Annual Report

annual report 2005 - 2006 The Hon Michael Costa MLC The Hon John Watkins MP Treasurer, Minister for Infrastructure, Deputy Premier, Minister for Transport, and Minister for the Hunter Minister for Finance Level 31 Governor Macquarie Tower Level 30 Governor Macquarie Tower 1 Farrer Place 1 Farrer Place SYDNEY NSW 2000 SYDNEY NSW 2000

Dear Ministers

We present State Water Corporation’s 2005/06 Annual Report, which outlines the performance of the Corporation during the past ﬁ nancial year.

This report has been prepared for presentation to the New South Wales Parliament, in accordance with the Annual Reports (Statutory Bodies) Act 1984 and the State Owned Corporations Act 1989. It includes ﬁ nancial statements prepared in accordance with the Public Finance and Audit Act 1983 and a report on State Water’s compliance with the Freedom of Information Act 1989.

We regret that completion of this Annual Report has been delayed beyond the approved submission date of 12 December 2006.

The transition of State Water from a business unit within the Department of Energy, Utilities and Sustainability, to a stand-alone State Owned Corporation, has been marked by ﬁ nancial reporting difﬁ culties.

State Water experienced signifi cant delays in fi nalising the 2004/05 accounts, largely resulting from start-up diffi culties.

In addition to the fl ow-on effects of delays in fi nalising the 2004/05 accounts State Water has also experienced teething problems with implementation of new fi nancial systems and the new international accounting standards. These issues have delayed the completion of work papers and reconciliations.

The Independent Audit Report for the 2005/06 accounts was signed by the Auditor-General’s Ofﬁ ce on 12 September 2007, allowing this Annual Report to be published.

Yours sincerely,

AG (Tony) Wright Geoff Borneman Chairman A/Chief Executive Ofﬁ cer

Cover image: The ﬁ rst major dam built for irrigation in NSW, Burrinjuck Dam is situated 60km from Yass on the Murrumbidgee River. The name Burrinjuck comes from the Aboriginal words ‘Booren Yiack’, meaning ‘precipitous mountain’.

Burrinjuck Dam was originally built in 1928 and has a storage capacity of 1,026,000ML, almost twice the volume of water in Sydney Harbour. It is a mass concrete gravity dam, which holds back stored water by using its own weight to withstand the pressure from the water.

About 250,000 tourists sample the delights of the dam and its surrounds each year. This ﬁ gure is expected to increase signiﬁ cantly in 2007 as the year marks the centenary of the Burrinjuck to Goondah railway, with many celebrations expected to take place.

Photographic credits: Vince Bucello, Stuart Humphreys and Suzie Gaynor. 2 State Water 05-06 Annual Report table of contents

Our Area of Operations 4 Our Vision, Values and Critical Success Factors 7 Report from Chairman and CEO 8 Our Board 14 Our Senior Staff 19 Corporate Plan 2005/06 20 Excellent Customer Service 24 Best Practice Operations 38 Strategic Asset Management and Investment 50 Skilled and Dedicated People 60 Proﬁ table Business Growth 66 Enhanced Riverine Environment 72 Supportive Stakeholders 80 Corporate Governance 86 Financial Statements 98 Appendix 1 - Code of Conduct 137 Glossary 142 Index 143 Ofﬁ ce Locations 147

State Water 05-06 Annual Report 3 our area of operations

State Water’s purpose is to deliver water for regional and rural NSW, and we are committed to a presence in these communities. Our people are located in the country towns shown on this map and at Parramatta, as well as at each of the dams and locks shown on the map. We provide bulk water supplies in the 12 regulated river valleys in NSW.

= Area Office = Town / City 0 40 80 120160 200 = Weir = Dam kilometres = Area not covered by State Water

4 State Water 05-06 Annual Report who is state water?

State Water is NSW’s rural bulk water delivery delivers treated water supplies as well as raw water in business, annually delivering 5,500 gigalitres of water the Oberon and Lithgow area to towns and the power to regional NSW on average, along 7,000 kilometres industry. of rivers. In accordance with Water Sharing Plans Our Area of Operations is administered in four (WSP), we also deliver on average, about 9,000 Customer Service Areas: North, South, Central and gigalitres of water for the environment. Coastal, each with a Customer Service Manager We manage and operate 20 dams and more than 280 who leads assets and operations teams to provide weirs and regulators to deliver water for town water customer service, day-to-day river operations, asset supplies, industry, irrigation, stock and domestic use, operation and maintenance. riparian and environmental fl ows. Our head offi ce in Dubbo is our centre for business We monitor water usage, manage customer accounts, and strategic planning, strategic water information, bill and collect bulk water charges. Our local Customer fi nance, accounts, payroll and corporate services. Service Offi cers work directly with water users in The Strategic Asset Services, Technical Services, managing water accounts and supporting them to and Strategic Policy and Compliance Branches are improve water delivery effi ciency. located in Parramatta, where they work closely with major stakeholders and suppliers to provide statewide We employ more than 300 people who operate from support to our regional teams. 44 offi ces throughout NSW and work closely with water users and Customer Service Committees (CSCs) to set asset management priorities and improve water delivery effi ciencies in regulated river valleys. The Fish River Water Supply (FRWS) scheme

Windamere Intake Tower

State Water 05-06 Annual Report 5 What We Do valley, to determine how much water goes to users and how much to the environment. WSP have been On regulated river systems in NSW, we: gazetted in seven regulated river valleys; Gwydir, Deliver allocated water to customers and the Namoi, Macquarie, Lachlan, Murrumbidgee, Murray- environment Lower Darling and the Hunter. Deliver environmental ﬂ ows, according to the State Water operates in accordance with these WSP Water Sharing Plans (WSPs) and delivers water to customers and the environment. Compile and analyse water orders Based on the WSP rules, the available water Manage customer water accounts resources are shared throughout the year, allowing Measure and monitor water usage water for the environment and for consumptive use. Customers’ water accounts are credited with their Coordinate Water Allocation Assignments shares of available water and, as they use their water, (Temporary Transfers) their usage is debited from their accounts. Manage supply and delivery restrictions Issue bulk water bills and accounts Ensure compliance with metering standards Bulk Water Pricing Take action against overuse of water allocations Water prices are set by the Independent Regulatory and Pricing Tribunal (IPART) and cover State Suspend customer accounts for non-payment Water’s costs of delivering water and maintaining and operating infrastructure. Bulk water prices are not based on the value of water, but based on the Water Resource Management recovery of costs incurred in delivering water. In NSW, the regulator and policy maker for water resource management is the Department of Natural Resources (DNR). It develops natural resource policy Ministerial Responsibility frameworks, strategies and plans related to water State Water has two voting shareholders, the management, water quality, salinity, soils, vegetation Treasurer and the Minister for Finance, with whom we and environmental sustainability. DNR is accountable enter into a Statement of Corporate Intent. for WSPs which deﬁ ne the rules for sharing the water Our Operating Licence is issued by our Portfolio resources of each regulated river valley, between Minister, the Minister for Water. consumptive users and the environment. The WSPs contain the sharing rules for each river

6 State Water 05-06 Annual Report Our Vision To be Australia’s leading water business.

Our Purpose To efﬁ ciently deliver water and services to customers, the community and the environment, to improve life and the economy.

Critical Success Factors Excellent Customer Service Great People Best Practice Operations Supportive Stakeholders Enhanced Environment Strategic Asset Investment Proﬁ table Business Growth Sound Financial Performance

Values We operate on the basis of our corporate values: Accountability - We are responsible for our actions, behaviours and outcomes. Customer Service - We meet our customers’ needs and strive to exceed their expectations. Environment - We respect and enhance the environment. Expertise - We apply our skills, competency and experience to deliver effective and innovative solutions. Integrity and Respect - We are honest, truthful and respectful in all that we do. People - We support, develop and motivate each other, professionally and personally. Safety - We put safety above time, cost, productivity and employment. Shareholder Value - We deliver consistent returns and long-term growth.

In our relationships with each other we aspire to: Be truthful Trust each other Coach unselﬁ shly Be open to new ideas Be innovative and supportive Give credit where it’s due Put the interests of others ﬁ rst Have pride in State Water

Staff and Directors were involved in an extensive corporate planning process during early 2006. This process included reviewing State Water’s Vision, Mission and Values. The above statements were adopted by the Board for implementation with the 2006/09 Corporate Plan.

State Water 05-06 Annual Report 7 a message from the Chairman of the Board and the Chief Executive Offi cer To our shareholders and as is strategic investment to improve asset reliability, productivity, and the necessary development of customers commercial systems to facilitate the transformation In our second year operating as a corporatised of the former branch of a Government Agency to business, the continuing drought further tested be a successful stand-alone business. External employees, assets and operating systems. With benchmarking during 2005/06 indicated that State slightly more water available than last year, State Water is toward the low end of the utility cost curve. Water put special effort into communicating water We aim to control costs in coming years through wise availability and implementing the Water Sharing Plans investment in business productivity measures. (WSPs). A further part of the effi ciency quest is our internal Improving service to customers culture of maximising delivery of all available water within WSP limits. In 2005/06 we delivered 100% Our customers rightly make two primary service of ordered available water and minimised water demands of State Water Corporation: clear and rapid losses in conveyance by adopting pulsing of fl ows, in information about fl ows and water availability; and cooperation with our customers. delivery, on time, of a maximum of available water. Strong fi nancial management in a year of With initial water storage at only 30% of capacity, and a welcome 80% of average runoff into storages, we increased sales managed to deliver 83% of average water volume, Overall revenue totalled $84.52 million, an increase and fi nish the year with 36% of capacity in our of 63% on our initial year. This included a windfall storages. At 4,575GL, the volume of water delivered positive net movement of $5.78 million in the defi ned was a substantial increase on last year’s 3,308GL, superannuation reserve position, which compared at 61% of average. Those valleys with WSPs used with a net negative movement of $1.61 million in the an aggregate 56% of full WSP general security previous year. entitlement. With somewhat more water available for sale, along Becoming a more effi cient utility business with a full year of operation of the Fish River Water Supply Scheme, water delivery revenue was up by The Independent Pricing and Regulatory Tribunal 18% to $35.96 million. Grants and subsidies from (IPART) is responsible for setting the price of water the NSW Government of $25 million were $14.5 and State Water has limited infl uence over the amount million higher than the 2005 year. This included for of water available for sale. State Water therefore the fi rst time a contribution of $7.9 million as an acts in other directions to add value to the business. operating subsidy and a further $17.1 million as the Controlling costs is an important part of this agenda, 8 State Water 05-06 Annual Report Government’s agreed share of meeting the community in managing water resources and environment and costs of our operations and the fi nancing costs of sets out obligations of the respective parties. upgrading major storage dams to pre-1997 dam safety compliance standards. The operating subsidy will be Working with Customers eliminated through IPART approved bulk water price The strong emphasis on working with customers was increases and effi ciency measures. continued through the nine valley-bases Customer Service Committees. The committees proved Operating expenses increased by more than 38% to especially valuable in consulting on start-up issues. $71.56 million. This included a $4.08 million increase in borrowing costs, while payments of $7.34 million were made for the fi rst time to the NSW Government People and safety for the share of water revenue attributed to the All employees contributed to the establishment of operations of the Murray-Darling Basin Commission. a set of shared values through a series of regional workshops this year. The endorsed values guide An operating profi t (before tax) result of $12.96 million employees at all levels in responsibly conducting was achieved – up from just $1.76 million in our fi rst business activities and making daily decisions. year of operations. This included a $7.38 million turnaround in our defi ned superannuation reserve Increased focus on the critical importance of position over the 12-month period. occupational health and safety helped to cut the lost time injury rate by 10.6% to 16.8 injuries per million Protecting the environment hours. This is an important step towards the Working Together targets for reduction of costs and incidents. The continuing drought emphasised the need for water releases from storages specifi cally to protect riverine We take the opportunity to thank the Shareholding ecosystem health. Such releases are determined by Ministers and Portfolio Minister for their support during the Department of Natural Resources, in consultation the second year of start-up. Thanks also to our Board with the Department of Environment and Conservation colleagues for their contribution to the development of and State Water Corporation. The results of these the business during the past year. releases included several successful bird breeding events. The installation of new fi sh ladders in some To our valued employees, thank you for the level of river systems is also starting to deliver results, with commitment and dedication you have shown and the Fisheries recording increases in fi sh passage. support you have provided to customers. We will continue to strive to work together to maximise the Effective asset stewardship value of every drop of available water. With a mature asset base of large dams and weirs (with a replacement value of some $2.8 billion), asset reliability and asset safety in extreme conditions are vitally important considerations. Planned maintenance and surveillance was completed as scheduled this AG (Tony) Wright year, and confi rmed through formal audit. Chairman

The Board commenced a review of State Water’s dam safety compliance program, with a view to determining the most cost-effective program to achieve safety compliance across the dam portfolio. Meanwhile, Geoff Borneman planning and investigation continued (or commenced) A/Chief Executive Ofﬁ cer for the upgrading of Keepit, Chaffey, Split Rock, Blowering, Copeton, Burrendong and Wyangala dams.

Working with stakeholders Memoranda of Understanding were completed with the NSW Departments of Environment and Conservation, Primary Industries and Natural Resources. Each provides the basis for cooperation

State Water 05-06 Annual Report 9 licences and water allocations Water licences are issued by the Department of Natural Resource (DNR) for a right to a certain ‘share’ of water.

There are two types of licence – High Security (guaranteed when water is available, eg local government for town water supply) and General Security (not guaranteed, eg irrigation licences).

Licences state a share component in megalitres or shares that relate to the amount of water available to licences during the year.

At the start of each “water year” in July, the DNR determines how much water is available for use in each valley.

All essential requirements (in most cases, two years’ supplies for towns and other high security requirements) are reserved ﬁ rst. Any water remaining is then allocated to water users as a percentage of entitlement. This percentage is known as the Available Water Determination (AWD). It used to be called the allocation.

The AWD is the volume of water available to licence holders for that year. For example, if a licence is for 1,000 megalitres and the DNR announces a 0.75ML/ share AWD, the licensee can only use 750 megalitres during the year. Additional AWDs are announced during the year if more water becomes available.

10 State Water 05-06 Annual Report operating licence performance State Water delivers services under an Operating Licence granted by the NSW Government. A copy of State Water’s Operating Licence is available on our website. The Licence sets out conditions relating to the following matters: State Water’s responsibilities Functions authorised by the Licence Customers and Community Engagement Complaints and Disputes Handling Asset Management Water Delivery The Environment Performance Indicators Pricing Licence Authorisation and Area of Operations Operation Audits by IPART

The following table summarises State Water’s performance relative to the requirements of the Operating Licence.

2005/06 Operating Licence Performance

Issue Requirement Achievement Memoranda of Use best endeavours to establish MoU with DEC signed 2 November 2005. MoU with understanding MoU with DEC, DNR and DPI DPI signed 23 June 2006. (MoU) by 1 October 2005, make MoU MoU with DNR signed 28 July 2006. MoU available available to the public on State Water’s internet site. (See page 81 for further details)

State Water Exercise functions under the No known instances of non-compliance. functions Operating Licence consistently authorised by the with Water Act, Water Licence Management Act, the Licence and relevant Water Management Plans

Community Establish and regularly consult First meeting held in July 2006 and next meeting Consultative with CCC scheduled by December 2006. (See page 25 for Committee further details) (CCC) Customer Establish and regularly consult Regular meetings of CSCs have taken place in all Service with CSCs valleys. (See page 25 for further details) Committees (CSCs)

State Water 05-06 Annual Report 11 Issue Requirement Achievement Customer Establish Charter in consultation Charter established on 28 January 2005 and is Service Charter with CSCs. Make charter available available to the public on State Water’s internet site. to the public (See page 29 for further details) Fish River Establish and regularly consult Regular meetings of the Customer Council have Customer with Customer Council occurred. Council Code of Practice Develop a Code of Practice and a Adopted by the Board in February 2005. Code and Procedure Procedure for Debt Management available to the public on State Water’s internet site. for Debt by 1 July 2005. Management Make code available to the public. Internal Establish procedure by 31 October Board endorsed framework in March 2005 and Complaints 2005. In consultation with IPART polices and procedures in July 2006. State Water Handling determine complaint categories by advised IPART of complaint categories in January Procedure 31 October 2005. 2006. IPART postponed its decision on the categories until completion of the proposed audit of State Water late 2006.

External Dispute Establish an External Dispute State Water became a member of the Energy and Resolution Resolution Scheme by 1 Water Ombudsman of NSW (EWON) from 1 January Scheme September 2005 which is 2006. State Water will include information on EWON consistent with requirements in the pamphlet it is developing on Complaints specifi ed in the Operating Licence. Handling and Dispute Resolution. Make a pamphlet regarding the scheme available to the public. Water Delivery Take reasonably practicable steps Water conservation and loss minimisation. to conserve water and minimise State Water commenced drafting new operational losses. Endeavour to ensure effi ciency performance indicators in 2005/06. timely delivery of water. Develop State Water is working with CSCs to propose drought management plans when improvements in water ordering procedures required. and compliance actions to improve operational effi ciencies. The new performance indicators include water conservation and loss minimisation measures. Timely delivery of water. State Water received notifi cation of six order days of non-delivery in 2005/06. Once valley accounted for four of these notifi cations (0.04% of all deliveries in this valley). Also, there were no material departures from the requirements of Water Sharing Plans. Improving water ordering procedures is expected to improve both water effi ciency and timeliness of water delivery. Drought management plans. State Water has developed drought management plans when required. The severe water shortage continued in the Lachlan Valley where the Water Sharing Plan rules have been suspended since introduction in July 2004. State Water developed amendments to the drought contingency plan, with customers and DNR, to respond to the variable water supply situation during the year.

12 State Water 05-06 Annual Report Issue Requirement Achievement Meter accuracy Submit meter accuracy State Water and DNR have agreed NSW Water performance performance measures to IPART Extraction Monitoring Standards for metering of their measures for approval by 31 March 2006 customers, but have recognised these will need to and maintain records to measure be modifi ed to maintain alignment with any national performance against these standards developed under the National Water measures. Report annually to initiative. State Water submitted metering accuracy IPART on action taken to address performance measures to IPART in April 2006. metering accuracy. However these cannot be fi nalised until the national standards are fi nalised.

Water Balances Prepare annual water balances Water balances to be provided to IPART in 2006/07 according to approved template and made available to the public on State Water’s by 1 September and make them website. available to the public.

Fish River Water Prepare annual water balances Water balances to be provided to IPART in 2006/07 Balance according to approved template and made available to the public on State Water’s by 1 September and make them website. available to the public. Report annually to IPART on the Scheme by 1 September. Environment Prepare a fi ve year EMP by 1 State Water fi nalised its EMP in April 2006 after Management November 2005 which includes a period of public exhibition and incorporation of Plan (EMP) items specifi ed under the comments from a wide range of stakeholder groups. Operating Licence. Make the The EMP is available on State Water’s website. A EMP available to the public. hard copy is available at all State Water offi ces and has been forwarded to key stakeholder groups. (See page 73 for further details)

Performance Maintain records to enable Records are available for a number of the Schedule Indicators reporting against Schedule One One performance indicators. A program to collect performance indicators information to enable reporting against all indicators will be progressed during 2006/07.

Pricing Apply charges in accordance with SWC has applied charges in accordance with the IPART pricing determinations. 2005 pricing determination and will apply prices from State Water’s IPART submission the 2006 pricing determination from 1 October 2006. reﬂ ects the ﬁ xed to variable price ratio prescribed in the Operating Licence

Make report to Make available to the public, 1 2005/06 report to IPART available on State Water’s IPART available September Report to IPART on website. to the public SWC’s performance over the previous ﬁ nancial year against the MOU, Customer Service Charter, Complaints Handling, Dispute Resolution, Complaints to Other Bodies, Water Metering Accuracy, Environment Management Plan and Performance Indicators

State Water 05-06 Annual Report 13 L to R: Don Marples, Kathy Ridge, Tony Wright, Ted Woodley, Abel Immaraj, Kath Bowmer. Absent: Mike Bennett our board A G (Tony) Wright Dip Tech, MBA State Water Corporation Chairman since 1 July 2004 • Chair, Remuneration and Organisation Development Committee • Member, Marketing and Customer Relations Committee • Chair, New Business Development Committee External Directorships • Joint Managing Director, Wright Corporate Strategy Pty Ltd • Chairman, BioTrack Australia Pty Ltd • Deputy Chairman, NSW EPA Board • Partner, Corymbia Creek Angus • Chairman, NSW Reference Group on Extended Producer Responsibility • Member, National Advisory Council for Environment Business Australia • Member, Barton Group Tony is Managing Director of a corporate strategy and public policy advisory ﬁ rm, specialising in resource and infrastructure management. His career focus has been in running utilities and developing infrastructure covering the water, waste and transport industries. Tony has played a signiﬁ cant role in developing the Australian environment management industry through leadership positions in the industry association, Environment Business Australia. Much of Tony’s recent work has been in guiding reform of solid waste management. He has chaired three public inquiries and helped shape the strategy and legislation for sustainable waste management at state and national levels. 14 State Water 05-06 Annual Report Michael Bennett BAgEcos (UNE) State Water Corporation Director since 1 July 2004 • Member, Risk Management Committee • Member, IPART Committee • Chair, Marketing and Customer Relations Committee • Member, New Business Development Committee External Directorships • Director, Bennett Nominees Pty Ltd • Director, Killowen, Pty Ltd • Director, Collyburl Pty Ltd • Director, NSW Irrigators’ Council • Director, Dataspan Pty Ltd • Executive Member, Macquarie River Food and Fibre • Chair, Macquarie-Cudgegong State Water Customer Service Committee Michael operates a 2,700 hectare property that produces cereals, sheep, cattle and cotton at Narromine, NSW. He has been actively involved in consultation with water users and governments over natural resource management issues at regional, state and Murray-Darling Basin Commission (MDBC) level. In addition, Michael has been involved with numerous advisory committees and boards developing NSW water policy since the mid-1980s.

Kathleen Bowmer BSc(Hons), PhD(Nott), FAICD State Water Corporation Director since 1 October 2004 • Member, Remuneration and Organisation Development Committee • Member, Water Efﬁ ciency and Innovation Committee • Member, New Business Development Committee External Directorships • NSW Department of Natural Resources, Science and Information Board Kath has worked in irrigation research and aquatic ecology with CSIRO for most of her career. Honours include the Eureka Prize for Environmental Science. She was previously Deputy Chief of CSIRO Water Resources, Business Director of CSIRO Land and Water, Deputy Vice-Chancellor of Charles Sturt University, board member of several Co-operative Research Centres and Chair of the Murrumbidgee River Management Committee. She currently holds the position of Professor of Water Policy at Charles Sturt University and is an Honorary Research Fellow with CSIRO Land and Water.

State Water 05-06 Annual Report 15 Graham Ebbett BCom State Water Corporation Director from 1 October 2004 to 15 February 2006 • Chair, Audit and Compliance Committee up to 15 February 2006 • Member, Water Effi ciency and Innovation Committee • Member, New Business Development Committee External Directorships • General Manager - Resources, Southern Hydro Pty Ltd • Director, Southern Hydro Operations Pty Ltd • Director, Southern Hydro Maintenance Services Pty Ltd • Director, Meridian Energy Australia Pty Ltd Graham held senior fi nancial management positions in the investment and development banking sector, as well as holding directorships in both private and publicly listed companies before entering the energy sector some 15 years ago where he has held senior posts at a fi nancial and operational level. Graham joined the state-owned Meridian Energy Ltd, New Zealand’s largest hydro electricity generator, in 1999 as Financial Controller, before moving to Australia in January 2002 to manage Meridian’s newly-acquired Australian hydro assets. Upon Meridian’s acquisition of Southern Hydro in 2003, Graham was appointed General Manager - Resources, responsible for asset management, human resources management, property management, insurance and information technology. He also holds several directorships of companies within the Australian group.

Abel Immaraj MSc (Eng) Chief Executive Ofﬁ cer and State Water Corporation Director since 1 July 2004 • Convenor, IPART Committee • Member, Audit and Compliance Committee (until 27 July 06) • Member, Risk Management Committee • Member, Remuneration and Organisation Development Committee • Member, Water Efﬁ ciency and Innovation Committee • Member, Marketing and Customer Relations Committee • Member, River Murray Water Advisory Board • Member, Natural Resources CEO Cluster Group As CEO, Abel provides leadership and strategic management for the Corporation; including staff, customer and stakeholder relationship management. As Executive Director on the State Water Corporation Board, he contributes to the corporate governance, direction and review of the organisation. Prior to his role as CEO, Abel was the General Manager of State Water while it was managed within the Department of Energy, Utilities and Sustainability (DEUS) and the former Department of Land and Water Conservation. He has contributed to water resource management in the Murray, Murrumbidgee Valleys in particular as well as more recently, across NSW. He is an engineer with expertise in natural resource management and agricultural engineering.

16 State Water 05-06 Annual Report Don Marples BCom, MCom, FFinsa, GAICD State Water Corporation Director since 24 April 2006 • Chair, Audit and Compliance Committee (from 24 April 2006) • Member, IPART Committee • Member, Water Efﬁ ciency and Innovation Committee • Member, New Business Development Committee External Directorships • Director Fortius Funds Management Pty Ltd • Director MPC Funding Ltd Don is a Senior Management professional with 22 years experience in strategic leadership in banking, merchant banking and major corporations, with particular emphasis on property and infrastructure. He has led, grown and repositioned value-added ﬁ nancial and investment businesses in a high performance environment. He is currently the Joint Managing Director of Fortius Funds Management, a specialist institutional property funds management group. Previously, Don was the General Manager and Global Head of Project and Infrastructure with the Commonwealth Bank and has held senior positions with Lend Lease Corporation Ltd, Wardley Australia Ltd and ANZ Banking Group.

Kathy Ridge LLB(Hons1), BSc State Water Corporation Director since 1 July 2004 • Chair, Water Efﬁ ciency and Innovation Committee • Acting Chair/Co-Chair, Audit and Compliance Committee (From 15 February to 26 May 2006), and ongoing member of this Committee • Member, IPART Committee • Member, New Business Development Committee Kathy is a solicitor at Shaw Reynolds Lawyers. Prior to working as a solicitor she was the tipstaff to the Chief Judge of the Land and Environment Court, the Hon Mahla Pearlman AO. Kathy is a co-author of the Biodiversity and Conservation Chapter of the Butterworths Local Government Planning and Environment Service. Kathy was the Executive Ofﬁ cer of the Nature Conservation Council of NSW (1999-2003). She has extensive experience in natural resource management policy and legislation.

State Water 05-06 Annual Report 17 EA (Ted) Woodley BSc, BE (Hons1), DipCD State Water Corporation Director since 1 October 2004 • Chair, Risk Management Committee • Member, Marketing and Customer Relations Committee • Member, New Business Development Committee External Directorships • Member, NSW Home Care Service Advisory Board • Member, Western Australian Gas Review Board Ted has extensive experience in the water, energy, transport, agricultural and community care sectors. He has held CEO or senior positions with CLP Power Hong Kong, Transmission Pipelines Australia, PowerNet Victoria, EnergyAustralia, GrainCorp, NSW Department of Water Resources, NSW Energy Authority and the Uniting Church. Previous Board appointments include Australian Inland, UnitingCare Ageing & Disability Service, Australian Bulk Handling Authorities, Snowy Mountains Council and Yarra Trams. organisation chart

Adopted April 2006

BOARD

Abel Immaraj CEO

Ross Barrie Bob Barber Geoff Borneman; Dan Berry Dennis Zandona Marysia Derewlany Manager Strategic Manager Technical Lindsay Beck; Jubrahil Manager Information Manager Corporate Company Secretary; Asset Services Services Khan; Greg Hillis & Operations Services Manager Strategic Customer Service Policy & Compliance Managers Safety & Maintenance Project Management ICT Management Financial Services Audits Services Policy & Regulatory Operations Compliance Operations Risk Organisational Asset Planning Engineering Services Management Development Asset O&M Corporate Counsel

Surveillance and Contract Management Strategic Projects Corporate Shared Survey Services Customer Service Services Board Executive Ofﬁ cer

Environmental Strategic Projects Corporate Policy Services and Communication Business Risk Management Business Development

18 State Water 05-06 Annual Report senior staff

Bob Barber BE(Hons), MEngSc Greg Hillis BE(Hons) Manager Technical Services Customer Service Manager, Coastal Area Responsible for the project management of major Responsible for the commercial and operational capital works, coordination of the dam safety upgrade performance of State Water’s operations and asset program to meet all NSW Government compliance management in the Coastal Area. This covers the requirements, provision of strategic community area along the coast from Queensland to the Victorian consultation advice. Coordination of Environment border and the Hunter Valley. Management Plan, contracts management and engineering services. Abel Immaraj MSc(Eng) Chief Executive Offi cer Ross Barrie BE(Hons), MEngSc, MBA Responsible for leading and strategic management Manager Strategic Asset Services of staff, customer and stakeholder relationship Responsible for the strategic management and management. As an Executive Director on the Board, planning of the total asset portfolio, principal responsible for corporate governance, direction and advisor on asset management policy, regulatory review. and legislative requirements, and for the provision of specialised technical services, including asset Jubrahil Khan BTech, Grad Dip Mgt performance surveillance monitoring, survey services, Customer Service Manager, North Area dam safety surveillance audit, dam safety emergency Responsible for leading the North Area of State Water planning and mechanical/electrical audits. in bulk water delivery, customer service, strategic asset management and commercial business Lindsay Beck Dip Civil Eng functions. Area of operations includes the Border Customer Service Manager, South Area Rivers, Gwydir, Namoi and Peel Valleys. Responsible for the operation, management and leadership of the State Water South Area, including Paul Percival Solicitor of Supreme Court of NSW and water delivery and strategic asset management. Area the High Court of Australia of operations covers the Murrumbidgee, Murray and Manager Risk Management (until April 2006) and Lower Darling Valleys. Corporate Counsel Responsible for Corporate Counsel and the Risk Dan Berry BEng Management Branch, including legal services, Manager Information and Operations risk management, environmental planning laws Responsible for performance of State Water’s water compliance, contracts management and audit and delivery operations, information technology, network freedom of information/privacy. asset management strategy and policy and records and intellectual property management. Bill Sims BEng, MBA, Grad Dip CSP Company Secretary (resigned January 2006) Geoff Borneman BEng Responsible for establishing and managing the Board Customer Service Manager Central Area processes, regulatory compliance and corporate Responsible for leading bulk water delivery and governance. infrastructure operations functions to customers and the community in the Central Area. This includes the Dennis Zandona BEc Syd, JP Macquarie, Cudgegong and Lachlan Valleys and Fish Manager Corporate Services River Water Supply. Responsible for strategic direction and management of the Corporate Finance and Accounts Group, including Marysia Derewlany BA(Hons), MTCP, MComm the Chief Finance Offi cer, Corporate Shared Services, Company Secretary and Manager Strategic Policy and Organisation Development, and Corporate Policy and Compliance (from May 2006) Communication. Areas of accountability include billing, Responsible for managing the Board processes, accounts payable/receivable, human resources, strategic policy and regulatory compliance, corporate industrial relations, payroll, fl eet and facilities counsel and business risk management. management, internal and external communications and corporate policy. State Water 05-06 Annual Report 19 corporate plan Excellent Customer Service What is Success at Projects Development Strategies 30 June 2006? • Further develop the role of Customer Research, development and 75% of our Service Committees (CSCs), to provide a sponsorships, as identifi ed by CSCs. customers clear linkage between customer needs and would choose operational improvements. State Water even if they had • Further develop the role of Community and Support and information required by an alternative. Stakeholder Reference Panels in major Community Reference Panels. projects to ensure that capital investment choices match willingness to pay. • Improve on-the-ground communication Brochures and newsletters for channels with diverse customers. customers in each valley. • Improve the quality and timeliness of Internet/email/fax services for information to customers, to maximise value water ordering, customer account for money, water effi ciency and to improve management and payments. profi tability/viability of customers. • Deliver products and services when Included in operations planning. promised. • Promote good relationships with customers Adoption of best practice customer through transactional experience. service standards.

Best Practice Operations

What is Success at Projects Development Strategies 30 June 2006? • Implement world’s best practice Implementation of Operating Licence Clear view of benchmarking and develop cooperative requirements and completion of relevant world’s relationships with benchmark partners for benchmarking project. best practice sharing of innovative practices. measures and performance benchmarks. Initial steps to measure performance against world’s best practice.

20 State Water 05-06 Annual Report Best Practice Operations continued What is Success at Projects Development Strategies 30 June 2006? • Improve and integrate operating systems: Integration and Coordination of Operations systems water management, fi nancial, billing & ExPlan, Total Records Information in place. revenue, records and information. Management System (TRIM), Integrated Financial Management Good information System (IFMS), Water Ordering & and communication Usage System (WO&U). Provide technology. reports and statements on-line to customers. • Develop an effi cient information and Supervisory Control & Data Implementation communications system so that all Acquisition (SCADA) Program to of a risk operating decisions can be made with full, operate the structures to maximise management real-time information. water deliverability. plan. • Develop and Implement a quality risk Compliance with requirements management plan. of Operating Licence, Customer Charter and insurer (TMF). • Ensure good performance in organisational Identifi cation and management of compliance, through analysis and business risk, compliance issues management of business risk. and develop continuity plans.

Strategic Asset Management and Investment

What is Success at Projects Development Strategies 30 June 2006? • Develop and implement an investment Included in Total Asset Management Investment program evaluation program that supports the State Plan (TAMP) Program. that supports our Water mission and wins the support of mission shareholders and key stakeholders. • Continuous development of asset Included in Facilities Maintenance Sound basis maintenance system to reduce costs and Management System (FMMS) for evaluating incidents, through improved preventive Program. the expenditure maintenance and condition monitoring. program priorities. • Analyse and manage risk and levels Included in Strategic Asset of service to balance compliance Management and Investment requirements, to increase investment in Program. proﬁ table areas.

