2019-20 ANNUAL REPORT

our water our customers healthy living Traditional Owners Acknowledgement Central Highlands Water acknowledges the Traditional Owners/Peoples of the land on which we operate including Dja Dja Wurrung, Wadawurrung, Wurrundjeri Woi Wurrung, Tjap Wurrung, and Wotjobaluk, Jaadwa, Jadawadjali, Wergaia and Jupagulk Peoples. We pay our respect to the Elders of these communities past, present and emerging, acknowledging that they have been custodians of land and water for many centuries and that their continuing culture and contribution is important to the life of the region.

Service area

Navarre

Redbank

Havelock Timor Landsborough Bowenvale

Alma Maryborough Centenary Reservoir Tullaroop Sugarloaf Avoca Reservoir Reservoir Craigie Lead Daisy Hill Dam Majorca

Amphitheatre Talbot

Talbot Reservoir Lexton Lexton Evansford Reservoir Reservoir Clunes Hepburn Springs Smeaton Hepburn Reservoir Raglan Daylesford Kingston Broomfield Bullarto Reservoir Wombat Learmonth Newlyn Beaufort Lake Creswick Reservoir Learmonth Cosgrave Reservoir Dean Burrumbeet Miners Rest Dean Blackwood Lake White Swan Reservoir Burrumbeet Reservoir Wilsons Moorabool Reservoir Reservoir Colbrook Gong Gong Reservoir Reservoir Kirks Wallace Bungaree Haddon Reservoir Gordon

Snake Valley Ballan Lal Lal Reservoir Pittong Buninyong Scarsdale Napoleons Skipton Linton

Enfield

Dereel 0 4.75 9.5 19 Kilometres

Corindhap LEGEND Rokewood Water pipeline Recycled water Wastewater treatment plant Water treatment plant Major road Lake and reservoir Water district Sewer district

2 About this report Contents This annual report details Central Highlands Water’s operational and financial performance during 2019-20. Traditional Owners Acknowledgement 2 It has been prepared in accordance with the relevant Service area map 2 Ministerial Reporting Directions, Financial Reporting About this report 3 Directions and Financial Reporting Direction FRD30D – Standard Requirements for the Publication of Annual The Corporation 3 Reports. This stipulates the specifications for design, print Responsible Body Declaration 3 and stock selection to ensure minimisation of cost and environmental impact. PART 1 THE YEAR IN REVIEW The Corporation About Us 6 Central Highlands Region Water Corporation is a statutory Message from our Chair and Managing Director 7 body and is one of 19 state-owned water businesses in At a Glance 8 operating under the guidance of the Water Act Urban Water Systems Serviced by CHW 8 1989 (Vic). We operate in accordance with a Statement of Obligations issued by the Minister for Water, pursuant to the Summary of Financial Results 9 Water Industry Act 1994 (Vic). Central Highlands Water’s Strategic Framework 10 Board reports to the Minister for Water via the Department of Environment, Land, Water and Planning (DELWP). Our pricing Key Initiatives and Projects 11 and service standards are regulated by the Essential Services Key Priorities – Letter of Expectations 12 Commission (Victoria’s economic regulator of prescribed essential utility services). PART 2 CORPORATE REPORT 19 The Minister responsible for Central Highlands Water for the period 1 July 2019 to 30 June 2020 was The Hon. Lisa Neville PART 3 WATER CONSUMPTION MP, Minister for Water. AND DROUGHT RESPONSE 30

PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 33 Responsible Body Declaration In accordance with the Financial Management Act PART 5 PERFORMANCE REPORT 43 1994, I am pleased to present Central Highlands Victorian Auditor-General’s Report (VAGO) 46 Water’s Annual Report for the year ending 30 June 2020. PART 6 FINANCIAL REPORT 48 Comprehensive Operating Statement 48 Balance Sheet 49 Statement of Changes in Equity 50 Cash Flow Statement 51 Dr Jeremy Johnson AM Notes to the Financial Statements 52 Chair Central Highlands Region Water Corporation Accountable Officer's and Chief Finance and Accounting Officer's Declaration 87 Victorian Auditor-General’s Report (VAGO) 88 30 October 2020 PART 7 DISCLOSURE INDEX 90

Additional copies ISSN: 2203-9503 (Print) This annual report is available for viewing or download from ISSN: 2203-9511 (Online) Central Highlands Water’s website, www.chw.net.au © State of Victoria, Central Highlands Water 2020. To minimise our impact on the environment, we print limited numbers of This publication is copyright. No part may be reproduced by any process this report and we encourage you to view this report online. If you require except in accordance with the provisions of the Copyright Act 1968. any additional printed copies, please contact Central Highlands Water at: This report has been printed on ecoStar 100% recycled stock. Email: [email protected] Phone: 1800 061 514 Cover image: Moorabool Falls, Michael Dwyer (Project Manager Capital Post: PO Box 152 Ballarat Vic 3353 Delivery) Ballarat South Wastewater Treatment Plant Solar Installation, In person: 7 Learmonth Rd Wendouree Vic 3355 Ballarat Begonia Festival February 2020 Water Cycle Installation, Jenna ABN: 75 224 340 348 Cashmore (Laboratory Signatory Biologist) Algae Identification.

Central Highlands Water 2019-20 Annual Report 3 Ballarat North Wastewater Treatment Plant solar array 4 PART 1 THE YEAR IN REVIEW Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 5 PART 1 THE YEAR IN REVIEW

ABOUT US

Our Vision Our core functions are: Our Water, Our Customers, Healthy Living Water supply Our Mission • collect, store, treat, transfer and distribute water • manage and protect the water supply system Together, we provide quality water and wastewater services, • identify current and future water needs safely, efficiently and sustainably to communities in the Central Highlands Region. • develop and implement programs for the conservation and efficient use of water Our Values • educate the public about the water supply Integrity Sewerage Teamwork • efficient collection, transfer, treatment and Leadership disposal of sewage Care • identify current sewerage needs and plan for future needs Central Highlands Water (referred to as CHW or the Corporation in this report) is a regional water corporation • develop and implement programs for the recycling and providing drinking water, sewerage, trade waste and recycled reuse of treated wastewater water services to customers throughout the Central • investigate, promote and conduct research into the Highlands Region of Victoria. provision of sewerage services Our region Trade waste • partner with industrial and commercial customers and CHW services a large geographical region of 9,275 square the community to provide environmentally friendly kilometres and manages 15 distinct water supply systems operating systems for the delivery, treatment and disposal and 13 wastewater systems in the local government areas of of trade waste Ballarat, Central Goldfields, Golden Plains, Hepburn, Pyrenees, Northern Grampians, Moorabool and Corangamite. Recycled water Our services Provide recycled water that supports us to: • reduce demand on our water catchments We provide water supply and sewerage services through 72,128 water supply connections and 62,475 wastewater • help us save a significant amount of drinking water service connections to 152,273 residents throughout the • reduce the amount of wastewater discharged to Central Highlands region. Throughout 2019-20, significant regional waterways customer and community engagement occurred to enable • provide a safe, alternative water source for gardening, CHW to gain a better understanding of our customers’ irrigation of public parks, golf courses, sporting ovals and needs and expectations, and to assist in planning services recreational lakes. for the future. CHW performs these functions in an environmentally sound way, recognising the need to preserve landscape, fauna and flora.

6 PART 1 THE YEAR IN REVIEW MESSAGE FROM OUR CHAIR AND MANAGING DIRECTOR

On behalf of the Central Highlands Water (CHW) Board welcomed over 60,000 visitors. We were also the major and our staff, we are pleased to present the community partner of the Ballarat International Foto Biennale, 2019-20 Annual Report on our operations to Government, an international event which ran from August to October 2019 our customers, communities and key stakeholders. and showcased our own CHW exhibition, Waterworks. Traditional Owners Acknowledgement Continuing customer focus In opening, we wish to acknowledge the Traditional Owners/ Reaffirming our customer focus has been a key strategy Peoples of the land on which we operate including Dja Dja throughout the year and we have initiated and trialled a range Wurrung, Wadawurrung, Wurrundjeri Woi Wurrung, Tjap of new initiatives we believe will continue to improve our Wurrung, and Wotjobaluk, Jaadwa, Jadawadjali, Wergaia and customers’ experience moving forward. These have included Jupagulk Peoples. a more user-friendly website, incorporating improved online functionality, such as Live Chat, and an online developer We look forward to continuing the positive relationships we consent platform. These online tools have become even have developed with Traditional Owners and Aboriginal And more important as we move through the COVID-19 pandemic. Torres Strait Islander Peoples as we continue to implement our We continue to engage and work closely with local land Reflect Reconciliation Action Plan and work towards finalising developers on a range of important matters. and implementing our Innovate Reconciliation Action Plan. In addition to the above, and as part of our pandemic COVID-19 response response, we have put in place a number of support services for small businesses and vulnerable customers in our region. 2019-20 has been an unprecedented year, not just for CHW CHW is an active member of the Network Coordination Group, but across the wider community. As we moved out of the collaborating with local community services on projects summer period, coronavirus (COVID-19) started to impact our such as Pocket Full of Help, supporting our most vulnerable region and business. A rapid response was required in order community members. Our annual Care Flow forum with the to manage the evolving public health situation. Protection of network group was revised to a digital event due to COVID-19 team members, families and communities were, and remain, and held via Zoom on 15 July. Our Customer Care team also paramount as we move through these difficult times. It is visited over 40 customers in their homes to offer support pleasing to note however, that the systems and processes between July 2019 and March 2020. put in place have enabled the ongoing supply of essential water and sewer services to all of our 15 supply systems. We would also like to thank our key stakeholders, especially the Leading health and safety Department of Environment, Land, Water and Planning for Internally, our business has also continued to focus on health their support and guidance through this difficult time. and safety under the banner ’It’s everyone’s priority’. Through our Learn Lead Grow leadership program, we communicated Downward pressure on customer bills new ways of leading to our team members as well as ways to support our business with a customer focus. In relation to As we move into year three of our five-year pricing plan, we health and safety, it is pleasing to see that our workplace safety can report that for the seventh year in a row, the average performance is trending towards our target of zero harm. customer bill has declined in real terms. This outcome will continue in the remaining years of this plan. Thank you to all Maintaining downward pressure on customer bills, while In conclusion, we would like to thank our Board members for catering for increased customer growth, has remained an their guidance throughout the year and recognise all of our staff important part of our evolving business model during the for their commitment as we, together with our communities, COVID-19 pandemic. As just, our business has had to be agile have worked through this extremely difficult time. It has been in how we address day-to-day situations. encouraging to see the adapted plans and actions we have collectively implemented, to allow CHW to continue to supply Major investment in our communities essential water and wastewater services on a daily basis. As part of our commitment to service provision during 2019-20, CHW invested $30.3 million across the region to build new, and replace ageing, water and sewer assets. Key projects, such as the replacement of 11.6 kilometres of the Evansford Reservoir to Maryborough raw water pipeline, and a new 140 megalitres storage at Ballan Wastewater Treatment Plant, will continue to support the provision of reliable water and wastewater services. In addition, the commissioning of five behind-the-meter solar power installations at White Swan and Lal Lal Reservoirs and Ballarat North and Ballarat South Wastewater Treatment Plants are major projects that will assist CHW to reach its target of a minimum 20% reduction in greenhouse gas emissions by 2025. Similarly, we remain strongly committed to our community members and continue to foster opportunities to engage with them. In 2020 we were again the major community partner Dr Jeremy Johnson AM Paul O’Donohue of the Ballarat Begonia Festival, a three day event which Chair Managing Director

Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 7 AT A GLANCE

152,273 $118.6 M $1.177 B 186.10 total population current operating value of infrastructure, property, full-time equivalent serviced revenue plant and equipment employees 30 13 34 17 47 reservoirs diversion groundwater bulk water service basins weirs bores entitlements held and tanks 15,654 ML 2,551 KM 15 41 total water of water water treatment water pumping supply volume mains plants stations 66,374 12,014 ML 1,478 KM 13 residential water of wastewater of sewer wastewater connections treated mains treatment plants 103 62,475 5,754 1,116 ML 22 wastewater wastewater non-residential effluent irrigated major trade pump stations connections water connections to land waste customers

URBAN WATER SYSTEMS SERVICED BY CHW

Size, based on Name of water Communities provided Communities provided with approximate supply system with water supply sewerage service number of water supply connections Greater than Ballarat Ballan, Ballarat and immediate suburbs, Ballan, Ballarat and immediate suburbs, 1,000 connections Bungaree, Buninyong, Cardigan Village, Buninyong, Cardigan Village, Creswick, Corindhap, Creswick, Dereel, Enfield, Gordon, Enfield, Gordon, Miners Rest, Skipton, Haddon, Linton, Miners Rest, Mount Egerton, Smythesdale, Snake Valley Napoleons, Rokewood, Scarsdale, Skipton, Smythesdale, Snake Valley, Wallace Maryborough Alma, Bet Bet, Carisbrook, Daisy Hill, Maryborough, Carisbrook Majorca, Maryborough, Talbot Daylesford Daylesford, Hepburn Daylesford, Hepburn 500 – 1,000 Clunes Clunes Clunes connections Beaufort Beaufort, Raglan* Beaufort Avoca Avoca Avoca Forest Hill Allendale, Broomfield, Newlyn, Kingston, N/A Smeaton, Springmount 100 – 500 Blackwood Barry’s Reef, Blackwood N/A connections Lexton Lexton N/A Landsborough Landsborough, Navarre N/A Waubra Waubra Waubra Learmonth Learmonth Learmonth Less than Amphitheatre Amphitheatre* N/A 100 connections Redbank Redbank* N/A Dean Dean N/A

Note: * Regulated (non-drinking water) supply

8 PART 1 THE YEAR IN REVIEW SUMMARY OF FINANCIAL RESULTS

2015-16 2016-17 2017-18 2018-19 2019-20 $'000 $'000 $'000 $'000 $'000

Core business revenue 93,073 94,433 101,640 108,537 109,013

Government contributions 2,091 452 650 234 91

Other revenue 4,375 4,700 5,014 6,534 9,476

Total revenue 99,539 99,584 107,304 115,305 118,580

Operating expenditure 47,318 48,561 49,896 55,493 55,332

Depreciation expenditure 21,744 23,173 23,701 24,235 25,248

Finance costs 10,288 9,770 8,965 8,252 7,393

Other expenditure 5,771 6,221 6,901 8,019 7,957

Total expenditure 85,121 87,725 89,463 95,999 95,930

Net result before tax 14,418 11,859 17,841 19,306 22,650

Current assets 33,430 31,183 27,779 28,089 26,289

Non-current assets 1,166,717 1,174,411 1,185,628 1,203,056 1,221,928

Total assets 1,200,147 1,205,594 1,213,407 1,231,145 1,248,217

Current liabilities 28,964 31,777 36,165 39,082 36,291

Non-current liabilities 243,561 237,896 228,838 230,150 234,159

Total liabilities 272,525 269,673 265,003 269,232 270,450

Net cash flows from operations 25,437 28,702 32,750 30,039 36,090

Payments for property, plant and equipment (including infrastructure) 15,182 20,699 22,985 27,643 27,393

Explanation for the summary of Financial management compliance financial results attestation statement CHW continued to perform strongly in 2019-20 delivering I, Jeremy Johnson, on behalf of the Board, certify that the a profit before tax of $22.7 million, an increase of 17% on Central Highlands Region Water Corporation has no Material the prior year. The 2019-20 year provided one of the most Compliance Deficiency with respect to the applicable challenging periods for CHW in responding to the global Standing Directions of the Assistant Treasurer under the COVID-19 pandemic, while continuing to deliver services Financial Management Act 1994 and Instructions. to customers and the community. There has been no material financial impacts during 2019-20 with an increase to doubtful debt provisions the only impact of note. A wet autumn saw water volume revenue reduce on the prior year. Strong population growth continues to drive revenue higher in terms of both increased demand and non-cash gifted assets. Temporary water sales were also higher. There was a Dr Jeremy Johnson AM flattening of costs in service delivery expenses particularly in Chair network costs, the overall result delivered an ongoing strong Central Highlands Region Water Corporation cash position. After funding a significant capital investment program total debt was reduced by $5.6 million. There were no significant changes or factors which changed our financial 30 October 2020 position during the reporting period.

Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 9 STRATEGIC FRAMEWORK

OUR VISION OUR WATER, OUR CUSTOMERS, HEALTHY LIVING OUR MISSION Together, we provide quality water and wastewater services, safely, efficiently and sustainably to communities in the Central Highlands region. OUR VALUES Integrity Teamwork Leadership Care STRATEGIC PILLARS

SUSTAINABLE CUSTOMER AND AGILE BUSINESS SAFETY AND ENVIRONMENT AND COMMUNITY MODEL OUR PEOPLE WATER RESOURCES We will engage and We will continually We will continue to We will ensure our act on the voice of evolve our business develop a collaborative, community has our customers to model to provide the safe and fair workplace sufficient water deliver exceptional most efficient and team capable of resources to live and experiences. effective 24/7 service. meeting all future invest with confidence challenges. while improving environmental outcomes. BOARD SUB- Sustainability Committee Customer & Community Audit & Risk Committee People, Culture & Safety Partnerships Committee Committee COMMITTEES KEY COMMITMENTS STATEMENT OF • Planning • Customer and • Price submission • Risk management OBLIGATIONS • Water services community engagement • Governance • Emission reduction • Compliance WATER FOR • Climate change • Customer and • Financial sustainability • Leadership and culture VICTORIA • Resilient and liveable community • Health and safety cities and towns • Aboriginal values • Recreational values CUSTOMER • Reliable and sustainable • Better customer • Increased value for • Safety OUTCOMES water and sewer systems experience money • Safe clean drinking water that tastes great • More efficient water use STRATEGIC • Drinking water quality • Customer needs • Financial sustainability • Health and safety RISKS (THREATS) • Climate change • Cyber and security threat • Infrastructure • Governance and sustainability compliance • Environmental impacts STRATEGIC RISKS • Environmental • Business transformation • Dynamic business model • People and culture (OPPORTUNITIES) regeneration • Partnerships and stakeholders SUPPORTING THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS

10 PART 1 THE YEAR IN REVIEW KEY INITIATIVES AND PROJECTS

SUSTAINABLE CUSTOMER AND AGILE BUSINESS MODEL SAFETY AND ENVIRONMENT AND COMMUNITY (see Part 6) OUR PEOPLE WATER RESOURCES (see Parts 1, 2 and 5) (see Parts 1 and 2) (see Parts 1, 3, 4 and 5)

• Ongoing delivery of safe water and • Preparations for our Innovate • Developed partnership with • Development of new five-year wastewater services Reconciliation Action Plan Barwon Asset Solutions to provide People, Culture and Safety • Updated the CHW Sustainability • Ongoing meetings with Customer 24/7 customer response services strategy Framework Advisory Panel • Kept all price rises to CPI or below • Recommitted to ‘zero harm’ vision • Installation of five solar energy • Improvements to Learmonth, in 2019-20 for all interactions with our people, panel arrays across four treatment Waubra and Clunes water supplies • Met all financial KPIs customers, public and contractors plant sites following period of community • Harmonised Board and sub- • Conducted year one of the • Continued participation in Large engagement committee KPIs Learn Lead Grow leadership Scale Renewable Energy Project • Continued investment in • Maintained ‘A’ credit rating development program (Zero Energy Water Inc) Customer Experience program • Developed Social Procurement • Ongoing development of • Refreshed the Climate Adaptation • Continued participation in the ESC Strategy to assist disadvantaged workplace culture, including a Action Plan robocall Customer Satisfaction sectors of the local community Leadership Maturity Assessment • Contributed to DELWP’s water Survey with results steadily • Organised TCV briefings within • Ongoing implementation of resource strategic planning improving business diversity and inclusion initiatives initiatives • Continued investment in digital • Invested $30.3m in capital • Continued journey from • Continued to Chair the Central transformation program with improvements and programs ‘calculative’ OH&S culture towards additional online forms created ‘transformative’ culture Highlands Integrated Water • Supported the GovHack Management Forum • Launched new website with innovation event • Continued with workplace safety • Worked with a range of improved functionality and groups to implement six key customer focus, including Live Chat • Facilitated creation of Incident workplace projects stakeholders to develop a number Management Team to manage of regional integrated water • My Services portal developed response to COVID-19 pandemic • Introduction of Life Saving Rules management projects to manage online consent across the business applications • Undertook scenario planning of • Began implementation of a potential future operating states • Appointment of new Senior Safety number of initiatives from the • Ongoing support of vulnerable under COVID-19 uncertainties Lead role Recreational Assets Master Plan customers • Identified COVID-19 business • Implemented safe working • Continued to maintain and provide • Ongoing implementation of specific risks and created procedures in response to public access to 12 accessible Community Amenity Plan additional controls/actions to COVID-19 pandemic water storages and three reservoir • Supported the Ballarat Begonia mitigate • Undertook detailed risk parks Festival as Community Partner • Conducted desk top exercises to assessment in relation to • Installed new groundwater bore • Major Community Partner to the build capability in the event of a COVID-19 incident and tank at Learmonth Football 2019 Ballarat International Foto positive COVID-19 case • Conducted two staff Pulse Ground Biennale • Conducted financial modelling Surveys in response to the • Participation in Water Research • Supported Energy Breakthrough to determine potential impact COVID-19 disruption Australia international research at Maryborough of various scenarios upon our • Ongoing support and project re incidence of COVID-19 • Delivered a range of school customers and the business development of programs for staff markers in sewage inflows education programs including • Provided business continuity during the COVID-19 disruption, • Ongoing participation in a number financial support for schools to and ICT support services during including leave provisions, flexible of research projects in partnership participate in the Schools Water COVID-19 during the transition to working approaches, FAQs, with Federation University Efficiency Program (SWEP) working from home counselling, one-on-one coaching and regular newsletters • Successfully met the Department • Delivered a range of • IPS Billing Enhancement Project of Health and Human Services communication campaigns to delivered improved billing • Participation in the VPS People (DHHS) Safe Drinking Water Act assist and advise customers efficiencies and customer Matters workplace survey Compliance Audit by an external • Conducted Developer Forums outcomes • Water Industry Operators and accredited auditor regarding issues of OH&S and • Developed a 12-month 2020-21 Association of Australia (WIOA) • CHW Laboratory maintained its compliance Corporate Plan in accordance with award for Operator of the Year – NATA accreditation • Installed three new Choose Tap DELWP guidelines Lee Marshall drinking fountains at Maryborough • Continued to provide community support through the Customer Rebate Program and the Community Housing Retrofit Program

CAPITAL EXPENDITURE FUTURE PLANNING • Investing $130 million over five years to upgrade and improve 2020-21 projected outcomes infrastructure and to better secure and deliver high quality water and • CPI (inflation rate): 2.2% wastewater services. • Water access fees reduced by 4.4% • Delivered $30.3 million of capital works in 2019-20. Some of the key • Water volume fee increased by CPI only 2.2% projects delivered include: • Wastewater access fee reduced by 0.5% – Greenhouse gas reduction initiatives: $5.2 million • Average household cost reduced by 0.5% – Ballarat South Wastewater Treatment Plant upgrade works: $1.8 million • Capital expenditure proposed: $26.5 million – Water main renewals: $1.9 million – Sewer main renewals: $1.4 million – Operational and passenger fleet replacement program: $0.5 million – White Swan Dam Safety works: $0.1 million – Evansford Reservoir raw water pipeline replacement: $1.7 million – Website and online functionality: $0.8 million

Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 11 KEY PRIORITIES – LETTER OF EXPECTATIONS

This section reports on the Victorian Government’s to use the IAP2 framework in consultation programs with key priorities for the water sector per MRD07 Letter of local communities, undertaking the following activities and Expectations: initiatives during 2019-20. 1. Climate change New engagement programs 2. Customer and community outcomes • Customer Advisory Panel 3. Water for Aboriginal cultural, spiritual and economic values – A new Customer Advisory Panel was established in 2019. 4. Resilient and liveable cities and towns This panel includes representatives from local government, 5. Recognising recreational values local welfare support agencies, major customers, education sector, regional development, Traditional Owner groups 6. Leadership and culture and individual community members. The Customer 7. Financial sustainability Advisory Panel's purpose is directly aligned to the CHW strategic pillar ‘Customer and Community’. Leading, 1. Climate Change influencing, educating and engaging key stakeholders and the community will be crucial to achieving long-term water CHW continues to recognise climate change as presenting a security. Working to actively strengthen relationships to strategic risk in relation to its business operations and delivery positively influence decision making at all levels remains of services. Accordingly, CHW has committed to undertake a vital. In 2019-20, the panel met three times, and once range of activities that mitigate climate change and adapt to virtually, during the COVID-19 pandemic. climate change and variability. • Stakeholder Engagement Plan E2: Emission reduction – CHW communicates with a wide range of internal and CHW committed to an Emission Reductions Pledge in March external stakeholders in every aspect of its operations. To 2017 in support of Victoria’s target of zero net emissions by continually derive meaningful stakeholder engagement, 2050. This pledge commits to a minimum 20% reduction in strengthen relationships and reputation, as well as deliver carbon emissions (relative to CHW’s 2011-12 to 2015-16 on core programs and services, a strategic and consistent emissions baseline) by 2024-25. CHW will achieve its approach to stakeholder engagement is essential. emissions reduction target through a combination of In 2019, to support the Communications and Engagement investment in behind-the-meter solar generation, operational Strategy, a Stakeholder Engagement Plan was created optimisation and a Power Purchase Agreement (PPA) with through validating strategic and operational stakeholders, Zero Emissions Water Ltd. their needs, expectations and lifecycle. • Small-Town Water Quality Program E3: Climate adaptation – As part of the PR18 commitments for the 2018-23 period, To ensure CHW’s resilience to future climate impacts and to a community engagement program was conducted with take advantage of related opportunities, CHW has developed the small-town communities of Learmonth and Waubra a Climate Change Adaptation Plan (CCAP). The CCAP aims to collaboratively investigate potential water quality to manage climate change risks to CHW and enhance CHW’s improvements. These programs were a great success with ability to carry out its statutory functions and meet the needs future improvement pathways identified and endorsed by of its customers and shareholders now and into the future. the community. In 2019-20, we continued the small-town The CCAP is aligned with the Water Services Association of engagement activities with the above towns as well as Australia’s Climate Change Adaption Guidelines and supports in Clunes, where residents have discussed the aesthetic CHW’s objectives to: components of their town’s water quality. • Support the implementation of the State Government policy, • GovHack including Water for Victoria and the Pilot Water Sector Climate Change Adaptation Plan – Along with 19 other Australian water businesses, CHW sponsored GovHack 2019, to gain ideas to develop a water • Reduce CHW’s vulnerability to the direct and indirect efficiency app. 45 teams entered our two challenges – consequences of climate change Create innovative ways to be water efficient and Water – • Build resilience to climate change impacts and extreme source to tap. weather events Major community partnerships • Innovate to take advantage of new and emerging opportunities presented by changes in our climate CHW continued its partnership with the 2020 Ballarat Begonia Festival as the Major Community Partner due to the • Continuously grow CHW’s capacity and capability multiple benefits this association brings. for adaptation In 2020, CHW’s area at the festival included a large water 2. Customer and community outcomes cycle table that encouraged children and families to learn about how water gets from the catchment to their tap. Local C1: Customer satisfaction school students entered an insect hotel competition, for further environmental learning. Funds raised from the sale CR1 and CR4 are reported on in Part 5, Performance Report of reusable stainless-steel bottles were donated to WRISC (see page 44). Family Violence Support who provide support services for C2: Customer and community engagement women and children experiencing family violence. CHW will use the water cycle table for other educational events in In line with our commitment to meaningful engagement with the future. customers, community and stakeholders, CHW continued

12 PART 1 THE YEAR IN REVIEW In 2019, CHW was a Major Community Partner of the 2019 • 2019 Ballarat Business Awards Ballarat International Foto Biennale, as well as having our Continued to support these awards through sponsorship own CHW Exhibition – Waterworks. This international event of the ‘Trade Business Award’ category – the winner of this was held from August – October 2019 and provided the category in 2019 was Portable Buildings by Design. opportunity to showcase CHW’s historic photos of the early development of water and sewage services in the community. 3. Water for Aboriginal cultural, spiritual and Online engagement economic values Consistent with the digital transformation program, CHW developed a new website launched in December 2019 AC1 to AC3: Reconciliation Acton Plan (reflecting engagement featuring new online tools – My Account and My Services. of Aboriginal communities and Traditional Owners) CHW also provided new online two-way communication tools During 2019-20, CHW continued to implement its first Reflect to enable community members to have their say and contribute Reconciliation Action Plan (RAP). Although this one-year RAP to conversations about matters of importance to them. expired in February 2020, initiatives within the RAP have Parks masterplan continued to be progressed and implemented. Key initiatives that have been completed, and that support recognition and We engaged with the community via social media and our achievement of Aboriginal cultural values, are outlined below. website for feedback on the CHW Draft Parks Masterplan. The masterplan provides the vision to guide future • Identification of scar trees on Central Highlands Water development of our recreational parks and reservoirs to managed site/s benefit the community. • Reburial of Aboriginal artefacts at Kennedy’s Drive sewer pump station, Delacombe Second Reconciliation Action Plan – Innovate • Creation of signage that recognises Aboriginal culture at In late 2019, our Reconciliation Working Group commenced various CHW managed site/s the development of CHW’s second RAP – Innovate, which focusses on enhancing relationships, understanding and • Engagement with Wadawurrung to progress and create a opportunities with the five Traditional Owner groups in our contemporary scar tree on CHW managed site/s service region. • Engagement with Wadawurrung to undertake a cultural burn on CHW managed site/s Ongoing engagement programs and initiatives • Development of a social procurement strategy including • Choose Tap Program a focus on procurement from Aboriginal and Torres Strait CHW continued the promotion of the ‘Choose Tap’ program Islander businesses. Actions undertaken to support the throughout the region by installing more drinking water social procurement strategy include: fountains at public spaces. An ongoing agreement has – Procurement of ongoing land maintenance services in the seen the installation of new fountains in each of the City Daylesford region with a Dja Dja Wurrung business enterprise of Ballarat, Central Goldfields and Moorabool Shire Council regions. CHW has also strengthened its commitment with – Procurement of Traditional Owner artwork the Ballarat Aquatic Centre, providing two drinking water – Development and procurement of Aboriginal artwork fountains for inside their facility as well as an agreement themed corporate lanyards and KeepCup to provide reusable ‘Choose Tap’ drink bottles at the • Sponsorship of Aboriginal events and groups Centre’s cafeteria. • Cultural training for staff as follows: The local Choose Tap Ambassador program has seen The Ballarat Football Umpires Association become CHW’s latest – Annual Sorry Day, National Reconciliation Week and ambassadors. The umpires are local community members NAIDOC week events, including Aboriginal guest speakers who are passionate about the development of everyone’s and Indigenous cultural training general health and wellbeing. There are over 260 female and – Aboriginal Cultural Heritage and Land Use Activity male umpires ranging from teenagers who learn leadership Agreement training (for staff as required by their roles) skills, responsibility, judgement and general fitness to the – Three-hour cultural awareness training course by active, experienced umpires in their 60s who are great Wadawurrung Traditional Owners (over 80 staff) mentors and role models. • Implementation of CHW’s first Heritage Strategy, which • School education program seeks to identify, protect and enhance local heritage values, In 2019-20, CHW engaged with kindergartens, primary Aboriginal and non-Aboriginal (over 900 known heritage schools and secondary schools across the region, through sites on land under CHW management), and implementation the following ways: of the supporting action plan to ensure the ongoing – Developed and distributed electronic educational protection of heritage sites materials via a quarterly newsletter (144 subscribers to • Provision of support to people from Aboriginal and Torres 103 campuses) Strait Islander backgrounds into education and training – Provided drinking water fountains and drink bottles through a targeted trainee program during COVID-19 • Enhancement of respectful and inclusive relationships – Ran themed tours for schools and community groups with Traditional Owners and the Aboriginal community in (634 students) which we work – Ran Begonia Festival Insect Hotel competition with In addition, during 2019-20 CHW started development of its entries from 12 early learning centres, primary schools and second Innovate RAP. While currently in draft, this RAP seeks secondary schools (545 students) to further implement reconciliation at CHW. The RAP has a strong focus on developing and strengthening relationships – Hosted National Water Week poster competition entries with Aboriginal and Torres Strait Islander peoples, engaging and awards presentation (153 students) staff and stakeholders in reconciliation, and developing and – Developed Laboratory and Water Treatment Plant piloting innovative strategies to empower Aboriginal and virtual tours Torres Strait Islander peoples.

Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 13 4. Resilient and liveable cities and towns L3: Water bills (urban) Victorian water bills are amongst the lowest in Australia L1: Integrated Water Management (urban)

The Central Highlands Integrated Water Management 2018-19 Central National Comment (IWM) forum is a collaborative approach involving all Total Highlands median for key organisations and agencies that play a role in water residential bill Water relevant management within the region. The forum’s vision is working ($) utility sized together to leverage opportunities across the water cycle to grouping deliver a healthy, resilient and prosperous future for the region ($)* and its communities. L3 a) Average 1,260 1,370 CHW 8% During 2019-20, CHW supported the forum by providing consumption below national valuable resources and support which included utilising median a Senior Manager to coordinate forum activities, a Senior L3 b) 200 kL 1,344 1,383 CHW 3% Executive to Chair the forum and Managing Director consumption below national participation within the forum. median Major achievements of the IWM forum during 2019-20 included: Note: * Data from National performance report 2018-19: urban water utilities, part • Making significant progress on the development of five key A (Bureau of Meteorology, February 2020) for utilities with 50,000-100,000 projects captured within the Central Highlands Strategic connected properties (n=10) Direction Statement, including: L4: Payment management and hardship – Central Highlands Small Towns Green-Blue Infrastructure Plan a. The total number of payment arrangements:

– Integrated Management of the Tullaroop Catchment 2018-19 2019-20 – Breathing Life into the Yarrowee River 3,476 3,547 – Hepburn Shire (including Daylesford) Integrated Water Management Plan – Beaufort Closed Loop Recycled Water Scheme b. Number of customers awarded hardship grants: See Part 4 – Environmental and Social Sustainability for • Continuing to foster relationships, explore ideas and more information about the hardship grants (Utility Relief collaborate with stakeholders across the region and the Grant Scheme) on page 42. broader industry to improve and enhance integrated water management planning • Securing joint funding to enable three priority projects 5. Recognising recreational values highlighted within the Central Highlands Strategic Direction Statement to progress to the next stage of development (Rec1: Recreational values – explicit inclusion of recreational during 2021-22: values in planning and reporting activities) – Central Highlands Small Towns Green-Blue In 2019-20, CHW finalised a Parks and Recreation Masterplan. Infrastructure Plan Significant community consultation undertaken during development of the Masterplan highlighted that Gong Gong – Integrated Management of the Tullaroop Catchment Reservoir and Kirks Reservoir parks are significant community – Beaufort Closed Loop Recycled Water Scheme assets. CHW continues to work with local communities to provide access to these reservoir parks and other reservoirs, L2: Water Efficiency resulting in many positive beneficial recreational outcomes for Key Achievements 2019-20: the community. • Continued participation in Schools Water Efficiency CHW supports community bookings of a wedding space Program (SWEP) and increased support via funding for all within Kirks Reservoir Park. Our Communication and participating schools from across the region Engagement and Environmental Services teams provide • Retrofitted water tank and evaporative cooler initiative to information to park visitors and user groups on parks facilities, support vulnerable customers opening times and event management. • Land Development Manual in conjunction with Water In 2019-20, CHW collaborated with the Hepburn Shire on Efficiency Program mandating water tanks for new the further development of the Creswick Trails project. developments – over 600 tanks installed within the When completed, Creswick Trails will deliver around 100km CHW catchment of new purpose-built mountain biking trails on public land • Continued collaborative working with Smart Water Advice in partnership with DELWP, Parks Victoria and Hancocks website incorporating initiatives on CHW website Plantations. • Active participant with IWN smart metering workshops, CHW is co-funding, with the City of Ballarat, the Yarrowee webinars and knowledge sharing River and Tributaries: River Corridor Master Plan 2020. The • Developing Water Efficiency app aimed at educating project is supported by the Central Highlands Integrated students and the community on sustainable environmental Water Forum and seeks to create a vision for the Yarrowee water usage River corridor for the next 25 years. It is designed to protect, enhance and harness the Yarrowee River as a valued • Installed smart weather station at Kirks Reservoir Park to community asset, building on the success of ongoing manage irrigation in a more efficient sustainable manner. community engagement that has informed restoration and Technology will be offered to schools and council sporting improvement works over the past 25 years. facilities as part of the Water Efficiency Program

14 PART 1 THE YEAR IN REVIEW Recreational values 6. Leadership and culture CHW continues to provide public access to 15 of our reservoirs and reserves. Public access is subject to ongoing G1: Diversity and inclusion reviews of risks associated with safety, health and drinking CHW is committed to inclusion and representing the diverse water quality. communities we serve. The Diversity and Inclusion Strategy Open reservoirs and reservoir parks: 2019-20 focused on key actions and objectives aligned to the employee life cycle: attraction, recruitment, on-boarding, • Kirks Reservoir Park Brown Hill (Ballarat) development, retention and separation. The strategy has the • Gong Gong Reservoir Park Brown Hill (Ballarat) following desired outcomes: • Moorabool Reservoir Park, Springbank • A safe and inclusive working environment for all Reservoirs open for recreational fishing: • Leadership that encourages diversity of thought and • Bullarto Reservoir, Bullarto (Daylesford) innovation recognising the identities of individuals • Colbrook Reservoir, Creswick • Employees feel valued and respected with access to equal opportunities • Cosgrove Reservoir, Blakeville • Increased workforce capability • Dean Reservoir, Dean • Increase diversity in retention and recruitment • Hepburn Reservoir, Hepburn • Inappropriate behaviours eliminated • Moorabool Reservoir, Springbank • CHW to be viewed as an employer of choice for diversity • Russells Reservoir (Russells Dam), Wattle Flat CHW continues to develop and implement initiatives and • Talbot Reservoir, Evansford strategies that support the ongoing work of being a diverse • Wombat Reservoir, Daylesford and inclusive workplace. Some highlights include: Diversity • Landsborough Reservoir, Landsborough Working Group, Employee Value Proposition, Reconciliation • Redbank Reservoir, Redbank Action Plan, leadership work and learning and development procedures. The 2021 Diversity and Inclusion Strategy is • Sugarloaf Reservoir, Avoca currently being developed and will reflect our strategic Facilities and features of reservoir parks objectives relating to: • All: full visitor facilities (toilets, walking trails, picnic • Gender Equity tables and BBQs) • Aboriginal and Torres Strait Islander Peoples • Kirks Reservoir Park: Living Water Trail, a school’s • Culturally and Linguistically Diverse (CALD/Multicultural) education centre, weddings and Shakespeare in the Park • Lesbian, Gay, Bisexual, Transgender, Intersex (LGBTI) performances • Workplace Accessibility • Gong Gong Reservoir Park: a native bush setting, with walking and cycling trails, wetlands and supports a diverse • Respect at Work native animal population CHW also continues to promote a ‘Safe, Healthy and Inclusive • Moorabool Reservoir Park is managed in conjunction with Workforce’ and in doing so acknowledges and supports the Friends of Moorabool Reservoir community group International Women’s Day, Harmony Day, end of Ramadan celebration, NAIDOC Week, Reconciliation Week, Mental Recreation highlights 2019-20 Health Week, Suicide Prevention Awareness, White Ribbon • CHW installed a new all-abilities restroom facility at the Day, the work of Our Watch and International Day for People Gong Gong Reservoir Park. This major amenity installation with a Disability. CHW has noted a reduction in the percentage provides enhanced access for park visitors and users of the of employees reporting living with a disability. Yarrowee River walking trail • The irrigation system and controls at Kirks Reservoir Park and garden were upgraded resulting in more efficient water use and higher public amenity value • CHW hosted local running club events in Kirks and Gong Gong Reservoir parks • CHW finalised the CHW Parks and Recreation Masterplan which outlines a vision to guide future development of CHW’s recreational assets in alignment with community and organisational needs over the next five years. The plan contains site planning strategies based on three key principles: – something for all (creating the experience) – telling the water story (the role) – reinforcing the unique character (the physical place). It outlines a pathway to improved facilities and expanded lifestyle experiences. The plan will support CHW’s recreational planning enhancement activities in the future.

Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 15 Diversity and inclusion metrics

Initiative Target/Measure 2018-19 2019-20

Inclusive workplace 25% staff work flexibly 50% staff access workplace 47% staff work flexibly flexibility 35% caring responsibilities 45% caring responsibilities Caring responsibilities were not 7% LGBTQI community 7.6% LGBTI community measured 2% identify as non-heterosexual

Gender participation Gender representation 48% female and 38% leadership representation 39% senior leadership 52% male representation 40% minimum female representation in 38% female 39% female senior leadership roles. 62% male 61% male The 5-year projection for the percentage of females in senior leadership roles is 40%

People living with Water industry target is 10% 3% 3% a disability CHW set target of 6.2% to reflect communities we serve

Aboriginal and/or Water industry target is 3% 2% 2% Torres Strait Islander CHW target 1.2% to reflect communities representation we serve

Intergenerational Demographics align with communities 51% staff are over 45 years of age 54% staff are 45 years of age workforce we serve and over 49% staff are 45 years of age and under 46% staff are under 45 years of age

20% of our Water industry target is 12.5% Not reported 7% workforce speak a CHW target greater than 5% to reflect language other than communities we serve English at home.

CHW utilises a range of survey tools including the Victorian Public Sector People Matters Survey and targeted internal surveys (diversity and Team Member Pulse Survey) to measure and track diversity and inclusion performance to targets.

G1.4: Participation of Traditional Owners on Board The People Matter Survey (PMS) 2020 was postponed by committees and internal committees the VPS due to the impacts of COVID-19. Despite this, CHW • In all requests for expressions of interest for internal has continued to obtain regular, systematic feedback from committees, CHW includes a specific request for non- all team members to measure employee sentiment, health, traditional participants and will approach staff to request safety and wellbeing feedback and the impact of COVID-19 on participation our workforce. Regular Pulse Surveys have enabled CHW to: • A representative from Wathaurung Aboriginal Corporation is • Identify topics requiring immediate attention – we want a member of the Customer Advisory Panel. to know what’s important to our employees and how we can improve • CHW engaged the professional services of a Wadawurrung Traditional Owner to support development and • Inform decision making and activities required to support implementation of CHW’s Reconciliation Action Plan the health, safety, wellbeing and work performance which involved their attendance at reconciliation working of team members whilst ensuring business continuity group meetings during COVID-19 • To track how our business is feeling over time G1.5: People Matter Survey Some highlights from the Pulse Surveys include: People Matters Survey participation rate: • A high level of survey uptake across all business units, 80+% completion rate 2015 2017 2019 2020 • A high level of confidence in CHW's response to the 45% 55% 81% N/A pandemic, 98% favourable • Strong employee understanding of what to do to keep safe People Matters Survey Engagement index: and healthy during the pandemic, 98% favourable • Large majority of employees feel safe carrying out their role, 2015 2017 2019 2020 96% favourable • Large majority of employees feel they are staying 71 75 68 N/A connected, 92% favourable

16 PART 1 THE YEAR IN REVIEW • A strong commitment to employee wellbeing identified, G3: Health and safety 93% favourable See Part 2 – Corporate Report for more information • 42% of respondents stated they are thriving in their current (pages 24-26). work environment • A strong desire for CHW to continue with ongoing flexible working arrangements beyond COVID-19 • A large proportion of employee learnings and ideas for opportunities to continue and improve business processes, technology and new ways of working

7. Financial sustainability

F1 to F7: Financial indicators

2018-19 2019-20 2019-20 Variance to Variance to Result Result Target prior year target

F1: Interest Cover (Cash) 4.46 5.18 4.28 16.1% 21.0%

F2: Gearing Ratio 10.86% 10.26% 11.00% (5.5)% (6.7)%

F3: Internal Financing Ratio 108.67% 131.75% 98.30% 21.2% 34.0%

F4: Current Ratio 0.72 0.72 0.79 0.6% (8.9)%

F5: Return on Assets 2.24% 2.41% 2.00% 7.6% 20.5%

F6: Return on Equity 1.40% 1.61% 1.20% 15.0% 34.2%

F7: EBITDA Margin 44.92% 46.63% 44.10% 3.8% 5.7%

For more information, refer to Part 5 – Performance Report.

Central Highlands Water 2019-20 Annual Report PART 1 THE YEAR IN REVIEW 17 Central Highlands Water Waterworks Exhibition Ballarat International Foto Biennale 2019 Major Community Partner 18 PART 1 THE YEAR IN REVIEW PART 2 CORPORATE REPORT

ORGANISATIONAL STRUCTURE

Board of Directors Chair Dr Jeremy Johnson AM

Customer and People, Sustainability Community Audit and Risk Culture and Committee Partnerships Committee Safety Committee Committee

Managing Director Paul O’Donohue

Executive and Board operations Commercial and business development Strategic planning

Infrastructure Capital Delivery Customer and Business People and Planning and and Networks Community Services Culture Operations General Manager General Manager General Manager General Manager General Manager Jeff Haydon Stephen Answerth Jacqueline O’Neill Anthony O’Brien Michele Le Noury (01/07/19 – 19/01/20) Environmental Infrastructure Customer service Finance Renée Fearn (20/01/20 – 30/06/20) services delivery Communications Governance

Sustainability Capital expenditure and engagement and risk Health, safety program Water and Growth and Strategic and wellbeing wastewater Network field development procurement People services treatment services Customer Business Diversity and Water resources Maintenance experience intelligence inclusion Laboratory Digital metering Information Learning and program communication Strategic asset development management and technology Change and planning management People strategy

Central Highlands Water 2019-20 Annual Report PART 2 CORPORATE REPORT 19 BOARD OF DIRECTORS

Dr Jeremy Johnson AM Jim Hallam Chair Director Appointed 1 July 2010 Appointed 1 October 2017 Jeremy was Chief Executive Officer Jim is currently Chief Financial at Sovereign Hill 2002-2018. He is Officer of the ASX listed MMJ President of the Australian Chamber Phytotech Limited and has 20 years of Commerce & Industry, a Director/ of experience in the Australian Trustee of Care Super Pty Ltd and an investment management industry Executive Council Member and Past with alternative asset fund managers President of the Victorian Chamber of in Australia and overseas including Commerce & Industry. In 2011, he was awarded an Honorary Hastings Funds Management and Annuity Australia. Jim Doctorate by Federation University for his services to the has been a non-executive director of several businesses in business community. A Justice of the Peace, Jeremy is a the essential infrastructure, funds management, timberland, qualified Company Secretary, a Fellow of the Governance agriculture and manufacturing sectors within Australia and Institute of Australia and a Member of the Australian Institute the United Kingdom. Jim has a Bachelor of Economics, is a of Company Directors. Qualification: Dip Bus Studies (RMIT). Member of the Chartered Accountants Australia and New Jeremy received an Order of Australia in the Queen’s Birthday Zealand and a Fellow of the Governance Institute of Australia. Honours 2019 ‘for significant service to tourism and to the community of Ballarat’. Jodi Heath Director Angeleen Jenkins Deputy Chair Appointed 1 October 2017 Jodi is currently General Manager, Appointed 1 October 2017 Geelong and Ballarat Regions, Angeleen is an experienced Parks Victoria, she has a wealth professional company director. of experience in the banking and In her executive career, Angeleen was telecommunication sectors with top- previously employed as a director and 10 ASX listed companies over the company executive of a major multi- past 21 years. As a non-executive national engineering, building and director Jodi has worked across many sectors including water, construction group that participated education, health, employment services, disability services, in water and wastewater infrastructure. A proud resident of aged care and community organisations over the past 14 Ballarat, Angeleen is passionate about the local community, years and chaired various committees. She is currently a safe production, the environment, workplace diversity, risk Director of Gen U (Karingal St Laurence) and Professionals management, sound governance and sustainable business with Alzheimer’s (PALZ) which is near and dear to her. Jodi is performance. Angeleen is currently a Director as well as a a Graduate of the Australian Institute of Company Directors, a Chair of various committees of Tiaki Plantations Company, Member of the Deakin Alumni Community and an Australian Taumata Plantations Limited and VicForests. Angeleen is Rural Leaders Fellow. Jodi holds a Master of Business also a former director of McConnell Dowell Corporation Administration specialising in Corporate Governance and Limited, a major multi-national construction group. Angeleen Ethics from Deakin University. has a Bachelor of Arts in Psychology, and is a Fellow of the Australian Institute of Company Directors. Stewart Howe Director Janet Dore Appointed 1 October 2011 Director Departed 30 September 2019 Appointed 1 October 2015 Stewart has 30 years’ experience in Departed 11 June 2020 the global oil, gas and mining sectors Janet is an experienced non-executive in executive management, operations, director and former CEO of the mergers and acquisitions and Transport Accident Commission, restructuring roles. His career with BP Ballarat and Newcastle City Councils. and Zinifex included direction of major She is a past Chair of Committee for investment programs to develop long-life natural resource Ballarat, Commissioner Commercial assets, plus directorship of a range of subsidiary and joint Passenger Vehicles Victoria, Director MAV WorkCare, venture companies. For the past ten years Stewart has run his Member CTP Committee SIRA NSW and Municipal Monitor own corporate advisory firm, directing restructuring initiatives Ararat Rural City Council. Janet has a Master of Business and investment selection for financiers. Stewart holds non- Administration, Bachelor of Applied Science (Planning) executive advisory roles and ownership interests in privately and is a Fellow and Graduate of the Australian Institute of owned mining service companies. Qualifications: BEng(Chem), Company Directors. MEng(Mining), MAppFin, FAICD, FAusIMM(CP).

20 PART 2 CORPORATE REPORT Peter Le Lievre Paul O’Donohue Director Managing Director Appointed 1 October 2015 Appointed July 2012 Peter has been a resident of Ballarat Paul is the Managing Director of all of his adult life and is a very active Central Highlands Water. Since member of the community in sporting joining the organisation in 2003, he circles. Peter is a Life Member of two has overseen many key business cricket clubs and a director of the areas including major project Ballarat Cricket Association. Peter’s delivery, strategy, long-term planning, professional experience includes communications and account one year as a graduate accountant with the Ballarat Water management. Prior to joining Central Highlands Water, Paul Commission and Sewerage Authority in the late 1970s, 11 held senior management positions in the recreation and years as CEO in the agricultural sector and a partner in an hospitality sectors. Qualifications: BA (Mgt), Dip (Ldrshp), accounting practice for 15 years specialising in KPIs, business GradDip (BusMgt), GAICD, FIWA. management and management reporting systems within the family business sector. Peter has extensive experience in strategic planning and is currently contracted to Ballarat Regional Industries and Australian Plant Proteins. Peter holds Fellow designation of CPA Australia and is a Graduate of the Australian Institute of Company Directors.

Mark McKenzie Director Appointed 1 October 2019 Mark has recently been appointed to the role of General Manager and Senior Consultant with Meridian Agriculture. Mark is a wine and olive grower in the Grampians region and a consultant in strategic communications. His experience includes business management, corporate affairs, marketing and communications. He held senior wine industry roles as CEO of the Victorian Wine Industry Association, Executive Director of Wine Grape Growers Australia, and CEO of Murray Valley Winegrowers. Mark was CEO of NSW Irrigators Council, before returning to farming. He was a Director of National Irrigators Council and a Member of the National Farmers Federation Water Taskforce. He is a past director of the NSW TAFE Commission. Mark holds tertiary qualifications in agricultural science.

Rachel Thomson Director Appointed 1 October 2015 Rachel has over 20 years' experience internationally and in Australia in senior roles in risk management and insurance. Rachel’s previous executive role involved analysis of business strategy, financial performance, corporate governance processes and assessment of risk management of Australian and U.S. corporations. Rachel is a former member of the risk management board in the insurance sector and is currently a non-executive director on V/Line Corporation. Rachel has a Bachelor of Science in Mathematics from the University of and is a Graduate of the Australian Institute of Company Directors.

Central Highlands Water 2019-20 Annual Report PART 2 CORPORATE REPORT 21 CORPORATE GOVERNANCE

Board of Directors Committee member Independent Number of The Board sets the strategic directions, policies and goals meetings for the business and management. It comprises nine Peter Le Lievre (Chair) Yes 4 of 4 directors, including a Chair and Managing Director. The Chair and Directors are appointed by the Minister for Water. The Janet Dore (Director until 11 June 2020) Yes 3 of 4 Managing Director is appointed by the Board. Jim Hallam (Director) Yes 4 of 4 Membership and meeting attendance Jodi Heath (Director) Number of meetings attended 1 July 2019 to 30 June 2020. (Member until 31 October 2019) Yes 1 of 4

Stewart Howe Board member Number of (Director until 30 September 2019) Yes 1 of 4 meetings attended Rachel Thomson (Director) (total 6 (Member from 1 November 2019) Yes 3 of 4 meetings)

Dr Jeremy Johnson AM (Chair) 6 of 6 Membership of the Committee is reviewed annually and members are eligible for reappointment. The Committee Angeleen Jenkins (Deputy Chair) 6 of 6 comprises at least three independent non-executive Janet Dore (Director until 11 June 2020) 5 of 6 Directors, with the option to include one independent external member. The members, collectively, will have diverse Jim Hallam (Director) 6 of 6 backgrounds with a broad and complementary range of skills Jodi Heath (Director) 5 of 6 and experience relevant to CHW’s operations. Meetings are held quarterly. Special meetings of the Committee can be Stewart Howe (Director until 30 September 2019) 1 of 6 called in accordance with CHW’s Board Charter 2018. Peter Le Lievre (Director) 6 of 6 Supporting policy Rachel Thomson (Director) 6 of 6 • Board Charter (2018) Mark McKenzie (Director appointed 1 October 2020) 5 of 6 • Audit and Risk Committee Charter Paul O'Donohue (Managing Director) 6 of 6 • Water Act 1989 • Standing Directions of the Minister for Finance under the Audit and Risk Committee Financial Management Act 1994

Purpose Other major Board committees

The Audit and Risk Committee assists the Board in the Sustainability Committee organisation's governance and exercising of due care, diligence and skill. Board Members: Purpose: to ensure the Jodi Heath (Chair) Board maintains a focus on The Committee’s key responsibilities are to: Peter Le Lievre Sustainability throughout • Oversee and appraise the scope and quality of the audits Mark McKenzie (from 1 October 2020) its policies, operations, Stewart Howe (until 30 September 2019) service delivery and conducted by internal and external auditors Dr Jeremy Johnson AM (ex officio) innovation. • Maintain, by holding quarterly meetings, open lines of Customer and Community Partnerships Committee communication among the Board, internal auditors and the external auditors to exchange views and information, and Board Members: Purpose: to ensure the confirm their respective authorities and responsibilities Janet Dore (Chair until 10 June 2020) Board remains informed Mark McKenzie (Chair from June 2020) on issues that impact • Serve as an independent and objective party to review the Angeleen Jenkins customers and customer reliability and integrity of financial information Jim Hallam perceptions of CHW. • Determine the adequacy of CHW’s administrative, operating Dr Jeremy Johnson AM (ex officio) and accounting controls People, Culture and Safety Committee

• Oversee the organisation's Risk Management Framework Board Members: Purpose: to assist the including the integration of risk management principles into Angeleen Jenkins (Chair) Board to fulfil its CHW's strategic objectives, policies and reporting Jodi Heath (from 1 October 2019) governance responsibilities • Ensure compliance with laws, regulations, financial code of Rachel Thomson in relation to organisational Dr Jeremy Johnson AM (ex officio) development and employee conduct and ethical standards. related activities including The Committee’s authority and role is set out in the Audit and leadership, safety, wellbeing and diversity and inclusion. Risk Committee Charter, a regulatory requirement that covers governance responsibilities including but not limited to those outlined in the Standing Directions of the Assistant Treasurer Information about CHW’s major committees, including the under the Financial Management Act 1994. extent to which the committee has achieved its purpose is available on request. Membership and meeting attendance Number of meetings attended 1 July 2019 to 30 June 2020. Performance appraisals Performance appraisals for all committees are conducted annually.

