2011/2012 | ANNUAL REPORT

Enrich quality of life. $249 million invested in capital works

of potable water supplied over 125,000mL to residents and businesses

customers within a 14,384 1.3 million square kilometre service territory

trees planted as part of our 4,860 offset rehabilitation works

131,000ML of sewage collected and treated

Passed on an per residential annual saving of $26 customer in 2011/12 PB Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 1 ISSN: 1838-5575 Interpreter service statement: © Queensland Urban Utilities 2012 Queensland Urban Utilities is committed to providing accessible services to our customers and stakeholders About this report from culturally and linguistically diverse backgrounds. This report details Queensland Urban Utilities’ performance If you have difficulty in understanding the annual report, during the 2011/12 financial year. It gives us the opportunity please contact us on 13 14 50 and we will arrange an to report on our operational, environmental, social, interpreter to communicate the report to you effectively. and financial performance against our key business objectives and targets as set out in our corporate and operational plans. This report also outlines the challenges we have experienced and highlights our achievements. It is structured around our five key corporate objectives, to: • deliver service that is valued and trusted by customers and the community • focus on business efficiency and continuity Enquiries • keep our people safe, capable and dedicated Where possible, readers are encouraged to download the • maintain appropriate financial performance report online at www.urbanutilities.com.au/annualreport. • deliver sustainable growth. Where this is not possible, printed copies are available using one of the contact options below. Readership Level 6, Brisbane Transit Centre This report aims to communicate comprehensive West Tower, 171 Roma Street information to satisfy the needs of individuals and groups Brisbane QLD 4000 who are affected by, or have an interest in, our activities, including, but not limited to: Office hours: 8:30am – 4:30pm • our residential and commercial customers T: 13 26 57 (7am – 7pm weekdays) • our employees F: +61 7 3403 3208 • our shareholders E: [email protected] • government departments • the community For more information on any of the initiatives, projects or • the media. services mentioned in this report, visit the Queensland Urban Utilities website at: www.urbanutilities.com.au. We are committed to open and accountable governance, and welcome your feedback on our reporting. ABN 86 673 835 011

GPO Box 2765 Hon. Mark McArdle, MP Brisbane QLD 4001 Minister for Energy and Water Supply PO Box 15456 General Enquiries 13 26 57 CITY EAST QLD 4002 Faults & Emergencies 13 23 64 www.urbanutilities.com.au

14 September 2012

Dear Minister

I am pleased to present the Annual Report 2011/12 for the Central SEQ Distributor-Retailer Authority trading as Queensland Urban Utilities.

I certify that this annual report complies with: • the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009; and • the detailed requirements set out in the Annual Report Requirements for Queensland Government Agencies.

A checklist outlining the annual reporting requirements can be found at: www.urbanutilities.com.au/annualreport.

Yours sincerely,

Bernard Ponting Acting Board Chairperson Central SEQ Distributor-Retailer Authority trading as Queensland Urban Utilities Our profile

1.1 Queensland Urban Utilities Queensland Urban Utilities was established as We are jointly owned by Brisbane, Ipswich, Lockyer Valley, a statutory body on 1 July 2010 to be a distributor- Scenic Rim, and Somerset councils, and governed by an retailer under the provision of the South East independent Board. Queensland Water (Distribution and Retail The South East Queensland water industry comprises Restructuring) Act 2009, and as a service provider a number of key players at both state and local under the Water Supply (Safety and Reliability) government levels. Our relationship with the Act 2008. SEQ Water Grid is depicted in Figure 1.

Seqwater

Responsible for catchment, management, storage and treatment of bulk drinking water. Supplies water from Gold Coast Desalination Plant and Western Corridor Recycled Water Projects to SEQ Water Grid Manager, power stations and Wivenhoe Dam. s e i t i r o

LinkWater h t u a

d

Moves drinking water from treatment plants and reservoirs through e n

bulk pipeline networks and into the distribution networks. w o - e t a t S SEQ Water Grid Manager

services, and sells water to local government-owned distribution and retail businesses operating from July 2010.

Queensland Urban Utilities Unitywater Redland City Council servicing customers in the Brisbane, servicing customers in the Gold Coast City Council

Local Ipswich, Lockyer Valley, Scenic Rim Sunshine Coast and Moreton Bay authorities and Somerset local authority areas. local authority areas. distributors Logan City Council Council water governemnt-owned These businesses are responsible for delivering potable, recycled and otherwater to customers, collecting and treating sewage , and charging for water and sewerage services.

Residential and business customers

Figure 1 – Our relationship with the SEQ Water Grid as at 1 July 2012.

i Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 ii 1.2 Our role Queensland Urban Utilities’ core responsibility is to By geographical area, we are the third largest water utility deliver drinking water, recycled water and sewerage in Australia. Our customer base lies within a territory of services to 1.3 million customers. Supporting the 14,384 square kilometres – an area that covers around delivery of these services are a number of functions, two-thirds of South East Queensland (see Figure 3). as listed in Figure 2. Our service territory area stretches from Cape Moreton Our water services are provided via 515,000 residential and in the east to the outskirts of Toowoomba in the west, 29,000 non-residential connections, while our sewerage up to the Yabba State Forest in the north, and down to the services are delivered via 491,000 residential and 27,000 New South Wales border along the Scenic Rim in the south. non-residential connections. We also service 5,028 trade waste and 225 recycled water customers.

Queensland Urban Utilities’ functions are divided into three areas:

Provision for Customer interface Enabling functions water distribution, and service provision for sustainability including: sewage transportation relating to: • strategy deployment and treatment including: • water meter management and data • financial and human resource management • demand forecasting and management • residential water billing and • governance and risk management • asset planning contract management • environment management • asset management and • bulk water billing and • community and stakeholder engagement asset alterations contract management • regulatory and legislative compliance • servicing, operating and maintenance. • direct supply to large customers including trade waste management • information and communication technology management • sewage transportation and treatment • procurement and contract management. • development assessments.

Figure 2 – Queensland Urban Utilities’ functions.

1.3 million residents supplied with water and sewerage services

i Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 ii N

W E Somerset S service territory

Brisbane service territory Lockyer Valley service Ipswich service territory territory

Scenic Rim service territory

iii Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 iv Figure 3 - Our service area is made up of five service territories. Our profile

1.3 Our stakeholders Our infrastructure We are committed to engaging with our stakeholders Physical assets Total to identify, and ultimately satisfy, their needs and expectations. By doing so, we can create a greater Water reservoirs 125 awareness of who we are as an organisation, how we provide our services, and what our customers can expect Water pump stations 39 from us in the way of new infrastructure and pricing. Water boosters 107 Our solid relationship with the state and federal governments allow us to keep abreast of legislation Sewage pump stations 336 and regulations and ensure we continually fulfil our Sewage treatment plants 28 responsibility to protect the environment and support sustainable practices. Water supply network (km) 8,885 We maintain a strong relationship with our shareholders by providing regular updates on our performance, consulting Sewerage network (km) 9,076 on our strategic direction, and engaging at all levels on operational matters that are pertinent to each region. Our water and sewerage infrastructure network services the cities and townships of Brisbane, Ipswich, Our relationships with our fellow distributor-retailers Lockyer Valley, Scenic Rim and Somerset. and council water distributors, developers, suppliers, environmental groups, and our Customer and Community Reference Group, allow us to collaborate at a local level to work towards common goals.

8,885km network of water pipes

iii Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 iv Our profile

1.3.1 Our Customer Charter Queensland Urban Utilities’ Customer Charter outlines The Queensland Urban Utilities’ Corporate Plan 2012–17 our commitment to delivering water and sewerage services re-frames our corporate objectives as statements of action to our customers. rather than static strategic pillars, and enhances clarity and accountability through the addition of: The charter describes how we will: • a clear link between business continuity and efficiency • deliver a safe and reliable water supply to our customers • a direct relationship between sustainability and growth. • maintain a rigorous water quality monitoring program • ensure our meter readings are accurate and Our corporate objectives for 2012/17 are to: our customers are charged correctly • deliver service that is valued and trusted by • protect public health and the environment through our customers and the community the provision of reliable residential and commercial • focus on business efficiency and continuity sewerage services • keep our people safe, capable and dedicated • understand and respond to the needs of our customers. • maintain appropriate financial performance • deliver sustainable growth. The charter also describes our customers’ rights and obligations. It is available on our website Our goals and refreshed corporate objectives reinforce the www.urbanutilities.com.au or by calling 13 26 57. commitment of our Board and Executive Leadership Team to lead Queensland Urban Utilities into a future defined 1.4 Our corporate plan by sustainability, economic growth and an improved quality The Queensland Urban Utilities’ Corporate Plan of life for the people of South East Queensland. 2012–17 reinforces our future direction and strategic priorities, as previously defined in earlier iterations of the plan.

The updated corporate plan articulates our definition for Deliver service that Participation Accountability Focus on is valued and trusted Activate See it success, with five-year corporate goals supporting our business ef ciency Collaborate Own it by our customers and vision to be recognised nationally as a leader in the delivery and continuity Accelerate Solve it the community of products and services, and valued as a trusted partner by our customers and community. Customers Creativity and Our objectives Initiate Community Create Listen Deliver Keep our Inspire Understand sustainable people safe, Respond growth capable and dedicated

Deliver Value Safety Everyone Maintain appropriate Create it Everywhere nancial performance Deliver it Every day

Our purpose, vision and objectives At Queensland Urban Utilities, everything we do is based on a clear purpose, a strong vision, and a defined set of objectives

v Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 vi Our purpose is to enrich quality of life

v Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 vi Table of contents

Our profile i Delivering our services 34 Our role ii Delivering efficiency 36 Our stakeholders iv Improving our capabilities 36 Our Customer Charter v Planning for growth 36 Our corporate plan v Case study Chairperson’s foreword 2 Goodna Sewage Treatment Plant Upgrade Project 38 Chief Executive Officer’s foreword 6 Case study Our structure 8 Auchenflower Branch Sewer Upgrade Project 39 Our Board 8 Our leadership team 12 Environment 40

Year in review 16 Case study Our achievements 16 Our commitment to energy Performance at a glance 18 and emission management 42

Our future 19 Case study Looking ahead - five-year strategic outlook 19 Canungra Sewage Treatment Plant Upgrade Project 43

Deliver service that is valued Sustainable growth 44 and trusted by our customers Research and development 44 and the community 22 Our commitment to business sustainability and sustainable growth 46 Case study Stakeholder Engagement Program 26 Case study Partnering with the community 47 Case study Financial Hardship Strategy 27 Corporate governance 48 Lay solid foundations for Safe, capable and Management and oversight 48 dedicated people 28 Structure that adds value 49 Safeguard integrity in financial reporting 50 Recognise and manage risk 51 Case study Remunerate fairly and responsibly 51 Values Awards for safety 32 Promote ethical and responsible decision-making 52 Code of conduct 52 Case study Respect the rights of shareholders 54 Fatigue Management Training 33

Appropriate financial performance 56

Glossary 57

vii Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 1 Delivering a safe and reliable water supply to our customers

vii Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 1 Chairperson’s foreword

Delivering enhanced customer service Looking back over the last 12 months, I can see we have made significant progress in improving customer services.

Besides exceeding our key performance indicators – such as grade of service, customer communication responsiveness, and having industry low levels of ombudsman complaints – we have introduced a number of key initiatives. These include: • Establishing a process to manage complex customer cases that fall outside of existing policies or processes, and provide assistance as needed. This is accomplished through a committee made up of senior managers and representatives from across the business. • Introducing a Customer Experience Program, which is a ‘continuous improvement’ process to enhance end-to-end customer service across key business teams. These improvements are implemented through Easing the price burden on families the following initiatives: The Board’s focus and determination for Queensland 1.  A case management process whereby each Urban Utilities to be an efficient and well-operated customer complaint is managed by a single business is steadfast. customer service officer to ensure that the customer is fully updated with the progress of the case and Building on the strong foundations of our inaugural year the message communicated is consistent. Also, the of operations, Queensland Urban Utilities has focused customer can directly contact the assigned officer heavily this year on identifying and realising further about the case at any time. efficiencies to ease the price burden on our customers. 2. Standardising and simplifying a number of our I am particularly pleased to report that building on processes and procedures to streamline customer $50 million in operational efficiencies last financial year, interactions and ensure quality service is delivered. Queensland Urban Utilities has realised a further • Revising the Concealed Leak Policy to provide financial $12.9 million in efficiencies this year, which allowed us to adjustments to small businesses. Further, the policy was pass on an annual saving of $26 per customer in 2011/12. modified to cover leaks in both underground pipework This represents a 5.1 per cent efficiency gain. and wall cavities.

Further, through stronger procurement and contract In addition to these, the Queensland Urban Utilities team negotiation, Queensland Urban Utilities has realised works around the clock to ensure we deliver a reliable capital savings of $75 million since formation, with water and sewerage service 24-hours a day, seven days approximately $45 million saved in 2011/12. This is a week. We respond to 98 per cent of urgent customer a significant achievement and highlights the benefits reported incidents and faults within an hour across our of economies of scale and skill achieved through service area. the distributor-retailer model. Building $249 million of infrastructure across These efficiencies allowed the Board to make pricing all service territories decisions for 2011/12 that kept Brisbane’s water and Queensland Urban Utilities’ capital program continues sewerage bills the lowest across South-East Queensland, to underpin our purpose to enrich quality of life by while closing the gap on historically higher prices for providing our customers and the community with clean, customers in the Ipswich, Lockyer Valley, Scenic Rim fresh and reliable water services. and Somerset service territories. Our $3.2 billion 10-year Capital Works Program As we embark on our third year of operations, I am continued to be delivered, with $249 million of confident our customers will benefit further from our infrastructure built in 2011/12. plan for additional savings, organisational efficiencies and enhanced productivity.

2 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 3 Satisfied stakeholders Investment in new water and sewerage infrastructure Our customer stakeholder satisfaction results released across all service territories ensures that economic and during the year reflect the strong collegial relationship we population growth is not constrained and that strong local have with external stakeholders at all levels of government. communities are serviced with reliable assets. The favourable 7.6/10 result from our shareholders is of Our capital program also invests in renewing and particular significance given the way we approach maintaining existing assets, network and infrastructure. the relationship.

Queensland Urban Utilities delivers innovative and Regular communication and consultation with our regionally focused infrastructure solutions, including shareholders has continued to be a key priority of the cross-boundary servicing such as the $115 million Goodna Board and myself. Sewage Treatment Plant upgrade. This results in avoiding It was satisfying to have all councils represented at investment in other surrounding infrastructure. Queensland Urban Utilities’ inaugural Special General This financial year has seen significant progress in major Meeting in October. capital projects, including: the $51.7 million Bulimba Creek This meeting allowed the Chief Executive Officer and Trunk Sewer upgrade; the $65.7 million Woogaroo Creek myself to provide an overview on Queensland Urban Sewer augmentation; the $8.7 million Auchenflower Branch Utilities’ operational and financial performance and Sewer upgrade; and the $115 million Goodna Sewage to seek council input on our strategic direction. Treatment Plant upgrade. The upgraded $7.2 million Canungra Sewage Treatment Plant was commissioned Coupled with the Special General Meeting were briefings in April 2012. by the Chief Executive Officer and myself to individual councils on our performance, and an opportunity Securing water for the Lockyer Valley food bowl to respond to questions on localised water and A particular achievement of which I am proud is sewerage matters. Queensland Urban Utilities’ leading role in a cross-regional I am pleased that the Board held at least one of its ordinary infrastructure lighthouse project that will finally meetings in each of our five service territories in 2011/12. secure water for the Lockyer Valley agricultural region. This allowed the Board to engage informally with our This project will contribute to the State Government’s participants and to see first-hand the scale and size of four-pillar economy through: the geographical regions we service. Given the success • employment growth due to the expansion and of these meetings, they will feature as a key component diversification of the agricultural sector made of our forward Board schedule. possible by a secure water supply • increased regional security by reducing the impact of We will continue to work closely with all stakeholders irrigation on the water table and potable water supply to ensure we understand their needs and that these • strengthening the Lockyer Valley’s position are considered when making decisions. as Queensland’s “food bowl” • providing affordable water to the farmers in the region. Actively engaging with customers and the community The Customer and Community Reference Group The project will support the State Government’s pledge continued to operate effectively, providing the Board and to increase Queensland’s food production by delivering management with valuable input into our organisational a secure and more affordable water supply to Queensland’s policies, plans and strategies. prime agricultural region. This group remains one of our key ways of engaging and I look forward to partnering with Lockyer Valley Regional consulting with a broad range of customer and community Council and other levels of government to implement stakeholders. I thank the Customer and Community this lighthouse project. Reference Group members for their ongoing input.

2 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 3 Chairperson’s foreword

Recognising Queensland Urban Utilities The Board was delighted that our first full-year annual Jude worked hard to build the Board and support the report received a silver award in the Australian Annual Queensland Urban Utilities Executive Leadership Team. Report Awards in June 2012. She delivered a number of achievements during her time as Chair, including: This award is a testament to an organisation that, last year, • delivering price reductions in four of our five service faced significant challenges with the January floods and territories in 2011/12, with Brisbane retaining the lowest consolidating five water and sewerage businesses. prices in South-East Queensland This award, coupled with others that we received this • delivering a price freeze for residential customers year, including the national Public Relations Institute of for 2012/13 Australia Golden Target Award for Community Relations, • overseeing the delivery of a record infrastructure is a testament to the employees that work for Queensland delivery program that will support population Urban Utilities. and economic growth across the region • forming strong ties with our community, including Acknowledging Queensland Urban Utilities’ being instrumental in the formation of the Customer founding Chairperson, Jude Munro AO and Community Reference Group On 20 July 2012, our inaugural Board Chairperson, • building consultative and collaborative relationships Jude Munro AO, announced her decision to retire with our shareholders. from the Board. On behalf of the Board, I would like to take this opportunity Jude was the Chairperson of the Establishment Committee to acknowledge and thank Jude for the role she has played setup to oversee the formation of Queensland Urban in Queensland Urban Utilities. Utilities and the consolidation of the councils’ five water I would like to thank our shareholders for their ongoing businesses into one, and she played an instrumental role support of Queensland Urban Utilities. To the Board, in our first two years of operation. your strategic guidance to the management team has been invaluable. Finally, I express deep gratitude to the employees of Queensland Urban Utilities for their effort and dedication this year.

Bernard Ponting Acting Board Chairperson

Easing the price burden on families

4 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 5 Our $3.2 billion, 10-year Capital Works Program continues to be delivered

4 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 5 Chief Executive Officer’s foreword

Our safety focus is not solely aimed at our employees; we are also acutely aware that our actions in the field are critical for ensuring the safety of our customers and the community. We regard the ‘safety of everyone, everywhere, everyday’ as not just a motto, but a way of thinking and acting.

It was also pleasing to launch our Queensland Urban Utilities Safety Values Awards at our employee events in June 2012. These awards recognise employees who demonstrate our safety values. We saw examples of employees who not only looked for innovative ways of working but delivered solutions that ensure the safety of themselves, their colleagues and the broader community.

Focused on delivering high-quality customer service Looking back over the last 12 months, I see we have made significant progress in improving our customer service.

Queensland Urban Utilities has been in business for a little We have met or exceeded our key performance indicators, over two years. During this time, we have faced a number of established the We Care Committee to address customer challenges and have made significant progress in our quest issues and complaints that fall outside existing policies and to be recognised as a national leader in the delivery of processes, and introduced the Customer Experience Program. products and services and valued as a trusted partner This program harnesses direct feedback from customers to by our customers and the community. help us develop plans for our customer-facing business units to deliver an enhanced standard of customer service. Safety first – everyone, everywhere, everyday During the past year, safety has been our number one A strong focus on minimising the price burden priority. The safety of everyone, everywhere, everyday on customers will continue to be our number one priority at Queensland The continuation of our efficiency program – to become Urban Utilities. a more productive and streamlined organisation – remained a key priority throughout the year. We have worked hard to implement initiatives that make our work processes safer. One such initiative was the rollout In June 2012, Queensland Urban Utilities announced that of standardised safe work method protocols and standards we would freeze residential and small business prices, for across the business. The launch of these standards marked our controllable costs, during 2012/13. This was on the back a significant milestone for Queensland Urban Utilities. of our 2011 announcement to lower prices in four of our five service territories, while keeping Brisbane prices the We also worked closely with our safety partners to lowest in South East Queensland. assess our organisational safety culture and overall safety performance. This led to the introduction of a number of We are determined to minimise the price burden on our new initiatives and activities including the rollout of safety customers and the community. Through our efficiency leadership training. program, we have reduced annual customer prices by approximately $148 since our formation over two years ago. Queensland Urban Utilities now has a safety roadmap, which outlines our safety journey as we strive to become $45 million in savings have been realised in the industry leaders for safety. 2011/12 capital program Delivery of our $3.2 billion Captial Works Program across One key initiative implemented in 2011/12 was the all service territories continued in 2011/12, with $249 million introduction of safety interactions by our Executive invested in infrastructure over the last year. Leadership Team and managers. This has proven to be a valuable way to see, first-hand, the current safety culture A number of major capital projects were either commissioned and environment in our business. These safety interactions or substantially completed in 2011/12, including the $115 have been strongly embraced by employees and are just million upgrade of the Goodna Sewage Treatment Plant and one example of how we are reducing our lost-time injury the $7.2 million upgrade of the Canungra Sewage Treatment frequency rate. Plant. The Canungra plant was formally opened at a community event on 14 April 2012.

6 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 7 Chief Executive Officer’s foreword

Recognition of Queensland Urban Utilities Both of these upgrades were part of our commitment Queensland Urban Utilities has been recognised to ensure the communities we serve have the essential publicly on a number of fronts during the past year. infrastructure to support population growth. The Canungra I am particularly proud that Queensland Urban Utilities cathcment, for example, has a projected population growth won the national Public Relations Institute of Australia of up to 40 per cent by 2018. Golden Target Award for Community Relations and the In delivering our capital program, we realised $45 million Industry Award at the Healthy Waterways Awards in June in savings through economies of scale, strategic 2012. Receiving the silver award in the Annual Reporting procurement and stronger contract negotiation with Awards was also great recognition for an organisation that contractors and suppliers. is only two years young.

During the year, I also welcomed Queensland Competition These awards are a tribute to the efforts of our dedicated Authority’s assessment that Queensland Urban Utilities’ staff that strive in our quest to be recognised as a leader Capital Works Program in 2011/12 was prudent and efficient. in the delivery of products and services and as a valued and trusted partner by our customers and community. Ongoing support by our shareholders I am indebted for the ongoing support by our shareholders I wish to thank Ian Maynard – who was Chief Executive over the past two years, but particularly in 2011/12. Officer during the reporting period – for his vision and leadership. Ian was instrumental in building a strong safety This confidence in Queensland Urban Utilities is not taken and customer platform, which I intend to build on for granted and being the custodian of these assets on behalf over the coming years. of our shareholders remains front of mind for the Executive Leadership Team in the discharge of our duties. I also thank the Board for its ongoing strategic leadership and our dedicated employees who, each and every day, Responding to our councils’ specific needs has, and will, contribute to the enrichment of the lives of the customers remain a focus for me over the next year, particularly given and communities we service. that our geographical service territory covers urban, semi-rural and rural communities. As we embark on our third year of operations, I believe we can be proud of what has been achieved over the past two Regular communication with our shareholders is a key years. While 2010/11 was a period of business consolidation, part of our operating model. Our Special General the last year has seen the organisation grow to have a Meeting of shareholders late last year, coupled with our stronger identity and culture. I look forward to 2012/13 with regular reporting ensures our owners understand how great anticipation, knowing we are well positioned to build we have performed, the challenges we face and our on two successful years of operation. strategic direction. Finally, I wish to express a deep gratitude and a strong A determination to reducing our carbon footprint appreciation for the support that our Chairperson, Jude Queensland Urban Utilities is committed to reducing Munro AO – who announced her retirement in July 2012 – our carbon footprint through innovative, ecological has provided Queensland Urban Utilities. Jude’s dedication, and environmentally friendly infrastructure solutions. energy and passion for the organisation, its shareholders, Management is currently implementing our Carbon customers and the community has been instrumental in Abatement Strategy, which was approved by the both the formation of Queensland Urban Utilities and its Board in 2011/12. first two years of operation.