State Water 05-06 Annual Report 21 Skilled and Dedicated People What is Success at Projects Development Strategies 30 June 2006? • Develop a commercial culture based Development and implementation A Human on personal initiative, technical and of human resources performance Resources Plan commercial excellence and a widely shared management program. that sets a clear understanding by all employees of all direction for aspects of the business. a commercial culture, appropriate • Encourage staff commitment to customer Included in the HR program. resourcing, focus and customer friendly relations. and personal • Succession planning through encouraging Development and implementation of development and fostering cadets, training, partnering Workforce Plan, Succession Plan, opportunities. with external organisations. Sponsorships. • Clearly articulate State Water’s employment Included in HR program. conditions, expectations and behaviours. • Senior management live and demonstrate Included in HR program. the articulated culture. • Collectively developing and working in Included in the OH&S Program. a safe and healthy work environment (towards zero injuries). Profi table Business Development and Growth What is Success at Projects Development Strategies 30 June 2006? • Progressively identify and evaluate and Market surveys, research and Options for growth move to secure new business opportunities development and market testing. in non core aligned to core competencies, including business examined asset management, bulk water operations and evaluated. and water information management. • Embrace innovations in water technology, Research and development to Agreement on marketing and fi nancing to enhance identify technology and products for new business commercial success. profi table investment. lines to pursue.

• Identify and deploy sound commercial Improve cost recovery through practices in existing business basics. broader base and charge-out rates. • Progressively develop State Water’s Included in the Statement of commercial capability and our deliverability Corporate Intent process. of outcomes.

22 State Water 05-06 Annual Report Enhanced Riverine Environment What is Success at Projects Development Strategies 30 June 2006? • Develop fundamental understanding across Partnership program with peak Establish State Water of the real outcomes being industry and environmental Memoranda of sought by all environmental regulators and agencies, CSCs and Catchment Understanding develop basis to ensure that environmental Management Authorities. (MoU) with health is integrated into operating and DEC, DPI and investment practices through formal DNR to deﬁ ne protocols and cultural awareness. best practice.

• Ensure that environmental health is Develop and implement awareness integrated into operating and investment program. practices through formal protocols and cultural awareness and personal commitment.

Supportive Owners and Other Stakeholders What is Success at Projects Development Strategies 30 June 2006? • Continue to work closely with customers Ongoing CSC support. Reputation as and shareholders, and cooperatively with problem solver regulators and all stakeholders so that and cooperative views and agendas are considered in State organisation to take Water’s planning. on additional tasks. Consulted early • Support and work with the Community Secretariat and operational support on all water policy Consultative Committee (CCC) in a to the CCC. issues affecting transparent manner. State Water. • Adopt positive issues management through Included in the Community Higher public consultation with key stakeholders. Consultation Program proﬁ le. • Optimise return to shareholders value Included in the Statement of added. Corporate Intent • Formal commercial and collaborative Develop relationships and relationships with key agencies. commitment to key agencies.

• Cooperate with DNR, DEC and DPI in Develop, implement and commit to accordance with the MoU. MoU.

State Water 05-06 Annual Report 23 excellent customer service

K e n Y a te s & T r o y

S a n d s

a t s e e p

State Water 05-06 Annual Report w e

i r achievements State Water has worked on improving services to comprehensive weekly reports in the Murrumbidgee customers during the year, focusing on water delivery Valley and contributed to the Murray-Darling Basin and information provision. Water delivery ordering Commission and River Murray Water weekly reports in processes have developed across the state, particularly the Murray Valley. with Customer Service Committee (CSC) involvement in recommending changes. Development of the centralised Major water users, agencies and the Murray-Darling Water Information Exchange (WIX) project continued CSC were involved in developing an agreed rationale through the year. The project will deliver information for sharing the water shortage in the Murray Valley this services via the internet, SMS, faxback and interactive year. This has promoted and improved relationships voice response. Implementation of WIX will begin with with, and perceptions of, some of the larger customers. trials next year. State Water also initiated meetings with DNR to develop customer liaison meetings for the 2006/07 Lower Darling In the Central Area, informal meetings or “verandah water supply outlooks. chats” have proven effective in improving communication with diverse customers. These Most CSCs have regularly been provided with works meetings have been organised in conjunction with programs and have had input to the development of Department of Natural Resources (DNR) and local these programs annually, with quarterly updates. Before irrigator groups to provide information on changing commencing major capital works projects, State Water systems and to gain feedback from customers. now undertakes stakeholder analyses as a standard Quarterly newsletters were issued to all customers element of the project planning. This approach has this year. Work also progressed in the Central Area encouraged greater communication with affected on a project in the Macquarie Valley to improve water and interested parties. Community Reference Panels ordering using the internet, email and fax, with the continued to have a role in the planning stages of the aim of eliminating phone orders by July 2006. A new proposed Keepit and Chaffey Dams upgrades. water order amending/cancelling process is also being developed and will include water order debiting. Due to the reliance on the temporary water market State Water increased its resourcing to facilitate transfers, particularly in the South Area. The volume of temporary The Coastal CSC formed an Unregulated and transfers was at a ﬁ ve-year high in 2005/06 with more Groundwater Advisory Group this year to advise the than 711,000ML traded across the state. CSC and provide a network to communicate issues that are relevant to these customers, who have been under- In July 2006, State Water will conduct a customer represented on the CSC. This year, the Coastal Area satisfaction survey of its regulated river customers. This also introduced a faxstream and email advice service will take the form of a telephone survey, with results for supplementary ﬂ ow and off allocation events. This benchmarked against the 2002 customer survey. The system will be extended to all customer groups and to Customer Service Charter is also due for review in include SMS advice in 2006/07. 2006/07.

In the North Area, State Water implemented The ﬁ rst meeting of the Community Consultative faxstream announcements to advise all customers of Committee (CCC) was held in late June 2006. State supplementary events and successfully trialled text Water Chairman Tony Wright chairs the CCC, and the messaging alerts. Monthly updated water allocation purpose of the committee is to consult on relevant issues statements were also issued during the irrigation with peak groups such as Nature Conservation Council, season. Catchment Management Authorities, NSW Irrigators, NSW Farmers and the Aboriginal Land Council. This The South Area enhanced dialogue with Department of helps State Water meet objectives of the Corporate Plan Natural Resources by developing a single reference point as well as the Operating Licence. The state-wide CCC for service agreements for unregulated and groundwater differs from CSCs which are valley based and customer contracts. Discussions also began on sharing resources focussed. between major corporate customers and State Water. The South Area also continued to distribute State Water 05-06 Annual Report 25 customer service committees Key Outcomes/Achievements:

Border Rivers CSC Gwydir CSC Three meetings held Four meetings held • Endorsed the assets work plan. • Developed water delivery strategies with • Provided input into the Border Rivers operations group for block releases. Institutional Reform. • Reached agreement with irrigators on water • Provided feedback to the Trial Access Rules for ordering to suit block releases. Supplementary Water in the Border Rivers. • Endorsed the storages and weirs maintenance program. Coastal CSC Five meetings held Lachlan CSC • Formed advisory committee to represent Four meetings held groundwater and unregulated river licence • Continually reviewed the Drought Contingency holders. Plan. CCCs recommendations led to • Provided ongoing support to area operations. 19% allocations for general security licences • Provided a robust and committed contribution and fl ows to the environment, resulting in towards the IPART determination on Bulk successful bird breeding events. Water Pricing. • Stock and Domestic Sub-Committee’s review led to mid-Lachlan willow removal. In making Fish River Water Supply (FRWS) Customer this recommendation, the Sub-Committee Council considered alternate ways of providing the Six meetings held stock and domestic water to the effl uent • Started development process for new creeks, as well as changes in fl ow distribution. customer contracts, with key development • Water effi ciency projects investigated areas before fi nalisation identifi ed as hydrology stock and domestic replenishment fl ows. Plans model, carryover, trading, new customers and in place to install regulators in Muggabah/ drought contingency. Meerimajeel Creeks to improve effi ciency of • Adopted Customer Council Terms of stock and domestic replenishments. Reference. • Progressed Lake Brewster water quality • Recommended adoption of the Business Plan. improvement project to preliminary design and • Continued to manage the worst drought on cost benefi t analysis stage. record. • Rationalisation of service delivery in the • Recommended increased water quality Lachlan led to a reduction in the number of monitoring. Customer Service Offi cers from six to fi ve and a proposal to base Customer Service Offi cers at offi ces in Forbes and Lake Cargelligo. • Good feedback on the monthly CSC operational report. • Valley business plan in place by May 2006, providing answers to most frequently asked questions.

26 State Water 05-06 Annual Report Murrumbidgee CSC Three meetings held • Increased participation in the review of asset replacement and maintenance programs. • Provided advice on Water Sharing Plan environmental fl ow rules and supplementary event fl ow rules. • Discussed the impact of revised cut-off dates for water transfers. • Ongoing refi nement of the Valley Business Plan.

Murray-Lower Darling CSC Four meetings held • Promoted discussion on the introduction of the Barwon-Darling Cap and implications for Lower Murray Darling. • Ongoing refi nement of the Valley Business Wentworth Lock Master Norm Boyd Plan. • Promoted discussion on interstate sharing of Murray River channel capacity. • Promoted discussion on improved metering Macquarie-Cudgegong CSC standards. Four meetings held • Reviewed the supplementary announcement • Endorsed implementation of compliance process. procedures for extraction exceeding • Managed customer expectations for potential allocations. Lower Darling water shortage in 2006/07. • Approved measures for improving water orders, including application of penalties and Namoi-Peel CSC selective water order debiting. Four meetings held • Stock and Domestic Sub-Committee worked • Provided input into the negotiation of a on water effi ciency projects that lead to discharge regime for bulk transfer from Split de-silting of eight kilometres of North Marsh Rock Dam to Keepit Dam. Bypass Channel. • CSC represented on the Keepit and Chaffey • Advised water users of possible drought Dam Upgrade Community Reference Panels. contingency operations in Macquarie- • Provided feedback to IPART on draft Cudgegong. Infl ows in winter/spring 2005 determination for Peel River Valley water negated need for drought contingency plan. prices. • Developed a draft communication plan in • Endorsed the storages and weirs maintenance conjunction with Macquarie Valley Food and program. Fibre. • Good feedback on the monthly CSC operational report. • Valley business plan in place by May 2006, providing answers to most frequently asked questions.

State Water 05-06 Annual Report 27 Community Reference Panel (CRP) Progress

State Water works with stakeholders on its major dam The Chaffey Dam Community Reference Panel at one of their many upgrade projects at Chaffey Dam and Keepit Dam. on-site inspections. Four meetings were held for Chaffey Dam Upgrade and one meeting for Keepit Dam Upgrade, at which a Success of Community Reference Panels ﬁ nal set of upgrade options were determined. In an aim to increase community participation in the decisions made by State Water Corporation, Chaffey Dam Upgrade CRP Community Reference Panels have been established. Meetings: 5 August 2005, 28 October 2005, 7 April 2006, 2 June 2006 The community plays an important role within State Water and underpins the organisation’s purpose: To Key outcomes/achievements: efﬁ ciently deliver water and services to customers, the • The Panel considered an environmental community and the environment to improve life and the improvements strategy for the storage. economy. • The Panel determined a small set of options covering dam safety and possible State Water has worked successfully with communities augmentation. during the continuing Keepit and Chaffey Dam upgrade projects where Community Reference Panels were • Members considered the need for established. augmentation of the storage in terms of water supply reliability and economics. The panels have wide local community representation, with each member having skills, community Keepit Dam Upgrade CRP connections and networks covering all the main issues Meetings: 26 September 2005 and regulatory requirements of the project.

Key outcomes/achievements: In the case of Keepit and Chaffey Dam Upgrade Projects, early community consultation has led to the • The ﬁ nal four options were selected: Options scope of the project being balanced, incorporating the A3, D3, D2 and B1. triple bottom line aspect of economics, environment and • The Panel advised State Water that its social consideration. preferred option was D3. • Members of the Panel continued to assist Early community consultation on State Water projects State Water in public consultation on has led to a strong sense of ownership and support the options and preparation of the ﬁ nal from the local community. This type of support is environmental assessment. opening doors and ears at every level of society, from local school children through to state politicians.

Projects no longer sit in isolation from the community, but become a whole of community project. A recent celebratory milestone event at Chaffey Dam, where the local school captain spoke with passion and gratitude for the project, for State Water and for the vision of the community, for being involved in the project, highlighted the conﬁ dence and trust within the ‘project community’.

In the example of the Chaffey Dam upgrade, the Panel has helped establish local understanding and ownership in the upgrade.

From the community’s perspective and in the words of the Chair of the Chaffey Dam Community Reference Panel: “The community feel wanted and integral to the project. They feel as though they have provided worthwhile input, having been involved from the beginning. There is an open door policy, demonstrating transparency, approachability and credibility. To this point, the community has had real input and they feel State Water 05-06 Annual Report 28 as though they have been listened to.” customer service charter The table below provides a summary of State Water’s performance against its obligations under the Customer Service Charter. This does not cover Fish River Water Supply (FRWS). The Charter is due for review in 2006/07, in consultation with CSCs. The revised Charter will also incorporate FRWS activities.

Customer Service Target Achievements

State Water will provide all information needed for quality No notiﬁ ed incidences of non-compliance. customer service and staff will respond promptly, efﬁ ciently Information on website expanded during the year, providing and courteously at all times. improved access for customers and members of the public.

State Water will be readily contactable by customers. Offi ce hours maintained and duty arrangements in place. Employees will be available during standard working hours No notifi ed incidences of non-compliance. 8.30am to 4.30pm at offi ces or on mobile phones and will acknowledge within one working day any telephone messages, faxes, emails or voicemails. On weekends and public holidays, the duty operations offi cer or Operations Manager will respond to any problem or urgent issues with water delivery.

State Water will communicate with customers effectively Expanded range of information provided on website, including and equitably, publishing relevant information on the customer notifi cations and media releases. Internet for access by customers. State Water will develop and continuously improve Signifi cant improvements and streamlining of water ordering electronic systems to handle all standard water ordering, processes and regular communication with customers to billing, trading and account management tasks on a ensure timely and accurate water ordering. continuous basis. New procedures introduced to accommodate changes in water legislation. Due to the complexities introduced by the new access licences and water accounting rules, the most effi cient option was to invoice each Water Account separately. Billing processes gradually developed under the new fi nance system.

State Water will provide a customer account queries Customer account enquiries hotline in operation. Hotline hotline (1800 353 091). received an average of 508 calls each month, peaking in June 2006 with 1206 calls in the one month.

State Water 05-06 Annual Report 29 Customer Service Target Achievements

State Water will develop and publish compliance, Compliance policies developed and available for staff debt management, water trading and water restriction information on the intranet. Continuing to develop in this area, processes to inform the customer of transparent decision in consultation with DNR. Legal action successfully pursued making and demonstrate procedural justice. for non-compliance against several customers in the South Area. The following information is provided on website: • Debt management and payment options • NSW Water Extraction Monitoring Standards • Link to Department of Natural Resources site for water trading and compliance information. In the Lachlan Valley, deferred payment plans were accepted for seven customers facing hardship.

State Water will treat customer information with privacy and No notiﬁ ed incidences of non-compliance. conﬁ dentiality in accordance with Freedom of Information Privacy Statements are now included on all forms that collect legislation. or use customer contact details.

State Water will provide a complaint handling process. Complaints handling policy has been developed, with input from staff in various roles within the organisation. Details of policy and complaint form will be uploaded to website, once ﬁ nalised.

State Water will provide a dispute resolution process and Energy and Water Industry Ombudsman (EWON) engaged to advice for customers and suppliers on handling disputes. handle external disputes.

State Water will undertake a customer satisfaction survey Questionnaire ﬁ nalised, with phone survey to be conducted of every three years. regulated customers only, in July 2006.

State Water will develop and publish a Code of Practice Debt management policy and procedures adopted by the and Procedures on Debt Management. The Procedures Board in February 2005. How and where to pay information, will include ‘How to pay’ and ‘Where to pay’ information. as well as guidelines for alternative payment plans and suspensions are provided on State Water’s website and linked to the NSW Government Portal home page.

State Water will commence bulk water billing within eight Issuing of 2004/05 bills delayed during 2005/06 due to weeks of the end of the period and will provide at least diffi culties with the implementation of a new fi nance system. three options for payment. Payment options advertised on back of accounts: in person at any State Water offi ce; by post to Head Offi ce; or by BPay.

State Water will develop protocols for adopting best Best practice guidelines issued by industry are followed by management practice and work with customers to ensure Customer Service Ofﬁ cers. No reported instances of non- that when entering properties to read and inspect meters, compliance. our staff do so with minimal disruption and impact.

State Water will comply with requirements under various No notiﬁ ed incidences of non-compliance. Working towards Acts including State Owned Corporations Act 1989, State full compliance for dam safety across the dam portfolio. Water Corporation Act 2004, Water Management Act 2000, Water Act 1912, Occupational, Health and Safety Act 2000, and the Dams Safety Act 1989.

30 State Water 05-06 Annual Report Water Delivery Target Achievements

State Water will be vigilant in continually reviewing and Developing performance reporting standards to assist in increasing operational efﬁ ciencies to maximise the delivery monitoring performance and increasing efﬁ ciencies. of available water to customers consistent with WSPs.

State Water will credit available water determination water Department of Natural Resources (DNR) has reassumed into customer accounts within one day of being advised of accountability for this function. State Water is now not able to a determination and will provide access to this information credit water accounts. to all customers through the internet within the same timeframe.

State Water will report on extraction performance against North and Central Areas are providing this information for water ordering to customers. customers.

State Water will reschedule orders in consultation with No notiﬁ ed incidences of non-compliance. customers within one day of a known shortage.

State Water will investigate climatic modelling to improve Project deferred due to a lack of internal resources. State predictive capability of daily demand to supplement water Water is supporting research by Cooperative Research Centre orders. for Irrigation Futures on climatic modelling.

Supplementary water announcements will be made State Water has issued media releases as well as notices available to customers within two hours of the event direct to customers by fax and by text messaging in some determination by DNR. areas. Further trials of text messaging planned for 2006/07.

State Water will develop a checklist process for determining This process is ongoing. State Water is now authorised by supplementary events and advising customers. DNR in some Valleys to make the supplementary water availability announcements. State Water will continue to develop national standards for NSW Water Extraction Monitoring Standards published on meters to ensure that our customers and business needs website in November 2005, after extensive consultation with are best met. DNR. State Water continuing to work with the National Water Commission to develop national metering standards.

State Water will enforce compliance with National Metering State Water’s standards are in line with what is being Standards. developed at the national level. In instances of breaches, licence holders may now be required to replace mechanical meters with accurate non-mechanical meters.

State Water will process complying intra-valley water No notiﬁ ed incidences of non-compliance. trades within four working days.

Any water going through a licensed work meter will be Billing rules changed to incorporate these provisions. Legal charged regardless of the nature/purpose of use, unless advice is being sought to clarify whether Basic Landholder State Emergency Provisions are triggered. Right water ﬂ owing through a meter is chargeable.

State Water 05-06 Annual Report 31 Asset Management Target Achievements

State Water will develop a compliance and penalties Lachlan, Macquarie-Cudgegong and Murray CSCs have regime in conjunction with CSCs. endorsed implementation of compliance and penalties regime for 2006/07. Some penalties have been imposed after pursuing legal action in the South Area. Two cases were referred to DNR for prosecution for breach of licence conditions and notices.

State Water will provide asset management services at As part of the IPART pricing determination, Parsons efﬁ cient cost as deﬁ ned by inter-valley and industry Brinckerhoff Associates conducted a benchmarking analysis benchmarks. of State Water with inter-state bulk water corporations.

State Water will ensure continuing involvement of CSCs in Valley Business Plans completed in most Areas, with high the Total Asset Management Planning (TAMP) process. level CSC involvement. Most CSCs have been involved in reviewing their valleys’ ﬁ ve-year capital works programs.

State Water will manage asset maintenance and renewal Asset maintenance and renewal has been managed effectively to provide assets in a state that is ‘fi t for purpose’. and effi ciently and water delivery was not compromised in managing the assets. State Water will demonstrate compliance with best No notifi ed incidences of non-compliance or failure of assets. management standards. State Water will identify benefi ciaries in cost sharing Benefi ciaries identifi ed in October 2005 pricing submission to arrangements. IPART. The actual decision on sharing of costs has been left to IPART.

State Water will comply with the Operating Licence. Compliance achieved in most areas. State Water will run a cost efﬁ cient and effective business, Benchmarking undertaken by IPART through the 2006 pricing benchmarked against similar industries and will report determination. transparently to CSCs.

Great People

Target Achievements

State Water will regularly provide CSCs with fi nancial This information was provided to some CSCs, but due to and other information relevant to each valley and of state diffi culties experienced with the introduction of the new signifi cance. fi nance system in 2005, it was not possible to provide all this information to the CSCs. The IPART submission contained all the relevant information at a valley level.

State Water will develop communication protocols between Issues continue to be brought to the Board via Customer the Board and CSCs. Service Managers and the CEO.

State Water will ensure it is staffed to provide adequate Stafﬁ ng levels reviewed in all areas during the year and service levels throughout the year and provide a review adjustments made accordingly. that caters for the long-term needs of the business.

32 State Water 05-06 Annual Report customer service statistics Number of Regulated River Water Management Act 2000 Licences Water Source As at 30 June 2005 As at 30 June 2006 Gwydir 439 444 Hunter 1,342 1,361 Lachlan 1,409 1,453 Lower Darling 259 261 Lower Namoi 548 556 Macquarie and Cudgegong 1,449 1,481 Murrumbidgee 1,482 1,520 NSW Murray 2,631 2,728 Upper Namoi 102 106 Total 9,661 9,910

This does not include regulated Water Act 1912 licences, such as those on the Border Rivers, Peel, Belubula, Paterson, Bega Rivers and Ironpot/Eden Creek.

Number of Works Approvals as at 30 June 2006 Water Source Number Gwydir 210 Hunter 850 Lachlan 964 Lower Darling 186 Lower Namoi 239 Macquarie and Cudgegong 660 Murrumbidgee 846 NSW Murray 1,505 Upper Namoi 96 Total 5,556

State Water 05-06 Annual Report 33 Regulated Customers Billed

Area 2004/05 2005/06 North 698 794 Central 1,361 1,596 South 2,057 2,311 Coastal 820 1,307 Total 4,936 6,008

Note: State Water implemented a new billing system in July 2005. Where a licence has changed ownership since that time, it appears as two separate customer listings for the ﬁ nancial year. The number of customers billed in 2005/06 did not increase as signiﬁ cantly as this table suggests.

Approved Temporary Transfers

4,000 800,000

3,500 700,000

3,000 600,000

2,500 500,000 L M

r e n i

2,000 400,000 e m m u u N l o

1,500 300,000 V

1,000 200,000

500 100,000

0 0 2001-02 2002-03 2003-04 2004-05 2005-06 Year

Number Volume

Note: This includes approved intra-valley, inter-valley and inter-state transfers.

NSW Temporary Water Transfers

Year Transfer Fees $ Face Value $m 2001/02 127,051 14.84 2002/03 228,654 15.35 2003/04 158,304 14.84 2004/05 131,000 11.18 2005/06 184,000 17.78

34 State Water 05-06 Annual Report Fish River Water Supply Customer Service Levels • All unplanned interruptions this year were addressed immediately. • Two planned water supply interruptions occurred, with an average duration of eight hours. • Two unplanned water supply interruptions occurred, with an average duration of 10 hours. • Nine pipe breaks and 12 leaks were reported in the year. These were repaired while maintaining the service.

Repairs 2003/04 2004/05 2005/06 Pipe breaks repaired 2 9 9 Leaks repaired 12 2 12

Water Quality: Filtered

NH&MRC* Guideline Tests % Tests Tests % Tests Tests % Tests Parameter Criteria Target 2003/04 passed 2004/05 passed 2005/06 passed 0 organisms E. Coli 98% 156 100 156 100 156 98 per 100ML Colour 15 CU 100% 528 100 528 100 528 92 Turbidity 5 NTU 100% 528 100 528 100 528 100 Iron 0.3 mg/L 100% 48 100 48 100 48 100 Manganese 0.1 mg/L 100% 48 100 48 100 48 100 Aluminium 0.2 mg/L 100% 48 100 48 100 48 100 pH 6.5-8.5 100% 528 100 528 100 528 100

Water Quality: Raw

NH&MRC* No of % No of No of % Guideline Tests Tests Tests % Tests Tests Tests Parameter Criteria Target 2003/04 passed 2004/05 passed 2005/06 passed 0 organisms E. Coli 98% 130 100 130 100 130 99 per 100ML Colour 15 CU 100% 312 100 312 100 312 92 Turbidity 5 NTU 100% 312 100 312 100 312 100 Iron 0.3 mg/L 100% 36 100 36 100 36 100 Manganese 0.1 mg/L 100% 36 99 36 100 36 100 Aluminium 0.2 mg/L 100% 36 100 36 100 36 100 pH 6.5-8.5 100% 312 99 312 100 312 100

* National Health and Medical Research Council The above results are from Hunter Water Laboratories (NATA Registered). They also include the operational monitoring results. The above results for turbidity are for aesthetic, the results for E Coli are the indicators for health and disinfection.

State Water 05-06 Annual Report 35 Water Prices 2005/06: DNR and State Water 2005/06: State Water 01.07.05 to 11.08.05 12.08.05 to 30.06.06 High General High General Usage Usage Region/river valley Security Security Security Security ($/ML) ($/ML) ($/ML) ($/ML) ($/ML) ($/ML) Border1 6.09 4.08 4.74 4.00 2.68 3.11 Gwydir 5.50 3.65 4.26 4.25 2.82 3.29 Namoi 10.41 6.94 8.31 8.04 5.36 6.42 Peel 12.39 5.43 9.89 11.52 5.05 9.19 Lachlan 7.09 4.72 5.41 5.80 3.86 4.42 Macquarie 4.45 3.42 4.62 3.66 2.81 3.79 Murray2 5.69 5.16 1.39 4.43 4.02 1.09 Murrumbidgee3 4.18 3.97 1.04 3.28 3.11 0.82 North Coast 11.28 8.67 5.78 10.59 8.14 5.42 Hunter 8.82 6.30 6.27 6.61 4.72 4.70 South Coast 11.28 8.67 5.78 10.60 8.15 5.43

1 Pindari Levy is an additional charge on Border Rivers usage. The 2005/06 rate is $14.58. This is not an IPART determined price but is indexed 5% each year. 2 Gol Gol Delivery Service Charge. This is not an IPART determined price. 2005/06 price is $4.94 + GST. 3 Yanco Columbo System Levy. This is an additional charge of $0.90/ML of entitlement or unit share.

Valley Price Comparisons

36 State Water 05-06 Annual Report Fish River Water Supply Prices

Fixed Above Fixed Above $/ML Access Usage MAQ* Access Usage MAQ* 2003/04 2004/05 2004/05 2004/05 2005/06 2005/06 2005/06 Bulk Unﬁ ltered Delta Electricity 405.7 200 225 425 205 230 435 SCA 405.7 200 225 425 205 230 435 Oberon Council 405.7 200 225 425 205 230 435 Minor Consumers 521.6 250 450 700 256 461 717 Bulk Filtered Lithgow Council 405.7 300 325 625 307 333 640 Minor Consumers 521.6 350 550 900 358 563 922

* Maximum annual quantity

Burrendong Dam

State Water 05-06 Annual Report 37 best practice operations

N aw a ra tn e K u d a b a n d a a t Y a l l a k o o l C r e e k

l a

State Water 05-06 Annual Report t o

r achievements

Best practice operations in 2005/06 required State Water worked with the Department of Natural continuing drought operations for most of the year. Resources (DNR) to fi nalise the NSW Water During the year staff reacted to promising spring Extraction Monitoring Standards. These metering and summer infl ows and provided timely information standards were developed after consultation with to allow allocation increments and access to industry and the CSCs. They were published on State supplementary fl ows. Water’s website in November 2005. water delivery report A NSW Perspective The total State Water storage level in July 2005 was Water delivery in 2005/06 saw an easing in the 30% of capacity. This rose to 57% in November 2005, ongoing drought. There was close to average rainfall the highest storage level since January 2002. The in most catchments for the 12 months, except the volume dropped to 35% by May 2005 and then rose to Hunter, which remained well below average. 41% by 30 June 2006.

Total Storage and Sydney Futures Exchange State Water Indexes

Total Barwon Macquarie Lachlan Murray Hunter

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

1-Jul-01 1-Jan-02 1-Jul-02 1-Jan-03 1-Jul-03 1-Jan-04 1-Jul-04 1-Jan-05 1-Jul-05 1-Jan-06

State Water 05-06 Annual Report 39 Initial available water determinations were zero for signifi cantly restricted. This meant that all of State general security customers in all valleys except the Water’s town, domestic, stock, industrial and high Murrumbidgee, Lower Darling, Hunter and Paterson. security irrigation customers received close to their full However, favourable spring conditions led to storage allocations for the year and State Water delivered all infl ows and increases in water availability. By the end water ordered by those customers. of the year all valleys had 40% or more, except for the Lachlan and Belubula, where water supplies remained General security customers received various levels very tight. of restricted allocations, depending on the water available in the storages in their particular valley. The Total water deliveries (excluding unregulated) of following bar chart shows the initial and fi nal levels of 4,575GL in 2005/06 were about 80% of the long term water availability in each valley. State Water delivered average sales, when looking at long-term extractions. all water ordered by general security customers. This was 38% higher than the previous year.

State Water delivered all water required under the environmental rules of the Water Sharing Plans. Deliveries to high security customers were not

General Security Water Availability 2005/06

Carryover from 2003/04 Initial Announcement Additional Announcements Total

Border

Gwydir

Namoi

Peel

Macquarie

Lachlan

Belubula

Murrumbidgee

Murray

Lower Darling

Toonumbar

Hunter

Paterson

Bega

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110%

40 State Water 05-06 Annual Report Drought Contingency Plans Total extraction from the lower Namoi River was about 138,130ML, or about 58% of the long-term average. State Water continued to operate the Lachlan Valley conservatively under the drought contingency plan to Environmental releases were made from Keepit Dam. maintain essential supplies to towns, domestic, stock The releases were needed to maintain end-of-system and high security customers. Drought contingency fl ows at Walgett. Initial releases were very high plans were under development at the early stages because the river had been dry for almost two months of the year for the Macquarie Valley. Storage infl ow beforehand. events meant these plans were not implemented. Split Rock Dam started the year at 27% and fell to Border Rivers 19% after a bulk water transfer to Keepit Dam in January. The bulk water transfer was undertaken in Levels in Pindari and Glenlyon Dams at the end of consultation with water users and was in accordance June 2006 were 66% and 28% respectively, which with environmental requirements prescribed by DNR. compares to 65% and 24% 12 months earlier. The bulk transfer saw 37GL of water released from Allocations in the Border Rivers started the year at the Split Rock Dam. equivalent of 52% for general security licence holders and fi nished the year with balances equivalent to Total extraction from the upper Namoi River was about 43%. This was after some use of allocation, along with 3,150ML, or about 18% of the long-term average. monthly allocation increments from November through to March. Access to off-allocation water was granted in Upper Namoi water users received the benefi t of July, December and January following good rainfall. 100% allocation from Split Rock Dam while Peel Valley general security customers received an initial Gwydir Valley allocation of 10% in August. This was followed by Customers in the Gwydir Valley received good rain allocation increases in September and November, during peak irrigation periods. The rain allowed fi nishing at 45% in February after Chaffey Dam State Water to provide small amounts of access received some infl ow and a total extraction of to supplementary water in July, September and 14,753ML. December through to February. Copeton Dam began the year with slightly less than 23% of its capacity Macquarie Valley and wound up the water year marginally above 23%. The Macquarie-Cudgegong Valley began the year Allocation increments throughout the year totalled once again under drought conditions. However, nearly 22%, guaranteeing general security licence the substantial infl ows received in November 2005 holders an average of 21% allocation for next season. and then smaller infl ows in December and January resulted in a record 10 allocation increments in the Total extraction from the Gwydir River was about water year. The fi nal allocation for the general security 223,784ML, or about 57% of the long-term average. licences stood at 44%.

Namoi Valley A signifi cant fl ow event in the Bell River in November The Namoi Valley also received good rain in allowed 36 hours of supplementary access. The December, which gave water users access to extraction during this event was about 18% of the total supplementary water. Keepit Dam received moderate supplementary entitlement in the valley. infl ows in December and reached its high for the year of 47%, before falling to 16% by the end of June. After nearly two years of no request for environmental General security water accounts received allocation water for the Macquarie Marshes, about 154,470ML increases totalling 31% and have access to an was delivered during this year. Of this 83,780ML was equivalent of 21% allocation next year. delivered between October and December 2005 and accounted as the environmental water allowance under the rules of the valley’s WSP.

State Water 05-06 Annual Report 41 For the fi rst time in the history of the regulated The allocations for the towns, stock, domestic and Cudgegong River system, about 2,000ML of planned high security entitlements were increased to 100% for environmental water was released from Windamere the fi rst time in two years. General security customers Dam. The release under the Water Sharing Plan rules received 19% allocation, which provided great relief was made for the benefi t of the riverine environment after zero allocation for the previous two years. in four events as a response to infl ows to Windamere Dam. There was no high volume transfer from The infl ows downstream of the dam allowed delivery Windamere to Burrendong Dam this year. of 25,770ML for the benefi t of the general riverine environment below Lake Brewster and the Great The exceptionally dry and warm autumn resulted in Cumbung Swamp. A further 11,500ML was delivered the delivery of water from Burrendong Dam for annual to achieve specifi c environmental outcomes, including stock and domestic replenishment fl ows to Marra successful colonial waterbird breeding in Merrowie Creek and Lower Macquarie. The replenishment Creek and Lake Brewster. fl ow requirements for Beleringar, Gum Cowal and Ewanmar Creeks, and for the Lower Bogan River were Diversions into Lake Cargelligo were made to met from fl ows received from tributaries downstream improve the town water supply and to sustain the of Burrendong Dam. local tourism industry. The downstream tributary fl ows were judiciously used to deliver the annual stock Total deliveries for extractive users in the valley and domestic replenishment fl ows into the Willandra, were about 179,663ML. About 265 assignments of Merrowie, Merrimajeel and Muggabah creek systems. allocation (including 13 supplementary assignments) were processed, transferring 44,660ML. Total extraction in the Lachlan River was about 109,732ML or about 36% of the long-term average. A total of 316 allocation assignments were processed for Fish River Water Supply about 35,270ML. The operation of the Fish River Water Supply scheme saw a continuation of the worst drought on record. The infl ows into Carcoar Dam in October 2005 This was the sixth consecutive year of below average ensured a 100% allocation for high security rainfall. This year again saw a record low February entitlements and allowed an extension to the access to May rainfall with only 47mm falling against an to the end of June 2006. The allocation for general average of 245mm. Good rains in January increased security continued to be zero, however access to the storage to 50% by the end of the month and general security carryover allocation was allowed, restrictions were moved to 20% for all customers. based on the downstream fl ow triggers. The continued dry saw Oberon Dam fall to 40% by the end of June 2006. The scheme sold 10,377ML of water for 2005/06. Murrumbidgee Valley The 2005/06 water allocation for Murrumbidgee Valleys was the best for the last four years. An Lachlan Valley extremely hot summer resulted in ideal growing conditions for rice production. Rice production was Due to the severe water shortage, the Lachlan Valley signifi cantly greater that the previous few growing continued to operate under the drought contingency seasons. measures and the WSP remained suspended. However, infl ows to Wyangala Dam and in the Additional water was delivered after negotiations downstream tributaries in October-November 2005 between Snowy Hydro, customers and DNR. This eased some of the restrictions from previous years. advanced water delivery from future seasons. The total infl ows to Wyangala Dam and in the Allocations for 2005/06 were 100% for towns, tributaries below the dam during 2005/06 exceeded domestic, stock, Aboriginal cultural and research, the total infl ows received in the previous three water 95% for high security and 54% for general security. years. General security carryover from the previous year was equivalent to an additional eight percent.

