Rising to the challenge

Annual Report 2010-11 14 September 2011 This Annual Report provides information about the financial and non-financial performance of for 2010-11. The Hon Stephen Robertson MP It has been prepared in accordance with the Financial Minister for Energy and Water Utilities Accountability Act 2009, the Financial and Performance PO Box 15216 Management Standard 2009 and the Annual Report City East QLD 4002 Guidelines for Government Agencies.

This Report records the significant achievements The Hon Rachel Nolan MP against the strategies and activities detailed in the Minister for Finance, Natural Resources and the Arts organisation’s strategic and operational plans. GPO Box 611 This Report has been prepared for the Minister for QLD 4001 Energy and Water Utilities to submit to Parliament.

It has also been prepared to meet the needs of Seqwater’s customers and stakeholders, which include the Federal and local governments, industry Dear Ministers and business associations and the community. 2010-11 Seqwater Annual Report This Report is publically available and can be viewed I am pleased to present the Annual Report 2010-11 for and downloaded from the Seqwater website at the Queensland Bulk Authority, trading www.seqwater.com.au/public/news-publications/ as Seqwater. annual-reports.

I certify that this Annual Report meets the prescribed Printed copies are available from Seqwater’s requirements of the Financial Accountability Act 2009 registered office. and the Financial and Performance Management Standard 2009 particularly with regard to reporting Contact the Authority’s objectives, functions, performance and governance arrangements. Queensland Bulk Water Authority, trading as Seqwater.

It has been prepared in line with the relevant ABN: 75450239876 legislative and reporting requirements outlined in the Annual Report Guidelines for Registered Office Agencies for the 2010-11 reporting year. 240 Margaret Street, Brisbane QLD 4000 PO Box 16146, City East QLD 4002

T 07 3035 5500 F 07 3229 7926 Yours sincerely E [email protected] W www.seqwater.com.au

Peter Borrows Chief Executive Officer

Seqwater Annual Report 2010-11

ISSN 1837-4549

© (Queensland Bulk Water Supply Authority) 2011.

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

Report from the Chairman and 2 Board attendance 34 the Chief Executive Officer Board remuneration 34 About our organisation 6 Organisational review 34 About the SEQ Water Grid 8 Compliance 34 The January 2011 Flood 10 Risk management 35 Vision and mission 12 Internal audit 36 The year in review 14 Information systems and record keeping 36

Summary of financial information for 2010-11 26 Workforce planning and retention 36 Industrial/employee framework 38 Summary of major assets 28 Whistleblower protection 39 Governance 30 Conduct and ethics 39 Responsible Ministers 30 Consultancy 40 Legislative and policy requirements 30 Overseas travel 40 Related entities 30 Carers Charter 42 Organisational structure 31 Greenhouse gas emissions 42 Executive Leadership Team 31 The Seqwater Board 32 Financial statements 44 Board role 33 Glossary 102 Board committees 33

Water quality research Hinze The thirst for water for the future gets interactive – a new Seqwater asset education 21 37 41 43

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 1 Phil Hennessy Peter Borrows

Report from the Chairman and the Chief Executive Officer

The 2010-11 financial year was an unprecedented The lead up to these events triggered our one for Seqwater and the challenges presented to the comprehensive emergency response with a dedicated organisation were exceptional. team working around the clock to strategically manage the . The Board acknowledges the While the January 2011 Flood was undoubtedly the professional work of our Executive Leadership Team, most notable event of the year and demanded a flood engineers, dam operators and support staff who dedicated focus from our organisation, it was also rose to the extraordinary challenge presented to them. important that we maintained normal operations to ensure a sustainable, safe and reliable water supply. While the devastating consequences of the January There was also substantial work undertaken to merge 2011 Flood were rightly uppermost in everyone’s with WaterSecure by 1 July 2011. minds and in the media spotlight, our people achieved exceptional outcomes in continuing to deliver safe In these demanding times, and in only our second full water supplies to the region during the Flood and its year of operation, we rose to the many challenges aftermath, despite interruptions to power supplies and inherent in our role of managing catchments, telecommunications. Their effective responses averted maintaining and operating infrastructure and supplying an even worse situation and assisted the clean-up water to the community. efforts when water was essential. Responding to an unprecedented event When the flood waters receded, we undertook an extensive program to assess asset damage, which In January 2011, extreme weather in the catchments included significant catchment and infrastructure resulted in our two largest dams, Wivenhoe and damage. This assessment for priority works was Somerset, reaching two flood peaks over a 30-hour completed within weeks of the event, which enabled period. The total rainfall throughout the January 2011 our team to move quickly to plan and undertake the Flood was more than double the rainfall experienced repair work required for a full recovery. during the 1974 flood event. In addition, our third largest dam, North Pine, experienced the biggest flood In addition, we devoted significant resources to event in the North Pine region’s recorded history. supporting and assisting the Queensland Floods Commission of Inquiry and to capturing insights that will help prepare the region for future extreme weather events.

2 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Delivering South East Queensland’s treatment plant upgrades. Workshops with the former water supply New York City Water Commissioner, Al Appleton, helped to finalise this strategic Framework and gave Throughout 2010-11, we continued to manage us the benefit of Mr Appleton’s globally-recognised our core business of delivering safe, reliable and approach to balancing water catchment management sustainable bulk supplies for South with major water infrastructure upgrades. East Queensland. As well as improved water quality from catchments, On behalf of the South East Queensland (SEQ) the benefits of adopting this approach to water Water Grid and working closely with SEQ Water Grid management includes greater quantities of available partners, we supplied more than 220,000 megalitres drinking water and the enhanced ability to anticipate of safe drinking water to residents and businesses and respond to regional growth and climate across the region. change. Our adoption of this holistic strategy will be The safety of our people remained a key focus and supported by partnerships and alliances with local priority over 2010-11 with a range of campaigns and government, businesses and the communities in our training programs to ensure safety continued to be at water catchments. Where we have involvement, this the forefront of our operations. Safety was also a key helps us achieve optimum economic, environmental focus in our approach to the January 2011 Flood, both and social benefits. at the dams and water treatment plants. Meanwhile, our major infrastructure development We also focused on initiatives to improve water quality continued on track throughout the year, with progress and produced drinking water management plans for on key projects designed to boost water storage all water treatment plants and our major drinking capacity, improve water-treatment capability and drive water storage, . More than 65,000 continued efficiencies. water quality tests were undertaken during the year, During the year, we achieved the functional completion with an increased monitoring program including the of the Stage 3 Project, which almost introduction of real-time monitoring points on our key doubles the capacity of the Gold Coast’s largest drinking water storages. water supply. We also completed Stage 2 of the Through the strategic use of the SEQ Water Grid Queensland Government’s South East Queensland assets, we, in partnership with SEQ Water Grid Fluoridation Program, and completed the design of entities, were also able to minimise water quality the future Wyaralong Water Treatment Plant to service issues following major rainfall events. Wyaralong Dam, and Bromelton Offstream Storage. A range of upgrades to key regional The connected nature of the SEQ Water Grid, and water treatment plants were also completed. the ability to move water to where it is needed most, played a key role in maintaining high-quality drinking Managing energy and water supplies, from water which continued to be environmental impact equal to, or better than, the Australian Drinking Water Guidelines 2004. A new procurement strategy for chemical and energy contracts reduced our key operating costs during Securing a sustainable water supply 2010-11 and new energy contracts are expected to for the future save our organisation up to $3 million over the next three years. Throughout 2010-11, we continued to progress with initiatives to deliver water for future generations and to We continued to work hard to manage our meet the principles of our Sustainability Charter. organisation’s carbon footprint. Initiatives during the year included supporting the Water Services This included developing a Capital Investment Association of in their benchmarking study of Framework to balance the benefits of long-term greenhouse gas emissions in the water industry. catchment improvements against short-term water

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 3 Report from the Chairman and the Chief Executive Officer continued

Our environmental initiatives also included developing Our recreation facilities again proved a major and introducing operational management plans to drawcard during the year, with more than two million better protect endangered species including Lungfish visitors to our campsites and dams. We also managed and Koalas. The Seqwater Lungfish Management a record crowd of almost 50,000 in October 2010, when Program received the endorsement of the Federal people were keen to experience the spectacle of the Department of Sustainability, Environment, Water, first flood-gate releases from Wivenhoe Dam in more Population and Communities and significantly reduced than a decade. the impact of flood-releases on aquatic life. We continued to develop our recreation master plans for major sites with the first of the plans expected to Increasing knowledge and innovation be implemented during 2011-12. We continue to maintain our focus on increasing organisational knowledge and capability. Managing financial performance This commitment is demonstrated by a new five-year Our financial performance has continued to achieve research partnership with both Griffith University and further efficiencies and business consolidation in The University of Queensland. Our strong relationship 2010-11. The consolidation of the WaterSecure and with the Commonwealth Scientific and Industrial Seqwater budgets, in preparation for the July 1 merger, Research Organisation (CSIRO) also provided the as well as the successful transfer of Wyaralong Dam foundation for enhanced understanding and innovation. from Queensland Water Infrastructure, were key achievements. Our regional approach to bulk water Through these knowledge partnerships, we were the management has helped to deliver value for our owners first water utility in Australia to introduce the next and the broader community. generation of water quality monitoring systems with a new system for Wivenhoe Dam. The introduction of the innovative smart-sensor network earned us one of the Working to achieve corporate information industry’s highest accolades – the 2010 performance goals iAward for research and development. As part of our yearly Operations Plan, we monitored our progress and measured performance against our Recognising our role in the community vision and strategic goals. While we were on track to meet all of our key performance criteria at the As an important part of our role, we provide half-year point, the January 2011 Flood demanded community education and manage recreational the reallocation of significant resources to manage facilities around our dams. the event and its aftermath. The Flood particularly In 2010-11, we provided water education and site tours affected our ability to meet targets for turbidity and re- to almost 15,000 students and community groups. vegetation works across our catchments. Surveys of tour participants showed more than an Work undertaken to merge with WaterSecure, which 85 per cent increase of knowledge of the SEQ Water was finalised from 1 July 2011, also required a Grid and awareness of the associated challenges of reallocation of resources. delivering water to South East Queensland. These two major events delayed the achievement of Our SEQ Water Grid Community Education Program some business objectives over 2010-11, which the was recognised with an international award for water organisation is now moving to accomplish over 2011-12. quality monitoring, after nomination by the region’s school students.

4 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Preparing to become a single Looking ahead water supplier As we look ahead to the next financial year and our Following the Queensland Government’s decision, increasing role in the SEQ Water Grid, we would like in December 2010, to merge WaterSecure with our to once again acknowledge the incredible work our organisation, there was a large body of work prepared employees have done in rising to the challenges in to transfer employees, assets, liabilities and contracts 2010-11, as well as the collaborative efforts of our into a single entity. The preparations included SEQ Water Grid partners. While the year will always reviewing all operational requirements, structures and be remembered for its devastating floods, it will also strategic directions. be remembered for the resilience of the Queensland people. Our people also played their part, contributing From 1 July 2011, the new expanded organisation whole-heartedly both during and after the Flood. became the single supplier of water to the SEQ Water Grid and will deliver a more effective long-term It is thanks to their commitment that we were able approach to managing regional supply needs. to continue to fulfil our promise to the community to provide a safe and reliable drinking water supply The merged authority now manages both catchment- throughout this period. based and climate-resilient water supply assets for South East Queensland including the Gold Coast It is also thanks to their dedication that we can look Desalination Plant and the Western Corridor Recycled forward to a new era for our organisation with its Water Scheme. This will allow an integrated approach greater mandate of responsibility. We will take on the to the management and sustainability of all aspects of challenge with full awareness of the community’s providing bulk drinking water. expectations that we will continue to balance the needs of a growing population, a changing climate and The merger is being undertaken with the sensitive catchment environments that mean many understanding that the region’s catchments are things to many people. complex natural systems subject to a range of factors including climate fluctuations, varied use of land, different community priorities and multiple economic demands. The new organisational structure has been defined to meet these challenges.

Building on the strengths of our people Phil Hennessy Developing the knowledge, skills and capabilities of our Chair people is vital to managing the complex demands of a major contemporary water utility. We increased our training and capacity-building significantly in 2010-11, with more than 55 per cent of staff undertaking training or professional development courses. We also launched our own internal Leadership Development Program to Peter Borrows prepare the next generation of leaders for their tasks. Chief Executive Officer

Following extensive consultation with staff, we launched the Water for LIFE (Leadership, Integrity, Future, and Excellence) values and integrated them into our daily operations. These values will guide the way our people work into the future.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 5 About our organisation

Seqwater provides integrated management of Infrastructure improvements catchments, water storages, dams and treatment services to provide quality water for the South East Our organisation has also been involved in a number Queensland region. of new water infrastructure projects and initiatives including the $395 million project to raise the Hinze We work collaboratively with partner water entities Dam wall, which will provide greater flood protection as part of the SEQ Water Grid, which manages South for more than 3,000 homes in the Gold Coast’s lower East Queensland’s water supplies through a connected catchment. The Project, which raised network of drinking water pipelines and a coordinated the dam wall by 15 metres, has also doubled the supply-chain management approach. The connected water storage capacity of Hinze Dam to over 309,000 SEQ Water Grid assets allow water to be moved across megalitres. The new dam wall achieved regulatory the region to where it is needed most. compliance in December 2010.

While we supply the bulk of drinking water to the From 1 July 2011, we will also take responsibility community via the SEQ Water Grid, we also supply for the newly constructed Wyaralong Dam, near water to smaller communities in the region that are Beaudesert. Final activities are currently underway, not connected to the network. with the construction of a fish lift, rehabilitation of During 2010-11, we were responsible for managing 25 the site and completion of recreational facilities dams, 46 operational water treatment plant facilities, and environmental corridors. Wyaralong Dam has a 47 weirs and 14 ground-water bore fields across South 103,000 megalitre storage capacity. East Queensland. In delivering and transferring these projects, we strive to maintain cooperative and productive relationships with Government agencies, research organisations, landholders and the community.

6 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Catchment management A streamlined approach In addition to the management of key infrastructure, In December 2010, the Queensland Government we also provide essential catchment management announced the merger of the region’s two bulk water monitoring services for landholders including authorities, Seqwater and WaterSecure. This move around 1,000 rural customers in five water-supply was designed to achieve a more streamlined and cost- schemes. We also manage research into water quality, efficient method of delivering bulk water by creating recreation and services. a single supplier of water to the SEQ Water Grid. The new business, now established under one brand, Flood management and monitoring has involved the transfer of employees, assets, and liabilities from WaterSecure to our organisation. Some of our major drinking water storages also provide significant flood mitigation benefits. We The merger formally took place on 1 July 2011 and manage flood gate releases through a specialised now allows us to manage bulk water delivery in South Flood Operations Centre and operation manuals which East Queensland even more effectively going forward. guide release strategies. The Flood Operations Centre is operated 24 hours a day during flood releases, by highly trained flood engineers and flood officers who communicate directly with dam operators.

The Grid Twelve

With the SEQ Water Grid assets fully operational, allowing the transfer of treated water between different areas, the volume of the region’s drinking water supply is now assessed on the capacity of the entire region, including 12 major storages.

The new regional-capacity reporting arrangement is called the ‘Grid Twelve’ to reflect these 12 storage points. It provides a more accurate picture of current water volumes and shows the increased now available in South East Queensland.

While Wivenhoe, Somerset and North Pine dams remain the major sources of bulk water supply, the Grid Twelve also incorporates Hinze, Baroon Pocket, Leslie Harrison, Ewen Maddock, Cooloolabin, Lake Kurwongbah, Lake Macdonald, Little Nerang and Wappa dams.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 7 About the SEQ Water Grid

The SEQ Water Grid is a Queensland Government ÆÆ The SEQ Water Grid Manager owns the urban initiative designed to provide a guaranteed level of water entitlements in South East Queensland security for the region’s water supply and to enable the and is responsible for managing the SEQ Water region to meet the demands of population growth and Grid. It purchases water services to store, treat, climate change. produce and transport bulk water from Seqwater, LinkWater and WaterSecure. It then sells treated The SEQ Water Grid consists of a network of treatment water to council-owned retail distribution facilities and new two-way pipes that move treated businesses and industry customers. water from new and existing sources to various destinations across the region. These water sources ÆÆ LinkWater (Queensland Bulk Water Transport are both climate dependent (dams and rainfall) and Authority) is the network controller for the climate resilient (including desalination and purified potable bulk water transport network. Water is recycled water). They are managed for maximum transported from treatment plants and storage efficiency and with a strong focus on conservation. through bulk water pipelines and into the distribution system. LinkWater monitors and As an SEQ Water Grid partner, it is Seqwater’s role operates the system from its centralised network to supply water to the SEQ Water Grid from dams, control centre and also maintains bulk water weirs and bore-fields, while managing the catchment, infrastructure across the region. treatment and storage process for bulk water. ÆÆ WaterSecure (Queensland Manufactured Water The connected nature of the SEQ Water Grid allows Authority) supplies water from the Gold Coast it to move treated water across the region to where Desalination Plant and the Western Corridor it is needed most, ensuring a continuous supply of Recycled Water Scheme to the SEQ Water water to the residents and businesses of South East Grid Manager as required. From 1 July 2011, Queensland. WaterSecure merged with our organisation to In addition to our organisation, the following create one bulk water supply authority. organisations were also members of the SEQ Water Grid during the 2010-11 financial year.

8 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Three regional water distribution and retail businesses ÆÆ Queensland Urban Utilities − responsible for the began operation on 1 July 2010, completing the second Brisbane, , Ipswich, Somerset and phase of the SEQ Water Grid. These entities deliver council areas water to customers and collect, transport and treat ÆÆ Allconnex Water − responsible for the Gold Coast, wastewater and sewage. During the 2010-11 financial Logan and Redland council areas year, the distribution retail businesses were each responsible for a defined geographic area. They were: ÆÆ Unitywater − responsible for the Sunshine Coast and regional council areas.

State-owned bulk water authorities

Seqwater supplies water from dams, weirs and WaterSecure supplies water from the Gold Coast borefields; and is responsible for the catchment, Desalination Plant and the Western Corridor treatment and storage of bulk water for the SEQ Recycled Water Scheme to the SEQ Water Water Grid Manager. Grid Manager.

LinkWater is the network controller for the potable bulk water transport network. Water is transported from treatment plants and storage reservoirs through bulk pipelines and into the distribution system. LinkWater monitors and operates the system from its centralised network control centre and also maintains bulk water infrastructure across the region.

The SEQ Water Grid Manager owns the urban water entitlements in South East Queensland and is responsible for managing the SEQ Water Grid. It purchases services to store, treat, produce and transport bulk water from Seqwater, WaterSecure and LinkWater. It then sells treated water to council-owned retail distribution businesses and industry customers.

Council-owned retail authorities

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

South East Queensland households and businesses

The diagram above represents the SEQ Water Grid supply chain at 30 June 2011.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 9 The January 2011 Flood

The January 2011, Flood will go down in history This is a significant finding given the magnitude and as one of the most extreme weather events ever rarity of the January 2011 Flood. It was the largest experienced by our region, and one of our country’s flood South East Queensland has seen in more than biggest natural disasters. 100 years. The region’s two largest dams, Wivenhoe and Somerset, experienced the equivalent rainfall of Seqwater is acutely aware of the Flood’s impact that experienced in two 1974 floods, less than 30 hours and the devastation caused. Many of our own staff apart. Yet the resulting flood levels in the City reaches experienced damage and loss. of the were around one metre lower. In On 1 August 2011 the Queensland Floods Commission addition, South East Queensland’s third largest dam, of Inquiry’s Interim Report was released by the North Pine, experienced the biggest flood event in its Queensland Government. We have strongly supported region’s recorded history, yet again; the flood peak was the Inquiry process from its establishment to help successfully reduced. ensure South East Queensland is best prepared for It is important to note that half of the catchment feeding any future flood events. the Brisbane River falls below the Wivenhoe Dam wall. The Commission’s Interim Report thoroughly This means that, as with the January 2011 Flood, the examined a range of issues, including the Dam cannot mitigate flows from the or management of South East Queensland’s three Bremer River downstream of Wivenhoe. largest dams – Wivenhoe, Somerset and North Pine. Wivenhoe Dam effectively controlled and stored the It endorsed not only the performance of our staff, but first flood peak, but was unable to store the second also the performance of the dams themselves. extreme rain event. However, it did manage to hold The Commission described our flood engineers back major releases until the Lockyer Creek and as ’diligent, competent’ and acting ‘in good faith Bremer River had both peaked. The devastation of the throughout the flood event’. In addition, the January 2011 Flood was a consequence of the extreme Commission’s own independent expert analysis of rainfall within the catchment – both above and below the Flood found that our engineers, flood officers and Wivenhoe Dam – not the operation of the Dam. dam operators together achieved close to the best possible outcome.

10 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Wivenhoe Dam gate releases

The Commission’s Interim Report made a range To achieve this continuity of supply, our teams were of recommendations in relation to future dam airlifted to locations where access had been cut and operations and we are already working with other water treatment facilities inundated to complete State Government agencies to implement them in restoration works and reinstate treatment operations. full. Many of the recommendations were made by The loss of drinking water supplies would have our organisation in our various flood reports and significantly compounded the challenges South East submissions to the Inquiry. Queensland residents experienced as a result of the It is important to note that during the January 2011 floods, and would have dramatically impacted the Flood and post-event clean-up period, the Brisbane recovery process. area was not subjected to water restrictions or boil For further information about the January 2011 Flood water notices, with the exception of limited regional and how South East Queensland dams are managed areas serviced by the Water Treatment during flood events go to www.seqwater.com.au Plant and Lowood Water Treatment Plant.

This was mostly due to the efforts of our operators and maintenance staff, who worked with other SEQ Water Grid entities to maintain water supplies, despite the intermittent loss of power and telecommunications.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 11 Vision and mission

Vision Sustainable catchments Water for LIFE – vibrant, sustainable and optimistic Catchments are vital regional resources. We define urban and rural communities and businesses. catchments as the combined natural and built infrastructure needed to source, store and supply water Mission to meet the quality and reliability needs of our customers. Seqwater provides innovative and efficient As catchments are complex systems, their management of both natural and built catchments, productivity is subject to changes in weather patterns, water storages, and treatment services to ensure the environmental impacts, land use, community values, quantity and quality of water supplies. regulation and economic demands. As a result, our business approach includes putting into practice both Seqwater will achieve this mission by adopting a the know-how and technological support needed to gain collaborative approach to working with partners and the maximum sustainable value from these systems. stakeholders across government, the water industry and community, to further develop and apply specialist knowledge and skills in water sourcing, storage, supply and treatment.

Baroon Pocket Dam

12 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Aligning Seqwater’s objectives and Balanced strategic goals strategies with the Toward Q2 ambitions Our Strategic Plan 2010-11 defined clear strategies to Seqwater’s objectives and strategies in 2010-11 were secure the quality and reliability of the region’s water aligned with the Queensland Government’s Toward supply while ensuring long-term catchment sustainability Q2 ambitions. to support our urban and rural communities and businesses. Strong – Our objective is to provide a safe, secure and sustainable drinking water supply for the South East This balanced outcome is achieved through integrated Queensland community. We are continually working management of natural and built water supply assets, as to improve the reliability and efficiency of our dams, well as through positively influencing the management of weirs and water treatment plants through strategic South East Queensland’s wider catchment resources. planning and the use of innovative supporting It also relies on the approach encapsulated in our technology. In addition, the health and safety of our strategy: excellence in putting into practice whole-of- people remains a top priority at all times. catchment know-how. In practice, this excellence is Green – We are committed to improving our achieved through the capability of our staff, the support environmental performance and are working to of stakeholders across the SEQ Water Grid and the wider reduce our carbon footprint as part of our Strategy for community, and through high standards of governance, Sustainable Water Management. risk mitigation and financial management.

Smart – We are partnering with key universities to drive research and development aimed at delivering an Our commitment to both quality water supply and ongoing and sustainable water supply for the region. catchment protection is defined in two strategic goals: Healthy – We are continuing with our extensive water Goal 1 – Water supply quality and quality monitoring, to maintain compliance with the security Australian Drinking Water Guidelines 2004. In partnership with other SEQ Water Grid entities, Fair – We promote a fair and equitable workplace and we will provide urban consumers with reliable, balance our diverse responsibilities in ensuring best quality water that meets, or exceeds, the Australian practice water supply and fair use of Seqwater-owned Drinking Water Guidelines 2004, as required by land. regulation, contract and best practice.

Strategic and operational planning Goal 2 – Catchment sustainability The Seqwater Strategic Plan 2011-12 to 2015-16 In order to ensure the current and future viability of outlines our long-term direction, vision and goals the primary drinking water sources of South East and explains our organisation’s strategy and targeted Queensland, we will effectively manage the water outcomes in more detail. catchments, and continue research for ongoing improvements, to maximise water quality while: The Seqwater Operational Plan is developed annually and outlines specific key initiatives and service delivery ÆÆ providing for flood mitigation objectives through programs of work that maintain ÆÆ fostering rural productivity the long-term direction for the business, while responding to changes in our business environment. ÆÆ providing places of recreation The Plan aligns the delivery of these key initiatives and ÆÆ enhancing biodiversity programs with budgets and performance targets. ÆÆ providing amenities for the people of We report to our responsible Ministers on performance South East Queensland. against the Operational Plan on a quarterly basis, through the Queensland Treasury and the Department of Environment and Resource Management.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 13 The year in review

The 2010-11 reporting year was a year of both Key performance indicator summary challenges and significant achievements for Seqwater. We monitored and measured our performance The January 2011 Flood was a defining event and against our vision, strategy and key strategic goals, as resulted in a strong focus on maintaining and outlined in the Seqwater Operational Plan 2010-11. We restoring our key services, in addition to our ongoing reviewed activity on a quarterly basis and measured it operational goals. against 11 key performance indicator themes. Results A major highlight was the extraordinary work were reported to our responsible Ministers. undertaken by our staff to continue delivering At the end of December 2010, all 11 indicators were safe drinking water supplies to the region during on track to achieve their annual targets. However, the Flood. Given the scale of the disaster and the the unprecedented events of January 2011 and impact it had on the region, including the loss of the announced merger of our organisation and power and telecommunications services, this was a WaterSecure shifted priorities and affected the final tremendous achievement. results for 2010-11. Six of the 11 key performance We also directed significant resources into supporting indicators either met, or substantially met, their and assisting the Queensland Floods Commission of annual targets while five performance indicator targets Inquiry and into helping prepare the region for the were not achieved due to the diversion of resources. coming wet season. The reallocation of resources to infrastructure repair, As a result of the Queensland Government’s decision the Queensland Floods Commission of Inquiry and the to merge WaterSecure with our organisation, merger preparations during the final two quarters of announced in December 2010, we undertook a range the financial year had most effect on our ability to meet of business activities to align the two organisations targets for turbidity reduction, re-vegetation works in ready for the merger which took place from 1 July our catchments and working hours of operational staff. 2011. Key areas of focus were transitioning staff and Detailed analysis has confirmed that all annual targets developing processes and systems to create a cohesive would have been achieved, or substantially achieved, organisation capable of working collaboratively to without the major additional challenges of the year. improve water delivery to the community.

