2013/2014 ANNUAL REPORT PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY SERVICE AREA

Navarre

Redbank

Havelock Timor Landsborough Bowenvale

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

Amphitheatre Talbot

Talbot Reservoir Lexton Lexton Maryborough Reservoir Reservoir Clunes Hepburn Springs Smeaton Hepburn Reservoir Waubra Daylesford Kingston Broomfield Bullarto Reservoir Learmonth Newlyn Beaufort Lake Creswick Learmonth Cosgrave Reservoir Dean Burrumbeet Miners Rest Dean Blackwood Lake White Swan Reservoir Burrumbeet Reservoir Wilson’s Moorabool Ballarat Reservoir Reservoir Colbrook Gong Gong Reservoir Reservoir

Kirk’s Wallace Bungaree Carngham Haddon Reservoir Gordon

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

Enfield

Dereel LEGEND Corindhap Rokewood Water pipeline Recycled water Wastewater treatment plants Water treatment plants Major roads Lakes and reservoirs Water district 0 4.75 9.5 19 Kilometres Sewer district

2 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX CONTENTS

PART 1 – YEAR IN REVIEW PART 5 – PERFORMANCE REPORT About us 4 Statement of performance for the At a glance 5 2013/14 financial year 30-31 – Financial performance indicators Message from our Chair and Managing Director 6 – Water and sewerage service performance indicators Summary of financial results 7 – Customer responsiveness performance indicators – Environmental performance indicators Summary of financial performance 7 Statutory certification 32 PART 2 – WATER CONSUMPTION Objectives and performance report 33 AND DROUGHT RESPONSE VAGO report 34-35 Corporate water consumption 8 PART 6 – FINANCIAL STATEMENTS Major water users 8 Comprehensive operating statement for Water consumption report 9 the period ended 30 June 2014 36 Management of drinking water quality 10 Balance sheet 37 Drought response report 11 Statement of changes in equity 38 Cash flow statement 39 PART 3 – ENVIRONMENTAL AND Notes to the financial statements 40-78 SOCIAL SUSTAINABILITY Accountable officer’s and chief finance Environmental sustainability 12-14 and accounting officer’s declaration 79 Groundwater licences 14 Central region sustainable water strategy 15 PART 7 – DISCLOSURE INDEX Bulk entitlement reporting 16-17 Greenhouse gas emissions 18 Social sustainability reporting 19

PART 4 – CORPORATE INFORMATION Organisational structure 20 Corporate governance 21-22 Board of directors 23 Executive team 24 Employment data 25 Health and safety reporting 26 Access to information 27 Other Acts and applicable policies 27 Consultancy expenditure 28 Major works 29

Additional copies ISSN: 2203-9503 (Print) This annual report is available for viewing or download from ISSN: 2203-9511 (Online) Central Highlands Water’s website chw.net.au © State of Victoria, Central Highlands Water 2014. To minimise our impact on the environment we print limited numbers of this This publication is copyright. No part may be reproduced by any process report, so we encourage you to view this report online. If you require any except in accordance with the provisions of the Copyright Act 1968. additional printed copies, please contact Central Highlands Water at: This report has been printed on Ecostar 100% recycled stock. Email: [email protected] Phone: 1800 061 514 Post: PO Box 152 Ballarat VIC 3353 In person: 7 Learmonth Rd Wendouree VIC 3355

2013/14 ANNUAL REPORT 3 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL RESPONSIBILITY PART 1 YEAR IN REVIEW

ABOUT US

Central Highlands Water (the Corporation, • identify current sewerage needs Our prices and service standards are CHW) is a regional water corporation and plan for future needs regulated by the Essential Services providing high quality drinking water, • develop and implement programs Commission. sewerage, trade waste and recycled for the recycling and reuse of water services to customers in Ballarat treated wastewater Capital investment for the year and surrounding towns. • investigate, promote and conduct Major water infrastructure projects Formerly known as the Central research into the provision of Highlands Region Water Authority, we included: sewerage services are one of 19 state-owned water • $3.0 M Lexton water supply project, businesses operating under the Recycled water providing a new reliable and secure guidance of the Victorian Water Act 1989. Class A recycled water produced at our water supply, partly funded under the Ballarat North Reclamation Plant reduces Small Town Water Quality Fund Our region demand on our water catchments and • $2.5 M Musical Gully dam safety Our area of operations encompasses supports greener open spaces. upgrade, ensuring the security of the potable water supply for Beaufort 9,275 square kilometres and incorporates We perform these functions in an and district the local government areas of Ballarat, environmentally sound way, recognising Central Goldfields, Golden Plains, the need to preserve landscape, fauna • $2.0 M Beales dam and Wilsons Hepburn, Pyrenees, Northern Grampians and flora. dam safety upgrade commenced and Moorabool. • $1.2 M Ballarat West managed aquifer Our promise recharge pilot project commenced Our services • $1.4 M Commencement of major We promise to provide quality water and works on the Maryborough clear We provide water supply and sewerage wastewater services fairly, efficiently and water storage tank to enhance water services through 65,188 water supply sustainably to communities in the security and asset life connections and 55,399 wastewater Central Highlands region. service connections to more than • $1.3 M Extensive investment in 137,000 people. An annual customer mains renewal projects throughout satisfaction survey is conducted. Our values the service area • Collaborate • $0.4 M Redbank groundwater Our core functions are: supply upgrade • Innovate Water • Deliver Major wastewater and sewerage • collect, store, treat, transfer and projects included: distribute water • Trust • $1.0 M Sewer main inflow/infiltration • manage and protect the water reduction program completed in supply system Corporate governance Ballarat catchment • identify current and future water needs Central Highlands Region Water • $0.9 M Maryborough biosolids reuse • develop and implement programs Corporation is a statutory body project with benefits extending to for the conservation and efficient use operating under the Water Act 1989. farmers and agriculture in the district of water The responsible Minister during the • $2.6 M Docwra St sewer rising main • educate the public about the reporting period was The Hon Peter renewal catering for present and water supply Walsh MLA, Minister for Water. future growth in Sebastopol Sewerage The Corporation operates under a • $2.0 M Ballarat South Wastewater • the efficient transfer, treatment and Statement of Obligations issued under Treatment Plant upgrade works disposal of sewage section 41 of the Water Industry Act 1994. continued throughout 2013/14.

4 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX AT A GLANCE

137,430 Total population serviced

$93.8M Current operating revenue

$881M Value of infrastructure, property, plant and equipment

176.13 Full-time equivalent employees

65,188 Total water supply connections

5,545 Non-residential customers

12,588ML Total water supply volume

15 Water treatment plants

30 Number of reservoirs

13 Number of diversion weirs

34 Number of groundwater bores

17 Bulk water entitlements held

2,444KM Length of water mains

47 Number of service basins and tanks

41 Number of water pumping stations

55,399 Total wastewater connections

7 Major trade waste customers

13 Wastewater treatment plants

10,711ML Total volume of wastewater treated

857ML Volume of effluent irrigated to land

1,358KM Length of sewer mains

100 Wastewater pump stations

2013/14 ANNUAL REPORT 5 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL RESPONSIBILITY MESSAGE FROM OUR CHAIR Jeremy Paul AND MANAGING DIRECTOR Johnson O’Donohue

Delivering quality water and This result is mainly due to a slight • partnering with Ballarat’s Begonia wastewater services, affordably and increase in water sales, growth within Festival to deliver an outstanding sustainably to our 137,000 plus our customer base, stronger cost community event. customers across our service area controls, savings across the capital • delivering recycled water and – this is Central Highlands Water’s expenditure program and reduced groundwater to support major stated aim. operating expenses. Ballarat community recreational The 2013/14 financial year has been an The resultant net cash flow from assets such as Lake Wendouree, important one for Central Highlands operating and investing activities of Ballarat Botanical Gardens and local Water. We have sharpened our focus on $8.7 M is our best result for more than sporting ovals. delivering customer value, improving our 10 years and has enabled the early • continuing to focus on and deliver service, investing in our people and repayment of sizable debt. non-revenue water programs reducing prices via the Living Victoria This is a significant achievement to ensure efficient use of existing Fairer Water Bills program. marking the commencement of the water supplies. While Water Plan 3 (2013-18) provides Corporation’s debt reduction strategy In addition, Central Highlands Water the framework for operating the following a sustained period of continues its strong commitment to business, we have also been actively significant infrastructure spend, and ensuring people are working safely and engaged in delivering the Living Victoria, ongoing this is a major focus for the re-affirm our tolerance to ‘zero’ harm Living Ballarat initiative. This is an Board and management. injuries in our workplace. exciting collaborative project for our region. We look forward to continuing With a clear focus on servicing future In the 2014/15 year, we will continue to: growth and improving water quality, our this excellent work and delivering • deliver the $50 per annum saving on capital works projects have included: benefits to all of our customers. customer tariffs and support the • Lexton water supply improvement In the past year, we have implemented Living Ballarat Project. a range of initiatives that demonstrate • replacement of major rising sewer • match and re-define customer our commitment to improving customer main in Sebastopol to provide service standards with the customer value and service. These include: capacity for future growth experience remaining paramount. • providing customers with greater • Musical Gully Reservoir (Beaufort) • deliver on an $18 M plus capital control over their water bills, upgrade improvement program that supports through the introduction of the • Ballarat South Wastewater Treatment quality sewer and water services for government’s Fairer Water Bills and Plant augmentation to provide our customers. a bill smoothing initiative to assist capacity for future population growth • lead the development of an integrated customers with better managing • Maryborough 10 ML clearwater whole-of-water-cycle management their household utility budgets. storage tank refurbishment works plan for Greater Ballarat. • investing in capital works to improve • new water supply for Redbank and • roll-out the Business Efficiency water quality for the townships of removal of water restrictions for the Improvement Program to continue Lexton and Redbank. town from March 2014. driving customer value. • improving dam safety on a number of Recognising that our role within our • invest in our people to develop their our key assets to ensure high quality community often extends beyond skills and experience and provide and reliable water supplies across delivering water and wastewater improved customer service. the region. services, we are proud of the many • use surplus revenue to further pay • delivering customer value by collapsing other projects that we have delivered down debt and improve customer the three-tiered water structure tariff throughout 2013/14, including: and shareholder equity. to two to better aid large families, tenants and high water users. • signing a memorandum of Finally, we would like to thank our fellow understanding with Ballarat’s Federation directors for their continued support, • embedding active permanent water University in order to increase savings rules across all our systems. guidance and professional input collaboration between our two throughout the year. We welcome • maintaining water quality accreditation organisations on education, training, Michael Myers as a new director and and continuing to deliver a reliable research and consultation activities. congratulate Richard Nicholson, Jo service, despite enduring the third • launching the Be Smart Choose Tap Plummer and Stewart Howe who were hottest summer on record. initiative with local Olympian Steve reappointed to the Board for a further • continuing to invest in our most Moneghetti as ambassador. four-year term. important resource – our people • subscribing to Dial Before You Dig to We extend our sincere thanks to our – through a range of development help contractors efficiently and safely initiatives. customers, stakeholders and locate underground water and sewer communities who have supported us in • implementing an internal Business infrastructure. striving to deliver the best service for Efficiency Improvement Program and • trialling Australia’s first futuristic Pipe our region. We also wish to delivering productivity gains that will Rover as part of the Intelligent Water acknowledge the professionalism and support lower tariff increases and Networks. The technology enables commitment of our staff as we move operational costs into the future. water mains to be visually inspected into the next phase of the business and The Corporation has delivered an by a remote device without the need look forward to working together over excellent profit/surplus for 2013/14. to interrupt water supply. the next 12 months.

6 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX SUMMARY OF FINANCIAL RESULTS

2009/10 2010/11 2011/12 2012/13 2013/14 $’000 $'000 $'000 $'000 $'000

Core business revenue 60,099 68,543 74,564 84,373 88,442

Government contributions 3,808 1,089 75 1,205 700

Other revenue 2,750 4,034 3,239 4,562 4,680

Total revenue 66,657 73,666 77,878 90,140 93,822

Operating expenditure 39,169 42,214 47,531 45,611 46,634

Depreciation expenditure 17,536 17,830 19,881 22,306 20,251

Finance costs 8,736 10,702 11,960 12,154 12,135

Other expenditure 4,191 4,183 4,573 4,529 4,470

Total expenditure 69,632 74,929 83,945 84,600 83,490

Net result before tax (2,975) (1,263) (6,067) 5,540 10,332

Current assets 26,778 21,401 23,471 29,813 29,535

Non-current assets 854,584 916,011 920,382 918,238 920,561

Total assets 881,362 937,412 943,853 948,051 950,096

Current liabilities 49,045 56,244 46,665 27,088 34,985

Non-current liabilities 124,354 146,352 166,633 185,796 172,724

Total liabilities 173,399 202,956 213,298 212,884 207,709

Net cash flows from operations 8,288 10,964 14,995 15,323 24,375

Payments for property, plant and equipment (including infrastructure) 48,090 33,151 25,920 19,897 14,863

SUMMARY OF FINANCIAL PERFORMANCE

Performance indicator 2009/10 2010/11 2011/12 2012/13 2013/14

Internal financing ratio 17.23% 33.07% 64.03% 77.01% 154.59%

Gearing ratio 16.31% 17.16% 18.20% 18.94% 17.92%

Interest cover (EBIT) 0.86 0.88 0.93 1.46 1.85

Interest cover (Cash) 1.93 1.96 2.26 2.18 2.90

Return on assets 0.63% 1.00% 0.63% 1.87% 2.37%

Return on equity -0.30% -0.35% -0.58% 0.53% 0.98%

Significant changes in financial position No significant changes have occurred to affect the Corporation’s financial position.

Performance – factors affecting performance No significant changes have occurred to affect the Corporation’s financial performance.

2013/14 ANNUAL REPORT 7 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL RESPONSIBILITY PART 2 WATER CONSUMPTION AND DROUGHT RESPONSE

CORPORATE WATER MAJOR WATER CONSUMPTION USERS

These amounts represent water consumption at Central Customer by volume range Highlands Water’s Wendouree office, workshop and maintenance areas and the Maryborough office site. Volumetric range (ML per year) No. These amounts do not include any treatment plants or customers other work sites. Equal to or greater than 200 ML 0 and less than 300 ML

Consumption 1,463 kL Equal to or greater than 300 ML 0 and less than 400 ML No. employees (FTE) 176.13 Equal to or greater than 400 ML 0 Annual use (per person) 8.3 kL and less than 500 ML

Daily use (per person) 22.8 L Equal to or greater than 500 ML 1 and less than 750 ML Per m2 office space 365.8 L Equal to or greater than 750 ML 0 and less than 1000 ML

Greater than 1000 ML 0

Total no. customers 1

Major customers and their participation in water conservation programs

Name of customer Information as to customer’s participation in water conservation program

McCain Foods (Aust) Ongoing maintenance to reduce water Pty Ltd consumption as part of water conservation programs

8 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX WATER CONSUMPTION REPORT

Water Residential Non-Residential Totals supply system Water Potable Non- Recycled Recycled Water Potable Non- Recycled Recycled Total water Total Total non- Total Total Average Weekly conn- consu- potable waste- storm- conn- consu- potable waste- storm- conn- potable potable recycled consu- annual resi- ections mption consu- water water ections mption consu- water water ections volume volume water mption consu- dential (ML) mption volume volume (ML) mption volume volume (ML) (ML) volume (ML) mption potable (ML) (ML) (ML) (ML) (ML) (ML) (ML) (ML) consu- mption (KL)

Amphitheatre 67 - 10.3 - - 7 - 1.3 - - 74 - 11.6 - 11.6 10.3 0

Avoca 571 79.1 - - - 91 32.2 - 33 - 662 111.3 - 33 144.3 95.3 2.7

Ballarat 48,395 7,286.4 - - - 4,268 3,118.2 - 82.5 - 52,663 10,404.6 - 82.5 10,487.1 9290.2 2.9 and district

Beaufort 704 86.6 10.1 - - 106 30.1 3.6 40.5 - 810 116.7 13.7 40.5 170.9 120.0 2.4

Blackwood 323 24.2 - - - 15 5.3 - - - 338 29.5 - - 29.5 25.4 1.4

Clunes 847 124.7 - - - 82 33.5 - - - 929 158.2 - - 158.2 149.5 2.8

Daylesford 2,542 340.0 - - - 304 151.3 - 324.7 - 2,846 491.3 - 324.7 816 450.2 2.6

Dean 16 4.1 - - - 5 1.6 - - - 21 5.7 - - 5.7 4.9 4.9

Forest Hill 455 102.3 - - - 39 9.9 - - - 494 112.2 - - 112.2 102.5 4.3

Landsborough 111 16.0 - - - 34 5.2 - - - 145 21.2 - - 21.2 17.9 2.8

Learmonth 125 24.0 - - - 27 16.3 - - - 152 40.3 - - 40.3 36.0 3.7

Lexton 91 12.8 - - - 11 1.3 - - - 102 14.1 - - 14.1 12.2 2.7

Maryborough 5,258 792.2 - - - 542 272.6 - 375.9 - 5,800 1,064.8 - 375.9 1,440.7 948.0 2.9 and district

Redbank 38 - 3.9 - - 5 - - - - 43 - 3.9 - 3.9 4.0 -

Waubra 100 17.2 - - - 9 1.3 - - - 109 18.5 - - 18.5 16.2 3.3

TOTALS 59,643 8,910 24.3 - - 5,545 3,679 5 856.6 65,188 12,588.4 29.2 856.6 13,474.2 11,282.6 2.9

Note: Average annual consumption calculated between 2009 – 2014

Non-revenue water

Volume (ML)

Non-revenue water 1,571

Real losses 950

Avoidable losses 89

Unavoidable losses 861

2013/14 ANNUAL REPORT 9 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL RESPONSIBILITY MANAGEMENT OF DRINKING WATER QUALITY

Central Highlands Water is committed Water quality to managing its water supply systems effectively to provide safe, high quality improvement projects drinking water that meets regulatory During 2013/14, Central Highlands requirements such as the Safe Drinking Water implemented and continued a Water Act 2003 and the Safe Drinking number of major initiatives to maintain Water Regulations 2005. and improve water quality for In accordance with the legislation, we customers, including: have prepared and implemented a • commissioning of a new bore water ‘catchment to tap’ risk management source for the regulated supply of plan to identify and manage risks in Redbank to improve water quality relation to all of our water supply systems. • installation of solar powered mixers An approved auditor from the at Evansford and Sugarloaf reservoirs Department of Health completed an to improve operational control audit of Central Highlands Water in • upgrading the storage tank at the February 2014. The audit confirmed that Clunes Water Treatment Plant the Corporation continues to be • progressing the Lexton water compliant with the obligations of the quality improvement project to Safe Drinking Water Act 2003. increase the security of supply and improve aesthetics • initiating the refurbishment of the treated water storage tank at the Maryborough Water Treatment Plant to protect water quality. The Corporation developed a comprehensive testing and monitoring program to verify the effectiveness of risk management processes. Detailed results of compliance with those parameters specified in the Safe Drinking Water Regulations 2005 are outlined in the Annual Water Quality Report.

10 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX DROUGHT RESPONSE REPORT

Overall, the region experienced a decline during an extremely dry Despite a relatively dry season, the relatively dry season during 2013/14 summer and autumn period. water restriction status remained the with recorded rainfall failing to exceed • Storages and groundwater levels same across systems, except Redbank the long-term average during most generally tracked at similar levels, or where water restrictions were actually months of the year. The following points slightly below those experienced the eased courtesy of a new groundwater summarise the general trends previous year. supply being commissioned. experienced during the year: • Less inflow and reservoir recovery In March 2014, the restriction level was • Some winter and spring inflows was experienced north of the Great eased from Stage 2 to Permanent helped to maintain reservoir levels Dividing Range, and an increased Water Saving Rules at Redbank. and generated some recovery, but reliance on groundwater supplies most systems experienced a small was required.

System Date Drought Comment response action

Amphitheatre All year PWSRs Amphitheatre Reservoir reached full supply during spring. However, some decline in reservoir level occurred during the relatively dry summer and autumn seasons.

Avoca All year PWSRs Little inflow to surface water storages with reservoirs tracking at very low levels. Supply is being maintained from the reliable groundwater resource.

Ballarat All year PWSRs A lower inflow year saw some decline in storage levels. However, the system continues and district to hold a considerable volume of water.

Beaufort All year PWSRs Reservoir levels were lowered during the year to facilitate dam safety works, and some recovery has occurred since the completion of these works.

Blackwood All year PWSRs Water storages were maintained at healthy levels throughout the year.

Clunes All year PWSRS Groundwater levels remained similar to previous years and there were no supply issues.

Daylesford All year PWSRs A dry summer resulted in some decline to reservoir levels. However, the system tracked slightly better than last year and some reservoir recovery commenced during June.

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

Forest Hill All year PWSRs Groundwater levels remained similar to previous years and the system performed in a reliable manner.

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

Learmonth All year PWSRs A groundwater system that continued to provide a reliable supply.

Lexton All year PWSRs Surface water storages tracked at similar levels to those experienced last year. Works on a new groundwater supply also progressed significantly during 2013/14.

Maryborough All year PWSRs Storage levels tracked slightly below the previous year, but remained at healthy levels throughout 2013/14.

Redbank March Stage 2 to Despite minimal inflow and Redbank Reservoir virtually running dry, water restriction 2014 PWSRs status was eased to Permanent Water Saving Rules in March 2014 thanks to the commissioning of a new groundwater bore.

Waubra All year PWSRs A reliable groundwater supply system that continued to perform well throughout 2013/14.

2013/14 ANNUAL REPORT 11 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY PART 3 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY

ENVIRONMENTAL SUSTAINABILITY

Water conservation The waterMAP program for large non- development industry and implemented residential customers continued as a a supplementary guide to support the Central Highlands Water continued to voluntary participation program. potable water demand targets set for support water efficiency during the A large component of the Corporation’s the Ballarat West Urban Growth Zone financial year by extending some of the which will ultimately see 14,000 new current programs. commitment to water efficiency was its major involvement in the Living Ballarat homes developed with a target to The State Government Showerhead Whole of Water Cycle Management Project reduce potable water consumption by Exchange Program for residential managed by the Office of Living Victoria 40 per cent within the growth zone. customers continued. (OLV). Central Highlands Water provided Encouragement and support of local The non-residential program continued significant personnel and data resources government water conservation to assist businesses in a scaled-down to support OLV-managed technical programs continued. The Corporation form following completion in 2012/13 of modelling of the water cycle patterns in continues to be a partner in the the highly successful State Government the service area and development of a Regional Sustainability Alliance Ballarat. funded Small Business Grants program. strategy consultation document. Water efficiency continued to be an The Small Business Rebates will continue Central Highlands Water has also important element of planning future to be available until 30 June 2015. worked closely with the land demand and supply of water.

