ANNUAL REPORT 2009–10 Moving water to where it’s needed most

ISSN 1836-9960 © State of (LinkWater) 2010 The Queensland Bulk Water Transport Authority

Contents

Letter of compliance 3

Annual report summary 5

About LinkWater 7

South East Queensland Water Grid 9

Strategy 10

Chairperson and Chief Executive Offi cer’s report 12

Our structure 16

Year in review 18

The year ahead 34

Corporate governance 35

Summary of fi nancial information 47

Financial report 2009–10 49

Certifi cate of Queensland Bulk Water Transport Authority trading as LinkWater 81

Independent Auditor’s Report 82 Molendinar , Southern Regional Water Pipeline LINKWATER ANNUAL REPORT 2009–10

Level 5, 200 Creek Street  Spring Hill Queensland 4000 PO Box 1045 Spring Hill QLD 4004 p + 61 7 3270 4000 f + 61 7 3270 4020 www..com.au

14 September 2010

The Honourable Mr Stephen Robertson MP The Honourable Mr Andrew Fraser MP Minister for Natural Resources, Mines and Treasurer and Minister for Employment and Energy and Minister for Trade Economic Development PO Box 15216 GPO Box 611 CITY EAST QLD 4002 QLD 4001

Dear Ministers

2009–10 LinkWater Annual Report

I am pleased to present the 2009–10 Annual Report for the Queensland Bulk Water Transport Authority, trading as LinkWater.

I certify this annual report complies with:

• the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, and

• the detailed requirements set out in the Annual Reporting Guidelines for Agencies.

A checklist outlining the annual reporting requirements can be accessed at www.linkwater.com.au.

Yours sincerely

3

Steve Roberts

Chairperson, LinkWater

The Queensland Bulk Water Transport Authority (trading as LinkWater) ABN 51 614 840 026

LINKWATER ANNUAL REPORT 2009–10 LINKWATER ANNUAL REPORT 2009–10 Mt Stapylton Balance Tank, Ormeau, Gold Coast Annual report summary

The annual report for the Queensland Bulk These advancements underpinned our achievements for 2009–10 and include: Water Transport Authority, trading as LinkWater, X major enhancements to water quality monitoring and testing in the highlights our key achievements and successes potable bulk water transport network, safeguarding water quality in during the 2009–10 year. (SEQ) X the transition to a new services contract model for the provision of This year focussed on the consolidation and enhancement of systems operational services that enables LinkWater to meet its obligations to and processes in preparation for economic regulation. government in a more cost effective and effi cient manner

This report also tracks LinkWater’s performance against our strategic X signifi cant capital upgrades to existing infrastructure that improved objectives and details our fi nancial performance in accordance with the bulk drinking water transport network in SEQ our obligations to government. X upgrades to LinkWater’s 24/7 network control room and enhanced Achievements at a glance monitoring capabilities for the potable bulk water transport network

During 2009–10, LinkWater achieved its performance outcomes X initial certifi cation by SAI Global for workplace health and safety, outlined in its 2009–10 operational plan approved by LinkWater’s quality and environment systems. responsible Ministers. All of these achievements underline LinkWater’s ongoing commitment Key operational advances were made that have further enhanced to deliver high quality, value-for-money services to the Queensland our ability to deliver reliable, high quality, value-for-money services Government and the people of SEQ. to government. More detailed information about LinkWater’s performance against our key reporting areas can be found throughout this report.

Overview – key performance measures Target (annual) Actual Achieved Safety Lost Time Injury (LTI) A work related occurrence that results in a fatality, permanent disability or time lost from <5 4* ✓ work of one day/shift or more 5 Staff with safety training compliance Staff have completed all safety training relevant to their roles 100% 100% ✓ Absenteeism Less than eight days unplanned absenteeism per employee per annum <8.0 7.4 ✓ Operations Compliance with Australian Drinking Water Guidelines in areas of: - health measures chemical and microbial parameters that could pose health risks 100% 100% ✓ - aesthetic measures parameters for taste, discolouration and odour 95% 100% ✓ Governance Compliance with all laws and regulations 100% 100% ✓ Compliance with all policies and standards Adherence to LinkWater and State Government policies and standards, where appropriate 100% 100% ✓

* LTIs were time lost from work and not permanent disabilities or fatalities.

LINKWATER ANNUAL REPORT 2009–10 LinkWater Assets and Projects Current and future

Lake Macdonald Noosa Water Treatment Plant () Map not to scale. Noosa Heads

Existing assets acquired from councils Northern Pipeline Northern Pipeline Interconnector – Interconnector – Stage 2 Stage 2 (under construction) (under construction)

Toowoomba Pipeline (to be operated by LinkWater for 12-month period) Maroochydore Northern Pipeline Interconnector – Stage 1

Eastern Pipeline Interconnector

Southern Regional Water Pipeline 32

Network Integration Pipeline

Cedar Grove Connector Northern Pipeline (in planning stages) Interconnector – Stage 1 Somerset

Toowoomba Caboolture Pipeline Morayfield Esk 1 Redcliffe Wivenhoe 3 Dam 2

North Pine 4 LinkWater Assets Dam 4 5 Existing assets New assets 6 BRISBANE Pump station Pump station or water quality facility Eastern Pipeline North Reservoir Reservoir Stradbroke 7 Interconnector Island 9 9 Existing assets 1. Narangba 8 13 2. Byrnes Rd pump station 13 3. North Pine WTP pump station 4. Aspley pump station and reservoir 17 5. Sparkes Hill reservoirs 22 10 6. Lloyd St pump station 18 21 16 11 7. Green Hill reservoirs Ipswich 14 14 8. Camerons Hill booster pump station 23 15 9. Wellers Hill reservoirs and pump station 26 12 12 10. Eprapah booster pump station 11. Mt Cotton reservoir 24 12. Heinemann Rd reservoirs, pump station Cedar Grove Connector and WQ facility (in planning stages) 13. Alexandra Hills pump station, reservoirs, 25 high level tank and WQ facility 14. Kimberley Park pump station and reservoir Southern Regional 15. Daisy Hill pump station Water Pipeline 27 16. Trinder Park pump station 17. Stones Rd pump station 18. Learoyd Rd pump station 28 19. Mudgeeraba pump station 20. Clover Hill reservoir 21. Kuraby reservoir New assets 22. Bundamba pump station (under construction) 29 23. Swanbank pump station 29 24. North Beaudesert balance tanks 25. Chambers Flat pump station and WQ facility 26. Gramzow Rd pump station and WQ facility 27. Stapylton balance tank and WQ facility 30 Tugun 28. Coomera pump station Network 29. Molendinar pump station and balance tank Integration Pipeline 19 Gold Coast 30. Tarrant Dr pump station 20 31 Desalination 31. Robina mixing reservoir Plant 32. Landsborough water quality management facility (WaterSecure) About LinkWater

The Queensland Bulk Water Transport Authority, trading as LinkWater, was LinkWater works closely with the Southern Regional Water Pipeline established in November 2007 as part of the water reform under the South Company Pty Ltd, trading as LinkWater Projects. LinkWater Projects is East Queensland Water (Restructuring) Act 2007. the Queensland Government’s special purpose vehicle for the design and construction of bulk water pipelines in SEQ. LinkWater is responsible for the management, operation and maintenance of potable bulk water pipelines and related infrastructure in SEQ. LinkWater became operational in July 2008 with the transfer of approximately 350km of SEQ council-owned bulk water pipelines and LinkWater is also responsible for monitoring water quality throughout the associated infrastructure. By April 2010, LinkWater had gained control of potable bulk water transport network. an additional 185km of new bulk water pipelines and related infrastructure LinkWater was established to: completed and handed over by LinkWater Projects and other alliances.

X improve the regional water supply network in SEQ The seamless transfer and effi cient operation of 535km of bulk water assets has positioned LinkWater as the network manager for potable bulk water X improve regional coordination and management of water supply pipelines and related infrastructure, a critical function of the SEQ Water Grid.

X provide more effi cient delivery of water services In March 2010, LinkWater was contracted by LinkWater Projects, the

X enhance customer service for water consumers interim pipeline owner, to operate and maintain the newly completed Toowoomba Pipeline until March 2011. The Toowoomba Pipeline will then X give a clear accountability framework for water supply security. be handed over to Toowoomba Regional Council by LinkWater Projects, for ongoing ownership and operation. Under the South East Queensland Water (Restructuring) Act 2007, Although not part of the SEQ Water Grid, the Toowoomba Pipeline will LinkWater is responsible to: secure the ’s future . X the Treasurer and Minister for Employment and Economic LinkWater is now moving an average of 600 megalitres of water per day Development through the SEQ Water Grid to where it’s needed most. We will continue X the Minister for Natural Resources, Mines and Energy and Minister the effective operation and maintenance of this infrastructure critical to for Trade. SEQ’s water security, while delivering a value-for-money service to the Queensland Government and the community of SEQ. 7

Pipelines owned, managed and operated by LinkWater Related infrastructure

23 reservoirs 350km of potable bulk water pipelines previously owned by SEQ councils 15 pump stations 2 water quality facilities

4 reservoirs 94km – Southern Regional Water Pipeline (SRWP) linking Brisbane, the Gold Coast, Logan, Ipswich and 5 pump stations council areas 2 water quality facilities

1 pump station 8.4km – Eastern Pipeline Interconnector (EPI) linking Redland and Logan cities 1 water quality facility

47km – Northern Pipeline Interconnector (NPI) – Stage 1 linking and Sunshine Coast Regional councils 1 water quality facility

35km – Network Integration Pipeline (NIP) and Pumps and Pipes connect the Gold Coast Desalination Plant at Tugun 1 reservoir 1 pump station to Molendinar Treatment Plant. Constructed by the Gold Coast Desalination Alliance and Pumps and Pipes Alliance 1 pump station

38km – Toowoomba Pipeline (not part of SEQ Water Grid) linking to Cressbrook Dam – operated 1 pump station, 2 pumps under contract (on behalf of LinkWater Projects) until March 2011

LINKWATER ANNUAL REPORT 2009–10 About LinkWater (continued)

CEO Peter McManamon and the LinkWater team

Our vision Our people To be a leader in the planning, development and At LinkWater, our people are our greatest asset. We have successfully created a diverse and talented workforce of water industry professionals transport of bulk water and related services. skilled in commercial and operational excellence, stakeholder Our mission relations and technical know how. Our focus on individual professional development is complemented by our reward and recognition program To move water to where it’s needed. and the strong encouragement of innovation. These programs help ensure Our values we attract and retain the best people in the business at a national and 8 Our employees value excellence through teamwork and professionalism. international level.

Team members demonstrate our values through: LinkWater employed 69.5 full time employees during 2009–10 and has a total workforce of 80.5. X a safe, healthy and happy approach to work To view our corporate DVD, please visit the ‘About us’ section of our X a professional, adaptive and united approach to work outcomes website www.linkwater.com.au

X a commitment to innovation and sustainability

X integrity

X high performance and celebration of our successes

X open, honest, appropriate and timely communication

X respect for others and acceptance of diversity in our workplace

X supportive behaviour to all colleagues.

LINKWATER ANNUAL REPORT 2009–10 South East Queensland Water Grid

The SEQ Water Grid is an integrated system that has been established to It provides SEQ with a combination of climate dependent and climate secure and effi ciently manage SEQ’s water supplies. resilient water sources, managed effi ciently with a strong conservation focus. By moving water to where it’s needed most, the SEQ Water Grid An industry leader in delivering safe, secure and reliable water for the delivers system security to the region. region, the SEQ Water Grid provides a secure investment for now and the future. LinkWater is responsible for the potable bulk water pipeline network that forms the backbone of the SEQ Water Grid. The SEQ Water Grid comprises an infrastructure network of treatment facilities and pipes that move water from new and existing sources across the region.

The Water Grid Manager owns the Legend urban water entitlements in South East Queensland and is responsible for managing Contractual the Water Grid. It purchases services to store, transaction treat, produce and transport bulk water from Seqwater, LinkWater and WaterSecure to sell treated Water supply water to councils, power stations and other businesses. Purified recycled water supply

Water Grid Manager

This is the distribution and retail business Water storage for Brisbane, Scenic Rim, Ipswich, Somerset and treatment and Lockyer Valley areas. Operating from 1 July 2010, it will sell and deliver drinking water to customers and collects, transports Recycling/desalination and treats wastewater and sewage.

Bulk water transport 9 Seqwater supplies water from Industrial customers , weirs and borefields; and is responsible for the Water and wastewater catchment, treatment and distribution/retail storage of bulk water for the This is the distribution and retail business Water Grid Manager. for Gold Coast, Logan and Redlands areas. Customer – households Operating from 1 July 2010, it will sell and and businesses deliver drinking water to customers and LinkWater moves drinking collects, transports and treats wastewater water from treatment plants and sewage. and reservoirs through bulk pipelines and into the distribution networks, for the Water Grid Manager.

Customer WaterSecure supplies water This is the distribution and retail business from the Gold Coast Desalination for Sunshine Coast and Moreton Bay areas. – households Plant and the Western Corridor Industrial Operating from 1 July 2010, it will sell and and businesses customers deliver drinking water to customers and Recycled Water Scheme to the collects, transports and treats wastewater Water Grid Manager. and sewage.

State-owned statutory authorities Council-owned authorities

*Diagram provided by the SEQ Water Grid Manager

LINKWATER ANNUAL REPORT 2009–10 Strategy

The 2009–14 Strategic Plan was LinkWater’s second plan approved by the These objectives were achieved by the delivery of robust strategies Queensland Government. focussing on the following key result areas:

In 2009–10 our key operational objectives were: LinkWater will implement Develop X to provide an effective and effi cient potable bulk water service to capability processes and systems to deliver a sustainable business SEQ Water Grid customers that meets quality assurance and volume requirements LinkWater will optimise the Deliver X to develop and maintain appropriate organisational capability to water management and operation of bulk water transport networks meet the service delivery requirements through the employment and retention of high quality staff and the integration of highly effective LinkWater will help secure fi t-for-purpose systems and procedures SEQ’s water future by Secure continuing support for planning X to manage health and safety outcomes to reduce the likelihood and supply the delivery of bulk water consequences of major accidents or incidents occurring within the transport networks on time SEQ Water Grid. and on budget

LinkWater will demonstrate Act commercially fi nancial value to government These key result areas, underpinned by and the community

supporting strategies, provided LinkWater LinkWater will be recognised Provide good governance for outstanding corporate with a roadmap for success, ensuring we governance met our obligations to government and These key result areas, underpinned by supporting strategies, provided delivered on our promises. LinkWater with a roadmap for success, ensuring we met our obligations to 10 government and delivered on our promises.

LINKWATER ANNUAL REPORT 2009–10 Working on the Tallai trunk main, Gold Coast LINKWATER ANNUAL REPORT 2009–10 Chairperson and Chief Executive Officer’s report

LinkWater’s Chairperson and CEO on a site visit

This was a year dedicated to the consolidation of Safety LinkWater’s capabilities as the Queensland Bulk LinkWater’s strong commitment to a safety-focussed culture is our number one priority and underpins everything we do. LinkWater provides a safe Water Transport Authority. work environment for all of our staff supported by a robust workplace 12 LinkWater achieved signifi cant advances in capability in the 2009–10 health and safety management standard. We expect the same high fi nancial year. These achievements continue our consolidation of business standard of safety from our contractors and service providers and work operations and position LinkWater as a contemporary, effi cient and with them to ensure their commitment is in line with our own. responsive provider of essential network management services. Safety is a cornerstone of our business and LinkWater will continue to build LinkWater is committed to a continuous improvement and learning culture. on the solid foundation we have put in place.

We leveraged lessons learnt from last year as opportunities for improvement People going forward. These learnings resulted in enhancements to our incident LinkWater’s achievements are directly associated with our ability to attract management response protocols and a suite of complementary incident and retain excellent staff. It is clearly recognised that, retention of staff, management tools now recognised as best practice. among other factors, is driven by the culture of the organisation and by opportunities that LinkWater presents through reward and recognition, In 2009–10, LinkWater successfully met all its obligations to the training and education and by offering a stimulating work environment to Queensland Government and our primary customer, the SEQ Water keep staff engaged and motivated. We have continued to attract and retain Grid Manager. the best people in the business in this way.