14 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 As an organisation, a major highlight was the extraordinary work undertaken by our staff to continue delivering safe drinking water supplies to the region during the January 2011 Flood.

Baroon Pocket Dam

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 15 The year in review continued

Achieving our vision ÆÆ Achieved a target of 50 per cent offset of anticipated greenhouse gas emissions associated with vehicle Our vision to achieve sustainable, regional, whole- fuel use for 2010-11. Emissions were just under of-catchment value is measured by key performance 1,500 tonnes carbon equivalent greenhouse gases indicators, which cover economic, environmental and and we purchased 750 tonnes of carbon offsets social performance. Highlights of our performance through Ecofund. are detailed below. ÆÆ Planted more than 12,000 infill trees in areas Highlights and achievements that were affected by the January 2011 Flood, in Economic value and business efficiency particular around Wivenhoe and Somerset dams.

ÆÆ Supplied more than 220,000 megalitres of treated ÆÆ Reduced fish losses during the January 2011 Flood drinking water to the SEQ Water Grid. and safely rescued more than 900 lungfish through the Seqwater Lungfish Management Plan. ÆÆ Managed major releases from Somerset, North Pine and Wivenhoe dams from October 2010, ÆÆ Conducted a Weed Management Program in including during the January 2011 Flood. partnership with multiple agencies, which is successfully controlling the Hygrophila weed ÆÆ Successfully supplied safe drinking water to the across both our land and private land throughout South East Queensland region during the January South East Queensland. 2011 Flood, and efficiently restored a number of damaged key assets within a short time frame. ÆÆ Began to develop and introduce new technology to control the weed ‘Cabomba’, which will reduce the ÆÆ Established a new Seqwater Flood Operations risk to both human safety and water quality, as well Centre ahead of the 2011-12 wet season to as reducing toxic waste in landfill. manage future floodgate releases. ÆÆ Signed a reciprocal agreement with Brisbane ÆÆ Continued to deliver key infrastructure projects, City Council to provide the aquatic weed, Salvinia including the construction of the Hinze Dam molesta, to their weevil-breeding facility in return Stage 3 Project and the Hinze Dam Interpretative for the supply of weevils to eradicate Salvinia Visitor Centre. molesta outbreaks. Weevils are an effective ÆÆ Continued the Asset Improvement and Upgrade alternative to chemical control and can respond to Program, including key regional water treatment Salvinia molesta outbreaks quickly with significant plant upgrades. water quality benefits for dams and waterways. ÆÆ Consolidated a Facility Asset Management Social System, with site-based management plans for ÆÆ Further developed the internal organisational all assets including ratings on asset criticality process ‘streamline’. and current conditions. ÆÆ Achieved an 83 per cent response rate (an Environmental increase from 77.8 per cent in 2010) to an ÆÆ Developed a new Asset Management Framework to independent electronic staff survey. This is the ensure the integrated management of our natural second staff survey to highlight considerable and built assets. improvement to a number of areas such as teamwork, morale and leadership. ÆÆ Signed a five-year Strategic Research Partnership with Griffith University and The University of Queensland to advance research into catchment and water cycle management.

16 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Vision Water for LIFE – vibrant, sustainable and optimistic urban and rural communities and businesses

2010-11 2010-11 2010-11 Comment Key performance indicator Measure Target

1. Economic Value Total $ per megalitre of $1,000-$1,300 per We substantially achieved overall financial business efficiency treated drinking water to megalitre efficiency targets. be supplied to the SEQ Water Grid Manager The June total operating cost was $1,416 per megalitre. Although the actual per megalitre cost was greater than the original target, this was largely due to substantially lower demand and does not reflect any deterioration in our financial performance.

Total $ per megalitre of $70-$90 per megalitre The target range of $70-$90 per megalitre was treated drinking water to for chemical and energy achieved each quarter. be delivered to the SEQ costs at water treatment Water Grid Manager for plants variable costs, including chemicals and energy

2. Environmental Value Percentage increase in 0.1 per cent increase The baseline measure of vegetation cover in our net environmental vegetation cover in water from baseline water supply catchments was established early in impact and supply catchments – 2010-11 but the activities to support a 0.1 per cent environmental specifically Seqwater’s land increase were significantly affected by the January contribution of 2011 Flood. In spite of this event, a number of Seqwater’s business strategies were undertaken to increase tree- planting and prevent future vegetation losses. Based on this initial work, activities will progress over the 2011-12 financial year and we expect to exceed a cumulative target for vegetation cover of 0.25 per cent increase from the baseline.

Rate of change of No net increase in rate While a number of actions were undertaken vegetation cover in water of vegetation loss to support the ‘no net’ increase in the rate of supply catchments, vegetation loss in non-Seqwater land, the impact specifically non-Seqwater of the January 2011 Flood affected the ultimate land achievement of this target.

3. Social Value Implementation of Survey conducted and A decision was made to delay the Corporate Social assess the Corporate Social baseline measured with Responsibility Survey, given the January 2011 Flood understanding and Responsibility Survey targeted groups and the merger with WaterSecure are likely to change support of Seqwater, the scope of the project. A methodology has been including knowledge of developed, ready to be introduced in 2011-12. our strategic direction and business priorities, with both internal employees and targeted community groups

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 17 The year in review continued

Achieving our goals ÆÆ Completed Stage 2 of the Queensland Government’s South East Queensland Fluoridation Two key performance indicators were identified for each Program, including the fluoridation of 20 of the business goals, to measure the delivery of water regional water treatment plants across South supply that meets regulated standards and ensures the East Queensland. All Stage 2 facilities now have effective management of our natural and built assets. fluoride-dosing capability.

Goal 1 ÆÆ Completed the Drinking Water Quality Management Plan covering all operational water The first of the two goals focuses on the partnerships treatment plants, including a separate plan for and delivery of a continued high-quality water supply to Wivenhoe Dam. This number of water quality South East Queensland. management plans was the largest undertaking by a water authority in the State of Queensland. Highlights and achievements in this area include: Water quality ÆÆ Worked in partnership with the CSIRO to develop an integrated sensor network technology pilot ÆÆ Maintained compliance with the Australian on Wivenhoe Dam, which received an iAward Drinking Water Guidelines 2004 during the January (Australian Technology for Industry Award). The 2011 Flood, and ensured safe water for South innovative water monitoring technology allows East Queensland residents to use for clean-up data collection from water storages in real time. operations after the Flood.

ÆÆ Completed more than 65,000 water quality tests to meet regulatory requirements and ensure community confidence.

ÆÆ Managed 41 Hazard Analysis and Critical Control Point (HACCP) plans, to guide procedures to ensure the production of safe drinking water for the South East Queensland community.

18 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Goal 1 In partnership with other SEQ Water Grid entities, Seqwater will provide urban consumers with reliable, quality water that meets, or exceeds, the Australian Drinking Water Guidelines 2004, as required by regulation, contract and best practice. 2010-11 2010-11 2010-11 Comment Key performance indicator Measure Target 4. Source and off- Percentage of off-take 70–90 per cent In the December quarter, there was record rainfall take water quality water turbidity achieved compliance across all measured catchments resulting in a standards within standard (the dramatic decline in water quality. This record rainfall level of compliance with 5-year long-term 80 per continued into the third quarter with the January Seqwater standards for cent percentile for the 2011 Flood dramatically increasing the level of raw water turbidity in specified site) weighted by turbidity in the reservoirs. The June quarterly result defined catchments volume supplied saw an improvement in water quality from the March quarter, with most of the measured reservoirs returning to within their normal long-term range. However, Wivenhoe and North Pine continued to experience elevated turbidity.

The standards (70-90 per cent) were derived from data recorded primarily during drought, setting a high water-quality range for this measure. It was always recognised that this standard would change as more information, across a greater range of weather conditions, became available. 5. Supply quantity Number of plants with 0 plants Grid Instructions were met throughout the and quality material breach of water 2010-11 period. extent of achievement quantity under The Market of regulated water Rules SEQ Water Market as supply reliability and advised by the Queensland quality Water Commission Number of plants with 0 plants For the 2010-11 financial year, allAustralian material breach of Drinking Water Guidelines 2004 for the key water quality based on performance indicator were met, with the the Australian Drinking exception of two minor aesthetic parameters. Water Guidelines These would have had an insignificant impact on 2004 definitions for downstream customers and are a characteristic of compliance, for regulated the source water that cannot be removed through water quality parameters conventional water treatment processes.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 19 The year in review continued

Goal 2 ÆÆ Managed the temporary closure of all the recreation areas under our management during the January The second business goal focuses on the management 2011 Flood including the coordination of necessary of our catchments. This includes continued research and public safety assessments. development to maximise both water quality and the use of our asset portfolio, including recreational land. ÆÆ Responded to more than 1,000 recreation enquiries through our recreation email enquiry service – Highlights [email protected]. ÆÆ Hosted an estimated two million people at our ÆÆ Prepared for the introduction of our Recreation recreation sites, including more than 47,000 Management Framework by undertaking a site- visitors to Wivenhoe Dam on 16-17 October based review of all major recreational sites. following the first water release for almost a decade. ÆÆ Secured $500,000 to implement a hydrometric data management system called WISKI (Water ÆÆ Managed approximately 150 events at our sites Management Information System). This system will including birthday parties, weddings, cross- assist with the collection and management of our country running events, endurance horse-riding water monitoring data. events, fishing competitions and water-ski racing.

Goal 2 In order to ensure the current and future viability of the primary drinking water sources of South East Queensland, Seqwater will effectively manage the water catchments, and continue research for ongoing improvements, to maximise water quality while:

ÆÆ providing for flood mitigation

ÆÆ fostering rural productivity

ÆÆ providing places of recreation

ÆÆ enhancing biodiversity

ÆÆ providing amenities for the people of South East Queensland.

2010-11 2010-11 2010-11 Comment Key performance indicator Measure Target 6. Infrastructure Percentage reduction in 15 per cent reduction We undertook activities during the financial year to condition and residual risks for high-risk in residual risks for support a reduction in residual risk for high-risk capability criteria across all plants high-risk criteria criteria for water treatment plants and a Water assessment of across all plants Treatment Plant Scorecard assessment is due treatment plant based on the rapid risk for completion in July 2011. However, due to the capability to achieve assessment impacts of the January 2011 Flood, this target will targeted performance not been met. Our understanding of our assets has increased and performance capability was maintained even during the January 2011 Flood. 7. Natural catchment Status of natural Eight catchments and This target was achieved. Natural catchment [watershed] and catchment (watershed) storages measured conditions were assessed and storage water storage condition condition and storage quality data was collected for eight catchments the natural watershed water quality according that account for more than 95 per cent of the condition and to the Seqwater Board region’s water supply. These catchments included storage water quality approved report card Lake Somerset, Lake Wivenhoe, Lake Samonsvale, according to the the mid-Brisbane River, Hinze Dam, Logan, Leslie Seqwater Board Harrison and Little Nerang dams. approved report card

20 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 CASE STUDY

Water quality research for the future

Research partnerships with leading authorities and university departments continue to be vital to Seqwater. A new collaborative project with the University of Queensland aims to examine the change in turbidity in Wivenhoe Dam after the January 2011 Flood. Turbidity is the amount of particles present in the water, and it affects water clarity and light penetration, ecology and subsequently the drinking water treatment process.

The outcome of the research will provide a better understanding of the impact of floods on water quality. WISKI is a specialist water industry application It will have a widespread impact across the business, designed to manage large amounts of hydrometric from operational processes to asset planning. data. This includes data acquisition, validation, Research and data collection is an essential part of our long-term archiving, a suite of analytical tools and business. We manages a vast data collection network customisable report generation. Data will be stored that incorporates hundreds of remote rainfall, water in a central location on our network, providing level and water quality stations, as well as regular staff with access to a centralised dataset of water manual readings and dam safety instrumentation data. information. This will ensure faster analysis and decision making, and promote better knowledge In 2010, the Bureau of Meteorology launched its and understanding of the impact of inflows on water fourth round of funding under the Modernisation quality. Other features of the system include: and Extension of Hydrologic Systems Program. This Program made $20 million available to water agencies ÆÆ the ability to enter data via the web to improve the coverage and quality of water resource ÆÆ process automation (reports, data import/ information across Australia. export) We were successful in securing $500,000 from the ÆÆ alarm generation (SMS, email, VoIP) Program to implement a hydrometric data management system called WISKI (Water Management Information ÆÆ spatial tools System). This System will assist with the collection and ÆÆ an internet/intranet interface. management of our water monitoring data.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 21 The year in review continued

Achieving our strategy ÆÆ Launched an internal ‘Connect to Learn’ staff development program, to provide our leaders Our strategy – Excellence in putting into practice with the opportunity to develop their skills, share whole-of-catchment know-how – is measured through knowledge and collaborate with peers to improve financial, people, stakeholder and systems key their leadership capability. performance indicators. ÆÆ Designed and implemented the first stage of a Highlights Competency Framework to shape the capability Financial and strategic planning and future growth of staff. This Framework will help attract and retain staff and provide career ÆÆ Revised the five-year Strategic Plan and annual pathways to enable us to grow our own talent and Operational Plan to better reflect our role address the issue of an ‘ageing workforce’. This and responsibilities following the merger with year, more than 55 per cent of staff enrolled in a WaterSecure. training or professional development course. ÆÆ Confirmed a revised leadership and organisational ÆÆ Continued to develop a new user-friendly content structure effective 1 July 2011 to reflect our new management intranet with improved functionality business following the merger with WaterSecure. including polls, customised pages, automised ÆÆ The consolidation of the WaterSecure and process, forums and integrated calendars. This Seqwater budgets, in preparation for the site is expected to be launched in the first quarter 1 July 2011 merger, as well as the successful of 2011-12. transfer of Wyaralong Dam from Queensland Stakeholder relations Water Infrastructure, were key achievements. ÆÆ Worked cooperatively with SEQ Water Grid ÆÆ Re-negotiated laboratory services and chemical partners to revise and improve the SEQ Water and electrical procurement contracts, which will Grid Emergency Response Plan, including our lead to chemical and energy savings. New energy role in the whole-of-Grid approach to incident contracts are expected to save up to $3 million management. over the next three years. ÆÆ Managed strategic risk through the development People of an Enterprise Risk Register and the completion ÆÆ Introduced workplace health and safety programs of a Strategic and Operational Risk Review and initiatives, including the Fit4Work Program Program, established from a whole-of-Grid and voluntary flu vaccination and skin check perspective. opportunities. ÆÆ Met all stakeholder and regulatory reporting ÆÆ Integrated the ‘Water for LIFE’ values into our obligations. day-to-day business, including the introduction of an awards scheme to recognise staff who demonstrate these values in an outstanding way.

ÆÆ Established service recognition awards to acknowledge the achievement of staff with five or more years of continuous service within our organisation and its transitioned entities.

22 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 ÆÆ Provided water education and site tour services to Systems 300 schools involving almost 15,000 students, and ÆÆ Significantly improved internal and external conducted tours for over 50 community groups processes and information flows through the and nursing homes. implementation of an integrated Corporate ÆÆ The SEQ Water Grid Education Program, managed Information System. by our organisation, won the prestigious Australia/ ÆÆ Enhanced Information and Communications Oceania World Water Monitoring Day Champion Technology reliability and security through Award, acknowledging the education of more than an update of the business’s core network 30,000 students in South East Queensland over a infrastructure. two-year period and recognising our high levels of relevance, support and innovation in promoting ÆÆ Continued to roll out a new data management water quality. system for recording and storing water quality results for all of our water treatment plants and ÆÆ Continued to raise awareness of the dangers of storages. flooding weirs and encouraged safe behaviour near dams through ‘No Lifeguards Here’ and ‘Be ÆÆ Further developed and expanded our Compliance DAM Smart’ campaigns. Obligations Register.

Strategy Excellence in putting into practice whole-of-catchment know-how 2010-11 2010-11 2010-11 Comment Key performance indicator Measure Target

8. Budget achievement +/- per cent variance 20 per cent variance This target was achieved and 2010-11 financial degree of accuracy analysis against the OPEX year-to-date actual result was -5 per cent. with budget forecasts budget 9. Staff know-how Analysis of full time Less than 5 per cent Staff employed under our Enterprise Bargaining capability equivalent hours worked variance in hours Agreement worked an average of 9.09 per cent extent to which staff compared with full time worked compared with more than their ordinary hours for the 2010-11 are engaged and equivalent hours employed the hours employed financial year. contributing to a safe for enterprise and productive work bargaining staff environment Analysis of lost time injury Target of 4, for lost The lost time injury frequency rate for the year was frequency rates time injury frequency 5.7, this is above the target of 4. It should be noted rates that for the five-month period from November to March there were no lost time injuries and there were no lost time injuries in June. Staff survey using the Improvement The ‘streamline’ survey measured 12 indicators of ‘streamline’ survey against baseline for organisational climate. While we achieved only 4 out methodology ‘streamline’ staff survey of 12 indicators above the Australian average in the results 2010 survey, the 2011 results indicate a substantial improvement with 10 out of 12 indicators above the Australian benchmark.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 23 The year in review continued

Strategy Excellence in putting into practice whole-of-catchment know-how 2010-11 2010-11 2010-11 Comment Key performance indicator Measure Target

10. Grid stakeholder Number, type and 100 per cent The target was 100 per cent achieved. We continued support for Seqwater compliance with project achievement of to provide a range of collaborative initiatives to extent of stakeholder schedules for SEQ progress targets, promote the SEQ Water Grid including: collaboration to Water Grid collaboration including number and support and promote initiatives type ÆÆ providing community updates on SEQ Water both the SEQ Water Grid projects Grid and Seqwater’s ÆÆ supporting the development of the strategic goals Queensland Water Commission Framework for Planning and Delivery of Water Infrastructure in South East Queensland and the SEQ Water Grid Stakeholder Management Program for 2011-12

ÆÆ contributing to a whole-of-Grid response to the January 2011 Flood. 11. Systems and process Assessment of Corporate Information Progress against the approved Corporate improvement improvements in targeted System on schedule, Information System Project schedule was on extent to which business process including improvement target for the majority of the year. A strategic systems and performance against the baseline review of the system will now occur following the processes support data from ‘streamline’ merger with WaterSecure and changes to our efficiency and reduce survey regarding business structure. residual risk organisation systems The organisational ‘streamline’ survey results relating to the performance indicator for Resources – Information Technology has improved in 2011 and significantly exceeds the Australian average in the survey company’s database. Commence evaluation A number of process improvements were of results of process achieved, including the redevelopment of the review outcomes corporate intranet, the implementation of a human resources recruitment measurement system and an enhanced stakeholder management tool for project managers. Risk Management The Risk Management Framework has been Framework to be in established and an external capability assessment place and operating was undertaken in October 2010. It identified the organisation’s Risk Management System was moving from a ‘top down’ to a ‘systematic’ maturity level, which is a significant improvement from 2009. Operational sites to Surveillance audits were conducted of the Quality, have international IMS Environment and HACCP corporate management certification as per systems with three minor non-conformances the agreed project raised. These will be addressed before the next plan monitored by the surveillance audit. Steering Committee Implementation of the Safety Management System Accreditation Action Plan is underway and is on track to be ready for the certification audit in August 2011.

24 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Looking ahead to 2011–12 In 2011-12, the newly-merged Seqwater-WaterSecure business will review and update its strategic and operational plans, taking into account the new climate resilient water assets and the new capacity they offer.

One of the most important priorities for the year ahead will be implementing the recommendations of the Queensland Floods Commission of Inquiry.

In addition, our new organisation will further embed sustainability by introducing a sustainability program across the business focusing on key aspects of business efficiency, such as energy and carbon, as well as improving the triple-bottom-line performance of all major projects.

We will also initiate projects to model and measure the drivers of water supply performance through a whole-of-catchment approach. Engaging with catchment stakeholders will be an important component of this initiative.

Integrating new recreation assets, including Wyaralong Dam and the upgraded Hinze Dam, and the ongoing development and implementation of master plans for all key recreation sites, will be a major focus for the year ahead.

We will continue to ensure we have the right staff in place to meet our expanded operational requirements and will work on developing the capabilities of our people.

Further work will also be done on developing knowledge-based systems.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 25 Summary of financial information for 2010-11

Total revenue Key financial ratios $359.0 million Return on assets (before tax)

Net profit (before tax) 0.46% $13.9 million Return on assets (after tax)

Net profit (after tax) 0.33% $10.1 million Interest coverage 1.10 times

Debt/total assets 70%

26 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Hinze Dam

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 27 Summary of major assets

Rain falls across more than 1.6 million hectares of catchment and river areas in South East Queensland, where our assets then catch, store and treat the Water storages are a major and region’s water to high-quality drinking water critical part of our business. standards – as guided by the Australian Drinking Water Guidelines 2004. While the primary purpose of In total, Seqwater manages the following assets: the dams is to provide a safe ÆÆ 25 dams and sustainable water supply, ÆÆ 46 operational water treatment plants including 7 recreational water treatment plants many also play an equally ÆÆ 47 weirs important role in managing and ÆÆ 14 ground-water bore fields and aquifers. mitigating major flood events. The following map clearly defines the locations of our dam and water treatment plant facilities across the South East Queensland region.

28 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Seqwater major assets

Water Treatment Plants (WTP) 1 Algester WTP N 2 Amity Point WTP 3 Atkinson Dam WTP* 4 Banksia Beach WTP 5 Beaudesert WTP 34 6 Boonah Kalbar WTP Lake Macdonald Dam 7 WTP* Noosa 8 Caboolture WTP 9 Canungra WTP 7 10 Capalaba WTP Borumba Dam 11 Chandler WTP 12 Dayboro WTP 20 22 13 Dunwich WTP 14 East Bank (Mt Crosby) WTP Maroochydore 21 15 Baroon Pocket Dam Enoggera WTP 27 16 Esk WTP 17 Ewen Maddock WTP 17 18 Forest Lake WTP 19 Hinze Dam WTP* 28 20 Image Flat WTP

21 Jimna WTP 23 46 22 Kenilworth WTP 24 Bribie 23 Kilcoy WTP Island

24 Kilcoy (Lake Somerset) WTP 4 25 25 Kirkleagh WTP* 8 26 Kooralbyn WTP 27 Landers Shute WTP 41 28 Linville WTP 29 Lowood WTP Redcliffe 30 WTP* 12 31 Molendinar WTP Sidling Creek Dam 16 32 WTP* 35 37 33 Mudgeeraba WTP Wivenhoe Dam 34 Noosa WTP 35 North Pine WTP Brisbane 45 36 North Stradbroke Island WTP 3 2 37 Petrie WTP 38 Atkinson Dam Lake Manchester 15 38 Point Lookout WTP 29 Dam Dam 11 39 Rathdowney WTP 13 North 14 10 Stradbroke 40 Runcorn WTP Clarendon Dam 44 Island 41 Somerset Dam (Township) WTP 43 Leslie Harrison 42 South Maclean WTP 40 Dam 36 18 1 43 Sunnybank WTP Ipswich 44 West Bank (Mt Crosby) WTP 45 Wivenhoe Dam WTP* 46 Woodford WTP

* Recreation Water Treatment Plant. 42

Gold Coast Wyaralong Dam 31 6

Bromelton Weir 5 Moogerah Dam 32 19 9 Hinze Dam

26 33

Little Nerang Dam Maroon Dam 30 39 Governance

Seqwater is a Statutory Authority and was Legislative and policy requirements created under the South East Queensland Water (Restructuring) Act 2007. We have complied with all legislative and policy requirements in the preparation and publication of this Responsible Ministers Annual Report. These include the: ÆÆ Financial Accountability Act 2009 The Queensland Government has appointed two Ministers to act as responsible Ministers for our ÆÆ Financial and Performance Management organisation: Standard 2009

ÆÆ The Hon. Stephen Robertson MP Minister for ÆÆ Public Sector Ethics Act 1994 Energy and Water Utilities ÆÆ South East Queensland Water (Restructuring) ÆÆ The Hon. Rachel Nolan MP Minister for Finance, Act 2007 Natural Resources and the Arts. ÆÆ State Water Authorities – Governance Framework In line with these Ministerial responsibilities, we have ÆÆ Whistleblowers Protection Act 1994 corresponding relationships with Queensland Treasury and the Department of Environment and Resource ÆÆ Public Interest Disclosure Act 2010. Management. These relationships cover reporting, oversight and the regulation of our catchment, storage Related entities and water treatment business activities. In the 2010-11 financial year, we had one subsidiary, We also have regulatory relationships with Queensland South East Queensland Water Corporation Pty Ltd Health, under the Water Fluoridation Act 2008, and (SEQWater Corporation). relevant departments in regard to the delivery of major water projects. On 20 January 2010, our responsible Ministers approved the retention of this subsidiary entity until, no later than, 1 April 2012, to enable completion of all formalities required to perfect the transfer of assets and liabilities from this subsidiary entity to our organisation (pursuant to a gazetted Transfer Notice).

30 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 We intend to complete these formalities as soon as Executive Leadership Team possible, with work in this regard continuing in the 2011-12 financial year. The following executives comprised the Executive Leadership Team for 2010-11: Organisational structure Peter Borrows, Chief Executive Officer Our leadership structure for 2010-11 included a Peter is our first Chief Executive Officer and prior to Chief Executive Officer and four Executive General this was the Chief Executive Officer of the SEQWater Manager positions. Corporation. Peter has held other senior roles including head of the engineering departments at Board Brisbane and Ipswich city councils. Chief Executive Officer Jim Pruss, Executive General Manager, Executive General Manager – Water Delivery Water Delivery Jim joined us from the Redland Shire Council where Executive General Manager – Asset Delivery he was General Manager Water and Waste. Jim Executive General Manager – Business Services has previously led both the former Operations and Sustainable Water and Asset Delivery groups within Executive General Manager – Organisational Development our organisation.