42 State Water 05-06 Annual Report State Water processed a near record of 1,824 water A key feature of the operating strategy of the transfer applications, an increase of 16% on 2001/02 Menindee Lakes during the 2005/06 season was to and 103% on 2000/01. This was achieved with a 56% draw Lake Wetherell down off the ﬂ ood plain. This reduction in processing time for interstate transfers signiﬁ cantly reduced the lake’s surface area and and 67% reduction for intra-valley transfers. resulted in the minimisation of evaporation losses from the storage. Total extraction from the Murrumbidgee River was about 1,942,845 ML or about the same as the long- Total extraction from the Lower Darling River was term average. about 41,412 ML.

Murray Valley Toonumbar Dam Operational planning in the Murray Valley for the Toonumbar Dam started the year at 80% before 2005/06 season was dominated by the management recovering to 100% by the end of June. Allocations of channel capacity constraints resulting from large were 100% for high security and 80% for general volumes transfers of water from Hume and Dartmouth security. Usage was down by about one-third due to reservoirs to South Australia. Restrictions to diversions wetter conditions during the summer. in during March and April were only narrowly avoided following a late improvement in conditions and reduced extractions as the season cooled, Hunter Valley accompanied by some rainfall. The combined storage in Glenbawn and Glennies Creek Dams fell from 51% to 38% over the year. A key feature of the 2005/06 season was the release Allocations were 100% for all high security customers of the Barmah-Millewa environmental water allowance and initially 94% for general security customers, later through the Barmah-Millewa Forest. Much of this rising to 100% for all customers. Drought conditions water was later re-regulated downstream of the progressively worsened during the year in the Upper forest at Lake Victoria and then made available for Hunter Valley, while the Lower Hunter received consumptive use. some good rainfall. As a result, usage was up in the Hunter valley from 2004/05. There were only three Additional water was also made available to those supplementary ﬂ ow events. irrigators who participated in another advance of water from Snowy Hydro as part of a commercial agreement. There were no restrictions in the Paterson Valley, with allocations of 100% for all customers. The valley Total extraction from the River Murray was about received good coastal rainfall, with a number of off- 1,603,284 ML or about 83% of the long-term average. allocation ﬂ ows while Lostock Dam remained above 90%.

Total extraction from the Hunter River was about Lower Darling Valley 156,409 ML or about 72% of the long-term average. Despite some infl ows to Menindee Lakes during the 2005/06 season, infl ows over the equivalent period of time since June 2001 remain signifi cantly the lowest Bega River on record. Brogo Dam started the year at 100% of capacity and a 40% allocation to general security customers. The Release from Menindee Lakes was made by State dam continued to fall to a low of 48% in May as a Water in accordance with requirements set by DNR. result of low infl ows with usage remaining similar to Late in the season, DNR permitted State Water to previous years. signifi cantly reduce release below normal minimum fl ow requirements in order to target a very low passing fl ow at Burtundy Weir. This enabled available resources to be conserved for the 2006/07 season.

State Water 05-06 Annual Report 43 Water Deliveries (ML) percentage of Valley 2005/06 average 2004/05 Average Border 134,417 64% 107,564 209,670 Gwydir 218,762 71% 153,195 309,164 Namoi 141,280 60% 96,823 237,146 Macquarie 179,663 46% 62,185 391,900 Lachlan 109,732 36% 19,348 305,000 Murrumbidgee 1,942,845 101% 1,529,210 1,925,000 Murray 1,603,284 83% 1,242,064 1,934,830 Hunter 156,409 122% 97,938 128,067 Total 4,486,392 82% 3,308,327 5,440,777

Total Valley Flow (ML) percentage of Valley 2005/06 average 2004/05 Average Border n/a* 319,067 Gwydir 433,210 38% 806,799 1,141,000 Namoi 440,138 51% 626,006 870,000 Macquarie 680,730 47% 258,107 1,448,000 Lachlan 608,144 50% 167,197 1,212,000 Murrumbidgee 3,674,970 84% 2,201,131 4,360,000 Murray 3,483,000 n/a* 2,906,420 Hunter 290,370 28% 431,179 1,040,000 Total 9,610,562 7,715,906

*Total ﬂ ow ﬁ gures are available through the Dumaresq-Barwon-Border Rivers Commission (for Border Rivers) or the Murray Darling Basin Commission (For Murray Valley).

44 State Water 05-06 Annual Report Consumption and Entitlement Volumes for Regulated Rivers Licensed Entitlement Region/river valley Consumption ML High Security ML General Security ML Border 209,670 3,107 263,328 Gwydir 309,164 21,439 509,917 Namoi 237,146 8,519 255,936 Peel 14,675 17,378 30,383 Lachlan 307,149 57,144 633,951 Macquarie 386,311 42,095 631,526 Murray 1,934,830 252,083 2,029,307 Murrumbidgee 1,915,848 358,552 2,414,307 North Coast 992 127 9,088 Hunter 128,067 70,694 137,955 South Coast 5,831 903 14,014 Total 5,449,683 832,041 6,929,712

Source: IPART Draft Determinations and Draft Report, May 2006.

Regulatory Asset Base Value In its Draft Determination and Draft Report on Bulk (Murray Darling Basin Commission), DBBRC Water Prices for State Water Corporation, 1 August (Dumaresq-Barwon Border Rivers Commission) and 2006 - 30 June 2010 (May 2006), IPART set the Fish River Water Supply. IPART then apportioned value of State Water’s opening RAB (Regulatory the user share of this RAB across the valleys, in Asset Base) at 1 July 2004 at $240.8 million, with accordance with its 2001 determination allowance for $83.5 million allocated for users and $157.2 million annuity by valley, as shown below. for Government. This opening RAB excludes MDBC

Opening RAB Value Apportioned Across Valleys at 1 July 2004 ($million, nominal) Valley Users Government Total Border 1.8 0.4 2.2 Gwydir 11.7 37.0 48.8 Namoi 8.8 41.2 50.1 Peel 2.0 8.8 10.8 Lachlan 9.1 15.0 24.1 Macquarie 12.3 19.7 32.0 Murray 6.8 5.6 12.4 Murrumbidgee 19.2 19.8 39.0 North Coast 2.0 1.5 3.5 Hunter 8.5 7.7 16.2 South Coast 1.2 0.4 1.6 Total 83.5 157.2 240.8

State Water 05-06 Annual Report 45 Operating Licence 5. On asset maintenance State Water has mixed results, spending 0.3% on asset State Water delivers services under an Operating maintenance as a proportion of asset value, Licence granted by the NSW Government, which is which is lower than others, but is more available on our website. Details of State Water’s comparable when this fi gure is taken as a performance, relative to the requirements of the proportion of total revenue. The low value of Operating Licence for 2005/06 are outlined on pages maintenance as a proportion of asset value 11-13. for State Water might be explained because it is a bulk water service provider, whereas Benchmarking other water agencies also provide retail water services. During 2005/06, as part of the pricing determination process, Parsons Brinckerhoff conducted a general statistical benchmarking analysis, comparing the performance of the major bulk water industry Risk Management agencies. State Water is committed to risk management as an The performance indicators employed are grouped integral part of its operations, focusing on strategies under: to minimise risks to corporate goals and objectives. • system operations This strategy is incorporated into the Corporate Plan, business plans, internal audit plans and the training • business process program. • fi nancial viability The Board’s Risk Management Committee oversaw • asset management. the development of a Risk Management Manual and Their analysis showed that: Risk Register, which were endorsed by the Board in May 2006. The risk register includes assessment of 1. State Water performs well or better than the the level of risk of State Water programs, identifi cation industry average on the system operations of appropriate risk management strategies and performance indicators like security of supply, allocation of organisational accountability for supply management and metering. However, implementation of these strategies. on other system operations performance indicators, such as water trading market State Water has a senior manager, reporting to the liquidity and delivery effi ciency, it is diffi cult to CEO, responsible for organisational risk management form an opinion due to data limitations. systems and processes. Risk management is a 2. On the business management performance key driver for a number of State Water’s programs, measures: in the case of fi nancial ratios, including the audit of dam safety and maintenance with limited data, State Water performs well practices and the surveillance of dam structures. on current ratio and working capital turnover for 2004/05 but is behind its peers on cost In 2005/06 State Water developed its capital works recovery ratio. program using a risk management approach. State 3. State Water’s Lost-time to Injury Frequency Water also initiated a comprehensive review of its Rate (LTIFR), the occupational health and occupational health and safety policies to ensure safety performance measure, is behind its compliance with recent legislative changes and peers. instituted procedures to minimise adverse incidents.

4. On other performance indicators such as In addition, State Water manages compliance with ﬁ nancial viability, State Water seems to be statutory and regulatory obligations relating to the behind the industry average, only recovering environment to reduce the risk of poor environmental 90% in 2004/05 from the rates revenue or outcomes and to take advantage of opportunities water sales, while interstate organisations for favourable outcomes. In 2005/06, State Water recover most of their operating costs from ﬁ nalised its Environment Management Plan which rates revenue. underpins its commitment to the management of environmental risks.

46 State Water 05-06 Annual Report The organisation will continue to build a risk management approach into its business processes in This documentation and policy was piloted in the order to achieve better outcomes. Murray and Lower Darling Valleys with the full support of the Murray Lower Darling Customer Service Committee. This resulted in a number of stop work Compliance notices, penalties and several modifi cations to During 2005/06 State Water developed a metering sites, as outlined below. comprehensive set of compliance documentation to address overuse, meter tampering, water ordering, The new compliance policies and documentation will metering site safety, compliance with metering be introduced statewide for the 2006/07 season. standards and suspensions of both water access licences and works approvals. Murray-Lower Darling Compliance Action 2005/06 Issue Summary of Actions Overuse Two orders to stop work, fi ve volumetric penalties and one warning letter. Meter Tampering One volumetric penalty, two warning letters and one case still under investigation. Water Ordering No actions - policy to be implemented from 1 July 2006. OH&S Metering Site Safety Three offi cial directions to modify metering sites; all followed and no further action needed. Suspensions One suspension for outstanding water charges proposed, but deferred following negotiations with security holder.

Policy Development a concise and rigorous account of State Water’s approach to capital investment decision-making Policy development became a strong focus for processes. the organisation this year. Many of State Water’s corporate policies were carried across from the former The framework assists staff members in the evaluation Department of Land and Water Conservation and of alternative capital allocation scenarios, competing the Ministry of Energy and Utilities when State Water strategic options and alternative project solutions. corporatised in 2004. Those policies are now in need These principles should provide sound commercial of reviewing and updating to meet the Corporation’s outcomes for State Water and its shareholders and needs. customers.

Areas of focus for policy development this year Detailed and comprehensive business opportunity included Occupational Health and Safety, complaints investment strategies, policies and guidelines will handling, purchasing, sponsorship, travel, recruitment also be developed and the framework will support and selection, energy management, environment and State Water’s activities until these processes are asbestos management. implemented.

Capital Investment and Risk Facility Maintenance Optimisation Framework Management System (FMMS) State Water developed a Capital Investment and During 2005/06, State Water trained its users of Risk Optimisation Framework during 2005/06. The the Facilities Maintenance Management System framework is designed to provide a foundation for (FMMS) in using the new version, FMMS 4.1. State processes and controls used when identifying and Water Central Area’s training continued into the new appraising investment options. It also provides ﬁ nancial year. State Water also implemented a new

State Water 05-06 Annual Report 47 module, Certifi ed Items. Certifi ed Items will be used Manual was fi nalised. A Heritage Management Policy by Supervisory Control and Data Acquisition (SCADA) Statement was developed this year and the Heritage administrators following inclusion of the SCADA asset Asset Management Strategy fi nalised. Heritage register into FMMS in 2006/07. assessments were also completed for Hume Dam and Menindee Lakes. FMMS was implemented across South Area river storages and regulator structures in 2004/05, followed The environmental assessment protocols for project in 2005/06 by implementation throughout Central Area planning were streamlined this year. With the and the Fish River Water Supply area. development of the Environment Management Plan, there was also an increased awareness among staff of The FMMS monthly report to management was our environmental responsibilities as a State Owned expanded to include reports on details of outstanding Corporation. jobs that are outside the calculated tolerance zone. Memoranda of Understanding with the Department of Environment and Conservation and the Department Total Asset Management Plan of Primary Industries (Fisheries) (see page 81) (TAMP) have strengthened the relationships with those departments. Fisheries has also played an integral In 2005/06, asset management planning focused on role in the development of a fi sh passage prioritisation the development of portfolio risk analysis for large strategy to ensure any improvements are effi cient and dams. Compliance studies were progressed to revise cost-effective. the hydrology at large dams, with hydrology reviews for the remaining dams well advanced. An expert panel was formed this year to develop a strategic plan and a staged program to achieve dam State Water published draft Frequency and Number safety compliance for submission to the NSW Dams (F-N) curves in July 2005 for the previous round of Safety Committee. The MEERA (Modern Engineering hydrology reviews for Chaffey, Copeton, Keepit and Equivalent Replacement of Assets) and replication Split Rock Dams. A series of portfolio risk assessment valuations of assets were also updated. Titles for Land workshops were held this year to reassess the under Infrastructure were identifi ed at Toonumbar Dam probabilities of dam failure, in light of interim and and progressed at Burrendong and Copeton Dams. proposed upgrade works at seven critical dams (Blowering, Burrendong, Chaffey, Copeton, Keepit, Other initiatives in the organisation that have provided Split Rock and Wyangala Dams). Further draft F-N benefi ts in asset management planning include: the curves were published to establish the current risk further development of a risk management framework position at these critical sites. for river structures, the establishment of nine Technical Improvement Groups and the completion of a Capital During the year, progress was made in completing Investment and Risk Optimisation Framework to compliance studies to revise the seismicity at large compare capital investment options. dams. State Water also consulted international experts to conduct a workshop on earthquake assessment of its dams. This helped establish the future direction in stability reviews and improve the level of understanding of earthquake issues by employees.

A program was also started this year to revise State Water’s dam break studies, with Split Rock Dam the ﬁ rst study to be undertaken.

Further steps were taken this year towards compliance with the Heritage Act 1977. The draft Heritage and Conservation Register was submitted to the Heritage Ofﬁ ce and the Heritage Procedures

48 State Water 05-06 Annual Report State Records Act Implementation This year, State Water began implementing its records

State Water’s Lachlan Valley Drought Plan was recognised in the management program by separating its ﬁ les from DNR Premier’s Public Sector Awards. and a contract was awarded for the implementation of TRIM (Total Records Information Management) Premiers Award Nomination for Drought Plan software.

State Water Corporation was nominated for the 2006 All electronic plans were exported from the Tower Premier’s Public Sector Awards for its Lachlan Valley Database to TRIM and a test import was successful 2003/06 Drought Contingency Plan. for State Water Records Management data from DNR’s CARMS system to TRIM. The plan made the ﬁ nals in the ‘Environment and Natural Resources’ category of the 2006 awards and was one of 17 high quality nominations. A records management and TRIM training contract was also awarded this year, with State Water to move The plan enabled individuals and communities along to TRIM in its entirety in August 2006 and all staff to the Lachlan River to equitably share the limited water be trained. resources during the historic drought of 2003/06 and beyond. This year, State Records approved the State Water Disposal Schedule and Access Directions. The project was particularly distinguished by the extent to which the resource operator, resource manager and stakeholders were involved at all stages of the project life cycle.

Through the plan, the risks associated with the drought were clearly deﬁ ned and addressed with active mitigation and response programs.

The planning process also allowed involvement of varied and numerous stakeholders, including the broader community. This ensured that conﬂ icts between various water users did not escalate during times of water shortage.

The project improved public awareness of the importance of water resources and demonstrates how collective action can help to conserve water resources.

Central Area Operations Manager, Sri Sritharan said the plan helped extend water supply for essential requirements, including drinking water for people and stock, and to save permanent plantings.

“In the past, the plan has helped to address the basic needs in a more fair way as it aims to conserve water by changing the traditional water delivery operations.

“The plan aims to ensure long-term security of town water supplies, stock and domestic supplies and to ensure the basic rights of downstream communities,” he said.

Mr Sritharan said the plan was continuously reviewed and updated to best utilise available resources and to maintain the delivery of essential requirements to the Lachlan Valley. State Water 05-06 Annual Report 49 strategic asset management and investment

C ar co ar D a m d o w n s t re a m v ie w o f t h e

c o n c r e t e

a r c

d State Water 05-06 Annual Report a m Capital Works Progress Report State Water’s capital investment program totalled $13.6 million for 2005/06 and major capital works projects carried out by State Water in 2005/06 totalled $8.4 million, as outlined below.

Project Expenditure $000 Project Status Comment Blowering Dam 248 Stage 1 investigations Concept design is complete, and REF Upgrade nearly complete. for Stage 1 Works is forwarded to Environmental and stakeholders for feedback. Economic economic assessments are appraisal in progress and expected to be in progress (50% complete). completed 2006/07. Burrendong Dam 290 70% of investigations Finalising fl ood security options. Upgrade complete Investigation of cold water pollution strategies well underway. Chaffey Dam 438 95% of investigations Draft fi nal dam safety upgrade options with Upgrade complete and without augmentation selected. Copeton Dam 159 40% of investigations Review of risk assessment and dam Upgrade complete upgrade options study nearly complete. Preliminary environmental investigation 90% complete. Detailed geotechnical investigation begun. Keepit Dam 950 100% investigations One preferred and two other options for Upgrade complete dam safety upgrade and environmental 30% formal environmental improvements undergoing formal assessment complete environmental assessment. Split Rock Dam 128 25% of investigations Dam breaks study being investigated. Upgrade complete Need to further investigate options with potential staged program. Wyangala Dam 608 50% of investigations Program for 2006/07 will look at options Upgrade complete with potential staged program. Spillway modelling being undertaken. Major Periodic 1,874 continuous program Further details on project progress can be Maintenance found on pages 55-57. River Structures 2,254 continuous program Further details on project progress can be found on pages 55-57. Staff Housing 460 continuous program One house was completed at Wyangala Dam. Two contracts were let at Copeton Dam for the village water supply pipes and sewerage and effl uent disposal system. Parramatta offi ce 953 93% complete New offi ce accommodation needed as move DNR needed the space. Total 8,362

An additional $5.3 million was spent on replacement motor vehicles, plant equipment and other minor purchases to meet operational needs. Previously, motor vehicles had been leased.

State Water 05-06 Annual Report 51 capital works progress report Summary of Works Completed 2005/06. Three options are under assessment and all include a proposed multi-level off-take. By 30 June, As shown in the previous table, State Water is 30% of the environmental assessment of the fi nal in the process of completing upgrade projects at options was complete. The key issues between the seven major dams. These dams complied with the three options relate to differences in environmental engineering standards of the day when they were built damage and recreational impacts from very large to many years ago. They are also safe for day-to-day extreme fl oods versus cost. operations and can easily handle the worst fl ood of record. However, as our ability to predict rainfall and A review of potential fi sh passage past the dam and extreme weather patterns and events has developed, downstream weirs was also under consideration new dam safety standards and guidelines for extreme and will be determined as part of the environmental fl oods and earthquakes have been established. In assessment. A formal environmental assessment order to comply with the current requirements of report is being compiled and public consultation is the NSW Dams Safety Committee, State Water has planned for late 2006. embarked on these upgrade programs. Split Rock Dam Upgrade North Area State Water completed preliminary fl ood security Chaffey Dam Upgrade upgrade options and environmental and cultural During 2005/06, more than 50 long-term Chaffey assessments for the Split Rock Dam upgrade project Dam upgrade options were refi ned, evaluated this year, completing 25% of investigations needed for and progressively short-listed by the Community the upgrade. Reference Panel (CRP). As part of the portfolio risk assessment revision, a The study of the need for augmentation of Chaffey contract was let for a dam break study of the main Dam study is very close to completion and will form embankment and saddle dams A and B. This study the basis for determining whether the upgrade will includes investigations into the effect a cascade failure include an increase in the storage capacity to improve would have on Keepit Dam. water supply reliability to Tamworth city and to Peel Valley irrigators. Almost all investigations for the Copeton Dam Upgrade Chaffey Dam upgrade project were completed this Investigations at Copeton Dam progressed as planned year. this year and are 40% complete. Work has included a review of risk assessment, investigation into A small set of options covering dam safety and potential environmental improvements and preliminary augmentation of the storage, including possible environmental investigations for the short-listed dam staging, were selected by the CRP during the safety upgrade options. reporting period. In addition, the CRP considered a range of environmental improvements and developed State Water also commissioned a hydraulic model a strategy for incorporation with the rest of the study of potential discharges in the area immediately upgrade. downstream of Copeton Dam. This study was used to assess the fl ow impacts for the manageable set of Keepit Dam Upgrade options already completed. The Keepit Dam upgrade project entered the formal environmental assessment stage towards the end of

52 State Water 05-06 Annual Report Computational Fluid Dynamics (CFD) modelling of the State Water commissioned physical modelling of the existing spillway was completed this year. The CFD existing spillway to confi rm its hydraulic behaviour model will be useful in determining conditions under and to assess the hydraulic characteristics of the varying levels of fl ow, eg the possibility of raising proposed auxiliary spillway systems to pass full spillway bridges and the extent and degree of negative probable maximum fl ood. There was also a detailed pressures on the spillway crest. geotechnical investigation comprising geological mapping, pit excavation, seismic refraction survey and State Water also commissioned a Finite Element diamond drilling carried out at the proposed auxiliary Analysis (FEA) of the spillway bridges and piers. The spillway site. FEA was carried out as part of the structural adequacy assessment of the spillway gates and based on the seismicity review, which was also completed in South Area 2005/06. Blowering Dam Upgrade A two-staged approach has been proposed to achieve Geotechnical investigations to further understand the the objectives of the Blowering Dam upgrade. Options site foundation conditions such as joint details and for Stage 1 works were developed to immediately fault zones, leading to an understanding of channel reduce the risk to the downstream communities to a lining requirements, began late in the year. tolerable level, whereas Stage 2 will include long-term solutions for the full safety compliance of the dam.

Central Area The investigation works for Stage 1 are nearly Burrendong Dam Upgrade complete. The fi nal draft concept design report (Stage During 2005/06, State Water undertook further 1 Works) was being reviewed at year-end and will investigations into using a fl oating curtain around be fi nalised in conjunction with the Environmental the intake tower of Burrendong Dam to improve the Assessment outcomes. The draft Review of quality of water releases. Algae issues associated Environmental Factors was also being reviewed and with high level draw off from the reservoir were also fi nalised in light of the DPI’s compliance requirements. investigated. Economic appraisal along Treasury guidelines should The spillway hydraulic modelling was completed. be completed early in 2006/07. The communication This included investigation of ways of increasing the and consultation plan will be revised in light of fl ow through the existing spillway by the possible the project’s recent outcomes and developments. installation of a defl ector plate upstream of the Consultation with the community will continue in a bid spillway bridge. to gain valuable input into the project development process. As part of the structural adequacy assessment of the spillway gates, an FEA of the spillway bridges Lock 10 and piers was carried out, based on the results of a State Water completed the construction work seismicity review. associated with the upgrade of the navigable pass and new fi shway at Lock 10, Wentworth this year. State Water also awarded a contract to carry out Additional work was carried out to the weir to ensure further studies and geotechnical investigations to its long-term strength. State Water successfully enable the fi nalisation of the upgrade options for extended the Lock 10 Upgrade Project to include the passage of full probable maximum fl ood and the safety measures for the new fi shway, including resolution of piping issues at the crest. personnel safety covers.

Wyangala Dam Upgrade Lock 15 During 2005/06, 50% of investigations for the Investigations into the integrity of the lock and Wyangala Dam upgrade were completed. These weir at Lock 15, Euston started this year. These investigations included an FEA of the spillway bridges investigations should identify any deﬁ ciencies in the and piers, which was carried out as part of the structure that may need to be addressed in a future structural adequacy assessment of the spillway gates. upgrade as part of the navigable pass program This analysis was based on the seismicity review also along the Murray River. The problem of the stop-log completed this year.

State Water 05-06 Annual Report 53 dimensions will be addressed during the refurbishment Work commenced in May 2005 and is expected to be of the guides during the future upgrade. completed in the ﬁ rst quarter 2006/07.

Stakeholders, including State Water, have also been During the year, State Water and DoL chose a ﬁ nal looking into the possibility of raising the pool of Lock option for the upgrading of Moore Creek Dam and a 15. The outcome of this decision will inﬂ uence the detailed design was completed. DoL expects to call ongoing integrity investigations and the future upgrade tenders for the upgrade works in 2006/07. requirements. On behalf of DoL, State Water submitted a Development Application for Bethungra Dam to Junee Small Dams Shire Council in July 2005. This DA proposed to lower State Water continued to manage the surveillance, the Bethungra Dam wall by 2.9 metres. The matter maintenance and capital upgrade works for three had not been determined as at 30 June. prescribed dams (Bethungra, Moore Creek and Junction Reefs Dams) and eight other small dams Emergency rehabilitation work was undertaken at under a contract with the dam owner, the NSW Gallymont Dam to repair erosion of the downstream Department of Lands (DoL). toe of the dam.

The NSW Heritage Ofﬁ ce approved the application under Section 60 of the Heritage Act 1977 for the remedial works proposed at Junction Reef Dam.

Burrinjuck Cableway

54 State Water 05-06 Annual Report major periodic maintenance and river structures rehabilitation Summary of Works Completed A substantial amount of work was completed to remove willow trees in the mid-Lachlan streams. This Macquarie Valley also restored the channel capacity and improved the Automation of Bulgeraga Bifurcation and Gum Cowal riverine environment. Regulator has been completed, except for installation of the radio tower. Substantial progress was made Lake Brewster access roads have been resurfaced in automating Duck Creek Regulator, Crooked to provide all weather access to the structures for Creek Regulator, Gunningbar Weir and Gunningbar maintenance and operation. The spillway bulkhead Regulator. gate at Wyangala Dam was recoated this year and the protective coating of the downstream steel work Sand build-up in Reddenville Block Bank has been of three spillway gates was restored. A residence removed and fl ow in the creek during high fl ow events was also completed at Wyangala Dam to house the has been restored, including erosion repairs. North Assistant Offi cer in Charge. Marsh Bypass Channel has been de-silted to improve water delivery effi ciency, resulting in savings in At Carcoar Dam, the trash racks at the intake tower regulated water. and one fi xed dispersion cone valve were refurbished.

Work started on diverting the access road at Coastal Valleys Windamere Dam to avoid one of the rock fall areas During the year work was completed on a major and reduce the risks to employees and the public who rehabilitation of the outlet works discharge channel use the road. below Glenbawn Dam. Over the past three years, Lostock, Brogo and Toonumbar Dams have been Two 30 inch Ring Follower Gate Valves, one 60 inch undergoing 30-year maintenance cycles, while Hollow Jet Valve and one 30 inch Hollow Jet Valve Glennies Creek Dam has had a 20-year maintenance were refurbished at Burrendong Dam. Substantial cycle underway. The majority of this work was amounts of spalls in the spillway apron concrete were completed this year, with inspections and an overhaul also repaired. carried out of mainly mechanical and electrical items. This work has focused on the outlet works, such Lachlan Valley as valves, pipelines, intake structures and ancillary Automation of Bumbuggan Weir and Island Creek equipment. Some essential plant items were replaced Weir was completed this year, providing an opportunity this year and the Dam Safety Emergency Plan was to enhance effectiveness and efﬁ ciency in water tested for Glenbawn Dam. delivery. Construction of the vertical slot ﬁ shway at Island Creek Weir was also completed.

State Water 05-06 Annual Report 55 North Area real-time infl ow data. SCADA was also installed at The program of grit-blasting and painting river control downstream river gauges at Carroll, Gunnedah and gates and their hoist equipment moved to the Gwydir Boggabri to improve access to river fl ow information. Valley this year, with fi ve gates at Tareelaroi Weir and two gates at Combadello Weir repainted for the fi rst A lack of available skilled tradesmen and labourers time in their 30 years of operation. Mallowa Creek in the New England Region led to vacancies and had regulator gates and arms were also refurbished and an impact on the works program. Diffi culties recruiting painted. The refurbishment work was completed by an electrician at Keepit Dam also meant that some State Water’s local maintenance crew, while the grit SCADA works had to be deferred. blasting and painting of the gates was completed by the Copeton Dam crew. South Area The refurbishment of Colligen Creek Weir and Major restoration of the rock protection works Menindee Main Weir operating platform began this at Wallamore Weir in the Peel Valley and on the year and will be completed in 2006/07. Beavers downstream river bed and bank at Gunidgera Creek Weir stabilisation works were completed and Weir were completed. The level of vandalism also the potential for water savings in that creek system signifi cantly declined after razor wire fencing was are being investigated. Refurbishment options for erected at fi ve major weirs and their associated Balranald Weir are well advanced, as is the fi shway regulators. automation project.

At Keepit Dam, the spillway gate arms were repainted Several major maintenance activities are due and and the trunnion bearings regreased ending a three- innovative solutions are being used to minimise year refurbishment program by dam staff. With cost and environmental impacts and maximise Keepit Dam levels falling below the spillway crest, the effectiveness. Gate painting at Hay Weir preparation bulkhead gate guides were fully exposed and works is well advanced for completion during the 2006/07 were rescheduled to grit blast and paint the guides irrigation season. Several reusable aquadams have while the opportunity existed. Access roads at Keepit been purchased to avoid constructing earthen banks and Copeton Dams were resealed and staff houses across waterways. One has been successfully were repainted and refurbished at Keepit Dam. The deployed at Stephens Weir and at Hay Weir, and will ageing water supply and sewerage system serving be used to repair erosion at Yanco Weir. the staff housing and offi ce at Copeton Dam were There was an ongoing planning focus on Menindee upgraded. This allowed the two effl uent evaporation Lakes during 2005/06 with the initiation of the ponds to be decommissioned, with improvements to Menindee Lakes Improvement Project. The Project the environment. incorporates both asset and operational aspects, including the development of a comprehensive Baulks and trashracks from the multi-level intake Menindee Lakes Operations and Maintenance towers were repainted at Chaffey, Split Rock and Manual, participation in the Menindee Lakes Pindari Dams. The spillway hoist bridge equipment Environmental Impact Statement (EIS) review and at Copeton Dam was also painted. Safety audits of refi ning emergency fl ood operations. the overhead gantry cranes identifi ed a number of electrical defi ciencies which were rectifi ed at Chaffey, Improving the effi ciency of Menindee Lakes operations Pindari, Split Rock and Copeton Dams to comply with and security of supply remains an important issue for OH&S requirements. State Water. Whilst a range of proposed structures in the EIS will not provide any relief during the current The North Area continued to improve the reliability water shortage, they will afford substantial benefi ts to of communications to dam sites and to gain access customers in the future when implemented. to real-time data from infl ow and river gauging stations. At Pindari Dam, an internal optic fi bre network replaced the old copper cables, giving Spillway Gate Investigations greater reliability after lightning events. SCADA has State Water has fi ve dams that have spillway gates been installed at three critical fl ood infl ow stations with trunnion bearings. Four of the dams have radial to Copeton Dam, improving reliability and providing gates that lift up, at Wyangala, Burrendong, Copeton

56 State Water 05-06 Annual Report and Keepit Dams, while Burrinjuck Dam has sector Hydro Power Summary gates that drop down. The gates at these dams are between 30 and 60 years old. The gates are designed There are hydro-electric power stations on 10 of State to be operated under fl ood conditions, however it is Water’s 19 large dam sites, with a potential generation more common for them to be operated under test capacity of 248 megawatts of power. conditions. In 2005/06, the hydro station at Wyangala Dam The failure of a spillway gate at Folsom Dam in the recommenced operations after a two-year rest, due United States highlighted the potential for radial gate to the drought. Commissioning of the new Hydro B failure resulting from poorly maintained or designed station is now almost complete. gate trunnions and bearings. During 2005/06, State Water engaged Glen Hobbs & Associates to Ongoing drought conditions continued to delay the investigate and report on the adequacy of the trunnion installation of hydro power facilities at Glennies lubrication at the fi ve dams with trunnion bearings, in Creek and Windamere Dams as plant installation and accordance with the following scope: commissioning will be economically viable after the dam storage levels increase. • Review the lubrication adequacy of the trunnion bearings for the gates at Wyangala, Burrendong, State Water signed agreements during 2005/06 for the Copeton, Keepit and Burrinjuck Dams. development of a mini hydro power facility at Lostock • Report and, where appropriate, propose revised Dam, with transmission line work due to begin in early procedures or modifi cations to ensure adequate 2007. Draft agreements are currently being prepared trunnion performance. for potential development of hydro-power facilities at Chaffey Dam. The reviews consider all aspects relevant to the adequate lubrication of the trunnion bearings, Income from hydro-electric power generation in including bearing design, loading, age, operation 2005/06 was about $680,000, including site rentals. frequency, test operation, suitable lubricants (including Total generation amounted to 124 GWh, representing corrosion considerations and dissimilar materials), a saving in production of 122,140 tonnes of lubrication schedules and procedures, the lubrication greenhouse gases. system, and transmission of lubricant. Hydro power associated with irrigation releases is State Water also commissioned investigations on the environmentally-friendly, utilising the kinetic energy structural adequacy of all its radial gates, with the from discharges that would otherwise be wasted. bridges and winch support mechanisms under scrutiny Transmission losses are minimised when power can during the reporting period. These investigations be utilised locally and does not need to be transported did not include the gates at Keepit Dam, which were over long distances on the electricity grid. studied as part of its upgrade project. Hydro power operators only have opportunistic access The contract for these investigations was awarded to to discharges, when water is released from storages SunWater in 2004, with investigations on the gates to meet customer orders and comply with statutory completed in August 2005 and the bridge studies in requirements, including environmental fl ows. June 2006. Gate investigations comprised computer analysis, physical inspections and non-destructive testing. Studies on the bridges used the latest seismic information available. SunWater’s investigations concluded that all gates, bridges and winch support mechanisms satisfi ed current design standard requirements.