Paper use

2011/12 2012/13 2013/14

Total units of copy paper used (reams) 1499 1364 1170

Units of copy paper used per FTE (reams/FTE) 8 7.7 6.6

Water supply demand strategies Security Outlooks, which are part of the Regional catchment strategies strategy, are reviewed and updated on Victoria has an integrated and dynamic an annual basis. These show the Regional Catchment Strategies were water planning framework in which expected resource position over a one released in June 2013. Central Water Supply Demand Strategies play to two year outlook period for a range Highlands Water liaises with the following an important role in guiding strategic of climatic scenarios. Updated Water Catchment Management Authorities local planning for regional urban water Security Outlooks are posted annually (CMA) whose regions are located in the corporations. The purpose of water at chw.net.au Corporation’s drinking water catchments: supply demand strategies is to identify • Corangamite CMA the best mix of measures to maintain a The development of an Integrated Water • North Central CMA balance between the demand for water Cycle Strategy identifying the best mix and available supply in our towns over a of measures to maintain a balance • Glenelg Hopkins CMA 50-year outlook. between the demand for water and the • Port Phillip and Western Port CMA supply of water for cities and towns Central Highlands Water released a • Wimmera CMA commenced. During 2013/14 the Water Supply Demand Strategy for each Corporation participated in the Living The State Environmental Protection of its 15 water supply systems in Ballarat Project which produced a draft Policy was considered across all water 2011/12 and is required to review the strategy ‘Help Shape our Water Future and wastewater operations. The strategy at five-year intervals. Water − Ballarat and Region’. Corporation’s environmental management system protects and enhances the environment through identification of impacts and appropriate controls.

12 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Catchment management • Pootilla Reserve targeting the Evansford catchment to remove blackberry and broom populations willows, construct stock exclusion Central Highlands Water actively worked in remnant bushland fencing and rehabilitate 1 km of with local government authorities to • White Swan Reservoir crown land waterway. review domestic wastewater targeting gorse and blackberry • Commenced rehabilitation of 1.5 km of management plans in accordance with infestations in revegetation areas Birches Creek at Lawrence Weir within the Ministerial Guidelines for Planning and remnant bushland the Tullaroop Reservoir catchment. Permit Applications in Open Potable • Bullarto South Reserve targeting • Conducted waterway rehabilitation Water Supply Catchments. blackberry infestations along drainage along Black Creek at Lal Lal The Corporation maintained its role as a lines and remnant bushland areas Reservoir to remove willows and referral authority Under Section 56 of • Lal Lal Reservoir targeting construct stock exclusion fencing the Planning and Environment Act 1987 blackberry, gorse and serrated along 800 m of waterway. and approved 67 out of 78 applications tussock infestations, and • Worked with the Glenelg Hopkins for a planning permit within a potable • Moorabool Reservoir targeting CMA to deliver willow removal works water catchment. blackberry infestations along the along Burrumbeet Creek at the Ballarat North Wastewater Treatment Plant. Catchment risks were reviewed in West Moorabool River. accordance with procedures to ensure that hazards to raw water sources were Victorian Waterway Management Biodiversity program factored into water treatment processes. The Moorabool Environmental Water Committed to the protection, conservation Regular inspections of all catchment Reserve was managed effectively by and improvement of natural assets on reserves and land use within all ensuring 2,500 ML was managed in owned and managed land, Central catchments were assessed. These compliance with seasonal water planning Highlands Water continued to implement assessments informed the water quality developed by the Corangamite CMA. its biodiversity program which focused on: • implementation and monitoring of monitoring program. Central Highlands Water continues to 10 offset management plans conduct a river health program to improve Biosecurity and invasive species water quality protection above water • control of woody weeds in high storages. The following river health conservation value areas Central Highlands Water continued to projects were conducted in 2013/14 to • building knowledge of biodiversity implement an invasive species control improve water quality outcomes: assets through flora and fauna surveys program across owned and managed • Continued work in partnership with • management of environment land through an asset based approach. Melbourne Water on a waterway protection and biodiversity High priority invasive species were project along the Werribee River at the conservation listed basalt peppercress targeted during the annual weed control Ballan Wastewater Treatment Plant. Lepidium hyssopifolium, and program with major control programs • Partnership project with catchment • environmental impact assessments implemented at: land holders on McCallums Creek in of capital infrastructure projects.

Capital project Offset site Actions implemented 2013/14

Cosgrove-White Swan Pipeline Creswick Wastewater Treatment Plant Large scale Hawthorn removal program, woody and and Newlyn-Cosgrove Pipeline and Cosgrove Reservoir herbaceous weed control, year seven monitoring assessment.

Goldfields Superpipe Daylesford Wastewater Treatment Plant Woody and herbaceous weed control, on-title and Talbot Reservoir management agreement.

Springs Rd Sewer Springs Rd, Brown Hill Woody and herbaceous weed control.

Creswick Sewerage Creswick Wastewater Treatment Plant Woody and herbaceous weed control, year six Transfer System and Russells Reservoir monitoring assessment.

Daylesford Sewer Flow Daylesford Wastewater Treatment Plant Woody and herbaceous weed control. Containment

Bullarto Dam Wall Upgrade Orr’s Spring, Bullarto Woody and herbaceous weed control, year three monitoring assessment.

Avoca Brine Pipeline Bushbroker N/A

Blackwood Raw Water Storage Moorabool Reservoir Woody and herbaceous weed control, revegetation of 3 ha, pest animal control, on-title management agreement.

Gong Gong Dam Wall Kirks Reservoir Woody and herbaceous weed control. Maintenance

Redbank Water Supply Upgrade Daylesford Wastewater Treatment Plant Woody and herbaceous weed control.

Gordon and Beaufort Lal Lal Reservoir Woody and herbaceous weed control, on-title Wastewater Treatment Plant management agreement.

2013/14 ANNUAL REPORT 13 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY

Eighteen thousand native trees and the Moorabool Catchment. The management is in accordance with shrubs were planted achieving 12 ha of Revegetation, weed control and approved offset management plans by native vegetation in the Moorabool River restoration of natural drainage are to be the Department of Environment and Catchment. The 2013/14 native implemented over a five-year period. Primary Industries. revegetation program focused on achieving reservoir buffers, offset A new offset site has been created at requirements and rehabilitation of Biodiversity offsets Lal Lal Reservoir due to unavoidable decommissioned forestry coupes. Central Highlands Water implements vegetation losses associated with the A partnership program was developed conservation actions at 10 offset sites development of the Gordon and with the Corangamite CMA to improve as a result of native vegetation Beaufort Wastewater Treatment Plants the condition of a 20 ha wetland area in clearance during capital works projects. in 2013.

GROUNDWATER LICENCES

Water supply Bore name Groundwater RWA licence Annual licence Volume extracted system licence no. authority volume (ML) in 2013/14

Amphitheatre Amphitheatre Bore 8003903 GWMWater 20 0

Avoca Bung Bung Bore BEE014154 G-MW 250 99.2

Ballarat Ballarat West BEE031536 SRW 1700 236.2

Bungaree Bore BEE027683 SRW 120 0

Beaufort Raglan BEE030997 SRW 200 47.6

Blackwood Barry’s Reef Bore BEE027580 SRW 50 0

Clunes Clunes (UW usage) BEE069135 G-MW 350 188.7

Daylesford Coomora Bore BEE069510 G-MW 273 0.5

Dean Dean Bore BEE025842 SRW 30 21.3

Forest Hill Forest Hill Bores BEE004957 G-MW 350 158.8

Landsborough/ Navarre Bore 8003328 GWMWater 150 29.7 Navarre

Learmonth Bankin Hill BEE005382 G-MW 100 47.6

Lexton Gordon Hill BEE071487 G-MW 30 0.8

Maryborough Moolort Bores BEE018090 G-MW 345 28.5

Stoney Creek Bore* BEE049134 G-MW 0 0.1

Redbank Redbank Bores BEE056519 GWMWater 50 4.1

Waubra Waubra Bores BEE014898 G-MW 70 29.2

* No permanent licence volume at these bores but allocation transferred to licence on a temporary basis

14 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX CENTRAL REGION SUSTAINABLE WATER STRATEGY

Released in 2006, the Central Region The government is focused on and preparing whole-of-water-cycle Sustainable Water Strategy (SWS) implementing the Living Melbourne, plans for Melbourne’s four main growth commits to a wide range of actions to Living Victoria initiative, which aims to areas, including Ballarat. protect rivers and aquifers while securing establish Victoria as a world leader in Central Highlands Water is responsible water supplies for cities, towns and whole-of-water-cycle management. for several actions outlined in the farms in Melbourne, Ballarat, Geelong, Central Region SWS. the Inner West and the Latrobe Valley. The government has established the Most actions in the Central Region SWS Office of Living Victoria to deliver key The status of those actions is have been implemented or are of an aspects of this initiative, including summarised in the following table. ongoing nature. administering the Living Victoria Fund

Conservation and efficiency

Action Status Comments

Action 4.1 The government requires Central Highlands AHEAD OF Central Highlands Water remains ahead of schedule to Water to work with its customers to achieve a 25% SCHEDULE achieve these targets due to the implementation of reduction in total per capita water use for Ballarat by successful demand management programs and the 2015, increasing to 30% by 2020. The basis of community’s response to prolonged drought conditions. comparison is the 1990s average water use. Residential consumption is currently less than the 2020 target of 197 litres per person per day and non-residential customers are on track to achieve the 2015 target.

Action 4.2 Central Highlands Water will implement a AHEAD OF Due to highly successful water efficiency programs, the range of conservation and efficiency measures within the SCHEDULE 1,900 ML per year target water savings by 2013 is being residential sector (homes) and non-residential sector in exceeded as a result of significant savings achieved in both order to meet its new conservation targets. residential and non-residential programs.

Alternative Supplies

Action 4.3 Central Highlands Water will substitute potable COMPLETED Construction work has been completed and the delivery water with recycled water in Lake Wendouree and for use of recycled water to Lake Wendouree commenced in by industry. August 2009.

Interconnections

Action 4.4 Central Highlands Water will connect Cosgrave COMPLETED The Cosgrave-White Swan pipeline connection was Reservoir to White Swan Reservoir to allow access to commissioned in late 2006 and this continues to be a Central Highlands Water’s currently unused entitlement. valuable supply source for the Ballarat and district water supply system.

Action 4.5 Central Highlands Water will develop COMPLETED The Newlyn pipeline connection was completed in infrastructure to transfer unused entitlement in Newlyn October 2007 and this supply source further adds to the Reservoir directly into White Swan Reservoir via the security of water supplies for the Ballarat and district water Cosgrave-White Swan pipeline. supply system.

Action 4.6 Central Highlands Water will interconnect COMPLETED The Ballarat-Goulburn connection was completed well to the Goulburn system (White Swan Reservoir to ahead of schedule in May 2008. Since commissioning, the Lake Eppalock) to allow access to water from the pipeline has contributed more than 22,000 ML to Ballarat’s Waranga Channel. water supply system.

Augmentations

Action 4.7 Central Highlands Water will develop COMPLETED This groundwater project was completed in July 2007 and infrastructure to supply water from Cardigan aquifer to the the resource remains available to supplement Ballarat's Ballarat urban water supply system during dry periods. urban water supply.

Action 4.8 Following the completion of major COMPLETED This was completed late 2010. augmentation options for Geelong and Ballarat, the government will transfer part of the water authorities’ water entitlements in the West and Lower Moorabool catchments to the environment.

2013/14 ANNUAL REPORT 15 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY BULK ENTITLEMENT REPORTING

2013/14 General Central Highlands Water holds 17 Bulk Entitlement The Corporation also maintains a Bulk Entitlement Metering Conversion Orders which define its legal rights to extract Plan to ensure repairs, replacements, operational processes water to supply its 15 water supply systems. These orders and data control is conducted in accordance with bulk require the Corporation to report on various aspects which entitlement requirements. This metering plan was approved are summarised below. by the Minister in 2011.

Bulk Entitlement Annual Volume remaining Transfers of BE Failures or Comment (*) Order amount in reservoirs or to supply difficulties with taken from at 30 June 2014 (*) system, complying with specified amendments, requirements point(s) new entitlements of BE (*) under or credits (*) Order (*)

Bulk Entitlement (Upper 3808.1 ML Beales - None None West Moorabool (14.1 (e)) 73 ML Wilsons - (14.1(g),14.1(h), (14.1,(k),(l)) System) Conversion 131 ML Moorabool 14.1(i), 14.1 (j)) Order 1995 - 3099 ML (14.1 (d))

Bulk Entitlement 3652.3 ML CHW share None None Total net gain to CHW’s (Lal Lal – CHW) (CHW) of Lal Lal (18.1(l),18.1(m), (18.1(p), 18.1 (q)) share of the reservoir was Conversion Order 2500 ML Reservoir - 18.1(n),18.1(o)) 1436 ML. (18.1(f),(j). 1995 (enviro) 28876.5ML No water was taken from 1854 ML (18.1(e)) any point other than the (Barwon specified point (18.1(i)). Water) (18.1(g))

Bulk Entitlement 0 ML Colbrook None None Reservoir remained out of (Ballan) Conversion (12.1 (c)) 160 ML (12.1(e)) (12.1(f)) (12.1(i)) (12.1(j)) service during 2013/14. Order 1998 (12.1(g)) (12.1(h))

Bulk Entitlement 43.0 ML Not None None (Blackwood and Barry’s (11.1(e)) Applicable (11.1(g)),(11.1(h)) 11.1(k)) (11.1(l)) Reef)) Conversion (11.1(i)), 11.1(j)) Order 1998

Bulk Entitlement 7765.2 ML White Swan None None (Yarrowee-White Swan (14.1(e)) 8540 ML Gong (14.1(g)),(14.1(h)) (14.1(k)), System) Conversion 513 ML Kirks (14.1(i)), 14.1(j)) (14.1(l)) Order 2002 225 ML Pincotts 204 ML (14.1(d))

Bulk Entitlement 0 ML 61 ML None None No surface water used (Landsborough/ 12.1(d)) (12.1(c)) (12.1(f)) (12.1(g)) (12.1(j)) (12.1 (k) during 2013/14. System Navarre) Conversion (12.1 (h) now relies on groundwater Order 2003 (12.1(i)) supply.

Bulk Entitlement 23.97 ML 65.8 ML None (12.1(e)) None (12.1(i)) (Lexton) Conversion (12.1(c)) (12.1(b)) (12.1(f)) (12.1(j)) Order 2004 (12.1(g)) (12.1 (h)

Bulk Entitlement 3.9 ML 3.4 ML None None Some groundwater was (Redbank) Conversion (12.1(d)) (12.1(c)) (12.1(f)) (12.1(g)) (12.1(j)) (12.1(k)) added to the reservoir Order 2003 (12.1(h)) during 2013/14. System (12.1(i)) is now largely reliant on groundwater supply.

16 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Bulk Entitlement Annual Volume remaining Transfers of BE Failures or Comment (*) Order amount in reservoirs or to supply difficulties with taken from at 30 June 2014 (*) system, complying with specified amendments, requirements point(s) new entitlements of BE (*) under or credits (*) Order (*)

Bulk Entitlement (Avoca) 78.3 ML Sugarloaf None None (12.1(j)) Conversion Order 2003 12.1(d)) 29 ML 12.1(f)) (12.1(g)) (12.1 (k) (12.1(c)) (12.1 (h) (12.1(i))

Bulk Entitlement 659.7 ML Wombat None None (12.1(i)) (Daylesford-Hepburn 12.1(c)) 351 ML Bullarto 12.1(e) (12.1(j)) Springs) Conversion 104 ML Hepburn 12.1(f)) (12.1(g)) Order 2004 30 ML (12.1 (h) (12.1(b))

Bulk Entitlement 489.6 ML Cosgrave None None (Creswick) Conversion (12.1(c)) 358 ML Russells (12.1(e)) (12.1(f)) (12.1(i)) (12.1(j)) Order 2004 25 ML Dean (12.1(g)) (12.1 (h) 82 ML (12.1(b))

Bulk Entitlement 155.2 ML Musical Gully None None (12.1(j)) Some groundwater was (Beaufort) Conversion 12.1(d)) 166 ML Troys 13 12.1(f)) (12.1(g)) (12.1 (k) added to Musical Gully Order 2005 ML (12.1 (h) Reservoir during 2013/14. (12.1(b)) (12.1(i))

Bulk Entitlement 11.4 ML 40 ML None (12.1(e)) None (12.1(i)) (Amphitheatre) (12.1(c)) (12.1(b)) (12.1(f)) (12.1(g)) (12.1(j)) Conversion Order (12.1 (h) 2003

Bulk Entitlement 0 ML None (12.1(e)) None (12.1(i)) Reservoir remained out of (Skipton) Conversion (12.1(c)) (12.1(f)) (12.1(j)) service during 2013/14. Order 2004 (12.1(g)) (12.1 (h)

Bulk Entitlement 1255.7 ML Not None None Tullaroop Reservoir was (Loddon System – Part (14.1(b)) applicable (14.1(c)) (14.1(e)) (14.1(i)) (14.1(j)) again the main water supply Maryborough – CHW) (14.1(g)) (14.1(h)) source for Maryborough Conversion Order 2005 during 2013/14. A full allocation was available for the Loddon System (14.1(f)).

Bulk Entitlement 1337.2 ML Evansford None None Reflects the total volume of (Evansford-Talbot (17.1(b)) 1049 ML Talbot (17.1(d)) (17.1(f)) (17.1(k)) (17.1(l)) water taken for System – Part 418 ML Centenary (17.1(g)) (17.1(h)) Maryborough (i.e. volume Maryborough – CHW) 168 ML (17.1(i)) leaving Centenary Reservoir Conversion Order (17.1(c)) (17.1(j)) less any groundwater into 2006 Centenary Reservoir).

Bulk Entitlement 121.1 ML Not applicable None Not applicable A full allocation was (Bullarook System- (12.1(b)) (12.1(f)) (12.1(g)) (12.1(h)) (12.1(i)) available for the Bullarook CHW) Conversion and Loddon systems in Order 2009 2013/14.

*Note: The numbers in brackets refer to the relevant clause of the Bulk Entitlement Order

2013/14 ANNUAL REPORT 17 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY GREENHOUSE GAS EMISSIONS

Central Highlands Water produces greenhouse emissions nitrous oxide emissions from wastewater treatment and from activities such as electricity use for pumping, water and carbon dioxide from combustion of fuel to provide energy for wastewater treatment and office based facilities; methane and vehicles, generators and diesel pumps.

Scope 1 and 2 greenhouse gas emissions by operational area

ESC performance 2009/10 2010/11 2011/12 2012/13 2013/14 Variance Comments indicator Scope 1 & 2 (tCO2-e) % Water treatment 38566 4238 2932 3148 4268 36 1a and supply Sewerage treatment 10231 12347 9715 9417 10140 8 2a and management Transport 945 1079 1085 1029 928 -10 3a Other 1524 1133 1079 988 950 -4 4a Offsets -15 -15 -15 -15 -15 0 5a Total 51251 18782 14826 14596 16270 11

Central Highlands Water’s greenhouse gas emissions have been assessed in accordance with the National Greenhouse Accounts (NGA) Factors July 2013, National Greenhouse and Energy Reporting System Measurement −Technical Guidelines, July 2013 and National Greenhouse and Energy Reporting (Measurement) Determination June 2008. 1a Relative to last year, emissions have risen due to increased use of the 4a During 2013-14 land use change has resulted in an incremental increase of Cosgrave and Daylesford Rd raw water pump stations 38 tCO2-e being sequestered in the biomass of trees. 2a An increase of 8% has been reported due to a reduction in the amount of 5a Offsets gained from claiming of Renewable Energy Certificates (RECs) from biogas flared from the digesters at Ballarat South compared to last year Kirks Reservoir Depot Solar Panel System. 3a Fuel emissions have reduced as a result of the installation of solar mixers at Evansford and Sugarloaf Reservoirs and changes to the CHW fleet policy.

Scope 1 and 2 greenhouse gas emissions by emission source

Petrol 0.63% Gas 2.75%

Diesel 2.62% Fugitives 16.09% Electricity 77.84% LPG 0.07%

Energy consumption

ESC performance 2009/10 2010/11 2011/12 2012/13 2013/14 Variance Comments indicator kWh per ML % Water treatment and 3393 829 818 777 764 -2 6a supply Sewerage treatment 841 630 710 778 766 -2 7a and management

6a A minor decrease in the amount of energy consumed per ML of potable 7a A minor decrease in the amount of energy consumed per ML of sewage water delivered has been reported treated delivered has been reported

An internal Energy Efficiency Committee has been established to promote energy awareness and facilitate energy efficiency outcomes through the use of technological and behavioural change. Energy efficiency initiatives undertaken in the reporting • energy efficiency improvement and demand management period include: control at Cosgrave Pump Station • whole of business energy efficiency review • external lighting upgrade at Learmonth Rd office • replacement of diesel fuel aerators with solar mixers at • main office heating and cooling upgrade. Sugarloaf and Evansford reservoirs External reporting on greenhouse gas emissions are • implementation of demand management control systems provided to stakeholders including the Essential Services on the Goldfields Superpipe Commission, Victorian Water Association, Water Services • investigation of demand management opportunities at Lal Association of Australia and the Department of Environment Lal Pump Station and Primary Industries.