LINKWATER ANNUAL REPORT 2009–10 Operational achievements LinkWater is now moving an average of 600 megalitres of water per day (ML/d) through the SEQ Water Grid, allowing the sharing of water from In 2009–10 LinkWater made key network management and operational various sources around the region and delivering water security in SEQ. advances that have improved our ability to deliver reliable, high quality, value-for-money services to the SEQ Water Grid. Sustainability

These advances include: LinkWater is committed to safeguarding and enhancing the environment and community in which it operates by responding to the challenges of X the transition to a more effi cient delivery model for operational services climate change through its sustainability program. Under this program, the X the adoption of interim Drinking Water Quality Management Plans following initiatives have been implemented over the last year:

X the installation of additional water sampling infrastructure and X a ‘Green Offi ce’ program to provide tools and education for staff on increased water quality testing how to implement sustainability in the workplace

X the engagement of enhanced laboratory services for water quality X membership to CitySwitch, a growing national partnership between monitoring businesses and local government acting as environmental leaders

X major progress of the Supervisory Control and Data Acquisition X purchase of carbon offsets through Ecofund Queensland to offset its (SCADA) integration project energy consumption for Earth Hour 2010

X major upgrades and refurbishments to potable bulk water X an energy monitoring improvement program aimed at improving infrastructure in SEQ measurement and ultimately optimisation of energy usage across LinkWater assets. X the optimisation of energy use within the SEQ Water Grid’s new standard operating procedures. Sustainability is a cornerstone of our business and we will continue to build upon the solid foundation we have put in place.

13

LinkWater board meeting, from left: Ross Landsberg, John Orange, Steve Roberts, Peter McManamon, Graham Thomsen and Catherine Sinclair

LINKWATER ANNUAL REPORT 2009–10 Chairperson and Chief Executive Officer’s report (continued)

Board asset tour, Chambers Flat Pump Station

Future outlook We also recognise the outstanding contribution of LinkWater Projects in partnering with us to deliver innovation and outstanding service to the LinkWater is geared for another exciting year of challenge and progress. Queensland Government and the people of SEQ. There is much work to be done in preparation for independent economic regulation and we will continue to work with government agencies in We would also like to thank fellow Board members and the Executive preparation for new requirements. Management Team for their ongoing dedication and contribution to LinkWater’s success. In addition to the estimated $2 million cost savings that will result from the change in the operational services delivery model implemented in And last but certainly not least, we acknowledge the signifi cant March 2010, we will achieve further operational savings by transferring contributions of all our talented people and thank them for their dedication organisational capability from external consultants and contractors, to and professionalism. We have great confi dence in the ability of our people 14 in-house capability. to continue delivering excellent results.

LinkWater will continue to add value to government and the people of SEQ by implementing our Infrastructure Master Plan. This plan will optimise the delivery of the capital works program and promote a greater understanding of water quality, hydraulic and demand assumptions for the SEQ Water Grid. Steve Roberts, Chairperson

With thanks

We would like to take this opportunity to acknowledge the efforts of all involved in LinkWater’s achievements over the past 12 months. Peter McManamon, Chief Executive Offi cer In particular, we recognise the valuable contributions of our key stakeholders; our responsible Ministers’ Offi ces of the Department of Environment and Resource Management and Queensland Treasury, the Queensland Water Commission, fellow SEQ Water Grid participants and local governments across SEQ.

LINKWATER ANNUAL REPORT 2009–10 Turning the valve on the Southern Regional Water Pipeline LINKWATER ANNUAL REPORT 2009–10 Our structure

LinkWater’s Executive Management Team has LinkWater Board an impressive balance of commercial and water Board Members industry experience. The team is lead by the Chief Executive Offi cer Chief Executive Offi cer, Peter McManamon.

Executive Management Team LinkWater’s organisational structure has been designed to refl ect the strategic key result areas Business Corporate Legal Operational Project within the business. Services Services Services Services Services Operations Services Contract

General Manager Business Services General Manager Corporate Services Ron Anderson (formally appointed to role 24 May 2010) Andrew Foley

X Corporate fi nance X Stakeholder management

X Business development X Corporate communications

X Commercial development X Regulation and risk

X Knowledge management X Workplace health and safety and quality systems

X Human resources 16 General Manager Legal Services Sally Frazer X Administration

X Company secretariat Chief Executive Offi cer X Compliance Peter McManamon

X Governance X Responsible to the Board for the overall management of LinkWater Projects and LinkWater X Legal counsel X Provision of expert advice to the Board on policy and future directions

X Oversight of the strategic plan

X Overall sustainability and stakeholder management

LINKWATER ANNUAL REPORT 2009–10 From left: Ron Anderson, Sally Frazer, Andrew Foley, Peter McManamon, Andrew Moir and Michael Hortz

General Manager Operational Services Andrew Moir

X Day-to-day network management and operation of LinkWater assets

X Water quality management

X System planning and development

X Sub-regional planning 17 X Asset management

X Operational strategy

General Manager Project Services Michael Hortz

X Capital works and project delivery

X Project development

X Procurement

LINKWATER ANNUAL REPORT 2009–10 Year in review

Key result area: Safety Develop LinkWater’s commitment to safety is a key pillar in its culture. Safety capability is underpinned by the Workplace Health and Safety Management Standard and Plan. These complementary documents form the basis of LinkWater’s Workplace Health and Safety system. X To provide a work environment aimed at no harm LinkWater works with its contractors and alliances to ensure the same X To attract, reward, develop, motivate and retain staff level of commitment to rigorous safety standards.

X To engage and collaborate with stakeholders

X To deliver systems that provide organisational knowledge

X To be a sustainable business

In 2009–10, four LTIs were reported. These LTIs occurred within LinkWater’s Operations and Maintenance Alliance comprising Transfi eld Services Limited and United Utilities employees. 18 While the number of LTIs for the year is under the performance standard set, we can do better in our efforts toward zero harm. LinkWater is in relentless pursuit of achieving this goal.

LinkWater continued to achieve its health and safety goals through the active promotion of a safe workplace and lifestyle programs for employees and contractors.

A Safety Leadership Training program was run during the second quarter for all LinkWater senior managers and other identifi ed key staff. This program focused on the behavioural drivers for a safe work environment and included:

X understanding an individual’s role and responsibility under legislation

X building a ‘no harm’ culture

X managing workplace health and safety risks and

X encouraging continuous improvement in safety.

LINKWATER ANNUAL REPORT 2009–10 March 2010 LinkSpiration award winners

A key achievement during 2009–10 was the successful transfer of third LinkWater’s achievements are underpinned by the expertise of our people party certifi cation for workplace health and safety, quality and environment and the value we place on them. systems to LinkWater. The former Operations and Maintenance Alliance LinkWater successfully negotiated a certifi ed agreement for relevant had previously obtained certifi cation and with the transfer to a services personnel. This agreement was approved through an employee ballot contract model LinkWater was able to ensure this knowledge was of relevant staff members. The certifi ed agreement is a culmination of transferred to LinkWater. six months of negotiation, consultation and benchmarking. Transition To more clearly articulate LinkWater’s expectations of all staff and service arrangements for staff covered by the agreement were implemented providers, a suite of Safety Golden Rules was approved by the Board. following certifi cation from the Queensland Industrial Relations 19 These have now been communicated across the business and to all service Commission in November 2009. providers. These rules are not negotiable and failure to adhere to them will Development plans have been implemented for all employees, identifying be considered a breach of LinkWater’s Code of Conduct. training needs and career goals. These plans are clearly aligned with our People and culture strategic and operational plans.

LinkWater continues to invest in its people and promotes a culture that In late 2009 LinkWater launched its reward and recognition program, empowers individuals to achieve and often exceed industry benchmarks. ‘LinkSpiration’. The program is focussed on innovation and achievement by rewarding outstanding individual contributions and teamwork. It also LinkWater’s Human Resource Strategy focuses on productivity, capability, recognises effi cient and safe workplace practices. wellbeing and satisfaction. Its continued success ensures organisational cultural alignment with our core values. The awards are held quarterly with the fi rst round of LinkSpiration winners announced in April 2010. The proud recipients were recognised Our wellbeing program promotes a healthy lifestyle to staff and for team commitment, innovation and improved business practices that supports the Queensland Government’s Toward Q2: Tomorrow’s promoted effi ciency. Queensland target of ‘cutting by one third, obesity, smoking, heavy drinking and unsafe sun exposure’.

LINKWATER ANNUAL REPORT 2009–10 Year in review (continued)

Organisational restructure A Green Offi ce Program was launched, aimed at reducing the environmental footprint of our offi ce LinkWater always looks for ways to improve effi ciency in our operations activities. The program focuses on reduction in and to reduce costs without compromising our quality of service. energy consumption, water usage and waste During 2009–10 LinkWater completed a strategic review of the delivery of generation through the adoption of effi ciency its operations, maintenance and capital works programs. This review was measures and encouraging behavioural changes. part of our commitment to deliver an effi cient and value-for-money potable The program has also set environmental targets bulk water transport service. in line with the state government’s Sustainable Offi ce Building Rating Policy. The focus of the review was to ensure LinkWater had appropriate operational structures in place to enable us to: LinkWater has also become a member of CitySwitch, a growing national partnership between businesses and local government acting X improve the delivery of strategic objectives as environmental leaders. The program works through offi ce tenants X effectively manage infrastructure asset risk committing to improvements in offi ce energy effi ciency to make a positive impact on climate change. As part of its commitment to this program, X meet all regulatory responsibilities LinkWater undertook its fi rst National Australian Built Environment Rating X promote an environment of continuous improvement and Scheme (NABERS) energy rating of its offi ces in October 2009, and received demonstrated value-for-money service delivery. a 3.5 star rating out of 5 stars for its energy consumption performance. LinkWater has also committed to developing an energy action plan to The review identifi ed that a more effective alternative to the current improve its NABERS energy rating to four stars in the next fi nancial year. alliance model would be the implementation of a services contract model, LinkWater’s primary tool for reducing its carbon footprint is the Energy with key management activities being brought in-house to LinkWater. This Management Strategy. Under the strategy, external providers have would establish LinkWater as a specifi er of services, and enable us to set been engaged to upgrade energy monitoring equipment for all major the strategy direction of operations and maintenance. energy consuming assets. The majority of the upgrade works have been The agreement for a new services delivery model for operations and completed and will enable LinkWater to monitor energy consumption maintenance service is a signifi cant one that builds on LinkWater’s online. The information will allow LinkWater to better understand the 20 capability to meet the objectives set out in our strategic plan over the next energy consumption associated with the various modes of operation and to fi ve years and beyond. determine the most energy effi cient means of fulfi lling instructions from the SEQ Water Grid Manager. Sustainability and environment LinkWater is committed to supporting the Queensland Government’s LinkWater is committed to safeguarding and enhancing the quality of the ‘Toward Q2: Tomorrow’s Queensland target of ‘cutting Queenslanders’ environment and community in which it operates for the benefi t of future greenhouse gas emissions by one third by 2020 ’. The fi rst stage of generations. Through this commitment LinkWater proudly contributes to the delivering upon this commitment is implementing energy measurement and Queensland Government’s Q2: Tomorrow’s Queensland targets of ‘cutting by monitoring systems to enable LinkWater to accurately quantify its energy one-third Queenslanders’ carbon footprint with reduced car and electricity consumption and its carbon footprint. LinkWater has implemented systems use, and protecting 50 per cent more land for nature conservation and to reliably measure energy consumption for its offi ce and vehicles, and now public recreation’. the majority of its pump stations. We will use these monitoring systems to In the 2009–10 fi nancial year, LinkWater has made numerous advances identify energy conservation and effi ciency opportunities. in responding to issues relating to environmental management, climate change and rapid population growth in SEQ.

LINKWATER ANNUAL REPORT 2009–10 LinkWater’s greenhouse gas emissions are attributable to the following Emissions have been calculated in line with the methodologies contained business activities: in the National Greenhouse and Energy (Measurement) Reporting Technical Guidelines 2009 and the Greenhouse Gas Emissions Calculator published X vehicle usage by the Australian Government Department of Environment, Water, Heritage X electricity consumption and the Arts. - offi ces Six gases have been identifi ed under the Kyoto Protocol as the main - depots greenhouse gases that need to be reduced in order to combat climate - water pumping and treatment change. These gases, under standard emission measurement practices, X air travel. are reported as carbon dioxide equivalent emissions (CO2-e). The following table outlines the estimated emissions relating to LinkWater’s operational activities during 1 July 2009 to 30 June 2010.

LinkWater Greenhouse Gas Emissions 2009–10

Activity Estimated tonnes CO2-e per year

Vehicle usage

LinkWater-owned vehicles 5

Lease/hire vehicles 323

Electricity consumption

Corporate offi ces1 210

Depots2 17

Water pumping3 23,563

Air Travel

Corporate air travel 9 21 TOTAL 24,127

1–2. Calculated using actual and averaged energy consumption data. 3. Electricity consumption was calculated using water pumping data and theoretical energy usage equations.

LinkWater produces an annual Sustainability Report Card available on our website under ‘Publications’. Please visit www.linkwater.com.au for more information.

LINKWATER ANNUAL REPORT 2009–10 Year in review (continued)

CASE STUDY LinkWater at Work

Engaging the community In March 2010, LinkWater commissioned a 110m mural to be painted on one of its high profi le assets, Sparkes Hill Reservoir in Stafford. The At LinkWater, we understand our success also relies on the site attracts substantial graffi ti and vandalism and is visible to nearby productive, long-term relationships we foster within the households. It is also used regularly by local residents for recreational communities where we operate. activities such as dog walking and exercise. Aside from minimising impacts caused by maintenance, LinkWater “The site is a haven for graffi ti artists and would otherwise be a also works to give back to the community through initiatives such as pleasant park-like amenity for the pubic to use,” Paul said. the proactive graffi ti management program. LinkWater engaged local school kids and nearby residents Graffi ti can be a major issue for maintaining water infrastructure discouraged by graffi ti to help put the fi nishing touches on the mural and also for surrounding communities. It is a very costly problem and thereby develop a sense of ownership and pride for it. They to manage. Traditional methods to control it involve periodically were also invited to participate in the community dedication event covering graffi ti with grey paint. Unfortunately, this also encourages held in April 2010 which celebrated the completion of the mural. more graffi ti to return by giving artists a ‘blank slate’. LinkWater will monitor the site for 12 months. If the trial indicates “If you’ve ever seen a reservoir you will understand why they are so the mural has been successful in preventing graffi ti, then it may be appealing to graffi ti artists–it is a large concrete canvas just waiting included as part of LinkWater’s Asset Management Strategy and for a tag,” said LinkWater’s Community Engagement Coordinator, rolled out to other water assets where graffi ti is a problem. Paul Ellender.

LinkWater commenced a trial to determine if graffi ti could be handled in a more proactive way. Research and experience in other industries indicates that murals signifi cantly reduce or prevent the incidence of graffi ti altogether. This is because a graffi ti artist shows respect to other artists’ work and are unlikely to tag it.

22

Local Councillor and students help celebrate the completion of the Paul Ellender and team painting the Sparkes Hill reservoir mural Sparkes Hill mural

LINKWATER ANNUAL REPORT 2009–10 Community and stakeholder relations

LinkWater’s Community Engagement team ensures any impacts on the community caused by our activities are minimised, and forges positive relationships by giving back to communities where possible.

In addition to the proactive graffi ti management program detailed in the case study (previous page), LinkWater also looks for ways to mitigate impacts to communities and the environment that result from our operations.

This was demonstrated in 2009–10 when LinkWater donated approximately 20 cubic metres of eucalyptus mulch to a local school. The mulch was sourced from trees that had to be removed to enable safe access to a work site. Rocklea State School, situated less than one kilometre away from the site, was appreciative of the mulch, sending their formal thanks to LinkWater for the “kind donation of forest mulch to enrich and enhance” the school’s gardens.

Through LinkWater’s Legacy project program, communities benefi t after new pipelines are installed by LinkWater Projects and their alliance construction partners. New public amenities are left behind such as park areas and equipment and environmental enhancements such as bushland regeneration, tree plantings etc. LinkWater involves the local community, council and interest groups to launch these projects and dedicate them back to the community.

LinkWater conducts a yearly satisfaction survey with our community and key government stakeholders to gauge the effectiveness of our dealings 23 with them and to help us continually improve our service.

Community and government stakeholders again expressed overall satisfaction with LinkWater in our second stakeholder satisfaction survey conducted in June 2010. Overall scoring was in the top quartile of the stakeholder satisfaction index.

