Secure and efficient water through partnership and innovation

Annual Report 2010–11 Contents

About this Annual Report...... 2 Our operational performance ...... 14

Operational highlights 2010-11...... 4 Priority area 1 – strategic operations ...... 14 Priority area 2 – customer service...... 21 About the SEQ Water Grid...... 6 Priority area 3 – risk and emergency management. . . 25 Our business...... 8 Priority area 4 – financial management...... 29 Chair and Chief Executive Officer’s report . . . . . 10 Priority area 5 – whole-of-Grid facilitation ...... 32 Capability area 1 – people and learning...... 36 Our corporate strategy...... 12 Capability area 2 – governance and compliance . . . . 38

Corporate governance...... 40

Our people...... 46

Glossary...... 89

© SEQ Water Grid Manager SEQ Water Grid Manager Annual Report 2010–11 ISSN: 1837 4816 (print) ISSN: 1837 4824 (online)

Disclaimer The materials presented in this PDF are provided by the Queensland Government for information purposes only . Users should note that the electronic versions of financial statements in this PDF are not recognised as the official or authorised version . The electronic versions are provided solely on the basis that users will take responsibility for verifying their accuracy, completeness and currency . Although considerable resources are used to prepare and maintain the electronic versions, the Queensland Government accepts no liability for any loss or damage that may be incurred by any person acting in reliance on the electronic versions . The official copy of the annual report, as tabled in the Legislative Assembly of Queensland, can be accessed from the Queensland Parliament’s tabled papers website database: http://www.parliament.qld.gov.au/view/legislativeAssembly/tabledPapers/home.asp 15 September 2011

Hon Rachel Nolan MP Hon Stephen Robertson MP Minister for Finance, Natural Resources and The Arts Minister for Energy and Water Utilities GPO Box 611 PO Box 15216 Brisbane Qld 4001 Brisbane Qld 4001

Dear Ministers

I am pleased to present the Annual Report 2010–2011 for the SEQ Water Grid Manager .

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 Reporting Guidelines for Queensland Government Agencies .

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

Yours sincerely

Gordon Jardine Deputy Chair SEQ Water Grid Manager

ANNUAL REPORT 2010–11 | 1 About this Annual Report

This Annual Report is an essential part of Contact us the SEQ Water Grid Manager’s corporate For information about the SEQ Water Grid Manager, governance framework . This report records or for copies of this report, please contact: our commitment to accountability and transparency and is the primary way in The SEQ Water Grid Manager which we report our achievements to Level 15, 53 Albert Street government and the community . Brisbane QLD 4000 PO Box 16205 This Annual Report is prepared in line with the City East QLD 4002 Financial Accountability Act 2009, the Financial and Performance Management Standard 2009 Phone: +61 7 3247 3012 and the South East Queensland Water (Restructuring) You can also download electronic copies of Act 2007 . this report at: www .seqwgm com. .au/news-and- Safe, secure and efficient drinking water services are publications/annual-reports . a fundamental expectation of our community . With respect to an ever-changing operating landscape, Translating and interpreting varied climate conditions and a growing population, our role ensures the continued best management assistance and operation of the SEQ Water Grid for all seasons The Queensland Government is committed to – in drought and deluge . providing accessible services to Queenslanders from culturally and linguistically diverse backgrounds . If This Report is one way we communicate to the you need an interpreter, please call the Translating community about our strategic approach to and Interpreting Service (TIS National) on 131 450 managing the supply of bulk water . and have them contact the SEQ Water Grid Manager on +61 7 3247 3012 between 8am and 5pm, Monday to Friday (except public holidays) .

2 | SEQ WATER GRID MANAGER Our vision Our mission Our values To deliver world class water security Safe, secure and efficient bulk Our organisational values are: and value to our customers . water services for South East „„ innovative Queensland through partnership and innovation . „„ deliver value „„ motivated „„ adaptable „„ professional .

ANNUAL REPORT 2010–11 | 3 Operational highlights 2010–11

A Water Grid for all seasons In 2010–11, the SEQ Water Grid Manager directed the day-to-day operations of the SEQ Water – managing the SEQ Water Grid focusing on maximising its efficiency and effectiveness . This included managing and overseeing Grid to maintain water emergency response operations during several severe security and quality for South weather events over summer in order to guarantee a safe, secure and high quality drinking water supply for East Queensland – in drought all South East Queenslanders . and deluge. During this reporting period we took full advantage of the unprecedented high-level of water supply security in South East Queensland to optimise the operation of major SEQ Water Grid assets so that savings could be realised—at the same time ensuring that these major components of the SEQ Water Grid were ready to do their part again when needed .

This was the case during the January 2011 flood event in South East Queensland when the Mt Crosby water treatment plants were flood damaged . The Gold Coast Desalination Plant and parts of the Western Corridor Recycled Water Scheme supplied, respectively, drinking water and water for cleaning .

In this its third year of operation, the SEQ Water Grid Manager again demonstrated that the SEQ Water Grid can operate as an asset for all seasons—in drought and deluge .

4 | SEQ WATER GRID MANAGER The table below highlights our primary objectives in 2010–11 and our key achievements .

Objectives Achievements Strategic operation—to accurately „„ Supplied 259,789 megalitres of safe drinking water to our prepare short- and medium-term service customers . specifications and publish Grid Instructions „„ Maintained a safe supply of drinking water to customers to our Grid Service Providers to ensure during the January 2011 flood event . 100 per cent compliance to the System „„ Directed the implementation of 'stand-by mode' for Operating Plan . desalination and recycled water production in order to maximise cost and operational efficiencies . Customer service—clearly specify and deliver „„ Implemented a comprehensive consumer and stakeholder services our customers want and have research program to inform our planning process . them regard us as business partners and as „„ Implemented a customer account review process . providers of a value-adding service . „„ Conducted 12 Grid 101 events—an information session about the SEQ Water Grid—where more than 100 people from Grid Participant organisations attended . Risk management—be highly regarded as „„ Managed whole-of-Grid emergency response management risk management and emergency response during several events including the January 2011 flood event . managers and have SEQ Water Grid risks „„ Implemented an online whole-of-Grid emergency managed to a level agreed by all Grid management system to help us make better decisions and Participants . deliver accurate and timely information to our stakeholders during a crisis . Financial management—to accurately forecast „„ Improved water demand forecasting and SEQ Water Grid the financial position of the SEQ Water Grid operation practices to reduce the SEQ Water Grid’s operating and ensure an optimised cost of funds . To have costs . the SEQ Water Grid Manager independently „„ Developed a long-term financial model to improve debt assessed as an efficient business . optimisation . Whole-of-Grid facilitation—deliver, in „„ Developed a SEQ Water Grid Information and Communication partnership, a technology vision and Technology (ICT) Strategy to provide a common ICT platform workforce plan that will enable a highly and create operating efficiencies, such as: regarded supply chain . –– ICT standards –– naming conventions –– desktop support . People and learning—to provide an attractive „„ Implemented new SEQ Water Grid Manager values and work environment for current and future behavioural statements to build a strong organisational staff, providing professional challenges and culture . an enjoyable team culture . Governance and compliance—to meet our „„ Established a Governance and Regulatory Compliance unit statutory obligations on time, every time . dedicated to supporting us to meet our corporate governance, legal, compliance, audit and business performance goals .

ANNUAL REPORT 2010–11 | 5 About the SEQ Water Grid

A connected supply chain The SEQ Water Grid is an internationally acclaimed leader in delivering safe, secure and sustainable water for South East Queensland—a strategic investment for now and the future .

Built at a cost of $6 .9 billion, the SEQ Water Grid is an infrastructure network of water treatment facilities and two-way pipes that move water from new and existing sources across the region .

The strength of the SEQ Water Grid is the connected nature of the drinking water system that allows water to be sourced from across the region and transferred to where it is needed most . Dam water is used as a base supply when it is available, with the support of climate resilient supplies, such as desalination and purified recycled water, when needed .

6 | SEQ WATER GRID MANAGER Our supply chain partners The Queensland Government amalgamated the 25 separate entities that previously owned and operated the bulk water treatment, storage and transport infrastructure into four bulk water Queensland Government owned statutory bodies—Seqwater, LinkWater, WaterSecure and the SEQ Water Grid Manager—and three Council-owned Distribution-retail entities—Unitywater, Queensland Urban Utilities and Allconnex Water .

The system works like this . .

State-owned bulk water authorities

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

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

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

Council-owned retail authorities

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

South East Queensland households and businesses

Note: From 1 July 2011, the region’s two bulk water supply authorities, Seqwater and WaterSecure will merge into one authority, under the Seqwater brand.

Thanks to the flexible and cohesive system now This year ended with South East Queensland’s dams in place, more than 90 per cent of South East at more than 90 per cent full, re-emphasising the Queensland’s drinking water customers have the added dramatic shift in water security since record low water security of supply from multiple water sources . levels of below 17 per cent capacity during the worst months of the drought in 2007 . Over the past year, the SEQ Water Grid has become more than the largest urban drought response in The SEQ Water Grid truly proved its worth this year, Australia . It has gone on to prove itself as a Grid for with the connected Grid providing stronger resilience all seasons – demonstrating its ability to assist the than ever before against natural disasters such as region in both drought and deluge . flooding and storms .

ANNUAL REPORT 2010–11 | 7 Our business

Our SEQ Water Grid partners in the bulk water section of the supply chain include Seqwater, WaterSecure and LinkWater . These are specialist, asset-owning entities, where service delivery risks are allocated across the SEQ Water Grid to where they can be best managed . This allows the specialist entities to take accountability for operating each part of the SEQ Water Grid supply chain .

Although we are Brisbane based, the scope of strategic operation for the SEQ Water Grid covers a region across South East Queensland from Noosa in the north, west to Toowoomba, and south to the Gold Coast . Who we are Prior to February 2011, we reported to the Queensland Parliament through two responsible The SEQ Water Grid Manager is a statutory body Ministers: the Treasurer and Minister for Employment established under the South East Queensland Water and Economic Development; and the Minister for (Restructuring) Act 2007 . Based in Brisbane, we Natural Resources, Mines and Energy and Minister started operation on 1 July 2008, to manage the for Trade . SEQ Water Grid . Following the changes to the Administrative We operate the SEQ Water Grid to maintain regional Arrangements Order (No . 1) 2011 made by the water security, including in emergencies; ensuring Governor in Council on 21 February 2011, our safe, secure and efficient bulk water services for responsible Ministers are: the Minister for Finance, South East Queensland and value-added services to Natural Resources and The Arts; and the Minister for our customers and stakeholders . Energy and Water Utilities . To do this, we work in partnership with Grid Participants and government stakeholders to develop What we do and implement innovative ways to operate the SEQ Water Grid . Our key responsibility is to maintain regional water security by directing water to where it is needed most, We are a not-for-profit entity that owns the urban and ensuring sufficient high-quality water supplies water entitlements for South East Queensland, are provided throughout South East Queensland in a but we do not own any infrastructure assets . We cost-effective manner . make strategic and operational decisions about the production and transportation of water to where it All activity is consistent with our legislative is needed most, at optimal quality and cost; rather context including the Water Act 2000, South East than decisions influenced by ownership interest in Queensland Water (Restructuring) Act 2007, Financial infrastructure assets . This establishes transparency Accountability Act 2009 and the Statutory Bodies and accountability throughout the water supply chain . Financial Arrangements Act 1982 .

8 | SEQ WATER GRID MANAGER Our primary functions under legislation are: „„ Risk management – we manage risks effectively through planning, development and „„ purchasing water services and selling water as implementation of practical tools and business outlined by the South East Queensland Water processes . The SEQ Water Grid Manager is (Restructuring) Act 2007 responsible for facilitating whole-of-Grid risk „„ ensuring desired levels of service under the management and in coordinating level 3, 4 and System Operating Plan, with reference to the 5 incidents and emergencies under the SEQ Water Act 2000 Water Grid Emergency Response Plan .

„„ ensuring financial and corporate governance „„ Financial management – we buy water services compliance applicable to statutory bodies and sell wholesale water products in South (Financial Accountability Act 2009, State Water East Queensland and optimise the SEQ Water Authorities Governance Framework 2008 and Grid Manager’s balance sheet . We work with Statutory Bodies Financial Arrangements Act 1982) Grid Participants to improve SEQ Water Grid operational practices to deliver a value-for-money „„ complying with The Market Rules SEQ Water bulk water supply chain . Market, with reference to the Water Act 2000 . „„ Whole-of-Grid facilitation – we facilitate We achieve this oversight role through the a shared vision of an industry best-practice operational functions listed below: water supply chain and assist partners in „„ Strategic operations – we manage the SEQ identifying and implementing initiatives that Water Grid, including emergencies, to ensure a will achieve this vision . This includes working safe, secure, sustainable, reliable and efficient with Grid Participants on collaborative projects water supply to south-east Queenslanders in information and communication technology, through directing SEQ Water Grid operations . training and skills development, and strategic This includes maintaining water security to a five issues affecting the SEQ Water Grid . year risk criteria and directing the SEQ Water Grid to operate cost efficiently .

„„ Customer service – we provide a service that meets our customers’ expectations . To do this, we are dedicated to understanding and delivering on our customers’ needs and ensuring a two-way approach to communications . This includes across the SEQ Water Grid, understanding bulk water services over the next 20 years, with regard to, water quality, service reliability and access points .

ANNUAL REPORT 2010–11 | 9 Chair and Chief Executive Officer’s report

The 2010–11 reporting year brought the The Gold Coast Desalination Plant was moved to SEQ Water Grid Manager’s role as an stand-by mode and is available to operate at full emergency manager and provider of advice capacity within hours of a request to produce water . regarding SEQ Water Grid optimisation into A section of the Western Corridor Recycled Water sharp focus . It has been an extraordinary Scheme also moved to stand-by mode and the Queensland Government revised downwards its and productive time for the SEQ Water Grid 10-year price path for bulk water sales . Manager, in response to an ever-changing operating landscape that has highlighted Two out of the region’s bulk water state-owned the need for the strategic management of entities, Seqwater and WaterSecure, will merge and the SEQ Water Grid that has proved itself form one organisation from 1 July 2011 . both in drought and deluge . As always, our primary focus is our role in With improved dam levels following the higher-than- embedding an industry best-practice supply chain average rainfall in late 2009, the rain kept falling, approach to deliver water services to South East reaching record rainfall in October 2010, making it Queensland residents and businesses . the wettest October in 38 years . Through strategic management, the connected As a result, the efficient operation of the SEQ SEQ Water Grid has truly proved its worth during Water Grid remained a key focus for our team . In 2010–2011, with the network providing stronger late 2010 the SEQ Water Grid Manager provided resilience against natural disasters than ever before . recommendations that informed the announcement The decision to operate the desalination plant on of further water reforms, to ensure the most suitable stand-by mode proved invaluable early this year, with operation of the SEQ Water Grid and to deliver cost the plant fully mobilised to support the region through savings to South East Queensland residents . the January flood event and following storm damage to SEQ Water Grid assets in subsequent months .

10 | SEQ WATER GRID MANAGER The plant continued to run at one-third capacity for The implementation of this unit has successfully several months while the SEQ Water Grid dealt with consolidated and streamlined into a 24 hour water quality challenges following flood and storm single point of reference the coordination of activity . the various operational SEQ Water Grid related communications and media activities, including Following the damage, we were able to isolate assets those during emergencies, previously undertaken and bring in drinking water from alternate sources by the four individual bulk entities . across the region to ensure a continued high-quality water supply . As we enter 2011–12, we look forward to continuing to work closely with the bulk water The Queensland Government established a entities and council-owned distributor-retailers to State-wide independent Commission of Inquiry to provide expert levels of service to end customers . forensically examine the 2011 flood disaster . The SEQ Water Grid Manager has fully cooperated To conclude, we’d like to thank our dedicated, with the Commission of Inquiry; this included the highly-skilled, committed team for their efforts voluntary lodgement of two submissions addressing over the past year . It has been an eventful time, relevant matters set out in the Commission of and the expertise and flexibility to operate the SEQ Inquiry’s terms of reference . The Commission of Water Grid to align with a changing environment Inquiry is scheduled to provide its Interim Report by must be acknowledged . The team has done a 1 August 2011 and provide recommendations to be commendable job in delivering our organisation’s addressed prior to the next wet season . objectives for the year .

We believe it is our combination of climate dependant and climate resilient water sources, and the ability to transfer water across the region to where it is needed most that gives South East Queensland the strongest water security position in any metropolitan area in Australia . Gary Humphrys Chair The SEQ Water Grid Manager plays an important leadership role in the management of bulk water, through delivering Grid Instructions to inform and guide the operation of the SEQ Water Grid, supported by stringent water quality monitoring . Barry Dennien Chief Executive Officer This financial year also saw the first full year of operation for the SEQ Water Grid (whole-of- Grid) Communications Unit, administered by the SEQ Water Grid Manager to provide strategic communications support on a whole-of-Grid level for SEQ Water Grid bulk entities .

ANNUAL REPORT 2010–11 | 11 Our corporate strategy

The SEQ Water Grid Manager’s roles and Importantly, we do not own infrastructure assets responsibilities provide the framework for but hold the water entitlements for South East the organisation to deliver on its statements Queensland . Therefore, we are able to make of strategic intent and form the focus of its strategic and operational decisions about the corporate strategy for 2011–15 . Our priority production and transportation of water to where it is needed most at optimal quality and cost . area roles and responsibilities encompass ‘what we do’ in delivering on our legislative To achieve this role in managing the SEQ Water and operational requirements . This is Grid our business delivers specialised services . These achieved through our capability areas specialist roles are outlined in the following diagram . (‘how we do it’) of people and learning, governance and compliance .

12 | SEQ WATER GRID MANAGER SEQ Water Grid Manager – roles and responsibilities

Strategic operation Customer service Risk management Financial Whole-of-Grid management facilitation To manage the To provide a To manage SEQ Water Grid to service that meets risks effectively To buy water To facilitate a shared ensure a secure, our customers’ through planning, services and sell vision of an industry sustainable, expectations . development and wholesale water best practice water reliable, safe and implementation of products in South supply chain and efficient water practical tools and East Queensland assist partners in supply to South business processes . and to optimise, identifying and East Queenslanders where possible, the implementing through directing SEQ Water Grid initiatives that will SEQ Water Grid Manager’s balance achieve this vision . operations . sheet . This includes: This includes: This includes: This includes: This includes: „„water security „„customer „„emergency „„borrowing „„SEQ Water Grid „„whole-of-Grid management management program Technology cost efficiency . „„services cost and coordination requirements Strategy compliance of level 3, 4 or „„debt „„training and skills 5 incidents and „ management development on „product emergencies specification and strategy initiatives with compliance „„facilitate whole- „„ managing cash whole-of-Grid

Priority area – roles and responsibilities Priority of-Grid risk mutual benefit „ flows „service management . specification and „„financial „„ coordinating compliance transaction responses to strategic issues . „„water quality compliance management „„whole-of-Grid integration . cost optimisation . People and learning To attract, manage and retain the staff we need to successfully deliver our business objectives .

areas Governance and compliance

Capability To deliver on our statutory obligations to a high standard using best practice governance processes .