18 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX SOCIAL SUSTAINABILITY REPORTING

Value of community service obligations provided

No. applied for Amount granted Amount granted (2013/14) (2013/14) (2012/13)

Rebates and concessions

Pensioner and Health Care Card Concessions 22,371 $4,559,087 $4,416,865

Life Support Rebates 9 $790 $296

Rebate Paid to Not-for-Profit Organisations 1,286 $317,513 $304,203

Hardship relief

Utility Relief Grant Scheme* 285 $113,298 $126,287

CHW Hardship Relief 33 $17,974 $10,113

Water saving

Water Saving Products Rebates 393 $113,003 $59,407

Guaranteed service levels

Customer Charter Rebates 43 $2,150 $14,650

*Customers receive payment for the Utility Relief Grant Scheme directly from the Department of Human Services.

Management of social and Community reference economic impacts committees

During this reporting period, Central Maryborough Water Resource Highlands Water undertook a number Stakeholder Task Group of measures to address the social and economic impacts on customers in This group meets twice a year to: relation to water restrictions, difficulties • discuss with community members with payment of accounts and other and council representatives water circumstances. resource options and projects for the These include: Maryborough and district water supply system, and • promoted Permanent Water Saving Rules (PWSR) throughout the region • to agree on the best forms of communication within the community. • The Complaints Resolution Officer worked with customers throughout The group consists of up to 12 members the year to achieve goals in relation and is chaired by Mr Barry Rinaldi to service delivery. (Central Goldfields Shire Council Mayor). • The Corporation’s Customer The group met on two occasions in Assistance Program (which includes 2013/14 and discussed a wide range of a dedicated Customer Assistance key topics including: Officer) facilitated: • water resources and major – access to State Government project updates concessions • water usage and water quality – referral to a sponsored no-cost financial counselling service • customer and community issues – a large range of payment options surrounding water and wastewater including bill smoothing services, and – access to the Utility Relief • customer and stakeholder Grant Scheme communications. – access to the Water And Sewerage Connection Scheme

2013/14 ANNUAL REPORT 19 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY PART 4 CORPORATE INFORMATION

ORGANISATIONAL STRUCTURE

State Government of Victoria Hon Peter Walsh MLA, Minister for Water

Audit Board of Directors Committee Chair Jeremy Johnson

Managing Director Paul O’Donohue

People and Infrastructure Infrastructure Business Customer and Culture Planning and Delivery Services Community Robyn Clark Operations Warren Jose Anthony O’Brien Graham Holt Jeff Haydon

OH&S Infrastructure Finance and Customer service Sustainability delivery governance People services Network services Water and Capital expenditure Strategic Community Learning and wastewater program procurement engagement and development treatment Business analytics marketing Change Water resources ICT Land development management Laboratory People strategy Major project planning

20 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX CORPORATE GOVERNANCE

Role of the Board The Audit Committee Charter is a Sustainability Committee regulatory requirement that outlines the The Board sets the strategic directions, parameters and framework in place to The function of the Sustainability policies and goals for the business and ensure the Audit Committee is fulfilling Committee is to ensure that the Board management. It comprises six directors, its corporate governance responsibilities maintains a focus on sustainability a chair and a managing director. including but not limited to those throughout its policies, operations and The chair and directors are appointed outlined in the Standing Directions of service delivery. This includes the broad by the Minister for Water. The managing the Minister for Finance under the areas of: director is appointed by the Board. Financial Management Act 1994. • resource sustainability • water efficiency Membership • climate change response Board meetings The Audit Committee comprises at • catchment management and Board meetings are scheduled least three independent non-executive biodiversity bi-monthly in February, April, June, directors − and may include one August, October and December. independent external member – with • energy and waste management. Minutes of meetings record Board diverse and complementary backgrounds. This will be achieved through: decisions and are available on the Each member should have a working • Maintaining, by holding quarterly Corporation’s website. knowledge of finance and accounting meetings, open lines of practices, compliance and or risk communication among the Board, management practices and be capable and key stakeholders to exchange Audit Committee of making a valuable contribution to the views and information, and confirm The Audit Committee supports the Committee. At least one member must their respective authorities and Board in fulfilling its responsibilities of have appropriate expertise in financial responsibilities. sound corporate governance and in accounting or auditing. the reporting practices of Central • Oversight of the Corporation’s Appropriate expertise being defined as Highlands Water. sustainability framework. one or a combination of the following: The Committee also: • Providing thought leadership into • relevant past employment experience policy development of the Board. • Oversees and appraises the scope in an accounting profession; • Making recommendations consistent and quality of the audits conducted • requisite professional qualification in by internal and external auditors. with the strategic plan to the Board accounting; or to assist the advancement of Central • Maintains, by holding quarterly • comparable experience with financial Highlands Water’s integration of the meetings, open lines of oversight responsibilities. sustainability management principles communication among the Board, into the performance of the internal auditors and the external Membership from Oct 2013-Dec 2014 Corporation’s functions, powers auditors to exchange views and Stewart Howe (Chair) and duties. information, and confirm their Gaye Mason respective authorities and The committee will annually review its Michael Myers responsibilities. sustainability framework (principles, objectives, key programs), its work plan • Serves as an independent and and annual calendar. objective party to review the reliability and integrity of financial information. Membership from Oct 2013-Dec 2014 • Determines the adequacy of Central Ian Coles (Chair) Highlands Water’s administrative, Stewart Howe operating and accounting controls. Jo Plummer • Identifies and monitors systems for reporting operating risks, with the aim of minimising them.

2013/14 ANNUAL REPORT 21 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY

People, Culture and Customer and Community • Feedback on community satisfaction Safety Committee Partnerships Committee with the current level of service performance. The role of the People, Culture and The Customer and Community • Strategic focus on being proactive in Safety Committee is to assist the Board Partnerships Committee (CCPC) was mitigating possible arising problems to fulfil its governance responsibilities in established as a Board sub-committee within the community. relation to organisational development in November 2013. It ensures Central and employee related activities including Highlands Water is informed of issues • Ensure an appropriate level of safety and wellbeing. that impact customers and their consideration is given to identifying and implementing policies and The People, Culture and Safety perceptions of the organisation. processes to provide better service Committee will: The Committee will provide the to our customers and community. • Review the strategies and policies to Corporation with: attract, retain, develop and provide • A link between the Board and its • Maintain a forum that emphasises a succession plans so that the customer base so it is responsive to strategic, whole of business focus to Corporation has the highest quality customer’s needs and concerns. customer perception. staff to allow it to maintain and • Strategic opportunities to develop • Board awareness of local priorities, enhance its performance. positive community engagement perspective, values and issues. • Ensure that an OH&S management and perceptions. Membership from Oct 2013-Dec 2014 system within the organisation is • A mechanism to receive feedback on being proactively managed so that it concerns, issues and possible Jo Plummer (Chair) is a safe workplace and key solutions from the perspective of the Michael Myers performance indicators are being met various interest groups and to identify Gaye Mason and over time improved. the trends in customer service. • Manage and monitor all related • Access to valuable local community polices to ensure they meet the Performance appraisals and consumer perceptions. relevant mandatory and statutory Performance appraisals are conducted • A connection between the Corporate obligations as well as the Public annually. Sector Code of Conduct. Plan and our customers to ensure the services provided reflect the They provide an objective evaluation • Ensure executive remuneration, needs and expectations of of the performance of the Board and performance management, review customers and the community. its members. processes and performance bonuses fall within Government Sector Executive Remuneration Panel Remuneration Policy parameters. • Ensure that Central Highlands Water has established relevant industry Board member meeting attendance benchmarks appropriate for the Board member Number of meetings attended employment conditions and a 1 July 2013 – 30 June 2014 competitive remuneration structure. • Monitor trends in relevant strategic Jeremy Johnson (Chair) 6 of 7 employment indicators. Richard Nicholson (Deputy Chair) 6 of 7 • Review and endorse the People and Culture Strategy and action plans. Paul O’Donohue (Managing Director) 6 of 7 • Review and receive relevant audit Ian Coles 6 of 7 reports and monitor the progress Stewart Howe 7 of 7 and effectiveness of remedial actions arising. Jo Plummer 7 of 7

Membership from Oct 2013-Dec 2014 Gaye Mason 6 of 7 Richard Nicholson (Chair) Michael Myers* 6 of 6 Ian Coles Jeremy Johnson * Commenced Board appointment 1 October 2013

22 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX BOARD OF DIRECTORS

Jeremy Stewart Howe, Gaye Mason, Johnson, Chair Director Director Dip (BusSt) BEng (Chem), BBus (Acc), Jeremy is the M (AppFin), GradDip Chief Executive FAICD, FFin, (AppInfSys), Officer of FAusIMM (CP) GradDip Sovereign Hill, Ballarat. He is Honorary Stewart has 30 years’ experience in (AppCorpGov), Treasurer of the Council of Australasian the global oil, gas and mining sectors MBA, FAICD, FCPA, AGIA/ACSA Museum Directors, past President of in executive management, operations, Gaye is a board member of the the Board and Executive Council of the mergers and acquisitions and Southern Metropolitan Cemeteries Trust, Victorian Employers’ Chamber of restructuring roles. His career with BP an independent member of the Audit Commerce and Industry and Chairman and Zinifex included direction of major and Risk Committees for the Victorian of the Victoria Tourism Industry Council. investment programs to develop long Departments of Health and Justice and In 2011 he was awarded an Honorary life natural resource assets, plus she chairs the Audit and Risk committee Doctorate by the University of Ballarat directorship of a range of subsidiary and at Wyndham City Council. for his services to the business joint venture companies. community. A Justice of the Peace, For the past six years Stewart has run Michael Myers, Jeremy is a qualified Company his own corporate advisory firm, Secretary and Fellow of the Governance directing restructuring initiatives and Director Institute of Australia. investment selection for financiers. He LLB, BCom, holds non-executive advisory roles and MAICD ownership interests in privately owned A solicitor with Richard mining service companies. more than 30 Nicholson, years’ experience, Michael operates a Deputy Chair Jo Plummer, mediation practice. BEng (Hons), Director During his time in the tourism and GAICD hospitality industry he managed and GAICD, MBA, oversaw the re-development of the A director and GradCert (Mgt), Royal Mail Hotel in Dunkeld and the owner of a 100 year old family business Dip (RetailMgt), Victoria Hotel in Port Fairy. in commercial construction, Richard is a Cert IV (TAA) qualified civil engineer with practiced Michael also has extensive experience Jo is owner and Director of Out of the skills in business and financial risk serving on boards at a variety of Box Business Services. This boutique management. education, tourism and welfare-based management and consultancy business community organisations. A Graduate Member of the Australian specialises in assisting organisations, Institute of Company Directors, he is a teams and individuals to think Director and past President of the strategically and operate efficiently. Paul O’Donohue, Sovereign Hill Museums Association (2006-2008). She has a strong commercial Managing background having held product Director development and procurement, Ian Coles, business planning, and strategic design BA (Mgt), Director roles with well-known retail brands for Dip (Ldrshp), over 20 years. She also has previous GradDip (BusMgt), BEng (Hons), experience as a non-executive Director GAICD, FIWA GradDip and Committee Chair in the not-for- Paul is the Managing Director of Central (BusAdmin), profit sector. Highlands Water. Since joining the FAICD organisation in 2003, he has overseen Ian is a consultant and company many key business areas including director with extensive public and major project delivery, strategy, long private sector experience in term planning, communications and management, environmental and account management. sustainability programs and projects. Prior to joining Central Highlands Water, He is a Director of several private sector Paul held senior management positions and government organisations, an in the recreation and hospitality sectors. independent member of EPA and

Victoria’s Risk and Audit Committee.

2013/14 ANNUAL REPORT 23 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY EXECUTIVE TEAM

Jeff Haydon, General Manager systems, policies and procedures in Network services relation to provision of new water and Infrastructure Planning • manage the sewerage and wastewater infrastructure. It also provides water network and Operations governance, leadership and oversight of • management of all sewerage and This division comprises the following the capital expenditure program. water pumping stations sections and services. • capital investment projects Sustainability Anthony O’Brien, General Manager • maintenance programs Protect source water quality through the Business Services • faults and emergency response management of our surface water catchments and aquifers; care for and The division comprises the following • non revenue water functions and services: protect our natural assets, including Community engagement biodiversity and ecological systems; Finance and governance and marketing maximise the beneficial reuse of biosolids Responsible for ensuring that the and reclaimed water; and implement Responsible for external and internal financial and accounting operations, programs to account for and reduce communication via newsletters, media, functions and obligations of the business water consumption, waste generation internet and announcements relating to are managed according to applicable and greenhouse gas emissions. the provision of water and wastewater. standards and regulations with a strong Includes regular water resource updates Water and wastewater treatment focus on efficiency. Delivering the and general information on key projects Provision of safe drinking water, meeting governance framework including audit and activities. The customer survey Department of Health requirements; support, insurance, risk management, program is also a key role of this team, sustainable return to the environment of business continuity and compliance. gaining a clear understanding of our treated wastewater meeting EPA Information communications customer needs through our community corporate licence and water quality technology (ICT) engagement program. compliance and reporting. Delivering ICT services and support to Land development Water resources drive improved customer engagement Manage and process requirements Hydrologic monitoring; headwork and business efficiency. relating to subdivision and special land operations and dam safety; system Strategic procurement use requests in relation to water and water resource modelling; and wastewater services. management of groundwater licences Driving efficient commercial procurement and bulk entitlements. outcomes targeted to specific business needs and market offering and managing Robyn Clark, Executive Manager Laboratory the governance framework around People and Culture Delivering a comprehensive chemical procurement policies and practices. and microbiological analysis and Business analytics The People and Culture team partners sampling regime while maintaining with the business to enable a National Association of Testing Management and monitoring of all collaborative, safe and fair workplace. business performance indicators both Authorities accreditation to support our The team guides the way Central water and wastewater operations. regulatory and non-regulatory. Delivering KPI reporting to the Board and Highlands Water people are appointed, Major project planning management team to improve resource retained, developed, transitioned and Network modelling, options assessment allocation and business decision-making. treated. It comprises the following and infrastructure master planning and services: • people safety (OH&S) concept designs for major infrastructure Graham Holt, General Manager projects including the preparation of • employee support/employee development servicing plans. Prepare Customer and Community benefits drought response plans and long-term This division comprises the following • employee relations advice water supply demand strategy of each functions and services: water supply system. Management of • management support the annual and long-term organisational Customer service • people services capital works program. • manage all customer enquiries • learning and development • meter reading, billing and collection • people policy and governance Warren Jose, General Manager • debt management frameworks Infrastructure Delivery • hardship support • workforce reporting The Infrastructure Delivery Division • trade waste management • change management develops and maintains strategies, • key account management • people strategies

24 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX EMPLOYMENT DATA

Employment and expectation that all people who interact reply and providing employees show conduct principles with Central Highlands Water (internally cause opportunities. and externally) have a right to be Central Highlands Water provides Central Highlands Water is committed treated at all times in a manner which employees with a number of avenues of to treating its people fairly, and demonstrates the Victorian public redress against unfair or unreasonable executing reasonable management sector values. treatment including: action. With the establishment of the All people procedures and practices People, Culture and Safety Committee • Discussing concerns openly and flowing on from this overarching Our and the appointment of an Executive honestly with the person causing or People policy and Code of Conduct Manager of People and Culture during contributing to their grievance/ policy uphold and enshrine the public the 2013/14 period, the Corporation dissatisfaction. sector values and the public sector has reviewed its people policies • Raising the concern to one of the employment principles. Practical facilitating the Board approval of Our Corporation’s contact officers. examples of this follow. People policy; Code of Conduct policy • Raising the matter with the newly and the OH&S policy in June 2014. Central Highlands Water’s recruitment created position of employee procedure and recruitment tools enable The purpose of the Our People policy advocate within the People and merit based selection decisions and in is to articulate a set of principles to Culture team. the 2013/2014 period, no selection guide the way people are appointed, grievances were lodged. • Raising the matter with his or her line retained, developed, transitioned and manager or general manager. The Corporation’s recruitment treated as employees. It also provides • Facilitated discussions and mediation an overview of what people can expect procedure also articulates the process if deemed appropriate. of their employment experience and for lodging a grievance should a what is expected of people to ensure person be dissatisfied with the Through its on-boarding processes, Central Highlands Water continues selection outcome. Central Highlands Water continues to provide: to provide high quality services to During the reporting period the its customers. Corporation strengthened its • copies of the Victorian Public The purpose of the Code of Conduct management practice relating to Sector Code of Conduct booklet as policy is to promote acceptable and managing unsatisfactory performance part of each new employee’s pre- respectful standards of behaviour in and behaviour, by focusing on employment information pack, and dealings with its people, colleagues and procedural fairness; the principles • two-hour employee education customers. This policy articulates the of natural justice; including right of sessions each quarter.

Staff numbers 2013/14 Staff numbers 2012/13

Division Total full-time equivalent Division Total full-time equivalent

Administration officer 112.13 Administration officer 110.99

Executive officer 6.00 Executive officer 6.00

Field staff 46.00 Field staff 48.00

Senior manager 12.00 Senior manager 12.00

Total 176.13 Total 176.99

Gender participation

2013/14 2012/13

Female employees 33% 33%

Male employees 67% 67%

2013/14 ANNUAL REPORT 25 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY HEALTH AND SAFETY REPORTING

OH&S governance and staff representation • The Corporation’s employer performance rating has risen significantly from 1.35 last year to 2.25 this year. The The 2013/14 year has been one of strengthening safety employer performance rating is based on the past 2.5 years leadership and governance within the organisation with the of WorkCover claims data. Initiatives detailed in the OH&S following key achievements completed: Strategy 2014-16 detailed below will help to drive the • Appointment of a new People and Culture Executive score down below the target of 1. The high claims costs in Manager bringing strong support and passion to the 2011/12 ($417,349) and 2012/13 ($304,191) are the main management of OH&S throughout the organisation. reason for the current rating. The rating will reduce • Secondment of an additional OH&S Officer for six months gradually over time as the claim costs for the previous to assist in strengthening the OH&S management system years are no longer included in the equation. If the claims and to accelerate our safety audit program. costs for 2014/15 are equal to or lower than the costs of this year ($101,777) the rating will reduce significantly. • A new People, Culture and Safety Board Committee established. • Additional OH&S Committee representatives were elected during the year to improve the representation of staff in teams • Review of OH&S governance arrangements including: throughout the organisation. The OH&S Committee now – documented OH&S policy includes 14 staff elected representatives and six management – OH&S Committee’s Terms of Reference representatives. New OH&S Committee members are – OH&S Committee’s key performance indicators. scheduled to participate in training in August 2014. The revised OH&S Committee key performance indicators include a mixture of lead and lag indicators. These KPIs are reported every six weeks at OH&S Committee meetings Preventative programs and injury management and quarterly at People, Culture and Safety Board Central Highlands Water continues to monitor injury trends to Committee meetings. identify additional preventative controls which further reduce Summary of results: the risk of injury to staff throughout the organisation. The following key achievements have occurred in 2013/14: • Despite widespread improvements in 2013/14, Central Highlands Water fell just short of the target Significant • investing in alternative footwear to address slips and trips Injury Frequency Rate (SIFR) of 20, with a score of 21.94. − resulted in no significant injuries in relation to this Although the target was not met, the organisation will • offering on-site physio treatment for pre-existing injuries continue to lower the target for 2014/15 to 17.5 and • strengthened partnership between line managers and introduce new initiatives to reduce injuries to staff. safety specialists Combined SIFR • revision of fatigue management procedures and trial of a new initiative 60 • introduction of annual fit for work assessments as a 50 preventative measure to proactively manage the health

40 of staff

SIFR • improvements in return to work processes and the 30 21.94 treatment of injured staff resulting in improvements in the 20 cost of standard claims and the average number of days lost per LTI 10 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 • OH&S related training session attendance was measured YEAR at 92 per cent for the financial year and significant improvements have been made to the internal OH&S • The average days lost per lost time injury (LTI) improved related training offered to staff significantly in 2013/14 compared to the previous financial year due to an increased focus on strengthening return to • attendance at scheduled health monitoring sessions was work outcomes. 100 per cent for the year with staff attending all 142 sessions scheduled. Average Lost Time Per LTI- Annual Comparison

35 31 30

25

20 15 15 Average Loss 12 10 9 5 5 3 AVERAGE DAYS LOST PER LTI DAYS AVERAGE 0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

YEAR

26 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX ACCESS TO OTHER ACTS AND INFORMATION APPLICABLE POLICIES

Freedom of Information Protected Disclosures Act 2012 Contacts The Freedom of Information Act 1982 The Act was part of a package of Department of Environment and allows public access to documents held integrity reforms introduced by the Primary Industries by government entities. During 2013/14 Victorian Coalition Government, which Jennifer Berensen, Senior Advisor, the Corporation received four valid also established the Independent Privacy & Ombudsman requests for access to documents under Broad-based Anti-corruption Department of Environment the Act. Access in full was granted in Commission (IBAC). and Primary Industries Address: PO Box 500, two cases and no documents were The Act enables people to make found for the other requests. East Melbourne VIC 8002 disclosures about improper conduct Phone: 03 9637 8697 Requests for access to documents within the public sector without fear of Website: www.depi.vic.gov.au under the Freedom of Information Act reprisal. It aims to ensure openness and are to be addressed to: accountability by encouraging people to Independent Broad-Based Anti-Corruption Commission Victoria Freedom of Information Officer make disclosures and protecting them when they do. Address: Level 1, North Tower, Central Highlands Water 459 Collins Street, Melbourne VIC 3001 PO Box 152 What is a protected disclosure? Mail: IBAC, GPO Box 24234, Ballarat VIC 3353 Melbourne VIC 3000 A protected disclosure is a complaint of Website: www.ibac.vic.gov.au Each request must be accompanied by corrupt or improper conduct by a public Phone: 1300 735 135 a $26.50 application fee and clearly officer or a public body. identify the documents sought. General Email: see the website above for the enquiries can be made by contacting Central Highlands Water is a public secure email disclosure process, which the Freedom of Information Officer body for the purposes of the Act. also provides for anonymous disclosures. during business hours on 1800 061 514. What is improper or corrupt conduct? Improper or corrupt conduct involves National Competition Policy Statement of availability of substantial: Competitive neutrality is a guiding other information • mismanagement of public resources; principle of the National Competition Information listed in Financial Reporting or Policy. It requires that government owned businesses should compete Direction 22D of the Financial • risk to public health or safety or the with private sector businesses on the Management Act 1994 is held at environment; or same basis. Central Highlands Water Central Highlands Water’s office in • corruption. Learmonth Rd Wendouree and is has operated in a manner that meets available on request, subject to the The conduct must be criminal in nature the National Competition Policy Freedom of Information Act 1982. or a matter for which an officer could compliance requirements. be dismissed. Building Act 1993 How do I make a protected Victorian Industry Participation disclosure? Central Highlands Water conducts a Policy Disclosures (VIPP) regular program to ensure compliance You can make a protected disclosure During the financial year the following with all relevant provisions of the about Central Highlands Water or its contracts to which a VIPP applied Building Act 1993 in building and board members, officers or employees included: maintenance activities. Any areas of by contacting the Department of • supply and delivery of water and concern are logged and addressed. Environment and Primary Industries waste treatment chemicals (DEPI) or IBAC on the contact details • Musical Gully Dam Upgrade Project provided below. Information Privacy Act 2000 • design and construction on the Please note that Central Highlands Lexton Water Supply Project. The Corporation has to the best of its Water is not able to receive protected knowledge, met its obligations under disclosures. Contracts completed to which a the Information Privacy Act 2000. VIPP applied: How can I access Central Highlands • Musical Gully Dam Upgrade Project Water procedures for the protection • design and construction on the of persons from detrimental action? Lexton Water Supply Project. Central Highlands Water has established procedures for the protection of persons from detrimental action in reprisal for making a protected disclosure about Central Highlands Water or its employees.