Rocklea State School students with LinkWater‘s Community Liason Offi cer

LINKWATER ANNUAL REPORT 2009–10 Year in review (continued)

Knowledge management LinkWater worked with staff to ensure that all core information is stored in TRIM, our electronic Document and Records Management System (eDRMS). LinkWater’s Knowledge Management Strategy delivered major initiatives There are now over a quarter of a million records safely stored in TRIM. over the year that signifi cantly improved business processes and information technology. Enhanced knowledge sharing, better reporting Technology also underpins the processes LinkWater has implemented to systems and compliance with information standards are just a few of the monitor its assets. overall benefi ts now realised. During the year, LinkWater’s network control room, the operational hub of Major advances were made in the installation of new technology and its SEQ’s potable bulk water transport network, moved to a 24/7 operation. integration across each aspect of the business. The control room uses a Supervisory Control and Data Acquisition (SCADA) LinkWater successfully introduced SAP, a new enterprise resource planning system to monitor core assets and to move water around the SEQ Water system to provide improved processes for many key business functions. The Grid. Water quality and asset performance can also be monitored at certain aim of the project was to create a fi nancial management platform for the key locations using the SCADA system. future and to streamline existing operations including plant maintenance. A network upgrade was completed that ensures redundant links for the The SAP system makes it easier for employees by providing benefi ts SCADA networks and corporate systems into LinkWater’s two remotely such as enhanced fi nancial reporting, integration with payroll, electronic located data centres. These links mean that, in the event of a network timesheets, leave and training request forms etc. failure with Telstra or Optus, LinkWater staff can still access data using an alternative link. This provides a valuable safety net for the SEQ Water Grid. Technology underpins the processes LinkWater has implemented to monitor its assets. A security check has also been undertaken to test the security of the SCADA and Corporate networks. A large part of the Knowledge Management Strategy involved the installation and upgrade of information management systems that are To meet Information Standards compliance (IS2) LinkWater completed an reliant on technology. In the past twelve months, the main focus has been Information and Communication Technology Strategic Resources plan, which on providing reliable, redundant and secure communication systems, as has been lodged with the Queensland Government Chief Information Offi ce. well as improved fi nancial and reporting systems.

24

The LinkWater control room

LINKWATER ANNUAL REPORT 2009–10 Key result area: Development of a detailed strategy and implementation plan were successfully completed in 2009–10, bringing LinkWater closer to Deliver integrated control of the SEQ Water Grid’s potable bulk water network water and a more effi cient, reliable transport system for the benefi t of the region. The implementation phase will commence in 2010–11. X Effi ciently operate the Water Grid assets Water quality X Effectively manage the Water Grid assets One of LinkWater’s key responsibilities is the monitoring of water quality in the potable bulk water transport network across the SEQ Water Grid. Operations LinkWater has established a water quality monitoring regime that To ensure operational consistency of existing and new assets, exceeds previous levels of monitoring conducted in the bulk water LinkWater has been working toward a consolidated and integrated transport network. SCADA system for its pipelines and related infrastructure. This will ensure infrastructure is controlled through one central system. Key to these improvements was the installation of a signifi cant number of new water sample points across the network. This allows a The project will align the interfaces between each system more representative picture of the water quality in assets transferred and improve the effi ciency of monitoring and operation of the from local councils and provides a better understanding of how water infrastructure. quality is maintained around the network.

25

Network Integration Pipeline on the Gold Coast

LINKWATER ANNUAL REPORT 2009–10 Year in review (continued)

CASE STUDY LinkWater at Work

Centralised monitoring and control of the potable bulk The network control room also assists LinkWater’s water quality team water transport network in monitoring water quality from key locations fi tted with monitoring technology. As the network manager, LinkWater is watching over SEQ’s potable bulk water pipelines, ensuring this critical system is safe and secure. “While the team conducts the majority of testing by hand at the many testing points, there are key locations throughout the network fi tted As the operational hub of SEQ’s potable bulk water network, with sensor technology that can pick up any changes in water quality LinkWater’s control room plays an essential role in monitoring the automatically,” he said. safety and security of SEQ’s potable bulk water supply. These impressive enhancements to LinkWater’s centralised control The network control team has eight employees who monitor and room capabilities ensure a world-class system critical to the security control the network 24 hours a day seven days a week, ensuring water of the SEQ Water Grid’s potable bulk water supply network. is transported to where it is needed most.

Operations Planning Offi cer Michael Hyde said “our control room technology not only allows us to redirect the fl ow of water in certain parts of the system at the click of a button, we can also monitor security—picking up a fault such as a burst water main or a security breach at one of our balance tanks,” he said.

26

Michael Hyde and Michael Whyte in the control room

LINKWATER ANNUAL REPORT 2009–10 Calibration of the PH analyser at the water quality facility, Camerons Hill

Water quality (continued) LinkWater has now engaged a single external service provider for all laboratory services. This new provider delivers LinkWater water quality The information gathered at the sample points will be critical to future results within industry-leading turnaround times. 27 water quality modelling and management. LinkWater is working with state and local government agencies to support LinkWater has developed and implemented an interim Drinking Water accurate reporting on network and water quality modelling. This includes Quality Management Plan. This plan is the predecessor to the fi nal Drinking the implementation of an SEQ Water Grid-wide Master Plan to better Water Quality Management Plan, a legislative requirement that must be understand demand and supply dynamics within the SEQ Water Grid. submitted to Government in 2011. A new water quality database has been developed and implemented As part of the development of the plan, LinkWater conducted a water to capture LinkWater’s water quality data from the potable bulk water quality risk assessment of the entire SEQ Water Grid. The consequence transport network. This information feeds into a public report that promotes tables that LinkWater formulated as part of this plan have been adopted as transparency and fosters confi dence in SEQ’s drinking water quality. the SEQ Water Grid’s standard for water quality risk assessment.

LINKWATER ANNUAL REPORT 2009–10 Year in review (continued)

CASE STUDY LinkWater at Work

Safeguarding water quality in SEQ’s potable bulk water X implementation of an advanced laboratory information transport network management and reporting system that automatically identifi es non-compliant results. This allows LinkWater to respond quickly LinkWater became operational in July 2008 with the transfer of 350km to and report any water quality non-conformances. of potable bulk water pipelines and related infrastructure previously owned by local councils. Since that time, major improvements have X further advances in our hydraulic modelling capabilities that will been made to further safeguard the quality of SEQ’s drinking water. enable us to foresee and track impacts of water quality incidents throughout the network As network manager, LinkWater is now responsible for monitoring water quality across the SEQ Water Grid’s vast potable bulk water X upgrades to our 24/7 network control room, enhancing our ability network stretching from the Sunshine Coast down to the Gold Coast. to monitor water quality remotely at key points in the network. This bulk network begins at drinking water treatment plants owned by Seqwater and fi nishes where pipes join the distribution network. The LinkWater is now averaging 6000 water quality tests per month in the distribution network is managed and maintained by council-owned bulk water transport network, a signifi cant improvement to previous distributor/retailer authorities that ultimately supply water to residents water quality management regimes. and businesses of SEQ. LinkWater will continue to expand upon our water quality monitoring Before July 2008, the potable bulk water network was owned and expertise, helping to safeguard water quality in SEQ now and into operated by a number of SEQ councils, all under different management the future. plans. The integration of the network, now consolidated under one management system, allows for economies of scale and system-wide improvements to both assets and water quality monitoring.

LinkWater has established a water quality monitoring regime that exceeds levels of monitoring previously conducted in the bulk water transport network.

28 Water Quality and Compliance Manager, Mark Crabtree, heads the LinkWater team responsible for water quality monitoring. Mark and his team have successfully implemented a number of strategies to enhance the water quality monitoring process. These include:

X the installation and/or replacement of 111 new water quality testing points throughout the network, painting a more representative picture of the water quality in the bulk transport system and providing a better understanding of how water quality is maintained network-wide

X the establishment of more effi cient laboratory testing regimes that Mark Crabtree, LinkWater’s Manager, Water Quality provide quicker turnaround times for water quality test results

LINKWATER ANNUAL REPORT 2009–10 Asset management An illustration of this criticality occurred in May 2008 when a barrel joint failed on one of the acquired pipelines and caused a signifi cant disruption LinkWater currently owns, operates and maintains over $2 billion of potable to the supply. LinkWater was already engaged on an accelerated criticality bulk water pipelines, pump stations and reservoirs stretching from the assessment program for the acquired assets. As a result of the incident, the Sunshine Coast to the Gold Coast. This system links all the major water program was refocussed on these particular joints. A replacement program supplies and urban demand areas in SEQ. was immediately executed for the joints that were considered below the As this is the major transport network for the SEQ Water Grid, a primary required standard of reliability. obligation for LinkWater is to maintain the system to a very high standard Information from this accelerated assessment program and the Strategic of reliability. While much of the system is relatively new it also includes Asset Management Plan (SAMP) provided the basis for the initial LinkWater many assets acquired from councils in 2008 as part of the Water Reform. Tactical Asset Management Plan (TAMP) that was developed in 2009. From These vary considerably in age and condition and are the primary focus of these documents a suite of programs, operating strategies and the Annual LinkWater’s structured Asset Management Planning program. This program Investment Plan (AIP) are identifi ed for each operating year. The relationship safeguards water assets critical to SEQ’s water supply. between these documents is illustrated in the following framework.

Tactical Asset Management Plan Framework

SAMP – Defi nes “why we do it” (Strategic Asset Management Plan) Asset service delivery requirements • CAPEX and OPEX program • Budgets • Critical asset issues

TAMP – Defi nes “how we do it” 29 (Tactical Asset Management Plans)

• Asset risk / criticality • Options analysis • Failure mode analysis • Research and Development • Demand and capacity prediction • Asset information • Life cycle costing • Performance reporting

Annual Program – Defi nes “what actions we take” • Annual investment programme (AIP) • Data acquisition • Operating program • Asset information • Maintenance program

LINKWATER ANNUAL REPORT 2009–10 Year in review (continued)

CASE STUDY LinkWater at Work

Supporting research and development to optimise SEQ formation across the SEQ Water Grid. LinkWater has made in-kind Water Grid services contributions relating to sampling and water quality analysis to support this important research initiative. As the network manager, LinkWater is supporting research and development in the water industry to optimise the services it provides As a member of Water Services Association Australia (WSAA), to the SEQ Water Grid. Over the past 12 months, LinkWater has LinkWater participated in a benchmark study on asset management supported a number of initiatives aimed at promoting innovation and best practice. Recommendations from this study will provide valuable continuous improvement in water quality monitoring and modelling input to improving asset operation performance. capabilities. LinkWater will continue to support and participate in valuable LinkWater commissioned a world-wide industry review to better research and development initiatives that will enhance services we understand national and international best practice water quality provide to the SEQ Water Grid and the people of SEQ. modelling. The study aimed to position LinkWater against global expertise and to identify any improvements needed to increase our capabilities in this area.

The initiative was supported by a scoping study that will focus on a discrete part of the SEQ Water Grid to help understand direct relationships between operating costs and water quality objectives. The study will deliver an operational decision making tool which will ultimately assist LinkWater to make more informed decisions regarding water transport, improved quality, and the enhanced operation of the SEQ Water Grid. Globally, this is the fi rst time a study of this kind has been undertaken by the water industry with the focus on achieving optimal water quality outcomes.

LinkWater is trialling brand-new technology to assist in analysing 30 water quality across SEQ’s potable bulk water transport network. An ultraviolet-visible spectrophotometer analyser (UV-vis) has been installed at one location and more will be installed across the network, shortly.

These units analyse water quality at an advanced level, compared to more traditional, online analysers and will help to better manage water quality risks.

If the trial is successful, the technology will be rolled out across the SEQ Water Grid’s potable bulk water network.

LinkWater became a project team member of the Urban Water Research Alliance’s Disinfection By-Product (DBP) Formation Study. Water quality monitoring The study will enhance understanding and improve control of DBP

LINKWATER ANNUAL REPORT 2009–10 Key result area:

Secure supply

X To deliver value for money infrastructure

X Ensure constructed pipelines integrate and operate with the rest of the Water Grid

X Support government’s planning for future requirements

LinkWater’s newly established Infrastructure Planning Team provides proactive and innovative support to other SEQ Water Grid participants in the short and long-term planning of sub-regional bulk water infrastructure.

Working with the Queensland Water Commission (QWC) and other SEQ water service providers, LinkWater worked closely with government in 2009–10 on the implementation of the Regional Water Security Program.

LinkWater, in conjunction with the QWC, achieved major developmental milestones on key projects including:

X feasibility assessment of the Cedar Grove Connector from the proposed Wyaralong Water Treatment Plant to the SEQ Water Grid

X integration of the Northern Pipeline Interconnector - Stage 2 proposal as a signifi cant contributor to the water security of the

X a whole-of-SEQ Water Grid understanding of the network through implementation of an Infrastructure Master Plan. Currently, LinkWater is obtaining data from relevant local councils to develop a basis for the SEQ Water Grid demand model

X development of an Memorandum of Understanding (MOU) with the QWC for the provision of services to investigate and assess the corridor connections between proposed new desalination plants in the region.

LinkWater’s delivery of value for money infrastructure and support of the government’s planning for future requirements contributes to the Queensland Government’s Q2: Tomorrow’s Queensland target of ‘Queensland is Australia’s strongest economy, with infrastructure that anticipates growth’. Year in review (continued)

Key result area:

Act commercially

X Develop a sound commercial business within a regulated environment

LinkWater has a clear approach to economic regulation to ensure that its organisational capability and systems meet any requirements of a regulatory framework. In anticipation of a regulatory framework being developed, LinkWater has secured resources with signifi cant experience in the fi eld.

LinkWater’s approach to economic regulation is to ensure that policies, procedures and processes that underpin procurement, forecast capital and maintenance expenditure and other signifi cant business operations are consistent with good industry practice.

By achieving this objective, LinkWater will ensure it operates effectively under the current regulatory arrangements prescribed by the SEQ Water Market Rules. It will also ensure we are able to effectively transition to a long-term form of economic regulation administered by an independent regulator.

LinkWater worked actively with government agencies and will continue to support government in meeting the commitments outlined in the National Water Initiative.

Checking the pipeline, connection to the Brisbane main pipeline, Camerons Hill LINKWATER ANNUAL REPORT 2009–10 Key result area: In 2009–10 LinkWater refi ned its protocols for incident management and has become highly effective in managing operational incidents. Provide good governance A number of internal and external simulation exercises helped us to sharpen our incident management skills.

X Provide accountability, transparency and reliability An internal exercise was held in February 2010 to test LinkWater’s Incident Management Plan in preparation for the broader whole-of- A comprehensive governance framework was approved by the Board SEQ Water Grid exercise in March 2010. and implemented in 2009–10 based on the State Water Authorities Exercise Matrix, convened by the SEQ Water Grid Manager, replicated Governance Framework and Australian Stock Exchange (ASX) a series of emergencies and crises across the Water Grid, requiring guidelines on good governance. the entities to manage the desktop scenarios. The exercise spanned LinkWater’s Governance Framework underpins the business’s two days and involved role players and observers from an independent sustainability. Regular review of LinkWater’s Governance Framework crisis management consultancy. is carried out including progressive review of existing policies and LinkWater’s incident management team was recognised for its depth procedures. In 2009–10, training continued to all staff levels on a of knowledge and understanding of the assets. Observers commented variety of governance issues. on the calm and professional conduct of the team. External publication of the governance framework supports the The communications tools that LinkWater developed in 2009–10 have delivery of stakeholder related goals, as it shows commitment attracted interest from a number of key stakeholders and are now to adopting and implementing broadly accepted governance considered best practice. responsibilities.

LinkWater has a comprehensive compliance program that is essential in ensuring no breaches or claims arise and that the business risk is kept at a minimum.

A complete compliance guide and reporting regime was established 33 in 2009–10. This was complemented by appropriate training and staff involvement to ensure a 100 per cent compliance goal was achieved.

LinkWater has a robust Risk Management Strategy that supports business continuity and underpins our good reputation.

Further progress has been made in reviewing LinkWater’s asset security and understanding any possible opportunities to improve. All new and inherited assets have been assessed. LinkWater’s Risk Management Plan was also reviewed to ensure alignment with the SEQ Water Grid Manager’s Risk Management Plan and to also adopt Community engagement the principles outlined in the new International Risk Management Standard (ISO31000).

