Thriving in primary schools and supplied early learning centres with Communities Partnership (TCP) across Australia. A voluntary, kits for younger children. cross-sector collaboration founded by Yarra Valley Water, the TCP brings together diverse organisations to ensure everyone has access to the modern essential services they need to thrive in contemporary Australia. TCP partnerships span organisations in the water, energy, banking and

26 YARRA VALLEY WATER ANNUAL REPORT 2018-19 2 FAMILY VIOLENCE POLICY SOCIAL PROCUREMENT 2018-19 HIGHLIGHTS As an essential service provider, we Our Supplier Code of Practice replaced our Supplier Code of Conduct in 2018-19, evolving to further require tendering have an important role supporting suppliers to self-assess against more comprehensive and protecting customers who are sustainability criteria. It is intended that the Supplier Code of experiencing family violence. Practice will be adopted across the Victorian water sector to ensure the industry’s expectations of suppliers are consistent We responded to industry concerns around better practices – it has already been adopted by Melbourne Water. for customers experiencing family violence and worked with This year we became a member of both Social Traders, an the leading men’s behavioural change organisation, No To organisation that identifies and certifies social enterprises, Violence, to upskill our organisation and customer facing staff and Kinaway, a Victorian Aboriginal Chamber of Commerce. on working with those who perpetrate violence. These memberships advance our understanding of social We collaborated with other organisations to strengthen enterprises and Aboriginal-owned businesses we can do and evolve our collective responses to family violence. Our business with, and the broader social outcomes we can community presence was strong this year as we attended achieve through our procurement. This also supports the development events run by Women’s Health in the East, current development of our sustainable procurement Eastern Health and the Together for Equality and Respect strategy, and associated changes to our procurement partnership. We participated in: processes and requirements. ›› the Thriving Communities Partnership and Women’s Information Referral Exchange (WIRE) national roundtable on organisational responses to family violence ›› a range of activities during the 16 Days of Activism against Gender-Based Violence, supporting action against family violence including the Walk Against Family Violence ›› OurWatch training resulting in two staff being endorsed and qualified to deliver industry leading OurWatch training materials. This year we further embedded our family violence policy throughout the organisation. All new staff, regardless of role, receive training in family violence and managers now undergo additional, tailored training. The cultural shift we are working towards internally was heightened by family violence survivor and advocate Lisa McAdams delivering a keynote speech to the organisation, encouraging the women of Yarra Valley Water to mark International Women’s Day and reiterating the availability of support for staff.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 27 THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE

We believe that a positive workplace culture focused on staff engagement, satisfaction and effective workplace practices also delivers high performance.

28 YARRA VALLEY WATER ANNUAL REPORT 2018-19 OUR APPROACH CAREER CONNECT 2 2018-19 HIGHLIGHTS We have trained our leaders to inspire and support staff and As part of our Diversity and Inclusion Strategy, we partnered implemented policies that reflect fairness and diversity. We with Jesuit Social Services to develop Career Connect. Career remain committed to growing our supportive, innovative Connect is an employment program designed to provide workplace to ensure the best possible outcomes for our meaningful employment opportunities for those in need customers, the community and our business. within our community. It also provides an opportunity to tap into talent we may not normally have considered. Two highly skilled migrant engineers from Zimbabwe joined Yarra Valley KEY INITIATIVES Water under the program this year. ORGANISATIONAL CULTURE INVENTORY RESULTS AFL SPORTSREADY TRAINEESHIPS In 2018 we continued to use the Human Synergistics’ Our newly created Career Connect program further Organisational Culture Inventory (OCI) to determine our evolved this year by partnering with AFL SportsReady. AFL organisation’s prevalent behavioural styles and cultural norms. SportsReady looks to place disadvantaged youth in meaningful In addition to the OCI, we also undertook an Organisational employment while encouraging them to further their Effectiveness Inventory to explore the key factors that educational qualifications. We welcomed a new Aboriginal contribute to the overall culture within Yarra Valley Water. trainee this year who is being trained as a Customer Care Our results in both surveys demonstrated highly constructive Consultant while completing tertiary studies. cultural norms, particularly the people-oriented norms.

As part of our ongoing journey and challenge to sustain and GRADUATE DEVELOPMENT PROGRAM maintain our highly constructive culture, key programs were In development for the last two years, our Graduate deployed. These programs included bespoke team-based Development Program commenced in January 2019. actions, a review and relaunch of our Performance Designed to attract and develop a diverse and highly capable Effectiveness Process and a review of the rewards talent pipeline for Yarra Valley Water and the wider water program that generated localised changes and proposed industry, we welcomed seven graduates from engineering, future changes to coincide with our next strategy. These business, IT and human centred design disciplines. Graduates programs will continue to support and nurture our culture, participating in the two-year program rotate every 12 months develop our people and ensure the way we work enables and are supported by a mentor, the Graduate Coordinator extraordinary performance. and their direct manager, who is trained to assist and embed DIVERSITY AND INCLUSION STRATEGY their learning. In 2018-19 we launched our new Diversity and Inclusion Attracting and retaining the best talent is a collaborative Strategy, which moves beyond diversity as a process of effort and we worked closely with City West Water, demographic measurement and recognises that diversity drives South East Water and Melbourne Water to design an business performance. We understand we must embrace a industry-wide development program for our respective ‘whole of person’ and ‘whole of organisation’ attitude to truly graduates that gives them greater exposure to the water benefit from and embrace diversity and inclusion. Our vision industry and the opportunity to network and learn from their for diversity and inclusion at Yarra Valley Water sums up counterparts across Melbourne. our aspiration: Our next intake of graduates has been recruited and will start in early 2020. In support of gender diversity in STEM (science, We stand for a fair and equitable technology, engineering and maths), four out of five of our society. We embrace diversity and 2020 engineering graduates are female. inclusion in everything we do, as we strive to reflect the community WATERAID WINNOVATORS A group of passionate and dedicated Yarra Valley Water staff we serve. formed a WaterAid Winnovators team to help solve real-world water, sanitation and hygiene challenges this year. In a global This vision sets the tone for the proactive roadmap of competition for water industry employees, our team developed programs, practices, measures and, for the first time, targets a solution for empowering Delhi communities to monitor and we need to attract and retain a diverse workforce. To achieve understand the quality of their water supply, and to lobby for our goals and encourage a positive and safe culture for staff, improved water services. The team raised $24,372 in seven we focused on reflecting the community, gender balance, short months and placed second in the global competition. Aboriginal and Torres Strait Islander participation and A testament to our strong culture, these efforts contributed workforce flexibility. Our employees are passionate about to WaterAid’s Winnovators program raising over $300,000 advocacy and support for staff and we have active Employee around the world in 2018 to fund water and sanitation projects Diversity Working Groups in each core area plus dedicated for poorer communities. Cultural, Disability and LGBTIQ+ Working Groups.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 29 WE MAKE EVERY CENT COUNT

By optimising operating and capital expenditure and identifying new revenue streams, we continue to deliver high-quality, affordable services now and into the future.

30 YARRA VALLEY WATER ANNUAL REPORT 2018-19 This year we met our obligations under the Victorian 2 OUR APPROACH Protective Data Security Framework (VPDSF), the overall 2018-19 HIGHLIGHTS Through improving business scheme for managing data security risks in Victoria’s public sector. To meet these requirements, we undertook an external processes, eliminating waste, review and self-assessment, and developed an extensive managing risk and utilising program of works to meet our obligations under the Privacy innovation and technology, we focus and Data Protection Act 2014. on delivering the best community In an ever-evolving threat landscape, our stance is to continually improve our cyber security posture and mature outcomes at a lower cost each year. our approach. In 2018-19: Keeping customer bills as low as possible is balanced with ›› we appointed a dedicated Head of Cyber Security to generating a return for our owner – the Victorian Government, the business and our ultimate shareholders – the people of Victoria. We ›› we were audited by the Victorian Auditor General’s Office pay annual dividend and tax equivalent payments to the (VAGO) where our cyber security direction was validated, government which is returned to the community through and the findings will inform the next iteration of our cyber government-funded services. Our prices are approved by security strategy the Essential Services Commission, which provides us with sufficient funds to deliver quality products and services to ›› our operational responsiveness and recovery plans were our customers. successfully tested in a water industry-wide cyber security role play We plan our investments well in advance, considering the impact of our capital investment projects on customer ›› Microsoft security experts reviewed our IT environment prices, while ensuring they optimise community value and for flaws and vulnerabilities in an invitation only review intergenerational equity. ›› we continued to collaborate with the Department of Premier and Cabinet and other water authorities on joint KEY INITIATIVES cyber security initiatives

NO CHANGE TO CUSTOMER BILLS ›› we commenced an internal awareness and education program via a mock phishing campaign with staff Through our citizens’ jury process, our customers told us they did not want bill fluctuations. Armed with this insight, ›› we continued to execute our multi-year cyber security we devised an underlying price path that resulted in no bill strengthening plan to ensure we stay at the forefront of increase in 2018-19. Bills are projected to increase less than protecting our data and infrastructure assets. inflation for the subsequent four years of the pricing period, meaning household budgets can go further. In parallel with CAPITAL EXPENDITURE returning savings to customers, this approach underpins Capital expenditure in 2018-19 totalled $312.8 million, driven a price path that mitigates the impacts of price increases largely by servicing residential and commercial growth in the associated with increased desalinated water orders. Northern Growth Corridor and renewing aging infrastructure. This represents a $40.5 million increase over the prior year, CONTINUED PRODUCTIVITY reflecting our improved capacity for delivering the services In 2018-19 we maintained a strong focus on our operating we promised our customers. expenditure and achieved some strong outcomes including We renewed over 125 kilometres of water and sewerage cost savings from optimising our asset operations. However, mains, completed the Craigieburn Transfer Hub, constructed we did experience some cost pressures associated with the Epping branch sewer to the Merri Creek main tunnel and higher emergency maintenance volumes due to increased extended our recycled water, drinking water and sewerage temperatures and reduced rainfall as a result of climate network by over 300 kilometres to provide essential services change. to new customers. We continue to focus on improving productivity as a way of To improve our capital works forecasting, scheduling ensuring our services remain affordable for customers and and reporting, we established a Capital Works Portfolio keep bills flat. Management Office (PMO) this year. The PMO will increase delivery certainty and prioritise capital works that deliver the CYBER SECURITY most benefits to customers. We take the threat of cyber security seriously and protecting our customers’ data, our water and sewerage assets and operations are key priorities.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 31 WE ARE SAFE

32 YARRA VALLEY WATER ANNUAL REPORT 2018-19 We believe nothing is more important than returning home safely after work, that all accidents are preventable, and that individuals can make a difference. 2 2018-19 HIGHLIGHTS OUR APPROACH our commitment to occupational health and safety (OH&S) improvement, will help ensure we meet our OH&S We focus on leadership, systems and capability, and empower requirements and drives business performance. A gap analysis and involve our staff in their own safety and wellbeing. indicates 73% alignment to our existing Occupational Health Collaborating with our contractors and influencing the industry and Safety Management System, which will inform our to shift performance is also paramount. roadmap for achieving full compliance by November 2020, well We continued our broad approach to health and safety before the effective date of March 2021. including both physical and mental wellbeing, which demonstrates our multi-faceted commitment to the health INDUSTRY INITIATIVES of our staff and contractors. This is underpinned by our In partnership with Melbourne’s water authorities, we organisational purpose which prioritises the health and established the Urban Water Authorities’ safety working group wellbeing of current and future generations – including staff, which shares and explores learnings from the water sector and contractors and members of our community. other industries, and collectively engages with contractors and peak bodies to help shift safety performance. KEY INITIATIVES We are also collaborating nationally with interstate water utilities through the Water Services Association of Australia, to SAFETY PERFORMANCE seek a step change in safety performance across our industry. There was one lost time injury (LTI) for our Mitcham site this year. The corresponding significant injury frequency rate SAFETY INITIATIVES (SIFR) for the same cohort of staff and contractors increased This year we developed and implemented a user-friendly to 1.6. safety app for staff working offsite, created a single asbestos Despite the progressive reduction in injuries over the years, our management framework and a single plant safety framework, SIFR for contractors working on self-managed sites increased and also rolled out a business partnering model ensuring to 15.6 in June 2019. To address this, we commenced a dedicated support and advice across the organisation. 12-month pilot selecting lead performance indicators including hazard reporting, contractor safety inspections and a more GLOBAL SAFETY INDEX SURVEY RESULTS focused analysis on reported high consequence near miss We maintained a strong result in our Global Safety Index and hazards, to help shift the safety performance of our (GSI) Survey this year achieving 76.6 overall. We aspire to principal contractors. achieve benchmarks of 80 across all nine GSI dimensions as our 2020 Strategy ends, and will strengthen our internal NEW SAFETY STANDARD engagement to fulfil this goal. This year we proactively worked to transition to the new ISO 45001:2018 standard. Migrating to ISO 45001 demonstrates

SAFETY PERFORMANCE RESULTS 2013 - 2019

8 25

7 20 6

5 15 4

3 10

2 5 Number of Lost Time InjuryNumber of Lost (LTI) 1 Significant Injury Frequency Rate (SIFR) Rate Significant Injury Frequency

0 0 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 LTI-YVW & Managed LTI-Contractor SIFR-YVW & Managed SIFR-Contractor

YARRA VALLEY WATER ANNUAL REPORT 2018-19 33 WE ARE SAFE CONTINUED

OTHER KEY SAFETY PERFORMANCE INDICATORS 2016-17 2017-18 2018-19

Number of reported hazards/incidents for the year 10.83 5.10 10.71 per 100 full time equivalent staff members

Number of ‘lost time’ standard claims for the year - - - per 100 full time equivalent staff members

Average cost per claim for the year $4,807 $275,951 -

Outstanding claim cost $28,361 $275,951 -

WELLBEING PROGRAM GSI / SCI RESULTS 2012-18 We continued to offer a broad wellbeing program in 2018-19 ranging from flu shots, mental health support through our Employee Assistance Program, peer interest groups such as Management gardening, healthy eating and bike riding, to various ‘lunchtime 100 Commitment learning’ seminars. Importantly, we identified the need to Work Environment 80 Communication normalise mental health issues, and to tailor our wellbeing program to the diverse community that makes up our 60 organisation. These insights will inform how we expand the 40 Personal 20 Safety mental health support programs offered, and how we educate Appreciation as a Priority staff and managers on supporting each other if wellbeing of Risk 0 issues arise individually or collectively.

Personal Safety Rules Priorities and Procedures

Involvement Supportive Environment

2018 2016 2014 2012 Benchmark

34 YARRA VALLEY WATER ANNUAL REPORT 2018-19 2 2018-19 HIGHLIGHTS

WE MAINTAINED A STRONG RESULT IN OUR GLOBAL SAFETY INDEX (GSI) SURVEY THIS YEAR ACHIEVING 76.6 OVERALL

YARRA VALLEY WATER ANNUAL REPORT 2018-19 35 OVERVIEW OF 2018-19 PERFORMANCE

36 YARRA VALLEY WATER ANNUAL REPORT 2018-19 PRICE SUBMISSION CUSTOMER COMMITMENTS

OUTCOME MEASURE TARGET RESULT 1 APRIL 2018 – 31 MARCH 2019 2 2018-19 HIGHLIGHTS SAFE DRINKING WATER Compliance with Safe Drinking Water Regulations 2015 100% 100%

RELIABLE WATER AND Customers who experience three or more unplanned SEWERAGE SERVICES water interruptions or three or more sewerage service <0.96% 0.94% interruptions in 12 months (five-year rolling average)

Customers whose interrupted service (water and TIMELY RESPONSE AND 93.9% RESTORATION sewerage) has been restored within four hours >91.1%

FAIR ACCESS AND Customers who, having accessed its support ASSISTANCE FOR ALL programs, believe Yarra Valley Water helps customers 89% 89% experiencing difficulty paying for their water and sewerage services

Total water usage (litres/per person/per day) WATER AVAILABILITY AND 221 233 CONSERVATION

Customers who are satisfied with their most recent MODERN FLEXIBLE SERVICE 86% 82% interaction

Reduction in carbon emissions (cumulative) CARE FOR AND PROTECT THE 4.0% 4.1% ENVIRONMENT (baseline is 34,083 tonnes CO2e in 2016-17)

FINANCIAL SUMMARY

Yarra Valley Water recorded a net profit after tax of Capital expenditure of $312.8 million was incurred during $111.7 million in 2018-19. The net profit after tax result is 2018-19 primarily to renew, augment and upgrade water and $23.2 million higher than the 2017-18 result and $40.5 million sewer infrastructure. We focused on the efficient and effective higher than budgeted. The additional profit above budget was use of capital expenditure to deliver planned outcomes in generated primarily as a result of: accordance with our Price Determination. ›› Higher water sales as consumption exceeded budget by A final dividend of $44.1 million for the 2017-18 financial year 5,091ML or 3.7% was paid during the year. The amount of the final dividend for the year ending 30 June 2019 will be determined after ›› Additional revenue from developer contributed assets consultation between the Board, the Minister for Water and due to revenue recognition process changes. The changes the Treasurer of Victoria. implemented improve the accuracy of the value of assets being provided by developers with more precise data During 2018-19 total assets increased by $154.7 million available on the length of water and sewerage assets as a result of the growth in infrastructure, property, plant transferred to us. The book rates were also updated and equipment. (increased) to better reflect asset value. These changes Total liabilities increased by $194.8 million in 2018-19 largely resulted in a significant increase in the revenue brought to as a result of additional borrowings of $215.4 million which account in 2018-19 were primarily used to fund capital investments for our water ›› Savings in finance charges due to lower-than-budgeted and sewerage infrastructure. Financial Accommodation Levy rate, deferring the 2018- 19 interim dividend payment to 2019-20 and savings in interest payments by holding higher-than-budgeted short term borrowings due to the low cash rate, and low interest rates achieved on new fixed rate loans.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 37 FIVE-YEAR FINANCIAL SUMMARY

2019 2018 2017 2016 2015 STATEMENT OF COMPREHENSIVE INCOME $’000 $’000 $’000 $’000 $’000

Service and usage revenue 957,613 936,265 886,081 907,953 844,346

Other revenue 166,440 110,532 103,262 114,414 89,992

Total revenue 1,124,053 1,046,797 989,343 1,022,367 934,338

Operating and other expenses 724,304 684,073 676,265 715,774 643,780

Depreciation and amortisation 107,486 107,843 96,872 97,490 94,294

Finance costs 132,207 130,127 127,440 123,942 121,373

Total expenses 963,997 922,043 900,577 937,206 859,447

Profit before income tax 160,056 124,754 88,766 85,161 74,891

Income tax (48,356) (36,252) (27,202) (26,247) (22,804)

NET PROFIT AFTER TAX 111,700 88,502 61,564 58,914 52,087

2019 2018 2017 2016 2015 BALANCE SHEET $’000 $’000 $’000 $’000 $’000

Current assets 171,358 196,849 184,292 188,616 170,982

Non-current assets 4,949,698 4,769,483 4,546,209 4,350,521 4,182,941

Total assets 5,121,056 4,966,332 4,730,501 4,539,137 4,353,923

Current liabilities 505,272 477,154 424,582 370,903 372,117

Non-current liabilities 2,981,543 2,814,871 2,681,759 2,612,419 2,462,634

Total liabilities 3,486,815 3,292,025 3,106,341 2,983,322 2,834,751

NET ASSETS 1,634,241 1,674,307 1,624,160 1,555,815 1,519,172

38 YARRA VALLEY WATER ANNUAL REPORT 2018-19 RETURN ON EQUITY (%) RETURN ON AVERAGE ASSETS (%) 2 2018-19 HIGHLIGHTS

8 7 6 6 5 6.75 4 5.79 4 5.26 5.37 4.70 4.66 3 4.52

3.83 3.87 2

2 3.41 1 0 0 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19

Return on equity increased in 2018-19 due to increased Return on assets increased in 2018-19 primarily due to higher developer contributed assets revenue. Average equity also profit after tax resulting from increased developer contributed decreased as a result of the capital repatriation payment, asset revenue due to increases in the book rates used to better and a reduction in the asset revaluation reserve as at reflect the actual value of the assets. The average asset value 30 June 2019. was impacted by a $127.6 million reduction as part of the 30 June 2019 infrastructure valuation.

GEARING RATIO (%) NET PROFIT AFTER TAX ($M) INTEREST BEARING DEBT TO ASSETS Net profit after tax % 60 120 50 100 40

51.35 80 111.70 48.61 47.83 47.84 46.14 30 60 88.50 20 40 61.56 58.91

10 20 52.09

0 0 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19

Gearing ratio increased in 2018-19 due to increased borrowing Net profit after tax increased in 2018-19 primarily due levels to fund capital, operating, dividend and capital to additional revenue generated from higher developer repatriation payments. contributed asset revenue arising from increased book rates used to better reflect the actual value of the assets.

INTEREST COVER TIMES CAPITAL EXPENDITURE ($M) Interest Cover (times)

3.0 350

2.5 300 250 2.61 2.0 2.62 2.50 2.40 200 312.77 2.19

1.5 282.26

150 261.58

1.0 233.88 100

0.5 50 173.72 0 0 2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19

Interest cover ratio in 2018-19 has been maintained. Capital expenditure increased in 2018-19 to meet our price submission commitments and also reflected an improved delivery capacity. We increased capital expenditure in a range of programs including water and sewer growth works, water main renewals and water reliability programs to ensure we meet customer service level targets.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 39 3

40 YARRA VALLEY WATER ANNUAL REPORT 2018-19 DELIVERING VALUE

YARRA VALLEY WATER ANNUAL REPORT 2018-19 41 OUR LEADERSHIP

ORGANISATIONAL BOARD OF CHART DIRECTORS

MANAGING DIRECTOR

Pat McCafferty

EXTERNAL SERVICES

Anne Farquhar

CIO SERVICE GROWTH PEOPLE, DISTRIBUTION RETAIL STRATEGY & FINANCIAL & CORPORATE FUTURES FUTURES PERFORMANCE SERVICES SERVICES COMMUNITY CORPORATE SECRETARY & CULTURE SERVICES Cameron Glenn Dona David McLean Wilson Chris Brace Kylie Row Tantirimudalige Steve Lennox Snadden Natalie Foeng Lisa Anelli

A HIGH STANDARD OF CORPORATE GOVERNANCE The Yarra Valley Water Board has overall responsibility We are committed to ensuring a robust Corporate Governance for corporate governance including: Framework is in place and reviewing the framework regularly to ensure it aligns with best practice. ›› setting the strategic direction This section sets out the main Corporate Governance practices ›› establishing goals for management and monitoring in place during the 2018-19 financial year. the achievement of these goals ›› monitoring the business' performance.

42 YARRA VALLEY WATER ANNUAL REPORT 2018-19 The Yarra Valley Water Board comprises eight independent non-executive Directors and one executive Director, with the non-executive Chair and non-executive Directors appointed by the Minister for Water.

3 DELIVERING VALUE

BOARD ROB SKINNER AM – DEPUTY CHAIR BE (Hons), MSc, FIEAust, MAICD The Managing Director is appointed Rob Skinner became a Director on 1 October 2015 and by the Board in accordance with the was appointed Deputy Chair of Yarra Valley Water on Water Act 1989. 16 December 2016. He is a Professorial Fellow and Director at Monash Water Our Directors have a wide range Sensitive Cities Centre, Chair of WaterAid Australia and of backgrounds and bring an WaterAid International, Deputy Chair of the Co-operative appropriate mix of skills and Research Centre for Water Sensitive Cities and Board member of the International Centre of Excellence for Water experience to the Board. Resources Management. He is a Distinguished Fellow of the International Water Association (IWA) and Chair of the SUE O’CONNOR – CHAIR IWA’s Cities of the Future Program. BAppSc, GDipBus Mgt, FAICD Rob was Managing Director at Melbourne Water from 2005 Sue became a Director and Chair of Yarra Valley Water on to 2011, and Chief Executive Officer of the City of Kingston 1 October 2015. She has been a non-executive Director and from 1996 to 2005. He was appointed to the Australian Water Chair for over 10 years. Partnership Committee in October 2015. Sue is a Director of Mercer Superannuation, ClimateWorks Over the past 20 years, Rob has been on a number of boards Australia, Treasury Corporation of Victoria, Kordia Group and involved in numerous advisory panels and reviews related Limited and Bush Heritage Australia. Sue is also a member to water policy and strategy in Victoria and elsewhere. of the Leadership Oversight Committee for the Women in Water Leadership Program (a Water for Victoria initiative) and Committee membership: an advisory committee member of the Monash Sustainable ›› Service, Community, Assets and Regulation Development Institute. Committee – Chair ›› Risk Management and Audit Committee She was previously Chair of YMCA Victoria and a Director and (from October 2018) Deputy Chair of Goulburn Valley Water (2008-2015). ›› Hazelwynde Steering Committee Sue brings to the board table over 25 years of senior ›› Leadership, Culture and Diversity Committee leadership experience of successfully growing and (July 2018 to October 2018). transforming customer focused, technology dependent businesses operating in disrupted markets. This includes 13 years at Telstra Corporation where she successfully led the establishment of a number of new businesses and completion of major cross-company transformation programs. Committee membership: ›› Hazelwynde Steering Committee - Chair ›› Service, Community, Assets and Regulation Committee ›› Risk Management and Audit Committee ›› Leadership, Culture and Diversity Committee.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 43 OUR LEADERSHIP CONTINUED

VICTOR PERTON ERIC SJERP BEc, LLB, LLM, Dip Chinese Law, GAICD BSc (Geol. Geog.), MEIANZ, MAICD Victor Perton became a Director of Yarra Valley Water on Eric became a Director of Yarra Valley Water on 1 October 2015. 1 October 2015. Victor is the founder of The Australian Leadership Project and Eric is an Environmental Scientist with over 25 years' the author of “The Case for Optimism: The Optimists’ Voices.” professional experience throughout Australia and Malaysia. He is currently Managing Director and Principal Consultant His experience in governance includes service on boards of Ethos NRM, specialising in ecological impact assessment, including the Transport Accident Commission, the Federal environmental approvals and strategic natural resource Government’s Council on Australia Latin American management. Relations, the Global Integrity Summit, the Australian Centre for Financial Studies and patron of the Digital Eric brings considerable governance experience having Leadership Institute. served on numerous other boards, including East Gippsland Water, Southern Rural Water, East Gippsland Environmental He has chaired public sector inquiries and committees on Sustainability Advisory Board, East Gippsland Catchment technology, justice, equal opportunity, regulatory efficiency, Management Authority Lands Advisory Committee, Within subordinate legislation and several other topics. His current Australia and the East Gippsland TAFE Industry Advisory work includes advice on optimistic leadership, Australian Committee. Eric has also previously served as Executive leadership, integrity and strategy. Officer of the Gippsland Lakes Management Council. Victor brings 18 years’ experience as a Parliamentarian, Committee membership: practice as a barrister, mediator, arbitrator, businessman, ›› Risk Management and Audit Committee private sector board service and mentor. He is a former ›› Service, Community, Assets and Regulation Committee. Commissioner to the Americas promoting foreign direct investment in Victoria, supporting Victorian exporters, building HELEN THORNTON global supply chains and expatriate and alumni networks. BEc, ICA, GAICD Committee membership: Helen has more than 30 years’ experience in finance roles ›› Risk Management and Audit Committee across a wide range of industries. Helen is currently a (July 2018 to October 2018) non-executive director and Deputy Chair of the Treasury ›› Service, Community, Assets and Regulation Committee Corporation of Victoria. She is also a Director of ISPT Pty Ltd, ›› Hazelwynde Steering Committee Ansvar Insurance, Austin Health and Legal Practitioners ›› Leadership, Culture and Diversity Committee Liability Committee. (from October 2018). Helen was previously Deputy Chair of Zoos Victoria and a ANITA ROPER non-executive director of Big Sky Building Society and Rural FAIM, GAICD Finance Corporation. Anita Roper became a Director of Yarra Valley Water on A Chartered Accountant, Helen has extensive experience in 1 October 2015. finance, governance, audit and risk management. She has held senior roles at Deloitte, KPMG, BHP Ltd and BlueScope Anita is currently a Director of the Stroke Association of Steel Ltd where she was responsible for the global risk Victoria. She previously served as a member of the Board of management function. Inquiry into the Hazelwood Coal Mine Fire and has served on numerous boards, councils and working groups including Committee membership: as a Non-Executive Director of Pacific Hydro, Director of the ›› Risk Management and Audit Committee – Chair Fitzroy Football Club, member of the Victorian Public Sector ›› Hazelwynde Steering Committee Commission Advisory Board, member of AngloGold Ashanti’s ›› Service, Community, Assets and Regulation Committee. Global Panel on Sustainability and board member of the Women’s Network for a Sustainable Future. Anita has over 30 years’ experience in senior management roles working with business, government, communities and multilateral agencies in Australia, Canada, UK and the USA. Her executive career spans the private and public sectors, including Chief Executive Officer at Sustainability Victoria and Global Director of Sustainability with Alcoa in New York. Committee membership: ›› Leadership, Culture and Diversity Committee – Chair ›› Service, Community, Assets and Regulation Committee.