Each Executive General Manager led a distinct Alex Fisher, Executive General Manager, Asset Delivery business group: Alex brings extensive knowledge and leadership experience across several industry areas including Water Delivery water, construction and engineering services. The Water Delivery group is responsible for managing She previously worked as the Executive Director, and operating all dams and water treatment plant Government Development Projects within the assets, infrastructure maintenance, land and water Department of Infrastructure and Planning. quality, monitoring, and catchment support services such as recreation. Helen Moore, Executive General Manager, Business Services (resigned March 2011) Asset Delivery Helen joined us from the Gold Coast City Council The Asset Delivery group is responsible for asset strategy where she worked as the Director, Organisational and planning (both natural and built), infrastructure asset Services. Helen has extensive experience and planning, the Capital Works Program, managing major knowledge as a Chief Financial Officer and in projects, and research and development. managing a wide variety of corporate service functions. Business Services She has previously undertaken roles within other Queensland Government Statutory Authorities and The Business Services group is responsible for finance Government Owned Corporations. and procurement, information technology, compliance and regulatory services, risk management, economic From March 2011 until 30 June 2011 an executive regulations and pricing, legal services, and property consultant was engaged on a short-term contract to and facilities management. act in this role. Organisational Development Bill Andrew, Executive General Manager, The Organisational Development group is responsible Organisational Development for organisational and culture change, strategic Bill brings considerable experience in organisational relations and communications, employee relations, and cultural change to this role. He previously enterprise bargaining, organisational design, worked as the General Manager, Organisational leadership development and team building functions, Development for CS Energy Limited. and workplace health and safety.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 31 Phil Hennessy Leeanne Bond

The Seqwater Board Thomas Fenwick BE (Hons), FIE Aust – Board member Our Board for 2010-11 comprised a Chairman and four Board members appointed by the responsible Appointed as a member on 4 February 2008, Thomas Ministers. is also a Director of Queensland Water Infrastructure Pty Ltd and SEQWater Corporation and is a member The Board is committed to providing effective of the Dispute Resolution Board for the Gateway governance and strategic direction to ensure our Motorway Upgrade. He is also Managing Director of a long-term success. private company. In line with the provisions of the South East Queensland Thomas is a former Director-General of the Water (Restructuring) Act 2007, Board members are Queensland Department of Natural Resources, and appointed for a period of three years. the Department of Primary Industries. Among his They are also the Board of Directors of SEQWater past appointments he has been a Commissioner for Corporation. Queensland on the Murray Darling Basin Commission. Phil Hennessy Ian Fraser BBus (Accountancy), FCA – Chairman BComm, FCA, FAICD – Board member Phil was appointed as Chairman of the Board on Appointed as a member on 4 February 2008, Ian has 1 October 2009. Phil is also the Queensland Chairman over 40 years’ business experience, particularly as a of KPMG. senior audit and corporate advisory partner of KPMG. He retired on 30 June 2004 after 27 years as a partner. Phil is a Director of SEQWater Corporation and the Starlight Children’s Foundation. He is Chair of the Ian is a Director of SEQWater Corporation, Wilson HTM Mater Hospital Foundation, Chair of the Premier of Investment Group Ltd, Diversified Mining Services Queensland Export Awards Judging Panel, a member Limited and Infragroup Holdings Limited. of the Infrastructure Australia Advisory Council and a Leith Boully member of the Senate of the University of Queensland. BRuSci, Dip Bus Stud, FAICD, FAIM, Leeanne Bond FIAMA – Board member BE (Chem), MBA, FIE Aust, RPEQ, Appointed as a member on 1 October 2009, Leith has GAICD – Board member 20 years’ experience at local, state and national levels Appointed as a member on 4 February 2008, Leeanne in natural resource management (particularly water). is a chemical engineer with experience across the Leith is a Director of SEQWater Corporation. Leith is hydrocarbons, minerals processing, infrastructure, Chairman of the Wide Bay Water Corporation, Healthy water and power industry sectors. Waterways Ltd, the Great Barrier Reef Marine Park Authority’s Water Quality and Coastal Development Previously, Leeanne has served as a Director of Reef Advisory Committee, Brisbane Riverprize National Tarong Energy Corporation Limited (a Government- Panel, Glennie School Council and Boully Pastoral Co owned power generator), Chairman of the Brisbane Pty Ltd. Water Advisory Board for the Brisbane City Council, Deputy Chairperson of the Board of Professional She is also a Board Member of Murrumbidgee Engineers in Queensland, President of Engineers Irrigation Limited, Cotton Research and Development Australia (Queensland Division), and is a Member of Corporation, Agrifood Skills Australia and Queensland the Queensland Government Smart Women Smart State Rural Leasehold Land Ministerial Advisory State Taskforce. Council. Leith is an Adjunct Professor, School of Agriculture and Food Sciences, University of Queensland and was a founding member of the Wentworth Group of Concerned Scientists.

32 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Thomas Fenwick Ian Fraser Leith Boully

The Audit Committee assists the Board to: Our Board membership has changed for 2011-12 with the Seqwater–WaterSecure merger, which ÆÆ assess and contribute to the audit planning took effect from 1 July 2011. processes, taking into account the financial and operational environment in which it operates and Board role its Performance Management Framework ÆÆ assess, oversee and enhance our corporate The Board is responsible for the way we perform our governance, including our systems of internal functions and exercise our powers under the South East control Queensland Water (Restructuring) Act 2007. ÆÆ review our financial statements and oversee the The Board’s role includes: external audit of these statements ÆÆ setting the strategy and direction for our ÆÆ evaluate the quality and facilitate the practical organisation, as well providing the governance discharge of the internal audit function framework for the organisation through the particularly in the areas of planning, monitoring endorsement of financial, administrative and and reporting operational policies ÆÆ oversee the actioning of external audit ÆÆ ensuring we perform our functions and exercises recommendations our powers in a proper, effective and efficient way ÆÆ oversee and appraise our financial and operational ÆÆ ensuring strategic and operational planning reporting processes. objectives are, as far as practicable, achieved The Audit Committee has observed the terms of its ÆÆ being accountable to the responsible Ministers for charter and operates in alignment with the Queensland our performance Treasury’s Audit Committee Guidelines. ÆÆ reviewing the annual performance of the Chief Major Projects Taskforce Executive Officer. The Major Projects Taskforce operates under a charter Board committees which sets out its authority, role and responsibilities. During 2010-11, the Board continued to be supported by The Major Projects Taskforce provides strategic the Audit Committee and the Major Projects Taskforce. advice to the Board regarding the implementation of our major projects, work programs and strategies. In Audit Committee doing this, the Taskforce: The Audit Committee operates under a charter which ÆÆ reviews and recommends to the Board the sets out its authority, role and responsibilities. The rationale and principles for the prioritisation of the Committee meets five times per year and is currently Capital Works Program comprised of four members of our Board. As at 30 June 2011, the Committee members were: ÆÆ monitors the progress of and identifies risks (and risk mitigation strategies) to the successful ÆÆ Mr Ian Fraser, Chairman implementation of our major projects ÆÆ Mr Phil Hennessy ÆÆ reviews and recommends to the Board the ÆÆ Mr Tom Fenwick rationale and principles for the work programs and strategies being undertaken pursuant to the ÆÆ Ms Leith Boully. our Strategic Plan 2011-12 to 2015-16.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 33 Governance continued

As at 30 June 2011, the Major Projects TaskForce We also make employer contributions to Board committee members were: members’ nominated superannuation funds.

ÆÆ Mr Tom Fenwick, Chairman Further details about the remuneration for each Board member can be found within the notes to the ÆÆ Ms Leeanne Bond financial statements. ÆÆ Ms Leith Boully. Organisational review Board attendance Following the announcement of the Queensland Our Board met on 22 occasions throughout the year. Government’s decision to merge WaterSecure with our organisation, preliminary work commenced on the The number of meetings attended by each Board revised organisational structure for the merged entity, member, along with meeting and attendance details of which became operational on 1 July 2011. the Audit Committee and the Major Projects Taskforce, is outlined in the following table. A Merger Implementation Steering Committee, involving representatives from our organisation, Committees and Working Groups WaterSecure and key Government agencies, was Board of Audit Major established to manage the planning and transition Seqwater Committee Projects Taskforce process. A consultative committee was also created, which comprised staff, management and union Total Meetings 22 5 4 representatives. Phil Hennessy 19 3 - In February 2011, the new executive structure was Leeanne Bond 22 - 4 established, with five Executive General Manager Ian Fraser 21 5 - positions created, covering: Thomas Fenwick 19 3 4 ÆÆ Water Delivery Leith Boully 20 5 4 ÆÆ Asset Delivery

Board remuneration ÆÆ Technical Warranty and Development

Board members are paid for their participation on our ÆÆ Business Services Board, Committees and Taskforces. Board members resolved in October 2009 to cease paying remuneration ÆÆ Organisational Development. for the SEQWater Corporation Director roles. As part of the selection process, members of our Remuneration is as nominated by our responsible Executive Leadership Team had the opportunity to apply Ministers and outlined in the following table. for a position on the new executive team. This structure became effective from 1 July 2011. Further work was Role per annum also undertaken to finalise the new entity’s functional Chairman of the Board $100,000 structure and strategic direction. Board members $45,000 Compliance Chairman of the Audit Committee $7,623 Our dedicated compliance function is responsible for Audit Committee members $4,356 rolling out a compliance program that complies with, Taskforce Chairman $5,445 and implements, the Australian Standard AS 3806-2006 Taskforce members $4,356 Compliance Programs.

34 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 During 2010-11, our Compliance Program built in The risk review resulted in the development of a Risk compliance responsibilities to work functions and Management System. This supports the mitigation of activities. The Program, which is a key Governance risks across the organisation including enterprise, Framework component, reviewed the adequacy of operational and site-based risk profiles. The System’s our compliance systems and controls, monitored objective is to provide a formal mandatory process to and reported on those controls and reviewed the assist with: effectiveness of the overall compliance program. ÆÆ developing and implementing procedures to The compliance function is part of the Business ensure all risks are identified and assessed Services group, and reports regularly to the Board, against accepted criteria and that appropriate Audit Committee, Chief Executive Officer and measures are implemented senior management. ÆÆ defining and documenting a Risk Management In 2010-11, we have undertaken a range of compliance System, responsibilities and processes required activities including: to integrate risk management into all facets of the business ÆÆ expanding and strengthening our Compliance Obligations Register across all of our functions ÆÆ establishing a culture of risk awareness and management ÆÆ developing a Compliance Response Register that identifies key controls and accountabilities for ÆÆ creating customised risk management tools those obligations to meet the needs of specialised units within the business, while ensuring a consistency in ÆÆ reviewing, providing assistance and reporting on language and outcomes key compliance risks ÆÆ encouraging staff understanding of the implication ÆÆ creating compliance general awareness and of risk exposures, opportunities and risk learning opportunities. management in their day-to-day work During 2011-12, focus will be on compliance ÆÆ linking risk management to corporate, operational, training, to ensure staff have a strong awareness of project and business process planning our compliance obligations, systems and controls, responsibilities in implementing and maintaining those ÆÆ enhancing existing established risks practices systems, and consideration of how those systems can across the organisation be improved. ÆÆ the identification of whole-of-Grid risks which may impact water supply security and quality Risk management ÆÆ ensuring an escalation process exists to facilitate Our approach to risk management has evolved to place potential whole-of-Grid risks equal emphasis on the optimisation of opportunities and mitigation of negative risk. ÆÆ responses to whole-of-Grid risks through the implementation of mitigation strategies. A comprehensive review of risk management practices and systems was undertaken during 2010-11. This The review and management of strategic risk within review included an examination of our strategic and our organisation is undertaken at Board level. operational goals as part of the SEQ Water Grid. As a result, we are partnering with Grid Participants, to manage risks at a whole-of-Grid level – ensuring a water supply guarantee into the future.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 35 Governance continued

Internal audit Measures were also undertaken to prepare for the merger with WaterSecure, effective from 1 July Our internal audit function supports the Corporate 2011. Both organisations have different operating Governance Framework by assuring the Board Information and Communication Technology networks (through the Audit Committee) that effective and and systems. The focus for 2011-12 will be integrating adequate internal controls are in place. the two network systems and providing staff training. In line with our Internal Audit Charter, an Internal In addition, a review of the Corporate Information Audit Plan has been developed. As part of this Plan, System usage and additional improvements, and the eight internal audit reviews were conducted this Information Communication Technology policies and year. The reviews focused on areas of risk primarily procedures, is planned. associated with systems and assets. Workforce planning and retention The implementation and status of recommendations is reviewed quarterly and is ongoing. 2010-11 has continued to represent a period of both change and consolidation. Following the Queensland Information systems and record keeping Government’s decision to merge WaterSecure with our organisation, our key workforce planning The 2010-11 year saw the continued focus on and retention objective has been integrating the delivering upgrades, technological improvements and businesses and providing certainty to staff, while service enhancements to both the core Information ensuring critical skills are maintained to meet the and Communications Technology infrastructure and new organisation’s operational requirements. internal business systems. Ongoing recruitment activity saw us finish the year A key Information and Communications Technology with 442 full time equivalent employees. This was enhancement focused on the re-design and re- within workforce planning objectives and budget, which implementation of our core infrastructure, to improve allowed for a maximum of 455 full time equivalent network reliability, security and the establishment of employees. Staffing levels will increase from 1 July 2011 off-site disaster recovery facilities. This project will as a result of the WaterSecure merger. continue to be a major focus in 2011-12. As a result of the ongoing water reform, the focus for The ongoing development of the Corporate 2011-12 will be on attracting and retaining key staff. This Information System has also been a key corporate will include developing new learning programs such as initiative. The Corporate Information System will leadership and training opportunities, cross-skilling, and provide one integrated system for Finance, (including increasing staff engagement and interaction. Procurement), Payroll, Human Resources, Asset Management, Records and Document Management, We have established a Workforce Plan that will be Business Intelligence and Reporting. This System is implemented in 2011-12 and reviewed on an annual being rolled out in three stages. basis. The Workforce Plan is designed to match our workforce to our organisation’s current and future Other key business system initiatives commenced business needs. It will be a crucial risk migration in 2010-11 centered on improving the collection, strategy. management and reporting of water quality sampling data and supplementary water-related information, (such as in-stream flows and heights, storage levels, releases, and rainfall), to form an entire water data management solution.

36 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 CASE STUDY

Hinze Dam gets interactive

As part of the South East Queensland water is still continuing in 2011 on the landscaping, and fit- reform process in July 2008, Seqwater took over out of the Hinze Dam Visitor Interpretative Centre. management of the $395 million Hinze Dam Stage The Project required around 5 million tonnes of rock 3 Project – one of the largest dam infrastructure and 430,000 tonnes of clay. The rock fill for the main projects undertaken in Australia. embankment and saddle dams alone could fill the Gold The Project involved raising the dam wall by 15 metres, Coast’s Q1 Building (the world’s tallest residential providing greater flood protection for more than building) more than five times. 3,000 homes in the Gold Coast’s lower Nerang River The Hinze Dam Interpretative Centre is due to catchment. The additional height increase has almost be completed in mid-2011, including interactive doubled the water storage capacity of Hinze Dam to material focusing on the four key themes of water, over 309,000 megalitres. The Dam will increase the technology, nature and history. Touch screen displays, water supply available to the SEQ Water Grid from interpretative and graphic panels, three-dimensional approximately 209 megalitres up to 225 megalitres per displays, models and special effects will all feature day – an additional 9,490 megalitres per year. in the Centre, as well as a cafe, function room and On-site construction of the stage 3 upgrade began in outdoor pavilion. January 2008 and involved raising the existing rockfill The Centre is expected to be a popular attraction clay core embankment and , raising two intake for both the general public and school and learning towers, upgrading and extending the existing saddle groups. It will feature as a key location in the SEQ dam, and associated works including roads, boat Water Grid’s Education Program. ramps and a new recreation area. While the Project met its regulatory completion date of 31 December For further information visit: www.hinzedamstage3.com. 2010, as directed by the Queensland Government, work

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 37 Governance continued

We have a range of flexible work arrangements for Our Health and Wellbeing Program continued staff to promote work-life balance. These include part- during 2010-11, with workplace health checks, a flu time and flexible working hours (subject to managerial vaccination program, skin checks, and various health approval), paid maternity, paternity, surrogacy and and wellbeing awareness programs. Comparison adoption leave (consistent with the Queensland across the 2009 to 2011 data showed substantial Government Paid Parental Leave Directive), and the improvements in a range of areas including the ability for staff to telecommute and work remotely. increase in physical activity and improved nutrition.

We have designed and implemented a Workforce Workplace Health and Safety Committees representing Planning Competency Framework to help shape all work areas continue to operate and provide the capability and future growth of our people. This valuable feedback on occupational health and safety Framework provides a career pathway to enable our issues for staff. organisation to ‘grow’ our own talent, address the Details of performance against key indicators are issue of an ‘ageing workforce’, and develop highly- provided monthly to the Board including lost time trained capable people. injury frequency rates, medical treatment injuries, The Framework implements competencies that are minor injuries, and near miss incidents. Reporting aligned with the Australian Quality Framework. These also includes the proactive workplace health and training packages specify the knowledge and skills safety programs being undertaken within our required by workers to be competent in the workplace organisation. for specific industries. This year more than 55 per cent An audit of safety management systems was of staff were enrolled in a professional development or completed in August 2010 and an action plan to training course. address gaps has been developed to prepare for We also established service recognition awards this year, the certification process. The next external audit is to acknowledge all staff with five or more continuous scheduled for August 2011. years of service within our organisation and our transitioned entities. In 2010-11, 169 service awards were Industrial/Employee Framework given to staff with between 5 and 50 years of service. We strive to have an open, consultative approach with In 2010, we launched the internal organisational staff, particularly when implementing any workplace improvement process, ‘streamline’, which involves changes. This includes resolving all issues through an annual staff survey followed by feedback and appropriate consultative mechanisms. A Joint improvement planning at a number of different levels. Consultative Committee has been established, which We continued to roll out ‘streamline’ in 2010-11, includes union and management representation. and achieved an 83.06 per cent response rate to an independent electronic staff survey – an increase from We consult with staff, principal unions, Queensland 77.8 per cent achieved in 2009-10. Treasury, the Department of Environment and Resource Management, the Public Sector Industrial We are committed to establishing and maintaining and Employee Relations division of the Department a safe working environment. All our policies place of Justice and Attorney-General and other SEQ Water priority on the safety and welfare of all our staff. These Grid participants on key employee and industrial policies include Occupational Health and Safety, Risk relations matters. Management and Rehabilitation.

38 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 We successfully negotiated and certified an Enterprise Conduct and ethics Bargaining Agreement for all staff, which is valid up to 30 June 2012. The Enterprise Bargaining Agreement We have adopted a Code of Conduct that affirms the applicable to former WaterSecure staff is valid up to 31 organisation’s commitment to high standards of July 2012. integrity, professionalism and accountability. The Code is based on the Public Sector Ethics Act 1994 principles In February 2012, we will commence negotiations with contained in clause 4(2) which are: relevant parties for a replacement agreement. We will work closely with the Public Sector Industrial and ÆÆ integrity and impartiality Employee Relations, the Department of Justice and ÆÆ promoting the public good the Attorney-General, both in preparation for, and negotiation of, the replacement agreement. ÆÆ commitment to the system of governance ÆÆ accountability and transparency. Whistleblower protection The Code of Conduct guides the business conduct From 1 July 2010 – 30 December 2010 there were two of all staff as well as contractors and consultants disclosures under the Public Interest Disclosure Act engaged by our organisation. All employees, 2010. Both disclosures were referred to the Crime and contractors and consultants have access to the Code Misconduct Commission and were fully investigated. of Conduct, which is available on our intranet and at all The disclosures related to conflict of interest and established work sites. bullying and harassment respectively. All employees and consultants engaged for three With the repeal of the Whistleblowers Protection months or more are required to attend a full-day Act 1994 and the introduction of the Public Interest induction session. During the induction, time is Disclosure Act 2010 on 1 January 2011, the way in which allocated to covering the Code of Conduct. Employees public interest disclosures are to be publicly reported are required to undertake a questionnaire to ensure has now changed. From 1 January 2011, agencies are they understand the training session. Information on no longer required to report public interest disclosures the Code of Conduct is provided constantly on our in annual reports. intranet in the form of screensavers.

The Public Service Commission is now responsible The Code of Conduct is supported by our shared for the oversight of public interest disclosures and organisational values, ‘Water for LIFE’, which were preparing an annual report on the operation of the finalised in 2010. During 2010-11, work commenced Public Interest Disclosure Act 2010. From 1 January on implementing these values into the organisation’s 2011, agencies are required to report information daily working life. about public interest disclosures to the Public Service An initiative to support the integration of these values Commission. The Commission will then prepare an within the organisation has been the establishment annual report on the operations of the Public Interest of an award scheme, which recognises staff who Disclosure Act 2010 and the information provided by demonstrate the values in an outstanding way as part agencies. The annual report will be made publicly of their work. The scheme invites staff to nominate available after the end of the financial year. their peers (either individuals or whole teams) for one, or more, of the four values.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 39 The LIFE values to guide staff are: Leadership Future We are leading the way by working We are the custodians of South East together and supporting each other Queensland’s water catchments and to create opportunities and develop we manage our business with future knowledge we can share with the industry. generations in mind. Integrity Excellence We are ethical and demonstrate integrity We are dedicated to achieving excellence and respect for our workmates, industry through innovation, continuous colleagues and community. improvement, quality, sustainability, safety and cost effectiveness.

Consultancy Expenditure on consultancy services for the 2010-11 reporting year is outlined in the following table.

$ Dam Safety 1,249,080 Water Quality 1,215,736 Asset Management 1,495,771 General Engineering 1,955,232 Accounting/Economic 1,231,419 Communication 678,213 Human Resource 508,888 Other 2,011,824 Total expenditure 10,346,163

Overseas travel Expenditure on overseas travel for the 2010-11 reporting year is outlined in the following table.

Name and position Destination Reason for travel Cost $ Contribution from other sources $ Dr Philip Orr, Istanbul, To attend and present two 5,000 Nil Senior Scientist Turkey papers at the 8th International Conference on Toxic Cyanobacteria Bill Andrew, Executive Cambridge, To attend a ‘Leadership Master $8,000 Flights were paid General Manager, USA (Harvard) Class’ for organisational (conference and by the employee accommodation (although there was no Organisational implementation costs) private component of Development the trip)

40 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 CASE STUDY

Wyaralong Dam – a new Seqwater asset

Wyaralong Dam will ultimately work in conjunction with the Cedar Grove Weir and the Bromelton Off stream Storage to improve reliability of the Water Supply Scheme. The Dam is a single wall construction with an un-gated spillway, and has a 103,000 megalitre storage capacity. The Dam has been designed for flood waters to flow over the centrally placed spillway.

As part of the Wyaralong Dam Project, a range of recreational facilities have been developed including:

ÆÆ approximately 40 kilometres of multi-use trails for walking and horse

The $348 million construction of the Wyaralong Dam, ÆÆ up to 25 kilometres of purpose-built mountain 13 kilometres west of Beaudesert, is an integral part bike trails of the Queensland Government’s plan to ensure a ÆÆ dedicated camping and picnic facilities to safe and sustainable water supply for South East promote tourism. Queensland’s growing population. Construction of the Dam was undertaken by the Practical completion of the Dam occurred in April Wyaralong Dam Alliance, a specialist group of 2011, with finishing work being continued on the seven companies, including Queensland Water construction of a fish lift, rehabilitation of the Infrastructure. site and completion of recreational facilities and environmental corridors. Seqwater took responsibility for the Dam on 1 July 2011.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 41 Governance continued

Carers Charter Our data is currently based largely on electricity and fuel consumption from most of our administration We acknowledges the importance of the Carers centres, water treatment plants, pumping stations (Recognition) Act 2008 and are instigating steps to and other plant and equipment (including fleet). ensure our officers and employees have an awareness We consider our data to be an estimate, with some and understanding of the Act and the Carers Charter. adjustments expected.

We are seeking to reflect the principles of the Charter The following table outlines the estimated emissions in providing services, which can affect carers and the relating to our operational activities during the 2010-11 persons they care for. This includes the provision of reporting period. Data is based on fuel purchased for carer’s leave in our Enterprise Bargaining Agreement, use in vehicles and electricity accounts paid during the which covers the majority of staff. financial year. We will consult with the representative bodies, that Seqwater greenhouse gas emissions we are satisfied represent the carers affected, when making strategic policy or planning decisions relevant Activity Estimated tones to carers and the persons they care for. of CO2-equivalent per year Greenhouse gas emissions Scope 1 Emissions We are committed to supporting the Queensland Fuel Combustion - 1505 Government’s targets to cut greenhouse gas emissions. Seqwater Vehicle Fleet1 Since our formation on 1 July 2008, we have been Fuel Combustion - 25 capturing and recording data associated with energy Plant and Equipment2 consumption and greenhouse gas emissions for the Scope 2 Emissions purpose of calculating our carbon footprint. Electricity Consumption - 291 As the owner and operator of significant bulk Corporate Offices water storage and treatment assets in South East Electricity Consumption - 68,085 Queensland, we are a significant consumer of energy. All other activities (including Our organisation, as a statutory authority, is not water treatment and pumping) required to report under the Federal Government’s National Greenhouse and Energy Reporting System GreenPower Purchases -5546 Framework. However, we are committed to reducing Total Scope 1 and 2 Emissions 64,360 our carbon footprint as part of our strategy for 1 Note: data is based on fuel purchased for use in vehicles in the Seqwater sustainable water management. vehicle fleet. 2 Note: this is a limited initial estimate only of emissions from fuel for We are using The National Greenhouse and Energy plant purposes. Reporting Act reporting requirements and the National A policy regarding greenhouse gas emissions and Greenhouse and Energy Reporting Measurement abatement will be developed in 2011-12. Determination 2010 amendment as the basis of our data collection and reporting. We have focused on capturing scope 1 and 2 emissions data for the entire 2010-11 reporting year.

42 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 CASE STUDY

The thirst for water education

As part of our commitment to water education, our organisation was the major sponsor of Bunya to the Bay 2010 - a two-week, eco-adventure that enabled students to learn about environmental sustainability, using the Brisbane River and its surrounding catchment as a real case study, while combined with physical activity.

Thirty-one junior high school students from around South East Queensland became river ambassadors and paddled, cycled and hiked the Brisbane River area - from its source in the Bunya Mountains through to Fort Lytton on Moreton Bay, a journey of some 340 kilometres. Seqwater, as part of the SEQ Water Grid, developed an innovative education and community engagement Along the journey, the river ambassadors completed program in 2009 that has now become well known within a range of tasks from monitoring water quality, the education sector and across the water industry. assessing plants and weeds, documenting the trip through producing news reports and monitoring The thirst for water education continues with more fauna and endangered species. than 15,000 students, 300 schools and 50 community groups booking tours of the SEQ Water Grid’s dedicated learning centres located across the region over 2010-11.

In 2010, the SEQ Water Grid’s Water Education Program won the prestigious Australia/Oceania World Water Monitoring Day Champion Award, acknowledging the water education efforts of more than 30,000 students in South East Queensland over a two year period.

As part of the program, students monitored more than 25 sites across the region and conducted hands- on water testing experiments and sampling activities, to learn more about water quality and how the water process, from catchment to the tap, works.

In honour of the United Nations’ World Water Day, the award was announced as one of eight awards world- wide, recognising education efforts, support and innovation in the promotion of water quality.