This has included redesigning small sewage treatment plants at Heildon, Aratula and Fernvale so they will eventually produce zero-emission, natural treatment solutions. We will also construct two new co-generation facilities at the Oxley Creek and Luggage Point Sewage Louise Dudley Treatment Plants to reduce our carbon emissions. Chief Executive Officer

Also, we are also nearing completion of the recommissioned CAMBI co-generation plant at the Oxley Creek Sewage Treatment Plant, which was severely damaged during the January 2011 floods. This plant not only produces electricity as part of its energy requirements but it also reduces transportation costs and, therefore, our carbon emissions. 6 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 7 Our structure

6.1 Our Board Queensland Urban Utilities’ Board is comprised The Board also ensures that Queensland Urban Utilities of eight independent members, including the performs its functions and exercises its powers in a proper, Chairperson. Each member contributes a wealth effective and efficient manner and that it complies with of skills, knowledge and experience, including public planning and reporting requirements. and private sector leadership across water policy In addition to these legislative requirements, the Board and governance; local government leadership; protects and enhances the long-term participant value finance and economic strategy; corporate and ensures sustainable returns. development; commercial and financial law; audit; and infrastructure delivery. To facilitate its efficient operation, the Board has established three committees: As the highest level of governance, the Board carries i. Audit, Finance and Risk Committee out its duties in accordance with: ii. Capital Delivery and Asset Management Committee • its governing legislation iii. Human Resources and Community Committee. • the Central SEQ Distributor Retailer Participation Agreement Each committee operates to a Terms of Reference, which • the Queensland Urban Utilities Board Charter describes its purpose, role, responsibilities, composition, • the highest levels of ethics and corporate governance. structure and membership requirements.

The Board is accountable under the South East Queensland Our governance structure is outlined in Figure 4 on page 9 Water (Distribution and Retail Restructuring) Act 2009 and and our Board members are introduced on page 10. its regulations, and the Participation Agreement between Queensland Urban Utilities and its shareholders.

The Board is responsible for setting and overseeing the strategic direction of Queensland Urban Utilities, as well as forming and adopting high-order operational matters.

9,076km of sewerage pipeline

8 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 9 Shareholders

Human Resources and Community Committee

Board Capital Delivery and Asset Management Committee

Audit, Finance and Risk Committee

Assurance and Accountability Delegation

Executive Leadership Team

Office of the CEO

Chief Executive Officer General Counsel and Board Secretary Tracey Moore Louise Dudley Executive Manager Mark Letica

Chief Financial Officer Chief Information and Executive Director Retail Chief Operating Officer Paul Bracegirdle Technology Officer Helen Harding Robin Lewis (Acting) Nina Meyers

Executive Director Executive Director General Manager People and Safety Strategy and Growth Planning Jennifer Leis Julie McLellan Paul Belz

Employees Customers Community

Figure 4 – Queensland Urban Utilities’ governance structure.

8 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 9 Our Board

1. Jude Munro 2. Bernard Ponting Board Chairperson: 25 June 2010 - August 17 2012 Appointed Acting Board Chairperson: August 17 2012 BA (Hons) (PolSc), GDip Public Policy, GDip Bus Admin, LLB (Hons), GDip Legal Practice, Solicitor of the Supreme Court Directors Course, FAICD of Queensland, GAICD Jude is a non-executive Director of Airservices Australia Bernard became a solicitor of the Supreme Court of and Uniting Care Queensland. She is the Director of her Queensland on 14 December 1978. After initially practising own consultancy company, Jude Munro and Associates. in Brisbane, he commenced practice at Southport in 1981, where he continues under the firm name of Bernard Jude was the Chief Executive Officer (CEO) of Brisbane Ponting & Co. City Council from 2000–2010, and was CEO, City of Adelaide from 1997–2000. She was CEO of the City of St His practice covers a range of legal areas, with an emphasis Kilda and CEO of the City of Moreland in the early 1990s. on commercial, corporate and administrative law matters, and litigation in those areas. His clients are drawn from She has served on a number of boards in Brisbane and Australia and overseas. Adelaide and is former Queensland President of the Institute of Public Administration. Bernard was a Board member of the Gold Coast Waterways Authority from 1988 to 1990. The authority Jude was awarded the Order of Australia Medal in 2010 is responsible for the management and control of the for distinguished service to local government, particularly Gold Coast Seaway at Southport and the waterways and the Brisbane City Council, and to the community through navigable rivers of south Moreton Bay and the Gold Coast her contributions to business, professional development area. Bernard was also a Board member of its successor and philanthropic organisations. authority, the Gold Coast Harbours Authority, in 1998. Jude is also a National Fellow of the Institute of Public Following the resignation of Jude Munro AO, Bernard Administration of Australia. was appointed Acting Board Chairperson effective 17 August 2012. 3 2 8 6 7 4 5 1

10 Queensland Urban Utilities Annual Report 2011/12 3. Barry Ball Appointed: 25 June 2010 6. Paul Emmerson Appointed: 25 June 2010 BEng (Civil), GDip Mgt, MAICD BComm, LLB, Solicitor of the Supreme Court of QLD, MAICD Barry is Deputy Director of the Global Challenge Institute Paul is a solicitor, Certified Practising Accountant and at the University of Queensland, and Water Policy Manager Registered Tax Agent. His long-standing involvement for the International Water Centre. He provides leadership in numerous community groups and major projects of in the area of water policy and governance, institutional regional significance contributed to his winning the 2009 strengthening and social change. inaugural Lockyer Valley Council Citizen of the Year award. Barry held senior management positions with the Paul’s many years of legal and accounting experience have Brisbane City Council for more than 18 years and has held made him sought after in the fields of commercial and many positions in organisations devoted to issues of water, financial law. As Principal of PJ Emmerson Accountancy planning and natural disaster responses. Practice, and manager of the family dairy farm, Paul has Barry’s roles within the water sector include being a wealth of business experience and regional knowledge. a board member of the Water Sensitive Cities Cooperative Paul has been heavily involved in water user groups for Research Centre and the International River Foundation. more than a decade, including the Upper Lockyer Water Barry is a registered professional engineer and was awarded Users Association, Lockyer Water Users Forum and South the Australian Public Service Medal for Water Policy. East Queensland Western Catchment Group.

4. Dennis Cavagna Appointed: 25 June 2010 7. Phil Kesby Appointed: 25 June 2010 BEcon, GDip Fin Planning, GAICD, FCA CertConst (Hons), Licensed Builder (NSW & QLD), GAICD Dennis has a wealth of experience in leadership roles Phil has more than 32 years’ experience in infrastructure in finance, economics and IT within the water and delivery and property related industries. He has essential services industries in Victoria. exceptional business and people skills and is highly His professional experience spans some 25 years in the regarded for his expertise in relationship management Victorian water industry, including leadership positions and stakeholder engagement. with South East Water, Melbourne Water, the Mornington Phil was Strategic Relationship Manager within the Thiess Peninsula and District Water Board and the Department Queensland Leadership Team and was responsible for of Water Resources. relationship management, stakeholder engagement and Since 2007, as a Commissioner of the Essential Services marketing. Phil was at the forefront of cultural programs Commission (the independent economic regulator in that improved the personal and business environments Victoria), Dennis has been involved with the approval at Thiess. of prices and the quality and reliability of essential Phil established his own consultancy practice in 2008, utility infrastructure services, including water services. which provides high-level mentoring and guidance in Dennis is also a board member with Parks Victoria as the fields of relationship management, stakeholder well an independent member of both the Risk and Audit engagement and business development. Committee of the Victorian Department of Sustainability and Environment and Audit Committee of VicRoads. 8. Len Scanlan Appointed: 25 June 2010 BBus (Acc), BA (Gov’t/Asian Studies/Public Admin), 5. Diana Eilert Appointed: 25 June 2010 M Pub Ad, FAICD BSc (Maths), MComm (Fin & Marketing), GAICD Len’s public service career spanned 31 years and included Diana is a professional Non-Executive Director, appointed service with the Departments of Premier, Transport, to boards of Queensland Urban Utilities, ASX listed digital Auditor-General and the Queensland Treasury. business “onthehouse”, and AMP Life. Len was Auditor-General of Queensland from 1997–2004. She has an executive career spanning more than 25 years. Upon completing his term as Auditor-General, Len Major roles include Group Executive, responsible for commenced a portfolio career as an independent private Suncorp’s entire insurance business, and Group Executive consultant, encompassing various activities in the public People, Technology, Marketing and Joint Ventures for and private sectors. Suncorp. Diana also worked for 10 years with Citibank where she ran retail credit and risk; the mortgage business; retail Len was an active member of CPA Australia for 30 years, funds management business; and the direct bank. Diana serving on numerous committees at local, state and built her strength in strategy early in her career as a Principal national levels, including time as State President. of AT Kearney and, subsequently, as a Partner of IBM Len is also Chair of Brisbane City Council’s Audit Committee. Consulting. From 2009 until 2012, she developed her career further while working with News Ltd, initially consulting, then as Head of Strategy and Corporate Development. Diana’s previous directorships include ASX-listed REA group (realestate.com.au), Chairmanship of GIO Australia and directorships of various other Suncorp subsidiaries. She holds a Bachelor of Science, Master of Commerce and is a member of Chief Executive Women.

Queensland Urban Utilities Annual Report 2011/12 11 Our leadership team

The Chief Executive Officer and the Executive Leadership 1. Louise Dudley Team are responsible for the day-to-day service delivery and Chief Executive Officer operations of the business. BCom, CA, GAICD The Executive Leadership Team, which is chaired by the Chief Louise was appointed Chief Executive Officer of Executive Officer, convenes weekly to discuss and approve a Queensland Urban Utilities on 1 July 2012. Prior to range of strategic and operational matters with the purpose this appointment, she was Chief Financial Officer of achieving the objectives set out in the Queensland Urban of Queensland Urban Utilities. Utilities 2012/17 Corporate Plan and 2011/12 Operational Plan. Louise played a key role in the creation of Queensland The responsibilities of the Executive Leadership Team also Urban Utilities, with highlights including the establishment include, but are not limited to: of the capital structure, funding facilities, and the • promoting and enhancing integration and collaboration successful lodgement of a first Queensland Competition between groups to facilitate consistency and to improve Authority regulatory submission. operational performance and service delivery Previously, Louise served on the executive team of • exchanging information and encouraging innovation Brisbane City Council. She held several senior executive and idea-sharing positions within Brisbane City Council, including: Executive • reviewing and endorsing policies that have the potential Manager of Water Retail; Director of Finance and Legal to impact other groups Water Transition Program; Chief Procurement Officer; and • advising on the implications of amendments to legislation Commercial Manager Information, Communication and • considering and providing feedback on strategic and Technology Division. operational matters to be considered by the Board. In June 2011, Louise became a Board member and Audit and Risk Management Committee member of LGsuper The Executive Leadership Team operates to a Charter that is who merged with CitySuper in mid-2011. LGsuper is the reviewed regularly to ensure the purpose of the team remains superannuation fund for current and former Queensland relevant, adaptable and responsive to change. local government employees and their spouses and takes To assist the Executive Leadership Team in discharging its care of $6 billion in retirement savings for more than responsibilities, three advisory bodies have been established: 90,000 Queenslanders. the Procurement and Projects Advisory Group; the Major Prior to 1 July 2011, Louise was a Director and Chair Projects Executive; and the Central Safety Committee. of the Audit and Risk Committee at City Super. These advisory bodies are explored further on pages 36 and 30.

12 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 13 2. Ian Maynard The latter role involved a range of retail management and Chief Executive Officer from 1 July 2011 to 30 June 2012 marketing roles, including Group Manager, Homesuite BSc (Hons), INSEAD Adv Mgt Prog (France), GAICD (energy related product and services), Manager Strategic Initiatives, and Manager – Full Retail Contestability. Ian commenced as the Chief Executive Officer of Queensland Urban Utilities on 1 July 2011. He resigned, Helen brings extensive retail experience to the role in effective 30 June 2012, to pursue a Queensland both competitive and non-competitive environments. Government appointment. 5. Jennifer Leis Ian has significant experience in both Australia and New Executive Director People and Safety Zealand as a senior executive in diverse industries across both the private and public sectors. Jenny is responsible for leading the provision of a range of human resource functions, including: workplace industrial Ian’s previous roles include: Chief Operating Officer for relations; performance and reward; recruitment; learning Brisbane City Council; Senior Risk Management and and development; workplace health and safety; and Strategic Procurement roles with Fonterra Limited, the business support. world’s leading exporter of dairy products; and Fletcher Challenge Limited, formerly the largest company in Jenny commenced her career in local government in 1989, New Zealand. gaining invaluable exposure to the water and sewerage industry. Jenny is an experienced and successful business Ian has a Bachelor of Science (First Class Honours) from management professional, having worked in the water and the University of Queensland, and has undertaken the sewerage industry for 22 years. She has held several senior INSEAD Advanced Management Programme (France). executive positions in the Brisbane City Council divisions Ian also holds directorships on the Boards of City Care of retail, city policy and strategy, corporate services, major Services Pty Ltd and Scripture Union Queensland Pty Ltd. projects, and commercial services. Throughout her career, Jenny has led the development, 3. Paul Belz coordination, and implementation of successful General Manager Planning business improvement strategies, integration and change MBA, B Eng management efforts, and increased operational capability. Paul is responsible for capital planning, capital Jenny has used her strong financial management skills to inauguration, and environmental and water quality continuously deliver customer-focused outcomes. issues across Queensland Urban Utilities’ service area. Paul has over 20 years’ experience in the water and 6. Robin Lewis sewerage industry across a wide spectrum of disciplines. Chief Operating Officer His main areas of expertise are in planning, asset BA, CIWEM (UK), GAICD management, and the associated fields of strategic Robin is responsible for all operational aspects of planning, and asset optimisation. Paul has had extensive Queensland Urban Utilities, including water and sewerage experience in the operation, maintenance and construction services, water quality, maintenance, asset planning, of water and sewerage assets. and Capital Works Program delivery. Paul was a key member of the team that established Queensland Urban Utilities and had input into the He has 37 years of experience in operation roles within South East Queensland water arrangements. Paul has the water industry, gained with Severn-Trent Water been a member of a number of national and South East (United Kingdom), Water Care Service Ltd (New Zealand), Queensland committees for the planning and asset and Brisbane Water, where he was the Executive Manager management of water and sewerage systems. prior to joining Queensland Urban Utilities.

4. Helen Harding Since moving to Australia in 2002, he has held Board positions with the Advanced Waste Water Treatment Executive Director Retail Centre (University of Queensland) and Water Services BPhys Ed, MBus, Dip Comp Dir. Association Australia. Helen is responsible for leading and managing the Queensland Urban Utilities retail business. This includes responsibility for marketing and communications, customer services, billing and collections, and demand management programs. In addition, Helen works with other members 6 of the executive team to establish the future direction 3 2 7 10 1 4 and leadership of Queensland Urban Utilities. 5 9 8 Prior to joining Queensland Urban Utilities, Helen had a 12-year career in the energy retail industry, during which time she held the positions of Acting General Manager Retail for Babcock and Brown Power, and Senior Manager for Energex Retail Pty Ltd.

12 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 13 Our leadership team

7. Mark Letica 9. Julie McLellan Executive Manager Executive Director Strategy and Growth BCom, Cert Gov Prac and Admin AssocDegAppSci, GradDip(T&D), GAICD Mark provides strategic direction and leadership for the As Executive Director Strategy and Growth, Julie is Office of the Chief Executive Officer. Mark also leads the responsible for leading Queensland Urban Utilities’ strategic and corporate planning, business performance strategic initiatives and growth opportunities in conjunction measurement and external reporting functions. Mark is with the Board and the Executive Leadership Team. responsible for ensuring sound enterprise level governance Before joining Queensland Urban Utilities, Julie held the frameworks are in place and oversees the internal audit and role of Water Resources Manager at Brisbane City Council, corporate property functions. where she was responsible for leading and developing Mark has worked in both state and local governments Council’s WaterSmart Strategy, which aims to deliver as well as in the financial services sector. He was one of total water cycle solutions for Brisbane City. the founding members of the Council of Mayors (South Julie has over 20 years’ experience in the water industry. East Queensland) water reform program, which was She has an extensive and diverse background including responsible for implementing the institutional water reform waterway health and water quality, stormwater and arrangements in South East Queensland. drainage, flood management and alternate water Following this term, Mark was appointed as Program Manager supply options. to establish Queensland Urban Utilities. This represented Julie holds an Associate Degree in Applied Science the largest water transaction – and second largest utilities (Chemistry) and a Graduate Diploma in Training, transaction – in Australian history. Development and Assessment. She is a member of 8. Nina Meyers the Australian Institute of Company Directors and is on the Board of Directors of International RiverFoundation. Chief Information and Technology Officer B Inf, MBA, GAICD, AFAIM 10. Tracey Moore As Queensland Urban Utilities’ Chief Information and General Counsel and Board Secretary Technology Officer, Nina is responsible for managing all LLB, BA, MA aspects of the organisation’s information, communication As the General Counsel/Board Secretary, Tracey is and technology (ICT) environment. She also plays a critical responsible for providing legal advice to the organisation role in Queensland Urban Utilities’ ICT technical separation (including right to information and Crime and Misconduct from Brisbane City Council. Commission matters), secretarial assistance to the Board, Nina joined Queensland Urban Utilities from Allconnex policy development and implementation, management Water, where she was responsible for establishing of the organisation’s insurance portfolio and its property a ‘greenfields’ capability and environment. access and tenure services.

Her previous ICT experience was gained with organisations Tracey has significant experience in infrastructure delivery like the Gold Coast City Council, the Queensland in both the government and private sectors, including Department of Emergency Services, Queensland University the major approvals process. Tracey is also an experienced of Technology (QUT), and the Queensland Police Service. probity advisor and contract lawyer.

Nina has successfully established program-management Immediately prior to this appointment, Tracey was a offices in three different organisations. She has delivered partner with, and led the water and electricity practice a number of large business transformation programs in groups of a major independent law firm. complex organisations using ICT solutions as a catalyst for Tracey holds a Bachelor of Arts degree and a Bachelor of business process reengineering and organisational change. Laws degree (Honours) from the University of Queensland, and a Master of Arts degree (Honours) from Australian National University. Tracey has held several previous Board appointments in the not-for-profit sector and is a member of Queensland Law Society, Australian Corporate Lawyers Association and the Australian Water Association.

14 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 15 Over 1,300 dedicated employees

14 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 15 Year in review – 2011/12

7.1 Our achievements

July 2011 • New residential newsletter, In the Pipeline, launched in Brisbane

• Operational Plan 2011/12 approved by the Board

• New residential newsletter, In the Pipeline, launched in Ipswich, August 2011 Lockyer Valley, Scenic Rim and Somerset

• Rehabilited water main along Queensborough Pde, Karalee

• Recognised as a finalist at the Institute of Public Administration September 2011 Australia Awards in the category of ‘Public Sector Excellence’

• Won best project under $5 million in Queensland for our work on the rehabilitation of a collapsed manhole on Nudgee Road at the Civil Construction Federation Earth Awards

• Inaugural Enterprise Bargaining Agreement supported with 75 percent of employees voting “yes”

• Won the national Public Relations Institute of Australia Golden October 2011 Target Award for Community Relations

• Rehabilitated 3516 metres of sewer in Ipswich

• Agreed to be an essential participant of the Co-operative Research Centre November 2011 for Water Sensitive Cities

• Held the inaugural Special General Meeting for shareholders

16 Queensland Urban Utilities Annual Report 2011/12 December 2011 • Corporate Plan 2011–16 approved by the Board

• Re-opening of the Denmark Hill Reservoir in Ipswich to celebrate the construction of a new raised viewing platform

January 2012 • Launched the BPAY View campaign, allowing customers to receive their accounts online

February 2012 • Launched Overflow Relief Gully Cap Trial in Rosewood

March 2012 • Launched the trial ‘Think at the Sink’ community education campaign

April 2012 • Canungra Sewage Treatment Plant commissioned

May 2012 • Sponsored the Mater Little Miracles Fun Run

• Announced Queensland Urban Utilities would freeze residential water June 2012 and sewerage prices for 2012/13

• Won the Industry Award at the 2012 Healthy Waterways Awards for our Canungra Sewage Treatment Plant Upgrade Project

Queensland Urban Utilities Annual Report 2011/12 17 Year in review – 2011/12

7.2 Performance at a glance Queensland Urban Utilities has service standards in place to assure our customers that the services we deliver are of a consistent and high standard. Table 1 lists our key performance indicators and how we have performed against our service standards over the past two years.

Service 2010 /11 2011/12 Indicator standard result result

Water quality 3.2 4.6 Water quality ≤8 per 1000 properties The increase in water quality complaints was primarily driven complaints by increased rainfall raising the levels of turbidity and naturally- occurring manganese in the water supply.

Water quality incidents ≤10 per 1000 properties 0.3 0.041

Water supply Water pressure Urban area Water pressure ≥210 kPa Trickle feed areas Queensland Urban Utilities undertakes ongoing electronic (and private booster) ≥100 kPa and manual monitoring of the water network to ensure water supply pressure and volume standards are met. Where an issue is detected or a complaint received, Urban areas ≥25 L/min it is investigated and corrective action is undertaken. Water volume Trickle feed areas ≥ 3.2 L/min Customer service Calls answered ≥80% within 30 secs 75% 83% grade of service (% within 20 secs) (% within 20 seconds)

Service connections Time to install a new ≥95% within 38% 52% service connection 15 working days Continuity of supply Number of ≤100 per 1000 properties 63 48 unplanned water per annum supply interruptions

Restoration of ≥90% unplanned 87% 89% interruptions restored water supply within 5 hours Response to incidents:

Urgent water 100% within 1 hour 93% 99%

Urgent sewerage 85% 97%

Non-urgent water 100% within 24 hours 78% 97%

Non-urgent sewerage 86% 98%

Notification of 48 hrs notice given Queensland Urban Utilities provides a minimum of planned interruptions 48 hours notice to our customers before any planned interruption to services. This is done through letterbox water and sewerage notices or hand-delivered calling cards.

Table 1: Queensland Urban Utilities’ two-year performance, measured against our service standards.

During 2011/12, Queensland Urban Utilities revised its management of water quality incidents to focus on those incidents that required immediate reporting to the regulator. This provided Queensland Urban Utilities with a better focus on managing water quality incidents within its control.

18 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 19 Our future

7.3 Looking ahead – five-year strategic outlook Our vision is to be recognised nationally as Over the next five years, safety will continue to be a key a leader in the delivery of products and services, priority. Our focus on customers and community will drive and to be valued as a trusted partner by our everything that we do. Through longer-term planning customers and community. and a culture of innovation, we will drive our operational efficiency and deliver a capital investment program that We will continue to work closely with our stakeholders aligns to population and economic growth forecasts across as we believe listening and responding to their needs our service territory. and expectations will drive our success. Our five-year corporate objectives are listed in Table 2, In developing our goals and key initiatives for the together with the key initiatives that will help us to achieve next five years, we have considered feedback from these goals. our shareholders, customers and employees. These goals recognise that we operate in one of the fastest-growing regions of Australia. As our region grows, so does our business.