LINKWATER ANNUAL REPORT 2009–10 The year ahead

The year ahead is one of challenge and achievement as we continue to provide effi cient and effective potable bulk water transport services to government and the people of SEQ.

Over the next 12 months, our operational objectives are:

X increase our network management capabilities

X continue to work with government agencies to meet the requirements of independent economic regulation

X realise benefi ts of change in the operational services delivery model implemented in March 2010

X transfer organisational capability from external consultants and contractors to in-house capability, achieving operational savings

X implement an Infrastructure Master Plan that will optimise the delivery of the capital works program and promote a greater understanding of water quality, hydraulic and demand assumptions for the SEQ Water Grid.

In the year ahead, LinkWater will continue to diligently manage costs and seek out innovations and opportunities that will build on our previous achievements.

Our comprehensive strategic and operational plans will continue to be used as our roadmap to future success and will drive us to deliver another year of a value-for-money, world-class bulk water transport services to our stakeholders.

Molendinar Reservoir, Southern Regional Water Pipeline LINKWATER ANNUAL REPORT 2009–10 Corporate governance

LinkWater is committed to the highest level of governance and strives LinkWater’s Board Charter specifi es the roles and responsibilities of the to foster a culture of outstanding ethical standards and individual and Board in detail, a summary of which is publicly available. The Board is corporate integrity. We have an effective Board and committee structure constituted by fi ve independent Non-Executive Board members. Board with clearly documented processes which are reviewed periodically for members are appointed by the responsible Ministers under section 16 effectiveness. An internal audit plan is followed that prevents and detects of the South East Queensland Water (Restructuring) Act 2007 having material errors or omissions and fraudulent or dishonest behaviour. regard to the ability to contribute to the implementation of LinkWater’s Delegations of power are regularly reviewed. A culture of compliance is Strategic and Operational plans. The responsible Ministers determine fostered, including ongoing staff training. the remuneration of Board members. Information on Board member and executive management benefi ts are included in the remuneration report Role of the Board and the fi nancial statements. The Board’s role includes: LinkWater provides Board members and executive management with an X deciding the strategies and the operational, administrative and indemnity in respect to carrying out their duties. LinkWater provides Board fi nancial policies to be followed by LinkWater members and offi cers liability insurance, for the Board and executive management team. The insurance premiums relate to costs and expenses X ensuring LinkWater performs its functions and exercises its powers in incurred by the relevant Board member or offi cer defending either civil a proper, effective and effi cient way or criminal legal proceedings or other liabilities that may arise from their X ensuring that, so far as practicable, LinkWater achieves the objectives position. It does not cover conduct involving a wilful breach of duty or in its strategic and operational plans improper use of information for personal gain.

X accounting to the responsible Ministers, as required by the South To assist Board members with the exercise of their duties, LinkWater East Queensland Water (Restructuring) Act 2007, for LinkWater’s makes available, independent professional advice as required to Board performance members at the expense of LinkWater. The Board performs an annual evaluation of its own performance in accordance with State Water X reviewing annually the performance of LinkWater’s Chief Executive Authorities Governance Framework. In the 2009–10 fi nancial year the Offi cer (CEO). annual evaluation of the Board was carried out by an external service provider and the results communicated to the Queensland Government. 35 Each Board member has been appointed for a period of three years. Board members are eligible for re-appointment.

Name Appointed Term ends Qualifi cations/memberships Mr Steve Roberts (Chairperson) 30 January 2008 29 January 2011 FPNA, MAICD

Mr John Orange 30 January 2008 29 January 2011 BCA, LLB, CA, ACT, FAICD

Ms Catherine Sinclair 30 January 2008 29 January 2011 BSc, M.A., FAICD, FAIM

Mr Graham Thomsen 30 January 2008 29 January 2011 FIE, MIAM, MAICD

Mr Ross Landsberg 1 August 2008 30 September 2011 BSc (Hons), LLB (Hons), MBA

LINKWATER ANNUAL REPORT 2009–10 Corporate governance (continued)

From left: John Orange, Ross Landsberg, Steve Roberts, Catherine Sinclair and Graham Thomsen

Board members John Orange: Non-Executive Board member

John has more than 20 years’ experience in public and private sector LinkWater’s Board members are highly organisations in Australia and overseas. He is qualifi ed in law and accountancy and has worked in corporate treasury, fi nance and respected professionals with the consulting services in Australia and overseas. John is Chairperson of the Audit and Risk Management Committee and has been a director on demonstrated experience and expertise a number of public and private sector boards since 1997. John has held to guide the authority towards a the role of Non-Executive Director of LinkWater Projects since July 2006. successful future. Ross Landsberg: Non-Executive Board member

Ross is a Non-Executive Board member and the Managing Partner Stephen (Steve) Roberts: Chairperson and of Minter Ellison’s Brisbane Offi ce. Ross also heads Minter Non-Executive Board member Ellison’s major projects practice in Queensland, providing specialist Steve has a fi nance, accounting and business development background 36 and strategic advice regarding the interface of commercial and with more than 25 years’ experience in the resources industry. He construction issues in the creation of large projects. He is experienced spent 17 years with BHP Billiton, the last four years to the end of 2005 in risk analysis and advising on different methods of project as Chief Development Offi cer of its Nickel business, responsible for delivery including public private partnerships, alliances, engineer strategy, exploration, technology, business development and mergers procure construct and engineering, procurement and construction and acquisitions. Since leaving BHP Billiton in 2005, Steve has been management, as well as other more traditional methods of project advising a number of large mining companies on a range of commercial delivery. He advises government, operators and proponents in areas. Steve has held the role of Chairperson and Non-Executive commercial aspects of large mining, infrastructure and resource Director of LinkWater Projects since May 2006. projects, and drafting appropriate documentation. Ross also acts for a number of Government-owned utilities, providing strategic advice in key operational areas. Ross has held the role of Non-Executive Director of LinkWater Projects since August 2008.

LINKWATER ANNUAL REPORT 2009–10 Catherine Sinclair: Non-Executive Board member Graham Thomsen: Non-Executive Board member

Catherine is a Non-Executive Board member and has worked in the Graham brings more than 40 years’ experience working closely with education and justice systems in the USA and Queensland before water authorities in South East Queensland to maintain the health a 20-year career providing a broad range of management and and lifestyle of communities from Caloundra to the Gold Coast. He consultancy services to the public and private sectors. Catherine joined LinkWater Projects in 2006 and oversaw the development of has been a Director of The Consultancy Bureau Pty Ltd since 1988, a its alliances and pipeline projects including the Southern Regional Water Pipeline, the Northern Pipeline Interconnector – Stage 1 and Director of the Brisbane Airport Corporation from 1999 to 2007 and is the Eastern Pipeline Interconnector. Graham also holds the position of currently Deputy Chair of the Port of Brisbane Corporation, a Director Chairperson of Wide Bay Water Corporation. Graham has held the role of Frontline Defence Services and a Councillor of the Royal National of Non-Executive Director of LinkWater Projects since January 2006. Agricultural and Industrial Association of Queensland. Catherine has held the role of Non-Executive Director of LinkWater Projects since May 2006.

Audit and Risk Management Remuneration and People Works and Environment Board member Board meetings Committee meetings Committee meetings Committee meetings 37 AB A B A B A B Mr Steve Roberts 13 13 8 8 5 5 NA NA Mr John Orange 12 13 8 8 NA NA 7 7 Ms Catherine Sinclair 11 13 NA NA 5 5 NA NA Mr Graham Thomsen 12 13 8 8 NA NA 7 7 Mr Ross Landsberg 11 13 NA NA 4 5 6 7

A = Number of meetings attended B = Number of meetings held NA = Not applicable

Board meetings

During the year, LinkWater held 13 Board meetings. The Board meeting The CEO and General Manager Legal Services attend all Board agendas and papers are prepared by the Chief Executive Offi cer meetings and General Managers are often invited to present and (CEO) and General Manager Legal Services in consultation with the discuss relevant issues. Chairperson and circulated in advance.

LINKWATER ANNUAL REPORT 2009–10 Corporate governance (continued)

Audit and Risk Management Committee In addition to carrying out the above responsibilities the Audit and Risk Management Committee: The primary role of LinkWater’s Audit and Risk Management Committee is to provide reasonable assurance to the Board that LinkWater’s core X received quarterly reports on compliance, insurance, internal audit business goals and objectives are being achieved in an effi cient manner, and risk within an appropriate framework of internal control and risk management. X reviewed the transition from an alliance contract to a services The discharge of this responsibility principally involves the consideration contract for the delivery of operational and maintenance services and reporting of audit and audit-related fi ndings. X reviewed SAP implementation The Audit and Risk Management Committee Charter, which is publicly available upon request, defi nes the role and responsibilities of the committee. X endorsed the GST compliance certifi cate

The committee monitors its performance against its charter with due X considered asset revaluations regard for Queensland Treasury’s Audit Committee Guidelines: Improving X participated in an audit committee effectiveness scan Accountability and Performance. X reviewed LinkWater’s budget The members of the Audit and Risk Management Committee during the year were John Orange (Chairperson from 28 February 2008), Steve Roberts X reviewed ICT Resources Strategic Plan. and Graham Thomsen. Remuneration and People Committee During the year, LinkWater held eight Audit and Risk Management Committee meetings. The committee meeting agendas and papers are prepared by the The primary role of the Remuneration and People Committee is to review CEO and General Manager Legal Services in consultation with the committee and recommend to the Board any proposed policies or procedures in respect Chairperson and circulated in advance. to executive or employee remuneration or employment conditions. The role of the Remuneration and People Committee also includes: The internal and external auditors, CEO, General Manager Legal Services, General Manager Business Services and General Manager Corporate X recommending to the Board individual remuneration packages for its Services are invited to Audit and Risk Management Committee meetings executive staff at the discretion of the committee. The committee meets quarterly as a X considering the issue of succession for the CEO and executive 38 minimum and additionally as required. employees All Board members are invited to attend the committee meeting. X recommending to the Board parameters for negotiation of industrial The Audit and Risk Management Committee assesses and contributes to agreements which may apply to employees employed under such the audit planning process, while overseeing the fi nancial and operational agreements reporting process. The committee plays a key role in overseeing the delivery X recommending the Human Resources Plan to the Board. of LinkWater’s outputs ensuring optimal value for money. The committee periodically reviews the internal control and risk management systems. The The Remuneration and People Committee Charter, which is publicly available committee ensures the integrity and consistency of LinkWater’s corporate upon request, defi nes the role and responsibilities of the committee. culture relative to ethical conduct and probity. The committee overseas the carrying out of any audit related recommendations. The external auditors recommend that a comprehensive revaluation of LinkWater’s assets be carried out in the 2009–10 fi nancial year. This has occured.

LINKWATER ANNUAL REPORT 2009–10 Molendinar pump station

The committee monitors its performance against its charter. The The primary function of the committee is to ensure LinkWater meets its Remuneration and People Committee consists of three Board members corporate, technical and project management performance objectives while – Catherine Sinclair (Committee Chairperson), Steve Roberts and Ross understanding and managing the associated risks and, as appropriate, Landsberg. ensure that management risk systems are in place.

During the year, LinkWater held fi ve Remuneration and People Committee In broad terms, the committee has the responsibility of ensuring: meetings. The committee meeting agendas and papers are prepared by the X the capital works program of LinkWater, in respect to construction CEO, Human Resources Manager and General Manager Legal Services in and operations and maintenance, is developed and implemented in 39 consultation with the committee Chairperson and circulated in advance. a manner consistent with the operational plan and the strategic plan The CEO, General Manager Legal Services, General Manager Corporate approved by the Board Services and Human Resources Manager are invited to Remuneration X appropriate operations and service delivery targets are established and People Committee meetings at the discretion of the committee. The and met committee meets quarterly as a minimum and additionally as required. X environmental targets are established and met All Board members are invited to attend the committee meeting. X innovation is encouraged in the areas of construction, operations and Works and Environment Committee maintenance, environment and sustainability The Works and Environment Committee is responsible for the review of X oversight of planning and future strategy proposals and plans. LinkWater’s construction, asset management, operations and maintenance activities that may impact on the environment. The Works and Environment Committee Charter, which is publicly available upon request, defi nes the role and responsibilities of the committee.

LINKWATER ANNUAL REPORT 2009–10 Corporate governance (continued)

The committee monitors its performance against its charter. The Works and During the year the Board assessed and reviewed the Risk Management Environment Committee is constituted by three Board members – Graham Policy and the Risk Management Plan. Thomsen (Committee Chairperson), John Orange and Ross Landsberg. The top organisational risks are reported monthly to the Board and a During the year, LinkWater held seven Works and Environment Committee comprehensive risk report is provided quarterly to the Audit and Risk meetings. The committee meeting agendas and papers are prepared by Management Committee, indicating any changes in the level of risk. All the CEO and General Manager Legal Services in consultation with the risks are reviewed as part of a continuous program. committee chairperson and circulated in advance. Signifi cant risk assessments were undertaken during the year with the The CEO, General Manager Legal Services, General Manager Business operational risks associated with water quality and the integration of Services, General Manager Project Services and General Manager SCADA process control system. A comprehensive program to improve the Operational Services are invited to Works and Environment Committee risk management of these services has commenced. meetings at the discretion of the committee. The committee meets LinkWater has also undertaken considerable work to improve the quarterly as a minimum and additionally as required. management of risks associated with costs and revenue. All Board members are invited to attend the committee meeting. Internal audit Strategic planning Internal audit supports LinkWater’s Corporate Governance Framework by A strategic plan and an operational plan are prepared annually, and are providing the Audit and Risk Management Committee and the Board with approved by the responsible Ministers in accordance with the South East advice about the effectiveness of internal controls and business processes. Queensland Water (Restructuring) Act 2007. Internal audit also supports management’s business objectives and the The operational plan outlines LinkWater’s objectives and major activities, Audit and Risk Management Committee’s need for overall assurance on the and specifi es various fi nancial and non-fi nancial performance targets for a quality, cost effectiveness and consistency of internal controls. fi nancial year. The scope of internal audit’s role is to review, assess and report on the: The strategic plan summarises LinkWater’s vision, values, goals, X adequacy and effectiveness of fi nancial, operational and business drivers, and key corporate expectations for the next fi ve years. management control 40 The operational plan outlines LinkWater’s key fi nancial and operational performance indicators. X compliance with LinkWater’s policies and procedures and with relevant legislation Risk management X accuracy of fi nancial and management information and the reporting LinkWater aims to achieve the following main objectives, as described in of such information LinkWater’s Risk Management Policy. This is done through the incorporation of risk management objectives throughout the different levels and functions X integrity of systems developed to provide protection against error and of the organisation to: misstatement

X enhance the safety and well-being of LinkWater’s people, customers, X achievement of LinkWater’s risk management objectives contractors and the general public X action taken to remedy weaknesses identifi ed by internal audit X protect the environment in which LinkWater operates X assessment of the cost-effectiveness of operations. X enhance LinkWater’s performance and value

X enhance LinkWater’s reputation as a bulk water transport entity in SEQ.

LINKWATER ANNUAL REPORT 2009–10 In addition to carrying out the above responsibilities internal audit also:

X reviewed the compliance framework

X reviewed the project management framework

X reviewed key result area and key performance Indicator reporting.

The internal audit function is carried out in accordance with the Board- approved Internal Audit Charter (which is consistent with relevant audit and ethical standards) and a risk-based audit plan that is annually endorsed by the Audit and Risk Management Committee. In formulating, approving and revising the audit plan, the Audit and Risk Management Committee identifi ed areas of signifi cant operational and fi nancial risk. In addition, the committee monitored and identifi ed signifi cant operational and fi nancial risks during the fi nancial year and specifi cally requested the internal auditors investigate and report on such risks. Management implemented any recommendations made by the internal auditors.

The Audit Plan for 2009–10 was successfully completed and implemented by internal audit.

All actions identifi ed were reported to the Audit and Risk Management Committee. The Audit and Risk Management Committee oversees the effective, effi cient and economic operation of the internal audit function.

The internal auditors had due regard to Queensland Treasury’s Audit Committee Guidelines: Improving Accountability and Performance. All actions required in respect of recommendations made by the internal auditors are tracked until completed.

The internal audit function is independent of management and the Queensland Audit Offi ce (QAO) and is currently outsourced to KPMG.

Internal audit and the QAO are invited to attend the Audit and Risk Management Committee meetings.