World Water Monitoring Day™ is an international education and outreach program that builds public awareness and involvement in protecting water resources around the world, by engaging people to conduct basic monitoring of their local water bodies.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 43 Financial Report for the year ended 30 June 2011

44 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 45

Contents

General Information ...... 473 Abbreviations ...... 484 Statement of Comprehensive Income ...... 49 5 Statement of Financial Position ...... 50 6 Statement of Changes in Equity ...... 51 7 Statement of Cash Flows ...... 52 8 Index to notes to the financial statements ...... 53 9 Certificate of Queensland Bulk Water Supply Authority for the year ended 30 June 2011 ...... 5599 Independent audit report to the Board of Queensland Bulk Water Supply Authority ...... 10056

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46 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

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

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 47

Queensland Bulk Water Supply Authority Abbreviations

AASB Australian Accounting Standards Board AAS Australian Accounting Standards ABF Accumulation Benefit Fund APG Accounting Policy Guidelines ATO Australian Taxation Office BCC Brisbane City Council CAPM Capital Asset Pricing Model CGU Cash Generating Unit CSO Community Service Obligation DBF Defined Benefit Fund DESAL South East Queensland (Gold Coast) Desalination Company Pty Ltd DERM Department of Environment and Resource Management DOGIT Deed of Grant in Trust DTA Deferred Tax Asset DTL Deferred Tax Liability EGM Executive General Manager GST Goods and Services Tax NTER National Tax Equivalent Regime PRW Purified Recycled Water QCA Queensland Competition Authority QTC Queensland Treasury Corporation QWC Queensland Water Commission QWI Queensland Water Infrastructure Pty Ltd RAB Regulatory Asset Base SEQWater South East Queensland Water Corporation Pty Limited SIS Superannuation Industry Supervision SVS State Valuation Services WACC Weighted Average Cost of Capital WCRW Western Corridor Recycled Water Pty Ltd WGM South East Queensland Water Grid Manager WTP Water Treatment Plant

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48 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Abbreviations Statement of Comprehensive Income for the year ended 30 June 2011

AASB Australian Accounting Standards Board Notes 2011 2010 AAS Australian Accounting Standards $000 $000 ABF Accumulation Benefit Fund Income from continuing operations APG Accounting Policy Guidelines Water services 7 352,202 302,871 ATO Australian Taxation Office Grants and contributions 8 1,726 1,836 BCC Brisbane City Council Project income 9 - 3,971 Other revenue 10 5,037 5,648 CAPM Capital Asset Pricing Model Total income from continuing operations 358,965 314,326 CGU Cash Generating Unit

CSO Community Service Obligation Expenses from continuing operations DBF Defined Benefit Fund Employee expenses 11 51,077 41,167 DESAL South East Queensland (Gold Coast) Desalination Company Pty Ltd Supplies and services 12 88,365 76,368 Depreciation and amortisation 13 43,520 40,745 DERM Department of Environment and Resource Management Revaluation decrement 14 - 7,580 DOGIT Deed of Grant in Trust Finance/borrowing costs 15 146,656 149,427 DTA Deferred Tax Asset Other expenses 16 15,408 4,663 DTL Deferred Tax Liability Total expenses from continuing operations 345,026 319,950 EGM Executive General Manager Operating result from continuing operations before income tax 13,939 (5,624) GST Goods and Services Tax Income tax expense 17 3,881 684 NTER National Tax Equivalent Regime Operating result from continuing operations 10,058 (6,308) PRW Purified Recycled Water QCA Queensland Competition Authority Other comprehensive income QTC Queensland Treasury Corporation Increase in asset revaluation surplus - 144,864 QWC Queensland Water Commission Total comprehensive income 10,058 138,556 QWI Queensland Water Infrastructure Pty Ltd RAB Regulatory Asset Base The accompanying notes form part of these statements. SEQWater South East Queensland Water Corporation Pty Limited SIS Superannuation Industry Supervision SVS State Valuation Services WACC Weighted Average Cost of Capital WCRW Western Corridor Recycled Water Pty Ltd WGM South East Queensland Water Grid Manager WTP Water Treatment Plant

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 49

Queensland Bulk Water Supply Authority Statement of Financial Position as at 30 June 2011

Notes 2011 2010 $000 $000 Current assets Cash and cash equivalents 25 69,563 100,703 Trade and other receivables 21 39,552 31,412 Inventories 22 2,317 2,373 Other 23 12,587 12,214 Total current assets 124,019 146,702

Non current assets Property, plant and equipment 18 2,898,002 2,820,987 Intangible assets 19 8,157 8,774 Deferred tax assets 24 13,513 12,767 Total non current assets 2,919,672 2,842,528 Total assets 3,043,691 2,989,230

Current liabilities Trade and other payables 28 30,120 32,492 Employee benefits 27 5,311 4,156 Interest bearing liabilities 26 29,864 32,491 Other 29 24,215 268 Total current liabilities 89,510 69,407

Non current liabilities Trade and other payables 28 816 908 Employee benefits 27 7,530 6,682 Interest bearing liabilities 26 2,113,065 2,217,832 Deferred tax liabilities 24 222,775 206,316 Total non current liabilities 2,344,186 2,431,738 Total liabilities 2,433,696 2,501,145 Net assets 609,995 488,085

Equity Contributed equity 3(p),38 347,582 223,898 Asset revaluation surplus 30 262,647 274,479 Accumulated losses (234) (10,292) Total equity 609,995 488,085

The accompanying notes form part of these statements.

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50 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

Queensland Bulk Water Supply Authority Statement of Financial Position Queensland Bulk Water Supply Authority as at 30 June 2011 Statement of Changes in Equity for the year ended 30 June 2011 Notes 2011 2010 $000 $000 Notes Asset Current assets Accumulated revaluation Contributed Cash and cash equivalents 25 69,563 100,703 losses surplus equity Total Trade and other receivables 21 39,552 31,412 $000 $000 $000 $000 Inventories 22 2,317 2,373 Other 23 12,587 12,214 Balance as at 1 July 2009 (4,010) 129,615 209,084 334,689 Operating result from continuing Total current assets 124,019 146,702 operations (6,308) - - (6,308)

Transfer revaluation increment as a Non current assets result of disposal of non current asset 26 - - 26 Property, plant and equipment 18 2,898,002 2,820,987

Intangible assets 19 8,157 8,774 Total other comprehensive income: Deferred tax assets 24 13,513 12,767 - increase/(decrease) in asset Total non current assets 2,919,672 2,842,528 revaluation surplus - 144,882 - 144,882 Total assets 3,043,691 2,989,230 Asset revaluation on disposal of non current asset - (18) - (18) Current liabilities Transactions with owners as owners Trade and other payables 28 30,120 32,492 - contributed equity - - 14,814 14,814 Employee benefits 27 5,311 4,156 Balance as at 30 June 2010 (10,292) 274,479 223,898 488,085 Interest bearing liabilities 26 29,864 32,491 Other 29 24,215 268 Balance as at 1 July 2010 (10,292) 274,479 223,898 488,085 Total current liabilities 89,510 69,407 Operating result from continuing operations 10,058 - - 10,058 Non current liabilities Trade and other payables 28 816 908 Total other comprehensive income: Employee benefits 27 7,530 6,682 - increase/(decrease) in asset Interest bearing liabilities 26 2,113,065 2,217,832 revaluation surplus 24(b),30 - (11,832) - (11,832) Deferred tax liabilities 24 222,775 206,316 Transactions with owners as owners Total non current liabilities 2,344,186 2,431,738 - contributed equity 3(p),38 - - 123,684 123,684 Total liabilities 2,433,696 2,501,145 Balance as at 30 June 2011 (234) 262,647 347,582 609,995 Net assets 609,995 488,085

Equity The accompanying notes form part of these statements. Contributed equity 3(p),38 347,582 223,898 Asset revaluation surplus 30 262,647 274,479 Accumulated losses (234) (10,292) Total equity 609,995 488,085

The accompanying notes form part of these statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 51

Queensland Bulk Water Supply Authority Statement of Cash Flows for the year ended 30 June 2011 2011 2010 Notes $000 $000

Cash flows from operating activities Inflows: Receipts from water services 367,024 296,300 CSO received 1,783 1,061 Other revenue 5,070 8,840 Interest received 2,605 2,428 GST collected 37,065 29,766 Outflows: Payments to suppliers and employees (138,244) (122,921) Finance and borrowing costs (149,185) (149,516) Return of Business Water Efficiency Program grant - (16,399) QWC & QCA levies (7,978) - GST paid (36,830) (27,606) Other (1,955) (1,050) Net cash provided by (used in) operating activities 25(b) 79,355 20,903

Cash flows from investing activities Inflows: Proceeds from sale of plant and equipment 671 430 Receipts from Council for assets acquisition adjustment 6 741 - Receipts from mortgage redemption - 5 Outflows: Payments for property, plant and equipment (129,789) (161,521) Payments for intangibles (659) (2,717) Payments for acquisition of assets from Councils - (11,970) Payments for assets transferred from WCRW - (13,127) Net cash provided by (used in) investing activities (129,036) (188,900)

Cash flows from financing activities Inflows: Borrowings 116,108 133,995 Contributed equity 3(p),38 123,684 14,814 Loan drawdown for payment of Councils, DERM and SunWater 2,433 11,970 Loan transferred from WCRW - 13,127 Outflows: Borrowing redemptions 26 (223,684) (14,814) Net cash provided by (used in) financing activities 18,541 159,092 Net (decrease) in cash and cash equivalents (31,140) (8,905) Cash and cash equivalents at the beginning of the financial 100,703 109,608 Cash and cash equivalents at the end of the financial year 69,563 100,703

The accompanying notes form part of these statements.

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52 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Statement of Cash Flows Index to notes to the financial statements for the year ended 30 June 2011 1. Reporting entity ...... 5410 2011 2010 2. Basis of preparation ...... 5410 Notes $000 $000 3. Significant accounting policies...... 5612 4. Determination of fair values ...... 6420 Cash flows from operating activities 5. Financial risk management ...... 6521 Inflows: 6. Asset acquisition adjustments ...... 6622 67 Receipts from water services 367,024 296,300 7. Water services ...... 23 67 CSO received 1,783 1,061 8. Grants and other contributions ...... 23 ...... 6723 Other revenue 5,070 8,840 9. Project income ...... 6723 Interest received 2,605 2,428 10. Other revenue 11. Employee expenses ...... 6723 GST collected 37,065 29,766 12. Supplies and services ...... 6824 Outflows: 13. Depreciation and amortisation ...... 6824 Payments to suppliers and employees (138,244) (122,921) 14. Revaluation decrement ...... 6824 Finance and borrowing costs (149,185) (149,516) 15. Finance/borrowing costs ...... 6925 Return of Business Water Efficiency Program grant - (16,399) 16. Other expenses ...... 6925 QWC & QCA levies (7,978) - 17. Income tax ...... 6925 GST paid (36,830) (27,606) 18. Property, plant and equipment ...... 7026 Other (1,955) (1,050) 19. Intangible assets ...... 7430 Net cash provided by (used in) operating activities 25(b) 79,355 20,903 20. Impairment testing for cash generating unit ...... 7632 21. Trade and other receivables ...... 7733 Cash flows from investing activities 22. Inventories ...... 7834 Inflows: 23. Other current assets ...... 7834 Proceeds from sale of plant and equipment 671 430 24. Tax assets and liabilities ...... 7834 Receipts from Council for assets acquisition adjustment 6 741 - 25. Cash and cash equivalents ...... 8036 Receipts from mortgage redemption - 5 26. Interest bearing liabilities ...... 8137 Outflows: 27. Employee benefits ...... 8238 Payments for property, plant and equipment (129,789) (161,521) 28. Trade and other payables ...... 8541 86 Payments for intangibles (659) (2,717) 29. Other current liabilities ...... 42 86 Payments for acquisition of assets from Councils - (11,970) 30. Asset revaluation surplus by class ...... 42 87 Payments for assets transferred from WCRW - (13,127) 31. Financial instruments ...... 43 ...... 9046 Net cash provided by (used in) investing activities (129,036) (188,900) 32. Operating leases 33. Capital and other commitments ...... 9046

34. Contingencies ...... 9046 Cash flows from financing activities 35. Segment reporting ...... 9147 Inflows: 36. Controlled entities ...... 9147 Borrowings 116,108 133,995 37. Key management personnel and remuneration...... 9147 Contributed equity 3(p),38 123,684 14,814 38. Related parties ...... 9652 Loan drawdown for payment of Councils, DERM and SunWater 2,433 11,970 39. Auditor’s remuneration ...... 9753 Loan transferred from WCRW - 13,127 40. Economic dependency ...... 9753 Outflows: 41. Subsequent events ...... 9753 Borrowing redemptions 26 (223,684) (14,814) Net cash provided by (used in) financing activities 18,541 159,092 Net (decrease) in cash and cash equivalents (31,140) (8,905) Cash and cash equivalents at the beginning of the financial 100,703 109,608 Cash and cash equivalents at the end of the financial year 69,563 100,703

The accompanying notes form part of these statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 53 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

1. Reporting entity The Queensland Bulk Water Supply Authority (the “Entity”) is a Queensland Statutory Body under the South East Queensland Water (Restructuring Act) 2007 with a limited life of 99 years from establishment. The address of the Entity’s registered office is 240 Margaret Street, Brisbane QLD. As set out in th e South East Queensland Water (Restructuring) Act 2007 the Entity must carry out it s functions as a commercial enterprise. The Entity meets the definition of a for profit entity for the purposes of the accounting standards. The Entity is primarily involved in the supply of water services and carrying out water activities. Refer to Note 36 for controlled entities.

2. Basis of preparation (a) Statement of compliance The financial statements are general purpose financial statements which have been prepared in accordance with:  applicable Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB);  the Financial and Performance Management Standard 2009;  Queensland Treasury’s Financial Reporting Requirements for Queensland Government agencies to the extent relevant; and  other authoritative pronouncements. The financial statements were authorised for issue by the Board on 26 August 2011. (b) Going concern The financial statements have been prepared on a going concern basis. The preparation of the financial statements on a going concern basis is appropriate on the basis that there is a reasonable expectation that the Entity will be able to pay its debts as and when they fall due for at least the next twelve months from the date of signing these financial statements for the following reasons:  the Queensland Government remains committed to providing ongoing support to the Entity. This commitment was recently reaffirmed in a letter fro m the H on. Andrew Fraser MP, Treasurer and Minister for State Development and Trade, issued to the Entity d ated 2 August 2011. The Treasurer reaffirmed that t he Government is committed to “ensuring the Authority remains solvent at all times and able to deliver essential services in a sustainable and cost effective way”. The Government’s support includes facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial Arrangements Act 1982 (refer to Note 40);  as at 30 June 2011, the Entity has access to a redraw facility from QTC amounting to $430 million (refer to Note 26) and a working capital facility from QTC amounting to $60 million (refer to Note 25) of which nil ha s been drawn at 30 June 2011, and has a c ash balance of $70 million at 30 June 2011(refer to Note 25);  the Entity has a contract with the WGM for the supply of water services into the water grid. The contract provides for the payment of water services provided to the grid as determined by the QWC in its role as the Price Regulator; and  forecasts have been prepared for the Entity based on the current and anticipated Grid Service Charge methodology (refer to Note 20 and 40). The forecasts for Queensland Bulk Water Manufacturing Authority (trading as WaterSecure) and the Wyaralong Dam (refer to Note 41), transferred on 1 July 2011 are included in the Entity’s forecasts. The forecasts support the Board’s expectation that the Entity will be able to pay its debts as and when they fall due for at least the next twelve months from the date of signing these financial statements. If for any reason the Entity is unable to continue as a going concern, it would impact on the Entity’s ability to realise assets at their recognised values and to extinguish liabilities in the normal course of business at the amounts stated in the financial statements.

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54 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

1. Reporting entity 2. Basis of preparation (continued) The Queensland Bulk Water Supply Authority (the “Entity”) is a Queensland Statutory Body under the (c) Basis of measurement South East Queensland Water (Restructuring Act) 2007 with a limited life of 99 years from establishment. The financial statements have been prepared on an accrual basis and are based on historical costs The address of the Entity’s registered office is 240 Margaret Street, Brisbane QLD. except for the following: As set out in th e South East Queensland Water (Restructuring) Act 2007 the Entity must carry out it s  financial instruments at fair value through profit or loss are measured at fair value; and functions as a commercial enterprise. The Entity meets the definition of a for profit entity for the purposes of the accounting standards.  land, buildings and infrastructure are measured at fair value. The Entity is primarily involved in the supply of water services and carrying out water activities. The methods used to measure fair values are discussed further in Note 4. Refer to Note 36 for controlled entities. (d) Presentation currency and comparatives The financial statements are presented in Australian dollars, which is the Entity’s functional currency. Amounts included in the financial statements have been rounded to the nearest $1,000 2. Basis of preparation unless disclosure of the full amount is specifically required. (a) Statement of compliance Comparative information has been restated where necessary to be consistent with disclosures in The financial statements are general purpose financial statements which have been prepared in the current reporting period. accordance with: (e) Use of estimates and judgements  applicable Australian Accounting Standards (AASBs) (including Australian Interpretations) The preparation of financial statements requires management to make judgements, estimates and adopted by the Australian Accounting Standards Board (AASB); assumptions that affect the application of accounting policies and the reported amounts of assets,  the Financial and Performance Management Standard 2009; liabilities, income and expenses. Actual results may differ from these estimates.  Queensland Treasury’s Financial Reporting Requirements for Queensland Government Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting agencies to the extent relevant; and estimates are recognised in the period in which the estimate is revised and in any future periods affected.  other authoritative pronouncements. In particular, information about significant areas of estimation, uncertainty and critical judgements The financial statements were authorised for issue by the Board on 26 August 2011. in applying accounting policies that have the most significant effect on the amount recognised in (b) Going concern the financial statements are described in the following: The financial statements have been prepared on a going concern basis. The preparation of the (i) Acquisition adjustments as a result of the South East Queensland Water financial statements on a going concern basis is appropriate on the basis that there is a reasonable (Restructuring) Act 2007 expectation that the Entity will be able to pay its debts as and when they fall due for at least the Through Transfer Notice the Entity paid and received outstanding amounts from BCC in next twelve months from the date of signing these financial statements for the following reasons: connection with the Brisbane Aquifers and Mt Crosby Weir Augmentation projects. Als o  the Queensland Government remains committed to providing ongoing support to the Entity. through Transfer Notice an employee benefits adjustment was paid to BCC in relation to the This commitment was recently reaffirmed in a letter fro m the H on. Andrew Fraser MP, acquisition on 1 July 2008. Treasurer and Minister for State Development and Trade, issued to the Entity d ated 2 August Additional details in relation to the adjustments are set out in Note 6. 2011. The Treasurer reaffirmed that t he Government is committed to “ensuring the Authority remains solvent at all times and able to deliver essential services in a sustainable and cost (ii) Impairment effective way”. The Government’s support includes facilitating access to funding facilities at The Entity assesses impairment at each reporting date by evaluating conditions specific to QTC supported by a Queensland Government guarantee under the Statutory Bodies Financial the Entity that may lead to impairment of assets. Where an impa irment trigger exists, the Arrangements Act 1982 (refer to Note 40); recoverable amount of the asset is determined. Value-in-use calculations performed in  as at 30 June 2011, the Entity has access to a redraw facility from QTC amounting to $430 assessing recoverable amounts incorporate a number of key assumptions (refer to Note 3(h) million (refer to Note 26) and a working capital facility from QTC amounting to $60 million (refer and Note 20). to Note 25) of which nil ha s been drawn at 30 June 2011, and has a c ash balance of $70 (iii) Income tax and utilisation of tax losses million at 30 June 2011(refer to Note 25); The Entity is subject to the NTER. During the year ended 30 June 2011, $0 of tax losses  the Entity has a contract with the WGM for the supply of water services into the water grid. The were utilised (2010: $0) with tax losses carried forward at 30 June 2011 amounting to contract provides for the payment of water services provided to the grid as determined by the $33,635,244 (2010: $33,310,375). A DTA of $10,090,573 (refer to N ote 24) has been QWC in its role as the Price Regulator; and recognised in relation to these carry forward tax losses as it is c onsidered probable that future taxable profits will be generated against which the tax losses could be utilised.  forecasts have been prepared for the Entity based on the current and anticipated Grid Service Charge methodology (refer to Note 20 and 40). The forecasts for Queensland Bulk Water (v) Provision for impairment of receivables Manufacturing Authority (trading as WaterSecure) and the Wyaralong Dam (refer to Note 41), A provision for impairment of receivables has been made at year end (refer to Note 21). transferred on 1 July 2011 are included in the Entity’s forecasts. The forecasts support the (vi) Interest bearing liabilities Board’s expectation that the Entity will be able to pay its debts as and when they fall due for at Loans have been provided to the Entity as a result of Transfer Notices and Project Directions least the next twelve months from the date of signing these financial statements. under the South East Queensland Water (Restructuring) Act 2007. These are per petual If for any reason the Entity is unable to continue as a going concern, it would impact on the Entity’s interest-only loans that will expire at the end of the Entity’s existence. The interest payable is ability to realise assets at their recognised values and to extinguish liabilities in the normal course recognised as a current liability and the principal amounts are recognised as non current of business at the amounts stated in the financial statements. liabilities.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 55 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Asset acquisition The acquisitions of specified net assets from BCC ha ve been determined by the En tity to be acquisitions of assets and liabilities to be dealt with in accordance with AASB 116 Property, Plant and Equipment. This standard requires that for assets acquired, the Entity must recognise items of property, plant and equipment at cost. In circumstances where a group of assets is acquired, the cost of in dividual assets is determined by allocating the cost of t he group of ac quired assets between the identified assets in the group based on their relative fair values at the acquisition date. The transfer of liabilities is be ing accounted for in a ccordance with AASB 139 Financial Instruments: Recognition and Measurement. (b) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and c ash equivalents, loans and borrowings and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. A financial instrument is recognised if the Entity becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Entity’s contractual rights to the cash flows from the financial assets expire or if the Entity transfers the financial asset to another party without retaining control or substantially all risks and rewards o f the asset. Financial liabilities are derecognised if th e Entity’s obligations specified in the contract expire or are discharged or cancelled. Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short- term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are reported as part of short-term borrowings in current liabilities in the balance sheet. The QTC Redraw Facility is treated in accordance with AASB 139 Financial Instruments: Recognition and Measurement, Application Guidance AG 62 (Debt restructure) (refer to Note 26). Financial instruments are classified and measured as follows:  Cash and cash equivalents - held at fair value through profit or loss;  Receivables - held at amortised cost;  Payables - held at amortised cost; and  Borrowings - held at amortised cost. The Entity does not enter transactions for speculative purposes, nor for hedging. Apart from c ash and cash equivalents, the Entity holds no financial assets classified at fair value through profit or loss. (c) Receivables Receivables are r ecognised initially at fa ir value, usually based on the transaction cost or fa ce value. Subsequent measurement is at amortised cost using the effective interest method, less an allowance for any impairment of receivables. Short term receivables with no stated interest rate are measured at the original invoice amount where the effect of discounting is immaterial. An allowance for impairment of receivables is established when there is objective evidence that the Entity will not be able to collect all amounts due. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Bad debts are written off as incurred.

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56 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies 3. Significant accounting policies (continued) The accounting policies set out below have been applied consistently to all periods presented in these (d) Inventories financial statements. Inventories are measured at t he lower of cost and net realisable value. Cost is assigned on a (a) Asset acquisition weighted average basis and includes expenditure incurred in acquiring the inventories and bringing The acquisitions of specified net assets from BCC ha ve been determined by the En tity to be them to their existing condition. acquisitions of assets and liabilities to be dealt with in accordance with AASB 116 Property, Plant Net realisable value is th e estimated selling price in the ordinary course of bu siness, less the and Equipment. This standard requires that for assets acquired, the Entity must recognise items of estimated costs of completion and selling expenses. property, plant and equipment at cost. In circumstances where a group of assets is acquired, the (e) Property, plant and equipment cost of in dividual assets is determined by allocating the cost of t he group of ac quired assets (i) Recognition and measurement between the identified assets in the group based on their relative fair values at the acquisition date. The transfer of liabilities is be ing accounted for in a ccordance with AASB 139 Financial Each class of property, plant and equipment is initially recognised at cost. Assets acquired in Instruments: Recognition and Measurement. exchange for other non-monetary assets or assets acquired at a nomi nal consideration are initially recognised at cost. On initia l recognition, all costs incurred in purchasing or (b) Financial instruments constructing the asset and getting it ready for us e are capitalised to the value of the asset. Non-derivative financial instruments The cost of self constructed assets includes the cost of materials and direct labour, any other Non-derivative financial instruments comprise trade and other receivables, cash and c ash costs directly attributable to bringing the asset to a working condition for its intended use and equivalents, loans and borrowings and trade and other payables. the costs of d ismantling and removing the items and restoring the site on which they are Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at located. fair value through profit or loss, any attributable transaction costs. Subsequent to initial recognition Land, buildings, dams and weirs, water treatment plants and other infrastructure are non-derivative financial instruments are measured as described below. measured at fair value in accordance with AASB 116 Property, Plant and Equipme nt and A financial instrument is recognised if the Entity becomes a party to the contractual provisions of Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector. the instrument. Financial assets are derecognised if the Entity’s contractual rights to the cash flows Plant and equipment is measured at cost. Separately identified components of assets are from the financial assets expire or if the Entity transfers the financial asset to another party without measured on the same basis as the assets to which they relate. retaining control or substantially all risks and rewards o f the asset. Financial liabilities are The Entity operates on a commercial basis, with the primary objective being the generation derecognised if th e Entity’s obligations specified in the contract expire or are discharged or of cash inflows. Where there is no market price for the asset, fair value is either the cancelled. depreciated replacement cost or the net present value of the cash flows from the asset. Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short- If the asset does not generate cash inflows independent from the assets or group of assets term highly liquid investments with original maturities of three months or less and bank overdrafts. then the fair value will be either the sum of the depreciated replacement cost of the group of Bank overdrafts are reported as part of short-term borrowings in current liabilities in the balance assets or the net present value of the cash flows from the group of assets. sheet. Where an item o f property, plant and equipment is revalued, the entire class of p roperty, The QTC Redraw Facility is treated in accordance with AASB 139 Financial Instruments: plant and equipment to which the asset belongs is revalued. Recognition and Measurement, Application Guidance AG 62 (Debt restructure) (refer to Note 26). Net revaluation increments in respect of eac h non-current asset are recognised in other Financial instruments are classified and measured as follows: comprehensive income and asset revaluation surplus, except to the extent that it reverses a  Cash and cash equivalents - held at fair value through profit or loss; previous decrement recognised as an expense for that asset in profit or loss. In this instance the reversal portion of th e increment is recognised as revenue in profit or loss. Net  Receivables - held at amortised cost; revaluation decrements in respect of each asset are recognised as an expense in profit or  Payables - held at amortised cost; and loss, except to the extent that it reverses a previous increment for that asset and a positive  Borrowings - held at amortised cost. balance exists in the asset revaluation surplus for that asset. In this instance, the reversal The Entity does not enter transactions for speculative purposes, nor for hedging. Apart from c ash portion of the decrement is recognised in other comprehensive income and asset revaluation and cash equivalents, the Entity holds no financial assets classified at fair value through profit or surplus. loss. (ii) Subsequent costs (c) Receivables Costs incurred subsequent to the initial asset purchase are capitalised when the expenditure Receivables are r ecognised initially at fa ir value, usually based on the transaction cost or fa ce improves the condition of the asset beyond its originally assessed standard of performance value. Subsequent measurement is at amortised cost using the effective interest method, less an or capacity. Outlays that do not meet the criteria for recognition as an asset are expensed in allowance for any impairment of receivables. Short term receivables with no stated interest rate are the financial year. measured at the original invoice amount where the effect of discounting is immaterial. An allowance for impairment of receivables is established when there is objective evidence that the Entity will not be able to collect all amounts due. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Bad debts are written off as incurred.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 57 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) (iii) Depreciation Land is not depreciated as it has an unlimited useful life. Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net cost or revalued amount of each asset, less its estimated residual value, progressively over its estimated useful life. Where assets have separately identifiable components that are s ubject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly. Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset. Major spares purchased specifically for particular assets are capitalised and depreciated on the same basis as the asset to which they relate. The estimated useful lives applied for the current and comparative periods are as follows:

Class of Fixed Asset Depreciation Rate Useful Life Buildings and land improvements 1.25% - 2.5% 40 - 80 years Dams and weirs 0.667% - 10% 10 - 150 years Water treatment plants and other infrastructure 0.667% - 33.33% 3 - 150 years Plant and equipment Motor vehicles and boats 10% - 33.33% 3 - 10 years Office equipment 10% - 33.33% 3 - 10 years Other equipment 10% - 33.33% 3 - 10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in profit or loss. (f) Intangible assets (i) Recognition of intangible assets Intangible assets with a cost or oth er value greater than $100,000 are recognised in the financial statements, items with a les ser value being expensed. Intangible assets that are acquired by the Entity are initially measured at cost. Where there is an active and liquid market, intangible assets are carried at a revalued amount; otherwise they are carried at cost after initial recognition. If revalued, the same rules apply as to tho se for property, plant and e quipment. Intangible assets have not been revalued. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the profit or loss. Intangible assets are subject to amortisation and impairment testing. Purchased software Expenditure associated with externally purchased computer software and licences has been capitalised and is amortised on a straight-line basis over its estimated useful life.