14 , 384 square kilometre service territory

18 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 19 Our future

Corporate Objectives In 2017, we will... Key Initiatives

Deliver service that is • Have a level of customer trust • Improve our customers’ valued and trusted by that exceeds that experienced experiences through enhanced our customers and by any other major water utility operational performance the community in Australia • Improve communication with • Have met or exceeded the our customers expectations of our key • Enhance on-line self-service community stakeholders capability

Focus on business • Have the lowest operating cost • Optimise service delivery efficiency and continuity per property of any comparable efficiency and effectiveness: water utility in Australia • Unaccounted for water • Project planning and • Deliver against a prudent management and efficient Capital • Key corporate processes Investment Plan that aligns to the shareholders’ planning • Deliver transformational schemes, population and ICT program economic growth and • Develop five year renewal developer activity and growth capital program, optimised on asset condition, capital and non-capital solutions

Keep our people safe, • Have safe, capable and • Implement integrated safety capable and dedicated dedicated people and well being program • Engage employees through Culture Program

Maintain appropriate • Continue to provide affordable • Revise EBA financial performance water and sewerage services • Rationalise tariffs starting 2013–14 • Have consistently delivered the • Develop five year price forecast return on the equity of path (in conjunction with our shareholders shareholders)

Deliver sustainable growth • Be generating revenue from new • Deliver lighthouse strategic business sources that contribute growth projects: positively to the reduction of • Lockyer Valley water scheme operating costs or future capital • Fitzgibbon stormwater harvesting scheme (FiSH) • Be an environmentally • Carbon abatement program sustainable organisation • Norman Creek waterway redevelopment • Be innovative in our R&D • Biosolids re-use

Table 2 – Our five-year corporate objectives and initiatives.

20 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 21 Exciting long-term vision for the future

20 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 21 Deliver service that is valued and trusted by our customers and the community

Performance summary 2011/12

Corporate objective: Deliver service that is valued and trusted by our customers and the community

Strategic Business Achievements outcome strategy

Customers recognise Develop and implement Continued to develop our brand strategy to align and trust our brand a brand strategy our external brand with our internal brand and culture. that supports our Achieved 90% prompted brand awareness across strategic direction our service territory and a Corporate Reputation Index score of 46 (2 point growth over 12 months). Implemented vehicle livery enhancement program to increase customer awareness that we are working 24/7 to maintain water and sewerage services. Established a proactive media program resulting in more than 110 positive news articles about Queensland Urban Utilities in 2011/12.

Identify and Implemented a Sponsorship Strategy to support establish a corporate initiatives that align with our corporate objectives citizenship presence and brand strategy. in the community that supports our vision

Satisfied customers Understand the needs Implemented a number of workflow management of our customers initiatives to improve our responsiveness and efficiency through effective in managing customer complaints. research and information management

Implement an efficient Progressed the transition of our contact centre from and consistent an external supplier to in-house, which will deliver customer-focused an enhanced customer focus and minimise the cost approach across to serve. our business Launched the paperless billing option, BPAY View, to enable customers to receive and pay their bills electronically. Developed and endorsed an e-business strategy to improve the online customer experience. Established the We Care Committee to address customer issues and complaints that fall outside existing policies and processes.

Educate our customers Launched a number of community education campaigns about the value of and initiatives, including the Capital Leveraging Program our services and Think at the Sink campaign. Achieved an increase in our customer-rated value score.

22 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 23 Strategic Business Achievements outcome strategy

Our performance Demonstrate our 98% of correspondence was acknowledged within outcomes evidence commitment to 2 business days, and 95% of correspondence was our continued our customers completed within 20 business days. competitive advantage through operational responsiveness

An established and Understand community See Stakeholder Engagement Program case study effective stakeholder needs and growth on page 26. engagement structure through effective stakeholder and community engagement

Work closely with Waived bills for customers in the Grantham community community social who were severely affected by the January 2011 floods groups and provide and were still recovering 18 months on. adequate support Adopted a Financial Hardship Strategy to support for customers facing customers experiencing difficulty paying their financial hardship accounts (see case study on page 27). Reviewed the Concealed Leak Policy to include small businesses with an annual water consumption of up to 100kL, and expanded the definition of ‘concealed’ to include leaks in both underground pipework and wall cavities.

Business positioning Understand our growth Achieved a 4-point growth in our Brand Index Score. goals and consistently Implemented a community engagement alliance model assess potential by signing a Standing Offer Agreement for the ecological value-adding alliances rehabilitation of our construction sites with a local bush-care group.

Strong community relationships

22 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 23 Deliver service that is valued and trusted by our customers and the community

Our brand drivers Improving our customer service In 2011, Queensland Urban Utilities commissioned Our customers and community are at the forefront of qualitative research to better understand our customers’ everything we do; therefore, delivering a high standard of perceptions of our organisation, our brand, and our customer service is integral to the success of our business. service offering. From this research, four key brand To improve the level of customer service provided by key drivers emerged: business teams, Queensland Urban Utilities implemented • Value: Our customers want fair and justifiable pricing, a Customer Experience Program. This program captures prices equal to or below other areas, relatively stable direct feedback from customers, which is used to inform pricing over time, and money reinvested in infrastructure. and drive a continuous improvement program to solve • Transparency: Our customers want us to be open any outstanding issues. and honest. They want to be informed of upcoming In 2011/2012, the program focused on customer work and our future plans and they want easy access interactions that related to new connections. The feedback to relevant information. from customers helped develop improvement plans for • Customer focus: Our customers want us to be the respective teams, which will assist them in delivering knowledgeable, responsive, helpful, friendly and an enhanced standard of customer service. The Customer courteous. They also want consistency in the Experience Program will continue to be rolled-out across customer service they receive. all customer-facing groups in the organisation. • Reliability: Our customers expect safe, clean drinking water and a reliable sewerage service 24 hours a day, Educating and informing our customers seven days a week. Our customers told us they wanted easy access to relevant In 2011/12, we harnessed a number of opportunities to build information. In response to this, Queensland Urban Utilities Queensland Urban Utilities’ value proposition and brand launched a number of community education programs and equity. Examples of these opportunities follow. initiatives to help raise our customers’ awareness of water and sewerage issues that may affect them.

In July 2011, we introduced our quarterly residential newsletter, In the Pipeline. This newsletter provides customers with important information about their account, details of our services and capital works projects happening in their community, and advice on water efficiency. It also keeps customers informed of their responsibilities regarding maintenance and repairs of water and sewerage infrastructure on their property.

Sophie McPhilomey, a member of Queensland Urban Utilities’ Contact Centre team, knows that delivering a high standard of customer service is integral to the success of our business

24 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 25 In late 2011, we launched our Capital Leverage Program to • WaterAid Australia Golf Day, which raised funds to help increase our customers’ awareness of infrastructure work some of the world’s poorest people escape poverty and occurring in their local communities. We communicated disease caused by living without safe water and sanitation. our key messages to them via newsletters, local newspaper • Mater Foundation’s Little Miracles 5km fun run, which was articles and signage at our work sites. attended by 30 Queensland Urban Utilities employees.

In March 2012, we launched our Think at the Sink campaign, Delivering efficient and reliabile targeting residential properties in suburbs with a high risk service around the clock of sewage overflows. This campaign encourages customers Our customers expect us to provide safe, clean drinking to adopt a series of simple and practical behaviours known water and a reliable sewerage service 24 hours a day, seven to minimise blockages that contribute to overflows. days a week.

Supporting communities In our service delivery unit, we have: through sponsorship • shifted our immediate priority in unplanned water In June 2012, Queensland Urban Utilities adopted a interruption events to reinstating water through Sponsorship Policy that states all sponsorships must bypass arrangements to affected customers support our brand drivers and help enhance Queensland • enhanced responsive coverage through an Urban Utilities’ corporate reputation. after-hours roster • improved customer satisfaction by reducing In 2011/12, we sponsored the following events: overall application and delivery timeframes for • Queensland Council of Social Service forum, ‘Building new connections resilience in communities and fairness for disadvantaged • developed a Rapid Response Team for people’, which provided the opportunity for community sewage overflows. groups to meet Queensland Urban Utilities’ customer service representatives. • Salvation Army breakfast function for civic and community leaders and high-profile business personnel as part of the annual Red Shield Appeal. • River Symposium conference, which enabled us to provide information about our sewerage operations and flood recovery.

Queensland Urban Utilities was the official track sponsor of the Mater Little Miracles 5km fun run. Over 30 employees, including Kassandra Hochwallner and Meheret Johnson (pictured) participated

24 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 25 We are committed to engaging with our stakeholders.

Case study Stakeholder Engagement Program

Queensland Urban Utilities is committed to engaging In 2011/12, stakeholder engagement occurred across with our stakeholders to identify, and ultimately satisfy, 45 major, medium and rolling infrastructure projects. customer needs and expectations. An example of an extensive community engagement project relates to the Auchenflower Branch Sewer We strive to meet these needs and expectations through Upgrade Project. our multi-faceted Stakeholder Engagement Program, which includes our Customer and Community Reference Group; The project team door-knocked hundreds of residential Capital Works Program stakeholder engagement; and our and commercial customers along the project route almost a year before construction started. These relationships annual Stakeholder Satisfaction Survey. were maintained for 18 months and, during this time, stakeholders were informed of project updates via phone Customer and Community Reference Group calls, text messages, letterbox drops and face-to-face visits. Queensland Urban Utilities’ Customer and Community Reference Group meets quarterly to discuss a range of This level of community engagement demonstrates issues, from infrastructure planning and pricing, to water Queensland Urban Utilities’ commitment to our efficiency and environmental sustainability. customers and community. The group, established in November 2010, is made up of 11 Stakeholder Satisfaction Survey self-nominated members, who speak on behalf of a variety In December 2011, a satisfaction survey was undertaken with of community sectors to ensure fair representation. Mayors, Elected Representatives, council Chief Executive The Customer and Community Reference Group helped Officers, Chairs and Chief Executive Officers of other water guide Queensland Urban Utilities’ actions in 2011/12 by industry participants, and our Customer and Community providing valuable feedback on: Reference Group. • the updating of our Financial Hardship Strategy On average, we scored a satisfaction rating of 7.6 out of 10. • the review of our Concealed Leak Policy This is an encouraging result given that Queensland Urban • future pricing principles and tariff structures Utilities was only 18-months-old at the time of the survey. • our approach to carbon emissions abatement The survey results indicated that: and GreenPower • our Customer and Community Reference Group is • the development of a draft Climate Change Strategy functioning well and has a high opinion of Queensland • our approach to sewage overflow management. Urban Utilities • our focus on stakeholder engagement has been noted Capital Works Program stakeholder engagement by many stakeholder groups and attracted positive Queensland Urban Utilities consults stakeholders comparisons with other water utilities regularly around our infrastructure projects to identify • regular meetings with key stakeholders by the and manage issues that may affect residents or businesses. Queensland Urban Utilities Board Chair and Chief Consultation occurs before, during and after the works Executive Officer was noted very positively. through a variety of channels, including doorknocks, This annual survey provides Queensland Urban Utilities letterbox drops, email and telephone calls. with a strong platform on which we can continue to further build our important stakeholder relationships.

26 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 27 We support our customers who are experiencing financial hardship.

Case study Financial Hardship Strategy

Queensland Urban Utilities has worked closely with 3. Development of a range of services to assist Kildonan UnitingCare – a leading authority in developing customers to manage their financial situation. hardship programs and staff training – and members of our With guidance from Kildonan UnitingCare and QCOSS, Customer and Community Reference Group to develop we have enhanced the range of services we offer to our Queensland Urban Utilities’ Financial Hardship Strategy. customers. These include flexible payment plans, multiple We are committed to supporting our customers who are payment channels, and water efficiency advice. We are also experiencing financial hardship and we strive to help them continuing to develop our referral network to community manage their debts. support organisations.

Our Financial Hardship Strategy outlines five key initiatives: 4. Engagement with community development agencies, government and other South 1. Early and proactive identification of East Queensland utilities. financially vulnerable customers. Queensland Urban Utilities is developing an outreach Queensland Urban Utilities has been proactively promoting program and building relationships with key community awareness of our hardship program to financial counsellors support agencies. For example, we have a sponsorship and community agencies. We highlight that customers agreement in place with UnitingCare Community to work should contact us if they are experiencing difficulty paying with our customers who are experiencing financial hardship. their water and sewerage accounts. Customers who avail themselves to this voluntary service In August 2011, we sponsored the Queensland Council will be transferred from Queensland Urban Utilities of Social Services (QCOSS) forum, ‘Building resilience in to UnitingCare Community, who will then conduct an communities and fairness for disadvantaged people.’ independent assessment of the customer’s financial This gave us the opportunity to meet with community situation. We have also engaged with other South East groups and help them understand our approach to Queensland utilities to coordinate a consistent approach managing financially vulnerable customers. to hardship.

2. Staff training to build hardship awareness 5. Develop efficient monitoring and reporting and ensure respectful engagement. of customer accounts. Hardship awareness training and advanced coaching has Queensland Urban Utilities is developing systems to been provided to our Retail staff to help the frontline monitor the effectiveness of our financial hardship teams proactively identify customers experiencing hardship services and to support early identification of financially and ensure they are treated with respect and sensitivity. vulnerable customers.

26 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 27 Safe, capable, and dedicated people

Performance summary 2011/12

Corporate objective: Keep our people safe, capable and dedicated

Strategic Strategy Achievements outcome 2011/12

Clear accountability Ensure that Purpose, vision and values articulated to staff through and alignment accountability across a variety of channels. the organisation is Strategic objectives and accountability cascaded clearly articulated down to employees through the performance management process.

Enabling Plan a long-term Commenced People and Safety Policy review. workforce relations workforce to support organisational needs

Support current Certified and implemented our first needs and enable future Enterprise Bargaining Agreement. change and growth through workplace relations and industrial instruments

Capability uplift Understand the benefit Developed and delivered a pilot ‘People Leader’ and leadership of enterprise leadership induction program to address performance planning, and deliver a leadership recruitment and culture development. model to support this

Foster employee Talent Management Strategy endorsed by the Board, performance through with a focus on leadership talent. talent acquisition, Launched a high-level succession-planning framework retention and to: identify pivotal roles and high potential talent; assess succession planning the talent pipeline; agree to Talent Matrix; plan and action talent development initiatives.

Deliver a learning and Leadership development modules launched to support development model, manager-led development. Launched ‘high potentials’ strategy and frameworks network and development program. that support our current Delivered a pilot Skills Development Program for leaders growth strategies to upskill in giving and receiving feedback and coaching. Delivered a pilot model to identify talent development opportunities.

Embedded culture Foster an organisational Continued to embed our organisational values through and commitment culture that supports targeted internal campaigns. our purpose, vision, Launched Values Awards to recognise staff that organisational values demonstrate organisational values in their work. and brand drivers, behaviour and capabilities

28 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 29 Strategic Strategy Achievements outcome 2011/12

Healthy and Embed health and Engaged external ‘safety partners’ to improve the safe people safety management monitoring and measurement of safety management in everyday life across the business. Implemented Fatigue Management Training. Reduced our Lost-Time Injury Frequency Rate from 17.6 to 12.6. Implemented an ongoing program of safety interactions, lead by the Executive Leadership Team, to create an environment that empowers employees to raise safety concerns.

Tailored Deliver a commercial Completed a 2011/12 Performance and Reward Review remuneration, remuneration framework of executives, leaders and professionals. rewards and optimising performance recognition outcomes

With end-to-end accountability, our People and Safety • building employee relations through initiatives such as group is responsible for a range of key functions, including: workplace consultative committees, safety committees, business partnerships; learning and development; and culture leaders organisational development; performance • agreed organisational capabilities and a talent and and reward; workplace health, safety and wellbeing; succession framework and workplace relations. • an Employee Value Proposition that, upon completion, will inform attraction and retention strategies Workforce profile (a post recruitment survey is currently collecting data). As at 30 June 2012, Queensland Urban Utilities employed • Talent and Leadership Strategy implementation. 1,311 staff in a range of professions and trades in permanent full-time, permanent part-time and temporary capacities. Promoting a work life balance This figure included 1,065 permanent employees. Queensland Urban Utilities operates within our Enterprise Bargaining Agreement (EBA1), relevant industrial awards, The full-time equivalent staff establishment for permanent and workplace policies related to employee provisions. employees was 1,033. Employee-related policies are continually under review For the 2011/12 financial year, Queensland Urban Utilities to ensure business flexibility in changing environments. recorded an 88.5 per cent permanent retention rate and Queensland Urban Utilities provides a variety of flexible 12.8 per cent permanent separation rate. employment options to meet the needs of our business Note: The sum of the separation rate and retention and employees, while supporting the development of rate is not expected to equate to 100 per cent as they a safe, capable and dedicated workforce. are calculated using different criteria. Employment options that promote work-life balance, and are available to employees, include the ability to: Workforce planning, attraction • negotiate flexible work arrangements, such as nine-day and retention fortnights, condensed hours (i.e. working 36.25 hours To meet future organisational needs, we initiated over four days), staggered working weeks/fortnights a two-year workforce plan. This process followed the and part-time agreements completion of a business-wide efficiency review and draws • enter into part-time employment with other employees on number of strategies, policies, and initiatives that have where two or more employees share one full-time been developed and/or initiated during the course position, each working on a fractional basis of the year, including: • strategies to attract, develop and retain employees with the diverse skills, talents, and experiences needed for our future success

28 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 29 Safe, capable, and dedicated people

• take advantage of flex-time arrangements, which allow The Employment Consultative Committee (ECC) accrual of up to 14.5 ordinary hours to be used on an continued to meet through 2011/12 and is the primary ad hoc basis, taking into account staffing levels while forum for industrial matters between employees, unions balancing the needs of the employee and Queensland Urban Utilities. • work from a remote workplace (e.g. their home), In addition to EBA1 implementation issues, the ECC while electronically maintaining a presence in their also discussed safety and operational issues as standard primary office (i.e. telecommuting) agenda items to ensure a level of industrial harmony • access various paid and unpaid leave arrangements, at Queensland Urban Utilities. such as annual and long service leave at half pay for double the time. Consultative committees, comprising general managers and local union delegates, continued to meet throughout Performance management 2011/12 to address any local operational issues. A key element to the development of safe, capable, and These local committees have been well supported by dedicated people is the management of performance. the establishment of the Health and Safety Representatives monthly meeting. As such, we developed an outcome-focused Performance Framework that uses a scorecard model. This framework No industrial action occurred in 2011/12. This demonstrates was rolled-out in 2011/12, initially applying to employees the sound industrial partnerships held with the nine unions. not covered by the enterprise bargaining framework. All matters have been successfully dealt with locally.

Talent and Leadership framework Central Safety Committee Our Cultural Change Program identified leadership, The Central Safety Committee leads, reviews and sets processes and systems, employee capability, and direction for the implementation of all Queensland Urban employee commitment as the four key levers of change. Utilities safety programs. As the strongest lever for change, a leadership model was The Central Safety Committee, which comprises the developed and adopted. The leadership model includes Executive Leadership Team and Safety Manager, makes the following key elements: decisions that will create and embed a culture where • Identify and review critical roles. “Safety Is First Priority for Everyone, Everywhere, Everyday”. • Talent and succession planning, identifying high- potential employees, and providing a personal The Central Safety Committee responsibilities include, development plan for further skills enhancement. but are not limited to: setting strategic safety goals • Development of leadership conversational skills. and objectives; monitoring and tracking progress towards • Lifestyles Inventory (LSI) and Group Styles Inventory these goals; and reviewing the progress of programs (GSI) delivered to teams with coaching provided and initiatives. by ‘in-house’ resources. • Retraining and Replacement Program that actively assists and demonstrates respect for people who are involved in and affected by technological and organisational change. • Employee Engagement Pulse survey completed at all Employee Events.

Industrial and employee relations Our Enterprise Bargaining Agreement (EBA1) consolidated 16 industrial instruments into one agreement and four relevant awards. This Enterprise Bargaining Agreement allowed for the harmonisation and alignment of terms and conditions across the business by simplifying allowances, leave provisions and industrial consultation arrangements.

30 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 31 67% of the Executive Leadership Team is female

30 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 31 Pictured left is Scott Peel (Fitter), accepting the team award for creativity in safety. Scott’s team identified a potential risk in its work area and worked together to successfully address it. This involved designing and fabricating a ramp for their truck to load and unload a heavy sewer camera. They were proactive in their approach and created a solution that will benefit the team in the future.

Case study Values Awards for safety

Queensland Urban Utilities’ six organisational values With the first value under the spotlight being ‘safety’, – safety, customers and community, accountability, awards were presented for: deliver value, participation and creativity – support the Creativity in safety – organisation’s purpose and vision, as well as provide for excellence in safety creativity. internal guidance on what behaviour is expected Safety accountability– and how decisions should be made. for accountability and taking action. Safety participation – To raise employees’ awareness of these values, an internal for an outstanding contribution to workplace safety. campaign was launched in April 2012 to highlight the importance of a different value each quarter. Queensland The enthusiastic response to the Values Awards was Urban Utilities’ ‘Values Awards’ were introduced as a way encouraging, demonstrating that safety as a value is gaining of recognising and rewarding both individuals and teams commitment and on its way to being embedded into who have demonstrated their commitment to the Queensland Urban Utilities’ culture. We will continue to highlighted value. The inaugural Values Awards ceremony promote Values Awards to raise awareness of our values was held as part of our Employee Events in June 2012. and recognise employees who embrace them in their work.

Pictured left is Daniel Faccio (Planned Maintenance Delivery), accepting the team award for safety participation. Daniel’s team identified an ongoing issue and worked collaboratively to produce a creative and safer way of managing it. This included implementing clear documentation specifically relating to safe working conditions for all 100 wet sewer wells within the Brisbane service territory.

32 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 33 Safety is our number one priority.

Case study Values Awards for safety Fatigue Management Training

Honouring our commitment to safety, Queensland The results Urban Utilities launched a program to educate employees Approximately 420 frontline employees participated in and manage the risks associated with fatigue. the six-hour fatigue management workshop, and 60 frontline supervisors and team leaders attended the The program eight-hour ‘Fitness for Work’ Program. An expert was engaged to deliver a face-to-face Fatigue Employees were given the opportunity to provide feedback Management Training Program to frontline employees upon completing the program. Responses included: from December 2011 to May 2012. • “One of the best information sessions I’ve been to.” The program educated employees about: • “A very informative course that gives us ways to • the extent and cause of fatigue in modern life monitor fatigue.” • safety and performance • “Probably the best value training I’ve attended.” • the potential impact of shiftwork on health • “Eye-opening course. Good job. Will change my • effects of drugs and alcohol thinking about fatigue.” • safe commuting • sleep management. Looking forward

Participants also undertook a comprehensive sleep In line with our commitment to safety, all employees assessment to determine the level and causes of their across the business will participate in an intuitive online fatigue and were supplied with a fatigue management Fatigue Awareness Program. This program will also form manual containing practical strategies to address the part of our induction course for all future employees, program content. contractors and visitors. We envisage this Fatigue Awareness Program will assist in making Queensland Urban Frontline supervisors and team leaders participated Utilities an industry leader in terms of safety. in a ‘Fitness for Work’ Program, where they learnt: • how to assess signs that an individual may be unfit for work • how to provide objective feedback with evidence to support concerns • how to establish appropriate consequences to promote behavioural change.

32 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 33 Delivering our services

Performance summary 2011/12

Corporate objective: Focus on business efficiency and continuity

Strategic Strategy Achievements outcome 2011/12

Prudent and efficient Understand our risks and Refreshed Risk Management Framework to embed risk asset management respond appropriately as part of business processes. Implemented intelligent risk reporting. Continued to develop a Corporate Compliance Program to manage compliance obligations. Established Business Continuity Framework to ensure continuity of core services.