44 YARRA VALLEY WATER ANNUAL REPORT 2018-19 KAREN MILWARD PAT MCCAFFERTY – MANAGING DIRECTOR GAICD BBus (Acc), Exec. MBA, GAICD, FWCLP, FIWA Karen Milward became a Director on 1 October 2017. Pat McCafferty was appointed Managing Director of Yarra Valley Water on 1 July 2014, and reappointed in Karen is the owner of Karen Milward Consultancy Services February 2018. and is currently the Chair of Mullum Mullum Indigenous Gathering Place, Chair of Kinaway Chamber of Commerce In a career spanning over 30 years in the water industry, Victoria Ltd, Co-Chair Indigenous Community Volunteers, Pat has extensive experience across the water sector Deputy Chair of Ganbina Ltd and the Major Transport and held General Manager roles at Yarra Valley Water 3 Infrastructure Authority - Aboriginal Advisory Council. from 2001. These roles covered a wide range of strategic DELIVERING VALUE leadership positions including planning, regulation, finance Karen was formerly the Deputy Chair of First Nations and operations. Foundation, the Co-Chair of the Victorian Aboriginal Economic Board, a Director of Aboriginal Housing Victoria, and was He has also worked in the USA water sector and advised a member of the Visitor Economy Ministerial Advisory the Australian Federal Government as part of the National Committee and Small Business Ministerial Council. Water Initiative. Karen brings to the Board extensive experience in working Pat is also Chair of the Water Services Association of with Aboriginal and Torres Strait Islander communities, Australia (Australia’s peak body for major urban water having worked on complex projects commissioned by public utilities) and the Thriving Communities Partnership (a sector agencies responsible for policies, programs and cross-sector collaboration to improve support for vulnerable services impacting on Aboriginal communities. Karen has customers of essential services); a member of the Monash also served on numerous committees and reference groups, Infrastructure Advisory Council and a member of the including the Premier’s Aboriginal Advisory Council. Leadership Oversight Committee for the Women in Water Leadership Program (a Water for Victoria initiative). Committee membership: ›› Leadership, Culture and Diversity Committee Committee membership: ›› Service, Community, Assets and Regulation Committee. ›› Leadership, Culture and Diversity Committee ›› Hazelwynde Steering Committee VICTORIA MARLES ›› Service, Community, Assets and Regulation. BA, Dip Ed, Dip Arts (Dramatic Arts), LLB (Hons), LLM, FAICD Victoria Marles became a Director on 1 October 2017. Victoria is the Chief Executive Officer of Trust for Nature (Victorian Conservation Trust) and is currently the Chair of the Abbotsford Convent Foundation, and the Consumer Action Law Centre. She has practised as a lawyer in the private, not-for-profit and public sectors in media/communications and consumer complaints law. Victoria has held the positions of Chief Executive Officer of the Legal Services Board (Victoria), Legal Services Commissioner (Victoria), Deputy Telecommunications Industry Ombudsman and has been a trustee of the Victorian Arts Centre Trust. Victoria brings to the Board extensive knowledge in the areas of natural resource management, climate change adaptation, biodiversity conservation/offsets and consumer law. Committee membership: ›› Risk Management and Audit Committee ›› Service, Community, Assets and Regulation Committee.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 45 OUR LEADERSHIP CONTINUED

BOARD CHARTER The Board Charter sets out clearly INDUCTION AND TRAINING the role, responsibilities and powers The Board has adopted a training and development policy for Directors. This policy facilitates appropriate training and of the Board and incorporates all development opportunities for Directors to enable them aspects of Board governance, along to fulfil their role, broaden their knowledge and share this with referencing the source of the knowledge with the rest of the Board. items included in the Charter. All newly appointed Directors are required to undertake an induction program to help them understand their role and encourage fulfilment of their Board responsibilities. CODE OF CONDUCT The induction program includes an overview of the Yarra The Board has adopted a Directors’ Code of Conduct Valley Water business, the water industry and the linkages based on the Code of Conduct issued by the Public Sector with Government. Standards Commissioner. Directors also attend seminars and other events to broaden their exposure to water industry issues and initiatives. DECLARATION OF PRIVATE INTERESTS All Directors have completed a declaration of private interests. LEARNING AND DEVELOPMENT All executives, senior managers, officers and contractors/ In 2018-19 the Directors undertook a number of activities to consultants with delegation to approve expenditure in excess support their ongoing learning and development, including of $20,000 have completed a declaration of private interests. exposure to senior management presentations and external presentations from water and non-water representatives. INDEPENDENT PROFESSIONAL ADVICE These presentations focused on learning about various operations of the business, topics that informed the strategic The Board has adopted a number of measures to ensure direction of the business and to ensure the Directors are that independent judgement is achieved and maintained. continually mindful of their obligations regarding key Directors are entitled to seek independent professional advice safety risks. on matters relating to the business of Yarra Valley Water at Yarra Valley Water's expense, subject to the prior approval of In 2018-19 two reports were released: the Australian the Chair. No Director exercised this right during the year. Prudential Regulation Authority's (APRA) Report - Prudential Inquiry into the Commonwealth Bank of Australia; and the BOARD PERFORMANCE REVIEW Victorian Ombudsman Report - Investigation into allegations In accordance with the Board Policy, an internally facilitated of improper conduct by Officers at Goulburn-Murray Water. Performance Review of the Board was conducted in January/ The performance of the Board and the organisation, and February 2019. The purpose of the review is continuous relevant policies and procedures of the organisation were governance improvement – identifying board performance mapped against the recommendations in both reports to improvement opportunities and governance framework gaps. identify any improvement opportunities. The findings of both reviews were discussed by the Board during 2018-19 to reflect The review process involved each Director completing a on the learnings and how they could relate to both the Yarra questionnaire followed by a round table discussion on the Valley Water Board and management. The actions identified findings and improvement opportunities drawn from the have been implemented during the 2018-19 financial year. questionnaire. Overall the results were very positive requiring few areas for discussion. The Board has further elevated In addition, to continue Yarra Valley Water’s cultural journey its performance over the last 12 months, successfully and further enable extraordinary performance, the Board transitioning a change in Board membership, and with the took part in the Organisational Culture Inventory (OCI) survey recent changes in Committee/Board structures and the in 2018-19. This marked a significant milestone for the addition of a new Committee focusing on the Hazelwynde organisation, with the current Board being the first to embark Project, this has provided space for the Board to balance its on this journey. The survey found the Board demonstrates role of insight, oversight and foresight. strong constructive behaviours and identified opportunities to use these strengths to take the Board to another level in the The review identified some potential improvements for the next strategic era for the organisation. Board to explore, to further elevate the Board’s performance.

46 YARRA VALLEY WATER ANNUAL REPORT 2018-19 BOARD COMMITTEES The Board has established four Committees of Directors to assist with carrying out its responsibilities and to allow detailed consideration of complex issues. Each Board Committee has its own terms of reference, which set out the Committee’s objectives, duties and responsibilities, composition, meetings, authority and reporting responsibilities. The Committees are as follows:

RISK MANAGEMENT AND The Risk Management and Audit Committee assists the Board in 3 AUDIT COMMITTEE fulfilling its duties and responsibilities relating to risk management, DELIVERING VALUE the effectiveness of internal controls and the accounting and reporting practices of the business, reviewing financial reports and overseeing the audits conducted by the internal and external auditors.

LEADERSHIP, CULTURE The Leadership, Culture and Diversity Committee assists the Board AND DIVERSITY COMMITTEE in reviewing strategies and policies to ensure critical actions and plans are in place to implement and develop the business’ people and culture, the adequacy of the Executive Remuneration Framework, the Management Succession Plan and the business' Diversity Policy, Strategy and Action Plans.

SERVICE, COMMUNITY, ASSETS The Service, Community, Assets and Regulation Committee assists AND REGULATION COMMITTEE the Board with oversight to ensure the business is currently meeting customer needs, community expectations and regulatory obligations. It also provides insight and has oversight of the business' future plans to meet customer needs, engage with community and address regulatory requirements.

HAZELWYNDE STEERING The Hazelwynde Steering Committee assists the Board with strategic COMMITTEE oversight and expert input into progressing the Hazelwynde Project including independent advice in relation to greenfield development, stakeholder management and best practice project governance.

Directors' attendance at Board and Committee meetings - 1 July 2018 to 30 June 2019

SUSTAINABILITY, SERVICE, PLANNING, COMMUNITY, LEADERSHIP, RISK PEOPLE INFRASTRUCTURE ASSETS AND CULTURE AND MANAGEMENT & CULTURE AND REGULATION REGULATION DIVERSITY HAZELWYNDE BOARD & AUDIT COMMITTEE COMMITTEE COMMITTEE COMMITTEE STEERING MEETINGS COMMITTEE MEETINGS1 MEETINGS1 MEETINGS MEETINGS COMMITTEE2 S O’Connor 7 of 7 4 of 4 1 of 1 1 of 1 3 of 3 2 of 2 3 of 3 R Skinner 7 of 7 2 of 3 1 of 1 1 of 1 2 of 3 - 2 of 3 V Marles 7 of 7 4 of 4 - 1 of 1 3 of 3 - - K Milward 6 of 7 - 1 of 1 1 of 1 2 of 3 2 of 2 - V Perton 6 of 7 2 of 2 - 1 of 1 3 of 3 2 of 2 2 of 3 A Roper 7 of 7 - 1 of 1 1 of 1 3 of 3 2 of 2 - E Sjerp 7 of 7 4 of 4 - 1 of 1 1 of 3 - - H Thornton 6 of 7 4 of 4 - 1 of 1 2 of 3 - 3 of 3 P McCafferty3 7 of 7 4 of 4 1 of 1 1 of 1 3 of 3 2 of 2 3 of 3

1 As part of a review of Board Committees during 2018-19, the People and Culture Committee was replaced by the Leadership, Culture and Diversity Committee, and the Sustainability, Planning, Infrastructure and Regulation Committee was replaced by the Service, Community, Assets and Regulation Committee. 2 The Hazelwynde Steering Committee was established in December 2018.

3 P McCafferty is not a member of the Risk Management and Audit Committee however attends in his capacity as Managing Director.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 47 OUR LEADERSHIP CONTINUED

OUR LEADERSHIP TEAM DAVID SNADDEN General Manager Strategy and Community BE (Civil), MBA PAT MCCAFFERTY David is responsible for providing strategy leadership and Managing Director BBus (Acc), Exec. MBA, programs that achieve greater customer and community GAICD, FWCLP, FIWA connection and value, and represents the business in water As Managing Director, Pat is also a member of the Board. industry policy and reform activities. Refer to details in the Board section. His role includes long-term strategy development, business planning, pricing and economic regulatory affairs, CHRIS BRACE corporate sustainability, strategic research, marketing and General Manager Growth Futures BE (Chem), customer programs, community inclusion and engagement, BS, GCert (Man) communication and stakeholder engagement. Chris is responsible for providing water and sewerage services to new customers. A key focus of his function is partnering DONA TANTIRIMUDALIGE with the community to develop new urban water futures General Manager Distribution Services BEng (Hons), that generate greater shared benefits for all stakeholders. M. Public Policy and Management, GAICD, MIWA He is accountable for delivering new infrastructure to Dona is responsible for managing our water, recycled water service growth as well as major upgrade projects for existing and sewerage infrastructure to ensure it delivers our desired infrastructure. customer service levels and meets applicable environmental performance standards. She is primarily responsible for NATALIE FOENG optimising existing infrastructure networks, infrastructure Chief Financial Officer BCom (Acc), CA maintenance and renewal, and safety and quality for Yarra Natalie is responsible for Financial and Corporate Services. Valley Water. Her role supports seamless operations and delivers insights to Dona is currently the chair of Springvale Monash Legal help everyone make great decisions, through providing world Services, and the 2018-19 President of the IWA. class financial planning, risk management, governance and corporate secretarial services. Natalie is also responsible for GLENN WILSON core finance functions such as statutory reporting, treasury, General Manager Service Futures BE (Civil), procurement, property and payroll. A key focus is partnering BBus (Admin) with the organisation to provide critical decision support, to deliver on productivity commitments, and to support strategy Glenn is responsible for enabling the transformation of execution. our core services (both retail and distribution) to improve productivity and the overall customer experience. This STEVE LENNOX includes the implementation of process improvements, new General Manager Retail Services BBus (Acc), CPA, technologies and innovations. He is also responsible for our ACIS, AGIA long-term asset management planning. Steve is responsible for customer operations functions. CAMERON MCLEAN He leads a group that delivers meter reading, billing Chief Information Officer BBus (Admin), management, debt collection, Customer Care centre GCert Change Management operations and commercial and development services, along with developing and implementing support programs for Cameron is responsible for the strategic direction of customers in financial difficulty. information technology to achieve the business objectives of Yarra Valley Water. This includes developing and delivering KYLIE ROW the digital strategy, enterprise architecture and IT projects. General Manager People, Performance and Culture BA, He is also responsible for the operation, maintenance and DipBus support of IT systems, sourcing and procurement of IT products and services and the management of IT vendors. Kylie is responsible for developing and implementing the human resources strategy for the business, including workforce planning, organisational culture, capability development and diversity. Kylie is also responsible for developing and maintaining systems for recruitment, onboarding, succession planning and performance management.

48 YARRA VALLEY WATER ANNUAL REPORT 2018-19 LISA ANELLI Corporate Secretary BCom (Acc), CA, GAICD Lisa is responsible for ensuring compliance with statutory and regulatory requirements and governance related administrative tasks of the Board and the organisation. This includes supporting the effective and efficient operation of the Board and providing advice and support on governance issues to the Board and the organisation. 3 DELIVERING VALUE RETIREMENT OF LEADERSHIP TEAM MEMBERS

ANNE FARQUHAR General Manager, External Services: Culture and Capability Cert Bus Mgt, GAICD On 30 June 2019 Anne retired from the business. Prior to her retirement, Anne worked with a number of regional water utilities and other government agencies and departments providing strategic human resources services and advice. The primary aim of this work was to strengthen culture and capability across the Victorian water sector, ultimately delivering new efficiencies and improving customer and staff satisfaction.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 49 OUR PEOPLE AND CULTURE

We believe that a great culture delivers great outcomes. Over the last decade, we have developed a high performance culture, high levels of employee engagement and effective workplace practices.

50 YARRA VALLEY WATER ANNUAL REPORT 2018-19 We do not tolerate discrimination and take a proactive ORGANISATIONAL CULTURE approach to ensure reasonable and proportionate measures Our culture provides the foundation are in place to monitor and improve practices and behaviours. All employees are required to comply with relevant federal for a high-performing workplace and state legislation that establishes grounds on which where we collaborate with partners discrimination is illegal including but not limited to the Acts relating to Occupational Health and Safety, Equal Employment and stakeholders to deliver Opportunity, Discrimination and Human Rights. Employees are exceptional outcomes for our required to complete discrimination awareness training which 3 is renewed every two years. customers and the environment. DELIVERING VALUE

Creating this constructive workplace culture requires RECRUITMENT a holistic approach, encompassing all aspects of the Yarra Valley Water is committed to applying merit and equity employment life cycle, such as recruitment, communication, principles when appointing staff. The selection processes role clarity, recognition, development, equity and leadership. ensure that applicants are assessed and evaluated fairly and Our focus on culture ensures we employ the right staff, equitably on the basis of the key selection criteria and other provide them with clear direction and challenging work, accountabilities without discrimination. enable performance through strong leadership and honest feedback, and provide ongoing development through targeted DIVERSITY AND INCLUSION learning opportunities. The diversity of our people is fundamental to extraordinary We are committed to further developing our achievement performance. Our Diversity and Inclusion Strategy oriented culture to create the best possible outcomes for aims to build an inclusive workplace that reflects the our community. We use several internationally recognised community it serves. benchmarking tools to track our progress and develop targeted strategies to improve our culture and engagement including: In December 2018, our Board reviewed and endorsed our second Diversity and Inclusion Strategy. The Diversity to ›› The Human Synergistics Organisational Culture Inventory Inclusion Strategy 2019-22 is the next phase in the continuous that measures the organisation’s prevalent behavioural journey of diversity to inclusion with a roadmap of programs, styles by exploring expected behaviours and norms that policies, measures and targets that reflect the community we manifest into the organisation’s culture. Our culture has serve. This strategy will see us continue to develop, expand been identified as highly constructive since 2013 which was and embrace our diverse workforce and broader community again endorsed by the 2018 OCI results through the Board endorsed vision: ›› Human Synergistics’ Leadership Impact (LI) and Life We stand for a fair and equitable Styles Inventory (LSI) are 360-degree feedback tools that measure managers’ overall effectiveness and the ways society. We embrace diversity and their managerial approaches affect the behaviours and inclusion in everything we do, as performance of those around them. These tools help us we strive to reflect the community align our management and leadership practices with the organisation’s overall vision, strategy and values we serve. ›› The Aon Hewitt Best Employer Engagement Survey The next phase of our Diversity and Inclusion Strategy measures staff engagement levels and the perceived identifies key focus areas: effectiveness of workplace practices. The survey gives ›› Reflecting our community – embracing diversity of us key information to inform human resources strategies ethnicity, identities, abilities, lifestyles and needs and improvement plans. In 2017 we were recognised by Aon Hewitt as a Best Employer. We had a very high ›› Gender balance, including women in leadership response rate, with 87% of staff completing the survey and ›› Aboriginal and Torres Strait Islander participation an overall company engagement score of 83%. ›› Workforce flexibility. FAIR TREATMENT AT WORK At Yarra Valley Water, it is our strategic intent to create a vibrant culture achieving exceptional business outcomes and successful partnerships through highly capable and engaged people. We are committed to providing fair and equitable treatment for all employees in the workplace including partners, contractors, work experience students, suppliers and agents, both on and off site, when they are working for us.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 51 OUR PEOPLE AND CULTURE CONTINUED

AS OF JUNE 2019, THE PROPORTION OF WOMEN IN SENIOR LEADERSHIP POSITIONS AT YARRA VALLEY WATER IS: 55.6% FEMALE DIRECTORS 50% FEMALE LEADERSHIP TEAM 40.6% FEMALE DIVISIONAL MANAGERS 50% FEMALE OVERALL WORKFORCE

52 YARRA VALLEY WATER ANNUAL REPORT 2018-19 We continue to observe a significant Karen Milward continues to serve on our Board, after her appointment in 2017-18. She is a Yorta Yorta woman and increase in the number of women a strong advocate for developing culturally appropriate shortlisted for positions over the solutions to the issues facing Aboriginal and Torres Strait past six months. Islander peoples. Our Reconciliation Leadership Committee is a key element 50.5% of candidates shortlisted for technical and leadership of our governance for delivering our RAP actions. It includes roles are now women, compared with 46% previously. Aboriginal and Torres Strait Islander staff and external This is due to managers and the recruitment team adjusting representatives. The Committee’s purpose is to ensure 3 their approach to shortlisting, as well as changes to our job ongoing collaboration, capacity and relationship building at a DELIVERING VALUE advertisement and careers' website. The proportion of women senior level within the organisation with representatives from in senior leadership positions at Yarra Valley Water include: Victorian Aboriginal communities, and their active involvement ›› Directors – 55.6% female in assessing the overall direction and effectiveness of outcomes being achieved. ›› Leadership team – 50% female Results from the diversity module of the Victorian Public ›› Divisional management – 40.6% female Sector Commission's (VPSC) 2017 People Matter Survey ›› Overall workforce – 50% female. indicate above average positive perception in most areas. In June 2019, our staff once again participated in the VPSC Strategic initiatives have been implemented to ensure cultural People Matter Survey achieving a 53% response rate. This diversity is a core component of our employee base to ensure is a significant increase from the previous response rate of we truly reflect our community. At Yarra Valley Water: 32%. We continue to drive change through training, working ›› 28% of employees weren't born in Australia groups and awareness campaigns to achieve increases to targeted areas. ›› 52% of employees have one or both parents who weren't born in Australia WE ARE SAFE ›› 27% of employees speak another language other than We are committed to the safety and wellbeing of our staff, English conversationally. partner organisations and members of the public. Our safety We have programs in place to support minority groups within commitment, We are Safe, is embedded in everything we do. our community who may struggle to work in their chosen Our 2020 Strategy safety outcomes are: profession. Career Connect, our partnership with Jesuit Social Services, has adjusted recruitment processes to ensure ›› Safety exists as each person’s responsibility exposure of roles and candidates within minority groups is ›› We make our workplaces safe ongoing allowing us to source quality applicants who may find it difficult to break through standard application processes. ›› We carry out our work without harming ourselves or others. Through our Reconciliation Action Plan (2017 to 2019), we are also committed to providing employment opportunities These safety outcomes are supported by our We are Safe for Aboriginal peoples and will take action to ensure we have behaviour statement, compliance with occupational health a culturally safe environment, and promote the attraction and and safety legislation and using our accredited Safety retention of Aboriginal and Torres Strait Islander staff. Management System. Currently, approximately 1% of our workforce identifies as Aboriginal or Torres Strait Islander, based on our Diversity Census. Within our first RAP, we identified the opportunity to discuss the inclusion of criteria for director appointments that takes account of the diverse community we serve, including Aboriginal and Torres Strait Islander peoples.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 53 OUR PEOPLE AND CULTURE CONTINUED

EMPLOYMENT DATA The following table discloses the head count and full-time equivalent (FTE) staff of all active Yarra Valley Water employees employed in the last full pay period in June 2019.

FULL PART FTE FULL PART FTE TIME TIME CASUAL TOTAL 2018-19 TIME TIME CASUAL TOTAL 2017-18

GENDER Male 329 13 10 352 340.6 307 13 16 336 324.2 Female 235 102 14 351 312.5 199 93 16 308 271.0 TOTAL 564 115 24 703 653.1 506 106 32 644 595.2

AGE 15-24 18 5 17 40 25.4 15 1 15 31 21.7 25-34 184 20 4 208 200.1 152 17 8 177 167.4 35-44 158 45 2 205 190.9 143 41 3 187 171.9 45-54 122 28 1 151 141.3 113 26 6 145 134.4 55-64 68 13 - 81 78.4 70 16 - 86 83.0 65+ 14 4 - 18 17.0 13 5 - 18 16.8 TOTAL 564 115 24 703 653.1 506 106 32 644 595.2

CLASSIFICATION Executive 9 - - 9 9.0 9 - - 9 9.0 Senior 31 - - 31 31.0 29 - - 29 29.0 manager Administration 524 115 24 663 613.1 468 106 32 606 557.2 and field staff TOTAL 564 115 24 703 653.1 506 106 32 644 595.2

Staff levels changed over the course of the year with roles INCOME BAND insourced from external contractors to lower overall costs, (SALARY EXCLUDING SENIOR additional customer service staff recruited to service growing SUPERANNUATION) EXECUTIVE MANAGER work volumes and vacancies filled from the previous year. $140,000 - $159,999 - - Bonuses were phased out of remuneration packages in 2018- $160,000 - $179,999 - 8 19 and incorporated into senior employee salaries. $180,000 - $199,999 - 18 The following table discloses the annualised total salary $200,000 - $219,999 - 2 (excluding super) for senior employees, categorised by $220,000 - $239,999 - 1 classification. The salary amount is reported as the full-time $240,000 - $259,999 2 1 annualised salary. $260,000 - $279,999 4 1 $280,000 - $299,999 2 - $380,000 - $399,999 1 - TOTALS 9 31

54 YARRA VALLEY WATER ANNUAL REPORT 2018-19 CORPORATE INFORMATION

INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) EXPENDITURE For the 2018-19 reporting period, Yarra Valley Water had a total ICT expenditure of $54.534 million (with the majority being depreciation), details shown below: BUSINESS AS USUAL (BAU) NON BAU 3 DELIVERING VALUE BAU ICT TOTAL NON BAU ICT OPERATIONAL CAPITAL ICT EXPENDITURE EXPENDITURE EXPENDITURE EXPENDITURE DEPRECIATION $'000 $’000 $’000 $’000 $'000

14,939 39,595 316 18,480 20,799

Protected Disclosure Act 2012 CONSULTANCY EXPENDITURE Yarra Valley Water has procedures in place to help employees The following is a summary of consultancy expenditure incurred and contractors understand the requirements and obligations by Yarra Valley Water during 2018-19. under the Protected Disclosure Act 2012, and to facilitate Details of consultancies (valued at less than $10,000) making and handling disclosures and notifying such disclosures In 2018-19 Yarra Valley Water engaged four consultancies to the Independent Broad-based Anti-corruption Commission. where the total fees payable to the consultants were less than These procedures are available to the public at Yarra Valley $10,000. Total expenditure incurred during the reporting period Water’s website. in relation to these consultants was $20,910 (GST exclusive). Freedom of Information Act 1982 Details of consultancies (valued at $10,000 or greater) The Freedom of Information Act 1982 (the Act) allows the In 2018-19 Yarra Valley Water engaged 24 consultancies where public a right of access to documents held by Yarra Valley the total fees payable to the consultants were $10,000 or Water. The purpose of the Act is to extend as far as possible greater. Total expenditure incurred during the reporting period in the right of the community to access information held by relation to these consultants was $1,707,641 (GST exclusive). government departments, local councils, Ministers and other bodies subject to the Act. Details of individual consultancies are outlined on Yarra Valley Water’s website. An applicant has a right to apply for access to documents held by Yarra Valley Water. This comprises documents both created by Yarra Valley Water or supplied to Yarra Valley Water by an GOVERNMENT ADVERTISING EXPENDITURE external organisation or individual, and may also include maps, Yarra Valley Water’s expenditure on government campaign films, microfiche, photographs, computer printouts, computer expenditure did not exceed $100,000 in the 2018-19 discs, tape recordings and videotapes. reporting period. The Act allows Yarra Valley Water to refuse access, either fully LEGISLATIVE COMPLIANCE or partially, to certain documents or information. Examples of documents that may not be accessed include: cabinet Privacy and Data Protection Act 2014 documents; some internal working documents; law enforcement Yarra Valley Water falls into the definition of a Victorian Public documents; documents covered by legal professional privilege, Sector agency under section 13 of the Privacy and Data such as legal advice; personal information about other people; Protection Act 2014 (Vic), and consequently complies with and information provided to Yarra Valley Water in-confidence. the Act. From 1 September 2017, the Act was amended to reduce the As the holder of our customers’ confidential and personal Freedom of Information (FOI) processing time for requests information, we are conscious of the need to ensure that this received from 45 to 30 days. In some cases, this time may information is protected, and to prevent any unauthorised be extended. access to, and improper use of, that information. In respect to the Notifiable Data Breach Scheme, Yarra Valley Water is legally obliged to disclose privacy breaches related to Tax File Numbers (TFN). A Privacy Policy and Code of Practice are in place for our employees, contractors and agency staff to ensure customer information is protected.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 55 OUR PEOPLE AND CULTURE CONTINUED