Towards Q2 – tomorrow’s Queensland SEQ Water Grid Manager’s contribution to Toward Q2 Strong: specify investment in water infrastructure, The Queensland Government’s vision for services and research and development to drive and Queensland–Towards Q2–is based on five ambitions support economic growth in South East Queensland . for the State and for communities across Queensland . Green: operate the SEQ Water Grid to efficiently The aim is to have a Queensland that is: optimise asset capacity to reduce energy „„ Strong – creating a diverse economy powered by consumption; and improve water quality, system bright ideas reliability and water security .

„„ Green – protecting our lifestyle and environment Smart: efficiently and effectively operate the SEQ Water Grid through partnership and innovation with „„ Smart – delivering world-class education and our stakeholders . training Healthy: establish and implement a regional „„ Healthy – making Queenslanders Australia’s water quality monitoring system to ensure safe and healthiest people quality water from the point of treatment to the „„ Fair – supporting safe and caring communities . consumers’ taps . Fair: optimise the operation of the SEQ Water Grid to deliver bulk water price savings .

ANNUAL REPORT 2010–11 | 13 Our operational performance

Our operational performance reports on how we have achieved the objectives and strategies Priority area 1 – outlined in our corporate strategy documents—the Strategic Plan 2011–15 and the Operational Plan strategic operations for 2010–2011 . In 2009–10, our water storages were full or near About strategic operations full and the South East Queensland region was out of drought for the first time in nine years . Hence, The role of strategic operations is to manage the 2010–11 allowed the SEQ Water Grid Manager to SEQ Water Grid to ensure a secure, sustainable, change the focus of our operations from maximising reliable, safe and efficient water supply to South security to ensuring the SEQ Water Grid was East Queensland through directing SEQ Water optimised so that assets were operated on an as Grid operations . need basis . Through these decisions, we have been able to identify and achieve some very real Highlights operational savings, while delivering improved water security and water quality . „„ Supplied 259,789 megalitres of water to our customers in 2010–11 . With the majority of the region’s storages reaching full supply capacity during the year, the SEQ Water „„ Monitored water quality compliance and Grid Manager provided advice to the Queensland continued to publish the monthly Customer Government on further optimising the operation of Confidence Report (Bulk Water) . the SEQ Water Grid . „„ Safe and reliable water supply was maintained throughout the January 2011 flood event, with the exception of a three-day interruption to supply to the Lockyer Valley during the flood event .

14 | SEQ WATER GRID MANAGER „„ Reduced operating costs through the changes We’re responsible for to the operation mode of the Gold Coast Desalination Plant to standby mode, while still managing the SEQ Water ensuring the plant was available to come online as required to help manage water supply or water Grid to ensure the South East quality issues . Queensland community has a „„ Conducted a detailed assessment of the forecasted water demand from 2011 to 2016 safe and secure water supply and the capacity of the SEQ Water Grid’s water at optimal cost. sources to meet that demand .

Performance overview The table below provides an overview of the performance in Priority area 1—strategic operations, in delivering its objective and strategies as specified in the strategic and operational plans .

Objective Actual

Review the SEQ Water Grid Quality Management Plan . 

Ensure water supplied continues to meet legislative and contractual water quality requirements . 

Develop the SEQ Water Grid Operating Strategy for the optimal operation of the SEQ Water Grid . 

Develop a five year capability assessment of: „„ maximum volumetric capacity „„ water quality  „„ system reliability „„ water security .

Enhance medium-term demand and operational cost forecasting . 

Develop holistic modelling tools for water balance, water transfer, efficiency, reliability and supply security . 

ANNUAL REPORT 2010–11 | 15 Our performance Fast facts Water security We supplied 259,789 megalitres of water to our customers in 2010–11 . This included: The SEQ Water Grid’s water storages, climate resilient sources of water supply, together with „„ over 13,400 megalitres via the Gold Coast two-way pipes, allow us to move water to where Desalination Plant to the Gold Coast and it’s needed most—securing the water supply for Brisbane regions our region . „„ over 5,800 megalitres via the Western As a result of this water security, we have been Corridor Recycled Water Scheme to power able to focus on making sure water is treated and stations delivered as efficiently as possible, while maintaining „„ over 9,600 megalitres via the Northern superior water quality and reliability . Pipeline Interconnector from the Sunshine The twelve largest dams within the SEQ Water Grid Coast region to the Brisbane region — the Grid 12 — were at 95 .7 per cent of full supply „„ over 13,600 megalitres via the Southern capacity at 1 July 2010, and were at 91 per cent Regional Water Pipeline from the Gold at 30 June 2011 . From current levels, even if dam Coast region to the Brisbane region inflows are as bad as those experienced during the Millennium Drought, we estimate a less than „„ over 1,800 megalitres via the Eastern 0 .1 per cent probability of reintroduced restrictions Pipeline Interconnector from the Redland in the next five years based the on current operating region to the Brisbane region . strategy and demand forecasts .

The reduction in full supply level after the January 2011 floods was due to releases made from Wivenhoe Dam in February 2011 . Water was released from Wivenhoe Dam to temporarily increase the flood mitigation capacity of the Dam and reduce its full supply level to 75 per cent until the end of the wet season on 31 March 2011 .

16 | SEQ WATER GRID MANAGER South East Queensland Storage levels – Grid 12

Full supply 01.07.2010 30.06.2011 Dam level Megalitres % Megalitres % Baroon Pocket Dam 61,000 59,355 97 .3% 60,335 98 .9% Cooloolabin Dam 13,800 13,640 98 .8% 13,780 99 .9% Ewen Maddock Dam 16,587 16,123 97 .2% 16,551 99 .8% Hinze Dam 161,073 156,098 96 .9% 171,128 106 .2% Lake Kurwongbah 14,370 13,018 90 .6% 13,684 95 .2% Lake MacDonald 8,018 8,181 102 .0% 8,079 100 .8% Leslie Harrison Dam 24,868 23,519 94 .6% 24,494 98 .5% Little Nerang Dam 6,705 5,237 78 .1% 5,995 89 .4% North Pine Dam 214,302 207,483 96 .8% 213,663 99 .7% Somerset Dam 379,849 379,016 99 .8% 380,275 100 .1% Wappa Dam 4,694 4,671 99 .5% 4,711 100 .4% Wivenhoe Dam 1,165,238 1,094,879 94 .0% 971,903 83 .4% Grid 12 2,070,504 1,981,220 95.7% 1,884,598 91.0%

Operating strategy This Strategy outlines our approach to implementing the South East Queensland System Operating Plan In operating the SEQ Water Grid in 2010–11 one and informs our directions and instruction to the bulk of our priorities was to maximise its operating water entities . The Queensland Water Commission is effectiveness while minimising its costs . Key operating expected to approve the SEQ Water Grid Operating strategies during this reporting period were to change Strategy at the start of the 2011–12 financial year . the operation of the Gold Coast Desalination Plant to ‘stand-by’ and to demobilise part of the Western To operate the SEQ Water Grid effectively, it is Corridor Recycled Scheme . Processes to demobilise important that we are able to make accurate the Gibson Island Advanced Water Treatment Plant decisions based on a range of information . To help and one part of the Bundamba Advanced Water us do this, in 2010–11 we established a project Treatment Plant began in the 2010–11 financial year to develop a holistic modelling tool to allow us to to be implemented by July 2011 . accurately determine the region’s water balance, water transfer, efficiency, reliability and supply During 2010–11 we completed the SEQ Water Grid security . Tenders were sought to build an integrated Operating Strategy for the following 12 months and decision support system to assist with this . submitted this to the Queensland Water Commission for approval .

ANNUAL REPORT 2010–11 | 17 Maintaining water quality The connected nature of the SEQ Water Grid allows us to manage and mitigate aesthetic water We are committed to delivering safe water that meets quality events . Access to water from multiple the standards set out in the Australian Drinking catchments as well as climate resilient sources gives Water Guidelines 2004 . To help deliver on this us the flexibility to run the SEQ Water Grid assets commitment we have developed a SEQ Water Grid collectively to reduce the impact of these aesthetic Quality Management Plan . The Plan ensures that incidents for the consumer . all of the water supplied from the SEQ Water Grid remains a consistent quality from point of treatment to consumers’ taps . Additionally, Drinking Water Quality Water quality results Management Plans have been developed at an asset- In 2010–11 we continued to publish the monthly by-asset level as part of the regulatory framework . Customer Confidence Report (Bulk Water) . The report covers water samples taken at 19 key locations in For the first time, the SEQ Water Grid Quality the SEQ Water Grid, with more than 10,000 tests Management Plan includes a detailed Monitoring conducted in 2010–11 . Excellent results were Plan that covers the whole of South East Queensland . achieved this year, with all yearly results compliant The Monitoring Plan includes a consolidated list of with the Australian Drinking Water Guidelines approximately 60 points across the SEQ Water Grid 2004 long-term compliance measures . Only a few that will be reported to the SEQ Water Grid Manager individual tests did not meet short-term targets and to ensure consistent water quality . This is an integrated none of these results affected overall compliance . monitoring process that links to the Operating Protocols The Customer Confidence Report (Bulk Water) and Drinking Water Quality Management Plans for continues to prove that the SEQ Water Grid is Grid Participants . To further ensure that consumers delivering industry-leading water quality . in South East Queensland can be guaranteed a safe supply of drinking water in the future these water quality standards will be linked to the contracts that the SEQ Water Grid Manager has with the bulk water suppliers .

Water Grid annual water quality performance 2010–11 assessed against the Australian Drinking Water Guidelines 2004 Parameter group Microbiological Health chemical Aesthetic Individual tests meeting ADWG short-term targets:

Tests meeting targets: Tests meeting targets: Tests meeting targets:

1888 / 1888 2934 / 2935 6814 / 6818 (100 .0000%) (99 .9997%) (99 .9994%) Yearly compliance to ADWG Fully compliant Fully compliant Fully compliant long-term compliance measures:

18 | SEQ WATER GRID MANAGER The parameters reported include Escherichia In 2011–12 we will continue to investigate how we coli, fluoride, total trihalomethanes, lead, copper, can improve the reliability of the SEQ Water Grid, manganese, hardness, pH, turbidity, total dissolved in particular the inter-relationships of the key assets solids, alkalinity, aluminium, iron . along the supply chain and the development of risk management plans for key assets . Even in the best managed systems, a few tests occasionally above the Australian Drinking Water Guidelines 2004 short-term targets are normal . Capacity assessment Compliance to the Australian Drinking Water Guidelines During 2010–11 we completed a comprehensive 2004 is based on achieving over a 12 month period: system planning review to identify by supply zone, a five year capability assessment of the following key „„ a 98 per cent pass for microbiological parameters capacity parameters: „„ 95th percentile of results meeting guideline values for health chemical parameters and „„ maximum volumetric capacity „„ mean results meeting guideline values for „„ water quality aesthetic parameters . „„ system reliability Based on these criteria, the results achieved in „„ water security . 2010–11 clearly demonstrate that the SEQ Water Grid is delivering outstanding water quality . During this review we worked closely with Seqwater and Linkwater to better understand asset capacity and how the SEQ Water Grid as a whole can meet Study into SEQ Water Grid forecast demand in the medium to long term . disinfection options Currently the SEQ Water Grid has the capacity to During 2010–11 we started a study into the most provide more than forecasted demands . However, appropriate secondary disinfectant regime to we have identified that within the next five years implement for the SEQ Water Grid . The aim of the capacity constraints may occur in some of our water investigation is to assess the current disinfection treatment plants . arrangements, and to evaluate whether alternative arrangements would be preferable . The study is In light of this we provided advice to our responsible expected to be finalised by the end of 2011 . Ministers and the Queensland Competition Authority on how we can efficiently operate the SEQ Water Reliability Grid to meet South East Queensland’s drinking water demands to assist decision-makers with their efficient The January 2011 flood event highlighted the and prudent analysis of any future capital investment . importance of an interconnected water grid for South East Queensland . The region has a relatively high This work also enabled us to provide comprehensive level of system reliability due to: input into the Queensland Urban Utilities Netserv Plan and understand how the SEQ Water Grid can „„ the ability of our water treatment plants to treat assist Distributor-Retailer Entities in meeting the more water Netserv Plan . „„ two-way water pipes allowing us to move water where it’s needed most „„ reduction in consumer demand during peak times .

ANNUAL REPORT 2010–11 | 19 Outlook for 2011–12 Gold Coast Desalination Plant—an In 2011–12 we will continue to focus on operating essential part of our water supply in the SEQ Water Grid to deliver a safe, reliable drought and deluge and sustainable water supply for the South East The January 2011 flood event in South East Queensland community . Specifically we will focus on: Queensland proved just how essential the Gold „„ refining the SEQ Water Grid Operating Strategy Coast Desalination Plant is . and Grid Instructions to continue to reduce The flood, debris and silt caused unprecedented operating costs while maintaining safe and turbidity in the Brisbane River and affected our reliable supplies main water supply . During the peak of the flood „„ collaborating with Grid Participants to deliver event, this grew to more than 10,000 tonnes operational efficiency improvements in key per day — at the same time as the region was regional areas such as the Sunshine Coast, in dire need of clean water to drink and to following the commissioning of the Northern clean away the mud . In the weeks immediately Pipeline Interconnector Stage 2 in early 2012 following the flood, approximately 1000 tonnes per day of sediment flowed past the main water „„ integrating water quality management standards treatment plants for the Brisbane and Ipswich across the SEQ Water Grid and delivering a areas, resulting in the reduced production of whole-of-Grid improvement program with clean drinking water . detailed water quality specifications The Gold Coast Desalination Plant, optimised „„ improving key asset specifications, based on for cost efficiencies, had been run at a minimum water quality requirements, to determine their of one third capacity since late December 2010 . reliability during normal operations and in On 13 January 2011, the height of the flood emergency response situations . emergency, the facility was switched from stand- by mode to full capacity, ensuring a safe and reliable water supply for South East Queensland throughout the flood event and beyond, including in February when the Mt Crosby Water Treatment Plants were again disabled, this time by storms .

The SEQ Water Grid protects the region from running out of high quality drinking water . The desalination plant underpins our water security by ensuring we can respond to population growth, future droughts, climate change and water quality issues .

20 | SEQ WATER GRID MANAGER We work with our customers as a trusted business partner – delivering vital and value- adding services.

Working in partnership with Grid Participants is Priority area 2 – critical to ensure the SEQ Water Grid, which is delivered through two tiers of government (State customer service and local), works seamlessly for the end consumer – the South East Queensland community . We’ve worked cooperatively with Grid Participants to foster About customer service a collaborative environment to operate the SEQ Water Grid effectively . In 2010–11 we achieved the To be effective and efficient strategic operators of the following key activities to build stronger relationships SEQ Water Grid, we work with our customers as a with our customers: trusted business partner delivering vital and value- adding services . We do this through providing Grid „„ We have implemented proactive communication Participants with: activities with our customers including:

„„ responsive customer service –– conducting formal customer account reviews „„ product specification and product compliance –– issuing product quality notifications to inform our customers of potential water quality „„ transparency . specification issues –– working cooperatively with Distributor-Retailer Highlights Entities and councils to build emergency response preparedness capabilities and 2010–11 was the first full year of operation for the to align stakeholder engagement and SEQ Water Grid Communications Unit . Administered communication activities . by the SEQ Water Grid Manager, the Unit was „ established to provide a coordinated corporate „ We implemented a comprehensive consumer communications response for emergencies and and stakeholder research program to inform and incidents for the SEQ Water Grid bulk entities . The support more effective development and delivery Unit acts as a central point of reference for SEQ of the SEQ Water Grid Manager communications Water Grid communications and provides a 24/7 and stakeholder plans . response to media enquiries . „„ Conducted 12 Grid 101 events—an information session about the SEQ Water Grid—where more than 100 people from Grid Participant organisations attended .

ANNUAL REPORT 2010–11 | 21 Other key highlights for the SEQ Water Grid „„ managed the whole-of-Grid call centre service, Communications Unit include: providing a one-stop service for community enquiries „„ hosted international delegations to educate international water industry professionals about „„ managed two dam safety campaigns the SEQ Water Grid „„ provided a coordinated emergency response for „„ enhanced the SEQ Water Grid website, to provide media and the community during the January additional online education and resources flood event and other water quality events .

Performance overview The table below provides an overview of the performance in Priority area 2—customer service, in delivering its objectives against the performance targets .

Objective Actual

Conduct educational and briefing sessions to stakeholders, customers and other interested parties regarding our operations . 

Continue to work with our customers and stakeholders to identify their service requirements and performance standards . 

Develop communication tools including Product Quality Notifications, to inform our customers about our product and services . 

Maintain and improve our website . 

Manage media enquiries 24/7, particularly during emergencies . 

Provide proactive advice and monitoring of whole-of-Grid issues to our stakeholders . 

22 | SEQ WATER GRID MANAGER Our performance Customer service and stakeholder management Awareness of the Water Grid In 2010–11 a key focus for customer service has Raising awareness within the community of the SEQ been to work with our customers and stakeholders Water Grid and the important role it plays in ensuring to identify their service needs and performance a safe, secure and sustainable water supply for South standards, and then work to exceed their East Queensland was a key focus during the year . expectations . To achieve this, we:

To raise awareness, we used a variety of „„ established whole-of-Grid communications communication and engagement activities including working group, to identify areas of service traditional and social media, community events, and „„ worked with local councils and other government speaking opportunities . stakeholders to agree on emergency roles The biggest community event during the year was the and responsibilities and develop effective ‘Ekka’–The Royal Queensland Show, held in Brisbane . communications protocols The SEQ Water Grid had a stand at the Ekka, located „„ conducted formal account meetings with in the Science Pavilion . The stand housed educational Distributor-Retailer entities materials including the SEQ Water Grid map display, the Grid half-pipe, the Seqwater interactive TV, the „„ conducted a customer and stakeholder survey to WaterSecure virtual tours of Bundamba Advanced help us continue to improve our service offering Water Treatment Plant, a LinkWater and Hinze Dam „„ worked closely with Grid Participants to ensure display panel and a range of fact sheets for both timely and accurate reactive media managed by children and adults . the SEQ Water Grid Communications Unit During the 10 days of the Ekka, more than 90,000 „„ managed a large number of media enquiries people visited the Science Pavilion . during the January 2011 flood event on a 24/7 In December 2010, we also introduced a whole-of- cycle for several weeks . Grid amalgamated call centre service making it easier for the community to access information about the SEQ Water Grid . Prior to this amalgamation all four bulk water entities had their own service .