State Water 05-06 Annual Report 57 Power Station Locations Dam Year Installed Capacity (megawatts) Burrendong 1996 19 Copeton 1995 21 Glenbawn 1994 6 Pindari 2001 6 Hume 1957 60 Burrinjuck Upgraded 2002 28 Blowering 1968 80 Keepit 1960 6 Wyangala 1991, upgraded 2004 22.5 Toonumbar 2000 0.1 Total 248.6

Dennis Humphries and Tony Pithers at Copeton Dam

58 State Water 05-06 Annual Report SCADA Project Report State Water Supervisory and Data Acquisition Systems (SCADA) continue to improve the effectiveness and timeliness of day-to-day water There are 10 hydro-electric power stations operating on State Water delivery and asset management across the state. By dam sites, providing more than 248 megawatts of power. using appropriate technologies, SCADA has been able to maximise the beneﬁ t to users and the environment State Water reduces greenhouse gas during the extended drought. emissions In 2005/06 State Water continued to improve and The production of more than 120,000 tonnes of develop SCADA. Planning for major automation greenhouse gas emissions has been eliminated during works and upgrades was undertaken with North and the 2005/06 year due to the installation and running of hydro-electric power stations at State Water dams. Coastal Areas. New and competing technologies were investigated with a priority being SCADA design to Operation of these hydro-electric generators substitutes minimise legacy system impacts and risks. for the burning of thousands of tonnes of coal at thermal power stations and avoids the production of A CDMA 1X wireless network trial was undertaken, greenhouse gases. providing an independent SCADA wireless network capable of: linking SCADA servers; providing real-time There are now hydro-electric power stations on 10 data from SCADA to other business systems; and of State Water’s 19 large dam sites, which have a providing hydrographic data into HYDSYS directly. potential generation capacity of some 248 megawatts Other investigations into “computerless” SCADA of power. The hydro-power stations feed electricity into the NSW power grid, reducing the dependency on promise to provide cheaper and more reliable SCADA environmentally unfriendly sources of power generation. in upcoming and replacement systems.

The extraction of this energy not only has the environmental beneﬁ ts of renewable energy production, but also saves the erosion and scouring caused by high energy water discharges from dams.

Water is not released from storages expressly for the purpose of power generation. Power is generated when releases are made for water users and other statutory requirements, including environmental (riparian) ﬂ ows.

Hydro power is an environmentally beneﬁ cial method of power generation, utilising kinetic energy from water discharges that would otherwise be lost.

Currently agreements have been signed for the installation of hydro stations at three more of State Water’s dam sites, with development of hydro facilities being contemplated at a further three dam sites.

These are efﬁ cient sources of electricity for regional and rural NSW because transmission losses are minimised when power does not need to be transported over long distances.

Each megawatt of electricity generated at a hydro-electric plant prevents the production of the equivalent of about one tonne of carbon dioxide for each hour it operates.

Hydro power stations at Burrinjuck, Keepit, Copeton, and Burrendong Dams have a combined generation capacity of 74 megawatts of electricity – enough to meet the needs of more than 35,500 homes. State Water 05-06 Annual Report 59 skilled and dedicated people

Tr oy Sa nd s, Jo h n D e C a ta ld o a n d G le n n

T u l l y a t

S p li t R

State Water 05-06 Annual Report a m achievements

A number of programs were implemented throughout As a result State Water now has a new Vision, the year to address the following key focus areas Purpose, Corporate Values, Shared Personal Values, identifi ed for 2005/06: Critical Success Factors and Strategies that provide a clear focus for: • Developing a commercial culture • Encouraging staff commitment • Where State Water is headed • Succession planning • What State Water will achieve • Clearly articulating employment conditions • How State Water employees operate and • Collectively developing and working in a safe interact on a day to day basis. and healthy work environment. A number of initiatives were undertaken to ensure A staff survey was conducted in 2005 to assist in employee capability and activity is aligned to effective prioritising our key focus areas. The survey analysed execution of the Corporate Plan. A cross-section of the following: employees in each Branch was involved in developing branch business plans to provide further grass roots • Kinds of people (employee behaviour) input to strategies from year one of the Corporate • Where is State Water going? (strategic Plan and to convert the strategies into operationally alignment) effective activities. • Values for an effective organisation • Follow-up questions from 2003 survey. The on-line Employee Planning and Review system was structured to enable employees to take The survey attracted a 63.47% response rate with a accountability for, plan and manage their activities high level of qualitative responses provided. There and development in alignment with strategies from were 18 key recommendations based on the results of the Corporate Plan and branch business plans. The the survey in relation to staff development, knowledge system was set up for piloting and progressive roll out retention, alignment of activity with strategic direction during 2006/07. and staff motivation. The Management Team began a management and Improving internal communication and developing leadership development program to improve their our management and leadership skills were identifi ed capability to execute the strategic intent. The program as the most signifi cant areas for development by included an assessment of their capability by the employees. These areas have been developed in CEO, their peers and employees against benchmarks conjunction with the key focus areas previously for emotional intelligence and the corporate values. identifi ed for 2005/06. Individual development was then tailored to improving specifi c capabilities. Developing a Commercial Employees then participated in a series of half-day Culture workshops that built stronger awareness of and Redefi ning the strategic intent of State Water and commitment to State Water’s Corporate Plan, Code of communicating a number of key initiatives was the Conduct, Environment Management Plan, Enterprise focus for developing a commercial culture during the Agreements and Occupational Health & Safety. year. The workshops were very successful with 83% of employees rating them six or above (using a one-eight The Corporate Plan for 2006/09 was developed using scale) when asked whether the session was useful an iterative process of development, testing and fi ne and informative. The workshops also provided an tuning to ensure innovative input and commitment was opportunity for the Management Team to be more secured from the Board, Management and employees. visible at the front line improving communications and addressing feedback from the Staff Survey.

State Water 05-06 Annual Report 61 Encouraging Staff Commitment nine young professionals to the 2006 Institute of Public Adminstration of Australia CEO and Young The Staff Survey was conducted and the results Professional Breakfast Forum. Here the Young clearly indicated that State Water employees are Professionals had direct access to the CEO and passionate, have cohesiveness and respect in the opportunity to voice their opinions and receive their work teams and have a desire to improve the feedback about their ideas on change. State Water’s organisation across all areas. Young Persons Group is now established to initially focus on developing a mentoring program to enhance Re-defi ning State Water’s Vision, Purpose and Values succession capability. with signifi cant input from employees and developing strong working relationships were the key initiatives for building stronger commitment. The new values provide Clearly Articulating Employment the framework for employees to operate and interact Conditions on a day-to-day basis to maintain commitment to and passion for working at State Water. One hundred State Water invested signifi cant time and resources and twenty employees participated in a series of into successfully negotiating and implementing two workshops to enhance their understanding of the value enterprise agreements to cover all non-executive and challenges that a diversity of work styles bring employees. Following registration, the agreements to State Water. This understanding is being applied were discussed with employees at information by employees to build stronger working relationships sessions across State Water to improve employee and commitment leading to innovation and improved understanding of their conditions of employment. performance. Safe and Healthy Work Succession Planning Environment A numer of initiatives were implemented in 2005/06 State Water’s safety performance continued to to improve State Water’s succession capability, such improve during 2005/06 and there were no breaches as encouraging employees to take up relieving roles; of OH&S requirements or legislation. The focus establishing a knowledge library; and establishing a has been on improving systems, consultation and young persons group. benchmarking. Additional resources and focus were injected into OH&S with the appointment of an OH&S Enhanced internal marketing of temporary vacancies Coordinator in February 2006. and relief opportunities and a fi nancial incentive for Field Offi cers were introduced to encourage OH&S systems were improved with the substantial employees to step outside their regular roles and completion of a complete overhaul of OH&S manuals, functional areas. State Water introduced a policy policies and procedures. An additional Area OH&S whereby an internal expression of interest must be Committee was formed to improve consultation and called to fi ll any position that will be vacant for more communication in the Dubbo offi ce. All Area OH&S than four weeks. Thirty opportunities were advertised Committees continued to provide an effective forum for through this process in 2005/06. These two initiatives communication and regular workplace inspections. enabled employees to acquire new skills and knowledge and enhance their career opportunities, as well as strengthening State Water’s succession State Water is now focusing on addressing the three capability. targets from the NSW Government Public Sector OH&S and Injury Management Strategy 2005-2012: An online library was established on the State Water Injury Prevention; Reductions in the Cost of Claims; Intranet. The library improved access to technical and OHS and Injury Management Training. information and provided a forum where ideas were debated and exchanged. The library has The OH&S focus for 2006/07 is to improve our enhanced the transfer and retention of knowledge and in-house risk management audit techniques and information and improved innovation. reporting as well as the continued development of our OH&S management systems to ensure we meet or In order to create more opportunities for the exceed our OH&S targets. young professionals at State Water, the CEO took

62 State Water 05-06 Annual Report Lost Time Injury Frequency Rate 35.0 30.0

s worked 25.0 r u o h

20.0 n o i l l i 15.0 m

e n

o 10.0 / s e i r

u 5.0 j n I 0.0

Year Employee Statistics

Branch Employees North Area 62 includes Border, Gwydir, Namoi, Barwon & Peel River valleys Central Area 66 includes Macquarie, Lachlan, Belubula and Upper Darling River valleys

South Area 91 includes Murrumbidgee, Murray and Lower Darling River valleys, and the Menindee Storages

Coastal Area 27 includes North Coast, Hunter, Sydney, Snowy and South Coast River valleys

Strategic Asset Services 28 Technical Services 18 Information & Operations 25 Corporate Services 36 Strategic Policy & Compliance 6

Total 2005/06 359* Total 2004/05 320 Total 2003/04 253 * Actual staff numbers, including contractors and temporary staff. Effective Full Time (EFT) was 311.78.

State Water 05-06 Annual Report 63 Turnover The employee turnover statistic that is benchmarked Department of Natural Resources (DNR). In the against the Australian average is formulated by a past year, employee numbers have stabilised as combination of departures and arrivals at State Water. State Water nears its optimum staffi ng levels. This is Corporatisation had a signifi cant impact on staffi ng directly refl ected in the turnover statistics for this year, levels, with expansion needed to provide corporate as outlined below. services that had previously been provided by the

16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

Sick Leave The amount of sick leave taken per employee has continued a mild upward trend, as outlined below. remained below the Australian average, but has

Year Sick Days EFT Ratio Australian Average

2002/03 980 262.7 3.73 NA 2003/04 970 253 3.83 NA 2004/05 1195.7 287.13 4.16 NA 2005/06 1487.62 311.78 4.77 6.05

Investment in Training State Water increased its investment in training during This level of investment is in line with the 2005/06 2005/06 to develop our business planning processes, forecasted budget and has brought State Water closer management capability, professional expertise and to industry benchmarks. workplace safety.

Type of Course Expenditure $ 2004/05 Expenditure $ 2005/06 Board of Directors $16,395 $18,851 First Aid $3,253 $4,975 Management Development NA $39,986 Occupational Health & Safety $48,133 $77,170 Professional Development $31,975 $56,720 Systems & IT Training NA $7,397 Miscellaneous $33,709 $53,124 Total $133,465 $258,223

64 State Water 05-06 Annual Report Looking Forward to 2006/07 State Water has identiﬁ ed the following key focus areas for 2006/07 as critical to the overall success of State Water: • Developing management and leadership capability • Creating a commercial culture • Enhancing employee relations • Developing a workforce plan • Providing excellent human resources services • Providing a safe and healthy working environment.

State Water employees now have an easier method of evacuating from the Burrinjuck Dam cableway.

Upgrade of Burrinjuck Dam Cableway

Staff at Burrinjuck Dam have been dropping down a rope 80m to the ground as part of evacuation scenarios for using a cableway that spans across the deep gorge.

For many years, courses have taught people how to evacuate the skip in an emergency, by abseiling down on a rope – State Water’s South Area staff thought there must be a better way.

In an aim to simplify evacuation methods from the cableway and increase safety for staff, a Wollongong based company Risk, Response and Rescue devised a system that could be used with minimal training and was less reliant on people hanging precariously from a rope.

The German-built descending device can lower a person gradually from the skip to the ground, at about 0.8m per second, on an 11mm diameter rope.

The descending device has proven to be a much simpler system to use than the initial evacuation equipment, which has been in service since 1989.

As an essential part of building the dam nearly 100 years ago, a cableway was ﬁ rst built to span across the deep gorge. The cableway has seen continued use over the years for minor construction and maintenance activities at the dam.

The cableway provides access to the left abutment and the spillways and for dam inspections - with staff riding in the skip attached to the lifting hook of the cableway.

State Water 05-06 Annual Report 65 proﬁ table business growth

i n d a m

e r e

State Water 05-06 Annual Report a m bulk water pricing submission In August 2005, the Independent Pricing and The NWI also requires the states to report Regulatory Tribunal (IPART) issued a one-year price independently on benchmark measures for pricing determination on Bulk Water Prices for 2005/06. and service quality. The National Water Commission This determination required State Water to make a has not yet fi nalised these measures for the irrigation submission for Bulk Water Prices for 2006/07, and industry and State Water is continuing to assist in for an unspecifi ed period beyond this, by September their development. In the absence of a common set 2005. State Water provided a submission to IPART in of indicators, State Water’s submission contained a October 2005. range of performance indicators against which it will report annually to IPART. State Water’s submission embodied the principles of the 2004 National Water Initiative (NWI). The IPART issued its draft determination in June 2006. NWI aims to improve water management across the This was supported by a report from Halcrow Pacifi c country and encourages the adoption of best-practice Pty Ltd, who provided advice to IPART on the capital approaches. and operating expenditure for State Water in May 2006. State Water is a critical stakeholder in the implementation of the NWI, due to the potential for State Water has lodged the following documents with implications on service delivery and changes to water IPART: pricing. State Water’s submission to IPART on bulk • October 2005: the Bulk Water Pricing water prices incorporated NWI strategies relating to Submission the implementation of best practice pricing as follows: • April 2006: a response to the March 2006 • Achievement of lower bound pricing. The review by PB Associates of State Water’s submission sought full cost recovery in all submission regulated valleys within fi ve years and the • June 2006: a response to the draft Bulk phasing out of the Government operating Water pricing determination issued by IPART subsidy. in May 2006. • Continued movement towards upper bound pricing. The submission sought the State Water also actively participated in the various introduction of a Regulatory Asset Base, on hearings and workshops undertaken by IPART as part which a return on capital would be recovered of the consultation process. from customers, including the Government. • Implementation of consumption based pricing. The submission proposed increasing Statement of Corporate Intent the percentage of revenue recovered from State Water entered into a Statement of Corporate usage charges to 60% by 2008/09, with the Intent (SCI) for 2005/06 with its shareholding Ministers remaining 40% recovered from fi xed charges. as required under the State Owned Corporations Act 1989. State Water’s pricing submission also included its Customer Service Charter, committing State Water The SCI outlines reporting requirements to the voting to service delivery standards that are consistent with shareholders and Treasury. State Water submitted the the NWI. These include the development of national following reports in relation to the 2005/06 SCI: standards for metering and facilitating intra-valley • Half yearly report in accordance with the State water trades. Owned Corporations Act 1989 • June quarterly report

State Water 05-06 Annual Report 67 • Forecast ﬁ nancial statements to Treasury via Treasury Online Electronic System • Forecast of ﬁ nancial distribution and tax Boomi Diversion Weir was constructed in 1958 and plays an important equivalents (budget round forecasts). part in the development of water services in the North Area of the state.

The following table shows State Water’s ﬁ nancial State Water values its heritage performance in 2005/06, relative to the ﬁ nancial targets in its 2005/06 SCI. While State Water Corporation is a relatively new entity, its assets are not and they hold valuable historic links in the development of water services in NSW.

Financial Performance in State Water is the custodian of assets that collectively are thousands of years old. These assets play an 2005/06 important role in the communities they reside in, so SCI much so that State Water has established a Heritage Target Actual and Conservation Register to ensure their continuation for future generations. Earnings before Interest & Tax $8.0M $15.1M* At August 2005, State Water maintained, managed and Operating Profi t before Tax $5.1M $13.0M* operated $2.3 billion of assets. The key physical assets under the responsibility of State Water include: Target Dividend $3.6M $7.9M 20 large dams and water storages Return on Assets 1.8% 3.7% 1 small dam not associated with water delivery 11 small dams not associated with water delivery Return on Equity 1.6% 5.0% managed under contract 282 weirs and regulators to manage water fl ows *A windfall net movement in defi ned superannuation 139 associated structures, such as bridges, reserves of $5.8 million resulted in a much higher than culverts, levees, etc budget result for 2005/06. 222 buildings and residences directly associated with the operation of the major assets more than 200 buildings and residences not associated with water delivery.

State Water regards the management of its heritage assets as an integral and core part of its asset management and is committed to managing its heritage assets in accordance with all relevant NSW and Federal legislation, including the NSW Heritage Act 1978.

This commitment includes: the identiﬁ cation of all heritage items under the corporation’s ownership and/or control adopting and developing best practice guidelines, procedures, and systems appropriate planning, budgeting and provision of adequate resources developing and acquiring the necessary skills, staff training and staff awareness to ensure that all heritage assets are managed with due diligence to their heritage value.

State Water holds a wide variety of assets which have identifi ed and potential State or local heritage signifi cance. State Water has an ongoing program for the preparation of conservation management plans Wyangala Dam from lookout for its State signifi cant items, and to complete heritage assessments for any outstanding items in its ownership or control.

The register provides information on State Water 68 State Water 05-06 Annual Report heritage assets, which can be used for research, for public relations and for interpretation. The 2005/06 SCI developed performance standards and medium term goals related to each of the Critical Success Factors indicated in the following table. The table also shows actual performance in 2005/06 relative to these standards/goals. 2005/06 SCI - Performance Standards and Medium Term Goals Excellent Customer Service

Performance Standards Sub Category Performance Criteria /Goals Actual Information State Water will Information about water Fact sheets and price information provision communicate with prices posted on the posted on website within two – customers and stakeholders effectively State Water website days. stakeholders to and equitably, publishing within two working days be provided timely relevant information on of the determination and accurate the Internet for access by being published on IPART information customers. website. State Water will develop Procedures developed Water Trading - State Water and publish compliance, and published on the State published Water Allocation debt management, Water website. Assignment forms and water trading and water procedures on its website. restriction processes to inform all stakeholders Compliance - proposed of transparent decision procedures were presented to making and demonstrate Customer Service Committees procedural justice. (CSCs) and ﬁ nalised with amendments. These will be published on the Internet.

Water restrictions - restrictions imposed as part of the Lachlan Drought Contingency Plan, as negotiated with CSC and DNR and published in newsletters to customers.

Debt Management - Code of Practice and procedures on Debt Management developed in consultation with CSCs, and adopted by the Board in February 2005. Customer- friendly version available on website.

State Water 05-06 Annual Report 69 Excellent Customer Service continued

Performance Standards Sub Category Performance Criteria /Goals Actual State Water will treat No complaints received No complaints received. stakeholder information by State Water about with privacy and information being wrongly conﬁ dentiality, in released by staff. accordance with Freedom of Information legislation.

Best Practice Operations Performance Standards Sub Category Performance Criteria /Goals Actual Measure and State Water will work with No landholder complaints Best practice guidelines for monitor water customers to ensure that received by State Water. entering properties are issued usage - Meter when entering properties by each industry and followed Reading to read and inspect by Customer Service Offi cers. meters, our staff do so with No reported instances of non- minimal disruption and compliance. impact. Business Operation State Water will develop Best practice to be Developed Risk Management to be effective and protocols for adopting Best identifi ed and implemented Manual and Risk Register. effi cient, in line with Management Business in four business processes. Developed a Capital Investment industry practice Practices. and Risk Optimisation Framework. Implemented a new module in Facilities Maintenance and Management Systems. Developed and adopted an Energy Management Policy.

State Water to continually Water delivery and revenue New operational effi ciency review and increase maximised. performance indicators drafted operational effi ciencies in 2005/06 for implementation to maximise the delivery in 2006/07. State Water is of available water to working with CSCs to propose customers consistent improvements in water ordering with the Water Sharing procedures and compliance Plans in order to maximise actions to improve operational revenue. effi ciencies.

Regulatory State Water will meet 95% of regulatory Progressively implementing Compliance to regulatory compliance compliance targets met. systems to achieve full regulatory acceptable level targets. compliance. Annual report to of risk IPART against the requirements of its Operating Licence available on website.

70 State Water 05-06 Annual Report Strategic Asset Management and Investment

Performance Standards Sub Category Performance Criteria /Goals Actual Performance to State Water will provide Compliance with works In accordance with the IPART agreed levels of asset management approvals and within determination, State Water service services at effi cient cost as budget. embarked on a program defi ned by inter-valley and to benchmark inter-valley industry benchmarks. performance. This program, due in July 2007, will compare business units’ costs in areas such as water delivery and staffi ng and will identify trends and anomalies, as well as assist in rolling out best practice operations.

State Water will manage Develop and implement Finalised draft Section 170 asset maintenance and plans to preserve assets Register, which identifi es renewal to provide assets with identifi ed heritage assessed heritage signifi cance of in a state that are ‘fi t for value. assets. purpose’. A Heritage Asset Management Strategy was developed, outlining the ongoing processes for identifi cation, planning and implementation of heritage management for the organisation. Both documents submitted to the NSW Heritage Offi ce for feedback and comment. State Water will Annual maintenance and demonstrate compliance surveillance audits undertaken with best asset in accordance with Dams management standards. Safety Committee (DSC), Australian National Committee on Large Dams and Treasury requirements. Dam Safety Emergency Procedures progressively updated and tested in accordance with DSC and State Emergency Services requirements.

State Water 05-06 Annual Report 71 enhanced riverine environment

D o w n s tr e a m o f B u r r e n d o n g

a m

t l State Water 05-06 Annual Report e t s achievements

State Water’s most signifi cant environmental In partnership with NSW Irrigators’ Council and achievement this year was the publication of its Siemens, State Water lodged a joint application for fi rst Environment Management Plan (EMP). This National Water Initiative (NWI) funding: to improve fi ve-year plan was developed in consultation with metering and monitoring of water extraction; to key stakeholder groups and addresses all the improve accounting for water; and to increase requirements set out in State Water’s Operating operational and water use effi ciencies. State Licence. Activities this year concentrated on Water also took the role of lead agency for an development of the EMP, consultation with staff and NWI funding application for Lake Brewster, with stakeholders and drafting the mechanisms to allow the Lachlan Catchment Management Authority implementation of the Plan. and Lachlan Valley Water. Both applications will be considered by NWI during the latter half of 2006. The EMP also includes an Energy Management Policy and an Environment Policy, both of which were In other environmental initiatives, the Capital adopted by the Board this year. These policies provide Investment Framework now includes environmental strategic direction in these areas and will help provide investments and the DNR was commissioned to guidelines for implementing the EMP. develop operating protocols for dams with cold water pollution facilities. State Water made signifi cant progress in strengthening its relationships with other agencies this year, to the benefi t of its environmental management Key Performance Indicators initiatives. A Memorandum of Understanding (MoU) • Monitoring of new fi shways which allow 510km of with the Department of Primary Industries (DPI) was open river for native fi sh movement. fi nalised in June 2006. This is further to the MoU with • $220,000 spent on removing willows from the Department of Environment and Conservation approximately 20km of river. that was fi nalised in November 2005 (see page 81) • More than 2,500 hectares of aquatic habitat and negotiations towards an MoU with DNR. These managed for protection. MoU help defi ne best practice in environmental management and support cooperative relationships between the agencies.

By developing partnership arrangements with the environmental regulators, State Water made extensive progress in ensuring that environmental health is integrated into its operating and investment practices this year. For example, State Water worked with Fisheries to gain concurrence and approval for more than 20 programs under the Fisheries Management Act 1994 this year. These projects included: the monitoring of new ﬁ shways; weir repairs; weed, snag and silt removal; and vegetation regrowth management plans.

State Water 05-06 Annual Report 73 area initiatives

Central Area After nearly two years of no fl ows to the Macquarie Marshes, about 154,470ML was delivered during In the past year, Fisheries was involved in monitoring 2005/06. Of this, 83,780ML was successfully delivered the movement of fi sh through fi ve fi shways that were between October and December 2005 and accounted constructed during the past three years. Studies as environmental water allowance under the rules of show that both large and smaller fi sh are successfully the Water Sharing Plan. State Water Central Area is fi nding their way upstream through the modifi ed rock involved in the Environmental Flow Reference Group ramp fi shways at Duck and Crooked Creeks. The in an advisory capacity and has provided timely vertical slot fi shways at Warren and Gunningbar and appropriate advice leading to the delivery of and Bumbuggan Weirs have proven to be effective environmental fl ows. for the migration of larger fi sh. However, there are inconsistent results for the migration of smaller For the fi rst time in the regulated history of the species. Cudgegong River, about two gigalitres of planned environmental water was released from Windamere Macquarie River Dam. The release under the Water Sharing Plan rules was made for the benefi t of the riverine environment in four events during infl ows to Windamere Dam.

In the Lachlan, downstream infl ows allowed the delivery of 25,770ML for the benefi t of the general riverine environment below Lake Brewster and the great Cumbung Swamp. In addition, about 11,500ML was delivered to achieve specifi c environmental outcomes, including successful colonial waterbird breeding activities in Merrowie Creek and Lake Brewster.

The preliminary designs, cost estimates and the cost benefi t analysis for the proposed water quality improvement works at Lake Brewster were completed this year. An application has been lodged with the From these monitoring results, it appears, all of the National Water Commission, seeking funding for fi shways are passing the size classes of fi sh for which construction work to supplement the contributions they were designed and are operating effectively. from State Water, Lachlan Valley Water and the Island Creek Fishway is now under construction. It Lachlan Catchment Management Authority. The should be commissioned in late 2006. proposed work is to achieve improvements in the quality of discharged water from the lake, to maintain A substantial amount of work was completed to the lake as an en-route storage and to gain hydraulic remove willows along 20km of mid-Lachlan streams effi ciency in operating the lake. this year to restore the channel capacity and improve the riverine environment. This has improved water State Water has actively contributed as part of the delivery and operational effi ciencies. Continuing inter-agency advisory group in identifying wetland removal of willows will reduce erosion of stream banks water saving projects for investigation. This year, State and provide an opportunity for native fl ora and fauna Water provided information for modelling, reviewing to re-establish. modelling output, and in the mapping of willow infestation in the lower Macquarie Valley.

74 State Water 05-06 Annual Report Coastal Area Protocols were developed this year for the operation of the intake towers at Glenbawn and Glennies Creek Dams, to mitigate cold water pollution releases. Representatives from the Coastal Area continued to represent State Water on the Cold Water Pollution Inter-Agency Working Group.

The were no events to manage for the Hunter River Salinity Trading Scheme due to the severe drought conditions experienced in the Hunter River.

Manilla Weir North Area State Water delivered supplementary environmental fl ows in accordance with the Gwydir Water Sharing Multi-level off-takes were operated at Split Rock, Plan in July, September, December, January and Chaffey and Pindari Dams, with trash-rack positioning February. Tributary environmental fl ows were also determined by State Water’s Water Quality Offi cer. delivered to the Gwydir wetlands throughout the year. State Water continued its involvement in the Gwydir Environmental Contingency Allowance Operations Pindari Dam environmental releases were made in Advisory Committee, providing advice to the accordance with the Environmental Impact Statement committee from a water delivery perspective. rules, with stimulus fl ows released in July, October and May. Asset management and maintenance projects in the North Area were used to trial a new, environmental State Water successfully managed supplementary assessment process in 2005/06. The mini-REF fl ows in July and December by ensuring that the (Review of Environmental Factors) concept aims environmental share of the surplus water was to streamline the assessment process required preserved in accordance with the Namoi Water to meet our responsibilities under Part Five of the Sharing Plan. Environmental releases from Keepit Environmental Planning and Assessment Act 1979 Dam maintained end-of-system fl ows at Walgett. The and the Fisheries Management Act 1994. This water was delivered in July 2005, August 2005 and process allows State Water staff to internally assess June 2006. the environmental impacts associated with small activities in conjunction with DPI, easily record and document the assessment process and save time and money. Examples of these projects include: Mollee Weir downstream rock protection works, Tyreel Weir de-silting works and Tareelaroi Weir rock protection works. Valuable feedback was provided from North Area staff before the practice was rolled out for use by the other Areas.

South Area South Area complied with the Water Sharing Plan’s recommended releases and variances, as advised by DNR for environmental ﬂ ows (variance in Lower Gwydir Riverlet Darling). Operations also continued to comply with the Burrinjuck Dam plan for translucent and transparent releases, with DNR auditing the releases.

State Water 05-06 Annual Report 75 In a bid to reduce the impact of operations on the environment, an aquadam was used during maintenance and remedial works at Hay and Stevens Weir (see page 96). Work on developing the foreshore management plan for Hume Dam also continued this Beavers Creek before the refurbishment works were undertaken. year to ensure sustainable use and access to the heavily used foreshore lands. Regeneration of Beavers Creek

Extensive preparatory work was undertaken with A refurbishment project at Beavers Creek Weir has not Fisheries this year, to develop a South Area fi sh only improved the reliability of water supply to irrigators passage strategy. This included a workshop to scope and the safety conditions for State Water staff, but also the priorities and a draft strategy that was circulated the ecology and riverine environment of the creek. for comment. Work was also ongoing to automate the The project involved a complete refurbishment of the Balranald Weir fi shway. weir and included repairing concrete cracks on the concrete cap and downstream apron, fi lling scour holes In 2005/06, State Water also worked with DNR upstream and protection of the right and left riverbanks wetlands offi cers to promote the best outcome for the downstream of the weir. one event in the South Area that resulted in signifi cant wetland inundation. It involved discussion with the As part of the project, State Water revegetated the site irrigation corporations to defer extraction to maximise and planted more than 220 native trees and shrubs, the peak as it travelled down river. An event in including river red gums, river sheoaks, silver wattles Wanganella Swamp in November and December also and bottle brush. led to successful bird breeding. The work was undertaken inline with the Corporation’s Environmental Management Plan, which details how State Water also continued to be involved in the operations are to be carried out to reduce the impact on Environmental Water Allowance Reference Group and the natural environment. an associated technical advisory group that will advise on the release of the environmental water allowance A number of willow trees were also removed from the under the regulated Murrumbidgee Water Sharing creek, as they deoxygenate the water through leaf fall Plan. into the river which can have a detrimental effect on native species.

A number of willow trees were removed from the bed and bank of Beavers Creek after tree roots were found clogging the waterway. These blockages can increase problems with fl ooding as it restricts the amount of water fl ow. The roots of the willow tree also reduce the habitat needed for native fi sh.

The completion of this project has restored the hydrological regime and ecology of the creek, improved the reliability of water supply for stakeholders and resulted in water savings that can be banked for environmental ﬂ ows.

Beavers Creek after the refurbishment with Willow Trees removed which were clogging the waterway.

76 State Water 05-06 Annual Report environment management plan State Water fi nalised its inaugural EMP in April 2006. Environmental protocols and The plan outlines State Water’s direction, strategies and targets for environmental management for 2005 to procedures streamlined 2009 and is available on the State Water’s website. State Water has further developed its Environmental Assessment Procedures and Approvals process State Water ensured that the valuable comments during the reporting year. Assessment procedures are from key stakeholders were considered in the EMP tailored to each activity, improving the effi ciency of the development process and fi nal document. The project planning and approval process. It is planned consultation and public exhibition process incorporate for fi nalisation, followed by staff training in September comments into the plan from key environment 2006. regulators, Catchment Management Authorities, irrigator groups, and environmental and non- government organisations such as the WWF (World Wildlife Fund) and Inland Rivers Network.

Each State Water Area now has an action plan to guide the EMP’s implementation. This process will ensure valley-specifi c issues are identifi ed, strategies developed and activities implemented to contribute to meeting the state-wide targets identifi ed within the EMP. A number of EMP targets have been met up to the end of June 2006. These include: • Development of a State Water Land Management Policy Bumbuggan Goobang • Completion of a Heritage Management Strategy • Submission of a draft Heritage and Increased staff awareness and Conservation Register to the Heritage Offi ce • Staff training on the EMP and what it means education for them During 2005/06, staff awareness and education • Establishment of a Community Consultative regarding State Water’s environmental responsibilities Committee has continued to improve. State Water’s continued • Commencement of implementation of a wide good relationship with DPI (including Fisheries), area network for improved communications. through the Liaison Offi cer process, has contributed greatly to this process.