If an applicant is not satisfied by a decision made by In relation to existing buildings, our Facilities Department Yarra Valley Water, under section 49A of the Act, they have is responsible for mandatory testing of emergency and exit the right to seek a review by the Office of the Victorian lighting and lift equipment in accordance with relevant Information Commissioner (OVIC) within 28 days of receiving standards, monthly, quarterly and bi-annual inspection and a decision letter. preventative maintenance routine of mechanical services and monthly and annual fire service audits. These inspections then Making a request inform the works program which is delivered annually through FOI requests can be lodged online at foi.vic.gov.au. existing maintenance. An application fee of $29.62 applies. Access charges may also be payable if the document pool is large, and the search for material is time consuming. In 2018-19: Access to documents can also be obtained through a written Number of major works projects 2 request to Yarra Valley Water’s Freedom of Information undertaken by Yarra Valley Water team, as detailed in s17 of the Freedom of Information (greater than $50,000) Act 1982. Number of building permits, 3 building permits When making a FOI request, applicants should ensure occupancy permits or certificates of 1 occupancy permit requests are in writing, and clearly identify what types of final inspection issued in relation to Nil certificates of occupancy material/documents are being sought. buildings owned by the entity Requests for documents in the possession of Yarra Valley Number of emergency orders and Nil emergency orders Water should be addressed to: building orders issued in relation to Nil building orders buildings Frank Portelli Manager, Risk and Corporate Services Yarra Valley Water Private Bag 1 Mitcham, Victoria, 3132 Number of buildings that have Nil buildings brought been brought into conformity with into conformity General enquiries relating to Freedom of Information can be building standards during the made by calling us on (03) 9872 2634 between 8.30am and reporting period 4.30pm, Monday to Friday. Freedom of Information statistics Local Jobs First Policy Disclosures During 2018-19, Yarra Valley Water received 35 applications. All requests were received from the general public. Yarra Yarra Valley Water implements the Local Jobs First Policy Valley Water made 35 FOI decisions during the 12 months in accordance with the Local Jobs First Act 2003. ending 30 June 2019. Full access to all documents was During 2018-19, we commenced eight Local Jobs First provided in response to 35 requests. The average time taken Standard projects where either a Victorian Industry to finalise requests in 2018-19 was 30 days. During 2018-19, Participation Policy (VIPP) Plan or a Local Industry nil requests were subject to a complaint/internal review by Development Plan (LIDP) was required. The value of these OVIC and nil progressed to VCAT. projects totalled $69.7 million and they were all located in Further information metropolitan Melbourne. Further information regarding the operation and scope of FOI The outcomes expected from implementing the Local Jobs can be obtained from the Act; regulations made under the Act; First -VIPP to these projects are: and foi.vic.gov.au. ›› an average of 92.9% local content commitment Building Act 1993 ›› a total of 137 jobs (annualised employee equivalent [AEE]) Yarra Valley Water owns government buildings located at were committed, including creating 10 new jobs and Lucknow Street, Mitcham and is consequently required to retaining 127 jobs (AEE) include a statement on its compliance with the building and maintenance provisions of the Building Act 1993 in relation to ›› a total of three positions for apprenticeships/trainees its buildings. Yarra Valley Water requires that appropriately were committed. qualified consultants and contractors are engaged for all During 2018-19, we completed five Local Jobs First Standard proposed works on land controlled by Yarra Valley Water projects that required VIPP plans totalling $35.5 million, and that their work and services comply with current all located in metropolitan Melbourne. building standards. All such consultants and contractors are expected to have appropriate mechanisms in place to ensure The outcomes from implementing the Local Jobs First -VIPP compliance with the building and maintenance provisions to these projects were: of the Building Act 1993, Building Regulations 2018 and the ›› an average of 90.3% local content commitment National Construction Code. was achieved

56 YARRA VALLEY WATER ANNUAL REPORT 2018-19 ›› a total of 95 jobs (AEE) were achieved, including creating FINANCIAL MANAGEMENT COMPLIANCE 18 new jobs and retaining 77 jobs (AEE) ATTESTATION STATEMENT ›› a total of 33 positions for apprenticeships/trainees were I, Sue T O’Connor, on behalf of the Responsible Body, certify achieved including creating 25 new apprentices /trainees that Yarra Valley Water has complied with the applicable and retaining eight apprentices/trainees. Standing Directions 2018 under the Financial Management For these commenced and completed projects, there were Act 1994 and Instructions. 54 small to medium sized businesses engaged as either the principal contractor or as part of the supply chain. 3 Competitive Neutrality Policy DELIVERING VALUE Competitive neutrality seeks to enable fair competition Sue T O’Connor between government and private sector business. Any Chair advantages or disadvantages that a government business may experience, simply as a result of government ownership should be neutralised. Yarra Valley Water continues to comply with the requirements of the Competitive Neutrality Policy. Other information The following information is available from Yarra Valley Water on request, subject to the Freedom of Information Act 1982: ›› a statement that declarations of pecuniary interests have been duly completed by all relevant officers ›› details of shares held by any senior officer as nominee or held beneficially in a statutory authority or authority ›› details of publications produced by the entity about itself, and how these can be obtained ›› details of changes in process, fees, charges, rates and levies charged by the entity ›› details of any major external reviews carried out on the entity ›› details of major research and development activities undertaken by the entity ›› details of overseas visits undertaken including a summary of the objectives and outcomes of each visit ›› details of major promotional, public relations and marketing activities undertaken by the entity to develop community awareness of the entity and its services ›› details of assessments and measures undertaken to improve the occupational health and safety of employees ›› a general statement on industrial relations within the entity and details of time lost through industrial accidents and disputes ›› a list of major committees sponsored by the entity, the purposes of each committee and the extent to which the purposes have been achieved ›› details of all consultancies and contractors including: – consultants/contractors engaged – services provided – expenditure committed to for each engagement.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 57 LIVEABILITY OUTCOMES

Yarra Valley Water exists to enhance the liveability of our community, now and in the future.

forums across Melbourne. This was the culmination of many RESILIENT AND LIVEABLE months of collaboration through the IWM forums and working CITIES AND TOWNS groups, with our inputs primarily relating to the Yarra and, to a lesser extent, Maribyrnong and Dandenong catchments. Our core purpose is to provide We are working with our IWM forum partners in the Yarra, exemplary water and sanitation Maribrynong and Dandenong Creek catchments to deliver a services that contribute to the health number of initiatives including: and wellbeing of current and future ›› Merri Creek Upper IWM sub-catchment plan generations. We are proud of the role ›› Progressing plans for supplying recycled water to around we play in making Melbourne one of 5,500 properties in Doncaster the world’s most liveable cities. ›› Improving sanitation through on-site wastewater management – Park Orchards trial INTEGRATED WATER MANAGEMENT (IWM) ›› Wallan restorative project We believe that strong collaboration between the water ›› Whittlesea community farm industry and the community in relation to water cycle management and planning is crucial and will enable us ›› Taralla Creek naturalisation to continue to enhance Melbourne’s liveability amid the ›› LaTrobe and Monash National Employment and challenges of population growth, climate change and Innovation Clusters weather variability. ›› Developing a trial to revegetate landscapes to capture During 2018-19, we worked on a range of sustainable and carbon and improve social and environmental outcomes resilient services for our customers, including: such as biodiversity ›› Collaborating with other metropolitan water corporations ›› Continuing to roll out recycled water infrastructure in to complete and commence implementing a new the Northern Growth Corridor and Chirnside Park area to Melbourne Metropolitan Sewerage Strategy. This takes ultimately service about 165,000 properties a 50-year strategic view for developing Melbourne's bulk sewerage system to protect public health and enhance the ›› Collaborating with farmers and Yarra Ranges Council to liveability, productivity, prosperity and environment of the develop a proposal to irrigate peri urban agriculture at metropolitan region Coldstream with recycled water.

›› Collaborating with DELWP, metropolitan water WATER USE, CONSERVATION AND EFFICIENCY corporations and Catchment Management Authorities to manage water supply security for consumptive and We are operating in a drying climate, with the challenge environmental water users in the southern region of of significant population growth, so water efficiency is the state through various processes including the Long- more important than ever. We have had a relatively stable Term Water Resource Assessment, a Review of the level of per capita usage over the past five years which is Central Region Sustainable Water Strategy and the Water comparable with the metropolitan average. We continue Grid Partnership to promote sensible and efficient use of water through the Target 155 program, our schools’ education programs where ›› Partnering with DELWP, Port Phillip and Westernport we help schools and early learning centres integrate water Catchment Management Authority, local government and as a topic into the curriculum for educators and students, other water corporations in the IWM forums established to by implementing the Schools Water Efficiency Program, and support the implementation of Water for Victoria. continuing to assist businesses and councils to become more In October 2018, the Minister for Water released the Strategic water efficient and explore alternative sources. We support Directions Statements (SDSs) for the five Metropolitan IWM our customers and the community to use water sensibly for the things that they value.

58 YARRA VALLEY WATER ANNUAL REPORT 2018-19 The water industry in Melbourne is working together to The objective of the CRP program is to support customers secure water supplies for the next 50 years. This approach to gain greater control over their bills by addressing leaks or is captured in the ‘Water for a Future–Thriving Melbourne’ inefficient appliances. We organise the plumber on behalf of document that provides the common elements of the Urban the customer (with their agreement) where they are unable Water Strategies of Yarra Valley Water, City West Water to afford the cost of a plumber, and pay the plumber directly, and South East Water, Melbourne Water’s Melbourne Water to avoid out of pocket costs for the customer. There is strong System Strategy and the joint action of supporting the demand for this program, with the allocated funding spent efficient use of water across the community. each year it has run. The number of customers assisted depends on the level of funding. The program has been very In 2018-19 we worked with DELWP and Victorian water well received by the community sector with 448 customers corporations to continue to communicate the Target 155 assisted in 2018-19. message and implement the overarching state-wide Water Efficiency Strategy. We remain focused on efficient water The CHRP program has a similar objective, however targets use behaviours to ensure we make the most of our state’s emergency and community housing across the Melbourne precious water supplies. We continue to promote the efficient metropolitan areas (serviced by Yarra Valley Water, City and sensible use of water through: West Water and South East Water) that are owned or managed by community welfare agencies. The objective ›› water efficiency programs such as Target 155, a voluntary is to support their ability to effectively support vulnerable program that encourages Melbourne households to use a 3

customers via their core business rather than unnecessarily DELIVERING VALUE maximum of 155 litres of water per person per day high bills. The program has been very well received by the ›› our schools’ education program which integrates water community sector. into the curriculum for schools and early learning centres Beyond water efficiency, these programs also enable – this includes free classroom presentations, games and customers experiencing vulnerability and hardship to take puzzles, competitions and educational resources action to reduce their water use, and in turn, have greater ›› encouraging schools to participate in the Schools Water control of their bill. Efficiency Program (SWEP), a Victorian Government initiative that enables schools to track and manage their water consumption WATER CONSUMPTION ›› assisting businesses and local councils to become more REPORT 2018-19 water efficient and explore alternative water sources – this includes promoting a water efficiency benchmarking NUMBER OF CUSTOMERS (AS AT 30 JUNE 2019) website for businesses Residential customers 764,589 ›› engaging customers around water efficiency through bills, Non-residential customers 57,145 social media, local media and website content, including TOTAL the Target 155 program 821,734 ›› encouraging the use of water efficient appliances, DRINKING WATER VOLUME (ML)1 products and services. Residential customers 118,332 During 2018-19 we developed with the other metropolitan Non-residential customers 31,736 water utilities, a segmented approach to residential behaviour change to encourage water conservation. This (1) TOTAL 150,068 segmented approach was based on customer research Average annual drinking water consumption2 141,188 which uncovered six residential customer segments to focus water conservation campaigns on. It also identified RECYCLED WASTEWATER VOLUME (ML) shower use and millennials as an initial focus for water conservation campaigns. Residential customers 139 Besides water conservation, extensive customer research Non-residential customers 1,397 has told us that our customers want us to focus our efforts (2) Total 1,536 on improving and innovating when it comes to alternative sources of water, such as stormwater and recycled water. (1)+(2) TOTAL CONSUMPTION (ML)3 151,604 We have a continued focus on alternative water sources and are actively participating in the government’s Integrated NON-REVENUE WATER (ML) Water Management forums. Leakage 7,426 Under the WaterCare support program, we offer water audits Bursts 3,641 – directly to residential customers experiencing vulnerability Other or hardship (Community Rebate Program – CRP) and via 3,776 not-for-profit community housing (the Community Housing (3) Total 14,843 Retrofit Program – CHRP). Both these programs are funded (1)+(2)+(3) TOTAL WATER ALL SOURCES (ML) 166,447 by DELWP on an annually reviewed basis, and we also contribute an additional $100,000 funding to the CRP program 1 Includes a small amount of unchlorinated water supplied directly each year. from aqueducts.

2Average customer usage calculated over five years from 2014-15 to 2018-19.

3Total consumption does not include water sourced from rainwater tanks or from greywater reuse.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 59 LIVEABILITY OUTCOMES CONTINUED

250 246 244 237 230 217 210 207 200 200 186 168 166 166 164 164 161 161 160 157

150 153 151 147

100

50

0 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19

DROUGHT RESPONSE REPORT CORPORATE WATER CONSUMPTION The metropolitan water retailers have prepared common The amounts in the table below represent consumption at Drought Preparedness Plans (incorporating a Drought our Lucknow Street, Mitcham office excluding any treatment Response Plan) based around an adaptive framework plants or other work sites. to manage water shortages and potential use of four levels of water restrictions to control the use of drinking Total water consumption for 2018-19 7,131.31kL water outdoors. Number of FTE staff on site 653.1 During 2018-19, there was no requirement for drought preparedness measures. In February 2019, the Minister Average water use per employee 10.92kL for Water announced a 125GL desalinated water order. (kL per employee) Permanent Water Use Rules continued to apply for the whole Total office space 10,000m2 of 2018-19. Average water use per m2 0.71kL

60 YARRA VALLEY WATER ANNUAL REPORT 2018-19 ANNUAL REPORTING OF MAJOR REQUIREMENT 2: NAMING OF MAJOR WATER USERS AND WHETHER OR NOT THEY PARTICIPATE IN WATER NON-RESIDENTIAL WATER USE EFFICIENCY PROGRAMS

REQUIREMENT 1: NUMBER OF CUSTOMERS WHO FALL (Section 122ZJ of the Water Act 1989) WITHIN EACH RANGE Table 2: Names of major customers and their participation (Section 122ZJ of the Water Act 1989) in water efficiency programs Table 1: Customer by volume range STATUS OF CUSTOMERS’ PARTICIPATION IN WATER 3 NAME OF CUSTOMER EFFICIENCY PROGRAM DELIVERING VALUE VOLUMETRIC RANGE NUMBER OF – ML PER YEAR CUSTOMERS Austin Hospital Yes Bega Cheese Yes Equal to or greater than 100ML 9 and less than 200ML Bertocchi Smallgoods Yes Chadstone Shopping Centre Yes Equal to or greater than 200ML 3 and less than 300ML Chiquita Mushrooms Pty Ltd Yes Continental Poultry Pty Ltd Yes Equal to or greater than 300ML - and less than 400ML CSL Behring Pty Ltd Yes

Equal to or greater than 400ML 2 Eastland Shopping Centre Yes and less than 500ML Huhtamaki Australia Pty Ltd Yes

Equal to or greater than 500ML 1 Lang Tech Bottling Pty Ltd Yes and less than 750ML Latrobe University Yes Equal to or greater than 750ML - Monash University Yes and less than 1,000ML Peters Ice Cream Yes Greater than 1,000ML 2 Sorbent Paper Company Pty Ltd Yes

TOTAL NUMBER OF CUSTOMERS 17 Visy Packaging Properties Pty Ltd Yes Visy Paper Coolaroo Yes Westfield Doncaster Yes

To build business knowledge and support large water users to adopt local water solutions, we coordinate and facilitate seminars, undertake site visits at various businesses (exploring process and procedural improvements), and document case studies that share the learnings of others’ achievements in this area. Furthermore, all large water users have access to a national benchmarking website to compare their water consumption with others in similar industries.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 61 LIVEABILITY OUTCOMES CONTINUED

In 2018-19 our Community Engagement team supported WATER RECYCLING more than 60 significant infrastructure projects, frequently in This year we produced 11,071ML of recycled water at challenging locations or environmentally sensitive areas. As our sewage treatment plants of which 3,721ML or 33.6% we deliver more projects with greater complexity, the team was reused. ensures key stakeholders, nearby residents, businesses and communities know exactly what we are doing and when, as We constructed 87km of recycled water mains and connected well as quickly responding to any concerns. 11,787 properties to Class A recycled water. This brings the total number of connected properties to 26,325 – almost AFFORDABILITY AND ASSISTANCE PROGRAMS double the 14,538 properties connected before June 2018. Melbourne’s water bills are currently the lowest in Australia We continued to lead a recycled water industry working for all capital cities. We have an important role in sustaining group, allowing for collaboration and alignment between Victoria’s productivity and a responsibility to deliver our Victorian water utilities. We also worked hand-in-hand with services as efficiently as possible. In doing this we strive to our regulators to revise the existing recycled water guidelines, relieve the pressure on household budgets and to ensure that to reduce barriers to recycled water use, while continuing the cost of water and sanitation services does not impact the to protect public health and the environment to the highest competitiveness of our business customers. Because most of possible standard. our investment decisions are long term we have an obligation Water recycling continues to be a key component of our to make financial decisions that optimise community value integrated water cycle management servicing strategy and intergenerational equity. for the Northern Growth Corridor, and new estates in the There was strong feedback from customers during our Price eastern suburbs. Public open space irrigation, and providing Submission process that they didn't want water bills to recycled water to all homes via a third pipe system for increase, though they valued increased service levels over a toilet flushing, garden watering and laundry use, provides bill decrease. Nearly all customers told us that small annual significant efficiency and environmental benefits to the bill changes are better than a single large change. As a result, entire community. we devised a price path for the five-year period of flat or below inflation annual bill increases. In 2018-19, the typical annual WATER QUALITY residential bill (based on 150kL consumption per annum) was During 2018-19, we maintained our commitment to provide $1,056 – the same as in 2017-18. For the residential household safe, high-quality drinking water. This year we received 4.9 with 200kL consumption per annum, the 2018-19 bill is $1,249 complaints for every 1,000 customers, against our target of – a decrease from 2017-18 of $33 or 2.6%. 3.2 complaints. This was due to three significant water supply Despite this, keeping on top of bills remains a challenge for network issues and a change in how we report complaints. many Victorians. We continue to evolve our programs to We continue to actively invest in reducing the impact of support customers who are experiencing vulnerability and water quality changes on our customers, including increasing who find it difficult to pay their water bill. In 2018-19: customer communication about operational changes to their ›› 48,218 customers were on instalment plans, an increase water supply, targeted cleaning of 400km of water mains from 46,392 in 2017-18 using a combination of cleaning methods, and installing additional chlorinators around our network. ›› 8,052 hardship customers were assisted through our WaterCare program, an increase of 10% from the We achieved 90% customer satisfaction with the overall 7,305 customers assisted during 2017-18. quality of drinking water provided. We are also committed to improving awareness of our programs among groups with a higher risk of vulnerability CUSTOMER AND (such as Victorians from culturally and linguistically diverse COMMUNITY OUTCOMES backgrounds, concession card holders and those accessing emergency relief) and offer tailored support for these people. CUSTOMER AND COMMUNITY ENGAGEMENT Acting with transparency and openness is central to our engagement approaches as well as ensuring timely communication. We place a high priority on creating mutually beneficial relationships with our customers and stakeholders. This provides important feedback to assist us in our decision making and planning and builds confidence and trust in the work we do.

62 YARRA VALLEY WATER ANNUAL REPORT 2018-19 3 DELIVERING VALUE

YARRA VALLEY WATER ANNUAL REPORT 2018-19 63 LIVEABILITY OUTCOMES CONTINUED

Community inclusion Family violence We are developing a holistic, integrated approach to ensure Following changes to the customer service code, we improved all areas of our business operate with common principles of our internal customer support systems by including a ‘safety community inclusion. flag’ to identify and provide greater safety assistance to people at risk of family violence. In addition, members of Our Community Inclusion division aims to embed our customer support team received professional training better inclusion practice across the business, including to help them assist customers who may be affected by customers, staff and our supply chain. This builds on our family violence. strong foundation of supporting customers experiencing vulnerability, by looking at all areas of the business through We delivered company-wide awareness training for all the lens of community and financial inclusion. staff, including our Board and Executive teams. In addition, all people managers at Yarra Valley Water were trained in This includes: responding to suspected or disclosed family violence among ›› building strong relationships with community stakeholders employees. This training supports our Family Violence to support the evolution of our programs Guidelines and we continue to run training sessions for new staff. During 2019-20, we will continue to develop, enhance ›› promoting community inclusion principles within the and promote our policies, protocol and support programs business to strengthen, influence and guide our policy to ensure we can address family violence as a trigger for and practices financial exclusion and ensure customers are aware of ›› co-creating programs and action plans that enable the support available. We also continue to strengthen our pathways for inclusion and addressing socioeconomic and processes and capabilities to ensure we protect private and inclusion barriers to the way we work and our services confidential information and consider appropriate responses for perpetrators. ›› developing an approach for measurement, evaluation and reporting. We continue to be actively involved in raising awareness and collaborating with other organisations to strengthen and Thriving Community Partnership evolve our collective responses to family violence. Some The Thriving Communities Partnership (TCP) grew out of examples from 2018-19 include: Yarra Valley Water’s vulnerability roundtable, where we ›› participating in workshops run by the Essential hosted 130 representatives from business, government Services Commission as part of their work program on agencies and the community sector to address some of the family violence for the retail energy sector – sharing complex issues within our community – by moving from talk our experiences and learnings in developing and to action on tackling vulnerability. The TCP transitioned to implementing responses to address family violence within a separate not-for-profit company limited by guarantee in our workplaces 2018, and is a cross-sector collaboration with the goal that everybody has fair access to the modern essential services ›› participating in a range of activities supporting action they need to thrive in contemporary Australia: including against family violence, including the Walk against Family utilities, financial services, telecommunications and transport. Violence and other events during the 16 Days of Activism The TCP has over 170 organisations participating in the against Gender-Based Violence program across Australia and is currently hosted by Yarra ›› the TCP and Women’s Information Referral Exchange Valley Water. (WIRE) held a national roundtable on organisational responses to family violence, considering new research on teachable moments from WIRE. This brought together representatives from corporate, government and community sectors to discuss challenges and crucially to hear from victim-survivor advocates, including Rosie Batty who was the keynote speaker.

64 YARRA VALLEY WATER ANNUAL REPORT 2018-19 COMMUNITY SERVICE OBLIGATIONS In addition to our own assistance programs, many customers are eligible for support via government initiatives and programs. In 2018-19, the amount of assistance provided to customers in these programs slightly decreased. 2018-19 2017-18 2016-17 3

COMMUNITY SERVICE OBLIGATIONS $'000 $’000 $’000 DELIVERING VALUE Provision of concessions to pensioners 49,228 49,563 49,111 Rebates paid to not-for-profit organisations under the 1,235 1,295 1,249 Water and Sewerage Rebate Scheme Utility relief grant payments 1,377 1,128 1,073 Water concessions for life support machines 16 18 20 – haemodialysis TOTAL 51,856 52,004 51,453

PROVISION OF CONCESSIONS TO PENSIONERS WATER CONCESSIONS FOR LIFE SUPPORT MACHINES Customers who hold either a Pension Concession Card, a Gold – HAEMODIALYSIS Repatriation Health Care Card for All Conditions or a Health The State Government of Victoria provides a rebate for Care Card are entitled to pay a concessionary amount customers required to use a dialysis/life support machine instead of the full balance outstanding on their accounts. at home, to compensate these customers for water When a customer pays this lesser amount, the difference is use and sewage disposal charges relating to the use of billed to and paid by the Department of Human and Health such a machine. Services(DHHS). The rebate amount is determined by the DHHS based on the estimated annual water usage of a dialysis machine REBATES PAID TO NOT-FOR-PROFIT ORGANISATIONS (168kL). This rebate is in addition to any other pension or UNDER THE WATER AND SEWERAGE REBATE SCHEME concession entitlements. Customers who are not-for-profit entities are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the State Revenue Office.

UTILITY RELIEF GRANT SCHEME The utility relief grant scheme provides assistance for residential customers unable to pay their utility accounts due to a temporary financial crisis. Customers need to demonstrate that unexpected hardship has left them seriously short of money so that they cannot pay their utility account without assistance.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 65 LIVEABILITY OUTCOMES CONTINUED

and are important steps forward in building our understanding WATER FOR ABORIGINAL of their objectives and how we can best support them. CULTURAL, SPIRITUAL AND As we have begun to work more closely with Wurundjeri ECONOMIC VALUES and Bunurong, there have been a range of opportunities for informal learning opportunities including developing our We proudly acknowledge the Traditional Owners of the land understanding of their aspirations for involvement in water and waterways on which we work and live, and pay respects management and planning (including Wurundjeri’s water to the Elders past, present and emerging. We recognise and policy), the suitability of the National Cultural Flows research value their traditional responsibility for the water and land. We methodology to their needs and attending the ceremony also recognise and value the continuing rich cultures and the marking the handover of full control for three Galeena Beek contribution of Aboriginal and Torres Strait Islander peoples properties in Healesville to Wurundjeri. As we continue to and communities to the Victorian community. build how we work together, these opportunities enable us to develop our understanding of their histories, current focus ABORIGINAL INCLUSION PLAN/RECONCILIATION and aspirations. ACTION PLAN Ensuring each of our Traditional Owners have the resources We launched our first Reconciliation Action Plan (RAP) in and capacity to effectively work with us as well as April 2017. Since then, the RAP has provided the cornerstone Yarra Valley Water staff understanding when and how of our commitment to make a meaningful contribution to to incorporate Traditional Owner objectives into business Reconciliation and Aboriginal and Torres Strait Islander decisions are key considerations. A range of approaches are affairs. It outlines the overall, holistic approach that we currently in development with each Traditional Owner group committed to, to strengthen how we engage and work with which include (but are not limited to) secondments – the Aboriginal and Torres Strait Islander peoples, organisations Wurundjeri OH&S officer completed a work placement with and Traditional Owner groups. The focus of our current plan us during 2018-19, to support his development in this new has been on foundational measures of building relationships role. This was highly successful, and a good model for future and capability and deepening our understanding of how we opportunities, regular meetings, site visits, engagement of can meaningfully contribute to Reconciliation. Aboriginal water professionals, and appropriate remuneration Our second RAP is considered a 'stretch' RAP and will have of Elders. more tangible outcomes than our first 'innovate' RAP that In addition, 145 staff to date have completed full-day was built around relationships and inclusion. In 2018-19 cultural awareness training with Karen Milward since we made significant progress in developing our 'stretch' 2015-16. This covers history from an Aboriginal perspective, RAP. This involved reflecting on our progress to date and Aboriginal people and communities today and mechanisms the lessons we have learnt, and seeking feedback from to support engagement. This training has been extremely Community. We developed a new vision for reconciliation to well received, and provides a good basis for our staff to guide our next RAP: build their awareness and capability to engage further and Our vision for Reconciliation is that understand broader issues related to Reconciliation. This training is supported by a short cultural induction delivered all who live on this land acknowledge to our Customer Care centre staff and a broader internal our shared history and move forward, communications program relating to the RAP, sharing stories and information about Aboriginal peoples, culture together, in a respectful way. and histories.