2013/14 ANNUAL REPORT 27 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY CONSULTANCY EXPENDITURE

In 2013/14, Central Highlands Water engaged 28 consultancies where the total fees payable were less than $10,000, with a total expenditure of $173,868 (excl. GST).

Consultants costing in excess of $10,000 There were 14 major consultancies engaged in 2013/14, with a total value of $1,637,473.

Consultant Purpose of Start date End date Total Expenditure Future consultancy approved 2013/14 expenditure project fee (excl.GST) (excl.GST) (excl. GST) $’000 $’000 $’000

Aurecon Australia P/L Dam safety movement January 2014 May 2014 17,700 17,700 0 survey

Barwon Computer ICT Penetration Testing May 2014 June 2014 11,100 11,100 0 Solutions

Evolve Information Project Portal Design September 2013 May 2014 51,400 51,363 0 Services Trust and Build

GHD Pty Ltd Engineering services July 2013 June 2014 250,000 211,987 40,000

Gnarwarre Group of Board Performance July 2013 September 2013 25,000 25,012 0 Companies Review

KS Business Asset Survey April 2014 June 2014 25,000 19,408 0 Consulting

MWH Engineering Services July 2013 June 2014 1,200,000 872,932 324,000

Price Waterhouse Business Efficiency July 2013 December 2013 280,000 292,722 0 Coopers Improvement Program

Projects on the Road Town Planning May 2014 October 2014 37,500 15,507 21,993

RMCG Environmental September 2013 January 2014 19,700 17,909 0 Improvement Plan

SMEC Victoria P/L Emergency response July 2013 June 2014 15,000 14,609 0

Justin Templar Application July 2013 February 2014 22,985 26,245 0 development

The Humphreys Group Strategic Planning September 2013 June 2014 20,000 20,830 0

Yabbie Pond Pty Ltd DoH Compliance July 2013 Jan 2014 40,000 40,150 0 Reporting

Note: The definition of consultancy was updated on 1 July 2013, and consequently, disclosures on consultancy expenditure for 2013/14 cannot be compared to previous years.

28 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX MAJOR WORKS

Central Highlands Water did not award any major contracts valued at $10 million or more in 2013/14.

Risk attestation I, Jeremy Johnson certify that Central Highlands Water has risk management processes in place consistent with the Australian/New Zealand Risk Management Standard ISO31000:2009 and an internal control system in place that enables the Executive to understand, manage and satisfactorily control risk exposures. The Audit Committee verifies this assurance and that the high and extreme risks of Central Highlands Water have been reviewed within the last 12 months.

Jeremy Johnson Chair 26 August 2014

2013/14 ANNUAL REPORT 29 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY PART 5 PERFORMANCE REPORT

STATEMENT OF PERFORMANCE FOR THE 2013/14 FINANCIAL YEAR

Financial performance indicators

KPI Key performance indicator 2012/13 2013/14 2013/14 Variance Notes Variance Notes no. result result target to prior to target year F1 Cash Interest Cover 2.2 2.9 2.4 31.8% 1a 20.8% 1b Net operating cash flows before net interest and tax/net interest payments F2 Gearing Ratio 18.9% 17.9% 19.3% -5.3% 2a -7.3% 2b Total debt (including finance leases) /total assets x 100 F3 Internal Financing Ratio 77.0% 154.6% 97.1% 100.7% 3a 59.2% 3b Net operating cash flow less dividends/net capital expenditure x 100 F4 Current Ratio 1.1 0.8 1.1 -27.3% 4a -27.3% 4b Current assets/current liabilities (excluding long term employee provisions and revenue in advance) F5 Return on Assets 1.9% 2.4% 1.3% 26.3% 5a 84.6% 5b Earnings before net interest and tax/average assets x 100 F6 Return on Equity 0.5% 1.0% -0.1% 100% 6a -1,100% 6b Net profit after tax/average total equity x 100 F7 EBITDA Margin 44.4% 45.5% 38.3% 2.5% 7a 18.8% 7b Earnings before interest, Tax, Depreciation and Amortisation/total revenue x 100

Notes: 1a Favourable variance driven by the improved operating result (12/13 also 4a Unfavourable variance due to roll-over of short-term lending facilities from included superannuation shortfall funding). non-current to current liabilities. 1b Favourable variance driven by the combination of the improved operating 4b Unfavourable variance due to roll-over of short-term lending facilities from result and repayment of some borrowings. non-current to current liabilities. 2a Favourable variance driven by repayment of some borrowings in 13/14. 5a Favourable variance driven by improved operating result. 2b Favourable variance driven by repayment of some borrowings in 13/14. 5b Favourable variance driven by improved operating result (both higher 3a Favourable variance driven by the combination of the improved operating revenue and reduced expenditure). result (12/13 also included superannuation shortfall funding) and a lower 6a Favourable variance driven by improved operating result. capital expenditure program. 6b Favourable variance driven by improved operating result. 3b Favourable variance driven by the combination of the improved operating 7a Favourable variance as a result of improved operating result. result and a lower capital expenditure program. 7b Favourable variance driven by improved operating result (both higher revenue and reduced expenditure).

30 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Water and sewerage service performance indicators

Performance indicator 2012/13 2013/14 2013/14 Variance Notes Variance Notes result result target to prior to target year WS1 Unplanned water supply interruptions 0% 0% 0% 0% 0% No. of customers receiving five unplanned interruptions in the year/total number of water (domestic and non-domestic) customers x 100 WS2 Interruption time (min) 142.2 104 120 -26.9% 8a -13.3% 8b Average duration of unplanned water supply interruptions WS3 Restoration of unplanned water supply 96.4% 97.8% 98.7% 1.5% -0.9% Unplanned water supply interruptions restored within five hours/total unplanned water supply interruptions x 100 SS1 Containment of sewer spills 100% 100% 100% 0% 0% Sewer spills from reticulation and branch sewers contained within five hours/total sewer spills from reticulation and branch sewers SS2 Sewer spills interruptions 100% 100% 100% 0% 0% No. of residential sewerage customers affected by sewerage interruptions restored within five hours

Notes: 8a & 8b Continued emphasis on prompt fault diagnosis and efficient repair has resulted in improved performance during 2013/14.

Customer responsiveness performance indicators

Performance indicator 2012/13 2013/14 2013/14 Variance Notes Variance Notes result result target to prior to target year CR1 Water quality complaints 0.39 0.32 0.60 -17.9% 10a -46.7% 10b (No. of complaints per 100 customers) CR2 Sewerage service quality complaints 0.00 0.00 0.02 0% -100% 9b (No. of complaints per 100 customers) CR3 Sewage odour complaints 0.01 0.02 0.05 100% 11a -60% 11b (No. of complaints per 100 customers) CR4 Billing complaints 0.08 0.02 0.10 -75% 12a -80% 12b (No. of complaints per 100 customers)

Notes: 9b CHW only recorded one complaint relating to sewerage service quality 11a & 11b CHW experienced 10 complaints relating to sewage odour during during 2013/14 and remained favourable to the internal target level. 2013/14. This was a slight increase from the previous year where 10a & 10b During 2012/13 CHW implemented a denitrification program in the seven complaints were recorded although there were no obvious Ballarat and district water supply system from February through to trends in the increase. The result is well within the 2013/14 target. June of 2013. This led to a small increase in the number of water 12a & 12b Billing complaints for 2013/14 were significantly down on the quality complaints received due to customers experiencing a slight 2012/13 result. During the past 12 months, CHW has focused on difference in taste and odour. Water quality complaints received innovative assistance programs for customers to manage payment during 2013/14 remained favourable to the internal target level. difficulties. The result for 2013/14 has met the target required.

Environmental performance indicators

Performance indicator 2012/13 2013/14 2013/14 Variance Notes Variance Notes result result target to prior to target year E1 Effluent re-use volume (end use) 18.4% 15.7% 17.6% -14.7% 13a -10.8% 13b E2 Net tonnes Co2 equivalent 14,596 16,270 < 45,000 11.5% 14a -63.8% 14b

Notes: 13a During 2013/14 Central Highlands Water’s wastewater facilities received 14a Increase in emissions due to higher volumes of raw water being pumped less influent than in 2012/13. All wastewater received was treated to an to reservoirs. An ongoing energy efficiency improvement program across appropriate standard for either beneficial reuse or return to the environment. Central Highlands Water’s operations is focused on reducing energy 13b Effluent volume was less than target. Eleven out of thirteen wastewater consumption and associated greenhouse gas emissions. treatment plants recycled 100% of available effluent. Central Highlands 14b Optimised use of local water resources. Water is seeking to identify additional recycled water opportunities for the remaining two wastewater treatment plants.

2013/14 ANNUAL REPORT 31 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY STATUTORY CERTIFICATION

We certify that the accompanying Performance Report of Central Highlands Region Water Corporation in respect of the 2013/14 financial year is presented fairly in accordance with the Financial Management Act 1994. The report outlines the relevant performance indicators for the financial year as determined by the Minister for Water and as set out in the 2013/14 Corporate Plan, the actual and comparative results achieved for the financial year against pre-determined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets and/or between the actual results in the current year and the previous year. As at the date of signing, we are not aware of any circumstance which would render any particulars in the Performance Report to be misleading or inaccurate.

Jeremy Johnson Chair

Paul O’Donohue Managing Director

Dated this 26th day of August 2014

32 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX OBJECTIVES AND PERFORMANCE REPORT

Water Plan 3 Government policy reform Business efficiency The Essential Services Commission Government policy relevant to the improvement program provided its final determination for the operations and future development of Central Highlands Water has worked for third regulatory period in June 2013. the water sector further matured during many years to develop a culture of This five-year period is referred to as the year and a number of policy creating efficiencies and building Water Plan 3 (2013-18). announcements were made. productivity through several major Central Highlands Water’s plan had the These actions reflect an ambitious initiatives. In 2013 we commenced a key objective to essentially transition the reform agenda to reposition the Business Efficiency Improvement organisation following the unique Victorian urban water sector to one of Program, focusing on initiatives to business pressures as a result of increasing productivity while embracing deliver an improved customer responding to the challenges of the the government’s new whole-of-water- experience and/or efficiencies. Millennium Drought during the 1998- cycle management approach through During the year the business 2010 period. the Living Victoria policy. implemented a number of customer The year 2013/14 represented the first The reforms most relevant to Central experience initiatives including: year of the Water Plan 3 period. Key Highlands Water include: • SMS bill reminders outcomes were as follows: • Securing Victoria’s economy to • bill smoothing options for customers • Tariff reform to provide pricing relief ensure the water industry is focused • Dial Before You Dig for large families by reducing the on providing value for money services. • streamlined processing of consent number of volumetric pricing tiers • Water law reform which is a applications from three to two and increasing the comprehensive review of Victoria’s threshold of the first tier from 150 kL water laws in order to deliver a Each of these initiatives has met with p.a. to 175 kL p.a. This has resulted streamlined and effective legislative favourable feedback from our customers in lower volumetric water prices for framework for water management in terms of improved engagement, more many customers. and use in Victoria. flexibility and quicker responses in their • Minimal price increases to ease • Plan Melbourne which recognises dealings with us. pricing pressure on customers. In development in the Ballarat West In addition the key efficiency fact a real price increase of just 1.1 growth area and the importance of initiatives included: per cent plus CPI was granted for the Ballarat growth corridor. • Re-alignment of a major service the total of the five year regulatory • Central Highlands Regional contract to deliver operational period. The Fairer Water Bills initiative Growth Plan supports the ‘state of efficiencies. has since resulted in a 20 per cent cities’ approach identified in Plan • Electricity contract demand re-sets reduction in the fixed water access Melbourne which aims to coordinate fee effective 1 July 2014. on major energy-using sites for growth across local regional optimal energy tariffs. • Reduction in long-term debt in municipalities. order to return the business to a • Reservoir solar water mixers • Fairer Water Bills initiative which replacing diesel-powered reservoir more sustainable financial basis and has the aim of lowering household mixers across a number of sites to reduce long-term pressure on bills as a result of water corporations eliminate greenhouse gas emissions. customer prices. delivering efficiencies and system- • Capital expenditure program to wide cost reductions. • Introduction of a consultancy panel to drive greater alignment and return to ‘business-as-usual’ • Regulatory review which has a consolidation of our spend. following the record investment levels focus on identifying opportunities to undertaken during the Water Plan 2 improve the regulatory framework These initiatives helped restrain period to ensure customer service beyond the current period. cost growth and contributed to the levels are maintained. strong financial performance delivered • Office of Living Victoria with the continuation of the Living Ballarat in 2013/14. project features collaboration Further initiatives will be introduced between local stakeholders and the during 2014/15 as we continue to drive OLV in the development of a whole- customer improvements and efficiency of-water-cycle management gains which will be used to reduce debt framework for the Ballarat region. and lower prices for our customers.

2013/14 ANNUAL REPORT 33 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY VAGO REPORT

34 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

2013/14 ANNUAL REPORT 35 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY PART 6 FINANCIAL STATEMENTS

COMPREHENSIVE OPERATING STATEMENT FOR THE PERIOD ENDED 30 JUNE 2014

Note 2014 2013 $'000 $'000 Revenue Service charges 1.2, 3 55,867 52,691 Usage charges 1.2, 3 23,892 23,293 Government grants and contributions 1.2, 3 700 1,205 Developer contributions 1.2, 3 1,741 2,037 Interest 289 278 82,489 79,504 Income from non-operating activities Developer contributions 3 7,380 7,247 Net Gain/(Loss) on disposal of non-current assets 3 (727) (1,173) Other income 3 4,680 4,562 11,333 10,636 Total Income 93,822 90,140

Expenses Interest Expenses 1.3, 3 (12,135) (12,154) Depreciation 1.3, 3 (19,414) (18,249) Amortisation 1.3, 3 (837) (4,057) Employee benefits 1.10, 3 (18,874) (17,305) BOOT Tolls 1.3, 1.12 (8,545) (8,739) Contractors & Materials 1.3 (13,146) (14,622) Utilities 1.3 (2,946) (2,950) Environmental Contributions 1.3 (3,123) (1,995) Other expenses 1.3, 3 (4,470) (4,529)

Total Expenses (83,490) (84,600)

Net Result before tax 10,332 5,540 Income Tax (expense)/revenue 4 (3,111) (1,677)

Net result after tax 7,221 3,863

Other comprehensive income - -

Comprehensive result 7,221 3,863

The above Comprehensive Operating Statement should be read in conjunction with the notes to the financial statements.

36 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX BALANCE SHEET AS AT 30 JUNE 2014

Note 2014 2013 $'000 $'000 ASSETS Current Assets Cash and cash equivalents 1.6, 2, 5 6,293 6,891 Receivables 1.7, 6 22,149 22,023 Inventories 1.8 548 502 Prepayments 1.17 545 397 Total Current Assets 29,535 29,813

Non Current Assets Receivables 1.7, 6 202 211 Biological Assets 1.11, 7 5,600 5,616 Infrastructure, Property, Plant & Equipment 1.4, 1.19, 8 880,871 878,929 Intangible assets 1.21, 9 33,888 33,482

Total Non Current Assets 920,561 918,238

Total Assets 950,096 948,051

LIABILITIES Current Liabilities Payables 1.9, 10, 20 9,132 8,672 Borrowings 1.22, 11 21,518 14,346 Employee benefits 1.10, 12 4,335 4,070 Total Current Liabilities 34,985 27,088

Non Current Liabilities Borrowings 1.22, 11 148,734 165,252 Employee benefits 1.10, 12 560 225 Net Deferred Tax Liabilities 1.14, 13 23,430 20,319 Total Non Current Liabilities 172,724 185,796

Total Liabilities 207,709 212,884

Net Assets 742,387 735,167

EQUITY Contributed Capital 1.18 358,241 358,241 Reserves 14 88,722 88,722 Accumulated surplus 295,424 288,204 Total Equity 742,387 735,167

The above Balance Sheet should be read in conjunction with the notes to the financial statements.

2013/14 ANNUAL REPORT 37 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY STATEMENT OF CHANGES IN EQUITY FOR THE REPORTING PERIOD ENDED 30 JUNE 2014

Note Contributed Reserves Accumulated Total Capital Funds $'000 $’000 $'000 $’000

Balance at 1 July 2012 357,491 88,722 284,341 730,553

Total comprehensive income/(loss) for the year - - 3,863 3,863

Transactions with the State in its capacity as owner:

Equity Contributions 750 - - 750

Balance at 30 June 2013 358,241 88,722 288,204 735,166

Total comprehensive income/(loss) for the year - - 7,221 7,221

Transactions with the State in its capacity as owner:

Equity Contributions - - - -

Balance at 30 June 2014 358,241 88,722 295,425 742,387

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

38 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX CASH FLOW STATEMENT FOR THE REPORTING PERIOD ENDED 30 JUNE 2014

Note 2014 2013 $'000 $'000

Cash Flows from Operating Activities

Receipts

Service and usage charges 79,214 74,676

Interest received 296 278

GST received from the Australian Taxation Office 1.16 4,590 5,152

Developer contributions 1,741 2,037

Other receipts 5,501 5,168

Government Grants and Contributions 450 1,205

Payments

Payments to suppliers and employees (inclusive of GST) (50,767) (58,216)

Interest and other costs of finance paid (12,862) (12,981)

Environmental contributions levy paid (3,788) (1,995)

Net Cash (outflow)/inflow from Operating Activities 19 24,375 15,324

Cash Flows from Investing Activities

Proceeds from sale of infrastructure, property, plant & equipment 141 186

Payments for purchases of infrastructure, property, plant & equipment (14,863) (19,897)

Payments for Intangible Assets (904) -

Net Cash (outflow)/inflow from Investing Activities (15,626) (19,711)

Cash Flows from Financing Activities

Repayments of borrowings (9,346) (4,190)

Proceeds from borrowings - 12,000

Government Equity Contributions 1.2 - 750

Net Cash (outflow)/inflow from Financing Activities (9,346) 8,560

Net increase/(decrease) in cash and cash equivalents (598) 4,172

Cash and cash equivalents at the beginning of the financial year 6,892 2,719

Cash and cash equivalents at the end of the financial year 5 6,294 6,891

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

2013/14 ANNUAL REPORT 39 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note: Note 1: Summary of significant accounting policies 1 Summary of significant accounting policies 1.1 Basis of Accounting 2 Financial Risk Management Objectives and Policies General 3 Comprehensive Operating Statement Disclosures The financial report includes separate financial statements for 4 Income Tax Central Highlands Region Water Corporation (CHW, the 5 Cash and Cash Equivalents Corporation) as an individual reporting entity. 6 Receivables This general purpose financial report consists of a Comprehensive Operating Statement, Balance Sheet, 7 Biological Assets Statement of Changes in Equity, Cash Flow Statement and 8 Infrastructure, Property, Plant and Equipment notes accompanying these statements. The general purpose 9 Intangible Assets financial report has been prepared in accordance with Australian Accounting Standards (AASs), Interpretations and 10 Payables other authoritative pronouncements of the Australian 11 Interest Bearing Liabilities Accounting Standards Board (AASB), and the requirements of the Financial Management Act (1994) and applicable 12 Employee Benefits Ministerial Directions. 13 Deferred Tax The Corporation is a not for profit entity for the purpose of 14 Reserves preparing the financial statements. 15 Commitments for Expenditure Where appropriate, those AASs paragraphs applicable to not- 16 Contingent Liabilities and Contingent Assets for-profit entities have been applied. 17 Superannuation The accrual basis of accounting has been applied in the preparation of this financial report whereby assets, liabilities, 18 Responsible Persons and Executive Officer Disclosures equity, income and expenses are recognised in the reporting 19 Cash Flow Information period to which they relate, regardless of when cash is received or paid. 20 Financial Instruments The annual financial report was authorised for issue by the 21 Events Occurring After Balance Date Board on 26 August 2014. 22 Jointly Controlled Assets The principal address is 7 Learmonth Road, Wendouree VIC 3355. Accounting policies Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. Unless otherwise stated, all accounting policies applied are consistent with those of the prior year. Where appropriate, comparative figures have been amended to align with current presentation and disclosure. Functional and presentation currency Items included in this financial report are measured using the currency of the primary economic environment in which the Corporation operates (‘the functional currency’). The financial report is presented in Australian dollars, which is the Corporation’s functional and presentation currency. Classification between current and non-current In the determination of whether an asset or liability is current or non-current, consideration is given to the time when each asset or liability is expected to be realised or paid. The asset or liability is classified as current if it is expected to be turned over within the next twelve months, being CHW’s operational cycle. See Note 1.10 for a variation in relation to employee benefits.