State Water 05-06 Annual Report 77 environmental research, planning and investigative projects

Burrendong Dam Draught Curtain Thermodynamic Storage State Water, in conjunction with the NSW Department Modelling of Commerce, continued to investigate the viability of the innovative, suspended fl oating curtain concept to As part of the Keepit Dam Upgrade Project, mitigate cold water pollution at Burrendong Dam. State Water is investigating the development of a fully-automated multi-level offtake mechanism to The fl oating curtain is innovative for its new design, improve the quality of water releases. The proposed new technology and, at this early stage, its cost- mechanism is innovative and the most cost-effective effectiveness. Key results in early testing have design. It involves modifying or retro-fi tting the existing confi rmed that such a curtain is structurally feasible intake towers with a roller door design. and the evolving concept designs have overcome issues of wave action and cyclic stresses. The next To determine the likely performance of this new step is to identify the performance and expected mechanism, State Water, in conjunction with Manly ecological improvements the curtain would allow at Hydraulics Laboratory, has undertaken considerable Burrendong Dam. modelling exercises to understand the thermodynamic behaviour of the water in the Keepit storage. The outcomes of this modelling are improving the Cold Water Pollution Group knowledge of how storages behave over a range of heights and discharge volumes, as well as the ability State Water is a key member of the newly formed or constraints associated with achieving optimum Cold Water Pollution Inter-Agency Group. This group releases. has been established to provide a forum to coordinate a whole-of-government response to the cold water The upgrade project is currently being assessed under pollution issue and oversee the implementation of the Part 3A of the Environmental Planning and Assessment State Government’s Cold Water Pollution Strategy. It Act 1979 and includes the proposed multi-level offtake is working towards an investigative and capital works component. If approval is granted, State Water will program to mitigate cold water pollution at high priority approach DNR to assess the design and resulting cost dams across NSW. benefi ts before requesting approval from Cabinet. The group is also developing conditions which will form part of the Water Supply Works Approvals for those Prioritisation of weirs and fi sh dams that can actively manage releases to optimise temperature under the Water Management Act 2000. passage strategies As part of this group, State Water is developing key During 2005/06, State Water, in conjunction with initiatives and programs for the mitigation of cold water DPI (including NSW Fisheries), began developing pollution at its storages over the next 10 years. a prioritisation tool to identify key sites suitable for

78 State Water 05-06 Annual Report fi sh passage remediation. The outcomes of this The parameters measured are: process will be used to develop 10-year fi sh passage • depth, dissolved oxygen, temperature, programs for each valley. These programs will provide electrical conductivity a strategic, cost-effective approach to improving fi sh • total nitrogen, total phosphorus, turbidity, pH, passage past State Water’s structures. electrical conductivity • major ions Improved protocols for • algae. temperature management During the past year, interim NSW guidelines for cyanobacteria (blue-green algae) were introduced. As infrastructure this change occurred mid-way through the year, this State Water, in conjunction with DNR, is nearing year’s reporting was based on the old, more stringent completion of formalised operational protocols for the criteria. seven State Water dams which have the capability to selectively withdraw water from the water column: During the past year signifi cant (red alert level) blue- Brogo; Chaffey; Glennies Creek; Glenbawn; Pindari; green algae outbreaks occurred at 12 reservoirs. Split Rock and Windamere Dams. These protocols Minor outbreaks (orange alert level) occurred at 14 incorporate the workshop outcomes developed under reservoirs. No fi sh kills were detected at any State the then Department of Land and Water Conservation Water reservoirs. Envirofund project. Due to the continuing drought over much of the state, no signifi cant infl ows were recorded at any Erosion and sediment transport of the major reservoirs, except Brogo, Lostock and Toonumbar Dams. As the period of low rainfall during extreme fl oods continues there is a possibility that the quality of water State Water, in partnership with expert hydrologists, in the reservoirs will deteriorate, unless there are geomorpholgists and soil scientists, began a signifi cant infl ows. project this year to examine the likely erosion and sedimentation impacts associated with extreme Fish River Water Supply conducts algae counting on a fl ood events. As part of the Keepit Dam Upgrade fortnightly basis, depending on conditions. State Water Environmental Assessment process, this exercise is proposes to conduct sediment sampling at Oberon aiding the option evaluation and impact assessment Dam in the future. procedures.

Water Quality Monitoring Program State Water undertakes its Water Quality Monitoring Program in order to meet the targets of the State Water Environment Management Plan. It monitors the quality of water stored in all the major reservoirs, except Blowering Dam.

Water sampling is generally undertaken on a monthly basis, unless circumstances require more frequent sampling, such as during a blue-green algal outbreaks or when a reservoir turns over during autumn. State Water employees collect that data under a contract arrangment for analysis by DNR.

State Water 05-06 Annual Report 79 supportive stakeholders

Field days are a go od opp or tun ity fo r S ta te W a te r to

in te ra c t w i th c u s to m e r s a n d

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l d State Water 05-06 Annual Report e r

. achievements

State Water is working closely with its stakeholders, Part 3A of the Environmental Planning and including the development of Memoranda of Assessment Act 1979 and DEC is a key regulator Understanding (MoU) with various Government in this process. agencies, in keeping with the requirements of the • DEC has continued to be involved in the Chaffey Interim Operating Licence. Upgrade Community Reference Panel which has been involved in working through dam safety upgrade and augmentation issues for State Memoranda of Understanding Water. Under the Operating Licence, State Water is • Information was exchanged with DEC during required to enter into MoU with the Departments the de-silting work on the North Marsh Bypass of Environment and Conservation (DEC); Primary Channel. The North Marsh Bypass Channel is Industries (DPI); and Natural Resources (DNR). The used to deliver water for stock and domestic following progress has been made on the MoU: uses to landholders located downstream of • MoU with DEC, signed on 2 November 2005 the Macquarie Marshes from Miltara to the • MoU with DPI, signed on 23 June 2006 Barwon River. DEC also assisted in resolving • MoU with DNR, expected to be signed in July environmental issues post-construction at the 2006. channel. State Water is currently developing operational principles for the channel with DEC. All MoU are available to the public on State Water’s • DEC participated in an inter-agency meeting, website. along with DPI and Carathool Shire Council, to advise DEC’s requirements for the Environmental Impact Assessment for the Lake Brewster Water Department of Environment and Quality Improvement Project. Conservation • State Water consulted DEC on fl ows to the environment in the Lachlan Valley and, in The MoU with DEC provides the basis for cooperative particular, environmental contingency fl ows to relations between DEC and State Water in fulfi lling support bird breeding activities in Lake Brewster their responsibilities, including the protection of water and Merrowie Creek. quality and ensuring environmental sustainability. The • State Water consulted DEC following the MoU recognises DEC’s role as the environmental acquisition and declaration of Yanga National regulator and agency responsible for environmental Park by DEC. Discussions have related to the protection and conservation of natural and development of the Lowbidgee Water Sharing cultural heritage. It also recognises State Water’s Plan and Yanga Wetland Management Plan. responsibility to address the water quality, river health and aquatic biodiversity impacts of its operations. Department of Primary Industries State Water has worked with DEC on number of State Water has had an MoU with NSW Fisheries for projects, in accordance with the MoU: the past three years, resulting in the development • DEC provided input to the development of State of an effective working relationship between the two Water’s Environment Management Plan and organisations. With the amalgamation of Fisheries into commented on the draft document. DPI, State Water has committed to establishing these • DEC has continued to be involved in the Keepit relationships with all arms of the new department. To Upgrade Community Reference Panel, assisting this end, a new MoU was signed on 23 June 2006. State Water in fi nalising upgrade options and The purpose of the MoU is to serve as the basis providing expert advice on aboriginal and for cooperative relations between DPI and State threatened species issues associated with the Water in fulfi lling their responsibilities, including the project. This project is being assessed under protection of water quality and ensuring environmental

State Water 05-06 Annual Report 81 sustainability. The MoU recognises DPI’s role as • Junctions Reef Dam wall repair the agency responsible for fi sheries management in • North Mash Bypass Channel (Macquarie NSW and addresses aquatic habitat and fi sh passage Marshes) desilting impacts of State Water’s operations and information • Island Creek Weir Fishway construction sharing arrangements. In addition, the MoU • Lake Cargelligo water recovery recognises the role of DPI as the agency responsible • Repair and removal of cumbungi and for primary industry and agriculture management. regrowth in the weir pool at Angledool Weir • Removal of regrowth vegetation in the weir State Water and DPI also entered into a three-year pool at Bengate Weir Service Level Agreement (SLA) on 23 June 2006, • Removal of regrowth vegetation in the weir with annual renewal at the end of this period. The SLA pool at Collarenebri Weir indicates which services are to be charged on a fee • Repair and regrowth management at for service basis, as well as the services that are to be Goodooga Weir exchanged freely during routine dealings between the • Tareelaroi Weir repair works parties. • Tyreel Weir desilting project • Gunidgera Weir repair works At the start of each fi nancial year, State Water holds • Old Man Creek desilting and snag an annual report meeting with DPI to discuss previous management. year’s outcomes and upcoming projects and priorities. The DPI (Fisheries) Liaison Offi cer discusses Under the SLA, DPI provides an annual report to individual State Water works programs and the State Water advising statistics on key performance inputs required by DPI with State Water area-based indicators (KPIs) aimed at determining the extent of employees. positive environmental impacts associated with State Water’s works. DPI’s annual report for 2005/06 is State Water worked extensively with DPI during expected to include a report on the following KPIs: 2005/06 on the Keepit and Chaffey Dam Upgrade • Total number of kilometres (upstream and projects as follows: downstream) opened up to the free passage • DPI has been heavily involved in the of native fi sh. Continued free passage of Community Reference Panels for the Keepit native fi sh occurs through the Warren, and Chaffey Dam Upgrades, helping State Gunningbar, Duck and Crooked Creek and Water in the options development process. Bumbuggan Weirs fi shways, totalling 510km. • State Water worked extensively with DPI to These fi shways continued to be monitored for investigate and develop a potential fi shway the effectiveness in 2005/06. past Keepit Dam. This process has involved investigation of the technical feasibility and • Removal of willows. $220,000 was spent the expected functionality and performance of in the mid Lachlan removing willows from a fi sh lift past the dam wall. approximately 20km of river length. This has improved water delivery and operational During 2005/06 State Water has been working closely effi ciencies. with DPI, in accordance with the MoU, to obtain • Area of aquatic habitat managed for concurrences and approvals under the Fisheries protection during State Water works, in Management Act 1994 for State Water’s works accordance with Fisheries Management Act program involving in-river works. Projects for which 1994. As part of the projects listed above, State Water obtained, and adhered to, approval 2,527 hectares were managed for protection conditions include: during 2005/06 as part of State Water’s works • Continued monitoring of new fi shways program. at Warren, Duck Creek, Crooked Creek, Gunningbar and Bumbuggan Weirs State Water and DPI are working to develop a • Windamere Dam access road realignment prioritisation process to identify priority fi shway sites • Fish River dredging within each valley and establish a potential trade-off • Repairs at Yanco Weir policy to ensure best environmental return for money • Repairs at Worronga Weir spent.

82 State Water 05-06 Annual Report Department of Natural Resources The North Marsh Bypass Channel was upgraded in consultation and support from stakeholders to improve water fl ows. The MoU with DNR provides the basis for cooperative Cooperation sees North Marsh Bypass Channel relations between DNR and State Water in fulfi lling their responsibilities, including water management and upgraded ensuring environmental sustainability. Urgent maintenance works were undertaken in the Central Area in 2005 with the removal of silt up to 1.3m deep The MoU recognises DNR’s role in regulating water along the North Marsh Bypass Channel in the Macquarie access, use and management and State Water’s role Marshes. in delivering water and managing assets. It addresses the coordination of functions and associated The 18.4km channel on the eastern side of the Marsh responsibilities between DNR and State Water, carries surplus fl ows to the lower Macquarie River for stock including arrangements in relation to information and domestic purposes. sharing and the making and announcements of available water determinations and controlled fl ows. About 13km of the channel runs through the Macquarie Marsh nature reserve, with the rest through private landholdings. Until the desilting, it took up to 10 days for State Water is working with DNR to defi ne roles a release of 150ML per day at the entrance to exit a mere and responsibilities between the two organisations 10ML at the bottom. regarding functions such as compliance, crediting of water accounts, supplementary water allocation, water State Water, in conjunction with the Macquarie-Cudgegong quality monitoring and management. Customer Service Committee, convened a meeting with representatives from the Department of Environment State Water is a key participant in the Cold Water and Conservation; the Department of Primary Industries, Pollution Inter-Agency Group on which DNR, DPI and including Fisheries specialists; Department of Natural DEC are also represented. Resources and the Central West Catchment Management Authority. Local landholders with an interest in the works also attended. State Water participates in several interagency committees on which DNR is also represented, All parties recognised the need for interim works to including the Water Chief Executive Offi cers’ improve water delivery operation effi ciencies, while a long- Committee and the Natural Resources and term solution was investigated. Environmental approvals Environment Cluster Group. were granted by the key environmental agencies to desilt the channel to improve water fl ows down the channel and In addition to the MoU with DPI, DEC and DNR, which decrease transmission losses. are required under State Water’s Operating Licence, an MoU has been developed with the Department of As the Macquarie Marshes is a recognised Ramsar Lands. Wetland, any proposed work is carefully carried out. With the support of the Macquarie-Cudgegong Customer Department of Lands (DoL) Service Committee, State Water met with all stakeholders to reach a consensus to complete the project. A number of service agreements between State Water and DoL are in effect: State Water addresses the environmental impact of changes or variations to fl ow regime, through consultation • General Service Agreements for 2005/06 for and cooperation with key regulatory agencies. Any the minor maintenance and surveillance of all proposed variations to fl ows require consideration of DoL small dams were signed by DoL on 13 environmental impacts and approvals from regulators. July 2005 and 15 August 2005 respectively. • Revised Project Management Service Through Memoranda of Understanding (MoU) with the key regulators, State Water maintains supportive, cooperative Agreements for Bethungra, Moore Creek and and mutually benefi cial relationships that ensure that the Junction Reefs Dams were signed by DoL on environment is considered. 23 May 2006. Nearly 19km of the North Marsh Bypass Channel was desilted to allow improved water delivery operation effi ciencies.

State Water 05-06 Annual Report 83 The above agreements are in addition to the Specifi c Hunter Salinity Trading Scheme Service Agreement to develop, update and issue Dam Safety Emergency Plans for Bethungra, Junction State Water is contracted by DNR to maintain and Reefs, Moore Creek and West Gosford One and operate the Salinity Trading Scheme model and to Two Dams, and test and update the Bethungra early produce the River Register and publish it on the warning system, signed before 2005/06. internet. The River Register contains information such as total allowable discharge (the amount of salt the river can absorb without exceeding limits) and, start Interagency Cold Water Pollution and fi nish times for the mines to discharge their salt- Group laden water. During 2005/06, there were no events to manage under this scheme due to the drought State Water is a key member of the Inter Agency conditions experienced in the Hunter Region. Cold Water Pollution Group. This Group has been established to provide a forum to coordinate a whole- of-government response to the cold water pollution Murray-Darling Basin issue and oversee the implementation of the State In the past year, State Water participated in the Government’s Cold Water Pollution Strategy. This MDBC’s Cost Effectiveness and Effi ciency Review. Group facilitates knowledge sharing on the biological State Water was part of a working group on two impacts of cold water pollution and upcoming works components of this review, one relating to River programs which have implications for cold water Murray Water and the other on dredging work at the pollution. mouth of the Murray River.

In addition, State Water is a member of the Navigable Pass/Fishway Steering Committee, which presides over the program of works required to upgrade all the removable Boulee Panel weirs on the Murray-Darling Basin Commission (MDBC) system (Locks 1-10 and 15) associated with ﬂ ow regulation. The removable steel navigable pass sections of the weirs are being replaced with a modern equivalent, which removes many of the OH&S and maintenance problems associated with the original 1920s design. Staff meeting at Split Rock Dam. Where funds allow, the opportunity is being taken to include a ﬁ shway into the existing structure as The group is also developing conditions which will part of the MDBC Fish Management Strategy. The form part of the Water Supply Works Approvals for Steering Committee has managed the consultation those dams which can actively manage releases to with stakeholders, design, funding and programming optimise temperature under the Water Management process across the state jurisdictions. Act 2000. Protocols have been developed for the operation of the Glenbawn and Glennies Creek Dams intake towers to mitigate cold water pollution releases. As part of this group, State Water is developing key initiative and programs for the mitigation of cold water pollution at its storages over the next 10 years.

84 State Water 05-06 Annual Report big water Water is often measured in ‘Olympic swimming pools’. This term usually refers to 1ML (a million litres).

In Australia, the size of many bodies of water are referenced back to the size of Sydney Harbour, that is a body of water x is y times the size of the Sydney Harbour. The unit of measure would be ‘Sydharbs’.

One ‘sydharb’ is the amount of water in Sydney Harbour, which is approximately 500 gigalitres.

1 litre (L) = 1,000 millilitres 1 kilolitre (KL) = 1,000 litres 1 cubic metre (m3) = 1,000 litres 1 megalitre (ML) = 1,000,000 litres 1 gigalitre (GL) = 1,000,000,000 litres

Windamere Intake Tower State Water 05-06 Annual Report 85 corporate governance

S te v e H a m s o n , O fﬁ c e r in

C h a r g e

a t

a r c o

State Water 05-06 Annual Report a m The information in this section of the report meets State Water’s statutory reporting obligations, particularly under the Annual Reports (Statutory Bodies) Act 1984 and the Annual Reports (Statutory Bodies) Regulation 2005. It is provided in accordance with the annual reporting requirements published by NSW Treasury.

Establishment Functions State Water Corporation is a statutory State The principal functions of the Corporation are as Owned Corporation (SOC) under the State Owned follows: Corporations Act 1989, established by the State Water Corporation Act 2004. Under this Act, the principal (a) to capture and store water and to release objectives of State Water are: water: i. to persons entitled to take water, 1. To capture, store and release water in an including release to regional towns, effi cient, safe and fi nancially responsible and manner. ii. for the purposes of fl ood management, and 2. The other objectives of the organisation are: iii. for any other lawful purpose, (a) to be a successful business and, to that including the release of end: environmental water, i. to operate at least as effi ciently as any (b) to construct, maintain and operate water comparable business, and management works, ii. to maximise the net worth of the (c) any other functions conferred or imposed State’s investment in the Corporation, on it by the operating licence or by or (b) to exhibit a sense of social responsibility under this or any other Act or law. by having regard to the interests of the community in which it operates, (c) where its activities affect the State Water Board government, to conduct its operations in The State Water Corporation Act 2004 provides compliance with the principles of that the Board consists of no less than three and no ecologically sustainable development more than eight Directors appointed by the voting contained in section 6 (2) of the shareholders, in consultation with the portfolio Protection of the Environment Minister. Administration Act 1991, (d) to exhibit a sense of responsibility The independent non-Executive Directors of the towards regional development and Board are listed in the following table and have been decentralisation in the way in which it appointed for fi xed-period, renewable terms. The CEO operates. is an Executive Director of the Board.

3. The other objectives of the Corporation are of The Board is accountable to the voting shareholders equal importance, but are not as important as in the manner set out in Part Four of the State the principal objectives of the Corporation. Owned Corporations Act 1989 and in the State Water Constitution. Shareholders In accordance with the provisions of the State Water Corporation Act 2004, State Water has two shareholders, each holding one equal share. As at 30 June 2007, those Ministers were The Hon Michael Costa MLC, NSW Treasurer and The Hon John Watkins MP, Minister for Finance.

State Water 05-06 Annual Report 87 Board Board meetings meetings Director Current Appointment eligible attended Anthony G Wright (Chairman) 1 October 2004 – 30 September 2007 12 12 Michael Bennett 1 October 2004 – 30 September 2007 12 12 Kathryn Ridge 1 October 2004 – 30 September 2007 12 12 Kathleen Bowmer 1 October 2004 – 30 September 2006 12 12 Edward Woodley 1 October 2004 – 30 September 2006 12 12 Graham J Ebbett 1 October 2004 – 30 September 2006, 77 resigned 15 April 2006 Don Marples 24 April 2006 – 24 April 2009 1 1 Abel Immaraj (CEO) 1 October 2004 – 1 April 2010 12 12 Directors’ Interests present and provide a forum that allows for open discussion on Board and management performance. Directors are required to disclose any material contract or relationship with State Water and to disclose all companies or other organisations with which they Indemnities are professionally involved. Details of Directors’ Under the State Owned Corporations Act 1989, SOCs interests are maintained by the Company Secretary are able to indemnify their directors and offi cers in a register, which is available at every Board against certain liabilities incurred in the course of their meeting. The constitution provides for procedures to employment. The indemnity cannot be issued without be followed in the event of a confl ict or a perceived the approval of the voting shareholders. confl ict arising between a Director’s interest and a matter before the Board. Currently, all State Water Directors have been issued with a Deed of Indemnity in the form approved by the Directors’ Remuneration shareholders. Directors’ remuneration is determined by the NSW The Deed of Indemnity provides cover against the Government and is currently in the form of a cash following types of liability: stipend without at risk elements, but including nine • Civil liability, but only if such liability is, or was, percent superannuation contributions. State Water incurred by the indemnifi ed party in his or her makes payments to the directors in accordance capacity as an offi cer acting in good faith with these directions under the framework of the • Costs and expenses incurred by the indemnifi ed organisation’s normal payroll system. Out of pocket party in defending proceedings, whether civil or expenses related to attendance at meetings are criminal, in which judgement is, or was, given in reimbursed. favour of the indemnifi ed party, or in which the indemnifi ed party is, or was, acquitted Board Performance Review • Costs and expenses in connection with any application in relation to a proceeding in which a The Board undertook a review of its performance, court grants or granted relief to the indemnifi ed by self assessment, this year. This review sought to party. identify where improvements to Board performance could be made and to assess the quality, timeliness State Water also purchases insurance cover for and effectiveness of information made available to Directors’ and offi cers’ liability, professional indemnity Directors. and employment practices. Non-Management Meetings The Board instigated regular brief meetings of non- Board Committees executive members before every board meeting this The Board has three Governance Committees to year. These meetings are held without management consider matters in more detail, to assist in decision

88 State Water 05-06 Annual Report making, oversight and control and resulting in Remuneration and Organisation Development recommendations to the Board. The committees have Committee delegated authority as speciﬁ ed in their respective Members: Anthony Wright (Chair), Kathleen Bowmer Terms of Reference. and Abel Immaraj.

Audit and Compliance Committee The purpose of the Committee is to: Members: Graham Ebbett (Chair until 15 February), • Assist the Board to determine and oversee the Kathryn Ridge (Interim Chair 3 March to 26 May), Board’s people and remuneration strategy and Don Marples (Chair from 24 April), Michael Bennett, policy Kathleen Bowmer, Abel Immaraj. • Assist the Board to determine parameters for and The purpose of the Audit and Compliance Committee oversee the CEO and contract staff remuneration, is to: recruitment and development policy and practice • Ensure that an effective internal control • Oversee State Water’s organisation development framework exists policy and practice to ensure seamless • Approve and review the annual audit program implementation of corporate strategy throughout • Review fi nancial statements, fi nancial reports and the organisation annual report(s) • Assist the Board in meeting regulatory reporting • Review audit report(s) and stakeholder reporting requirements • Review the performance of the internal auditors • Review and monitor the effectiveness of • Review and monitor the effectiveness of management systems designed to ensure management systems designed to ensure compliance with policy requirements. compliance with legal requirements • Review compliance with applicable accounting Special Interest Committees standards State Water also has three Special Interest • Review compliance with the OH&S Act and Committees: Water Effi ciency and Innovation; Regulations Marketing and Customer Relations and New Business • Monitor statutory compliance with various Development. The Water Effi ciency and Innovation regulators of the Corporation, including the Dams Committee met once this year. In October this year, Safety Committee, DNR (water supply works the Board put all Special Interest Committees on approvals), and IPART (operating licence and bulk hold until further notice. The committees will be water pricing determination). reconvened once other governance and regulatory requirements are established. Risk Management Committee Members: Edward Woodley (Chair), Michael Bennett State Water also has an IPART Committee that was and Abel Immaraj. established to oversee the preparation of current and future IPART submissions, and meets on an ad hoc The purpose of the Risk Management Committee is basis. The Committee met twice in 2005/06. Members to: are Abel Immaraj (Convenor), Michael Bennett, • Ensure that an effective risk management Kathryn Ridge and Don Marples. framework exists to manage and mitigate risk in an innovative manner • Review risk management strategies Insurance • Ensure that adequate policies and procedures State Water has policies under the Treasury Managed have been designed and implemented to manage Fund, providing unlimited cover for the following all identifi ed risks insurable risks: • Review audit reports on compliance with risk • Workers’ compensation, as per NSW statute management policies • Comprehensive motor vehicle • Review internal control systems and the • Property (full replacement, new for old, including operational effectiveness of policies and consequential loss) procedures relating to risk • Liability, including but not limited to public liability, • Monitor the investigations of alleged breaches of products liability, professional indemnity and policy directors/offi cers liability • Monitor the ten most signifi cant risks and regularly • Miscellaneous, notably personal accident and review the actions taken to manage these risks. protection for overseas travellers. State Water 05-06 Annual Report 89 The only exposures not included are: illegal State Water invested heavily in developing new operations; wear, tear and inherent vice; and pollution values, leadership development and enhancing (other than sudden and accidental pollution). employee understanding of individual diversity to provide a solid foundation for EEO programs this The fund is protected by a wide-ranging year. These values will be incorporated into the reinsurance program that reimburses losses above EEO program and will be part of all future policy a predetermined retention fi gure. For general development. liability that amount is $25 million and for workers’ compensation and property it is $20 million. The Executive Management team welcomed the fi rst woman to the team in May 2006. Manager Strategic Policy and Compliance and Company Secretary, Board Manual Marysia Derewlany is the fi rst female to join the The Board approved a Board Manual at its March Executive. 2006 meeting. The manual incorporates the Board’s commitment to good corporate governance, the Board For the second consecutive year, State Water Charter, information regarding the role of the Board engaged an Aboriginal trainee. This female trainee is and its various offi cers, the State Water Corporation based at Head Offi ce in Dubbo and is completing an Code of Conduct and Terms of Reference for each administration traineeship. of the Board Committees. The manual also outlines administrative processes for all Board and committee State Water will further promote EEO practises in meetings. 2006/07 by continuing the culture development program and developing a recruitment and promotion policy and associated procedures which will be based Code of Conduct on EEO principles. During 2005/06 State Water developed a new Code of Conduct (see Appendix 1). This document sets Each year State Water prepares a report on its EEO the expected standards of behaviour for employees Management Plan for submission to the Director of and others associated with State Water, as well as Equal Opportunity and Public Employment. providing guidelines that will assist effective decision making. No breaches of equal employment policy were identifi ed or reported during the year. A thorough introduction to the Code of Conduct was delivered to 85% of employees during June 2006 as part of a Corporate Plan Road Show. Feedback Ethnic Affairs Priority Statement was provided by employees and this feedback will be During the year, State Water sent a representative to considered before the Code is adopted in 2006/07. an Ethnic Affairs Priority Statement (EAPS) Seminar held by the Community Relations Commission. This There was one investigation of a breach of the Code helped improve the organisation’s understanding of of Conduct this year. This was an ongoing matter EAPS and its impact on our business. from 2004/05 and ended with disciplinary action. One further investigation of a breach of the Code is ongoing.

Equal Employment Opportunities State Water has continued to operate under the policies and programs of the Department of Energy, Utilities and Sustainability in relation to Equal Employment Opportunities (EEO) this year. A State Water EEO policy and program will be developed in 2006/07.

90 State Water 05-06 Annual Report Trends in the representation of EEO Groups

EEO Group Target 2004/05 2005/06 Women 50% 17.0% 18.0% Aboriginal and Torres Straight Islanders 2% 1.7% 1.7% People whose ﬁ rst language was not English 19% 8.0% 7.0% People with a disability 12% 9.0% * People with a disability requiring work related adjustment 7% 2.0% *

Trends in the distribution of EEO Groups EEO Group Target 2004/05 2005/06 Women 100 92 91 Aboriginal and Torres Straight Islanders 100 n/a n/a People whose fi rst language was not English 100 136 127 People with a disability 100 98 * People with a disability requiring work related adjustment 100 n/a * Notes 1. Staff numbers are as at 30 June. 2. Excludes Casual Staff. 3. A distribution index of 100 indicates that the centre of the distribution of the EEO group across salary levels is equivalent to that of other staff. Values less than 100 mean that the EEO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this tendency is, the lower the index will be. In some cases the index may be more than 100, indicating that the EEO group is less concentrated at lower salary levels. The Distribution Index is automatically calculated by the software provided by ODEOPE. * Despite the fact that the workforce has been relatively stable, fewer employees identifi ed themselves as having a disability when surveyed in 2006, compared to the 2005 survey. Freedom of Information 36 Darling Street, Dubbo or Level 8, 2-10 Wentworth Street, Parramatta. State Water did not receive any Freedom of Information (FOI) requests during 2005/06. Many of State Water’s key documents and a current list of State Water publications are available at www. Kinds of documents held by State Water statewater.com.au. Corporation. State Water publishes a Summary of Affairs under the State Water holds a variety of documents including: Freedom of Information Act, 1989 in the Government • Business fi les Gazette every six months, which lists all State Water • Legal documents policy documents. • Maps • Photographs Access arrangements, procedures and • Plans • Publications. contact points Under the Freedom of Information Act 1989, State Water State Water’s policy documents and annual reports, is required to make information available whenever setting out its functions and responsibilities may be possible. However, access may be refused where it inspected and purchased (at no cost) at State Water can be demonstrated that there is a legitimate need for offi ces located at Suite 12-14, Riverview Business Park, confi dentiality or where another person’s privacy may

State Water 05-06 Annual Report 91 be invaded. Exempted information may include: • NSW Government Cabinet and Executive State Water past and present employees have access Council documents to their own fi le/s at any time and do not need to use FOI procedures or pay fees to do so. • documents which are exempt under the Freedom of Information legislation of another jurisdiction Amendment to Personal Information • documents concerning law enforcement or public If members of the public think personal information safety held by State Water Corporation is inaccurate, • documents subject to legal professional privilege incomplete, out of date, irrelevant or misleading, they • documents subject to secrecy provisions in other can apply to amend it free of charge. legislation • documents affecting the personal or business Cost of FOI Applications affairs of another person or business; this A $30 application fee applies for both personal and exemption maintains the confi dentiality of non-personal information. information relating to the business affairs of companies made available to State Water A processing charge of $30 per hour after the fi rst 20 • documents affecting the economy of the State. hours also applies to requests for personal information while all other requests attract a processing charge of Access $30 per hour. Enquiries may be made to Jodi Butfi eld, FOI Coordinator, by telephone, fax, or mail. Details as follows: A 50% reduction in fees and charges applies in some situations such as pensioners or non-profi t Telephone: (02) 9354 1043 organisations experiencing fi nancial hardship. Fax: (02) 9354 1106 Address: PO Box W16, Westfi eld Parramatta NSW 2150 Internet address: www.statewater.com.au

Nature of Application Application Fee Processing Access to records by natural persons about their $30 $30 an hour after fi rst 20 personal affairs hours All other requests $30 $30 per hour Internal review (all circumstances) $40 Nil Amendment of personal details Nil Nil Delegations to Management Legal Change State Water Corporation has an Authorisation Manual No changes were made to the Corporation’s enabling for use by State Water staff. The Manual contains legislation, the State Water Corporation Act 2004. authorisation limits for the Chief Executive Offi cer and State Water Corporation has not departed from the all other staff employed by State Water. The Manual requirements of the Subordinate Legislation Act 1989. covers an extensive range of functions and defi nes the limits on the exercise of functions and powers for relevant staff. Land Disposal State Water did not dispose of any property during Privacy Policy 2005/06. State Water has in place a Privacy Management Plan in accordance with Section 33 of the Privacy and Controlled Entities Personal Information Protection Act 1998 (NSW). State Water does not control any entities. No reviews were conducted by or on behalf of State Water under Part 5 of the Act.

92 State Water 05-06 Annual Report Executive Remuneration Overseas Visits At the end of 2005/06, State Water had 11 executive Three staff travelled to the United States of America offi cers with remuneration equal to or exceeding the during 2005/06, at a total cost of $19,300. equivalent of the NSW Senior Executive Services (SES) Level One. Of these 11, one employee was Dam Safety Tour female and the remaining 10 were male. One The Safety and Audit Coordinator, John De Cataldo executive offi cer was employed at the equivalent to attended the Dam Safety, Operation and Maintenance SES Level Five or above: International Technical Seminar and Study Tour for Abel Immaraj, Chief Executive Offi cer, $237,796 12 days in August 2005 at a cost of $8,300. This tour • Appointed 16 March 2005 was presented by the US Bureau of Reclamation and • Successful Performance Assessment included a tour of Hoover Dam. undertaken December 2006. The seminar provided comprehensive training in In comparison, at the end of 2004/05 there were 10 establishing and enhancing dam safety, operation and male executive offi cers employed at or above SES maintenance programs. The study tour covered dam Level One, with one male executive offi cer being operations and maintenance programs, maintenance employed at SES Level 5 or above. and management, operating procedures, storage offi cer training and dam documentation, as well as CEO Performance Statement detailed site surveillance and mechanical inspections of a number of reclamation facilities. This year saw further challenges associated with the formative stages of developing State Water Aquadams Tour Corporation as a successful business. Mr Immaraj effectively led a multi-faceted and demanding program South Area Asset Manager, Mel Jackson and Asset to: Offi cer, Mark Constable, visited the United States in • improve management of water operations; November 2005 at a cost of $11,000. The purpose of • develop and implement a new strategic direction; their visit was to investigate the use of large aquadams • commence development of commercial systems. as an economic and environmentally appropriate dewatering technique. As a result of this visit, State He demonstrated good performance and sound Water has purchased four aquadams for the South achievements in the water operations aspects of Area and has successfully completed two projects critical success factors (CSFs) relating to Excellent which would have otherwise been much more diffi cult Customer Service and Effi cient Operations. He led and costly. the development of initiatives to improve organisation performance in the CSFs for Skilled and Dedicated People, Strategic Asset Investment and Enhanced Riverine Environment. It was agreed that Profi table Business Growth was essentially deferred for the present, but noted the amalgamation of the Fish River Water Supply Scheme into State Water Corporation was smoothly achieved.

Progress on developing State Water’s stand-alone commercial systems, and provision of consistent, timely commercial reporting was unsatisfactory, largely due to transition pressures in the start-up phase of the business. This particularly relates to commercial aspects of the CSF for Efﬁ cient Operations, and the CSF for Supportive Owners and Stakeholders.