CROSS-CULTURAL TRAINING Our internal communications include regular stories relating to Aboriginal and Torres Strait Islander culture, history, A key part of our RAP is to engage employees in cultural achievements and current issues. As we go forward our focus learning opportunities to increase understanding and is on building our understanding of shared history, and the appreciation of Aboriginal and Torres Strait Islander impact on the present. cultures, histories and achievements. We have developed a cultural learning strategy that outlines our approach to ENGAGEMENT OF ABORIGINAL COMMUNITIES build cross-cultural awareness and capability. It identifies the different training needs for specific parts of the business Our RAP includes a commitment to support procurement – including formal and informal training opportunities. opportunities that will effectively engage with Aboriginal and Torres Strait Islander businesses. Wurundjeri’s water team met with our Reconciliation We have existing relationships with various Aboriginal Leadership Committee and our Board, to share their water enterprises – including for cultural awareness training, journey and for us both to deepen our understanding of each stationery suppliers (with a Supply Nation certified supplier), other. Both sessions have provided excellent opportunities to photography, graphic design and other consultancy services. strengthen the connections between the two organisations, We have also engaged Wurundjeri Woi wurrung's Narrap

66 YARRA VALLEY WATER ANNUAL REPORT 2018-19 Team to undertake land management work, and the ENGAGEMENT OF TRADITIONAL OWNERS Mullum Mullum Indigenous Gathering Place social enterprise for our National Reconciliation Week event. During 2018-19 we significantly increased the number of times we engaged and our level of engagement with Awareness among staff about Aboriginal enterprises is a key Traditional Owners across Melbourne. We appointed an barrier to engaging them. To address this and to help build Aboriginal Partnership and Business Development Manager, our knowledge of Aboriginal businesses, we have joined the whose role is to work with Traditional Owners in our service Kinaway Chamber of Commerce who support us through area, building capacity of all parties involved and enabling connecting with relevant businesses. During 2018-19 we participation in water planning and management. This role implemented a new procurement system which identifies 3 reflects the embedding of Traditional Owner engagement in Aboriginal enterprises and incorporates flags for the DELIVERING VALUE the business as business as usual and is a significant step relevant procurement categories to help make staff aware forward in integrating Traditional Owner inclusion within of opportunities to engage an Aboriginal enterprise. During our planning and management frameworks. The role will be 2018-19 we began developing a social procurement strategy instrumental in developing joint business plans and potentially that will incorporate how we will realise opportunities for identifying other partners to collaborate with. Aboriginal enterprises to supply goods and services to us. This will be in line with our Reconciliation Action Plan actions Wurundjeri Woi wurrung's water officer joined our and will refer to the Victorian Government’s Aboriginal Reconciliation Leadership Committee, a forum to ensure Procurement Strategy. the active involvement of leaders from the Aboriginal community. The Committee assesses the overall direction Reconciliation and providing economic opportunity are key and effectiveness of outcomes being achieved and guiding the areas where we will engage with our broader supply chain, delivery of actions within our RAP. both to understand what they currently do and identify opportunities to do more. We are an active part of the We have capacity-built water knowledge within Wurundjeri VicWater Social Value in Procurement working group, which Woi wurrung through supporting eminent Aboriginal water provides a useful platform to work collaboratively to address experts. This included funding key Aboriginal water experts barriers for Aboriginal enterprises supplying goods and to work independently with Elders and staff to develop services and share learnings. water related strategies and understand the resourcing requirements necessary to deliver on current policy and Through our current RAP, we committed to identifying and new legislation as it relates to water and Traditional supporting Aboriginal and Torres Strait Islander training and Owner engagement. employment opportunities at Yarra Valley Water. Through AFL SportsReady, a Registered Training Organisation, we Cultural flows assessments are being facilitated with engaged a trainee who started with us in early 2019. The Traditional Owners in two sub-catchment areas. This trial trainee is gaining work experience in different areas across project will become mandatory in future sub-catchment our business, coupled with gaining a registered qualification. Integrated Water Management planning. The Cultural Flow methodologies, released by the National Cultural Flows Our sponsorship of a Cultural Flows breakfast featuring Research Project in June 2018, provide tools and support Aboriginal presenters who work in the National Cultural resources for Traditional Owners and water authorities. Flows Project was well supported in its attendance and the This pilot program will enable inclusion of Traditional Owners level of engagement with Traditional Owners. in the water industry and collaboration with the aim of We also support the broader Aboriginal and Torres Strait creating a future where Aboriginal water allocations are Islander community through our Choose Tap initiative, embedded within Australia's water planning and management providing water stations at events such as Survival Day and framework, delivering cultural, social, spiritual, environmental participating in other community events. and economic benefit to communities across Australia.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 67 ENVIRONMENTAL OUTCOMES

›› analysing our current and future service vulnerabilities CLIMATE ADAPTATION to climate change in a high priority region AND VARIABILITY ›› benchmarking our resilience to ensure we meet best We have embraced the Victorian Government’s vision for long- practice standards across the organisation term water management in developing our 50-year Urban ›› supporting actions arising from DELWP's Pilot Water Water Strategy: We will manage water to support a healthy Sector Climate Change Adaptation Action Plan, such as environment, a prosperous economy and thriving communities, developing the sewerage guidelines, considering climate now and in the future. risks in IWM forums, reviewing emergency management Our Urban Water Strategy and Drought Preparedness Plan plans and industry knowledge sharing forums about apply DELWP’s guidelines for forecasting the impacts of impacts on our water supply and sewerage networks. climate change on water supplies, and we have monitored Through these actions we have embedded climate change progress against these. Consideration of climate change considerations more deeply into our decision making impacts has also been embedded in the recently completed processes across our asset planning, water and sewerage Melbourne Sewerage Strategy. resource planning and product delivery functions. We have Our Climate Resilience Plan outlines our approach to further also worked closely with industry colleagues to ensure integrate climate change adaptation into our decision making our actions are aligned with broader adaptation actions across the business. In 2018-19 we implemented key actions undertaken across the industry. from this plan, including: The following table outlines how each of the key actions in our ›› trialling long-term adaptive planning techniques in a high Climate Resilience Plan relates to core functional areas. priority region

CORE FUNCTIONAL AREAS DEMANDS & WATERS SOURCE ASSETS BUILT ENVIRONMENT NATURAL WORKPLACE PEOPLE & INTERDEPENDENCIES PRODUCT DELIVERY & CUSTOMER

ACTIONS ACTION TIMEFRAME

Enhance adaptive pumping

Scenario based modelling Medium term X X X

Pilot adaptive planning Short term X X X X X

Embed adaptive planning Long term X X X X X

Reduce service vulnerabilities Asset vulnerability assessment Medium term X X X Contingency planning support Short term X X X X Emergency management responses Short term X X X X Foster collaborative partnerships Climate change resilience Short term X benchmarking Partner with DELWP Ongoing X Develop industry and customer Ongoing X X X X X partnerships

68 YARRA VALLEY WATER ANNUAL REPORT 2018-19 BULK ENTITLEMENTS REPORT Yarra Valley Water holds Bulk Entitlements to the water resources of the Greater Yarra River — Thomson Basin and to the Victorian Desalination Project. In addition, we hold Bulk Entitlements in the River Murray and Goulburn System of up to 25,000ML annually of water savings, as a result of investment in Goulburn-Murray Water's (GMW) Connections Project. 3 GREATER YARRA VICTORIAN DELIVERING VALUE SYSTEM – THOMSON DESALINATION GOULBURN REPORTING OBLIGATION RIVER POOL 1, 2 PROJECT 4 SYSTEM 7, 8 RIVER MURRAY 12, 13

The volume of water taken by Yarra Clause 16.1 (a) Clause 13.1 (a) 0ML Clause 14.1 (b) 0ML 9 0ML Valley Water in 2018-19 164,910ML

Annual water allocation made Clause 16.1 (b) Clause 13.1 (a) Clause 14.1 (c) Clause 11.1 (a) available to Yarra Valley Water 111,771ML 8,196ML 5 8,042ML 5,898ML

Share of storage volume at 30 June Clause 16.1 (b) Clause 13.1 (a) 7,369ML 10 5,385ML 14 2019 for carryover 127,891ML 8,185ML

Compliance with the Clause 16.1 (c) Yes N/A N/A N/A entitlement volume

Any assignment of water allocation or Clause 16.1 (d) Nil Clause 13.1 (b) Nil Clause 14.1 (d)11 Clause 11.1 (b) temporary/permanent transfers of the Net 7,300ML Net 3,800ML 15, 16 bulk entitlement Clause 14.1 (e) Nil Clause 11.1 (c) Nil

Approval, amendment and Clause 16.1 N/A N/A N/A implementation of approved (e) Continued metering program implementation 3

Any amendment to the Clause 16.1 (f) Nil Clause 13.1 (c) Nil Clause 14.1 (f) Nil Clause 11.1 (d) Nil bulk entitlement

Any new bulk entitlement granted to Clause 16.1 (g) Nil Clause 13.1 (d) Nil Nil Nil Yarra Valley Water

Compliance with the bulk entitlement N/A Clause 13.1 (e) N/A N/A Continued compliance 6

Any failures to comply with any Clause 16.1 (h) Nil Clause 13.1 (f) Nil Clause 14.1 (g) Nil Clause 11.1 (e) Nil provision of the bulk entitlement

Any difficulty experienced in Clause 16.1 (i) Nil Clause 13.1 (g) Nil Clause 14.1 (h) Nil Clause 11.1 (f) Nil complying with the bulk entitlement and if so, any remedial action taken or proposed

YARRA VALLEY WATER ANNUAL REPORT 2018-19 69 ENVIRONMENTAL OUTCOMES CONTINUED

9. Compliance with the combined annual diversion limit NOTES FOR COMPLIANCE WITH of 75,000ML for the holders of Bulk Entitlement BULK ENTITLEMENTS (Goulburn System – City West Water) Order 2012, Bulk Entitlement (Goulburn System – South East Water) GREATER YARRA SYSTEM – THOMSON RIVER POOL Order 2012 and Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 is assessed using the 1. Yarra Valley Water holds the following Bulk Entitlement actual measured annual diversion. Diversions are subject to the Greater Yarra System – Thomson River Pool. to clause 6.1 of Yarra Valley Water’s Statement of Bulk Entitlement (Greater Yarra System – Thomson River Obligations (System Management). Pool – Yarra Valley Water) Order 2014 – WSE000081 (previously BEE072377). 10. Yarra Valley Water’s commencement volume on 1 July 2018 was 6,627ML. At 30 June 2019, Yarra Valley Water 2. The metropolitan retailers make water available in held 7,639ML. Tarago Reservoir to Gippsland Water under a Bulk Water Supply Agreement. This is used by Gippsland Water to 11. Yarra Valley Water has in place water management supplement their Tarago Bulk Entitlement during periods strategies to manage water allocation holdings in the of high demand. Yarra Valley Water provided 179.36ML River Murray and Goulburn System to maximise the under the Agreement in 2018-19. Yarra Valley Water also value of the resources held to their customers and made available water to Goulburn Valley Water, under a minimise the risk of spilling water allocation. These Water Supply Agreement, to help secure water supplies strategies include the transfer of allocations between for Kilmore. In 2018-19 Yarra Valley Water provided Bulk Entitlement Allocation Accounts and trading water 97.6ML. allocations. Net total trade out was 7,300ML. 3. Continued compliance with approved metering program RIVER MURRAY through Bulk Water Supply Agreement between Melbourne Water and Yarra Valley Water and Melbourne 12. Yarra Valley Water holds the following Bulk Entitlements Water’s System Management Rules. to the River Murray. Bulk Entitlement (River Murray – Yarra Valley Water) Order 2012 – WSE000145 VICTORIAN DESALINATION PROJECT (previously BEE072242). 4. Yarra Valley Water holds the following Bulk Entitlement 13. Yarra Valley Water’s Bulk Entitlements in the River to the Victorian Desalination Project. Bulk Entitlement Murray provide for the progressive annual assignment (Desalinated Water – Yarra Valley Water) Order 2014 of entitlement volumes as water saving works and – WSE000054 (previously BEE050816). measures from GMW's Connections Project are completed. The 2018-19 entitlement volume was 5. The Hon Lisa Neville MP, Minister for Water, announced 8,601ML (4,247ML in Zone 6 (Vic Murray – Dartmouth a 15GL desalinated water order for the 2018-19 year, of to Barmah) and 4,354ML in Zone 7 (Vic Murray – Barmah which Yarra Valley Water’s share is 5,695ML. We received to SA Border). this order in September and October 2018, delivered into the Melbourne water supply system. The Minister for 14. Yarra Valley Water’s commencement volume on 1 July Water has also announced a further water order of 125GL 2018 was 3,287ML (1,514ML in Zone 6 and 1,773ML to be delivered during 2019-20. 6,587 ML was delivered in in Zone 7). At 30 June 2019, Yarra Valley Water held June 2019 to the Melbourne headworks system, of which 5,385ML (2,731ML in Zone 6 and 2,655ML in Zone 7). Yarra Valley Water’s share is 2501 ML. 15. Yarra Valley Water has in place water management 6. Compliance with our Desalinated Water long term strategies to manage water allocation holdings in the average diversion limit of 56,951ML is assessed using River Murray and Goulburn System to maximise the a 5-year rolling average diversion. value of the resources held to their customers and minimise the risk of spilling water allocation. These GOULBURN SYSTEM strategies include the transfer of allocations between Bulk Entitlement Allocation Accounts and trading 7. Yarra Valley Water holds the following Bulk Entitlement water allocations. to the Goulburn System. Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 – WSE000010 16. Net total trade out for River Murray system was 3,800ML (previously BEE072239). (1,800ML in Zone 6 and 2,000ML in Zone 7). 8. Yarra Valley Water’s Bulk Entitlements in the Goulburn System provide for the progressive annual assignment of entitlement volumes as water saving works and measures from GMW's Connections Project are completed. The 2018-19 entitlement volume was 11,699.2ML.

70 YARRA VALLEY WATER ANNUAL REPORT 2018-19 performance, we set a target of emitting no more than 32,727 GREENHOUSE GAS EMISSIONS tCO2-e (tonnes of carbon dioxide equivalents) in 2018-19. We AND NET ENERGY CONSUMPTION achieved the target through a combination of energy efficiency measures and increased renewable energy use - reporting We pledged to reduce our greenhouse gas (GHG) emissions 32,684 tCO2-e for the financial year. To achieve net zero by 64% by 1 July 2025. This commitment is necessary as we emissions for the tenth year in a row, we offset the reported operate against a backdrop of a rapidly growing population and emissions through a voluntary surrender of Certified Emission increased demand for our services. This would lead to higher Reduction credits. Further, we are working with our partners emissions if we didn't have an active plan to reduce them. To and suppliers to encourage them to reduce their emissions address this, we developed and commenced implementing a 3 year on year. business-wide emissions reduction strategy. To measure our DELIVERING VALUE

PROGRESS TOWARD 2025 GREENHOUSE GAS EMISSIONS TARGET

40000

35000

30000

25000

20000

15000

10000

5000

0 2011-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Baseline Target

Actual GHG emissions Projected GHG emissions

We rely on electricity to pump and treat water and wastewater be more efficient and reduce electricity consumption. This as well as power our head office. We currently operate close year we reduced electricity consumption by almost 21% at to 400 network connection points that use electricity and Brushy Creek, our largest sewage treatment plant, through this carbon-intensive consumption is the largest source of operational efficiencies driven by treatment plant operators. our emissions. We continue to look for additional ways to

GREENHOUSE GAS EMISSIONS 2018-19 TARGET 2018-19 RESULT PERFORMANCE INDICATOR (t CO2e) (t CO2e) VARIANCE NOTES

Water treatment and supply 8,500 9,090 6.94% 1

Sewage collection, treatment and recycling 21,500 20,851 -3.02% 2

Transport 1,130 1,136 0.53% -

Other (eg. office) 1,597 1,607 06.3% -

TOTAL GHG EMISSIONS 32,727 32,684 -0.13%

Offsets retired – self generated - - - -

NET EMISSIONS 32,727 32,684 -0.13%

NOTES

1 - Emissions greater to target due to water pumping to meet increased water demand.

2 - Energy efficiency initiatives at sewage treatment plants resulted in reduced emissions.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 71 ENVIRONMENTAL OUTCOMES CONTINUED

TOTAL ENERGY USE 2017-18 2018-19 RESULT RESULT PERFORMANCE INDICATOR (MWH) (MWH) NOTES

Water treatment and supply 8,039 8,496 1

Sewage collection, treatment and recycling 19,149 17,753 2

Transport - - -

Other (eg. office, workshops, depots etc) 1,243 1,485 3

TOTAL 28,431 27,734

NOTES

1 - Increased energy associated with water pumping to meet increased customer demand.

2 - Implementation of energy efficiency initiatives at sewage treatment plants reduced energy needs.

3 - The mix of energy sources for our Mitcham head office site varies from year to year. In June 2019 we commissioned our solar carpark decreasing our reliance on traditional energy sources.

RENEWABLE ENERGY We aspire to generate 100% of our energy needs from solar systems at three sewage treatment plants which have renewable sources by 2025. This year, almost 26% of our produced 251MWh of renewable energy. 91% of the energy electricity needs were supplied from renewable sources. produced was used to run the treatment plants, with the 21% came from our Waste to Energy (W2E) facility, which remaining 9% exported to the grid. generated 5,885MWh of renewable energy. 41% of this In June 2019, a 324kW solar carpark was commissioned at was used to run the W2E facility and the adjacent sewage our Mitcham head office. We expect this system to produce treatment plant leading to a 2,349 tCO2-e reduction in 408MWh each year, with over 90% consumed onsite and the emissions than if we sourced this electricity from the grid. In excess exported to the grid. December 2018, we commissioned 100kW ground mounted

TOTAL RENEWABLE ELECTRICITY USE 2017-18 RENEWABLE 2018-19 RENEWABLE ELECTRICITY USED ELECTRICITY USED PERFORMANCE INDICATOR (MWh) (MWh) NOTES

Solar - 227 1

Hydroelectric - - -

Wind - - -

Biogas 2,172 2,542 2

Greenpower - - -

Other 3,975 2,396 3

TOTAL 6,147 7,165 -

Percentage renewable electricity % 21.62% 25.83%

NOTES

1 - Solar systems at three sewage treatment plants

2 - ReWaste facility

3 - Large-scale Renewable Energy Target (LRET)

72 YARRA VALLEY WATER ANNUAL REPORT 2018-19 In line with the new legislation and guidance, we developed OTHER STATUTORY OBLIGATIONS a new risk assessment framework for our sewerage network and a detailed gap analysis on the Sewerage Management VICTORIAN BIODIVERSITY STRATEGY Guidelines. Yarra Valley Water follows the directive of ‘Victoria’s Native During the past year we delivered the following projects Vegetation Management: A Framework for Action’, which to reduce the impacts of sewer overflows and to align our was developed as an offset measure to support the Victorian practices with the Sewerage Management Guidelines: Biodiversity Strategy. We work with multidisciplinary companies and involve ecologists early in the preliminary ›› Detailed design of Roycroft Avenue emergency relief design phase of projects to complete them in a more structures (ERS) installation sustainable manner. This includes conducting complete risk ›› Detailed design of Great Ryrie Street ERS installation assessments, life-cycle analyses, net-gain assessments and offset management plans, and preliminary flora and fauna ›› Functional design of three ERS screens options assessments. ›› Concept design of monitoring critical locations within the We liaise with stakeholders such as the Department of sewer network Environment, Land, Water and Planning (DELWP) local ›› Functional design of monitoring for high risk gas councils and other water utilities on a project by project basis 3

check manholes. DELIVERING VALUE to determine how best to conserve Victoria’s biodiversity. We liaise directly with DELWP on ongoing growth and We progressed hydraulic options assessment for the development of all native offset areas established as part of following projects: these projects. ›› Burwood East sewer duplication and ERS installation VICTORIAN WATERWAY MANAGEMENT STRATEGY ›› Brunswick catchment upgrade and inflow reduction. Yarra Valley Water strives to deliver our services within the We worked with Melbourne Water to reduce the barriers to carrying capacity of nature and reducing our environmental taking an integrated water management approach to the Merri footprint is a priority. Creek waterway. We started the process to co-design and To improve waterway health, we continued to manage our co-deliver projects to reduce the environmental risks from nitrogen discharges to Port Phillip Bay in accordance with sewage overflows and improve the waterway quality in the our self-imposed nitrogen cap of 87 tonnes. In 2018-19, our Merri Creek catchment. discharge was 44.9 tonnes. While the new regulations focus predominantly on a To comply with river and aquifer health requirements as per risk-based approach to environmental harm, the regulations our Statement of Obligations, we undertook regular (weekly, still maintain a wet weather compliance standard (18.1% monthly) sampling at each of our sewage treatment plants Annual Exceedance Probability). Work has progressed on a to ensure they comply with our Environment Protection number of projects to minimise or eliminate non-compliant Authority Victoria (EPA) Corporate Licence Requirements. spills. We have: In 2018-19 we also prepared to transition to the new ›› Commenced concept design of the Darebin Creek Environment Protection Authority Victoria legislation and branch sewer corresponding license reform that is occurring by: ›› Undertaken planning to reduce the amount of rainfall ›› completing desktop risk assessments of all inflow into our sewers in Blackburn, Donnybrook waterway discharges and Coldstream. ›› commencing detailed Ecological Risk Assessments (ERAs) We also continued to construct new sewerage infrastructure for those deemed to be high risk discharges. for previously unsewered areas as part of the Community Sewerage Program. The findings from these ERAs will form the basis for compliance criteria for our new license. The Community Sewerage Program provides wastewater services to areas local councils refer to us, that are deemed A summary of our sewage treatment plants’ performance is to have a high risk of environmental impact to waterways reported to the EPA on an annual basis. Additionally, water and public health. The areas contain a large number of failing quality and flow data relating to waterways is reported to septic systems and properties unable to contain wastewater the Essential Services Commission, the National Pollutant within property boundaries. Inventory and the Bureau of Meteorology. During 2018-19, we continued to provide reticulated sewerage STATE ENVIRONMENT PROTECTION POLICY (WATERS) services to parts of Donvale while also commencing construction works for similar reticulation projects in Park During 2018-19 we played an active role influencing the Orchards, Yarra Junction, Kallista and The Patch. We also development of the new State Environmental Protection continued to plan for new sewerage services in Wesburn, Policy (Waters) and a significant role developing related Don Valley, Launching Place, Eltham South, Lower Plenty, industry guidance, the EPA Sewerage Management Lilydale and in the Dandenong Ranges at Sherbrooke Guidelines. The new policy takes a new risk based approach and Monbulk. to minimising harm to the environment, and along with the guidelines, allows for alternate non-sewerage infrastructure based options to manage the risk of sewer impacts to the environment.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 73 74 YARRA VALLEY WATER ANNUAL REPORT 2018-19 3 DELIVERING VALUE

WE WILL MANAGE WATER TO SUPPORT A HEALTHY ENVIRONMENT, A PROSPEROUS ECONOMY AND THRIVING COMMUNITIES, NOW AND IN THE FUTURE

YARRA VALLEY WATER ANNUAL REPORT 2018-19 75 OUR PERFORMANCE FINANCIAL PERFORMANCE INDICATORS

FINANCIAL PERFORMANCE

INDICATORS VARIANCE 2018-19 2017-18 2018-19 TO PRIOR VARIANCE PERFORMANCE INDICATOR TARGET RESULT RESULT YEAR NOTES TO TARGET NOTES

F1 Cash interest cover 2.18 times 2.62 times 2.61 times -0.4% - 19.7% 1b Cashflow from operations before net interest and tax payments / net interest payments

F2 Gearing ratio 51.57% 48.61% 51.35% 5.6% - -0.4% - Total debt (including finance leases) / total assets *100

F3 Internal financing ratio 31.88% 52.00% 39.29% -24.4% 2a 23.2% 2b (Net operating cash flow – dividends) / capital expenditure *100

F4 Current ratio 0.48 0.44 0.40 -9.1% - -16.7% 3b (Current assets / current liabilities) excluding long- term employee provisions and revenue in advance

F5 Return on assets 4.84% 5.26% 5.79% 10.1% 4a 19.6% 4b Earnings before net interest and tax / average total assets *100

F6 Return on equity 4.31% 5.37% 6.75% 25.7% 5a 56.6% 5b Net profit after tax / average total equity *100

F7 Earnings before interest, tax, 33.58% 34.65% 35.56% 2.6% - 5.9% - depreciation and amortisation Earnings before interest, tax, depreciation and amortisation / total revenue *100

VARIANCE EXPLANATIONS

1b 3b Higher net operating cash flows due to additional receipts generated primarily Current assets lower than budgeted due to a GST refund from the ATO, lower from increased customer demand compared to budget. Savings were achieved in trade debtors from improved debt collection activity, and hardship customer interest payments due to prevailing market conditions resulting in achieving low deferred debt written off. Current liabilities were higher than budgeted due to interest rates on new borrowings. additional accrued expenses and higher borrowings as a result of lower interest 2a rates. The difference between this year's result and last year's result is primarily due to 4a higher capital payments in 2018-19 due to required growth in the capital program The difference between this year's result and last year's, is primarily due to higher to meet our price submission commitments. developer contributed asset revenue due to increased book rates used to better 2b reflect actual asset value. The average asset value was impacted by a $127.6 Higher net operating cash flows from additional water sales and savings achieved million reduction as part of the 30 June 2019 infrastructure valuation. in finance charges due to low interest rates on new borrowings, and lower than 4b budgeted financial accommodation levy rate on new borrowings. These factors Additional water sales and developer contributed asset revenue due to increased were partially offset by higher capital payments associated with delivering a book rates used to better reflect actual asset value. The average asset value higher volume of priority works for water main renewals, carryover from 2017-18 reduced by $127.6 million as part of the 30 June 2019 infrastructure valuation. for some projects and additional works to service growth.

76 YARRA VALLEY WATER ANNUAL REPORT 2018-19 5a The difference between this year's result and last year's result is primarily due to higher developer contributed asset revenue due to increased book rates used to better reflect actual asset value. Average equity also decreased as a result of the capital repatriation payment to the Government in June 2019, and a reduction in the asset revaluation reserve as at 30 June 2019. 5b Higher profit after tax from additional water sales generated from customer demand and developer contributed asset revenue due to increased book rates used to better reflect actual asset value. We also achieved savings in finance charges due to market conditions resulting in low interest rates on new 3

borrowings, and a lower than budgeted financial accommodation levy rate DELIVERING VALUE on new borrowings.

WATER AND SEWERAGE SERVICE

PERFORMANCE INDICATORS VARIANCE 2018-19 2017-18 2018-19 TO PRIOR VARIANCE PERFORMANCE INDICATOR TARGET RESULT RESULT YEAR NOTES TO TARGET NOTES

SS1 Containment of sewer spills 97.7% 98.1% 97.0% -1.1% - -0.7% - Sewer spills from reticulation and branch sewers (priority 1 and 2) contained within 5 hours / total sewer spills from reticulation and branch sewers

SS2 Sewer spill interruptions 83.8% 86.0% 84.8% -1.4% - 1.2% - Number of residential sewage customers affected by sewerage interruptions restored within 4 hours

WS1 Unplanned water supply 0.015% 0.021% 0.036% 71.4% 6a 140.0% 6b interruptions Number of customers receiving > 5 unplanned interruptions in the year / total number of water (residential and business) customers *100

WS2 Interruption time 104.4 102.9 95.0 -7.7% 7a -9.0% 7b Average duration of unplanned water minutes minutes minutes supply interruptions

WS3 Restoration of unplanned 96.0% 96.5% 97.9% 1.5% - 2.0% - water supply Unplanned water supply interruptions restored within 5 hours / total unplanned water supply interruptions * 100

VARIANCE EXPLANATIONS

6a and 6b 7a and 7b

We experienced an increase in the number of customers experiencing > 5 water We significantly improved performance by achieving a > 50% reduction in backlog supply interruptions. The customers affected were within five separate, large volumes and improved the maintenance contractor's resource management. water supply isolation areas. We developed a tactical plan to significantly reduce the number of customers with > 5 interruptions including proactively case managing for customers with > 4 interruptions and implementing high priority initiatives to improve future performance.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 77 OUR PERFORMANCE CONTINUED

CUSTOMER RESPONSIVENESS

PERFORMANCE INDICATORS VARIANCE 2018-19 2017-18 2018-19 TO PRIOR VARIANCE PERFORMANCE INDICATOR TARGET RESULT RESULT YEAR NOTES TO TARGET NOTES

CR1 Water quality complaints 3.20 3.23 4.95 53.3% 8a 54.7% 8b Number of complaints per 1,000 customers

CR2 Sewerage service 0.90 0.84 0.70 -16.7% 9a -22.2% 9b quality complaints Number of complaints per 1,000 customers

CR3 Sewerage odour complaints 0.22 0.17 0.18 5.9% 10a -18.2% 10b Number of complaints per 1,000 customers

CR4 Billing and account complaints 3.40 2.83 3.20 13.1% 11a -5.9% 11b Number of complaints per 1,000 customers

VARIANCE EXPLANATIONS

8a and 8b 10b We experienced three significant network issues this year. A change in source The continuation of our odour management strategy including proactively supply from Winneke to Silvan Reservoir created increased water quality monitoring and treating problem areas resulted in a better performance level complaints in August 2018. We experienced a water quality issue at Melbourne than targeted. Water’s Greenvale Reservoir in March, April and early May 2019. In May 2019, a 11a distribution main failed, resulting in increased localised water quality complaints Implementing an enhanced complaint management framework focusing on in Craigieburn. We also continued to improve the accuracy of our complaints capturing of complaints from across the business, resulted in an increased reporting which contributed to the increase in complaint volumes. volume of reported complaints compared to last year. 9a and 9b 11b Sewerage service quality complaint numbers continued to trend downward A focus on the importance of resolving customer enquiries before they become as a result of the improved field response times achieved by the maintenance complaints, resulted in a performance level that was better than target. contractor. 10a We experienced an increase in sewerage odour complaints due to the higher volume of sewer pipe blockages from tree roots infiltrating pipes due to the hot and dry weather conditions.

ENVIRONMENTAL PERFORMANCE INDICATORS VARIANCE 2018-19 2017-18 2018-19 TO PRIOR VARIANCE PERFORMANCE INDICATOR TARGET RESULT RESULT YEAR NOTES TO TARGET NOTES Effluent re-use volume E1 - (end use) 28.8% 33.3% 33.6% 0.9% 16.7% 12b

Total net CO2 emissions E2 ------Net tonnes CO2 equivalent

VARIANCE EXPLANATIONS

12b

There was an increase in recycled water re-use for onsite irrigation, greater opportunities identified for recycled water used within the sewage treatment plant processes and additional volume of Class A production. These factors resulted in a performance level that was better than targeted.