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Rounding However, AASB 13 has predominantly impacted the Unless otherwise stated, amounts in the report have been disclosures of the Corporation. It requires specific disclosures rounded to the nearest thousand dollars. about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in Historical Cost Convention other standards, including AASB 7 Financial Instruments: This financial report has been prepared under the historical Disclosures. cost convention, except for the revaluation of financial assets, The disclosure requirements of AASB 13 apply prospectively certain classes of property, plant and equipment and and need not be applied in comparative information before investment property. first application. Consequently, the 2012‑13 comparatives of Accounting estimates these disclosures have not been provided. The preparation of the financial statements in conformity with AASB 119 Employee benefits AAS’s requires the use of certain accounting estimates that In 2013‑14, the Corporation has applied AASB 119 Employee affect the application of accounting policies and the reported Benefits (September 2011, as amended) and the related amounts of assets, liabilities, income and expenses. Actual consequential amendments for the first time. results may differ from these estimates. It also requires management to exercise its judgement in the process of The revised AASB 119 changes the accounting for defined applying the Corporation’s accounting policies. The most benefit plans and termination benefits. The most significant significant accounting estimates undertaken in the preparation change relates to the accounting for changes in defined of the financial statements relate to: benefit obligation and plan assets. As the current accounting policy is for the Department of Treasury and Finance to • estimation of useful lives recognise and disclose the State’s defined benefit liabilities in • the impairment of assets its financial statements, changes in defined benefit obligations • recognition of deferred tax assets and plan assets will have limited impact on the Corporation. • unearned revenue The revised standard also changes the definition of short‑term • employee entitlements employee benefits. These were previously benefits that were expected to be settled within twelve months after the end of • contingent assets and liabilities the reporting period in which the employees render the • fair value of infrastructure, property, plant and equipment related service, however, short‑term employee benefits are • actuarial assumptions of the defined benefits superannuation now defined as benefits expected to be settled wholly within twelve months after the end of the reporting period in which During the period ended 30 June 2011 a revaluation of assets the employees render the related service. No change has was undertaken across the entire water industry. The asset occurred as a result of these changes. revaluations were taken to account in 2010/11. The review also included a revised set of useful lives for long lived assets. Net gain/(loss) on disposal of non‑financial assets The adoption of these assumptions is being reviewed by a Any gain or loss on the disposal of non‑financial assets is VicWater working group and this work is still in progress as at recognised at the date of disposal and is the difference between 30 June 2014. Accordingly, the Corporation will assess the the proceeds and the carrying value of the asset at the time. findings and adjust the carrying amounts of assets within the next financial year where appropriate. 1.2 Revenue Changes in accounting policies Service and usage charges Subsequent to the 2012/13 reporting period, the following Rate/tariff and service charges are recognised as revenue new and revised Standards have been adopted in the current when levied or determined. period with their financial impact detailed as below. Trade Waste charges are recognised as revenue at the end of AASB 13 Fair Value Measurement the service delivery period. Volume meters are read and AASB 13 establishes a single source of guidance for all fair appropriate charges levied as per the trade waste value measurements. AASB 13 does not change when CHW agreements. The meters are read on a monthly basis with is required to use fair value, but rather provides guidance on accounts sent on a quarterly basis. how to measure fair value under Australian Accounting Water usage charges by measure are recognised as revenue Standards when fair value is required or permitted. The when the water is provided. Meter reading is undertaken Corporation has considered the specific requirements relating progressively during the year. An estimation, calculated by to highest and best use, valuation premise, and principal (or multiplying the number of days since the last reading by each most advantageous) market. The methods, assumptions, customer’s average service usage, is made at the end of each processes and procedures for determining fair value were accounting period in respect of meters which have not been revisited. In light of AASB 13, the Corporation has reviewed read at balance date. the fair value principles as well as its current valuation methodologies in assessing the fair value, and the assessment has not materially changed the fair values recognised.

2013/14 ANNUAL REPORT 41 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Government Grants and Contributions Major depreciation periods used are listed below and are Government grants and contributions are recognised as consistent with the prior year, unless otherwise stated: operating revenue on receipt or when the Corporation obtains Periods control of the contribution and meets certain other criteria as Buildings outlined in AASB 1004, whichever is sooner, and disclosed in - Buildings 20 - 100 years the comprehensive operating statement as government - Leasehold improvements 30 - 66.67 years grants and contributions. However, grants and contributions received from the Victorian State Government, which were Infrastructure Water originally appropriated by the Parliament as additions to net - Storages 40 - 400 years assets or where the Minister for Finance and the Minister for - Distribution network 40 - 150 years Water have indicated are in the nature of owners’ contributions, - Treatment plants 15 - 100 years are accounted for as Equity – Contributed Capital. Infrastructure Waste Water Developer contributions - Distribution network 20 - 150 years - Treatment plants 25 - 100 years Water infrastructure assets built by developers in new land subdivisions are provided to CHW on completion and upon BOOT Assets 44 years acceptance are recognised at their fair value as revenue. Fees Plant and Equipment 3 - 20 years paid by developers to connect new developments to the Intangible Assets Corporation’s existing water supply and sewerage systems - Software 3 - 12 years are recognised as revenue when the contributions are received. Employee benefits Interest and Rents These expenses include all costs related to employment Interest income is recognised as revenue when earned. (other than superannuation which is accounted for separately) Rentals are recognised as income on a straight line basis over including wages and salaries, fringe benefits tax, leave the rental period. entitlements, redundancy payments and WorkCover premiums. 1.3 Expense Recognition Superannuation Interest Expense The amount recognised in the comprehensive operating Borrowing costs are recognised as an expense in the period statement is the employer contributions for members of both in which they are incurred. Borrowing costs include interest defined benefit and defined contribution superannuation plans on bank overdrafts and short-term and long-term borrowings, that are paid or payable during the reporting period. Refer to amortisation of discounts or premiums relating to borrowings, Note 17 for additional superannuation disclosures. amortisation of ancillary costs incurred in connection with the The Department of Treasury and Finance (DTF) in their Annual arrangement of borrowings and finance lease charges. Financial Statements, disclose on behalf of the State as the Depreciation and Amortisation of Non-Current Assets sponsoring employer, the net defined benefit cost related to the members of these plans as an administered liability. Refer All non-current physical assets that have a limited useful to DTF’s Annual Financial Statements for more detailed life are depreciated. Where assets have separate identifiable disclosures in relation to these plans. components that have distinct useful lives and/or residual values, a separate depreciation rate is determined for BOOT Tolls each component. These expenses include costs incurred in operating CHW’s Depreciation is calculated using the straight line basis to water and wastewater treatment plants. allocate their cost or revalued amounts, net of their residual Contractors and Materials values, over their estimated useful lives, commencing from the These expenses include costs incurred in operating and time the asset is held ready for use. The assets residual maintaining CHW’s assets as well as costs incurred for values and useful lives are reviewed, and adjusted if consultants and specialist advice. appropriate, at each balance sheet date. Utilities Intangible assets with finite useful lives are amortised as an expense on a systematic basis (typically straight line) These expenses include amounts made for telephone and commencing from the time the asset is available for use. The electricity costs. amortisation periods are reviewed and adjusted if appropriate at balance date. Intangible assets with indefinite useful lives are not amortised. However, all intangible assets are assessed for impairment annually as outlined in Note 1.4.

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Environmental Contributions Measurement of Non-Current Physical Assets The Water Industry (Environmental Contributions) Act 2004 All non-current physical assets are recognised initially at cost (the Act) amended the Water Industry Act 1994 to make and subsequently measured at fair value less accumulated provision for environmental contributions to be paid by water depreciation and impairment in accordance with the supply authorities. The Act establishes an obligation for requirements of Financial Reporting Direction (FRD) 103E authorities to pay into the consolidated fund annual Non-Financial Physical Assets. contributions for the first period, from 1 October 2004 to 30 Revaluations are conducted in accordance with FRD 103E. June 2008 in accordance with the pre-established schedule Scheduled revaluation is undertaken every five years with an of payments, which sets out the amounts payable by each annual assessment of fair value to determine if it is materially corporation. The contribution period has been extended to different to carrying value. If the difference to carrying value is cover the period 1 July 2012 until 30 June 2016. greater than 10 per cent, a management revaluation is The purpose of the environmental contribution is set out in the undertaken while a movement greater than 40 per cent will Act, and the funding may be used for the purpose of funding normally involve an Approved Valuer (usually the Valuer initiatives that seek to promote the sustainable management General of Victoria) to perform detailed assessment of the fair of water or address water-related initiatives. value. If the movement in fair value since the last revaluation is The Corporation has a statutory obligation to pay an less than or equal to 10 per cent, then no change is made to environmental contribution to the Department of Environment carrying amounts. and Primary Industries. This contribution is recognised as an Plant, equipment and motor vehicles are measured at fair expense during the reporting period as incurred. value. For the plant, equipment and vehicles asset class, Other Expenses where the Corporation is able to demonstrate that there is no evidence that a reliable market-based fair value (or other fair These costs generally represent other operating costs incurred value indicators) exist for these assets, depreciated during the course of normal operations. Supplies and services replacement cost is used to represent a reasonable costs are recognised as an expense in the reporting period in approximation of fair value. which they are incurred. The carrying amounts of any inventories held for distribution are expensed when distributed. Water infrastructure assets are measured at fair value less accumulated depreciation and impairment in accordance with 1.4 Infrastructure assets, property, plant and equipment FRD 103E. These assets comprise substructures or Recognition of Non-current Physical Assets underlying systems held to facilitate harvesting, storage, treatment and transfer of water to meet customer needs. Infrastructure, property, plant and equipment represent non- They also include infrastructure assets that underlie sewage current assets comprising land, buildings, leasehold and drainage systems. improvements, water, sewer and drainage infrastructure, plant, equipment and motor vehicles used by CHW in its The initial fair value assessment for water infrastructure in the operations. Items with a cost or value in excess of $1,000 year ended 30 June 2011 was undertaken with involvement and a useful life of more than one year are recognised as an from the Valuer General of Victoria (VGV) and under the asset. All other assets acquired are expensed. instructions of the Department of Treasury and Finance (DTF). The assessment was performed on a portfolio basis for Where assets are constructed by the Corporation, the cost at various categories of water infrastructures. which they are recorded includes an appropriate share of fixed and variable overheads. Revaluation of Non-Current Physical Assets Acquisition Revaluation increments are credited directly to equity in the revaluation reserve, except that, to the extent that an The purchase method of accounting is used for all increment reverses a revaluation decrement in respect of that acquisitions of assets, regardless of whether equity same class of assets previously recognised as an expense in instruments or other assets are acquired. Cost is measured determining the net result, the increment is recognised as as the fair value of the assets given or liabilities incurred or other comprehensive income in determining the net result. assumed at the date of exchange plus costs directly attributable to the acquisition. Where assets are constructed Revaluation decrements are recognised immediately as by CHW, the cost at which they are recorded includes an an expense in the net result, except that, to the extent that appropriate share of fixed and variable overheads. Assets a credit balance exists in the revaluation reserve in respect acquired at no cost or for nominal consideration by CHW are of the same class of assets, they are debited to the recognised at fair value at the date of acquisition. revaluation reserve. Repairs and Maintenance Revaluation increases and revaluation decreases relating to individual assets within a class of property, plant and Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Where the repair relates to the equipment are offset against one another within that class but replacement of a component of an asset and the cost are not offset in respect of assets in different classes. exceeds the capitalisation threshold, the cost is capitalised Revaluation reserves are not transferred to accumulated funds and depreciated. on derecognition of the relevant asset.

2013/14 ANNUAL REPORT 43 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Impairment of Assets 1.6 Cash and Cash Equivalents Intangible assets with indefinite useful lives are tested annually Cash and cash equivalents include cash on hand, deposits as to whether their carrying value exceeds their recoverable held at call with financial institutions, other short-term, highly amount. All other assets are assessed annually for indicators liquid investments with original maturities of three months or of impairment, except for; less that are readily convertible to known amounts of cash - inventories; and which are subject to insignificant risk of changes in value, and bank overdrafts. - deferred tax assets; - financial instrument assets; and 1.7 Receivables - certain biological assets related to agricultural activity. Trade receivables are recognised initially at fair value and If there is an indication of impairment, the assets concerned subsequently measured at amortised cost, less an allowance are tested as to whether their carrying value exceeds their for impaired receivables. Trade receivables are due for recoverable amount. Where an asset’s carrying amount settlement no more than 30 days from the date of recognition exceeds its recoverable amount, the difference is written-off for water utility debtors, and generally no more than 30 days by a charge to the statement of other comprehensive income for other debtors. except to the extent that the write-down can be debited to Collectability of trade receivable is reviewed on an ongoing an asset revaluation reserve amount applicable to that class basis. Debts which are known to be uncollectible are written of asset. off. An allowance for impaired receivables is established when The recoverable amount for most assets is measured at the there is objective evidence that CHW will not be able to collect higher of depreciated replacement cost and fair value less all amounts due according to the original terms of receivables. costs to sell. Recoverable amount for assets held primarily to The amount of the allowance is the difference between the generate net cash inflows is measured at the higher of the asset’s carrying amount and the present value of estimated present value of future cash flows expected to be obtained future cash flows, discounted at the effective interest rate. from the asset and fair value less costs to sell. It is deemed The amounts credited to the allowance are recognised as an that, in the event of the loss of an asset, the future economic expense in the comprehensive operating statement. benefits arising from the use of the asset will be replaced 1.8 Inventories unless a specific decision to the contrary has been made. Inventories comprise stores and materials used in the A reversal of an impairment loss on a revalued asset is construction of new works and for the repair and credited directly to equity under the heading revaluation maintenance of existing assets. All inventories are valued at reserve. However, to the extent that an impairment loss on the lower of cost and net-realisable value. Costs are assigned the same class of asset was previously recognised in the to inventory quantities on hand at balance date on a first in, statement of other comprehensive income, a reversal of that first out basis (FIFO). Inventories held for distribution are impairment loss is also recognised in the comprehensive measured at the lower of cost and current replacement cost. operating statement. 1.9 Payables 1.5 Finance Leases Payables consist predominantly of trade and sundry creditors. Leases of property, plant and equipment where CHW has These amounts represent liabilities for goods and services substantially all the risks and rewards incidental to ownership provided to CHW prior to the end of the financial year, which are classified as finance leases. Finance leases are capitalised are unpaid at financial year end. The amounts are unsecured at the lease’s inception at the lower of the fair value of the and are usually paid within 30 days of recognition. leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of Payables are initially recognised at fair value, being the cost of finance charges, are included in payables. Each lease the goods and services, and subsequently measured at payment is allocated between the liability and finance charges amortised cost. so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the comprehensive operating statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance lease is depreciated over the shorter of the assets useful life and the lease term.

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1.10 Employee Benefits (iv) Employee Benefits On-Costs (i) Wages and salaries and annual leave Employee benefit on-costs, including payroll tax and worker’s Liabilities for wages and salaries, including non‑monetary compensation, are recognised and included in employee benefits annual leave, are all recognised in the provision for benefit liabilities and costs when the employee benefits to employee benefits as ‘current liabilities’, because the which they relate are recognised as liabilities. Corporation does not have an unconditional right to defer (v) Performance payments settlements of these liabilities. Performance payments for the Corporation’s Executive Depending on the expectation of the timing of settlement, Officers are based on a percentage of the annual salary liabilities for wages and salaries and annual leave are package provided under their contract(s) of employment. measured at: A liability is recognised and is measured as the aggregate of • Undiscounted value – if the Corporation expects to wholly the amounts accrued under the terms of the contracts to settle within 12 months: or balance date. • Present value – if the Corporation does not expect to 1.11 Biological Assets wholly settle within 12 months. Productive trees in forests surrounding water catchments are (ii) Long service leave recognised as biological assets. The fair value of timber in Liability for long service leave (LSL) is recognised in the forestry plantations is calculated by using the closing balance provision for employee benefits. Unconditional LSL is of the previous year, applying the average rate per cubic disclosed in the notes to the financial statements as a current metre sold during the financial year to the increase/(decrease) liability; even where the Corporation does not expect to settle in natural growth of the plantations and then applying a the liability within 12 months because it will not have the discounted cash flow to calculate the gains/(losses) unconditional right to defer the settlement of the entitlement attributable to price changes over time. should an employee take leave within 12 months. 1.12 BOOT (Build Own Operate and Transfer) Contracts The components of this current LSL liability are measured at: Central Highlands Water has two BOOT contracts in • Undiscounted value – if the Corporation expects to wholly operation. The first was signed on 12th April 1999 and settle within 12 months; and commenced full operational tolling in December 2000 for the • Present value – if the Corporation does not expect to supply of treated water to Ballarat and a number of wholly settle within 12 months. neighbouring communities for a period of 25 years. The Conditional LSL is disclosed as a non‑current liability. There is second was signed on 12th November 2003 and an unconditional right to defer the settlement of the commenced full operational tolling in June 2006 for the supply entitlement until the employee has completed the requisite of treated water to four small towns (Beaufort, Blackwood, years of service. This non‑current LSL liability is measured at Forest Hill and Clunes) for a period of 20 years. present value. As ownership of the asset(s) is transferred to the CHW at the Any gain or loss following revaluation of the present value of end of the contractual term and this term is for the major part non‑current LSL liability is recognised as a transaction. of the economic life of the asset(s), CHW accounts for the asset(s) under the BOOT scheme as a finance lease. Finance In calculating present value, consideration is given to leases are capitalised at the lease’s inception at the lower of expected future wage and salary levels, experience of the fair value of the leased property and the present value of employee departures and periods of service. Expected future the minimum lease payments. The corresponding rental payments are discounted using market yields at the reporting obligations, net of finance charges, are included in payables. date on national government bonds with terms to maturity Each stream of lease payment is allocated between the and currency that match, as closely as possible, the liability and finance charges so as to achieve a constant rate estimated future cash outflows. on the finance balance outstanding. The interest element of (iii) Superannuation the finance cost is charged to the operating statement over the lease period so as to produce a constant periodic rate of The amount charged to the comprehensive operating interest on the remaining balance of the liability for each statement in respect of superannuation represents the period. The asset(s) acquired in a BOOT scheme that meets contributions made by CHW to the superannuation plan in the classification of finance lease is depreciated over the respect to the current services of current entity staff. asset’s useful life. Superannuation contributions are made to the plans based on the relevant rules of each plan. 1.13 Changes in Accounting Policy The accounting policies are consistent with those of the previous year, unless stated otherwise.

2013/14 ANNUAL REPORT 45 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

1.14 Taxation 1.17 Prepayments CHW is subject to the National Tax Equivalent Regime Prepayments represent payments in advance of receipt of goods (NTER), which is administered by the Australian Tax Office. or services or that part of expenditure made in one accounting period covering a term extending beyond that period. The income tax expense or revenue for the period is the expected tax payable or receivable on the current period’s 1.18 Equity taxable income based on the national corporate income tax rate of 30%, adjusted by changes in deferred tax assets and Contributions by owners liabilities attributable to temporary differences between the tax Additions to net assets which have been designated as bases of assets and liabilities and their carrying amounts in contributions by owners are recognised as contributed the financial statements, and to unused tax losses. capital. Other transfers that are in the nature of contributions Deferred tax assets and liabilities are recognised for temporary or distributions have also been designated as contributions by differences at the tax rates expected to apply when the owners. Transfers of net assets arising from administrative assets are recovered or liabilities are settled, based on those restructurings are treated as distributions to or contributions tax rates which are enacted or substantially enacted. The by owners. relevant tax rates are applied to the cumulative amounts of Grants and contributions received from the Victorian State deductible and taxable temporary differences to measure the Government, which were originally appropriated by the deferred tax asset or liability. No deferred tax asset or liability Parliament as additions to net assets or where the Minister for is recognised in relation to these temporary differences if they Finance and the Minister for Water have indicated are in the arose in a transaction that at the time of the transaction did nature of owners’ contributions, are accounted for as Equity – not affect either accounting profit or taxable profit or loss. Contributions by Owners. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that 1.19 Fair Value future taxable amounts will be available to utilise those Consistent with AASB 13 Fair Value Measurement, the temporary differences and losses. Corporation determines the policies and procedures for both Current and deferred tax is recognised in profit or loss, except recurring fair value measurements such as infrastructure, to the extent that it relates to items recognised in other property, plant and equipment and biological assets, in comprehensive income or directly in equity. In this case, the accordance with the requirements of AASB 13 and the tax is also recognised in other comprehensive income or relevant Financial Reporting Directions. directly in equity, respectively. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within 1.15 Dividend Policy the fair value hierarchy, described as follows, based on the CHW is required to pay a dividend in accordance with a lowest level input that is significant to the fair value determination of the Treasurer of Victoria under the Public measurement as a whole: Authorities (Dividend) Act 1983, based on a prescribed • Level 1 — Quoted (unadjusted) market prices in active percentage of the previous year’s adjusted net profit. An markets for identical assets or liabilities obligation to pay a dividend only arises after consultation with • Level 2 — Valuation techniques for which the lowest level the relevant portfolio Minister and the Treasurer and a formal input that is significant to the fair value measurement is determination is made by the Treasurer. CHW’s preliminary directly or indirectly observable; and estimate in respect to the reporting period is nil (2013: Nil). • Level 3 — Valuation techniques for which the lowest level 1.16 Goods and Services Tax input that is significant to the fair value measurement is unobservable. Revenues, expenses and assets are recognised net of goods and services tax (GST), except where the amount of GST For the purpose of fair value disclosures, the Corporation has incurred is not recoverable from the Australian Taxation Office determined classes of assets and liabilities on the basis of the (ATO). In these circumstances, the GST is recognised as nature, characteristics and risks of the asset or liability and part of the cost of acquisition of the asset or as part of an the level of the fair value hierarchy as explained above. item of expense. In addition, the Corporation determines whether transfers Receivables and payables are stated inclusive of GST. The net have occurred between levels in the hierarchy by reassessing amount of GST recoverable from, or payable to, the ATO is categorisation (based on the lowest level input that is included as a current asset or liability in the balance sheet. significant to the fair value measurement as a whole) at the Cash flows arising from operating activities are disclosed in end of each reporting period. the Cash Flow Statement on a gross basis - i.e. inclusive of The Valuer General Victoria (VGV) is the Corporation’s GST. The GST component of cashflows arising from investing independent valuation agency, however there may be and financing activities which is recoverable or payable to the occasions when CHW will use other external independent taxation authority is classified as operating cash flows. third-party valuers to determine fair value.