22 PART 2 CORPORATE REPORT PEOPLE AND CULTURE

Public sector values and employment principles Comparative workforce data The Public Administration Act 2004 established the Victorian Employees by division Public Sector Commission (VPSC). The VPSC’s role is to strengthen public sector efficiency, effectiveness and capability, The full-time employee equivalent (FTE) of all CHW team and advocate for public sector professionalism and integrity. members employed in the last full pay periods in June 2019 and June 2020: CHW has policies and practices that are consistent with the VPSC’s employment standards and provide for fair treatment, Division 2018-19 2019-20 career opportunities and the early resolution of workplace issues. CHW has provided employees with training in how to Office of Managing Director 5.00 4.00 avoid conflicts of interest, how to respond to offers of gifts and how it deals with misconduct. Business Services 33.66 33.66 All recruitment undertaken by CHW follows a consistent Infrastructure Planning process to ensure selection is based on merit. All applicants and Operations 54.74 56.23 are assessed and evaluated without discrimination on Capital Delivery and Network the basis of the key selection criteria and key capabilities. Field Services 40.06 41.06 Recruitment of managers and supervisors includes a focus on leadership and management capability. All people People and Culture 6.50 8.11 leaders undertake psychometric testing that assesses IQ, Customer and Community 50.72 43.06 engagement, commitment to OHS, risk of demonstrating discriminatory behaviour and emotional intelligence testing. Total FTE 190.67 186.10 CHW’s Code of Conduct policy is supported by procedures, team members development and awards programs to Employees by classification encourage behaviour that supports CHW’s and VPSC’s values and behaviours. A requirement that employees Workforce type 2018-19 2019-20 demonstrate and further develop these values and behaviours Administration Officer 118.81 116.40 is incorporated into all performance reviews. Employees have been correctly classified in workforce Executive Officer 6.00 6.00 data collections. Field Employees 47.80 47.80 Training and development Senior Manager 18.06 15.90 In line with our commitment to employee development, Total FTE 190.67 186.10 in 2019-20, CHW provided training and development opportunities across the business in the areas of individual Employees by age development, leadership and management, safety, governance and compliance, corporate/executive and water quality. Age group 2018-19 FTE 2019-20 FTE CHW remains committed to the development of our headcount headcount employees and provides opportunities for all people at 15-24 7 6.21 5 5.00 CHW to develop, grow and positively contribute. A key project commenced in 2019-20 was the Learn Lead 25-34 29 27.15 33 31.15 Grow Program, which is aligned to Great Leadership 35-44 57 51.85 53 48.11 that Leads with Values and developing CHW’s long-term leadership and organisational culture. The Learn Lead Grow 45-54 72 70.04 67 65.07 Program includes: 55-64 36 34.63 33 31.98 • Development opportunities for employees at all levels of the organisation Over 65 1 0.80 5 4.80 • Development of role specific authority, influence and Total 202 190.67 196 186.10 accountability • Contemporary leadership concepts, innovative thinking and strategies into CHW

Gender participation in the workforce

Total number (head count) 2018-19 2019-20

Percentage Number Percentage Number

Female employees 38% 77 39% 77

Male employees 62% 125 61% 119

Total 202 196

Central Highlands Water 2019-20 Annual Report PART 2 CORPORATE REPORT 23 OHS performance and benchmarking • Providing an environment that consults and cooperates between management, employees, contractors and OHS The 2019-20 year has been one of strong safety performance representatives with the following key achievements completed. • Executive Management and Board of Directors Key achievements commitment to ensure the requirements of the policy and subsequent OHS framework, strategies and plans • 54% reduction in the overall number of injuries in 2019-20 are in place and implemented compared to 2018-19 3. The first half of 2019-20 saw work continue to focus • Continued focus on hazard and near miss reporting on the priority action plan from the 2018 Safety Culture supported through the use of Hazard Recognition Awards. Review. Work included increasing OHS conversations, The emphasis is on eliminating hazards to reduce the implementing a fair and just culture process to incident likelihood of injury investigation, training line leaders in ICAM incident • Sustained Work Cover performance compared to industry investigation, launching a new contractor management peers. CHW’s employer performance rating for 2019-20 is onboarding and prequalification system and improving safe 0.57 a minor increase from the 2018-19 rating of 0.55. (A work procedures. score below 1 indicates CHW has performed better than the The latter half of the financial year shifted focus into industry average over the past 2.5 years) the COVID-19 pandemic response with dedicated OHS • CHW successfully transitioned to certification to the action plans developed to mitigate risks and support the new International Standard for OHS Management government direction in the management of COVID-19 in Systems (ISO 45001) the workplace. The COVID-19 Incident Management Team • 100% of the 102 scheduled OHS internal audits were is working with a primary objective to protect the health completed across the organisation with a significant number and wellbeing of our people, contractors and community. of improvements identified A revised Health, Safety and Wellbeing Strategy will • Further refinement and review of CHW’s OHS governance be developed in 2020-21 encompassing the ongoing arrangements including a comprehensive review of the work in COVID-19 and other priority areas as identified OHS Key Performance Indicators (KPIs) which are reported through OHS performance, Safety Culture review six weekly to the OHS Committee, bi-monthly to the and implementation of the VPS Leading the Way Board and quarterly to the People, Culture and Safety OHS Framework. Board Committee 4. CHW senior management are actively involved in OHS • Responding to the COVID-19 situation with OHS hazards improvement and consultation processes. Involvement identified and controlled as low as reasonably practicable and consultation occur through the Senior Management within the scope of CHW’s control Team meetings, membership on the OHS Committee and • Remaining agile and in a constant state of review of risks participation in 6 monthly reviews of the performance and external requirements to enable prompt adjustment to of the OHS Management System. In addition, Senior the COVID-19 situation Management have been directly involved in OHS working groups set up from the priority actions of the Summary of results Safety Culture review as a method to create a shared accountability model for safety leadership and maturity CHW is committed to the implementation of the Victorian across the business. Public Sector’s Leading the Way strategy to improve health and safety in the public sector. 2019-20 is the first reporting 5. Health and Safety Representatives (HSR) are in place cycle against the new framework. The current systems and across the organisation. HSRs meet formally with senior initiatives are in place at CHW to support Leading the Way: management bi-monthly via the OHS Committee. HSRs form an active role in their respective work groups to Commitment to OHS leadership, improvement facilitate resolving local OHS issues and provide a platform and achievement to escalate unresolved issues to the OHS Committee. 1. CHW has an OHS policy endorsed by the Managing HSRs also are engaged proactively in working groups Director and Board of Directors. CHW has committed to to enhance CHW’s OHS Management System by way implement a framework that provides a safe physical, of working collaboratively with Senior Management to psychological and emotional working environment develop and implement controls for identified risks and for all employees, contractors engaged by CHW and priority safety projects in the business. Throughout visitors to minimise and/or eliminate risk of physical or 2019-20 collaborative work has included improvements psychological injury. to Lone Worker procedures, Site Induction methods and 2. CHW embraces a 'safety is everyone's priority' culture trials of new equipment for gas line detection in Civil which is underpinned by principles that include (but not Maintenance as direct actions to identified hazards within limited to): the business. • Compliance with OH&S legislative requirements, ISO 6. CHW has an OHS Management System in place that is 45001 OH&S Management System, is a minimum independently certified to ISO 45001 OHS Management Systems. In 2018 CHW proactively elected to be further • Developing and implementing health, safety and assessed with a specific focus on Safety Culture. The wellbeing strategies and action plans that are aligned with assessment was conducted by an independent assessor organisational objectives, trends and industry best practice and scored against the Patrick Hudson Safety Culture • Identifying and controlling all OHS risks (physical and Maturity Model. CHW was assessed as calculative psychological) to a level that is reasonably practicable to (compliance as the standard). As well as maintaining conduct work safely and without harm to self or others management system certification there is a strong • Practicing continual improvement to build upon commitment and work continues to take place to further successes and learn from incidents and failures of improve the safety culture at CHW with an objective to the OHS framework and management system to best move up the safety culture maturity. practice standards and beyond

24 PART 2 CORPORATE REPORT 7. CHW has multi-level mental health and wellbeing support Health and Safety Reporting and guidance in place. The programs include Employee Assistance Program, Critical Incident Response, Mental – Leading the Way Measures Health First Aiders, Contact Officer Network and targeted training programs for Line Leaders. Measures of 2017-18 2018-19 2019-20 implementation During COVID-19 a suite of additional mental health and wellbeing initiatives have occurred including employee Near Misses 78 60 61 check-ins, online health and wellbeing webinars, men’s Reported health checks during June for Men’s Health Week as well Hazards 93 156 83 as communications campaigns targeted at taking a break, Reported mindfulness and wellbeing. CHW has psychosocial risks identified on the OHS risk profile and continually monitors Injuries (First aid) 28 23 10 the impacts COVID-19 and other emerging issues have on Lost Time these potential risks. 3 3 0 Injuries (LTIs) 8. CHW as part of our rewards and recognition program has Hazard Recognition and Safety and Innovation Awards Medical to recognise and reward proactive hazard recognition Treatment 0 1 1 and creative and practical solutions to health and safety. Injuries During 2019-20, innovations included a tool for creating Process (lead) – Measures of implementation psychological safety in the workplace and purchasing a spring-loaded Intermediate Bulk Container stand to Rates of 7.7% 6.9% 6.3% eliminate a hazardous manual handling task. absenteeism

9. CHW is connected to the Victorian Water and Water OHS Induction Services Association of Australia OHS networks. Our Training 100% 100% 100% Senior Leadership and OHS professionals regularly Completion contribute to emerging themes and working groups in Yearly employee 81% OHS. During 2019-20 CHW has also become an active Postponed committee member for the Ballarat Regional Occupational People Matters Did not Participation Survey (PMS) due to participate 68% Safety and Health Group and now is actively contributing to results COVID-19 local OHS issues affecting the region. Engagement Mental health OHS Performance data and wellbeing Not reported 98% The CHW Significant Injury Frequency Rate (SIFR) for employee training 2019-20 of three (3) was significantly lower than our score of Consultation – Not reported 100% 12.5 for 2018-19. The CHW contractors SIFR rate for 2019-20 OHS Committees of 17.8 was slightly higher than the score of 15.4 for 2018-19 reporting period. There were a number of contributing factors Consultation – Senior to this increase including three (3) Medical Treatment Injuries Not reported 100% (MTIs) involving contractors in 2019-20 and one (1) Lost Time management commitment Injury (LTI) and one (1) MTI involving contractors in 2018-19. Contractor Management continues to remain an ongoing area OHSMS of focus for CHW. Implementation, 100% 100% 100% Review and As shown below the SIFR has continued to trend Improvement downwards over time. Outcome (lag) – Measures of effectiveness No. of standard 0 1 2 H SFR Workcover claims ontractors SFR Linear H SFR Average cost per 0 $358,211* $17,979 claim Fatalities 0 0 0

Claims 0 2 2 13 weeks as percent of total 0 0 0 claims 26 week as

percent of total 0 50% 0 claims

Average lost 0 546 0 days/ shifts

Prosecutions 0 0 0

Note: * This WorkCover claim involved a meter reader who was attacked by a dog. This figure has been adjusted from 2018-19 Annual Report due to the full claim costs being processed post 30 June 2019.

Central Highlands Water 2019-20 Annual Report PART 2 CORPORATE REPORT 25 • There is a strong reporting culture at CHW which is Health and wellbeing reflected in the near miss and hazard reporting results on page 25. These reports are proactively managed and CHW continues to strengthen preventative controls to help rapidly addressed reduce the risk of injury to team members. The following key achievements in CHW’s Health and Wellbeing Program in • The active promotion and training of employees on CHW’s 2019-20 include: online reporting system has strengthened CHW’s OHS Management System by enabling the efficient capture of • On-site influenza vaccinations and health checks for information relating to hazards and near misses all employees • CHW has a target of zero harm. If a team member is injured, • Targeted health and wellbeing sessions, including Skin immediate action is taken to diagnose, actively manage and Cancer Action Week activities, eye health checks, Men’s and give employees the right support to rehabilitate Women’s Health Week activities, Active April and Mindful May sessions, Health and Safety month, Mental Health • CHW’s focus is on ensuring all employees are returned month, suicide prevention awareness to appropriate meaningful work as soon as possible (with the support of medical practitioners, their team leaders, • Fully-funded Men’s Health Week GP health checks for male managers and the People, Culture & Safety team). This team members has improved the timeliness of return to work and people’s • Availability of on-site physiotherapy and remedial massage connection with the workplace sessions for team members with pre-existing injuries and • Early identification and management of injuries and early intervention for musculoskeletal discomfort – in preventative health initiatives have resulted in health issues excess of 90% of the appointments are utilised being resolved before they require medical treatment or • Online physio consults and home workstation lead to lost time injuries. This has resulted in a significant ergonomic assessments decrease in the number of WorkCover claims over time • Pilot of online group exercise physiology classes during Stage 3 COVID-19 restrictions Safety culture During COVID-19, health and wellbeing has been a constant In 2018-19 CHW had a Current State Analysis of our safety focus to support team members. Psychosocial risk factors culture conducted to measure CHW’s safety culture maturity. associated with Job Demand, Job Control and Support have Areas for improvement were identified and these have guided been identified as critical risks during COVID-19. In addition to the focus of our activities (per list below), with significant work already existing supports, funds have been allocated towards undertaken in many of these areas during 2019-20: preventative self-care online webinars conducted by CHW’s • OHS commitment EAP provider Converge. Topics have included: • Training and resources • Sleep and our health • Safety management system • Isolation and working from home • Health and wellbeing • Managing through COVID-19 • Near miss reporting • Maintaining motivation • Recognition for safety • Mindfulness • Consultation • Managing with emotional intelligence • Driving OHS strategically • Dealing with uncertainty • Operational delivery of OHS leadership • Gut health and your immune system • Contractor management • Leading remote workforces • Organisational learning • Financial self-care • Parenting whilst working from home • Building resilience • Healthy brain, healthy body • Nutrition to boost the immune system • Looking out for your mates • Balancing work and life • Positive parenting

26 PART 2 CORPORATE REPORT SUMMARY OF EXPENDITURE

Consultancy Expenditure Details of consultancies (valued at less than $10,000) In 2019-20, there were 26 consultancies engaged during the Details of consultancies (valued at $10,000 or greater) year, where the total fees payable to the consultants was less In 2019-20, there were 33 consultancies where the total fees than $10,000. The total expenditure incurred during 2019-20 payable to the consultants were $10,000 or greater. The in relation to these consultancies was $102,916 (excl. GST). total expenditure incurred during 2019-20 in relation to these consultancies was $1,575,287 (excl. GST). Details of individual consultancies are outlined on Central Highlands Water’s website, at www.chw.net.au/about-us/ annual-report

Information and Communication Technology (ICT) expenditure For the 2019-20 reporting period, Central Highland Water had a total ICT expenditure of $7,973,596 with the details shown below.

All operational ICT expenditure ICT expenditure relating to projects to create or enhance ICT capabilities

Business As Usual (BAU) Non-Business As Usual Operational expenditure Capital expenditure ICT Expenditure (non-BAU) ICT Expenditure (OPEX) (CAPEX) (Total) (Total = operational expenditure and capital expenditure)

$4,400,769 $3,572,826 $162,942 $3,409,884

• ICT expenditure refers to Central Highlands Water's costs in Government advertising expenditure providing business enabling ICT services within the current reporting period. It comprises Business As Usual (BAU) CHW’s expenditure during 2019-20 did not exceed $100,000. ICT expenditure and Non-Business As Usual (Non BAU) ICT expenditure. • Non-BAU ICT expenditure relates to extending or enhancing Central Highlands Water's current ICT capabilities. • BAU ICT expenditure is all remaining ICT expenditure which primarily relates to ongoing activities to operate and maintain the current ICT capabilities.

Central Highlands Water 2019-20 Annual Report PART 2 CORPORATE REPORT 27 DISCLOSURES

Freedom of Information For two (2) of the requests an extension was granted in consultation with the applicant and with all other requests The Freedom of Information Act 1982 (the Act) allows decisions were made within the statutory 30 days. the public a right of access to documents held by Central Highlands Water (CHW). The purpose of the Act is to extend There was one review received by the Information as far as possible the right of the community to access Commissioner. This remains under review. CHW has information held by government departments, local councils, fully complied with review and all information requested Ministers, and other bodies subject to the Act. was provided. An applicant has a right to apply for access to documents held Additional information available on request by CHW. This comprises documents both created by CHW or supplied to CHW by an external organisation or individual, In compliance with the requirements of Standing Directions of and may also include maps, films, microfiche, photographs, the Assistant Treasurer, details in respect of the items listed computer printouts, computer discs, tape recordings and below have been retained by Central Highlands Water (CHW) videotapes. Information about the type of material produced and are available (in full) on request from CHW’s FOI Officer by CHW is available on its website www.chw.net.au under its (contact details listed above), subject to the provisions of the Part II Information Statement. Freedom of Information Act 1982. The Act allows CHW to refuse access, either fully or partially, a) A statement that declarations of pecuniary interests have to certain documents or information. Examples include: been duly completed by all relevant officers of CHW cabinet documents; some internal working documents; b) Details of publications produced by CHW about itself, and law enforcement documents; documents covered by how these can be obtained legal professional privilege such as legal advice; personal c) Details of major promotional, public relations and information about other people; and information provided to marketing activities undertaken by CHW to develop CHW in-confidence. community awareness of the corporation and its services From 1 September 2017, the Act has been amended to reduce d) Details of changes in prices, fees, charges, rates and levies the Freedom of Information (FOl) processing time for requests charged by CHW received from 45 to 30 days. In some cases, this time may e) Details of any major external reviews carried out on CHW be extended. f) Details of major research and development activities If an applicant is not satisfied by a decision made by undertaken by CHW CHW, under section 49A of the Act, they have the right to g) Details of overseas visits undertaken including a summary seek a review by the Office of the Victorian Information of the objectives and outcomes of each visit Commissioner (OVIC) within 28 days of receiving a decision letter. h) A list of CHW’s major committees, the purpose of each committee and the extent to which the purpose has Making a request been achieved Access to documents may be obtained through a written i) A general statement on industrial relations within CHW and request to CHW's FOI Officer. An application fee of $29.62 details of time lost through industrial accidents and disputes applies. Access charges may also be payable if the document j) Details of assessments and measures undertaken to pool is large, and the search for material time consuming. improve the occupational health and safety of employees When making an FOl request, applicants should ensure Available on request and included in this Annual Report requests are in writing, and clearly identify what types of material/documents are being sought. k) Details of all consultancies and contractors, including consultants/contractors engaged, services provided, and People wanting access to CHW documents under the expenditure committed for each engagement (on page 27 Freedom of Information Act may use our online FOI – see also our website www.chw.net.au). application on our website at www.chw.net.au We also accept applications made in writing to: Information not applicable to CHW Freedom of Information Officer The following is not applicable for the reason set out below: Central Highlands Water l) Details of shares held by a senior officer as nominee, PO Box 152 or held beneficially in a statutory authority or subsidiary Ballarat Vic 3353 (no shares have ever been issued in the name of CHW). General enquiries about FOI may be made by contacting us on 1800 061 514 or via email to Further information [email protected] Further information regarding the operation and scope of FOl can be obtained from the Act, regulations made under the FOl responsiveness 2019-20 Act, and at ovic.vic.gov.au CHW received six (6) requests for access to documents under the Act, five (5) from members of the public and one (1) from a Privacy and Data Protection Act 2014 (Vic) legal firm. Central Highlands Water has, to the best of its knowledge, Full access was granted in three (3) cases, partial access met its obligations under the Privacy and Data Protection was granted in two (2) in accordance with the Act and one (1) Act 2014 (Vic). request was withdrawn.

28 PART 2 CORPORATE REPORT Public Interest Disclosures Act 2012 Local Jobs First Act 2003 The Public Interest Disclosures Act 2012 (PID Act) enables Reporting on all Local Jobs First projects except those people to make disclosures about improper conduct by related to grants public officers and public bodies. The PID Act aims to ensure openness and accountability by encouraging people to make 5.3: The following information relates to projects commenced disclosures and protecting them when they do. and/or completed to which Local Jobs First applied during the 2019-20 reporting period. • A public interest disclosure is a complaint of corrupt or improper conduct by a public officer or a public body. CHW a) The number of projects that the Major Projects Skills is a public body for the purposes of the PID Act Guarantee has been applied, the total number of hours completed or to be completed by apprentices, trainees • Improper or corrupt conduct involves substantial or cadets on these projects, and the total number of mismanagement of public resources, risk to public health or opportunities created for apprentices, trainees and cadets safety or the environment, or corruption. The conduct must on these projects: 0 be criminal in nature or a matter for which an officer could be dismissed b) The number of projects and percentage of ‘local content’ committed under projects commenced and/or completed • You can make a public interest disclosure about CHW or its to which LIDP was required: Board members, officers or employees by contacting the Independent Broad-Based Anti-Corruption Commission • Total: 7 (contact details provided below) • Fellmongers siphon replacement: 98% • Solar installations*: 61% • CHW is not able to receive public interest disclosures • Ballan WWTP**: 81% • CHW has an established procedure for the protection of • Evansford Raw Water Pipeline Replacement: 98% persons from detrimental action in reprisal for making a • BSWWTP Lagoon Upgrade***: 91% public interest disclosure about CHW or its employees. • BSWWTP Lime & Hydraulics Upgrade: 93% You can access CHW’s procedure on its website at • BSWWTP Inlet Works Upgrade: 71% www.chw.net.au c) For projects commenced, a statement of total LIDP Contacts commitments (local content, employment and engagement of apprentices, trainees and cadets) committed as a result Independent Broad-Based Anti-Corruption Commission of these projects: (IBAC) Victoria • BSWWTP Lagoon Upgrade: 4 Address: Level 1, North Tower, 459 Collins Street, • BSWWTP Lime & Hydraulics Upgrade: 4.6 Melbourne Vic 3000 • BSWWTP Inlet Works Upgrade: 7.8 Mail: IBAC, GPO Box 24234 Melbourne Vic 3001 • Total: 16.4 Website: www.ibac.vic.gov.au d) For projects completed, a statement of total VIPP Plan Phone: 1300 735 135 or LIDP outcomes (local content, employment and Email: See the website above for the secure email disclosure engagement of apprentices/trainees) achieved as a result process, which also provides for anonymous disclosures. of these contracts: 86 Building Act 1993 e) The total number, across all projects commenced or completed of small and medium-sized businesses Central Highlands Water does not own or control any engaged as either the principle contractor or as part of the government buildings and therefore is exempt from notifying supply chain: its compliance with the building and maintenance provisions • Fellmongers siphon replacement: 7 of the Building Act 1993. CHW conducts a regular program to • Solar installations*: 12 ensure compliance with all relevant provisions of the Building • Ballan WWTP**: 5 Act 1993 in building and maintenance activities, and any areas • Evansford Raw Water Pipeline Replacement: 4 of concern are logged and addressed. • BSWWTP Lagoon Upgrade: 11 • BSWWTP Lime & Hydraulics Upgrade: 24 Competitive Neutrality Policy • BSWWTP Inlet Works Upgrade: 39 Central Highlands Water continues to comply with the • Total: 102 requirements of the Competitive Neutrality Policy. This Notes: policy requires government businesses to ensure that, where * Solar installations: provision of the design, construction and initial services compete, or potentially compete with the private maintenance of integrated large-scale solar generation behind the meter sector, any advantage arising solely from their government systems at four nominated sites. ownership be removed if it is not in the public interest. ** Ballan WWTP: Ballan Wastewater Treatment Plant winter storage. Government businesses are required to cost and price these *** Ballarat South Wastewater Treatment Plan services as if they were privately owned. This policy supports fair competition between public and private businesses and Reporting on grants provided provides government businesses with a tool to enhance a) The total number of conversations with the Industry decisions on resource allocation. It does not override other Capability Network that correspond with the registration policy objectives of government and focuses on efficiency in and issue of an Interaction Reference Number: 0 the provision of service. Major contracts DataVic Access Policy (2012) Central Highlands Water did not enter into any major To comply with the Victorian Government’s DataVic Access contracts (valued at $10 million or more) during 2019-20. Policy, the information included in this Annual Report, including the Performance Report and Financial Report, will be made available online at http://www.data.vic.gov.au/ in readable format.

Central Highlands Water 2019-20 Annual Report PART 2 CORPORATE REPORT 29 PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE

CORPORATE WATER CONSUMPTION

The amounts reported in the table below represent water Consumption Value Units consumption at our Wendouree and Maryborough sites. The figures include maintenance, office and workshop areas. Consumption 1522 kL

These amounts do not include any treatment plants or Number of employees 186.1 FTE other work sites. Annual use 8.2 kL per person

Daily use 22.4 L per person

Per m2 office space 282.3 L

MAJOR NON-RESIDENTIAL WATER USERS

Major customers – use by volume range Major customers – participation in water efficiency programs

Volumetric range – ML per year Number of Customer Comment customers McCain Foods (Aust) Ongoing collaborative focus to reduce Equal to or greater than 100ML Pty Ltd water consumption per quantity of and less than 200ML 3 product through more efficient processes

Equal to or greater than 200ML City of Ballarat In collaboration with CHW, and other and less than 300ML 0 stakeholders, the Ballarat Integrated Water Management Plan has been Equal to or greater than 300ML developed and endorsed and less than 400ML 1 Imerys Minerals Maintaining long-term commitment to Equal to or greater than 400ML Australia Pty Ltd optimising water use through recycling and less than 500ML 0 process water and good management practices Equal to or greater than 500ML and less than 750ML 0 Ballarat Health Maintaining long-term commitment to Services optimising water use through substitution Equal to or greater than 750ML and good management practices and less than 1000ML 1 Central Goldfields In collaboration with CHW, and other Greater than 1000ML 0 Shire stakeholders, the Maryborough Integrated Water Management Plan has been Total number of customers developed and endorsed equal to or greater than 100ML 5

30 PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE WATER CONSUMPTION 3.40 12.31 29.01 10.04 32.94 46.92 28.69 23.60 149.27 Total water all sources (ML) 157.92 233.73 202.88 967.99 1,776.70 17,279.71 13,604.30 2.21 1.29 0.17 5.54 3.66 4.85 6.90 0.50 17.91 13.42 32.24 Total non-revenue water (ML) 29.66 143.45 100.62 1,239.28 1,601.70 0.21 4.13 0.15 1.00 4.77 2.98 0.29 0.92 0.63 0.46 0.56 0.08 15.02 Other (ML) 36.14 404.93 475.69 Non-Revenue Water Non-Revenue 0.01 0.01 0.01 0.01 2.48 0.29 0.20 0.03 0.04 0.06 0.06 3.20 0.00 0.00 0.00 Fire fighting (ML) 0.00 1.21 1.00 0.29 6.43 4.69 3.09 4.90 0.09 27.41 12.47 14.89 25.47 Leakage (ML) 85.40 107.02 831.87 1,122.81

- - -

174.74 182.26

Per capita daily residential water consumption 173.39 218.06 223.57 223.26 229.52 202.23 249.64 265.38 245.03 238.30 205.84 L Per L Per Person Person Per Day Per - - 1.72 2.41 4.13 2.77 2.74 3.29 4.62 2.89 2.98 3.34 2.90 3.04 3.05

Weekly household potable consumption (KL) 39.86 3.28 4.96 17.17 13.65 1 22.24 23.47 42.36 35.48 Average annual consumption (ML) 124.21 128.94 167.69 185.44 697.62 1,451.78 12,025.33 14,943.61 5.19 3.23 11.02 16.70 23.47 30.73 25.03 33.50 119.61

Total consumption (ML) 140.01 201.49 867.37 202.38 1,633.25 12,365.02 15,678.01 ------5.76 28.18 23.23 Total recycled water volume (ML) 62.90 450.51 347.20 707.80 Totals 1,625.58 ------3.23 17.71 11.02 Total non-potable consumption (ML) 31.95 - - 5.19 19.27 16.70 23.47 30.73 33.50 111.84 119.61 121.77 178.26 Total potable consumption (ML) 520.17 1,182.74 11,657.22 14,020.48 21 75 44 110 144 159 516 104 877 342 985 686 6,041 Total water connections 2,962 72,128 59,062 ------

Recycled stormwater volume (ML) ------5.76 28.18 23.23 Recycled wastewater volume (ML) 62.90 450.51 347.20 707.80 1,625.58 ------4.19 0.10 0.20 Non-potable consumption (ML) 4.49 - - Non-Residential 1.35 1.85 1.85 4.29 7.83 6.28 17.14 27.25 42.07 Potable consumption (ML) 25.84 135.63 309.32 3,448.77 4,029.47 7 5 5 8 16 81 10 27 92 33 39 111 525 289 4,506 Water connections 5,754 ------

Recycled stormwater volume (ML) ------

Recycled wastewater volume (ML) ------3.13 13.51 10.82 Non-potable consumption (ML) 27.46 Residential - - 3.85 17.19 17.42 29.21 14.85 22.90 95.93 84.59

Potable consumption (ML) 136.19 102.46 873.42 384.54 9,991.01 8,208.45 16 39 94 68 111 132 102 477 326 766 594 904 5,516 Water connections 2,673 54,556 66,374

Average annual water consumption (average over five-year period 2015-16 to 2019-20) period 2015-16 to five-year over (average consumption annual water Average Water Water Supply District Amphitheatre Avoca Ballarat & District Beaufort Blackwood Clunes Daylesford Dean Forest Hill Forest Landsborough Learmonth Lexton Maryborough & District Redbank Waubra Totals Note: 1

Central Highlands Water 2019-20 Annual Report PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE 31 DROUGHT RESPONSE

Our region’s storage volumes have ended the year relatively • Completing a new raw water transfer main from Evansford high after good winter rainfall in 2019 and autumn rainfall in Reservoir to Maryborough, reducing water loss from leaks 2020. Precautionary operational measures were implemented and bursts and providing a more stable delivery system in a number of systems to safeguard against short-term • Maximising the use of groundwater as a supplementary low rainfall risks by maximising supply diversity. Only minor supply to Daylesford allowing surface water levels to remain drought response actions were implemented due to a dry high throughout the year start to the summer, however work continues to reduce • Using groundwater to supplement surface water and exposure to future drought conditions. maintain supply to raw water customers in Raglan Measures employed to maximise water supply resilience to • Supplying a blend of surface water and groundwater drought conditions include: in Amphitheatre to help preserve surface water • Drilling a new groundwater bore at Avoca to provide storage volumes redundancy for the system The water restriction status remained at Permanent Water • Optimising Moolort groundwater usage for supply to Saving Rules across all supply systems. Maryborough, to maximise the available resource and provide flexibility to optimise raw water quality

System Date Drought Comment Response Action

Amphitheatre All year PWSRs Amphitheatre Reservoir volumes have fallen through the year. Groundwater was not required during 2019-20 but the system is ready for CHW to introduce groundwater if the surface water system does not recover

Avoca All year PWSRs Overall groundwater levels remained steady throughout 2019-20. An additional bore hole has been drilled to provide redundancy to the system, with fit out to occur in 2020-21

Ballarat All year PWSRs The Ballarat system remains in a healthy state with the system finishing the year above 80% full

Beaufort All year PWSRs Storage volumes have remained relatively high throughout 2019-20. Groundwater has been used to supplement raw water supply for Raglan and maintain Musical Gully Reservoir levels

Blackwood All year PWSRs Groundwater was used to supplement basin levels during late summer and early autumn. Leak detection and demand management options have been explored for the system

Clunes All year PWSRS Groundwater levels remained steady throughout 2019-20

Daylesford All year PWSRs Early rainfall has resulted in the system finishing the year above 90% full after drawing down to a healthy 71% during summer and early autumn. With groundwater now a permanent part of the system the diversity of supply ensured adequate storage levels were maintained

Dean All year PWSRs A groundwater system that continued to supply sufficient volumes of water throughout the year

Forest Hill All year PWSRs Groundwater levels remained steady throughout 2019-20. Maximising the systems diversity and drawing from multiple groundwater bores assisted in maintaining groundwater levels

Landsborough All year PWSRs A reliable groundwater supply system that performed well throughout the year

Learmonth All year PWSRs A reliable groundwater supply system that performed well throughout the year

Lexton All year PWSRs A reliable groundwater supply system that performed well throughout the year

Maryborough All year PWSRs A combination of surface water and groundwater was used throughout 2019-20. Surface water storages finished below 70% and require winter rainfall for replenishment

Redbank All year PWSRs The system remained on groundwater during 2019-20 due to the water quality preferences and low surface water volumes

Waubra All year PWSRs A reliable groundwater supply system that performed well throughout the year