78 YARRA VALLEY WATER ANNUAL REPORT 2018-19 CERTIFICATION OF PERFORMANCE REPORT FOR 2018-19 We certify that the accompanying Performance Report of Yarra Valley Water Corporation in respect of the 2018-19 financial year is presented fairly in accordance with the Financial Management Act 1994. The Performance Report outlines the relevant performance 3 indicators for the financial year as determined by the Minister DELIVERING VALUE for Water and as set out in the 2018-19 Corporate Plan, the actual and comparative results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets and/ or between the actual results in the current year and the previous year. As at the 21st day of August 2019, we are not aware of any circumstances that would render any particulars in the Performance Report to be misleading or inaccurate.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

Natalie Foeng Chief Financial Officer

YARRA VALLEY WATER ANNUAL REPORT 2018-19 79 AUDITOR-GENERAL’S AUDIT REPORT

Independent Auditor’s Report To the Board of the Yarra Valley Water Corporation

pinion I have audited the accompanying performance report of the Yarra Valley Water Corporation (the corporation) for the year ended 30 June 2019, which comprises the:

• financial performance indicators • water and sewerage service performance indicators • customer responsiveness performance indicators • environmental performance indicators • the certification of performance report. In my opinion, the performance report of the Yarra Valley Water Corporation in respect of the year ended 30 June 2019 presents fairly, in all material respects, in accordance with the performance reporting requirements of Part 7 of the Financial Management Act 1994.

sis or pinion I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Standards on Assurance Engagements. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the performance report section of my report. My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the performance report in Victoria and have also fulfilled our other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

ords The Board is responsible for the preparation and fair presentation of the responsiiities or performance report in accordance with the performance reporting requirements of te perorne the Financial Management Act 1994, and for such internal control as the Board report determines is necessary to enable the preparation and fair presentation of the statement of performance that is free from material misstatement, whether due to fraud or error.

80 YARRA VALLEY WATER ANNUAL REPORT 2018-19

Auditor’s As rrd t Audit At rsonst s to rss an onon on t rsosiiitis or roran rort asd on t adt ots or t adt ar to otan t udit o t rasona assran aot tr t roran rort as a o s r ror ro atra sstatnt tr d to rad or rror and to ss an rort auditor’s report that includes my opinion. Reasonable assurance is a high level of assran t s not a arant tat an adt ondtd n aordan t t 3 Astraan Standards on Assran Enants aas dtt a atra DELIVERING VALUE sstatnt n t sts sstatnts an ars ro rad or rror and ar onsdrd atra ndda or n t arat t od rasona td to nn t dsons o srs tan on t ass o ts roran rort. As art o an adt n aordan t t Astraan Standards on Assran Enants rs rossona dnt and antan rossona sts troot t adt aso

• dnt and assss t rss o atra sstatnt o roran rort tr d to rad or rror dsn and ror adt rodrs rsons to tos rss and otan adt dn tat s snt and arorat to rod a ass or onon rs o not dttn a atra sstatnt rstn ro rad s r tan or on rstn ro rror as rad a no oson orr ntntona ossons srrsntatons or t orrd o ntrna ontro • otan an ndrstandn o ntrna ontro rant to t adt n ordr to dsn adt rodrs tat ar arorat n t rstans t not or t ros o rssn an onon on t tnss o t ororaton’s internal control • aat t ora rsntaton strtr and ontnt o t roran rort ndn t dsosrs and tr roran rort rrsnts t ndrn nts and rsts n a annr tat as ar rsntaton onat t t Board rardn aon otr attrs t annd so and tn o t adt and snant adt ndns ndn an snant dns n ntrna ontro tat dnt drn adt

EBE Pa artn Ast 01 s dt or t Auditorr o itori

YARRA VALLEY WATER ANNUAL REPORT 2018-19 81 4

82 YARRA VALLEY WATER ANNUAL REPORT 2018-19 FINANCIAL REPORT

YARRA VALLEY WATER ANNUAL REPORT 2018-19 83 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

The Directors of Yarra Valley CAPITAL REPATRIATION Water Corporation present their A capital repatriation of $23.87 million for the year ended report for the financial year ended 30 June 2019 was paid on 28 June 2019 and a capital 30 June 2019. repatriation of $23.87 million for the year ended 30 June 2018 was paid on 29 June 2018.

DIRECTORS REVIEW OF OPERATIONS Directors in office during the financial year were as follows. A review of Yarra Valley Water's operations during the year Directors were in office for the entire period, unless ended 30 June 2019 and the results of those operations are otherwise stated. contained in this Annual Report. Sue Therese O’Connor Chair Robert Clive Skinner Deputy Chair STATE OF AFFAIRS Patrick John McCafferty Managing Director There were no significant changes in the state of affairs of Victor John Perton Director Yarra Valley Water during the year ended 30 June 2019. Anita Michele Roper Director Eric Sjerp Director For a discussion of the program and initiatives we rolled Helen Lynette Thornton Director out this year, refer to the 2018-19 Highlights section in this Karen Milward Director Annual Report. Victoria Fay Marles Director EVENTS SUBSEQUENT TO BALANCE SHEET DATE Particulars of the Directors’ and Corporate Secretary’s qualifications, experience and special responsibilities Except as provided above, no matter or circumstance has (if any) are set out in the Our Leadership section of this arisen that, in the opinion of the Directors, has significantly Annual Report. affected or may significantly affect the operations of Yarra Valley Water, the results of those operations, or Yarra Valley Water’s state of affairs in future financial years. DIRECTORS’ ATTENDANCE AT MEETINGS

The number of Directors’ meetings and Board Committee ENVIRONMENTAL REGULATION meetings held, and the number of meetings attended by each of the Directors during the financial year is set out in the Our Yarra Valley Water’s operations are subject to environmental Leadership section of this Annual Report. regulation. We hold a Corporate Licence issued by the Environment PRINCIPAL ACTIVITIES Protection Authority Victoria (EPA) under the Environment The principal activities during the course of the financial year Protection Act 1970 (Vic). The licence imposes conditions were providing retail water supply and sewerage services and relating to discharges, reporting obligations and other matters collecting trade waste within the Yarra Valley Water district. concerning the operation of seven sewage treatment plants. There were no significant changes in the nature of these During the 2018-19 financial year, Yarra Valley Water complied activities during the year. with all conditions of the EPA’s Corporate Licence. Yarra Valley Water maintains an Environment Management DIVIDENDS System certified to ISO 14001: (2015). The amount of the final dividend for the year ended 30 June On 12 December 2017, the EPA issued charges to Yarra Valley 2019 will be determined after consultation between the Board, Water Corporation under the Environmental Protection Act the Minister for Water and the Treasurer of Victoria. 1970 (Vic) relating to an alleged water pollution event; a An interim dividend of $10.2 million for the year ended sewage spill in Chirnside Park on 5 July 2016. 30 June 2018 was paid on 29 June 2018. A final dividend Yarra Valley Water identified that the discharge of sewage of $44.1 million for the year ended 30 June 2018 was paid and industrial effluent was caused by a blockage in a sewer on 30 October 2018. maintenance hole due to a build-up of non-degradable materials such as wet wipes. We completed all clean-up activities around the spill site, carried out remedial works and implemented a proactive well cleaning program targeting our pumped sewage facilities.

84 YARRA VALLEY WATER ANNUAL REPORT 2018-19 On 12 December 2018, Yarra Valley Water was found guilty without conviction. In accordance with the court order, we contributed $80,000 towards local community groups and $20,000 towards implementing a local community wet wipe education campaign. Further particulars of specific environmental performance measures are set out in the Environmental Outcomes and Our Performance sections of this Annual Report.

DIRECTORS’ DEEDS Yarra Valley Water has entered into a Deed with each Director under which it is required to provide access to its books and to maintain insurance coverage for at least seven years after the Director ceases to be a Director. INSURANCE OF OFFICERS 4

During the financial year, Yarra Valley Water paid premiums in FINANCIAL REPORT respect of contracts to insure Directors, former Directors and Officers of Yarra Valley Water against certain liabilities. Some of the contracts of insurance prohibit disclosure of the nature of the liabilities insured and the amount of the premium.

ROUNDING OF AMOUNTS TO NEAREST THOUSAND DOLLARS The amounts in this Report and the Annual Financial Report have been rounded to the nearest thousand dollars, unless otherwise stated. This Report is made in accordance with a resolution of the Directors of Yarra Valley Water on 21 August 2019.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

YARRA VALLEY WATER ANNUAL REPORT 2018-19 85 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 NOTE $’000 $’000

Service and usage revenue 2.2 957,613 936,265 New customer contributions by developers 2.2 32,204 32,101 Developer contributed assets 2.2 83,603 23,272 Other revenue 2.2 46,592 50,718 Other income 2.2 4,041 4,441 Total revenue 1,124,053 1,046,797

Bulk water and sewerage expenses 3.1 (522,119) (503,305) Contract expenses 3.1 (58,718) (57,270) Salary and employee benefits expense 3.2.1 (50,884) (48,447) Environmental contribution 8.2 (42,855) (29,880) Depreciation 4.2 (87,755) (87,051) Amortisation 4.3 (19,731) (20,792) Finance costs 6.1.2 (132,207) (130,127) Other expenses 3.1 (49,728) (45,171) Total expenses (963,997) (922,043)

Profit before income tax 160,056 124,754 Income tax expense 8.1 (48,356) (36,252) NET PROFIT AFTER TAX 111,700 88,502

OTHER COMPREHENSIVE INCOME Decrease from revaluation of infrastructure assets 4.2 (127,587) (32,745) Increase from revaluation of land 4.2 - 57,749 Defined benefit superannuation plan actuarial gain / (loss) 9.2 (2,098) 2,213 Deferred income tax on items of other comprehensive income 8.1 39,073 173 Other comprehensive income, net of tax (90,612) 27,390 TOTAL COMPREHENSIVE INCOME 21,088 115,892

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

86 YARRA VALLEY WATER ANNUAL REPORT 2018-19 BALANCE SHEET AS AT 30 JUNE 2019

2019 2018 NOTE $’000 $’000 ASSETS Current assets Cash 6.2 1,036 986 Receivables 5.2 165,777 191,431 Other non-financial assets 5.3 4,545 4,432 Total current assets 171,358 196,849 Non-current assets Infrastructure, property, plant and equipment 4.2 4,772,209 4,578,102 Intangible assets 4.3 171,818 180,125 Defined benefit superannuation asset 3.2.3.2c 5,671 8,317 Receivables 5.2 - 2,939 4 Total non-current assets 4,949,698 4,769,483 FINANCIAL REPORT TOTAL ASSETS 5,121,056 4,966,332

LIABILITIES Current liabilities Contract liabilities 5.5 56,208 20,293 Current tax payable 8.1 22,614 11,239 Provisions - employee benefits 3.2.2 20,268 17,014 Other provisions 5.6 4,629 4,737 Payables 5.4 113,446 134,306 Borrowings 6.1 288,107 289,565 Total current liabilities 505,272 477,154 Non-current liabilities Provisions - employee benefits 3.2.2 1,882 1,785 Contract liabilities 5.5 - 8,184 Deferred tax liabilities 8.1 638,261 680,302 Borrowings 6.1 2,341,400 2,124,600 Total non-current liabilities 2,981,543 2,814,871 Total liabilities 3,486,815 3,292,025 NET ASSETS 1,634,241 1,674,307

EQUITY Contributed equity 9.1 420,967 444,832 Retained earnings 9.2 398,284 325,174 Asset revaluation surplus 9.3 814,990 904,301 TOTAL EQUITY 1,634,241 1,674,307

The above Balance Sheet should be read in conjunction with the accompanying notes.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 87 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019

ASSET CONTRIBUTED RETAINED REVALUATION EQUITY EARNINGS SURPLUS TOTAL NOTE $’000 $’000 $’000 $’000 Balance as at 1 July 2017 468,697 276,722 878,741 1,624,160 Net profit after tax - 88,502 - 88,502 Other comprehensive income, net of tax 9.2, 9.3 - 1,550 25,560 27,110 Capital repatriation 9.1 (23,865) - - (23,865) Dividends paid 9.2 - (41,600) - (41,600) BALANCE AS AT 30 JUNE 2018 444,832 325,174 904,301 1,674,307 Adjustments due to changes in accounting 2.1.1, 5.1 - 6,978 - 6,978 standards after tax Restated balance as at 1 July 2018 444,832 332,152 904,301 1,681,285 Net profit after tax - 111,700 - 111,700 Other comprehensive income, net of tax 9.2, 9.3 - (1,468) (89,311) (90,779) Capital repatriation 9.1 (23,865) - - (23,865) Dividends paid 9.2 - (44,100) - (44,100) BALANCE AS AT 30 JUNE 2019 420,967 398,284 814,990 1,634,241

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

88 YARRA VALLEY WATER ANNUAL REPORT 2018-19 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 NOTE $’000 $’000

Cash flow from operating activities Receipts from customers 1,050,775 1,004,622 Payments to suppliers and employees (750,216) (693,979) Goods and services tax refunded (net) 42,021 24,224 Income tax paid (43,109) (26,705) Interest and other costs of finance paid (131,153) (127,669) Interest received 13 9 Net cash inflow from operating activities 6.2.1 168,331 180,502

Cash flows from investing activities Proceeds from sale of intangibles, infrastructure, property, plant and equipment 992 1,069 4 FINANCIAL REPORT Payments for acquisition of infrastructure, property, plant and equipment (301,550) (251,445) Payments for acquisition of intangible assets (15,654) (16,768) Net cash outflow from investing activities (316,212) (267,144)

Cash flows from financing activities Refinancing of borrowings - inflow 367,642 344,148 Refinancing of borrowings - outflow (152,300) (193,200) Developer security deposits 554 1,034 Dividends paid 9.2 (44,100) (41,600) Capital repatriation 9.1 (23,865) (23,865)

Net cash inflow from financing activities 147,931 86,517 Net increase / (decrease) in cash held 50 (125) Cash at beginning of year 986 1,111 CASH AT END OF YEAR 6.2 1,036 986

The above Cash Flow Statement should be read in conjunction with the accompanying notes.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 89 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

Accounting estimates 1. ABOUT THIS REPORT Yarra Valley Water evaluates estimates and makes judgements which are incorporated in the financial report Basis of accounting based on historical knowledge and the best available current This financial report is a general purpose financial report, information. Estimates assume a reasonable expectation of consisting of Statement of Comprehensive Income, Balance future events and are based on current trends and economic Sheet, Statement of Changes in Equity and Cash Flow data obtained both externally and within Yarra Valley Water. Statement and notes accompanying these statements The significant judgements made in preparing these financial for the period ending 30 June 2019. The general purpose statements are disclosed in the notes where amounts affected financial report has been prepared in accordance with by those judgements are disclosed. Actual results may differ Australian Accounting Standards, Interpretations and other from these estimates. authoritative pronouncements of the Australian Accounting The most significant accounting estimates undertaken in Standards Board, the requirements of the Financial preparing this financial report relate to: Management Act 1994 and applicable Ministerial Directions. ›› Water usage and sewage disposal charge accruals The financial report has been prepared on an accrual and – note 2.2 going concern basis and is prepared on a historical cost convention, except for infrastructure, property, plant and ›› New customer contributions – note 2.2 equipment, and the defined superannuation asset which have ›› Developer contributed assets – note 2.2 been measured at fair value. ›› Other revenue – note 2.2 The financial report of Yarra Valley Water Corporation, as an individual reporting entity for the year ended 30 June 2019, ›› Employee benefit provisions and other provisions was authorised for issue in accordance with a resolution of the – note 3.2.2 and note 5.6 Directors on 21 August 2019. ›› Defined benefit superannuation fund – note 3.2.3.2 Accounting policies ›› Asset residual values and useful lives – note 4.2 Accounting policies are applied in a manner which ensures that the resulting financial information satisfies the concepts ›› Asset impairment – note 4.2 of relevance and reliability, thereby ensuring that the ›› Trade receivables - accrued revenue – note 5.2 substance of the underlying transactions or other events is reported. The accounting policies have been consistently ›› Unearned income – note 5.5 applied, unless otherwise stated. Refer to notes 2.1 and 5.1 ›› Contingent assets and liabilities – note 7.3 for the transition to AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments. ›› Fair value of infrastructure, property, plant and equipment – note 7.4 Functional and presentation currency All amounts are presented in Australian dollars, unless ›› Deferred tax – note 8.1 otherwise stated, and have been rounded to the nearest thousand dollars or, in other cases, to the nearest dollar. Classification between current and non-current In the determination of whether an asset or liability is current or non-current, consideration is given to the time when each asset or liability is expected to be realised or paid. The asset or liability is classified as current if it is expected to be turned over within the next 12 months.

90 YARRA VALLEY WATER ANNUAL REPORT 2018-19 2.1. CHANGE IN ACCOUNTING STANDARD 2. FUNDING DELIVERY OF – AASB 15 REVENUE FROM CONTRACTS OUR SERVICES WITH CUSTOMERS AASB 15 Revenue from Contracts with Customers came into Introduction effect for Yarra Valley Water from 1 July 2018. Under AASB 15 This section provides additional information about how Yarra we recognise revenue as performance obligations are satisfied. Valley Water is funded and the accounting policies that Consideration received in advance of completing performance are relevant for understanding the items recognised in the obligations is recorded as a contract liability, refer note financial statements. 5.5. Revenue from contracts with customers is recognised Structure when control of the goods or services has transferred to the 2.1 Change in accounting standard – AASB 15 Revenue from customer at an amount that reflects the consideration to Contracts with Customers which we expect to be entitled in exchange of those goods 2.1.1 The effect of adopting AASB 15 as at 1 July 2018 or services. 2.1.2 The effect of adopting AASB 15 as at 30 June 2019 A modified retrospective approach has been applied in 2.2 Summary of income that funds the delivery of our services applying the new standard. In implementing AASB 15 2.3 Commitments for lease receivables under the modified retrospective approach, an adjustment 4 has been applied to the opening balance of retained earnings FINANCIAL REPORT as at 1 July 2018 (refer note 9.2) for contracts that were not completed at 1 July 2018. The following tables show the adjustments recognised for each individual line item as a result of adopting AASB 15. Line items that were not affected by the changes have not been included.

2.1.1. THE EFFECT OF ADOPTING AASB 15 AS AT 1 JULY 2018 2018 INCREASE/ (DECREASE) NOTE $'000 Assets Infrastructure, property, plant and equipment i 24,328 TOTAL ADJUSTMENT ON ASSETS 24,328

Liabilities Contract liabilities i-iii 14,506 Current tax payable i 7,286 Deferred tax liabilities i-iii (4,339) TOTAL ADJUSTMENT ON LIABILITIES 17,453

TOTAL ADJUSTMENT ON NET ASSETS 6,875

Equity Retained earnings i-iii 6,875 TOTAL ADJUSTMENT ON EQUITY 6,875 i. Refer to note 2.2 for our accounting policies in respect of revenue from developer contributed assets. Under AASB 15 revenue from developer contributed assets is recognised at the point in time that the Statement of Compliance or Acceptance of Works is issued. This has predominately brought forward revenue recognition and increased the assets recognised during the year. ii. Refer to note 2.2 for our accounting policies in respect of revenue from new customer contributions. Under AASB 15 revenue from new customer contributions is typically recognised at the point in time when the Statement of Compliance is issued or connection to services occurs. This has deferred revenue previously recognised to contract liabilities, to be recognised in future periods. iii. Refer to note 2.2 for our accounting policies in respect of revenue from other products and services. Under AASB 15 revenue from other products and services is recognised at the point in time when Yarra Valley Water has met the performance obligations associated with the products and services, for example the issue of Statement of Compliance or installation of a new water meter. This has deferred revenue previously recognised to contract liabilities to be recognised in future periods.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 91 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

2.1.2. THE EFFECT OF ADOPTING AASB 15 AS AT 30 JUNE 2019

2019 $'000 IMPACT ON STATEMENT OF COMPREHENSIVE PREVIOUS AS REPORTED INCREASE / INCOME FOR THE YEAR ENDED 30 JUNE 2019 NOTE STANDARD - AASB 15 (DECREASE)

Revenue New customer contributions by developers ii 44,328 32,204 (12,124) Developer contributed assets i 81,034 83,603 2,569 Other revenue iii 52,959 46,592 (6,367) Total revenue 1,139,975 1,124,053 (15,922)

Profit before income tax 175,978 160,056 (15,922) Income tax expense i-iii (53,133) (48,356) 4,777 Net profit after tax 122,845 111,700 (11,145) TOTAL COMPREHENSIVE INCOME 32,233 21,088 (11,145)

IMPACT ON BALANCE SHEET AS AT 30 JUNE 2019 Assets Infrastructure, property, plant and equipment i 4,744,557 4,772,209 27,652 Total non-current assets 4,922,046 4,949,698 27,652

Total assets 5,093,404 5,121,056 27,652

Liabilities Contract liabilities i-iii 22,435 56,208 33,773 Current tax payable i-iii 22,663 22,614 (49) Total current liabilities 471,548 505,272 33,724

Deferred tax liabilities i-iii 640,063 638,261 (1,802) Total non-current liabilities 2,983,345 2,981,543 (1,802)

Total liabilities 3,454,893 3,486,815 31,922

Net assets 1,638,511 1,634,241 (4,270)

Equity Retained earnings i-iii 402,554 398,284 (4,270) TOTAL EQUITY 1,638,511 1,634,241 (4,270)

92 YARRA VALLEY WATER ANNUAL REPORT 2018-19 2.2. SUMMARY OF INCOME THAT FUNDS THE DELIVERY OF OUR SERVICES

2019 2018 SERVICE AND USAGE REVENUE $’000 $’000

Fixed service charges 396,359 390,168 Water usage charges 416,016 400,652 Sewage disposal charges 120,598 190,767 Trade waste charges 24,642 24,745 Government water rebate provided to customers (2) (70,067) TOTAL SERVICE AND USAGE REVENUE 957,613 936,265

Service and usage charges New customer contributions (NCC) Water and sewerage service charges (fixed service charges) New customer contributions represent charges applicable are billed quarterly in advance and recognised as revenue over when a customer builds or develops a property and 4 time as the customer receives access to our services. Service connects to Yarra Valley Water’s water supply and sewerage FINANCIAL REPORT charges represent charges for access to the water supply and infrastructure. The contributions collected contribute towards sewerage systems. the cost of providing shared infrastructure and are recognised as revenue at the point in time when Yarra Valley Water Water usage charges and sewage disposal charges has met the performance obligations associated with the are recognised as revenue over time as the customer contribution. Performance obligations are typically recognised simultaneously receives and consumes the services provided. as being met by issuing of a Statement of Compliance (Yarra As meter reading is cyclical, an estimate is made at the end Valley Water’s consent to Council for the Council to continue of the accounting period for water usage and sewage disposal processing a developer’s application) or connection to services. by customers, refer note 5.2. This estimate is determined based on bulk water purchases from Melbourne Water less Developer contributed assets (DCA) the estimated non-revenue, including bursts and leaks, Revenue from developer contributed assets arise where water required for operational use, firefighting, unauthorised developers pay for the cost of constructing new assets and consumption/theft and meter inaccuracies. subsequently gift these assets to Yarra Valley Water. We Trade waste charges are recognised as revenue at a point in maintain these assets in perpetuity. Revenue is recognised time when the service delivery period ends. Volume meters at the point in time when Yarra Valley Water has met are read, and appropriate charges levied per trade waste the performance obligations associated with the asset. agreements. Meters are read on a cyclical basis with accounts Performance obligations are recognised as being met by sent on a quarterly basis. issuing of a Statement of Compliance or Acceptance of Works (Yarra Valley Water’s acknowledgement that the assets are The payment in advance by customers of accounts is classified operational) depending upon the developer’s application and as contract liabilities, refer note 5.5. specific performance obligations. This non-cash revenue is Government water rebate recorded as developer contributed assets. The Government water rebate is recognised as a rebate We measure the income by assessing the value of the works against revenue when the associated revenue is billed. It using a schedule of rates. represents a rebate back to residential customers provided by Yarra Valley Water on behalf of the State Government. It was first issued in 2014-15 on the first quarterly bill (July, August, September), and provided each year until 30 September 2017. There was no rebate in the financial year ended 2019.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 93 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

2019 2018 OTHER REVENUE $’000 $’000

Other products and services 15,287 23,375 Park and drainage fees 7,768 7,678 Information statements and applications 4,817 5,929 Other 18,720 13,736

TOTAL OTHER REVENUE 46,592 50,718

Other revenue Other revenue items are recognised on an accrual basis. Other revenue includes fees for information statements, water trading, billing and collection administration fees from Other products and services relate to various plumbing both Melbourne Water and the Department of Environment, services revenue including new meter connections and Land, Water and Planning, and land development application recycled water inspection fees. Revenue is recognised fees which are recognised at the point in time when the service at the point in time when Yarra Valley Water has met the has been provided. performance obligations associated with the products and services, for example, issue of Statement of Compliance or installing a new water meter. 2019 2018 REVENUE FROM CONTRACTS WITH CUSTOMERS $’000 $’000

Total revenue recognised over-time 932,973 981,587 Total revenue recognised at a point in time 187,039 60,769 TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS 1,120,012 1,042,356

OTHER INCOME Operating lease income 2,882 1,712 Interest income 13 9 Impairment writeback 1,146 2,720 TOTAL OTHER INCOME 4,041 4,441

Other income Other income is not revenue from contracts with customers. It is recognised on an accrual basis. Income from operating leases is recognised in net profit in the Statement of Comprehensive Income on a straight-line basis over the lease term.

2.3. COMMITMENTS FOR LEASE RECEIVABLES NON-CANCELLABLE LEASE 2019 2018 The following table summarises the non-cancellable operating RECEIVABLES $’000 $’000 lease receivables contracted for at balance date but not provided in the financial statements. Revenue for operating No later than one year 2,050 425 leases, where substantially all risks and benefits remain with Later than one year and 3,290 1,216 the lessor, are recognised as revenue in the periods in which no later than five years they are incurred. The commitments recorded below are at Later than five years 4,797 2,363 their nominal value and are inclusive of GST. TOTAL (GST INCLUSIVE) 10,137 4,004 Yarra Valley Water has non-cancellable agreements with various telecommunication bodies who use Yarra Valley Water land and buildings to house their telecommunication infrastructure.

94 YARRA VALLEY WATER ANNUAL REPORT 2018-19 Variable charges are levied in arrears and are payable on a 3. THE COST OF DELIVERING weekly basis. Fixed charges are levied once a month and are payable on the fifteenth of the month to which they refer. Any OUR SERVICES variable charges that remain outstanding at the end of the period are accrued. Introduction This section provides additional information about how Yarra BULK WATER AND SEWERAGE 2019 2018 Valley Water’s funding is applied and the accounting policies EXPENSES $’000 $’000 that are relevant for understanding the items recognised in the Variable bulk water and sewerage 72,964 68,924 financial statements. expenses Structure Fixed bulk water and sewerage 449,155 434,381 3.1 Summary of other expenses incurred in the delivery expenses of our services TOTAL BULK WATER AND 522,119 503,305 3.2 Our People SEWERAGE EXPENSES 3.2.1 Employee benefits – Statement of Comprehensive Income Contract expenses 3.2.2 Employee benefits – Balance Sheet Contract expenses include costs such as maintenance 4 3.2.3 Superannuation contracts, software licences and various other contracts which FINANCIAL REPORT 3.3 Commitments for operating leases expenditure are expensed in the reporting period in which they are incurred. 3.4 Remuneration of auditors Billing and revenue collection costs 3.1. SUMMARY OF OTHER EXPENSES INCURRED Billing and revenue collection costs include printing, postage IN THE DELIVERY OF OUR SERVICES and collection fees which are expensed in the reporting period in which they are incurred. Bulk water and sewerage charges Bulk water and sewerage charges are levied by Melbourne Other expenses Water for the cost of water Yarra Valley Water purchases, and Other expenses includes legal, insurance, materials, transport for sewerage treated at Melbourne Water’s treatment plants. and other expenses.

2019 2018 OTHER EXPENSES NOTE $’000 $’000

Billing and revenue collection costs 9,026 9,198 Information technology costs 5,400 3,271 Electricity 5,501 4,880 Consulting services 3,853 3,165 Government taxes, fees and contributions 3,070 3,777 Impairment write down of assets to recoverable amount 85 1,104 Bad and doubtful debts 2,417 3,066 Deferred property debt forgiveness 5.2.1 3,985 - Write off / disposal of assets 4.2 2,076 2,944 Superannuation defined benefit expense 3.2.3.2.c 548 688 Rental expenses relating to operating leases 173 111 Other expenses 13,594 12,967 TOTAL OTHER EXPENSES 49,728 45,171

YARRA VALLEY WATER ANNUAL REPORT 2018-19 95 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

3.2. OUR PEOPLE Unconditional long service leave Unconditional long service leave (LSL) is disclosed as a 3.2.1. EMPLOYEE BENEFITS – STATEMENT current liability - even where Yarra Valley Water does not OF COMPREHENSIVE INCOME expect to settle the liability within 12 months because we Employee expenses include all costs related to employment don't have the unconditional right to defer the settlement of including wages and salaries, superannuation, fringe the entitlement should an employee elect to take leave within benefits tax, leave entitlements, termination payments 12 months. and WorkCover premiums. The components of this current LSL liability are measured at:

3.2.2. EMPLOYEE BENEFITS – BALANCE SHEET ›› Undiscounted value – if Yarra Valley Water expects to wholly settle within 12 months A provision is recognised for benefits accruing to employees in respect of annual leave and long service leave when it is ›› Present value – if Yarra Valley Water does not expect to probable that settlement will be required and the liability is wholly settle within 12 months. capable of being reliably measured. Conditional long service leave Wages and salaries, annual leave and sick leave Conditional LSL is disclosed as a non-current liability. Liabilities for wages and salaries (including non-monetary There is an unconditional right to defer the settlement of the benefits, annual leave and on-costs) are recognised as entitlement until the employee has completed seven years part of the employee benefit provision as current liabilities, of service. This non-current long service leave is measured because Yarra Valley Water does not have an unconditional at present value. right to defer settlements of these liabilities. The liability for salaries and wages are recognised in the balance sheet at remuneration rates which are current at the reporting date. As Yarra Valley Water expects the liabilities to be wholly settled within 12 months of the reporting date, they are measured at an undiscounted amount. The annual leave liability is classified as a current liability and measured at an undiscounted amount for those entitlements expected to be wholly settled within 12 months. Annual leave that is expected to be settled after 12 months is measured as the present value of estimated future cash flows. No provision has been made for sick leave as all sick leave is non-vesting and it is not considered probable that the average sick leave taken in the future will be greater than the benefits accrued in the future. As sick leave is non-vesting, an expense is recognised in the Statement of Comprehensive Income as it is taken. Employment on-costs such as payroll tax, workers’ compensation and superannuation are not employee benefits however contribute to the cost of employment provisions. They are disclosed separately as a component of the provision for employee benefits when the employment to which they relate has occurred.