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58 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (iii) Depreciation (ii) Amortisation Land is not depreciated as it has an unlimited useful life. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net lives of intangible assets from the date that they are available for use. cost or revalued amount of each asset, less its estimated residual value, progressively over The estimated useful lives applied for the current and comparative periods are as follows: its estimated useful life. Where assets have separately identifiable components that are s ubject to regular Class of Intangible Asset Amortisation Rate Useful Life replacement, these components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly. Software purchased 20% 5 years Any expenditure that increases the originally assessed capacity or service potential of an Other intangible 2.5% 40 years asset is capitalised and the new depreciable amount is depreciated over the remaining (g) Leased assets useful life of the asset. A distinction is made between finance leases which effectively transfer from the lessor to th e Major spares purchased specifically for particular assets are capitalised and depreciated on lessee substantially all the risks and benefits incidental to ownership of the leased assets, and the same basis as the asset to which they relate. operating leases under which the lessor effectively retains all such risks and benefits. The estimated useful lives applied for the current and comparative periods are as follows: Where a non-current asset is acquired by means of a finance lease, the asset is recognised at the lower of the fair value of the leased property and the present value of th e minimum lease payments. The c orresponding liability is established at the same amount. Lease payments are Class of Fixed Asset Depreciation Rate Useful Life allocated between the principal component and the interest expense. The fair value of the asset is Buildings and land improvements 1.25% - 2.5% 40 - 80 years depreciated over the term of the lease. Dams and weirs 0.667% - 10% 10 - 150 years Operating lease payments are charged to profit or loss in the period in which they are incurred. Water treatment plants and other infrastructure 0.667% - 33.33% 3 - 150 years Restoration obligations under leases are provided for over the life of the lease. Plant and equipment Plant and equipment subject to a finance lease is amortised on a straight line basis over the shorter Motor vehicles and boats 10% - 33.33% 3 - 10 years of the lease term and their useful lives unless it is reasonably certain that the Entity will obtain Office equipment 10% - 33.33% 3 - 10 years ownership by the end of the lease term. Other equipment 10% - 33.33% 3 - 10 years (h) Impairment Depreciation methods, useful lives and residual values are reviewed at each reporting date. (i) Financial assets Gains and losses on disposals are determined by comparing proceeds with the carrying A financial asset is assessed at each reporting date to determine whether there is any amount. These gains and losses are included in profit or loss. objective evidence that it is impaired. A financial asset is considered to be impaired if (f) Intangible assets objective evidence indicates that one or more events have had a ne gative effect on the estimated future cash flows of that asset. (i) Recognition of intangible assets Intangible assets with a cost or oth er value greater than $100,000 are recognised in the An impairment loss in respect of a financial asset measured at amortised cost is calculated financial statements, items with a les ser value being expensed. Intangible assets that are as the difference between its carrying amount, and the present value of the estimated future acquired by the Entity are initially measured at cost. cash flows discounted at the original effective interest rate. Where there is an active and liquid market, intangible assets are carried at a revalued Significant financial assets are tested for impairment on an individual basis. The remaining amount; otherwise they are carried at cost after initial recognition. If revalued, the same rules financial assets are assessed collectively in groups that share similar credit risk apply as to tho se for property, plant and e quipment. Intangible assets have not been characteristics. revalued. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the Subsequent expenditure is capitalised only when it increases the future economic benefits reversal can be related objectively to an event occurring after the impairment loss was embodied in the specific asset to which it relates. All other expenditure is recognised in the recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. profit or loss. Intangible assets are subject to amortisation and impairment testing. Purchased software Expenditure associated with externally purchased computer software and licences has been capitalised and is amortised on a straight-line basis over its estimated useful life.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 59 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) (ii) Non-financial assets The carrying amounts of the Entity’s non- financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their p resent value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss unless the asset is carried at a revalued amount. When the asset is measured at a revalued amount, the impairment loss is offset against the asset revaluation surplus of the relevant asset to the extent available. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in th e estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the c arrying amount that w ould have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (i) Assets under construction Assets under construction (work in p rogress) are carried at cost and n ot depreciated until they reach service delivery. Interest costs on borrowings specifically financing assets under construction are capitalised. (j) Payables Trade creditors are recognised upon receipt of the goods or services ordered and are measured at the agreed purchase/contract price, gross of applicable trade and other discounts. Amounts owing are unsecured and are generally settled on 30 day terms. (k) Employee benefits Employer superannuation contributions, annual leave and long service leave are regarded as employee benefits. Payroll tax and workers’ compensation insurance are a consequence of employing employees and are not counted in an employee’s total remuneration package. They are not employee benefits and are recognised separately as employee related expenses. (i) Wages, salaries, annual leave and sick leave Liabilities for short-term employee benefits for wages, salaries and an nual leave represent present obligations resulting from employees’ services provided to the reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Entity expects to pay as at the reporting date, including applicable related on-costs. For those entitlements not expected to be paid within 12 months, the liabilities are classified as non-current liabilities and recognised at their present value, calculated using yields on fixed rate Commonwealth Government Bonds of similar maturity. Non-vesting sick leave is recognised as an expense as it is taken.

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60 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (ii) Non-financial assets (ii) Long service leave The carrying amounts of the Entity’s non- financial assets, other than inventories and The long service leave provision represents the present value of the estimated future cash deferred tax assets are reviewed at each reporting date to determine whether there is any outflows to b e made resulting from employees’ services provided to balance date. The indication of impairment. If any such indication exists then the asset’s recoverable amount is current provision is calculated using the simplified approach whereby a net factor of 0.95 is estimated. applied to the long service leave amount of the employees with 3 or more years of service in The recoverable amount of an asset or cash-generating unit is the greater of its value in use order to estimate the present value. This approach is an approximation process to recognise and its fair value less costs to sell. In assessing value in use, the estimated future cash flows the probable liability that will eventuate for staff that have achieved the 7 years of service. are discounted to their p resent value using a pre-tax discount rate that reflects current (iii) Superannuation schemes market assessments of the time value of money and the risks specific to the asset. For the QSuper purpose of impairment testing, assets are grouped together into the smallest group of assets The Entity c urrently contributes to the QSuper defined ben efit and accumulation that generates cash inflows from continuing use that are largely independent of the cash superannuation funds. Where there is a surplus or deficit in financial position of a defined inflows of other assets or groups of assets (the “cash-generating unit”). benefit superannuation fund, the employer sponsors, to the extent permissible under the An impairment loss is recognised if the carrying amount of an asset or its cash-generating trust deed of the superannuation fund, can recognise an asset for the surplus or must unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss recognise a liability for the deficit. However, as responsibility for the funding of the QSuper unless the asset is carried at a revalued amount. When the asset is measured at a revalued defined benefit superannuation fund is assumed at a whole-of-Government level, no asset or amount, the impairment loss is offset against the asset revaluation surplus of the relevant liability is required to be recognised by the Entity. asset to the extent available. Local Government Superannuation Scheme (LG Super) Impairment losses recognised in respect of cash-generating units are allocated first to The Entity contributes to LG Super for employees under both defined benefit scheme and reduce the carrying amount of any goodwill allocated to the units and then to reduce the accumulation superannuation scheme. The Entity has no liability to or interest in LG S uper carrying amount of the other assets in the unit (group of units) on a pro rata basis. other than the payment of the statutory contribution. Any amount by which either scheme is Impairment losses recognised in prior periods are assessed at each reporting date for any over or under funded would only affect future benefits and is not an asset or liability of the indications that the loss has decreased or no longer exists. An impairment loss is reversed if Entity. Accordingly, there is no recognition in the financial statements of any over-or-under there has been a change in th e estimates used to determine the recoverable amount. An funding of LG Super (refer to Note 27). impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the c arrying amount that w ould have been determined, net of depreciation or Brisbane City Council Superannuation Plan (City Super) amortisation, if no impairment loss had been recognised. The Entity contributes to City Supe r for employees under both defined benefit and accumulation superannuation funds. The Trustee of the fund issued the State ment of (i) Assets under construction Advice: Funding and Solvency Certificate by the Trustee of the fund effective from 1 June Assets under construction (work in p rogress) are carried at cost and n ot depreciated until they 2011 and expired at mid midnight 30 June 2011. This Certificate certified that, at the reach service delivery. effective date of the Certificate, City Super was “solvent” as defined in the Superannuation Interest costs on borrowings specifically financing assets under construction are capitalised. Industry (Supervision) Regulations 1994 (SIS Regulations) (refer to Note 27). (j) Payables (iv) Key management personnel and remuneration Trade creditors are recognised upon receipt of the goods or services ordered and are measured at Key management personnel and remuneration disclosures are made in accordance with the the agreed purchase/contract price, gross of applicable trade and other discounts. Amounts owing section 5 Addendum (issued in May 2011) to th e Financial Reporting Requirements for are unsecured and are generally settled on 30 day terms. Queensland Government Agencies issued by Queensland Treasury (refer to note 37). (k) Employee benefits (l) Revenue Employer superannuation contributions, annual leave and long service leave are regarded as Revenue is measured at fair value of the consideration or contribution received or receivable. All employee benefits. revenue is stated net of the amount of GST. Payroll tax and workers’ compensation insurance are a consequence of employing employees and (i) Water services are not counted in an employee’s total remuneration package. They are not employee benefits and There is a contract with the WGM that provides Grid Service Charges revenue to the Entity are recognised separately as employee related expenses. up to 30 June 2020 (refer to Note 40). (i) Wages, salaries, annual leave and sick leave Revenue from the WGM is accrued monthly based on the Market Rules and the Entity’s Liabilities for short-term employee benefits for wages, salaries and an nual leave represent Water Grid Services contract. It includes the capital charge, fixed and variable operating present obligations resulting from employees’ services provided to the reporting date and are costs incurred for the month and other specific allowable costs identified in the contract. calculated at undiscounted amounts based on remuneration wage and salary rates that the The charges for rural irrigation water are calculated based on two part tariff charges. Part A Entity expects to pay as at the reporting date, including applicable related on-costs. relates to fixed costs based on water allocation volume and applied quarterly in advance and For those entitlements not expected to be paid within 12 months, the liabilities are classified Part B r epresents the charge for water used based on meter readings for the previous as non-current liabilities and recognised at their present value, calculated using yields on quarter. These charges are accrued on a monthly basis. fixed rate Commonwealth Government Bonds of similar maturity. Non-vesting sick leave is recognised as an expense as it is taken.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 61 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) (ii) Government grants and subsidies Government grants and subsidies are recognised initially as deferred income when there is reasonable assurance that they will be received and that the Entity will comply with the conditions associated with the grant. Grants and subsidies that compensate the Entity for expenses incurred are recognised in profit or loss on a systematic basis in the same periods in which the expenses are recognised. The Entity rec eives CSO payments from the Queensland Government. The Rural Water payment is for the provision of rural irrigation water to rural irrigators. The Water Planning Development payment is for activities to ensure compliance with regulatory and policy areas of resource management. The CSO payments are recognised on a monthly accrual basis. (iii) Services Revenue for a service is recognised upon the delivery of the service to the customers. (iv) Finance income Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. (m) Finance/borrowing costs Finance/borrowing costs comprise:  interest expense on bank overdrafts, short-term and long-term borrowings;  unwinding of the discount on provisions;  amortisation of discounts or premiums relating to borrowings; and  ancillary administration charges. Finance/borrowing costs are recognised in profit or loss using the effective interest method and are expensed in the period in which they arise. Finance/borrowing costs that are not settled in the period in which they arise are added to the carrying amount of the borrowing. Finance/borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a s ubstantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. (n) Income tax The Entity has been a participant in the NTER from the date of establishment. As a result an “equivalent” or “notional income tax” liability is payable to Queensland Treasury for payment into the consolidated fund. Income tax expense comprises current and deferred tax. Inc ome tax expense is recognised in profit or l oss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the r eporting date and any adjustment to tax p ayable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of as sets and li abilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or li abilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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62 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) 3. Significant accounting policies (continued) (ii) Government grants and subsidies (o) Goods and services tax Government grants and subsidies are recognised initially as deferred income when there is Revenue, expenses and assets are recognised net of the amount of GS T, except where the reasonable assurance that they will be received and that the Entity will comply with the amount of GST incurred is not recoverable from the ATO. In the se circumstances, the GST is conditions associated with the grant. Grants and subsidies that compensate the Entity for recognised as part of the cost of acquisition of the asset or as part of the expense. expenses incurred are recognised in profit or loss on a systematic basis in the same periods Receivables and payables are stated with the amount of GST included. The net amount of GST in which the expenses are recognised. recoverable from, or payable to, the ATO is incl uded as a current asset or liability in the balance The Entity rec eives CSO payments from the Queensland Government. The Rural Water sheet. payment is for the provision of rural irrigation water to rural irrigators. The Water Planning Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of Development payment is for activities to ensure compliance with regulatory and policy areas cash flows arising from investing and financing activities which are recoverable from, or payable to, of resource management. The CSO payments are recognised on a monthly accrual basis. the ATO are classified as operating cash flows. (iii) Services The Entity and its subsidiary formed a GST group for GST purposes effective on 1 July 2008. Revenue for a service is recognised upon the delivery of the service to the customers. (p) Contributed equity (iv) Finance income The Entity has applied the accounting treatment of Interpretation 1038 Contribution by Owners Finance income comprises interest income on funds invested. Interest income is recognised Made to Wholly-Owned Public Sector Entities to the equity proceeds received during the year (refer as it accrues in profit or loss, using the effective interest method. to Note 38). (m) Finance/borrowing costs Equity contributions have been provided by the Queensland Government. Finance/borrowing costs comprise: (q) New and revised accounting standards  interest expense on bank overdrafts, short-term and long-term borrowings; The Entity did not change any of its accounting policies during 2010-11. Only one amendment to  unwinding of the discount on provisions; an Australian Accounting Standard applicable for the first time for 2010-11 was relevant to the Entity, as explained below.  amortisation of discounts or premiums relating to borrowings; and AASB 2009 – 5 Amendments to Australian Accounting Standards arising from the A nnual  ancillary administration charges. improvements project includes certain amendments to AASB 117 Leases that revised the criteria Finance/borrowing costs are recognised in profit or loss using the effective interest method and are for classifying leases involving land and buildings. Consequently, the Entity was required to expensed in the period in which they arise. Finance/borrowing costs that are not settled in the reassess the classification of the land elements of all unexpired leases the Entity has entered into period in which they arise are added to the carrying amount of the borrowing. as at 1 July 2010, on the basis of information existing at the inception of the relevant leases. The Finance/borrowing costs directly attributable to the acquisition, construction or production of assets outcome of the Entity r eassessment was that no reclassification from an operating lease to a that necessarily take a s ubstantial period of time to prepare for their intended use or sale, are finance lease was necessary. added to the cost of those assets, until such time as the assets are substantially ready for their The Entity has not applied any Australian Accounting Standards and interpretations that have been intended use or sale. issued but are not yet effective. The Entity will apply these standards and interpretations in (n) Income tax accordance with their respective commencement dates. The Entity has been a participant in the NTER from the date of establishment. As a result an At the date of signing the financial statements, the only significant impacts of ne w or amended “equivalent” or “notional income tax” liability is payable to Queensland Treasury for payment into Australian accounting standards with future commencement dates are as set out below. the consolidated fund. Income tax expense comprises current and deferred tax. Inc ome tax expense is recognised in profit or l oss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the r eporting date and any adjustment to tax p ayable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of as sets and li abilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or li abilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 63 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) (q) New and revised accounting standards (continued) AASB 9 Financial Instruments (December 2010) and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136,137, 139, 1023 & 1 038 and interpretations 2,5, 10, 12, 19 & 127] become effective from reporting periods beginning on or after 1 January 2013. The main impacts of these standards are that they will change the requirements for the classification, measurement and disclosures associated with financial assets. Under the new requirements, financial assets will be more simply classified according to whether they are measured at either amortised cost or fair value. Pursuant to AASB 9, financial assets can only be measured at amortised cost if two conditions are met. One of these conditions is that the asset must be held within a business model whose objective is to hold assets in order to collect contractual cash flows. The other condition is that the contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial application of AASB 9, the Entity will need to re-assess the measurement of its financial assets against the new classification and measurement requirements, based on the facts and circumstances that exist at that date. Assuming no change in the types of transactions the Entity enters into, it is not expected that any of the Entity’s financial assets will meet the criteria in AASB 9 to be measured at amortised cost. It is not anticipated that this change will have a material impact on the Entity, as from the 2013-14 financial statements, all of the Entity’s financial assets will be required to be classified as “financial assets required to be measured at fair value through profit or loss”. The same classification will be used for net gains/losses recognised in the Statement of Comprehensive Income in respect of those financial assets. In the case of the Entity’s receivables, the carrying amount is considered to be a reasonable approximation of fair value. All other Australian accounting standards and interpretations with future commencement dates are either not applicable to the Entity’s activities, or have no material impact on the Entity.

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

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64 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

3. Significant accounting policies (continued) 5. Financial risk management (q) New and revised accounting standards (continued) Overview AASB 9 Financial Instruments (December 2010) and AASB 2010-7 Amendments to Australian The Entity’s activities expose it to a variety of financial risks including credit risk, liquidity risk, and interest Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, rate risk. Exposure to financial risks is managed in accordance with the Entity’s approved policies on 112, 118, 121, 127, 128, 131, 132, 136,137, 139, 1023 & 1 038 and interpretations 2,5, 10, 12, 19 financial risk management. These policies focus on managing the volatility of financial markets and seek & 127] become effective from reporting periods beginning on or after 1 January 2013. The main to minimise potential adverse effects on the financial performance of the Entity. The Entity measures risk impacts of these standards are that they will change the requirements for the classification, exposure using a variety of methods as follows: measurement and disclosures associated with financial assets. Under the new requirements, financial assets will be more simply classified according to whether they are measured at either Risk Exposure Measurement Method amortised cost or fair value. Pursuant to AASB 9, financial assets can only be measured at Credit risk Ageing analysis amortised cost if two conditions are met. One of these conditions is that the asset must be held Liquidity risk Maturity analysis within a business model whose objective is to hold assets in order to collect contractual cash flows. The other condition is that the contractual terms of the asset give rise on specified dates to cash Interest rate risk Sensitivity analysis flows that are solely payments of principal and interest on the principal amount outstanding. Credit risk On initial application of AASB 9, the Entity will need to re-assess the measurement of its financial Credit risk exposure refers to the situation where the Entity may incur a financial loss as a result of assets against the new classification and measurement requirements, based on the facts and another party to a financial instrument failing to discharge their obligations. The Entity has a substantial circumstances that exist at that date. Assuming no change in the types of transactions the Entity concentration of credit risk to a single debtor, being the WGM. enters into, it is not expected that any of the Entity’s financial assets will meet the criteria in AASB 9 to be measured at amortised cost. It is not anticipated that this change will have a material impact The Entity is exposed to credit risk through its investments with the QTC and deposits held with banks. on the Entity, as from the 2013-14 financial statements, all of the Entity’s financial assets will be The QTC C ash Fund is an asset management portfolio that invests with a w ide variety of high credit required to be classified as “financial assets required to be measured at fair value through profit or rating counterparts. Deposits are capital guaranteed. Other investments are held with highly rated and loss”. The same classification will be used for net gains/losses recognised in the Statement of regulated financial institutions and whilst not capital guaranteed the likelihood of a credit failure is Comprehensive Income in respect of those financial assets. In the case of the Entity’s receivables, considered remote. the carrying amount is considered to be a reasonable approximation of fair value. Liquidity risk All other Australian accounting standards and interpretations with future commencement dates are Liquidity risk refers to the situation where the Entity may encounter difficulty in meeting obligations either not applicable to the Entity’s activities, or have no material impact on the Entity. associated with financial liabilities. The Entity is exposed to liquidity risk through its trading in the normal course of bu siness and borrowings from the QTC for asset acquisitions and c apital works. The Entity manages its exposure to liquidity risk by maintaining sufficient cash deposits and undrawn facilities, both 4. Determination of fair values short and long term, to cater for unexpected volatility in cash flows. A number of the Entity’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement Market risk and/or disclosure purposes based on the following methods. Where applicable, further information about The Entity does not trade in foreign currency and is not materially exposed to commodity price ranges. the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. The Entity is exposed to interest rate risk through its borrowings from QTC and cash deposited in interest bearing accounts. The Entity manages its portfolio by setting, monitoring and adjusting the terms and (a) Property, plant and equipment duration of its loan portfolio as allowed under its commercial financing contract with QTC. The fair value of land, buildings, dams and weirs, water treatment plants and other infrastructure is measured as follows: Interest rate risk The Entity is ex posed to interest rate risk through its borrowings and investment with QTC and c ash  where there is an active and liquid market for assets similar in type and condition, the fair value deposited in interest bearing accounts. The risk in borrowing is effectively managed through QTC’s of an asset is its price in that market; and capacity to issue securities with variable terms allowing an appropriate duration for debt of the Entity.  where there is no market price for the assets, fair value is either the depreciated replacement Interest rate risk in other areas is mitigated. The Entity relies on QTC’s management of its debt portfolios cost or the net present value of the cash flows from the asset. and on interest rate immunisation provided by the QWC in its calculation of th e WACC that sets the (b) Trade and other receivables and payables Entity’s earning rate. The fair value of trade and other receivables and payables approximates their nominal value less estimated credit adjustments. (c) Prepayments The fair value of prepayments is represented by the book value as the period of time to consumption is short and there are no rates involved in the calculation. (d) Borrowings The fair value of borrowings, which is determined for disclosure purposes, is determined by reference to published price quotations in an active market and reflects the value of the debt if the Entity repaid it in full at balance date. As it is the intention of the Entity to hold its borrowings for their full term, no adjustment provision is made in these accounts.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 65 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

5. Financial risk management (continued) Capital management The Entity mu st give the responsible Ministers an estimate of its net profit for the ye ar, and a recommendation on the amount of annual return to be paid. The recommendation is to be provided to Ministers between 1 and 15 May prior to the end of the financial year. Before the end of the financial year, the responsible Ministers must either approve the recommendation or direct the Entity to pay another amount (though not more than the estimated net profit previously advised) as decided under section 53 of the South East Queensland Water (Re structuring) Act 2007. The return must be paid within 6 months after the end of the financial year. Annual return payable in 2011 is $0 (2010: $0) 2011 2010 Note $000 $000 Total borrowings 26 2,144,768 2,252,558 Total assets (excluding cash and cash equivalents) 2,974,128 2,888,527 Gearing ratio 72% 78%

6. Asset acquisition adjustments Through Transfer Notice, the Entity paid and received outstanding amounts from BCC in connection with the Brisbane Aquifers and Mt Cr osby Weir Augmentation projects. Also through Transfer Notice an employee benefits adjustment was paid to BCC in relation to the acquisition on 1 July 2008.

Net Consideration paid (received) Transferors Transfer Date by the Entity $000 Brisbane City Council – Mt Crosby Weir Augmentation Project (outstanding amount) 12 November 2010 243 Brisbane City Council – Brisbane Aquifers (outstanding amount) 12 November 2010 (741) Brisbane City Council – employee benefits adjustment to the acquisition on 1 July 2008 12 November 2010 65 Total value (433)

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66 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

5. Financial risk management (continued) Capital management 2011 2010 The Entity mu st give the responsible Ministers an estimate of its net profit for the ye ar, and a $000 $000 recommendation on the amount of annual return to be paid. The recommendation is to be provided to 7. Water services Ministers between 1 and 15 May prior to the end of the financial year. Before the end of the financial year, the responsible Ministers must either approve the recommendation or direct the Entity to pay another Water services - WGM 350,184 300,548 amount (though not more than the estimated net profit previously advised) as decided under section 53 of Water sales - Irrigators 2,018 2,323 the South East Queensland Water (Re structuring) Act 2007. The return must be paid within 6 months Total 352,202 302,871 after the end of the financial year.