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The Corporation, in conjunction with VGV and other external Identifying unobservable inputs (Level 3) fair value measurements valuers, where applicable, monitors changes in the fair value Level 3 fair value inputs are unobservable valuation inputs for of each asset and liability through relevant data sources to an asset or liability. These inputs require significant judgement determine whether revaluation is required. and assumptions in deriving fair value for both financial and The Valuer General Victoria (VGV) confirmed in May 2014 that non-financial assets. the use of the indices detailed below remain appropriate Unobservable inputs shall be used to measure fair value to revaluation options for the year ended 30 June 2014. CHW the extent that relevant observable inputs are not available, utilised both indices for relevant asset classes. thereby allowing for situations in which there is little, if any, 1. Road and Bridge Construction (Victoria) for pipelines, market activity for the asset or liability at the measurement dams, reservoirs and channels; and date. However, the fair value measurement objective remains 2. Stage of Production – Final Domestic Capital (Australia) the same, i.e. an exit price at the measurement date from the index for other built asset classes. perspective of a market participant that holds the asset or owes the liability. Therefore, unobservable inputs shall reflect Additionally, CHW is required to assess land and building the assumptions that market participants would use when asset valuations based on postcode indexation factors for pricing the asset or liability, including assumptions about risk. land and general building (non-specialised) cost factors reported by the Australian Bureau of Statistics (ABS) biannually. Assumptions about risk include the risk inherent in a particular valuation technique used to measure fair value (such as a Fair value measurement pricing model) and the risk inherent in the inputs to the Fair value is the price that would be received to sell an asset valuation technique. or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 1.20 Financial Instruments The fair value measurement is based on the following Recognition assumptions: Financial instruments are initially measured at fair value, plus • that the transaction to sell the asset or transfer the liability in the case of a financial asset or financial liability not at fair takes place either in the principal market (or the most value through profit and loss, transaction costs that are advantageous market, in the absence of the principal directly attributable to the acquisition or the issue of the market), either of which must be accessible to the entity at financial asset or liability. Subsequent to initial recognition, the the measurement date; and financial instruments are measured as set out below: • that the entity uses the same valuation assumptions that Loans and receivables market participants would use when pricing the asset or Loans and receivables are non-derivative financial assets with liability, assuming that market participants act in their fixed or determinable payments that are not quoted in an economic best interest. active market. They are included in current assets, except for The fair value measurement of a non-financial asset takes into those with maturities greater than 12 months after the account a market participant’s ability to generate economic reporting date which are classified as non-current assets. benefits by using the asset in its highest and best use or by Loans and receivables are included in trade and other selling it to another market participant that would use the receivables and other receivables in the balance sheet. Loans asset in its highest and best use. and receivables are recorded at amortised cost less impairment. Consideration of highest and best use for non-financial Impairment of financial instruments physical assets At each reporting date, CHW assesses whether there is Judgements about highest and best use (HBU) must take into objective evidence that a financial instrument has been account the characteristics of the assets concerned, including impaired. Impairment losses are recognised in the restrictions on the use and disposal of assets arising from the Comprehensive Operating Statement. asset’s physical nature and any applicable legislative/ contractual arrangements. 1.21 Intangibles In accordance with paragraph AASB 13.29, CHW assumes Intangible assets represent identifiable non-monetary assets the current use of a non-financial physical asset is its HBU without physical substance. Intangible assets are recognised unless market or other factors suggest that a different use by at cost. Costs incurred subsequent to initial acquisition are market participants would maximise the value of the asset. capitalised when it is expected that additional future economic benefits will flow to CHW. The intangible assets of CHW relate to software (including internally generated software development costs), which have a finite life and are amortised on a straight line basis over three to twelve years, and tradeable water entitlements which have an indefinite life.

2013/14 ANNUAL REPORT 47 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

1.22 Interest bearing liabilities 1.26 Jointly Controlled Assets Borrowings are initially recognised at fair value, net of Joint ventures are contractual arrangements between the transaction costs incurred. Borrowings are subsequently entity and one or more other parties to undertake an measured at amortised cost. Any difference between the economic activity that is subject to joint control. Joint control proceeds (net of transaction costs) and the redemption only exists when the strategic financial and operating amount is recognised in the comprehensive operating decisions relating to the activity require the unanimous statement over the period of the borrowings, using the consent of the parties sharing control (the venturers). effective interest method. Jointly controlled operations and assets are accounted for Borrowings are classified as current liabilities unless CHW has using proportionate consideration. an unconditional right to defer settlement of the liability for at Investments in jointly controlled operations and assets, in least 12 months after the balance sheet date. respect of any interest in jointly controlled assets, CHW 1.23 Provisions recognises in the financial statements: - its share of jointly controlled assets; Provisions are recognised when the corporation, as a result of a past event, has a legal or constructive obligation that can - any liabilities that it had incurred; be estimated reliably, and it is probable that an outflow of - its share of liabilities incurred jointly by the joint venture; economic benefits will be required to settle the obligation. - any income earned from the selling or using of its share of The amount recognised as a provision is the best estimate of the output of the joint venture; and the consideration required to settle the present obligation at - any expenses incurred in relation to being an investor in the end of the reporting period, taking into account the risks the joint venture. and uncertainties surrounding the obligation. CHW recognises its direct right to the assets, liabilities, 1.24 Commitments revenues and expenses of joint operations and its share of jointly held or incurred assets, liabilities, revenues and Commitments for future expenditure include operating and expenses. These have been incorporated in the financial capital commitments arising from contracts. These statements under the appropriate headings. commitments are disclosed by way of a note (refer to Note 15) at their nominal value and inclusive of the goods and Details of the joint operation are set out in Note 22. services tax (GST) payable. In addition, where it is considered 1.27 New Accounting Standards and Interpretations appropriate and provides additional relevant information to users, the net present values of significant individual projects Certain new accounting standards and interpretations have are stated. These future expenditures cease to be disclosed been published that are not mandatory for the 30 June 2014 as commitments once the related liabilities are recognised in reporting period. the balance sheet. As at 30 June 2014, the following standards and interpretations which were applicable to the Corporation had 1.25 Contingent assets and contingent liabilities been issued but were not mandatory for financial year ending Contingent assets and contingent liabilities are not recognised 30 June 2014. in the balance sheet, but are disclosed by way of a note (refer The Corporation has not and does not intend to adopt these to Note 16) and, if quantifiable, are measured at nominal standards early. value. Contingent assets and liabilities are presented inclusive of GST receivable or payable respectively.

48 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Standard / Summary Applicable Impact on financial statements Interpretation for annual reporting periods beginning on or after AASB 9 This standard simplifies requirements for the 1-Jan-17 The preliminary assessment has identified that Financial classification and measurement of financial assets the financial impact of available for sale (AFS) Instruments resulting from Phase 1 of the IASB’s project to assets will now be reported through other replace IAS 39 Financial Instruments: Recognition comprehensive income (OCI) and no longer and Measurement (AASB 139 Financial Instruments: recycled to the profit and loss. Recognition and Measurement). While the preliminary assessment has not identified any material impact arising from AASB 9, CHW will continue to monitor and assess. AASB 11 Joint This Standard deals with the concept of joint control, 1-Jan-14 CHW anticipates that there would be no material Arrangements and sets out a new principles-based approach for impact. Ongoing work is being done to monitor determining the type of joint arrangement that exists and assess the impact of this standard. and the corresponding accounting treatment. The new categories of joint arrangements under AASB 11 are more aligned to the actual rights and obligations of the parties to the arrangement. AASB 128 This revised Standard sets out the requirements 1-Jan-14 CHW anticipates that there would be no material Investments in for the application of the equity method when impact. Ongoing work is being done to monitor Associates and accounting for investments in associates and and assess the impact of this standard. Joint Ventures joint ventures.

In addition to the new standards above, the AASB has issued a list of amending standards that are not effective for the 2013- 14 reporting period (as listed below). In general, these amending standards include editorial and references changes that are expected to have insignificant impacts on CHW’s reporting. The AASB Interpretation in the list below is also not effective for the 2013-14 reporting period and is considered to have insignificant impacts on CHW’s reporting.

§ AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010). § AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards. § 2013-1 Amendments to AASB 1049 – Relocation of Budgetary Reporting Requirements. § 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets. § 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting. § 2013-5 Amendments to Australian Accounting Standards – Investment Entities § 2013-6 Amendments to AASB 136 arising from Reduced Disclosure Requirements § 2013-7 Amendments to AASB 1038 arising from AASB 10 in relation to consolidation and interests of policy holders § 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments § AASB Interpretation 21 Levies.

Note 2: Financial Risk Management The Board provides written principles for overall risk management, as well as policies covering specific areas, such Objectives and Policies as foreign exchange risk, interest rate risk, credit risk and The Corporation’s activities expose it to a variety of financial investment of excess liquidity. risks: market risk, credit risk and liquidity risk. 2.1 Risk Exposures The Corporation’s Board has the overall responsibility for the establishment and oversight of the Corporation’s risk The main risks the Corporation is exposed to through its management framework. The Corporation’s overall risk financial instruments are as follows: management program focuses on the unpredictability of (a) Market Risk financial markets and seeks to minimise potential adverse effects on the financial performance of the Corporation. The Market risk is the risk that changes in market prices will affect Corporation uses different methods to measure different types the fair value or future cash flows of the Corporation’s financial of risk to which it is exposed. These methods include instruments. Market risk comprises of foreign exchange risk, sensitivity analysis in the case of interest rate and other price interest rate risk and other price risk. The Corporation’s risks and ageing analysis for credit risk. exposure to market risk is primarily though interest rate risk, there is no exposure to foreign exchange risk and insignificant Risk management is carried out by the finance department exposure to other price risks. under policies approved by the Board of Directors. The finance department identifies and evaluates financial risks on Objectives, policies and processes used to manage these behalf of the Corporation. risks are disclosed in the paragraphs below:

2013/14 ANNUAL REPORT 49 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

(i) Interest Rate Risk Interest Rate Risk The Corporation’s exposure to market interest rates relates -0.5% +0.5% primarily to the Corporation’s long term borrowings and funds 30 June 2013 Carrying Result Equity Result Equity invested on the money market. Amount $'000 $'000 $'000 $'000 $'000 The Corporation minimises its exposure to interest rate changes on its long term borrowings by holding a mix of fixed and Financial Assets floating rate debt. Debt is sourced from Treasury Corporation Cash 5,872 (5) (4) 5 4 Victoria and is managed within a range of Board approved Deposits at Call 1,019 (3) (2) 3 2 limits with debt levels and interest rates being monitored Total increase/ regularly. CHW manages interest rate risk by endeavouring to (decrease) (8) (6) 8 6 enter into all new borrowings at fixed interest rates, thereby avoiding risks attributable to movements in interest rates. Financial Liabilities Loans1 0 0 0 0 0 This approach has not changed from the previous period. Total increase/ The Corporation has minimal exposure to interest rate risk (decrease) 0 0 0 0 through its holding of cash assets and other financial assets. 1 Interest rate risk only applies to loans held at variable rates Corporation manages its interest rate risk by maintaining a (30th June 2013 $Nil; 30th June 2012 $14m). diversified investment portfolio.

(ii) Foreign Exchange Risk (b) Credit Risk The Corporation has no exposure to changes in the foreign exchange rate. Credit risk is the risk of financial loss to the Corporation as a result of a customer or counterparty to a financial instrument (iii) Other Price Risk failing to meet its contractual obligations. Credit risk arises The Corporation has no significant exposure to Other principally from the Corporation’s receivables. Price Risk. The Corporation’s exposure to credit risk is influenced by the Market Risk Sensitivity Analysis individual characteristics of each customer. The receivables The sensitivity analysis below has taken into consideration balance consists of a large number of residential and past performance, future expectations, economic forecasts business customers which are spread across a diverse range and management’s knowledge and experience of the financial of industries. markets, the Corporation believes that: Receivable balances are monitored on an on-going basis to - a movement of 0.5% in interest rates is reasonable over ensure that exposure to bad debts is not significant. Credit the next 12 months. risk for receivables is managed in the following ways: - payment terms are 30 days Interest Rate Risk - debt collection policies and procedures, including use of a -0.5% +0.5% debt collection agency. 30 June 2014 Carrying Result Equity Result Equity An analysis of the ageing of the Corporation’s receivables at Amount $'000 $'000 $'000 $'000 reporting date has been provided in Note 20. $'000 Financial Assets (c) Liquidity Risk Cash 601 (3) (2) 3 2 Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Deposits at Call 5,692 (28) (20) 28 20 Corporation’s policy is to settle financial obligations within 30 Total increase/ days and in the event of dispute make payments within 30 (decrease) (31) (22) 31 22 days from the date of resolution. The Corporation manages Financial Liabilities liquidity risk by maintaining adequate reserves, banking Loans1 7,000 35 25 (35) (25) facilities and reserve borrowing facilities, and by continuously Total increase/ monitoring forecasts and actual cash flows and matching the (decrease) 35 25 (35) (25) maturity profiles of financial assets and financial liabilities. 1 Interest rate risk only applies to loans held at variable rates The Corporation’s financial liability maturities have been (30th June 2014: $7m; 30th June 2013 $Nil). disclosed in Note 20.

50 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Note 3: Comprehensive Operating Statement Disclosures

2014 2013 $'000 $'000 REVENUES

Service charges Water access 16,214 15,384 Waste water access 39,282 36,954 Fire Service 221 141 Trade Waste 150 212 Total 55,867 52,691

Usage charges Water volume 22,091 21,752 Waste water volume 434 396 Trade waste volume 1,182 962 Recycled water volume 185 183 Total 23,892 23,293

Government contributions Operating 700 1,205 Total 700 1,205

Developer contributions Fees paid by developers 1,741 2,037 Gifted Assets 7,380 7,247 Total 9,121 9,284

Net gain/(loss) on disposal of non current assets Net gain/(loss) on disposal of: Buildings (39) - Plant and equipment (108) (124) Retired Infrastructure (516) (1,049) Intangible Assets (64) - Total (727) (1,173)

Other Income Forestry Timber Sales 775 914 Insurance Recoups 92 688 Sundry Income 3,813 2,960 Total 4,680 4,562

2013/14 ANNUAL REPORT 51 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 3: Comprehensive Operating Statement Disclosures (cont’d)

2014 2013 $'000 $'000 EXPENSES

Depreciation Buildings (789) (297) Plant and equipment (1,518) (1,389) Infrastructure assets (17,107) (16,563) Total (19,414) (18,249)

Amortisation Infrastructure assets - (876) Intangible assets (837) (3,181) Total (837) (4,057)

Employee Benefits - Salaries and wages (13,866) (13,366) - Annual leave (1,113) (1,029) - Long service leave (914) (434) - Superannuation contributions (1,331) (1,343) - Other (1,650) (1,133) Total (18,874) (17,305)

Borrowing Costs expense Interest paid/payable (9,733) (9,658) Interest on Finance Leases (2,402) (2,496) Total (12,135) (12,154)

Other Expenses Auditors' remunerations - Victorian Auditor-General’s Office for Audit of financial statements (75) (71) - Internal audit (85) (115) Bad and Doubtful debts - Trade and Tariff Debtors (95) (193) Harvesting Costs (463) (508) Postage (196) (167) Legal Fees (207) (130) Insurance Costs (583) (671) Training (206) (236) Bank & Merchant Fees (471) (244) Advertising (104) (95) Bulk Water Charges (653) (604) Temporary Water Charges (206) (258) Other Expenses (1,126) (1,237) Total (4,470) (4,529)

52 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Note 4: Income Tax

Income Tax 2014 2013 $'000 $'000

The income tax expense for the financial year differs from the amount calculated on the net result. The differences are reconciled as follows:

(a) Components of tax expense Current tax payable 1,360 194 Deferred tax relating to temporary differences 1,751 1,483 3,111 1,677

Deferred income tax expenses included in income tax expense comprises: (Decrease)/increase in deferred tax assets 189 (1,497) Decrease/(increase) in deferred tax liabilities (1,941) 14 (1,752) (1,483)

(b) Reconciliation of income tax to prima facie tax payable Net result before income tax 10,332 5,539

Tax at the Australian tax rate of 30% (2013: 30%) (3,100) (1,662)

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: - Expenditure not allowed for income tax purposes (11) (15)

Income tax as reported in the Comprehensive Operating Statement (3,111) (1,677)

Note 5: Cash and cash equivalents

Cash and cash equivalents 2014 2013 $'000 $'000

Cash Cash on Hand 3 3 Cash at Bank 598 5,869 Deposits at Call 5,692 1,019 6,293 6,891

2013/14 ANNUAL REPORT 53 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 6: Receivables

2014 2013 $’000 $’000

Current Trade Receivables 18,209 17,967 Provision for impaired receivables (189) (161) GST Receivable 645 589 Sundry Debtors 965 890 Accrued Income - Gifted Assets 2,469 2,631 Other Receivables 50 106 Total current receivables 22,149 22,023 Non Current Other Receivables 202 211 Total non current receivables 202 211

Total receivables 22,351 22,234

(a) Provision for Doubtful Debts As at 30 June 2014, current receivables of the Corporation with a nominal value of $227,484 (2013: $200,757) were impaired. The amount of the provision was $189,036 (2013: $161,000). The individually impaired receivables mainly related to tenant debtors and sundry debtors. It was assessed that a portion of the receivables is expected to be recovered. The aging of these receivables is as follows:

2014 2013 $’000 $’000

3 - 6 months 23 20 Over 6 months 204 181 227 201

Movements in the provision for impaired receivables are as follows:

2014 2013 $’000 $’000

At 1 July 161 147 Provision for impairment recognised during the year 189 161 Receivables written off during the year as uncollectible (161) (147) Unused amount reversed - - 189 161

The creation and release of the provision for impaired receivables has been included in 'other expenses' in the comprehensive operating statement. Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash.

54 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Note 6: Receivables (cont’d)

(b) Past due but not impaired trade receivables As at 30 June 2014, trade receivables of $1,490,110 (2013: $1,277,625) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging analysis of these receivables is as follows:

2014 2013 $'000 $'000

Up to 6 months 1,178 1,040 Over 6 months 312 238 1,490 1,278

The other amounts within receivables do not contain impaired assets and are not past due. Based on credit history, it is expected that these amounts will be received when due.

(c) Fair value and credit risk Due to the short term nature of the current receivables, their carrying value is assumed to approximate their fair value.

2014 2013 Carrying Fair Value Carrying Fair Value Amount $'000 Amount $'000 $'000 $'000

Other receivables 202 202 211 211 202 202 211 211

The maximum exposure to credit risk at the reporting date is the higher of the carrying value and the fair value of each class of receivables mentioned above. The Corporation does not hold any collateral as security. Refer to Note 2 for more information on the risk management policy of the Corporation.

2013/14 ANNUAL REPORT 55 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 7: Biological Assets

2014 2013 hectares hectares

Timber volume (hectares) 1,433 1,323

2014 2013 $'000 $'000

Movements in carrying amounts of timber in forests:

Carrying amount at beginning of period 5,616 5,605 Gains arising from changes in fair value less estimated point of sale costs attributable to physical changes 1,398 1,426 Gains/(losses) arising from changes in fair value less estimated point of sale costs attributable to price changes (638) (500) Decreases due to harvest (776) (915) Carrying amount at end of period Timber in Forests 5,600 5,616

Central Highlands Water manages significant timber The Corporation is exposed to financial risks in respect of its plantations in its catchments for the purpose of catchment biological activities, in particular, the commercial forests. protection. These plantations are managed on a 35 year cycle The primary financial risk occurs due to the length of time from planting to harvesting. The value of the timber in these between expending cash on the purchase, planting and forest has been calculated on a discounted cash flow basis, maintenance of trees and on felling the adult trees and based on the harvesting forecast over this 35 year period and ultimately receiving the cash from the eventual sale to third using a discount rate of 5.50%. The movement in carrying parties. The Corporation manages these risks by actively amounts of timber in forests over the period reflects changes reviewing and managing the working capital requirements of in the harvesting forecast. these activities. The fair value less costs to sell of timber harvested during the Disclosure of biological assets measured at fair value and their period was $323,926. categorisation in the fair value heirachy can be seen below.

Carrying Fair value measurement at end of amount reporting period using: as at 30/06/2014 (i) (i) (i) $'000 Level 1 Level 2 Level 3 Forests 5,600 - 5,600 -

(i) Classified in accordance with the fair value hierarchy, see Note 1.19.

There have been no transfers between levels during the period. There were no changes in valuation techniques throughout the period to 30 June 2014. Biological assets are measured at fair value less costs to sell, with any changes recognised in the comprehensive operating statement – other expenses. Costs to sell include all costs that would be necessary to sell the assets, including freight and direct selling costs.

56 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Note 8: Infrastructure, Property, Plant and Equipment

2014 2013 $'000 $'000

Land At fair value 41,863 41,162 Total 41,863 41,162 Buildings At fair value 15,328 14,518 Less: Accumulated depreciation (1,996) (1,372) Total 13,332 13,146 Plant & Equipment At fair value 15,277 15,941 Less: Accumulated depreciation (8,198) (8,016) Total 7,079 7,925 Water infrastructure assets At fair value 515,042 508,417 Less: Accumulated depreciation (31,548) (21,121) Total 483,494 487,296 Wastewater infrastructure assets At fair value 339,334 323,418 Less: Accumulated depreciation (17,149) (11,083) Total 322,185 312,336 Capital Works In Progress At Cost 12,918 17,064 Total Capital works in progress 12,918 17,064

Total Infrastructure, Property, Plant and Equipment 880,871 878,929

Revaluation of Land, Buildings and Infrastructure Assets CHW’s infrastructure assets and determine their useful life via Land, buildings and infrastructure assets were valued at 30 condition assessments. This sample size included assets across all asset classes for above ground assets owned by June 2011. CHW. From this data, AECOM then estimated useful remaining The valuation of land and buildings were completed by Egan lives for all other assets in the appropriate asset classes. National Valuers acting as an agent for the Valuer General of To form a judgement on assets that are unable to be Victoria. The valuation of infrastructure assets was completed inspected (i.e. underground assets), AECOM utilised a by AECOM, also acting as an agent for the Valuer General combination of CHW’s asset condition data and previous of Victoria. deterioration curves in their databases for underground assets For land and buildings, the valuer used a market based operating under similar conditions. comparison approach whereby CHW’s properties were AECOM then established current optimised current compared to recent comparable land sales in comparable replacement costs (determined on an optimum modern proximity to the subject properties and applying an equivalent basis) and assigned salvage values using industry appropriate $-rate per square metre/hectare rate to determine benchmarking data. With the establishment of remaining their valuation. useful lives, current replacement costs and salvage values, For infrastructure assets, the approach taken by the valuer AECOM were then able to establish fair value using the was to undertake physical site inspection of a sample of depreciated replacement cost method.