Provide infrastructure Developed Water Netserv Plan 18-months ahead planning that meets of legislated due date, which was endorsed by all the requirements of all shareholders. stakeholders and enables Completed the SEQ Design and Construction Code, community growth and subsequent stakeholder engagement, which saw 18 codes reduced to one. Established ongoing engagement with local and state government to identify regional land-use plans, including ‘hot spots’ for growth and investment. Developed and refreshed growth projections in consultation with shareholders. Updated existing regional master plans for shareholders.

Optimal Proactively pursue Progressed towards a private sector self-certification operational opportunities for and delivery model. performance operational efficiency Delivered a number of service delivery efficiencies. Implemented a sustainable supply chain working with our suppliers to positively influence their and our ethical, social and environmental performance.

Ensure that our systems Implemented a Business Reporting Framework that and processes enable aligns ongoing operational and strategic measurement us to regularly monitor, and reporting to corporate objectives. review and improve our Implemented multiple plans to ensure systems and performance processes are in place to reduce operational risks. Implemented an online energy management system at six major sewage treatment plants. Integrated the reporting of our performance against the Global Reporting Initiative indicators into the Business Reporting Framework.

34 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 35 Strategic Strategy Achievements outcome 2011/12

Optimise our asset The Oxley Creek co-generation replacement project base with value-added identified a 1.4MW dual-fired (biogas and natural gas) initiatives system as the optimal solution to replace the existing 1.0MW flood-damaged unit. The Luggage Point Co-generation replacement project identified the optimal solution of 2 x 1.2MW systems to replace existing infrastructure. Refurbished Helidon and Aratula Sewage Treatment Plants with natural reed bed solutions. Sealed digester roofs. Completed concept design for centralised regional Wacol Sewage Treatment Plant, which will ultimately take flows from Ipswich and west Brisbane. Completed evaluation of regional Sewage Treatment Plant for Yarabilba to take flows from Beaudesert and Bromelton.

Plan and deploy efficient Completed the Records and Documents Management and effective technology Feasibility Study as basis for future implementation of and systems electronic records and documents management. Established enterprise contract for geospatial (GIS) solution. Completed planning for the transfer of ICT systems from Brisbane City Council to Queensland Urban Utilities. Completed tenders for external service providers to manage and support our ICT systems, infrastructure and communications networks.

Ensure that our Established robust governance practices and frameworks governance structure modelled against the ASX Corporate Governance enhances efficient Principles and Recommendations. and effective decision-making

Legal and Continue to comply Lodged Drinking Water Quality Management Plan regulatory with all regulatory to the regulator for approval. compliance requirements Obtained approval from the regulator for the Gatton Sewage Treatment Plant recycled water scheme for the irrigation of minimally processed food crops. Implemented new notification procedures for environmental issues. Instigated a project to upgrade sampling points in Ipswich and the western areas. Updated site-based environmental management plans for 27 sewage treatment plants to ensure ongoing compliance with development approval conditions.

34 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 35 Delivering our services

Delivering efficiency Planning for growth In 2011/12, we proactively pursued multiple opportunities Water Netserv Plan to enhance our operational efficiency. We: Under the South East Queensland Water • developed outsourcing arrangements to provide (Distribution and Retail Restructuring) Act 2009, additional capacity distributors-retailers are required to have a Water • delivered extensive sewer network and sewage Netserv Plan in place by 1 July 2013. treatment plant improvements Queensland Urban Utilities was the first utility to develop • improved emergency management protocols a Water Netserv Plan, 18-months ahead of the legislated • improved scheduling and logistics through the use of due date. It provides a framework for prudent and GPS systems and mobile computing efficient planning and delivery of services to achieve • developed a contingent workforce through private long-term sustainability. sector partnerships • developed remote sewer monitoring for The Water Netserv Plan consists of two parts: Part A overflow occurrences. is a public document that broadly deals with strategies, infrastructure, planning, service standards, connections, Improving our capabilities and charging; Part B is a confidential document that Information and Communication Technology focuses on operating frameworks, management functions Our Information and Communication Technology and key actions. (ICT) group provides valuable support to all levels Part A was approved by the Board in October 2011 and of the organisation. The group’s primary goal is to submitted for endorsement by our shareholders and the enable and support business change and growth by Queensland Government Minister for Planning. adopting appropriate technologies, while delivering All five shareholders have endorsed our Water Netserv an assured business platform in a cost-effective Plan. The Board approved Part B in November 2011. manner. This is achieved through: planning; program delivery; management of the business information The Water Netserv Plan promotes greater transparency systems; supporting information technology on the business’ operations and will be a pivotal tool to infrastructure; and network technologies. strengthen our strategic relationship with shareholders, and engage with regulators, industry and the wider community. Key initiatives in 2011/12 included: • upgrading Ipswich SCADA WAN for improved Procurement and Projects Advisory Group performance, security and reliability, and introducing and Major Project Executive Service Level Agreements and Standards The Procurement and Projects Advisory Group and the • moving SCADA technology into a ‘best practice’ Major Project Executive review project feasibilities prior environment, and introducing improved to going to market and plan for the sourcing of products user-access security and services. • completing the update of ICT Continuity and Disaster These bodies also provide advice and recommendations Recovery Plans, which are to further updated in 2012/13 relating to the award of contracts. to reflect managed services provider model • implementing improvements to ICT governance and The function of these groups is to ensure that proper portfolio management processes consideration is given to determining the most • aligning ICT organisation to the managed services advantageous arrangements for Queensland Urban Utilities delivery model when awarding contracts, and to provide a record of • commencing alignment of ICT processes with industry appropriate governance in the procurement process. standards and benchmarks (ITIL).

36 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 37 We proactively pursue opportunities to enhance our operational efficiency

36 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 37 A Membrane Bio-Reactor Process (MBR) has been installed to reduce the plant’s environmental impact.

Case study Goodna Sewage Treatment Plant Upgrade Project

In 2011/12, Queensland Urban Utilities invested $68.4 The upgrade will also improve performance of the plant million from a total project cost of $115 million to and reduce its environmental impact on the Brisbane River upgrade the Goodna Sewage Treatment Plant in Ipswich. and associated wetlands.

Construction, which commenced in October 2010, By installing a membrane bioreactor process, the plant now is expected to be finalised by September 2012. complies with the stringent discharge conditions set by the Department of Environment and Heritage Protection. The works have increased the plant’s capacity by almost 40 percent, and will cater for expected population growth Further, to enhance air quality, a fully automated over the next three years in Springfield, Wacol, Carole Park air treatment facility has been installed. This extracts and Goodna. and treats emissions before they are vented into the atmosphere.

Works have increased the plant’s capacity by almost 40 per cent.

38 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 39 $8.7 million invested in the suburb of Auchenflower.

Case study Goodna Sewage Treatment Auchenflower Branch Plant Upgrade Project Sewer Upgrade Project

Queensland Urban Utilities is increasing the capacity Micro-tunnelling is an innovative process that uses a of the Auchenflower sewerage system to cater for remotely controlled tunnel boring machine to directly increasing population density in the area. install the sewer pipe underground, with minimal impact on local residents and businesses. The $8.7 million Auchenflower Branch Sewer upgrade, which commenced in March 2011, is scheduled to From July 2012, the existing sewer will be connected to be completed by December 2012. the new sewer on Eagle Terrace. The existing sewer, which is 70 years old, will have a liner inserted inside the pipe By June 2012, 10 maintenance holes had been constructed, to extend its life by 20 years. along with one kilometre of new 600mm pipe – via micro- tunnelling – along streets leading to the sewer system Queensland Urban Utilities continues to work on Coronation Drive. closely with the local community to provide updates and manage impacts.

Upgrade works in Auchenflower: a reinforcing bar is lowered into the caisson for installation in the formwork.

38 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 39 Delivering our services

Environment A sustainable approach We are committed to achieving ecologically In response to the 2011 South East Queensland floods, sustainable outcomes by using cost effective, we reviewed our Overflow Management Strategy with a efficient, resilient and appropriate methods key focus on improving community outcomes. Our revised for the intended purpose. approach encompasses a range of short and long-term One of our environmental goals is to improve the health actions across the business in the areas of planning, and resilience of our local waterways and Moreton Bay. operations, retail, and with our shareholders. To help us achieve this, we have developed a series A number of projects are underway that will provide of strategies and management actions around immediate benefits to the community, protect our sewage overflows, trade waste, sewage treatment, assets and operations, and contribute to sustainable and recycled water. environmental outcomes. These efforts include: Sewage overflows investigating infrastructure requirements and rapid-response teams for known “hot spot” areas; greater community Queensland Urban Utilities delivers a sewerage network engagement and awareness programs; and contribution and sewage treatment services in a manner that protects to local and regional waterways monitoring programs. and improves waterway quality and minimises health risks to the community. Trade waste management At times, sewage overflows do occur, usually during The management of trade waste is an important function significant rainfall events when excessive stormwater that not only protects the environment, but minimises enters the network. Other potential causes for overflows health risks to our employees, protects our networks and can include pipe blockages, mechanical failure and treatment plants, and improves the quality of biosolids and power outages. recycled water for re-use.

Queensland Urban Utilities’ Trade Waste Environmental Management Plan provides the framework to ensure the business meets its legislated responsibilities. While the plan supports a consistent approach to trade waste management across our service territory, local provisions are also considered. In 2011/12, improvements have been made to trade waste management practices in the Somerset, Scenic Rim and Lockyer Valley service territories. These improvements will provide a more efficient approach to managing our customers and minimising the impact of trade waste.

Committed to protecting the health of local and regional waterways

40 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 41 Sustainable sewage treatment Climate change and energy management Queensland Urban Utilities is committed to protecting and Queensland Urban Utilities is taking action to mitigate improving the health of our local and regional waterways. greenhouse gas emissions, adapt to climate change Cost-effective, sustainable treatment of sewage at our 28 and improve energy efficiency. sewage treatment plants is a key focus in our approach to Mitigation actions that will be implemented include: providing maximum social benefit for our customers and • the introduction of an energy-savings culture achieving positive environmental outcomes. • management of electricity demand In the short-term, we are investing in improvements • optimisation of sewage treatment plant to our western-area sewage treatment plants to ensure full aeration systems regulatory compliance. The upgrade to the Canungra Sewage • optimisation of water and sewage pumping systems Treatment Plant demonstrates our commitment to the • the installation and operation of energy-efficient community and environment (see case study on page 43). equipment and controls • new cogeneration plant at Luggage Point and the Our philosophy on sustainability for future improvements Oxley Creek Sewage Treatment Plant to produce to both new and existing sewage treatment plants green electricity promotes solutions that: are appropriate for the area; • the refurbishment of digesters at Luggage Point and consider technology innovations and natural processes; Oxley Creek Sewage Treatment Plants to increase the are less energy intensive; and place greater value on production of biogas for use in cogeneration plants nutrient recovery and maximum re-use availability. • the recommissioning of idle digesters at Oxley Creek Already, we are installing natural treatment systems Sewage Treatment Plant. for our smaller treatment plants and are incorporating These energy management and emissions mitigation zero energy, low environmental footprint solutions for measures will reduce: total energy consumption; our newer plants. the total cost of energy; greenhouse gas emissions; and the carbon costs associated with Queensland Urban Utilities’ emissions.

We work around the clock to provide our customers with safe, clean drinking water and a reliable sewerage service 24 hours a day, seven days week

40 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 41 Energy meters allow employees to monitor and manage energy usage in real-time.

Case study Our commitment to energy and emissions management

As part of Queensland Urban Utilities’ commitment to The energy management system provides employees energy and emissions management, we have implemented with an understanding of plant performance. This allows an online energy management system at six of our major initiatives for energy reduction and performance sewage pumping and treatment sites to monitor, control improvement to be prioritised and targeted to maximise and report on energy usage. The system, which is a critical energy, emissions and cost savings. These savings, in turn, part of our wider Energy Management Strategy, allows us benefit our customers. Queensland Urban Utilities intends to measure the performance of strategic and operational to rollout the energy management system to other major energy efficiency initiatives. sites as we continue to focus on improving our energy and emissions management. The energy management system consists of energy meters that measure energy usage of sewage pumping and treatment processes. These meters are connected to a central server that stores energy data and hosts a web interface, allowing employees to monitor and manage energy usage in real- time, and perform detailed analysis.

42 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 43 Community members take a behind-the-scenes tour of the upgraded Canungra Sewage Treatment Plant during a community open day in April 2012.

Case study Our commitment to energy Upgrade of Canungra and emissions management Sewage Treatment Plant

In early 2012, Queensland Urban Utilities completed In June 2012, we were announced the winner of the upgrade works on the $7.2 million Canungra Sewage Industry Award category at the 2012 Healthy Waterways Treatment Plant. Awards for our Canungra Sewage Treatment Plant Upgrade project. As a result of the upgrade, the plant now meets all licence requirements set by the Queensland Government’s The Industry Award category was open to industry sectors Department of Environment and Heritage Protection. such as manufacturing, commerce, development and retail groups for projects aimed at improving the management Works included the installation of a membrane bioreactor of water, or the state of waterways. process. Instead of a conventional settlement tank, this technology filters sewage through a series of flat plates with tiny holes that trap sediment, resulting in a high-quality effluent that has minimal impact on the environment when discharged into Canungra Creek.

At a community open day, Project Director, Steve Gibson, shows a sample of the high-quality treated effluent that is discharged from the upgraded Canungra Sewage Treatment Plant.

42 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 43 Sustainable growth

Performance summary 2011/12

Corporate objective: Deliver sustainable growth

Strategic Strategy Achievements outcome 2011/12

Business Understand our growth Implemented community engagement alliance model positioning goals and consistently by signing a Standing Offer Agreement with a local bush- assess potential care group. value-adding alliances Began implementing a sustainable supply chain, working with our suppliers to positively influence their and our own ethical, social and environmental performance. Subscribed to the Global Reporting Initiative (GRI) including the alignment of this annual report with GRI reporting requirements. Commenced our sustainable investment program to ensure the most efficient distribution of funding. Continued to develop and implement our Business Sustainability Program.

Innovative research Indentify our potential Developed a Research and Development Strategy to and development technology, research and improve and grow the business. Implementation of the development partners strategy commenced with the following projects and and a funding strategy to funding opportunities being identified and/or formalised: engage with them • Cooperative Research Centre (CRC) for Water Sensitive Cities. • Collaborating with Brisbane City Council on the proposed Norman Creek Stormwater Harvesting Scheme. • Australian Research Council (ARC) Industry linkage project. • Isle Utilities Technology Approval Group (TAG).

Research and development During 2011/12, Queensland Urban Utilities The Water Sensitive Cities program brings together research, developed a Research and Development Strategy. expertise and leadership from Australia (Brisbane, Melbourne, As part of that strategy, we indentified and and Perth), Singapore, Denmark and the Netherlands engaged with the following technology, to address the challenges in urban water management. research and development partners. Four themes will be addressed: society, water sensitive urbanism, future technologies, and adoption pathways. Cooperative Research Centre for Water Sensitive Cities Norman Creek Stormwater Harvesting Scheme As an essential participant of the Cooperative Research Our collaboration with Brisbane City Council on the Centre for Water Sensitive Cities, Queensland Urban proposed Norman Creek Stormwater Harvesting Scheme Utilities will invest $1 million over nine years through supports the Board’s waterway redevelopment growth in-kind contributions. We will also leverage research initiative. The potential benefits of this project include outcomes to develop and implement the Board’s improved health of Brisbane waterways and establishing strategic growth initiatives. an alternative water source to offset potable water use.

44 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 45 A Research and Development Strategy has been developed to improve and grow the business

44 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 45 Sustainable growth

Australian Research Council (ARC) Sustainability programs Industry linkage project During 2011/12, Queensland Urban Utilities demonstrated This research project focuses on sewer corrosion and its commitment to sustainability through the development odour generation. Queensland Urban Utilities will invest and enhancement of a number of key programs. Examples $100,000 over three years through in-kind contributions. of these programs are detailed below.

The Community Empowerment Program provides the Performance of natural systems platform for our unique community engagement approach, We are seeking to identify potential research and which encourages residents and community groups development partners to investigate the performance to take part in our ecological site rehabilitation, planning of natural systems that could link into the Department and decision-making process (see case study on page 47). of Environment and Heritage Protection’s nutrient offset policy. We will monitor and report on sustainable solutions Through the Sustainable Supply Chain Program, of vetiver grass from Boonah and Toogoolawah Sewage Queensland Urban Utilities is committed to integrating Treatment Plants and will monitor planned wetland sustainable supply chain principles into our overall systems to be installed at Aratulla and Helidon Sewage procurement processes. This program strives to maintain Treatment Plants. our preferred operating principles by encouraging those who provide us with their products and services to align Isle Utilities Technology Approval Group their operating practices with our commitment to best We have formalised an agreement with Isle Utilities practice and continuous improvement. Technology Approval Group (TAG), which has access We recognise sustainability and prudency in our financial to a knowledge centre across water, waste, the built and investment approach, and this influences efficiencies environment, energy and carbon. The agreement focuses in all of our activities. Our Sustainable Investment and on accelerating the development and commercialisation Accounting Program is designed to ensure efficiencies that of emerging technologies in the water industry. maintain our high operational and administrative standards.

Our commitment to business sustainability Our Measuring, Benchmarking, Reporting and Assurance and sustainable growth Program, together with our policies and strategic framework, are consistent with the Global Reporting Queensland Urban Utilities is committed to Initiative. It sets out the principles and indicators against excellence in business sustainability and sustainable which we measure and report our social, economic and growth management. Further, we strive to achieve environmental performance. and maintain industry ‘best practice’ in this field.

To assist us in reaching this goal, we have adopted Global Reporting Initiative five sustainability types that reflect our activities During 2011/12, Queensland Urban Utilities joined the and the associated impact on the local community Global Reporting Initiative (GRI) as an Organisational and natural environment. Stakeholder. The GRI is a non-profit organisation The five types of business sustainability are defined as follows: that promotes economic, environmental and social 1. Natural sustainability involves natural resources and sustainability. It works towards a sustainable global ecological systems. economy by providing guidance in organisational reporting. 2. Social sustainability is the critical component of our Queensland Urban Utilities maps its annual report against relationship with the community. the Global Reporting Initiative Sustainability Reporting 3. Human sustainability relates to the health, knowledge, Guidelines and adopts the GRI principles for reporting. skills, motivation and intellectual output of our staff. 4. Manufactured sustainability refers to all material goods and our infrastructure necessary to provide our services. 5. Financial sustainability reflects the productive power and monetary value of the other four types of sustainability.

These five sustainability types help us to provide our products and services as efficiently and effectively as possible.

46 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 47 Queensland Urban Utilities’ CEO, Louise Dudley, and a Belmont Scout Club member help revegetate Carindale Recreational Reserve at a community tree planting day.

Case study Partnering with the community

At the beginning of 2011, Queensland Urban Utilities The funds also support the running of B4C’s Sustainability partnered with the not-for-profit land care group, Centre and the operation of a community nursery, Bulimba Creek Catchment Coordinating Committee permaculture gardens and 15 associated bush-care groups. (B4C), to strengthen community relationships and achieve Our agreement with B4C demonstrates social and ecological restoration. environmental responsibility, and helps increase the Such a partnership between a water utility and an health, safety and overall wellbeing of the community. environmental group was an Australian first, and has been highly successful since its inception.

The funds that B4C receives from Queensland Urban Utilities for site rehabilitation flow back into the community and the environment through a variety of channels. One such channel is B4C’s community education program on native plants and habitat protection, which is presented to schools, colleges, and the wider community.

46 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 47 Corporate governance

The ASX Corporate Governance Principles and Membership criteria Recommendations are the basis upon which Queensland Queensland Urban Utilities’ governing legislation requires Urban Utilities demonstrates its commitment to sound that the Board be comprised of a minimum of four and a corporate governance performance and practices. maximum of eight members, each of whom is subject to retirement by rotation. Lay solid foundations for management and oversight The appointed Board members bring a wealth of skills, experience and expertise to their roles, including, but Role of Board and management not limited to, working in regulated utility, government, The Queensland Urban Utilities Board is comprised engineering, finance and audit environments. of eight independent, non-executive members who were appointed in 2010 for terms varying from Responsibilities of the Board three to five years. The appointments were made Under s32 of the South-East Queensland Water (Distribution in accordance with the provisions of the South- and Retail Restructuring) Act 2009, the primary role of the East Queensland Water (Distribution and Retail Board is to decide Queensland Urban Utilities’ strategies Restructuring) Act 2009. and operational, administrative, and financial policies. The Board operates to a number of heads of power, The Board also ensures that Queensland Urban Utilities including, but not limited to, the South-East Queensland performs its functions and exercises its powers in a proper, Water (Distribution and Retail Restructuring) Act 2009. effective, and efficient manner, and that it complies with planning and reporting requirements. The Queensland Urban Utilities Board is responsible for setting and overseeing the organisation’s strategic The Board’s role and responsibilities are set out in direction, and forming and adopting matters of a high-order a Board Charter, and include: operational nature. 1. Monitoring the implementation of policies, strategies, and achievement against objectives. To discharge its obligations and responsibilities, the Board 2. Monitoring compliance with control and operates to an authorities and delegation instrument, which accountability systems, regulatory requirements, describes the powers vested in and reserved by the Board. and ethical standards. Outside of these reserved powers, the Chief Executive 3. Ensuring that appropriate risk management systems, Officer has the authority to manage and supervise the internal control and reporting systems, and compliance day-to-day operations and activities of Queensland frameworks are in place and operating effectively. Urban Utilities. 4. Informing and approving the business and capital The Chief Executive Officer, in turn, sub-delegates investment plans. her powers, in accordance with Section 53(4) of the 5. Tariff and price determination. South-East Queensland Water (Distribution and Retail 6. Approving the annual and long-term budgets, including Restructuring) Act 2009 to officers through an instrument operational and capital expenditure. of sub-delegation. 7. Ensuring the preparation of accurate financial reports and statements. 8. Reporting to participants on the performance and state of Queensland Urban Utilities.

48 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 49 Structure that adds value Board meetings Committee meetings Board ordinary meetings are scheduled monthly The Board has three sub-committees to assist in in accordance with the Board Charter. Recognising the execution of its duties, and to allow for detailed the need to be flexible and adapt to changing consideration of complex issues or areas of special interest: environments and circumstances, the Board, from 1. Audit, Finance and Risk Committee time-to-time, considers routine matters out- 2. Capital Delivery and Asset Management Committee of-session by circular resolution or by way of an 3. Human Resources and Community Committee. extraordinary Board meeting where the matter is Each committee operates to a Terms of Reference, complex, or requires fulsome discussion. which sets out its roles and responsibilities, composition, A summary of attendance of Board members at ordinary structure, membership requirements and the manner in and extraordinary Board meetings is set out in Table 3. which it is to operate.

To provide advice and support to the Board, the Chief A summary of attendance of Board members at committee Executive Officer, General Counsel and Executive Manager meetings is set out in Table 3. attended ordinary and extraordinary Board meetings during the 2011/12 financial year.

Recognising the need for Board members to have sufficient time to review, digest and seek information prior to an ordinary Board meeting, management circulates Board papers at least five business days before meetings.

Asset Human Management Audit, Finance Resources and Member Board and Risk and Capital Community Delivery Ordinary Extraordinary Term of Appointment 12 4 6 5 3

Jude Munro AO (5 years) 12 4 6 5 3 Bernard Ponting (3 years) 12 4 6 n/a n/a Len Scanlan (5 years) 12 4 6 4 n/a Diana Eilert (4 years) 12 4 n/a n/a 3 Phil Kesby (4 years) 10 3 n/a 4 n/a Barry Ball (3 years) 12 3 n/a n/a 3 Paul Emmerson (3 years) 12 4 6 n/a n/a Dennis Cavagna (4 years) 12 3 n/a n/a 3

Table 3: Summary of attendance at Board meetings 2011/2012. All Board members appointed 25 June 2010.