Annual return payable in 2011 is $0 (2010: $0) 8. Grants and other contributions 2011 2010 CSO 1,396 1,449 Note $000 $000 Other grants 330 387 Total borrowings 26 2,144,768 2,252,558 Total 1,726 1,836 Total assets (excluding cash and cash equivalents) 2,974,128 2,888,527

Gearing ratio 72% 78% 9. Project income

Business Water Efficiency Program - 3,971 6. Asset acquisition adjustments Total - 3,971 Through Transfer Notice, the Entity paid and received outstanding amounts from BCC in connection with the Brisbane Aquifers and Mt Cr osby Weir Augmentation projects. Also through Transfer Notice an employee benefits adjustment was paid to BCC in relation to the acquisition on 1 July 2008. 10. Other revenue Investment revenue 2,605 2,428 Net Consideration Consulting revenue 523 506 paid (received) Lease revenue 913 1,286 Transferors Transfer Date by the Entity $000 Other 996 1,428 Brisbane City Council – Mt Crosby Weir Augmentation Total 5,037 5,648 Project (outstanding amount) 12 November 2010 243 Brisbane City Council – Brisbane Aquifers (outstanding 11. Employee expenses amount) 12 November 2010 (741) Wages and salaries 37,708 30,333 Brisbane City Council – employee benefits adjustment to the acquisition on 1 July 2008 12 November 2010 65 Annual leave expenses 3,583 3,016 Total value (433) Long service leave expenses 872 881 Employer superannuation contribution 4,687 3,821

Workers' compensation premium 130 125

Payroll tax 2,175 1,810 Other employee related expenses 1,922 1,181 Total 51,077 41,167

The number of employees including both full time employees and part time employees measured on a full time equivalent basis as at 30 June are: 2011 2010 Number of employees 442 395

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 67 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

2011 2010 $000 $000 12. Supplies and services Labour hire expenses 4,371 2,950 Consultancies and contractors* 11,904 7,917 Energy 9,036 8,750 Information technology and communications 4,100 2,415 Repairs and maintenance* 24,746 20,547 Supplies and consumables 33,474 28,492 Business Water Efficiency Program - 4,412 Other expenses 734 885 Total 88,365 76,368

* Costs were incurred by the Entity as a result of the January 2011 South East Queensland flood. Costs incurred to 30 June 2011 have been included in these financial statements and further costs will be included in subsequent years. Insurance claims have been lodged and as at the date of this report the insurance claims have not been settled (refer to Note 34).

13. Depreciation and amortisation Buildings 1,289 1,288 Dams and weirs 15,252 12,209 Water treatment plants and other infrastructure 23,214 23,700 Plant and equipment 2,492 2,590 Intangibles 1,273 958 Total 43,520 40,745

14. Revaluation decrement Dams and weirs - 7,580 Total - 7,580

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68 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

2011 2010 2011 2010 $000 $000 $000 $000 12. Supplies and services 15. Finance/borrowing costs Labour hire expenses 4,371 2,950 Interest paid or payable to QTC 127,300 129,692 Consultancies and contractors* 11,904 7,917 Competitive neutrality fee 18,885 19,278 Energy 9,036 8,750 Other financial costs 471 457 Information technology and communications 4,100 2,415 Total 146,656 149,427 Repairs and maintenance* 24,746 20,547 Supplies and consumables 33,474 28,492 Business Water Efficiency Program - 4,412 16. Other expenses Other expenses 734 885 Insurance 2,394 2,409 Total 88,365 76,368 Internal audit fees 147 280 External audit fees 142 172 * Costs were incurred by the Entity as a result of the January 2011 South East Queensland flood. Costs incurred to QWC & QCA levies 7,978 - 30 June 2011 have been included in these financial statements and further costs will be included in subsequent years. Insurance claims have been lodged and as at the date of this report the insurance claims have not been Rates and taxes 3,004 1,653 settled (refer to Note 34). Other 1,743 149 Total 15,408 4,663 13. Depreciation and amortisation

Buildings 1,289 1,288 17. Income tax Dams and weirs 15,252 12,209 The difference between income tax expense provided in the financial statements and the prima facie Water treatment plants and other infrastructure 23,214 23,700 income tax expense is reconciled as follows: Plant and equipment 2,492 2,590 Profit/(loss) before income tax 13,939 (5,624) Intangibles 1,273 958 Prima facie income tax thereon at 30% 4,182 (1,687) Total 43,520 40,745 Less: Tax impact of transferred council provision for 14. Revaluation decrement employee benefits recognised 152 399 Dams and weirs - 7,580 Income tax underprovided in prior year 1,254 522 Investment allowances - 246 Total - 7,580 Add: Depreciation difference on transferred council assets 1,077 - Non deductible expenses 28 3,538 Total income tax expense 3,881 684

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 69 70

2011 JUNE 30 ENDED YEAR THE FOR REPORT FINANCIAL Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

18. Property, plant and equipment

2011 Water treatment Dams and plants and other Plant and Work in Land Buildings weirs infrastructure equipment progress Total $000 $000 $000 $000 $000 $000 $000 Balance at 1 July 2010 507,510 36,994 1,589,808 749,118 14,694 348,366 3,246,490 Asset classes reclassification - - 37 (254) 217 - - Acquisitions as per transfer notices - - - (741) - - (741) Additions - - - - 2,217 118,346 120,563 Disposal - - - - (1,175) - (1,175) Transfer between classes (60) 108 271 17,954 1,640 (19,913) - Balance at 30 June 2011 507,450 37,102 1,590,116 766,077 17,593 446,799 3,365,137 Depreciation and impairment losses Balance at 1 July 2010 - (2,991) (376,603) (41,412) (4,497) - (425,503) Asset classes reclassification - - 5 (8) 3 - - Disposal - - - - 615 - 615 Depreciation for the year - (1,289) (15,252) (23,214) (2,492) - (42,247) Balance at 30 June 2011 - (4,280) (391,850) (64,634) (6,371) - (467,135) Carrying amount at 30 June 2011 507,450 32,822 1,198,266 701,443 11,222 446,799 2,898,002

26 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

18. Property, plant and equipment

2011 Water treatment Dams and plants and other Plant and Work in Land Buildings weirs infrastructure equipment progress Total $000 $000 $000 $000 $000 $000 $000 Balance at 1 July 2010 507,510 36,994 1,589,808 749,118 14,694 348,366 3,246,490 Asset classes reclassification - - 37 (254) 217 - - Acquisitions as per transfer notices - - - (741) - - (741) Additions - - - - 2,217 118,346 120,563 Disposal - - - - (1,175) - (1,175) Transfer between classes (60) 108 271 17,954 1,640 (19,913) - Balance at 30 June 2011 507,450 37,102 1,590,116 766,077 17,593 446,799 3,365,137 Depreciation and impairment losses Balance at 1 July 2010 - (2,991) (376,603) (41,412) (4,497) - (425,503) Asset classes reclassification - - 5 (8) 3 - - Disposal - - - - 615 - 615 Depreciation for the year - (1,289) (15,252) (23,214) (2,492) - (42,247) Balance at 30 June 2011 - (4,280) (391,850) (64,634) (6,371) - (467,135) Carrying amount at 30 June 2011 507,450 32,822 1,198,266 701,443 11,222 446,799 2,898,002

26

Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

18. Property, plant and equipment (continued)

2010 Water treatment Dams and plants and other Plant and Work in Land Buildings weirs infrastructure equipment progress Total $000 $000 $000 $000 $000 $000 $000 Balance at 1 July 2009 485,776 97,699 993,263 495,657 15,105 379,105 2,466,605 Asset classes reclassification 21,789 (60,528) - 41,310 (3,693) - (1,122) Acquisitions as per transfer notices - - - 25,097 - 2,433 27,530 QUEENSLAND BULKWATERSUPPLY AUTHORITYTRADING ASSEQWATER Additions - - - - 3,005 160,421 163,426 Disposal (55) (177) - - (454) - (686) Transfer between classes - - 5,808 187,054 731 (193,593) - Revaluation increments - - 598,317 - - - 598,317 Revaluation decrements - - (7,580) - - - (7,580) Balance at 30 June 2010 507,510 36,994 1,589,808 749,118 14,694 348,366 3,246,490 Depreciation and impairment losses Balance as at 1 July 2009 - (3,762) (12,492) (16,375) (1,664) - (34,293) Asset classes reclassification - 2,056 - (1,337) (343) - 376 Disposal - 3 - - 100 - 103 Revaluation - - (351,902) - - - (351,902) Depreciation for the year - (1,288) (12,209) (23,700) (2,590) - (39,787) Balance at 30 June 2010 - (2,991) (376,603) (41,412) (4,497) - (425,503) Carrying amount at 30 June 2010 507,510 34,003 1,213,205 707,706 10,197 348,366 2,820,987

ANNUALREPORT 2010-11

71

27 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

18. Property, plant and equipment (continued) Land, buildings, dams and weirs, water treatment plants and other infrastructure are measured at fa ir value in accordance with AASB 116 Property, Plant and E quipment and Queensland Treasury’s Non- Current Asset Policies for the Queensland Public Sector. Plant and equipment and work in progress are measured at cost. The Board has adopted the following policies in respect of the measurement of fair value: Frequency of Method of measurement of fair value measurement * Land Independent valuation – market valuation 5 years Buildings Independent valuation – market valuation 5 years Dams and weirs Board adopted valuation – income approach 5 years Water treatment plants and other infrastructure Depreciated replacement cost 5 years

*Valuations are more frequent where the Board considers that there are indicators that period-end carrying values materially differ to their fair values.

Land Land was valued by an independent valuer, State Valuation Services, as at 1 July 2008 and 16 February 2009. The independent valuations were performed using the fa ir value principle by reference to observable prices in an active market as well as recent market transactions on an arm’s length basis. The carrying values of land were revalued as at the effective dates of those valuations to reflect the fair values determined by the independent valuers. Additions since the time of the independent valuations have been recorded at cost. Land with a total value of $225,867,108 (as valued by State Valuation Services) representing reserve land or land subject to a Deed of Grant in Trust (DOGIT), is not included in the carrying value of land. That land is retained by the Crown, however, the economic benefit of the land accrues to the Entity and the land is administered by the Entity on behalf of the Department of Environment and Resource Management.

Buildings The Entity’s head office building at 240 Margaret Street, Brisbane, was valued by an independent valuer, Herron Todd White, as at 1 February 2008. Other buildings (predominantly houses) owned by the Entity are carried at their acquisition values as at 1 July 2008. Additions since the time of t he independent valuation (240 Margaret Street) and date of acquisition (houses) have been recorded at cost.

28

72 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

18. Property, plant and equipment (continued) 18. Property, plant and equipment (continued) Land, buildings, dams and weirs, water treatment plants and other infrastructure are measured at fa ir Dams and weirs value in accordance with AASB 116 Property, Plant and E quipment and Queensland Treasury’s Non- An income based approach to fair value was undertaken as at 30 June 2010. An income approach Current Asset Policies for the Queensland Public Sector. Plant and equipment and work in progress are assumes the amount for which assets could be exchanged between knowledgeable and willing parties in measured at cost. an arm’s length transaction. The Board has adopted the following policies in respect of the measurement of fair value: The same assumptions have been applied to determining the recoverable amount for impairment testing Frequency of (refer to Note 20) apart from the following assumptions which are considered to be more a ppropriate in Method of measurement of fair value measurement * the context of the income approach: Land Independent valuation – market valuation 5 years Buildings Independent valuation – market valuation 5 years  the WACC has been increased by 0.80% to take into account an independent third party’s Dams and weirs Board adopted valuation – income approach 5 years (arm’s length purchase) approach to the Gamma component of the WACC calculation; Water treatment plants  cash flows have been adjusted to reflect potential synergies that an independent third party and other infrastructure Depreciated replacement cost 5 years may derive from the acquisition of the Entity’s assets; and

*Valuations are more frequent where the Board considers that there are indicators that period-end carrying values  future capital expenditure and related revenues have been included in the cash flows (in materially differ to their fair values. accordance with Accounting Standards these are excluded for the purpose of determining the recoverable amount for impairment testing). Land The income based valuation results in a value of the Entity as a whole. After deducting other non current Land was valued by an independent valuer, State Valuation Services, as at 1 July 2008 and 16 February assets, the remaining value has been apportioned to individual dams and weirs on the basis of their 2009. The independent valuations were performed using the fa ir value principle by reference to depreciated replacement cost and carrying values as at 30 June 2010. observable prices in an active market as well as recent market transactions on an arm’s length basis. The carrying values of land were revalued as at the effective dates of those valuations to reflect the fair values Water treatment plants and other infrastructure determined by the independent valuers. Additions since the time of the independent valuations have been recorded at cost. Water treatment plants and other infrastructure were valued by an independent valuer, Cardno Limited, as at 1 July 2008 us ing a depreciated replacement cost approach consistent with the r equirements of Land with a total value of $225,867,108 (as valued by State Valuation Services) representing reserve land Australian Accounting Standards. The carrying values of water treatment plants and other infrastructure or land subject to a Deed of Grant in Trust (DOGIT), is not included in the carrying value of land. That land were revalued as at the effective date of those valuations to reflect the fair v alues determined by the is retained by the Crown, however, the economic benefit of the land accrues to the Entity and the land is independent valuers. Additions since the time of the independent valuation have been recorded at cost. administered by the Entity on behalf of the Department of Environment and Resource Management.

Plant and equipment Buildings All plant and equipment is measured at c ost less accumulated depreciation in ac cordance with The Entity’s head office building at 240 Margaret Street, Brisbane, was valued by an independent valuer, Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector. Herron Todd White, as at 1 February 2008. Other buildings (predominantly houses) owned by the Entity are carried at their acquisition values as at 1 July 2008. Additions since the time of t he independent valuation (240 Margaret Street) and date of acquisition (houses) have been recorded at cost. Work in progress Work in progress is measured at cost. Borrowing costs of $23,047,839 have been capitalised during the year (2010: $17,330,007).

28 29

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 73 74

2011 JUNE 30 ENDED YEAR THE FOR REPORT FINANCIAL Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

19. Intangible assets

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

30 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

19. Intangible assets

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

30

Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 19. Intangible (continued)

2010 Software Other Software work in Goodwill purchased intangibles progress Total $000 $000 $000 $000 $000 Balance at 1 July 2009 39,440 2,104 4,900 35 46,479 Asset classes reclassification - 579 658 - 1,237 Additions - - - 2,717 2,717 Transfers between classes - 2,752 - (2,752) - Transfer to asset revaluation reserve (39,440) - - - (39,440) QUEENSLAND BULKWATERSUPPLY AUTHORITYTRADING ASSEQWATER Balance at 30 June 2010 - 5,435 5,558 - 10,993 Amortisation Balance as at 1 July 2009 - (134) (636) - (770) Asset classes reclassification (376) (115) - (491) Amortisation for the year - (738) (220) - (958) Balance at 30 June 2010 - (1,248) (971) - (2,219) Carrying amount at 30 June 2010 - 4,187 4,587 - 8,774 ANNUALREPORT 2010-11 75

31 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

20. Impairment testing for cash generating unit The carrying amount of assets, including intangibles (refer Notes 18 and 19), allocated to the CGU are set out below:

Note Carrying amount Recoverable Entity of assets amount Surplus $000 $000 $000 CGU 2,906,159 3,293,636 387,477 Total 18,19 2,906,159 3,293,636 387,477

The Board has adopted the following methodology, key assumptions and approach to determine the recoverable amount for the purpose of impairment testing:  the Entity has a single CGU for the purposes of impairment testing because it receives the majority of its revenue from one customer – the WGM;  the recoverable amount of the CGU was estimated based on the v alue in use and was determined with the assistance of independent experts; the discount rate has been calculated by an independent expert using the WACC and CAPM framework. The Board has adopted a target gearing level of 70% consistent with advice from an i ndependent expert with the assumption that surplus cash will be applied to debt repayment in the first instance and dividends thereafter, in accordance with the Board adopted Cash Management Policy;  the WACC provided by the QCA on non-drought assets for 2011-12 assumes interest rate immunisation. This impacts both the earning rate and the impairment rate on non-drought assets because of reduced risk. As the Entity enters into a more normal regulatory environment in the future, it is expected that the interest rate immunisation would cease. This movement from an immunised to a non-immunised position is assumed to occur from 2012-13 with the earnings rate adjusted accordingly;  the model makes provision each year for receipt of a r eturn on working capital in line with normal regulatory practice as part of the revenues received by the Entity;  cash flows are projected utilising the building blocks methodology recommended by the QCA, to the Price Regulator, for both drought related and non-drought related assets and applied to the RAB. The prices used to determine revenues are based on a rate of return that is set by the QCA and modelling assumptions include different future price paths for drought and non -drought assets (refer to QCA website – www.qca.org.au). Cash inflows are nominal cash flows incorporating inflation of 2.5% per annum;  cash inflows incorporate net revenue generated from regulated revenue as well as other revenue sources including hydro electric power generating revenue. These other revenue sources relate directly to the CGU bas ed on management’s best estimate of future cash flow having regard to historical performance and contractual cash flows as well as expectations about possible variations in the amount and timing of those future cash flows;  cash flow forecasts are estimated for a period of 40 years using the building block approach, and then extrapolated in perpetuity utilising the Gordon’s Growth Model;  the pricing mechanism is based on the RAB which assumes a remaining useful life for depreciation purposes of 60 years for the initial tranche of a ssets and specific depreciation periods relating to drought assets, all transferred assets from local governments and state entities and ongoing capital expenditure post 1 July 2008; and  expenditure necessary to maintain or sustain the performance of the assets has been taken into account when estimating the net future cash flows as it is deemed maintenance in nature. The values assigned to the key assumptions represent the Entity’s assessment of future trends in the water industry and are based on both external sources and internal sources (historical data).

32

76 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

20. Impairment testing for cash generating unit 20. Impairment testing for cash generating unit (continued) The carrying amount of assets, including intangibles (refer Notes 18 and 19), allocated to the CGU are Inherent uncertainty set out below: The above estimates are particularly sensitive to changes in the prices by set by the Price Regulator on water assets. The bulk of the Entity’s revenues are determined annually by the Price Regulator under the Note Carrying amount Recoverable provisions of the Market Rules. The current methodology includes provision to: Entity of assets amount Surplus  retain the treatment of capital returns via a WACC ra te for non-drought assets and a cost of debt $000 $000 $000 return for drought assets; CGU 2,906,159 3,293,636 387,477  set a maximum allowable revenue for operating expenditure, including overheads, non-variable Total 18,19 2,906,159 3,293,636 387,477 water treatment costs and allowable costs;  recover budgeted variable operating costs on a $ per ML basis, reflecting plant production costs for The Board has adopted the following methodology, key assumptions and approach to determine the chemicals and electricity; and recoverable amount for the purpose of impairment testing:  include capital expenditure into the RAB.  the Entity has a single CGU for the purposes of impairment testing because it receives the majority of Budget forecasts have been used as the basis for the modelling of cash flows for impairment testing its revenue from one customer – the WGM; purposes as they are the most reasonable assumptions available at this time.  the recoverable amount of the CGU was estimated based on the v alue in use and was determined It is anticipated that the Grid Service Charge methodology applying from 1 July 2011 will be applicable with the assistance of independent experts; the discount rate has been calculated by an independent until 30 June 2013. Responsibility for recommending charges for the forthcoming two years (2011-12 and expert using the WACC and CAPM framework. The Board has adopted a target gearing level of 70% 2012-13) rests with the QCA. consistent with advice from an i ndependent expert with the assumption that surplus cash will be The QCA has been instructed to recommend a new regulatory regime to apply to Grid Service Providers. applied to debt repayment in the first instance and dividends thereafter, in accordance with the Board The long term economic regulatory framework is likely to commence from 1 July 2013, and may provide adopted Cash Management Policy; incentives appropriate for commercially operated, mature regulated entities. Therefore, there is significant  the WACC provided by the QCA on non-drought assets for 2011-12 assumes interest rate uncertainty with what form the pricing mechanism may take post 30 June 2013. immunisation. This impacts both the earning rate and the impairment rate on non-drought assets because of reduced risk. As the Entity enters into a more normal regulatory environment in the future, it is expected that the interest rate immunisation would cease. This movement from an immunised to 2011 2010 a non-immunised position is assumed to occur from 2012-13 with the earnings rate adjusted $000 $000 accordingly; 21. Trade and other receivables  the model makes provision each year for receipt of a r eturn on working capital in line with normal Current regulatory practice as part of the revenues received by the Entity; Trade debtors 789 1,548  cash flows are projected utilising the building blocks methodology recommended by the QCA, to the Less: Provision for impairment (49) (40) Price Regulator, for both drought related and non-drought related assets and applied to the RAB. The prices used to determine revenues are based on a rate of return that is set by the QCA and modelling 740 1,508 assumptions include different future price paths for drought and non -drought assets (refer to QCA website – www.qca.org.au). Cash inflows are nominal cash flows incorporating inflation of 2.5% per Other receivables - WGM 38,420 29,019 annum; Other receivables - other 392 885  cash inflows incorporate net revenue generated from regulated revenue as well as other revenue 38,812 29,904 sources including hydro electric power generating revenue. These other revenue sources relate Total 39,552 31,412 directly to the CGU bas ed on management’s best estimate of future cash flow having regard to historical performance and contractual cash flows as well as expectations about possible variations in the amount and timing of those future cash flows;  cash flow forecasts are estimated for a period of 40 years using the building block approach, and then extrapolated in perpetuity utilising the Gordon’s Growth Model;  the pricing mechanism is based on the RAB which assumes a remaining useful life for depreciation purposes of 60 years for the initial tranche of a ssets and specific depreciation periods relating to drought assets, all transferred assets from local governments and state entities and ongoing capital expenditure post 1 July 2008; and  expenditure necessary to maintain or sustain the performance of the assets has been taken into account when estimating the net future cash flows as it is deemed maintenance in nature. The values assigned to the key assumptions represent the Entity’s assessment of future trends in the water industry and are based on both external sources and internal sources (historical data).

32 33

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 77 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

2011 2010 $000 $000 22. Inventories Chemicals 1,185 1,183 Other 1,132 1,190 Total 2,317 2,373

23. Other current assets Deposit paid 11,166 11,166 Prepayments 1,421 1,048 Total 12,587 12,214

24. Tax assets and liabilities (a) Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: 2011 Assets Liabilities Net $000 $000 $000 Property, plant and equipment - (222,209) (222,209) Borrowings - (566) (566) Provision for employee benefits 2,690 - 2,690 Superannuation 5 - 5 Tax losses 10,091 - 10,091 Lake Baroon funding 293 - 293 Accrued expenses 368 - 368 Other items 66 - 66 Total tax assets (liabilities) 13,513 (222,775) (209,262)

2010 Assets Liabilities Net $000 $000 $000 Property, plant and equipment - (205,638) (205,638) Borrowings - (678) (678) Provision for employee benefits 2,065 - 2,065 Superannuation 5 - 5 Tax losses 9,993 - 9,993 Lake Baroon funding 320 - 320 Accrued expenses 297 - 297 Other items 87 - 87 Total tax assets (liabilities) 12,767 (206,316) (193,549)

34

78 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

24. Tax assets and liabilities (continued) 2011 2010 (b) Movement in temporary differences during the year $000 $000 Recognised 22. Inventories in profit or Acquired 2010 loss in equity 2011 Chemicals 1,185 1,183 $000 $000 $000 $000 Other 1,132 1,190 Property, plant and equipment (205,638) (4,739) (11,832) (222,209) Total 2,317 2,373 Borrowings (678) 112 - (566) Provision for employee benefits 2,065 625 - 2,690 23. Other current assets Superannuation 5 - - 5 Deposit paid 11,166 11,166 Tax losses 9,993 98 - 10,091 Prepayments 1,421 1,048 Lake Baroon funding 320 (27) - 293 Total 12,587 12,214 Accrued expenses 297 71 - 368 Other items 87 (21) - 66 24. Tax assets and liabilities Total (193,549) (3,881) (11,832) (209,262) (a) Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Recognised in profit or Acquired 2011 Assets Liabilities Net 2009 loss in equity 2010

$000 $000 $000 $000 $000 $000 $000 Property, plant and equipment - (222,209) (222,209) Property, plant and equipment (134,583) (8,970) (62,085) (205,638) Borrowings - (566) (566) Borrowings (791) 113 - (678) Provision for employee benefits 2,690 - 2,690 Provision for employee benefits 1,161 904 - 2,065 Superannuation 5 - 5 Superannuation 10 (5) - 5 Tax losses 10,091 - 10,091 Tax losses 2,630 7,363 - 9,993 Lake Baroon funding 293 - 293 Lake Baroon funding 350 (30) - 320 Accrued expenses 368 - 368 Accrued expenses 266 31 - 297 Other items 66 - 66 Other items 177 (90) - 87 Total tax assets (liabilities) 13,513 (222,775) (209,262) Total (130,780) (684) (62,085) (193,549)

2010 Assets Liabilities Net $000 $000 $000 Property, plant and equipment - (205,638) (205,638) Borrowings - (678) (678) Provision for employee benefits 2,065 - 2,065 Superannuation 5 - 5 Tax losses 9,993 - 9,993 Lake Baroon funding 320 - 320 Accrued expenses 297 - 297 Other items 87 - 87 Total tax assets (liabilities) 12,767 (206,316) (193,549)

34 35

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 79 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

2011 2010 $000 $000 25. Cash and cash equivalents

(a) Cash and cash equivalents Cash on hand 3 4 Bank balances 546 1,230 Short term deposits with QTC 69,014 99,469 Cash and cash equivalents in the Statement of Cash Flows 69,563 100,703

(b) Reconciliation of cash flows from operating activities Cash flows from operating activities Profit /(Loss) for the year 10,058 (6,308) Adjustments for: Depreciation 42,247 39,787 Amortisation of intangible assets 1,273 958 Loss on sale of property, plant and equipment 1,644 153 Income tax expense 3,881 684 Revaluation decrement - 7,580 Doubtful debts expenses 9 (5) Change in assets and liabilities Change in trade and other receivables (8,149) (7,595) Change in inventories 56 (592) Change in GST input tax credits receivable (183) 2,116 Change in repayment (373) (135) Change in trade and other payables 4,760 6,361 Change in provisions and employee benefits 2,003 1,519 Change in unearned revenue 23,963 (18,751) Change in interest payable (2,252) (4,913) Change in GST payable 418 44 Net cash from operating activities 79,355 20,903

(c) Funding facilities Drawn 118,541 141,620 Unused 5,080 47,580 Total Facility 123,621 189,200

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

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

36

80 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

2011 2010 2011 2010 $000 $000 $000 $000 25. Cash and cash equivalents 26. Interest bearing liabilities Current (a) Cash and cash equivalents QTC - Loans interest payable 30,193 32,840 Cash on hand 3 4 QTC - Redraw facility fees 47 26 Bank balances 546 1,230 QTC - Market valuation at acquisition (376) (375) Short term deposits with QTC 69,014 99,469 Total 29,864 32,491 Cash and cash equivalents in the Statement of Cash Flows 69,563 100,703 Non current (b) Reconciliation of cash flows from operating activities QTC - Loans 2,544,327 2,425,786 Cash flows from operating activities QTC - Redraw Facility (429,752) (206,068) Profit /(Loss) for the year 10,058 (6,308) QTC - Market valuation at acquisition (1,510) (1,886) Adjustments for: Total 2,113,065 2,217,832 Depreciation 42,247 39,787

Amortisation of intangible assets 1,273 958 The amount in the Redraw Facility offsets the Entity’s debt balance and is available for use by the Entity Loss on sale of property, plant and equipment 1,644 153 at short notice (refer to Note 3(b)). Income tax expense 3,881 684 No assets have been pledged as security for any liabilities. Revaluation decrement - 7,580 All borrowings are in Australian dollar denominated amounts and carried at amortised cost, interest being Doubtful debts expenses 9 (5) expensed as it accrues, except for assets under construction. The amount of $23,047,839 has been Change in assets and liabilities capitalised during current year (2010: $17,330,007). There have been no defaults or breaches of the loan Change in trade and other receivables (8,149) (7,595) agreement during the year. Change in inventories 56 (592) Balances of outstanding loans were as follows: Change in GST input tax credits receivable (183) 2,116 Carrying amount Fair Value Change in repayment (373) (135) $000 $000 Change in trade and other payables 4,760 6,361 QTC – Water Infrastructure Debt Pool 199,012 203,803 Change in provisions and employee benefits 2,003 1,519 QTC – CSP Post 1 July 08 Debt Pool 718,413 781,393 Change in unearned revenue 23,963 (18,751) QTC – CSP Pre 1 July 08 Debt Pool 539,071 567,939 Change in interest payable (2,252) (4,913) QTC – BCC Aquifier Debt Pool 54,665 56,706 Change in GST payable 418 44 QTC – Caboolture Aquifier Debt Pool 43,967 45,048 Net cash from operating activities 79,355 20,903 QTC – Cedar Grove / Bromelton Debt Pool 73,377 77,327 QTC – Hinze Dam Debt Pool 420,748 430,575 (c) Funding facilities QTC – Esk Pipeline Off-Stream Storage Debt Pool 6,636 6,938 Drawn 118,541 141,620 QTC – Coominya Pipeline Off-Stream Storage Debt Pool 6,709 7,012 Unused 5,080 47,580 QTC – Enoggera WTP Upgrade Debt Pool 11,996 12,403 Total Facility 123,621 189,200 QTC – Fluoridation Stage 2 Debt Pool 13,663 13,953

The State Borrowing Program funding application is submitted annually by the Entity and is approved by QTC – Wyaralong Dam Debt Pool 9,982 10,153 the Queensland Government. The majority of this funding is for the upgrade of Hinze Dam and the facility QTC – EMA Debt Pool 46,529 48,119 is maintained by QTC. Total 2,144,768 2,261,369 Note (d) Credit standby arrangement Loans interest payable 30,193 Drawn - - Loans principal 2,544,327 Unused 60,000 60,000 Redraw Facility (429,752) Total Facility 60,000 60,000 Total 5 2,144,768

36 37

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 81 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

26 Interest bearing liabilities (continued) The Weighted Average Borrowing Rate for Q TC borrowings as at 30 June 2011 is 7.45%. Interest payments are made quarterly in arrears at rates ranging from 6.07% to 8.24%. The fair value of the borrowings as at 30 June 2011 was determined by QTC to be $2,261,369,215 (2010: $2,384,301,324). The fair value is calculated using discounted cash flow analysis and the effective interest rate. No fair value adjustment was made to the carrying amount of the borrowings during the year (2010: $0).