2013/14 ANNUAL REPORT 57 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 8: Infrastructure, Property, Plant and Equipment (cont’d)

Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the financial year are set out below.

Opening Additions Gifted Disposals Re- Transfer Impairment Other Work in De- Closing WDV at 1 Assets valuations Work in Progress preciation WDV at 30 July 2013 Progress amounts June 2014 to Assets expensed $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2013/2014 Land 41,162 701 - 41,863 Buildings 13,146 (39) 1,014 (789) 13,332 Plant and Equipment 7,925 102 (252) 822 (1,518) 7,079 Water Infrastructure Assets 487,296 1,999 (243) 5,135 (10,693) 483,494 Wastewater Infrastructure Assets 312,336 5,544 (274) 10,993 (6,414) 322,185 Work In Progress 17,064 14,719 (17,964) (901) 12,918 Carrying amount at end of year 878,929 15,522 7,543 (808) - - - (901) - (19,414) 880,871

Opening Additions Gifted Disposals Re- Transfer Impairment Other Work in De- Closing WDV at 1 Assets valuations Work in Progress preciation WDV at 30 July 2012 Progress to amounts June 2013 Assets expensed $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2012/2013 Land 41,163 - - (1) ------41,162 Buildings 12,329 - - (25) - 1,139 - - - (297) 13,146 Plant and Equipment 8,546 - - (343) - 1,110 - - (1,389) 7,925 Water Infrastructure Assets 492,951 2,986 (1,913) 5,094 (11,822) 487,296 Wastewater Infrastructure Assets 295,159 - 3,359 (210) - 18,769 - - - (4,741) 312,336 Work In Progress 28,682 15,344 - - - (26,113) - (849) - - 17,064 Carrying amount at end of year 878,830 15,344 6,345 (2,492) - - - (849) - (18,249) 878,929

58 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Note 8: Infrastructure, Property, Plant and Equipment (cont’d)

Fair value measurement hierarchy for assets as at 30 June 2014.

Carrying Fair value measurement at end of amount reporting period using: as at 30/06/2014 Level 1(i) Level 2(i) Level 3(i) $'000

Land at fair value Specialised land 41,863 - - 41,863 Total of land at fair value 41,863 - - 41,863

Buildings at fair value Specialised buildings 13,332 - - 13,332 Total of buildings at fair value 13,332 - - 13,332

Plant, equipment and vehicles at fair value Vehicles 3,268 - 3,268 - Plant and equipment 3,811 - - 3,811 Total of plant, equipment and vehicles at fair value 7,079 - 3,268 3,811

Water infrastructure at fair value Water treatment plants 48,764 - - 48,764 Water mains 263,060 - - 263,060 Reservoirs 65,881 - - 65,881 Water infrastructure - other 105,789 - - 105,789 Total of water infrastructure at fair value 483,494 - - 483,494

Wastewater infrastructure at fair value Wastewater treatment plants 86,013 - - 86,013 Wastewater sewer mains 178,190 - - 178,190 Wastewater infrastructure - other 57,982 - - 57,982 Total of wastewater infrastructure at fair value 322,185 - - 322,185

(i) Classified in accordance with the fair value hierarchy, see Note 1.19. There have been no transfers between levels during the period.

Specialised land and specialised buildings For CHW’s majority of specialised buildings, the depreciated The market approach is used for specialised land, although it replacement cost method is used, adjusting for the associated is adjusted for the community service obligation (CSO) to depreciations. As depreciation adjustments are considered as reflect the specialised nature of the land being valued. significant, unobservable inputs in nature, specialised buildings are classified as Level 3 fair value measurements. The CSO adjustment is a reflection of the valuer’s assessment of the impact of restrictions associated with an asset to the Water infrastructure and Wastewater infrastructure extent that is also equally applicable to market participants. Infrastructure is valued using the depreciated replacement This approach is in light of the highest and best use cost method. This cost represents the replacement cost of consideration required for fair value measurement, and takes the building/component after applying depreciation rates on a into account the use of the asset that is physically possible, useful life basis. Replacement costs relate to costs to replace legally permissible, and financially feasible. As adjustments of the current service capacity of the asset. Economic CSO are considered as significant unobservable inputs, obsolescence has also been factored into the depreciated specialised land is classified as Level 3. replacement cost calculation. As depreciation adjustments are

2013/14 ANNUAL REPORT 59 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 8: Infrastructure, Property, Plant and Equipment (cont’d) considered as significant, unobservable inputs in nature, Plant and equipment infrastructure assets are classified as Level 3 fair value Plant and equipment is held at fair value. When plant and measurements. equipment is specialised in use, such that it is rarely sold Vehicles other than as part of a going concern, fair value is determined using the depreciated replacement cost method. Vehicles are valued using the market approach. Under this valuation method, the assets are compared to recent There were no changes in valuation techniques throughout comparable sales, or sales of comparable assets which are the period to 30 June 2014 and all fair value assessments considered to have nominal or no added improvement value. undertaken during the period, for each relevant asset class, The Corporation acquires new vehicles and at times disposes revealed that no movement had occurred that was greater of them before the end of their economic life. The process of than 10% of the carrying amount, hence no revaluations were acquisition, use and disposal in the market is managed by brought to account in 2014. experienced staff who set relevant depreciation rates during For all assets measured at fair value, the current use is use to reflect the utilisation of the vehicles. considered the highest and best use.

Reconciliation of Level 3 fair value $’000

2014 Specialised Specialised Plant and Water Wastewater land buildings equipment Infrastructure Infrastructure Opening balance 41,162 13,146 7,925 487,296 312,336

Purchases (sales) 701 1,014 780 7,134 16,536 Transfers in (out) of Level 3 - - (3,268) - - Gains or losses recognised in net result - (39) (108) (243) (273) Depreciation - (789) (1,518) (10,693) (6,414) Impairment loss - - - - - Subtotal 41,863 13,332 3,811 483,494 322,185

Revaluation - - - - - Subtotal - - - - - Closing balance 41,863 13,332 3,811 483,494 322,185 Unrealised gains/ (losses) on non-financial assets - - - - -

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Note 8: Infrastructure, Property, Plant and Equipment (cont’d)

Description of significant unobservable inputs to Level 3 valuations

Asset Type Valuation Significant Range (weighted Sensitivity of fair value technique unobservable inputs average) measurement to changes in significant unobservable inputs Specialised Market approach Community Service CSO 80% A significant increase or decrease in the land Obligation (CSO) (80%) CSO adjustment would result in a VGV provided to Egans significantly lower (higher) fair value. plus subsequent additions 6,843ha Specialised Depreciated Direct cost per square $13 – $1,987/m2 A significant increase or decrease in direct buildings replacement cost metre ($989m2) cost per sq m adjustment would result in a VGV provided to Egans significantly higher or lower value. 13,295m2 Useful life of specialised 20–100 years A significant increase or decrease in the buildings (60 years) estimated useful life of the asset would result in a significantly higher or lower valuation. Plant and Depreciated Cost per unit $1,000 – $183,570 A significant increase or decrease in cost per equipment replacement cost per unit unit would result in a significantly higher or ($6,258 per unit) lower fair value. Useful life of plant and 3–20 years A significant increase or decrease in the equipment (12 years) estimated useful life of the asset would result in a significantly higher or lower valuation. Water Infrastructure Water treatment Depreciated Cost per unit Average A significant increase or decrease in cost per plants replacement cost $3,250,933 unit would result in a significantly higher or (15 in total) lower fair value. Useful life of water 15-100 years A significant increase or decrease in the treatment plants (58 years) estimated useful life of the asset would result in a significantly higher or lower valuation. Water mains Depreciated Cost per metre Weighted average A significant increase or decrease in cost per (2,443,616m) replacement cost (18ml - 1,250ml) $108/m metre would result in a significantly higher or lower fair value. Useful life of water mains 40 - 150 years A significant increase or decrease in the (95 years) estimated useful life of the asset would result in a significantly higher or lower valuation. Reservoirs Depreciated Cost per unit Average A significant increase or decrease in cost per (30 in total) replacement cost $2,196,033 unit would result in a significantly higher or lower fair value. Useful life of the 40 to 400 years A significant increase or decrease in the infrastructure (220 years) estimated useful life of the asset would result in a significantly higher or lower valuation. Wastewater Infrastructure Wastewater Depreciated Cost per unit Average A significant increase or decrease in cost per treatment plants replacement cost $6,616,385 unit would result in a significantly higher or (13 in total) lower fair value. Useful life of wastewater 25-100 years A significant increase or decrease in the treatment plants (63 years) estimated useful life of the asset would result in a significantly higher or lower valuation. Wastewater Depreciated Cost per metre Average A significant increase or decrease in cost per sewer mains replacement cost (63ml - 1,500ml) $131/m metre would result in a significantly higher or (1,358,307m) lower fair value. Useful life of wastewater 20 - 150 years A significant increase or decrease in the sewer mains (85 years) estimated useful life of the asset would result in a significantly higher or lower valuation.

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Note 9: Intangible Assets

2014 2013 $'000 $'000

At cost 37,467 39,818 Less: accumulated depreciation (3,579) (6,338) 33,888 33,482

$'000 $'000 $'000 Software Tradeable Total Water Rights Year Ended 30 June 2014 Opening WDV at 1 July 2013 2,887 30,595 33,482 Additions 904 - 904 Transfer Work in Progress to Assets - 403 403 Net gain/(loss) on disposal (64) - (64) Amortisation (837) - (837) Closing WDV at 30 June 2014 2,890 30,998 33,888

Year Ended 30 June 2013 Opening WDV at 1 July 2012 5,219 30,595 35,814 Additions 849 - 849 Amortisation (3,181) - (3,181) Closing WDV at 30 June 2013 2,887 30,595 33,482

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Note 10: Payables

2014 2013 $'000 $'000 Current Payables Trade Creditors 4,980 3,169 Accrued Expenses 3,879 5,435 Sundry Creditors, Deposits and Retention Monies 273 68 Total current payables 9,132 8,672

Total non-current payables - - Total Payables 9,132 8,672

(a) Foreign currency risk and interest rate risk for trade and other payables The carrying amounts of the Corporation's payables are denominated in Australian Dollars. For an analysis of the sensitivity of payables to interest rate risk, refer to Note 2.

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Note 11: Interest bearing liabilities

2014 2013 $'000 $'000

Current Secured Finance Leases: BOOT Assets 1,518 1,346 Total current secured borrowings 1,518 1,346 Unsecured Loans** 20,000 13,000 Total current unsecured borrowings 20,000 13,000 Total current borrowings 21,518 14,346

Non-current Secured Finance Leases: BOOT Assets 29,734 31,252 Total non current secured borrowings 29,734 31,252 Unsecured Loans** 119,000 134,000 Total non current unsecured borrowings 119,000 134,000 Total non current borrowings 148,734 165,252

** All borrowings have been transacted with the approval of the Treasurer of Victoria and hence are subject to Statutory Guarantee by the State of Victoria in accordance with the Borrowing and Investment Powers Act 1987.

Total interest bearing liabilities 170,252 179,598

Assets pledged as security

Non Current Finance Lease Water Infrastructure Assets 28,135 29,011

Credit Standby Arrangements Bank Overdrafts - - Used at Balance Date - - Unused at Balance Date - -

Loan Facilities Total Facilities 145,100 150,000 Used at balance date 139,000 147,000 Unused at Balance Date 6,100 3,000

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Note 11: Interest bearing liabilities (cont’d)

2014 2013 Carrying Fair Carrying Fair Amount Value Amount Value $'000 $'000 $'000 $'000 On Balance Sheet Non traded financial liabilities Loans 139,000 150,786 147,000 156,711 Lease Liabilities 31,252 31,252 32,599 32,599 170,252 182,038 179,599 189,310

On Balance Sheet The fair values of non-current borrowings are based on cash flows discounted using borrowing rates varying from 4.285% to 7.275%, depending on the maturity and type of borrowing (2013: 4.38% to 7.345%).

(a) Risk Exposures The exposure of the Corporation's borrowings to interest rate changes and the contractual repricing dates at balance date are as follows:

2014 2013 $'000 $'000

6 months or less 7,000 - 6 - 12 months 13,000 13,000 1 - 5 years 60,000 48,000 Over 5 years 59,000 86,000

139,000 147,000

Current borrowings 20,000 13,000 Non-Current borrowings 119,000 134,000 139,000 147,000

The carrying amounts of the Corporation's borrowings are denominated in Australian dollars. For an analysis of the sensitivity of borrowings to interest rate risk and foreign exchange risk refer to Note 2.

2013/14 ANNUAL REPORT 65 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 12: Employee Benefits

2014 2013 $'000 $'000

Current Annual leave, rostered days off (RDO's) and unconditional long service leave entitlements representing 7 years of continuous service:

- RDO's expected to settle within 12 months, measured at nominal value 69 87 - Annual Leave expected to settle within 12 months, measured at nominal value 986 969

- Annual Leave expected to settle after 12 months, measured at present value 320 315 - Long service leave expected to settle after 7 years of continuous service, measured at present value 2,960 2,699

Total Current 4,335 4,070

Non Current Conditional long service leave, measured at present value 560 225 Defined benefits superannuation liability - - Total Non Current 560 225

Total Employee Benefits 4,895 4,295

Note 1.10 sets out the value measurement applied to employee entitlements. The following assumptions were adopted in measuring present values:

Weighted average increase in employee costs 4.44% 4.50% Weighted average discount rates 3.57% 3.79% Weighted average settlement period 14 years 14 years

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Note 13: Deferred Tax

2014 2013 $'000 $'000

Deferred Tax Assets The balance comprises temporary differences attributable to: - Tax Losses 61,080 62,441 - Doubtful Debts 57 48 - Employee Benefits 1,468 1,288

Deferred Tax Assets 62,605 63,777

Movements: Opening balance at 1 July 63,777 69,872 Loss Utilisation (1,361) (4,598) Credited/(debited) to the comprehensive operating statement 189 (1,497) Closing balance at 30 June 62,605 63,777

Deferred tax assets to be recovered after more than 12 months 61,080 62,441

Deferred tax assets to be recovered within 12 months 1,525 1,336

Deferred Tax Liabilities The balance comprises temporary differences attributable to: Amounts recognised in the comprehensive operating statement - Infrastructure, Property, plant and equipment 73,229 75,506 - Accrued Income - (4,218) Aggregate in comprehensive operating statement 73,229 71,288

Amounts recognised directly in equity Buildings (Revaluation) 12,806 12,806

Deferred Tax Liabilities 86,035 84,094

Movements: Opening balance at 1 July 84,094 88,514 Credited/(debited) to the comprehensive operating statement 1,941 (14) Adjustments to DTL - (4,406) Closing balance at 30 June 86,035 84,094

Set-off of deferred tax assets 62,605 63,777 Net deferred tax liabilities 23,430 20,317

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Note 14: Reserves

2014 2013 $'000 $'000

Movements in reserves (a) Land Revaluation Reserve Opening Balance at 1 July 26,663 26,663 Increment (decrement) on revaluation - - Add Back tax effect of revaluation decrement - - Closing balance at 30 June 26,663 26,663 The asset revaluation reserve is used to record asset revaluation increments and decrements in the value of non-current physical assets.

(b) Building Revaluation Reserve Opening Balance at 1 July 28,083 28,083 Increment (decrement) on revaluation - - Less tax effect of revaluation increment - - Closing balance at 30 June 28,083 28,083

(c) Infrastructure Revaluation Reserve Opening Balance at 1 July 33,976 33,976 Increment (decrement) on revaluation - - Less tax effect of revaluation increment - - Closing balance at 30 June 33,976 33,976

Total Reserves 88,722 88,722

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Note 15: Commitments for Expenditure

2014 2013 $'000 $'000 Capital Commitments Commitments for capital expenditure entered into but not yet recognised as liabilities, payable: Within one year 1,452 2,679 Later than one year but not later than 5 years - 2 Later than 5 years - - Total 1,452 2,681

Build-Own-Operate-Transfer – Supply of Treated Water Service Charge by the Private Sector Central Highlands Water is obligated to pay Ballarat Water Pty Ltd an annual service charge comprising both fixed On 12th April, 1999 Central Highlands Water signed a Build, and variable components. At 30 June 2014 the present value Own, Operate and Transfer (BOOT) contract with Ballarat of the obligation has been measured using a discount rate Water Pty Ltd to supply Ballarat and a number of neighbouring of 5.50%. communities with treated water for a period of 25 years. Nominal Value of Consideration On 12th November, 2003 Central Highlands Water signed The nominal value of the purchase consideration provided another BOOT contract with Ballarat Water Pty Ltd to supply for the supply of services under the arrangement as at the four small towns (Beaufort, Blackwood, Forest Hill and date of entering the contract has been determined on the Clunes) with treated water for a period of 20 years. following basis:

2014 2013 Commitments contracted for but not recognised as liabilities: $'000 $'000 Obligation for Service Charge Within one year 6,948 6,712 Later than one year but not later than 5 years 29,572 30,295 Later than 5 years 49,991 56,217 Total 86,511 93,224

2014 2013 Finance Lease Commitments $'000 $'000 are payable as follows: Within one year 3,813 3,748 Later than one year but not later than 5 years 15,912 15,643 Later than 5 years 27,354 31,436 Minimum lease payments 47,079 50,827 Less: Future interest charges 15,827 18,229 Total 31,252 32,598 Representing lease liabilities Current (refer Note 11) 1,518 1,346 Non Current (refer Note 11) 29,734 31,252 Total 31,252 32,598

2014 2013 Environmental Commitments $'000 $'000 Commitments for payments in relation to environmental contributions are as follows: Within one year 3,123 3,123 Later than one year but not later than 5 years 3,123 6,246 Total 6,246 9,369

2013/14 ANNUAL REPORT 69 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 16: Contingent Liabilities and Contingent Assets

Central Highlands Water does not have any contingent liabilities or contingent assets to disclose in this period.

Note 17: Superannuation level of participation of CHW in the Fund cannot be measured as a percentage compared with other participating employer. While there is an agreed methodology to allocate any Vision Super shortfalls identified by the Fund Actuary for funding purposes, Central Highlands Water makes employer superannuation there is no agreed methodology to allocate benefit liabilities, contributions in respect of most of its employees to Vision assets and costs between the participating employers for Super Superannuation Fund (the Fund). The Fund has two accounting purposes. Therefore, the Actuary is unable to categories of membership, accumulation and defined benefit, allocate benefit liabilities, assets and costs between each of which is funded differently. employers for the purposes of AASB 119. The defined benefit section provides lump sum benefits based CHW makes employer contributions to the defined benefit on years of service and final average salary. The defined category of the Fund at rates determined by the Trustee on contribution section receives fixed contributions from CHW the advice of the Fund’s Actuary. The Fund’s employer and CHW’s legal or constructive obligation is limited to these funding arrangements comprise of three components as contributions. Obligations for contributions to the Fund are detailed below: recognised as an expense in Comprehensive Operating 1. Regular contributions - which are ongoing contributions Statement when they are made or due. This process is needed to fund the balance of benefits for current identical for all other funds that CHW contributes to. members and pensioners; (a) Accumulation 2. Funding calls – which are contributions in respect of each The Fund’s accumulation category, Vision MySuper/Vision participating employer’s share of any funding shortfalls that Super Saver, receives both employer and employee arise; and contributions on a progressive basis. Employer contributions 3. Retrenchment increments – which are additional are normally based on a fixed percentage of employee contributions to cover the increase in liability arising from earnings in accordance with the Superannuation Guarantee retrenchments. Legislation (9.25% in 2013/2014 and 9% in 2012/2013). Our commitment to defined contribution plans is limited to making CHW is also required to make additional contributions to contributions in accordance with our minimum statutory cover the contribution tax payable on the contributions requirements. No further liability accrues to the employer as referred to above. the superannuation benefits accruing to employees are Employees are also required to make member contributions represented by their share of the net assets of the Fund. to the Fund. As such, assets accumulate in the Fund to meet Effective from 1 July 2014, the Superannuation Guarantee member benefits, as defined in the Trust Deed, as they accrue. contribution rate is legislated to increase to 9.5%, and will CHW makes employer contributions to the defined benefits progressively increase to 12% by 2019. Based on category of the Fund at rates determined by the Fund’s announcements included in the May 2014 Federal Budget, Trustee on the advice of the Fund’s Actuary. Central Highlands this progressive increase to 12% will be delayed until 2022. Water makes the following contributions: (b) Defined Benefits Members - 9.25% of members’ salaries (9.25% in 2012/2013), this As provided under Paragraph 34 of AASB 119, CHW does rate increased to 9.5% on 1 July 2014 and is expected to not use defined benefit accounting for its defined benefit increase in line with the required Superannuation obligations under the Fund’s Defined Benefit category. This is Guarantee contribution rate; because the Fund’s Defined Benefit category is a multi- - the difference between resignation and retrenchment employer sponsored plan. benefits paid to any retrenched employees, plus As a multi-employer sponsored plan, the Fund was contribution tax (same as 2012/2013). established as a mutual scheme to allow for the mobility of Funding calls the workforce between the participating employers without attaching a specific liability to particular employees and their The Fund is required to comply with the superannuation current employer. Therefore, there is no proportional split of prudential standards. Under the superannuation prudential the defined benefit liabilities, assets or costs between the standard SPS 160, the Fund is required to target full funding participating employers as the defined benefit obligation is a of its vested benefits. There may be circumstances where: floating obligation between the participating employers and - a fund is in an unsatisfactory financial position at an the only time that the aggregate obligation is allocated to actuarial investigation (i.e. its vested benefit index (VBI) is specific employers is when a call is made. As a result, the less than 100% at the date of the actuarial investigation); or