ANNUAL REPORT 2010–11 | 23 Water Grid website Outlook for 2011–12 In November 2010, the whole-of-Grid website went In 2011–12 we will continue to maintain positive live, dedicated to informing the community about the and effective relationships with our customers SEQ Water Grid and Grid Participants . and stakeholders working with them to identify opportunities for delivering better service outcomes . The website provides a central and comprehensive To do this we will continue to strengthen our point of reference for all Water Grid information customer account review process and improve including current news, history of the Grid, education our incident and emergency management materials and operational information . Since its communication with the Distributor-Retailer entities . launch, the website has had an average of 1840 visitors per month . We will also develop a 20 year service specification setting out the services to be required from our service The advantages of being able to engage in social providers and the water supplied to our customers . media, particularly Twitter and Facebook, as contemporary communication tools was brought into sharp focus during this reporting period . These media, augmented by the website, proved to be SEQ Water Grid Communications Unit advantageous vehicles for the transmission of Established as a central point of reference timely and accurate information during the high- for stakeholders and the community, the SEQ tempo January 2011 flood events . Online traffic to Water Grid Communications Unit was able to our website and social media sites peaked during work remotely during the January 2011 flood this time when the need for information was at its event to provide a 24/7 mass media response highest, and now has a substantial and growing list to media outlets as far away as the United of followers . Kingdom and the United States of America . The January 2011 flood event received Product specification and compliance significant media coverage and the unit We continued to work with our customers to responded to more than 140 media enquiries improve our communications about our products about the flood over a 10 day period . and services . In particular we continued to provide Prior to the January flood event, the Product Quality Notifications, a proactive operational Communications Unit conducted training communication tool, to inform our customers about for our stakeholders in the entire SEQ any potential water quality matters . Water Grid supply chain on coordinated emergency communications responses, which enabled us to provide effective and efficient communications during the event and beyond .

24 | SEQ WATER GRID MANAGER Our risk management delivers our customers a secure, sustainable, reliable, safe and efficient water supply.

Priority area 3 – Highlights During 2010–11 we implemented systems and risk and emergency processes to ensure that we had the ability and resources to successfully manage risks in the SEQ Water Grid . Our key achievements for this priority management area were:

„„ managed the whole-of-Grid response to a series About risk management of high-level water supply emergencies, including Operating the SEQ Water Grid to deliver a reliable those that were a result of the January 2011 supply of safe drinking water to our customers is one flood event of our main priorities . To do this we have made risk „„ delivered successful crisis and issues management an essential part of our business . Our management activities for the SEQ Water Grid goal is to manage risks effectively through planning, during the floods in South East Queensland – development and implementation of practical tools resulting in minimal disruption to drinking water and business processes . The SEQ Water Grid uses supplies to the public an ‘all hazards’ approach to risk management . We classify risks and incidents depending on their „„ implemented a web-enabled whole-of-Grid severity including the extent of their direct and emergency management system to manage ancillary impacts on water supply . information – helping all Grid Participants make better decisions and deliver accurate and timely information to our stakeholders during a crisis

„„ implemented a risk and compliance information system to streamline our business processes

„„ established the SEQ Water Grid Emergency Management Room, equipped with the latest technology, providing us with the resources to successfully manage a crisis in the SEQ Water Grid .

ANNUAL REPORT 2010–11 | 25 Performance overview The table below provides an overview of the performance in Priority area 3—risk management, in delivering its objectives against the performance targets .

Objective Actual

Continually improve the SEQ Emergency Response Plan and associated tools . 

Continue internal and external training programs for the SEQ Emergency Response Plan . 

Develop a whole-of-Grid critical infrastructure security guideline and a whole-of-Grid business  continuity guideline . 

Develop the SEQ Water Grid Risk Management Plan . The SEQ Water Grid Risk Management Plan has undergone consultation and endorsement by all Grid Participants, and has been submitted .

Our performance Administered by the SEQ Water Grid Manager, the SEQ Water Grid Emergency Response Plan provides Throughout 2010–11 our focus has been to continue a framework to manage emergency responses across to implement risk management processes and separate, geographically dispersed organisations, in controls and build emergency response preparedness a region covering 22,420 square kilometres . across the SEQ Water Grid . Delivering a strong risk management capability means we have the ability Each Grid Participant also has its own internal to continue to deliver safe water to our customers Emergency Response Plan for detailed incident during times of crisis; as demonstrated during the management and asset recovery . The Grid January 2011 flood event . Participant Emergency Response Plans are assessed by us annually to ensure they enable a coordinated Emergency management response to emergencies across the entire SEQ Water Grid . The SEQ Water Grid is equipped to handle and respond quickly and efficiently to all emergencies and water quality incidents . With the SEQ Water Grid Emergency Response Plan in place, all Grid Participants through the supply chain have clear, step-by-step guidance on how to respond to Water Grid emergencies, providing the region with an unprecedented level of readiness and resilience .

26 | SEQ WATER GRID MANAGER In addition to emergency response plans, during manage an emergency or crisis . We worked with 2010 the SEQ Water Grid Manager implemented Emergency Management Queensland to further refine a new, secure web enabled system for managing our processes for notifying the public of potential emergencies . This system, OCA Incident Manager, major or catastrophic incidents by developing is used by emergency management organisations protocols for using the national Emergency Alert throughout Australia . The system was used System for major or catastrophic events . extensively and successfully during the January We also engaged with Grid Participants to develop flood event where it greatly facilitated the effective emergency communication protocols which were emergency response of the SEQ Water Grid . It did implemented during a number of emergency events . this by providing a common operating picture for all Grid Participants involved in the emergency, and During 2010–11, in partnership with Grid supporting the SEQ Water Grid Manager in our role Participants, Queensland Health and the Office of as the Emergency Manager of the SEQ Water Grid the Water Supply Regulator, we developed a process during the floods . to streamline the issuing of a boil water notice to the community during a serious water quality event . Building emergency response preparedness We also opened the new Water Grid Emergency During 2010–11 we worked with the Grid Management Room, providing a central hub to Participants and Distributor-Retail Entities to build manage crisis events across the SEQ Water Grid . strong emergency response preparedness . Located in the SEQ Water Grid Manager’s office the Emergency Management Room provides a high- We supported their ability to effectively manage tech, holistic view of the region’s water supply and emergencies through the implementation of OCA the ability to coordinate responses . This helps us to Incident Manager, which allowed us to gather and prevent small issues from becoming large ones and manage information from multiple sources, make to quickly re-establish quality drinking water to the accurate and quick decisions and to communicate community during natural disasters . More than a them to a range of stakeholders during time- room, it gives us the ability to work in an integrated sensitive situations . way with Grid Participants, local councils, state The Water Grid Manager trained almost 100 key government departments and emergency services . staff from throughout the Water Grid on the use These emergency response management tools of OCA Incident Manager to support the effective were implemented as a result of Exercise Matrix, management of emergencies . We conducted detailed an emergency response exercise involving all Grid training sessions, including scenario exercises, for Participants in the SEQ Water Grid . Exercise Matrix all staff who perform the role of Water Grid Duty was held in March 2010 to simulate a number of Manager under the Emergency Response Plan . potential incidents and measure the effectiveness of Consistent and clear processes and protocols are the participants in resolving the crisis . critical to the success of managing an emergency or crisis . We continued to improve the SEQ Water Grid Emergency Response Plan and associated tools to provide clear guidance to Grid Participants and Distribution-Retail entities on how to effectively

ANNUAL REPORT 2010–11 | 27 Managing risk and business continuity Training and tools the key to successful To successfully operate the SEQ Water Grid, we use emergency response coordination an ‘all hazards’ approach to support the delivery of a secure, sustainable, reliable, safe and efficient In early January 2011, an unprecedented flood occurred in South East Queensland . water supply to South East Queensland . This means we use a structured approach to identify, Damage to multiple water treatment plants and assess and control risks to make sure we can water and sewage mains, and loss of power deliver our business objectives . During 2010–11 we and chemical supplies—combined with physical undertook the following activities to support our risk isolation of plants due to floodwaters—caused management approach: widespread access issues and challenged our ability to deliver safe drinking water through „„ developed a whole-of-Grid Business Continuity conventional water treatment processes . Despite Guideline these challenges, we continued to deliver safe drinking water to our customers . There was only „„ provided the Queensland Police with a one instance where water supply could not be comprehensive listing of critical assets in the provided . This occurred for three days, in one of SEQ Water Grid the worst hit areas, the Lockyer Valley, which was isolated for several days due to high flood waters . „„ developed the SEQ Water Grid Risk Management Plan and supporting guidelines, which is due for To ensure the community continued to have release in 2011–12 . access to safe drinking water we coordinated our emergency response, with Grid Participants, through the SEQ Water Grid Emergency Outlook for 2011–12 Response Plan . In 2011–12 our focus for this priority area will include: The success of our emergency response management was due to an extensive testing „„ implementing and maintaining the SEQ Water and training program of the SEQ Water Grid Grid Risk Management Plan and ensuring Grid Emergency Response Plan with Grid Participants Participant strategies address the key risks that started in 2009 . In late 2010 we trained more than 90 people in the SEQ Water Grid „„ implementing guidelines and processes that Emergency Response Plan and have held several ensure the SEQ Water Grid’s critical infrastructure desktop and test exercises to simulate a crisis is protected in line with national security standards situation . These training activities provided Grid Participants with the necessary skills to „„ ensuring the SEQ Water Grid can effectively successfully respond to an emergency . respond to emergencies by using scenario planning to identify and prepare contingency In addition, our online emergency management plans and materials for high risk impacts, acting system—OCA Incident Manager—provided us with the capability to manage large amounts of as educators of the SEQ Water Grid Emergency incident related information in one place so that Response Plan and facilitating the testing and we could make better decisions faster and with validation of our emergency response procedures . greater accuracy . This single operating picture gave us the necessary information to effectively use our resources, deliver accurate information and manage the expectations of our stakeholders and the community .

28 | SEQ WATER GRID MANAGER Our effective financial management has resulted in the reduction of SEQ Water Grid operating costs.

Priority area 4 – Highlights Over the past year we continued to focus on financial management reducing the expenses associated with operating the SEQ Water Grid . First, we achieved a reduction in the operating expenses of the SEQ Water Grid Manager, About financial management keeping them below budget . Our overarching goal for financial management A further key performance highlight was better is to buy water services and sell wholesale water demand forecasting and understanding of the products in South East Queensland and to optimise, trends and external influencing factors, which where possible, the SEQ Water Grid Manager’s improved our understanding of the impacts of balance sheet . demand on our revenue .

Performance overview The table below provides an overview of the performance in Priority area 4—financial management, in delivering its objectives against the performance targets .

Objective Actual

Finances are monitored and forecasts provided to the Queensland Treasury Corporation . 

Instruct the Water Grid to enable it to operate at optimum cost . 

Stage 2 of the cost optimisation model is designed,  developed and implemented . Ongoing in 2011–12 through implementation of our Decision Support System project .

Ensure that actual administrative costs are within the administrative budget . 

Investigate future revenue sources via new  wholesale customers . Ongoing in 2011–12 .  Actual revenue and costs are within budget . Revenue is below budget due to the extraordinary rainfall experienced in 2010–11 .

ANNUAL REPORT 2010–11 | 29 Our performance In addition, we have worked with the Queensland Treasury Corporation and Queensland Treasury Financial performance to establish and implement effective strategies to manage our debt . Cash flow forecasting was refined, During 2010–11 accurately forecasting the financial which resulted in significant improvements in our position of the SEQ Water Grid; delivering value-for- cash flow management . money and having the SEQ Water Grid Manager independently assessed as an efficient business New wholesale water products continued to underpin our financial management . During 2010–11 we continued to investigate In the first instance, we focused on reducing our own opportunities to provide purified recycled water costs and as a result the SEQ Water Grid Manager’s as a new wholesale water product to customers . expenses during 2010–11 remained below budget . Our Business Development Manager continued to Revenue forecasts were not achievable due to cooler assist Queensland Urban Utilities in progressing temperatures and the unseasonal wet year . However, industrial purified recycled water connections . Our despite being 20 percent under budget for sales focus has been on those industrial end-users who volumes for the year we were still able to achieve have approached Queensland Urban Utilities for a savings in expenses associated with the storage, connection to the Western Corridor Recycled Water treatment and transportation of bulk water . Scheme .

In 2010–11 the Queensland Treasurer reconfirmed through a ‘letter of support’ the Queensland Government’s commitment to ensuring the SEQ Water Grid Manager maintains access to the financing necessary for the viability of the institutional and pricing structure of the South East Queensland water industry; and the SEQ Water Grid Manager’s financial commitments under The Market Rules SEQ Water Grid Market and Grid Contract Documents .

30 | SEQ WATER GRID MANAGER Outlook for 2011–12 Improved SEQ Water Grid cost efficiency In 2011–12 we will continue to focus on the effective During this reporting period, improving the cost financial management of the SEQ Water Grid . Our efficiency of the SEQ Water Grid operations key activities will include: remained a key driver . We worked with our Grid „„ providing accurate forecast cash flow Service Providers to identify savings across the requirements to enable timely and accurate SEQ Water Grid . This resulted in a significant access to borrowings change to our operations placing our climate resilient water sources—the Gold Coast „„ further improving our long-term financial Desalination Plant and the Western Corridor forecasting Recycled Water Scheme—from ‘always-on’ to „„ continuing to work in partnership with ‘stand-by’ mode . Queensland Urban Utilities to facilitate the As a result of this review, in December 2010 the supply of purified recycled water to industrial Queensland Government announced that each users and to conduct a desktop market analysis household would receive a $5 saving off the bulk of other potential industrial customers for water price increase for next year and additional purified recycled water . savings will continue for every year and will grow to more than $30 per household by 2017 . Some of these savings are due to the operation of the SEQ Water Grid in efficiency mode, reducing operating costs and deferring capital expenditure .

ANNUAL REPORT 2010–11 | 31 Whole-of-Grid facilitation – together with Grid Participants we deliver a shared vision for the SEQ Water Grid.

Priority area 5 – Highlights In 2010–11 our key achievements included: whole-of-Grid „„ developed an agreed SEQ Water Grid Information and Communication Technology facilitation Strategy between all Grid Participants to improve efficiencies across the SEQ Water Grid About whole-of-Grid facilitation „„ developed and implemented the SEQ Water Grid Manager Information and Communication Our role in delivering whole-of-Grid facilitation is to Technology Plan 2011–12 make possible a shared vision of an industry best practice water supply chain and assist partners in „„ implemented a technology platform to allow the identifying and implementing initiatives that will SEQ Water Grid Manager to maintain a lean achieve this vision . We are responsible for delivering, workforce in partnership with Grid Participants, the SEQ Water „„ implemented the Grid Instruction automation Grid Information and Communication Technology system and processes, which improved efficiency Strategy, workforce training and skills development, and reduced the risk of errors . and coordinating responses to strategic issues concerning the SEQ Water Grid .

Performance overview The table below provides an overview of the performance in Priority area 5—whole-of-Grid facilitation, in delivering its objectives against the performance targets .

Objective Actual

Implementation of the SEQ Water Grid Information and Communication Technology Strategy .   We have worked with other entities at a federal and State level, including endorsement of Implementation of the SEQ Water Grid Skills qldwater, the Local Government Association Formation Strategy Phase 2 . of Queensland's water directorate, and the Queensland Water Skills Partnership; for an investment proposal for a skills formation strategy across the water industry in Queensland . Pilot whole-of-Grid ICT initiatives to automate and improve processes for the delivery of Grid Instructions, the management of water quality and  emergency responses .

32 | SEQ WATER GRID MANAGER Objective Actual Facilitate the reporting requirements under the National Water Initiative .  Identify and undertake conference and speaking engagements .  Development of an internal communication plan to communicate key messages to staff .  Develop SEQ Water Grid data and asset naming standards . 

Our performance Automation of Grid Instruction processes During the year, new methods of producing Grid Information and communication Instructions were implemented . By automating some technology of the processes we were able to create a more We worked collaboratively with Grid Participants to efficient way of issuing Grid Instructions . Changes develop an integrated SEQ Water Grid Information were made to: and Communication Technology Strategy to improve „„ standardise demand and capacity forecast data the operation of the SEQ Water Grid . The first from customers and Grid Service Providers whole-of-Grid system implemented was an online emergency management system–OCA Incident „„ automate population and linkage of spreadsheets Manager . This system gives each Grid Participant a used in compiling Grid Instructions . common operating picture during an incident and allows for a rapid response to our stakeholders . National reporting In addition we implemented an Information and For the first time, the SEQ Water Grid Manager and Communication Technology Governance Policy, the Grid Service Providers participated in the Water the purpose of which is to provide direction for Services Association of Australia’s 2009–10 Urban investment activity and ensure: National Performance Report . The SEQ Water Grid Manager facilitated the collection of relevant „„ alignment with business strategies and objectives data from the Grid Participants . We will continue to „„ use of information and communication provide information on the SEQ Water Grid to the technology to further enable business efficacy Urban National Performance Report in coming years .

„„ responsible use of information and We also continued to participate in the National communication technology resources Water Commission’s consultations on the development of national water accounting . „„ appropriate management of information and communication technology related risks .

ANNUAL REPORT 2010–11 | 33 Community and industry presentations In 2010–11, the SEQ Water Grid continued to attract attention and we were invited to present to 12 organisations about its operations .

Who When Committee for Economic Development of Australia – Go with the flow – Changes in October 2010 Water Management Institute of Public Engineering Works Australia – Water Infrastructure Management October 2010 WASH Roadshow – Australian Water Association September 2010 Water Pricing Conference – Australian Water Series September 2010 Public Sector Conference September 2010 AWA Regional Conference November 2010 Australian Water Association (AWA) Board Meeting and Strategic Advisory Council March 2011 Healthy Waterways Clean Up Australia Day March 2011 IPWEAQ South West Queensland Branch Conference May 2011 ICOMS Asset Management Conference May 2011 Healthy Waterways Clean Up Award June 2011 IAHR World Congress – Hydrology and Water Resources Symposium June 2011 TasWater June 2011

34 | SEQ WATER GRID MANAGER These presentations covered a range of topics including: Consistent communications across our supply chain „„ history of water reform in South East Queensland In line with our role of delivering whole-of-Grid „„ history of the Millennium Drought facilitation, we initiated the development of Emergency Communication Protocols . „„ building the Water Grid These protocols, developed in consultation with the „„ operational benefits of the Water Grid three South East Queensland Distributor-Retailers, „„ water supply and emergency management set out the guidelines for communications around low level incidents . This complements the SEQ „„ demand management . Water Grid Emergency Response Plan, which Delivering these presentations to a wide-ranging addresses incidents and emergencies rated from audience aligns with one of our key communications low-level alerts to natural disaster . objectives, which is to raise the profile of the SEQ The protocols establish the various responsibilities Water Grid . for communication and stakeholder liaison for a range of events including:

Outlook for 2011–12 „„ minor local water quality incident isolated to In 2011–12 our focus will be to: a zone but still within the Australian Drinking Water Guidelines 2004 „„ implement a single service desk for all SEQ Water Grid Manager information technology issues „„ minor supply issue that requires redirection management by 30 December 2011, reporting from another source greater than 97 per cent system availability „„ localised pump breakdown

„„ make our information, communication and „„ minor burst in a suburban street within technology compliant with IS18 Information distribution network Security by 30 September 2011, in accordance with Queensland Government requirements „„ minor supply interruption due to loss of power .

„„ deliver a suite of projects improving the efficiency The protocols allow us and the Distributor- of the SEQ Water Grid and the SEQ Water Retailers to communicate with our stakeholders, Grid Manager, including a Knowledge and including the public, in a timely and consistent Information Management system and a Decision way, ensuring they receive all the information Support (Cost Optimisation) System . they need .

ANNUAL REPORT 2010–11 | 35 Developing our team culture in line with the values and behaviours important to our staff.

Capability area 1 – Highlights In 2010–11 we completed a restructure of people and learning our organisation to better meet our roles and responsibilities of managing the SEQ Water Grid and our stakeholders’ needs .