96 YARRA VALLEY WATER ANNUAL REPORT 2018-19 2019 2018 CURRENT LIABILITIES - PROVISIONS $’000 $’000 Annual leave Unconditional and expected to settle within 12 months 1,557 1,672 Unconditional and expected to settle after 12 months 3,477 2,933 Long service leave Unconditional and expected to settle within 12 months 69 67 Unconditional and expected to settle after 12 months 12,749 10,145 Provisions for on-costs Unconditional and expected to settle within 12 months 234 254 Unconditional and expected to settle after 12 months 2,182 1,943 TOTAL CURRENT LIABILITIES - PROVISIONS 20,268 17,014 4 NON-CURRENT LIABILITIES - PROVISIONS FINANCIAL REPORT Employee benefits - long service leave 1,663 1,553 On-costs 219 232 TOTAL NON-CURRENT LIABILITIES - PROVISIONS 1,882 1,785

Reconciliation of movement in on-cost provision Opening balance 2,429 2,283 Additional provision 1,435 972 Amounts utilised during year (935) (863) Effect of changes in discount rate and remeasurement (294) 37 CARRYING AMOUNT AT YEAR END 2,635 2,429

Reconciliation of on-cost provision relates to the sum of current $2,416,000 (2018: $2,197,000) and non-current $219,000 (2018: $232,000) on-costs.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 97 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

3.2.3. SUPERANNUATION The plan's Trustee is responsible for the governance of the 3.2.3.1. Accumulation plans plan and has a legal obligation to act solely in the best interest of plan beneficiaries. The Trustee has the following roles: Contributions to the accumulation plans are expensed as the contributions are paid or become payable. ›› Administration of the plan and payment to the beneficiaries from plan assets when required in accordance with the 3.2.3.2. Defined benefit superannuation asset plan rules A liability or asset in respect of the defined benefit superannuation plan is recognised in the Balance Sheet ›› Management and investment of the plan assets and is measured as the present value of the defined benefit ›› Compliance with superannuation law and other obligation at the reporting date, plus unrecognised actuarial applicable regulations. gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date. The present The prudential regulator, the Australian Prudential value of the defined benefit obligation is based on expected Regulation Authority, licences and supervises regulated future payments to the reporting date, calculated annually by superannuation plans. independent actuaries using the projected unit credit method. There were no plan amendments affecting the defined Consideration is given to the expected future wage and benefits payable, curtailments or settlements during the year. salary levels, experience of employee departures and periods of service. b. Description of risks There are a number of risks to which the plan exposes Actuarial gains and losses are recognised immediately in other Yarra Valley Water. The more significant risks relating to the comprehensive income. defined benefits are: a. Superannuation plan information ›› Investment risk – The risk that investment returns will be For employees who are members of the Equipsuper lower than assumed and Yarra Valley Water will need to Superannuation Fund defined benefit plan, an agreed increase contributions to offset the shortfall. percentage of salaries is contributed to the fund by Yarra Valley Water as recommended by an actuary. ›› Salary growth risk – The risk that wages or salaries (on which future benefit amounts will be based) will rise more Defined benefit members receive lump sum benefits on rapidly than assumed, increasing defined benefit amounts retirement, death, disablement and withdrawal. Some defined and thereby requiring additional employer contributions. benefit members are also eligible for pension benefits in certain circumstances. The defined benefit plan is closed ›› Legislative risk – The risk that legislative changes to new members. All new members of the fund receive could be made which increase the cost of providing the accumulation only benefits. defined benefits. The Superannuation Industry (Supervision) Act 1993 (SIS) ›› Pension risk – The risk that a greater proportion of eligible governs the superannuation industry and provides the members will elect to take a pension benefit, which is framework within which superannuation plans operate. The generally more valuable than the corresponding lump SIS Regulations require an actuarial valuation to be performed sum benefit. for each defined benefit superannuation plan every three The plan assets are invested by the Trustee in the Defined years, or every year if the plan pays defined benefit pensions Benefit and Cash investment options. The assets are unless an exemption has been obtained. Yarra Valley Water diversified within these investment options and therefore values its plan annually. the plan has no significant concentration of investment risk.

98 YARRA VALLEY WATER ANNUAL REPORT 2018-19 DEFINED FAIR VALUE OF BENEFIT NET DEFINED c. Reconciliation of assets and obligations PLAN ASSETS OBLIGATION BENEFIT ASSET $’000 $’000 $’000 Opening balance at 1 July 2017 36,125 (29,333) 6,792 Current service cost - (822) (822) Interest income / (expense) 782 (648) 134 Actuarial return on plan assets less interest income 1,763 - 1,763 Contributions by plan participants 211 (211) - Actuarial gains arising from changes in financial assumptions - 708 708 Actuarial losses arising from liability experience - (258) (258) Benefits paid (1,256) 1,256 - Taxes, premiums and expenses paid (129) 129 - CLOSING BALANCE AT 30 JUNE 2018 37,496 (29,179) 8,317 Current service cost - (733) (733) 4 Interest income / (expense) 918 (733) 185 FINANCIAL REPORT Actuarial return on plan assets less interest income 925 - 925 Contributions by plan participants 197 (197) - Actuarial losses arising from changes in financial assumptions - (2,998) (2,998) Actuarial losses arising from liability experience - (25) (25) Benefits paid (3,652) 3,652 - Taxes, premiums and expenses paid (148) 148 - CLOSING BALANCE AT 30 JUNE 2019 35,736 (30,065) 5,671

Superannuation defined benefit expense (note 3.1) is represented by the sum of current service cost, interest income and interest expense $548,000 (2018: $688,000).

The asset ceiling has no impact on the net defined benefit liability / (asset). d. Fair value plan assets as at 30 June 2019 Investment funds are measured using significant observable inputs – Level 2. 2019 2018 e. Plan assets % %

Australian equity 10 11 International equity 16 13 Fixed income 16 15 Property 6 6 Growth alternatives 12 11 Defensive alternatives 9 6 Cash 31 38 TOTAL 100 100

Asset allocation as at 30 June 2019 is currently unavailable. Asset allocation at 31 May 2019 has been used.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 99 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

f. Fair value of Yarra Valley Water’s own financial instruments The fair value of plan assets includes no amounts relating to: ›› Any of Yarra Valley Water’s own financial instruments ›› Any property occupied by, or other assets used by Yarra Valley Water.

g. Actuarial assumptions to determine defined benefit cost and obligation

DEFINED BENEFIT COST DEFINED BENEFIT OBLIGATION 2019 2018 2019 2018 Actuarial assumptions to determine % % % %

Discount rate 2.6% 2.3% 1.3% 2.6% Salary increase rate 4.6% 4.6% 4.6% 4.6%

h. Sensitivity analysis The defined benefit obligation as at 30 June 2019 under several scenarios is presented below.

DISCOUNT RATE SALARY RATE 0.5% PA 0.5% PA 0.5% PA 0.5% PA BASE CASE LOWER HIGHER LOWER HIGHER

Discount rate - per annum 1.3% 0.8% 1.8% 1.3% 1.3% Salary increase rate - per annum 4.6% 4.6% 4.6% 4.1% 5.1% Defined benefit obligation ($’000) 1 30,065 31,340 28,861 28,883 31,302

1 Includes contribution tax provision.

The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions. No asset and liability matching strategies have been adopted by the plan.

i. Funding arrangements Where the Funding Ratio is greater than 100 per cent, the The Equipsuper Contribution and Funding Policy provides for financing objective is to achieve the Target Funding Ratio over a review of the financial position of the plan each six months, five years. Where the Funding Ratio is less than 100 per cent as at 30 June and 31 December, with Yarra Valley Water’s the primary financing objective is to achieve 100 per cent over contribution rate comprising a long-term contribution rate and three years and the Target Funding Ratio over five years. an adjustment to meet the financial objective of a Funding In the most recent review of the financial position as at 31 Ratio of 104 per cent. December 2018, the actuary recommended continuing Yarra The Target Funding Ratio reflects the proportion of salary Valley Water’s contribution rate of nil. The next review of the related benefits and the allocation to ‘growth’ assets for plan’s financial position and Yarra Valley Water’s contribution the plan. The Funding Ratio is the ratio of assets to accrued rate is due at 30 June 2019. This review will occur post 30 liabilities, being the greater of vested benefits and the present June once the required information becomes available. value of past membership benefits. Yarra Valley Water continues to contribute salary sacrifice contributions at the required rates for accumulation members.

100 YARRA VALLEY WATER ANNUAL REPORT 2018-19 j. Expected contributions Employer contributions for the financial year ending 30 June 2020 are expected to be nil. k. Maturity profile of defined benefit obligations The weighted average duration of the defined benefit obligation as at 30 June 2019 is seven years (2018: seven years). $’000

30 June 2020 2,036 30 June 2021 2,308 30 June 2022 2,369 30 June 2023 2,527 30 June 2024 2,829 Following five years 13,245 4 FINANCIAL REPORT 3.3. COMMITMENTS FOR OPERATING LEASE EXPENDITURE Payments for operating leases, where substantially all the risks and benefits remain with the lessor – are charged as expenses in the periods in which they are incurred and are disclosed in note 3.1. Yarra Valley Water, has an immaterial number of leases. Refer note 9.10 for changes in accounting standards in 2019-20. Refer notes 4.5 and 8.2 for details on contractual and environmental commitments, respectively.

3.4. REMUNERATION OF AUDITORS 2019 2018 REMUNERATION OF AUDITORS $’000 $’000

Financial statements - Victorian Auditor-General’s Office 145 142 Internal audit - Pitcher Partners 279 296 TOTAL REMUNERATION OF AUDITORS 424 438

YARRA VALLEY WATER ANNUAL REPORT 2018-19 101 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY

Introduction Yarra Valley Water controls infrastructure and other assets that are utilised in fulfilling its objectives and conducting its activities. They represent the key resources that have been entrusted to Yarra Valley Water to be utilised for delivery of those outputs. Structure 4.1 Total infrastructure, property, plant and equipment: carrying amount 4.2 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment 4.3 Intangible assets 4.4 Net gain / loss on disposal of non-current physical assets 4.5 Contractual commitments

4.1. TOTAL INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT: CARRYING AMOUNT GROSS CARRYING ACCUMULATED NET CARRYING AMOUNT DEPRECIATION AMOUNT 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000

At fair value Infrastructure 3,890,500 3,817,200 - - 3,890,500 3,817,200 Land 410,871 408,968 - - 410,871 408,968 Buildings 36,599 35,028 (3,848) (2,455) 32,751 32,573 Plant and equipment 52,891 44,588 (26,809) (24,858) 26,082 19,730 At cost Capital works in progress 412,005 299,631 - - 412,005 299,631 TOTAL 4,802,866 4,605,415 (30,657) (27,313) 4,772,209 4,578,102

102 YARRA VALLEY WATER ANNUAL REPORT 2018-19 4.2. RECONCILIATION OF MOVEMENTS IN CARRYING VALUES OF INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT CAPITAL PLANT AND WORKS IN INFRASTRUCTURE LAND BUILDINGS EQUIPMENT PROGRESS TOTAL $’000 $’000 $’000 $’000 $’000 $’000 Balance at 1 July 2017 3,771,700 348,074 33,851 20,932 178,541 4,353,098 Additions - - - - 288,379 288,379 Transfers 160,382 1,529 113 5,265 (167,289) - Write off / disposal of assets (618) - - (2,326) - (2,944) Depreciation (81,519) - (1,391) (4,141) - (87,051) Revaluation increase / (decrease) (32,745) 57,749 - - - 25,004 recognised in equity

Impairment writeback of assets - 1,616 - - - 1,616 to recoverable amount 4 CARRYING AMOUNT AT FINANCIAL REPORT 3,817,200 408,968 32,573 19,730 299,631 4,578,102 30 JUNE 2018

Additions - - - - 411,525 411,525 Transfers 284,773 1,903 1,570 10,905 (299,151) - Write off / disposal of assets (1,156) - - (920) - (2,076) Depreciation (82,730) - (1,392) (3,633) - (87,755) Revaluation decrease (127,587) - - - - (127,587) recognised in equity CARRYING AMOUNT AT 30 JUNE 2019 3,890,500 410,871 32,751 26,082 412,005 4,772,209

Initial recognition Revaluations are performed with sufficient regularity so that Infrastructure, property, plant and equipment are measured the carrying amounts do not differ materially from those initially at cost and subsequently revalued at fair value less that would be determined using fair values at the end of the accumulated depreciation and impairment losses, where reporting period. applicable. Where an asset is acquired for no or nominal cost, Revaluation increments are credited directly to equity in the cost is its fair value at the date of acquisition. The cost of the asset revaluation surplus, except where a revaluation constructed non-financial physical assets includes the cost of decrement for that class of asset was previously recognised all materials used in construction, direct labour on the project as an expense. The increment is recognised as revenue up to and appropriate proportion of variable and fixed overheads. the value of the previous expense. Any excess is recognised Subsequent measurement in the assets’ revaluation surplus. Infrastructure, property, plant and equipment are subsequently Revaluation decrements are recognised immediately as an measured at fair value less accumulated depreciation and expense, except where a revaluation increment for that class impairment. Fair value is determined with regard to the asset’s of asset was previously recognised in the asset revaluation highest and best use (considering legal or physical restrictions reserve. The decrement is recognised as a debit in the asset imposed on the asset, public announcements or commitments revaluation surplus up to the value of the previous decrement. made in relation to the intended use of the asset) and is Any excess is recognised as an expense. summarised by asset category on the next page. Refer note Revaluation increases and revaluation decreases relating 7.4 for fair value disclosures. to individual assets within a class of infrastructure, property, Revaluations plant and equipment are offset against one another In measuring the fair values of non-financial assets, we engage within that class but are not offset in respect of assets in independent valuers for scheduled valuations every five years different classes. or earlier if interim indices suggest there has been a material Assumptions in respect of revaluations can be found in note movement. Infrastructure assets are measured at fair value 7.4. every year.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 103 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

Depreciation Impairment of non-financial assets The depreciable amount of all non-current physical assets, Infrastructure, property, plant and equipment and intangible excluding freehold land and Crown land, is depreciated on a assets with finite useful lives are assessed annually for straight-line basis over their useful lives, commencing from indications of impairment. Whenever there is an indication of the time the asset is held ready for use. The useful lives, which impairment, the assets concerned are tested as to whether are consistent with the prior period, used for each class of their carrying value exceeds their recoverable amount. depreciable assets are: Where an asset’s carrying value exceeds its recoverable CLASS OF FIXED ASSET USEFUL LIFE amount, an impairment loss is recognised in net profit in the Statement of Comprehensive Income for the excess amount, Buildings 5 to 100 years except to the extent that the write-down reverses an asset Infrastructure: revaluation reserve amount applicable to that asset. The – Main structure 50 to 100 years recoverable amount of assets held primarily to generate net – Other 3 to 30 years cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and Plant and equipment 2 to 25 years fair value less costs to sell. There are no material indicators of impairment at the time The assets' residual values and useful lives are reviewed and financial statements were authorised for issue. adjusted if appropriate, at each Balance Sheet date. There have been no changes to asset category useful lives as at 30 June 2019.

104 YARRA VALLEY WATER ANNUAL REPORT 2018-19 4.3. INTANGIBLE ASSETS INTANGIBLE WATER WORKS IN ENTITLEMENTS SOFTWARE PROGRESS TOTAL $’000 $’000 $’000 $’000

Balance at 1 July 2017 96,917 78,235 8,997 184,149 Additions - - 16,768 16,768 Transfers - 7,290 (7,290) - Amortisation expense - (20,792) - (20,792) CARRYING AMOUNT AT 30 JUNE 2018 96,917 64,733 18,475 180,125 Additions - - 11,424 11,424 Transfers - 15,654 (15,654) - Amortisation expense - (19,731) - (19,731) CARRYING AMOUNT AT 30 JUNE 2019 96,917 60,656 14,245 171,818 4 Water entitlements ›› The intention to complete the intangible asset and use FINANCIAL REPORT Yarra Valley Water contributed $100 million towards the or sell it cost of the Goulburn-Murray Water Connections Project. In ›› The ability to use or sell the intangible asset exchange for this contribution, Yarra Valley Water is entitled to a one-ninth share of the progressive water savings generated ›› How the intangible asset will generate probable future by Stage 1 of the Connections Project (estimated to be 225 economic benefits gigalitres of long-term water savings in total when complete ›› The availability of adequate technical, financial and other in 2020) on an ongoing basis. resources to complete the development and to use or sell In exchange for access to the three Melbourne metropolitan the intangible asset water retailers’ water entitlements from the Melbourne ›› The ability to measure reliably the expenditure attributable water supply system, four regional urban water businesses to the intangible asset during its development. (Barwon Water, South Gippsland Water, Western Water and Westernport Water) made contributions of $9.3 million to the Subsequent to initial recognition, internally generated retailers, with Yarra Valley Water’s share being $3.1 million. intangible assets are reported at cost less accumulated The investment has therefore been recognised at its net value amortisation and impairment losses on the same basis as ($100 million less $3.1 million). intangible assets that are acquired separately. Water entitlements are recognised at cost and have an infinite life and are not amortised. Amortisation Intangible assets with finite useful lives are amortised on a Intangible assets acquired separately straight-line basis over the asset’s useful life. Amortisation (software and intangible works in progress) begins when the asset is available for use. That is, when it is Intangible assets acquired separately are initially recognised in the location and condition necessary for it to be capable at cost. Subsequently, intangible assets with finite useful of operating in the manner intended by management. The lives are carried at cost less accumulated amortisation and amortisation period and the amortisation method for an accumulated impairment losses. Intangible assets with intangible asset with a finite useful life are reviewed at least indefinite useful lives are carried at cost less impairment at the end of each annual reporting period. losses, where applicable. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional Intangible assets with indefinite useful lives are not amortised. future economic benefits will flow to Yarra Valley Water. There has been no change to useful lives during 2018-19 or 2017-18. Internally generated intangible assets (software and intangible works in progress) CLASS OF FIXED ASSET USEFUL LIFE Expenditure on research activities is recognised as an expense Software 3 to 10 years in the period in which it is incurred. An internally generated intangible asset arising from a development project is Water entitlements indefinite recognised only if all the following are demonstrated: ›› The technical feasibility of completing the intangible asset so that it will be available for use or sale

YARRA VALLEY WATER ANNUAL REPORT 2018-19 105 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

Impairment Intangible assets that have an indefinite useful life and 5. OTHER ASSETS AND intangible assets not yet available for use are tested annually for impairment or more frequently if events or changes in LIABILITIES circumstances indicate that they might be impaired. Introduction 4.4. NET GAIN / LOSS ON DISPOSAL OF This section sets out any other assets and liabilities that arose NON-CURRENT PHYSICAL ASSETS from Yarra Valley Water’s controlled operations. Structure Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses 5.1 Change in accounting standard – AASB 9 Financial are included in net profit in the Statement of Comprehensive Instruments Income. When significant revalued assets are sold, amounts 5.2 Receivables included in the asset revaluation surplus relating to that asset 5.2.1 Ageing analysis and impairment of are transferred to retained earnings. The surplus / deficit from contractual receivables ordinary activities includes the following specific net gains 5.2.2 Reconciliation of the expected credit loss allowance and expenses: 5.3 Other non-financial assets 5.4 Payables NET (GAIN) / LOSS ON DISPOSAL 2019 2018 5.4.1 Ageing analysis of contractual payables OF ASSETS $’000 $’000 5.5 Contract liabilities 5.6 Other provisions Infrastructure, property, plant and equipment (16) 218 5.1. CHANGE IN ACCOUNTING STANDARD TOTAL NET (GAIN) / LOSS ON DISPOSAL OF ASSETS (16) 218 – AASB 9 FINANCIAL INSTRUMENTS AASB 9 Financial Instruments, which replaces AASB 139 Financial Instruments: Recognition and Measurement, introduces new requirements for recognition, classification 4.5. CONTRACTUAL COMMITMENTS and measurement, a new impairment model for financial Significant contractual expenditure arising from contracts assets based on expected credit losses, and simplified are disclosed at their nominal value and inclusive of goods hedge accounting. Yarra Valley Water adopted AASB 9 as and services tax. Yarra Valley Water commitments include at 1 July 2018 and has applied the new rules on a modified growth works and mains renewals for both water and sewer. retrospective basis. As a result, comparatives for 2017-18 Total expenditure contracted for at balance date but not account have not been restated. provided for in the financial statements: AASB 9 has not significantly impacted the classification and CONTRACTUAL COMMITMENTS 2019 2018 measurement of financial assets and liabilities in the financial PAYABLE $’000 $’000 statements of Yarra Valley Water. Yarra Valley Water does not apply hedge accounting. The financial statements have been Not later than one year 232,555 213,449 impacted by a change in the calculation methodology applied Later than one year and not later 156,765 168,101 to the provision for impairment of contractual receivables. than five years Yarra Valley Water has applied the simplified approach for Greater than five years 5,500 1,214 measuring expected credit losses under AASB 9 which uses a TOTAL CONTRACTUAL lifetime expected loss allowance for contractual receivables. COMMITMENTS PAYABLE 394,820 382,764 (GST INCLUSIVE)

106 YARRA VALLEY WATER ANNUAL REPORT 2018-19 To measure the expected credit losses, receivables have affecting the ability of customers to settle the receivables been grouped based on shared credit risk characteristics and and then applied to current contractual receivable balances the days past due and then Yarra Valley Water has reviewed to determine the impairment amount. receivables at points in time to determine the percentage This resulted in a decrease of the loss allowance on 1 July that have historical credit losses. This calculation has been 2018 by $147,000 for trade receivables which was adjusted performed over three years at three points in time. The against retained earnings at 1 July 2018. historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors

ALLOWANCE FOR EXPECTED IMPAIRMENT CREDIT LOSS UNDER AASB UNDER AASB 9 139 AS AT 2018 AS AT 30 JUNE 2018 RE-MEASUREMENT 1 JULY 2018 $'000 $'000 $'000

Trade receivables - debtors - current 87,419 - 87,419 Less: allowance for expected credit losses - current (2,191) 147 (2,044) 4 85,228 147 85,375 FINANCIAL REPORT

5.2. RECEIVABLES Receivables Contractual receivables such as debtors and accrued

2019 2018 revenue in relation to goods and services, are classified CURRENT RECEIVABLES NOTE $’000 $’000 as financial instruments and categorised as ‘loans and receivables’. They are initially recognised at fair value plus any Contractual receivables directly attributable transaction costs. Subsequent to initial Trade receivables - debtors 80,715 87,419 measurement they are measured at amortised cost using the effective interest method, less any impairment. Trade receivables - accrued 80,258 88,313 revenue Bad debts are written off when determined uncollectable, in Other receivables 3,830 4,486 accordance with delegation authorities. Less: allowance for expected 5.2.1 (2,063) (2,191) Statutory receivables, such as amounts owing from the credit losses Victorian Government and goods and services tax (GST) input tax credit recoverable are recognised and measured similarly Statutory receivables to contractual receivables (except for impairment), but are not GST receivables 3,037 13,404 classified as financial instruments because they do not arise TOTAL CURRENT 165,777 191,431 from a contract. RECEIVABLES Accrued revenue is recognised for water usage and sewage disposal as well as other works and services that have been NON-CURRENT 2019 2018 rendered to balance date but not yet invoiced. Water usage RECEIVABLES $’000 $’000 charges, sewage disposal charges, trade waste charges, recycled water charges and water trading revenue are all Contractual receivables recognised as income when the service has been provided. Trade receivables - debtors - 3,954 An accrual is recognised to account for water and sewage Less: allowance for expected services not billed at the end of the period. This is calculated - (1,015) credit losses using the volume of water purchased from Melbourne Water to the end of the period less the estimated non-revenue water. TOTAL NON-CURRENT - 2,939 RECEIVABLES

YARRA VALLEY WATER ANNUAL REPORT 2018-19 107 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

5.2.1. AGEING ANALYSIS AND IMPAIRMENT OF CONTRACTUAL RECEIVABLES 1 TO 21 22 TO 60 61 TO 90 91 TO 180 OVER 180 NOT AGED DAYS1 DAYS DAYS DAYS DAYS TOTAL 2019 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Expected credit loss rate 1.37% 0.78% 4.06% 10.37% 13.25% Trade debtors Not past due - 49,034 - - - - 49,034 Past due - - 19,317 3,127 3,737 5,500 31,681 Allowance for expected credit losses - (669) (150) (127) (387) (730) (2,063) NET TRADE RECEIVABLES - DEBTORS - 48,365 19,167 3,000 3,350 4,770 78,652 Accrued revenue 80,258 - - - - - 80,258 Other receivables 2 6,867 - - - - - 6,867 TOTAL RECEIVABLES 87,125 48,365 19,167 3,000 3,350 4,770 165,777

2018

Trade debtors Not past due and not impaired - 54,709 - - - - 54,709 Past due but not impaired - - 19,839 3,186 4,191 5,494 32,710 Impaired - (180) (473) (94) (504) (940) (2,191) NET TRADE RECEIVABLES - DEBTORS - 54,529 19,366 3,092 3,687 4,554 85,228 Accrued revenue 88,313 - - - - - 88,313 Other receivables 2 20,829 - - - - - 20,829 TOTAL RECEIVABLES 109,142 54,529 19,366 3,092 3,687 4,554 194,370

1 The 0 to 21 days category includes customers who have renegotiated arrangements and payment terms as a consequence of entering hardship programs.

2 Includes non current receivables (net of impairment).

All contractual receivables are recognised at the amounts Following a review of the deferred debt arrangement in 2019, receivable less any provision for impairment of receivables. a decision was made to withdraw the arrangement and write Credit is generally allowed for a period of 20 days. The off any outstanding deferred debt. Property owners will now collectability of debt is assessed each accounting period be eligible for the same Arrange and Save scheme available for usage and other charges. to tenants under our affordability and assistance programs. Non-current trade receivables (deferred debt) relate to Loans and receivables are measured at amortised cost using property owner customers, who had outstanding fees that the effective interest rate method less any impairment. would be recovered when their property was sold or when the customers' circumstances permitted payment.

5.2.2. RECONCILIATION OF THE EXPECTED CREDIT LOSS ALLOWANCE 2019 2018 EXPECTED CREDIT LOSS ALLOWANCE NOTE $’000 $’000

Balance at beginning of year (3,206) (2,514) Changes in accounting standards before tax 5.1 147 - Reversal of provision and write offs recognised as an expense 3.1 6,402 3,066 Increase in provision (5,406) (3,758) TOTAL EXPECTED CREDIT LOSS ALLOWANCE (2,063) (3,206)

Movements relate to current and non-current receivables. Refer note 5.2.

108 YARRA VALLEY WATER ANNUAL REPORT 2018-19 5.3. OTHER NON-FINANCIAL ASSETS Other non-financial assets are predominantly made up of prepayments which represent payments in advance of receipt of goods or services or where part of the expenditure is made in one accounting period covering a term extending beyond that period. This includes insurances, IT subscription and maintenance agreements and other various subscriptions.