32 PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY

ENVIRONMENTAL SUSTAINABILITY

CHW relies on the natural environment to provide essential Water efficiency and conservation services, and is committed to creating a sustainable future • Developed a new Water Efficiency program (following on through the following principles which are aligned to the from our Let’s Talk Water community engagement program) United Nations Sustainable Development Goals (SDG’s): which includes a broad range of initiatives that support • Supporting sustainable agriculture practices (SDG2) residential and non-residential customers to improve their • Providing clean water and wastewater services (SDG6) water efficiency • Delivering renewable energy and being energy • Supported the State Government’s ‘Water for Victoria: efficient (SDG7) Water Plan’ (Action 5.3) to reinvigorate water efficiency programs by: • Enhancing Aboriginal inclusion in natural resources management (SDG10) – Taking a leading regional role in developing new initiatives for the Target Your Water Use program • Helping to create sustainable cities and communities and protecting our heritage (SDG11) – Supporting large industrial water users to improve their water efficiency • Reducing waste generation through prevention, reduction, recycling and reuse (SDG12) – Increasing support for the State Government’s Schools Water Efficiency Program (SWEP) by commencing to • Strengthening resilience to climate change (SDG13) fund SWEP fees for all of our schools, and participating • Continuing sustainable land management practices (SDG15) in the SWEP Victorian Facilities Program which involves To support the achievement of these sustainability monitoring water and electricity use and solar power principals CHW implements an accredited ISO14001:2015 generation at government facilities Environmental Management System (EMS). The key – Extending CHW’s Be Smart Choose Tap program which requirements of the EMS are to: involved installing drinking fountains at recreational areas • Establish an environmental policy for the organisation around the region to provide free quality drinking water • Identify, understand and minimise risk to the environment where it is most needed (including for pets) • Identify relevant legal and other compliance requirements • Continued to implement the Community Rebate program, the Pilot Community Housing Retrofit program and the • Establish environmental objectives, targets and programs Showerhead Exchange program (now funded by CHW), • Monitor and measure progress in achieving our objectives and the WaterMAP (Management Action Plan) program • Review the EMS and our environmental performance for large non-residential customers; to support Local Government water efficiency programs; and to plan further • Ensure continuous improvement on the environmental programs to support the Target Your Water Use campaign in performance of the business regional Victoria Sustainable water use • Performed a leading role in increasing collaboration on water efficiency at a state and national level by: CHW undertook the following initiatives and activities – Developing and reviewing the Victorian Water Efficiency during 2019-20: Strategy (VWES) Water recycling – Continuing to actively participate in the VWES Coordination Group to develop new state-wide initiatives • CHW continued to provide recycled water from across the and in the Smart Water Advice Committee to develop 13 wastewater systems for a range of uses, including: shared water efficiency resources such as website – Environmental water to Lake Wendouree in Ballarat information and printable fact sheets – Agricultural irrigation across the region for the – Actively participated in DELWP’s international scan on production of fodder water efficiency initiatives – Industrial process water at the Ballarat South and Ballarat – Chairing the newly formed Water Services Association North Wastewater Treatment Plants of Australia (WSAA) Water Efficiency Network to – The provision of recycled water for sporting facilities and support Victorian water corporations to collaborate at a open public spaces across the region national level

Central Highlands Water 2019-20 Annual Report PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 33 • Mandated a potable water target of 145 litres per person per 3. Building climate resilience day for homes in all new developments in Ballarat greater 4. Environmental water entitlements than ten lots in size which has resulted in a significant 5. Improving water quality increase in the number of rainwater tank installations connected to laundries and toilets 6. Communications and engagement with the community and other regional stakeholders Sustainable and Resilient Water Services Systems 7. Natural resource management data sharing CHW implements a range of ongoing measures to deliver Actions that CHW has undertaken that specifically support sustainable and resilient water services systems. Some of the the CMAs Regional Catchment Strategy include: key achievements delivered during 2019-20 included: • Contributing to the development of annual work • Finalising and publishing CHW’s Climate Change Adaptation plans for 2020-21 Plan to focus on mitigating CHW’s contribution to the • Collaborating on data sharing with partner agencies causes of climate change and on timely and effective adaptation responses • Continued to align our management and enhancement of natural resources with Regional Catchment Strategies, • Progressing actions and investigations from CHW’s including CHW’s annual catchment and land management Urban Water Strategy which offers a long-term water operations plan needs assessment for communities across the region and considers factors such as future growth and climate • Created a new environmental asset database for use in change scenarios a Geographic Information System that supports mobile field staff and long-term planning for operational and • Publishing the Annual Water Outlook which provides capital investment perspective on how systems are likely to perform over the coming year based on a range factors including rainfall, • Continued to implement actions to reduce risks to water temperature, stream flows and water demand scenarios quality in our declared water supply catchments • Commencing planning to undertake an Integrated Water • Continued to assess statutory planning permits against the Management Plan with the Hepburn Shire which will include Ministerial Guidelines for planning permits in open potable key objectives to optimise the use of local water sources, water supply catchments, working with the Moorabool, support river health, improve water efficiency and generate Pyrenees and Hepburn Shires to complete municipal improvements in greenspace, liveability and recreation Domestic Wastewater Management Plans – this has resulted in the processing of 89 planning applications within • Delivering the annual water and sewer main renewal potable water supply catchments programs which assesses current network risks to ensure the targeted replacement and rehabilitation of these assets Victorian Waterway Management Strategy and River • Working with the Hepburn Shire Council towards delivering Health Projects: the Greening Newlyn Oval Project which aims to provide a • CHW is committed to the delivery of the Victorian new alternative water source to ensure greening of the oval Waterway Management Strategy through partnerships and relieve stress on the local water supply network with catchment managers. CHW has developed projects • Maintaining active partnerships with DELWP, Sustainability under the Corangamite and North Central CMA Regional Victoria, Regional Sustainability Alliance Ballarat, City of Waterway Strategies. The Corporation led a waterway Ballarat, Committee for Ballarat, Federation University and stability assessment for a section of the Yarrowee River, other local organisations in partnership with the City of Ballarat. CHW continued a willow tree control program in the Ballarat catchment and Central Region Sustainable Water Strategy a stream rehabilitation project on McCallums Creek above Evansford Reservoir. CHW continue to complete ongoing A State Government review of this strategy was published maintenance of its waterways during summer months to in October 2018. This review showed that of the 10 actions prevent the re-establishment of willow species around listed for the Greater Ballarat region, eight actions have been reservoirs and waterways. achieved, with two actions partly achieved and described as ‘ongoing’ in relation to environmental flows in the Biodiversity 2037 Strategy Moorabool River. Action completed in 2019-20 that support delivery of the Other statutory obligations Victorian Government’s Biodiversity 2037 Strategy include: • Planted 8,830 native trees, shrubs and grasses, achieving CHW undertook the following initiatives and activities 16.5 hectares of native revegetation along waterways and during 2019-20. decommissioned forestry coupes Catchment Management Authority (CMA) Regional • Continued the native seed collection program for Catchment Strategy revegetation projects CHW continued to support the Victorian Government’s Our • Assessed the risk of waterway erosion on wastewater Catchments, Our Communities strategy through Catchment treatment lagoon in the Yarrowee River Partnership Agreements with the Corangamite and North • Completed a Biodiversity Action Plan that supports the Central Catchment Management Authorities (CMAs). implementation of the CHW Biodiversity Strategy. Actions Furthermore, in 2019-20 CHW completed a Memorandum of achieved include management of the threatened species Understanding (MoU) with these CMAs. Basalt Peppercress, development of a seed production area at Talbot Reservoir, continued flora and fauna assessments The MoU strengthens the collaborative relationship between and weed mapping the CMAs and CHW and promotes cooperation and joint action to maintain and improve catchment health. It focuses • Continued to implement and monitor Biodiversity on the following strategic areas of common interest: Offset Management Plans at six biodiversity offset sites and submitted final reports for two offset plans at Russell’s 1. Integrated catchment management Reservoir and Creswick 2. Integrated water management planning

34 PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY • Collaborated with DELWP on Biodiversity Response Planning State Environment Protection Policy (SEPP) (Waters • Through CHW’s improved GIS capability, CHW has increased of Victoria) the data capture of environmental assets and environmental CHW assesses planning permit applications for dwellings threats such as weeds in potable water supply catchment for compliance against • Developed a scope outlining the development of a CHW the Code of Practice for Onsite Wastewater Management Healthy Waterways Strategy 891.4 and in Clause 28 of the State Environment Protection Policy – Water of Victoria (SEPP WoV 2018). CHW uses its • Continued rehabilitative works along the Werribee River at powers as a referral authority to set conditions related to the Ballan Wastewater Treatment Plant in collaboration with the installation and maintenance of septic tanks and effluent Melbourne Water disposal systems and works with municipalities in the ongoing • Completed native revegetation projects along the implementation of Domestic Water Management Plans. Moorabool River at Lal Lal and Mollongghip, Donovans Creek in the Moorabool Reservoir catchment, Giles creek at Pincotts Reserve and along McCallums Creek at Evansford • Commenced a weed program on the Moorabool River at Lal Lal Reserve to reduce the blackberry infestation

GROUNDWATER LICENCES

Water Supply System Bore Name Groundwater RWA Licence Annual Licence Volume Extracted Licence Number Authority Volume (ML) in 2019-20

Amphitheatre Amphitheatre Bore BEE059427 GWM Water 20 0.6

Avoca Bung Bung Bore BEE069412 G-MW 250 164.4

Ballarat Ballarat West BEE031536 SRW 1697* 508

Bungaree Bore BEE027683 SRW 69 0

Beaufort Raglan BEE030997 SRW 200 73.0

Blackwood Barry’s Reef Bore BEE027580 SRW 50 6.0

Clunes Clunes (UW usage) BEE069135 G-MW 350 213

Daylesford Coomoora Bore BEE069510 G-MW 268* 45.3

Dean Dean Bore BEE025842 SRW 30 11.4

Forest Hill Forest Hill Bores BEE004957 G-MW 350 149.8

Landsborough / Navarre Navarre Bore BEE062916 GWM Water 150 42.2

Learmonth Bankin Hill BEE005382 G-MW 98 33.7

Lexton Gordon Hill BEE071487 G-MW 30 22.2

Maryborough Moolort Bores BEE018090 G-MW 1070.8* 456.6

Stoney Creek Bore BEE069615 G-MW 5 1.4

Redbank Redbank Bores BEE056519 GWM Water 50 4.0

Waubra Waubra Bores BEE014898 G-MW 65 25.1

Notes: * Includes temporary transfer to/from CHW licence in 2019-20

Central Highlands Water 2019-20 Annual Report PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 35 BULK ENTITLEMENT COMPLIANCE REPORT

2019-20 General control is conducted in accordance with Bulk Entitlement requirements. CHW holds 17 Bulk Entitlement Conversion Orders which define its legal rights to extract water to supply its water CHW also has environmental programs in place to fulfil supply systems. These orders are summarised below. the obligations in the bulk entitlements to manage the environmental effects of storages and works on CHW maintains a Bulk Entitlement Metering Plan to ensure the waterways. repairs, replacements, operational processes and data

Bulk Entitlement Annual amount Volume remaining Transfers of BE Failures or Comment (*) Order taken from in reservoirs at to supply system, difficulties with specified 30 June 2020 (*) amendments, new complying with point(s) under entitlements or requirements of Order (*) credits (*) BE (*)

Bulk Entitlement 5885 ML Beales 145 ML None None Nil. (Upper West (14.1 (e)) Wilsons 139 ML (14.1 (g)), (14.1 (h)), (14.1 (k)), (14.1 (l)) Moorabool System) Moorabool 3430 ML (14.1 (i)), (14.1 (j)) Conversion (14.1 (d)) Order 1995

Bulk Entitlement 5262 ML CHW Share None None Total net gain to CHW’s (Lal Lal – CHW) (CHW) of Lal Lal Reservoir (18.1 (l)), (18.1 (m)), (18.1 (p)), (18.1 (q)) share of the reservoir Conversion 3652 ML 32249 ML (18.1 (n)), (18.1 (o)) was 11759 ML (18.1 (f)), Order 1995 (VEWH) (18.1 (e)) (18.1 (j)). No water was 2854 ML taken from any point (Barwon Water) other than the specified (18.1 (g)) point (18.1 (i))

Bulk Entitlement 0 ML Colbrook 164 ML None None Reservoir remained (Ballan) (12.1 (c)) (12.1 (d)), (12.1 (e)), (12.1 (i)), (12.1 (j)) out of service during Conversion (12.1 (f)), (12.1 (g)), 2019-20 Order 1998 (12.1 (h))

Bulk Entitlement 57 ML Not Applicable None None Nil. (Blackwood and (11.1 (e)) (11.1 (g)), (11.1 (h)), (11.1 (k)), (11.1 (l)) Barry’s Reef) (11.1 (i)), (11.1 (j)) Conversion Order 1998

Bulk Entitlement 7633 ML White Swan None None Nil. (Yarrowee – White (14.1 (e)) 10541 ML (14.1 (g)), (14.1 (h)), (14.1 (k)), (14.1 (l)) Swan System) Gong 738 ML (14.1 (i)), (14.1 (j)) Conversion Kirks 340 ML Order 2002 Pincotts 211 ML (14.1 (d))

Bulk Entitlement 0 ML 35 ML None None No surface water (Landsborough/ (12.1 (d)) (12.1 (c)) (12.1 (f)), (12.1 (g)), (12.1 (j)), (12.1 (k)) used during 2019-20. Navarre) (12.1 (h)), (12.1 (i)) System now relies on Conversion groundwater supply Order 2003

Bulk Entitlement 0 ML 98ML None None Reservoir remained (Lexton) (12.1 (c)) (12.1 (b)) (12.1 (e)), (12.1 (f)), (12.1 (i)), (12.1 (j)) out of service during Conversion (12.1 (g)), (12.1 (h)) 2019-20 Order 2004

Bulk Entitlement 0 ML 0 ML None None System reliant on (Redbank) (12.1 (d)) (12.1 (c)) (12.1 (f)), (12.1 (g)), (12.1 (j)), (12.1 (k)) groundwater supply for Conversion (12.1 (h)), (12.1 (i)) 2019-20 Order 2003

Bulk Entitlement 19 ML Sugarloaf 120 ML None None System reliant on (Avoca) (12.1 (d)) (12.1 (c)) (12.1 (f)), (12.1 (g)), (12.1 (j)), (12.1 (k)) groundwater supply for Conversion (12.1 (h)), (12.1 (i)) 2019-20. Surface water Order 2003 use consumed by raw water customers

Bulk Entitlement 556 ML Wombat 474 ML None None System supplemented (Daylesford – (12.1 (c)) Bullarto 220 ML (12.1 (e)), (12.1 (f)), (12.1(i)), (12.1 (j)) with 45 ML of Hepburn Springs) Hepburn 28 ML (12.1 (g)), (12.1 (h)) groundwater during Conversion (12.1 (b)) 2019-20 Order 2004

36 PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY Bulk Entitlement Annual amount Volume remaining Transfers of BE Failures or Comment (*) Order taken from in reservoirs at to supply system, difficulties with specified 30 June 2020 (*) amendments, new complying with point(s) under entitlements or requirements of Order (*) credits (*) BE (*)

Bulk Entitlement 498 ML Cosgrave 502 ML None None Transferred into the (Creswick) (12.1 (c)) Russells 25 ML (12.1 (e)), (12.1 (f)), (12.1 (i)), (12.1 (j)) White Swan Reservoir Conversion Dean 96 ML (12.1 (g)), (12.1 (h)) during 2019-20 Order 2004 (12.1 (b))

Bulk Entitlement 167 ML Musical Gully 242 ML None None All water sourced from (Beaufort) (12.1 (d)) Troys 5 ML (12.1 (f)), (12.1 (g)), (12.1 (j)), (12.1 (k)) Musical Gully Reservoir. Conversion (12.1 (b)) (12.1 (h)), (12.1 (i)) System supplemented Order 2005 with 73 ML of groundwater during 2019-20

Bulk Entitlement 13 ML 34 ML None None Nil (Amphitheatre) (12.1 (c)) (12.1 (b)) (12.1 (e)), (12.1 (f)), (12.1 (i)), (12.1 (j)) Conversion (12.1 (g)), (12.1 (h)) Order 2003

Bulk Entitlement 0 ML Not Applicable None None Reservoir remained out (Skipton) (12.1 (c)) (12.1 (e)), (12.1 (f)), (12.1 (i)), (12.1 (j)) of service during Conversion (12.1 (g)), (12.1 (h)) 2019-20 Order 2004

Bulk Entitlement 541 ML Not Applicable None None There were no periods (Loddon System – (14.1 (b)) (14.1 (c)), (14.1 (e)) (14.1 (i)), (14.1 (j)) of restrictions during Part Maryborough (14.1 (g)), (14.1 (h)) 2019-20 (14.1(f)) – CHW) Conversion Order 2005

Bulk Entitlement 1513 ML Evansford 818 ML None None Reflects the total (Evansford – (17.1 (b)) 339.41 mAHD (17.1 (d)), (17.1 (g)), (17.1 (k)), (17.1 (l)) volume of water taken Talbot System – Talbot 491 ML (17.1 (h)), (17.1 (i)), for Maryborough Part Maryborough 334.65 mAHD (17.1 (j)) (i.e. volume leaving – CHW) Centenary 154 ML Centenary Reservoir less Conversion (17.1 (c)) any groundwater into Order 2006 281.32 mAHD Centenary Reservoir). There were no periods of restrictions during 2019-20 (17.1 (h))

Bulk Entitlement 221 ML Not Applicable None Not applicable CHW pumped 221 ML (Bullarook System (12.1 (b)) (12.1 (f)), (12.1 (g)) (12.1 (h)), (12.1 (i)) from Newlyn Reservoir – CHW) into Cosgrave Reservoir Conversion during 2019-20. There Order 2009 were no periods of restrictions during 2019-20 (12.1(e))

Notes: The numbers in brackets refer to the relevant clause of the Bulk Entitlement Order. CHW did not make any applications for changes under any of the “Making Allowances” clauses in its Bulk Entitlements in 2019-20. CHW undertakes an extensive river health program in order to fulfil its environmental obligations. Metering programs were in place for all bulk entitlements and no changes were made to the programs.

Central Highlands Water 2019-20 Annual Report PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 37 GREENHOUSE GAS AND ENERGY REPORTING

CHW produces greenhouse gas emissions from a range of Have a Strategy for Zero Net Emission by 2050

t activities such as the consumption of electricity, methane n e m Avoid Emissions (& Lock-in) y and nitrous oxide emissions from wastewater treatment lo p e and the combustion of fossil fuel in vehicles. Our Emissions D d Energy Productivity n a Reduction Pledge commits CHW to reducing emissions by a n o g n ati i r t minimum of 20% by 2025, compared with the baseline figure t r Utilise Waste s o n p e of 18,336 tCO -e. R mo 2 e d e , D v Low Carbon Electricity t o n r CHW’s emissions reduction performance for 2019-20 is e p m Im p lo outlined in Table 1 below. Electrification & e Fuel Switching ev D , h c r a Sequester e s e R Offset

Emissions Reduction Hierarchy

Table 1: Scope 1 and 2 greenhouse gas emissions by operational area

Performance Greenhouse gas emissions (tCO2-e) Variance Commentary Indicator 2019-20 2019-20 Result Emission Reduction Scope 1 Scope 2 2019-20 Target ** emissions emissions Result

Water treatment - 0 3,105 3,105 NA A 17% decrease was experienced and supply compared with 2018-19 mostly due to decreased electricity consumed by water pump stations

Sewerage - 5,288 5,207 10,495 NA A 14% decrease was experienced collection, compared with 2018-19 which is treatment and mainly attributable to a reduction in recycling fugitive emissions from the Ballarat South WWTP. The decrease in fugitive emissions was due to increased monitoring of COD Load in influent and improved data collection of the volume of sludge produced from the plant

Other - 111 740 851 NA Nil

Transport - 525 0 525 NA A 9% reduction in emissions compared with 2018-19 from CHW's corporate fleet has been observed

TOTAL EMISSIONS - 5,924 9,052 14,976 NA (a)

OFFSETS RETIRED - 0 0 0 NA – Self generated * (b)

NET EMISSIONS * 16,067 5,924 9,052 14,976 -6.8% In 2019-20 CHW has reduced its

(a-b) carbon emissions by 3,360 tCO2-e when compared to the baseline figure

of 18,336 tCO2-e CHW reduced emissions by an

additional 1,091 tCO2-e (- 6.8%) when compared to the 2019-20 Emission Reduction Pledge Target of 16,067

tCO2-e

Notes: * CHW’s greenhouse gas emissions have been calculated in accordance with the National Greenhouse and Energy Reporting (Measurement) Determination 2008 as amended July 2019 and National Greenhouse Accounts (NGA) Factors, August 2019. ** CHW does not have an Emission Reduction Target for each Performance Indicator category as this was not a requirement of the Emissions Reduction Pledge.

38 PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY Figure 1: Progress towards greenhouse gas emissions target Energy consumption and generation for 1 July 2025 CHW has adopted a renewable energy led strategy to help

Net reenhouse as emissions tonnes of O equialent reduce its greenhouse gas emissions. Current and future initiatives supporting CHW’s emissions reduction efforts include:

• A reduction in the consumption of 367MWh of grid

electricity was achieved in 2019-20 due to the installation of “behind-the-meter” solar generation systems at:

– White Swan Water Treatment Plant and Pump Station e – Lal Lal Water Treatment Plant tO – Ballarat South Waste Water Treatment Plant – Ballarat North Water Reclamation Plant

• Deployment of new, energy efficient technologies, such as high efficiency aerators, pumps and lighting Baseline aret • Participation in the Zero Emissions Water Ltd. Power Purchase Agreement (PPA)

Actual net reenhouse as emissions tOe CHW’s current electrical consumption is outlined in

Proected net reenhouse as emissions tOe Table 2 below.

Table 2: Total electricity consumption report

Total electricity use 2018-19 2018-19 2019-20 Commentary Result Result Result (MWh) (MWh) (MWh) Grid electricity Total Total consumed electricity* electricity* Water treatment 13,362 13,751 12,287 A 12% decrease in electricity usage for water treatment and supply and supply was experienced compared with last year mostly due to a reduction in the use of the Goldfields Superpipe and lower annual demands in 2019-20 Sewage collection, 8,012 8,070 8,452 A 5% increase in electricity mostly due to increased flows treatment and recycling in the sewage network and wastewater treatment plants compared with 2018-19 Other (office, 693 814 843 A 3% increase in electricity due to an increase in electricity workshops, depot, etc) used at the Kirks Reservoir Depot compared with 2018-19 TOTAL (a) 22,066 22,635 21,582

Note: * Total electricity is inclusive of all CHW’s sites and services and includes the consumption of grid electricity, purchase of green power and renewable electricity used behind the meter.

Table 3: Total renewable energy used

Performance Indicator 2018-19 2019-20 Commentary Renewable Renewable electricity used electricity used (MWh) (MWh) 1. Grid sourced: 3,688 3,926 Mandatory (LRET) 2. Solar 298 583 An increase in solar energy generated due to the construction of new solar installations at Ballarat South WWTP, Ballarat North WWTP, Lal Lal WTP, White Swan WTP and White Swan Pump Station between March and June 2020 3. Hydroelectric 271 285 4. Wind 0 0 5. Biogas 0 0 6. Green power ** 786 0 7. Other 0 0 TOTAL (b) 5,043 4,794 Percentage renewable 22.3%* 22.2% Performance will improve as a result of completed solar installations at electricity = (b)/(a) * 100 5 sites between March and June 2020

Notes: * Total electricity ** The 2018-19 purchase of Green power was a once-off initiative to reduce emissions associated with use of the Goldfields Superpipe.

Central Highlands Water 2019-20 Annual Report PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 39 Procurement Office-based Environmental Data CHW’s major procurement activities include requirements for The majority of office-based activities take place at CHW’s supplier compliance with ISO14000. main office in Learmonth Road Wendouree. CHW also CHW is participating in the water industry Large Scale operates a small office in Maryborough. Renewables Project which will help achieve the Government’s Energy use emission reduction and renewable energy targets. CHW consumes grid electricity and gas in both the Learmonth CHW’s Social Procurement Strategy supports the opportunity Road Office and Maryborough Office. CHW generates of using buying power within the region to deliver positive approximately 117 MWH of electricity annually from a solar social impacts to the community being: array at the Learmonth Road Office avoiding the generation • Opportunities for Victorian Aboriginal people, Victorians of approximately 119 tCO2-e annually. with a disability and disadvantaged Victorians • Women’s equality and safety Waste and recycling • Supporting safe and fair workplaces Waste generated from office-based activities includes general municipal waste, disposed via a licenced landfill, • Sustainable Victorian social enterprise and Aboriginal and segregated recyclables. CHW implements a Resource business sectors Recovery and Waste Reduction Plan aimed to achieve zero • Sustainable Victoria regions waste to landfill from operations by 2050. CHW conducted • Environmentally sustainable outputs and business practices a compost awareness session and a recycling Q&A session • Implementation of the Climate Change Policy objectives with office-based staff in 2019-20 to help improve resource recovery performance. CHW has engaged ‘social procurement’ suppliers to carry out works and services under the following categories: Paper car-washing, waste management, labour hire/recruitment, CHW utilises office paper that is carbon-neutral in its origin traineeships, catering, supply of native plants, landscaping and is certified by the Australian Forestry Standard; endorsed services, supply of artwork for recognition awards and by PEFC, (sustainable forest certification scheme) and meets conservation programs. ISO 14001 standard requirements. CHW has also incorporated the following socially responsible The use of modern printers incorporating time out initiatives through our purchasing processes: functionality and individual user identification for print release • Purchasing environmentally friendly toilet paper and paper ensures that unaccounted for printing is avoided. CHW’s towels, ‘Thank-you’ products to assist in reducing world document management system also plays a key role in poverty and 100% recycled copy paper sharing business information electronically, reducing the need • Supporting the 5 star ANCAP safety rating and selecting for hard copies.

energy efficient alternatives to reduce CO2 emissions of our passenger vehicles and utilities in line with our Fleet Water consumption Management Framework CHW consumed approximately 1522kL of potable water to • Installing solar panels, LED lighting and mini-hydro systems operate its office based activities at the Learmonth Road and at CHW sites Maryborough office locations. CHW continues to focus on • Improving access to safe water, improved hygiene and water minimisation with water saving technology installed in sanitation in the world's poorest communities through staff toilet facilities. partnership with Water Aid Transport CHW complies with the Victorian Government’s Local Jobs CHW continues to optimise the size and characteristics of First Policy which ensures that small and medium size its vehicle fleet to ensure that it remains fit-for-purpose and enterprises are given a full and fair opportunity to compete for efficient. Through the introduction of GPS vehicle tracking CHW’s works helping to create job opportunities, including for and the implementation of the ‘euro 6’ engine emissions apprentices, trainees and cadets (see page 29). standard, the environmental impact associated with office- based transport continues to be minimised. CHW’s Smart Fleet vehicle management system also contributes to reduced vehicle travel through increased facilitation of carpooling. Technologies such as video conferencing and cloud-based information sharing tools are increasingly helping CHW’s staff avoid physical travel.

40 PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY Office based environmental data for 2019-20

Indicator 2019-20 2018-19 2017-18 Energy Use E1. Total energy usage segmented by primary source (MJ) 4,510,884 4,648,168 - Electricity (MJ) – excluding Green Power 2,360,484 2,371,079 - Natural gas (MJ) 2,150,400 2,277,088 - Green Power (MJ) 0 0 - LPG (MJ) 0 0 -

E2. Total greenhouse gas emissions from energy consumption (tonnes CO2-e) 780 822 -

Electricity (tonnes CO2-e) – excluding Green Power 669 705 -

Natural Gas (tonnes CO2-e) 111 117 -

LPG (tonne CO2-e) 0 0 - E3. Percentage of electricity purchased as Green Power (%) 0 0 - E4. Units of office energy used per FTE (MJ/FTE) 31,958 24,076 - E5. Units of office energy used per office area (MJ/m2) 837 862 - Waste and Recycling Ws1. Total units of waste disposed of by destination (kg/yr) 33,910 84,136 - Landfill 29,420 76,297 61,786 Comingled recycling (kg) 4,490 7,839 11,046 Paper and card (kg) - - - Secure documents (kg) - - - Organics (kg) - - - Ws2. Total units of waste disposed of per FTE by destination (kg/FTE) Landfill 208 395 337 Comingled recycling (kg) 32 41 - Paper and card (kg) N/A NA - Ws3. Recycling rate (%) 13.24% 9.32% 18

Ws4. Greenhouse gas emissions associated with waste (tonnes CO2-e) 41 76 - Paper use P1. Total units of A4 equivalent copy paper used (reams) 1116 1,424 1,209 P2. Units of A4 equivalent copy paper used per FTE (reams/FTE) 8 7 7 P3. Percentage of recycled content in copy paper purchased (%) 0% 100% (2) - Water consumption W1. Total water consumption (kilolitres) 1,522 1,452 - W2. Units of office water used per FTE (kilolitres/FTE) 11 8 - W3. Units of office water used per office area (kilolitres/m2) 0.28 0 - Travel and Transport T.1 Total energy consumption by fleet vehicles (MJ) 1,059,975 - - Diesel 405,285 - - LPG 0 - - Unleaded 654,691 - - T2. Total distance travelled by fleet vehicles (km) 300,053 422,632 402,330 Diesel 93,916 41,332 - LPG 0 0 - Unleaded 206,137 381,300 - (1) T3. Total greenhouse gas emissions from fleet vehicles (tonnes CO2-e) 72 577 - Diesel 28 467 (1) - LPG 0 NA - Unleaded 44 109 (1) - (1) T3.Total greenhouse gas emissions from fleet vehicles per 1000km (tonnes CO2-e) 0.24 1.36 - Diesel 0.30 11.30 (1) - LPG 0.00 0.00 - Unleaded 0.21 0.29 (1) - T4. Total distance travelled by air 31,520 54,686 - T5. Percentage using sustainable transport to get to and from work by locality NA NA -

Note: (-) Data not available (1) The 2018-19 figures reported greenhouse gas emissions from CHW’s entire corporate fleet. The 2019-20 figures include fleet greenhouse gas emissions only associated with office-based activities. (2) The 2018-2019 figure was reported as renewable content.