About people and learning Our key performance highlights include the: The people and learning priority area is a „„ development of the People and Capability Plan core capability that underpins our roles and responsibilities . Our focus in this capability is to „„ development of new organisational values attract, manage and retain the staff we need to with staff successfully deliver our business objectives, by providing an attractive work environment for current „„ revision of our Code-of-Conduct to align with and future staff . the Queensland Government integrity and accountability reforms for the public sector .

Performance overview The table below provides an overview of the performance in Capability area 1—people and learning, in delivering its objectives against the performance targets .

Objective Actual

Improve our team effectiveness through well documented and automated business processes . 

Develop a capability framework and identify core skills for roles . 

Staff are able to undertake short-term opportunities in  the other water entities . Ongoing through the development of a ‘Young Professionals’ Program .

A development program is designed for graduates . 

Develop our team culture in line with the values and behaviours important to our staff . 

36 | SEQ WATER GRID MANAGER Our performance organisational values . Our Executive Management Group worked collaboratively with staff through a People and Capability Plan series of whole-of-organisation workshops to develop a set of values and behavioural statements for the In 2010–11 we developed a People and Capability organisation and to ensure that our values are Plan for the SEQ Water Grid Manager . The people and integrated into the way we do things . Our Board is capability planning process gives us an opportunity to committed to building a strong organisational culture align human resources with the key strategic drivers and during 2010–11 they approved key performance of the business . The Plan provides our organisation indicators to measure organisational culture . with a strong foundation for managing our human resources and is designed to expand and strengthen Young Professionals Program human resource goal setting and planning . The Plan will be implemented from March to August 2011 . We recognise that as a smaller organisation we need to work harder to keep talented staff . The Key achievements during 2010–11 include: Young Professionals Program, which is part of our „„ reviewed and improved our Code of Conduct People and Capability Plan, has been developed to provide young professionals with innovative career „„ reviewed HR policies to align our policies with opportunities across the SEQ Water Grid . current legislation and best practice In 2010–11, having completed their graduate „„ conducted compliance training with staff program, our three graduates progressed through to the next stage of their career path in the SEQ Water „„ conducted workforce planning, including a review Grid Manager . of job descriptions, to ensure our workforce profile aligned with our strategic objectives . Outlook for 2011–12 We held two staff culture surveys to help inform the development of the plan . Overall, staff satisfaction Our focus for 2011–12 is to continue to support our levels have increased by 15 per cent . people so that they are able to do their jobs effectively and have a high level of satisfaction with their work During 2010–11, we implemented a structured and our organisation . We will continue to implement approach to performance management and training the People and Capability Plan to ensure our staff and development for our staff, through implementing have the tools they need to do their job and build a performance and development plans for each staff strong culture . member . Staff Performance and Development Plans are linked to our strategic and operational plans To do this effectively, we will: and individual training and development needs . „„ continue to listen to our staff through formal staff It provides staff with ongoing feedback on their surveys and informal feedback to the Executive performance as well as an annual formal review . Management Group Organisational values „„ map our staff learning and development needs to the training framework Our organisational values represent how we do things at the SEQ Water Grid Manager . During 2010–11 we „„ implement a workplace health and safety system . have worked to build a culture that is aligned to our

ANNUAL REPORT 2010–11 | 37 Delivering our statutory requirements to a high standard using best practice governance processes.

Capability area 2 – Performance overview The table below provides an overview of the governance and performance in Capability area 2—governance and compliance, in delivering its objectives against the compliance performance targets . Objective Actual About governance and compliance Ensure statutory obligations are identified, documented complied with Governance and compliance is the second core  and managed . capability function for our business . We aim to operate the SEQ Water Grid within a governance and Job descriptions are reviewed and align compliance framework that makes sure we deliver on with the capability framework .  our statutory obligations to a high standard using best practice governance processes . This ensures that we Implement and maintain policies and meet our statutory obligations on time, every time . processes to improve governance  standards .

Highlights Migration to a new technology In 2010–11, our key achievements in governance operating environment to improve  and compliance include: business productivity .

„„ implemented a formal compliance framework Build on our project and program management capability to deliver „„ established a Governance and Regulatory on time, on budget and to quality  Compliance unit solely dedicated to corporate standards . governance, legal, compliance, audit and business performance „„ commenced implementing a risk and Our performance compliance software system to support the compliance framework . Governance To achieve the outcomes of the South East Queensland water market, we manage the strategic operation of the SEQ Water Grid in the most efficient and effective manner consistent with applicable legislation and regulatory instruments .

To do this effectively in 2010–11 we continued to refine our rigorous compliance framework and processes to ensure we meet our governance requirements .

38 | SEQ WATER GRID MANAGER During the year we continued to ensure the Engagement with regulatory stakeholders review and update of our policies and procedures In 2010–11 we continued to engage with our particularly the Board Charter, Board delegations, regulatory stakeholders including: Audit and Risk Management Committee Charter, Internal Audit Charter, Code of Conduct, and Gifts „„ the Queensland Competition Authority to assist and Benefits Policy . We also established new policies it in understanding the regulatory framework we such as the Compliance Policy and Information and operate in and how we interact with our service Communication Technology Governance Policy . providers and customers

Internal audits have demonstrated the maturity of „„ the Queensland Water Commission on matters our processes, procedures and internal controls . and improvements to the Market Rules and To improve our project management capability we Grid Contracts, particularly through our Annual have adopted the Queensland Government Chief Market Rules Review . Information Office recommended project and program management methodologies of PRINCE We also participated in the Queensland Water 2 and MSP . All our project managers are PRINCE Commission’s consultation process for the 2 qualified, and our program managers are MSP development of the Operating Protocol Guideline qualified . To support our project and program and have continued to liaise with Grid Participants management we use SERENA, a project monitoring throughout the development of their draft operating system, and report monthly to the Board on project protocols to ensure they align with the guideline . progress against time, quality and cost . Outlook for 2011–12 Compliance In 2011–12 we will continue to build on our During 2010–11 we continued to comply with our governance and compliance frameworks and look statutory obligations including: to develop further process efficiencies to reduce operational effort and cost . „„ continued to monitor and report on compliance with core statutory obligations on a monthly basis Our main priorities will include:

„„ formalised our compliance framework with „„ implementing the risk and compliance software the development of our Compliance Policy in system to support our compliance framework line with the Australian Standard 3806-2006, more efficiently Compliance Programs . „„ using the risk and compliance software system Throughout the 2010–11 financial year we and a SEQ Water Grid Manager intranet to continued to adhere to the State Water Authorities proactively communicate policies and procedures Governance Framework . with staff

„„ focusing internal audit on more strategic aspects of our business .

ANNUAL REPORT 2010–11 | 39 Corporate governance

The SEQ Water Grid Manager is a statutory body We prepared a five year Strategic Plan and an annual established under the South East Queensland Water Operational Plan reflecting our strategic direction (Restructuring) Act 2007 . It is governed by a Board and business priorities . These plans serve as a of Directors reporting to our responsible Ministers . performance contract with our responsible Ministers .

In 2010-11 there were machinery-of-Government To ensure compliance with our statutory changes and our responsible Ministers for this responsibilities, we undertake a rigorous reporting year were: regime . We report on our operations to our stakeholders through a range of channels, including: 1 July 2010–21 February 2011 „„ this Annual Report „„ the Treasurer and Minister for Employment and Economic Development „„ Annual Market Rules Review

„„ the Minister for Natural Resources, Mines and „„ quarterly and annual System Operating Plan Energy and Minister for Trade . reports

21 February 2011–30 June 2011 „„ quarterly report against the strategic and operational plans „„ the Minister for Finance, Natural Resources and The Arts „„ quarterly report against the State Borrowing Program . „„ the Minister for Energy and Water Utilities .

40 | SEQ WATER GRID MANAGER Our Board In undertaking its responsibilities and activities, the Board promotes a culture of the highest ethical Chair: Gary Humphrys standards, has implemented a Code of Conduct and Members: Gordon Jardine, Dr David Cunliffe, Teresa embraced the values developed by our staff . Dyson, Jamie Quinn In 2010–11, an independent review and evaluation was conducted to assess the performance of the Responsibilities SEQ Water Grid Manager’s Board . Issues considered included: Under the Board charter, the Board’s key responsibilities and activities are to: „„ Board management

„„ approve strategic and operational plans „„ Board papers and information provided to the Board „„ provide guidance on the opportunities to strengthen the operation of the SEQ Water Grid „„ Board contribution to the organisation’s strategy

„„ ensure the establishment of an appropriate „„ Director skills, education and training . framework for the operation of the SEQ Water Grid, in particular in terms of contractual arrangements, Based on this evaluation, it was concluded that performance and reporting obligations management by the Board was appropriate . Additionally, the evaluation found that Board „„ approve and monitor the progress of major members had attained sufficient understanding of contracts and capital expenditure the functions and issues which were critical to the organisation and that Board members’ interactions „„ delegate authority for the operation of our with management were appropriate and healthy . organisation to the Chief Executive Officer and Executive Management Group, where appropriate Attendance „„ appoint the Chief Executive Officer and Senior Executives The Board met 13 times during 2010–11 .

„„ review and evaluate the Chief Executive Officer’s Member Number Number performance eligible to attended attend „„ promote an efficient and effective operation and pricing structure Gary Humphrys 13 12 Gordon Jardine 13 12 „„ ensure the establishment of a monitoring regime for our compliance framework Dr David Cunliffe 13 13 Teresa Dyson 13 13 „„ ensure the establishment of a monitoring regime Jamie Quinn 13 13 for an appropriate risk management framework

„„ ensure effective communications with stakeholders

„„ communicate results and performance outcomes to the responsible Ministers and other stakeholders .

ANNUAL REPORT 2010–11 | 41 Audit and Risk Management In May and June 2011, the Committee conducted an assessment of the achievement of its roles and Committee responsibilities as set out in the Committee’s Charter Chair: Jamie Quinn and a performance evaluation respectively . The Committee determined that it had: Members: Gary Humphrys, Teresa Dyson „„ successfully achieved its roles and responsibilities Responsibilities for 2010–11 in accordance with the Committee’s Charter The Audit and Risk Management Committee assists the Board in discharging its financial and „„ reached a level of maturity and understanding of risk governance responsibilities . It oversees the its roles and responsibilities through the continual financial reporting processes that ensure the review of its processes and procedures, including accuracy, transparency and integrity of reported recent reviews of its Charter and the internal financial information . audit charter, with due regard to Queensland Treasury’s Audit Committee Guidelines . Under the Committee’s Charter, the Committee is responsible for reviewing and monitoring In 2010–11 the Committee has considered and the following: accepted all recommendations by the Queensland Audit Office and is responsible for overseeing the „„ the effectiveness of our organisation’s internal implementation of the recommendations . controls and risk management system

„„ the effectiveness and outputs of the internal audit Attendance function, including reports and recommendations The Audit and Risk Management Committee met „„ the preparation of the annual financial seven times in 2010–11 . statements Member Number Number „„ the independent audit process, undertaken by the eligible attended Queensland Audit Office to attend

„„ the process for monitoring compliance with laws, Jamie Quinn 7 7 regulations, internal standards and policies . Gary Humphrys 7 7

In addition, the Committee oversees the development Teresa Dyson 7 7 and implementation of our SEQ Water Grid Risk Management Plan . Internal audit In accordance with section 29 of the Financial and Performance Management Standard 2009, the SEQ Water Grid Manager engages a consultant to perform the internal audit function, independent of management .

42 | SEQ WATER GRID MANAGER Internal audit is governed by a charter, which was All internal audit activities were undertaken in recently reviewed against the Queensland Treasury’s accordance with the strategic and annual internal Audit Committee Guidelines and relevant audit and audit plans . Internal audits have contributed to the ethical standards . maturity and rigour of the Water Grid Manager’s processes and procedures, internal controls, risk The objectives of internal audit are to provide: management and compliance . „„ independent objective assurance on the state of the SEQ Water Grid Manager’s risks and Our Board members internal controls Gary Humphrys – Chair „„ the Executive Management Group with recommendations to enhance the SEQ Water Gary Humphrys was an inaugural Board member in Grid Manager’s ability to operate and achieve its 2008–09 and was Deputy Chair . On 1 July 2009, he objectives and strategies in an efficient, effective was appointed as Chair, and has helped to shape our and ethical manner organisation in its formative years .

„„ assistance in the SEQ Water Grid Manager’s Gary is a Chartered Accountant and a graduate of compliance with all governance, legal and the Australian Institute of Company Directors . statutory requirements . He has a strong background in finance, treasury As prescribed by the internal audit charter, internal and risk management with over 30 years experience audit is responsible for: in the mining and energy industries, both in the public and private sectors . Gary has held a number „„ attending the quarterly Audit and Risk of other Board appointments to corporations in the Management Committee meetings, including mining, energy and health industries . meeting with the Committee at least once a year without management present Gordon Jardine – Deputy Chair

„„ seeking strategic direction for internal audit Gordon Jardine was until July 2011, the Chief Executive of Powerlink Queensland, which owns, „„ consulting on and setting objectives, scope, develops and operates the high voltage electricity timing and resourcing of the Internal Audit grid in Queensland . He held this position since Strategic Plan and Internal Audit Annual Plan 1995, and during his tenure, Powerlink has grown its „„ liaising with external audit in the course of asset base from $1 .3 billion to $6 billion . preparing the internal audit plans Gordon was the Chairman of Grid Australia, the „„ regularly advising of progress against the Internal representative body for the owners of Australia’s Audit Plans and of any significant matters affecting electricity transmission networks, and is the the achievement of the internal audit plans Chairman of ElectraNet SA, the South Australian electricity transmission utility . He was also a „„ reporting on key risks and internal control issues foundation member of the System Reliability Panel of arising from internal audit activity . the National Electricity Market .

ANNUAL REPORT 2010–11 | 43 Gordon brings to our Board a strong background Jamie Quinn – Member in commercial business and in implementing utility Jamie Quinn is a former Commissioner of the industry reforms . He holds bachelor degrees in Queensland Water Commission and was a member engineering and commerce, and a masters degree of our inaugural Board . He has extensive local in environmental science . He is a Fellow of the government experience and specialist knowledge Australian Institute of Company Directors, Australian in sustainable development, including water and Institute of Management and the Australian transport infrastructure . For more than 30 years, Academy of Technological Sciences and Engineering . he held executive positions in councils throughout Dr David Cunliffe – Member Queensland .

David Cunliffe is the Principal Water Quality Adviser Jamie was the Chief Executive of Ipswich City Council with the South Australian Department of Health . He for 16 years to January 2006 . He was the 2005 has over 30 years experience in dealing with public recipient of the Queensland Local Government health aspects of drinking water and recycled water . Managers Australia Award for Excellence in Leadership and Management . David has contributed to a range of national and international guidelines including Australian and World Health Organization (WHO) guidelines for Executive Management Group drinking water quality and use of recycled water . He Under the strategic direction of our Board, our is a member of the WHO Drinking Water Quality Executive Management Team implements the Committee and chair of the National Health and Board’s strategy for the organisation . Each director Medical Research Council’s Water Quality Advisory is responsible for a functional business stream Committee . ensuring the SEQ Water Grid Manager’s projects and Teresa Dyson – Member activities are achieved through effective planning, organisation, resourcing and monitoring . Teresa Dyson is a partner with Blake Dawson . Teresa is a leading practitioner in taxation law, particularly Barry Dennien – Chief Executive Officer in relation to the taxation of financial arrangements, Formerly the Executive Director, Regional Planning infrastructure and public-private partnership and Policy for the Queensland Water Commission, developments, leasing, and debt/equity . Teresa is also Barry was responsible for the draft South East a member of the Board of Taxation . Queensland Water Strategy and system operation Teresa has tertiary qualifications in arts, law, plans for the new SEQ Water Grid . taxation and applied finance, and brings a wealth of Barry has been instrumental in establishing the SEQ knowledge from the financial, government and not- Water Grid Manager, leading the organisation during for-profit sectors to our Board . its formative phase and guiding the development of its foundation operations, processes and values .

Barry has worked in the water industry for 30 years across many roles . He held the position of Planning Manager at Brisbane Water for five years .

44 | SEQ WATER GRID MANAGER Dan Spiller – Director of Operations Joanne Collins – Director of Finance and Corporate Services Dan joined the SEQ Water Grid Manager team as the Director of Operations in July 2010, from Joanne joined the SEQ Water Grid Manager in his previous role as the acting Executive Director November 2010 bringing 20 years management of the Queensland Water Commission . Dan was experience in business consulting, corporate the principal author of the South East Queensland governance and financial management from a range Water Strategy and was directly responsible of industries . Joanne has received a commendation for policy and communications regarding the from the Auditor-General for financial reform of local development and use of purified recycled water government, and was also recognised as Queensland schemes in South East Queensland . CPA of the Year for the corporatisation of Wide Bay Water Corporation, Queensland’s first local Dan has previously been involved in infrastructure government owned water corporation . planning and assessment at Brisbane City Council, the Queensland Competition Authority and the Joanne has been a university lecturer and provided Office of Urban Management . He holds a Master specialist advice on corporatisation and financial of Professional Economics, Master of Urban and reform nationally and internationally . Regional Planning and Bachelor of Built Environment . Scott Denner – Director of Risk and Technology Elaina Smouha – Director of Governance and Scott joined the SEQ Water Grid Manager team Regulatory Compliance in July 2009 . His previous roles, including Head Elaina joined the SEQ Water Grid Manager in August of Department (Security, Risk and Compliance) 2009 . Her previous roles have given her a broad for G4S in London, have seen him gain extensive range of legal experience having worked as a lawyer knowledge across areas including risk management, in private practice in the areas of water, construction, business continuity management and business mining, government, professional negligence and process improvement . personal injury . Scott is a Graduate of the Royal Military College Elaina holds a Bachelor of Laws and a Bachelor of and is a Certified Practising Risk Manager . Scott International Business from Griffith University . holds a Bachelor of Management and Professional Studies and an Associate Diploma of Personnel Michael Lyons – Director of SEQ Water Grid Administration . Communications Michael has a wide range of experience in corporate Consultants affairs management and strategic communication in Australia and internationally . A former national During 2010–11 we engaged external consultants at award winning journalist, Michael also has post a total expenditure of $259,722 to provide specialist graduate qualifications in business and has served skills to undertake the SEQ Water Grid Optimisation on a number of advisory Boards . Project .

Michael joined the SEQ Water Grid in August 2010 after working for one of Australia’s biggest mining, Overseas travel engineering and water infrastructure companies . No overseas travel was undertaken during the 2010–11 financial year .

ANNUAL REPORT 2010–11 | 45 Our people

While the SEQ Water Grid Manger is responsible for We have an established team with extensive the strategic operations of the SEQ Water Grid, a experience in water operations and business vital water supply asset, we place equal importance management . We had provision in our 2010–11 on retaining and developing our most important organisational structure for 29 full-time equivalent asset—our people . staff . Our core skill sets include:

During 2010–11 we established a workforce „„ water operations planning framework to provide a strong foundation „„ hydraulic and hydrology modelling for our people management . In addition, we have established a dedicated human resource position „„ financial management to deliver our workforce planning initiatives . We also worked on revising our organisational values to „„ emergency management planning provide an attractive work environment for current „„ water quality and future staff . „„ system reliability engineering Workforce profile „„ risk management During 2010–11 we reorganised our business to „„ business development and contract negotiation more closely align our business needs with our statutory roles and responsibilities . The legal and „„ communications and policy regulatory compliance role was separated from „„ information technology . finance and corporate services to provide greater attention to board and governance issues .