5.4. PAYABLES

2019 2018 CURRENT LIABILITIES - PAYABLES $’000 $’000

Contractual payables Trade payables 26,714 28,907 Accruals 80,017 99,268 Security deposits 6,692 6,138 Statutory payables Fringe benefits tax payables 23 (7) 4 FINANCIAL REPORT TOTAL CURRENT LIABILITIES - PAYABLES 113,446 134,306

Payables and accruals ›› Statutory payables relate to goods and services tax Trade payables and accruals are recognised for future and fringe benefits tax payables. Statutory payables amounts to be paid in respect of goods and services received. are recognised and measured similarly to contractual The amounts are unsecured and are usually paid 30 days after payables, but are not classified as financial instruments invoice date. and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract. Payables consist of: ›› Contractual payables represent liabilities for goods and services provided to Yarra Valley Water prior to the end of the financial year that are unpaid, and arise when Yarra Valley Water becomes obligated to make future payments in respect of the purchase of those goods and services. Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost

5.4.1. AGEING ANALYSIS OF CONTRACTUAL PAYABLES LESS THAN 1 TO 3 3 TO 12 OVER 12 NOT AGED 1 MONTH MONTHS MONTHS MONTHS TOTAL 2019 $’000 $’000 $’000 $’000 $’000 $’000

Trade payables - 26,269 445 - - 26,714 Accruals 80,040 - - - - 80,040 Other payables 6,692 - - - - 6,692 TOTAL PAYABLES 86,732 26,269 445 - - 113,446

2018

Trade payables - 28,350 472 85 - 28,907 Accruals 99,261 - - - - 99,261 Other payables 6,138 - - - - 6,138 TOTAL PAYABLES 105,399 28,350 472 85 - 134,306

YARRA VALLEY WATER ANNUAL REPORT 2018-19 109 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

5.5. CONTRACT LIABILITIES 2019 2018 CONTRACT LIABILITIES NOTE $’000 $’000

Grant income 896 787 Customers paid in advance 18,206 16,188 Unearned income 2.2 36,556 2,769 Developer contributions 550 549 TOTAL CURRENT CONTRACT LIABILITIES 56,208 20,293 Developer contributions - 8,184 TOTAL NON-CURRENT CONTRACT LIABILITIES - 8,184

Government grants 5.6. OTHER PROVISIONS Government grants are recognised once reasonable assurance Provisions are recognised when Yarra Valley Water has a has been reached that Yarra Valley Water will comply with present legal or constructive obligation because of past the conditions attached to them and that the grants will events, for which it is probable that an outflow of economic be received. Government grants of a revenue nature are benefits will result and that outflow can be reliably measured. recognised as income over the periods necessary to match them with related costs. Government grants related to assets The amount recognised as a provision is the best estimate of are recognised in the Balance Sheet by deducting the grant in the consideration required to settle the present obligation at arriving at the carrying amount of the asset, thereby incurring reporting date, taking into account the risks and uncertainties a reduced depreciation charge. surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present Customers paid in advance obligation, its carrying amount is the present value of those Customers paid in advance represent payments received from cash flows, using a discount rate that reflects the time value customers in advance of the provision of goods or services or of money and the risks specific to the provision. any legal or constructive obligation required to be performed by Yarra Valley Water to settle the terms of receipt of income. When some or all of the economic benefits required to settle Yarra Valley Water will recognise these advance payments a provision are expected to be received from a third party, once it has performed the performance obligations associated the receivable is recognised if it is virtually certain that with the payments. economic benefits will be received and their amount can be measured reliably. Unearned Income Unearned income represents payments received for developer contributed assets, new customer contributions, application fees and rental where performance obligations associated 6. FINANCING OUR OPERATIONS with the payment are outstanding, refer note 2.2. Developer contributions Introduction Unearned developer contributions represent amounts received This section provides information on the sources of from developers for the reimbursement of costs that will be finance utilised by Yarra Valley Water during its operations, incurred by Yarra Valley Water constructing assets to service along with interest expenses (the cost of borrowings and new urban growth. These payments will be recognised as other information related to financing activities of Yarra revenue at the point in time that Yarra Valley Water has Valley Water). completed the performance obligations agreed with the This section includes disclosures of balances that are financial developer. instruments (such as borrowings and cash balances). Structure 6.1 Borrowings and finance costs 6.1.1 Maturities of financial liabilities 6.1.2 Finance costs 6.2 Cash flow information and balances 6.2.1 Reconciliation of net result for the period to cash flow from operating activities

110 YARRA VALLEY WATER ANNUAL REPORT 2018-19 6.1. BORROWINGS AND FINANCE COSTS CARRYING AMOUNT NET FAIR VALUE 2019 2018 2019 2018 INTEREST-BEARING FINANCIAL LIABILITIES $’000 $’000 $’000 $’000

Borrowings - current liabilities 288,107 289,565 292,380 293,895 Borrowings - non-current liabilities 2,341,400 2,124,600 2,644,673 2,291,589 TOTAL INTEREST-BEARING FINANCIAL LIABILITIES 2,629,507 2,414,165 2,937,053 2,585,484

Borrowings are classified as financial instruments. All The fair value of the interest-bearing financial liabilities interest-bearing borrowings are initially recognised at the fair is determined by discounting the expected future cash flows value of the consideration received less directly attributable at current interest rates. transaction costs. The measurement basis subsequent to initial recognition is based on the classification of interest- 6.1.1. MATURITIES OF FINANCIAL LIABILITIES bearing liabilities as financial liabilities at ‘amortised cost’. The following table allocates Yarra Valley Water’s financial Amortised cost is measured using the effective interest rate liabilities into relevant maturity groupings based on the method. This classification is determined at initial recognition. 4

remaining period at the reporting date to the contractual FINANCIAL REPORT Interest is payable semi-annually and is accrued over the maturity date. The amounts disclosed are the contractual period it becomes due. Accrued interest is recorded as part undiscounted cash flows. of accruals.

WEIGHTED AVERAGE LESS THAN 1 TO 3 3 TO 5 OVER 5 EFFECTIVE INTEREST 12 MONTHS YEARS YEARS YEARS TOTAL 2019 BORROWINGS RATE % $’000 $’000 $’000 $’000 $’000

Fixed interest rate 3.88 153,200 332,300 464,100 1,445,000 2,394,600 Floating interest rate 1.42 134,907 100,000 - - 234,907 TOTAL 288,107 432,300 464,100 1,445,000 2,629,507

2018 BORROWINGS

Fixed interest rate 4.29 132,300 231,400 338,200 1,415,000 2,116,900 Floating interest rate 2.01 157,265 90,000 50,000 - 297,265 TOTAL 289,565 321,400 388,200 1,415,000 2,414,165

6.1.2. FINANCE COSTS 2019 2018 FINANCE COSTS $’000 $’000

Interest on borrowings 96,811 96,211 Financial accommodation levy 35,182 33,255 Other interest expense 214 661 TOTAL FINANCE COSTS 132,207 130,127

Finance costs are recognised as expenses in the period in The financial accommodation levy is paid by Yarra Valley which they are incurred. All qualifying assets (being assets Water into the consolidated fund in accordance with section that necessarily take a substantial period of time to get 40N of the Financial Management Act 1994 in respect of ready for their intended use or sale) are measured at fair financial accommodation provided to Yarra Valley Water by the value. Therefore, any finance costs directly attributable to State Government of Victoria. the acquisition, construction or production of these qualifying assets are not required to be capitalised and will continue to be expensed in the period in which they are incurred.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 111 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

6.2. CASH FLOW INFORMATION AND BALANCES Cash and cash equivalents include cash at bank and cash on hand with original maturities of three months or less, and bank overdrafts. 2019 2018 CASH $’000 $’000

Cash at bank 1,035 985 Cash on hand 1 1 TOTAL CASH 1,036 986

6.2.1. RECONCILIATION OF NET RESULT FOR THE PERIOD TO CASH FLOW FROM OPERATING ACTIVITIES 2019 2018 $’000 $’000

Net profit after tax 111,700 88,502

Adjustments for non-cash items Depreciation / amortisation 107,486 107,843 Bad and doubtful debts 6,402 3,066 Write off/ disposal of assets 2,076 2,944 Defined benefit superannuation plan expense 548 688 Net loss on disposal of non-current physical assets (16) (218) Impairment writeback (land and land related provisions) (1,146) (2,720) Impairment write-down 85 1,104 Developer contributed assets and other authority works (84,503) (23,272)

Changes in operating assets and liabilities Increase in other current assets (113) (269) (Increase) / decrease in GST receivable 10,367 (7,660) (Increase) / decrease in trade receivables 17,265 (5,717) Increase in accrued interest 840 463 Increase / (decrease) in provisions (108) 2,565 Increase / (decrease) in contract liabilities 35,915 (4,551) Increase / (decrease) in net deferred tax liabilities (45,764) 2,056 Increase in payables 7,297 15,678 NET CASH INFLOW FROM OPERATING ACTIVITIES 168,331 180,502

112 YARRA VALLEY WATER ANNUAL REPORT 2018-19 Financial liabilities at amortised cost are initially recognised 7. RISKS, CONTINGENCIES AND on the date they are originated. They are initially measured at fair value plus any directly attributable transaction costs. VALUATION JUDGEMENT Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between Introduction the initial recognised amount and the redemption value being Yarra Valley Water is exposed to risk from its activities and recognised in the Statement of Comprehensive Income over outside factors. In addition, it is often necessary to make the period of the interest-bearing liability, using the effective judgements and estimates associated with recognising and interest rate method. Yarra Valley Water recognised the measuring items in the financial statements. This section following liabilities in this category: sets out financial instrument specific information (including ›› payables (excluding statutory payables) – refer note 5.4 exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to ›› contract liabilities – refer note 5.5 be applied, which relate mainly to fair value determination. ›› borrowings – refer note 6.1. Structure 7.1 Financial instruments specific disclosures 7.2. FINANCIAL RISK MANAGEMENT 7.2 Financial risk management objectives and policies OBJECTIVES AND POLICIES 4 7.3 Contingent assets and liabilities FINANCIAL REPORT Capital risk management 7.4 Fair value 7.4.1 Fair value - Determination of non-financial Yarra Valley Water controls its capital structure in order physical assets to provide the State Government of Victoria with adequate 7.4.2 Fair value - Reconciliation of changes in level 3 items returns and to ensure that it can fund its operations as a 7.4.3 Fair value - Valuation techniques and significant going concern. unobservable inputs in level 3 items The capital structure of Yarra Valley Water consists of net debt (borrowings as detailed in table below and offset by 7.1. FINANCIAL INSTRUMENTS cash and bank balances - refer note 6.2) and equity of Yarra SPECIFIC DISCLOSURES Valley Water (comprising contributed equity, asset revaluation Introduction surplus and retained earnings detailed in notes 9.1 to 9.3). Financial instruments arise out of contractual agreements The only externally imposed capital requirements are that: that give rise to a financial asset of one entity and a financial ›› Financial accommodation does not exceed the approval liability or equity instrument of another entity meeting the limits set by the Treasurer of Victoria pursuant to the definition of assets and liabilities under AASB 9 Financial Borrowing and Investment Powers Act 1987 Instruments. Due to the nature of Yarra Valley Water’s activities, certain financial assets and financial liabilities ›› Yarra Valley Water, with the exception of an operating arise under statute rather than a contract (for example account with overdraft facilities, is required to taxes, fines and penalties). Statutory assets and liabilities do borrow exclusively with the Treasury Corporation of not meet the definition of financial instruments in AASB 9 Victoria (TCV). Financial Instruments. These external capital requirements are incorporated into Categories of financial instruments the management of capital through the Board approved Loans, receivables and cash are financial instrument assets Corporate Plan. with fixed and determinable payments that are not quoted on an active market. These assets and liabilities are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables (net of impairment) are measured at amortised cost using the effective interest method. Yarra Valley Water recognised the following assets in this category: ›› cash and deposits – refer note 6.2 ›› receivables (excluding statutory receivables) – refer note 5.2.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 113 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

Yarra Valley Water effectively manages its capital by ii. Liquidity risk assessing its financial risks and adjusting its capital structure Liquidity risk is the risk of not being able to meet the specific in response to changes in these risks and the market. These financial commitments including short term working responses include the management of debt levels. There capital needs and financing new and maturing loans as they have been no changes to the strategy adopted by Yarra Valley are required. Water to control its capital during the year. The gearing ratios for the years ended 30 June 2019 and 30 June 2018 were Yarra Valley Water manages liquidity risk by actively as follows: maintaining efficient banking practices, regularly monitoring 2019 2018 forecast and actual cash flows and ensuring adequate $’000 $’000 borrowing facilities are maintained. Borrowings - current 288,107 289,565 Annual approval is received from the Treasurer of Borrowings - non-current 2,341,400 2,124,600 Victoria for new borrowings, borrowings to refinance maturing and non-maturing loans and temporary purpose Total borrowings 2,629,507 2,414,165 borrowing facilities. Total assets 5,121,056 4,966,332 Financing arrangements GEARING RATIO 51% 49% Yarra Valley Water had access to a total of $60.76 million (2018: $153.6 million) of unused borrowings approved by Financial risks the Treasurer of Victoria as at 30 June 2019. Yarra Valley Water has a formal bank overdraft facility with Westpac The main risks Yarra Valley Water is exposed to through Banking Corporation. its financial instruments are interest rate risk, liquidity risk and credit risk. The Board reviews and approves policies for iii. Credit risk managing these risks. Credit risk is the risk that a counterparty or customer will fail i. Interest rate risk to meet contractual obligations. For Yarra Valley Water credit risk arises mainly from outstanding customer receivables Interest rate risk is the risk to earnings or capital arising from as it is legally obliged to service all customers in its district movements in interest rates. Yarra Valley Water is exposed without regard to their credit quality, refer note 5.2.1. Yarra to interest rate risk through its borrowing activities and Valley Water has in place extensive debt collection strategies changes in the market in comparison to the assumptions to minimise customer credit risk and recover outstanding of the Essential Services Commission’s regulatory pricing receivables. determination in relation to the underlying cost of debt.

Interest rate exposures are also recognised in terms of the The credit risk attributable to Yarra Valley Water’s deposits change in the market value of the debt portfolio which arise as with the TCV and other financial institutions is considered a consequence of changes in market interest rates. to be very low due to the minor amounts involved and the contractual arrangements in place for counterparties. Yarra Valley Water effectively manages interest rate risk by maintaining the debt portfolio within the strategic targets The maximum exposure to credit risk at the reporting date and policy bands that have been approved by the Board. is the carrying amount of items in the Balance Sheet. For Strategic and tactical debt portfolio options are assessed in receivables, the maximum exposure is the gross amount of consultation with TCV, with borrowing decisions based on receivables before allowing for doubtful debts. future borrowing requirements, treasury management policy compliance and TCV’s market interest rate outlook. Refer section 6.1.1 for maturity analysis of contractual financial liabilities. INTEREST RATE 2019 2018 SENSITIVITY ANALYSIS $’000 $’000

+ 50 basis points (1,011) (1,015) - 50 basis points 1,011 1,015

114 YARRA VALLEY WATER ANNUAL REPORT 2018-19 7.3. CONTINGENT ASSETS AND LIABILITIES 7.4. FAIR VALUE Contingent assets and contingent liabilities are not recognised Fair value determination requires judgement and the use in the Balance Sheet, but are disclosed by way of a note and, of assumptions. This section discloses the most significant if quantifiable, are measured at nominal value. Contingent assumptions used in determining fair values. Changes to assets and contingent liabilities are presented inclusive of assumptions could have a material impact on the results and goods and services tax receivable or payable respectively. financial position of Yarra Valley Water. a. Contingent assets Fair value is the price that would be received to sell an asset Yarra Valley Water enters into agreements with land or paid to transfer a liability in an orderly transaction between developers whereby assets are transferred to Yarra Valley market participants at the measurement date. Water at no cost. These assets are brought to account as All assets and liabilities for which fair value is measured or revenue (refer note 2.2) and capitalised. disclosed in the financial statements are categorised within 2019 2018 the fair value hierarchy, described as follows, and based on $’000 $’000 the lowest level inputs that are significant to the fair value Water supply assets under construction 32,735 39,322 measurement as a whole: Water supply assets committed to 11,946 13,799 ›› Level 1 – Quoted (unadjusted) market prices in active 4 markets for identical assets or liabilities Sewerage supply assets under FINANCIAL REPORT 38,230 construction 30,042 ›› Level 2 – Valuation techniques for which the lowest level Sewerage supply assets committed to 8,451 14,592 input that is significant to the fair value measurement is directly or indirectly observable Yarra Valley Water is unaware of any other material contingent assets. ›› Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement b. Contingent liabilities is unobservable. Contingent on the completion of the contingent assets transferred from developers, Yarra Valley Water has a liability to reimburse developers for additional works constructed at Yarra Valley Water’s request. 2019 2018 $’000 $’000

Water supply assets 8,405 8,998 Sewerage supply assets 18,451 19,487

These reimbursements will occur upon request by the developer following the issuing of the certificate of completion as agreed in accordance with the conditions of the agreement between Yarra Valley Water and the developer. Yarra Valley Water has legal claims and hearings pending as a result of a small number of contractual and pricing disputes. Due to the uncertainty inherent in litigation, an accurate assessment of any outcome is not possible. Yarra Valley Water is of the view that further disclosure of these disputes may prejudice its position. Yarra Valley Water is unaware of any other material contingent liability. Claims to which we are aware and which may result in a liability being incurred have been provided for as other provisions, refer note 5.6.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 115 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

7.4.1. FAIR VALUE – DETERMINATION OF NON-FINANCIAL PHYSICAL ASSETS Yarra Valley Water’s land, buildings, plant and equipment and infrastructure are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and impairment losses. This note explains the judgements and estimates made in determining the fair values of non-financial assets. In accordance with AASB 13 Fair Value Measurement, Yarra Valley Water’s non-financial assets have been categorised into the three levels of the fair value hierarchy depending on the degree to which inputs into the fair value measurements are observable, and the significance of the inputs to the fair value measurement. FAIR VALUE AS LEVEL 1 LEVEL 2 LEVEL 3 AT 30 JUNE $’000 $’000 $’000 $’000 Infrastructure - - 3,817,200 3,817,200 Land (specialised) - - 241,202 241,202 Land (non-specialised) - 167,766 - 167,766 Buildings (market approach) - 2,189 - 2,189 Buildings (depreciated replacement cost) - - 30,384 30,384 Plant and equipment - - 19,730 19,730 CARRYING AMOUNT AT 30 JUNE 2018 - 169,955 4,108,516 4,278,471

Infrastructure - - 3,890,500 3,890,500 Land (specialised) - - 243,105 243,105 Land (non-specialised) - 167,766 - 167,766 Buildings (market approach) - 2,128 - 2,128 Buildings (depreciated replacement cost) - - 30,623 30,623 Plant and equipment - - 26,082 26,082 CARRYING AMOUNT AT 30 JUNE 2019 - 169,894 4,190,310 4,360,204

Infrastructure ›› Arrives at an enterprise valuation by discounting the cash The 30 June 2019 valuation of infrastructure assets has been flows to the valuation date using the selected high ($4.05 independently provided by KPMG, using a discounted cash flow billion) and low ($3.73 billion) WACC estimates and adopts a methodology to determine the fair value of infrastructure. This mid-point ($3.89 billion) involved discounting the forecast stream of cash flows of the ›› Deducts non-infrastructure related assets and liabilities to entire business to both debt and equity investors at a weighted derive the implied water infrastructure asset valuation average cost of capital (WACC), which represents an estimate of a hypothetical market participant’s discount rate. The ›› Includes a tax amortisation benefit (TAB) on water valuation model: infrastructure assets, being an estimate of the present value of future tax amortisation benefits that may be received. In ›› Calculates forecast cash flows to debt and equity investors including a TAB, a delay of five years is overlayed to reflect over a 10-year forecast period. Cash flows to debt and equity the likely timing of secondary infrastructure asset sales, the investors are those cash flows available after all operating impact being to reduce the calculated TAB by approximately expenses (including taxes) have been paid and necessary 25 per cent. The calculated TAB is added to the implied investments in working and fixed capital have been made water infrastructure assets’ valuation to arrive at the total ›› Calculates a terminal value at the end of the forecast period value of water infrastructure assets. adopting the Gordon Growth methodology by applying the Infrastructure assets are classified as level 3. There is no active mid-point of the WACC, terminal growth rate and terminal market which has a significant impact on the fair value. cash flows. A single terminal value has been adopted due to the sensitive nature of the terminal value in the model

116 YARRA VALLEY WATER ANNUAL REPORT 2018-19 Land – specialised / non-specialised and crown Buildings – specialised / non-specialised The most recent valuation of land was independently The most recent valuation was performed on 30 June 2016 determined by the Victorian Valuer-General's Office using and valuation was independently determined by the Victorian fair value as at 30 June 2016. In undertaking the valuation of Valuer-General’s Office using market value or depreciated land, the Victorian Valuer-General's Office adopted the market replacement cost method. The depreciated replacement based direct comparison approach, whereby the properties cost method is based on the replacement of buildings to a were valued by analysing land sales in comparable proximity ‘modern equivalent’ standard after applying an appropriate to the subject sites and allowing for shape, size, topography, depreciation rate, useful life and adjusting for condition. location and other relevant factors specific to the land being As depreciation adjustments are considered as significant, valued. unobservable inputs in nature, buildings are classified as level 3 fair value. Where applicable specialised land is adjusted for the community service obligation (CSO) to reflect the specialised To the extent that non-specialised buildings do not contain nature of the land being valued. As adjustments to CSO are significant, unobservable adjustments, these asset are considered as significant unobservable inputs, specialised land classified as level 2 under the market approach. would be classified as level 3 assets. As at 30 June 2019, buildings were checked against To the extent that non-specialised land does not contain indices provided by the Victorian Valuer-General’s Office to 4 significant, unobservable adjustments, the assets are determine any material or exceptionally material movements. FINANCIAL REPORT classified as level 2 under the market approach. No material movements have occurred. As at 30 June 2019 the fair value of land was checked against If buildings were measured at historical cost, the carrying indices provided by the Victorian Valuer-General’s Office to amount would be $40.3 million (2018: $38.7 million). determine any material or exceptionally material movements. Plant and equipment Land was not revalued at 30 June 2019 (2018: revalued upwards by $60.4 million). Plant and equipment are held at carrying value (depreciated cost) which approximates fair value. Unless there is market If land was measured at historical cost, the carrying amount evidence that current replacement costs are significantly would be $58.4 million (2018: $56.5 million). different from the original acquisition cost, it is considered unlikely that depreciated cost will be materially different from the existing carrying value. As at 30 June 2019 no material movements have occurred other than as disclosed in note 4.2.

7.4.2. FAIR VALUE – RECONCILIATION OF CHANGES IN LEVEL 3 ITEMS PLANT AND LAND EQUIPMENT (SPECIALISED) BUILDINGS INFRASTRUCTURE TOTAL $’000 $’000 $'000 $’000 $’000 Balance at 1 July 2017 20,932 197,840 31,511 3,771,700 4,021,983 Acquisitions 5,265 425 113 160,382 166,185 Disposals / write off (2,326) - - (618) (2,944) Depreciation (4,141) - (1,240) (81,519) (86,900) Revaluation gains / (loss) recognised in other - 42,937 - (32,745) 10,192 comprehensive income CARRYING AMOUNT AT 30 JUNE 2018 19,730 241,202 30,384 3,817,200 4,108,516 Acquisitions 10,905 1,903 1,570 284,773 299,151 Disposals / write off (920) - - (1,156) (2,076) Depreciation (3,633) - (1,331) (82,730) (87,694) Revaluation loss recognised in other - - - (127,587) (127,587) comprehensive income CARRYING AMOUNT AT 30 JUNE 2019 26,082 243,105 30,623 3,890,500 4,190,310

YARRA VALLEY WATER ANNUAL REPORT 2018-19 117 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

7.4.3. FAIR VALUE – VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS IN LEVEL 3 ITEMS SIGNIFICANT VALUATION UNOBSERVABLE RANGE SENSITIVITY OF THE INPUT TECHNIQUE INPUTS (AVERAGE) TO FAIR VALUE

LAND Market approach Community service 1% to 92% A significant increase or decrease in the (SPECIALISED) obligation (CSO) (21%) community service obligations (allowance for adjustment restrictions placed on land) adjustment would $1,000 to result in a higher or lower land valuation $17,568,000 ($254,495)

INFRASTRUCTURE Income Weighted average cost 5% to 5.6% If the WACC had changed by +/- 0.25% approach using a of capital (WACC) from the year end valuation, the impact discounted cash to the valuation would have been a decrease flow model of $895.4 million and an increase by $791.8 million

Terminal value growth 3.50% If the terminal growth rate had changed by rate (inclusive of +/- 0.25% from the year end valuation, the inflation) impact to the valuation would have been a decrease of $654.1 million and increase by $865.0 million

Terminal value capex $226.4 If the terminal value capex changed by +/- million 10% the impact would be $687.5 million

PLANT AND Depreciated cost Original useful life 2 to 25 years A significant increase or decrease in the EQUIPMENT (deemed fair (4.78 years) useful life impacts the fair value of plant value) and equipment

Cost per unit $100 to A significant increase or decrease in cost $1,600,000 per unit impacts the fair value of plant and ($11,718) equipment

BUILDINGS Depreciated Cost per square metre $100 to A significant increase or decrease in cost replacement cost $4,200 per square metre impacts the fair value approach ($2,165) of buildings

Useful life (remaining) 1 to 60 years A significant increase or decrease in useful (22.67 years) life impacts the fair value of buildings

118 YARRA VALLEY WATER ANNUAL REPORT 2018-19 8.1. INCOME TAX 8. STATUTORY OBLIGATIONS Yarra Valley Water is subject to the National Tax Equivalent Regime (NTER), which is administered by the Australian Introduction Taxation Office (ATO).The income tax expense for the period This section includes disclosures in relation to Yarra Valley is the expected tax payable on the current period’s taxable Water’s statutory obligations. income based on the national corporate income tax rate of Structure 30 per cent, adjusted by changes in deferred tax assets and 8.1 Income tax liabilities attributable to temporary differences between the 8.2 Environmental contributions tax bases of assets and liabilities and their carrying amounts 8.3 Goods and services tax in the financial statements, and to unused tax losses. The income tax expense for the financial year differs from the amount calculated on the net result. The differences are reconciled as follows:

2019 2018 INCOME TAX $’000 $’000 4 Statement of comprehensive income FINANCIAL REPORT Current income tax expense (paid or payable) 54,044 32,461 Adjustments for prior years 315 (1,372) Deferred income tax expense Temporary differences1 (6,003) 5,163 INCOME TAX EXPENSE REPORTED IN THE STATEMENT OF COMPREHENSIVE INCOME 48,356 36,252

Statement of changes in equity INCOME TAX REPORTED IN EQUITY 39,073 173

Tax reconciliation Net result before income tax expense 160,056 124,754 Tax at the Australian tax rate of 30% 48,017 37,426 Adjustments for income tax of previous years 315 (1,372) Non-deductible expenses 7 64 Non-deductible depreciation 7 13 Assessable income 10 121 INCOME TAX ON PROFIT BEFORE TAX 48,356 36,252

Income tax payable

CURRENT TAX PAYABLE 22,614 11,239

1 Included in 2019 deferred income tax expense, is $4.8 million due to transitional impacts of AASB 15 Revenue from Contracts with Customers.