Central Highlands Water 2019-20 Annual Report PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 41 SOCIAL SUSTAINABILITY

Value of community service obligations provided

Number Applied For Amount Granted Amount Granted 2019-20 2019-20 2018-19 $ $

Rebates and Concessions

Pensioner & Health Care Card Concessions 22,165 5,316,016.17 5,133,154.35

Life Support Rebates 0 0 268.46

Rebate Paid to Not-for-Profit Organisations 1,340 315,516.66 308,412.91

Vulnerable Customer Relief

Utility Relief Grant Scheme* 339 169,016.39 151,284.79

CHW Vulnerable Customer Relief 29 7,923.43 24,248.05

Water Saving

Community Housing Retrofit Program (CHRP) 36 151,479.00 70,889.00

Community Rebate Program (CRP) 193 61,887.00 98,952.00

Water Saving Products Rebates 0 0 0

Guaranteed Service Levels

Customer Charter Rebates 376 40,200.00 50,400.00

Management of social and economic impacts During 2019-20, CHW continued its focus on delivering positive customer outcomes via its three core programs, Customer Assistance and Vulnerability, Community Rebates, and the promotion of Permanent Water Saving Rules throughout the region. These core programs are supported by CHW’s dedicated Customer Care team and facilitate the following for customers: • Access to State Government concessions • Access to the DHHS Utility Relief Grant Scheme • Access to the Community Rebate Program provided in partnership with DELWP, supporting our vulnerable customers • Access to the Community Housing Retrofit Program provided in partnership with DELWP, supporting not-for- profit housing providers • Referrals to no-cost financial counselling services and other local agencies • Home visits to assist customers with paperwork, grant applications and provide water efficiency advice • A range of payment options including Centrepay and flexible payment arrangements • Access to CHW’s Business Assistance Package – a customised program targeting small business customers in financial hardship • Access to community information sessions providing information on payment options, how to read a water meter and identify leaks, and concessions and other assistance available • An annual Care Flow forum aimed to strengthen partnerships with local agencies providing assistance to vulnerable customers across the region.

42 PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY PART 5 PERFORMANCE REPORT

STATEMENT OF PERFORMANCE FOR THE 2019-20 FINANCIAL YEAR

Financial performance indicators

KPI Key Performance Indicator 2018-19 2019-20 2019-20 Variance Notes Variance Notes Number Result Result Target to prior to target year

F1 Cash Interest Cover Net operating cash flows before net interest and tax/net interest payments 4.46 5.18 4.28 16.1% 1 21.0% 2

F2 Gearing Ratio Total Debt (including finance leases)/total assets *100 10.86% 10.26% 11.00% (5.5)% (6.7)%

F3 Internal Financing Ratio Net operating cash flow less dividends/net capital expenditure *100 108.67% 131.75% 98.30% 21.2% 3 34.0% 4

F4 Current Ratio Current assets/current liabilities (excluding long-term employee provisions and revenue in advance) 0.72 0.72 0.79 0.0% (8.9)%

F5 Return on Assets Earnings before net interest and tax/average assets *100 2.24% 2.41% 2.00% 7.6% 20.5% 5

F6 Return on Equity Net profit after tax/average total equity *100 1.40% 1.61% 1.20% 15.0% 6 34.2% 7

F7 EBITDA Margin Earnings before interest, tax, depreciation and amortisation/total revenue *100 44.92% 46.63% 44.10% 3.8% 5.7%

Notes: 1 & 2 Favourable variance to prior year and target driven by a range of factors 5 Favourable variance to target driven largely by increased including increased temporary water sales, project funding received temporary water sales from DELWP and a reduction in non-tariff debtors 6 & 7 Favourable variance to prior year and target driven largely by increased 3 & 4 Favourable variance to prior year and target driven by a range of factors temporary water sales including increased temporary water sales, project funding received from DELWP and a reduction in non-tariff debtors

Central Highlands Water 2019-20 Annual Report PART 5 PERFORMANCE REPORT 43 Water and sewerage service performance indicators

KPI Key Performance Indicator 2018-19 2019-20 2019-20 Variance Notes Variance Notes Number Result Result Target to prior to target year

WS1 Unplanned Water Supply Interruptions Percentage of customers receiving more than 5 unplanned water supply interruptions in the year 0% 0% 0% 0.0% 0.0%

WS2 Interruption time Average duration of unplanned water supply interruptions 125 121 120 (2.9)% 1.1%

WS3 Restoration of Unplanned Water Supply Interruptions Percentage of unplanned water supply interruptions restored within 5 hours 91.8% 94.8% 96.0% 3.2% (1.3)%

SS1 Containment of Sewer Spills Percentage of sewer spills from reticulation and branch sewers contained within 5 hours 93.9% 97.2% 100% 3.5% (2.8)%

SS2 Sewer Spills Interruptions Percentage of residential sewerage customers affected by sewerage interruptions restored within 5 hours 96.6% 95.8% 95% (0.9)% 0.8%

Customer responsiveness performance indicators

KPI Key Performance Indicator 2018-19 2019-20 2019-20 Variance Notes Variance Notes Number Result Result Target to prior to target year

CR1 Water Quality Complaints No. of complaints per 1000 customers 1.63 1.15 2.09 (29.4)% 1 (45.0)% 2

CR4 Billing Complaints No. of complaints per 1000 customers 0.00 0.16 0.38 - 3 (57.9)% 4

Notes: Note: Values have been converted from 'per 100 customers' to per 3 & 4 CHW has developed its reporting procedures to capture complaints 1000 customers more accurately during 2019-20 to better align with ESC guidance 1 & 2 CHW provides high quality, safe drinking water to its customers. relating to complaints. This has been demonstrated in the increased Enhanced focus on preventative programs, better operational billing complaints for 2019-20 compared to previous year. In addition, response procedures, targeted mains cleaning and better disinfection billing complaints have risen due to the increased financial vulnerability management have contributed to the 29.4% decrease of water quality of our customers following the COVID-19 pandemic. CHW remains complaints for 2019-20 compared to the previous year. In addition, CHW below the projected target as it continues to engage with our customers has refined its reporting procedures for water quality complaints during and support customers who identify themselves to CHW experiencing 2019-20 to better align with ESC guidance relating to complaints not financial vulnerability. associated with CHW owned and operated infrastructure.

Environmental performance indicators

KPI Key Performance Indicator 2018-19 2019-20 2019-20 Variance Notes Variance Notes Number Result Result Target to prior to target year

E1 Effluent reuse volume (and use) Percentage recycled for each category 15.1% 13.5% 15.0% (10.2)% 1 (10.0)% 2

E2 Total net CO2 emissions 17,380 14,976 16,067 (13.8)% 3 (6.8)% 4

Notes: 1 & 2 100% of Class C water was beneficially reused at 10 WWTPs. Increased 3 & 4 A favourable variance due to decreased grid electricity consumed, inflows into CHW’s two largest treatment plants, Ballarat South and installation of behind-the-meter solar, improved monitoring of North WWTP, was observed during 2019-20, resulting in a drop in the wastewater treatment processes and reduction in the use of the proportion of Class A and B water reused. The lower volume of Class Goldfields Superpipe. Performance will continue to improve as a result A water reused was also attributable to an early break in the irrigation of behind-the-meter energy generation at the Ballarat South WWTP season, resulting in decreased demand for recycled water. and CHW’s commitment to purchasing renewable energy via a Power Purchasing Agreement (PPA) with Zero Emissions Water Pty Ltd.

44 PART 5 PERFORMANCE REPORT STATUTORY CERTIFICATION

We certify that the accompanying Performance Report of Central Highlands Region Water Corporation in respect of the 2019-20 financial year is presented fairly in accordance with the Financial Management Act 1994. The Performance Report outlines the relevant performance indicators for the financial year as determined by the responsible Minister and as set out in the 2019-20 Corporate Plan, the actual and comparative results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets and/or between the actual results in the current year and the previous year. As at the date of signing, we are not aware of any circumstances which would render any particulars in the Performance Report to be misleading or inaccurate.

Dr Jeremy Johnson AM Chair Central Highlands Region Water Corporation

Paul O’Donohue Managing Director Central Highlands Region Water Corporation

Anthony O’Brien General Manager Business Services Central Highlands Region Water Corporation

Dated this 30th day of October 2020

Central Highlands Water 2019-20 Annual Report PART 5 PERFORMANCE REPORT 45 VAGO REPORT

Independent Auditor’s Report To the Board of the Central Highlands Region Water Corporation

pinion I have audited the accompanying performance report of the Central Highlands Region Water Corporation (the corporation) for the year ended 30 June 2020, which comprises the:

• financial performance indicators • water and sewerage service performance indicators • customer responsiveness performance indicators • environmental performance indicators • certification of performance report. In my opinion, the performance report of the Central Highlands Region Water Corporation in respect of the year ended 30 June 2020 presents fairly, in all material respects, in accordance with the performance reporting requirements of Part 7 of the Financial Management Act 1994.

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

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

46 PART 5 PERFORMANCE REPORT

Auditor’s As reuired the Audit At resonsiilit is to eress an oinion on the rsosiiitis erforance reort ased on the audit oecties for the audit are to otain or t udit o reasonale assurance aout hether the erforance reort as a hole is free fro t ror aterial misstatement, whether due to fraud or error, and to issue an auditor’s rort reort that includes oinion easonale assurance is a high leel of assurance ut is not a guarantee that an audit conducted in accordance ith the Australian Standards on Assurance Engageents ill alas detect a aterial isstateent hen it eists isstateents can arise fro fraud or error and are considered aterial if indiiduall or in the aggregate the could reasonal e eected to influence the decisions of users taen on the asis of this erforance reort. As art of an audit in accordance ith the Australian Standards on Assurance Engageents eercise rofessional udgeent and aintain rofessional sceticis throughout the audit also

• identif and assess the riss of aterial isstateent of the erforance reort hether due to fraud or error design and erfor audit rocedures resonsie to those riss and otain audit eidence that is sufficient and aroriate to roide a asis for oinion he ris of not detecting a aterial isstateent resulting fro fraud is higher than for one resulting fro error as fraud a inole collusion forger intentional oissions isreresentations or the oerride of internal control • otain an understanding of internal control releant to the audit in order to design audit rocedures that are aroriate in the circustances ut not for the urose of eressing an oinion on the effectieness of the cororation’s internal control • ealuate the oerall resentation structure and content of the erforance reort including the disclosures and hether the erforance reort reresents the underling eents and results in a anner that achiees fair resentation counicate ith the Board regarding aong other atters the lanned scoe and tiing of the audit and significant audit findings including an significant deficiencies in internal control that identif during audit

EBE Paul artin 0 ctoer 00 s delete or te Auditorenerl o itori

Central Highlands Water 2019-20 Annual Report PART 5 PERFORMANCE REPORT 47 PART 6 FINANCIAL REPORT

COMPREHENSIVE OPERATING STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020

Note 2020 2019 $'000 $'000 Revenue and income from continuing operations Service charges 2.1 61,615 61,308 Water usage charges 2.1 29,803 30,281 Government grants and contributions 2.2 91 234 Interest income 2.3 11 88 Developer contributions 2.4 17,584 16,860 Other income 2.5 9,476 6,534 Total revenue and income from continuing operations 118,580 115,305

Expenses Depreciation 4.1.1 (24,613) (23,653) Amortisation 4.3 (635) (582) Employee benefits 3.1.1 (22,846) (22,203) Service concession arrangement tolls 3.3 (10,687) (10,981) Service delivery expenses 3.2 (17,832) (18,342) Environmental contributions 8.2 (3,967) (3,967) Finance cost 6.1.2 (7,393) (8,252) Other expenses 3.4 (7,957) (8,019) Total expenses (95,930) (95,999)

Net result before tax 22,650 19,306

Income tax expense 8.1.1 (6,797) (5,796)

Comprehensive result for the period 15,853 13,510

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

48 PART 6 FINANCIAL REPORT BALANCE SHEET AS AT 30 JUNE 2020

Note 2020 2019 $'000 $'000 ASSETS Current assets Cash and cash equivalents 6.2 3,963 3,474 Receivable 5.1 20,235 23,417 Inventories 571 635 Prepayments 1,520 563 Total current assets 26,289 28,089

Non-current assets Receivables 5.1 174 174 Infrastructure, property, plant & equipment 4.1.1 1,176,531 1,160,961 Intangible assets 4.3 38,277 36,116 Biological assets 4.2 6,946 5,805 Total non-current assets 1,221,928 1,203,056

Total assets 1,248,217 1,231,145

LIABILITIES Current liabilities Payables 5.2 11,869 12,397 Interest bearing liabilities 6.1 18,894 21,614 Employee benefits 3.1.2 5,528 5,071 Total current liabilities 36,291 39,082

Non-current liabilities Interest bearing liabilities 6.1 109,144 112,038 Net deferred tax liabilities 8.1.2 124,363 117,565 Employee benefit 3.1.2 652 547 Total non-current liabilities 234,159 230,150

Total liabilities 270,450 269,232

Net assets 977,767 961,913

EQUITY Contributed capital 9.1.1 358,241 358,241 Reserves 9.1.2 253,925 253,925 Accumulated surplus 9.1.3 365,601 349,748 Total equity 977,767 961,914

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

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 49 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020

Note Contributed Asset Accumulated Total capital revaluation surplus surplus $'000 $'000 $'000 $'000

Opening balance at 1 July 2018 358,241 253,925 336,238 948,404

Total comprehensive income for the year - - 13,510 13,510

Balance at 30 June 2019 9.1 358,241 253,925 349,748 961,914

Total comprehensive income for the year - - 15,853 15,853

Balance at 30 June 2020 9.1 358,241 253,925 365,601 977,767

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

50 PART 6 FINANCIAL REPORT CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020

Note 2020 2019 $'000 $'000 Cash flows from operating activities

Receipts Service and usage charges 93,341 90,755 Receipts from Government grants – other 1,487 234 Interest received 11 88 Developer contribution fees 3,044 1,857 Goods and Services Tax received from the Australian Taxation Office (219) 22 Other receipts 11,661 6,058

Payments Payments to suppliers and employees (61,949) (56,644) Interest and other costs of finance paid (8,641) (8,364) Environmental contribution levy paid (2,645) (3,967)

Net cash inflow from operating activities 6.2.1 36,090 30,039

Cash flows from investing activities Payments for infrastructure, property, plant & equipment (27,393) (27,643) Proceeds from sale of infrastructure, property, plant & equipment 202 518 Payments for intangible assets (2,796) (614) Net cash outflow from investing activities (29,987) (27,739)

Cash flows from financing activities Repayments of borrowings (3,000) (1,000) Principal element of service concession liability (2,614) (2,358) Net cash outflow from financing activities (5,614) (3,358)

Net increase/(decrease) in cash and cash equivalents 489 (1,058) Cash and cash equivalents at the beginning of the financial year 3,474 4,532 Cash and cash equivalents at the end of the financial year 6.2 3,963 3,474

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

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 51 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019

NOTE: 1. ABOUT THIS REPORT 1 About this report Basis of Accounting 2 Funding delivery of our services The financial report includes separate financial statements for Central Highlands Regional Water Corporation (CHW) as 3 The cost of delivering services an individual reporting entity. This financial report is a general- purpose financial report, that consists of a Comprehensive 4 Key assets available to support Operating Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement, Director’s declaration and delivery of our services notes accompanying these statements for the year ending 5 Other assets and liabilities 30 June 2020. The general-purpose financial report has been prepared in accordance with Australian Accounting 6 How we financed our operations Standards (AASs), interpretations and other authoritative pronouncements of the Australian Accounting Standards 7 Risks, contingencies, and Board, and the requirements of the Financial Management Act 1994 and applicable Ministerial Directions. CHW is a not- valuation judgements for-profit entity for the purpose of preparing the financial 8 Statutory obligations statements. Where appropriate, those AASs paragraphs applicable to not- 9 Other disclosures for-profit entities have been applied. The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, income and expenses are recognised in the reporting year to which they relate, regardless of when cash is received or paid. The annual financial statements were authorised for issue by the Board on 30 October 2020. The principal address is: Central Highlands Regional Water Corporation 7 Learmonth Road Wendouree VIC 3355 Accounting policies Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. Unless otherwise stated, all accounting policies applied are consistent with those of the prior year. The following standard has been adopted by CHW: • AASB 15 Revenue from contracts with customers which replaces AASB 118 Revenue, AASB 111 Construction Contracts, and related interpretations, requires CHW to recognise revenue when CHW satisfies a performance obligation by transferring a promised good or service to a customer. CHW has adopted AASB 15 as at 1 July 2019 and has applied the new rules on a modified retrospective basis as mandated by the DTF through FRD 121 Transitional requirements on the application of AASB 15 Revenue from Contracts with Customers. As a result, comparatives for 2018-19 in our 30 June 2020 financial statements did not need restating. • AASB 16 Leases was issued in February 2016 and replaces AASB 117 Leases. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed for lessees. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay the obligation for lease payments are recognised. CHW has adopted AASB 16 as

52 PART 6 FINANCIAL REPORT at 1 July 2019 and has applied the new rules on a modified Rounding retrospective basis as mandated by the DTF through FRD 123 Transitional requirements on the application of AASB 16 Unless otherwise stated, amounts in the report have been Leases. As a result, comparatives for 2018-19 in our 30 June rounded to the nearest thousand dollars. Figures in the 2020 financial statements did not need restating. financial statements may not equate due to rounding. • AASB 1058 Income for Not-for-Profits replaces Historical cost convention requirements of income transactions previously accounted for under AASB 1004 Contributions. It establishes principles These financial statements have been prepared under the for not-for-profit entities that apply to (a) transactions historical cost convention, except for all classes of property, where the consideration to acquire an asset is significantly plant and equipment. less than fair value principally to enable a not-for-profit Corporation to further its objectives; and (b) the receipt Accounting estimates of volunteer services. It will apply to capital grants from Judgements, estimates and assumptions are required to government and grants with no sufficiently specific be made about financial information being presented. The performance obligation. CHW needs to determine whether significant judgements made in the preparation of these a transaction falls under AASB 1058 or actually a contract financial statements are disclosed in the notes where with a customer under AASB 15. CHW has adopted AASB amounts affected by those judgements are disclosed. 1058 as at 1 July 2019 and has applied the new rules Estimates and associated assumptions are based on on a modified retrospective basis as mandated by the professional judgements derived from historical experience DTF through FRD 122 Transitional requirements on the and various other factors that are believed to be reasonable application of AASB 1058 Income of Not-for-Profit Entities. under the circumstances. Actual results may differ from these As a result, comparatives for 2018-19 in our 30 June 2020 estimates. Revisions to accounting estimates are made in financial statements did not need restating. the period in which the estimate is revised and also in future • AASB 1059 Service Concession arrangements effective periods that are affected by the revision. Judgements and as of 1 January 2020 (Early adopted). The Australian assumptions made by management in applying Australian Accounting Standards Board (AASB) has issued AASB Accounting Standards or “AAS” that have significant effects 1059 Service Concession Arrangements: Grantors (AASB on the financial statements and estimates relate to: 1059) to account for service concession arrangements • Accrued water usage charges (Note 5.1) from the grantor’s perspective. The standard applies to both not-for-profit and for-profit public sector entities that • The fair value of land, buildings, infrastructure, plant and are grantors in a service concession arrangement. These equipment, biological assets and intangibles (Note 4); are arrangements that involve an operator providing public • Estimation of useful life (Note 4) services related to a service concession asset on behalf • Impairment of assets (Note 4) of a grantor for a specified period of time and managing • Employee benefit provisions (Note 3) at least some of those services under its own discretion. While the application date of the Standard has been • Actuarial assumptions for employee benefit provisions deferred to 1 January 2020, DTF mandates early adoption based on likely tenure of existing staff, patterns of leave of AASB 1059 using full retrospective approach, applicable claims, future salary movements and future discount for annual reporting periods commencing on or after 1 rates (Note 3) January 2019 as mandated by the DTF through FRD 124 • Determining whether the performance obligations are Transitional requirements on the application of AASB 1059 sufficiently specific so as to determine whether the Service Concession Arrangements: Grantors. Therefore, arrangement is within the scope of AASB 15 or AASB CHW has adopted AASB 1059 as at 1 July 2019 using a full 1058 (Note 2) retrospective approach with 1 July 2018 (‘being the date of The COVID-19 global health pandemic event has seen a initial application’). As a result, all comparative information State of Emergency declared in Victoria on 16 March 2020. in the financial statements are prepared as if AASB 1059 A range of restrictions have been in place across the state had always been in effect with a cumulative adjustment since that time which have impacted CHW’s customers and between the recognition of service concession assets and communities to varying degrees. financial liabilities and/or “Grant of A Right To The Operator” (or GORTO) liabilities recognised in accumulated surplus/ The consequential effects of COVID-19 on the economy (deficit) as at 1 July 2018. Further disclosures in relation to remain difficult to quantify at balance day. Significant AASB 1059 are at note 6.3.2 and 9.7 of this report. government funding at both the federal and state level have cushioned the economic impacts through a range of Functional and presentation currency measures including low interest loans, one-off payments and income support payments in the form of JobKeeper Items included in this financial report are measured using the and JobSeeker. currency of the primary economic environment in which CHW operates (‘the functional currency’). The financial statements CHW's operations have been largely unaffected outside a are presented in Australian dollars, which is CHW’s functional need to de-prioritise non-essential works. Despite having to and presentation currency. close our administration centre to both customers and staff as they adapt to working from home, our remote working Classification between current and non-current contact centre provided continuity of service. Digital channels remained available for customer enquiries and bill payments. In the determination of whether an asset or liability is current or non-current, consideration is given to the time when The most significant impact on the business has been each asset or liability is expected to be realised or paid. The the ability of our customers to pay bills given the broader asset or liability is classified as current if it is expected to economic impacts across the economy. Hardship programs be turned over within the next twelve months, being CHW's have increased as we support our customers through operational cycle. this period.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 53 As a result, at this stage the only account balance that is CHW has an ongoing obligation to provide a continuous affected by COVID-19 due to Management's judgements supply of the major services to our customers in our is Receivables and expected credit loss provision where an service region, and so customers simultaneously increased provision amount has been included as per note 5.1. receive and consume the benefit in line with CHW The following items have been considered by Management performing its obligations. Service and usage charges are but we remain satisfied that COVID-19 has not required recognised overtime. a change to the judgement and/or assumptions in the Service charges are billed quarterly based on a fixed fee disclosure of any balances. and revenue is recognised over time as the customer • Fair value of non-financial assets simultaneously receives and consumes the services provided by CHW. Where payments are made in advance by customers • Impairment of non-financial assets to unbilled accounts at reporting date, these payments are • Superannuation defined benefit assets and liabilities, classified as contract liabilities as CHW has yet to provide • Going concern the service. AASB 15 usually requires the disclosure of the aggregate amount of revenue expected to be derived from The State of Emergency in Victoria was elevated to a State of performance obligations which are unsatisfied as at the end Disaster on 2 August 2020. CHW’s operations will continue of the reporting period. Management consider that such consistent with the description above. an amount cannot be reliably estimated, primarily because CHW’s obligation to supply customers with major services 2. FUNDING DELIVERY OF will continue in perpetuity. As a result, CHW has applied the OUR SERVICES practical expedient given in AASB 15, paragraph 121(b), not to disclose this amount in relation to service charges. Introduction Usage charges are billed quarterly in arrears and revenue is recognised over time as CHW has the right to receive an This section provides additional information about how CHW amount of consideration based on the unit of water consumed is funded and the accounting policies that are relevant for by and sewage, recycled water and trade waste disposed an understanding of the items recognised in the financial of during the financial year and the regulated price. Usage statements. charges are accrued, and contract liabilities are booked. Income is recognised to the extent it is probable the economic CHW has applied the practical expedient given in AASB 15, benefits will flow to CHW and the income can be reliably paragraph B16, where revenue can be recognised in the measured at fair value. Where applicable, amounts disclosed amount which it has a right to invoice, since the amount is as income are net of returns, allowances, duties and taxes. considered by CHW to correspond directly with the value to the customer of CHW’s performance to date. The amount Structure of right to invoice is based on meter readings. As meter 2.1 Service and usage charges reading is cyclical, an estimate is made at the end of the accounting period for water usage and sewerage and trade 2.2 Government grants and contributions waste disposal by customers and recycled water produced. 2.3 Interest income The estimate is made by multiplying the number of days 2.4 Developer contributions since the last reading by daily average water consumption for that period. Any difference between the amount invoiced 2.5 Other income and actual consumption is adjusted in the period in which the meter readings are finalised and are recovered or paid as part of the next period’s charges. Further, this revenue stream 2.1 Service and usage charges includes an estimate of the amount of water consumed by, and sewage disposed, and trade waste disposed and recycled 2020 2019 water for customers that are not yet billed at the end of the $'000 $'000 period. This amount is included in contract assets. Service charges Water service charges 14,394 14,554 2.2 Government grants and contributions

Wastewater charges 46,706 46,269 2020 2019 Trade waste charges 515 485 $'000 $'000 Total service charges 61,615 61,308 State operating grant 91 234 Total government grants and contributions 91 234 Usage charges

Water volume 26,869 28,109 CHW applies AASB 1058 when the grants received by CHW Wastewater volume 1,123 1,067 are not enforceable and doesn’t have sufficiently specific performance obligations. CHW also applies AASB 1058 to Trade waste volume 1,761 920 capital grants that are controlled by CHW. Recycled water volume 50 185 Total usage charges 29,803 30,281

Total service and usage charges 91,418 91,589

54 PART 6 FINANCIAL REPORT 2.3 Interest income 3. THE COST OF

2020 2019 DELIVERING SERVICES $'000 $'000 Introduction Interest income 11 88 This section provides additional information about how Total interest income 11 88 CHW’s funding is applied and the accounting policies that are relevant for an understanding of the items recognised in the Interest income is recognised using the effective interest rate financial statements. method, in the period in which it is incurred. Structure 2.4 Developer contributions 3.1 Our people

2020 2019 3.1.1 Employee benefits – comprehensive $'000 $'000 operating statement Developer contributions 3.1.2 Employee benefits – balance sheet Fees paid by developers 3,044 1,857 3.1.3 Superannuation Assets received from developers 14,540 15,003 3.2 Service delivery expenses Total contributions 17,584 16,860 3.3 Service concession arrangement tolls 3.4 Other operating expenses New customer contributions represent non-refundable upfront charges applicable when customers request to build or develop a property and connect to CHW’s water supply 3.1 Our people and sewerage infrastructure network. The charges contribute towards the cost of augmenting CHW's water supply 3.1.1 Employee benefits – comprehensive distribution systems and sewerage disposal systems. operating statement Revenue from new customer contributions is recognised at a point in time when CHW has satisfied its performance obligation. 2020 2019 $'000 $'000 The rates applied to calculate the new customer contributions Employee benefits are regulated by the Essential Services Commission. Salaries and wages 18,841 17,869 Developer contributed assets arise when developers pay for the cost of construction of new infrastructure assets and Annual leave 1,231 1,370 subsequently gift these assets to CHW to maintain in perpetuity. Long service leave 700 678 Revenue from developer contributed assets is recognised at a Employer superannuation point in time when CHW has satisfied its performance obligation. contributions 1,913 1,718 Depending on the type of developer application, this can Termination benefit 317 489 result in the performance obligation being satisfied: Other (156) 79 • when the Statement of Compliance is issued to the Total employee benefit costs 22,846 22,203 customer, or • when the customer is connected to CHW's infrastructure network for the provision of water and sewerage services Employee expenses include all costs related to when no Statement of Compliance is required to be issued. employment including wages and salaries, fringe benefits tax, leave entitlements, termination payments and Revenue is recognised at the fair value of the gifted assets by WorkCover premiums. assessing the value of the works using schedule of rates. The amount charged to the Comprehensive Operating 2.5 Other income Statement in respect of superannuation represents contributions made or due by CHW to the relevant superannuation plans in respect to the services of CHW’s 2020 2019 $'000 $'000 staff (both past and present). Superannuation contributions are made to the plans based on the relevant rules of each plan Forestry timber sales 1,274 1,343 and any relevant compulsory superannuation requirements Temporary water sales 5,713 3,273 that CHW is required to comply with. Other 2,489 1,918 Termination benefits are payable when employment is terminated before normal retirement date, or when an Total other income 9,476 6,534 employee accepts an offer of benefits in exchange for the termination of employment. Termination benefits are Revenue from other services rendered is recognised when recognised when CHW is demonstrably committed to or as performance obligations are satisfied. Revenue is terminating the employment of current employees according recognised over time based on the number of customers to a detailed formal plan without possibility of withdrawal or serviced as the customer simultaneously receives and providing termination benefits as a result of an offer made to consumes the benefits provided by the third parties. encourage voluntary redundancy. Benefits falling due more Unearned income at reporting date is reported as income than 12 months after the end of the reporting period are received in advance. discounted to present value.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 55 3.1.2 Employee benefits – balance sheet Wages and salaries, annual leave and sick leave Provision is made for benefits accruing to employees in Liabilities for wages and salaries, including non-monetary respect of annual leave and long service leave for services benefits and annual leave that are expected to be settled rendered to the reporting date and recorded as an expense wholly within 12 months after the end of the period in which during the period the services are delivered. the employee renders the related service are recognised in respect of employee's services up to the end of the reporting 2020 2019 period and are measured at the amounts expected to be paid $'000 $'000 when the liabilities are settled. The liabilities are presented as Current provisions: current employee benefit obligations in the balance sheet. Rostered days off Liabilities for wages and salaries (including non-monetary benefits, annual leave and on-costs) are recognised as Unconditional and expected to part of the employee benefit provision as current liabilities, settle within 12 months 116 116 because CHW does not have an unconditional right to defer settlements of these liabilities. Annual leave Liabilities for salaries and annual leave are all recognised Unconditional and expected to in the provision for employee benefits as ‘current liabilities’ settle within 12 months 1,139 1,016 as per AASB 119 Employee Benefits, because CHW does not have an unconditional right to defer settlements of Unconditional and expected to these liabilities. settle after 12 months 346 335 Sick leave payments are made in accordance with relevant awards, determinations and Corporation policy. No provision Long service leave is made in the Financial Statements for unused sick leave Unconditional and expected to entitlements as these are non-vesting benefits. settle within 12 months 412 418 On-costs Unconditional and expected to settle after 12 months 2,829 2,633 On-costs, such as payroll tax and workers’ compensation insurance, are not employee benefits. They are disclosed separately as a component of the provision for employee Provisions for on-costs benefits when the employment to which they relate Unconditional and expected to has occurred. settle within 12 months 279 183 Long service leave Unconditional and expected to settle after 12 months 407 370 Long Service Leave (LSL) is recognised in the provision for employee benefits. Total current provisions for employee benefits 5,528 5,071 Unconditional LSL (representing seven or more years of continuous service) is disclosed as a current liability even where CHW does not expect to settle the liability within 12 Non-current provisions: months. CHW does not have the unconditional right to defer Long service leave – conditional 577 487 the settlement of the entitlement should an employee take leave within 12 months. On-costs 75 60 Total non-current provisions for The components of this current LSL liability are measured at: employee benefits 652 547 • Undiscounted value – the component CHW expects to wholly settle within 12 months; or • Present value – the component CHW does not expect to Total provisions for employee benefits 6,180 5,618 wholly settle within 12 months. Conditional long service leave is disclosed as a non-current Reconciliation of movement in on-cost provision liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current long service 2020 2019 $'000 $'000 liability is measured at present value. Opening balance 613 630 Any gain or loss following revaluation of the present value of non-current LSL liability is recognised as a transaction, Additional provisions recognised 385 150 except to the extent that a gain or loss arises due to changes Amounts utilised recognised (259) (186) in bond interest rates for which it is then recognised in the operating statement. Effects of changes in the discount rate 22 19 Performance payments Closing balance 761 613 Performance payments for CHW’s Executive Officers are Current 686 553 based on a percentage of the annual salary package provided Non-current 75 60 under their contract(s) of employment. A liability is recognised and is measured as the aggregate of the amounts accrued under the terms of the contracts to balance date.