46 | SEQ WATER GRID MANAGER Our organisational structure Governance and Regulatory Finance Compliance

Corporate Services

Finance and Corporate Water Quality Services

System Capacity

Chief Executive Policy Operations Officer

Correspondence

SEQ Water Grid Communications Communications

Program Delivery

ICT Support Risk and Technology Risk

Workforce statistics Workforce planning framework In 2010–11 our organisation had 29 full-time To guide our workforce planning framework, in equivalent staff . Our workforce gender balance was 2010–11 the SEQ Water Grid Manager developed 55 per cent female and 45 per cent male full-time a People and Capability Strategy . The Strategy equivalent staff . Our permanent retention rate has recommends an approach to deliver organisational increased to 89 .7 per cent compared to 81 percent development and Human Resource programs for in 2009–10 . SEQ Water Grid Manager .

Number Percentage of During 2010–11, we reviewed our conditions workforce of employment policies to improve our work-life balance policies . This review will be completed in Women 16 55 July 2011 and aims to provide staff with improved Men 13 45 access to flexible work arrangements to improve Permanent 26 90 work-life balance . retention rate Permanent 3 10 separation rate

ANNUAL REPORT 2010–11 | 47 Key workforce polices Every new staff member receives an induction on these policies and they are reinforced regularly Our values and how we act through our day-to-day operation . In 2010–11, we held a series of staff workshops Values to update our values . Collaboratively the Board, Our values and Code of Conduct provide a Executive Management Team and staff developed framework for our staff to know ‘how we do things’ . new organisational values and the behavioural statements that support them . „„ Values – outlines the expected behavioural elements of our organisation’s operation .

„„ Code of Conduct – outlines the expected manner in which staff will conduct themselves in relation to the law, other persons, conflicts of interest, resource allocation and usage, and how any breaches will be managed .

Our organisational values and behavioural statements

Value Behavioural statement Innovative „„ We inquire, listen and challenge so that we are fully informed to make wise and effective decisions .

„„ We consider innovative processes and solutions taking place in other industries and identify opportunities to adapt these to our operations . Deliver value „„ We strive to add value from a whole-of Grid perspective by collaborating with our Grid Service Providers, customers and stakeholders, and by facilitating information sharing and communication .

„„ We encourage continuous learning and skilling so that we are able to deliver services above and beyond our customers’ expectations . Motivated „„ We demonstrate leadership and take pride in delivering on our commitments as we are keen to make a difference . Adaptable „„ We aim to be open-minded and flexible so that we can respond to our customers’ needs in a dynamic water market . Professional „„ We do what we say in a timely manner because we have a plan and have confidence and trust in who will be accountable to deliver it .

„„ We seek to define and achieve best practice in all aspects of our work by adopting a straight-talking approach, being open and honest, and showing respect for the expertise of others .

48 | SEQ WATER GRID MANAGER Ethical behaviour and decision making We have reflected the principles of the Carer’s As part of our People and Capability Plan, in Charter where the services of the SEQ Water Grid 2010–11 we aligned our Code of Conduct with the Manager can affect carers and the persons they care Code of Conduct for the Queensland Public Service for . The SEQ Water Grid Manager will consult the which was introduced as part of the amendments to appropriate representative organisations in making the Public Sector Ethics Act 1994 . The alignment of strategic and policy decisions that affect carers and our Code of Conduct was done in consultation with persons they care for . all employees and contractors . Workplace health and safety Our revised Code of Conduct has been incorporated into our induction program, and all employees and We recognise that happy and healthy people mean contractors will receive training in the new Code of better services for our customers through greater Conduct early 2011–12 . productivity and reduced absenteeism .

We actively encourage our staff to demonstrate our We promote flexible working arrangements, to allow organisational values and apply the Code of Conduct staff to balance work and family commitments such as: in our day-to-day interactions with each other, our „„ tele-commuting stakeholders and customers . „„ flexible start and finish times . We value, actively support and promote a fair, safe Our healthy staff program includes providing staff and ethical work environment . We are committed with access to influenza vaccinations and health to the highest standards of integrity, honesty, ethical information . behaviour and accountability . We have established policies to ensure we have a Employment conditions safe workplace, and these policies include: Our people are employed under the South East „„ Freedom from Harassment and Violence Policy Queensland Water (Restructuring) Act 2007 . Our „„ Grievance Policy people are remunerated under the State Government „„ Workplace Health and Safety Policy Departments Certified Agreement, to which we became a signatory in June 2010 . „„ Employee Assistance Policy . As part of our People and Capability Plan, during Carers (Recognition) Act 2008 2010–11 these policies were reviewed and aligned The SEQ Water Grid Manager ensures that its officers with the relevant legislation and Queensland and employees have awareness and understanding Government policies . of the Carer’s Charter included within the Carers (Recognition) Act 2008 .

ANNUAL REPORT 2010–11 | 49 Whistleblowers Protection Act 1994 During 2010–11 we initiated a knowledge and With the repeal of the Whistleblowers Protection information management solution project to Act 1994 and the introduction of the Public Interest improve and automate our knowledge management Disclosure Act 2010 on 1 January 2011, the way in and recordkeeping practices . Key benefits of this which public interest disclosures are to be publically electronic system include: reported has changed . From 1 January 2011 „„ a single place to store business records agencies are no longer required to report public interest disclosures in annual reports . „„ fast and easy access to business records and corporate information Under section 61 of the Public Interest Disclosure Act 2010, the Public Service Commission is now „„ improved information sharing and documentation responsible for the oversight of public interest collaboration across the business disclosures and preparing an annual report on the „„ improved stakeholder management and operation of the Public Interest Disclosure Act 2010 . communications From 1 January 2011 agencies are required to report information about public interest disclosures „„ secure and systematic management of documents to the Public Service Commission . The Public Service Commission will prepare an annual report on the „„ improved information security operations of the Public Interest Disclosure Act 2010 „„ compliance with legislative obligations and and the information provided by agencies . The standards . annual report will be made publicly available after the end of each financial year . The knowledge and information management solution will be implemented during 2011–12 . The SEQ Water Grid Manager has not had any public interest disclosure requests in 2010–11 .

Accountability and transparency through good recordkeeping As a knowledge-based business, the SEQ Water Grid Manager recognises the importance of good recordkeeping to ensure that our decisions are accountable and transparent to the community .

We have continued to comply with the Public Records Act 2002, Information Standard 40: Recordkeeping and Information Standard 31: Retention and Disposal of Public Records .

We’re committed to continually improving our recordkeeping practices and we continue to work with Queensland State Archives to develop and agree a retention and disposal schedule .

50 | SEQ WATER GRID MANAGER Financial summary

Summary of Financial Performance

Statement of Comprehensive Income

2010–11 2010–11 Budget Actual $‘000 $‘000 Operating revenue Bulk water sales 510,580 410,464 Other 25,564 25,141 TOTAL OPERATING REVENUE 536,144 435,605 Operating costs Bulk water purchases 878,984 811,590 Finance costs 53,746 51,056 Other expenses 10,819 10,748 TOTAL OPERATING COSTS 943,549 873,394 OPERATING PROFIT (LOSS) (407,405) (437,789) PROFIT (LOSS) AFTER TAX (407,405) (437,789)

ANNUAL REPORT 2010–11 | 51 Statement of Financial Position

Budget Actual 30 June 2011 30 June 2011 $‘000 $‘000 Current assets 93,871 79,857 Non-current assets 989 1,250 TOTAL ASSETS 94,860 81,107 Current liabilities 121,684 14,907 Non-current liabilities 1,050,701 1,143,962 TOTAL LIABILITIES 1,172,385 1,158,869 NET ASSETS (1,077,525) (1,077,762) Retained earnings (1,077,525) (1,077,762) TOTAL EQUITY (1,077,525) (1,077,762)

Our organisation does not own infrastructure assets; Financial commentary however, we own the South East Queensland urban water entitlements . These water entitlements are for The financial results reflect the price path for bulk water drawn from watercourses, and in some cases water as reviewed by the Queensland Government from groundwater . As there is no active market for in November 2010, and the contracted costs to these intangible assets, these are not recognised in produce, treat and deliver water . the financial statements .

Through the 10 year price path, the price of We prudently operate within the capital structure water has been set at a lower rate than the full parameters (including debt capital) approved by the cost of producing and delivering this water . Our Government . In particular, we ensure we manage organisation will have a negative net cash flow our activities, within the State Borrowing Program until the optimal bulk water price is reached where approvals, for our working capital and client-specific we will begin to realise positive cash flows and pool facilities . pay back the debt borrowed from the Queensland Treasury Corporation . We are a non profit seeking entity . We must, however, act in a commercial manner and implement The Queensland Government has confirmed its responsible financial management practices to continued financial support of the SEQ Water Grid ensure risks are managed and water services are Manager through the provision of access to debt delivered efficiently . funding . A letter of support was received on 3 August 2011, stating this commitment remains in place for the 2011–12 year and the duration of the pricing period .

52 | SEQ WATER GRID MANAGER Revenue Overall position Bulk water sales were $410 million, 20% less The net result of significantly lower income from than the original budget of $511 million due to bulk water sales (down $100 million) and lower bulk customer demand for water being significantly water costs (down $67 million) and interest (down $3 lower than expected, as a result of the continuation million) was a loss for 2010–11 of $438 million . This of unprecedented wet weather conditions with is a $31 million (8%) larger loss than the original lower than average temperatures . Bulk water is budgeted loss of $407 million . charged wholly at a variable rate per megalitre, in Due to the shortfall in cash revenue resulting from accordance with the bulk water price path set by lower water demand experienced during the year, it Queensland Government . was necessary to request an increase of $96 million in our State Borrowing Program (SBP) allocation Expenses from $404 to $500 million during 2010–11 .

Bulk water purchases were $812 million, 8% less $494 million of the revised approved SBP allocation than original full year budget of $879 million . Bulk of $500 million for the year was drawn down in the water is purchased at a price set by Queensland year, including capitalised interest of $51 million, Government, with the price based on a largely fixed making our Queensland Treasury Corporation long component with only a minor component related to term debt balance at 30 June 2011 $1,142 million . the variability in water demand . Interim end of year adjustments to grid service charges totalling $72 million related to reductions in capital, fixed and variable charges for bulk water have been brought to account pending ministerial determinations confirming these amounts .

Finance charges were $51 million, 5% less than original budget of $54 million . Interest rates were budgeted at 6 .36%, whereas the actual interest rates applied during the year were 5 .98% to 6 .01% .

Other expenses for the operation and management of the organisation were $10 .7 million, within 1% of the original budget of $10 .8 million .

ANNUAL REPORT 2010–11 | 53 Financial Statements 2 010 –11

Contents

Statement of comprehensive income ...... 56

Statement of financial position...... 57

Statement of changes in equity ...... 58

Statement of cash flows...... 59

Notes to and forming part of the financial statements...... 60

Management certificate...... 86

54 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager financial statements 2010–11

Contents

Statement of comprehensive income

Statement of financial position

Statement of changes in equity

Statement of cash flows

Notes to and forming part of the financial statements

Management certificate

General information

These financial statements provide information on the financial activities of the SEQ Water Grid Manager.

The SEQ Water Grid Manager is a not-for-profit Queensland Government statutory body established under the South East Queensland Water (Restructuring) Act 2007.

The head office and principal place of business of the SEQ Water Grid Manager is:

Level 15 53 Albert Street Brisbane QLD 4000

A description of the nature of the SEQ Water Grid Manager's operations and its primary activities are included in the notes to the financial statements.

For information in relation to the SEQ Water Grid Manager's financial report please call (07) 3247 3012, email [email protected] or visit www.seqwgm.com.au.

Amounts shown in these financial statements may not add to the correct sub-totals or totals due to rounding.

ANNUAL REPORT 2010–11 | 55

SEQ Water Grid Manager Statement of comprehensive income For the year ended 30 June 2011

Notes 2011 2010 $’000 $’000 Income from continuing operations User charges 410,464 352,639 Grants and other contributions 24,799 52,391 Other revenue 2 342 380

Total income from continuing operations 435,605 405,410

Expenses from continuing operations Employee expenses 3 3,824 2,319 Supplies and services 5 817,443 661,967 Depreciation and amortisation 6 275 203 Finance/borrowing costs 7 51,056 24,684 Other expenses 8 796 712

Total expenses from continuing operations 873,394 689,885

Operating result from continuing operations before income tax equivalent Operating result before income tax equivalent (437,789) (284,475) Income tax equivalent expense 9 - -

Total comprehensive income after income tax (437,789) (284,475) equivalent

The accompanying notes form part of these financial statements.

56 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Statement of comprehensive income Statement of financial position For the year ended 30 June 2011 As at 30 June 2011

Notes 2011 2010 Notes 2011 2010 $’000 $’000 $’000 $’000 Income from continuing operations User charges 410,464 352,639 Current assets Grants and other contributions 24,799 52,391 Cash and cash equivalents 10 1,085 12,577 Other revenue 2 342 380 Trade and other receivables 11 78,724 59,836 Other current assets 12 48 23 Total income from continuing operations 435,605 405,410 Total current assets 79,857 72,436 Expenses from continuing operations Employee expenses 3 3,824 2,319 Non-current assets Supplies and services 5 817,443 661,967 Property, plant and equipment 13 1,049 692 Depreciation and amortisation 6 275 203 Intangible assets 14 201 297 Finance/borrowing costs 7 51,056 24,684 Other expenses 8 796 712 Total non-current assets 1,250 989

Total expenses from continuing operations 873,394 689,885 Total assets 81,107 73,425

Operating result from continuing operations Current liabilities before income tax equivalent Trade and other payables 15 13,598 63,343 Operating result before income tax equivalent (437,789) (284,475) Accrued employee benefits 16 733 189 Income tax equivalent expense 9 - - Other financial liabilities 17 382 254 Other liabilities 18 194 102 Total comprehensive income after income tax (437,789) (284,475) equivalent Total current liabilities 14,907 63,888

The accompanying notes form part of these financial statements. Non-current liabilities Accrued employee benefits 16 57 81 Other financial liabilities 17 1,142,851 648,858 Other liabilities 18 1,054 571

Total non-current liabilities 1,143,962 649,510

Total liabilities 1,158,869 713,398

Net assets (liabilities) (1,077,762) (639,973)

Equity Retained surplus/(accumulated deficit) (1,077,762) (639,973)

Total equity (1,077,762) (639,973)

The accompanying notes form part of these financial statements.

ANNUAL REPORT 2010–11 | 57

SEQ Water Grid Manager Statement of changes in equity For the year ended 30 June 2011

Notes 2011 2010 $’000 $’000

Accumulated deficit Balance as at 1 July (639,973) (355,498) Operating result from continuing operations after (437,789) (284,475) income tax equivalent

Balance as at 30 June (1,077,762) (639,973)

The accompanying notes form part of these financial statements.

58 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Statement of changes in equity Statement of cash flows For the year ended 30 June 2011 For the year ended 30 June 2011

Notes 2011 2010 Notes 2011 2010 $’000 $’000 $’000 $’000

Accumulated deficit Cash flows from operating activities Balance as at 1 July (639,973) (355,498) Inflows: Operating result from continuing operations after (437,789) (284,475) User charges 394,477 346,281 income tax equivalent Grants and other contributions 25,043 46,131 Interest received 337 406 Balance as at 30 June (1,077,762) (639,973) GST input tax credits received from ATO 55,924 56,867

The accompanying notes form part of these financial statements. Outflows: Employee expenses (3,625) (2,268) Supplies, services and other (924,263) (762,727) GST remitted to ATO (2,432) (1,775) Other - (265)

Net cash flows provided by/(used in) operating 19 (454,539) (317,350) activities

Cash flows from investing activities Inflows: Security deposit - 10 Outflows: Payments for intangibles - (49) Payment for property, plant and equipment (17) -

Net cash flows provided by/(used in) investing (17) (39) activities

Cash flows from financing activities Inflows: Proceeds from borrowings 443,065 328,247

Net cash flows provided by/(used in) financing 443,065 328,247 activities

Net increase (decrease) in cash held and cash (11,491) 10,858 equivalents Cash and cash equivalents at beginning of 12,577 1,719 financial year

Cash and cash equivalents at end of financial 10 1,085 12,577 year

The accompanying notes form part of these financial statements.

ANNUAL REPORT 2010–11 | 59

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

Objectives and principal activities of the SEQ Water Grid Manager

Note 1 Summary of significant accounting policies

Note 2 Other revenue

Note 3 Employee expenses

Note 4 Key executive management personnel and remuneration

Note 5 Supplies and services

Note 6 Depreciation and amortisation

Note 7 Finance/borrowing costs

Note 8 Other expenses

Note 9 Income tax equivalent

Note 10 Cash and cash equivalents

Note 11 Trade and other receivables

Note 12 Other current assets

Note 13 Property, plant and equipment

Note 14 Intangible assets

Note 15 Trade and other payables

Note 16 Accrued employee benefits

Note 17 Other financial liabilities

Note 18 Other liabilities

Note 19 Reconciliation of operating surplus/(deficit) to net cash from operating activities

Note 20 Financial instruments

Note 21 Commitments

Note 22 Going concern

60 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

Objectives and principal activities of the SEQ Water Grid Manager Objectives and principal activities of the SEQ Water Grid Manager The SEQ Water Grid Manager’s key objective is to manage the operation of the SEQ Water Grid in Note 1 Summary of significant accounting policies the most efficient manner; consistent with the South East Queensland System Operating Plan, The Market Rules SEQ Water Market, and associated legislative and regulatory requirements. The SEQ Note 2 Other revenue Water Grid Manager is involved in the purchase of bulk water services and the sale of bulk water.

Note 3 Employee expenses To achieve the outcomes of the South East Queensland water market and enhance the purchase of water services and sale of water, we manage the strategic operation of the SEQ Water Grid in the Note 4 Key executive management personnel and remuneration most efficient and effective manner consistent with applicable legislation and regulatory instruments. SEQ Water Grid Manager owns the urban water entitlements in South East Note 5 Supplies and services Queensland, purchases water services from our Grid Services Providers (storage, treatment, transportation and manufactured water) and sells water to our Grid Customers. SEQ Water Grid Note 6 Depreciation and amortisation Manager does not own infrastructure assets.

Note 7 Finance/borrowing costs 1. Summary of significant accounting policies (a) Statement of compliance Note 8 Other expenses The SEQ Water Grid Manager has prepared these financial statements in compliance with section 43 of the Financial and Performance Management Standard 2009. Note 9 Income tax equivalent The financial statements have been prepared in accordance with Australian Accounting Standards Note 10 Cash and cash equivalents and Interpretations. In addition, the financial statements comply with the Queensland Treasurer's Minimum Reporting Requirements for the year ending 30 June 2011, and other authoritative Note 11 Trade and other receivables pronouncements.