Deferred tax assets and liabilities are recognised for asset or liability is recognised in relation to these temporary temporary differences at the tax rates expected to apply differences if they arose in a transaction that at the time when the assets are recovered or liabilities are settled, of the transaction did not affect either accounting profit or based on those tax rates which are enacted or substantially taxable profit or loss. Deferred tax assets are recognised for enacted. The relevant tax rates are applied to the cumulative deductible temporary differences and unused tax losses only amounts of deductible and taxable temporary differences to if it is probable that future taxable amounts will be available measure the deferred tax asset or liability. No deferred tax to utilise those temporary differences and losses.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 119 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

2019 2018 DEFERRED TAX ASSETS $’000 $’000

Amounts recognised in comprehensive operating statement Provisions 8,652 8,024 Buildings future deductible amounts 2,141 2,100 Contract liability1 1,802 - TOTAL DEFERRED TAX ASSETS 12,595 10,124

Movements Opening balance 1 July 10,124 9,477 Credited to the comprehensive operating statements 2,471 647 CLOSING BALANCE AT 30 JUNE 12,595 10,124

DEFERRED TAX LIABILITIES

Amounts recognised in comprehensive operating statement Accelerated depreciation for tax purposes (373,731) (374,228) Amounts recognised directly in equity Revaluation of infrastructure to fair value (220,126) (258,405) Revaluation of land to fair value (54,709) (54,709) Revaluation of buildings to fair value (588) (588) Defined benefit superannuation asset (1,702) (2,496) TOTAL DEFERRED TAX LIABILITIES (650,856) (690,426)

Movements Opening balance 1 July (690,426) (684,967) Credited / (debited) to the comprehensive operating statements 497 (5,632) Credited to the comprehensive income 39,073 173 CLOSING BALANCE AT 30 JUNE (650,856) (690,426)

NET DEFERRED TAX LIABILITIES (638,261) (680,302)

1 Contract liability deferred tax asset arising from transitional impacts of AASB 15 Revenue from Contracts with Customers. 8.2. ENVIRONMENTAL CONTRIBUTIONS The Water Industry (Environmental Contributions) Act 2004 seek to promote the sustainable management of water or (the Act) amended the Water Industry Act 1994 to provide for address water-related initiatives. environmental contributions to be paid by water authorities. Yarra Valley Water has a statutory obligation to pay an The Act establishes an obligation for authorities to pay into environmental contribution to the Department of Environment, a consolidated fund, annual contributions for the first period, Land, Water and Planning. This contribution is recognised as from 1 October 2004 to 30 June 2008 in accordance with the an expense during the reporting period as incurred. pre-established schedule of payments, which sets out the amounts payable by each corporation. The contribution period Yarra Valley Water has a commitment to pay an environmental has been extended until 30 June 2020. contribution to the Department of Environment, Land, Water and Planning of $42.86 million each year until 30 June 2020. The purpose of the environmental contribution is set out in the Act, and the funding may be used for financing initiatives that

120 YARRA VALLEY WATER ANNUAL REPORT 2018-19 ENVIRONMENTAL CONTRIBUTION COMMITMENTS AT BALANCE DATE 2019 2018 NOT PROVIDED FOR IN THE FINANCIAL STATEMENTS $’000 $’000

Payable Not later than one year 42,855 42,855 Later than one year but not later than five years - 42,855 TOTAL ENVIRONMENTAL CONTRIBUTION 42,855 85,710

8.3. GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of the 9. OTHER DISCLOSURES amount of GST, except where the amount of GST incurred is Introduction not recoverable from the ATO. In these circumstances, GST is recognised as part of the cost of acquisition of the asset or This section includes additional material disclosure required as part of an item of the expense. Receivables and payables by accounting standards or otherwise, for the understanding 4 of this financial report. in the Balance Sheet are shown inclusive of GST. The net FINANCIAL REPORT amount of GST receivable from or payable to the ATO is Structure included in the Balance Sheet as part of receivables or 9.1 Contributed equity payables, refer note 5.2. 9.2 Retained earnings Cash flows are presented in the Cash Flow Statement on 9.3 Asset revaluation surplus a gross basis except for the GST component of investing 9.4 Responsible persons and financing activities which are disclosed as operating 9.4.1 Remuneration of responsible persons cash flows. 9.5 Remuneration of executive officers 9.6 Related party 9.6.1 Significant transactions with government-related entities 9.6.2 Key management personnel 9.6.3 Transactions with key management personnel and other related parties 9.7 Ex-gratia expenditure 9.8 Economic dependency 9.9 Events subsequent to balance sheet date 9.10 Australian accounting standards issues that are not yet effective

YARRA VALLEY WATER ANNUAL REPORT 2018-19 121 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

9.1. CONTRIBUTED EQUITY Additions to net assets which have been designated as contributions by owners are recognised as contributed equity. Other transfers that are in the nature of contributions or distributions (capital repatriation) have been recognised in contributed equity.

2019 2018 CONTRIBUTED EQUITY $’000 $’000

Opening balance at 1 July 444,832 468,697 Less capital repatriation (23,865) (23,865) CLOSING BALANCE AT 30 JUNE 420,967 444,832

9.2. RETAINED EARNINGS 2019 2018 NOTE $’000 $’000

Opening balance at 1 July 325,174 276,722 Changes in accounting standards after tax - AASB 15 2.1.1 6,875 - Changes in accounting standards after tax - AASB 9 5.1 103 Net profit after tax 111,700 88,502 Defined benefit superannuation plan actuarial gain / (loss)1 3.2.3.2 (2,098) 2,213 Net deferred tax assets recognised through retained earnings 1 630 (663) Dividend paid (44,100) (41,600) CLOSING BALANCE AT 30 JUNE 398,284 325,174

1Defined benefit superannuation plan actuarial loss net of tax effect $1,468,000 (2018: $1,550,000 gain).

Dividend An obligation to pay a final dividend only arises after a formal determination is made by the Treasurer following consultation between the Board, the relevant portfolio Minister and the Treasurer.

9.3. ASSET REVALUATION SURPLUS The asset revaluation surplus is used to record changes in the carrying amount of fixed assets arising on revaluation. Any revaluation increment is credited to the asset revaluation surplus. A decrement would be debited to the surplus to the extent of the balance of prior increments. Any further decrements would be taken to the Statement of Comprehensive Income.

INFRASTRUCTURE LAND BUILDINGS TOTAL $’000 $’000 $’000 $’000

Balance at 1 July 2017 625,862 251,318 1,561 878,741 Revaluation, net of tax effect (22,922) 48,482 - 25,560 BALANCE AT 30 JUNE 2018 602,940 299,800 1,561 904,301 Revaluation, net of tax effect (89,311) - - (89,311)

BALANCE AT 30 JUNE 2019 513,629 299,800 1,561 814,990

122 YARRA VALLEY WATER ANNUAL REPORT 2018-19 9.4. RESPONSIBLE PERSONS 9.5. REMUNERATION OF EXECUTIVE OFFICERS The relevant Minister and directors of Yarra Valley Water are The number of executive officers, other than the Minister deemed to be responsible persons by Ministerial Direction and accountable officer, and their total remuneration during pursuant to the provisions of the Financial Management the period are shown in the table below. Total annualised Act 1994. employee equivalents provide a measure of full time equivalent executive officers over the reporting period. The responsible persons of Yarra Valley Water at any time during the financial year ended 30 June 2019 were: Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on Hon Lisa Neville MP Minister for Water behalf of the entity in exchange for services rendered, and is Sue Therese O’Connor Chair of the Board disclosed in the following categories: Robert Clive Skinner Deputy Chair of the Board Patrick John McCafferty Managing Director ›› Short-term employee benefits include amounts such as Victor John Perton Director wages, salaries, annual leave or sick leave that are usually Anita Michele Roper Director paid or payable on a regular basis, as well as allowances Eric Sjerp Director ›› Post-employment benefits include pensions and other Helen Lynette Thornton Director retirement benefits paid or payable on a discrete basis Karen Milward Director 4 when employment has ceased Victoria Fay Marles Director FINANCIAL REPORT ›› Other long-term benefits include long service leave, other long service benefit or deferred compensation 9.4.1. REMUNERATION OF RESPONSIBLE PERSONS The Minister’s remuneration and allowance are set by the ›› Termination benefits include termination of employment Parliamentary Salaries and Superannuation Act 1968 and is payments, such as a severance packages. reported within the Department of Parliamentary Services’ 2019 2018 Financial Report. Other relevant interests are declared in the $’000 $’000 Register of Members’ Interest which each member of the Short-term employee benefits 2,471 2,150 Parliament completes. Post-employment benefits 195 170 The number of responsible persons from Yarra Valley Water Other long-term employment benefits 58 52 whose remuneration was within the specified bands were 1 as follows: 2019 2018 Total amount ($’000) 2,724 2,372 NO. NO. Total number 8 9 $10,000 to $19,999 - 2 TOTAL ANNUALISED EMPLOYEE 8 8 EQUIVALENT (AEE)2 $30,000 to $39,999 - 2 $50,000 to $59,999 7 5 1 Bonuses were phased out of remuneration packages in 2018-19 and the above disclosure reflects current remuneration plus final bonus relating to $90,000 to $99,999 1 1 the previous financial year.

$430,000 to $439,999 - 1 2 AEE is based on the time fraction worked over the reporting period. $450,000 to $459,999 1 1 - 9.6. RELATED PARTY Total number 9 11 Related parties of Yarra Valley Water include: TOTAL AMOUNT ($’000) 922 908 ›› All key management personnel and their close family 1 Bonuses were phased out of remuneration packages in 2018-19 members, and personal business interests (controlled and the above disclosure reflects current remuneration plus final entities, joint ventures and entities they have significant bonus relating to the previous financial year. influence over) ›› All cabinet ministers and their close family members ›› All department and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements ›› Controlled business interests. All related party transactions have been entered into on an arm’s length basis.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 123 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

9.6.1. SIGNIFICANT TRANSACTIONS WITH Amounts recognised as revenue in the 2019 2018 GOVERNMENT-RELATED ENTITIES Statement of Comprehensive Income $’000 $’000

i. Department of Environment, Land, Water and Planning Administration fees for billing and 5,416 5,378 collecting drainage rates and Yarra Valley Water, under a normal commercial agency reimbursement of costs of arrangement, bills and collects rates on behalf of the supplementary council valuations Minister for Water relating to Parks Victoria services. Yarra Valley Water charges the Department of Environment, Amounts recognised as an Land, Water and Planning for the services it provides in expense in the Statement of billing and collecting rates, and on charges costs incurred Comprehensive Income regarding supplementary council valuations. Yarra Valley Bulk water and sewage wholesaler 522,119 503,305 Water is required to pay an environmental contribution to the charges expense (note 3.1) department. Cash amounts paid during the year Drainage billed to customer 86,704 85,758 Amounts recognised as revenue in the 2019 2018 Statement of Comprehensive Income $’000 $’000 AMOUNTS PAYABLE AT 30 JUNE 9,377 11,098

Administration fees for billing and collecting 3,506 3,472 rates and reimbursement of costs of supplementary council valuations iii. Treasury Corporation of Victoria Yarra Valley Water borrows from and invests with the Treasury Water efficiency program funding 539 468 Corporation of Victoria, refer note 6.1. The aggregate amount Amounts recognised as an expense in the of borrowings payable at reporting date and the amounts of Statement of Comprehensive Income interest expense included in the determination of profit before income tax is: Environmental contributions 29,880 42,855 2019 2018 Cash amounts paid during the year $’000 $’000

Parks Victoria levy billed to customers 66,356 64,803 Aggregate amount of borrowings 2,629,507 2,414,165 AMOUNTS PAYABLE AT 30 JUNE 1,445 1,605 Interest expense 96,811 96,211 AMOUNTS PAYABLE AT 30 JUNE 28,064 27,677

ii. Melbourne Water Corporation Yarra Valley Water transacts solely with the Melbourne Water iv. Department of Treasury and Finance Corporation for the purchase of drinking water and disposal Yarra Valley Water pays amounts to the State Government of sewage. Yarra Valley Water, under a normal commercial of Victoria, via the Department of Treasury and Finance. agency arrangement, bills and collects drainage rates and Amounts incurred were as follows: charges on behalf of the Melbourne Water Corporation. Yarra Valley Water charges the Melbourne Water Corporation for 2019 2018 the services it provides in billing and collecting drainage fees Cash payments $’000 $’000 on behalf of the Melbourne Water Corporation, and on charges Dividend paid 44,100 41,600 costs incurred regarding supplementary council valuations. Capital repatriation 23,865 23,865

Amounts recognised as revenue in the Statement of Comprehensive Income

Financial accommodation levy 35,182 33,255 Income tax equivalent 48,356 36,252

AMOUNTS PAYABLE AT 30 JUNE 31,602 19,774

124 YARRA VALLEY WATER ANNUAL REPORT 2018-19 v. Department of Health and Human Services certificates (LGCs) from the facility. The PPA contains Customers of Yarra Valley Water who hold either a Pension certain conditions precedent with the targeted commercial Concession Card, a Gold Repatriation Health Care Card for operation date of 1 October 2019. At 30 June 2019, the All Conditions or a Health Care Card are entitled to pay a conditions precedent in the PPA are not complete, and ZEW concessionary amount instead of the full balance outstanding does not have a contractual obligation for the CFD derivative. on their accounts. When a customer pays this lesser amount, Therefore, there are no transactions to recognise as at 30 the difference is billed to and paid by the Department of June 2019. Health and Human Services. Upon satisfying the conditions precedent, the CFD derivative 2019 2018 will be recognised as a financial liability and measured at its $’000 $’000 fair value. Subsequent changes in the derivate’s fair value will Concession amounts billed during the year 49,229 49,581 be recognised in profit and loss. AMOUNTS PAYABLE AT 30 JUNE 3,533 4,111 The members’ agreement specifies that Yarra Valley Water must make a loan available to ZEW amounting to $124,726.37. The loan provided to ZEW meets the definition of a financial vi. Power Purchase Agreement asset as it gives rise to a contractual right for Yarra Valley Yarra Valley Water is one of 13 water corporation members of Water to receive cash from ZEW at the end of the loan term. Zero Emissions Water (ZEW) Limited, a public company limited 4 Once the facility is operational, the financial impact of the FINANCIAL REPORT by guarantee. ZEW’s objectives are to acquire electricity, members’ agreement with ZEW is expected to increase contracts for difference and other derivative products in revenue, expenses, and recognition of LGCs as intangible relation to electricity, and/or green products from an energy assets or assets held for sale. and emissions reduction facility in Victoria and in turn supply these products to its members. This vehicle provides the vii. Other State Government of Victoria related parties opportunity for water corporation members to collaboratively During the year Yarra Valley Water supported Thriving promote energy and emissions reduction initiatives in Victoria Communities Partnership (TCP), a cross-sector collaboration and to reduce emissions. with the goal that everybody has fair access to the modern On 30 October 2018, ZEW and the water corporations entered essential services they need to thrive in contemporary into a members’ agreement to regulate their rights and Australia. Pat McCafferty acts as a director and Yarra Valley obligations as members of ZEW and as participants in the Water has supported TCP with their set up and administration. project. The members’ agreement establishes the operating At 30 June 2018, Yarra Valley Water had a liability to TCP activities of ZEW and the decision-making responsibilities of amounting to $358,040. ZEW’s directors. Water and sewerage services were provided to wholly owned Under the members' agreement, Yarra Valley Water's liability State Government of Victoria entities for properties within as a member is limited to $10 in the event of a winding up. Yarra Valley Water’s district under normal commercial terms and conditions. As required by Australian accounting standards, Yarra Valley Water has assessed the nature of its relationship with ZEW, All other transactions with State Government of Victoria and concluded that it does not have control, joint control or related parties were made on normal commercial terms significant influence over ZEW. Yarra Valley Water will account and conditions and have not been considered material for its investment in ZEW as a financial instrument within the for disclosure. scope of AASB 9 Financial Instruments. ZEW is a related party of Yarra Valley Water. On 30 October 2018, ZEW entered into an 11-year power purchasing agreement (PPA) with a solar farm energy generator. In relation to the PPA, ZEW will act as a central intermediary between the energy generator and the water corporations. The PPA contains a contract for difference (CFD) payment mechanism in respect of electricity generated by the facility and the sale and supply of large-scale generation

YARRA VALLEY WATER ANNUAL REPORT 2018-19 125 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 CONTINUED

9.6.2. KEY MANAGEMENT PERSONNEL 9.7. EX-GRATIA EXPENSES Key management personnel are those persons having 2019 2018 EX-GRATIA EXPENDITURE $’000 $’000 authority and responsibility for planning, directing and Hardship write offs for customers in the controlling the activities of Yarra Valley Water, directly or 1,680 1,615 indirectly, comprising independent Directors and the Managing Arrange and Save Program Director. Key management personnel (as defined in AASB 124 Write offs for disconnected customer 2,055 2,598 Related Party Disclosures) includes the Portfolio Minister and accounts greater than 180 days all directors listed under responsible persons in note 9.4 who Bankruptcies and liquidations 57 36 have the authority and responsibility for planning, directing and controlling the activities of Yarra Valley Water directly or Minimum account write offs 123 102 indirectly, during the financial year. Deferred property debt forgiveness 5,000 -

The compensation detailed below excludes the salaries TOTAL EX-GRATIA EXPENDITURE 8,915 4,351 and benefits the Portfolio Minister receives. The Minister’s remuneration and allowances are set by the Parliamentary All ex-gratia expenses above form part of bad and doubtful debts expense, Salaries and Superannuation Act 1968 and is reported within refer note 3.1. the Department of Parliamentary Services’ financial report. 2019 2018 9.8. ECONOMIC DEPENDENCY $’000 $’000 The normal trading activities of Yarra Valley Water are Short-term employee benefits 833 821 significantly dependent on the provision of finance from the Post-employment benefits 79 77 Treasury Corporation of Victoria. Other long-term employment benefits 10 10 9.9. EVENTS SUBSEQUENT TO BALANCE TOTAL AMOUNT ($’000)1 922 908 SHEET DATE Total number 9 11 Since 30 June 2019 to the date of this report, no matter or TOTAL ANNUALISED EMPLOYEE circumstance has arisen that, in the opinion of the directors, 9 9 EQUIVALENT (AEE)2 has significantly affected or may significantly affect the operations of Yarra Valley Water, the results of those 1 Bonuses were phased out of remuneration packages in 2018-19 and the operations, or the state of affairs of Yarra Valley Water above disclosure reflects current remuneration plus final bonus relating to the previous financial year. in future financial years.

2 Annualised employee equivalent (AEE) is based on the time fraction worked over the reporting period.

9.6.3.Transactions with key management personnel and other related parties All key management personnel and other related party transactions have been considered immaterial for disclosure. In this context, transactions are only disclosed when they are considered necessary to draw attention to the possibility that Yarra Valley Water’s Balance Sheet and Statement of Comprehensive Income may have been affected by the existence of related parties, and by transactions and outstanding balances, including commitment, with such parties.

126 YARRA VALLEY WATER ANNUAL REPORT 2018-19 9.10.AUSTRALIAN ACCOUNTING STANDARDS ISSUED THAT ARE NOT YET EFFECTIVE

STANDARD / SUMMARY APPLICABLE FOR ANNUAL IMPACT ON YARRA VALLEY WATE'SR INTERPRETATION REPORTING PERIODS FINANCIAL REPORT BEGINNING ON OR AFTER

AASB 16 Leases The key changes 1 January 2019 The assessment has indicated that most operating introduced by AASB leases, except for short-term and low-value leases will 16 include the come on to the balance sheet and will be recognised as recognition of most right of use assets with a corresponding lease liability. operating leases In the operating statement, the operating lease expense (which are currently will be replaced by depreciation expenses of the asset not recognised) on and an interest charge. the balance sheet. There will be no change for lessors as the classification of operating and finance leases remains unchanged. The impact will be immaterial given the small number of leases and their value currently held by Yarra Valley 4 Water (refer to note 3.3). FINANCIAL REPORT We anticipate that the change will result in an increase in assets and liabilities of less than $100,000 with the difference recognised in equity at 1 July 2019. There will be no impact on our cash flow statement in future periods as interest is treated as an operating activity. The statement of comprehensive income will be impacted by the increase in depreciation expense for future periods of less than $100,000.

In addition to the new standard above, the Australian Accounting Standards Board has issued a list of amending standards. In general, these amending standards include editorial and reference changes that are expected to have insignificant impacts on Yarra Valley Water’s financial report. There are no other standards that are not yet effective that are expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 127 STATUTORY CERTIFICATION

We certify that the attached Financial Statements of Yarra Valley Water Corporation have been prepared in accordance with Standing Directions 5.2 of the Assistant Treasurer’s Standing Directions issued pursuant to the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements. In our opinion, the information set out in the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and accompanying notes presents fairly the financial transactions during the year ended 30 June 2019 and financial position of Yarra Valley Water at 30 June 2019. At the time of signing, we are not aware of any circumstance which would render any particulars included in the Financial Statements to be misleading or inaccurate. We authorise the attached Financial Statements for issue dated at Melbourne on 21 August 2019.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

Natalie Foeng Chief Financial Officer

128 YARRA VALLEY WATER ANNUAL REPORT 2018-19 4 FINANCIAL REPORT

YARRA VALLEY WATER ANNUAL REPORT 2018-19 129 AUDITOR-GENERAL'S AUDIT REPORT

Independent Auditor’s Report To the Board of the Yarra Valley Water Corporation

pinion I have audited the financial report of the Yarra Valley Water Corporation (the corporation) which comprises the:

• balance sheet as at 30 June 2019 • statement of comprehensive income for the year then ended • statement of changes in equity for the year then ended • cash flow statement for the year then ended • notes to the financial statements, including significant accounting policies • statutory certification. In my opinion, the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2019 and their financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

sis or I have conducted my audit in accordance with the Audit Act 1994 which incorporates the pinion Australian Auditing Standards. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report. My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Victoria. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

e udit Key audit matters are those matters that, in my professional judgement, were of most tters significance in my audit of the financial report of the current period. These matters were addressed in the context of my audit of the financial report as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters.

130 YARRA VALLEY WATER ANNUAL REPORT 2018-19

e udit tter o I ddressed te tter

Reenues ro serie nd use res re deried ro ope I iin sste it seer inputs inudin etern serie proiders ot 11 – Reenue fro serice and usae chares Reenue ro serie nd use res My key procedures included: iion  testing the operating effectiveness of key application I considered this to be a key audit matter because: controls and key manual controls in the billing system  revenue recognised is financially significant to the  obtaining an understanding of management's corporation approach to estimating the value of unbilled water  revenue is generated by a complex IT system that and sewerage services revenue at year end and uses several inputs and business rules assessing the reasonableness of key assumptions and  revenue includes a significant accrual for unbilled inputs water and sewerage services at year end that  substantive analytical procedures  4 involves a higher degree of estimation reviewing the adequacy of the revenue recognition FINANCIAL REPORT uncertainty and measurement policies  a key input, customer water volume  assessing the adequacy of financial statement consumption, relies on external service providers disclosures against the requirements of Australian to conduct meter readings. Accounting Standards. e ir ue estite o inrstruture ssets is deried ro n inoesed ution ppro tt uses ope disounted so ode ode) Note 4 – Key assets available to support output delivery ir ue estite o inrstruture ssets My key procedures included: iion  obtaining an understanding of management's I considered this to be a key audit matter because: approach to estimating the fair value of infrastructure  the infrastructure assets are financially significant  assessing the competence and capability of to the corporation management's expert engaged to assist with the  the fair value estimate relies on management’s valuation process use of an external valuation expert  engaging a subject matter expert to assist us in  the DCF model is highly complex and involves obtaining sufficient appropriate audit evidence, significant management judgements, including: underpinned by various subjective assumptions the appropriateness of using an income-based  the calculated value is sensitive to small changes valuation approach in key assumptions used in the DCF model the reasonableness and consistency of all the  the model's forecast period is long, and includes assumptions used in the DCF model a terminal value, which increases the difficulty in identify any changes to the DCF model and/or accurately estimating the fair value assumptions.  applicable accounting standard AASB 13 Fair the reasonableness of all inputs used in the model, Value Measurement (AASB 13) and the Assistant with specific reference to underlying data and Treasurer issued Financial Reporting Direction supporting documentation 103H Non-financial physical assets (FRD 103H) the DCF model’s computational accuracy both require extensive financial report the appropriateness of all infrastructure asset disclosures. related financial report disclosures with regard to AASB 13 and FRD 103H, including the significant observable and unobservable inputs utilised in the model and the sensitivity analysis  evaluating our subject matter expert's workings and concluding the work was adequate for the purposes of our audit.

YARRA VALLEY WATER ANNUAL REPORT 2018-19 131

’s The Board of the corporation is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Financial Manaement ct 4 and for such internal control as the Board determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Board is responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.

Auditor’s As required by the udit ct 4, my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

• identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the corporation’s internal control • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board • conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the corporation’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the corporation to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

3

132 YARRA VALLEY WATER ANNUAL REPORT 2018-19

Auditor’s communicate with the oard regarding, among other matters, the planned scope and timing of rsosiiitis the audit and significant audit findings, including any significant deficiencies in internal control or t udit that identify during my audit. o t ii rom the matters communicated with the oard, determine those matters that were of most rort significance in the audit of the financial report of the current period and are therefore ey audit otiud matters. describe these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in etremely rare circumstances, determine that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be epected to outweigh the public interest benefits of such communication.

4 FINANCIAL REPORT R aul artin ugust as deleate for the uditor-eneral of Victoria

5

134 YARRA VALLEY WATER ANNUAL REPORT 2018-19 DISCLOSURE INDEX

YARRA VALLEY WATER ANNUAL REPORT 2018-19 135 DISCLOSURE INDEX Yarra Valley Water’s 2018-19 Annual Report is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of Yarra Valley Water’s compliance with statutory disclosure requirements.

LEGISLATION DISCLOSURE REQUIREMENT PAGE Report of Operations and Additional Information

Charter and purpose FRD 22H Manner of establishment and the relevant Ministers 7 FRD 22H Purpose, functions, powers and duties cover, 1-2 & 4-39 FRD 22H Key initiatives and projects 16-35 FRD 22H Nature and range of services provided cover, 1-2 & 10-13

Management and structure FRD 22H Organisational structure 42

Financial and other information FRD 10A Disclosure index 134-135 FRD 22H Five year summary of financial results 38-39 FRD 22H Employment and conduct principles 28-29 & 50-53 FRD 22H Occupational health and safety policy 32-35 & 53 FRD 22H Summary of the financial results for the year 36-39 FRD 22H Current financial year review 37 FRD 22H Significant changes in financial position during the year 84 FRD 22H Major changes or factors affecting performance 16-35 FRD 22H Subsequent events 84 FRD 22H Application and operation of Freedom of Information Act 1982 55-56 FRD 22H Compliance with building and maintenance provisions of Building Act 1993 56 FRD 22H Statement on Competitive Neutrality Policy 57 FRD 22H Application and operation of the Protected Disclosure Act 2012 55 FRD 22H Details of consultancies over $10 000 55 FRD 22H Details of consultancies under $10 000 55 FRD 22H Disclosure of government advertising expenditure 55 FRD 22H Disclosure of ICT expenditure 55 FRD 22H Statement of availability of other information 57 FRD 22H Operational and budgetary objectives and performance against objectives 37 & 76-77 FRD 22H Environmental performance 68-73 & 78 FRD 22H Workforce inclusion policy 29 & 51-53 FRD 25D Local Jobs First 56 FRD 27C Presentation and reporting of performance information 76-78 FRD 29C Workforce data disclosures 54 FRD 30D Standard requirements for the publication of annual reports entire report

136 YARRA VALLEY WATER ANNUAL REPORT 2018-19 LEGISLATION DISCLOSURE REQUIREMENT PAGE

Ministerial reporting directions MRD 01 Performance reporting 76-78 MRD 02 Water consumption and drought response 59-60 MRD 03 Environmental and social sustainability reporting 58-59, 62-65 & 73-74 MRD 04 Disclosure of information on bulk entitlement 69-70 MRD 05 Annual reporting of major non-residential water users 61 MRD 06 Greenhouse gas and energy reporting 71-72 MRD 07 Disclosure of information Climate change 68 Customer and community outcomes 62-65 Water for aboriginal cultural, spiritual and economic values 66-67 Resilient and liveable cities and towns 58-59 Leadership and culture 46, 48-53 & 66-67 Financial sustainability 63

Compliance attestation and declaration SD 5.1.4 Attestation for compliance with Ministerial standing direction 57 SD 5.2.3 Declaration in report of operations 79

Financial statements

Declaration SD 5.2.2 Declaration in financial statements 128

Other requirements under Standing Directions 5.2 SD 5.2.1(a) Compliance with Australian Accounting Standards and other authoritative pronouncements 128 SD 5.2.1(a) Compliance with Ministerial directions 128

Other disclosures as required by FRDs in notes to the financial statements FRD 03A Accounting for dividends 84 & 122 5 DISCLOSURE INDEX FRD 07B Early adoption of authoritative accounting pronouncements 90 FRD 11A Disclosure of ex gratia expenses 126 FRD 17B Wage inflation and discount rates for employee benefits 96-97 FRD 21C Disclosures of responsible persons, executive officers in the financial report 123 FRD 100A Financial reporting directions – framework entire report FRD 103H Non financial physical assets 109 FRD 105B Borrowings costs 111 FRD 106A Impairment of assets 103-106 FRD 109A Intangible assets 105-106 FRD 110A Cash flow statements 89 & 112 FRD 112D Defined benefit superannuation obligations 99 FRD 114C Financial instruments 113 FRD 119A Transfers through contributed capital 112 FRD 120M Accounting and reporting pronouncements 127

Legislation Water Act 1989 Water Industry Act 1994 UN GLOBAL COMPACT INDEX Freedom of Information Act 1982 Please refer to our report, Planet, People, Prosperity, for Building Act 1993 information on how our policies, programs and actions Protected Disclosure Act 2012 align with the 10 principles of the UN Global Compact Local Jobs First Act 2003 and the Sustainable Development Goals (SDGs). Financial Management Act 1994 Public Administration Act 2004 Environment Protection Act 1970 (Vic)

YARRA VALLEY WATER ANNUAL REPORT 2018-19 137 Yarra Valley Water ABN 93 066 902 501 Lucknow Street Mitcham Victoria 3132 DX 13204 Telephone – 03 9872 1699 Fax – 03 9872 1353 yvw.com.au

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