AG (Tony) Wright Chairman, State Water Corporation State Water 05-06 Annual Report 93 Consultants Consultants equal to or more than $30,000 Consultant Project $’000 Finance & Accounting AIFRS Impacts of new accounting standards 68.6 Danu Consulting Assistance with IPART submission 80.6 Dept of Commerce Provision of replacement and replication valuations for 128.3 headworks assets, including 18 major dams, 425 river and related structures and the FRWS infrastructure E3 International Pty Ltd Development of water pricing strategies 48.4 Projects associated with major structures Dept of Commerce, Manly Hydraulics Copeton Dam Upgrade, environmental upgrade 51.0 Laboratory options Burrendong Dam Upgrade, spillway hydraulic 165.0 modelling Burrendong Dam Upgrade, water quality curtain stage 38.0 two modelling Dept of Commerce Burrendong Dam Upgrade, option development 38.0 Copeton Dam Upgrade, dam safety option 147.0 development DHI Water and Environment Pty Ltd Copeton Dam Upgrade, environmental impact 73.0 investigation of options Douglas Partners Wyangala Dam Upgrade, geotechnical investigation 160.0 Glen Hobbs & Assoc Spillway gate operation risk assessment 31.0 GHD Pty Ltd Chaffey Dam Upgrade, option development 260.0 Parsons Brinkerhoff Keepit Upgrade, environmental assessment 213.0 SMEC Aust Hume Dam Remedial Works, hydrologic risk 96.0 assessment Wyangala Dam Upgrade, spillway hydraulic modelling 87.0 SunWater Structural adequacy of spillway bridges 34.0 Management Services Evans & Peck Project Management System 40.5 Review of capital expenditure program 71.7 KPMG Development of regulatory compliance and audit 51.3 frameworks Total 1,882.4* *This amount represents engagement, not expenditure. Consultants less than $30,000 During the year, 19 other consultants were engaged for projects costing less than $30,000, at a total cost of $285,897. Sixteen of these consultancies were for projects associated with major structures, at a total of $243,097. The remaining projects were for fi nance and accounting advice ($28,400) and a further $14,400 on a Strategic Management System. 94 State Water 05-06 Annual Report Publications scheme. This framework was fully developed in 2006, ready for the Board to consider a Complaints Handling State Water published the following in 2005/06: and Resolution Policy and associated procedures in July 2006. • Environment Management Plan (Jun 2006) • Important Changes to your water Accounts During the year, State Water also engaged the Energy – 05/06 Bulk Water Prices Pamphlet (Aug 05) and Water Ombudsman (EWON) as an external • Important Changes to your water Accounts – body for dispute resolution for customers. Details of 05/06 Bulk Water Prices Pamphlet – Barwon the policy, how and where to lodge a complaint and Valley version (Sept 05) EWON’s details will be available on State Water’s • TAMP2004 – (Oct 05) website once the policy is adopted by the Board. • An important message to water users – understanding your water rights - joint publication with DNR (Feb 06) Technical Improvement Groups • State Water Map and Overview (Jun 06) State Water established Technical Improvements Groups (TIGs) as an initiative of the 2005 Asset Published to the Internet Forum, which is an annual conference of offi cers from • State Water Operating Licence (Jul 05) State Water storages such as dams and weirs and • State Water Corporation Information Sheet Area technical staff. TIGs are groups of skilled and (Jun 05) dedicated State Water people from across all areas of • Memoranda of Understanding – operation and skill sets. The TIGs focus on a particular Department of Natural Resources area of technical knowledge, as detailed below. Each Department of Primary Industries TIG pursues excellence in work practices to provide (Fisheries) technical expertise and guidance. Department of Environment and Conservation Technical Improvement Groups have been established • Development of Sydney Futures Exchange for: State Water Indexes Discussion Paper and • Lifting equipment and scaffolding Frequently asked Questions, plus Valley • Corrosion control specifi c Index Fact Sheets (Jul 05) • Mechanical equipment • NSW Water Extractions Monitoring Standards • Electrical equipment (Nov 05) • Major civil structures – dams, weirs and bridges • Lake Brewster Water Effi ciency Project Fact • Emergency operation and standby equipment Sheet (April 06) • Concrete and cement • Menindee Lakes Information Paper (May • Environment and heritage management 2006) • Contracts and contract management. • Murray-Lower Darling Water Ordering Compliance Communication Material including – Fact Sheet, Step-by-Step Government Energy Userguide, Form (Jun 06) Management Policy • Macquarie Valley Business Plan • Lachlan Valley Business Plan In 2006, the Board of State Water adopted an Energy • 104 media releases issued by State Water. Management Policy. This policy was included as Appendix B of the Environment Management Plan. This policy acknowledges that energy is a valuable Funds Granted to resource and that State Water needs to manage its energy use sensibly. The policy gives direction to State non-Government Organisations Water employees and requires the implementation of State Water did not grant any funds during 2005/06. strategies and practices to minimise environmental impacts, while fulfi lling the organisation’s regulatory, human, health, environmental and operational Consumer Response obligations. In March 2005, the Board gave in-principle approval to a framework for an internal complaints handling

State Water 05-06 Annual Report 95 The objectives of the policy over the next four years are to: • Increase the effi ciency of energy use • Minimise greenhouse gas emissions • Identify opportunities with energy producers for the production of renewable energy Employees on the fl oating Aquadam at Steven’s Weir. • Establish energy consumption as one of the primary criteria in option assessment when Research and Development acquiring or upgrading offi ce buildings, offi ce equipment or major plans State Water used a relatively new technology for • Strive to meet best practice in energy Australia and a fi rst for State Water this year when management within the water industry. it successfully completed maintenance work at Steven’s Weir using an American-manufactured This year, State Water engaged the Department of aquadam. The aquadams proved an economic and Commerce to assist in the development of its own environmentally appropriate dewatering technique. Energy Management Plan (EMP) for introduction in 2006/07. The new EMP will establish a plan of The repair work to the weir gate had to have implementation to achieve energy savings. It will minimal impact on river fl ows and the environment. address facilities or technologies with the greatest The aquadams allowed that by providing dry areas energy saving potential. The plan will also identify to work in, without the need to close off river fl ows. suitable funding options to enable energy saving recommendations to be implemented. The gate was de-commissioned for the 2005/06 season after routine maintenance inspections Most of State Water’s regular energy use includes revealed a major fracture in the load-bearing electricity for infrastructure, sites, offi ce and depots; rocking beams of one of the cast iron gate guides. petrol and diesel infrastructure to provide back up or Asset Manager Murray and Lower Darling system, standby power in the case of mains supply failure; and Mel Jackson said dewatering options were the petrol or diesel for vehicle fl eet and machinery. State main challenges to overcome in developing the Water has a commitment to purchasing green power project. and currently sources approximately six percent green power. “Unfortunately, the fractured section was in the centre of the structure and in the deepest part of Recent initiatives aimed at reducing energy the river channel, which is under water even in the consumption have included the trial of a vehicle fuelled lowest of fl ows,” Mr Jackson said. by LPG. This exercise produced mixed results and further LPG and electric vehicle trials will be conducted “Traditional methods of dewatering involve the in 2006/07. In accordance with Government guidelines, construction of a cofferdam using either steel sheet State Water will introduce the use of ethanol blended piling or earthen embankments. The use of sheet fuel in all its vehicles from next year, where practicable, piles was exceptionally diffi cult and expensive, available and cost effective. while the construction of earthen embankments, also expensive, has associated negative Waste Management environmental impacts. The project duration was also very limited as we needed to refi ll the weir State Water is committed to the NSW Government’s pool to meet irrigation requests.” Waste Reduction and Purchasing Policy (WRAPP) agenda and encourages staff participation through Given the cost and time constraints, State Water practical strategies that aim to avoid waste, increase bought two re-useable aquadams with inner plastic resource recovery and increase the purchase of bladders. When infl ated with water, the bladders recycled products. provided a safe and strong barrier and a dry work area. The team involved at Steven’s Weir To June 2005, State Water was included in DNR’s managed to dewater the weir gate area, remove biannual WRAPP return. A State Water WRAPP the fractured section, replace it and have the weir Plan was developed this year, for consideration by back in service within seven days.

96 State Water 05-06 Annual Report management. Processes for the recording of statistical Credit Card Certiﬁ cation information have been implemented and data will be monitored against targets progressively during each State Water Corporation operates Mastercard credit ﬁ nancial year. card facilities with Westpac Bank.

New initiatives this year to help reduce waste include All expenditure on credit cards is certifi ed by card the recycling of 124 tonnes of steel at Burrinjuck Dam. holders and independently verifi ed by the cardholder’s The steel has accumulated at the dam since the major supervisor. There is also continuous review of usage upgrade was completed in 1996 and later power characteristics and authorisations to promote correct station upgrade. Dam staff have been able to use the usage. Card usage is also closely monitored as part of steel for various projects around the site. the audit process. State Water incurred no late payment fees for Electronic Service Delivery 2005/06. Credit card expenditures during the fi nancial year were considered to comply with best practice State Water further developed its website this year, guidelines. giving customers and members of the public greater access to water delivery and asset information, as well as information about how to pay their accounts and Payment of Accounts key publications that are available to the public. State Water’s target is to settle all accounts payable within 30 days, or in accordance with the terms agreed The website provides the State Water Corporation with individual vendors. Act 2004, State Water Operating Licence and the Customer Service Charter, as well as previous annual There was no penalty interest incurred by State Water reports and staff contact details. It also contains for late payments in 2005/06. links to all State Water media releases, including announcements on water delivery issues such as supplementary water, demand management and bulk water releases. In 2005/06 a Tenders page and a Careers page, showing all positions vacant, were added to the website. Accounts Payable Performance Review Aged analysis at the end of each quarter Less than 30 30 - 60 days 60 - 90 days More than 90 Current days overdue overdue days overdue TOTAL September $9,732,121 $8,830,358 $359,162 $131,859 $519,911 $19,573,411 December $9,250,075 $1,298,927 $374,531 $81,802 $309,150 $11,314,485 March $9,546,470 $1,745,189 $225,253 $69,725 $376,493 $11,963,130 June $12,592,633 $2,517,545 $341,047 $192,181 $127,519 $15,770,925 $41,121,299 $14,392,019 $1,299,993 $475,567 $1,333,073 $58,621,951 Accounts paid on time within each quarter Total accounts paid on time Target % Actual % Target TOTAL September 60 49.72 $9,732,121 $19,573,411 December 75 81.75 $9,250,075 $11,314,485 March 85 79.80 $9,546,470 $11,963,130 June 85 79.85 $12,592,633 $15,770,925 Commentary * Delays were experienced in the fi rst quarter of 2005/06 with the handover of the accounts payable function from DNR to State Water Corporation * The larger amounts in the 30-60 day category for December, March and June relate to disputed Service Level Agreements * No interest was paid for late payment of accounts during 2005/06 State Water 05-06 Annual Report 97 fi nancial statements year ended 30 June 2006

b e r o

State Water 05-06 Annual Report a m table of contents Statement by Members of the Board 100 Independent Audit Report 101 Income Statement 102 Balance Sheet 103 Statement of Changes in Equity 104 Cash Flow Statement 105

Notes to the Financial Statements 1 Statement of Signiﬁ cant Accounting Policies 106 2 Adjustments of Errors in AGAAP Comparatives 117 3 First-time Adoption of Australian Equivalent of International Financial Reporting Standards 119 4 Revenue 122 5 Net Proﬁ t before Tax 122 6 Income Tax Equivalent Expense 124 7 Cash and Cash Equivalents 124 8 Trade Receivables 124 9 Other Current Assets 124 10 Property, Plant and Equipment 125 11 Intangible Assets 127 12 Trade and Other Payables 127 13 Borrowings 127 14 Provisions 127 15 Other Current Liabilities 128 16 Contributed Equity 128 17 Retained Earnings 128 18 Note to the Cash Flow Statement 128 19 Superannuation Plans 129 20 Commitments 131 21 Contingent Liabilities and Contingent Assets 131 22 Directors 131 23 Key Management Personnel 132 24 Related Party Disclosures 132 25 Auditor’s Remuneration 132 26 Financial Instruments Disclosure 133 27 Administered Revenue and Assets 135 28 Events After Balance Date 135 29 Corporation Details 135

State Water 05-06 Annual Report 99 statement by members

of the board Year ended 30 June 2006

Pursuant to Section 41C of the Public Finance and Audit Act 1983 we state that:

1. The accompanying fi nancial statements are a general purpose fi nancial report which have been prepared in accordance with Australian Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board, the State Owned Corporations Act 1989, the Public Finance and Audit Act 1983 and the Public Finance and Audit Regulation 2005, and give a true and fair view of the fi nancial position of State Water Corporation as at 30 June 2006 and its performance, as represented by the results of its operations and its cash fl ows for the year ended on that date. 2. At the date of this statement, there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they become due and payable. 3. We are not aware of any circumstances at the date of this statement that would render any particulars included in the fi nancial report to be misleading or inaccurate.

Signed in accordance with a resolution of the Directors: 31 August 2007

Tony Wright Geoff Borneman Chairman A/Chief Executive Ofﬁ cer 31 August 2007 31 August 2007

100 State Water 05-06 Annual Report State Water 05-06 Annual Report 101 INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2006 2006 2005 Notes $’000 $’000 Revenue Water delivery revenue 4 35,958 30,407 Government grants and subsidies 25,000 10,495 Contracting revenue 12,798 6,923 Other income 4 2,828 2,887 Interest income 4 2,163 1,081 Net movement in employer’s superannuation reserve 5,777 - Total Revenue 84,524 51,793

Expenditure Operating expenses 5 (67,212) (48,164) Net movement in employer’s superannuation reserve - (1,605) Finance costs (4,349) (265) Total Operating Expenditure (71,561) (50,034)

Profi t before Income Tax Expense from continuing operations 12,963 1,759 Income tax equivalent expense 6 (1,624) (2,813) Profi t/(Loss) for the Year from continuing operations 11,339 (1,054) Profi t attributable to minority interests - - Profi t/(Loss) attributable to members of the entity 11,339 (1,054)

The accompanying notes form part of these ﬁ nancial statements

102 State Water 05-06 Annual Report BALANCE SHEET AS AT 30 JUNE 2006 2006 2005 Notes $’000 $’000 ASSETS Current Assets Cash and cash equivalents 7 32,012 22,170 Trade receivables 8 4,112 4,168 Other current assets 9 28,457 33,543 Total Current Assets 64,581 59,881

Non-current Assets Property, plant and equipment 10 345,267 337,443 Intangible assets 11 1,392 - Total Non-current Assets 346,659 337,443

Total Assets 411,240 397,324

LIABILITIES Current Liabilities Borrowings 13 5,000 13,703 Trade and other payables 12 27,253 9,435 Provisions 14 15,696 13,479 Other current liabilities 15 1,610 652 Total Current Liabilities 49,559 37,269

Non-current Liabilities Borrowings 13 56,680 53,411 Provisions 14 2,143 7,188 Total Non-current Liabilities 58,823 60,599

Total Liabilities 108,382 97,868

Net Assets 302,858 299,456

EQUITY Contributed equity 16 300,510 300,510 Retained earnings/(Accumulated losses) 17 2,348 (1,054)

Total Equity 302,858 299,456

The accompanying notes form part of these ﬁ nancial statements

State Water 05-06 Annual Report 103 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006 2006 2005 Notes $’000 $’000 Contributed equity at the beginning of the period 16 300,510 - Equity transfer from Department of Energy, Utilities and Sustainability 16 - 309,073 (DEUS) on State Water’s formation Conversion of equity to loan - (60,000) Fish River Water Authority net assets contributed to State Water - 51,437 Retained earnings at the beginning of the period 17 (1,054) - Proﬁ t/(Loss) for the year 11,339 (1,054) Dividends (7,937) - Equity at the end of the period 302,858 299,456

The accompanying notes form part of these ﬁ nancial statements

104 State Water 05-06 Annual Report CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006

2006 2005 Notes $’000 $’000 Cash ﬂ ows from operating activities Receipts from customers 56,928 47,610 Payments to suppliers and employees (50,845) (57,316) Recurrent contribution from the New South Wales Government 25,000 10,495 Interest received 2,163 1,081 Interest and other ﬁ nance costs paid (3,751) (265) Income tax refund/ (paid) 486 (1,082) Net cash provided by operating activities 18 29,981 523

Cash ﬂ ows from investing activities Payments for property, plant and equipment and intangible assets (15,403) (4,313) Proceeds from sale of property, plant and equipment 264 217 Net cash used in investing activities (15,139) (4,096)

Cash ﬂ ows from ﬁ nancing activities Repayments of borrowings (5,000) (6) Net Increase/ (Decrease) in cash held 9,842 (3,579)

Cash transferred from New South Wales Department of Energy, Utilities - 15,919 and Sustainability on formation of State Water Corporation Cash taken over on merging the Fish River Authority business with State - 9,830 Water Cash and cash equivalents at the beginning of the ﬁ nancial year 22,170 - Cash at the end of the ﬁ nancial year 7 32,012 22,170

The accompanying notes form part of these ﬁ nancial statements

State Water 05-06 Annual Report 105 notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2006

CORPORATE INFORMATION State Water Corporation (State Water) is a statutory State Owned Corporation under the provisions of the State Owned Corporations Act 1989 and was corporatised under the State Water Corporation Act 2004 on 1 July 2004. State Water’s capital comprises two fully paid $1.00 ordinary shares benefi cially owned by the Government of New South Wales. State Water’s principal function is to capture, store and release bulk water for the benefi t of entitlement holders, for fl ood management, and to meet the needs of the environment in an effi cient, effective, safe and fi nancially responsible manner. Entitlement holders include regional communities, primary producers, irrigators, industrial users and local utilities in regional New South Wales. These functions require that State Water construct, maintain and operate water management works and any other functions conferred or imposed on it by virtue of the operating licence granted to it and under any applicable requirements under the Water Management Act 2000 or the Water Act 1912. In addition, following the transfer of the Fish River Water Supply scheme on 1 January 2005, State Water is a water supply authority under the provisions of Chapter 6 of the Water Management Act 2000 for the purpose of administering that scheme.

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Preparation The accompanying fi nancial statements are a general purpose fi nancial report which disclose the whole of the fi nancial activities of State Water during the period and report on its fi nancial position at the reporting date. They are prepared on an accrual basis in accordance with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). The fi nancial statements have been prepared to comply with the requirements of the Public Finance and Audit Act, 1983; the Public Finance and Audit Regulation, 2005; the State Owned Corporations Act 1989; and relevant Treasury Circulars, Policies and Guidelines. In preparing this fi nancial report, the accounting policies described below are based on the requirements applicable to for-profi t entities under this fi nancial reporting framework. The statements are prepared in accordance with the historical cost convention and, except where stated, do not take account of changes in monetary values. All amounts are rounded to the nearest thousand dollars and are presented in Australian dollars.

106 State Water 05-06 Annual Report b. Statement of compliance The fi nancial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standard (AIFRS). Compliance with AIFRS ensures that the fi nancial report, comprising the fi nancial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). This is the fi rst fi nancial report prepared based on AIFRS and accordingly comparatives for the year ended 30 June 2005 have been restated. Reconciliations of AIFRS opening equity at 1 July 2004 and profi t for the year ended 30 June 2005 to the balances reported in the 30 June 2005 fi nancial report are detailed in Note 3 below. State Water management has elected not to apply the following AASBs to its comparative fi nancial information, in accordance with AASB1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards paragraph 36A: • AASB132 Financial Instruments: Presentation • AASB139 Financial Instruments: Recognition and Measurement Instead, State Water has continued to apply the same AGAAP it complied with in the 2005 fi nancial statements to the recognition, measurement and disclosure of fi nancial instruments at 30 June 2005. This approach is mandated by NSW Treasury TPP06-4 Accounting for Financial Instruments

State Water management does not believe that any material adjustments would need to be recognised in its 2005 comparative data, if AASB132 or AASB139 were applied. c. Determination of for-profi t or not-for-profi t State Water management has applied its judgement in assessing whether it meets the defi nition of a for-profi t or not-for-profi t entity for the purposes of the accounting standards. Management has concluded that the business is a for-profi t entity, taking into account the objectives of corporatisation, the governance framework applied, the application of pricing principles to achieve full cost recovery on a commercially sustainable basis, and the registration of State Water Corporation under the National Tax Equivalent Regime (NTER). d. Basis of Accounting The preparation of the fi nancial report requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied, unless otherwise stated. The accounting policies are consistent with those applied in the previous year, or where appropriate have been amended to conform to AIFRS. e. Recognition of Revenue Revenue arises in the course of ordinary activities. Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to State Water and the revenue can be reliably measured. The following recognition criteria must be met before revenue is recognised: · Water Delivery Revenue Water delivery revenue represents revenue earned from the provision of bulk water and includes both fi xed and variable charges. Fixed entitlement charges and variable usage charges are recognised proportionally on a monthly accrual basis in arrears. Prices for water delivery are subject to price regulation by the New South Wales Independent Pricing and Regulatory Tribunal (IPART).

State Water 05-06 Annual Report 107 Water delivery revenue includes the proportion of revenue from water sales to bulk water customers in New South Wales that is attributable to the operations of the Murray-Darling Basin Commission (MDBC) and which is passed on to NSW Treasury. Under the Murray-Darling Basin Agreement approximately 40% of the operations and maintenance costs of the MDBC are apportioned to NSW and directly funded by the Government of New South Wales. · Government Grants and Subsidies Grants and subsidies that are receivable for expenses incurred or revenue foregone are recognised as revenue in the Income Statement on a systematic monthly accrual basis over the periods for which the grant or subsidy was to apply. Government grants are recognised as revenue at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Under the funding model agreed to in setting up State Water as a State Owned Corporation and negotiated with the Shareholding Ministers, State Water receives government funding for agreed activities and for past and future capital investment so as to achieve an expected commercial rate of return from its operations, as follows: · Government Contribution to Operations This funding is provided to: · meet the costs of certain activities that satisfy community expectations, public benefi t or government requirements, eg fl ood operations, environmental fl ows, stock and domestic supply · fi nance on a commercial basis the agreed share of past capital investment along with any further capital investment necessary to address pre-1997 dam safety non-compliance conditions and other mandated capital improvements, eg for environmental compliance or to provide fi sh passage ways at regulatory structures · Government Operating Subsidies This funding is provided to explicitly recognise the extent to which there is a shortfall between the agreed revenue requirements of State Water’s operations and the revenues generated in an average water supply year from supplying customers and from the agreed Government contribution to operations. The share of the Government’s contributions is determined by IPART through its Bulk Water Pricing Determinations. The amounts of the Government contribution to operations and of the Government operating subsidies are negotiated annually with the Shareholding Ministers through the Statement of Corporate Intent (SCI). There is no provision for adjustment to the quantum of the negotiated amounts. The revenue is accordingly recognised on a monthly accrual basis. · Contracting Revenue Contracting revenue represents revenue for work done by State Water on the operations and assets of other entities and on the provision of contracted services as covered by service agreements. This revenue is recognised on the basis of work completed at the reporting date. · Interest Income Interest income is recognised as the interest accrues using the effective interest method. This uses the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial instrument. · Other Income Consultancy fees, property income, proceeds from disposal of property, and other income outside the provision of water, are recognised on an accrual basis in accordance with the substance of the agreement covering such transactions.

108 State Water 05-06 Annual Report f. Property, Plant and Equipment · Acquisitions and Capitalisation All items of property, plant and equipment acquired by State Water are recognised initially at the cost of acquisition. Subsequent to this initial recognition, each class of property, plant and equipment is carried at fair value less, where applicable, any accumulated depreciation and impairment losses. Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire the asset, including costs that are directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended. Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and revenues at their fair value at the date of acquisition. Fair value means the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction Expenditure of the following type that will provide future economic benefi t and which exceed the thresholds set will be recognised as an asset and capitalised: · acquisition costs of new assets or components of assets including water infrastructure, plant and equipment, land and buildings or other non-current assets · acquisition costs of replacement assets · acquisition costs of asset enhancements and upgrades · expenditure on major renewals or refurbishments which extend the economic life or service potential of the existing asset. In respect of system assets constructed by State Water for its own use, cost includes: · materials used in construction · direct labour and oncosts · contractors’ services · major inspection costs · an estimate, where relevant, of the costs of dismantling, decommissioning and removing the asset and restoring the site on which it is located, and · an appropriate share of direct overheads. In respect of major inspections undertaken for system assets, the cost of the inspection is capitalised as part of the cost of the asset if it is probable that future economic benefi ts will fl ow to State Water and the cost can be measured reliably. Any inspection cost so capitalised is recognised as a component asset and depreciated over the period of time until the next inspection. When each major inspection cost is capitalised, any remaining cost or estimated cost of the previous inspection is de-recognised. The cost of dismantling, decommissioning and removing an asset and restoring the site on which it is located is capitalised when a decision to decommission the asset has been made. This gives rise to the recognition of a corresponding liability as a provision. System assets are capitalised only when they are brought into use. While an asset is being constructed or is not yet available for the purpose to which it is to be put, the expenditure is treated as Work-in- Progress and recognised as such in the balance sheet. Depreciation is not raised until it is brought into use.

State Water 05-06 Annual Report 109 Thresholds are applied for the capitalisation of expenditure according to asset classes as follows: · computers and attractive items $2,000 · other plant and equipment $5,000 · new or replacement infrastructure assets $10,000 · renewal or refurbishments of major dam components $50,000 · renewal or refurbishments of river structure components $20,000 · Valuation of Non-current Assets Non-current assets were transferred from the Department of Energy, Utilities and Sustainability (DEUS) to State Water Corporation effective on 1 July 2004 at a value of $300 million. These assets were previously carried at a net book value of around $2.0 billion in the accounts of DEUS. The assets of the Fish River Water Supply scheme (FRWS) with a net book value of $75.2 million were subsequently transferred at a value of $46.5 million on 1 January 2005. The combined value of $346.5 million was agreed to by NSW Treasury, DEUS and The Cabinet Offi ce based on a Financial Structure Review report commissioned for the purpose of determining a suitable value that would ensure State Water’s fi nancial viability as a stand - alone commercial organisation without requiring substantial price increases for its customers. Initial recognition of each class of property, plant and equipment transferred to State Water in the Balance Sheet was at their transferred cost representing their assessed fair value at time of transfer as follows: · Specialised Infrastructure Assets comprising storages and dams, river regulators, pipelines and associated structures, and associated land and buildings at assessed fair value based on an assessment of their reasonable recoverable amount. · Non-specialised Assets comprising operational equipment, plant and motor vehicles, furniture and fi ttings, offi ce equipment, computer hardware and leasehold improvements at cost less accumulated depreciation. Subsequent additions have been at cost, less any subsequent accumulated depreciation. All the specialised infrastructure assets form systems in the river valleys and are treated as an asset with components. State Water’s use of the river system delivers the economic benefi t. All structures are components of the relevant river system asset. Following initial recognition at cost, each class of property, plant and equipment is stated in the Balance Sheet at fair value less any subsequent accumulated depreciation and accumulated impairment losses. Adopting the fair value model for property, plant and equipment assets is a requirement of NSW Treasury’s mandate. For some classes of assets, remeasurement to fair value is undertaken by way of an asset revaluation. Valuations are performed with suffi cient regularity to ensure that the carrying amount does not differ materially from the assets’s fair value at the reporting date. In respect of classes of assets for which there exists an active market, fair value is the amount for which the assets could be exchanged between knowledgeable and willing parties in an arm’s length transaction, having regard to the highest and best use of the assets for which the other parties would be willing to pay. Specialised Infrastructure Assets Due to the specialised nature of these assets, their fair value would be determined as their estimated depreciated current replacement cost. This cost is based on estimates of modern engineering equivalent replacement asset (MEERA) values on a whole of facility basis and would take into account condition-based assessments of the assets and their asset lives to determine their remaining service potential.

110 State Water 05-06 Annual Report An independent valuation of the MEERA values of all State Water’s dams and river structures performed in June 2006 assessed these assets at $2.93 billion. However no assessment was made of their depreciated replacement values. Based on this and a previous valuation performed in 2001, the equivalent valuation at June 2005 would have been in the order of $2.79 billion. Operational Plant and Equipment Operational plant and equipment, including plant, vehicles, furniture and fi ttings, offi ce equipment, computer hardware and leasehold improvements are recognised at the cost of acquisition. It is considered that their depreciated net carrying amount closely approximates their fair market value less costs to sell. Subsequent to determining their fair value, specialised infrastructure assets are then tested for impairment to ensure their carrying amount is not in excess of their recoverable amount. The recoverable amount is assessed on the basis of the expected cash fl ows that will be received from the assets employment and subsequent disposal. The expected net cash fl ows have been discounted to their present values in determining recoverable amounts. Refer to Note 1(g) for further details regarding the key assumptions used in determining the recoverable amount. · Intangible Assets Intangible assets are identifi able non-monetary assets without physical substance. State Water represents intangible assets initially at cost. Following initial recognition, the cost model is applied as there is no active market that can be referenced for performing revaluations to a market based fair value. Useful lives of intangible assets are assessed to be either fi nite or indefi nite. Where they are determined to have fi nite lives, they are amortised on a straight-line basis and the expense is recognised as part of the depreciation and amortisation line item in the Income Statement. These assets are recognised in the Balance Sheet at cost less accumulated amortisation and accumulated impairment losses, where applicable. Computer application software and development costs are typical assets that come under this category. Where intangible assets are determined to have indefi nite lives they are not amortised. However they are tested for impairment as part of the cash-generating unit test applied by State Water in conjunction with other assets. Any resulting impairment losses are recognised as an expense in the Income Statement. Any reversals of impairment losses are also recognised in the Income Statement. These assets are recognised in the Balance Sheet at cost less accumulated impairment, where applicable. Research and Development Expenditure on research activities, undertaken with the prospect of obtaining new technical knowledge or understanding, is recognised as an expense in the Income Statement when incurred. Expenditure on development activities, whereby research fi ndings are applied to the development of substantially new or improved products or processes is capitalised if the product or process is signifi cant, is technically or commercially feasible, will provide future economic benefi ts and there are suffi cient resources to complete development. The expenditure capitalised may comprise direct labour, materials, other costs directly attributable to the development activity and an appropriate proportion of overheads. Such expenditure is tested for impairment at each reporting date, whether or not the intangible asset arising from the expenditure is available for use or in progress. Other development expenditure is expensed in the Income Statement when incurred. · Leased assets Leases of property, plant and equipment where the lessor retains substantially all of the risks and rewards of ownership are classifi ed as operating leases. Payments under an operating lease are recognised as an expense on a straight-line basis over the lease term. Leases of property, plant and equipment where State Water assumes substantially all the risks and rewards of ownership are classifi ed as fi nance leases.

State Water 05-06 Annual Report 111 g. Impairment Testing State Water undertakes annual reviews of the carrying amount of its cash generating unit to ensure that it represents fair value based on the recoverable amounts test. Due to the lack of an active market for State Water’s infrastructure assets, their value in use is relied upon to determine their fair value. If the carrying amount of the cash generating unit exceeds its fair value, the assets are written down proportionately to ensure their carrying amounts refl ect fair value. Infrastructure assets refl ect the balance of asset values under the recoverable amounts test. State Water holds its assets at the Recoverable Amount based on discounted future cash fl ows. State Water assesses impairment at each reporting date by evaluating conditions specifi c to the Corporation that may lead to impairment of assets. Where indicators of impairment exist, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates as outlined below. At each reporting date, the carrying values of any intangible assets are reviewed to determine whether there is any indication that those assets have been impaired. State Water also assesses whether there is objective evidence that a fi nancial instrument has been impaired. Impairment losses are recognised in the Income Statement. Key assumptions used for value-in-use calculation for 30 June 2006 The following describes each key assumption on which management has based its cash fl ow projections to undertake impairment testing of fi xed assets. · Discount rate - the pre-tax WACCs used to discount future cash fl ows were 9.88% pa and 11% pa. Each WACC was used in half of the four scenarios evaluated. · Future cash fl ows - these have been estimated for the next 50 years, which is the longest period over which management considers realistic projections can be made. · Infl ation - this has been assumed to equal 3% pa over the forecast period. · Future cash fl ows have been estimated for the State Water’s specialised assets in their current condition and consequently new capital expenditure and enhancements have been excluded from cash outfl ows. Cash outfl ows for operating expenditure and any capital expenditure that involves renewal or refurbishment of existing components that are regarded as necessary for the day-to- day servicing of the assets form part of the projections. · Revenue from customers - this is expected to grow by 5.5% pa in real terms for the 4 years from 30 June 2007, consistent with the September 2006 IPART determination. Real revenue growth rate is then expected to fall to 1.5% pa for 8 years and remain at 0% pa thereafter. · Cash outfl ows - these are expected to be in line with State Water’s Statement of Corporate Intent (SCI) over the next four years and to increase in line with infl ation thereafter. The SCI sets State Water’s targets in conjunction with its Shareholding Ministers. h. Depreciation and Amortisation The depreciable amount of all property, plant and equipment (including buildings, but excluding freehold land), and intangible assets with fi nite lives such as computer application software and development costs, are depreciated on a straight line basis over their estimated useful lives to State Water, commencing from the time the asset was fi rst held for use. The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date, taking into account assessments of asset condition, commercial and technical obsolescence and expected normal wear and tear. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

112 State Water 05-06 Annual Report The applicable depreciation rates of major asset categories are as follows:

Asset Class Depreciation Rate

Land & Buildings Buildings - Cottages and Dwellings/Ofﬁ ce Buildings/Accommodation 1.2 - 4.0% Water Systems Dams - Structure/Concrete Works 0.50% Dams - Other Civil Components 0.5 - 1.0% Dams - Mechanical/Electrical Components 0.5 - 3.3% Weirs and Regulators – Concrete Components & Fountain Pilings 1.00% Weirs and Regulators - Steel Structural Components 1.0 - 2.0% Channels and Structures 2.50% Plant 6.7 - 20.0% Other Non-Current Assets Furniture and Fitouts 10.00% Instruments 10.0 - 20.0% Marine Craft 20.00% Motor Vehicles 20.00% Intangible Assets Computer application software 20.0 – 33.0% Development costs 5.0 – 20.0% Gains and losses on disposal are determined by comparing the proceeds with the carrying amount. These gains or losses are included in the Income Statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. i. Insurance State Water maintains a mix of external insurance policies and internal provisioning in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. These are managed through the NSW Treasury Managed Fund on behalf of State Water. The treatment of risks and associated liabilities are determined in conjunction with independent insurance advisers and loss adjusters. Outstanding claims are recognised when an incident occurs that may give rise to a claim against State Water. Accordingly, no general insurance provision is made for insurance. j. Trade & Other Receivables State Water’s trade and other receivables are recognised and carried at original invoice amount, less any impairment losses recognised by way of an allowance for doubtful debts that represents an assessment of amounts considered to be either doubtful or uncollectible. Recognition at original invoice amount is adopted as this is not materially different to amortised cost, given the short-term nature of these receivables. The allowance for doubtful debts is recognised when collection of the full amount is considered to be no longer probable after due consideration of factors such as past recoverability experience and prevailing economic conditions. Known bad debts are written off against the allowance as and when identiﬁ ed. k. Trade and Other Payables Trade creditors, accruals and other current liabilities are recognised in the Balance Sheet at cost which is considered to approximate amortised cost due to their short term nature. Trade and other payables are recognisable when State Water is obliged to make a future payment for the purchase of goods or services. Payables are recorded at fair values. Payables are usually settled within 30 days from the end of the month in which the invoice is received.