Note 12 Other current assets These financial statements constitute a general purpose financial report.

Note 13 Property, plant and equipment With respect to compliance with Australian Accounting Standards and Interpretations, the SEQ Water Grid Manager has applied those requirements applicable to not-for-profit entities. Except Note 14 Intangible assets where stated, the historical cost convention is used.

Note 15 Trade and other payables (b) The reporting entity The SEQ Water Grid Manager is a not-for-profit Queensland Government statutory body established Note 16 Accrued employee benefits under the South East Queensland Water (Restructuring) Act 2007 and became a separate legal entity on 2 May 2008. Note 17 Other financial liabilities The financial statements include the value of all revenues, expenses, assets, liabilities and equity of Note 18 Other liabilities the SEQ Water Grid Manager. The SEQ Water Grid Manager does not control any other entity.

Note 19 Reconciliation of operating surplus/(deficit) to net cash from operating activities (c) User charges User charges and fees controlled by the SEQ Water Grid Manager are recognised as revenue after Note 20 Financial instruments services are delivered. User charges and fees are controlled by the SEQ Water Grid Manager where they can be deployed for the achievement of the SEQ Water Grid Manager’s objectives. User charges Note 21 Commitments shown in these financial statements represent the revenue derived through selling bulk water to regional councils, power stations and other industrial and rural customers. Note 22 Going concern

ANNUAL REPORT 2010–11 | 61

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

(d) Grants and other contributions Grants, contributions, donations and gifts that are non-reciprocal in nature are recognised as revenue in the year in which the SEQ Water Grid Manager obtains control over them. Where grants are received that are reciprocal in nature, revenue is accrued over the term of the funding arrangements.

Included in revenue for grants received in 2010-11 is $24,799,000 from Queensland Treasury. This additional ongoing revenue stream is for the return of competitive neutrality fees that have been paid by the Grid Service Providers, as Queensland Government statutory bodies, to Queensland Treasury.

(e) Cash and cash equivalents For the purpose of the Statement of financial position and Statement of cash flows, cash assets include all cash and cheques receipted but not banked as at 30 June 2011 as well as deposits at call with financial institutions.

(f) Trade and other receivables Trade debtors are recognised at the amounts due at the time of sale or service delivery. Settlement of these amounts is required within 20 business days from invoice date.

The collectability of receivables is assessed periodically and a provision has been made for impairment.

(g) Acquisitions of assets The actual cost of the asset is used for the initial recording of all non-current physical and intangible asset acquisitions. Cost is determined as the value given as consideration plus costs incidental to the acquisition, including all other costs incurred in getting the assets ready for use. Any training costs are expensed as incurred.

Assets acquired at no cost or for nominal consideration, other than from an involuntary transfer from another Queensland Government entity, are recognised at fair value at the date of acquisition in accordance with AASB 116 Property, Plant and Equipment.

(h) Property, plant and equipment Items of property, plant and equipment with a cost or equivalent value in excess of $5,000 are recognised in the year of acquisition. Items with a lesser value are expensed as incurred. Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that future economic benefits embodied within the part will flow to the SEQ Water Grid Manager and can be reliably measured. The cost of day-to-day maintenance of property, plant and equipment is recognised in the statement of comprehensive income as incurred.

62 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

(i) Intangibles Intangible assets with a cost or other value greater than $100,000 are recognised in the financial statements. Items with a lesser value are expensed as incurred. Each intangible asset is amortised over its estimated useful life to the SEQ Water Grid Manager, less any anticipated residual value. The residual value is zero for all the SEQ Water Grid Manager's intangible assets.

It has been determined that there is no active market for any of the SEQ Water Grid Manager's intangible assets. As such, the assets are recognised and carried at cost less accumulated amortisation and accumulated impairment losses.

(j) Amortisation and depreciation of intangibles and property, plant and equipment Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net cost or revalued amount of each asset, less its estimated residual value, progressively over its estimated useful life to the SEQ Water Grid Manager.

Intangible assets under construction (work-in-progress) are not amortised until they reach service delivery capacity.

Any expenditure that increases the original assessed capacity of the service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset to the SEQ Water Grid Manager.

For each class of depreciable asset the following depreciation and amortisation rates are used:

Class Rate % Property plant and equipment Computers and communications 33.33 Furniture, fixtures and fittings 15 Leasehold improvements 12-16 Office equipment 30

Amortisation Amortisation is recognised on a straight-line basis over the estimated useful life of the asset less any anticipated residual value from the date the intangible is available for use. The residual value for the SEQ Water Grid Manager’s intangible assets is zero.

Class Rate % Intangible assets Internally generated software 20

(k) Impairment of non-current assets All non-current physical and intangible assets are assessed for indicators of impairment on an annual basis. If an indicator of possible impairment exists, the SEQ Water Grid Manager determines the asset's recoverable amount. Any amount by which the asset's carrying amount exceeds the recoverable amount is recorded as an impairment loss.

ANNUAL REPORT 2010–11 | 63

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

The asset's recoverable amount is determined as the higher of the asset's fair value less costs to sell and depreciated replacement cost.

An impairment loss is recognised immediately in the Statement of comprehensive income.

(l) Trade and other payables Trade creditors are recognised upon receipt of the goods and services ordered and are measured at the agreed purchase or contract price, gross of applicable trade and other discounts. Amounts owing are unsecured and are generally settled on 30 day terms.

(m) Financial instruments Recognition Financial assets and financial liabilities are recognised in the Statement of financial position when the SEQ Water Grid Manager becomes party to the contractual provisions of the financial instrument.

Classification - Cash and cash equivalents – held at fair value through profit or loss - Receivables – held at amortised cost - Payables – held at amortised cost - Borrowings – held at amortised cost

Any borrowing costs are added to the carrying amount of the borrowing to the extent they are not settled in the period in which they arise. All interest incurred on the SEQ Water Grid Manager’s borrowings are capitalised.

The SEQ Water Grid Manager does not enter into transactions for speculative or hedging purposes.

All disclosures relating to the measurement basis and financial risk management or other financial instruments held by the SEQ Water Grid Manager are included in note 20.

All impairment losses are recognised in the Statement of comprehensive income.

(n) Employee benefits Wages, salaries, recreation leave and sick leave Wages, salaries and recreation leave due but unpaid at the reporting date represent present obligations resulting from employees' services and are recognised in the Statement of financial position at the remuneration rates expected to apply at the time of settlement. Payroll tax and workers' compensation insurance are a consequence of employing employees, but are not counted in an employee's total remuneration package. They are not employee benefits and are recognised separately as employee related expenses. Employer superannuation contributions, annual leave and long service leave accruals are regarded as employee benefits.

For unpaid entitlements expected to be paid within 12 months, the liabilities are recognised at their undiscounted values. For those entitlements not expected to be paid within 12 months, the liabilities are classified as non-current liabilities and recognised at their present value, calculated using yields on Fixed Rate Commonwealth Government bonds of similar maturity, after projecting the remuneration rates expected to apply at the time of likely settlement.

64 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

Prior history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised.

As sick leave is non-vesting, an expense is recognised for this leave as it is taken.

Long service leave The SEQ Water Grid Manager provides for long service leave liability for all employees on the following basis: - employee with 2 years service, long service leave is recognised at 10% of the total liability. - employee with 3 years service, long service leave is recognised at 20% of the total liability. - employee with 4 years service, long service leave is recognised at 50% of the total liability. - employee with 5–7 years service, long service leave is recognised at 95% of the total liability. - employee with greater than 7 years service, long service leave is recognised at 100% of the total liability.

The SEQ Water Grid Manager’s net obligation is respect of long service leave is the amount of future benefit that employees have earned in return for their service in the current and prior periods.

For unpaid long service leave entitlements expected to be paid within 12 months, the liabilities are recognised at their undiscounted values. For those entitlements not expected to be paid within 12 months, the liabilities are classified as non-current liabilities and recognised at their present value calculated using yields of Fixed Rate Commonwealth Government bonds of similar maturity.

Superannuation Employee superannuation contributions are paid to QSuper, the superannuation plan for Queensland Government employees, at rates determined by the State Government. Contributions are expensed in the period in which they are paid or payable. The SEQ Water Grid Manager’s obligation with regard to employees is limited to its contributions to QSuper.

Board members superannuation contributions are paid to their nominated fund. Contributions are expensed in the period in which they are paid or payable. The SEQ Water Grid Manager’s obligation with regard to board members is limited to its contributions to the nominated fund.

Key executive management personnel and remuneration Key executive management personnel and remuneration disclosures are made in accordance with the Financial Reporting Requirements for Queensland Government Agencies issued by Queensland Treasury. Refer to note 4 for the disclosures on key executive management personnel and remuneration.

(o) Finance/borrowing costs Finance costs are recognised as an expense in the period in which they are incurred. Finance costs include interest on bank overdrafts, finance lease charges and ancillary administration charges.

Borrowing costs are capitalised into the base level of the loan. Borrowing costs include long term borrowings and working capital facilities provided by the Queensland Treasury Corporation.

ANNUAL REPORT 2010–11 | 65

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

(p) Insurance The SEQ Water Grid Manager’s non-current physical assets and other risks are insured through the private insurance market with premiums being paid on a risk assessment basis. In addition, the SEQ Water Grid Manager pays premiums to WorkCover Queensland in respect of its obligations for employee compensation and provides Directors’ and Officers’ insurance to the SEQ Water Grid Manager’s board members and officers.

(q) Leases Operating lease payments are representative of the pattern of benefits derived from the leased assets and are expensed in the period in which they are incurred.

Incentives received on entering into operating leases are recognised as liabilities. Lease payments are allocated between rental expense and reduction of the liability.

(r) Taxation The SEQ Water Grid Manager pays Fringe Benefits Tax and Goods and Services Tax as required by Commonwealth legislation. i) Tax equivalents The SEQ Water Grid Manager makes tax equivalent payments on its taxable income to the Queensland Government. These taxation payments are made pursuant to section 62 of the South East Queensland Water (Restructuring) Act 2007. These payments are administered by the Australian Taxation Office under the National Tax Equivalent Regime. The National Tax Equivalent Regime broadly utilises the provisions of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and associated legislation, as well as rulings and other pronouncements by the Australian Taxation Office, in order to determine the tax payable by the SEQ Water Grid Manager. The SEQ Water Grid Manager is not required to maintain a franking account. ii) Income tax Income tax expense comprises current tax payable and deferred tax. Income tax expense is recognised in the statement of comprehensive income except to the extent that it relates to items directly in equity, in which case it is recognised in equity.

Current tax equivalents is the expected tax equivalents payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment in respect of previous years.

66 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

(p) Insurance Deferred tax equivalent is recognised using the balance sheet method, providing for temporary The SEQ Water Grid Manager’s non-current physical assets and other risks are insured through the differences between the carrying amounts of assets and liabilities for financial reporting purposes private insurance market with premiums being paid on a risk assessment basis. In addition, the SEQ and the amounts used for taxation purposes. Deferred tax is not recognised for temporary Water Grid Manager pays premiums to WorkCover Queensland in respect of its obligations for differences occurring from the initial recognition of assets or liabilities in a transaction that is not a employee compensation and provides Directors’ and Officers’ insurance to the SEQ Water Grid business combination and that affects neither accounting nor taxable profit or loss or differences Manager’s board members and officers. relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the rates that are (q) Leases expected to be applied to temporary differences when they reverse, based on the laws that have Operating lease payments are representative of the pattern of benefits derived from the leased been enacted or substantially enacted by the reporting date. Deferred tax assets and liabilities are assets and are expensed in the period in which they are incurred. offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax Incentives received on entering into operating leases are recognised as liabilities. Lease payments entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets are allocated between rental expense and reduction of the liability. and liabilities will be released simultaneously.

(r) Taxation A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be The SEQ Water Grid Manager pays Fringe Benefits Tax and Goods and Services Tax as required by available against which the temporary difference can be utilised. Deferred tax assets are reviewed at Commonwealth legislation. each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. i) Tax equivalents The SEQ Water Grid Manager makes tax equivalent payments on its taxable income to the (s) Issuance of financial statements Queensland Government. These taxation payments are made pursuant to section 62 of the The financial statements are authorised for issue by the Chairman and Director, Finance and South East Queensland Water (Restructuring) Act 2007. These payments are administered by the Corporate Services at the date of signing the Management Certificate. Australian Taxation Office under the National Tax Equivalent Regime. The National Tax Equivalent Regime broadly utilises the provisions of the Income Tax Assessment Act 1936, the Income Tax (t) Judgements and assumptions Assessment Act 1997 and associated legislation, as well as rulings and other pronouncements by the The preparation of the financial statements requires management to make judgements and Australian Taxation Office, in order to determine the tax payable by the SEQ Water Grid Manager. assumptions that affect the application of accounting policies and the reported amounts of assets, The SEQ Water Grid Manager is not required to maintain a franking account. liabilities, revenues and expenses within the next financial year. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in ii) Income tax the period in which the estimate is revised and in any future period affected. Income tax expense comprises current tax payable and deferred tax. Income tax expense is recognised in the statement of comprehensive income except to the extent that it relates to items The SEQ Water Grid Manager has made no judgements or assumptions that may cause a material directly in equity, in which case it is recognised in equity. adjustment to the carrying amounts of assets, liabilities, income or expenses within the next reporting period. Current tax equivalents is the expected tax equivalents payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment in respect (u) Rounding and comparatives of previous years. Amounts included in the financial statements are in Australian dollars and have been rounded to the nearest $1,000 or, where that amount is $500 or less, to zero, unless disclosure of the full amount is specifically required.

(v) New and revised accounting standards The SEQ Water Grid Manager did not voluntarily change from any of its accounting policies during 2010–11. Only one amendment to the Australian Accounting Standards applicable for the first time in the 2010–11 financial year was relevant, as explained below.

ANNUAL REPORT 2010–11 | 67

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

The SEQ Water Grid Manager is not permitted to adopt a new accounting standard ahead of the specified commencement date unless approval is obtained from the Queensland Treasury. Consequently, the SEQ Water Grid Manager has not applied any Australian Accounting Standards and Interpretations that have been issued but are not yet effective. The SEQ Water Grid Manager will apply these standards and interpretations in accordance with their respective commencement dates.

At the date of authorisation of the financial report, significant impacts of new or amended Australian Accounting Standards with future commencement dates are as set out below.

AASB 9 Financial Instruments and AASB 2009–11 Amendments to Australian Accounting Standards arising from AASB 9 become effective from reporting periods beginning on or after 1 January 2013. The main impacts of these standards are that they will change the requirements for the classification, measurement and disclosures associated with financial assets. Under the new requirements, financial assets will be more simply classified according to whether they are measured at either amortised cost or fair value. Pursuant to AASB 9, financial assets can only be measured at amortised cost if two conditions are met.

One of these conditions is that the asset must be held within a business model whose objective is to hold assets in order to collect contractual cash flows. The other condition is that the contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other Australian Accounting Standards and interpretations with future commencement dates are either not applicable to SEQ Water Grid Manager, or have no material impact on SEQ Water Grid Manager.

2011 2010 $’000 $’000 2. Other revenue

Interest 342 369 Other - 11 Total 342 380

3. Employee expenses 2011 2010 $’000 $’000 Employee benefits Wages and salaries 2,579 1,559 Annual leave* 234 179 Employer superannuation contributions* 301 214 Long service leave* 208 26 Other employee benefits 193 107

68 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

Employee related expenses Workers’ compensation premium* 8 6 Payroll tax* 109 90 Other employee related expenses 192 138 Total 3,824 2,319

*Refer to note 1 (n)

The number of employees as at 30 June 2011 including both full-time and part-time employees measured on a full-time equivalent basis is:

2011 2010 Number of employees: 27 16

4 (a) Key executive 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 the organisation during 2010-11. Further information on these positions can be found in the body of the annual report under the section relating to Corporate Governance.

Position Responsibilities Current incumbents Contract classification and Date appointed appointment authority to position (date resigned from position) Chief Executive Chief Executive Officer is responsible for Common law contract. Appointed 3 Officer managing the organisation’s affairs under South East Queensland Water December 2008 the South East Queensland Water (Restructuring) Act 2007; State Water (Restructuring) Act 2007 and other relevant Authorities Governance Arrangements legislation, and the Board’s policies. for Chief and Senior Executives. Director, Risk Director, Risk and Technology is responsible Common law contract. Appointed 5 July and Technology for providing strategic leadership to ensure South East Queensland Water 2010 the risk and emergency management and (Restructuring) Act 2007; State Water technology goals of the organisation are Authorities Governance Arrangements met. for Chief and Senior Executives. Director, Director, Operations is responsible for the Common law contract. Appointed 5 July Operations planning and management functions of South East Queensland Water 2010 water grid demand and supply, water (Restructuring) Act 2007; State Water quality and systems operations. Authorities Governance Arrangements for Chief and Senior Executives. Director, Director, SEQ Water Grid Communications Common law contract. Appointed 9 Communications is responsible for management of all media South East Queensland Water August 2010 and stakeholder relationships on behalf of (Restructuring) Act 2007; State Water the SEQ Water Grid entities. Authorities Governance Arrangements for Chief and Senior Executives. Director, Finance Director, Finance and Corporate Services is Common law contract. Resigned 27 and Corporate responsible for the financial management South East Queensland Water August 2010 Services of the organisation and providing corporate (Restructuring) Act 2007; State Water services in the areas of knowledge Authorities Governance Arrangements Appointed 1 management and human resources. for Chief and Senior Executives. November 2010 Director, Director, Governance and Regulatory SO3 equivalent. Appointed 1 Governance and Compliance is responsible for supporting November 2010 Regulatory the Board and the organisation to ensure Compliance all legal and regulatory compliance obligations are met.

ANNUAL REPORT 2010–11 | 69

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

4 (b) Remuneration Remuneration policy for the agency’s key executive management personnel is set by the board of SEQ Water Grid Manager as provided for under the State Water Authorities Governance Arrangements for Chief and Senior Executives. The remuneration and other terms of employment for the key executive management personnel are specified in employment contracts. The contracts provide for the provision of performance-related cash payments and other benefits.

For the 2010-11 year, remuneration of key executive management personnel increased in accordance with employment contracts.

Remuneration packages for key executive management personnel comprise the following components: - Short term employee benefits which include: o Base – 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. o Non-monetary benefits – consisting of provision of car park together with fringe benefits tax applicable to the benefit. - Long term employee benefits include long service leave accrued. - Post employment benefits include superannuation contributions. - Redundancy payments are not provided for within individual contracts of employment. Contracts of employment provide only for notice periods or payment in lieu of notice on termination, regardless of the reason for termination. - Performance payments may be paid or payable annually depending upon satisfaction of key criteria. Performance payments of the key executive management are capped at 15% of total fixed remuneration. The amounts payable are tied to the achievement of pre- determined organisation and individual performance targets as agreed by the board.

Total fixed remuneration is calculated on a ‘total cost’ basis and includes the base and non-monetary benefits, long term employee benefits and post employment benefits.