Business continuity management

LinkWater regularly reviews its business continuity plans to ensure minimum disruption to LinkWater’s operations in the event of a major incident. As part of this process, LinkWater has updated its Incident Management Plan and Disaster Recovery Plan which sets out procedures to cope with an unexpected disaster.

LINKWATER ANNUAL REPORT 2009–10 Corporate governance (continued)

Recordkeeping Recordkeeping is integrated with LinkWater’s systems such as risk and other business planning. Specifi cally, the eDRMS has been integrated LinkWater maintains a full records management framework including an with other vital business systems such as LinkWater’s enterprise resource electronic Document and Recordkeeping Management System (eDRMS). planning system (SAP). LinkWater is investigating the integration with the The framework is designed to ensure that LinkWater complies with the geographical information systems in the near future. laws governing recordkeeping and retains suffi cient documentation to support any supply of information under the Right to Information Act 2009 Use of the eDRMS is compulsory for all staff and all LinkWater staff must while simultaneously minimising document storage costs, improving undergo training in the eDRMS as part of their induction to LinkWater. fi le management practices and minimising the prospects of inadvertent Recordkeeping responsibilities are articulated in all position descriptions. disclosure of confi dential documents. LinkWater is committed to Part of LinkWater’s recordkeeping framework includes the use of a full maintaining a records management system that ensures full and accurate business classifi cation scheme (BCS). A regular program of review and records of the organisation’s business are documented, preserved and audit of the BCS is now underway. made accessible as required under legislation. South East Queensland Water (Restructuring) Act Specifi c recordkeeping activities undertaken by LinkWater in the 2009–10 LinkWater has not received any directions under section 43 of the fi nancial year: South East Queensland Water (Restructuring) Act 2007 in 2009–10. X review of document and recordkeeping processes to provide an Whistleblowers protection environment where the development of key documentation is captured from registration to completion. Examples of document- LinkWater is a public sector entity as defi ned in the Whistleblowers centric procedures include but are not limited to the following: Protection Act 1994. No disclosures under the legislation were received in 2009–10. 1. review of the mail process to include better control of the incoming Access to information and outgoing mail management The Right to Information Act 2009 allows members of the community access 2. review of the contract process to ensure that key contracts to government information and documents under certain circumstances. are captured as one item in the eDRMS to provide a single LinkWater is an ‘agency’ under the Act. In 2009–10, LinkWater received no point of truth applications under the Right to Information Act 2009. 42 3. controlled document process to ensure that documents published within the organisation are managed and published correctly. If access to information is partially or completely refused, then the applicant can ask for a formal review of the decision. Initially, this takes the

X review of process for capturing emails into the eDRMS to provide form of an internal review of the decision by LinkWater. If an applicant still a more uniform and organisational-wide approach to the capture does not agree with the decision to refuse access, then the applicant may of email records in accordance with the guideline published by apply to the Information Commissioner for further review of the decision.

Queensland State Archives (QSA) LinkWater’s right to information policy was available on LinkWater’s

X liaising with other water authorities to develop a water business- website (www.linkwater.com.au) for the 2009–10 fi nancial year. specifi c retention schedule to be approved by QSA LinkWater’s publication scheme describes and categorises information routinely available from LinkWater. It has been developed to give X implemented the general retention and disposal schedule for all the community greater access to information held by LinkWater. The other records. Records are kept and disposed of according to the publication scheme can be located on LinkWater’s website. approved schedule. LinkWater has appointed a Right to Information Offi cer.

LINKWATER ANNUAL REPORT 2009–10 Privacy

The privacy and confi dentiality of personal information of LinkWater’s stakeholders and other parties is of the highest importance. LinkWater is committed to protecting privacy through responsible collection, use, storage, and disclosure of personal information. LinkWater complied with the Information Privacy Act 2009 in the 2009–10 fi nancial year. LinkWater’s privacy policy was available on LinkWater’s website at www.linkwater.com.au.

LinkWater has appointed a Privacy Offi cer.

Code of Conduct

The Code of Conduct, based on the Public Sector Ethics Act 1994, applies to Board members, the Executive Management Team, employees, and contractors. It provides a framework for high ethical standards. The Code of Conduct is available to all employees and contractors on LinkWater’s intranet. Any person may access the Code of Conduct upon request. In 2009–10 a pocket book version of the Code of Conduct was supplied to all employees and contractors of LinkWater with acknowledgment of receipt and understanding received from each person.

The Code of Conduct is communicated to employees and contractors through the corporate induction program. Further education and training is provided annually regarding the Public Sector Ethics Act 1994, the application of ethics principles and obligations to employees/contractors; the contents of the Code of Conduct and the rights and obligations of employees/contractors in relation to contraventions of the approved Code of Conduct.

The administrative and management practices of LinkWater have proper regard to the Public Sector Ethics Act 1994, the ethical obligations of public offi cials and LinkWater’s Code of Conduct.

The Board follows Queensland Government guidelines set out in Welcome Aboard: A Guide for Members of Government Boards, Committees and Statutory Authorities.

Board members are required to declare any potential and actual confl icts of interest as and when they arise. An opportunity to declare such confl icts is given at the commencement of each Board meeting. A declaration of Interest is also completed by each Board member annually and upon commencement of appointment.

LINKWATER ANNUAL REPORT 2009–10 Corporate governance (continued)

Carers In 2009–10 LinkWater had a total of 80.5 full time equivalents (FTEs) staff comprising 69.5 permanent full-time positions and 11 contract (fi xed term) LinkWater has ensured that its offi cers and employees have an awareness roles (2008–09 – 66 FTEs comprising 50 permanent full-time positions and and understanding of the Carer’s Charter included within the Carer’s 16 contract (fi xed term) roles). LinkWater has experienced 13 resignations (Recognition) Act 2008. LinkWater has also taken action to refl ect the of permanent full-time employees during the year. In 2009–10 LinkWater principles of the charter in providing services of LinkWater which can affect had a permanent retention rate of 83.3% and a permanent separation rate carers and the persons they care for. of 19.7%. LinkWater has recently fi nalised its organisational structure in Compliance readiness for regulation. It is expected that the retention of employees will stabilise in the 2010–11 fi nancial year. There were no redundancies, early LinkWater has implemented a number of policies and procedures to ensure retirement schemes or retrenchments this year. it complies with relevant legislation, regulations, and codes of practice. Regular monthly reports are given to the Board regarding compliance. LinkWater’s wellbeing program encourages a healthy lifestyle for Detailed quarterly compliance reports are given to the Audit and Risk employees and their families. In 2009–10 this program delivered: Management Committee. X Sun Smart education Comprehensive compliance guides and monthly compliance reporting X ‘Bridge to Brisbane’ run assisted LinkWater to meet its statutory and policy requirements in the 2009–10 fi nancial year. X ‘Febfast’ program to encourage staff to give up drinking alcohol for one month and reduce overall alcohol intake Overseas travel X ‘Brissie to Bay’ bike ride LinkWater is required to include within its annual report details of any overseas travel carried out by any of its Board members, Executive X lunch-time sessions on various health topics

Management Team or staff. Overseas travel occurred on the following X fl u vaccinations available to all employees occasion during the year: X voluntary health assessments for all staff.

Name of offi cer/member Contribution from other Destination Reason for travel Agency cost and position agencies or sources 44 Mr Hany Hanna, Idaho, USA Attend Advanced Cyber Security Training $256.28 $5,000 (Commonwealth IT/SCADA Offi cer for operators of critical infrastructure at Attorney-General’s Department). Idaho National Laboratory.

Workforce planning, attraction and retention LinkWater is an equal opportunity employer that promotes diversity in our workforce supported by a range of strategies including fl exible working LinkWater’s achievements are driven by a diverse and highly skilled team, arrangements. including global leaders in their respective fi elds. LinkWater’s ‘people principles’ encourage a culture that empowers individuals to achieve, and LinkWater conducts diversity and equity training once per year to encourage often exceed, industry benchmarks and promotes outcomes-focussed thinking. diversity and cultural sensitivity in the workplace. Training for 2009–10 was conducted in May 2010 and was compulsory for all employees. LinkWater continues to invest in its people to ensure that they have the skills, management and leadership competencies to meet current and future capability requirements.

LinkWater aligns its workforce planning with its strategic plan to ensure it has adequate resources to deliver on its strategic objectives.

LINKWATER ANNUAL REPORT 2009–10 Outlined below are initiatives in respect to workplace planning, attraction LinkWater hosted a safety day in October 2009 where a number of and retention conducted during 2009–10. workshops and seminars were held to demonstrate safe practices. Recently, a heart defi brillator was added to LinkWater’s fi rst aid equipment. Promoted a high performance working environment and provided Staff fi rst aid representatives have been trained in the use of the fl exible working arrangements defi brillator and all LinkWater staff have been briefed on its availability. LinkWater continues to review its human resources policies and procedures LinkWater promotes broader employee health and well-being programs as business processes are developed, to ensure we maintain contemporary including involvement in health campaigns, hosting topical guest speakers working conditions suited to our corporate offi ce and operational and participating in health and fi tness challenges. environments. Achievements in this area include job sharing arrangements, fl exible working hours and leave arrangements. Work/life balance Priority given to succession planning is encouraged and promoted within LinkWater’s wellbeing program. LinkWater has implemented a succession planning process to support LinkWater also offers an employee assistance program which provides free confi dential counselling with an external service provider. This is available business continuity and long-term human resource planning. Individual to all LinkWater employees and members of their immediate family. goals were identifi ed through staff members’ performance appraisal and development plans. Essential business functions and their alternates were Build on the skills and capability within the organisation including also identifi ed. LinkWater’s performance management process was aimed staff development at identifying development opportunities and up-skilling staff to be able to

LinkWater implemented integrated individual performance and take on more senior roles as required. development plans focussed on setting clear goals and objectives. These Remuneration report plans also identifi ed training and personal development requirements and Principles of compensation opportunities for all staff. The employee goals were linked to LinkWater’s Remuneration is referred to as compensation throughout this report. strategic and operational plans, with expectations of behaviour and conduct being aligned to LinkWater’s values. LinkWater’s Board and the Executive Management Team have authority

LinkWater revised its Remuneration and Performance Incentive Payment and responsibility for planning, directing and controlling the activities of Policy to ensure that there was a focus on the achievement of operational LinkWater. goals. The Board has approved a suite of corporate measures aimed at the Compensation levels for the Board, Chief Executive Offi cer (CEO) and the 45 delivery of outstanding results against the operational plan in accordance general managers are competitively set to attract and retain appropriately with this policy. qualifi ed and experienced Board members and executives. The Board LinkWater’s comprehensive training program focused on compliance obtains independent advice on the appropriateness of LinkWater training in 2009–10. This operational training was essential for up-skilling compensation packages, given trends in comparative companies both LinkWater’s technical staff, enhancing their ability to effectively operate locally and internationally. new and transferred assets. Other examples of training undertaken in this The compensation structures explained below are designed to attract period include safety leadership, information technology, team-building and suitably qualifi ed candidates, reward the achievement of strategic specifi c role-related training. objectives and achieve the broader outcome of creation of value for the Priority given to workplace health and safety Queensland Government. The compensation structures take into account:

LinkWater rolled out Safety Leadership training across its senior X the capability and experience of the Board and executive management. A strong workplace, health and safety culture continues management to be promoted through LinkWater’s active staff committees and regular X the ability to control the relevant segment’s performance. toolbox meetings.

LINKWATER ANNUAL REPORT 2009–10 Corporate governance (continued)

Compensation packages include fi xed compensation Legislative and policy requirements – annual report

In addition to Board member fees and the salaries paid to executives, LinkWater has complied with all legislative and policy requirements in the LinkWater also contributes to superannuation plans on behalf of the Board compilation and publication of this annual report including those outlined in and Executive Management Team as part of the Total Fixed Remuneration the table below: (TFR) that forms their compensation package. Sections Legislation Compensation levels are reviewed annually by the Board through a Section 43 South East Queensland Water process that considers individual, segment and overall performance of (Restructuring) Act 2007 LinkWater. In addition, external consultants provide analysis and advice to Section 63 Financial Accountability Act 2009 ensure the Board and executive managers’ compensation is competitive in Section 49 Financial and Performance the market place. Management Standard 2009

Non-Executive Board members Section 23 and Schedule Public Sector Ethics Act 1994

Board members’ base fees are presently $20,000 per annum and $37,500 Sections 30 – 31 and Schedule Whistleblowers Protection Act 1994

per annum for the Chairperson. Section 10 Carer’s (Recognition) Act 2008

Non-Executive Board members do not receive performance related Annual Reporting Requirements for compensation. Board member’s fees cover all main Board activities. Queensland Government Agencies Non-Executive Board members who are members of a Board committee State Water Authorities – receive an additional payment of $4,000 per annum and the Chairperson Governance Framework of a committee, an additional payment of $7,000 per annum. A more detailed treatment of the legislative and policy requirements in Details of the nature and amount of each major element of compensation the compilation and publication of this annual report can be found at for each Board member of LinkWater and the Executive Management Team LinkWater’s website (www.linkwater.com.au). including other key management personnel are contained within the notes to the fi nancial accounts.

Remuneration policies 46 LinkWater’s remuneration policies are approved by the Board and are in accordance with all Queensland Government requirements including the State Water Authorities Governance Framework. Further information on LinkWater’s remuneration policies is disclosed in the annual fi nancial statements.

LINKWATER ANNUAL REPORT 2009–10 Summary of financial information

Summary of fi nancial information 2009–10 $

Total income 186.5 million

Total Expenses 209.4 million

Total Non-Current Assets 2,225.9 million

Total Non-Current Liabilities 1,810.7 million

Net Assets 382.5 million

Net operating cash fl ow 13.5 million

Key fi nancial ratios

Net Debt to Equity ratio 4.99 times

Current Ratio 1.37 times

Information on consultancies

Expenditure on consultancy services for the 2009–10 reporting year is outlined in the following table:

$

Corporate 234,344

Operations 1,340,664

Total consultancy expenditure 1,575,008

LINKWATER ANNUAL REPORT 2009–10 LINKWATER ANNUAL REPORT 2009–10 Queensland Bulk Water Transport Authority trading as LinkWater ACN 614 840 026 Financial report For the fi nancial year ended 30 June 2010

Statement of comprehensive income 50

Statement of fi nancial position 51

Statement of changes in equity 52

Statement of cash fl ows 53

Notes to the fi nancial statements 54

Certifi cate of Queensland Bulk Water Transport Authority trading as LinkWater 81

Independent auditor’s report 82

LINKWATER ANNUAL REPORT 2009–10 Statement of comprehensive income for the year ended 30 June 2010

2010 2009

Note $’000 $’000

Income from continuing operations

Revenue

Interest income 3 857 2,731

Management services fee 4 3,571 3,847

SEQ Water Grid Manager (SEQ WGM) 5 181,766 113,008

Other revenue 6 309 392

Total income from continuing operations 186,503 119,978

Expenses from continuing operations

Operating expenses 7 29,548 23,636

Employee expenses 8 8,605 5,198

Depreciation and amortisation expenses 9 41,063 21,977

Administration expenses 10 132,727 79,502

Revaluation (increment)/decrement 11 (2,570) 2,570

Total expenses from continuing operations 209,373 132,883

Operating result from continuing operations before income tax (22,870) (12,905)

Income tax expense / (benefi t) 12 (8,684) (105,066)

Operating result from continuing operations after income tax (14,186) 92,161

Other comprehensive income

Increase (decrease) in asset revaluation surplus 22 (3,817) 121,713 50 Increase (decrease) equity injections 23 – 186,701

Total other comprehensive income (3,817) 308,414

Total comprehensive income / (loss) (18,003) 400,575

The statement of comprehensive income should be read in conjunction with the notes to the fi nancial statements.

LINKWATER ANNUAL REPORT 2009–10 Statement of financial position as at year ended 30 June 2010

2010 2009 Note $’000 $’000

Current assets

Cash and cash equivalents 13 46,772 38,707

Trade and other receivables 14 15,813 34,257

Inventory 15 2,429 1,106

Other current assets 16 23 138

Current tax receivable 12 – 241

Total current assets 65,037 74,449

Non-current assets

Deferred tax asset 12 119,404 105,437

Property plant and equipment 17 2,102,207 2,114,678

Intangibles 17 4,294 219

Total non-current assets 2,225,905 2,220,334

Total assets 2,290,942 2,294,783

Current liabilities

Trade and other payables 18 60,828 101,098

Loans and borrowings 19 35,800 28,176

Employee benefi ts 21 1,078 571 Total current liabilities 97,706 129,845

Non-current liabilities

Loans and borrowings 20 1,752,845 1,711,836

Deferred tax liability 12 57,846 52,554 51 Total non-current liabilities 1,810,691 1,764,390

Total liabilities 1,908,397 1,894,235

Net assets 382,545 400,548

Equity Contributed equity 23 186,701 186,701

Asset revaluation reserve 22 117,896 121,713

Accumulated surplus/(defi cit) 77,948 92,134

Total equity 382,545 400,548

The statement of fi nancial position should be read in conjunction with the notes to the fi nancial statements.