48 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 49 Corporate governance

Board evaluation As part of the Board’s commitment to improving its The Audit, Finance and Risk Committee is structured in effectiveness, there was an external review during 2011/12. accordance with the ASX recommendation that there is an independent chair and three standing members. This review was conducted in accordance with the During the 2011/12 reporting period, the membership provisions set out in the Board and Committee of the Audit, Finance and Risk Committee was Len Performance Assessment Policy. It involved seeking input Scanlan (Chair), Jude Munro AO, Bernard Ponting, and from each Board member and from senior management Paul Emmerson. Also attending in advistory capacities on the operation of the Board and its sub-committees. were the Chief Executive Officer, Chief Financial Officer, Queensland Audit Office and internal audit service Safeguard integrity in financial reporting provider, and Brisbane City Council’s Chief Internal Auditor. Audit, Finance and Risk Committee Queensland Urban Utilities has robust structures During the report period the Audit, Finance and Risk and processes in place to independently verify Committee observed the terms of its charter and had and safeguard the integrity of financial reporting. due regard to the Queensland Treasury’s Audit Committee Guidelines. One way in which this is achieved is through the Audit, Finance and Risk Committee, which provides the Board Internal Audit review with an independent assessment of the suitability of The Internal Audit is an independent function established Queensland Urban Utilities’ accountability and control within the Office of the Chief Executive Officer to assist framework. the Chief Executive Officer in the discharge of her In 2011/12, the committee: responsibilities under the Financial Accountability Act • reviewed the annual financial statements 2009, and to provide an independent review of internal • reviewed and monitored the framework, adequacy system controls. and security of internal controls, and accounting During 2011/12, Brisbane City Council’s Assurance Security and management information systems and Ethical Standards unit performed the internal audit • reviewed funding arrangements and capital structures function for Queensland Urban Utilities, in accordance • ensured there was an appropriate risk management with an approved Audit Charter and Audit Strategy Plan framework in place approved by the Audit, Finance and Risk Committee. • reviewed the annual and strategic internal audit plans The Internal Audit fulfilled its functions in accordance • reviewed significant internal audit findings and with the above requirements. management responses • oversaw the adequacy of the Authority’s accounting In 2011/12, the Internal Audit undertook nine reviews based internal control system by reviewing written reports on the organisation’s risk profile and in accordance with from internal and external auditors, and monitoring the internal audit plan. The reviews are separated into management’s responses and corrective action plans four key categories: • received a briefing from the Queensland Audit Office • internal control and risk management on findings from audits • major projects • reviewed external reports and ensured deficiencies • revenue assurance identified in internal controls were dealt with • continuous assurance. by management.

50 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 51 The reviews supported the management of service Amalgamation of the five water businesses brought with it delivery and internal control with recommendations a requirement to develop a recordkeeping system for the for improvements in the areas of corporate and local new business. These recordkeeping services were aligned governance. In addition, assurance data reviews are to the Information Services group in February 2012. carried out on a quarterly basis. Major initiatives for 2011/12 included: Review days by key category, and business unit, • establishing Queensland Urban Utilities’ recordkeeping are shown in Tables 4 and 5 respectively. system based on the TRIM computer system • completing the transition of water records Review areas 2011-2012 Review days • reviewing records compliance and initiating a number of activities to address mail scanning, reduce on- site paper records storage, review of the Business Internal control and risk management 85 Classification Scheme, and develop the Retention Major projects 30 and Disposal Schedule.

Revenue assurance 40 During 2012/13, Queensland Urban Utilities will Continuous assurance 53 continue to build on these initiatives to further implement and enhance its record keeping systems.

Table 4: Key review categories. Recognise and manage risk Capital Delivery and Asset Business unit Review days Management Committee The Capital Delivery and Asset Management Committee Operations 60 has three broad functions: • to oversee Queensland Urban Utilities’ asset People and Safety 15 management planning and network risk management ICT 30 • to oversee the enhancement of the capital and Finance 10 the asset acquisition and replacement strategy • to review Queensland Urban Utilities’ five-year Retail 40 corporate plan.

The Committee is chaired by Barry Ball, with Diana Eilert Table 5: Review days by business unit. and Dennis Cavagna as standing members.

External scrutiny Remunerate fairly and responsibly The Queensland Audit Office is Queensland Urban Human Resources and Community Committee Utilities’ external auditor under the terms of the Financial The primary function of this committee is to review Accountability Act 2009. Besides the report on financial and provide direction on matters related to people, statements, no other government body, including the including attraction and retention and human Auditor-General, issued any other external scruitiny resource policies. The committee also has a strong reports regarding the operations of Queensland focus on safety, as well as developing constructive Urban Utilities. and positive stakeholder relationships with our customers, the community and broader stakeholders. Records management (Public Records Act) Under the provisions of the Public Records Act 2002, we The committee is chaired by Phil Kesby, with Diana Eilert as are required to make and keep full and accurate records a standing member. of our activities and have regard to any relevant policy, standards and guidelines made by the Queensland State Archivist about the making and keeping of public records.

50 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 51 Corporate governance

Promote ethical and responsible Public Sector Ethics Act 1994 decision-making Queensland Urban Utilities’ Code of Conduct was Ethical standards and disclosures implemented in the latter half of 2011, with a content The Board is acutely aware of its members’obligations review date set to occur in 2013/14. to avoid conflicts of interest between their duties to All Queensland Urban Utilities’ employees are trained Queensland Urban Utilities and their personal interests. in the Code of Conduct. In 2011/12, Queensland Urban A Conflicts of Interest policy has been in place for Utilities developed online training whereby all new the duration of the reporting period. employees train via the intranet. Prior to this, all staff attended face-to-face training sessions. The policy sets out the obligation of Board members to declare any material interests relevant to the activities of All training attendances are recorded in Queensland Queensland Urban Utilities, and to ensure that conflict Urban Utilities’ Learning and Development training arising from any material interest is noted and managed database, and dates are set to remind employees in accordance with the policy. to undertake refresher training every two years.

Queensland Urban Utilities’ Code of Conduct relies Code of Conduct heavily on the direction set by the Public Sector Ethics Act Board members and employees are expected to in relation to the operation of the Act and the application maintain the highest ethical standards in discharging of ethical principles and obligations. their responsibilities and duties. Queensland Urban Utilities’ Code of Conduct specifically Decisions made must be consistent with our states where employees may take their concerns and organisational values, our policies and procedures, outlines possible ramifications if breaches of the and overarching legislative requirements. Code of Conduct occur.

Official misconduct Queensland Urban Utilities’ procedures and practices Matters that raise a suspicion of official misconduct are support the Code of Conduct as employees are fully referred to the Crime and Misconduct Commission. aware of their obligations in regards to their ethics and Where necessary, investigations are undertaken by principles – these include their obligation to report Brisbane City Council’s Assurance Security and Ethical ‘suspicions of misconduct’. Queensland Urban Utilities’ Standards Unit. Outcomes of the investigations are Code of Conduct makes direct reference to the four reviewed and monitored. ethics principles: 1. Integrity and impartiality 2. Promoting the public good 3. Commitment to the system of government 4. Accountability and transparency.

We engage with our shareholders on a local level

52 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 53 We promote ethical and responsible decision-making

52 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 53 Corporate governance

Being accountable and transparent to our Respect the rights of shareholders shareholders, customers, community, and Queensland Urban Utilities actively engages with stakeholders is a cornerstone principle for our shareholders on a range of strategic and Queensland Urban Utilities. We are committed operational matters. to providing timely, accurate and comprehensive In the interests of transparency and openness, Queensland reporting on our performance, and remaining Urban Utilities regularly communicates our performance. accountable for our actions and decisions. In accordance with the Participation Agreement, We produced a corporate plan for the period 2011–16 to Queensland Urban Utilities produces a performance report set out our future direction, goals and priorities as defined in the first three quarters of each financial year that sets by the Board. The purpose of this plan is to guide us in out key achievements, highlights, and operational and our forward action. In developing this plan, we consulted financial performance results for the previous quarter. our shareholders. On 21 November 2011, Queensland Urban Utilities held The corporate plan is supported by our operational plan, its inaugural Special General Meeting. Its purpose was to which identifies our success targets for the current financial provide our Mayors, their delegates and Chief Executive year and outlines the strategies we have in place to meet Officers with an overview of our performance for the them. The operational plan identifies key risks to service previous year, discuss our strategic direction, and to provide delivery and mitigation strategies. It also articulates a forum to actively engage with our participants. our operational performance measures, including customer standards. To engage with councils on a local level, the Chairperson and Chief Executive Officer presented to four of our five Tables 6 and 7 fulfil State Government shareholders on Queensland Urban Utilities’ performance. disclosure obligations for overseas travel and They responded to localised water and sewerage matters consultancies, respectively. that were raised by our shareholders.

Following each Board meeting, the Chairperson writes to each Mayor outlining the key outcomes and decisions from the Board’s ordinary meeting.

Name of member Destination Reason for travel Cost to Queensland and position Urban Utilities

Zane Tomlins, Investigate best practice alternate Amsterdam, Manager Treatment technologies for sustainable $ 11, 5 1 3 The Netherlands Plant Engineerng treatment of sewage.

Present at Business Continuity Robin Lewis Wellington, $604 and Disaster Management Chief Operating Officer New Zealand Conference in Wellington.

Table 6: Overseas travel.

54 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 55 Consultancies $’000

Capital Program - Engineering and Design 1,812 Capital Program - Infrastructure Planning 1,855 Capital Program - Information Technology 809 Capital Program - Other 726 Organisational Efficiency Reviews 259 Expert Specialist and Legal Advice 234 Specialist Engineering Technical Advice 1,454 Consultancies in Response to Economic Regulation 24 Expert Specialist Financial, Treasury and Taxation Advice 856 Safety, Culture and Other Human Resource Consultancies 395 Information Technology 40 Other 68

Total 8,532

Table 7: Consultancies.

Being accountable and transparent is a cornerstone principle for Queensland Urban Utilities

54 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 55 Appropriate financial performance

Performance summary 2011/12

Corporate objective: Appropriate financial performance

Strategic Strategy Achievements outcome 2011/12

Adequate cash flow Ensure that our systems Reviewed Quarterly Capital Program to manage risks and processes enable us appropriately and identify efficiency opportunities, to identify all potential resulting in realised savings. funding opportunities Evaluated priorities based on population growth and asset optimisation to ensure funds were directed to highest priority work. Conducted reviews of developer revenues and other funding opportunities to deliver minimal impact on customer prices.

Financial insight Manage our financial Revenue within 1% of original budget with major risk in performance Developer Revenues both cash and donations managed. Total controllable expenditure within 1% of original budget. Depreciation 6% less than budget due to no asset revaluation and savings from Capital Program. Borrowing costs 10% less than budget due to lower than expected borrowings from Capital Program savings. Operating profit before tax $17.9M or 10% more than original budget. Overall shareholder returns $16.6M or 8% more than original budget.

56 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 57 Glossary

Board The Central SEQ Distributor-Retailer Board.

Board Member Means a person who is, for the time being, a member of the Board of Queensland Urban Utilities.

Central SEQ Distributor-Retailer A statutory body supplying water and treating sewage to the service territories of Brisbane, Ipswich, Lockyer Valley, Scenic Rim and Somerset.

Executive Leadership Team Means the Chief Executive Officer, and direct reports.

Gigalitre (GL) Measurement of volume equal to one billion litres, or one thousand megalitres (refer Megalitre).

Lost-time injury frequency rate (LTIFR) A lost-time injury is defined as an occurrence that resulted in a fatality, permanent disability or time lost from work of one day/shift or more.

 The LTIFR is the number of lost-time injuries per million hours worked, calculated using this equation:-

 (Number of lost-time injuries x 1,000,000)/(Total hours worked in accounting period).

Megalitre (ML) Measurement of volume equal to one million litres. One megalitre is approximately the volume of a one-metre deep Olympic-sized swimming pool.

Participation Agreement A Participation Agreement under s20 or 23 of the South East Queensland Water (Distribution and Retail Restructuring) Act 2009.

Raw water Unfiltered water supplied in bulk to water supply authorities for treatment before distribution to customers.

Recycled water Water taken from any waste (effluent) stream and treated to a level suitable for further use, where it is used safely and sustainably for beneficial purposes. This is a general term that can include reclaimed water.

Sewage Material transported in a sewerage system. Sewage is collected from all internal household drains; it contains all the contaminants of grey water and urine, plus high concentrations of faecal material from toilets and wastes from industrial and commercial premises. Sewage can therefore contain a range of infectious enteric pathogens and a range of physical and chemical contaminants.

Sewerage The pipes and channels, including all trunk, pressure and reticulation pipes, via which sewage is transported from its point of origin (e.g. house or business) to a point of treatment and/or disposal.

Shareholders  Brisbane and Ipswich City Councils and the Lockyer Valley, Scenic Rim and Somerset Regional Councils.

56 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 57 Glossary

Stakeholder All those who are either affected by or who can affect the activities of an organisation, namely customers, governments, the media, non- government organisations, local residents and employees.

Supervisory control and The term usually refers to centralised systems that monitor and control data acquisition (SCADA) entire sites, or complexes of systems spread out over large areas (anything from an industrial plant to a nation). Most control actions are performed automatically by remote terminal units (RTUs) or by programmable logic controllers (PLCs).

Control functions are usually restricted to basic overriding or supervisory level intervention. For example, a PLC may control the flow of cooling water through part of an industrial process, but the SCADA system may allow operators to change the set points for the flow, and enable alarm conditions – such as loss of flow and high temperature – to be displayed and recorded. The feedback control loop passes through the RTU or PLC, while the SCADA system monitors the overall performance of the loop.

Trade waste Water-borne waste from a business or manufacturing premises, that is not: 1. a prohibited substance (for example, petrol, pesticide) 2. domestic sewage (human waste 3. stormwater.

Some trade waste cannot be accepted at sewage treatment plants and must be disposed of through special facilities.

Water Netserv Plan Section 99BJ of the South East Queensland Water (Distribution and Retail Restructuring) Act 2009 requires that a “distributor-retailer must, from 1 July 2013, have a plan (a Water Netserv Plan) about its water and sewerage networks and providing its water service and sewerage service”.

 Among other requirements the Water Netserv Plan must be consistent with the SEQ Regional Plan and the planning assumptions for the distributor-retailer’s geographic area.

 The Water Netserv Plan will become the key strategic document guiding Queensland Urban Utilities’ delivery of water and sewerage infrastructure, replacing a range of planning tools that existed prior to the creation of the distributor retailers.

58 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 59 Delivering operational efficiencies

58 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 59 Contents

For the year ended 30 June 2012

Statement of 21 Property, plant and equipment reconciliation 79 Comprehensive Income 61 22 Intangible assets 80 23 Impairment testing for cash generating units 80 Statement of Financial Position 62 24 Income tax expense/(benefit) 82 25 Interest bearing liabilities 83 26 Employee benefits 84 Statement of Changes in Equity 63 27 Trade and other payables 84 28 Other current liabilities 84 Statement of Cash Flows 64 29 Participation rights 85 30 Financial instruments 87 Index to notes to the 31 Operating leases 92 financial statements 65 32 Capital and other commitments 92 33 Contingencies 92 1 Reporting entity 65 34 Superannuation 93 2 Basis of preparation 65 35 Funds held in trust 95 3 Significant accounting policies 67 36 Key management personnel and remuneration 96 4 Utility charges 74 37 Related parties 100 5 Contributions, grants and subsidies 74 38 Significant weather events 101 6 Insurance 74 39 Prior period adjustments 7 Interest received 74 (2010/2011 financial year) 102 8 Fees and charges 74 40 After balance date events 102 9 Other revenue 74 10 Employee expenses 75 Management Certificate 103 11 Bulk water purchases 75 12 Materials and services 75 Independent Auditor’s Report 104 13 Depreciation and amortisation 76 14 Finance/ borrowing costs 76 15 Loss on disposal of assets 76 16 Other expenses 76 17 Cash and cash equivalents 77 18 Trade and other receivables 78 19 Inventories 78 20 Other current assets 78

60 Queensland Urban Utilities Annual Report 2011/12 Central SEQ Distributor-Retailer Authority Statement of Comprehensive Income

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

Revenue Utility charges 4 750,576 688,222 Contributions, grants and subsidies 5 125,853 142,695 Insurance 6 - 10,182 Interest received 7 3,220 2,869 Fees and charges 8 26,461 25,993 Other revenue 9 5,409 4,322 Total operating revenue 911,519 874,283

Expenses Employee expenses 10 84,597 80,209 Bulk water purchases 11 224,192 183,066 Materials and services 12 137,930 132,664 Depreciation and amortisation 13 137,702 135,396 Finance/borrowing costs 14 123,291 116,188 Loss on disposal of assets 15 6,793 30,126 Other expenses 16 9,185 7,414 Total operating expenses 723,689 685,063

Profit before income tax equivalent 187, 83 0 18 9, 2 2 1 Income tax equivalent 24 55,556 58,286 Profit for the year 132,274 130,935

Other comprehensive income Defined benefit plan revaluation 34 (478) 1,091 Total other comprehensive income (478) 1,091 Total comprehensive income 131,796 132,026

The accompanying notes form part of these statements.

Queensland Urban Utilities Annual Report 2011/12 61 Central SEQ Distributor-Retailer Authority Statement of Financial Position

As at 30 June 2012

2 012 2 0 11 Notes $'000 $'000

Current assets Cash and cash equivalents 17 77,806 77,432 Trade and other receivables 18 27,253 25,122 Inventories 19 2,428 2,650 Other current assets 20 149,273 148,128 Total current assets 256,760 253,332

Non current assets Property, plant and equipment 21 4,506,589 4,335,482 Intangible assets 22 1,854 1,955 Deferred tax assets 24 29,530 12,408 Defined benefit plan 34 613 1,091 Total non-current assets 4,538,586 4,350,936 Total assets 4,795,346 4,604,268

Current liabilities Trade and other payables 27 36,069 33,147 Employee benefits 26 29,785 30,458 Current income tax payable 28 23,032 14,230 Other current liabilities 28 90,083 106,516 Provision for participation rights 29 59,759 42,633 Total current liabilities 238,728 226,984

Non current liabilities Trade and other payables 27 476 - Employee benefits 26 2,697 1,900 Interest bearing liabilities 25 1,874,895 1,774,985 Deferred tax liabilities 24 42,455 20,939 Total non current liabilities 1,920,524 1,797,824 Total liabilities 2,159,252 2,024,808 Net assets 2,636,094 2,579,460

Equity Contributed equity 29 2,538,793 2,538,793 Retained earnings 97,301 40,667 Total equity 2,636,094 2,579,460

The accompanying notes form part of these statements.

62 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 63 Central SEQ Distributor-Retailer Authority Statement of Changes in Equity

For the year ended 30 June 2012

Retained Contributed earnings equity Total Notes $'000 $'000 $'000

Balance as at 1 July 2010 (27,237) - (27,237)

Contributions by and distributions to Participants Contributed equity 29 - 2,538,793 2,538,793 Participation return to Participants 29 (64,121) - (64,121) Total contributions by and distributions to Participants (64,121) 2,538,793 2,474,672

Profit for the year 130,934 - 130,934 Other comprehensive income 34 1,091 - 1,091 Total comprehensive income for the year 132,025 - 132,025

Balance as at 30 June 2011 40,667 2,538,793 2,579,460

Balance as at 1 July 2011 40,667 2,538,793 2,579,460

Contributions by and distributions to Participants Contributed equity 29 - - - Participation return to Participants 29 (75,163) - (75,163) Total contributions by and distributions to Participants (75,163) - (75,163)

Profit for the year 132,274 - 132,274 Other comprehensive income 34 (478) - (478) Total comprehensive income for the year 1 31, 7 9 6 - 1 31, 7 9 6

Balance as at 30 June 2012 97,301 2,538,793 2,636,093

The accompanying notes form part of these statements.

62 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 63 Central SEQ Distributor-Retailer Authority Statement of Cash Flows

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

Cash flows from operating activities Inflows: Receipts from customers 816,312 744,211 Developer cash contributions 86,815 28,853 Interest received 3,312 2,529 GST input tax credits from ATO 36,711 23,153 GST collected from customers 1,428 408 944,578 799,154 Outflows: Employee expenses (95,658) (87,122) Suppliers and services (397,817) (418,741) Finance and borrowing costs (119,441) (104,926) Income tax (42,360) (23,922) GST paid to suppliers (40,736) (26,575) GST remitted to ATO (1,358) (322) (697,368) (661,608) Net cash provided by (used in) operating activities 17b 247,210 137,546

Cash flows from investing activities Inflows: Proceeds from sale of plant and equipment 871 - Outflows: Payments for property, plant and equipment (289,581) (152,718) Net cash provided by (used in) investing activities (288,710) (152,718)

Cash flows from financing activities Inflows: Cash on initial transfer of assets and liabilities from Participants 29 - 9,006 Borrowings 99,910 105,087 Outflows: Participation rights payments 29 (58,035) (21,488) Net cash provided by (used in) financing activities 41,874 92,605

Net increase (decrease) in cash and cash equivalents 374 77,433 Cash and cash equivalents at the beginning of the financial year 77,432 (1)

Cash and cash equivalents at the end of the financial year 17 77,806 77,432

The accompanying notes form part of these statements.

64 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 65 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

1. Reporting entity The primary functions of the Central SEQ Distributor- The Central SEQ Distributor-Retailer Authority Retailer Authority are to do the following for its (the Authority) was established under the South-East geographic area – Queensland Water (Distribution and Retail Restructuring) (a) purchase water from the water grid manager under the Act 2009 (the Act) and is a Statutory Body under the South East Queensland Water (Restructuring) Act 2007; Financial Accountability Act 2009 and the Statutory (b) distribute water; Bodies Financial Arrangements Act 1982. (c) provide the following services to customers – i. water services; Under the Act, governance arrangements for the new ii. wastewater services; Authority were established in a Participation Agreement, (d) charge customers for relevant services; which became operative from 25 June 2010. (e) manage customer enquiries, service requests The participants are Brisbane City, Ipswich City, Lockyer and complaints; Valley Regional, Scenic Rim Regional and Somerset (f) on and from 1 July 2010 – Regional Councils. i. perform functions under the South-East The assets, liabilities, instruments and employees of the Queensland Water (Distribution and Retail five participating Councils’ water distribution and sewerage Restructuring) Act 2009 and the Water Supply operations were transferred to the Authority as a result (Safety and Reliability) Act 2008 relating to trade of the Act and by the Queensland Government gazettal waste as a sewerage service provider; and of the First and Second Transfer Schemes on 29 June ii. perform particular planning and development 2010 and 30 September 2010 respectively (refer to note assessment functions under the Sustainable 29(c) for summary of assets and liabilities transferred). Planning Act 2009; The value of the net assets transferred from the Councils (g) anything else likely to complement or enhance to the Authority has been calculated using a regulatory a function mentioned in paragraphs (a) to (f). asset base (RAB) valuation approved by the Queensland The Central SEQ Distributor-Retailer Authority trades as Government to represent the market value of the business. Queensland Urban Utilities and is a “for profit” entity. This valuation was prepared to underpin the water pricing The registered office is Level 6, West Tower, 171 Roma methodology currently under review by the Queensland Street, Brisbane, QLD. Competition Authority. The final transfer notice was completed prior to 30 June 2012. 2. Basis of preparation In return for the net assets transferred to the Authority, (a) Statement of compliance each Council participates in the Authority based on its These financial statements are general purpose financial share of the RAB, comprising debt and participation rights statements and have been prepared for the period 1 July as agreed by the five Councils and the Authority in the 2011 to 30 June 2012 in accordance with: ratio of 40 to 60. • Australian Accounting Standards (AASBs) and Interpretations; Section 10(1) of the Act states that the Authority expires • the Financial Accountability Act 2009; at the end of 99 years from when it was established on • the Financial and Performance Management 3 November 2009. On expiration (a) the Authority’s Standard 2009; assets and liabilities become the assets and liabilities • Queensland Treasury’s Financial Reporting of its participants; and (b) the participants become Requirements for Queensland Government agencies the successor in law of the assets and liabilities rateably (as applicable to statutory bodies); and in accordance with their participation rights under the • applying the exemptions under the South-East participation agreement. Queensland Water (Distribution and Retail Restructuring) Act 2009.