70 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

4 (b) Remuneration 1 July 2010–30 June 2011 Remuneration policy for the agency’s key executive management personnel is set by the board of Position Short Term Employee Long Term Post Termination Total Benefits Employee Employment Benefits SEQ Water Grid Manager as provided for under the State Water Authorities Governance Salary Non-Monetary Benefits Benefits Arrangements for Chief and Senior Executives. The remuneration and other terms of employment Benefits for the key executive management personnel are specified in employment contracts. The contracts $’000 $’000 $’000 $’000 $’000 $’000 provide for the provision of performance-related cash payments and other benefits. Chief Executive Officer 319 13 7 37 - 376 Director, Finance and 32 2 - 3 - 37 Corporate Services (resigned For the 2010-11 year, remuneration of key executive management personnel increased in 27 August 2010) accordance with employment contracts. Director, Operations 223 13 4 23 - 263 (appointed 5 July 2010) Director, Finance and 115 8 2 12 - 137 Remuneration packages for key executive management personnel comprise the following Corporate Services components: (appointed 1 November - Short term employee benefits which include: 2010) o Base – consisting of base salary, allowances and leave entitlements paid and Director, Communications 157 11 3 16 - 187 (appointed 9 August 2010) provided for the entire year or for that part of the year during which the employee Director, Risk and Technology 170 13 3 17 - 203 occupied the specified position. Amounts disclosed equal the amount expensed in (appointed 5 July 2010) the Statement of Comprehensive Income. Director, Governance and 89 9 2 10 - 110 o Non-monetary benefits – consisting of provision of car park together with fringe Regulatory Compliance (appointed 1 November benefits tax applicable to the benefit. 2010) - Long term employee benefits include long service leave accrued. Total 1,105 69 21 118 - 1,313 - Post employment benefits include superannuation contributions. - Redundancy payments are not provided for within individual contracts of employment. 1 July 2009–30 June 2010 Contracts of employment provide only for notice periods or payment in lieu of notice on Position Short Term Employee Long Term Post Termination Total Benefits Employee Employment Benefits termination, regardless of the reason for termination. Salary Non-Monetary Benefits Benefits - Performance payments may be paid or payable annually depending upon satisfaction of key Benefits criteria. Performance payments of the key executive management are capped at 15% of $’000 $’000 $’000 $’000 $’000 $’000 total fixed remuneration. The amounts payable are tied to the achievement of pre- Chief Executive Officer 328 12 7 37 - 384 Director, Finance and 199 12 4 22 - 237 determined organisation and individual performance targets as agreed by the board. Corporate Services Director, Operations 114 6 - 13 35 168 Total fixed remuneration is calculated on a ‘total cost’ basis and includes the base and non-monetary (resigned 9 February 2010) benefits, long term employee benefits and post employment benefits. Total 641 30 11 72 35 789

ANNUAL REPORT 2010–11 | 71

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

4 (c) Performance payments The basis for performance payments paid or payable in the 2010–11 financial year is set out below:

2011 performance payments Position Date paid Basis for payment Chief Executive August The cash performance payment was calculated by reference to the weighted Officer 2011 achievement of predetermined performance targets. The performance payment paid equated to 12.2% as compared to the maximum of 15% total fixed remuneration payable. Director, Operations August The cash performance payment was calculated by reference to the weighted (appointed 5 July 2011 achievement of predetermined performance targets. The performance payment 2010) paid equated to 12.4% as compared to the maximum of total 15% fixed remuneration payable. Director, Finance and August The cash performance payment was calculated by reference to the weighted Corporate Services 2011 achievement of predetermined performance targets. The performance payment (appointed 1 paid equated to 11.3% as compared to the maximum of 15% total fixed November 2010) remuneration payable. Director, August The cash performance payment was calculated by reference to the weighted Communications 2011 achievement of predetermined performance targets. The performance payment (appointed 9 August paid equated to 11.8% as compared to the maximum of 15% total fixed 2010) remuneration payable. Director, Risk and August The cash performance payment was calculated by reference to the weighted Technology 2011 achievement of predetermined performance targets. The performance payment (appointed 5 July paid equated to 12.4% as compared to the maximum of total fixed remuneration 2010) payable.

2010 performance payments Position Date paid Basis for payment Chief Executive July 2010 The cash performance payment was calculated by reference to the total fixed Officer contract amounts. The performance payment paid equated to 12.56% as compared to the maximum of 15% total fixed remuneration payable. Director, Finance and July 2010 The cash performance payment was calculated by reference to the total fixed Corporate Services contract amounts. The performance payment paid equated to 11.62% as compared (resigned 27 August to the maximum of 15% total fixed remuneration payable. 2010)

The aggregate performance payments paid to or provided for all key executive management personnel are as follows:

2011 2010 $’000 $’000 Key executive management personnel 128 69

4 (d) Remuneration of board and board committee members was as follows:

2010–11 Board members Position Directors fees Superannuation Other Total $’000 $’000 $’000 $’000 $’000 $’000 Gary Humphrys Chairman 70 6 - 76 Gordon Jardine Deputy Chairman 40 0 - 40 David Cunliffe Director 40 5 5* 50 Teresa Dyson Director 40 - - 40 Jamie Quinn Director 40 5 - 45

72 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

4 (c) Performance payments 2009–10 The basis for performance payments paid or payable in the 2010–11 financial year is set out below: Board members Position Directors fees Superannuation Other Total $’000 $’000 $’000 $’000 $’000 $’000 Gary Humphrys Chairman 70 6 - 76 2011 performance payments Position Date paid Basis for payment Gordon Jardine Deputy Chairman 40 - - 40 Chief Executive August The cash performance payment was calculated by reference to the weighted David Cunliffe Director 40 5 6* 51 Officer 2011 achievement of predetermined performance targets. The performance payment Teresa Dyson Director 40 - - 40 paid equated to 12.2% as compared to the maximum of 15% total fixed Jamie Quinn Director 40 5 - 45 remuneration payable. Director, Operations August The cash performance payment was calculated by reference to the weighted (appointed 5 July 2011 achievement of predetermined performance targets. The performance payment * Other remuneration relates to air travel to attend board meetings. 2010) paid equated to 12.4% as compared to the maximum of total 15% fixed remuneration payable. Director, Finance and August The cash performance payment was calculated by reference to the weighted 5. Supplies and services Corporate Services 2011 achievement of predetermined performance targets. The performance payment (appointed 1 paid equated to 11.3% as compared to the maximum of 15% total fixed 2011 2010 November 2010) remuneration payable. Director, August The cash performance payment was calculated by reference to the weighted $’000 $’000 Communications 2011 achievement of predetermined performance targets. The performance payment Water services purchases* 811,590 658,013 (appointed 9 August paid equated to 11.8% as compared to the maximum of 15% total fixed Consultants and contractors 4,263 3,082 2010) remuneration payable. Service providers 1,110 672 Director, Risk and August The cash performance payment was calculated by reference to the weighted Technology 2011 achievement of predetermined performance targets. The performance payment Travel and accommodation 33 22 (appointed 5 July paid equated to 12.4% as compared to the maximum of total fixed remuneration Supplies and consumables 411 130 2010) payable. Other 36 48

2010 performance payments Total 817,443 661,967 Position Date paid Basis for payment Chief Executive July 2010 The cash performance payment was calculated by reference to the total fixed *Under the South East Queensland Water (Restructuring) Act 2007, the SEQ Water Grid Manager is Officer contract amounts. The performance payment paid equated to 12.56% as compared to the maximum of 15% total fixed remuneration payable. responsible for the efficient operation of the SEQ Water Grid. In undertaking these duties, the Director, Finance and July 2010 The cash performance payment was calculated by reference to the total fixed SEQ Water Grid Manager contracts with other State Government water entities for the storage, Corporate Services contract amounts. The performance payment paid equated to 11.62% as compared treatment, transportation and manufacture of water. (resigned 27 August to the maximum of 15% total fixed remuneration payable. 2010) 6. Depreciation and amortisation

The aggregate performance payments paid to or provided for all key executive management Depreciation and amortisation were incurred in respect of: personnel are as follows:

2011 2010 2011 2010 $’000 $’000 $’000 $’000 Property, plant and equipment 15 12 Key executive management personnel 128 69 Leasehold improvements 164 102

Internally generated software 96 89 4 (d) Remuneration of board and board committee members was as follows: Total 275 203

2010–11 Board members Position Directors fees Superannuation Other Total 7. Finance/borrowing costs $’000 $’000 $’000 $’000 $’000 $’000 Gary Humphrys Chairman 70 6 - 76 2011 2010 Gordon Jardine Deputy Chairman 40 0 - 40 $’000 $’000 David Cunliffe Director 40 5 5* 50 Interest 50,114 24,152 Teresa Dyson Director 40 - - 40 Administration charges 942 532 Jamie Quinn Director 40 5 - 45 Total 51,056 24,684

ANNUAL REPORT 2010–11 | 73

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

8. Other expenses 2011 2010 $’000 $’000 External audit fees* 77 65 Internal audit fees 179 122 Insurance 231 196 Miscellaneous 3 64 Board expenses 288 265 Receivables impairment expense 18 - Total 796 712

*Total external audit fees relating to the 2010–11 financial year are estimated to be $49,000 (2010: $54,900). There are no non-audit services included in this amount.

9. Income tax

There is no income tax expense for 2011 (2010: nil).

Reconciliation between tax expense and pre-tax operating result: 2011 2010 $’000 $’000 Operating result before income tax ( 437,789) (284,475)

Prima facie income tax effect using tax rate of 30% (2010: 30%) ( 131,337) (85,343) Tax effect of current year tax losses for which no deferred tax asset 131,337 85,293 was recognised Under/(over) provided in prior periods - 50 Total - -

Deferred tax liabilities: 2011 2010 $’000 $’000 Taxable temporary differences 2,114 218 Offset of deferred tax assets (2,114) (218) Total - -

Deferred tax assets: 2011 2010 $’000 $’000 Deductible temporary differences 546 300 Tax effect of current year tax losses 324,926 191,354 Offset of deferred tax liabilities (2,114) (218) Total 323,358 191,436

The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these because it is not probable that future taxable profit will be available against which the SEQ Water Grid Manager can utilise the benefits. The aggregate amount of deferred tax assets not recognised at 30 June 2011 was $323,358,000(2010: $191,436,000).

74 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

8. Other expenses 10. Cash and cash equivalents 2011 2010 $’000 $’000 2011 2010 External audit fees* 77 65 $’000 $’000 Internal audit fees 179 122 Imprest accounts 1 1 Insurance 231 196 Cash at bank 1,084 12,576 Miscellaneous 3 64 Total 1,085 12,577 Board expenses 288 265

Receivables impairment expense 18 - Cash held during 2011 earned between 4.35% and 4.6%. Total 796 712

11. Trade and other receivables *Total external audit fees relating to the 2010–11 financial year are estimated to be $49,000 (2010:

$54,900). There are no non-audit services included in this amount. 2011 2010 9. Income tax $’000 $’000 Trade debtors 67,806 49,141 There is no income tax expense for 2011 (2010: nil). Less: allowance for impairment loss 18 - 67,788 49,141 Reconciliation between tax expense and pre-tax operating result: 2011 2010 GST receivable 4,902 4,422 $’000 $’000 Interest receivable 18 13 Operating result before income tax ( 437,789) (284,475) Grants receivable 6,016 6,260

Total 78,724 59,836 Prima facie income tax effect using tax rate of 30% (2010: 30%) ( 131,337) (85,343)

Tax effect of current year tax losses for which no deferred tax asset 131,337 85,293 Movements in the allowance for impairment loss 2011 2010 was recognised $’000 $’000 Under/(over) provided in prior periods - 50 Balance at beginning of year - - Total - - Amounts written off during the year - - Amounts recovered during the year - - Deferred tax liabilities: Increase/decrease in allowance recognised in the operating result 18 - 2011 2010 Balance at the end of the year 18 - $’000 $’000 Taxable temporary differences 2,114 218 12. Other current assets Offset of deferred tax assets (2,114) (218) Total - - 2011 2010

$’000 $’000 Deferred tax assets: Prepayments 48 23 2011 2010 Total 48 23 $’000 $’000 Deductible temporary differences 546 300 13. Property, plant and equipment Tax effect of current year tax losses 324,926 191,354 Offset of deferred tax liabilities (2,114) (218) 2011 2010 Total 323,358 191,436 $’000 $’000 Plant and equipment at cost 1,394 858 The deductible temporary differences and tax losses do not expire under current tax legislation. Less: accumulated depreciation (345) (166) Deferred tax assets have not been recognised in respect of these because it is not probable that Total 1,049 692 future taxable profit will be available against which the SEQ Water Grid Manager can utilise the benefits. The aggregate amount of deferred tax assets not recognised at 30 June 2011 was Plant and equipment are valued at cost in accordance with Queensland Treasury's Non-Current Asset $323,358,000(2010: $191,436,000). Policies for the Queensland Public Sector.

ANNUAL REPORT 2010–11 | 75

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

2011 Property, plant and equipment reconciliation Plant and equipment Leasehold Total improvement $’000 $’000 $’000 Carrying amount at 1 July 2010 19 673 692 Acquisitions 17 519 536 Depreciation (15) (164) (179) Carrying amount at 30 June 2011 21 1,028 1,049

2010 Plant and equipment reconciliation Plant and equipment Leasehold Total improvement $’000 $’000 $’000 Carrying amount at 1 July 2009 31 775 806 Acquisitions - - - Depreciation (12) (102) (114) Carrying amount at 30 June 2010 19 673 692

14. Intangible assets

2011 2010 $’000 $’000 Internally generated software at cost 445 445 Less: accumulated amortisation (244) (148) Total 201 297

The SEQ Water Grid Manager has developed a contracts and settlements system to assist in the management of its Grid Contracts. This system was developed in-house and the costs associated with the development of the system have been capitalised and are reported as an intangible asset. This system has been in use since August 2008 and has been amortised during the current financial year. This asset will be amortised on a straight-line basis over the period of expected benefit to the SEQ Water Grid Manager, namely five years. The system has undergone further development in the current financial year which has captured data in accordance with the Market Rules SEQ Water Market.

Expenditure on research activities relating to internally-generated intangible assets is recognised as an expense in the period in which it is incurred.

The water entitlements received by the SEQ Water Grid Manager on 1 July 2008 represent an intangible asset under the requirements of AASB 138 Intangible Assets. The restructure of water arrangements in South East Queensland resulted in the transfer of the water entitlements from existing holders to the SEQ Water Grid Manager on 1 July 2008 which represented a contribution under the requirements of AASB 1004 Contributions. AASB 1004 requires a contribution to be recognised by a not-for-profit entity as income at the fair value of the contribution received or receivable. The water entitlements have a fair value of nil.

76 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

Intangible asset reconciliation

Internally generated software 2011 2010 $’000 $’000 Carrying amount at 1 July 297 337 Acquisitions - 48 Transfers between classes - - Amortisation (96) (88) Carrying amount at 30 June 201 297

15. Trade and other payables

2011 2010 $’000 $’000 Trade creditors 13,538 63,176 GST payable 60 167 Total 13,598 63,343

16. Accrued employee benefits

2011 2010 $’000 $’000 Current Salaries 221 - Annual leave 280 189 Long service leave 232 - Total 733 189

Non-current Long service leave 57 81 Total 57 81

17. Other financial liabilities

2011 2010 $’000 $’000 Current Queensland Treasury Corporation borrowings 372 244 Security deposit 10 10 Total 382 254

Non-current Queensland Treasury Corporation borrowings 1,142,851 648,858 Total 1,142,851 648,858

No assets have been pledged as security for any liabilities.

ANNUAL REPORT 2010–11 | 77

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

A working capital facility and a long-term debt facility have been established with the Queensland Treasury Corporation, and are available for use in future periods. The working capital facility of $70 million (2010: $70 million) was available during the year along with a long-term debt facility of $500 million (2010: $550 million) for 2010–11 to meet the operating costs of the SEQ Water Grid.

All borrowings are denominated in Australian dollars and carried at amortised cost.

The Queensland Government has confirmed its continued financial support of the SEQ Water Grid Manager, through the provision of access to debt funding. The SEQ Water Grid Manager has received a letter from the Treasurer supporting the future cash flow requirements of the organisation.

The working capital facility interest rate applied during 2010–11 was 4.55% to 4.80% (2010: 3.05% to 4.55%).

The fair value of the SEQ Water Grid Manager’s borrowings at 30 June 2011, as notified by the Queensland Treasury Corporation, was $1,160,558,632 (2010: $666,551,090). The Queensland Treasurer has approved a borrowing allocation of $501 million for the SEQ Water Grid Manager under the 2011–12 State Borrowing Program.

18. Other liabilities 2011 2010 $’000 $’000 Current Leasehold improvement 184 102 Lease incentive 10 - Total 194 102

Non-current Leasehold improvement 845 571 Lease incentive 209 - Total 1,054 571

78 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

A working capital facility and a long-term debt facility have been established with the Queensland 19. Reconciliation of operating deficit to net cash from operating activities Treasury Corporation, and are available for use in future periods. The working capital facility of $70 2011 2010 million (2010: $70 million) was available during the year along with a long-term debt facility of $500 $’000 $’000 million (2010: $550 million) for 2010–11 to meet the operating costs of the SEQ Water Grid. Operating loss (437,789) (284,475)

All borrowings are denominated in Australian dollars and carried at amortised cost. Depreciation and amortisation expense 275 203 Lease incentive received 219 - The Queensland Government has confirmed its continued financial support of the SEQ Water Grid Leasehold improvement expensed (164) (102) Manager, through the provision of access to debt funding. The SEQ Water Grid Manager has Queensland Treasury Corporation loan interest and borrowing 51,056 24,684 received a letter from the Treasurer supporting the future cash flow requirements of the expense organisation. Change in assets and liabilities: The working capital facility interest rate applied during 2010–11 was 4.55% to 4.80% (2010: 3.05% to (Increase)/decrease in trade debtors (18,646) (8,299) 4.55%). (Increase)/decrease in GST input tax credits receivable (480) 3,615 (Increase)/decrease in interest receivable (5) 26 The fair value of the SEQ Water Grid Manager’s borrowings at 30 June 2011, as notified by the (Increase)/decrease in grant receivable 244 (6,260) Queensland Treasury Corporation, was $1,160,558,632 (2010: $666,551,090). The Queensland (Increase)/decrease in prepayments/other (25) (3) Treasurer has approved a borrowing allocation of $501 million for the SEQ Water Grid Manager Increase/(decrease) in trade creditors (49,533) (46,854) under the 2011–12 State Borrowing Program. Increase/(decrease) in accrued employee benefits 416 54 Increase/(decrease) in GST payable (107) 61 18. Other liabilities Increase/(decrease) in other payables - - 2011 2010 Net cash from operating activities (454,539) (317,350) $’000 $’000 Current 20. Financial instruments Leasehold improvement 184 102 Lease incentive 10 - (a) Categorisation of financial instruments Total 194 102 The SEQ Water Grid Manager has the following categories of financial assets and financial liabilities:

Non-current 2011 2010 Leasehold improvement 845 571 Category Notes $’000 $’000 Lease incentive 209 - Total 1,054 571 Financial assets Cash and cash equivalents 10 1,085 12,577 Trade and other receivables 11 78,724 59,836 Other current assets 12 48 23 Total 79,857 72,436

Financial liabilities Trade and other payables 15 13,598 63,343 Other financial liabilities 17 1,143,233 649,112 Other liabilities 18 1,248 673 Total 1,158,079 713,128

(b) Financial risk management The SEQ Water Grid Manager’s activities expose it to financial risks – interest rate risk, credit risk, liquidity risk and market risk.