LINKWATER ANNUAL REPORT 2009–10 Statement of changes in equity for the year ended 30 June 2010

Accumulated Contributed equity Asset revaluation Total surplus/(defi cit) 2010 2009 2010 2009 2010 2009 2010 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 July 92,134 (27) 186,701 - 121,713 - 400,548 (27)

Operating result from continuing operations (14,186) 92,161 - - - - (14,186) 92,161

Total other comprehensive income Increase/(decrease) in asset revaluation surplus - - - - (3,817) 121,713 (3,817) 121,713

Transactions with owners as owners:

Appropriate equity injections - - - 186,701 - - 186,701

Balance at 30 June 77,948 92,134 186,701 186,701 117,896 121,713 382,545 400,548

The statement of changes in equity should be read in conjunction with the notes to the fi nancial statements.

52

LINKWATER ANNUAL REPORT 2009–10 Statement of cash flows for the year ended 30 June 2010

2010 2009 Note $’000 $’000

Cash fl ows from operating activities

Infl ows

Receipts from customers 186,919 105,070

Interest receipts 732 2,731

Goods and Services Tax (GST) collected from customers 19,225 10,983

GST input tax credits from Australian Taxation Offi ce (ATO) 10,321 4,649

Outfl ows

Supplies and services (166,381) (53,725)

Employee expenses (7,639) (4,550)

GST paid to suppliers (10,777) (5,153)

GST remitted to ATO (19,153) (9,409)

Income tax paid 241 (241)

Net cash provided by/(used in) operating activities 24 13,488 50,355

Cash fl ows from investing activities

Outfl ows

Payments for property, plant and equipment (70,400) (543,549)

Net cash provided by/(used in) investing activities (70,400) (543,549)

Cash fl ows from fi nancing activities

Infl ows

Borrowings 64,977 497,703

Equity injections - 186,701

Outfl ows 53 Borrowing payments - (153,730)

Net cash provided by/(used in) fi nancing activities 64,977 530,674

Net increase / (decrease) in cash and cash equivalents 8,065 37,480

Cash and cash equivalents at the beginning of the fi nancial year 38,707 1,227

Cash and cash equivalents at 30 June 13 46,772 38,707

The statement of cash fl ows should be read in conjunction with the notes to the fi nancial statements.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

Index Page No.

1. Summary of signifi cant accounting policies 55 2. Financial risk management 62 3. Interest income 64 4. Management services fee 64 5. SEQ WGM 64 6. Other income 64 7. Operating expenses 64 8. Employee expenses 65 9. Depreciation and amortisation expenses 65 10. Administration expenses 66 11. Revaluation increment/(decrement) 66 12. Income tax expense/(benefi t) 66 13. Cash and cash equivalents 68 14. Trade and other receivables 68 15. Inventories 69 16. Other current assets 69 17. Property, plant and equipment 69 18. Trade and other payables 71 19. Loans and borrowings - current 71 20. Loans and borrowings non-current 71 21. Employee benefi ts 72 22. Asset revaluation reserve 72 23. Contributed equity 72 24. Reconciliation of operating profi t to net cash from operating activities 73

54 25. Subsequent events 73 26. Credit standby arrangements 73 27. Financial instruments 73 28. Operating leases 75 29. Capital and other commitments 76 30. Contingent liabilities and assets 76 31. Dividends 76 32. Segment reporting 76 33. Related parties - key management personnel 76 34. Related party transactions 77 35. Economic dependency 78 36. Impairment 78 37. Auditors remuneration 80

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

1. Summary of signifi cant accounting policies

(a) Reporting entity

Queensland Bulk Water Transport Authority trading as LinkWater is a for profi t Queensland statutory body established on 16 November 2007 under the South East Queensland Water Restructuring Act 2007 with a limited life of 99 years from establishment. The address of LinkWater’s registered offi ce is Level 5, 200 Creek Street, Spring Hill Queensland 4000. The fi nancial statements of LinkWater are for the year ended 30 June 2010. LinkWater is a controlled entity of the Queensland Government.

LinkWater manages, operates and maintains the bulk transport water pipelines and related infrastructure for the bulk water portion of the SEQ Water Grid.

(b) Consistency

The accounting policies set out below have been applied consistently to all periods presented in these fi nancial statements.

(c) Basis of preparation

(i) Statement of compliance

The fi nancial statements constitute a general purpose fi nancial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB).

The fi nancial statements also comply with the Non-Current Asset Policies issued by the Queensland Government and have regard to the Financial Reporting Requirements issued by the Queensland Government.

The fi nancial statements were approved by the Board members on 25 August 2010 .

(ii) Basis of measurement

The fi nancial statements have been prepared on the historical cost basis, except for the following:

X Non-current assets are measured at fair value.

(iii) Rounding, functional and presentation currency

These fi nancial statements are presented in Australian dollars, LinkWater’s functional currency. All fi nancial information presented in Australian dollars has been rounded to the nearest thousand dollars, unless otherwise stated.

(iv) Use of estimates and judgements 55 The preparation of the fi nancial statements required management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Signifi cant estimates and judgements were made around impairment (refer note 36).

(v) Comparatives

Where necessary, comparatives have been adjusted to conform to changes in presentation and disclosure.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(d) Revenue

LinkWater receives the majority of its revenue via payments from the SEQ WGM for the management, operation and maintenance of the bulk transport water pipelines and related infrastructure for the bulk water portion of the SEQ Water Grid.

Revenue is based on a pre-determined rate of return on fi xed assets employed. Revenue is accrued at the end of the month based on the Market Rules and LinkWater’s SEQ Water Grid services contract. It includes a monthly capital charge, fi xed and variable operating costs incurred for the month and other specifi c allowable costs identifi ed in the contract.

Revenue received as reimbursement of pass through costs for services is recognised in the statement of comprehensive income in proportion to the stage of completion of the services at the reporting date.

Management fee income is received from LinkWater Projects for management services provided to this entity by LinkWater.

(e) Finance income and expenses

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues, using the effective interest method. Finance expenses comprise interest expense on borrowings. If no qualifying asset exists, fi nance expenses are charged to the statement of comprehensive income when incurred using the effective interest method.

(f) Lease payments

Payments made under operating leases are recognised in the statement of comprehensive Income on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense over the term of the lease.

(g) Employee benefi ts

(i) Superannuation

The entity currently contributes to the QSuper defi ned benefi t superannuation fund for three of its employees, to the QSuper accumulation superannuation fund for sixty-seven employees and to funds other than QSuper for the remainder. Defi ned Benefi t employer superannuation contributions paid to QSuper, the superannuation plan for Queensland Government employees are at rates determined by the State Actuary. Contributions are expensed in the period in which they are paid or payable. The entity’s obligation is limited to its contribution to QSuper.

Therefore, no liability is recognised for accruing superannuation benefi ts in these fi nancial statements, the liability being held on a whole-of-government basis.

(ii) Termination benefi ts

56 Termination benefi ts are recognised as an expense when LinkWater is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date or to provide termination benefi ts as a result of an offer made to encourage voluntary redundancy. Termination benefi ts for voluntary redundancies are recognised as an expense if LinkWater has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

(iii) Short-term benefi ts

Liabilities for employee benefi ts for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on compensation wage and salary rates that LinkWater expects to pay as at reporting date. All annual leave is expected to be settled within 12 months.

(iv) Employee related expenses

Payroll tax and workers compensation insurance are a consequence of employing employees, but are not counted in an employee’s total remuneration package. They are not employee benefi ts and are recognised separately as employee expenses.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(v) Long service leave

The long service leave provision represents the present value of the estimated future cash outfl ows to be made resulting from employees’ services provided to balance date in accordance with AASB 119 Employee Benefi ts.

(vi) Executive remuneration

The executive remuneration disclosure in the employee expenses note (note 8) in the fi nancial statements includes:

X the aggregate remuneration of all senior executive offi cers whose remuneration for the fi nancial year is $100,000 or more

X The remuneration disclosed is all remuneration paid and payable, directly or indirectly, by LinkWater in connection with the management of the affairs of LinkWater. For this purpose, remuneration includes:

X wages, salaries, allowances and bonuses

X accrued leave

X superannuation

X benefi ts such as car parking, motor vehicles.

(h) Income tax

LinkWater is exempt from Commonwealth Government income taxation but is subject to the National Tax Equivalents Regime.

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the statement of comprehensive income except to the extent that it related to items recognised directly in equity, in which case it is recognised in equity.

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

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profi t, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax 57 liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profi ts will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(i) Financial instruments

(i) Non-derivative fi nancial instruments

Non-derivative fi nancial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative fi nancial instruments are recognised initially at fair value plus, for instruments not at fair value through the statement of comprehensive income, any directly attributable transaction costs. Subsequent to initial recognition non-derivative fi nancial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of LinkWater’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash fl ows. For the purposes of the statement of fi nancial position and the statement of cash fl ows, cash assets include all cash and cheques receipted but not banked at 30 June 2010 as well as deposits at call with fi nancial institutions.

Accounting for fi nance income and expenses is discussed in note 1 (e).

(j) Property, plant and equipment

(i) Recognition and measurement

Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Plant and the Equipment, and Queensland Treasury’s Non-Current Asset Accounting Policies for the Queensland Public Sector .

Non-current physical assets measured at fair value will be comprehensively revalued at least once every three years, with interim valuations using relevant indices being otherwise performed on an annual basis.

Where there is an active and liquid market for assets similar in type and condition, the fair value of an asset is its price in that market. Where a market price can be derived from market information, that price is regarded as the fair value of the asset. Where there is no market price for an asset, fair value is the lower of the depreciated replacement cost or the net present value of the cash fl ows from the asset.

If an item of property, plant and equipment is revalued, the entire class to which that asset belongs is revalued on a consistent basis. The major pipeline networks are treated as complex assets for the purposes of revaluation such that increments and decrements can be offset.

Revaluation increments, net of tax, are recognised in the asset revaluation reserve. This is except for amounts reversing a decrement previously recognised as an expense, which are recognised in the income statement. Revaluation decrements are only offset against revaluation increments applying to the same 58 complex asset, and any excess is recognised as an expense. On revaluation, accumulated depreciation is restated proportionately with the change in the carrying amount of the asset and any change in the estimate of remaining useful life.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and the net result in the statement of comprehensive income. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

Items of property, plant and equipment with a cost or other value equal to or in excess of the following thresholds are recognised for fi nancial reporting purposes in the year of acquisition:

Land $1

Buildings $5,000

Infrastructure $10,000

Plant and equipment $5,000

Items with a lesser value are expensed in the year of acquisition.

During the year, purchased property, plant and equipment was transferred to LinkWater from the transferors of infrastructure assets on 31 August 2009 which amounted to $11.448 million for the Moreton Bay Regional Pipeline.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within the part will fl ow to LinkWater and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

(k) Leased assets

A distinction is made in the fi nancial statements between fi nance leases that effectively transfer from the lessor to the lessee substantially all risks and benefi ts incidental to ownership, and operating leases, under which the lessor retains substantially all risks and benefi ts.

Leases in terms of which LinkWater assumes substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Upon initial recognition, the asset is measured at the lower of the fair value of the leased property and the present value of the minimum lease payments. The lease liability is measured at the same amount.

Lease payments are allocated between the principal component of the lease liability and the interest expense.

Other leases are operating leases and the leased assets are not recognised in the statement of fi nancial position. Operating lease payments are representative of the pattern of benefi ts derived from the leased assets and are expensed in the periods in which they are incurred.

(l) Impairment

(i) Financial assets

A fi nancial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A fi nancial asset is considered 59 to be impaired, if objective evidence indicates that one or more events have had a negative effect on the estimated future cash fl ows of that asset.

The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash infl ows from continuing use that are largely independent of the cash infl ows of other assets or groups of assets.

An impairment loss in respect of a fi nancial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash fl ows discounted at the original effective interest rate. All impairment losses are recognised in the statement of comprehensive income.

Individually signifi cant fi nancial assets are tested for impairment on an individual basis. The remaining fi nancial assets are assessed collectively in groups that share similar credit risk characteristics.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For fi nancial assets measured at amortised cost the reversal is recognised in the statement of comprehensive income.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(ii) Non-fi nancial assets

The carrying amounts of LinkWater’s non-fi nancial assets, other than deferred tax assets and inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time, value of money and the risks specifi c to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash infl ows from continuing use that are largely independent of the cash infl ows of other assets or groups of assets.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(m) Goods and Services Tax

Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of fi nancial position.

Cash fl ows from customers, suppliers and services are included in the statement of cash fl ows on a net basis as per the fi nancial reporting requirements of the Queensland Government. The GST components of cash fl ows arising from investing and fi nancing activities which are recoverable from, or payable to, the ATO are classifi ed as operating cash fl ows.

(n) New standards and revised accounting standards

The following standards, amendments to standards and interpretations have been identifi ed as those which may impact LinkWater in the period of initial application. Those new and amended Australian Accounting Standards that were applicable for the fi rst time in the 2009-10 fi nancial year and that had a signifi cant impact on the fi nancial statements of LinkWater are as follows: 60 X Revised AASB 101 Presentation of Financial Statements does not have any measurement or recognition implications. However, the balance sheet is now re-named to the statement of fi nancial position, and the cash fl ow statement is now renamed to statement of cash fl ows. The former income statement has been replaced by a statement of comprehensive income. In line with the new concept of “comprehensive income’, the bottom of this new statement contains certain transactions that previously were detailed in the statement of changes in equity (refer to the items under the sub- heading “other comprehensive income” in the new statement of comprehensive income). The statement of changes in equity now only includes details of transactions with owners in their capacity as owners, in addition to the total comprehensive income for the relevant components of equity.

X Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 is mandatory for LinkWater’s 30 June 2010 fi nancial statements. LinkWater does not anticipate any effect on future earnings.

X AASB 2009-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Process and 2009-6 Further Amendments to Australian Accounting Standards arising from The Annual Improvements Process affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments, mandatory for Linkwater’s 30 June 2010 fi nancial statements, are not expected to have any impact on the fi nancial statements.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(o) Going concern

The Board members are of the opinion that LinkWater is a going concern on the following basis:

X The Queensland Treasurer advised in a letter to LinkWater dated 23 July 2010, that states the Queensland Government is committed to ensuring the ongoing fi nancial viability of LinkWater.

X LinkWater has access to a redraw facility of $150 million, a working capital facility of $50 million, and has a cash balance of approximately $47 million at 30 June 2010

X there is an agreement between the SEQ WGM and LinkWater up to 30 June 2010 to provide revenue for LinkWater in return for the services it provides that will cover at least its operational costs.

X the Board members are comfortable that LinkWater has both the fi nancial capacity and operational cash fl ows to meet its debts as and when they fall due for at least the next 12 months.

(p) Receivables

Trade debtors are recognised at the amounts due at the time of service delivery. Settlement of these amounts is required within 30 days from invoice date.

(q) Inventories

Inventories held for distribution are those inventories that the entity distributes for no consideration. They are measured at cost adjusted, where applicable, for any loss of service potential.

Cost is assigned on a weighted average basis and includes expenditure incurred in acquiring and bringing them to their location and condition.

(r) Intangibles

Intangible assets with a cost or other value equal to or greater than $5,000 are recognised in the fi nancial statements, items with a lesser value being expensed. Each intangible asset is amortised over its estimated useful life, less any anticipated residual value. The residual value is zero for all LinkWater’s intangibles.

The purchased cost of software has been capitalised as an intangible asset and is being amortised on a straight-line basis over the period of the expected benefi t to LinkWater, ranging between three to seven years.

(s) Depreciation of property, plant and equipment

(i) Depreciation 61 Depreciation is recognised in the statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Depreciation is not calculated from the date of the legal transfer of title, but from the date of handover which is the date at which management takes control of the asset.