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- a fund’s VBI is below its shortfall limit at any time other Differences between calculations than at the date of the actuarial investigations. The Fund surplus or deficit (i.e. the difference between fund If either of the above occur, the fund has a shortfall for the assets and liabilities) is calculated differently for funding purposes of SPS 160 and the fund is required to put a plan in purposes (i.e. calculating required contributions), for the place so that the shortfall is fully funded within three years of calculation of accrued benefits as required in AAS 25 and for the shortfall occurring. There may be circumstances where the values needed for the AASB 119 disclosure in CHW’s the Australian Prudential Regulation Authority (APRA) may financial statements. AAS 25 requires that the present value approve a period longer than three years. The Fund monitors of the defined benefit liability be calculated based on benefits its VBI on a quarterly basis and the Fund has set its shortfall that have accrued in respect of membership of the plan up to limit at 97%. the measurement date, with no allowance for future benefits In the event that the Fund Actuary determines that there is a that may accrue. shortfall based on the above requirement, the Fund’s Retrenchment increments participating employers (including CHW) are required to make During 2013-14, CHW was not required to make payments to an employer contribution to cover the shortfall. The the Fund in respect of retrenchment increments ($33,668 in methodology used to allocate the shortfall was agreed in 2012/13). CHW’s liability to the Fund as at 30 June 2014, for 1997 to fairly and reasonably apportion the shortfall between retrenchment increments, accrued interest and tax is $Nil the participating employers. ($33,668 in 2012/13). Using the agreed methodology, the shortfall amount is The Fund’s liability for accrued benefits was determined in the apportioned between the participating employers based on 31 December 2011 actuarial investigation pursuant to the the pre-1 July 1993 and post-30 June 1993 service liabilities then requirements of Australian Accounting Standard AAS 25 of the Fund’s defined benefit category, together with the as follows: employer’s payroll at 30 June 1993 and at the date the $m shortfall has been calculated. Net Market Value of Assets $4,315.3 The pre-1 July 1993 and post-30 June 1993 service liabilities of the Fund are based on: Accrued Benefits (per accounting standard) $4,642.1 - The service periods of all active members split between the Difference between Assets and Accrued Benefits $326.8 active members pre-1 July 1993 and post-30 June 1993 Vested Benefits $4,838.5 service period;

- The service periods of all deferred members split between The assumptions used in this actuarial investigation are the deferred members pre-1 July 1993 and post-30 June 1993 service period; and summarised below: - The pensioner (including fixed term pension) liabilities which (a) Net investment return: 7.5% p.a. (gross: 8.25%p.a.) are allocated to the pre-1993 period. (b) Salary Inflation: 4.25% p.a. The pre-1 July 1993 component of the shortfall is apportioned (c) Price Inflation: 2.75% p.a. between the participating employers based on the employer’s The next full actuarial investigation of the Fund’s liability for share of the total participating employer payroll at 30 June 1993. accrued benefits will be based on the Fund’s position as at The post-30 June 1993 component of the shortfall is 30 June 2014. The anticipated completion date of this apportioned between the participating employers based on actuarial investigation is 19 December 2014. the employer’s share of the total participating employer payroll (c) Defined Benefits Unfunded Liability Shortfall at the date the shortfall has been calculated. Vision Super’s actuary projected a shortfall at 1 July 2013 of Due to the nature of the contractual obligations between the $453m net of tax. CHW is a member of the Defined Benefits participating employers and the Fund, and that the Fund fund. The Corporation was made aware of the expected includes lifetime pensioners and their reversionary beneficiaries, shortfall through the year and was informed formally of their it is unlikely that the Fund will be wound up. In the unlikely share of the shortfall on 31 July 2012 which amounted to event that the Fund is wound up and there is a surplus in the $5.2m. This amount consists of $4.4m in contributions and Fund, the surplus cannot be applied for the benefit of the $0.8m in contributions tax. defined benefit employers where there are on-going defined benefit obligations. The surplus would be transferred to the The Corporation accounted for this shortfall in the 30 June fund accepting those defined benefit obligations (including the 2012 Annual Report in the Comprehensive Income Statement lifetime pension obligations) of the Fund. in Employee Benefits Expenses (Note 3) and in the Balance In the event that a participating employer is wound-up, the Sheet in Employee Benefits Provision (Note 12). defined benefit obligations of that employer will be transferred CHW paid the Defined Benefits fund shortfall in full on to that employer’s successor. 28 June 2013.

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Note 17: Superannuation (cont’d)

Central Highlands Water contributes in respect of its employees to the following superannuation schemes:

Type of Contribution 2014 2013 Scheme Rate $'000 $'000 Vision Super Scheme (Super Saver) Defined Benefits 9.25% 633 629 Vision Super Scheme (DEFB) Super Guarantee 9.25% 326 340 Australian Superannuation Super Guarantee 9.25% 61 57 AMP Super Guarantee 9.25% 38 33 ASGARD Super Guarantee 9.25% 12 12 VIC Super Super Guarantee 9.25% 32 29 Portfolio Super Super Guarantee 9.25% 21 19 MLC Super Super Guarantee 9.25% 7 6 Summit Super Guarantee 9.25% 0 4 UniSuper Super Guarantee 9.25% 25 14 CBUS Super Super Guarantee 9.25% 11 11 Plum Super Super Guarantee 9.25% 10 16 Telstra Super Guarantee 9.25% 26 22 ING Master Super Super Guarantee 9.25% 4 6 Health Superannuation Super Guarantee 9.25% 6 6 HESTA Super Super Guarantee 9.25% 6 5 Equipsuper Super Guarantee 9.25% 6 6 BT SuperWrap Super Guarantee 9.25% 7 7 Rest Super Guarantee 9.25% 33 20 Colonial First State Super Guarantee 9.25% 18 11 JWM Superannuation Fund Super Guarantee 9.25% 4 4 Mercer Super Guarantee 9.25% 3 5 Navigator Personal Retirment Super Guarantee 9.25% 6 6 Host Plus Super Guarantee 9.25% 7 6 LG Super Super Guarantee 9.25% 7 7 Wendouree Superannuation Fund Super Guarantee 9.25% 0 2 Force For Good Superannuation Super Guarantee 9.25% 2 2 Nicholson FRF Pty Ltd Super Guarantee 9.25% 2 2 Perpetual Wealthfocus Super Super Guarantee 9.25% 0 2 RND Superannuation Fund Super Guarantee 9.25% 4 3 Water Corp Super Fund Super Guarantee 9.25% 2 0 North Personal Superannuation Super Guarantee 9.25% 9 0 Freedom of Choice Personal Super Super Guarantee 9.25% 4 0 LUCRF Super Super Guarantee 9.25% 1 0 Care Super Super Guarantee 9.25% 1 0 J & L Bolt Super Fund Super Guarantee 9.25% 0 0 Myers Family Superannuation Fund Super Guarantee 9.25% 1 0 Contributions to all funds 1,335 1,294

As at the reporting date, there were no outstanding/overdue contributions payable to the above funds. As at the reporting date, there were no loans to or from CHW to any of the above funds.

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Note 18: Responsible Persons and Executive Officer Disclosures

(a) Responsible Persons The names of persons who were Responsible Persons at any time during the financial year are:- The Hon. Peter Walsh MP, Minister for Water (1 July 2013 to 30 June 2014) J. Johnson - Board Chair I. Coles - Director S. Howe - Director R. Nicholson - Director J. Plummer - Director G. Mason - Director M. Myers - Director (Appointed 1 October 2013) P. O’Donohue - Managing Director

Remuneration of responsible persons Remuneration paid to ministers is reported in the Annual Report of the Department of Premier and Cabinet. Other relevant interests are declared in the Register of Members’ Interests which each member of the Parliament completes. The number of Responsible Persons are shown below in their relevant income band.

Income Band ($) 2014 2013 Number Number $1 - $9,999 - 1 $10,000-$19,999 1 1 $20,000 - $29,999 5 5 $40,000 - $49,999 1 1 $180,000 - $189,999 - - $260,000 - $269,999 - 1 $280,000 - $289,999 1 - 8 9

2014 2013 $'000 $'000 Remuneration received, or due and receivable from the Corporation in connection with the management of the Corporation (includes termination payments and bonuses paid). 474 443

There were no amounts paid by the Corporation in connection with the retirements of responsible persons of the Corporation during the financial year. There were no amounts paid by the Corporation to other related parties during the year.

(b) Executive officers’ remuneration executive officers have been employed on a full time basis The number of executive officers, other than ministers and during the reporting period. accountable officers, and their total remuneration during the Several factors have affected total remuneration payable to reporting period are shown in the first two columns in the executives over the year. A new executive manager joined table below in their relevant income bands. The base CHW and a number of executives received bonus payments remuneration of executive officers is shown in the third and during the year. These bonus payments depend on the fourth columns. Base remuneration is exclusive of bonus terms of individual employment contracts. There were no payments, long service leave payments, redundancy contractors with significant management responsibility during payments and retirement benefits. All of the Corporation’s the financial year.

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Note 18: Responsible Persons and Executive Officer Disclosures (cont’d)

Income Band ($) Total Remuneration 1 Base Remuneration 2014 2013 2014 2013 Number Number Number Number $80,000-$89,999 1 1 $120,000-$129,999 - - - 1 $150,000-$159,999 - 1 - 1 $160,000-$169,999 - - 3 2 $170,000-$179,999 - 3 - - $180,000-$189,999 1 - - 1 $190,000-$199,999 2 - 1 - $200,000-$209,999 - - - - $210,000-$219,999 - 1 - - $220,000-$229,000 1 - - Total number of Executives 5 5 5 5

Total annualised employee equivalents 4.7 5 4.7 5

1 Total Remuneration includes base remuneration paid plus performance bonus paid.

2014 2013 $'000 $'000 Total remuneration received or due and receivable, by executive officers from the Corporation amounted to: 882 882 Base remuneration received or due and receivable, by executive officers from the Corporation amounted to: 775 802

Loans to Responsible Persons No loans have been made, guaranteed or secured by CHW, on behalf of the Responsible Persons or Responsible Persons’ related entities, during the financial year. Other Transactions between Responsible Persons and Responsible Persons’ Related Entities As a matter of Board policy all such dealings are conducted on normal commercial or employee terms at arms length. No such transactions occurred during the year.

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Note 19: Cash Flow Information

2014 2013 $'000 $'000

(a) Reconciliation of Net Cash Provided by Operating Activities to Net Result

Net Result for the period after income tax 7,221 3,863 Add/(less) Non-Cash Flows in Net Result Depreciation and Amortisation 20,250 22,305 (Profit)/Loss on Sale of Non-Current Assets 727 1,173 Provision for Impaired Receivables (28) (14) Gifted Assets Income (7,543) (6,074)

Changes in Assets and Liabilities Decrease/(Increase) in Receivables (84) (2,148) Decrease/(Increase) in Inventory and Biological Assets (30) (33) Decrease/(Increase) in Prepayments (154) (65) (Decrease)/Increase in Payables and Accruals 306 (213) (Decrease)/Increase in Provisions 599 (5,149) (Decrease)/Increase in Deferred Tax Liabilities 3,111 1,678

Net Cash (Outflow)/Inflow from Operating Activities 24,375 15,323

2013/14 ANNUAL REPORT 75 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 20: Financial Instruments

Table 20.1 Ageing analysis of financial assets

30 June 2014 Carrying Not past Past due but not impaired Impaired Amount due and not 1-3 months 3 months - 1-5 years financial impaired Less than 1 year assets 1 month $’000 $’000 $’000 $’000 $’000 $’000 $’000 Receivables Trade Receivables 18,020 16,491 554 413 689 61 (189) Other Receivables 4,330 3,798 145 54 104 228 - Investments and other financial assets Cash 601 601 - - - - - Deposits at Call 5,692 5,692 - - - - - Total 28,643 26,582 699 467 793 289 (189)

30 June 2013 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Receivables Trade Receivables 17,807 16,489 526 204 679 69 (161) Other Receivables 4,427 3,727 29 93 366 211 - Investments and other financial assets Cash 5,872 5,872 - - - - - Deposits at Call 1,019 1,019 - - - - - Total 29,125 27,107 555 297 1,045 280 (161)

Table 20.2 Maturity analysis of financial liabilities

30 June 2014 Carrying Nominal Maturity Dates Amount Amount Less than 1-3 months 3 months - 1-5 years 5+ 1 month 1 year years $'000 $'000 $'000 $'000 $'000 $'000 $'000 Financial Liabilities Payables 9,132 9,132 8,860 - 272 - - Borrowings 139,000 139,000 - 7,000 13,000 60,000 59,000 Finance Lease Liabilities* 31,252 31,252 - - 1,518 8,082 21,652 Total 179,384 179,384 8,860 7,000 14,790 68,082 80,652

30 June 2013 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Financial Liabilities Payables 8,672 8,672 8,604 - 68 - - Borrowings 147,000 147,000 - - 13,000 48,000 86,000 Finance Lease Liabilities* 32,598 32,598 - - 1,347 7,242 24,009 Total 188,270 188,270 8,604 - 14,415 55,242 110,009

* Finance Lease Liabilities relate to BOOT Contracts as disclosed at Note 1.12

76 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

Note 20: Financial Instruments (cont’d)

Table 20.3 Interest rate risk exposures The following sets out the Corporation’s exposure to interest rate risk, including the contractual repricing dates and the effective weighted average interest rate by maturity periods. Exposures arise predominantly from liabilities bearing variable interest rates as the Corporation intends to hold fixed rate liabilities to maturity.

30 June 2014 Weighted Carrying Interest rate exposure Floating Non- Average Amount Fixed Fixed Fixed interest interest Interest interest interest interest rate bearing Rate rate rate rate 0 - 1 Year 1 - 5 Years Over 5 Years $'000 $'000 $'000 $'000 $'000 $'000 Receivables Trade Receivables 6.9% 18,020 1,102 61 - - 16,857 Other Receivables - 4,330 - - - - 4,330 Investments and other financial assets Cash 0.00% 601 - - - 601 - Investments 2.40% 5,692 - - - 5,692 - Total Financial Assets 28,643 1,102 61 - 6,293 21,187

Financial Liabilities Payables - 9,132 - - - - 9,132 Borrowings 5.50% 139,000 13,000 60,000 59,000 7,000 - Finance Lease Liabilities 7.77% 31,252 1,518 8,082 21,652 - - Total Financial Liabilities 179,384 14,518 68,082 80,652 7,000 9,132

30 June 2013 Weighted Carrying Interest rate exposure Floating Non- Average Amount Fixed Fixed Fixed interest interest Interest interest interest interest rate bearing Rate rate rate rate 0 - 1 Year 1 - 5 Years Over 5 Years $'000 $'000 $'000 $'000 $'000 $'000 Receivables Trade Receivables 6.9% 17,807 883 69 - - 16,855 Other Receivables - 4,427 - - - - 4,427 Investments and other financial assets Cash 0.00% 5,872 - - - 5,872 - Investments 2.75% 1,019 - - - 1,019 - Total Financial Assets 29,125 883 69 - 6,891 21,282

Financial Liabilities Payables - 8,672 - - - - 8,672 Borrowings 5.72% 147,000 14,000 44,000 75,000 14,000 - Finance Lease Liabilities 7.77% 32,598 1,347 7,242 24,009 - - Total Financial Liabilities 188,270 15,347 51,242 99,009 14,000 8,672

2013/14 ANNUAL REPORT 77 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014

Note 21: Events occurring after balance date

No matters or circumstances have arisen since the end of the reporting period which significantly affected or may significantly affect the operations of the Corporation, the results of those operations, of the state of affairs of the Corporation in future financial years.

Note 22: Jointly Controlled Assets

On 6th May 2008, Central Highlands Water established with to Lake Eppalock and the Lake Eppalock to Sandhurst Coliban Water, an unincorporated joint venture for the Reservoir upgrade. development, operation and maintenance of the pipelines and The construction and operation of these jointly controlled infrastructure associated with the Goldfields Superpipe. assets are embedded in CHW’s core operations, and as such Under the agreement, both parties to the joint venture will there are no separately identifiable borrowings, borrowing costs own all Joint Venture assets as tenants in common in their or depreciation charges. There are no contingent liabilities. respective percentage interests. Central Highlands Water’s Operational costs are to be calculated on a combination of capital share has been determined by the total expenditure fixed component based on capacity share, a variable incurred on the Sandhurst Reservoir to the White Swan component based on volumes of water pumped and an Reservoir portion of the Goldfields Superpipe, as well as energy charges share based on volumes stored or pumped expenditure incurred on the upsizing of the Waranga Channel from Lake Eppalock.

Principal Activity Interest Water Operational 2013/14 Distribution Costs % $'000 $'000

Operation and maintenance of pipelines and associated infrastructure As detailed below

Waranga Channel to Lake Eppalock, Bendigo pipeline and associated 1/3 operations and 19,979 580 pumps and works maintenance costs

Lake Eppalock to Sandhurst Reservoir, Bendigo pipeline and associated 1/3 operations and 40,155 164 pumps and works maintenance costs

Sandhurst Reservoir Bendigo, to White Swan Reservoir, Ballarat pipeline 100% operations and 88,051 179 and associated pumps and works maintenance costs

Principal Activity Interest Water Operational 2012/13 Distribution Costs % $'000 $'000

Operation and maintenance of pipelines and associated infrastructure As detailed below

Waranga Channel to Lake Eppalock, Bendigo pipeline and associated 1/3 operations and 20,219 490 pumps and works maintenance costs

Lake Eppalock to Sandhurst Reservoir, Bendigo pipeline and associated 1/3 operations and 40,708 174 pumps and works maintenance costs

Sandhurst Reservoir Bendigo, to White Swan Reservoir, Ballarat pipeline 100% operations and 89,199 83 and associated pumps and works maintenance costs

As at 30 June 2014, there were $nil ($nil 2012/13) outstanding liabilities incurred by Central Highlands Water and the unincorporated joint venture.

78 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX ACCOUNTABLE OFFICER’S AND CHIEF FINANCE AND ACCOUNTING OFFICER’S DECLARATION

We hereby certify that the financial report of Central Highlands Region Water Corporation has been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Australian Accounting Standards and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2014 and the financial position of the Corporation as at 30 June 2014. We are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate. Signed in accordance with a resolution of the Board:

Jeremy Johnson Chair Central Highlands Region Water Corporation

Paul O’Donohue Managing Director Central Highlands Region Water Corporation

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

26 August 2014

2013/14 ANNUAL REPORT 79 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY VAGO REPORT

80 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

2013/14 ANNUAL REPORT 81 PART 1 - YEAR IN REVIEW | PART 2 - WATER CONSUMPTION & DROUGHT RESPONSE | PART 3 - ENVIRONMENTAL & SOCIAL SUSTAINABILITY PART 7 DISCLOSURE INDEX

The 2013/14 Annual Report of the CENTRAL HIGHLANDS REGION WATER CORPORATION is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of the Corporation’s compliance with statutory disclosure requirements.

Legislation Requirement Page Reference

REPORT OF OPERATIONS Charter and purpose FRD 22 E Manner of establishment and the relevant Ministers 4 FRD 22 E Objectives, functions, powers and duties 4 FRD 22 E Nature and range of services provided 4 Management and structure FRD 22 E Organisational structure 20 SD 2.2(f)(g) Audit Committee requirements 21 Financial and other information FRD 10 Disclosure index 82-83 FRD 22 E Statement of workforce data 25 FRD 22 E Employment and conduct principles 25 FRD 22 E 5 year summary of the financial results 7 FRD 22 E Significant changes in financial position during the year 7 FRD 22 E Operating and budgetary objectives and performance against objectives 30-31 FRD 12 A Disclosure of major contracts 29 FRD 22 E Major changes or factors affecting performance 7 FRD 22 E Subsequent events 78 FRD 22 E Application and operation of the Freedom of Information Act 1982 27 FRD 22 E Compliance with building and maintenance provisions of Building Act 1993 27 FRD 22 E Statement on National Competition Policy 27 FRD 22 E Application and operation of the Protected Disclosures Act 2012 27 FRD 22 E Details of consultancies over $10,000 28 FRD 22 E Details of consultancies under $10,000 28 FRD 22 E Statement of availability of other information 27 FRD 22 E Occupational Health and Safety 26 FRD 25 B Victorian Industry Participation Policy disclosures 27 SD 4.2(j) Accountable Officer’s Declaration 32 SD 4.5.5 Risk Management Attestation 29

82 2013/14 ANNUAL REPORT PART 4 – CORPORATE INFORMATION | PART 5 – PERFORMANCE REPORT | PART 6 – FINANCIAL STATEMENTS | PART 7 – DISCLOSURE INDEX

FINANCIAL STATEMENTS Financial statements required under Part 7 of the FMA SD 4.2(c) Compliance with Australian accounting standards and other authoritative pronouncements 40-50 SD 4.2(c) Compliance with Ministerial Directions 40-50 SD 4.2(d) Rounding of amounts 41 SD 4.2(c) Accountable Officer’s Declaration 32 SD 4.2(a) Statement of changes in equity 38 SD 4.2(b) Comprehensive Operating Statement 36 SD 4.0(b) Statement of financial position 37 SD 4.2(b) Statement of cash flows during the year 39 Other disclosures in notes to the financial statements FRD 21 B Responsible person and executive officer disclosures 73-74 FRD 23 Superannuation liabilities and disclosure 70-72

LEGISLATION Freedom of Information Act 1982 27 Building Act 1993 27 Protected Disclosures Act 2012 27 Victorian Industry Participation Policy Act 2004 27

MINISTERIAL REPORTING DIRECTIONS MRD 01 Performance Reporting 30-31 MRD 02 Reporting on Water Consumption and Drought Response 8-9, 11 MRD 03 Environmental and Social Sustainability Reporting 12-15, 18-19 MRD 04 Disclosure of Information on Bulk Entitlements, Transfer of Water Entitlements, Allocations and Licenses, Irrigation Water Usage and License Entitlements 14, 16-17 MRD 05 Annual Reporting of Major Non-Residential Water Users 8

2013/14 ANNUAL REPORT 83 CENTRAL HIGHLANDS WATER 7 Learmonth Road Wendouree VIC 3355 PO Box 152 Ballarat VIC 3353 P: 1800 061 514 F: 03 5320 3299

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