ANNUAL REPORT 2010–11 | 79

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

Financial risk is managed pursuant to Government and the SEQ Water Grid Manager’s financial policies. These policies seek to minimise potential adverse effects on the financial performance of the SEQ Water Grid Manager.

All financial risk is managed by the Chief Executive Officer under policies approved by the board.

The SEQ Water Grid Manager measures risk exposure using a variety of methods as follows:

Risk exposure Measurement method Credit risk Ageing analysis, earnings at risk Liquidity risk Maturity analysis Market risk Interest rate sensitivity analysis

(c) Credit risk exposure Credit risk exposure refers to the situation where the SEQ Water Grid Manager may incur financial loss 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 assets is the gross carrying amount of those assets inclusive of any provisions for impairment.

The following table represents the SEQ Water Grid Manager’s maximum exposure to credit risk based on contractual amounts net of any allowances:

Maximum exposure to credit risk 2011 2010 Category Notes $’000 $’000 Financial assets

Cash and cash equivalents 10 1,085 12,577 Trade and other receivables 11 78,724 59,836 Other current assets 12 48 23 Total 79,857 72,436

No collateral is held as security and no credit enhancements relate to financial assets held by the SEQ Water Grid Manager.

No financial assets or financial liabilities have been offset and presented net in the statement of financial position.

The method for calculating any provisional impairment for risk is based on past experience, current and expected changes in economic conditions and changes in client credit ratings. There is no impairment loss to be recognised for 2011.

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

Ageing of past due but not impaired financial assets are disclosed in the following table:

80 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

2011 financial assets due but not impaired Contractual repricing/maturity date Less More Not than 30 30 – 60 61 – 90 than 90 overdue days days days days Total $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Trade and other 72,672 6,034 - - 18 78,724 receivables Total 72,672 6,034 - - 18 78,724

2010 financial assets due but not impaired Contractual repricing/maturity date More Not Less than 30 – 60 61 – 90 than 90 overdue 30 days days days days Total $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Trade and other receivables 53,497 13 6,260 - 66 59,836 Total 53,497 13 6,260 - 66 59,836

(d) Liquidity risk Liquidity risk refers to the situation where the SEQ Water Grid Manager may encounter difficulty in meeting obligations associated with financial liabilities.

The SEQ Water Grid Manager is exposed to liquidity risk in respect of its payables and borrowings from the Queensland Treasury Corporation for operational funding. Borrowings are accessed through a Queensland Treasury Corporation Client Specific Pool Facility and Working Capital Facility.

The SEQ Water Grid Manager manages its liquidity risk through the use of a liquidity management strategy. This strategy aims to reduce the exposure to liquidity risk by ensuring the SEQ Water Grid Manager has sufficient funds available to meet employee and supplier obligations as they fall due. This is achieved by ensuring appropriate levels of cash are held in the bank account so as to match the expected duration of the various employee and supplier liabilities. The Queensland Government has confirmed its continued financial support of the SEQ Water Grid Manager, through the provision of access to debt funding. The SEQ Water Grid Manager has received a letter from the Treasurer supporting the future cash flow requirements of the organisation.

The following table sets out the liquidity risk of financial liabilities held by the SEQ Water Grid Manager. It represents the contractual maturity of financial liabilities, calculated based on cash flows relating to the repayment of the principal amount outstanding at balance date.

ANNUAL REPORT 2010–11 | 81

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

2011 Payable in Total Financial liabilities Notes < 1 year 1 – 5 years > 5 years $’000 $’000 $’000 $’000 Trade and other payables 15 13,598 - - 13,598 Queensland Treasury Corporation borrowings Client specific pool* 17 - - 1,521,193 1,521,193 Working capital 17 372 - - 372 Other liabilities 18 194 1,054 - 1,248 Total 14,164 1,054 1,521,193 1,536,411

2010 Payable in Total Financial liabilities Notes < 1 year 1 – 5 years > 5 years $’000 $’000 $’000 $’000 Trade and other payables 15 63,343 - - 63,343 Queensland Treasury Corporation borrowings Client specific pool* 17 - - 865,140 865,140 Working capital 17 244 - - 244 Other liabilities 18 102 408 163 673 Total 63,689 408 865,303 929,400

*Contractual undiscounted cashflows as at 30 June 2011 on Queensland Treasury Corporation borrowings. No repayments are currently being made on this debt and interest is capitalised. The weighted average borrowings rate for Queensland Treasury Corporation borrowings is 6.11% (2010: 6.10%).

(e) Market risk The SEQ Water Grid Manager does not trade in foreign currency and is not materially exposed to commodity price changes. The SEQ Water Grid Manager is exposed to interest rate risk through its borrowings from the Queensland Treasury Corporation and cash deposited in an interest bearing account. The SEQ Water Grid Manager does not undertake any hedging in relation to interest rate risk and manages its risk as per the liquidity management strategy.

Interest rate sensitivity analysis The following interest rate sensitivity analysis depicts the outcome to profit and loss if interest rates change by +/- 1 per cent from the year-end rates applicable to the SEQ Water Grid Manager’s financial assets and liabilities. With all other variables held constant, the SEQ Water Grid Manager would have a deficit and equity increase/(decrease) of $612,000 (2010: $325,000). This is mainly attributable to the SEQ Water Grid Manager’s exposure to variable interest rates on its borrowings from the Queensland Treasury Corporation.

82 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

2011 Interest rate risk Carrying 2011 Payable in Financial instruments -1% +1% Total amount Financial liabilities Notes < 1 year 1 – 5 years > 5 years Deficit Equity Deficit Equity $’000 $’000 $’000 $’000 Cash and cash equivalents 1,085 11 11 (11) (11) Trade and other payables 15 13,598 - - 13,598 Queensland Treasury Queensland Treasury Corporation borrowings Corporation borrowings Client specific pool* 1,142,851 (619) (619) 619 619 Client specific pool* 17 - - 1,521,193 1,521,193 Working capital 372 (4) (4) 4 4 Working capital 17 372 - - 372 (612) (612) 612 612 Other liabilities 18 194 1,054 - 1,248 Total 14,164 1,054 1,521,193 1,536,411 *The results of this sensitivity analysis are based on a portfolio modified duration of five years. The analysis has been performed on a net debt basis. The increase/decrease in interest cost is the result 2010 Payable in of periodic rebalancing over the year. Total Financial liabilities Notes < 1 year 1 – 5 years > 5 years $’000 $’000 $’000 $’000 Carrying 2010 Interest rate risk Trade and other payables 15 63,343 - - 63,343 Financial instruments amount -1% +1% Queensland Treasury Deficit Equity Deficit Equity Corporation borrowings Cash and cash equivalents 12,577 126 126 (126) (126) Client specific pool* 17 - - 865,140 865,140 Queensland Treasury Working capital 17 244 - - 244 Corporation borrowings Other liabilities 18 102 408 163 673 Client specific pool 648,858 (449) (449) 449 449 Total 63,689 408 865,303 929,400 Working capital 244 (2) (2) 2 2 Overall effect Potential *Contractual undiscounted cashflows as at 30 June 2011 on Queensland Treasury Corporation impact (325) (325) 325 325 borrowings. No repayments are currently being made on this debt and interest is capitalised. The weighted average borrowings rate for Queensland Treasury Corporation borrowings is 6.11% (2010: The SEQ Water Grid Manager’s sensitivity to interest rates has increased in the current period due to 6.10%). increased borrowings for operational requirements.

(e) Market risk (f) Fair value The SEQ Water Grid Manager does not trade in foreign currency and is not materially exposed to The fair value of monetary financial assets and financial liabilities, other than borrowings, is based on commodity price changes. The SEQ Water Grid Manager is exposed to interest rate risk through its market prices where a market exists, or is determined by discounting expected future cash flows by borrowings from the Queensland Treasury Corporation and cash deposited in an interest bearing the current interest rate for financial assets and liabilities with similar risk profiles. account. The SEQ Water Grid Manager does not undertake any hedging in relation to interest rate risk and manages its risk as per the liquidity management strategy. The fair value of trade receivables and payables is assumed to approximate their nominal value less estimated credit adjustments. Interest rate sensitivity analysis The following interest rate sensitivity analysis depicts the outcome to profit and loss if interest rates The carrying amounts of all financial assets and financial liabilities, except the borrowings from the change by +/- 1 per cent from the year-end rates applicable to the SEQ Water Grid Manager’s Queensland Treasury Corporation are representative of their fair value. financial assets and liabilities. With all other variables held constant, the SEQ Water Grid Manager would have a deficit and equity increase/(decrease) of $612,000 (2010: $325,000). This is mainly The fair value of borrowings is determined by reference to published price quotations in an active attributable to the SEQ Water Grid Manager’s exposure to variable interest rates on its borrowings market and reflects the value of the debt if the SEQ Water Grid Manager repaid it in full at balance from the Queensland Treasury Corporation. date. It is calculated using discounted cash flow analysis and the effective interest rate and is disclosed below.

ANNUAL REPORT 2010–11 | 83

SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11

2011 2010 Carrying Carrying Financial liabilities amount Fair value amount Fair value $’000 $’000 $’000 $’000 Financial liabilities at amortised cost: Queensland Treasury Corporation borrowings Client specific pool* 1,142,851 1,160,559 648,858 666,551 Working capital 372 372 244 244 Total 1,143,223 1,160,931 649,102 666,795

*The book value of Queensland Treasury Corporation borrowings as at 30 June 2011 is $1,142,850,735.

*The fair value of borrowings as at 30 June 2011 is $1,160,558,632 as advised by the Queensland Treasury Corporation. The fair value represents the true value of a debt at a relevant time and hence the repayment amount that would be required at that time to extinguish the debt.

21. Commitments

Non-cancellable operating lease Commitments under operating leases at the reporting date are inclusive of anticipated GST and are payable as follows:

2011 2010 $’000 $’000

Not later than one year 775 423 Later than one year and not later than five years 3,422 2,384 Later than five years 541 307 Total 4,738 3,114

Operating leases entered into as a means of acquiring access to office accommodation. Lease payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined.

There is an existing option of a five year renewal in relation to the operating lease.

Contractual commitments The SEQ Water Grid Manager has in place Grid Contracts with other State Government water entities for the provision of storage, treatment, transportation and manufacture of water. The SEQ Water Grid Manager is required to pay for services provided under these contracts for charges on capital assets, fixed operating costs, fixed corporate costs, variable operating costs and other allowable costs. Amounts payable for charges on capital assets may be payable in the event that the services are not required by the SEQ Water Grid Manager. The amount payable for this item in 2011–12 is yet to be determined by the responsible Minister.

84 | SEQ WATER GRID MANAGER

SEQ Water Grid Manager SEQ Water Grid Manager Notes to and forming part of the financial statements 2010–11 Notes to and forming part of the financial statements 2010–11

2011 2010 22. Going concern Carrying Carrying Financial liabilities amount Fair value amount Fair value These financial statements have been prepared on a going concern basis. The Queensland $’000 $’000 $’000 $’000 Government has confirmed its continued financial support of the SEQ Water Grid Manager, through Financial liabilities at amortised cost: the provision of access to funding necessary to meet any financial commitments and obligations Queensland Treasury incurred as a result of the institutional pricing structure, including any variation to funding Corporation borrowings requirements arising as a result of future price path reviews. This also includes interest and other Client specific pool* 1,142,851 1,160,559 648,858 666,551 costs capitalised over the ten-year price path. This commitment remains in place for the 2011–12 Working capital 372 372 244 244 financial year and over the duration of the pricing period. Total 1,143,223 1,160,931 649,102 666,795

*The book value of Queensland Treasury Corporation borrowings as at 30 June 2011 is $1,142,850,735.

*The fair value of borrowings as at 30 June 2011 is $1,160,558,632 as advised by the Queensland Treasury Corporation. The fair value represents the true value of a debt at a relevant time and hence the repayment amount that would be required at that time to extinguish the debt.

21. Commitments

Non-cancellable operating lease Commitments under operating leases at the reporting date are inclusive of anticipated GST and are payable as follows:

2011 2010 $’000 $’000

Not later than one year 775 423 Later than one year and not later than five years 3,422 2,384 Later than five years 541 307 Total 4,738 3,114

Operating leases entered into as a means of acquiring access to office accommodation. Lease payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined.

There is an existing option of a five year renewal in relation to the operating lease.

Contractual commitments The SEQ Water Grid Manager has in place Grid Contracts with other State Government water entities for the provision of storage, treatment, transportation and manufacture of water. The SEQ Water Grid Manager is required to pay for services provided under these contracts for charges on capital assets, fixed operating costs, fixed corporate costs, variable operating costs and other allowable costs. Amounts payable for charges on capital assets may be payable in the event that the services are not required by the SEQ Water Grid Manager. The amount payable for this item in 2011–12 is yet to be determined by the responsible Minister.

ANNUAL REPORT 2010–11 | 85 Management certificate of the SEQ Water Grid Manager

These general purpose financial statements have been prepared pursuant to section 62(1) of the Financial Accountability Act 2009 (the Act), relevant sections of the Financial and Performance Management Standard 2009 and other prescribed requirements. In accordance with section 62(1)(b) of the Act we certify that in our opinion:

(a) The prescribed requirements for establishing and keeping the accounts have been complied with in all material respects.

(b) The financial statements have been drawn up to present a true and fair view, in accordance with prescribed Accounting Standards, of the transactions of the SEQ Water Grid Manager for the financial year ended 30 June 2011 and the financial position of the SEQ Water Grid Manager as at 30 June 2011.

Joanne Collins Gary Humphrys Director, Finance and Corporate Services Chair SEQ Water Grid Manager SEQ Water Grid Manager Date Date

86 | SEQ WATER GRID MANAGER ANNUAL REPORT 2010–11 | 87 88 | SEQ WATER GRID MANAGER Glossary

Alkalinity Total measure of the acid-neutralising compounds within water .

Australian Drinking Water Developed by the National Health and Medical Research Council Guidelines 2004 in collaboration with the Natural Resource Management Ministerial Council . The Australian Drinking Water Guidelines 2004 incorporates the Framework for the Management of Drinking Water Quality and provides the Australian community and the water supply industry with guidance on what constitutes good quality drinking water . We measure water quality provided to our customers against these Guidelines .

Balanced scorecard Process of managing and measuring operational performance considering all aspects of service delivery, including operational efficiency, provision of water security, customers and stakeholders, and culture and systems .

Bulk water Water supplied from dam, desalination and recycled sources by a Grid Service Provider to the SEQ Water Grid Manager for sale to Grid Customers .

Conductivity Electrical conductivity (often shortened to ‘conductivity’) is a measurement used to approximate the concentration of total dissolved solids in water . Refer to total dissolved solids .

Desalinated water Salt water converted to drinking water through a process involving reverse osmosis membranes .

Distributor-Retailer Entities Local government level organisations responsible for distribution of water supplies to customers, replacing previous individual council management of this function .

Distribution Service Provider A person or organisation who distributes water supplied by a declared Water Service Provider, to a customer .

ANNUAL REPORT 2010–11 | 89 E. Coli A bacterial species found in the gut of warm blooded animals that can be detected in the water supply .

Fluoride A chemical ion added to the water supply to reduce tooth decay .

Grid Customer A person or organisation that purchases water supplied by a declared water service from the SEQ Water Grid Manager and is registered as a Grid Customer under the Market Rules .

Grid Instructions Directions issued by the SEQ Water Grid Manager to optimise SEQ Water Grid operating performance and water supply security .

Grid Participant A Grid Service Provider, Grid Customer or Distribution Service Provider .

Grid Service Provider The Queensland Bulk Water Supply Authority trading as (Seqwater), the Queensland Bulk Water Transport Authority trading as LinkWater and the Queensland Manufactured Water Authority trading as WaterSecure, who supply declared water services to the SEQ Water Grid Manager and are registered as Grid Service Providers under the Market Rules .

Hardness 'Hard' water is caused primarily by the presence of dissolved calcium and magnesium salts .

LinkWater Queensland Government statutory authority responsible for the management, operation and maintenance of potable bulk water pipelines and related infrastructure throughout South East Queensland .

Metals Elements including copper, lead, manganese, aluminium and iron dissolved into the water from metal pipes .

Mega litres One million litres . pH Measures the strength of an acid or base in water .

Purified recycled water Wastewater that has been purified to a standard that is ready for consumption under the Australian Drinking Water Guidelines 2004 .

Raw water Raw water that has not yet been treated by a Grid Service Provider .

Rules Administrator The Queensland Water Commission has been appointed as the Rules Administrator for the purposes of the Market Rules .

SEQ South East Queensland .

Seqwater South East Queensland’s bulk water supply provider, delivering innovative and efficient management of catchments, water storages and treatment services, to ensure the quantity and quality of the region’s water supplies .

90 | SEQ WATER GRID MANAGER SEQ Water Grid The SEQ Water Grid is a network of treatment facilities and existing pipelines . It moves water from selected sources across the region to where it is needed most .

SEQ Water Grid Manager Queensland Government statutory authority responsible for managing the strategic operation of the SEQ Water Grid . The SEQ Water Grid Manager holistically manages the water supply chain and capacity to deliver water to Grid Customers, maintaining regional water security for the South East Queensland community .

Total dissolved solids Measures the combined content of all inorganic and organic substances, including salt, contained in water in molecular, ionized or micro-granular suspended form .

Total trihalomethanes Chemical compounds present in drinking water, principally as the result of disinfection using chlorination . Chlorine, when added to water, can react with naturally occurring organic material to produce trihalomethanes .

Treated water Water that has undergone a cleansing process to a standard that is ready for consumption under the Australian Drinking Water Guidelines 2004 .

Turbidity Fine, suspended particles present in water, including natural matter such as clay, silt, plankton and other microscopic organisms . Can make water appear “cloudy” or “hazy” .

WaterSecure Queensland Manufactured Water Authority, supplying a new source of water to South East Queensland through its desalination plant and water recycling scheme .

Water security Management of the water supply to meet the demands of current and future population growth and climate change across the South East Queensland region .

Water Service Provider Owner of infrastructure related to water storage, treatment or supply as drinking water, including dam, recycled and desalinated raw water sources .

Water transfers Moving water around the SEQ Water Grid .

Whole-of-Grid Whole-of-Grid refers to the collaboration of the organisations with unique functions that complement each other in providing the SEQ Water Grid .

ANNUAL REPORT 2010–11 | 91 Notes

92 | SEQ WATER GRID MANAGER Copyright

©The State of Queensland. SEQ Water Grid Manager 2011. Copyright protects this publication. Except for purposes permitted by the Copyright Act, reproduction by any means (photocopying, electronic, mechanical, recording or otherwise) is prohibited without the prior written permission of the Chief Executive Officer, SEQ Water Grid Manager, PO Box 16205, City East, Queensland 4002.

ANNUAL REPORT 2010–11 | 93 Level 5 53 Albert Street, Brisbane QLD 4000 PO Box 16205, City East QLD 4002

Tel: +61 7 3247 3012 Fax: +61 7 3405 0373 www .seqwgm .com .au