56 PART 6 FINANCIAL REPORT 3.1.3 Superannuation In addition, CHW reimburses the Fund to cover the excess of the benefits paid as a consequence of retrenchment above CHW makes all of its employer superannuation contributions the funded resignation or retirement benefit. in respect of its employees to the Local Authorities Superannuation Fund (the Fund). This Fund has two categories Funding calls of membership, accumulation and defined benefit, each of which is funded differently. Obligations for contributions to If the Defined Benefit category is in an unsatisfactory financial the Fund are recognised as an expense in Comprehensive position at an actuarial investigation or the Defined Benefit Operating Statement when they are made or due. category‘s VBI is below its shortfall limit at any time other than the date of the actuarial investigation, the Defined Benefit Accumulation category has a shortfall for the purposes of SPS 160 and the Fund is required to put a plan in place so that the shortfall is The Fund's accumulation categories, Vision MySuper/ fully funded within three years of the shortfall occurring. The Vision Super Saver, receives both employer and employee Fund monitors its VBI on a quarterly basis and the Fund has contributions on a progressive basis. Employer contributions set its shortfall limit at 97%. are normally based on a fixed percentage of employee earnings (for the year ended 30 June 2020, this was 9.5% as In the event that the Fund Actuary determines that there required under Superannuation Guarantee (SG) legislation). is a shortfall based on the above requirement, the Fund’s participating employers (including CHW) are required to make Defined benefit an employer contribution to cover the shortfall. CHW does not use defined benefit accounting for its defined Using the agreed methodology, the shortfall amount is benefit obligations under the Fund's Defined Benefit category. apportioned between the participating employers based on This is because the Fund's Defined Benefit category is a the pre-1 July 1993 and post-30 June 1993 service liabilities pooled multi-employer sponsored plan. of the Fund’s Defined Benefit category, together with the employer’s payroll at 30 June 1993 and at the date the There is no proportional split of the defined benefit liabilities, shortfall has been calculated. assets or costs between the participating employers as the defined benefit obligation is a floating obligation between the Due to the nature of the contractual obligations between participating employers and the only time that the aggregate the participating employers and the Fund, and that the obligation is allocated to specific employers is when a call Fund includes lifetime pensioners and their reversionary is made. As a result, the level of participation of CHW in the beneficiaries, it is unlikely that the Fund will be wound up. Fund cannot be measured as a percentage compared with If there is a surplus in the Fund, the surplus cannot be other participating employers. Therefore, the Fund Actuary is returned to the participating employers. unable to allocate benefit liabilities, assets and costs between employers for the purposes of AASB 119. In the event that a participating employer is wound-up, the defined benefit obligations of that employer will be Funding arrangements transferred to that employer’s successor.

CHW makes employer contributions to the Defined Benefit The 2019 interim actuarial investigation surplus amounts category of the Fund at rates determined by the Trustee on the advice of the Fund Actuary. An actuarial investigation is conducted annually for the Defined Benefit category of which CHW is a contributing A triennial actuarial review is currently underway for the employer. Generally, a full actuarial investigation conducted Defined Benefit category as at 30 June 2020 and is expected every three years and interim actuarial investigations are to be completed by 31 December 2020. conducted for each intervening year. An interim investigation As at 30 June 2019, an interim actuarial investigation was held was conducted as at 30 June 2019 and the last full actuarial as the Fund provides lifetime pensions in the Defined Benefit investigation was conducted as at 30 June 2017. category. The vested benefit index (VBI) of the Defined The Fund’s actuarial investigations identified the following Benefit category of which CHW is a contributing employer for the Defined Benefit category of which CHW is a was 107.1%. The financial assumptions used to calculate contributing employer: the VBIs were: • Net investment returns 6.0% pa 2019 2017 • Salary information 3.5% pa $m $m • Price inflation (CPI) 2.0% pa. A VBI surplus $151.3 $69.8 Vision Super has advised that the actual VBI at 30th June A total service liability surplus $223.4 $193.5 2020 was 104.6%. A discounted accrued benefits surplus $256.7 $228.8 The VBI is used as the primary funding indicator. Because the VBI was above 100%, the 30 June 2019 actuarial investigation The VBI surplus means that the market value of the fund’s determined the Defined Benefit category was in a satisfactory assets supporting the defined benefit obligations exceed financial position and that no change was necessary to the the vested benefits that the defined benefit members would Defined Benefit category’s funding arrangements from have been entitled to if they had all exited on 30 June 2019. prior years. The total service liability surplus means that the current value On the basis of the results of the 2017 full actuarial of the assets in the Fund’s Defined Benefit category plus investigation conducted by the Fund Actuary, CHW makes expected future contributions exceeds the value of expected employer contributions to the Fund’s Defined Benefit future benefits and expenses as at 30 June 2019. The category at rates determined by the Fund’s Trustee. For the discounted accrued benefit surplus means that the current year ended 30 June 2020, this rate was 9.5% of members' value of the assets in the Fund’s Defined Benefit category salaries (9.5% in 2018-19). This rate is expected to increase exceeds the value of benefits payable in the future but in line with any increases in the SG contribution rate and accrued in respect of service to 30 June 2019. reviewed as part of the 30 June 2020 triennial valuation. CHW was notified of the 30 June 2019 VBI during August 2019 (2018: August 2018).

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 57 The 2020 triennial actuarial investigation A triennial actuarial investigation is being conducted for the Fund’s position as at 30 June 2020. It is anticipated that this actuarial investigation will be completed by 31 December 2020. The financial assumptions for the purposes of this investigation are:

2020 2017 Triennial investigation Triennial investigation Net investment return 5.6% pa 6.5% pa Salary inflation 2.50 % pa 3.5% pa for the first two years and 2.75% pa thereafter Price inflation 2.0% pa 2.5% pa

Superannuation contributions Contributions by CHW (excluding any unfunded liability payments) to the above superannuation plans for the financial year ended 30 June 2020 are detailed below:

Scheme Type of Scheme Rate 2020 2019 $’000 $’000 Vision Super Defined Benefits 9.50% 202 217 Vision Super Accumulation 9.50% 726 713 Superannuation funds – other Accumulation 9.50% 985 788 Contributions to all funds 1,913 1,718

There were employee contributions of $149,216 ($155,903: 2019) outstanding and no loans issued from or to the above schemes as at 30 June 2020. The expected contributions to be paid to the Defined Benefit category of Vision Super for the year ending 30 June 2020 is $216,000.

3.2 Service delivery expenses 3.3 Service concession arrangement tolls Service delivery expenses, including routine maintenance, CHW has entered into contractual arrangements to build, repair costs and minor renewal costs are expensed as own, operate and transfer several facilities as noted under incurred. Where the repair relates to the replacement Note 6.3.2, CHW accounts for these as service concession of a component of an asset and the cost exceeds the arrangement – refer Note 6.3.2. The service concession capitalisation threshold, the cost is capitalised and arrangement tolls below refer to the variable expenses of the depreciated. arrangement. The expenses are volume-based charges for water and wastewater treatment. 2020 2019 $'000 $'000 2020 2019 $'000 $'000 Service delivery expenses Service concession Fleet 705 690 arrangement tolls 10,687 10,981 Power 2,391 2,264 Total service concession Water and sewer network 8,753 9,441 arrangement tolls 10,687 10,981 Bulk and temporary water charges 752 779 Forestry (biological assets) 967 865 Catchments and grounds 1,535 1,606 Monitoring and testing 827 873 Other repairs and maintenance 1,902 1,823 Total service delivery expenses 17,832 18,341

58 PART 6 FINANCIAL REPORT 3.4 Other operating expenses 4. KEY ASSETS AVAILABLE TO

2020 2019 SUPPORT DELIVERY OF $'000 $'000 OUR SERVICES Other operating Professional and technical services 3,207 3,455 Introduction CHW controls infrastructure and other assets that are utilised Printing and postage 503 550 in fulfilling its objectives and conducting its activities. They Insurance 415 348 represent the key resources that have been entrusted to Community engagement 453 535 CHW to be utilised for delivery of those outputs. Bad and doubtful debts 492 266 Structure Bank and merchant fees 408 379 4.1 Infrastructure, property, plant and equipment: Audit fees 187 260 Carrying amount Telephone and communication links 612 471 4.1.1 Reconciliation of movements in carrying values of Other operating 1,680 1,755 infrastructure, property, plant and equipment Total other operating 7,957 8,019 4.1.2 Fair value determination: Non-financial physical assets Other operating expenses generally represent the day-to-day 4.1.3 Depreciation and impairment running costs incurred in normal operations and are deemed 4.1.4 Net gain/(loss) on disposal of non-current assets relevant for the understanding of this financial report. They are expensed in the period in which they are incurred. 4.2 Biological assets 4.2.1 Reconciliation of movement in carrying amounts 4.2.2 Fair value determination: Biological assets 4.3 Intangible assets

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 59 4.1 Infrastructure, property, plant and equipment: Carrying amount

4.1.1 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment

Land Buildings Plant & Infra- Infra- Service Capital Total equipment structure structure concession works In - water - waste- assets progress water $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 July 2018 Cost or fair value 50,226 24,348 18,328 750,067 351,321 46,033 20,059 1,260,382 Accumulated depreciation - (4,463) (9,546) (71,232) (28,757) (2,887) - (116,885) Net book amount 50,226 19,885 8,782 678,835 322,564 43,146 20,059 1,143,497

Year ended 30 June 2019 Opening net book amount 50,226 19,885 8,782 678,835 322,564 43,146 20,059 1,143,497 Additions 52 - 1,481 - - - 26,137 27,670 Gifted asset - - - 3,308 8,631 - 3,065 15,004 Disposal - - (633) (216) (82) - (11) (942) Transfer between asset classes - 404 607 7,544 4,884 - (13,439) - Transfer to intangibles ------(614) (614) Depreciation - (533) (1,532) (11,211) (8,924) (1,453) - (23,653) Closing net book Amount 50,278 19,756 8,705 678,260 327,073 41,693 35,197 1,160,962

At 30 June 2019 Cost or fair value 50,278 24,830 18,386 762,890 364,329 43,145 35,197 1,299,055 Accumulated depreciation - (5,075) (9,681) (84,630) (37,256) (1,452) - (138,094) Net book amount 50,278 19,756 8,705 678,260 327,073 41,693 35,197 1,160,962

Year ended 30 June 2020 Opening net book amount 50,278 19,756 8,705 678,260 327,073 41,693 35,197 1,160,962 Additions ------30,262 30,262 Gifted assets - - - 4,708 11,112 - (1,280) 14,540 Disposal - - (164) (411) (94) - (1,181) (1,850) Transfer between asset classes 1,631 1,260 2,687 19,246 8,693 - (33,496) 21 Transfer to intangibles ------(2,791) (2,791) Depreciation - (606) (1,795) (11,382) (9,373) (1,457) - (24,613) Closing net book amount 51,909 20,410 9,433 690,421 337,411 40,236 26,711 1,176,531

At 30 June 2020 Cost or fair value 51,909 26,056 20,369 785,470 383,765 43,145 26,711 1,337,425 Accumulated depreciation - (5,646) (10,936) (95,049) (46,354) (2,909) - (160,894) Net book amount 51,909 20,410 9,433 690,421 337,411 40,236 26,711 1,176,531

60 PART 6 FINANCIAL REPORT Initial recognition Revaluation decrements are recognised immediately as an expense in the net result, except that, to the extent that Infrastructure, property, plant and equipment represent non- a credit balance exists in the asset revaluation reserve in current physical assets comprising land, buildings, water, respect of the same class of assets, they are debited to the wastewater and drainage infrastructure, service concession asset revaluation reserve. assets, plant and equipment, used by CHW in its operations. Items with a cost or value in excess of $1,000 and a useful life Revaluation increases and revaluation decreases relating to of more than one year are recognised as an asset. All other individual assets within a class of infrastructure, property, assets acquired are expensed. plant and equipment are offset against one another within that class but are not offset in respect of assets in Items of infrastructure, property, plant and equipment, are different classes. measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment. Where Revaluation reserves are not transferred to accumulated an asset is acquired for no or nominal cost, the cost is its fair surplus/(deficit) on derecognition of the relevant asset. value at the date of acquisition. 4.1.2 Fair value determination non-physical assets The cost of constructed non-financial physical assets includes the cost of all materials used in construction, direct labour Significant judgement: Fair value measurements of assets on the project and an appropriate proportion of variable and and liabilities fixed overheads. Fair value determination requires judgement and the use CHW recognises a service concession asset constructed, of assumptions. This section discloses the most significant developed or acquired from a third party by the operator, assumptions used in determining fair values. Changes to including an upgrade to an existing asset of CHW, when CHW assumptions could have a material impact on the results and controls the asset. CHW controls or regulates the services financial position of CHW. the operator must provide with the asset, price, and any Fair value is the price that would be received to sell an asset significant residual interest in the asset at the end of the term or paid to transfer a liability in an orderly transaction between of the arrangement. market participants at the measurement date. CHW initially measures Service concession assets at current Consistent with AASB 13 Fair Value Measurement, CHW replacement cost in accordance with the cost approach to determines the policies and procedures for both recurring fair fair value in AASB 13 Fair Value Measurement. Subsequent value measurements such as infrastructure, property, plant to the initial recognition, or reclassification of the asset, and equipment, biological assets, and financial instruments CHW measures the service concession asset in accordance and for non-recurring fair value measurements such as assets with AASB 16 Property Plant and Equipment or AASB 138 held for sale, in accordance with the requirements of AASB 13 Intangible Assets as appropriate as relevant. and the relevant Financial Reporting Directions. Where an existing asset of CHW is reclassified as a service Fair value hierarchy concession asset, CHW measures the asset at current replacement cost as at the date of reclassification. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised Subsequent measurement within the fair value hierarchy, described as follows, based Infrastructure, property, plant and equipment are on the lowest level input that is significant to the fair value subsequently measured at fair value less accumulated measurement as a whole: depreciation and impairment. Fair value is determined with • Level 1 – Quoted (unadjusted) market prices in active regard to the asset’s highest and best use (considering markets for identical assets or liabilities; legal or physical restrictions imposed on the asset, public • Level 2 – Valuation techniques for which the lowest level announcements or commitments made in relation to the input that is significant to the fair value measurement is intended use of the asset). Refer to Note 4.1.2 for fair value directly or indirectly observable; and disclosures. • Level 3 – Valuation techniques for which the lowest level Revaluation of infrastructure, property, plant and equipment input that is significant to the fair value measurement is Revaluations are conducted in accordance with FRD 103H. unobservable. Scheduled revaluation is undertaken every five years with an For the purpose of fair value disclosures, CHW has annual assessment of fair value to determine if it is materially determined classes of assets and liabilities on the basis of the different to the carrying value. If the difference to carrying nature, characteristics and risks of the asset or liability and the value is greater than 10 per cent, a management revaluation level of the fair value hierarchy as explained above. is undertaken while a movement greater than 40 per cent will normally involve an Approved Valuer (usually the Valuer General of Victoria) to perform detailed assessment of the fair value. If the movement in fair value since the last revaluation is less than or equal to 10 per cent, then no change is made to carrying amounts. Revaluation increments are credited directly to equity in the asset revaluation reserve surplus/(deficit), except that, to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in determining the net result, the increment is recognised as revenue in determining the net result.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 61 Non-financial physical assets

Carrying Fair value measurement at end of amount as at reporting period using: 30/6/20 Level 1 (i) Level 2 (i) Level 3 (i) $'000 $'000 $'000 $'000 Land at fair value Specialised land 51,909 - - 51,909 Total of land at fair value 51,909 - - 51,909

Buildings at fair value Specialised buildings 20,410 - - 20,410 Total of buildings at fair value 20,410 - - 20,410

Plant, equipment and vehicles at fair value Vehicles 3,156 - 3,156 - Plant and equipment 6,277 - - 6,277 Total of plant, equipment and vehicles at fair value 9,433 - 3,156 6,277

Service concession assets at fair value Service concession assets 40,236 - - 40,236 Total service concession assets 40,236 - - 40,236

Water infrastructure at fair value Water treatment plants 15,495 - - 15,495 Water mains 338,288 - - 338,288 Reservoirs 208,283 - - 208,283 Water infrastructure – other 128,356 - - 128,356 Total of water infrastructure at fair value 690,421 - - 690,421

Wastewater infrastructure at fair value Wastewater treatment plants 117,004 - - 117,004 Wastewater sewer mains 125,444 - - 125,444 Other 94,963 - - 94,963 Total of wastewater infrastructure at fair value 337,411 - - 337,411

Note: (i) Classified in accordance with the fair value hierarchy, see above.

62 PART 6 FINANCIAL REPORT Carrying Fair value measurement at end of amount as at reporting period using: 30/6/19 Level 1 (i) Level 2 (i) Level 3 (i) $'000 $'000 $'000 $'000 Land at fair value Specialised land 50,278 - - 50,278 Total of land at fair value 50,278 - - 50,278

Buildings at fair value Specialised buildings 19,755 - - 19,755 Total of buildings at fair value 19,755 - - 19,755

Plant, equipment and vehicles at fair value Vehicles 1,481 - 1,481 - Plant and equipment 7,224 - - 7,224 Total of plant, equipment and vehicles at fair value 8,705 - 1,481 7,224

Service concession assets at fair value Service concession assets 41,693 - - 41,693 Total service concession assets 41,693 - - 41,693

Water infrastructure at fair value Water treatment plants 14,170 - - 14,170 Water mains 327,919 - - 327,919 Reservoirs 208,213 - - 208,213 Water infrastructure – other 127,958 - - 127,958 Total of water infrastructure at fair value 678,260 - - 678,260

Wastewater infrastructure at fair value Wastewater treatment plants 117,546 - - 117,546 Wastewater sewer mains 119,994 - - 119,994 Other 89,533 - - 89,533 Total of wastewater infrastructure at fair value 327,073 - - 327,073

There have been no transfers between levels during the period. For the majority of CHW’s specialised buildings, the current replacement cost method is used, adjusting for the associated The Valuer General Victoria (VGV) is CHW’s independent depreciations. As depreciation adjustments are considered valuation agency in relation to valuation of property and as significant, unobservable inputs in nature, specialised infrastructure. buildings are classified as Level 3 fair value measurements. CHW, in conjunction with VGV, monitors changes in the fair An independent valuation of CHW's specialised land and value of property, plant and equipment and infrastructure specialised buildings was carried out by JLT Valuation Services through relevant data sources to determine whether on behalf of the Valuer General Victoria. The valuation was revaluation is required. performed using the market approach adjusted for CSO. The Specialised land and specialised buildings effective date of the valuation is 30 June 2016. The market approach is used for specialised land, although CHW conducted an assessment at 30 June 2020 with no it is adjusted for the community service obligation (CSO) to material movement identified since the 2016 valuation. reflect the specialised nature of the land being valued. COVID-19 impact on valuations The CSO adjustment is a reflection of the Valuer’s assessment The impact the COVID-19 pandemic has had on the of the impact of restrictions associated with an asset to the fundamental valuations inputs remains to be seen. However, extent that is also equally applicable to market participants. given the current lack of observable transactions, it is not This approach is in light of the highest and best use possible to reliability determine whether the COVID-19 consideration required for fair value measurement, and takes pandemic has caused a significant or material impact on into account the use of the asset that is physically possible, valuations. In addition, buildings and infrastructure assets are legally permissible, and financially feasible. As adjustments predominantly valued according to depreciated replacement of CSO are considered as significant unobservable inputs, costs which are largely unaffected by the COVID-19 specialised land would be classified as Level 3 assets.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 63 pandemic. CHW believes that the valuations as disclosed in Where it has not been possible to examine hidden works these financial statements are a true reflection of fair value as such as structural frames and floors, the use of reasonable at 30 June 2020. materials and methods of construction have been assumed bearing in mind the age and nature of the building. The Plant and equipment estimated cost of reconstruction includes structure services Plant and equipment are held at fair value. When plant and and finishes as applicable. equipment is specialised in use, such that it is rarely sold other An independent valuation of CHW’s water and wastewater than as part of a going concern, fair value is determined using infrastructure was carried out by JLT Valuation Services the current replacement cost method. on behalf of the Valuer General Victoria. The valuation was There were no changes in valuation techniques throughout performed based on the current replacement cost of the the period to 30 June 2020. assets. The effective date of the valuation is 30 June 2016. For all assets measured at fair value, the current use is These assets are classified as level 3 fair value as the lowest considered the highest and best use. level input, the absence of an active market, has a significant Water and wastewater infrastructure impact on the fair value which is unobservable. Water and wastewater infrastructure assets are valued CHW conducted an assessment at 30 June 2020 with no using the current replacement cost method less all forms material movement identified since the 2016 valuation. of obsolescence and depreciation. This cost represents the Reconciliation of level 3 fair value movements replacement cost of the building/component after applying A reconciliation from the opening balances to the closing depreciation rates on a useful life basis. Replacement costs balances for fair value measurements categorised within relate to costs to replace the current service capacity of the asset. Economic obsolescence has also been factored into level 3 of the fair value hierarchy, disclosing separately the current replacement cost calculation. changes during the period.

Specialised Specialised Plant and Service Water Wastewater land buildings equipment concession infrastructure infrastructure assets $'000 $'000 $'000 $'000 $'000 $'000 2020 Opening balance 50,278 19,756 7,224 41,693 678,260 327,073 Purchases (sales) 1,631 1,260 434 - 23,543 19,711 Depreciation - (606) (1,381) (1,457) (11,382) (9,373) Closing balance 51,909 20,410 6,277 40,236 690,421 337,411

2019 Opening balance 50,226 19,884 5,683 43,146 678,835 322,564 Purchases (sales) 52 404 1,929 - 10,636 13,433 Depreciation - (533) (388) (1,453) (11,211) (8,924) Closing balance 50,278 19,755 7,224 41,693 678,260 327,073

64 PART 6 FINANCIAL REPORT Description of significant unobservable inputs to level 3 valuations

Asset Type Fair value at Fair value at Valuation technique Significant unobservable inputs 30 June 2020 30 June 2019 $'000 $'000 Specialised land 51,909 50,278 Market approach Community Service Obligation (CSO) Specialised buildings 20,410 19,755 Current Direct cost per square metre VGV 13,295m2 replacement cost Useful life of specialised buildings Plant and equipment 6,277 7,224 Current Cost per unit replacement cost Useful life of plant and equipment Water infrastructure Water treatment plants 15,495 14,170 Current Cost per unit (15 in total) replacement cost Useful life of water treatment plants Water mains 338,288 327,919 Current Cost per metre (18mm - 1,250mm) (2,496,666m) replacement cost Useful life of water mains Reservoirs 208,283 208,213 Current Cost per unit (30 in total) replacement cost Useful life of reservoirs Water infrastructure 128,356 127,958 Current Cost per unit - other replacement cost Useful life of other infrastructure Service concession assets 40,236 41,693 Current Cost per unit replacement cost Useful life of other infrastructure Wastewater infrastructure Wastewater treatment plants 117,004 117,546 Current Cost per unit (13 in total) replacement cost Useful life of wastewater treatment plants Wastewater sewer mains 125,444 119,994 Current Cost per metre (63mm - 1,500mm) (1,411,728m) replacement cost Useful life of wastewater mains Wastewater infrastructure 94,963 89,554 Current Cost per unit - other replacement cost Useful life of other infrastructure

4.1.3 Depreciation and impairment Indefinite life assets All infrastructure assets, buildings, plant and equipment Land, earthworks, land under declared roads, and core cultural and other non‑financial physical assets that have finite assets, which are considered to have an indefinite life, are useful lives, are depreciated. Where assets have separate not depreciated. Depreciation is not recognised in respect of identifiable components that have distinct useful lives and/or these assets because their service potential has not, in any residual values, a separate depreciation rate is determined for material sense, been consumed during the reporting period. each component. Impairment Depreciation is generally calculated on a straight‑line basis, Non-financial assets, including items of property, plant and at rates that allocate the asset’s value, less any estimated equipment, are tested for impairment whenever there is an residual value, over its estimated useful life, commencing from indication that the asset may be impaired. the time the asset is held ready for use. The assets concerned are tested as to whether their carrying Typical estimated useful lives for the different asset classes value exceeds their recoverable amount. Where an asset’s for current and prior years are included in the table below: carrying value exceeds its recoverable amount, the difference is written off, except to the extent that it can be debited Periods to an asset revaluation surplus amount applicable to that Buildings class of asset. Buildings 5-100 years If there is an indication that there has been a reversal in Water infrastructure impairment, the carrying amount shall be increased to its recoverable amount. However this reversal should not Storages 40 years to perpetual increase the asset’s carrying amount above what would have Distribution network 40-100 years been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years. Treatment plants 12-100 years The recoverable amount for most assets is measured at the Wastewater infrastructure higher of current replacement cost and fair value less costs Distribution network 20-100 years to sell. The current replacement cost of an asset is its cost Treatment plants 25-100 years measured by reference to the lowest cost at which the gross future economic benefits of that asset could currently be Service concession assets 44 years obtained in the normal course of business. 3-20 years Plant and equipment The recoverable amount of specialised non-cash-generating Motor vehicles 8-15 years assets which are held for continuing use of their service capacity, is expected to be materially the same as fair value determined under AASB 13 Fair Value Measurement. As a The estimated useful lives, residual values and depreciation consequence, that AASB 136 does not apply to such assets method are reviewed at the end of each annual reporting that are regularly revalued. period, and adjustments made where appropriate.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 65 4.1.4 Net gain/(loss) on disposal of non-current assets The surplus/(deficit) from ordinary activities includes the following specific net gains and expenses:

2020 2019 $'000 $'000 Proceeds on sale of infrastructure, property, plant and equipment 202 518 Less written down value (913) (932) Net gain/loss on disposal (711) (414)

4.2 Biological assets Biological assets comprise nature forests and their quantities and measurement bases are disclosed below.

Biological asset Measurement basis Quantities Carrying amount 2020 2019 2020 2019 $’000 $’000 Timber volume Hectares 1,363 1,388 6,946 5,805 Total carrying amount 1,363 1,388 6,946 5,805

Biological assets are measured at fair value less costs to that market is the appropriate basis for determining the fair sell, with any changes recognised in the comprehensive value of that asset. Where access exists to different markets operating statement. Costs to sell include all costs that would then the most relevant market is referenced. be necessary to sell the assets, including freight and direct In the event that market determined prices or values are not selling costs. available for a biological asset in its present condition, the The fair value of a biological asset is based on its present present value of the expected net cash flows from the asset, location and condition. If an active market exists for a biological discounted at a current market determined rate is utilised to asset in its present location and condition, the quoted price in determine fair value.