2011 2010 $000 $000 27. Employee benefits Current Salaries and wages accrued 1,946 1,414 Liability for long service leave 322 274 Liability for annual leave 3,043 2,468 Total 5,311 4,156 Non current Liability for long service leave 5,890 5,249 Liability for annual leave 1,640 1,433 Total 7,530 6,682 Refer to N ote 11 for details of the amount o f superannuation contribution paid by t he Entity to th e superannuation funds in respect of this year for the benefit of the employees.

Local government superannuation scheme – LG Super The Entity contributes to LG Super for its employees. LG Super is a Multi-employer Plan as defined in the Australian Accounting Standard AASB 119 Employee Benefits. The Queensland Local Government Superannuation Board, the trustee of LG Su per, advised that LG Super was a complying superannuation scheme for the purpose of the Commonwealth Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). LG Super has two elements referred to as the DBF and the ABF. Th e ABF is a defined contribution scheme as defined i n AASB 119. The E ntity has no liability to or interest in the ABF other than the payment of the statutory contributions as required by the SIS Regulations. The DBF is a defined benefit plan as defined in AASB 119. The Entity is not able to account for the DBF as a defined benefit plan in accordance with AASB 119 because LG Super is unable to account to the Entity for its proportionate share of the defined benefits obligation plan assets and costs. Any amount by which either fund is over or under funded would only affect future benefits and contributions to the DBF, and is not an asset or liability of the Entity. Accordingly there is no recognition in the financial statements of any over or under funding of LG Super. The audited general purpose financial report of LG Super as at 30 June 2010 (the most recent available) which was not subject to any audit qualification, indicates that the assets of LG S uper are sufficient to meet the vested benefits.

38

82 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

26 Interest bearing liabilities (continued) 27. Employee benefits (continued) The Weighted Average Borrowing Rate for Q TC borrowings as at 30 June 2011 is 7.45%. Interest Local government superannuation scheme – LG Super (continued) payments are made quarterly in arrears at rates ranging from 6.07% to 8.24%. The most recent actuarial assessment of LG Super was undertaken as at 1 July 2009. The actuary The fair value of the borrowings as at 30 June 2011 was determined by QTC to be $2,261,369,215 (2010: indicated that “the DBF is in a very modest Financial Position with regard to the net asset coverage of $2,384,301,324). The fair value is calculated using discounted cash flow analysis and the effective vested liabilities. Investment returns will be volatile under the required investment strategy, particularly interest rate. over short periods. The DBF therefore needs sufficient reserves to be able to withstand a reasonable No fair value adjustment was made to the carrying amount of the borrowings during the year (2010: $0). range of such influences. Because the DBF is now running down and cash flows are negative, the VBI (vested benefit index) should not be allowed whenever possible to retreat below 100%. Once below

100%, benefits drawn reduce the available assets for remaining members and hence the net asset 2011 2010 coverage of vested benefits declines further. In order to withstand a one in ten “low return” outcome, the $000 $000 DBF would need reserves of the order of 8% to 10% having regard to the investment strategy adopted. Given the current position of the DBF, such reserve can essentially only eventuate from either excess 27. Employee benefits investment returns over salary increase or additional employer contributions.” Current The trustee of LG Super has advised in a letter dated 5 March 2010 that no additional contributions will Salaries and wages accrued 1,946 1,414 be required at the current time, in accordance with the advice of the actuary. No fu rther written advice Liability for long service leave 322 274 has been received. Liability for annual leave 3,043 2,468 The next actuarial investigation will be made as at 1 July 2012. Total 5,311 4,156 Non current Brisbane City Council Superannuation Plan - City Super Liability for long service leave 5,890 5,249 The Entity h as four (2010: five) defined benefit (Part A) members in th e Brisbane City Coun cil Liability for annual leave 1,640 1,433 Superannuation Plan (City Super). Part B members participate in the accumulation superannuation fund. Total 7,530 6,682 City Super has been declared “Technically Insolvent” which means that assets were lower than Minimum Refer to N ote 11 for details of the amount o f superannuation contribution paid by t he Entity to th e Requisite Benefits (MRB) as described in the SIS Regulations as at 2 1 November 2008. A Special superannuation funds in respect of this year for the benefit of the employees. Funding and Solvency Certificate has been issued by the Trustee of the fund. The Special Funding and Solvency Certificate required the Entity to make additional employer

contributions of $10,000 per month for 3 years from 1 March 2009 to 28 February 2012 and 1% extra of Local government superannuation scheme – LG Super members’ salary from 1 January 2009. The Entity contributes to LG Super for its employees. LG Super is a Multi-employer Plan as defined in the Since the start of the 2010-11 financial year, Part A’s assets have earned 8.9% over the ten months to 30 Australian Accounting Standard AASB 119 Employee Benefits. April and top-up contributions have totalled $5.9 million (gross of tax), thus reducing the vested benefit The Queensland Local Government Superannuation Board, the trustee of LG Su per, advised that LG shortfall by $8.4 million and creating a surplus position of approximately $2.7 million (gross of tax) as at Super was a complying superannuation scheme for the purpose of the Commonwealth Superannuation 30 April 2011. From the “technically solvent” financial perspective, the MRB surplus was approximately Industry (Supervision) Regulations 1994 (SIS Regulations). $11.4 million as at 30 April 2011. LG Super has two elements referred to as the DBF and the ABF. Th e ABF is a defined contribution The Trustee of the fund issued the Statement of Advice: Funding and Solvency Certificate that was scheme as defined i n AASB 119. The E ntity has no liability to or interest in the ABF other than the effective as at 30 June 2011. This Certificate certified that, at the effective date of the Certificate, the Plan payment of the statutory contributions as required by the SIS Regulations. was “solvent” (as defined in the SIS Regulations). The DBF is a defined benefit plan as defined in AASB 119. The Entity is not able to account for the DBF The current employer contribution requirements are as follows: as a defined benefit plan in accordance with AASB 119 because LG Super is unable to account to the 1. In respect of Part A members: Entity for its proportionate share of the defined benefits obligation plan assets and costs.  14% of members’ salaries; plus Any amount by which either fund is over or under funded would only affect future benefits and  contributions to the DBF, and is not an asset or liability of the Entity. Accordingly there is no recognition in $5,000 per month from 1 June 2011 – 28 February 2012; and the financial statements of any over or under funding of LG Super.  5.88% of salaries for those part A members in respect of whom the employers pay the The audited general purpose financial report of LG Super as at 30 June 2010 (the most recent available) member’s 5% contribution by way of salary sacrifice. which was not subject to any audit qualification, indicates that the assets of LG S uper are sufficient to 2. In respect of Part B members: meet the vested benefits.  14% of members’ salaries for permanent employees; and  9% of salaries for casual employees. The following sets out details in respect of the defined benefit section only. The Actuary of City Super on behalf of the Entity prepared this report based on a n approach to pro-rata the tota l plan assets to the vested benefits of the Entity.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 83 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

27. Employee benefits (continued) Brisbane City Council Superannuation Plan - City Super (continued) 2011 2010 $000 $000 (a) Reconciliation of the present value of the defined benefit obligation Present value of defined benefits obligations at beginning of the year 1,602 1,520 Current service cost 41 37 Interest cost 78 66 Contributions by plan participants 17 16 Actuarial losses 6 160 Benefits paid - (172) Taxes and premiums paid (26) (25) Present value of defined benefit obligations at end of the year 1,718 1,602 (b) Reconciliation of the fair value of plan assets Fair value of plan assets at beginning of the year 1,361 1,232 Expected return on plan assets 95 77 Actuarial gains/(losses) 54 77 Employer contributions 158 156 Contributions by plan participants 17 16 Benefits paid - (172) Taxes and premiums paid (26) (25) Fair value of plan assets at end of the year 1,659 1,361 (c) Reconciliation of the assets and liabilities recognised in the Statement of Financial Position Defined benefit obligation (includes contributions tax provision) 1,718 1,602 Fair value of plan assets (1,659) (1,361) Net superannuation liability 59 241 (d) Expense recognised in Statement of Comprehensive Income Service cost 41 37 Interest cost 78 66 Expected return on assets (95) (77) Actuarial losses/(gains) (48) 83 Superannuation expense/(income) (24) 109 (e) Plan assets The percentage invested in each asset class at the reporting date: Australian equity 33% 33% International equity 23% 23% Fixed income 11% 16% Property 16% 16% Alternatives/Other 12% 12% Cash 5% 0%

40

84 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

27. Employee benefits (continued) 27. Employee benefits (continued) Brisbane City Council Superannuation Plan - City Super (continued) Brisbane City Council Superannuation Plan - City Super (continued) 2011 2010 (f) Fair value of plan assets $000 $000 The fair value of plan assets excludes amounts relating to any of the Entity’s own financial instruments (a) Reconciliation of the present value of the defined benefit obligation or any property occupied by, or other assets used by the Entity. Present value of defined benefits obligations at beginning (g) Expected rate of return on plan assets of the year 1,602 1,520 The expected return on assets assumption is determined by weighting the expected long-term return for Current service cost 41 37 each asset class by the target allocation of assets to each asset class and allowing for the correlations Interest cost 78 66 of the investment returns between asset classes. The returns used for each class are net of investment Contributions by plan participants 17 16 tax and investment fees. An allowance for asset-based administration expenses has also been deducted from the expected return. Actuarial losses 6 160

Benefits paid - (172) 2011 2010

Taxes and premiums paid (26) (25) $000 $000 Present value of defined benefit obligations at end of (h) Actual return on plan assets the year 1,718 1,602 Actual return on plan assets 149 154 (b) Reconciliation of the fair value of plan assets (i) Principal actuarial assumptions at the reporting date Fair value of plan assets at beginning of the year 1,361 1,232 Discount rate 4.9% 5.2% Expected return on plan assets 95 77 Expected rate of return on plan assets 6.8% 6.9% Actuarial gains/(losses) 54 77 Expected salary increase rate 4.0% 4.0% Employer contributions 158 156 (j) Historical Information Contributions by plan participants 17 16 Present value of defined benefit obligation Benefits paid - (172) 1,718 1,602 Taxes and premiums paid (26) (25) Fair value of plan assets 1,659 1,361 Fair value of plan assets at end of the year 1,659 1,361 Deficit in plan 59 241 Experience adjustments (gains) – plan assets (54) (77) (c) Reconciliation of the assets and liabilities recognised in the Statement of Financial Position Experience adjustments (gains)/losses – plan liabilities (22) 180 Defined benefit obligation (includes contributions tax Other adjustments (gain)/loss on – change in provision) 1,718 1,602 assumptions 28 (20) Fair value of plan assets (1,659) (1,361) (k) Expected contributions Net superannuation liability 59 241 Expected employer contributions for 2011-12 are $116,000. (d) Expense recognised in Statement of Comprehensive Income

Service cost 41 37 28. Trade and other payables Interest cost 78 66 Expected return on assets (95) (77) Current Actuarial losses/(gains) (48) 83 Trade and other payables 29,103 31,710 Superannuation expense/(income) (24) 109 GST receivable (2,054) (1,871) (e) Plan assets GST payable 3,071 2,653 The percentage invested in each asset class at the reporting date: 1,017 782 Australian equity 33% 33% Total 30,120 32,492 International equity 23% 23%

Fixed income 11% 16% Non current Property 16% 16% Other payables 816 908 Alternatives/Other 12% 12% Total 816 908 Cash 5% 0%

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 85 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

2011 2010 $000 $000 29. Other current liabilities Unearned revenue - WGM 23,920 - Unearned revenue - other 171 129 Security deposits 21 21 Other payables 103 118 Total 24,215 268

30. Asset revaluation surplus by class Water treatment Dams and plants and other 2011 Land Building weirs infrastructure Total $000 $000 $000 $000 $000 Balance at 1 July 2010 61,116 1,397 129,941 82,025 274,479 Transfer between classes - - - - - Revaluation increments - - - - - Goodwill transfer - - - - - Asset revaluation on disposal - - - - - Deferred tax liabilities - - (11,832) - (11,832) Balance at 30 June 2011 61,116 1,397 118,109 82,025 262,647

Water treatment Dams and plants and other 2010 Land Building weirs infrastructure Total $000 $000 $000 $000 $000 Balance at 1 July 2009 61,134 12,707 (14,941) 70,715 129,615 Transfer between classes - (11,310) - 11,310 - Revaluation increments - - 246,415 - 246,415 Goodwill transfer - - (39,440) - (39,440) Asset revaluation on disposal (26) - - - (26) Deferred tax liabilities 8 - (62,093) - (62,085) Balance at 30 June 2010 61,116 1,397 129,941 82,025 274,479

42

86 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

31. Financial instruments 2011 2010 (a) Categorisation of financial instruments $000 $000 The Entity has the following categories of financial assets and financial liabilities: 29. Other current liabilities 2011 2010 Unearned revenue - WGM 23,920 - Category Note $000 $000 Unearned revenue - other 171 129 Financial assets Security deposits 21 21 Cash and cash equivalents 25 69,563 100,703 Other payables 103 118 Receivables 21 39,552 31,412 Total 24,215 268 Total 109,115 132,115

Financial liabilities 30. Asset revaluation surplus by class Payables 28 30,936 33,400 Water treatment Other financial liabilities – QTC Dams and plants and other 26 2,144,768 2,252,558 bi 2011 Land Building weirs infrastructure Total Total 2,175,704 2,285,958

$000 $000 $000 $000 $000 (b) Credit risk exposure Balance at 1 July 2010 61,116 1,397 129,941 82,025 274,479 The maximum exposure to credit risk at balance date in relation to each class of recognised financial Transfer between classes - - - - - asset is the gross carrying amount of t hose assets inclusive of any provisions for imp airment. The Revaluation increments - - - - - following table represents the Entity’s maximum exposure to credit risk based on contractual amounts Goodwill transfer - - - - - net of any allowances: Asset revaluation on Maximum exposure to credit risk disposal - - - - - Category Deferred tax liabilities - - (11,832) - (11,832) Cash and cash equivalents 25 69,563 100,703 Balance at 30 June 2011 61,116 1,397 118,109 82,025 262,647 Receivables 21 39,552 31,412 Total 109,115 132,115 Water treatment Dams and plants and other 2010 Land Building weirs infrastructure Total No collateral is held as security and no credit enhancements relate to financial assets held by the Entity. $000 $000 $000 $000 $000 No financial assets and financial liabilities have been offset in the Statement of Financial Position. Balance at 1 July 2009 61,134 12,707 (14,941) 70,715 129,615 The method of calculating any provisional impairment for risk is based on past experience. Transfer between classes - (11,310) - 11,310 - The recognised impairment provision for receivables is $48,566 for the current year (2010: $39,771). Revaluation increments - - 246,415 - 246,415 No financial assets have had their terms renegotiated so as to prevent them from being past due or Goodwill transfer - - (39,440) - (39,440) impaired, and are stated at the carrying amount as indicated. Asset revaluation on Ageing past due, but no t impaired, as well as impaired financial assets are disclosed in the following disposal (26) - - - (26) tables: Deferred tax liabilities 8 - (62,093) - (62,085) 2011 2010 Balance at 30 June 2010 61,116 1,397 129,941 82,025 274,479 Gross Impairment Gross Impairment Receivables $000 $000 $000 $000 Not past due 39,240 - 31,190 - Past due 31- 60 days 138 - 87 - Past due 61- 90 days 43 - 21 - More than 90 days 180 49 154 40 Total 39,601 49 31,452 40

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 87 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

31. Financial instruments (continued) (c) Liquidity risk The Entity is exposed to liquidity risk in respect of its payables and borrowings from QTC. The following tables set out the liquidity risk of financial liabilities held by the Entity. It represents the contractual maturity of financial liabilities, calculated based on cash flows relating to the repayment of the principal amount outstanding at balance date. 2011 Payable in Total Financial liabilities <1 year 1-5 years >5 years $000 $000 $000 $000 QTC borrowings - loans 133,632 533,421 2,300,093 2,967,146 Trade and other payables 30,120 740 76 30,936 Total 163,752 534,161 2,300,169 2,998,082

2010 Payable in Total Financial liabilities <1 year 1-5 years >5 years $000 $000 $000 $000 QTC borrowings - loans 153,092 612,792 2,329,210 3,095,094 Trade and other payables 32,492 722 186 33,400 Total 185,584 613,514 2,329,396 3,128,494

(d) Market risk The Entity does not trade in foreign currency and is not materially exposed to commodity price ranges. The Entity is exposed to interest rate risk through borrowings and investment with QTC an d cash deposited in interest bearing accounts. Sensitivity analysis The following sensitivity analysis depicts the outcome to profit and loss if interest rates change by +/- 1% from the year-end rates applicable to the Entity’s financial assets and liabilities. The calculations assume that the rate would be held constant over the next financial year, with the change occurring at the beginning of that year. This is mainly attributable to the Entity’s exposure to variable interest rates on its borrowings from QTC.

2011 - 1% + 1% Net carrying amounts Profit Equity Profit Equity $000 $000 $000 $000 $000 Cash and cash equivalents 69,563 (696) (696) 696 696 QTC borrowings - loans 2,144,768 1,635 1,635 (1,635) (1,635) Overall effect on profit and equity 939 939 (939) (939)

2010 - 1% + 1% Net carrying amounts Profit Equity Profit Equity $000 $000 $000 $000 $000 Cash and cash equivalents 100,703 (1,007) (1,007) 1,007 1,007 QTC borrowings - loans 2,252,558 1,692 1,692 (1,692) (1,692) Overall effect on profit and equity 685 685 (685) (685)

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88 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

31. Financial instruments (continued) 31. Financial instruments (continued) (c) Liquidity risk (e) Fair value The Entity is exposed to liquidity risk in respect of its payables and borrowings from QTC. The recognised fair values of financial assets and liabilities are classified according to the following fair The following tables set out the liquidity risk of financial liabilities held by the Entity. It represents the value hierarchy that reflects the significance of the inputs used in making these measurements: contractual maturity of financial liabilities, calculated based on cash flows relating to the repayment of Level 1 - fair values that reflect unadjusted quoted prices in active markets for identical assets/liabilities; the principal amount outstanding at balance date. Level 2 - fa ir values that are b ased on inputs that are directly or indirectly observable for th e 2011 Payable in Total asset/liabilities (other than unadjusted quoted prices); and Financial liabilities <1 year 1-5 years >5 years Level 3 - fair values that are derived from data not observable in a market. $000 $000 $000 $000 According to the above hierarchy, the fair values of each class of asset/liabilities recognised at fair value QTC borrowings - loans 133,632 533,421 2,300,093 2,967,146 are as follows: Trade and other Class Classification according to fair value hierarchy 2011 Total payables 30,120 740 76 30,936 Level 1 Level 2 Level 3 carrying amount Total 163,752 534,161 2,300,169 2,998,082 $000 $000 $000 $000

Financial assets 2010 Payable in Total Cash and cash equivalents 69,563 - - 69,563 Financial liabilities <1 year 1-5 years >5 years Receivables 39,552 - - 39,552 $000 $000 $000 $000 Total 109,115 - - 109,115 QTC borrowings - loans 153,092 612,792 2,329,210 3,095,094

Trade and other payables 32,492 722 186 33,400 Financial liabilities Total 185,584 613,514 2,329,396 3,128,494 Payables 30,936 - - 30,936 QTC borrowings 2,261,369 - - 2,261,369 (d) Market risk Total 2,292,305 - - 2,292,305 The Entity does not trade in foreign currency and is not materially exposed to commodity price ranges. The Entity is exposed to interest rate risk through borrowings and investment with QTC an d cash The carrying amounts of all financial assets and financial liabilities, except the borrowings from the QTC deposited in interest bearing accounts. are representative of their fair value. The fair value of the QTC borrowings, calculated using discounted Sensitivity analysis cash flow analysis and the effective interest rate, is disclosed below: The following sensitivity analysis depicts the outcome to profit and loss if interest rates change by +/- 2011 Notes Carrying amount Fair value 1% from the year-end rates applicable to the Entity’s financial assets and liabilities. The calculations $000 $000 assume that the rate would be held constant over the next financial year, with the change occurring at QTC borrowings - loans 2,144,768 2,261,369 the beginning of that year. This is mainly attributable to the Entity’s exposure to variable interest rates QTC borrowings - working capital facility - - on its borrowings from QTC. Total 5,26 2,144,768 2,261,369

2011 - 1% + 1% Net carrying 2010 Carrying amount Fair value amounts Profit Equity Profit Equity $000 $000 $000 $000 $000 $000 $000 QTC borrowings - loans 2,252,558 2,384,301 Cash and cash equivalents 69,563 (696) (696) 696 696 QTC borrowings - working capital facility - - QTC borrowings - loans 2,144,768 1,635 1,635 (1,635) (1,635) Total 2,252,558 2,384,301 Overall effect on profit and equity 939 939 (939) (939)

2010 - 1% + 1% Net carrying amounts Profit Equity Profit Equity $000 $000 $000 $000 $000 Cash and cash equivalents 100,703 (1,007) (1,007) 1,007 1,007 QTC borrowings - loans 2,252,558 1,692 1,692 (1,692) (1,692) Overall effect on profit and equity 685 685 (685) (685)

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 89 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

2011 2010 $000 $000 32. Operating leases (a) Leases as lessee Non-cancellable operating lease rentals are payable as follows: Less than one year 290 236 Between one and five years 1,183 473 More than five years 3,602 1 Total 5,075 710 (b) Leases as lessor Non-cancellable operating lease rentals are receivable as follows: Less than one year 919 770 Between one and five years 1,881 2,051 More than five years 1,137 1,270 Total 3,937 4,091

33. Capital and other commitments Contracted but not yet provided for and payable: Within one year 52,640 124,893 One year and no later than five years 38,133 112,676 More than five years - - Total 90,773 237,569

34. Contingencies Under the Queensland Government Transfer Notice dated 27 February 2008, the specified net assets of AquaGen (including the Stage 2 Trunk Main Project Construction Contract) were transferred to the Entity. A claim was made by a Contractor (now in liq uidation), in relation to the Stage 2 Trunk Main Project Construction Contract and, in an adjudication process, an adjudication decision was made against the Entity for a sum in excess of $11 million. On 11 July 2008, the contractor entered judgement against the Entity for the amount of the adjudication decision. On 18 March 2009, the Entity made payment to the Court (as advised by its legal representative) of the amount $11,165,820.61. A determination as to which party is entitled to all or part of those monies has not yet been made. On 5 March 2010, the Entity commenced legal proceedings in the Supreme Court against the Contractor to bring for determination all issues associated with the Contractor’s claim. The amount paid to the Court remains in the possession of th e Court and will not be rele ased until it is decided in the proceedings which party is entitled to all or part of the monies. On 24 June 2011, the contractor submitted amended pleadings that now place the claim somewhere between $15.4 million and $22.2 mi llion. The Entity is the refore in the process of re questing further particulars in relation to this claim. For these reasons and as the proceedings will not be completed at the time of sign ing the financial statements, the Entity cannot reliably measure the quantum of liabilities in respect of the dispute and no liability has been recognised in the financial statements (refer to Note 23).

Costs were incurred by the Entity as a result of the January 2011 South East Queensland flood. Costs incurred to 30 June 2011 have been included in these financial statements. Further costs will be included in subsequent years for which no liability has been recognised in the financial statements.