State Water 05-06 Annual Report 113 l. Borrowings Interest bearing fi nancial liabilities or borrowings raised by the NSW Treasury Corporation on behalf of State Water are recognised initially at cost, being the fair value of the consideration received less any transaction costs associated with the borrowings. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any differences between cost and the fi nal redemption value, such as discounts or premiums. These differences are amortised to the Income Statement as part of fi nance costs over the period of the borrowings on an effective interest basis. Gains or losses are recognised in the Income Statement when liabilities are derecognised, such as through a debt restructuring, as well as through the amortisation process. m. Cash and Cash Equivalents Cash and cash equivalents include cash at hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of less than three months. State Water currently has no bank overdrafts. n. Dividends Provision is made for the amount of dividend payable in relation to the current fi nancial year, in accordance with the recognition policy set out in Treasury Circular NSW TC 05/11 Accounting for Dividends. Accordingly, a dividend in relation to the fi nancial year is taken to be determined before balance sheet date, consistent with the requirements of AASB 137 Provisions, Contingent Liabilities and Contingent Assets. o. Employee benefi ts A calculation in accordance with AASB 119 Employee Benefi ts is made for State Water’s liability for employee benefi ts arising from services rendered by employees at balance date. Employee benefi ts that are expected to be settled in one year have been measured at amounts expected to be paid when the liability is settled, plus related on-costs. These are reported under current liabilities in the Balance Sheet. Employee benefi ts payable later than one year have been measured at the present value of the estimated future cash outfl ows to be made for those benefi ts. These are reported under non-current liabilities in the Balance Sheet, unless they are non-conditional obligations, in which case they are reported as current liabilities. p. Superannuation Actuarial gains and losses for defi ned benefi t plans are immediately and fully recognised in the Income Statement when incurred. q. Income Tax State Water is subject to the National Tax Equivalent Regime (NTER) administered by the Australian Taxation Offi ce (ATO). The NTER is based on application of federal income tax laws under which State Water pays income tax equivalents to NSW Treasury. The charge for the current income tax expense is based on the profi t for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profi t or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to

114 State Water 05-06 Annual Report items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Current and deferred tax assets are offset with current and deferred tax liabilities respectively where State Water intends to settle current tax assets and liabilities on a net basis. The amount of benefi ts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive suffi cient future assessable income to enable the benefi t to be realised and comply with the conditions of deductibility imposed by the law. r. Goods and Services Tax Revenues, expenses and assets are recognised net of Goods and Services Tax (GST), except where the amount of GST incurred by State Water is not recoverable from the ATO. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated with the amount of GST included. Cash fl ows are included in the Statement of Cashfl ows on a gross basis. The GST component of cash fl ows arising from investing and fi nancing activities which are recoverable from, or payable to, the ATO are classifi ed as operating cashfl ows. Commitments are disclosed inclusive of GST where applicable. s. Segment Reporting State Water operates in one industry being the delivery of bulk water in New South Wales. As such, State Water has only one business segment as well as one geographical segment in accordance with AASB 114 Segment Reporting, and this is reported in the fi nancial statements. t. Accounting Standards Issued but not yet operative At the reporting date, a number of new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2006 reporting periods and have not been early adopted by State Water Corporation. The assessment of the impact of these new standards and interpretations is set out below: UIG4 Determining whether an Arrangement Contains a Lease Applicable to reporting periods beginning on or after 1 January 2006. This will be applied in State Water’s 2007 fi nancial statements and the UIG4 transition provisions. Implementation of UIG4 is not expected to change the accounting for any of State Water’s current arrangements. UIG5 Rights to Interests arising from Decommisssioning, Restoration and Environmental Rehabilitation Funds Applicable to reporting periods beginning on or after 1 January 2006. Implementation of this interpretation is not expected to affect State Water’s fi nancial statements. AASB7 Financial Instruments: Disclosure and AASB2005-10 Amendments to Australian Accounting Standards (AASB132, AASB101, AASB114 & AASB117, AASB133, AASB1, AASB4, AASB1023 and AASB1038) Applicable to reporting periods beginning on or after 1 January 2007. Application of the standards will not affect any of the amounts recognised in the fi nancial statements but will impact the type of information disclosed in relation to State Water’s fi nancial instruments. AASB2005-9 Amendments to Australian Accounting Standards (AASB4, AASB1023, AASB139 & AASB132) Applicable to reporting periods beginning on or after 1 January 2007. Application of the standards will not affect the fi nancial results of State Water.

State Water 05-06 Annual Report 115 AASB119 Employee Beneﬁ ts and AASB2004-3 Amendments to Australian Accounting Standards (AASB1, AASB101 & AASB124) Applicable to reporting periods beginning on or after 1 January 2006. Application of these standards will not affect the ﬁ nancial results of State Water as NSW Treasury has issued an indicative mandate that the two additional options allowed by AASB119 are not to be used by NSW public sector entities.

The following standards and UIG interpretations have no impact on any disclosure or reporting by State Water Corporation as they relate to transactions or structure that are not undertaken or applicable to it AASB2005-1 Amendments to Australian Accounting Standards (AASB139) AASB2005-5 Amendments to Australian Accounting Standards (AASB1 and AASB139) AASB2006-1 Amendments to Australian Accounting Standards (AASB121) UIG6 Liabilities arising from Participating in a Speciﬁ c Market - Waste Electrical and Electronic Equipment UIG7 Applying the Restatement Approach under AASB129 Financial Reporting in Hyperinﬂ ationary Economies UIG8 Scope of AASB2 UIG9 Assessment of Embedded Derivatives

116 State Water 05-06 Annual Report 2. ADJUSTMENTS OF ERRORS IN AGAAP COMPARATIVES Recording errors have been identifi ed in the 2005 fi nancial statements. The prior year comparatives have been restated to disclose the fi nancial data as if the errors had not occurred as is required by AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The restatement has impacted the balance sheet and affected the previous year’s reported profi t/loss. The net effect of these adjustments is an increase of $1.921 million in equity. These adjustments are disclosed in the reconciliation below. Previous Adjustments Adjusted AGAAP at 30 AGAAP at 30 June 2005 June 2005 Current Assets Notes $’000 $’000 $’000 Cash A, D 30,307 (8,137) 22,170 Receivables 5,336 5,336 Accrued Water Sales B 27,901 1,937 29,838 Inventories 109 109 Unbilled Work 780 780 Tax assets 486 486 Other current assets C 4,162 282 4,444 Total Current Assets 69,081 (5,918) 63,163 Non-current Assets Land & Buildings 16,096 16,096 Water Supply Infrastructure 313,193 313,193 Plant & equipment 3,277 3,277 Work in progress 10,360 10,360 Computers & systems 254 254 Furniture and fi touts 253 253 Instruments 70 70 Marine craft 94 94 Motor vehicles 1,418 1,418 Work in Progress- other 582 582 Total Non-current Assets 345,597 - 345,597 Total Assets 414,678 (5,918) 408,760 Current Liabilities Payables D 17,565 (8,130) 9,435 Provisions F 3,566 2,307 5,873 Other current liabilities 652 652 Total Current Liabilities 21,783 (5,823) 15,960 Non-Current Liabilities Borrowings E 67,163 (49) 67,114 Provisions 9,573 (1,967) 7,606 Total Non-current Liabilities 76,736 (2,016) 74,720 Total Liabilities 98,519 (7,839) 90,680 Net Assets 316,159 1,921 318,080 Equity Contributed Equity 318,198 318,198 Retained earnings (2,039) 1,921 (118) Total Equity 316,159 1,921 318,080 State Water 05-06 Annual Report 117 Reconciliation of 2005 year net profi t after tax under AGAAP to adjust for recording errors 2005 Notes $’000 Prior year net profi t/(loss) after tax as previously reported under AGAAP (2,039) Prior period error affecting fi nance costs A (7) Prior period error affecting water revenue B 1,937 Prior period error affecting other income C 282 Prior period error affecting fi nance costs E 49 Tax equivalent expense attributable to the errors above and adjustment of F deductions (2,307) Offset of deferred tax liability G 1,967 Adjusted prior year net profi t/(loss) after tax as reported under AGAAP (118)

Notes to adjustment of errors in comparatives

A Correction of a minor error affecting ﬁ nance costs. B A detailed reconciliation of water revenue for 2005 billed in arrears in 2006 revealed that Accrued Water Sales as at 30 June 2005 had been understated. C Revenue from leases with a third party had not been brought to account covering 2005 and previous years. These should have been accrued as at 30 June 2005. D Adjustment for administered cash of $8.130 million incorrectly included in Cash balance. Impacts Balance Sheet disclosure but has no impact on Proﬁ t/(Loss). E Adjustment to correctly record the amortised cost of TCorp borrowings. F Adjustment to the calculated tax equivalent expense to take account of the errors above and adjustment of deductions for water facilities capital expenditure under Subdivisions 40-F and 40-G of the Income Tax Assessment Act 1997. G Offset of deferred tax liability as a result of recognising deferred tax asset.

118 State Water 05-06 Annual Report 3. FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS IMPACT OF AIFRS ON THE BALANCE SHEET AS AT 30 JUNE 2005 Adjusted Effect of AIFRS at AGAAP at 30 transition 30 June June 2005 to AIFRS 2005 Current Assets Notes $’000 $’000 $’000 Cash 22,170 22,170 Receivables G 5,336 (1,168) 4,168 Accrued Water Sales 29,838 29,838 Inventories 109 109 Unbilled Work 780 780 Tax assets 486 486 Other current assets H 4,444 (2,114) 2,330 Total Current Assets 63,163 (3,282) 59,881 Non-current Assets Land & Buildings I 16,096 17 16,113 Water Supply Infrastructure I 313,193 (1,491) 311,702 Plant & equipment I 3,277 79 3,356 Work in progress I 10,360 (6,866) 3,494 Computers & systems I 254 6 260 Furniture and ﬁ touts I 253 48 301 Instruments I 70 6 76 Marine craft I 94 2 96 Motor vehicles I 1,418 45 1,463 Work in Progress-other 582 582 Total Non-current Assets 345,597 (8,154) 337,443 Total Assets 408,760 (11,436) 397,324 Current Liabilities Borrowings J 13,703 13,703 Payables 9,435 9,435 Provisions K 5,873 7,606 13,479 Other current liabilities 652 652 Total Current Liabilities 15,960 21,309 37,269 Non-current Liabilities Borrowings J 67,114 (13,703) 53,411 Provisions H, K 7,606 (418) 7,188 Total non-current liabilities 74,720 (14,121) 60,599 Total Liabilities 90,680 7,188 97,868 Net Assets 318,080 (18,624) 299,456 Equity Contributed Equity G, H, L 318,198 (17,688) 300,510 Retained earnings M (118) (936) (1,054) Total Equity 318,080 (18,624) 299,456

State Water 05-06 Annual Report 119 Impact of AIFRS on the opening Balance Sheet as at 1 July 2004

Previous Effect of AIFRS at AGAAP at 1 transi- 1 July July 2004 tion to 2004 AIFRS Current Assets Notes $’000 $’000 $’000 Cash 15,919 15,919 Receivables 1,546 1,546 Accrued Water Sales 39,310 39,310 Inventories - Unbilled Work - Tax assets - Other current assets 2,212 2,212 Total Current Assets 58,988 - 58,988 Non-current Assets Land & Buildings 13,179 13,179 Water Supply Infrastructure G, L 286,707 (12,105) 274,602 Plant & equipment - Work in progress - Computers & systems - Furniture and ﬁ touts 17 17 Instruments 51 51 Marine craft 46 46 Motor vehicles - Work in Progress- other - Total Non- Current Assets 300,000 (12,105) 287,895 Total Assets 358,987 (12,105) 346,882 Current Liabilities Payables 29,191 29,191 Provisions 2,339 2,339 Other current liabilities 138 138 Total Current Liabilities 31,669 - 31,669 Non-Current Liabilities Borrowings - Provisions H 558 5,583 6,141 Total non-current liabilities 558 5,583 6,141 Total Liabilities 32,227 5,583 37,810 Net Assets 326,761 (17,688) 309,073 Equity Contributed Equity G, H, L 326,761 (17,688) 309,073 Retained earnings - Total Equity 326,761 (17,688) 309,073

120 State Water 05-06 Annual Report Notes to Explain Adjustments to the Balance Sheets following adoption of AIFRS G Adjusting accounting errors in previous periods AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors requires that accounting errors identifi ed be adjusted where possible against prior year comparatives. An error was made in recognising work for other parties in sundry debtors when the work had separately been paid for. An amount of $1.168 million was de-recognised as a result. H Change in discount rate used in calculating employee benefi ts AASB 119 Employee Benefi ts requires the defi ned benefi t superannuation obligation to be discounted using the government bond rate at each reporting date, rather than the long-term expected rate of return on plan assets. This has an impact of increasing the defi ned benefi t superannuation liability (or decreasing the asset if in an overfunded position) and change the quantum of the superannuation expense. The change in the discount rate on superannuation obligations provided a net movement of $9.302 million on the AGAAP position, changing the defi ned superannuation asset of $2.114 million under AGAAP to a defi ned superannuation liability of $7.188 million under AIFRS as at 30 June 2005 . The assessed impact on the opening Balance Sheet as at 1 July 2004 was to increase non-current liabilities by $5.583 million. The impact on net profi t/loss for the year ended 30 June 2005 was to increase the loss by $3.719 million. I De-recognition of fi xed assets AASB 138 Intangible Assets requires all research costs to be expensed and restricts the capitalisation of development costs. AGAAP permitted some research and development costs to be capitalised when certain criteria were met. State Water management reviewed costs contained within Work-in-Progress (WIP), other current assets and water infrastructure for compliance with the AIFRS criteria. A total of $8.154M was derecognised at 30 June 2005, with $4.528 million attributed to expenditure pre 1 July 2004 adjusted against opening equity, and $3.626 million adjusted against net profi t/loss. J Reclassifi cation of Borrowings AASB101 Presentation of Financial Statements requires disclosure of borrowings according to when they are due for repayment. This has led to a reclassifi cation of loans of $13.703 million from non-current to current as at 30 June 2005. K Reclassifi cation of Employee Benefi ts AASB101 Presentation of Financial Statements requires that unconditional liabilities where the entity does not have discretion to delay payment be disclosed as current liabilities. This has led to a reclassifi cation of unconditional long service leave entitlements of $7.606 million previously treated as non-current under AGAAP to current liabilities under AIFRS as at 30 June 2005. L Reclassifi cation of Opening Work in Progress Expenditure on major periodic maintenance, total asset management planning that could not satisfy the defi nition of an asset, and on expenditure related to contract revenue from prior years that was included in the opening Work in Progress balances transferred from DEUS totalling $6.409 million was adjusted against opening Contributed Equity as at 1 July 2004. M Reconciliation of net profi t/loss after tax as adjusted for errors under previous AGAAP to that under AIFRS 2005 Notes $’000 Adjusted prior year net profi t/(loss) as previously reported under AGAAP (refer Note 2) (118) - Prior year expenses transferred from WIP L 6,409 Defi ned benefi t superannuation adjustment for change in discount rate H (3,719) Amounts previously treated as capital expenditure expensed under AIFRS I (3,626) Income tax expense adjustment due to AIFRS - Net profi t/(loss) after tax under AIFRS (1,054) Explanation of material adjustments to the cashfl ow statements There are no material differences between the cash fl ow statement presented under AIFRS and the cash fl ow statement presented under previous AGAAP.

State Water 05-06 Annual Report 121 2006 2005 $’000 $’000 4. REVENUE Water delivery revenue Regulated water sources 35,555 30,004 Unregulated water sources 403 403 Total water delivery revenue 35,958 30,407 Government grants and subsidies Grants 17,100 10,495 Subsidies 7,900 - 25,000 10,495 Interest income Interest on investments 1,811 943 Interest from bank 45 - Interest on overdue debts 307 138 2,163 1,081 Other income Proﬁ t/(loss) on disposal of non-current assets 145 (142) Other income 2,683 3,029 2,828 2,887

5. NET PROFIT BEFORE TAX Expenses Employee beneﬁ ts 22,458 17,800 Share of revenue payable to NSW Treasury 7,339 - Contractors and consultants 4,582 3,853 Maintenance of infrastructure and plant 8,162 8,725 Bad debts - 47 Doubtful debts - 130 Depreciation and amortisation expense 6,070 2,484 Rental expense on operating leases (minimum lease payments) 1,871 818 Other operating expenses 16,730 14,307 67,212 48,164 Depreciation and Amortisation Expense included above Buildings 110 34 Computers 63 - Furniture and ﬁ touts 316 3 Instruments 71 12 Marine Craft 33 18 Motor Vehicle 666 73 Plant and Equipment 477 236 Water Infrastructure 3,638 2,108 Intangible assets 696 - 6,070 2,484

122 State Water 05-06 Annual Report 2006 2005 Notes $’000 $’000 Signifi cant revenue and expense items The following signifi cant revenue and expense items are relevant in explaining the fi nancial performance of State Water. Revenue items Water Delivery Revenue - regulated water sources a. 35,555 30,004 Government grants and subsidies b. 25,000 10,495 Net movement in employer’s superannuation reserve c. 5,777 - Expense items Share of revenue payable to NSW Treasury a. 7,339 - Net movement in employer’s superannuation reserve c. - (1,605) Notes a. Water delivery revenue includes charges to customers attributable to the operation of the Murray Darling Basin Commission (MDBC). For State Water’s fi rst year of operation (2004-05), NSW Treasury allowed State Water to retain this revenue of $6.643 million as an implicit subsidy. In the 2005-06 year, the revenue from customers attributed to MDBC operations of $7.339 million was payable to NSW Treasury. b. For the 2005-06 year, the $25.0 million provided by the NSW Government included an operating subsidy of $7.9 million. In the 2004-05 year, as no operating subsidy had been provided for, State Water retained as an implicit operating subsidy the proportion of water revenue from customers attributed to MDBC operations otherwise payable to NSW Treasury of $6.643 million, in addition to the grant of $10.495 million. (Refer Note a. above) c. The net positive movement in employer’s superannuation reserve of $5.777 million for 2005-06 included the recognition of net actuarial gains of $4.724 million (refer note 19). For the 2004-05 year, a negative movement of $1.605 million was experienced.

State Water 05-06 Annual Report 123 2006 2005 $’000 $’000 6. INCOME TAX EQUIVALENT EXPENSE Profi t from ordinary activities before income tax equivalent expense 12,963 1,759 The prima facie tax equivalent, using tax rates applicable on operating profi t and extraordinary items differs from the income tax equivalent expense provided in the fi nancial statements as follows: Prima facie income tax equivalent expense calculated at 30% of profi t 3,889 528 Adjustments to income tax due to the tax effect of permanent differences arising from non-tax relevant items: Non-deductible expenses - Entertainment 30 30 Income tax adjusted for permanent differences 3,919 558 Adjustment for the tax effect of timing differences (2,295) 2,255 Income Tax Expense 1,624 2,813 Current tax equivalent expense 1,624 2,813 Deferred tax equivalent expense - origination and reversal of temporary - - differences Income Tax Expense 1,624 2,813 Tax Equivalent Assets Prior year over payment of tax equivalent instalments to the Offi ce of - 486 State Revenue for Fish River Water Supply

7. CASH AND CASH EQUIVALENTS Cash on hand 15 14 Operating accounts 2,418 10,189 Deposit accounts 29,579 11,967 32,012 22,170

8. TRADE RECEIVABLES Trade debtors - water 2,020 1,004 Trade debtors - other 2,401 3,764 Allowance for impairment (309) (600) 4,112 4,168

9. OTHER CURRENT ASSETS Accrued income 28,300 29,838 Net refund due on account of GST 14 2,012 Other current assets 143 1,693 28,457 33,543

124 State Water 05-06 Annual Report 2006 2005 $’000 $’000 10. PROPERTY, PLANT AND EQUIPMENT Land 14,038 14,038 Buildings At cost 2,897 2,109 Accumulated depreciation (150) (34) 2,747 2,075 Water Infrastructure At fair value 314,337 313,804 Accumulated depreciation (5,980) (2,102) 308,357 311,702 Plant & equipment At cost 3,888 3,592 Accumulated depreciation (714) (236) 3,174 3,356 Computers and systems At cost 309 260 Accumulated depreciation (63) - 246 260 Furniture and ﬁ touts At cost 1,838 304 Accumulated depreciation (318) (3) 1,520 301 Instruments At cost 618 88 Accumulated depreciation (106) (12) 512 76 Marine craft At cost 184 114 Accumulated depreciation (51) (18) 133 96 Motor vehicles At cost 5,917 1,446 Accumulated depreciation (656) 17 5,261 1,463 Work in progress Infrastructure and other at cost 9,279 4,076 Total Property, Plant and Equipment 345,267 337,443

State Water 05-06 Annual Report 125 $’000 $’000 $’000 $’000 PROPERTY, PLANT AND EQUIPMENT Movements WATER PLANT & Year ended 30 June 2006 LAND BUILDINGS INFRASTRUCTURE EQUIPMENT Balance at 1 July 2005 14,038 2,075 311,702 3,356 Additions - 782 293 295 Depreciation - (110) (3,638) (477) Reclassifi cation of depreciation - Balance at 30 June 2006 14,038 2,747 308,357 3,174 COMPUTERS FURNITURE & MARINE & SYSTEMS FITOUTS INSTRUMENTS CRAFT Balance at 1 July 2005 260 301 76 96 Additions 49 1,535 507 Depreciation (63) (316) (71) (33) Reclassifi cation of depreciation Balance at 30 June 2006 246 1,520 512 133 WORK IN MOTOR VEHICLES PROGRESS Balance at 1 July 2005 1,463 4,076 Additions 4,464 5,203 Depreciation (666) - Reclassifi cation of depreciation Balance at 30 June 2006 5,261 9,279 WATER PLANT & Year ended 30 June 2005 LAND BUILDINGS INFRASTRUCTURE EQUIPMENT Balance at 1 July 2004 12,044 1,135 250,613 2,514 Additions 257 1151 18,434 1,039 Disposals (177) (28) Transfer in from FRWS 1,737 44,763 67 Depreciation (34) (2,108) (236) Balance at 30 June 2005 14,038 2,075 311,702 3,356 COMPUTERS FURNITURE & MARINE & SYSTEMS FITOUTS INSTRUMENTS CRAFT Balance at 1 July 2004 260 17 51 45 Additions 285 33 69 Transfer in from FRWS 2 4 Depreciation (3) (12) (18) Balance at 30 June 2005 260 301 76 96 WORK IN MOTOR VEHICLES PROGRESS Balance at 1 July 2004 Additions 1,349 4,076 Transfer in from FRWS 187 Depreciation (73) Balance at 30 June 2005 1,463 4,076 126 State Water 05-06 Annual Report 2006 2005 $’000 $’000 11. INTANGIBLE ASSETS Systems software Additions 2,088 - Amortisation (696) - 1,392 - The intangible assets have fi nite lives and are being amortised over three years. Amortisation is included in operating expenses in the income statement. 12. TRADE AND OTHER PAYABLES Trade creditors 1,516 811 NSW Treasury 7,339 - Dividends 7,937 - Accrued expenses 10,461 8,624 27,253 9,435 13. BORROWINGS Short-term Borrowing Unsecured loans from NSW Treasury Corporation 5,000 13,703 Long-term Borrowing Unsecured loans from NSW Treasury Corporation 56,680 53,411 Financing Facilities At balance date, State Water had Treasurer’s approval for a borrowing facility with The New South Wales Treasury Corporation with a limit of $80 million. State Water has a ‘come and go’ facility of $7 million with the NSW Treasury Corporation, which is available for use as and when required as part of its daily cash management functions. Interest is charged on this facility on the basis of the corporate banker’s debit rate that is calculated daily. This facility was not utilised at the reporting date. In addition to the above facility, State Water has Treasurer’s approval for a credit card facility with its corporate banker of up to $500,000. At reporting date the credit card borrowing limit utilised was $171,000. The Corporation has no other fi nancing facilities in place. 14. PROVISIONS Current Income Tax Equivalent 4,438 2,813 Employee Benefi ts 11,258 10,666 15,696 13,479 Non-Current Deferred Tax Equivalent Liability - - Fair value of defi ned benefi t fund superannuation defi cit 1,412 7,188 Employee benefi ts 731 - 2,143 7,188 Analysis of Total Provisions Current 15,696 13,479 Non-current 2,143 7,188 17,839 20,667

State Water 05-06 Annual Report 127 2006 2005 $’000 $’000 15. OTHER CURRENT LIABILITIES Accrued interest 1,032 - Security & contract deposit 65 165 Other 513 487 1,610 652 16. CONTRIBUTED EQUITY Balance at start of period 300,510 - Opening Equity transferred from DEUS on formation of State Water - 326,761 Corporation on 1 July 2004 AIFRS adjustment - assessed defi ned superannuation liability at 1 July (5,583) 2004 (refer Note 3) AIFRS adjustment - prior years’ expenditure inappropriately included in (6,409) Work in Progress balances transferred from DEUS (refer Note 3) AIFRS adjustment - error in recognising work for other parties when work (1,168) had separately been billed (refer Note 3) AIFRS adjustment - prior years’ expenditure in Work in Progress balances (4,528) transferred from DEUS de-recognised (refer Note 3) Adjusted Opening Equity following adoption of AIFRS on 1 July 2004 309,073 Conversion of equity to loan - (60,000) Fish River Water Authority net assets contributed to State Water - 51,437 Balance at end of period 300,510 300,510 The equity transfer from DEUS includes 2 ordinary fully paid shares of $1.00 each. Authorised capital is 2 ordinary shares of $1.00 each. 17. RETAINED EARNINGS Balance at start of period (1,054) - Profi t/(Loss) for the period 11,339 (1,054) Dividends at 70% (2005 50%) of profi t for the period (7,937) - Balance at end of period 2,348 (1,054) 18. NOTE TO THE CASH FLOW STATEMENT Profi t/(Loss) from ordinary activities after tax 11,339 (1,054) Non-cash items: Amounts set aside to provision for doubtful debts (291) 130 Net movement in Employer’s superannuation reserve (5,777) 1,605 Depreciation of non-current assets 6,070 2,484 Revaluation of borrowings (434) (49) Item classifi ed as fi nance/ investment activities: (Profi t)/ Loss on disposal of assets (145) 142 Changes in assets and liabilities: (Increase)/ decrease in receivables 347 (2,752) (Increase)/ decrease in other current assets 5,086 7,979 Increase/ (decrease) in trade and other payables 9,879 (19,058) Increase/ (decrease) in provisions 2,949 10,582 Increase/ (decrease) in other operating liabilities 958 514 Net cash fl ow from operating activities 29,981 523 128 State Water 05-06 Annual Report 19. SUPERANNUATION PLANS All employees are entitled to benefi ts on retirement, disability or death. The superannuation plans are administered by Pillar Administration (formerly the Superannuation Administration Corporation). State Water Corporation contributes to the defi ned benefi t State Superannuation Scheme, State Authorities Superannuation Scheme and State Authorities Non-Contributory Superannuation Scheme and other defi ned contribution schemes. In the case of defi ned benefi t schemes, employer contributions are based on the advice of the plans’ actuaries. Employee contributions are based on various percentages of employee gross salaries. The actual contributions are expensed at the time of payment. The plans provide defi ned benefi ts to qualify- ing employees, based on length of service and fi nal average salary. The assessment of the defi ned benefi t plans as at 30 June 2006 by Pillar Administration, the funds’ administrator, showed that the fund was not fully funded under existing accounting standards. Payments made to Pillar towards superannuation liabilities are held in Investment Reserve Accounts. The liability funding with Pillar is disclosed in the Balance Sheet. The superannuation positions of the funds as at 30 June 2006 were: SASS SANCS SSS Total $’000 $’000 $’000 $’000 Gross Liability assessed by actuaries as at 30 June 14,199 3,303 31,804 49,306 2006 Investment Reserve account balance 15,435 3,789 28,672 47,896 Over/ (under) funded 1,236 486 (3,132) (1,410) (i) SASS= State Authorities Superannuation Scheme (iii) SSS= State Superannuation Scheme (ii) SANCS= State Authorities Non- contributory Superannuation Scheme The comparative superannnuation positions of the funds as at 30 June 2005 were: SASS SANCS SSS Total Gross Liability assessed by actuaries as at 30 June 7,882 2,998 21,873 32,753 2005 Investment Reserve account balance 7,642 3,347 14,576 25,565 Over/ (under) funded (240) 349 (7,297) (7,188) Total expense recognised in income statement as at 30 June 2006 was: SASS SANCS SSS Total Current service cost 450 175 542 1,167 Interest on obligation 719 150 1,757 2,626 Expected return on plan assets (901) (252) (1,761) (2,915) Net actuarial losses (gains) recognised in year (958) (243) (3,523) (4,724) Change in surplus in excess of recovery available - - - - from scheme Past service costs - - - - Losses (gains) on curtailments and settlements - - - - Total included in employee benefi ts expense (690) (171) (2,985) (3,846) SASS SANCS SSS Total Actual return on plan assets: 1,932 539 3,647 6,118

State Water 05-06 Annual Report 129 19. SUPERANNUATION PLANS CONTINUED Valuation Method The Projected Unit Credit (PUC) valuation method was used to determine the present value of the defi ned benefi t obligations and the related current service cost. The method sees each period of service as giving rise to an additional unit of benefi t entitlement and measures each unit separately to build up the fi nal obligation. Economic Assumptions 2006 2005 Discount Rate at 30 June 5.9% pa 5.2% pa Expected return on plan assets at 30 June 7.6% 7.3% Expected salary increases 4.0% pa to 2008; 4% pa 3.5% pa thereafter Expected rate of CPI increase 2.5% pa 2.5% pa

Arrangements for employer contributions for funding - Paragraph AUS121.1 S A S S SANCS S S S 30 June 30 June 30 June 2006 2 0 0 6 2006 $’000 $’000 $’000 Accrued beneﬁ ts 13,600 3,141 26,851 Net market value of Fund assets (15,434) (3,789) (28,672) Net (surplus)/deﬁ cit (1,834) (648) (1,821)

30 June 30 June 30 June 2005 2005 2 0 0 5 Accrued benefi ts 10,825 2,639 22,529 Net market value of Fund assets (11,816) (3,347) (22,943) Net (surplus)/defi cit (991) (708) (414) Recommended contribution rates for the entity at 30 June 2006 and 2005 are: SASS SANCS SSS multiple of % member multiple of member salary member contributions contributions 1.90 2.50 1.60 The method used to determine the employer contribution recommendations at the last actuarial review was the Aggregrate Funding method for 2006 and 2005. The method adopted affects the timing of the cost to the employer. Under the Aggregate Funding method, the employer contribution rate is determined so that suffi cient assets will be available to meet benefi t payments to existing members, taking into account the current value of assets and future contributions. Weighted-Average Assumptions 2006 2005 Expected rate of return on Fund assets 7.3% pa 7.0% pa Expected salary increase rate 4% pa 4.0% pa Expected rate of CPI increase 2.5% pa 2.5% pa

130 State Water 05-06 Annual Report 20. COMMITMENTS 2006 2005 $’000 $’000 Operating lease commitments Non-cancellable operating lease commitments not provided for in the accounts: Not later than 12 months 1,085 562 Between 12 months and ﬁ ve years 2,816 652 Greater than ﬁ ve years - - 3,901 1,214 State Water Corporation leases property, IT equipment and motor vehicles under non-cancellable operating leases. Leases for property generally have terms of three to six years with provision to increase rent annually by 3%. All leases allow for renewal at the end of the lease term.

Capital commitments Not later than 12 months 131 - Between 12 months and ﬁ ve years - - Greater than ﬁ ve years - - 131 -

Fish River Capital WIP contracted expense.

Other expense commitments Not later than 12 months 3,506 66 Between 12 months and ﬁ ve years - 26 Greater than ﬁ ve years - - 3,506 92

Other expense commitments comprise outstanding purchase orders of 3,159K and GST overclaimed of 347K.

21. CONTINGENT LIABILITIES AND CONTINGENT ASSETS There are no known contingent liabilities or contingent assets at balance date.

22. DIRECTORS The names of persons holding the position of director at any time during the ﬁ nancial year are: AG (Tony) Wright (Chairman) Abel Immaraj (Chief Executive Ofﬁ cer) Kathleen Bowmer Michael Bennett Graham J. Ebbett (resigned 15 February 2006) Don Marples (appointed 24 April 2006) Kathryn Ridge Edward Woodley Details of Directors remuneration are set out in Note 23.

State Water 05-06 Annual Report 131 2006 2005 $’000 $’000 23. KEY MANAGEMENT PERSONNEL Key Management Personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the corporation, directly or indirectly. This comprises: - All Directors - The CEO and all Heads of Branches (‘Senior executives’)

Key Management Personnel compensation is as follows: - Short-term employee benefi ts 1,729 1,347 - Post-employment benefi ts 196 155 - Other long-term benefi ts 36 47 1,961 1,549

This comprises compensation relating to: - Directors 273 198 - Senior executives 1,688 1,351 1,961 1,549

24. RELATED PARTY DISCLOSURES Some directors of State Water are also directors of other companies, or have a substantial interest in other companies or entities, that may have had transactions with State Water during the year. A register of Directors’ interests is conﬁ rmed and noted at each meeting of the Board. During the current reporting period, the following related party transactions occurred: A director of State Water, Mr Michael Bennett, was a holder of water licences during the reporting period. Mr Bennett was also a director of Bennett Nominees Pty Ltd as trustee for Bennett Family Settlement No 1 which was a holder of water licences during the reporting period. State Water earned revenue totalling $26,800 during the reporting period at rates determined by IPART for services rendered under the conditions of these water licences, which were issued by the Department of Natural Resources on an arm’s length basis and on commercial terms and conditions in the ordinary course of business. As at 30 June 2006, the revenue earned during the reporting period had not been invoiced to Mr Bennett or Bennett Nominees Pty Ltd and is included in Accrued income in Other current assets in the Balance Sheet. Mr Bennett and Bennett Nominees Pty Ltd did not have a current debt with State Water. Mr Bennett, representing riparian irrigators from regulated streams, is also chairman of the Macquarie- Cudgegong Customer Service Committee (CSC). This is one of a number of customer service committees established by State Water as a condition of its Operating Licence to exchange information with its customers and to develop a positive, constructive and efﬁ cient service provider-customer relationship. A CSC can make recommendations to State Water but is not a decision-making body.