The financial statements were authorised for issue by the Board on 29 August 2012.

64 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 65 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

2. Basis of preparation (contd) (iii) Carbon emissions (b) Basis of measurement The Australian Government passed its Clean Energy Act The financial statements have been prepared on an accrual in November 2011 with a start date of 1 July 2012. basis and, except where stated, in accordance with the The legislation will result in the introduction of a price principles of historical cost. on carbon emissions made by Australian businesses from 1 July 2012. (c) Presentation currency and comparatives The flexible market-based price phase of the carbon Amounts included in the financial statement are in pricing mechanism will commence on 1 July 2015. Australian dollars and have been rounded to the nearest It will be preceded by a three year period during which $1,000 or, where that amount is $500 or less, zero, the price of permits will be fixed at $23 per tonne or unless disclosure of the full amount is specifically carbon dioxide equivalent in year one, $24.15 in year required. Amounts shown in this financial report may not two and $25.40 in year three. add to the correct sub-totals or totals due to rounding. Section 4.3.4 of Queensland Treasury’s report on “Carbon Comparative information has been restated where Price Impacts for Queensland” dated August 2011 indicates necessary to be consistent with disclosures in the that, for non-residential construction activities, costs current reporting period. may increase by between 0.7% and 0.8% over the period 2 012/2 013 to 2 015 /2 016. (d) Use of estimates and judgements The preparation of financial statements requires On this basis and other information available, the management to make judgements, estimates and introduction of the carbon pricing mechanism is not assumptions that affect the application of accounting expected to have a significant impact on critical accounting policies and the reported amounts of assets, liabilities, estimates, assumptions and management judgements. income and expenses. Actual results may differ from (iv) Provision for impairment of receivables these estimates. A provision for impairment of receivables has been made Estimates and underlying assumptions are reviewed on at year end, refer note 18. an on-going basis. Revisions to accounting estimates are (e) Going concern recognised in the period in which the estimate is revised The financial statements have been prepared on a going and in any future period affected. concern basis in accordance with AASB 101 Presentation In particular, information about specific areas of estimate, of Financial Statements. uncertainty and critical judgement in applying accounting policies that have a significant effect on the amounts (f) New and revised accounting standards recognised in the financial statements are described Queensland Urban Utilities did not voluntarily change in the following notes: any of its accounting policies during 2011/2012. No amendments to Australian Accounting Standards Valuation of property, plant and equipment – notes 21, 22 applicable for the first time for 2011/2012 were relevant and 23 Contingencies – note 33 to Queensland Urban Utilities. Changes applicable (ii) Impairment for the first time for 2011/2012 have had minimal effect Queensland Urban Utilities assesses impairment at on the financial statements, as explained below: each reporting date by evaluating conditions specific AASB1054 Australian Additional Disclosures requires to Queensland Urban Utilities that may lead to impairment identification and clarification of the nature of the work of assets. In accordance with the provisions of AASB136 performed by Queensland Urban Utilities’ Auditor Impairment of Assets, where an indicator of impairment and note 16 has been amended. exists, the recoverable amount of the asset is determined. Value-in-use and fair value less costs to sell calculations performed in assessing recoverable amounts incorporate a number of key assumptions (refer to note 23).

66 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 67 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

2. Basis of preparation (contd) An estimation of unbilled water consumption is performed (f) New and revised accounting standards (contd) monthly, based on historical information of the customers’ A number of new standards, amendments to standards usage and accrued revenue is recognised for this amount. and interpretations are effective for annual periods Accruals or prepayments are recognised for fixed access beginning on or after 1 July 2012, Queensland Urban charges billed in arrears or advance. Utilities has not applied any amendments or standards that have been issued but are not yet effective. Queensland (a) (ii) Contributions Urban Utilities does not plan to early adopt any standards Developer contributions or interpretations and the extent of the impact of these Queensland Urban Utilities finances part of its capital has not been determined. Expected impacts of new or works infrastructure program through non-refundable amended standards with future commencement dates contributions from developers. These contributions applicable to 2012/2013 are set out below: received may be in the form of a non-cash contribution (assets) and/or a cash contribution. AASB13 Fair Value Measurement sets out a new definition of “fair value” as well as new principles to be applied Non-cash contributions when determining the fair value of assets and liabilities. Non-cash contributions from developers such as water This requirement will apply to all assets and liabilities and sewerage infrastructure are recognised as revenue (excluding leases) that are measured and/or disclosed and as non-current assets when the authority obtains at fair value. AASB13 will require increased disclosure. control of the assets and becomes liable for any ongoing A review of methodologies, including instructions to maintenance. These contributed assets are recognised valuers, data used and assumptions made will occur at their fair value. 2012/2013 to ensure compliance. No material impacts Cash contributions are expected. Non-refundable cash contributions from developers The following new and revised standards that may impact towards the cost of water supply and sewerage financial statement disclosures apply as from reporting infrastructure are collected by Councils on behalf periods beginning on or after 1 January 2013: of Queensland Urban Utilities and transferred to Queensland Urban Utilities when received. Cash developer AASB119 Employee Benefits changes requirements for contributions for specific assets are recognised as a the measurement of employer liabilities/assets arising liability where that specific asset has not been constructed from defined benefit plans and the measurement and at balance date. Cash contributions for assets already presentation of changes in such liabilities/assets. constructed or for which there are no performance As Queensland Urban Utilities has only a small number obligations are recognised as revenue on receipt. of staff remaining in the defined benefit plan for LG Super, the impact of this change will be immaterial. (a) (iii) Grants and subsidies Grants and subsidies that are non-reciprocal in nature All other Australian accounting standards and interpretations are recognised as revenue in the year in which control with future commencement dates are either not applicable is obtained. Where grants and subsidies are reciprocal or have no material impact on Queensland Urban Utilities. in nature, revenue is recognised over the term of funding arrangements. 3. Significant accounting policies

(a) Revenue (a)(iv) Interest (a)(i) Utility charges Interest income is recognised as it accrues in the Statement of Utility charges are recognised as revenue on an accrual Comprehensive Income, using the effective interest method. basis in the period to which they relate. Queensland Urban Utilities issues utility accounts quarterly and monthly with (a)(v) Insurance water consumption billed in arrears and the fixed service Insurance income is recognised when there is near certainty charge generally billed in advance. that a claim will be approved and the funds will be received.

66 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 67 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

3. Significant accounting policies (contd) Capital and operating expenditure (a)(vi) Other services Labour and materials expenditure, which are directly Revenue from rendering of a service is recognised upon the attributable to the purchase or construction of an asset, delivery of the service to the customers and includes fees is considered capital expenditure. Expenditure necessarily and charges from the approved fees and charges schedule incurred in either maintaining the operational capacity and from quotes for services. of assets or ensuring that their original life estimates are achieved, is considered maintenance and is treated as (b) Cash and cash equivalents an expense as incurred. Cash and cash equivalents includes cash on hand, all cash and cheques receipted but not banked at year end, Acquisition deposits held at call with financial institutions, other short- Acquisitions of property, plant and equipment are initially term, highly liquid investments with original maturities of recorded at cost. Cost is determined as the value of the three months or less that are readily convertible to known assets given as consideration plus costs incidental to the amounts of cash and which are subject to an insignificant acquisition, including architects’ fees, engineering design risk of changes in value, and bank overdrafts. fees and all other establishment costs.

Donated (non cash) contrubitions of items of property, (c) Receivables plant and equipment except reserve land are recognised Debtors are recognised at the amounts due at the time as assets and revenue at fair value. Fair value means the of invoicing, sale or service delivery for example the agreed amount for which an asset could be exchanged, or a purchase/contract price. Settlement of these amounts liability settled, between knowledgeable, willing parties is required within 30 days from invoice date. in an arm’s length transaction. The collectability of receivables is assessed periodically with provision being made for impairment. Valuation Property, plant and equipment assets, including leased All known bad debts are written off periodically and/or as assets, are valued at fair value, except for land, plant at 30 June. Subsequent recoveries of amounts previously and equipment and fleet (which are recorded at cost). written off are recognised via an adjustment to finance Property, plant and equipment is assessed for impairment costs in the Statement of Comprehensive Income. in accordance with AASB136 (refer note 23).

(d) Inventories Assets within each class of property, plant and equipment Inventories held for distribution comprise of stores and carried at fair value are subject to ongoing review and materials used in operating, maintenance and capital revalued as necessary, so that the carrying amount of each works activities. These inventories are valued at cost class of asset does not materially differ from its fair value at (purchase price). the reporting date. Details of property, plant and equipment including details Recognition of methods of valuations are disclosed in note 21. Items of property, plant and equipment with a total value of less than $5,000, except for network assets, are treated Depreciation as an expense in the year of acquisition. All other items of Land is not depreciated. Property, plant and equipments is property, plant and equipment are capitalised. depreciated on a straight-line basis so as to allocate the net All network assets are capitalised. The term “network cost or revalued amount of each asset, less its estimated asset” is applied to an accumulation of individual items or residual value, progressively over its estimated useful life. components operating as a cohesive whole in the provision These estimates are reviewed annually. The depreciation of a particular service. Computer equipment is not treated method applied to assets is reviewed annually. Details of as a network asset. Interconnected infrastructure assets are estimated useful lives of assets are set out below. treated as a network asset.

68 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 69 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

3. Significant accounting policies (contd) (e) Property, plant and equipment Items or components that form an integral part of a complex infrastructure asset are recognised as a separate asset. These items or components may be replaced during the useful life of the complex asset. Each component is depreciated over its individual life or life of the complex asset if shorter. Property, plant and equipment assets are depreciated from the date acquired or installed and ready for use or, for internally constructed assets, from the time an asset is completed and commissioned ready for use.

Class of Fixed Asset Depreciation Rate Useful Life

Buildings and improvements 1.25% - 6.66% 7-80 years Plant and equipment: Fleet vehicles 10% - 33.33% 3-10 years Fleet machinery 4.55% - 25% 4-22 years Computer and communications equipment 5% - 33.33% 3-20 years Other 1.66%-20% 5-60 years Infrastructure: Water supply network 1%-10% 10-100 years Sewerage network 0.91%-10% 10-110 years

(f) Construction work in progress It has been determined that there is not an active market Property, plant and equipment under construction at for any of the intangible assets. As such, the assets year end is valued at cost, including the cost of materials are recognised and carried at cost less accumulated and direct labour and an appropriate proportion of amortisation and accumulated impairment losses. overheads excluding administration costs. Construction work in progress is assessed regularly and where costs (h) Impairment of non-current assets cannot be capitalised, they are expensed. Assets under Each non-current physical and intangible asset is assessed for construction are not depreciated until they are complete indicators of impairment annually. If an indicator of possible and commissioned ready for use. impairment exists, Queensland Urban Utilities determines the asset’s recoverable amount. Any amount by which the asset’s (g) Intangible assets carrying amount exceeds the recoverable amount is recorded Amounts paid for computer software in excess of the as an impairment loss. The recoverable amount of an asset is recognition threshold of $10,000 are capitalised and then the higher of its fair value less costs to sell and its value in use. amortised on a straight-line basis over the expected Refer note 23. period of benefit (3-20 years) (note 22). An impairment loss is recognised immediately through profit Useful lives are reviewed annually to ensure these reflect or loss in the Statement of Comprehensive Income, unless the probability of continuing future benefits. Intangible the asset is carried at a revalued amount. When the asset is assets are also assessed for impairment (refer note 23). measured at a revalued amount, the impairment loss is offset against the asset revaluation surplus to the extent available. Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits Where an impairment loss subsequently reverses, the carrying embodied in the specific asset to which it relates. All other amount of the asset is increased to the revised estimate of expenditure is recognised in the Statement of Comprehensive its recoverable amount, to the extent that the increased Income as incurred. carrying amount does not exceed the carrying amount that would have been determined had no impairment loss Amortisation is based on the cost of an asset less been recognised for the asset in prior years. A reversal of an its residual value. impairment loss is recognised as income unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation surplus increase.

68 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 69 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

3. Significant accounting policies (contd) Non-derivative financial instruments (i) Leases Non-derivative financial instruments comprise trade and A distinction is made in the financial statements between other receivables, cash and cash equivalents, loans and finance leases that effectively transfer from the lessor to borrowings, and trade and other payables. the lessee substantially all risks and benefits incidental to Non-derivative financial instruments are recognised ownership, and operating leases, under which the lessor initially at fair value plus, for instruments not at fair value retains substantially all risks and benefits. through profit and loss, any attributable transaction costs. Queensland Urban Utilities is a statutory body under Subsequent to initial recognition non-derivative financial the Statutory Bodies Financial Arrangements Act 1982 and instruments are measured as described below. cannot enter into a finance lease without the approval of Financial instruments are classified and measured as follows: the Queensland Treasurer. As at 30 June 2012, Queensland • Cash and cash equivalents – held at fair value through Urban Utilities had not entered into any finance leases. profit or loss, Operating lease payments are representative of the • Receivables – held at amortised cost, pattern of benefits derived from the leased assets and • Payables – held at amortised cost, are expensed in the periods in which they are incurred. • Borrowings – held at amortised cost.

(j) Investments (m) Loan liabilities Term deposits in excess of three months are reported as (i) Queensland Treasury Corporation (QTC) investments, with deposits of less than three months being (a) General purpose borrowings – Queensland Urban reported as cash equivalents. Utilities borrows from QTC to fund a range of non-specific capital projects undertaken. (k) Payables Trade creditors are recognised upon receipt of the goods or Repayments are made monthly in accordance with the services ordered and are measured at the agreed purchase/ underlying borrowing rate and after adjustment for new contract price net of applicable discounts other than borrowings and earlier repayments. contingent discounts. Amounts owing are unsecured Apportionment of the payment between finance costs and and are generally settled on 30 day terms. debt redemption will vary according to interest rates. At year end, the outstanding QTC loan balance is disclosed (l) Financial instruments at book value. A financial instrument is recognised if Queensland Urban (b) Specific borrowings – Queensland Urban Utilities Utilities becomes a party to the contractual provisions borrows from QTC to fund a range of specific, targeted of the instrument. Financial assets are derecognised if projects undertaken. Queensland Urban Utilities’ contractual rights to the cash flows from the financial assets expire or if Queensland Repayments are made in accordance with the arrangements Urban Utilities transfers the financial instrument to another set up for the specific loans, including frequency of loan party without retaining control of substantially all risks and repayments and new borrowings. rewards of the asset. Financial liabilities are derecognised (c) Queensland Urban Utilities has access to a working if Queensland Urban Utilities’ obligations specified in capital facility with QTC - refer note 17(c). the contract expire or are discharged or cancelled.

Queensland Urban Utilities is not party to any derivative financial instruments and does not enter into transactions for speculative purposes.

70 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 71 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

3. Significant accounting policies (contd) Long service leave (m) Loan liabilities (contd) The provision for long service leave represents the present (ii) Participants’ loans value of the estimated future cash outflows to be made by Queensland Urban Utilities resulting from employees’ services The Participating Councils provided loans to Queensland provided up to balance date. Urban Utilities under a separate loan agreement (“Participating Local Government Fixed Rate Loan Agreement (Senior The provision comprises amounts that Queensland Urban Debt)”). This loan is subject to a fixed interest rate of 6.7834% Utilities has a present obligation to pay resulting from with monthly interest-only payments for 3 years from employees’ services provided up to balance date and 1 July 2010. The Councils have provided agreement to extend an actuarial estimate of future obligations, taking into account the loans to 30 June 2014. The Queensland Treasurer has future increases in wage and salary rates, periods of service approved the extension in accordance with the Statutory and experience of employee departures. Related on-costs Bodies Financial Arrangement Act (SBFA) 19 82 . The terms have also been included. These are reported as current will be renegotiated prior to 30 June 2013. liabilities (employee benefits).

Amounts that Queensland Urban Utilities does not have (n) Employee benefits a present obligation to pay at balance date are discounted Employee benefits relate to amounts expected to be paid to using the rates attaching to national government securities at employees for annual leave, leave in lieu of statutory holidays balance date that most closely match the terms of maturity worked and overtime, long service leave, sick leave, workers’ of the related liabilities. This amount is reported as a non compensation and superannuation. current liability (employee benefits). Payroll tax and workers’ compensation insurance are a Sick leave consequence of employing employees, but are not counted The provision for sick leave represents staff entitlements in an employee’s total remuneration package. They are not under arrangements that existed prior to 30 June 1996. employee benefits and are recognised separately as employee The reported balances reflect Queensland Urban Utilities related expenses. present obligation to employees resulting from employees Wages and salaries services provided up to 30 June 1996 at which point sick leave Wages and salaries due but unpaid at reporting date are ceased to vest (for example employees from this date were recognised in the Statement of Financial Position at the no longer entitled to cash equivalents payments for unused current salary rates. sick leave). Accordingly, the vested sick leave entitlement is effectively ‘frozen’ with remaining balances predominantly Annual leave paid on termination of those entitled employees who were Accrued annual leave is recognised in current liabilities in service prior to 30 June 1996. (employee benefits) and represents the amount that Queensland Urban Utilities has a present obligation to The provision has been calculated at nominal amounts based pay resulting from employees’ services provided up to balance on remuneration rates as at 1 July 1996 and includes related date. The accrual has been calculated at nominal amounts on-costs and CPI adjustments. based on remuneration rates that would be required to be All other sick leave is non-vesting, and an expense is paid if the liability was settled at balance date and includes recognised as leave is taken. related on-costs. Superannuation Time in lieu Local Government Superannuation Scheme (LG Super) Accrued leave in lieu is recognised in current liabilities Queensland Urban Utilities contributes to LG super for (employee benefits) and represents the amount which employees under both the defined benefit scheme and the Queensland Urban Utilities has a present obligation to pay accumulation superannuation scheme. Queensland Urban resulting from employees’ services provided up to balance Utilities has no liability to or interest in LG Super other than date. The accrual has been calculated at nominal amounts the payment of the statutory contribution. Any amount by based on remuneration rates that would be required to be which either scheme is over or under funded would only paid if the liability was settled at balance date and includes affect future benefits of employees and is not an asset or related on-costs. liability of Queensland Urban Utilities. Accordingly, there is no recognition in the financial statements of any over-or-under funding of LG Super. Refer to note 34.

70 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 71 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

3. Significant accounting policies (contd) (o) Provisions (n) Employee benefits (contd) Provisions are recorded when Queensland Urban Utilities has a present obligation, either legal or constructive as a City Defined Benefit Fund (a sub-fund in the LG Super scheme) result of a past event. They are recognised at the amount Queensland Urban Utilities contributed to City Super expected at reporting date for which the obligation will for employees under both the defined benefit and the be settled in a future period. Where the settlement of accumulation superannuation plans during 2010/2011. the obligation is expected after 12 or more months, the According to the Statement of Advice: Funding and Solvency obligation is discounted to the present value using an Certificate by the Trustee of the fund effective 21 November appropriate discount rate. The amounts recognised as 2008, City Super is declared as “technically insolvent” provisions in relation to the dismantling and removal of as described in the Superannuation Industry (Supervision) assets and the restoration of land on which the assets have Regulations 1994 (SIS Regulations). Refer to note 34. been located, have been included in the cost of the assets. The LG Super and City Super (Brisbane City Council Superannuation Plan) funds merged from 1 July 2011. (p) Trust funds There is no change in the defined benefits arrangements Funds held in the trust account include deposits lodged at the time and Queensland Urban Utilities will continue to guarantee performance and unclaimed amounts. to make payments as advised. Queensland Urban Utilities performs only a custodian Key executive management personnel and remuneration role in respect of these funds and because they cannot Key executive management personnel and remuneration be used for Queensland Urban Utilities purposes they disclosures are made in accordance with the section 5 of are not considered revenue nor brought to account in the the Financial Reporting Requirements for Queensland financial statements. They are disclosed in note 35 for Government Agencies issued by Queensland Treasury. information purposes only. Refer to note 36 for the disclosures on key executive management personnel and remuneration. (q) Finance and borrowing costs Finance and borrowing costs comprise: Board Remuneration • Bank charges The Participation Agreement discloses the remuneration • Interest expense on bank overdrafts, short-term and and benefits of Board Members and the Chairperson. long-term borrowings; Remuneration includes reasonable travelling, • Unwinding of the discount on provisions; accommodation and other expenses that a Board • Amortisation of discounts or premiums related to Member properly incurs in attending Board Meetings borrowings; and or otherwise in connection with the business of • Ancillary administration charges. Queensland Urban Utilities. To the extent permitted by law, Queensland Urban Utilities must indemnify each Finance and borrowing costs are recognised in the profit Board Member against a liability of that person and the or loss using the effective interest rate method and are legal costs of that person. Queensland Urban Utilities expensed in the period in which they arise. Finance and has an appropriate insurance coverage for Directors borrowing costs that are not settled in the period in and Officers liability. which they arise are added to the carrying amount of the borrowing. Detail of payments to each Board Member is included at note 37. Finance and borrowing costs directly attributable to a specific capital project that necessarily takes a substantial period of time to prepare for its intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

72 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 73 Central SEQ Distributor-Retailer Authority Notes to and forming part of the Financial Statements 2011-2012

3. Significant accounting policies (contd) Receivables and payables are stated with the amount of (r) Taxation GST included. The net amount of GST recoverable from, Income tax or payable to, the ATO is included as a current asset or Queensland Urban Utilities is exempt from liability in the Statement of Financial Position. Commonwealth Government income taxation but Cash flows are included in the Statement of Cash Flows is subject to the Local Government Tax Equivalents on a gross basis. The GST components of cash flows arising Regime (LGTER). Under the LGTER, Queensland Urban from investing and financing activities which are recoverable Utilities pays an income tax and land tax equivalent to its from, or payable to, the ATO are classified as operating participating Councils in accordance with the requirements cash flows. of its Participation Agreement. Other taxes Income tax expense comprises current and deferred tax. Queensland Urban Utilities pays payroll tax to the Current tax and deferred tax is recognised in profit or loss Queensland Government Office of State Revenue on except to the extent that it relates to items recognised its activities. Fringe benefits tax is paid to the Australian directly in equity or in other comprehensive income. Taxation Office in accordance with the relevant legislation. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted (s) Contributed equity or substantively enacted at the reporting date, and any In return for the net assets transferred to Queensland adjustment to tax payable in respect of previous years. Urban Utilities, each Council participates based on its share of the RAB, comprising debt and participation rights as Deferred tax is recognised in respect of temporary agreed by the five Councils and the Authority in the ratio of differences between the carrying amounts of assets 40 to 60. The value of participation rights (60% of the RAB) and liabilities for financial reporting purposes and the has been brought to account as contributed equity amounts used for taxation purposes. Deferred tax is in accordance with advice given by Queensland Treasury. not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is (t) Participation returns not a business combination and that affects neither Participation returns are paid to the participating Councils accounting nor taxable profit or loss. in accordance with the Participation Agreement. Payment Deferred tax is measured at the tax rates that are expected is from post-tax operating profits (after adjustment for to be applied to temporary differences when they reverse, donated assets and other comprehensive income). based on the laws that have been enacted or substantively An estimate of the total amount of Participation Returns enacted by the reporting date. is calculated according to the Participation Return Policy A deferred tax asset is recognised for unused tax losses, and provided to the participating Councils no later than tax credits and deductible temporary differences, to the 30 May annually. extent that it is probable that future taxable profits will be Between 1 and 15 November annually, Queensland Urban available against which they can be utilised. Deferred tax Utilities will provide to the participating Councils an assets are reviewed at each reporting date and are reduced to estimate of the net profit for the first six months and the extent that it is no longer probable that the related tax advise the total amount of the Interim Participation Return. benefit will be realised. The Final Participation Return for the year ended 30 June Goods and services tax 2012 was declared on 28 May 2012, refer note 29. Revenue, expenses, assets and liabilities are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

72 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 73 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

4. Utility charges Wastewater charges 352,034 338,409 Water base charges 99,599 100,579 Water consumption 298,945 249,234 750,576 688,222

5. Contributions, grants and subsidies Developer contributions - cash 81,838 87,034 Developer contributions - donated assets 43,849 55,498 Grants and subsidies 168 163 125,853 142,695

6. Insurance Insurance recovery - 10,182 - 10,18 2

During the 2010/2011 financial year a progress claim for insurance for $10.15m related to the weather events occurring in January 2011 was made; these funds were accrued as it was assessed by management that is is probable that future economic benefits associated with this item would flow to Queensland Urban Utilities and the value could be reliably measured. Further insurance recoveries are being pursued (refer note 38).