46

90 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

34. Contingencies (continued) 2011 2010 The Entity’s insurance claim in response to the January 2011 South East Queensland flood, is in $000 $000 progress. The Entity is pursuing insurance for costs incurred to date and estimates for the restoration of 32. Operating leases asset damage due to the flood. The actual amount to be received from the underwriters is dependent on their review of the submitted claim and the ongoing completion of engineering assessments. No asset (a) Leases as lessee has been recognised in the financial statements. Non-cancellable operating lease rentals are payable as follows: 35. Segment reporting Less than one year 290 236 The Entity operates in the water supply industry in the south east area of Queensland. Between one and five years 1,183 473 More than five years 3,602 1 36. Controlled entities l Tota 5,075 710 Country of establishment Ownership (b) Leases as lessor Parent and ultimate controlling party /incorporation interest Non-cancellable operating lease rentals are receivable as follows: Entity Less than one year 919 770 Queensland Bulk Water Supply Authority Australia - Between one and five years 1,881 2,051 Subsidiary More than five years 1,137 1,270 South East Queensland Water Corporation Pty Total 3,937 4,091 Limited Australia 100%

The South East Queensland Water Corporation Pty Limited (SEQWater) ceased operations on 1 July 33. Capital and other commitments 2008. SEQWater converted to a proprietary company on 29 July 2010. Contracted but not yet provided for and payable: The Queensland Bulk Water Supply Authority is controlled by the Q ueensland Government which is the Within one year 52,640 124,893 ultimate parent (refer to Note 38). One year and no later than five years 38,133 112,676 More than five years - - 37. Key management personnel and remuneration Total 90,773 237,569 The following details for key management personnel include those positions that had authority and responsibility for planning, directing and controlling the activitie s of the Entity d uring 2010-11. Further 34. Contingencies information on these positions can be found in the body of the Annual Report under the section relating to Governance. Under the Queensland Government Transfer Notice dated 27 February 2008, the specified net assets of AquaGen (including the Stage 2 Trunk Main Project Construction Contract) were transferred to the Entity. (a) Board Members and remuneration A claim was made by a Contractor (now in liq uidation), in relation to the Stage 2 Trunk Main Project Board members’ fees include fees paid for membership of the Audit Committee and a Task Force. The Construction Contract and, in an adjudication process, an adjudication decision was made against the Board members who were paid, or were due to be paid directly or indirectly from the Entity were: Entity for a sum in excess of $11 million. On 11 July 2008, the contractor entered judgement against the 2011 2010 Entity for the amount of the adjudication decision. Salary and Superannuation Salary and Superannuation On 18 March 2009, the Entity made payment to the Court (as advised by its legal representative) of the Fees Contribution Fees Contribution amount $11,165,820.61. A determination as to which party is entitled to all or part of those monies has $$ $ $ not yet been made. Phil Hennessy 67,487 46,261 43,482 32,350 On 5 March 2010, the Entity commenced legal proceedings in the Supreme Court against the Contractor Tom Fenwick 54,801 4,932 55,901 5,031 to bring for determination all issues associated with the Contractor’s claim. The amount paid to the Court Leeanne Bond 53,712 4,834 54,937 4,944 remains in the possession of th e Court and will not be rele ased until it is decided in the proceedings which party is entitled to all or part of the monies. Leith Boully 58,546 - 35,201 1,851 Ian Fraser 52,623 4,736 54,575 4,912 On 24 June 2011, the contractor submitted amended pleadings that now place the claim somewhere between $15.4 million and $22.2 mi llion. The Entity is the refore in the process of re questing further Annabelle Chaplain - - 37,452 3,371 particulars in relation to this claim. Mary Boydell - - 1,416 271 For these reasons and as the proceedings will not be completed at the time of sign ing the financial Total 287,169 60,763 282,964 52,730 statements, the Entity cannot reliably measure the quantum of liabilities in respect of the dispute and no liability has been recognised in the financial statements (refer to Note 23).

Costs were incurred by the Entity as a result of the January 2011 South East Queensland flood. Costs incurred to 30 June 2011 have been included in these financial statements. Further costs will be included in subsequent years for which no liability has been recognised in the financial statements.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 91 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

37. Key management personnel and remuneration (continued) (b) Key executive management personnel and remuneration Date appointed to position (Date resigned form Position Responsibilities position) The Chief of Executive Officer is responsible for the Peter Borrows - Chief efficient, effective and economic administration of the Appointed 16 Executive Officer (CEO) Entity. November 2007 The EGM for Water Delivery is responsible for the management and operation of all dams and water treatment plant assets, infrastructure maintenance, Jim Pruss - EGM - land and water quality, water quality monitoring, as Appointed 16 Water Delivery well as catchment support services such as recreation. November 2007 The EGM for Asset Delivery is responsible for asset strategy and planning (both natural and built), infrastructure asset planning, the capital works Alex Fisher - EGM - program, managing major projects as well as research Appointed 01 Asset Delivery and development. February 2010 The EGM for Business Services is responsible for finance and procurement, information technology, Appointed 18 compliance and regulatory services, risk management, January 2010, Helen Moore - EGM - economic regulations and pricing, legal services, resigned 01 April Business Services property and facilities management. 2011 The EGM for Organisation Development is responsible for organisational and culture change, strategic relations and communications, employee relations, Bill Andrew - EGM - enterprise bargaining, organisational design, Organisation leadership development and team building functions as Appointed 25 May Development well as workplace health and safety. 2009

Remuneration policy for the Entity’s key executive management is set by the Responsible Ministers as provided for under the State Water Authorities - Governance Arrangements for Chief and S enior Executives. The remuneration and other terms of employment for th e key executive management personnel are specified in employment contracts. The contracts provide for the provision of performance- related cash bonuses and other benefits including car parking. For 2010-11, remuneration of key executive management personnel was increased in accordance with State Water Authorities - Governance Arrangements for Chief and Senior Executives.

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92 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

37. Key management personnel and remuneration (continued) 37. Key management personnel and remuneration (continued) (b) Key executive management personnel and remuneration (b) Key executive management personnel and remuneration (continued) Date appointed to Remuneration packages for key executive management personnel comprise the following components: position (Date  short term employee benefits which include: resigned form o Base - consisting of base salary, allowances and leave entitlements paid and provided for the Position Responsibilities position) entire year or for the part of the year during which the e mployee occupied the specified The Chief of Executive Officer is responsible for the position. Amounts disclosed equal the amount expensed in the Statement of Comprehensive Peter Borrows - Chief efficient, effective and economic administration of the Appointed 16 Income; and Executive Officer (CEO) Entity. November 2007 o Non-monetary benefits - c onsisting of provision of car parking with fringe benefits tax applicable to the benefit. The EGM for Water Delivery is responsible for the  long term employee benefits include long service leave accrued; management and operation of all dams and water treatment plant assets, infrastructure maintenance,  post employee benefits included superannuation contributions; Jim Pruss - EGM - land and water quality, water quality monitoring, as Appointed 16  redundancy payments are not provided for within individual contracts of employment. Contracts of Water Delivery well as catchment support services such as recreation. November 2007 employment provide only for notice periods or payment in lieu of notice on termination, regardless of the reason for termination. The EGM for Asset Delivery is responsible for asset strategy and planning (both natural and built), Total fixed remuneration is calculated on a ‘total cost’ basis and includes the base and non-monetary infrastructure asset planning, the capital works benefits, long term employee benefits, post employment benefits, redundancy payments and Alex Fisher - EGM - program, managing major projects as well as research Appointed 01 performance payments. Asset Delivery and development. February 2010 The EGM for Business Services is responsible for finance and procurement, information technology, Appointed 18 compliance and regulatory services, risk management, January 2010, Helen Moore - EGM - economic regulations and pricing, legal services, resigned 01 April Business Services property and facilities management. 2011 The EGM for Organisation Development is responsible for organisational and culture change, strategic relations and communications, employee relations, Bill Andrew - EGM - enterprise bargaining, organisational design, Organisation leadership development and team building functions as Appointed 25 May Development well as workplace health and safety. 2009

Remuneration policy for the Entity’s key executive management is set by the Responsible Ministers as provided for under the State Water Authorities - Governance Arrangements for Chief and S enior Executives. The remuneration and other terms of employment for th e key executive management personnel are specified in employment contracts. The contracts provide for the provision of performance- related cash bonuses and other benefits including car parking. For 2010-11, remuneration of key executive management personnel was increased in accordance with State Water Authorities - Governance Arrangements for Chief and Senior Executives.

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 93 94

2011 JUNE 30 ENDED YEAR THE FOR REPORT FINANCIAL Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

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

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

1 July 2009 – 30 June 2010 Short term Employee benefits Long term Post Non- Monetary employee employment Base benefits benefits benefits Termination benefits Total Remuneration Position $ $ $ $ $ $ P Borrows - CEO 394,804 - 9,841 35,147 - 439,792 J Pruss - EGM 282,656 3,056 7,728 39,047 - 332,487 A Fisher - EGM* 90,318 1,146 2,097 10,695 - 104,256 H Moore - EGM* 105,623 - 2,534 12,925 - 121,082 B Andrew - EGM 245,421 3,056 5,802 29,756 - 284,035 Total Remuneration 1,118,822 7,258 28,002 127,570 - 1,281,652 * Employee commenced part way through the financial year.

50 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

37. Key management personnel and remuneration (continued) (c) Performance payments Performance bonuses may be paid or payable annually depending upon satisfaction of key performance criteria. Performance payments of key executive management are capped at 15% o f total fixed remuneration. The amounts payable are tied to the achievement of pre-determined Entity and individual performance targets as approved by the Board. The calculation of the cash performance bonuses is as per the Entity’s Remuneration Policy. The payment of the performance bonuses for the 2010-11 and 2009-10 financial years is set out below:

Position Date paid Basis for Payment The bonus paid equated to 12.75% (12.00%:2010) as compared P Borrows - CEO 18 July 2011 to the maximum 15% of total fixed remuneration payable. The bonus paid equated to 12.00% (11.00%:2010) as compared J Pruss - EGM 18 July 2011 to the maximum 15% of total fixed remuneration payable. The bonus paid equated to 11.25% (10.00%:2010) as compared A Fisher – EGM* 18 July 2011 to the maximum 15% of total fixed remuneration payable. The bonus paid equated to 7.88% (11.00%:2010) compared to H Moore – EGM* 18 July 2011 the maximum 15% of total fixed remuneration payable. The bonus paid equated to 11.25% (11.00%:2010) as compared B Andrew - EGM 18 July 2011 to the maximum 15% of total fixed remuneration payable. * Employee commenced and/or concluded employment part way through the financial year.

The aggregate performance bonuses paid to all key executive management personnel are as follows: 2011 2010 $ $ Key Executive Management Personnel 178,810 138,419

(d) Loans to key management personnel None of the key management personnel have personal loans with the Entity outstanding as at 30 June 2011. (e) Other key management personnel transactions Key management personnel have not conducted transactions with the Entity during the year. John Orange was engaged as a consultant through Orange and Associates Pty Ltd to provide services in relation to the Executive General Manager - Business Services role and Merger Project Manager. Mr Orange is also a Board Member of Queensland Bulk Water Transport Authority (trading as LinkWater) and a Non-Executive Director of Southern Regional Water Pipeline Company Pty Ltd (trading as LinkWater Projects).

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 95 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

37. Key management personnel and remuneration (continued) (f) Board members’ transactions During the year, all Board Members were directors of the Entity’s subsidiary, SEQWater (refer to Note 36). Tom Fenwick is a Director of QWI. During the year, the Entity participated in the Wyaralong inter-agency working group with QWI and others, regarding the delivery of infrastructure associated with the construction of Wyaralong Dam a nd conducted due diligence ahead of the 1 July 2 011 transfer of the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 41). Phil Hennessy is a Member of the Senate of the University of Queensland and Leith Boully is an Adjunct Professor at the University of Queensland. During the year, the Entity was party to research arrangements with the University of Queensland. Leith Boully is Chair of Healthy Waterways Ltd. During the year, the Entity provided funding to Healthy Waterways Ltd pursuant to a Network Deed.

38. Related parties The Entity is controlled by the Queensland Government and as a result there are a significant number of interactions with other entities controlled by the same parent (refer to Notes 36 and 37). The Entity procures services from a number of Queensland Government departments on normal commercial terms. QTC, a Queensland Government owned corporation, provided loan debt funding to the Entity under normal commercial terms and conditions (refer to Note 26). The Entity received the amount of $123,684,000 as contributed equity from the Queensland Government on 10 June 2011, $73,449,000 for Hinze Dam and $50,235,000 for Wyaralong Dam, (2010: $14,814,000) (refer to Note 3(p) and the Statement of Changes in Equity). The following entities have the same controlling entity as the Queensland Bulk Water Supply Authority and therefore are considered to be related parties. Transactions with these entities during the year are:  WGM - total revenue received $350,184,057 (2010:$300,547,825), receivable of $38,420,227 (2010: $29,018,875) and unearned revenue of $23,919,576 (2010:0);  LinkWater - reimbursement of electricity costs;  WaterSecure and the subsidiaries, WCRW and DESAL – transfer of assets to the Entity on 1 July 2011 (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 41);  SunWater – p rovision of flood management services to the Entity, pursuant to a Service Level Agreement;  QWI - Wyaralong inter-agency working group regarding the delivery of infrastructure associated with the construction of Wyaralong Dam and conducted due diligence ahead of the 1 July 2011 transfer of the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 41);  QWC – determination of revenue (refer Note 20 inherent uncertainty);  QCA – economic regulator (refer to Note 40); and  Department of Infrastructure and Planning (now Department of Employment, Economic Development and Innovation (DEEDI)) - joint delivery of the Wyaralong Water Treatment Plant project and land transfer formalities to finalise prior asset transfers (via Project Direction). Phil Hennessy is Queensland Chairman of KPMG. During the year, KPMG provided internal audit and advisory services to the Entity. Mr Hennessy has no involvement in the provision of these services. All other amounts are set out in the respective notes to the financial statements.

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96 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11 Notes to and forming part of the Financial Statements 2010-11

37. Key management personnel and remuneration (continued) (f) Board members’ transactions 2011 2010 During the year, all Board Members were directors of the Entity’s subsidiary, SEQWater (refer to Note $000 $000 36). 39. Auditor’s remuneration Tom Fenwick is a Director of QWI. During the year, the Entity participated in the Wyaralong inter-agency Audit services working group with QWI and others, regarding the delivery of infrastructure associated with the Auditors of the Entity: Queensland Audit Office construction of Wyaralong Dam a nd conducted due diligence ahead of the 1 July 2 011 transfer of the - Audit and review of financial reports 142 172 Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) Regulation Total 142 172 2011) (refer to Note 41).

Phil Hennessy is a Member of the Senate of the University of Queensland and Leith Boully is an Adjunct There are no non-audit services included in this amount. Professor at the University of Queensland. During the year, the Entity was party to research arrangements with the University of Queensland. 40. Economic dependency Leith Boully is Chair of Healthy Waterways Ltd. During the year, the Entity provided funding to Healthy Waterways Ltd pursuant to a Network Deed. There is a contract with the WGM up to 30 June 2020 to pay Grid Service Charges to the Entity. These charges are to be based on a return on and of assets and allowance for operating expenses initially under the South East Queensland Water Market Rules and then by the QCA. 38. Related parties The Queensland Government remains committed to p roviding ongoing support to the Entity. This The Entity is controlled by the Queensland Government and as a result there are a significant number of commitment was recently reaffirmed in a letter from the Hon. Andrew Fraser MP, Treasurer and Minister interactions with other entities controlled by the same parent (refer to Notes 36 and 37). The Entity for State Development and Trade, issued to the Entity dated 2 August 2011. The Treasurer reaffirmed procures services from a number of Queensland Government departments on normal commercial terms. that the Gov ernment is committed to “ensuring the Authority remains solvent at all time s and able to QTC, a Queensland Government owned corporation, provided loan debt funding to the Entity under deliver essential services in a sustainable and cost effective way”. The G overnment’s support includes normal commercial terms and conditions (refer to Note 26). facilitating access to funding facilities at QTC supported by a Queensland Government guarantee under The Entity received the amount of $123,684,000 as contributed equity from the Queensland Government the Statutory Bodies Financial Arrangements Act 1982 (refer to Note 2 (b)). on 10 June 2011, $73,449,000 for Hinze Dam and $50,235,000 for Wyaralong Dam, (2010: $14,814,000) (refer to Note 3(p) and the Statement of Changes in Equity). 41. Subsequent events The following entities have the same controlling entity as the Queensland Bulk Water Supply Authority WaterSecure and therefore are considered to be related parties. Transactions with these entities during the year are: In December 2010, the Queensland Government announced that the Entity and WaterSecure would be  WGM - total revenue received $350,184,057 (2010:$300,547,825), receivable of $38,420,227 (2010: merged, creating a single bulk water supply authority for the South East Queensland region. $29,018,875) and unearned revenue of $23,919,576 (2010:0); WaterSecure was responsible for supplying new sources of pure water to the region through desalination  LinkWater - reimbursement of electricity costs; and water recycling.  WaterSecure and the subsidiaries, WCRW and DESAL – transfer of assets to the Entity on 1 July The assets and liabilities of WaterSecure were transferred to the Entity on 1 July 2011, via the South East 2011 (via the South East Queensland Water (Restructuring) Regulation 2011) (refer to Note 41); Queensland Water (Res tructuring) Regulation 2011. The value of the transfer of the net assets of WaterSecure to the Entity was $300 million. The effect of the WaterSecure transfer on the gearing ratio is  SunWater – p rovision of flood management services to the Entity, pursuant to a Service Level an increase from 72% to 74% (refer to Note 5). Agreement; From the 2011-12 year the Grid Service Charge applicable to WaterSecure will be paid to the Entity as  QWI - Wyaralong inter-agency working group regarding the delivery of infrastructure associated with the single bulk water supply authority, under a single integrated Grid Contract. the construction of Wyaralong Dam and conducted due diligence ahead of the 1 July 2011 transfer of Financial modelling of the revenues and expenses of the single bulk water supply authority indicate that it the Wyaralong Dam assets to the Entity (via the South East Queensland Water (Restructuring) will be loss making in the initial years following the transfer however it is likely to become profitable within Regulation 2011) (refer to Note 41); a 5 to 10 year timeframe. Modelling of the cash flows of the single bulk water supply authority, based on  QWC – determination of revenue (refer Note 20 inherent uncertainty); the same assumptions as set out in Note 20, has also been undertaken and shows that as at 1 July 2011,  QCA – economic regulator (refer to Note 40); and no impairment of the assets of the single bulk water supply authority is required.  Department of Infrastructure and Planning (now Department of Employment, Economic Development Contingent Liabilities of WaterSecure that transferred to the Entity amount to $11.8 million. and Innovation (DEEDI)) - joint delivery of the Wyaralong Water Treatment Plant project and land At the date of tra nsfer, WaterSecure was in the process of finalising the commercial settlement transfer formalities to finalise prior asset transfers (via Project Direction). arrangements in respect of the construction of a number of its recently completed advanced waste water Phil Hennessy is Queensland Chairman of KPMG. During the year, KPMG provided internal audit and treatment plants and pipeline networks. The commercial settlement arrangements will be completed by advisory services to the Entity. Mr Hennessy has no involvement in the provision of these services. the Entity. All other amounts are set out in the respective notes to the financial statements.

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41. Subsequent events (continued) WaterSecure was a participant in the South East Queensland Water Grid and as such it had similar related parties to the Entity as well as other Gov ernment owned entities with which it transacted. In addition WaterSecure transacted with and provided in k ind support in the form of labour and expense payments to the Australian Water Recycling Centre of Excellence which the Entity will continue to provide. As a result of the WaterSecure transfer the Board of the Entity increased by 2 new Board Members on 1 July 2011. These 2 new Members are David McDougall and Scott Standen. David McDougall is a director of KPMG. KPMG provide alliance financial auditor services for each of the project alliances, including procedure audits of the alliances progress claims. Mr McDougall has no involvement in the audit services. The following entities have the same controlling entity as the Queensland Bulk Water Supply Authority and as a result of the transfer of WaterSecure are considered to be related parties. Transactions with these entities during the year are:  CS Energy and Tarong – provision of operating protocols for the supply of PRW;  DEEDI – management of acquisition of land and easements along the pipeline corridor; and  Department of Transport and Main Roads – acquisition of land and easements along the pipeline corridor. The contingent liabilities and related party information of WaterSecure have not been included in these financial statements.

Wyaralong Dam On 1 July 2011, the recently constructed Wyaralong Dam and associated infrastructure was transferred to the Entity from QWI fo r $373.4 million, via the South East Queensland Water (Restructuring) Regulation 2011. The debt balance owing to QTC of $373.4 million was also transferred to the Entity at 1 July 2011. The transferred asset will be included in the Entity’s RAB from which the organisation derives regulatory revenue. The asset and debt transferred were included in the impairment assessment referred to above undertaken as at 1 July 2011. Assuming only the Wyaralong Dam and its corresponding debt was transferred on 1 July 2011 the effect on the gearing ratio is an increase from 72% to 75% (refer to Note 5).

Queensland Government Commission of Inquiry On 17 January 2011 the Queensland Government announced an independent Commission of Inquiry, to examine the January 2011 Queensland flood. The Commission released its Interim Report on 1 August 2011. Many of the Entity’s recommendations have been adopted by the Commission and work is alr eady well underway on implementing the recommendations. This includes the review of the Entity’s Flood Operations Manuals which is required after every major flood event. The Entity is fully co-operating with various government agencies to implement all recommendations from the Commission of Inquiry’s Interim Report. Costs were incurred by the Entity as a result of the January 2011 South East Queensland flood. Costs incurred to 30 June 2011 have been included in these financial statements and further costs will be included in subsequent years (refer to Note 12).

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98 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Queensland Bulk Water Supply Authority Notes to and forming part of the Financial Statements 2010-11

41. Subsequent events (continued) WaterSecure was a participant in the South East Queensland Water Grid and as such it had similar related parties to the Entity as well as other Gov ernment owned entities with which it transacted. In addition WaterSecure transacted with and provided in k ind support in the form of labour and expense payments to the Australian Water Recycling Centre of Excellence which the Entity will continue to provide. As a result of the WaterSecure transfer the Board of the Entity increased by 2 new Board Members on 1 July 2011. These 2 new Members are David McDougall and Scott Standen. David McDougall is a director of KPMG. KPMG provide alliance financial auditor services for each of the project alliances, including procedure audits of the alliances progress claims. Mr McDougall has no involvement in the audit services. The following entities have the same controlling entity as the Queensland Bulk Water Supply Authority and as a result of the transfer of WaterSecure are considered to be related parties. Transactions with these entities during the year are:  CS Energy and Tarong – provision of operating protocols for the supply of PRW;  DEEDI – management of acquisition of land and easements along the pipeline corridor; and  Department of Transport and Main Roads – acquisition of land and easements along the pipeline corridor. The contingent liabilities and related party information of WaterSecure have not been included in these financial statements.

Wyaralong Dam On 1 July 2011, the recently constructed Wyaralong Dam and associated infrastructure was transferred to the Entity from QWI fo r $373.4 million, via the South East Queensland Water (Restructuring) Regulation 2011. The debt balance owing to QTC of $373.4 million was also transferred to the Entity at 1 July 2011. The transferred asset will be included in the Entity’s RAB from which the organisation derives regulatory revenue. The asset and debt transferred were included in the impairment assessment referred to above undertaken as at 1 July 2011. Assuming only the Wyaralong Dam and its corresponding debt was transferred on 1 July 2011 the effect on the gearing ratio is an increase from 72% to 75% (refer to Note 5).

Queensland Government Commission of Inquiry On 17 January 2011 the Queensland Government announced an independent Commission of Inquiry, to examine the January 2011 Queensland flood. The Commission released its Interim Report on 1 August 2011. Many of the Entity’s recommendations have been adopted by the Commission and work is alr eady well underway on implementing the recommendations. This includes the review of the Entity’s Flood Operations Manuals which is required after every major flood event. The Entity is fully co-operating with various government agencies to implement all recommendations from the Commission of Inquiry’s Interim Report. Costs were incurred by the Entity as a result of the January 2011 South East Queensland flood. Costs incurred to 30 June 2011 have been included in these financial statements and further costs will be included in subsequent years (refer to Note 12).

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QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 99 100 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 101 Glossary

Australian Drinking Water Developed by the National Health and Medical Research Council in collaboration Guidelines 2004 with the Natural Resource Management Ministerial Council.

The Australian Drinking Water Guidelines 2004 incorporates the Framework for the Management of Drinking Water Quality and provides the Australian community and the water supply industry with guidance on what constitutes good quality drinking water. Bulk water Water supplied from dam, desalination and recycled sources by a Grid Service Provider to the SEQ Water Grid Manager for sale to Grid Customers. Desalinated water Salt water converted to drinking water through a process involving reverse osmosis membranes. Flood storage compartment A flood storage compartment refers to the capacity within a dam to store flood water, to then be released at a controlled rate, to minimise downstream impacts. Full supply level The maximum normal operating level of a behind a dam. Grid Instructions Directions issued by the SEQ Water Grid Manager to optimise SEQ Water Grid operating performance and water supply security. January 2011 Flood The January 2011 Flood refers to the flooding which occurred across Queensland between December 2010 and January 2011. LinkWater The Queensland Government statutory authority responsible for the management, operation and maintenance of the drinkable bulk water pipelines and related infrastructure throughout South East Queensland. Purified recycled water Wastewater that has been purified to a standard that is ready for consumption under the Australian Drinking Water Guidelines 2004. Queensland Floods Commission The Queensland Floods Commission of Inquiry refers to the Commission of Inquiry of Inquiry established by the Queensland Government to enquire into the December 2010 and January 2011 flood events.

102 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Raw water Raw water that has not yet been treated by a Grid Service Provider. SEQ South East Queensland SEQ Water Grid The SEQ Water Grid is a network of treatment facilities and connected pipelines, the move water across the region to where it is needed most. SEQ Water Grid Manager The SEQ Water Grid Manager owns the urban water entitlements in South East Queensland and purchases services to store, treat, produce and transport bulk water from Seqwater, WaterSecure and LinkWater. It then sells treated water to council-owned retail distribution businesses and industry customers. Sustainability Charter The Sustainability Charter outline’s our organisations commitment to sustainability through: 1. working within the restorative capacity of our environment 2. nurturing confidence in the strength of our communities 3. contributing to the long-term prosperity of our regions. The full Sustainability Charter can be viewed online at www.seqwater.com.au Treated water Water that has undergone a cleansing process to a standard that is ready for consumption under the Australian Drinking Water Guidelines 2004. WaterSecure Queensland Manufactured Water Authority, supplying a new source of water to South East Queensland through its desalination plant and water recycling scheme.

On 1 July 2011, WaterSecure merged with Seqwater to comprise one bulk water supply authority, responsible for managing catchment-based and climate-resilient water supply assets. Whole-of-Grid Refers to the collaboration of the organisations with unique functions that complement each other in operating the SEQ Water Grid.

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 103 104 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011 Baroon Pocket Dam

QUEENSLAND BULK WATER SUPPLY AUTHORITY TRADING AS SEQWATER ANNUAL REPORT 2010-11 105 This Annual Report is printed on environmentally friendly stock. www.seqwater.com.au