The estimated useful lives for the current and comparative periods are as follows:

Buildings 50 years

Infrastructure 4-100 years

Plant and equipment 3-5 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Land is not depreciated as it has an unlimited useful life.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net cost of each asset, less its estimated residual value, progressively over its estimated useful life to the entity.

Assets under construction (work-in-progress) are not depreciated until they reach service delivery capacity.

Where assets have separately identifi able components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly.

Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over its remaining useful life of the asset to the department.

Major spares purchased specifi cally for particular assets are capitalised and depreciated on the same basis as the asset to which they relate.

The depreciable amount of improvements to or on leasehold land is allocated progressively over the estimated useful lives of the improvements or the unexpired period of the lease, whichever is the shorter. The unexpired period of a lease includes any option period where exercise of the option is probable.

Plant and equipment subject to a fi nance lease is amortised on a straight-line basis, over the term of the lease, or, where it is likely that LinkWater will obtain ownership of the asset, the expected useful life of the asset to LinkWater.

(t) Payables

Trade creditors are recognised upon receipt of the goods and services ordered and are measured at the agreed purchase/contract price. Amounts owing are unsecured and are generally settled on 30-day terms.

(u) Provisions

LinkWater has recorded provisions where the entity has a present obligation, either legal or constructive, as a result of a past event. The provisions are recognised at the amount expected at reporting date for which the obligation will be settled in a future period. Where the settlement of the obligation is expected after 12 or more months, the obligation has been discounted to the present value using an appropriate discount rate.

2. Financial risk management

(a) Overview

LinkWater has exposure to the following risks from their use of fi nancial instruments:

X credit risk

62 X liquidity risk X market risk.

This note presents information about LinkWater’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this fi nancial report.

The Board members have overall responsibility for the establishment and oversight of the risk management framework. The Board members have established the Audit and Risk Management Committee which is responsible for developing and monitoring risk management policies. The Audit and Risk Management Committee reports regularly to the Board members on their activities.

Risk management policies are established to identify and analyse the risks faced by LinkWater, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and LinkWater’s activities. LinkWater, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

LinkWater’s Audit and Risk Management Committee oversees how management monitors compliance with LinkWater’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risk faced by LinkWater. LinkWater’s Audit and Risk Management

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to LinkWater’s Audit and Risk Management Committee.

(b) Credit risk

Credit risk is the risk of fi nancial loss to LinkWater if a customer or counterparty to a fi nancial instrument fails to meet its contractual obligations, and arises principally from LinkWater’s receivables from customers and investment securities.

(i) Trade and other receivables

LinkWater’s exposure to credit risk is infl uenced mainly by the individual characteristics of each customer. As the SEQ WGM is LinkWater’s only customer, this risk is insignifi cant as the SEQ WGM is a statutory body of the State.

(ii) Cash and investments

LinkWater limits its exposure to credit risk by only investing in overnight cash with the Queensland Treasury Corporation (QTC) and the Commonwealth Bank of Australia (CBA) where the credit risk is considered to be low.

(c) Liquidity risk

Liquidity risk is the risk that LinkWater will not be able to meet its fi nancial obligations as they fall due. LinkWater’s approach to managing liquidity is to ensure, as far as possible, that it will always have suffi cient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to LinkWater’s reputation.

(d) Market risk

Market risk is the risk that changes in market prices, (such as interest rates) will affect LinkWater’s income or the value of its holdings of fi nancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

QTC manages all of LinkWater’s market risk which LinkWater is required to do under the funding deed.

(e) Capital management

Linkwater is a Queensland statutory body under the South East Queensland Water Restructuring Act 2007. Initial capital was provided in the form of a working capital facility from QTC.

The Board members’ policy is to maintain a strong capital base so as to maintain creditor and market confi dence and to sustain future developments of the business. 63

The capital base funding is guaranteed by the Queensland Government.

LinkWater is not subject to externally imposed capital requirements, but the monitoring and management of the capital structure is performed by the Board members.

There were no changes in LinkWater’s approach to capital management during the year.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

3. Interest income

2010 2009 $’000 $’000

QTC cashfund at call account - interest 43 2,351

QTC working capital at call account - interest – 41

Commonwealth Bank operating account - interest 814 339

857 2,731

4. Management services fee

2010 2009 $’000 $’000

LinkWater Projects 3,571 3,847

3,571 3,847

5. SEQ WGM

2010 2009 $’000 $’000 Capital charge 138,625 81,496 Reimbursement of pass through costs 43,141 31,512 181,766 113,008

6. Other income

2010 2009 $’000 $’000 Sundry income 309 392 309 392

7. Operating expenses

64 2010 2009 $’000 $’000 Mobilisation costs – 253 Maintenance 7,523 7,173 Information technology 1,190 2,630 Insurance 1,466 2,534 Operations 12,943 4,919 Service level agreement 549 1,468 Electricity 3,889 3,055 Other operating expenses 1,988 1,604 29,548 23,636

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

8. Employee expenses

2010 2009 $’000 $’000 Employee benefi ts Annual recreation leave 559 368 Employer superannuation contributions* 663 413 Wages and salaries 5,990 3,872

Employee related expenses Other employee related expenses 915 265 Payroll tax* 466 265 Workers compensation premium* 12 15

8,605 5,198

* Employer superannuation contributions are regarded as employee benefi ts. Costs of payroll tax and workers’ compensation insurance are a consequence of employing employees, but are not counted in employees’ total remuneration package. They are not employee benefi ts, but rather employee related expenses.

2010 2009 $’000 $’000 Number of employees: 77 55

(a) Executive remuneration

2010 2009 $’000 $’000 The number of senior executives who received or were due to receive total remuneration of $100,000 and more: $100,000 to $200,000 – – $200,000 to $300,000 5 5 $300,000 to $400,000 1 1 Total 6 6 65 9. Depreciation and amortisation expenses

2010 2009 $’000 $’000 Depreciation and amortisation 41,063 21,977

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

10. Administration expenses

2010 2009 $’000 $’000 Tax and accounting advisors 280 358 Internal and external audit 886 318 Legal consultants 450 302 Consultants and contractors* 2,525 1,786 Directors' fees and on costs 177 170 Financial model consulting 33 261 Minor plant, equipment and software 191 534 Recruitment 380 290 Telecommunications 1,379 1,220 Travel 112 8 Interest expense - QTC 118,458 53,989 Interest expense - LinkWater Projects – 11,962 Competitive neutrality fee 5,724 5,744 Other 2,132 2,560 132,727 79,502

* Includes consultants of $1.575 million and contractors of $0.95 million.

11. Revaluation increment/(decrement)

2010 2009 $’000 $’000 Reversal of prior year decrement (2,570) 2,570 (2,570) 2,570

12. Income tax expense/(benefi t)

LinkWater is exempt from Commonwealth Government income taxation but is subject to the National Tax Equivalents Regime. LinkWater is only subject to the Commonwealth taxes being Fringe Benefi t Tax (FBT) and GST. 66 (a) Income tax expense/(benefi t)

2010 2009 $’000 $’000 Current tax (6,771) (104,423) Deferred tax (487) (604) Adjustments for current tax of prior periods (1,426) (39) (8,684) (105,066)

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(b) Numerical reconciliation of income tax expense to prima-facie tax payable

2010 2009 $’000 $’000 Surplus/(defi cit) from operating activities before income tax expense (benefi t) (22,870) (12,905)

(22,870) (12,905)

Tax at the Australian tax rate of 30% (6,861) (3,872) Non-deductible expenditure 19 3 Permanent difference - depreciation on acquired assets 5 1,398 Adjustment for prior periods (1,847) (39) 30% investment allowance* – (102,556) Income tax expense/(benefi t) (8,684) (105,066)

* LinkWater qualifi ed for the 30% investment allowance during the fi nancial year to 30 June 2009.

(c) Deferred tax equivalent asset

2010 2009 $’000 $’000 Opening balance 105,437 18 Prior year adjustment 1,799 – Unused tax losses 6,772 104,423 (Charge) / equity 4,183 – (Charge) / credit to income statement 1,213 996 119,404 105,437

(d) Deferred tax equivalent asset comprises of:

2010 2009 $’000 $’000 67 Accrued expenses 572 12 Provisions 178 185 Unused tax losses 112,993 104,423 Other 96 – Plant and equipment 1,382 817 Revaluations of plant and equipment 4,183 – Net tax assets 119,404 105,437

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(e) Deferred tax equivalent liability

2010 2009 $’000 $’000 Opening balance (52,554) – Prior year adjustment (373) – (Charge) / equity (4,192) – (Charge) / credit to income statement (727) (52,554) (57,846) (52,554)

2010 2009 $’000 $’000 Plant and equipment (1,454) (391) Amounts recognised directly in equity: Revaluation of plant and equipment (56,355) (52,163) Accrued income (37) – (57,846) (52,554)

(f) Current tax equivalent (refundable)/payable

2010 2009 $’000 $’000 Opening balance (241) – Instalment (paid)/refund 241 (241) – (241)

13. Cash and cash equivalents

2010 2009 $’000 $’000 QTC cash fund at call account 1,067 1,025 Commonwealth Bank operating account 45,705 37,682 68 46,772 38,707

The effective interest rate on the QTC cash fund at call account in 2010 was 4.25% (2009: 3.44%). The weighted average interest rate on the CBA operating account was 4.35% (2009: 3.81%).

14. Trade and other receivables

2010 2009 $’000 $’000 Trade debtors 14,699 33,533 GST receivable 1,114 724 15,813 34,257

LinkWater’s exposure to credit risks related to trade receivables are disclosed in note 2(b).

Trade and other receivables are non interest bearing.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

15. Inventories

2010 2009 $’000 $’000 Supplies and consumables at cost 2,429 1,106 2,429 1,106

During the year ended 30 June 2010 a stocktake was carried out, resulting in no obsolete or slow moving stock and no items required writing down. It is expected that all items will be consumed as required.

16. Other current assets

2010 2009 $’000 $’000 Prepaid insurance 23 112 Deposits paid – 26 23 138

17. Property, plant and equipment

2010 2009 $’000 $’000 Land At fair value 95,561 95,236 Land 95,561 95,236

Plant and equipment At cost 4,253 2,254 Accumulated depreciation (1,012) (312) Total plant and equipment 3,241 1,942

Construction work in progress At cost 5,084 5,631 69 Total construction work in progress 5,084 5,631

Infrastructure At fair value 2,065,380 2,037,730 Accumulated depreciation (67,059) (25,861) Total plant and equipment 1,998,321 2,011,869

Total property, plant and equipment 2,102,207 2,114,678

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(a) Movements in carrying amounts

Construction Plant and Land work in Infrastructure Total equipment progress $’000 $’000 $’000 $’000 $’000 Balance at 1 July 2008 – 214 557 – 771 Additions* 95,236 2,029 5,074 1,862,197 1,964,536 Depreciation – (301) – (21,633) (21,934) Revaluation – – – 178,008 178,008 Accumulated depreciation increment** – – – (4,228) (4,228) Decrease in revaluation – – – (2,475) (2,475) Balance at 30 June 2009 95,236 1,942 5,631 2,011,869 2,114,678

Balance at 1 July 2009 95,236 1,942 5,631 2,011,869 2,114,678 Additions* 325 2,000 (547) 27,657 29,435 Depreciation – (700) – (39,968) (40,668) Revaluation – – – (8) (8) Accumulated depreciaton increment** – – – (1,230) (1,230) Balance at 30 June 2010 95,561 3,242 5,084 1,998,321 2,102,207

* Refer to note 1. (j) (i)

** This refers to accumulated depreciation proportionately restated at revaluation.

LinkWater became responsible for the management, operations and maintenance of bulk water transport infrastructure assets transferred to the entity on 1 July 2008. During 2009-10 LinkWater engaged an independent valuer – Cardno (QLD) Pty Ltd (Cardno) - to carry out the re-valuation of the infrastructure assets to determine the depreciated replacement cost. The outcome of the revaluation is refl ected in note 22.

Set out below is a summary of the consideration paid for the assets transferred to LinkWater.

Transferors

70 Consideration paid by LinkWater* 2010 2009 $’000 $’000 Acquisitions Moreton Bay Regional Council 11,448 12,852 Council – 37,437 Redland Shire Council – 37,949 Brisbane City Council – 362,072 Gold Coast City Council – 36,334 Total acquisition value 11,448 486,644

* Amounts set out on the respective transfer notices and/or other correspondence.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

LinkWater acquired specifi ed net assets from LinkWater Projects:

Transferors

Consideration paid by LinkWater* Transfer date $’000 2008-09 acquisitions Network Integration Pipeline (NIP) 18 March 2009 173,895 Northern Pipeline Interconnector (NPI) – Stage 1 30 June 2009 316,256 Eastern Pipeline Interconnector (EPI) 30 June 2009 39,022 Southern Regional Water Pipeline (SRWP) 30 June 2009 807,748 Total acquisition value 1,336,921

*Consideration includes the assumption of debt facilities where applicable.

(b) Intangibles

2010 2009 $’000 $’000 Intangibles At cost 4,732 262 Accumulated depreciation (438) (43) Total intangibles 4,294 219

18. Trade and other payables

2010 2009 $’000 $’000 Trade creditors 59,348 99,498 Other 1,480 1,600 60,828 101,098

19. Loans and borrowings - current

2010 2009 71 $’000 $’000 QTC debt pool - current 35,800 28,176 35,800 28,176

20. Loans and borrowings non-current

2010 2009 $’000 $’000 QTC debt pool - non current 1,752,535 1,711,469 Lease liability incentive 310 367 1,752,845 1,711,836

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

This note provides information about the contractual terms of LinkWater’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about LinkWater’s exposure to interest rate and liquidity risk, see note 2.

No assets have been pledged as security for any liabilities.

All borrowings are in AUD denominated amounts and include interest capitalised during the reporting period.

The facility bears a weighted average borrowing interest rate at 7.12% (2009: 7.17%) per annum.

All borrowings are interest bearing.

The market and contractual undiscounted cash fl ow values of the QTC debt pool at 30 June 2010, as notifi ed by the QTC, were $1.88 billion (2009:$1.78 billion) and $2.39 billion (2009: $2.34 billion) respectively.

No assets have been pledged as security for any liabilities.

21. Employee benefi ts

2010 2009 $’000 $’000 Annual leave accrued 405 244 Accrued salaries and wages 485 321 Long service leave provision 188 6 1,078 571

22. Asset revaluation reserve

2010 2009 $’000 $’000 Balance at 1 July 121,713 – Revaluation increments/(decrements) (3,808) 173,876 Deferred tax liability (9) (52,163) Balance at 30 June 117,896 121,713

23. Contributed equity

72 2010 2009 $’000 $’000 Contributed equity 186,701 186,701

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

24. Reconciliation of operating profi t to net cash from operating activities

2010 2009 $’000 $’000 Operating surplus/(defi cit) (14,186) 92,161 Adjustments for: Depreciation 42,293 26,205 Accumulated depreciation increment (1,230) (4,228) Transfers from LinkWater Projects – 17,792 Decrement in revaluation (2,570) 2,570 QTC interest expense 3,084 8,590

Change in assets and liabilities: Increase/(decrease) in trade and other receivables 427 (30,102) Increase/(decrease) in trade and other payables (4,307) 42,122 Increase/(decrease) in prepayments (89) (67) Increase/(decrease) in provisions 343 646 Deferred income tax benefi t (10,277) (105,334) Net cash from /(used in) operating activities 13,488 50,355

25. Subsequent events

There are no subsequent events.

26. Credit standby arrangements

Interest is calculated daily based on QTC’s cost of funds and capitalised on the fi rst day of each quarter. LinkWater has available capital expenditure funds of $60 million (2009: $228.89 million) and a $50 million (2009: $50 million) working capital fund from QTC.

27. Financial instruments

(i) Credit risk exposure

The maximum exposure to credit risk at balance date in relation to each class of recognised fi nancial assets is the gross carrying amount of those assets inclusive of any provision for impairment. 73

LinkWater’s maximum exposure to credit risk at balance date was:

2010 2009 $’000 $’000 Cash and cash equivalents 46,772 38,707 Trade and other receivables 15,813 34,257 62,585 72,964

Trade and other receivables consist of two counterparties, being LinkWater Projects and the SEQ WGM. Both entities are controlled by the Queensland Government.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

The ageing of LinkWater’s trade and other receivables at the reporting date was:

Gross Impairment Gross Impairment 2010 2010 2009 2009 $’000 $’000 $’000 $’000 Not past due 15,809 – 1,345 – Past due 0-30 days – – 32,831 – Past due 31-60 days 4 – 24 – Past due 61-90 days – – 57 – More than 90 days – – – – 15,813 – 34,257 –

No allowance for impairment in respect of trade debtors was made. Based on the nature of the counterparties, LinkWater believes no impairment allowance is necessary in respect of trade debtors.