7. Interest received Interest on arrears 680 321 Interest on investments 2,540 2,548 3,220 2,869

8. Fees and charges Property connection fees 10,511 11,903 Professional fees 2,498 1,857 Recycled water 8,535 8,256 Other fees 4,917 3,977 26,4 61 25 ,993

9. Other revenue Recovery for damage to services 622 801 Other revenue 4,787 3,521 5,409 4,322

74 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 75 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

10. Employee expenses Salaries and wages 76,359 75,318 Annual leave expenses 7,107 7,667 Long service leave expenses 3,633 (1,276) Employer superannuation contribution 11,029 11,852 Workers’ compensation premium 764 760 Payroll tax 5,002 4,715 Other employee related expenses 8,636 8,191 112,530 107,227 Less: capitalised costs 3(f) (27,933) (27,018) 84,597 80,209

The number of employees including full time and part time employees measured on a full time equivalent basis are: 1,079 FTE 1,077 FTE

11. Bulk water purchases Bulk water purchases 224,192 183,066

Bulk water is purchased from the SEQ Water Grid Manager. The price for bulk water is currently set by the Queensland Government through the Queensland Water Commission.

12. Materials and services Labour hire expenses 11,026 9,775 Advertising 199 827 Chemicals 3,002 3,212 Consultancies 8,532 8,269 Contracts 7,352 5,848 Directors fees 37 417 439 Electricity 10,440 11,802 Information, communications and technology 2,964 1,047 Legal costs 695 341 Materials 11,563 12,498 Printing and stationery 2,158 2,841 Rent 4,219 4,935 Repairs and maintenance 999 876 Supplies and consumables 43,971 52,341 Traffic control 2,633 1,593 Transport and travel 377 285 Plant and equipment hire 10,507 11,208 Software purchases 772 487 ICT investment program 12,442 - Other expenses 3,662 4,040 137,930 132,664

74 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 75 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

13. Depreciation and amortisation Buildings 761 297 Plant and equipment 764 398 Fleet 2,463 2,646 Water supply network 42,622 41,122 Sewerage network 90,167 90,141 Intangibles 925 792 137,702 135,396

14. Finance/ borrowing costs Bank charges 2,419 2,164 QTC finance costs 19,668 13,009 Interest on Participants’ debt 101,203 101,015 123 , 291 116,188

15. Loss on disposal of assets Proceeds from disposal of assets 871 - Less: Cost of assets disposed 7,664 30,126 6,793 30,126

16. Other expenses Bad and doubtful debts 3,816 3,515 Insurance 2,564 1,849 Audit fees* 510 480 Rates and taxes 2,073 2 Remissions 221 1,528 Other 1 40 9,185 7,414

* Total external audit fees paid to the Queensland Audit Office relating to the 2011/2012 financial statements are estimated to be $264,342 (2011: $270,000). There are no non-audit services included in this amount.

76 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 77 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

17. Cash and cash equivalents (a) Cash and cash equivalents Cash on hand 7 7 Cash at bank 84 1,023 Short term deposits Commonwealth Bank 1,000 11,900 Short term deposits Queensland Treasury Corporation 76,715 64,502 Cash and cash equivalents in the cash flow statement 77,806 77,432

(b) Reconciliation of operating surplus to net cash from operating activities Cash flows from operating activities Profit for the year 132,274 130,934 Adjustments for: Depreciation and amortisation 137,702 135,396 Loss on sale of property, plant and equipment 6,793 30,126 Donated assets (43,849) (55,498)

Increase/decrease in assets and liabilities (Increase)/decrease in trade and other receivables (1,548) (8,678) (Increase)/decrease in inventories 222 (1,194) (Increase)/decrease in GST input tax credits receivable (603) (3,422) (Increase)/decrease in accrued revenue (843) (147,580) (Increase)/decrease in prepayment (266) (523) (Increase)/decrease in deferred tax assets (17,122) (805) Increase/(decrease) in trade and other payables 12,303 19,640 Increase/(decrease) in provisions and employee benefits 124 3,334 Increase/(decrease) in unearned revenue (908) 5,693 Increase/(decrease) in interest payable 1,431 9,098 Increase/(decrease) in deferred tax liabilities 21,516 20,939 Increase/(decrease) in GST payable (16) 86 Net cash from operating activities 247,210 137,546

(c) Funding facilities Working capital facility QTC 100,000 100,000 Client specific pool QTC borrowing limit for 30 June 218,000 346,100 Overdraft facility - Commonwealth Bank 5,000 5,000 Total facility 323,000 451,100

Amount of facility undrawn 223,000 163,006

76 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 77 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

18. Trade and other receivables Current Utility debtors 25,506 23,783 Other debtors 6,168 2,583 Less: Provision for impairment (8,376) (4,580) 23,298 21,786

GST receivable 4,025 3,422 GST payable (70) (86) 3,955 3,336

Total 27,253 25,122

Movements in the provision for impairment Balance at beginning of the year (4,580) - Amounts written off during the year 20 2 (Increase)/decrease in provision recognised in the operating result (3,816) (4,582) Balance at the end of the year (8,376) (4,580)

19. Inventories Inventories held for use 2,428 2,650 2,428 2,650

20. Other current assets Prepayments 789 523 Accrued revenue 1,281 1,240 Accrued water consumption 86,147 70,886 Accrued base charges 7,545 6,763 Accrued insurance recovery - 10,155 Accrued interest 248 340 Accrued developer contributions 53,203 58,197 Other 60 24 149,273 148,128

78 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 79 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

21. Property, plant and equipment reconcilliation

Water Plant and Sewerage Work in supply Land Buildings equipment Fleet network progress Total 2 012 network 2 012 2 012 2 012 2 012 2 012 2 012 2 012 2 012 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Carrying amount at 1 July 50,110 6,461 1,846 12,804 1,596,412 2,289,561 378,289 4,335,484 Additions at cost - 1,816 2,104 3,976 115,539 140,207 - 263,641 Disposals - (1,891) (1) (623) (369) (3,686) - (6,571) Transfers between classes - - 6 (6) - - - - Additions to work in progress ------270,603 270,603 Work in progress capitalised ------(219,792) (219,792) Depreciation for the year - (761) (764) (2,463) (42,622) (90,167) - (136,776) Carrying amount at 30 June 50,110 5,625 3,191 13,688 1,668,960 2,335,914 429,100 4,506,589

Gross carrying amount 50,110 6,566 4,353 18,622 1,750,865 2,513,345 429,100 4,772,962 Less accumulated depreciation - 941 1,162 4,934 81,905 177,431 - 266,373 Carrying amount at cost at 30 June 50,110 5,625 3,191 13,688 1,668,960 2,335,914 429,100 4,506,589

A fair valuation of property, plant and equipment was undertaken as at 30 June 2012 using a discounted cash flow methodology which determined the fair value of these assets to be $4.769B. As the impairment testing of the assets indicated a value-in-use value of $4.636B (refer note 23), the Board considered that the carrying value (RAB) was not materially different to the impairment value, hence, elected to retain the assets at the RAB valuation.

Additions acquired during the financial year are valued at cost.

Water Plant and Sewerage Work in supply Land Buildings equipment Fleet network progress Total 2 0 11 network 2 0 11 2 0 11 2 0 11 2 0 11 2 0 11 2 0 11 2 0 11 2 0 11 $'000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Carrying amount at 1 July ------Acquisitions as per transfer notices 50,110 6,757 2,249 159 1,605,594 2,335,913 227,793 4,228,576 Additional assets acquired from Participants - - - 15,545 - - - 15,545 Additions at cost - - - - 37,271 68,354 - 105,625 Disposals - - (5) (253) (5,331) (24,565) - (30,153) Additions to work in progress ------200,623 200,623 Work in progress capitalised ------(50,127) (50,127) Depreciation for the year - (297) (398) (2,647) (41,122) (90,141) - (134,605) Carrying amount at 30 June 50,110 6,461 1,846 12,804 1,596,412 2,289,561 378,289 4,335,483

Gross carrying amount 50,110 6,757 2,243 15,298 1,637,470 2,379,674 378,289 4,469,841 Less accumulated depreciation - 297 397 2,494 41,058 90,113 - 134,358 Carrying amount at cost at 30 June 50,110 6,461 1,846 12,804 1,596,412 2,289,561 378,289 4,335,483

A fair valuation of property, plant and equipment was undertaken as at 30 June 2011 using a discounted cash flow methodology which determined the fair value of these assets to be $4.563B. As the impairment testing of the assets indicated an impairment value of $4.387B (refer note 23), the Board considered that the carrying value (RAB) was not materially different to the impairment value, hence, elected to retain the assets at the RAB valuation.

Additions acquired during the financial year are valued at cost.

78 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 79 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

22. Intangible assets

Software purchased Total

2 012 2 0 11 2 012 2 0 11 $’000 $’000 $’000 $’000

Carrying amount at 1 July 1,955 - 1,955 - Acquisitions as per transfer notices - 2,747 - 2,747 Acquisitions at cost 825 - 825 - Gross carrying amount 2,780 2,747 2,780 2,747 Amortisation for the year (925) (792) (925) (792) Carrying amount at 30 June 1, 854 1,9 55 1, 854 1,9 55

23. Impairment testing for cash generating units (a) Valuation and assumptions

The carrying amount of assets, including intangibles (refer Notes 21 and 22) allocated to the cash-generating unit (CGU) are set out below:

Carrying amount of assets Recoverable amount Surplus $’000 $’000 $’000

Cash-generating unit - Queensland Urban Utilities 4,508,443 4,769,481 261,038

The Board has adopted the following methodology, key • Cash flow projections are discounted on a mid point basis. assumptions and approach to determine the recoverable • The Gordon growth model is used for cash flows from amount for the purpose of impairment testing: year 11 to “in perpetuity”. • Queensland Urban Utilities treats its business activities • The cash flows are effectively EBITDA less renewals capital as a single cash-generating unit for the purposes expenditure allowing for cash flow timing differences. of impairment testing. • Cash flows are estimated using the building block • Assumed capital structure is 50% debt and 50% equity. approach consistent with the Queensland Competition • Pretax nominal cash flows are estimated for at least Interim Price Monitoring Framework, with a conservative ten years. price path for water and sewerage charges for all • Cash flow projections are based on the draft Corporate customers assumed for 10 years within this approach. Plan projected for 10 years, taking into account the • Change in working capital has been taken into account 2 year price cap and the Board approved freeze on for cash flow requirements. prices for 2012/2013. • A rate from the Reserve Bank of Australia target • The inclusion of the two year price cap for residential inflation rate (2.5%) is used as a long term growth rate. and small customers is as required by the Queensland • The discount rate reflects the risk of the cash flows Government legislation, the Fairer Water Prices for SEQ and has been calculated using the WACC and Capital Amendment Bill 2011. Asset Pricing Model (CAPM) framework. • For impairment purposes the pre-tax nominal discount rate is 7.22%.

80 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 81 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

23. Impairment testing for cash generating units (contd) (b) Price path post 1 July 2013

As outlined above, for impairment modelling cash flows are estimated using the building block approach consistently with the Queensland Competition Interim Price Monitoring Framework, with a conservative price path assumed for 10 years within this approach.

In June 2011, the Fairer Water Prices for SEQ Amendment Bill 2011 was passed by the Queensland Government. This legislation requires the Participating Councils to develop and publish final price paths for water and sewerage charges for residential and small customers by 30 March 2013 for the period 1 July 2013 to 30 June 2019. These price paths will be developed in a collaborative manner between Participating Councils and in consultation with Queensland Urban Utilities.

As a result of this process the cash flows from the price paths to be developed may differ from the cash flows based on the price path currently included in the impairment model. The price paths have not yet reached a stage of development that allows an assessment of the difference, if any, between the price paths as included in the impairment model and the price paths that are to be developed by the Participating Councils.

Accordingly, as at the date of this report the impact, if any, that a difference in price paths may have on the valuation of assets or the assessment of impairment cannot yet be determined.

80 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 81 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

24. Income tax expense/ (benefit)

Queensland Urban Utilities is exempt from Commonwealth Government income taxation but is subject to the Local Government Tax Equivalents Regime. Queensland Urban Utilities is only subject to the Commonwealth taxes being Fringe Benefits Tax (FBT) and Goods and Services Tax (GST).

2 012 2 0 11 Notes $'000 $'000

(a) Income tax expense/ (benefit) Current tax 53,777 38,153 Deferred tax 1,779 20,133 55,556 58,286 (b) Numerical reconciliation of incometax expense to prima-facie tax payable Surplus/ (Deficit) from operating activities before income tax expense/ (benefit) 187,352 190,311 Tax at the the Australian tax rate of 30% 56,206 57,095 Non-deductible expenditure 8 4 Permanent difference - depreciation on acquired assets 1,150 1,187 Permanent difference - accrued leave provisions (1,808) - Income tax expense/ (benefit) 55,556 58,286

(c) Deferred tax equivalent asset Opening balance 12,408 11,603 Unused tax losses - (2,228) (charge)/ credit to income tax statement 17,122 3,033 29,530 12,408

(d) Deferred tax equivalent asset comprises of: Provisions 6,022 1,903 Accrued expenses 150 93 Plant and equipment 18,436 3,141 Expenses capitalised for tax 4,538 6,807 Other 384 464 Net tax assets 29,530 12,408

(e) Deferred tax equivalents liability Opening balance (20,939) - (charge)/ credit to income tax (21,516) (20,939) (42,455) (20,939) Deferred tax liability comprises of: Accrued income - (3,046) Contributed assets (42,271) (16,636) Other (184) (1,257) Net tax liability (42,455) (20,939)

2011 comparatives have been adjusted based on the finalisation of the 2010/2011 annual taxation return.

82 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 83 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

25. Interest bearing liabilities QTC client specific pool loans 388,089 288,179 Participant loans 1,486,806 1,486,806 Total 1,874,895 1,774,985

No assets have been pledged as security for any liabilities.

All borrowings are in Australian dollar denominated amounts and an amount of $5,467,653 has been capitalised during the current year (2011: $539,992). There have been no defaults or breaches of the loan agreement during the year.

It is Queensland Urban Utilities’ intention to hold its borrowings for their full term. No fair value adjustment is made to the carrying amount of the borrowings.

The Weighted Average Borrowing Rate for QTC borrowings as at 30 June 2012 is 5.87% (2011: 6.24%). Interest payments are made monthly in arrears at rates ranging from 4.0465% to 6.7834% (2011: 6.2054% to 6.7834%).

The fair value of borrowings at 30 June 2012 was determined by QTC at $1,903,113,674 (2011: $1,789,902,731). The fair value is calculated using discounted cash flow analysis and the effective interest rate.

2 012 2 0 11 Notes $'000 $'000

Carrying Amount Carrying Amount

Balances of outstanding loans were as follows: Participant loans 1,486,806 1,486,806 QTC - client specific pool 388,089 288,179 1, 874 , 8 9 5 1, 774 ,9 85

QTC client specific pool loans Opening balance 288,179 - QTC loans transferred from Brisbane City Council - 180,992 QTC loans transferred from Scenic Rim Regional Council - 2,100 288,179 183,092 Add: Drawdown of debt 99,910 105,087 388,089 288,179

Participant loans Brisbane City Council 1,241,282 1,241,282 Ipswich City Council 202,309 202,309 Lockyer Valley Regional Council 14,735 14,735 Scenic Rim Regional Council 14,676 14,676 Somerset Regional Council 13,804 13,804 1,486,806 1,486,806

Participant loans are subject to a fixed interest rate of 6.7834% (2011: 6.7834%) with monthly interest-only payments to 30 June 2014. The original Participant loans were for a 3 year period to 30 June 2013. The Participants and the Queensland Treasurer have given written approval to extend the loans to 30 June 2014. The terms will be renegotiated prior to 30 June 2013.

82 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 83 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

26. Employee benefits Current Salaries and wages accrued 882 2,461 Annual leave 12,136 11,879 Long service leave 15,432 14,637 Time in lieu 912 895 Vested sick leave 423 586 Total 29,785 30,458

Non-current Long service leave 2,697 1,900 Total 2 , 697 1,9 0 0

27. Trade and other payables Current Trade creditors 29,939 17,516 Infrastructure agreement liabilities 5,081 10,199 Other payables 1,049 5,432 Total 36,069 33,147

Non Current Other - lease incentive 476 - Total 476 -

28. Other current liabilities Unearned revenue 7,422 9,072 Accrued expenses 1,999 6,302 Accrued interest 10,529 9,098 Accrued capital program costs 30,806 47,865 Accrued electricity 2,683 1,048 Accrued bulk water purchases 17,543 14,988 Other 19,101 18,143 9 0, 083 10 6, 516

Current income tax equivalent payable 23,032 14,230 Total 11 3 ,115 1 2 0 , 7 4 6

84 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 85 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 $'000 $'000

29. Participation rights (a) Participation rights returns In accordance with the Participation Agreement, the Board declared the final participation rights payment of $59.76m (2011: $42.6m) on 28 May 2012. Payment will be made on 28 September 2012. 59,759 42,633

An interim participation return was declared on 17 October 15,403 21,488 2011 and paid on 31 January 2012. Total participation rights paid/payable 75,162 64,121

Amounts per Participant: Brisbane City Council 63,893 54,507 Ipswich City Council 9,186 7,837 Lockyer Valley Regional Council 679 579 Scenic Rim Regional Council 783 668 Somerset Regional Council 621 530 75 ,162 64 ,121

(b) Participation rights percentages

Section 5.2(c) of the Participation Agreement provides for the calculation of the participation rights of each Participant. Participation rights are determined based on each Participants’ Regulatory Asset Base (RAB). The RAB is calculated in accordance with the method set out in the Ministerial Direction titled “Queensland Competition Authority Act 1997 section 10(e) Ministers’ Direction Notice” as published in the Queensland Government Gazette No. 46 on 9 October 2009.

The RAB and participation rights percentage for each Participant is:

RAB Participation Rights $'000 %

Brisbane City Council 3,596,905 85.007% Ipswich City Council 517,150 12.222% Lockyer Valley Regional Council 38,199 0.903% Scenic Rim Regional Council 44,100 1.042% Somerset Regional Council 34,969 0.826% 4,231,322 100.000%

84 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 85 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

29. Participation rights (contd) (c) Assets and liabilities transferred On 1 July 2010 the participating Councils transferred the assets, liabilities, instruments and employees necessary for Queensland Urban Utilities to commence trading under a scheme made in accordance with the Act and gazetted on 29 June 2010.

1/ 7/2010 $'000

Summary of the transferred assets and liabilities is: Property, plant and equipment 4,003,528 Capital works in progress 227,794 Cash 9,006 Employee entitlements (31,424) QTC debt transferred to Queensland Urban Utilities (183,092) 4,025,812 Represented by: Contributed equity 2,538,793 Participant’s debt 1,487,019 4,025,812

2 0 11 $'000

Details of the transferred assets and liabilities by Council are:

Brisbane City Council Property, plant and equipment 3,413,238 Capital works in progress 183,667 Cash 9,006 Employee entitlements (25,494) QTC debt transferred to Queenland Urban Utilities (180,992) 3,399,425 Represented by: Contributed equity 2,158,143 Participant’s debt 1,241,282 3,399,425 Ipswich City Council Property, plant and equipment 474,866 Capital works in progress 42,284 Employee entitlements (4,338) 512,812 Represented by: Contributed equity 310,290 Participant’s debt 202,522 512,812

86 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 87 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

29. Participation rights (contd) (c) Assets and liabilities transferred (contd) 2 0 11 $'000

Lockyer Valley Regional Council Property, plant and equipment 38,107 Capital works in progress 92 Employee entitlements (545) 37,654 Represented by: Contributed equity 22,919 Participant’s debt 14,735 37,654 Scenic Rim Regional Council Property, plant and equipment 42,768 Capital works in progress 1,331 Employee entitlements (863) QTC debt transferred to Queenland Urban Utilities (2,100) 41,1 3 6 Represented by: Contributed equity 26,460 Participant’s debt 14,676 41,1 3 6 Somerset Regional Council Property, plant and equipment 34,549 Capital works in progress 419 Employee entitlements (183) 34,785 Represented by: Contributed equity 20,981 Participant’s debt 13,804 34,785

30. Financial instruments

Queensland Urban Utilities’ activities expose it to a variety of financial risks including credit risk, liquidity risk and interest rate risk. Exposure to financial risks is managed in accordance with approved policies on financial risk management. These policies focus on managing the volatility of financial markets and seek to minimise potential adverse effects on the financial performance of Queensland Urban Utilities. Queensland urban Utilities measures risk exposure for credit risk by ageing analysis, liquidity risk by maturity analysis and interest rate risk by sensitivity analysis.

86 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 87 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

30. Financial instruments (contd) (a) Categorisation of financial instruments

Queensland Urban Utilities has the following categories of financial assets and financial liabilities

2 012 2 0 11 Category Notes $'000 $'000

Financial assets Cash and cash equivalents 17 77,806 77,432 Trade and other receivables 18 27,253 25,122 Total 105 ,05 9 102, 554

Financial liabilities Trade and other payables 27 36,545 33,147 Interest bearing liabilities 25 1,874,895 1,774,985 Total 1,911,4 4 0 1, 8 0 8 ,1 3 2

(b) Credit risk exposure

Credit risk exposure refers to the situation where a financial loss may be incurred as a result of another party to a financial instrument failing to discharge their obligation.

The maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the gross carrying amount of those assets inclusive of any provisions for impairment. No collateral is held as security relating to the financial assets held by the Authority. Queensland Urban Utilities has minimum exposure to credit risk due to the large number of small value receivables.

The following table represents the maximum exposure to credit risk based on contractual amounts net of any allowances:

Maximum exposure to credit risk

Category Notes Cash and cash equivalents 17 77,806 77,432 Trade and other receivables 18 27,253 25,122 Total 105 ,05 9 102, 554

No financial assets and financial liabilities have been offset and presented net in the Statement of Financial Position.

The method of calculating any provisional impairment for risk is based on past experience.

The recognised impairment provision for receivables is $8,375,766 for the current year (2011: $4,579,709).

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amount as indicated.