4.2.1 Reconciliation of movement in carrying amounts

2020 2019 $’000 $’000 Carrying amount at beginning of period 5,805 5,874 Gains arising from changes in fair value less estimated point of sale costs attributable to physical changes 1,879 2,125 Gains arising from changes in fair value less estimated point of sale costs attributable to price changes 538 (851) Decreases due to harvest (1,276) (1,343) Carrying amount at end of period 6,946 5,805

4.2.2 Fair value determination of biological assets There have been no transfers between levels during the Biological assets measured at fair value and their period. There were no changes in valuation techniques categorisation in the fair value hierarchy. throughout the period to 30 June 2020. For productive trees, revaluation to fair value is determined Carrying Level 2 (i) using a discounted cash flow method based on expected amount net future cash flows, discounted by a current market $'000 $'000 determined rate. 2020 An increase or decrease in the fair value of these biological Forests 6,946 6,946 assets is recognised in the comprehensive operating statement as an ‘other expenses’. 2019 Forests 5,805 5,805

Note (i) Classified in accordance with the fair value hierarchy, see Note 4.1.2 above.

66 PART 6 FINANCIAL REPORT 4.3 Intangible assets

Water Computer Total entitlements software $'000 $'000 $'000 At 30 June 2018 Cost or fair value 31,438 12,086 43,524 Accumulated amortisation - (7,440) (7,440) Net book amount 31,438 4,646 36,084

Year ended 30 June 2019 Opening net book amount 31,438 4,646 36,084 Additions - 614 614 Amortisation - (582) (582) Closing net book amount 31,438 4,678 36,116

At 30 June 2019 Cost or fair value 31,438 12,700 44,138 Accumulated amortisation - (8,022) (8,022) Net book amount 31,438 4,678 36,116

Year ended 30 June 2020 Opening net book amount 31,438 4,678 36,116 Additions 5 2,791 2,796 Amortisation - (635) (635) Closing net book amount 31,443 6,834 38,277

At 30 June 2020 Cost or fair value 31,443 15,491 46,934 Accumulated amortisation - (8,657) (8,657) Net book amount 31,443 6,834 38,277

Recognition Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and Intangible assets represent identifiable non-monetary assets accumulated impairment losses. Depreciation and without physical substance. amortisation begin when the asset is available for use, that is, Purchased intangible assets are initially recognised at when it is in the location and condition necessary for it to be cost. When the recognition criteria in AASB 138 Intangible capable of operating in the manner intended by management. Assets is met, internally generated intangible assets are [AASB 138.74-75; FRD 109A] recognised at cost. A summary of the policies applied to CHW’s intangible assets is as follows:

Software Permanent Water Entitlements Useful lives Finite Indefinite Amortisation method used Straight line Not amortised Internally generated/acquired Acquired Acquired Impairment test/Recoverable amount testing Amortisation method reviewed at each Annually and where an indicator of financial year-end; Reviewed annually for impairment exists indicators of impairment

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 67 Permanent water entitlements 5.1 Receivables Permanent water entitlements purchased are recognised as an intangible asset on the Balance Sheet at cost (in 2020 2019 accordance with AASB 138 Intangible Assets and FRD 109A $'000 $'000 Intangible Assets), and will not be subject to amortisation, Current as the permanent water entitlements have an indefinite life. Contractual Permanent entitlements are tested annually for impairment. Service and usage charges 2,692 4,778 Amortisation Provision for doubtful debts (579) (212) Intangible assets with finite useful lives are amortised as Contract asset 16,556 16,094 an expense on a systematic basis (typically straight-line), commencing from the time the asset is available for use. The Other receivables 790 2,188 amortisation periods are reviewed and adjusted if appropriate Statutory at each balance date. Intangible assets with indefinite useful GST Input tax credit receivables 776 569 lives are not amortised. However, all intangible assets are assessed for impairment annually as outlined below. Software Total current receivables 20,235 23,417 assets have a useful life of between 3-12 years.

Impairment of intangible assets Non-current Intangible assets with indefinite useful lives (and intangible Contractual assets not yet available for use) are tested annually for Other receivables 174 174 impairment and whenever there is an indication that the asset Total non-current receivables 174 174 may be impaired. Intangible assets with finite useful lives are tested for impairment whenever an indication of impairment - - is identified. Total receivables 20,409 23,591 The policy in connection with testing for impairment is outlined in section 4.1.3. Receivables consist of: • Contractual receivables, classified as financial instruments and categorised as financial asset at amortised cost. 5. OTHER ASSETS AND LIABILITIES They are initially recognised at fair value plus any directly attributable transaction costs. CHW holds contractual Introduction receivables with the objective of collecting the contractual This section sets out those assets and liabilities that arose cash flows and therefore measures them subsequently at from CHW’s operations and the delivery of services. amortised cost using the effective interest method, less any impairment. Trade receivables and sundry debtors are Structure due for settlement no more than 30 days from the date of recognition for water utility debtors. 5.1 Receivables • Statutory receivables, do not arise from contracts and 5.2 Payables are recognised and measured similarly to contractual receivables initially. Subsequent to initial measurement 5.2.1 Ageing analysis of contractual payables these are tested for expected credit loss as per AASB 9. 5.3 Fair value determination of financial assets • Receivables arise from unconditional multi-year grants and liabilities accounted for under AASB 1058 are recognised upfront. 5.4 Contract liabilities Impairment of contractual and statutory receivables CHW applies the AASB 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for contractual and statutory receivables. On that basis, the loss allowance as at 30 June 2020 was determined as follows for receivables – service and usage charges and other receivables.

68 PART 6 FINANCIAL REPORT Current More than More than More than Total 30 days 60 days 120 days past due past due past due $'000 $'000 $'000 $'000 $'000 2020 Expected loss rate - - 10% 74% 16% Net carrying amount – receivables from service and usage charges 1,129 423 615 525 2,692 Net carrying amount – other receivables 790 - - 174 964 Loss allowance - - (64) (515) (579)

2019 Expected loss rate - - 3% 19% 1% Net carrying amount – receivables from service and usage charges 1,227 1,808 738 1,005 4,778 Net carrying amount – other receivables 2,362 - - - 2,362 Loss allowance - - (20) (192) (212)

Receivables from service and usage charges are written- 5.2 Payables off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery Payables 2020 2019 include, amongst others, the failure of a debtor to engage in a $'000 $'000 repayment plan, and a failure to make contractual payments Current payables for a period of greater than 90 days past due. Contractual Loss allowance on receivables from service and usage charges are presented in other expenses within the Trade creditors 2,423 1,394 comprehensive operating statement. Sundry creditors 1,390 6 As there remains uncertainty on the impacts of COVID-19, Accrued expenses 7,990 10,963 an additional provision of 11% of amounts owing greater 12,363 than 90 days past due has been included in the provision for Total contractual 11,803 doubtful debts amount, adding an additional $221,723 to the total provision. Statutory GST payable 23 34 Payroll tax 43 - Total statutory 66 34

Total current payables 11,869 12,397

Total payables 11,869 12,397

Payables consist of: • Contractual payables, classified as financial instruments and measured at amortised cost. Accounts payable represent liabilities for goods and services provided to CHW prior to the end of the financial year that are unpaid; and • Statutory payables, that are recognised and measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from contracts. Payables for supplies and services have an average credit period of 30 days. No interest is charged on these payables. In response to COVID-19, CHW committed to paying all supplier invoices within five business days with a policy of a maximum 10-day payment period.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 69 5.2.1 Ageing analysis of contractual payables

Carrying Nominal Maturity Dates Amount Amount Less than 1-3 3 months 1-5 5+ 1 month months - 1 year years years $’000 $’000 $’000 $’000 $’000 $’000 $’000 2020 Financial liabilities Payables 11,803 11,803 10,413 - 1,390 - - Total 11,803 11,803 10,413 - 1,390 - -

2019 Financial liabilities Payables 12,363 12,363 12,357 - 6 - - Total 12,363 12,363 12,357 - 6 - -

5.3 Fair value determination of financial assets 6. HOW WE FINANCED OUR and liabilities OPERATIONS The fair values and net fair values of financial assets and liabilities are determined as follow: Introduction • Level 1 – The fair value of financial instrument with standard This section provides information on the sources of finance terms and conditions and traded in active liquid markets are utilised by CHW during its operations, along with interest determined with reference to quoted market prices expenses (the cost of borrowings) and other information • Level 2 – The fair value is determined using inputs other related to financing activities of CHW. than quoted prices that are observable for the financial This section includes disclosures of balances that are financial asset or liability, either directly or indirectly instruments (such as borrowings and cash balances). Notes 7.1 • Level 3 – The fair value is determined in accordance with provide additional, specific financial instrument disclosures. generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs Structure CHW currently holds a range of financial instruments that 6.1 Interest bearing liabilities are recorded in the financial statements where the carrying amounts are a reasonable approximation of fair value, either 6.1.1 Maturity analysis of interest bearing liabilities due to their short-term nature or with the expectation 6.1.2 Finance cost that they will be paid in full by the end of the 2019-20 6.2 Cash flow information reporting period. 6.2.1 Reconciliation of net result to cash flow from 5.4 Contract liabilities operating activities 6.3 Commitments for expenditure 2020 2019 6.3.1 Total commitments payable $'000 $'000 Grants 6.3.2 Service concession arrangement commitments Contractual liability 1,400 - 6.3.3 Capital commitments Total contract liabilities 1,400 - 6.3.4 Other commitments

Payments received in advance of the provision of goods or services or performance obligation required to be performed by CHW to settle the terms of receipt of income is considered as customers paid in advance. CHW will recognise these advance payments as revenue, once it has performed the performance obligations associated with the payments.

70 PART 6 FINANCIAL REPORT 6.1 Interest bearing liabilities

2020 2019 $'000 $'000 Current Financial liabilities – service concession arrangements 2,894 2,614 Loans from TCV 16,000 19,000 Total current interest bearing liabilities 18,894 21,614

Non-current Financial liabilities – service concession arrangements 16,144 19,038 Loans from TCV 93,000 93,000 Total non-current interest bearing liabilities 109,144 112,038

Total interest bearing liabilities 128,038 133,652

Interest bearing liabilities are initially recognised at the fair Interest bearing liabilities are classified as current liabilities value of the consideration received less directly attributable unless CHW has an unconditional right to defer settlement of transaction costs. Interest bearing liabilities are subsequently the liability for at least 12 months after the balance sheet date. measured at amortised cost. Any difference between the CHW has classified borrowings which mature within 12 initial amount recognised (net of transaction costs) and the months as current liabilities and has discretion to refinance redemption amount is recognised in the Comprehensive or rollover these loans with Treasury Corporation of Operating Statement over the period of the interest bearing Victoria (TCV), pursuant to section 8 of the Borrowings and liabilities, using the effective interest method. Investment Powers Act 1987.

6.1.1 Maturity analysis of interest bearing liabilities

Carrying Nominal Maturity Dates Amount Amount Less than 1-3 3 months 1-5 5+ 1 month months - 1 year years years $'000 $'000 $'000 $'000 $'000 $'000 $'000 2020 Financial liabilities Financial liabilities – service concession arrangements 19,038 19,038 - 696 2,198 14,763 1,381 Loans from TCV 109,000 109,000 - - 16,000 45,000 48,000 Total 128,038 128,038 - 696 18,198 59,763 49,381

2019 Financial liabilities Financial liabilities – service concession arrangements 21,652 21,652 - 629 1,985 13,494 5,544 Loans from TCV 112,000 112,000 - - 19,000 43,000 50,000 Total 133,652 133,652 - 629 20,985 56,494 55,544

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 71 6.1.2 Finance cost (TCV) and costs relating to the Financial Accommodation Levy (FAL) set by the Treasurer of the State of Victoria under 2020 2019 section 40N(2) of the Financial Management Act 1994. The $’000 $’000 FAL is in place to remove the financial benefit obtained by Interest on loans from TCV 4,670 5,275 CHW in securing lower than market interest rates as a result of being guaranteed by the State of Victoria. Interest on financial liabilities – 1,540 1,725 service concession arrangements 6.2 Cash flow information Financial accommodation levy 1,183 1,252 Cash and deposits, including cash equivalents, comprise Total 7,393 8,252 cash on hand and cash at bank, deposits at call and those highly liquid investments with an original maturity of three ‘Interest expense’ includes costs incurred in connection months or less. with the borrowing of funds. Interest costs include interest on short term and long term borrowings, financial 2020 2019 liabilities recognised for service concession arrangements, $'000 $'000 amortisation of discounts or premiums relating to borrowings Cash and cash equivalents and lease charges. Cash Interest expense is recognised in the period in which it Cash at bank and on hand 3,963 3,474 is incurred. 3,963 3,474 Borrowing costs include interest on short-term and long-term borrowings held with the Treasury Corporation of Victoria

6.2.1 Reconciliation of net result for the period to cash flow from operating activities

2020 2019 $'000 $'000 Net result for the period 15,853 13,510

Non-cash movements: (Profit)/loss on sale of non-current assets 711 414 Depreciation and amortisation 25,248 24,235 Gifted assets income (14,540) (15,003)

Movements in assets and liabilities: Decrease/(increase) in receivables 3,182 (1,415) Decrease/(increase) in inventory and biological assets (1,059) (2) Decrease/(increase) in prepayments (957) 117 (Decrease)/increase in payables 293 2,068 (Decrease)/increase in provisions 562 319 (Decrease)/increase in deferred tax liabilities 6,797 5,796

Net cash flows from operating activities 36,090 30,039

6.3 Commitments for expenditure These commitments are recorded below at their nominal value and inclusive of GST. Where it is considered appropriate Commitments for future expenditure include operating and and provides additional relevant information to users, the capital commitments arising from contracts. Commitments net present values of significant individual projects are included in this section are as follows: stated. These future expenditures cease to be disclosed as • 6.3.1 Total commitments payable commitments once the related liabilities are recognised in the • 6.3.2 Service concession arrangement commitments balance sheet. • 6.3.3 Capital commitments Please refer to Note 8.2.1 for details on capital and • 6.3.4 Other commitments environmental commitments.

72 PART 6 FINANCIAL REPORT 6.3.1 Total commitments payable

Less than Between Over Total 1 year 1 and 5 years 5 years $'000 $'000 $'000 $'000 Nominal amounts 2020 Service concession arrangement commitments 2,894 14,763 1,381 19,038 Capital commitments payable 4,667 4,613 - 9,280 Other commitments payable 2,793 - - 2,793 Total commitments (inclusive of GST) 10,354 19,376 1,381 31,111 Less GST recoverable 601 419 - 1,020 Total commitments (exclusive of GST) 9,753 18,957 1,381 30,091

Nominal amounts 2019 Service concession arrangement commitments 2,614 13,494 5,544 21,652 Capital commitments payable 6,425 - - 6,425 Other commitments payable 3,463 - - 3,463 Total commitments (inclusive of GST) 12,502 13,494 5,544 31,540 Less GST recoverable 899 - - 899 Total commitments (exclusive of GST) 11,603 13,494 5,544 30,641

6.3.2 Service concession arrangement commitments The other form of SCAs, the ‘grant of a right to the operator’ model, is one in which CHW grants to an operator, for a CHW sometimes enters into arrangements with private/public specified period of time, the right to collect fees from users of sector participants to design and construct or upgrade assets the SCA asset, in return for which the operator constructs the used to provide public services. These arrangements usually asset and has the obligation to supply agreed upon services, include the provision of operational and maintenance services including maintenance of the asset for the period of the for a specified period of time. These arrangements are often concession. These private sector entities typically lease [land] referred to as public private partnerships (PPPs). from CHW and construct infrastructure. At the end of the CHW has adopted AASB 1059 Service Concession concession period, the [land] together with the constructed Arrangements: Grantors to account for PPP arrangements facilities, will be returned to CHW. that meet the definition of a service concession arrangements (SCAs) in accordance with AASB 1059. Where a PPP is not For arrangements within the scope of AASB 1059 that take the considered a SCA, CHW determines whether the arrangement ‘financial liability’ model, CHW records the asset(s) used in the is a lease (and accounted for under AASB 16) or a construction SCAs at current replacement cost in accordance with the cost contract (and accounted for under AASB 116 and AASB 9) and approach to Fair Value under AASB 13: Fair Value Measurement accounts for them under those relevant standards (AASB 13), with a related financial liability(s). SCAs usually take one of two main forms. In the more Service concession assets are recognised under Property common form, the ‘financial liability’ model, CHW pays the plant and equipment in section 4.1 and related liabilities under operator over the arrangement period, subject to specified Interest bearing liabilities under section 6.1 respectively. performance criteria being met. At the date of commitment to CHW has entered into two contractual arrangements with the principal provisions of the arrangement, these estimated Ballarat Water Pty Ltd to build, own and operate water periodic payments are allocated between a component treatment facilities over 20 and 25 years respectively in related to the design and construction or upgrading of the exchange for a stream of payments. At the end of the contract asset, and the components related to the ongoing operation periods, the assets are transferred to CHW at no cost. and maintenance of the asset.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 73 The table below illustrates commitments for service concession arrangements.

Minimum future financial Present value of minimum payments future financial payments 2020 2019 2020 2019 $'000 $'000 $'000 $'000 Less than 1 year 4,226 4,151 2,894 2,614 Between 1 and 5 years 17,570 18,021 14,763 13,494 Over 5 years 1,407 5,183 1,381 5,544 Minimum financial payments 23,203 27,355 19,039 21,652 Less Future interest charged in accounts 4,165 5,703 Total future financial liabilities payments 19,038 21,652

Representing financial liabilities Service concession arrangements Current 2,894 2,614 Non-current 16,145 19,038 Total financial liabilities 19,039 21,652

Note: GST is not applicable

6.3.3 Capital commitments Capital commitments arising from contracts. These commitments are recorded below at their nominal value and inclusive of GST. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

Less than Between Over Total 1 year 1 and 5 years 5 years $’000 $’000 $’000 $’000 Nominal amounts 2020 Capital commitments payable 4,667 4,613 - 9,280 Total commitments (inclusive of GST) 4,667 4,613 - 9,280 Less GST recoverable 424 419 - 843 Total commitments (exclusive of GST) 4,243 4,194 - 8,437

Nominal amounts 2019 Capital commitments payable 6,425 - - 6,425 Total commitments (inclusive of GST) 6,425 - - 6,425 Less GST recoverable 584 - - 584 Total commitments (exclusive of GST) 5,841 - - 5,841

74 PART 6 FINANCIAL REPORT 6.3.4 Other commitments Other commitments for future operating expenditure arising from contracts. These commitments are recorded below at their nominal value and inclusive of GST. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

Less than Between Over Total 1 year 1 and 5 years 5 years $’000 $’000 $’000 $’000 Nominal amounts 2020 Other commitments payable 2,793 - - 2,793 Total commitments (inclusive of GST) 2,793 - - 2,793 Less GST recoverable 177 - - 177 Total commitments (exclusive of GST) 2,616 - - 2,616

Nominal amounts 2019 Other commitments payable 3,463 - - 3,463 Total commitments (inclusive of GST) 3,463 - - 3,463 Less GST recoverable 315 - - 315 Total commitments (exclusive of GST) 3,148 - - 3,148

7. RISKS, CONTINGENCIES AND Categories of financial instruments VALUATION JUDGEMENTS Loans, receivables and cash are financial instrument assets with fixed and determinable payments that are not quoted on Introduction an active market. Financial assets are initially recognised at fair value plus any CHW is exposed to risk from its activities and outside factors. directly attributable transaction costs. Subsequent to initial In addition, it is often necessary to make judgements and measurement, receivables are measured at amortised cost estimates associated with recognition and measurement only if both of the following criteria are met: of items in the financial statements. This section sets out financial instrument specific information, including exposures • The asset is held within a business model whose objective is to financial risks, as well as those items that are contingent to collect the contractual cash flows in nature or require a higher level of judgement to be applied, • The contractual terms give rise to cash flows that are solely which for CHW related mainly to fair value determination. payments of principal and interest The following assets are held with the objective to collect the Structure contractual cash flows: 7.1 Financial instruments specific disclosures • Cash and deposits 7.1.1 Financial instruments: categorisation • Receivables 7.1.2 Financial risk management objectives Financial liabilities are initially measured at fair value plus and policies any directly attributable transaction costs. Subsequent 7.1.3 Power Purchase Agreement to initial recognition, these financial instruments are measured at amortised cost with any difference between 7.2 Contingent assets and contingent liabilities the initial recognised amount and the redemption value being recognised in the profit and loss over the period of the interest bearing liability, using the effective interest 7.1 Financial instruments specific disclosures rate method. CHW recognises the following liabilities in this category: Financial instruments arise out of contractual agreements that give rise to a financial asset of one corporation and a • Payables (excluding statutory payables) financial liability or equity instrument of another corporation. • Borrowings (including lease liabilities) These financial instruments include: Impairment of financial assets

Financial assets Financial liabilities At the end of each reporting period, CHW assesses whether there is objective evidence that a financial asset or group of Cash and deposits Payables financial assets is impaired. All financial instrument assets, Receivables For supplies and services except those measured at fair value through profit or loss, are Sale of goods and services Other payables subject to annual review for impairment. Other receivables Interest bearing liabilities Impairment losses are recognised in the Comprehensive Operating Statement. Due to the short-term nature of the financial assets and liabilities held by CHW, their carrying value is assumed to approximate their fair value.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 75 7.1.1 Financial instruments: categorisation Liquidity risk All financial assets and financial liabilities of CHW are Liquidity risk arises from being unable to meet financial measured at amortised cost in line with AASB 9 Financial obligations as they fall due. CHW’s policy is to settle financial Instruments. obligations within 30 days and in the event of dispute make payments within 30 days from the date of resolution. 7.1.2 Financial risk management objectives and policies CHW manages liquidity risk by maintaining adequate CHW's activities expose it to a variety of financial risks: reserves, banking facilities and reserve borrowing facilities market risk, credit risk and liquidity risk. As a whole, CHW’s by continuously monitoring forecasts and actual cash flows financial risk management program seeks to manage these and matching the maturity profiles of financial assets and risks and the associated volatility of its financial performance. financial liabilities. The main purpose in holding financial instruments is to prudentially manage CHW’s financial risks within the Market risk government policy parameters. CHW’s main financial risks Market risk is the risk that changes in market prices will include credit risk, liquidity risk, interest rate risk, foreign affect the fair value or future cash flows of CHW’s financial currency risk and equity price risk. instrument. Market risk comprises of interest rate risk, Risk management is carried out by the Audit & Risk foreign exchange risk and another price risk. CHW’s exposure Committee under policies approved by the Board of Directors. to market risk is primarily though interest rate risk. There Management identifies, evaluates and hedges financial risks is insignificant exposure to foreign exchange and other in close cooperation with CHW’s operating units. The Board price risks. provides written principles for overall risk management, as Objectives, policies and processes used to manage these risks well as policies covering specific areas, such as interest rate are disclosed in the paragraphs below: risk, credit risk, and investment of excess liquidity. a) Interest rate risk Credit risk CHW’s exposure to market interest rates relates primarily to Credit risk is the risk of financial loss to CHW as a result of a CHW’s long-term interest bearing liabilities. CHW minimises customer or counterparty to a financial instrument failing to its exposure to interest rate changes on its long-term meet its contractual obligations. Credit risk arises principally borrowings by holding a mix of fixed and floating rate debt, from CHW’s receivables. with the majority of the portfolio fixed rate. Debt is sourced CHW’s exposure to credit risk is influenced by the individual from Treasury Corporation Victoria and is managed within a characteristics of each customer. The receivable balance range of Board approved limits with debt levels and interest consists of a large number of residential and business rates being monitored regularly. customers which are spread across a diverse range of CHW has minimal exposure to interest rate risk through its industries. Receivable balances are monitored on an ongoing holding of cash assets and other financial assets. basis to ensure that exposure to bad debts is not significant. b) Foreign exchange risk CHW applies the AASB 9 simplified approach to measuring CHW has no exposure to changes in the foreign expected credit losses which uses a lifetime expected loss exchange rate. allowance for all receivables. Refer to section 5.1. c) Other price risk CHW has no significant exposure to other price risk. Interest rate exposure of financial instruments Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates. CHW does not hold any interest bearing financial instruments that are measured at fair value, and therefore has no exposure to fair value interest rate risk. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. CHW has minimal exposure to cash flow interest rate risks through cash and deposits that are at floating rate. The carrying amounts of financial assets and financial liabilities that are exposed to interest rates and CHW’s sensitivity to interest rate risk are set out in the table that follows.

76 PART 6 FINANCIAL REPORT 2020 Carrying Interest rate exposure Interest rate risk sensitivity amount Weighted Fixed Variable Non‑ -0.25% 0.25% average interest interest interest Net result Equity Net result Equity interest rate rate bearing $'000 rate % $'000 $'000 $'000 $'000 $'000 $'000 $'000 Contractual financial assets Cash and deposits 3,963 0.9% - 3,963 - (10) (10) 10 10 Receivables 19,632 0% - - 19,632 - - - - Total financial assets 23,595 - - 3,963 19,632 (10) (10) 10 10 Contractual financial liabilities Payables 11,804 0% - - 11,804 - - - - Service concession arrangements 19,038 7.77% 19,038 ------TCV loans 109,000 3.80% 100,000 9,000 - (23) (23) 23 23 Total financial liabilities 139,842 - 119,038 9,000 11,804 (23) (23) 23 23

2019 Carrying Interest rate exposure Interest rate risk sensitivity amount Weighted Fixed Variable Non‑ -0.50% 0.50% average interest interest interest Net result Equity Net result Equity interest rate rate bearing $'000 rate % $'000 $'000 $'000 $'000 $'000 $'000 $'000 Contractual financial assets Cash and deposits 3,474 1.4% - 3,474 - (17) (17) 17 17 Receivables 23,022 0% - - 23,022 - - - - Total financial assets 26,496 - - 3,474 23,022 (17) (17) 17 17 Contractual financial liabilities Payables 12,363 0% - - 12,363 - - - - Service concession arrangements 21,652 7.77% 21,652 ------TCV loans 112,000 4.20% 106,000 6,000 - (30) (30) 30 30 Total financial liabilities 146,015 - 127,652 6,000 12,363 (30) (30) 30 30

7.1.3 Power Purchase Agreement specific disclosure On 30 October 2018, a Members’ Agreement was entered into between the water corporations and ZEW in order to CHW is one of 13 water corporation members of Zero regulate their rights and obligations as members of ZEW Emissions Water (ZEW) Limited, a public company limited and as participants in the project. CHW’s Managing Director by guarantee. ZEW’s substantial objective is to acquire is a Director of ZEW. The Members’ Agreement establishes electricity, contracts for difference and other derivative the operating activities of ZEW and the decision making products in relation to electricity, and/or green products from an energy and emissions reduction facility(ies) in Victoria and responsibilities of the ZEW Directors. in turn supply these products to its members. This vehicle Under the Members’ Agreement CHW’s liability as a member provides the opportunity for water corporation members is limited to $10 in the event of a winding-up. As required to collaboratively promote energy and emissions reduction by Australian accounting standards, CHW has assessed the initiatives in Victoria and to reduce emissions. nature of its relationship with ZEW, and has concluded that

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 77 it does not have control, joint control or significant influence 7.2 Contingent assets and contingent liabilities over ZEW. CHW will account for its investment in ZEW as a financial instrument within the scope of AASB 9 Financial Contingent assets and contingent liabilities are not Instruments. ZEW is a related party of CHW. recognised in the balance sheet but are disclosed and, if quantifiable, are measured at nominal value. Contingent On 30 October 2018, ZEW entered into an 11-year Power assets and liabilities are presented inclusive of GST receivable Purchasing Agreement (PPA) with a solar farm energy or payable respectively. generator. In relation to the PPA, ZEW will act as a central intermediary between the energy generator and the water CHW has contingent assets (gifted assets for water and corporations. The PPA contains a contract for difference wastewater) of $2.4 million as at 30 June 2020 (30 June 2019, (CFD) payment mechanism in respect of electricity generated $1.6 million). There are no material contingent liabilities at 30 by the facility and the sale and supply of large-scale June 2020 (30 June 2019, $nil). generation certificates (LGCs) from the facility. The PPA contains certain conditions precedent which were due to be satisfied during the 2019-20 financial year. 8. STATUTORY OBLIGATIONS The solar farm energy generator experienced a construction delay due to redesign of electrical infrastructure and a Introduction connection delay relating to generator restrictions and revised This section includes disclosures in relation to CHW’s connection procedures advised by the Australian Electricity statutory obligations. Market Operator (AEMO). Renegotiated terms have resulted in an extension of the target commercial operation date to 1 Structure October 2020 and a compensation settlement to ZEW for the delay. CHW’s share of the settlement is $257,607 which has 8.1 Tax been recognised in the Comprehensive Operating Statement 8.1.1 Income tax as other income. 8.1.2 Deferred tax assets and liabilities At 30 June 2020 the conditions precedent in the PPA are not 8.2 Environmental contribution completed and ZEW does not have a contractual obligation for the CFD derivative. Therefore, there are no other 8.2.1 Environmental commitments transactions to be recognised. Upon satisfaction of the conditions precedent, the CFD derivative will be recognised as a financial liability and will be 8.1 Tax measured at its fair value. Subsequent changes in the fair 8.1.1 Income tax value of the derivative will be recognised in profit and loss. CHW is subject to the National Tax Equivalent Regime (NTER), The Members’ Agreement specifies that ZEW may call on which is administered by the Australian Taxation Office. The CHW to make a loan available to ZEW amounting to $147,872. income tax expense or revenue for the period is the expected The loan, if requested by ZEW, would meet the definition of a tax payable or receivable on the current period’s taxable financial asset as it gives rise to a contractual right for CHW to income based on the national corporate income tax rate of receive cash from ZEW at the end of the loan term. As at 30 30%, adjusted by changes in deferred tax assets and liabilities June 2020, no request has been made by ZEW. attributable to temporary differences between the tax bases Once the facility is operational, the financial impact of the of assets and liabilities and their carrying amounts in the Members’ Agreement with ZEW is expected to be an increase financial statements, and to unused tax losses. in revenue, expenses, and recognition of LGCs as intangible The income tax expense for the financial year differs from assets or asset held for sale (asset). the amount calculated on the net result. The differences are reconciled as follows:

2020 2019 $’000 $’000 Comprehensive operating statement Current income tax expense (paid or payable) - - Deferred income tax expense Temporary differences 314 108 Utilisation of losses (7,111) (5,904) Income tax reported in the comprehensive operating statement (6,797) (5,796)

2020 2019 $’000 $’000 Tax reconciliation Net result before income tax expense 22,650 19,306 Tax at the Australian tax rate of 30% (2017: 30%) (6,795) (5,792) Non-deductible items (2) (4) Income tax on profit before tax (6,797) (5,796)

78 PART 6 FINANCIAL REPORT 8.1.2 Deferred tax assets and liabilities differences if they arose in a transaction that at the time Deferred tax assets and liabilities are recognised for of the transaction did not affect either accounting profit or temporary differences at the tax rates expected to apply taxable profit or loss. Deferred tax assets are recognised for when the assets are recovered or liabilities are settled, deductible temporary differences and unused tax losses only based on those tax rates which are enacted or substantially if it is probable that future taxable amounts will be available enacted. The relevant tax rates are applied to the cumulative to utilise those temporary differences and losses. CHW's amounts of deductible and taxable temporary differences to deferred tax liabilities exceed the level of deferred tax assets measure the deferred tax asset or liability. No deferred tax and therefore a net deferred tax liability has been disclosed in asset or liability is recognised in relation to these temporary the balance sheet.