25. AUDITOR’S REMUNERATION Amounts paid and payable to the external auditor for audit and review of 250 121 the ﬁ nancial statements (other services nil)

132 State Water 05-06 Annual Report 26. FINANCIAL INSTRUMENTS DISCLOSURE Exposure to a range of risks arises in the normal course of business operations of State Water Corporation. These risks include interest rate risk, credit risk and liquidity risk. These risks are managed by State Water through policies, procedures and controls designed to assist in management of these risks. State Water does not use derivative fi nancial instruments for any purpose. (a) Interest rate risk State Water is exposed to changes in market interest rates. Although there is a small exposure arising from cash and investment portfolios, the main exposure arises primarily from State Water’s debt portfolio. State Water manages this exposure by implementing various policies and controls that are designed to ensure debt maturities are spread across the yield curve. These controls include approved parameters specifying the minimum and maximum percentages of debt issuance in maturity bands, and approved parameters limiting the maximum exposure to fl oating interest rate debt products. Interest rate risk tables In respect of interest-bearing fi nancial instruments, which give rise to exposure to interest rate risk for State Water, the following tables summarise their effective weighted average interest rates at the reporting date and the periods in which they either reprice or mature, whichever is the earlier. Apart from those instruments listed below, all other fi nancial instruments are not subject to interest rate risk. Non Less More Interest than 1 1 to 2 2 to 3 3 to 4 4 to 5 than 5 2006 Bearing year years years years years years Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash 15 2,418 - - - - - 2,433 Cash equivalents - TCorp - 29,579 - - - - - 29,579 investments * Trade receivables 4,112 ------4,112 4,127 31,997 - - - - - 36,124 Financial liabilities Borrowings (TCorp) ** - 5,000 18,986 - - 10,548 27,146 61,680 Trade & other payables 26,677 ------26,677 26,677 5,000 18,986 - - 10,548 27,146 88,357 * Weighted average interest rate 5.66% ** Weighted average interest rate 5.77% Non Less More Interest than 1 1 to 2 2 to 3 3 to 4 4 to 5 than 5 2005 Bearing year years years years years years Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash 14 10,189 - - - - - 10,203 Cash equivalents - TCorp - 11,967 - - - - - 11,967 investments *** Trade receivables 4,168 ------4,168 4,182 22,156 - - - - - 26,338 Financial liabilities Borrowings (TCorp) **** - 13,703 - 15,616 - - 37,795 67,114 Trade & other payables 9,435 ------9,435 9,435 13,703 - 15,616 - - 37,795 76,549 *** Weighted average interest rate 5.66% **** Weighted average interest rate 5.77% State Water 05-06 Annual Report 133 FINANCIAL INSTRUMENTS DISCLOSURE CONTINUED (b) Credit risk Credit risk refers to the risk that indebted counterparties will default on their contractual obligations, resulting in fi nancial loss to State Water. Exposures to credit risk exist in respect of fi nancial assets such as trade and other receivables, cash and cash equivalents and investments in marketable securities. In respect of trade and other receivables, State Water monitors balances outstanding on an ongoing basis and has policies in place for the recovery or write-off of amounts outstanding. In respect of cash and cash equivalents and investments in marketable securities, State Water only deals with creditworthy counterparties and recognised fi nancial intermediaries as a means of mitigating against the risk of fi nancial losses from defaults. Policies are in place to monitor the credit ratings of counterparties and to limit the amount of funds placed with those counterparties, depending on their credit rating. In addition, only highly liquid marketable securities are used for investment purposes. At the reporting date, there were no signifi cant concentrations of credit risk in which State Water is signifi cantly exposed to any single counterparty or group of counterparties having similar characteristics. The consolidated entity is not materially directly exposed to overseas countries. The maximum exposure to credit risk is represented by the carrying amount of each fi nancial asset in the Balance Sheet. (c) Liquidity risk Liquidity risk refers to the risk that State Water will be unable to meet expenditure commitments when they fall due. Liquidity risk is managed through the maintenance of extensive short-term and long-term cash fl ow forecasting, and the availability of fi nancing facilities including a long-term fi xed borrowing facility with the NSW Treasury Corporation. (d) Fair values of fi nancial assets and fi nancial liabilities Fair values of fi nancial assets and fi nancial liabilities are determined on the following bases: · Cash and cash equivalents The carrying amount is considered to be a reasonable approximation of the fair value. · Trade and other receivables The carrying amount is considered to be a reasonable approximation of the fair value. · Trade and other payables The carrying amount is considered to be a reasonable approximation of the fair value. · Borrowings Fair values are determined on the basis of discounted cash fl ows using valuation rates supplied by independent market sources. · Other fi nancial liabilities The carrying amount is considered to be a reasonable approximation of the fair value.

134 State Water 05-06 Annual Report 2006 2005 27. ADMINISTERED REVENUE AND ASSETS $’000 $’000 Administered revenues DNR - Water Charges 18,502 16,009 NSW Treasury - Pindari Levy 1,960 1,494 20,462 17,503 Administered Assets Administered cash 4,481 8,130 Debtors - DNR Accrued Water Sales 22,110 16,009 Debtors - Pindari Levy 4,524 1,494 31,115 25,633

Administered Liabilities Creditor - DNR Accrued Water Charges 25,724 20,869 Creditor - NSW Treasury (Pindari Levy) 5,391 4,764 31,115 25,633

The amounts shown above have not been recognised in the Income Statement and the Balance Sheet, as they arise from agency arrangements with the Department of Natural Resources (DNR) and NSW Treasury. Under these arrangement State Water is responsible for billing water licence holders on behalf of: · DNR for unregulated river and groundwater charges as well as regulated river charges which are shared between State Water and DNR. · NSW Treasury for the Pindari Dam Levy These charges are payable by State Water to the respective agencies as and when collected. At the reporting date, reliance was placed on estimates as billing for these charges had not occurred.

28. EVENTS AFTER BALANCE DATE State Water Corporation has an approval from the Governor of the State of New South Wales to obtain fi nancial accommodation in accordance with the Public Authorities (Financial Arrangements) Act 1987. It also had Treasurer’s approval under Section 8 of that Act for the specifi c terms of its borrowings for the year ended 30 June 2006. As at balance date, no further approval had been obtained to cover the terms of its borrowings for the year ended 30 June 2007. State Water was therefore in breach of Section 8(2) of the Public Authorities (Financial Arrangements) Act 1987 as it continued to have borrowings. The Treasurer’s approval was given on 26 June 2007 for State Water Corporation to hold borrowing facilities with a limit of $80 million until 30 June 2010. There are no other known events that would impact on the state of affairs of the economic entity or have a material effect on these fi nancial statements. The fi nancial report was authorised for issue on 31 August 2007 by the Board of Directors.

29. CORPORATION DETAILS State Water Corporation ABN: 21 147 934 787 Suites 12-14, Riverview Business Park 36 Darling Street Dubbo NSW 2830

State Water 05-06 Annual Report 135 water delivery State Water is responsible for delivering the right amount of water, to the right place at the right time.

On average State Water delivers 5,500 gigalitres (GL) of bulk water each year primarily for:

Irrigation - approximately 6,300 customers hold more than 10,000 licences.

Industry - more than 150 customers including agricultural processing, mining, manufacturing and power generation.

Environmental ﬂ ows - in order to maintain and enhance biodiversity in 14 regulated river valleys.

Town water - supplying water to nearly 70 regional cities and major towns.

Stock and domestic - delivered to more than 15,000 licensed and unlicensed landholders.

State Water’s principal objective, as outlined in legislation is ‘to capture, store and release water in an efﬁ cient, effective, safe and ﬁ nancially responsible manner’.

136 State Water 05-06 Annual Report appendix 1 Code of Conduct A statement of State Water Corporation’s commitment to These are the principles our shareholders, customers and the maintaining ethical standards of behaviour. community expect.

Adopted as an interim policy by the Management Team for Each employee of State Water has an obligation directly linked to consultation on implementation, 14 September 2005. these principles.

Scope of the Code State Water’s shareholders, customers and members of the community have a right to expect our business to be conducted This code applies to all individuals employed, appointed or with integrity, impartiality, accountability, responsive service and otherwise engaged to work for State Water. This includes effi ciency. Employment with State Water requires staff to display permanent, temporary and casual staff, as well as consultants, standards of professional behaviour that promote and maintain contractors and agency staff engaged to perform work for or on confi dence and trust in their work. behalf of State Water. To meet these expectations, all staff should demonstrate the A deliberate act or omission breaching this Code of Conduct, or following principles when undertaking their day-to-day work: State Water’s policies referred to in this Code, may be lead to disciplinary action, including termination of employment. Integrity: Earning and sustaining trust Maintain public trust by being honest, open and transparent in all The Code of Conduct is closely linked with State Water’s Mission, dealings and by acting in the public interest. Avoid real or apparent Vision and Values. confl icts of interest and report any improper conduct, corruption, fraud or maladministration at work. Our Mission To be Australia’s most effective water business. Impartiality: Making decisions objectively Make decisions, advise and behave in a manner that is free Our Vision from favouritism, self-interest and preference. Treat people fairly To sustain life and serve the community by getting more water to by objectively considering all relevant facts and implementing where it is needed most effectively and effi ciently. government policy and programs equitably. Accountability: Taking responsibility for results Organisational Values Work to clear objectives in a transparent manner. Ensure that all We will be recognised as being: decisions and actions are reasonable, fair and appropriate to the • Accountable circumstances, based on consideration of all the relevant facts • Consultative and supported by relevant legislation, policies and procedures. • Reliable Always accept the consequences of actions you take or decisions • Innovative and Leading Edge you make. • Effective • Experts Responsive service: Demonstrating a spirit of service Our people will have: Treat members of the public, stakeholders and their colleagues • Integrity fairly and consistently, in a non-discriminatory manner, with proper • Respect regard for their rights and obligations. Provide a relevant and • Expertise responsive service to customers, providing all necessary and timely assistance. During 2005/06, staff will be involved in developing a new set of organisational values that will be incorporated into this Code of Effi ciency Conduct. Achieve results through the best use of the organisation’s fi nancial and physical resources and by working effectively with people. General Principles of Behaviour and Conduct Use your authority, available resources and information only for the work-related purposes intended. There are fi ve ethical principles that form the basis of good public administration: • Integrity Code of Conduct • Impartiality To ensure that State Water is an organisation where ethical • Accountability conduct and decision making guides all our actions, you may fi nd • Responsive service it useful to ask yourself the following fi ve questions and may fi nd it • Effi ciency. useful to talk to your colleagues or supervisor in the process:

State Water 05-06 Annual Report 137 Guide to ethical decision making Seek feedback on the services you provide and listen and respond to the concerns of all your customers – whether external 1. Is the decision or conduct lawful? customers or other staff. 2. Is the decision or conduct consistent with current Government policy and in line with State Water’s Mission, Be reasonable and consistent in applying policies and procedures. Values and Code of Conduct? How should I interact with other staff? 3. What will be the outcome for me, my colleagues, State Water By working with your colleagues and respecting them, State Water and other parties? will be a harmonious work environment.

4. Do these outcomes raise a conﬂ ict of interest or lead to Work cooperatively with your colleagues. Support and learn from private gain at public expense? each other and accept differences in personal style.

5. Can the decision or conduct be justifi ed in terms of the public Respect the opinions of your colleagues and seek their input, interest and would it withstand public scrutiny? particularly in their area of expertise. Be careful how you handle differences of opinion with other staff. You should discuss these Personal and Professional Behaviour matters in the workplace – don’t criticise other staff in public or in As public sector employees, we should always maintain high front of customers. standards What does State Water expect of me? How should I manage staff? As staff of a State Owned Corporation, our standards of personal Supervisors need to be consistent; to support and encourage staff; and professional behaviour must promote and maintain the and lead by example. confi dence and trust of our shareholders, customers and the community. State Water is a diverse workplace, with staff from all walks of life. In all our work, we have a responsibility to: Supervisors should provide a safe, encouraging and supportive work environment that recognises and values that diversity. • Perform duties impartially and conscientiously, to the best of our ability. All supervisors should give staff a clear sense of direction and purpose and lead by example. • Behave in a manner that supports and promotes State Water’s business and supports operational effi ciency and Set realistic goals, timelines and workloads and provide adequate effective employee relations. resources to complete work. Trust staff to manage their work and • Maintain knowledge and skills in relevant areas of expertise. provide them with support where it is needed. • Be aware of and comply with any relevant legislation, Treat staff fairly and consistently and genuinely consult them on industrial or administrative requirements. any proposed changes to the workplace that will affect them. • Maintain adequate and accurate documentation to support any decisions we make. We want State Water to be a happy place to work, so understand and respond to the legitimate needs and concerns of your staff. • Be aware of State Water’s activities so that we can answer Encourage arrangements that allow them to achieve a work-life queries from customers and stakeholders. balance. • Not take or seek improper advantage of any offi cial information gained in the course of employment. Who is protected from discrimination and harassment? Everyone has a right to a fair workplace, free of harassment and • Understand and apply Equal Employment Opportunity discrimination. principals and policies. • Respect the personal and professional ethics of other staff in State Water staff should behave in a way that ensures that the State Water. workplace is free from all forms of harassment and discrimination. It is illegal to discriminate on the grounds of gender, marital status, • Obey any lawful instruction given by a supervisor or anyone pregnancy, age, ethnic or national origin, physical or intellectual with the authority to give such instruction. impairment, sexual preference or religious or political convictions, How should I deliver services? irrelevant criminal record and family carer’s responsibilities. • Look for value for money and avoid waste In particular, State Water does not tolerate bullying in any form. All supervisors must ensure that employees are informed of these • Apply policies and procedures consistently. principles and take all necessary steps, such as training and other active measures, to prevent and deal with harassment and All staff should achieve value for money and avoid waste and discrimination in the workplace. extravagance in the use of State Water’s resources. If possible, you should identify improvements to systems and procedures to If you believe that you are a victim of discrimination, or you have ensure State Water operates effectively and effi ciently. witnessed discrimination by another member of staff at work (or outside work if representing State Water in an offi cial capacity), You should consider the economic, environmental and social you have a duty to report the matter to your supervisor. impacts of major programs when you are making decisions or providing advice.

138 State Water 05-06 Annual Report What should I wear to work? State Water realises that as a member of the community, you have the right to enter into public debate on professional, political Our standard of dress is important and must be appropriate and and social issues. However, you must be sure not to give the safe. impression that you are giving an ofﬁ cial comment as a member of State Water. All staff are expected to dress according to the requirements of their jobs. In particular, you should ensure that what you wear to Can I belong to a political party? work is suitable for your duties and is consistent with the image you wish to present to your customers and fellow staff. Members of staff must be seen to be impartial.

Managers and staff must ensure that specifi c OH&S requirements, If you are a member of a political party, you must make sure any such as protective clothing, are complied with. Where uniforms are party political activities do not confl ict with your primary duty as a supplied, they must be worn. member of State Water staff and that shareholders and customers can be confi dent that your actions and advice are impartial. The same rules apply for staff who may be involved in a local Use and Release of Information water user group or Crown Reserve Trust. How should I handle offi cial information?

All staff have a responsibility to protect information. Confl icts of Interest How can I avoid a confl ict of interest? You must not use confi dential information obtained in your capacity We must avoid confl icts of interest at all times. as an employee of State Water to secure a private benefi t for you or anyone else. It is important that our shareholders, stakeholders, colleagues and members of the public are confi dent that all decisions made by We must make sure that confi dential information, in any form State Water are impartial. Staff must recognise confl icts of interest (such as computer fi les), cannot be accessed by unauthorised when they arise and take appropriate action. people and that sensitive information is only discussed with people, either within or outside State Water, who are authorised to A confl ict of interest exists where you, a family member or close have access to it. relative or friend has a personal interest that could lead you to be As a guideline, staff must not give out information unless: infl uenced (or lead a fair person to think you could be infl uenced) in the way you do your job. • the information is offi cially available to the public; • offi cial permission has been granted to release the As a general guideline: information; • you are required to do so by law. • Ensure that personal interests do not (or cannot be perceived to) infl uence the way you carry out your duties. You are still bound by the rules regarding confi dential information, • If you believe you could be in a confl ict of interest situation, even if you leave State Water. tell your supervisor or the CEO.

How should I treat personal information? In most cases only you will be aware of the potential for confl ict, so Our customers have a right for their information to be treated the responsibility rests with you. Staff who hold a water licence or confi dentially. are involved in a water user group need to be particularly careful that they do not use confi dential information for their personal In addition to business information, personal information should benefi t and should ensure this information is documented. be considered confi dential and must be protected. Personal information refers to data or information that identifi es or could Each Branch Manager should keep a record of actual or perceived be used to identify a person or persons to actions, statements, confl icts of interest in the Register of Confl icts of Interest in their opinions or events. Specifi c legislation, policy and procedures branch. apply to the way we must handle, store and protect personal information. Gifts, Benefi ts and Hospitality When do I need to keep fi les or records? Can I accept a gift from a customer? All decisions and agreements must be documented. You must decide if a gift is intended in good faith or aimed at infl uencing you. You must keep records of all documented decisions, verbal agreements or commitments (including telephone discussions), In your role as a representative of State Water, you may be offered meetings and other events. These records should be kept in the a gift or benefi t. These may be offered innocently in good faith or, offi cial record keeping systems for electronic documents, paper in an attempt to infl uence you. Regardless, you are responsible for based records and emails. deciding whether to accept or not.

Can I make public comment? Staff must never demand or request any gift or beneﬁ t for Don’t give the impression you represent State Water if you aren’t themselves or anyone else in connection with their work. authorised to make public comment. As a general rule, gifts or beneﬁ ts of nominal or little commercial Only staff nominated by the CEO can make public comment or value such as a bottle of wine, chocolates, diary, etc, may be speak to the media. accepted. Generally, these do not create a sense of obligation, or

State Water 05-06 Annual Report 139 offer the potential to infl uence the performance of offi cial duties. Staff will also be effi cient and economical in the use and For other non-token gifts and hospitality, eg tickets to a sporting management of resources, including their own work time. event, dinner at a restaurant, exercise your judgment and tell your supervisor. Can I use my corporate credit card, mobile phone or company vehicle for private purposes? Staff dealing with, or having access to, sensitive investigations or Vehicles, phones and credit cards are business tools and should commercially sensitive information, should be particularly alert to be used for offi cial purposes only. inappropriate attempts to infl uence them. As a general guideline: You should only use State Water vehicles, mobile phones and • Do not accept a gift or benefi t if you think the person offering credit cards for offi cial purposes and not for private benefi t, unless the gift is likely to expect you to be infl uenced in the way you you have an agreement to do so. do your work. • Don’t accept offers of hospitality or gifts, no matter how If you are a corporate credit card holder, you must comply with small, from anyone you know is in the process of negotiating any limits set by State Water on the value and type of purchases. a tender or contract. Never use the credit card for private purchases, cash withdrawals • If you receive any gift or benefi t, tell your supervisor so that or for expenses that will be claimed by any form of allowance. Tell it can be recorded in the Register of Gifts by your Branch your supervisor as soon as possible if your corporate card is lost, Manager. stolen or misused. • Cash is never an acceptable gift. If you have a State Water mobile phone, you are responsible for Use of Offi cial Resources all calls made from that phone. You will also be asked to sign off your phone bill and reimburse State Water for any personal calls. What are the rules for using State Water equipment? We should avoid waste and use equipment and technology Workplace Safety responsibly. What are my health and safety responsibilities? Staff should not use State Water information and communication Workplace health and safety is everyone’s number one priority technology to create, send, access or store any form of and responsibility. information that: Employees and employers have joint legal and moral • could damage the reputation of State Water or misrepresents responsibilities to ensure that State Water maintains healthy and State Water in any way; safe workplace environments and practices. These include: • involves or could lead to victimisation, discrimination, harassment or vilifi cation; • Ensuring the health and safety of everyone at work, including • is sexually suggestive, offensive, obscene, threatening, staff, contractors and visitors. abusive or defamatory; • Providing and maintaining suitable and safe workplaces, • is used for operating a private business; facilities and plant. • is deliberately misleading or deceptive; • Providing and/or cooperating with work safety instructions • is business–related information encrypted without the and training. approval of your manager; • Providing and/or using protective clothing and equipment • violates any State or Federal law; when there is no other practical way to control hazards at • may hinder productivity (such as forwarding chain mails, work. pyramid selling schemes); • Supervisors and staff working together to ensure a spirit • may damage, destabilise or compromise the security of of consultation and cooperation exists in achieving the State Water information or technology (eg sending a virus, objectives of State Water’s OH&S policy. using password cracking tools); • Ensuring that any risks to workplace health and safety • breaches the copyright or other intellectual property rights of are identifi ed, assessed and eliminated or controlled third parties; systematically. • may compromise the confi dentiality of customers, suppliers • Working together to ensure all injury management and or other employees; rehabilitation services are effective. • is a game, audio, video or image fi le for private use; • is encrypted private information. You should be aware of other policies that have an impact on Reasonable private use of technology, is acceptable , provided workplace safety, including the keeping of guns on storages. it is infrequent and brief, and does not intrude on our work time, You also need to be familiar with and comply with State Water’s impact on service delivery, or incur costs. This might include a security and emergency procedures. These cover access for personal phone call during work hours or a phone call home while visitors to State Water premises and safety evacuation procedures travelling on offi cial duties. such as fi re drills and fi rst aid equipment.

Permission is needed for any other use of resources, including Can I drink alcohol, smoke or use drugs at work? study, and should be done in your own time. We should present for work in a ﬁ t and proper state.

Staff will not change the conﬁ guration or install additional Alcohol, drugs and other substances must not adversely affect hardware or software that will adversely affect the ability of others your work performance, ofﬁ cial conduct or safety in the workplace. to use the computer.

140 State Water 05-06 Annual Report This includes behaviour at offi cial functions where alcohol is and other stakeholders as well as to protect State Water staff by served. providing guidelines on expected standards of behaviour. Behaviour that is inconsistent with this Code may result in Talk to your supervisor if prescribed medication may affect your disciplinary action. work performance. You should report any concerns you might have about inappropriate conduct in the workplace, including violations Smoking in work premises and work vehicles is not allowed. of laws, regulations and State Water policies and procedures (including this Code), and seek clarifi cation whenever you are in Terms of Employment doubt. Can I have a second job? Staff are encouraged to resolve workplace issues or grievances You need approval before you can work a second job. informally, at the earliest opportunity and with the immediate staff involved. However, if this is not possible, talk to a trained Before you engage in any form of paid employment outside your Grievance Counsellor. offi cial duties, you must gain the approval of the Chief Executive Offi cer. If approved, ensure all your work or business is done in You should report any suspected corrupt conduct, as well your own time, and does not adversely affect your normal work or as poor administration and serious and substantial waste of lead any fair person to think you have a confl ict of interest. This public resources to the Chief Executive offi cer. This can include applies equally to all permanent staff, whether they are full-time or instances where it is known that a staff member has been charged part-time. or convicted of a serious offence. Anyone who has a farm or small holding and holds a water licence Other bodies that investigate are: or belongs to a water user group should tell their supervisor. He or she will talk to you about the implications of this on your work and • Independent Commission Against Corruption, make sure this information is documented. ph (02) 9318 5999; • Ombudsman (for reports of maladministration), ph (02) State Water resources and information must not be used for a 9286 1000; second job or business. • Auditor-General (for reports of serious and substantial waste of public money), ph (02) 9285 0155. Temporary part-time or casual staff do not need approval for other employment, except if there is potential for a confl ict of interest. All staff are offered protection against victimisation and recrimination under the Protected Disclosures Act 1994 if making a What happens if I leave State Water? protected disclosure. You should however exercise responsibility in Your responsibilities continue, even if you leave State Water. reporting concerns and must not make vexatious and or malicious allegations. You should not use your position to obtain future employment or allow your work to be infl uenced by plans for, or offers of, For more information employment outside State Water. If you do, there is a confl ict of If you want to discuss the Code of Conduct or need more interest. information, talk to your supervisor or Rod Smith, Organisational Development Manager on (02) 6841 2024. Former staff members should not use, or take advantage of, confi dential information for gain or profi t, until it becomes publicly available.

All staff should be careful in their dealings with former State Water staff and make sure that they do not give them, or appear to give them, favourable treatment or access to privileged information. If you leave State Water, you should return anything that is the property of State Water. Supervisors must ensure all State Water property is returned.

Breaches of the Code How should I report corrupt or unethical behaviour, maladministration or waste? We are all responsible for reporting suspicious or inappropriate conduct.

Your ﬁ rst step should be to try and resolve any grievance informally with the person involved.

State Water is committed to the standards and principles outlined in this Code of Conduct. The Code is designed to attract the highest level of conﬁ dence from our shareholders, customers

State Water 05-06 Annual Report 141 glossary

AWD Available Water Determination GWh Gigawatt (hours) CAIRO Computer Aided Improvements to River IFMS Integrated Financial Management Operations System CCC Community Consultative Committee IPART Independent Pricing and CEO Chief Executive Ofﬁ cer Regulatory Tribunal CFD Computational Fluid Dynamics JCC Joint Consultative Committee CMA Catchment Management Authority KPI Key Performance Indicator CPI Consumer Price Index LTIFR Lost-time to Injury Frequency Rate CRP Community Reference Panel MDBC Murray-Darling Basin Commission CRC Cooperative Research Centre ML Megalitre (1,000,000 litres) CSC Customer Service Committee MoU Memorandum of Understanding DBBRC Dumaresq-Barwon Border Rivers MW Megawatts Commission MWh Megawatt hours DEC Department of Environment and MPM Major Periodic Maintenance Conservation NWI National Water Initiative DEUS Department of Energy, Utilities and OH&S Occupational Health & Safety Sustainability RAB Regulatory Asset Base DNR Department of Natural Resources SCADA Supervisory Control and Data DoC Department of Commerce Acquisition System DoL Department of Lands SCI Statement of Corporate Intent DPI Department of Primary Industries SCSC Staff Consultative Steering Committee DSC NSW Dams Safety Committee SES NSW Senior Executive Service DSEP Dam Safety Emergency Plan SFE Sydney Futures Exchange EFT Effective Full Time SOC State Owned Corporation EIS Environmental Impact Statement TAMP Total Asset Management Plan EMP Environment Management Plan TIG Technical Improvement Group EWON Energy and Water Ombudsman of NSW WIX Water Information Exchange EXPLAN Expenditure Planning (for strategic asset WOU Water Ordering and Usage management) WRAPP Waste Reduction and Purchasing Policy FEA Finite Element Analysis WSP Water Sharing Plan FMMS Facilities Maintenance Management System FRWS Fish River Water Supply GL Gigalitre (100 million litres) GW Gigawatts

142 State Water 05-06 Annual Report index Consumer Response 95 A Consumption and Entitlement Volumes for Account enquiries 147 Regulated Rivers 45 Accounts Payable Performance Review 97 Controlled Entities 92 Annual report production 147 Copeton Dam Upgrade 52 Approved Temporary Transfers 34 Corporate Governance 86 Aquadams Tour 93 Corporate Plan 20 Area of Operations 4 Credit Card Certiﬁ cation 97 Audit and Compliance Committee 89 Critical Success Factors 7 Auditor’s Report 101 Customer Service Charter 29

Customer Service Committees 26 B Customer Service Statistics 33 Bega River 43

Benchmarking 46

Best Practice Operations 20, 38, 70 D Dam Safety Tour 93 Blowering Dam Upgrade 53 Dam Upgrades 52 Board Committees 88 Delegations to Management 92 Board Manual 90 Department of Environment and Conservation 81 Board meeting attendance 88 Department of Lands 83 Board of Directors 14, 87 Department of Natural Resources 83 Board Performance Review 88 Department of Primary Industries 81 Border Rivers Customer Service Committee 26 Developing a Commercial Culture 61 Border Rivers 41 Directors’ Interests 88 Bulk Water Pricing 6 Directors’ Remuneration 88 Bulk Water Pricing Submission 67 Drought Contingency Plans 41 Burrendong Dam Draught Curtain 78

Burrendong Dam Upgrade 53

Business Hours 147 E Electronic Service Delivery 97

Employee Sick Leave 64 C Employee Statistics 63 Capital Investment and Risk Optimisation Employee Training 64 Framework 47 Employee Turnover 64 Capital Works Progress Report 51, 52 Encouraging Staff Commitment 62 Central Area 53, 55, 63, 74, 146,147 Enhanced Riverine Environment 72 Chaffey Dam Upgrade 28, 51, 52 Environmental Management Plan 77 Chairman and Chief Executive Ofﬁ cer’s Message 8 Environmental Protocols and Procedures 77 Chief Executive Ofﬁ cer’s Performance Statement 93 Environmental Research, Planning and Clearly Articulate Employment Conditions 62 Investigative Projects 78 Coastal Area 63, 75, 146, 147 Equal Employment Opportunities 90 Coastal Customer Service Committee 26 Equal Employment Opportunity Trends 91 Coastal Valleys 55 Erosion and Sediment Transport 79 Code of Conduct 90, 137 Establishment of State Water 87 Cold Water Pollution Group 78 Ethnic Affairs Priority Statement 90 Community Consultative Committe 25 Excellent Customer Service 20, 24 Community Reference Panels 28 Executive Remuneration 93 Consultants 94

State Water 05-06 Annual Report 143 Map 4 F Memoranda of Understanding 81 Facility Maintenance Management System 47 Ministerial Responsibility 6 Financial Performance 68 Murray Darling Basin 84 Financial Statements 98 Murray-Lower Darling Customer Service Committee 27 Fish River Water Supply 42 Murray Valley 43 Fish River Water Supply Customer Council 26 Murrumbidgee Customer Service Committee 27 Fish River Water Supply Customer Service Levels 35 Murrumbidgee Valley 42 Fish River Water Supply Prices 37

Freedom of Information 91 Functions of State Water 87 N Namoi – Peel Customer Service Committee 27 Funds Granted to Non-Government Organisations 95 Namoi Valley 41 Non-Management Meetings 88 G North Area 52, 56, 75, 146, 147 General Security Water Availability 40 Notes to the Financial Statements 106 Glossary 142 NSW Temporary Water Transfers 34 Government Energy Management Policy 95 Number of Employees 63 Gwydir Customer Service Committee 26 Number of Regulated River Licences 33 Gwydir Valley 41 Number of Works Approved 33

Hunter Salinity Trading Scheme 84 O Ofﬁ ce Locations 147 Hunter Valley 43 Operating Licence 46 Hydro Power Summary 57 Operating Licence Performance 11

Organisation Chart 18 I Organisation Values 7 Indemnities 88 Overseas Visits 91 Independent audit report 101

Insurance 89

Interagency Cold Water Pollution Group 84 P Payment of Accounts 97 IPART Pricing Submission 67 Policy Development 47

Power Station Locations 58 K Prices 36, 37 Keepit Dam Upgrade 28, 51, 52 Prioritisation of weirs and ﬁ sh passage strategies 78

Privacy Management Plan 91 L Privacy Policy 91 Lachlan Valley 55 Proﬁ table Business Development and Growth 66 Land Disposal 92 Publications 95 Legal Change 92 Purpose 7 Lock 10 53 Lock 15 53

Lower Darling Valley 43 R Regulated Customers Billed 34 Regulatory Asset Base Value 45 Remuneration and Organisation Development M Committee 89 Macquarie – Cudgegong Customer Service Research and Development 95 Committee 27 Risk Management 46 Macquarie Valley 41, 55 Risk Management Committee 89 Major Periodic Maintenance and River River Structures Rehabilitation 55 Structures Rehabilitation 55

144 State Water 05-06 Annual Report Water Quality: Raw 35 S Water Resource Management 6 Safe and Healthy Work Environment 62 What We Do 6 SCADA Project Report 59 Who Is State Water 5 Senior Staff 19 Wyangala Dam Upgrade 53 Shareholders 87

Sick Leave 64 Skilled and Dedicated People 60 Small Dams 54 South Area 53, 56, 75 Special Interest Committees 89 Spillway Gate Investigations 56 Split Rock Dam Upgrade 52 Staff Training 64 Staff Turnover 64 State Records Act Implementation 49 Statement by Members of the Board 100 Statement of Corporate Intent 67 Statement of Corporate Intent Performance Standards 69 Strategic Asset Management and Investment 50 Succession Planning 62 Supportive Owners and Other Stakeholders 23 Supportive Stakeholders 80

T Technical Improvement Groups 95 Temperature Management Infrastructure 79 Thermodynamic Storage Modelling 78 Toonumbar Dam 43 Total Asset Management Plan 48 Total Storage and Sydney Futures Exchange State Water Indexes 39 Total Valley Flow 44 Training 64

V Valley Price Comparisons 36 Values 7 Vision 7

W Waste Management 96 Water Delivery 44 Water Delivery Report 39 Water Licences 33 Water Prices 36 Water Quality Monitoring Program 79 Water Quality: Filtered 35

State Water 05-06 Annual Report 145 our assets State Water is responsible for 20 dams and one minor dam. The major dams, weirs and regulators enable controlled water delivery operations. State Water’s sound management of these assets ensures that bulk water is delivered in a sustainable, timely and cost effective manner.

State Water is operationally responsible for the following 20 dams: North Area Pindari Dam (Severn River) Copeton Dam (Gwydir River) Split Rock Dam (Manilla River) Keepit Dam (Namoi River) Chaffey Dam (Peel River) Central Area Windamere Dam (Cudgegong River) Burrendong Dam (Macquarie River) Carcoar Dam (Belubula River) Wyangala Dam (Lachlan River) Oberon Dam (Fish River Creek) Rydal Dam (Fish River Water Supply, off-river storage) South Area Burrinjuck Dam (Murrumbidgee River) Blowering Dam (Tumut River) Menindee Lakes (Darling River) Hume Dam (Murray River) Coastal Area Toonumbar Dam (Iron Pot Creek) Glennies Creek Dam (Glennies Creek) Glenbawn Dam (Hunter River) Lostock Dam (Paterson River) Brogo Dam (Brogo River)

146 State Water 05-06 Annual Report ofﬁ ce locations

For more information, contact your nearest State Water ofﬁ ce: Head Ofﬁ ce Riverview Business Park, 36 Darling St, Dubbo 2830 Ph: (02) 6841 2000

Strategic Asset Services, Technical Services, Strategic Policy and Compliance, Information and Operations Level 8, 2-10 Wentworth St, Parramatta 2150 Ph: (02) 9354 1000

North Area 66-68 Frome St, Moree 2400 Ph: (02) 6751 2700

Central Area Suite 12, 36 Darling St, Dubbo 2830 Ph: (02) 6841 2060

South Area Chelmsford Place, Leeton 2705 Ph: (02) 6953 0776

Coastal Area Level 2, 160 Bridge St, Muswellbrook 2333 Ph: (02) 6542 4403

Account Enquiries 1800 353 091 [email protected]

Business hours at all ofﬁ ces are 8.30am to 4.30pm, Monday to Friday

ISSN 1448-7551 Published September 2007 Design and print management by Inspired Design Studio, Dubbo. Printed on paper that is derived from carefully managed and renewed forests.

This report was produced in hard copy and as a CD-rom at a cost of $27,472. It is available on the internet: www.statewater.com.au or as a CD-rom by phoning (02) 6841 2000.

Comments or Feedback? Tell us what you think about this report by sending an email to [email protected].

State Water 05-06 Annual Report 147