Ageing of past due receivables and the amount of impairment is disclosed in the following table:

88 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 89 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

30. Financial instruments (contd) (b) Credit risk exposure (contd)

2 012 2 012 Receivables Gross Impairment Gross Impairment $’000 $’000 $’000 $’000

Not past due 14,831 - 14,874 - Past due 31-60 days 5,371 - 5,134 - Past due 61-90 days 844 - 109 - More than 90 days 10,628 8,376 6,249 4,580 31,674 8,376 26,366 4,580

(c) Liquidity risk

Liquidity risk refers to the situation where Queensland Urban Utilities may encounter difficulty in meeting obligations associated with financial liabilities. Queensland Urban Utilities is exposed to liquidity risk in respect of its trade and other payables and interest bearing liabilities. Liquidity risk is managed by maintaining sufficient cash deposits and undrawn facilities, both short and long term, to cater for unexpected volatility in cash flows.

The following table sets out the liquidity risk of the 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 reporting date.

2012 Payable in

Financial liabilities < 1 year 1-5 Years > 5 years Total $’000 $’000 $’000 $’000

Participant loans - 1,486,806 - 1,486,806 QTC client specific pool - - 388,089 388,089 Trade and other payables 36,545 - - 36,545 3 6 , 54 5 1,4 8 6 , 8 0 6 3 8 8 , 0 8 9 1,911,4 4 0

2011 Payable in

Financial liabilities < 1 year 1-5 Years > 5 years Total $’000 $’000 $’000 $’000

Participant loans - 1,486,806 - 1,486,806 QTC client specific pool - - 288,179 288,179 Trade and other payables 33,147 - - 33,147 33,147 1,486,806 288,179 1,808,132

88 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 89 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

30. Financial instruments (contd)

(d) Interest rate sensitivity analysis

Queensland Urban Utilities is exposed to interest rate risk through borrowings and cash deposited in interest bearing accounts. Queensland Urban Utilities manages its portfolio by setting, monitoring and adjusting the terms and duration of its loan portfolio as allowed under its commercial financing contract with QTC. The risk in borrowing is effectively managed through QTC’s capacity to issue securities with variable terms allowing an appropriate duration for that of Queensland Urban Utilities.

Sensitivity analysis

The following sensitivity analysis depicts the outcome on net income if interest rates would change by +/- 1% from the year-end rate rates applicable to QUU’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.

2 012 -1% +1%

Net carrying amounts Profit Equity Profit Equity $’000 $’000 $’000 $’000 $’000

Cash and cash equivalents 77,806 (778) (778) 778 778 QTC client specific pool 388,089 3,881 3,881 (3,881) (3,881) Overall effect on profit and equity 3,103 3,103 (3,103) (3,103)

2 0 11 -1% +1%

Net carrying amounts Profit Equity Profit Equity $’000 $’000 $’000 $’000 $’000

Cash and cash equivalents 77,432 (774) (774) 774 774 QTC client specific pool 288,179 2,882 2,882 (2,882) (2,882) Overall effect on profit and equity 2,108 2,108 (2,108) (2,108)

90 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 91 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

30. Financial instruments (contd) (e) Fair value

Queensland Urban Utilities does not recognise any financial assets or financial liabilities at fair value.

The fair value of trade and other receivables and payables is assumed to approximate the value of the original transaction, less any allowance for impairment.

The fair value of borrowings is notified by QTC. It is calculated using discounted cash flow analyses and the effective interest rate and is disclosed below:

Carrying Amount Fair Value Notes $'000 $'000

2 012 Financial liabilities Financial liabilities at amortised cost: Participant loans 25 1,486,806 1,507,071 QTC client specific pool 25 388,089 396,043 1, 874 , 8 9 5 1,9 03 ,114

2 0 11 Financial liabilities Financial liabilities at amortised cost: Participant loans 25 1,486,806 1,499,828 QTC client specific pool 25 288,179 290,075 1, 774 ,9 85 1, 78 9,9 03

90 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 91 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

2 012 2 0 11 Notes $'000 $'000

31. Operating leases (i) Leases as lessee Non-cancellable operating lease rentals are payable as follows: Less than one year 9,728 4,399 Between one and five years 28,898 6,071 More than five years 22,497 - 61,123 10,470

(ii) Leases as lessor Non-cancellable operating leases rentals are receivable as follows: Less than one year 130 123 Between one and five years 407 401 More than five years 475 573 1, 01 2 1, 0 97 32. Capital and other commitments Contracted but not yet provided for and payable: Within one year 139,515 162,457 One year and no later than five years 33,497 69,576 More than five years - - 173,012 232,033

33. Contingencies Contingent liabilities A small number of claims are pending for contract variations, the maximum exposure of which is: 168 2,416

There are 4 (2011: 5) appeals in the Planning and Environment Court, it is not possible to make an estimate of the final amount payable at reporting date.

On or about 5 July 2012 Workplace Health and Safety Queensland (WHSQ) commenced a prosecution by way of Complaint and Summons against Queensland Urban Utilities in the Ipswich Magistrates Court alleging that Queensland Urban Utilities failed to discharge its obligations under section 28 of the WHS Act (Complaint) in that workers were exposed to risk to their health and safety arising out of the conduct of Queensland Urban Utilities’ business or undertaking.

The maximum penalty for this type of offence under the WHS Act is 1,000 -

Contingent assets Reimbursement of costs associated with an incomplete contract is pending, the maximum exposure is: 2,500 2,500

It is the intention of management to pursue further insurance recoveries. No amounts for contingent assets have been provided in the financial statements.

92 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 93 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

34. Superannuation The most recent actuarial assessment of the scheme was undertaken as at 1 July 2011. The actuary indicated that “the Refer to note 10 for details of amount of superannuation DBF is in a very modest financial position with regard to the contribution paid by Queensland Urban Utilities to the net asset coverage of vested liabilities. Investment returns superannuation funds in respect of this year for the benefit will be volatile under the required investment strategy, of the employees. particularly over short periods. The DBF therefore needs Local government superannuation scheme - LGsuper sufficient reserves to be able to withstand a reasonable range of such influences. Because the DBF is now running Queensland Urban Utilities contributes to the Local down and cash flows are negatives, the VBI (vested benefits Government Superannuation Scheme (Qld) (the scheme). index) should not be allowed whenever possible to retreat The scheme is a Multi-employer Plan as defined in below 100%. Once below 100%, benefits drawn reduce the the Australian Accounting Standard AASB119 available assets for remaining members and hence the net Employee Benefits. asset coverage of vested benefits declines further. The Queensland Local Government Superannuation Board, In order to withstand a one in ten ‘low return’ outcome, the the trustee of the scheme, advised that the local government DBF would need reserves of the order of 8% to 10% having superannuation scheme was a complying superannuation regard to the investment strategy adopted. Given the scheme for the purpose of the Commonwealth current position of the DBF, such reserve can essentially Superannuation Industry (Supervision) legislation. only eventuate from either excess investment returns over The scheme has two elements referred to as the Defined salary increases or additional employer contributions. Benefits Fund (DBF) and the Accumulation Benefits Fund Queensland Urban Utilities has been advised by the (ABF). The ABF is a defined contribution scheme as defined trustee of the scheme, following advice from the scheme’s in AASB 119. Queensland Urban Utilities has no liability actuary, that additional contributions may be imposed in to or interest in the ABF other than the payment of the the future at a level necessary to protect the entitlements statutory contributions as required. of DBF members. Under the Local Government Act 2009 The DBF is a defined benefit plan as defined in AASB119. the trustee of the scheme has the power to levy additional Queensland Urban Utilities is not able to account for the contributions on Employers which have employees DBF as a defined benefit plan in accordance with AASB119 in the DBF when the actuary advises such additional because the scheme is unable to account to Queensland contributions are payable – normally when assets of the Urban Utilities for its proportionate share of the defined DBF are insufficient to meet members’ benefits. benefit obligation, plan assets and costs. The expiry date of the solvency certificate is 30 June 2016 Any amount by which either fund is over or under funded but should be replaced by 30 June 2015. would only affect future benefits and contributions to the DBF, and is not an asset or liability of Queensland Urban Utilities. Accordingly, there is no recognition in the financial statements of any over or under funding of the scheme.

The audited general purpose financial report of the scheme as at 30 June 2011 (the most recent available) which was not subject to any audit qualification, indicates that the assets of the scheme are sufficient to meet the vested benefits.

92 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 93 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

34. Superannuation (contd)

2 012 2 0 11 $'000 $'000

(a) Reconciliation of the present value of the defined benefit obligation Present value of defined benefits obligations at the beginning of the current year 12,037 12,198 Current service cost 311 333 Interest cost 535 565 Contributions by plan participants 144 144 Actuarial losses/(gains) 834 (14) Benefits paid (2,384) (953) Taxes and premiums paid (136) (236) Present value of defined benefits obligations at the end of the current year 11,341 12,037

(b) Reconciliation of the fair value of the plan assets Fair value of plan assets at the beginning of the year 13,128 11,505 Expected return on plan assets 840 756 Actuarial gains / (losses) (311) 455 Employer contributions 673 1,457 Contributions by plan participants 144 144 Benefits paid (2,384) (953) Taxes and premiums paid (136) (236) Fair value of plan assets at the end of the year 11,954 13 ,128

(c) Reconcilaition of the assets and liabilities recognised in the Statement of Financial Position Defined benefit obligations (includes contributions tax provision) 11,341 12,037 Fair value of plan assets (11,954) (13,128) Net superannuation asset (613) (1,091)

(d) Expense recognised in Statement of Comprehensive Income Service cost 311 333 Interest cost 535 565 Expected return on assets (840) (756) Actuarial losses 1,145 (469) Superannuation expense 1,151 (327)

The percentage invested in each asset class at the reporting date: Australian equity 24% 33% International equity 24% 23% Fixed income 12% 11% Property 15% 16% Alternatives/other 25% 12% Cash 0% 5%

94 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 95 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

34. Superannuation (contd) (f) Fair value of plan assets

The fair value of Plan assets includes no amounts relating to: • any of the Company’s own financial instruments • any property occupied by, or other assets used by, the Company.

(g) Expected rate of return on plan assets

The expected rate of return on assets assumption is determined by weighting the expected long term return for each asset class by the target allocation of assets to each asset class and allowing for the correlations of the investment returns between asset classes. The returns used for each class are net of investment tax and investment fees. An allowance for asset-based administration expenses has been deducted from the expected return.

2 012 2 0 11 $'000 $'000

(h) Actual return on plan assets Actual return on plan assets 529 1,212

(i) Principal actuarial assumptions at the reporting date Discount rate 3.5% pa 4.9% pa Expected rate of return on plan assets 7.0% pa 6.8% pa Expected salary increase rate 4.25% pa* 4.0% pa

* 4.25% for the year ending 30 June 2013 and 3.0% thereafter.

The expected rate of return on CDBF assets includes a reduction to allow for the asset-based administrative expenses of the CDBF.

(j) Historical information Present value of defined benefit obligation 11,341 12,037 Fair value of Plan assets 11,954 13,128 (Surplus)/deficit in Plan (613) (1,091) Experience adjustments (gains)/losses - Plan assets 311 (455) Experience adjustments (gains)/losses - Plan liabilities 189 (298) Other adjustments (gain)/loss - change in assumptions 645 284

(k) Expected contributions Expected employer contributions for 2013 are $0.278m

35. Funds held in trust

Queensland Urban Utilities performs only a custodial role in respect of external Trust Fund money. As such, the balances disclosed below have not been brought to account in the Financial Statements and are shown here for information purposes only:

Standpipe bonds, security deposits and unclaimed money 172 165 172 165

94 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 95 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

36. Key management personnel and remuneration (a) Key management personnel

The following details for key executive management personnel include those positions that had authority and responsibility for planning, directing and controlling the activities of Queensland Urban Utilities during 2011/2012. Further information on these positions can be found in the body of the Annual Report under the section relating to Executive Management.

Current incumbents Position Responsibilities Contract classification Dates position held and appointment authority Chief Executive Officer* Strategic planning and corporate Board appointed Appointed 1 July governance, legal (general counsel), Band A Contract 2011; resigned with internal audit an effective date 10 August 2012 Chief Financial Officer Tax and treasury, financial services, Board appointed Transitioned under regulatory affairs, financial Band A Contract the Transfer Scheme performance and reporting, financial 1 July 2010 planning, financial accounting, sourcing, procurement and legal, risk Chief Operating Officer Service delivery (West and East), Board appointed Transitioned under planning, maintenance and renewal Band A Contract the Transfer Scheme planning, major projects and 1 July 2010 commercial services, source control Chief Information & Strategic planning and program Board appointed Appointed Technology Officer delivery, operations, records Band A Contract 19 March 2012 management Executive Director People HR and workforce planning, WH Board appointed Appointed and Safety and S, learning and development, Band A Contract 1 February 2012 remuneration and HR administration, employment arrangements and HR practice, organisational development, Registered Training Organisation Executive Director Retail Billing and revenue, demand Board appointed Transitioned under and efficiency, customer service, Band A Contract the Transfer Scheme marketing and communications, 1 July 2010 operation support Executive Director Strategy Leading QUU’s strategic initiatives Board appointed New role appointed and Growth and growth opportunities Band A Contract 12 June 2012 General Manager HR and workforce planning, WH and S, Board appointed Transitioned under Human Resources learning and development, remuneration Band A Contract the Transfer Scheme 1 and HR administration, employment July 2010; resigned 7 arrangements and HR practice, October 2011 organisational development, Registered Training Organisation General Manager Business services, business solutions Board appointed Transitioned under Corporate Services and information management, business Band A Contract the Transfer Scheme resilience, records management, 1 July 2010; sourcing, procurement and legal, role expired 1 performance and Integrated February 2012 Management Systems, administration Chief Information Officer Strategic planning and Board appointed Transitioned under program delivery, operations Band A Contract the Transfer Scheme 1 July 2010; resigned 3 February 2012

* An appointment for the new Chief Executive Officer was made with an effective date of 2 July 2012.

96 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 97 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

36. Key management personnel Long term employee benefits include long service and remuneration (contd) leave accrued. (b) Remuneration Post employment benefits include superannuation contributions. Remuneration for key executive management personnel Redundancy payments are not provided for within individual is determined by the Board. Remuneration and other terms contracts of employment. Contracts of employment provide of employment is specified in individual employment only for notice periods or payment in lieu of notice on contracts. The contracts provide for the provision of termination, regardless of the reason for termination. performance-related cash bonuses. Performance bonuses may be paid or payable annually For the 2011/2012 year, remuneration of key executive depending upon satisfaction of key criteria. Performance management personnel increased by 3.6% (2011: 6.5% payments of the key executive management are capped at to 10%) based on a market review of similar roles. a range of between 15% and 25% of total fixed remuneration. Remuneration packages for key executive management The amounts payable are tied to the achievement of personnel comprise the following components: pre-determined organisational and individual performance targets as agreed by the Board and the Chief Executive Officer. Short term employee benefits consisting of base salary, allowances and leave entitlements paid and provided for the entire year or for that part of the year during which the employee occupied the specified position. Amounts disclosed equal the amount expensed in the Statement of Comprehensive Income.

96 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 97 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

36. Key management personnel and remuneration (contd) (b) Remuneration (contd)

Total fixed remuneration is calculated on a “total cost” basis as below. 2 012

Long term Base Non-monetary employee Post employment Termination Total Position $’000 benefits benefits benefits benefits remuneration $’000 $’000 $’000 $’000 $’000

Chief Executive Officer (resigned effective10 August 2012) 450 - 10 42 - 502 Chief Financial Officer 319 - 9 25 - 353 Chief Operating Officer 311 - 9 28 - 348 Chief Information and Technology Officer 57 - 8 5 - 70 Executive Director People and Safety 77 - 2 2 - 81 Executive Director Retail 269 - 6 24 - 299 Executive Director Strategy and Growth 8 - - 1 - 8 General Manager Human Resources 112 - 1 10 143 266 Chief Information Officer 172 - 3 22 102 299 General Manager Corporate Services 135 - 4 4 - 143 Total remuneration 1,910 - 51 163 245 2,370

2 0 11

Long term Base Non-monetary employee Post employment Termination Total Position $’000 benefits benefits benefits benefits remuneration $’000 $’000 $’000 $’000 $’000

Chief Executive Officer (resigned 30 June 2011) 410 2 10 37 - 459 Chief Executive Officer (designate) 112 - 3 9 - 124 Chief Financial Officer 266 2 7 28 - 303 Chief Operating Officer 267 2 7 27 - 303 Chief Information Officer 197 4 5 18 - 224 General Manager Corporate Services 195 4 4 28 - 231 General Manager Human Resources 183 4 5 17 - 209 Executive Director Retail 225 4 6 22 - 257 Total remuneration 1,855 22 47 186 - 2,110

98 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 99 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

36. Key management personnel and remuneration (contd) (c) Performance payments

The basis for performance bonuses paid or payable is set out below: 2 012

Expected date Position of payment Basis for payment

Chief Executive Officer Sept 2012

Chief Financial Officer Sept 2012

Chief Operating Officer Sept 2012 Individual performance plans based on achievement Chief Information and of targets for key result areas and tied to the Technology Officer Sept 2012 Corporate Plan strategies. Executive Director People and Safety Sept 2012

Executive Director Retail Sept 2012

2 0 11

Position Date Paid Basis for payment

Chief Executive Officer (resigned 30 June 2011) 30-Aug-11

Chief Financial Officer 30-Aug-11

Chief Operating Officer 30-Aug-11 Individual performance plans based on achievement Chief Information Officer 30-Aug-11 of targets for key result areas and tied to the Corporate Plan strategies. General Manager Corporate Services 30-Aug-11

General Manager Human Resources 30-Aug-11

Executive Director Retail 30-Aug-11

The aggregate performance bonuses paid to all key executive management personnel is $309,088. (2011: $256,960).

(d) Organisational realignment

On 1 February 2012, Queensland Urban Utilities underwent an organisational realignment to more closely align the Executive roles with functions. The position of General Manager, Corporate Services was abolished with some functions transferred to the Chief Financial Officer, Chief Information and Technology Officer, Executive Director Retail, Executive Manager and the Executive Director, People and Safety (this position retained the responsibilities of the General Manager Human Resources).

98 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 99 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

37. Related parties Key management personnel compensation (a) Board members

The Board Members who were paid directly or indirectly were:

2 012 * Superannuation Salary and fees contribution Total $'000 $'000 $'000

Jude Munro AO 101 9 110 Barry Ball 50 5 55 Dennis Cavagna 50 5 55 Diana Eilert 49 6 55 Paul Emmerson 50 5 55 Phil Kesby 50 5 55 Bernard Ponting 50 5 55 Len Scanlan 50 5 55 450 45 495

* 2012 includes 13 months payments. The CPI increase of 3.6% was applied and monthly rates set at $7,770 Chair and $3,885 Board members. Due to timing the above includes 12 payments at the 2011/2012 rate and 1 payment at the 2010/2011 rate.

2 0 11 * Superannuation Salary and fees contribution Total $'000 $'000 $'000

Jude Munro AO 90 8 98 Barry Ball 45 4 49 Dennis Cavagna 45 4 49 Diana Eilert 45 4 49 Paul Emmerson 45 4 49 Phil Kesby 45 4 49 Bernard Ponting 45 4 49 Len Scanlan 45 4 49 405 36 441

* 2011 includes 12 months payments. The Participation Agreement set the monthly rate at $7,500 Chair and $3,750 Board members and provided for an increase in line with CPI.

(b) Loans to key management personnel Louise Dudley, Chief Executive Officer, is a Director of LG Super. QUU contributed to the fund based on actuarial None of the key management personnel have personal advice and the total payments for the year were $332,500. loans with the Authority oustanding at 30 June 2012. All transactions are made on normal commercial terms. (c) Other key management personnel transactions (d) Board member transactions Transactions with related parties of key management There are no transactions with related parties of Board personnel that occurred during the financial year are members for the financial year, other than on normal noted below. commercial terms.

10 0 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 101 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

37. Related parties (contd) (e) Transactions with Participating Councils

Queensland Urban Utilities entered into a number of transitional service agreements (TSA’s) with its Participants. The amount of expenditure included in the Statement of Comprehensive Income follows:

2 012 2 0 11 $'000 $'000

Brisbane City Council 19,457 21,668 Services provided include: information and communication technology, payroll, internal audit, accommodation, contact centre, information management systems, rates processing, sourcing and category management, logistics and warehousing, GIS, radio access

Brisbane City Council (BCC) communicated their intention not to continue service provision under the TSA’s post the expiration date of 30 June 2013.

During 2012/2013 Queensland Urban Utilities will enter into a range of contracts for managed services to faciliate separation from the BCC systems and services.

Ipswich City Council 219 246 Services provided include: PABX, radio access, GIS, help desk and phones

Capital commitments to be provided by Brisbane City 4,149 8,258 Council (included in note 32)

38. Significant weather events

In January 2011 there were a number of signicant weather events that affected the business operations across the Brisbane, Ipswich and Lockyer Valley regions. Associated revenue and costs are:

Income from insurance* (74) 10,155 Other income - 449 Assets written off due to damage beyond repair 48 (24,669) Cost of replacement of assets (18,820) (18,632) Cost of repair to assets (2,579) (5,542) Cost of cleanup - (13,666) Other costs (1,073) (2,326) Cost to Queensland Urban Utilities (22,498) (54,231)

* Insurance funds were received for an amount less than accrued in 2010/2011; there has been no accrual for insurance or NDRRA funding (note 40) in 2011/2012 due to uncertainty of funding.

10 0 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 101 Central SEQ Distributor-Retailer Authority Notes to the financial statements

For the year ended 30 June 2012

39. Prior period adjustments (2010/2011 financial year)

(a) On 17 February 2011 the Honourable Stephen Robertson MP advised the final outcome of the claim by Queensland Urban Utilities for reimbursement of costs to establish Queensland Urban Utilities as the Distributor-Retailer for customers within the Brisbane, Ipswich, Lockyer Vallyer, Scenic Rim and Somerset Council areas.

The total approved amount for each Council and the repayment of the Interim Distribution Entity debt was:

Approved Estimate $'000 $'000

Brisbane City Council 25,125 24,376 Ipswich City Council 1,484 1,463 Lockyer Valley Regional Council 102 30 Scenic Rim Regional Council 602 131 Somerset Regional Council - 34 Interim Distribution Entity Debt 11,540 11,454 38,853 37,488

The 2009/2010 financial statements included a reliable estimate that, at the time was not considered to be materially different to the anticipated outcome. An adjustment to the 2010 comparative figures for $1.363m has been made based on the approved costs.

(b) Tax effect entries were not processed in the 2009/2010 financial statements and have been adjusted by restatement of comparatives to take this into account.

The following adjustments to the 2010 comparative figures have been made:

2010 financial statements adjusted balance for 2010 $'000 $'000

Total for materials and services (note 12) in the Statement of Comprehensive Income (a) 37,588 38,951 Income tax expense (b) - (11,603) Deferred tax asset (b) - 11,603 Retained earnings/(loss) (a) (b) (37,477) (27,237)

40. After balance date events

Insurance funds were received on 12 July 2012 in the amount of $7.256m.

A business case submission has been made to the Queensland Recovery Authority for funding. It is expected that the claim will be in the vicinity of $40m.

Queensland Urban Utilities acquired the SAS laboratory from Brisbane City Council on 3 August 2012. Assets, employee liabilities and employees were transitioned on 3 August 2012. The cost of this transaction is $5.18m.

102 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 103 Central SEQ Distributor-Retailer Authority Certificate of Queensland Urban Utilities

For the year ended 30 June 2012

102 Queensland Urban Utilities Annual Report 2011/12 Queensland Urban Utilities Annual Report 2011/12 103 Central SEQ Distributor-Retailer Authority Independent Auditor’s Report

For the year ended 30 June 2012 Central SEQ Distributor-Retailer Authority Independent Auditor’s Report

For the year ended 30 June 2012 Prudent and efficient asset management www.urbanutilities.com.au xxxxx-2012

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