Deferred tax assets 2020 2019 $’000 $’000 Amounts recognised in comprehensive operating statement Doubtful debts 174 64 Employee benefits 1,854 1,685 Tax losses 32,247 39,360 Other 170 165 Total deferred tax assets 34,445 41,274

Movements Opening balance at 1 July 41,274 47,070 Credited/(debited) to the Comprehensive Operating Statement (6,829) (5,796) Closing balance at 30 June 34,445 41,274

Deferred tax asset to be recovered after more than 12 months 32,247 39,360 Deferred tax asset to be recovered within 12 months 2,198 1,914 Ending balance at 30 June 34,445 41,274

Deferred tax liabilities 2020 2019 $’000 $’000 Amounts recognised in comprehensive operating statement Depreciation 75,201 75,232 Amounts recognised directly in equity Revaluation of infrastructure property, plant and equipment 83,607 83,607 Total deferred tax liabilities 158,808 158,839

Movements Opening balance at 1 July 158,839 158,839 Credited/(debited) to the net result 31 - Closing balance at 30 June 158,870 158,839

Deferred tax liabilities to be recovered after more than 12 months 158,808 158,839 Deferred tax liabilities to be recovered within 12 months - - Ending balance at 30 June 158,808 158,839

Net deferred tax liability 124,363 117,565

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 79 8.2 Environmental contribution the first period, from 1 October 2004 to 30 June 2008 in accordance with the pre-established schedule of payments, 2020 2019 which sets out the amounts payable by each Contribution. The $’000 $’000 contribution period has been extended until 30 June 2024. Environmental contribution levy 3,967 3,967 The purpose of the environmental contribution is set out in the Act, and the funding may be used for financing initiatives that seek to promote the sustainable management of water or The Water Industry (Environmental Contributions) Act 2004 address water-related initiatives. (the Act) amended the Water Industry Act 1994 to make provision for environmental contributions to be paid by water CHW has a statutory obligation to pay an environmental authorities. The Act establishes an obligation for authorities contribution to DELWP. This contribution is recognised as an to pay into a consolidated fund an annual contribution for expense during the reporting period as incurred.

8.2.1 Environmental commitments At 30 June 2020, CHW had outstanding environmental contribution commitments, to be paid as follows:

2020 Less than Between Over 2020 2019 1 year 1 and 5 years 5 years Total Total $’000 $’000 $’000 $’000 $’000 Environmental contribution levy commitments 4,472 13,417 - 17,889 3,967 Total commitments (inclusive of GST) 4,472 13,417 - 17,889 3,967 Less GST recoverable - - - - - Total commitments (exclusive of GST) 4,472 13,417 - 17,889 3,967

9. OTHER DISCLOSURES 9.1 Equity Introduction 9.1.1 Contributed capital

This section includes additional material disclosures required 2020 2019 by accounting standards or otherwise, for the understanding $’000 $’000 of this financial report. Balance 1 July 358,241 358,241 Structure Capital contributions - - 9.1 Equity Balance 30 June 358,241 358,241 9.1.1 Contributed capital Additions to net assets which have been designated as 9.1.2 Asset revaluation surplus contributions by owners are recognised as contributed 9.1.3 Accumulated surplus/ (deficit) equity. Other transfers that are in the nature of contributions or distributions (capital repatriation) are recognised in 9.2 Events occurring after the balance date contributed equity. 9.3 Responsible persons 9.1.2 Asset revaluation surplus 9.4 Remuneration of executives 9.5 Related parties 2020 2019 $’000 $’000 9.6 Remuneration of auditors Land 32,608 32,608 9.7 Changes in accounting policies Buildings 33,022 33,022 9.8 Australian Accounting Standards issued that are not yet effective Infrastructure 188,295 188,295 Total 253,925 253,925

80 PART 6 FINANCIAL REPORT Movements during the reporting period Land Buildings Infrastructure Total $’000 $’000 $’000 $’000 Opening balance 32,608 33,022 188,295 253,925 Revaluation increment/decrement - - - - Closing balance 32,608 33,022 188,295 253,925

9.1.3 Accumulated surplus/(deficit)

Accumulated surplus 2020 2019 $’000 $’000 Accumulated surplus at beginning of financial year 349,748 336,238 Net profit for the year 15,853 13,510 Accumulated surplus at end of financial year 365,601 349,748

9.2 Events occurring after the balance date The COVID-19 global health pandemic has resulted in a number of directions from Government; our workforce and contractors have adopted a safe working approach to ensure continuity of all essential services and obligations. No additional matters or circumstances have arisen since the end of the reporting period which further significantly affects or may significantly affect the operations of the authority, the results of those operations, or the state of affairs of the authority in future financial years. 9.3 Responsible persons In accordance with the Ministerial Directions issued by the Assistant Treasurer under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period, as required by AASB 124 Related Party Disclosures. The names of persons who held the positions of Ministers and Accountable Officers in CHW are as follows:

Name Title Period of appointment The Hon. Lisa Neville MP Minister for Water Since May 2016 J. Johnson Board Chair 1 July 2019 to 30 June 2020 J. Dore Director 1 July 2019 to 11 June 2020 J.Hallam Director 1 July 2019 to 30 June 2020 J.Heath Director 1 July 2019 to 30 June 2020 S. Howe Director 1 July 2019 to 30 September 2019 A. Jenkins Deputy Chair 1 July 2019 to 30 June 2020 P. Le Lievre Director 1 July 2019 to 30 June 2020 M. McKenzie Director 1 October 2019 to 30 June 2020 R. Thomson Director 1 July 2019 to 30 June 2020 P. O'Donohue Managing Director 1 July 2019 to 30 June 2020

Remuneration Remuneration received or receivable by the Board and Accountable Officer in connection with the management of CHW during the reporting period is detailed below:

Income Band Number Number 2020 2019 $0 - $9,999 1 - $20,000 - $29,999 1 - $30,000 - $39,999 6 7 $60,000 - $69,000 1 1 $360,000 - $369,999 - 1 $380,000 - $389,999 1 - Total responsible persons 10 9 Total remuneration ($'000) 704 660

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 81 9.4 Remuneration of executives Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually The number of executive officers, other than ministers and paid or payable on a regular basis, as well as non-monetary accountable officers, and their total remuneration during benefits such as allowances and free or subsidised goods the reporting period are shown in the table below. Total or services. annualised employee equivalents provide a measure of full- time equivalent executive officers over the reporting period. Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when Remuneration comprises employee benefits (as defined in employment has ceased. AASB 119 Employee Benefits) in all forms of consideration paid, payable or provided by the entity, or on behalf of the Other long-term benefits include long service leave, other entity, in exchange for services rendered, and is disclosed in long-service benefit or deferred compensation. the following categories. Termination benefits include termination of employment payments, such as severance packages.

Remuneration 2020 2019 $’000 $’000 Short-term employee benefits 1,559 1,499 Post-employment benefits 127 123 Other long-term benefits 16 15 Termination benefits - - Total remuneration 1,702 1,637

Total number of executives 8 7 Total annualised employee equivalents (a) 7 7

Note: (a) Annualised employee equivalent is based on the time fraction worked over the reporting period.

9.5 Related parties • All departments and public sector entities that are controlled and consolidated into the whole of state CHW is a wholly owned and controlled entity of the State consolidated financial statements of Victoria. • Controlled business interests Related parties of CHW include: All related party transactions have been entered into on an • All key management personnel and their close family arm’s length basis. members and personal business interests (controlled entities, joint ventures and entities they have significant Significant transactions with government-related entities influence over) During the year, CHW had the following government-related • All cabinet ministers and their close family member entity transactions:

82 PART 6 FINANCIAL REPORT 2020 2019 $’000 $’000 Significant funds received Department of Environment, Land, Water and Planning (DEWLP) 232 232 Department of Health and Human Services (DHHS) 4,062 4,062 Total significant funds received 4,294 4,294

Significant payments Department of Treasury and Finance (DTF) (i) 1,504 1,008 Department of Environment, Land, Water and Planning (DEWLP) (ii) 3,356 637 Coliban Water 1,063 1,189 Goulburn Murray Water 483 531 Treasury Corporation of Victoria (TCV) (iii) 4,623 6,307 Total significant payments 11,029 9,672

Notes: (i) Significant transactions with Department of Treasury and Finance (DTF) are disclosed at Note 6.1.2 (ii) Significant transactions with Department of Environment, Land, Water and Planning (DELWP) are disclosed at Note 8.2 (iii) Significant transactions with Treasury Corporation of Victoria (TCV) are disclosed at Note 6.1.1 and 6.1.2

Key management personnel Transactions with key management personnel and other Key management personnel are those persons having related parties authority and responsibility for planning, directing and Given the breadth and depth of Corporation activities, related controlling the activities of CHW, directly or indirectly, parties transact with the Victorian public sector in a manner as defined in AASB 124 Related Party Disclosures. Key consistent with other members of the public e.g. stamp duty management personnel includes the Portfolio Minister and and other government fees and charges. Further employment all Directors listed under responsible persons in note 9.3 and of processes within the Victorian public sector occur on terms General Managers which includes: and conditions consistent with the Public Administration Act • General Manager People and Culture, Renee Fearn 2004 and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes • General Manager Infrastructure Planning and occur on terms and conditions consistent with the Victorian Operations, Jeff Haydon Government Procurement Board requirements. Outside of • General Manager Capital Delivery and Network Field normal citizen type transactions with CHW, there were no Services, Stephen Answerth related party transactions that involved key management • General Manager Business Services, Anthony O’Brien personnel and their close family members. No provision has • General Manager Customer and Community, been required, nor any expense recognised, for impairment of Jacqueline O’Neill receivables from related parties. The compensation detailed below excludes the salaries There were no transactions with KMP’s which are required to and benefits the Portfolio Minister receives. The Minister’s be disclosed in these financial statements. remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within 9.6 Remuneration of auditors the Department of Parliamentary Services’ financial report. 2020 2019 Compensation of key 2020 2019 $’000 $’000 management personnel $’000 $’000 Victorian Auditor-General’s Office Short-term employee benefits 1,859 1,750 87 85 Post-employment benefits 149 144 Total remuneration of auditors 87 85 Other long-term benefits 23 23 Total 2,031 1,917 Note: (i) The Victorian Auditor General’s Office is not allowed to provide non- audit services

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 83 9.7 Changes in accounting policies • excluding initial direct costs from the measurement of the right-of-use asset at the date of initial application, and AASB 15 Revenue from Contracts with Customers • using hindsight in determining the lease term where the CHW has transitioned to AASB 15 Revenue from contracts contract contains options to extend or terminate the lease with Customers from 1 July 2019 (date of initial application). • accounting for low value leases. In accordance with the transition provisions in AASB 15 CHW has also elected not to reassess whether a contract is and as mandated by FRD 121 Transitional requirements or contains a lease at the date of initial application. Instead, for on the application of AASB 15 Revenue from Contracts contracts entered into before the transition date CHW relied with Customers, this new standard has been adopted on its assessment made applying AASB 117 and Interpretation retrospectively (under the modified retrospective method). 4 Determining Whether an arrangement contains a lease. There were no transition adjustments at 1 July 2019 and comparatives for the 2019 financial year did not need restating. Low value leases Additionally, as mandated by the DTF, CHW applied the CHW is not required to make any adjustments on transition for practical expedient described in AASB16.C5 (c), for contracts leases for which the underlying asset is of low value. CHW shall that were modified before the date of initial application. In recognise the lease payments associated with those leases applying this practical expedient, CHW did not retrospectively as an expense on either a straight-line basis over the lease restate the contract for those modifications in accordance term or another systematic basis. CHW shall apply another with AASB15.20-21. Instead, it reflected the aggregate effect systematic basis if that basis is more representative of the of all of the modifications that occur before the date of initial pattern of CHW’s benefit. CHW shall account for those leases application when: applying this Standard from the date of initial application. • Identifying the satisfied and unsatisfied performance AASB 1059 Service Concession Arrangements: Grantors obligations • Determining the transaction price Prior to the issuance of AASB 1059, there was no definitive accounting guidance in Australia for service concession • Allocating the transaction price to the satisfied and arrangements, which include a number of public private unsatisfied performance obligation partnership (PPP) arrangements. The AASB issued the new CHW has applied this practical expedient consistently to all standard to address the lack of specific accounting guidance contracts within the current reporting period. and based the content thereof broadly on its international equivalent: International Public Sector Accounting Standard AASB 1058 Income for not-for-profits 32: Service Concession Arrangements: Grantor. CHW has transitioned to AASB 1058 Income for not-for-profits For arrangements within the scope of AASB 1059, CHW is from 1 July 2019. In accordance with the transition provisions required to record the asset(s) used in the service concession in AASB 1058 and as mandated by FRD 122 Transitional arrangement at current replacement cost in accordance requirements on the application of AASB 1058 Income of with cost approach to fair value under AASB 13 Fair Value Not-for-Profit Entities, this new standard has been adopted Measurement, with a related liability, which could be a retrospectively (under the modified retrospective method). financial liability, an accrued revenue liability (referred to as Under this transition method, the entity has elected to apply the “Grant Of A Right To The Operator” or GORTO liability) or a this standard retrospectively only to contracts and transactions combination of both. that are not completed contracts at the date of initial The AASB announced a one-year deferral on the new application. A completed contract is a contract or transaction accounting requirements for public sector grantors in service for which the entity has recognised all of the income in concession arrangements. As a result, AASB 1059 will apply accordance with AASB 1004 Contributions. There were no to annual periods beginning on or after 1 January 2020, rather transition adjustments at 1 July 2019 and comparatives for the than 1 January 2019. However, CHW has early adopted AASB 2019 financial year did not need restating. 1059 in line with the original adoption date of 1 January 2019, AASB 16 Leases i.e. the 2019-20 financial year, as mandated by FRD 124 Transitional requirements on the application of AASB 1059 CHW has transitioned to AASB 16 Leases from 1 July 2019. Service Concession Arrangements: Grantors. In accordance with the transition provisions in AASB 16 and as mandated by FRD 123 Transitional requirements on the CHW has applied the standard using a full retrospective application of AASB 16 Leases, the new rules have been approach to prior reporting periods from 1 July 2018 (transition adopted retrospectively (under the modified retrospective date) as mandated by FRD 124. The impact resulted in the method). There were no transition adjustments at 1 July 2019 previous finance leases being were reclassified as SCAs, there and comparatives for the 2019 financial year have not been was not an impact on measurement of assets or liabilities. As a restated. opening balance of retained earnings on 1 July 2019. result, all comparative information in the financial statements CHW has applied this approach to transition consistently to all have been prepared as if AASB 1059 had always been in effect of its leases for which it is a lessee. with a cumulative adjustment between the recognition of service concession assets and financial liabilities and/or GORTO In applying AASB 16 for the first time, CHW has used the liabilities recognised in accumulated surplus as at 1 July 2018. following practical expedients to all its contracts as permitted by the standard and as mandated by the DTF: Section 6.3.2 contains information about the service concession arrangements of CHW and the AASB 1059 accounting policies. • applying a single discount rate to a portfolio of leases with The table below showing the adjustments recognised for each reasonably similar characteristics individual line item on adoption of AASB 1059. • relying on previous assessments on whether leases are Impact on financial statements onerous as an alternative to performing an impairment review – there were no onerous contracts as at 1 July 2019 As a result of the above changes in CHW’s accounting policies, • accounting for leases with a remaining lease term of less the following tables show the adjustments recognised for each than 12 months as at 1 July 2019 as short-term leases line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.

84 PART 6 FINANCIAL REPORT List of material PPPs based on AASB 1059 Service Concession Arrangements

2020 $'000 Material service concession arrangements PPP arrangements accounted under AASB 1059 Service agreement for water and wastewater treatment 40,236

Impact of AASB 1059 on the Statement of Profit or Loss and Other Comprehensive Income (increase/decrease)

Note 30 June 2020 30 June 2019 $’000 $’000 Depreciation Service concession asset 4.1.1 1,457 1,453 BOOT assets at fair value 4.1.1 (1,457) (1,453)

Interest Interest on financial liabilities – service concession arrangements 6.1.2 1,540 1,725 Interest on leases (BOOT) 6.1.2 (1,540) (1,725)

The Statement of Profit or Loss and Other Comprehensive Income required one category reclassification as a result of AASB 1059. BOOT Tolls has been renamed to Service concession arrangement tolls.

Impact of AASB 1059 on the Statement of Financial Position (increase/decrease)

Note 30 June 2020 30 June 2019 1 July 2018 $’000 $’000 $’000 Non- Current assets Land, buildings, infrastructure, plant and equipment Service concession asset 4.1.1 40,236 41,693 43,146 BOOT assets at fair value (40,236) (41,693) (43,146)

Current liabilities Interest bearing liabilities 6.1 Financial liabilities – Service concession arrangements 6.1 2,894 2,614 2,358 BOOT arrangements (2,894) (2,614) (2,358)

Non-current liabilities Interest bearing liabilities Financial liabilities – Service concession arrangements 6.1 16,144 19,038 21,652 BOOT arrangements (16,144) (19,038) (21,652)

The Statement of Cash Flows required one category reclassification as a result of AASB 1059. Principal element of lease liability has been renamed to repayment of Principal element of service concession liability.

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 85 9.8 Australian Accounting Standards issued AASB 2018-6 Amendments to Australian Accounting that are not yet effective Standards – Definition of a Business [AASB 3] The AASB has issued amendments to the guidance in The following AASs become effective for reporting periods AASB 3 Business Combinations that revises the definition commencing after the operative dates stated: of a business. Certain new Australian Accounting Standards (AAS) have The amendment is effective from 1 January 2020. The been published that are not mandatory for the 30 June 2020 amended definition of a business requires an acquisition to reporting period. DTF assesses the impact of all these new include an input and a substantive process that together standards and advises CHW of their applicability and early significantly contribute to the ability to create outputs. The adoption where applicable. definition of the term ‘outputs’ is amended to focus on goods The following accounting pronouncement has also been and services provided to customers, generating investment issued but not yet effective for the 2018‑19 reporting income and other income, and it excludes returns in the form period. The preliminary assessment suggests it may have an of lower costs and other economic benefits. The amendments insignificant impact on public sector reporting. will likely result in more acquisitions being accounted for as • AASB 2018-7 Amendments to Australian Accounting asset acquisitions, in particular for the real estate industry. Standards – Definition of Material [AASB 101 and AASB 108] Earlier application is permitted. The AASB has made amendments to AASB 101 Presentation • AASB 2019-3 Amendments to Australian Accounting of Financial Statements and AASB 108 Accounting Standards – Interest Rate Benchmark Reform: This Standard Policies, Changes in Accounting Estimates and Errors and amends AASB 7 Financial Instruments: Disclosures, AASB 9 consequential amendments to other Australian Accounting Financial Instruments and AASB 139 Financial Instruments: Standards (AAS) which: Recognition and Measurement. It modifies some specific hedge accounting requirements to provide relief from the use a consistent definition of materiality throughout AAS and potential effects of the uncertainty caused by the interest the Conceptual Framework for Financial Reporting; rate benchmark reform. It also requires entities to provide i) Clarify when information is material additional information about their hedging relationships that ii) Incorporate some of the guidance in AASB 101 about are directly affected by these uncertainties. This will have immaterial information limited impact on Victorian public sector reporting. • AASB 2019-1 AASB 2019-1 amends Australian Accounting The amendments clarify: Standards, Interpretations and other pronouncements to • That the reference to obscuring information addresses reflect the issuance of the revised Conceptual Framework situations in which the effect is similar to omitting or for Financial Reporting (Conceptual Framework). Effective misstating that information, and that a Corporation date 1 January 2020. assesses materiality in the context of the financial statements as a whole • The meaning of ‘primary users of general-purpose financial statements’ to whom those financial statements are directed, by defining them as ‘existing and potential investors, lenders and other creditors’ that must rely on general purpose financial statements for much of the financial information they need While the amendments clarify the definition of material and make AAS more consistent, they are not expected to have a significant impact on the preparation of financial statements. They should be applied for annual periods beginning on or after 1 January 2020, with earlier application permitted.

86 PART 6 FINANCIAL REPORT ACCOUNTABLE OFFICER’S AND CHIEF FINANCE AND ACCOUNTING OFFICER’S DECLARATION

The attached financial statements for the Central Highlands Region Water Corporation have been prepared in accordance with Standing Directions 5.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement and accompanying notes, presents fairly the financial transactions during the year ended 30 June 2020 and financial position of CHW at 30 June 2020. At the time of signing, we are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate. We authorise the attached financial statements for issue on 30 October 2020.

Dr Jeremy Johnson AM Chair Central Highlands Region Water Corporation

Paul O’Donohue Managing Director Central Highlands Region Water Corporation

Anthony O’Brien General Manager Business Services Central Highlands Region Water Corporation

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 87 VAGO REPORT

Independent Auditor’s Report To the Board of the Central Highlands Region Water Corporation

pinion I have audited the financial report of the Central Highlands Region Water Corporation (the corporation) which comprises the:

• balance sheet as at 30 June 2020 • comprehensive operating statement for the year then ended • statement of changes in equity for the year then ended • cash flow statement for the year then ended • notes to the financial statements, including significant accounting policies • accountable officer's and chief finance and accounting officer's declaration.

In my opinion, the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2020 and its financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

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

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

ter The Board of the corporation is responsible for the "other information" included in the Inortion corporation’s Annual Report for the year ended 30 June 2020. The other information in the Annual Report does not include the financial report, performance report and my auditor’s reports thereon. My opinion on the financial report does not cover the other information included in the Annual Report. Accordingly, I do not express any form of assurance conclusion thereon. In connection with my audit of the financial report, my responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a materially misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

ord’s The Board of the corporation is responsible for the preparation and fair presentation of the responsiiities financial report in accordance with Australian Accounting Standards and the Financial or te inni Management Act 1994, and for such internal control as the Board determines is necessary to report enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Board is responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.

88 PART 6 FINANCIAL REPORT

Auditor’s As reuired by the Audit Act my responsibility is to epress an opinion on the financial rsosiiitis report based on the audit y obecties for the audit are to obtain reasonable assurance about or t udit o hether the financial report as a hole is free from material misstatement, hether due to t ii fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is rort a high leel of assurance but is not a guarantee that an audit conducted in accordance ith the Australian Auditing Standards ill alays detect a material misstatement hen it eists isstatements can arise from fraud or error and are considered material if, indiidually or in the aggregate, they could reasonably be epected to influence the economic decisions of users taen on the basis of this financial report

As part of an audit in accordance ith the Australian Auditing Standards, eercise professional udgement and maintain professional scepticism throughout the audit also

• identify and assess the riss of material misstatement of the financial report, hether due to fraud or error, design and perform audit procedures responsie to those riss, and obtain audit eidence that is sufficient and appropriate to proide a basis for my opinion he ris of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may inole collusion, forgery, intentional omissions, misrepresentations, or the oerride of internal control • obtain an understanding of internal control releant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of epressing an opinion on the effectieness of the corporation’s internal control • ealuate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board • conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit eidence obtained, hether a material uncertainty eists related to eents or conditions that may cast significant doubt on the corporation’s ability to continue as a going concern f conclude that a material uncertainty eists, am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadeuate, to modify my opinion y conclusions are based on the audit evidence obtained up to the date of my auditor’s report oeer, future eents or conditions may cause the corporation to cease to continue as a going concern • ealuate the oerall presentation, structure and content of the financial report, including the disclosures, and hether the financial report represents the underlying transactions and eents in a manner that achiees fair presentation

communicate ith the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that identify during my audit

EBE Paul artin 0 ctober 00 as deleate for the Auditoreneral of ictoria

Central Highlands Water 2019-20 Annual Report PART 6 FINANCIAL REPORT 89 PART 7 DISCLOSURE INDEX

The 2019-20 Annual Report of Central Highlands Region Water Corporation is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of CHW’s compliance with statutory disclosure requirements.

Legislation Requirement Page Reference

MINISTERIAL DIRECTIONS & FINANCIAL REPORTING DIRECTIONS REPORT OF OPERATIONS Charter and purpose FRD 22H Manner of establishment and the relevant Minister 3 FRD 22H Purpose, functions, powers and duties 4 FRD 22H Key initiatives and projects 11 FRD 22H Nature and range of services provided 6, 8 Management and structure FRD 22H Organisational structure 19 Financial and other information FRD 10A Disclosure Index 90 FRD 12B Disclosure of major contracts 29 FRD 22H Employment and conduct principles 23 FRD 22H Occupational health and safety 24 FRD 22H Summary of the financial results for the year 9 FRD 22H Significant changes in financial position during the year 9 FRD 22H Major changes or factors affecting performance 9 FRD 22H Subsequent events 81 FRD 22H Application and operation of Freedom of Information Act 1982 28 FRD 22H Compliance with building and maintenance provisions of Building Act 1993 29 FRD 22H Statement on Competitive Neutrality Policy 29 FRD 22H Application and operation of the Public Interest Disclosures Act 2012 29 FRD 22H Details of consultancies over $10,000 27 FRD 22H Details of consultancies under $10,000 27 FRD 22H Disclosure of government advertising expenditure 27 FRD 22H Disclosure of ICT expenditure 27 FRD 22H Statement of availability of other information 28 FRD 24D Reporting of office-based environmental impacts 40 FRD 25D Local Jobs First Act 2003 29 FRD 29C Workforce Data Disclosures 23 SD 3.2.1 Audit Committee membership and role 22 SD 5.2 Specific requirements under Standing Direction 5.2 87 Compliance attestation and declaration SD 5.1.4 Attestation for compliance with Ministerial Standing Direction 5.1.4 9 SD 5.2.3 Responsible Body Declaration 3

90 PART 7 DISCLOSURE INDEX FINANCIAL STATEMENTS Declaration SD 5.2.2 Declaration in financial statements 87 Other requirements under Standing Directions 5.2 SD 5.2.1(a) Compliance with Australian accounting standards and other authoritative pronouncements 87 SD 5.2.1(a) Compliance with Ministerial Directions 12-47 SD 5.2.1(b) Compliance with Model Financial Report 48-89 Other disclosures as required by FRDs in notes to the financial statements(a) FRD 21C Disclosures of Responsible Persons, Executive Officers and other Personnel (Contractors with Significant Management Responsibilities) in the Financial Report 81 FRD 110A Cash Flow Statements 51 FRD 112D Defined Benefit Superannuation Obligations 57-58 Note: (a) References to FRDs have been removed from the Disclosure Index if the specific FRDs do not contain requirements that are of the nature of disclosure.

MINISTERIAL REPORTING DIRECTIONS MRD 01 Performance Reporting 43-47 MRD 02 Water Consumption and Drought Response Reporting 30-32 MRD 03 Environmental and Social Sustainability Reporting 33-42 MRD 04 Disclosure of Information on Bulk Entitlements and Compliance Activities 36-37 MRD 05 Major Non-Residential Water Users Reporting 30 MRD 06 Greenhouse Gas and Energy Reporting 38-39 MRD 07 Disclosure of Information on Letter of Expectations 12-17

LEGISLATION Water Act 1989 (Vic) 3 Water Industry Act 1994 (Vic) 3 Freedom of Information Act 1982 (Vic) 28 Building Act 1993 (Vic) 29 Public Interest Disclosures Act 2012 (Vic) 29 Local Jobs First Act 2003 (Vic) 29 Financial Management Act 1994 (Vic) 3, 9, 45, 87

GLOSSARY

AASs Australian Accounting Standards CHW Central Highlands Water CMAs Catchment Management Authorities DELWP Department of Environment, Land, Water and Planning EPA Environment Protection Authority FTE Full-time equivalent IWM Integrated Water Management Kilolitre (kL) One thousand litres Megalitre (ML) One million litres Gigalitre (GL) One thousand megalitres NGERS National Greenhouse and Energy Reporting System Measurement OHS Occupational health and safety PWSR Permanent water saving rules tCO2-e tonnes of CO2 equivalent VWES Victorian Water Efficiency Strategy

Central Highlands Water 2019-20 Annual Report PART 7 DISCLOSURE INDEX 91 E T PO Box 152Ballarat Vic3353 7 LearmonthRdWendouree Vic3355 entr hndster 1800061514 [email protected] F 0353203299 chw.net.au

CHW20-07-03