(ii) Interest rate risk

LinkWater is exposed to interest rate risk through its borrowings from QTC and cash deposited in interest bearing accounts. In accordance with the QTC facility letter, management of interest rate risk or variation in the market value of the debt is the sole responsibility of QTC and Queensland Treasury.

(iii) Sensitivity analysis

The following sensitivity analysis depicts the outcome to profi t and loss if interest rates would change by +/- 1% from the year end rates applicable to LinkWater’s fi nancial assets and liabilities. The calculations assume that the rate would be held constant over the next fi nancial year, with the change occurring at the beginning of that year. This is mainly attributable to LinkWater’s exposure to variable interest rates on its borrowings from QTC.

Consolidated -1% +1% Net Carrying Profi t Equity Profi t Equity Amounts $’000 $’000 $’000 $’000 $’000 2010 Cash and cash equivalents 46,772 (468) (468) 468 468 QTC borrowings - loans * 1,782,335 1,336 1,336 (1,336) (1,336) 74 Overall effect on profi t and equity 868 868 (868) (868)

2009 Cash and cash equivalents 38,707 (387) (387) 387 387 QTC borrowings - loans 1,739,644 1,452 1,452 (1,452) (1,452) Overall effect on profi t and equity 1,065 1,065 (1,065) (1,065)

*QTC borrowings and loans excludes drawn working capital of $6 million for 30 June 2010.

(iv) Liquidity risk

LinkWater is exposed to liquidity risk through its obligations to repay borrowings from QTC and working capital requirements.

LinkWater reduces the exposure to liquidity risk by ensuring LinkWater has suffi cient funds available to meet employee and supplier obligations at all times. This is achieved by ensuring that minimum levels of cash are held within the operating bank account so as to match the expected duration of the various employee and supplier liabilities.

The contractual maturity of fi nancial liabilities, including estimated interest payments is disclosed in the liquidity risk management table at the end of this note.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(v) Fair value

2010 2009 Carrying Amount Fair Value Carrying Amount Fair Value $’000 $’000 $’000 $’000 Financial Liabilities Trade and other payables 60,828 60,828 101,098 101,098 QTC debt pool 1,782,335 1,884,951 1,739,645 1,785,151 Accrued employee benefi ts 1,078 1,078 571 571 Total 1,844,240 1,946,857 1,841,314 1,886,820

(vi) Interest rates used for determining fair value

The weighted average borrowing rate for QTC undiscounted cash fl ows is 7.12% (2009: 7.17%).

The following are the contractual maturities of fi nancial liabilities, including estimated interest payments.

2010 < 1 year 1-5 years > 5 years Total $’000 $’000 $’000 $’000 Financial liabilities at amortised cost Non-interest bearing Trade and other payables 60,828 – – 60,828 Interest bearing QTC debt pool 126,894 507,927 1,752,106 2,386,927

2009 < 1 year 1 - 5 years > 5 years Total $'000 $'000 $'000 $'000 Financial liabilities at amortised cost Non-interest bearing Trade and other payables 101,098 – – 101,098 Interest bearing 75 QTC debt pool 125,047 499,090 1,715,506 2,339,643

28. Operating leases

Non-cancellable future commitments for operating lease rentals are:

2010 2009 $’000 $’000 Contracted but not yet provided for and payable: Within one year 1,244 638 One year later and no later than fi ve years 5,470 2,912 Later than fi ve years 479 – 7,193 3,550

During the year ended 30 June 2010, $1.12 million (2009: $688,000) was recognised as an expense in the income statement in respect of operating leases.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

29. Capital and other commitments

Capital and operating expenditure commitments contracted for but not yet provided for and payable, not brought to account in the fi nancial statements.

2010 2009 $’000 $’000 Contracted but not yet provided for and payable: Within one year 3,624 655 One year later and no later than fi ve years 2,880 – 6,504 655

The above capital and operating expenditure commitments are based on committed open purchase orders and signed contracts.

30. Contingent liabilities and assets

At 30 June 2010, there were no outstanding contingencies recorded, (2009 a claim resulting from a major pipe burst at Mt Crosby in the amount of $150,000).

31. Dividends

During the fi nancial period, no amounts have been paid, proposed or declared by way of dividends.

32. Segment reporting

LinkWater manages, operates and maintains the bulk water transport water pipelines and related infrastructure for the bulk water portion of the SEQ Water Grid.

33. Related parties - key management personnel

The following were key management personnel of LinkWater at any time during the reporting period and, unless otherwise indicated, were key management personnel for the entire period:

Non-executive Directors Executive Management

Mr S Roberts (Chairperson) Mr P McManamon, Chief Executive Offi cer

Mr J Orange Mr R Anderson, General Manager Business Services (appointed 24 May 2010)

Ms C Sinclair Ms S Frazer, General Manager Legal Services

Mr G Thomsen Mr A Foley, General Manager Corporate Services 76 Mr R Landsberg Mr A Moir, General Manager Operational Services

Mr M Hortz, General Manager Project Services

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(i) Individual Board members’ and executive’s compensation disclosures

Board members and executives of LinkWater, or their related entities, have not conducted transactions with LinkWater in the reporting period, with the exception below:

Mr J Orange was providing consulting services in the role of acting Executive General Manager Business Services of Queensland Bulk Water Supply Authority trading as Seqwater (Seqwater) until March 2010. In addition he was chairman of Brisbane City Enterprises Pty Ltd, a controlled subsidiary of SMEC Holdings Limited.

2010 2009 $’000 $’000 Directors' and executives' remuneration

Board Members: Salary and fees 163 156 Superannuation 14 14 177 170

Executives Salary and fees 1,256 1,282 Superannuation 113 127 1,369 1,409

(ii) Other key management personnel transactions

Key management persons, or their related parties, have not held positions in other entities that result in them having control or signifi cant infl uence over the fi nancial or operating policies of those entities for the year ended 30 June 2010, apart from LinkWater Projects.

34. Related party transactions

(a) Guarantees

The Queensland Government has provided guarantees in respect of loans provided by QTC.

(b) Parent entity 77

The ultimate Australian parent entity is the Queensland Government.

(c) Other related parties

The following entities have the same controlling entity as LinkWater, and therefore are considered to be related parties of LinkWater. Transactions with these parties are disclosed in section (d). The fi ve major related parties are:

Department of Infrastructure and Planning (DIP)

LinkWater Projects

SEQ WGM

QTC

Seqwater

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(d) Transactions and loans

2010 2009 $’000 $’000 Transactions with related parties DIP 10,261 (5,128) Department of Environment and Resource Management 77 – Gold Coast City Council 338 – South East Queensland Water Corporation 494 – LinkWater Projects (4,250) (11,830) SEQ WGM 181,766 113,008 Loans advanced Loan - QTC 1,788,335 1,739,645 1,977,021 1,835,695

(e) Outstanding balances

2010 2009 $’000 $’000 Receivables SEQ WGM 13,636 15,038 LinkWater Projects 310 621

Queensland Water Commission (QWC) 200 –

14,146 15,659

Payables LinkWater Projects – 332 Loan - QTC 1,788,335 1,739,645 1,788,335 1,739,977

35. Economic dependency 78 LinkWater depends on the provision of fi nancial support from the Queensland Government.

During the 2010 fi nancial year, LinkWater’s operation has depended on its original equity contributions from its shareholder and debt contributions made by the Queensland Government.

Future contributions will be made by the Queensland Government to ensure that LinkWater has suffi cient funds to pay for all assets transferred to it and to be able to meet its fi nancial obligations on time.

36. Impairment

The carrying amount of assets (refer to note 17), allocated to the CGU is set out below:

Carrying amount of assets Recoverable amount Surplus/(defi ciency) 2010 2009 2010 2009 2010 2009 LinkWater CGU 2,080,792 2,114,678 2,089,071 2,232,723 8,279 118,045 2,080,792 2,114,678 2,089,071 2,232,723 8,279 118,045

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

The recoverable amount has been determined utilising the following key assumptions:

X Previous external advice provided by Synergy Economic Consulting to the Board members regarding a target gearing level for LinkWater has been adopted in the long-term fi nancial modelling and for impairment testing purposes. The Board members have adopted a target gearing level of 70%, with the assumption for modelling purposes that surplus cash will be applied to debt repayment in the fi rst instance, until such time as the target gearing level is reached and thereafter applied as dividends.

X For impairment modelling purposes, the rate of return and the impairment rate applied to drought assets are assumed to move over time, incrementally adopting the methodology applied to non-drought assets on a pro rata basis. This assumption is consistent with moving toward a normal regulatory environment and assumes a ten-year adjustment period. This assumption will be reviewed each year to take account of new information as it becomes available.

X The Board have agreed to treat LinkWater’s business activities as a single CGU for the purposes of impairment testing.

X The model makes provision each year for receipt of a return on working capital in line with normal regulatory practice as part of the revenues received by LinkWater. This is confi rmed by Queensland Water Commission’s (QWC) decision on behalf of the pricing regulator to allow for a return to LinkWater in 2009-10 for the lag in receipt of payments (average 60 days) with an offsetting provision for the lag between LinkWater being invoiced and paying for the goods or services (set at 25 days).

X Cash fl ows were projected utilising the methodology currently set by the QWC, on behalf of the price regulator, for both drought related and non- drought related assets and applied to the regulatory asset base. The prices used to determine revenues are based on a rate of return for drought assets ranging from 6.58% - 9.69% over a ten-year period and for non-drought assets of 9.69% for the entire ten-year period. Cash infl ows incorporate net revenues generated from regulated revenue as discussed above.

X Cash fl ow forecasts were estimated for a period of 30 years using the building blocks approach, and then extrapolated in perpetuity utilising the Gordons Growth Model.

X The discount rate was calculated using the weighted average cost of Capital/Capital Asset Pricing Model framework. The return on capital was tested to ensure that it incorporated current market conditions and the riskiness of the cash fl ows. The rate was adjusted to refl ect the borrowing capacity of the entity, the removal of interest rate risk, little refi nancing risk and short-term contracts in place. The resultant discount rate applicable for drought assets ranges from 7.13%-9.19% and is 9.19% for non-drought assets. Expenditure necessary to maintain or sustain the performance of the assets has been taken into account when estimating the net future cash fl ows as it is deemed maintenance in nature.

X The valuation model was analysed by independent third parties. The model and the validity of the assumptions adopted were found to be rigorous. A sensitivity analysis was conducted to identify the valuation effect of changes in key value drivers being: 79

- Internal drivers – asset lives, capital expenditure, non-regulated income

- External drivers – regulated asset base, discount rate and infl ation.

The assumptions concerning the internal drivers were in line with management’s current business strategy. For the external drivers, the valuation was most sensitive to the discount rate and the regulated asset base.

LINKWATER ANNUAL REPORT 2009–10 Notes to the financial statements 30 June 2010

(a) Inherent uncertainty

The above estimates are particularly sensitive to changes in the prices set by the QWC on the water assets.

The pricing methodology has been initially set by the QWC, in relation to the entity’s two-year contract with the SEQ WGM, and the impact of a reasonably possible change in these prices during or after this period is not able to be reliably estimated. This is due to the estimate being dependent on the exact timing of this change in the future and future changes in the methodology used in determining the regulatory return. At this point in time, the Queensland Government has not yet determined the pricing mechanism post 30 June 2010. Therefore, there is signifi cant uncertainty with what form the pricing mechanism may take post 30 June 2010. Should the pricing provided by the Regulator be reduced or if the pricing on assets acquired or constructed in the future be insuffi cient to generate a commercial return, further impairment may arise which could have a signifi cant effect on the carrying value of the assets in future periods. Without additional information in relation to the changes to the methodology and the uncertainty of what form the pricing mechanism may take post 30 June 2010, the group is not currently able to reliably model/quantify any potential future impairment and the fi nancial statements have not been adjusted for the effect of any future impairment that may eventuate due to this uncertainty.

37. Auditors remuneration

2010 2009 $’000 $’000 External audit fees 114 92 114 92

There are no non-audit services included in the amount above.

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LINKWATER ANNUAL REPORT 2009–10 Certificate of Queensland Bulk Water Transport Authority trading as Linkwater for the year ended 30 June 2010

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LINKWATER ANNUAL REPORT 2009–10 Independent Auditor’s Report

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LINKWATER ANNUAL REPORT 2009–10 Independent Auditor’s Report

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LINKWATER ANNUAL REPORT 2009–10 Independent Auditor’s Report

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LINKWATER ANNUAL REPORT 2009–10 Glossary

AASB Australian Accounting Standard Board AASBs Australian Accounting Standards ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange ATO Australian Taxation Offi ce BCS Business classifi cation scheme CAPM Capital Asset Pricing Model CBA Commonwealth Bank of Australia CEO Chief Executive Offi cer CFO Chief Financial Offi cer CGU Cash-generated unit CO2-e Carbon dioxide equivalent emissions eDRMS electronic Document and Recordkeeping Management System EPI Eastern Pipeline Interconnector FBT Fringe Benefi t Tax GIS Geographic Information System GST Goods and Services Tax IS2 Information standard compliance IT Information technology km Kilometres LTI Lost Time Injury ML Megalitres (one million litres) ML/d Megalitres of water per day NABERS National Australian Built Environment Rating Scheme NIP Network Integration Pipeline NPI Northern Pipeline Interconnector NWI National Water Initiative QAO Queensland Audit Offi ce QGCIO Queensland Government Chief Information Offi ce QSA Queensland State Archives QTC Queensland Treasury Corporation QWC Queensland Water Commission SAP Enterprise resource planning system SCADA Supervisory Control and Data Acquisition SEQ South East Queensland SEQWGM South East Queensland Water Grid Manager SRWP Southern Regional Water Pipeline TAMP Tactical Asset Management Plan TOC Target Out-turn Costs WACC Weighted Average Cost of Capital Index

Achievements at a glance 5 Operational plan 39, 40, 45, 5

Access to information 42 Organisational restructure 20

Audit and Risk Management Committee 36, 37,38,40, Operations and Maintenance Alliance 18, 19

41,44, 62, 63 Our people 8

LinkWater Board 35–46 Infrastructure Master Plan 14,31,34

Code of Conduct 19, 43 Privacy 43

Community and stakeholder relations 23 Recordkeeping 42

Drinking Water Quality Management Plan 13, 27 Remuneration and People Committee 37, 38–39

Energy Management Strategy 20 Risk management 40, 62–63

Financial statements 49, 80 Safety 5, 12, 18–19, 45

Governance framework 33, 35, 40, 46 South East Queensland Water Graffi ti management trial 22–23 (Restructuring) Act 7, 35, 40, 42, 46

Green Offi ce Program 20 South East Queensland Water Grid 9

Greenhouse gas emissions 20–21 Strategic plan 10, 20, 38, 39, 40, 44

Human Resources Strategy 19 Summary of fi nancial information 47

Incident management 12, 33, 41 Supervisory Control and Data Acquisition (SCADA) 13, 24

Infrastructure Planning Team 31 Sustainability 8, 13, 20–21, 39

Internal audit 35, 38, 40–41, 63 Tactical Asset Management Plan (TAMP) 29

Key performance measures 5 Vision 8

LinkWater Projects 7 Works and Environment Committee 37, 39–40

Mission 8 The Queensland Bulk Water Transport Authority (trading as LinkWater) ABN 51 614 840 026

Registered Offi ce Level 5, 200 Creek Street, Spring Hill Queensland 4000 PO Box 1045, Spring Hill Queensland 4004

Telephone: +61 3270 4000 Facsimile: +61 3270 4020

Email: [email protected] Website: www.linkwater.com.au

Copies of the 2009–10 annual report are available from LinkWater’s registered offi ce. An electronic version of the report is also available on the LinkWater website www.linkwater.com.au/publications. The Queensland Government is committed to providing accessible services to Queenslanders from all culturally and linguistically diverse backgrounds. If you have diffi culty in understanding the Annual Report, please contact us and we will arrange an interpreter to effectively communicate the report to you.