2016

Murray Irrigation Irrigation Murray Annual Report Murray Irrigation Murray

focus Future Future

Murray Irrigation Annual Report 2016 Murray Irrigation Limited Banker 2016 Murray Irrigation Limited (ABN 23 067 197 933) is a company Commonwealth Bank of Australia Annual Report limited by shares, incorporated and 31 Napier Street The 2016 Murray Irrigation Limited Annual domiciled in Australia. Its registered office Deniliquin NSW 2710 Report is a summary of operations and and principal place of business is: financial performance of the Company from 1 July 2015 to 30 June 2016. 443 Charlotte Street Solicitor Operations and performance for this period PO Box 528 Addisons have been measured against key reporting Deniliquin NSW 2710 Level 12 areas in addition to meeting our statutory Telephone: 1300 138 265 60 Carrington Street financial reporting responsibilities. Facsimile: (03) 5898 3301 Sydney NSW 2000 www.murrayirrigation.com.au The 2016 Murray Irrigation Limited [email protected] Annual Report provides a concise and Annual General Meeting comprehensive summary. The objective Board of Directors Will be held at 7.00pm on Thursday of this report is to provide information 17 November 2016 at the Deniliquin to our shareholders to demonstrate The following people were Directors of the Golf Club, Golf Club Road, Deniliquin, our transparency, accountability and Company at the end of the financial year: NSW 2710 performance. D.M. Robertson (Chairman) The 2016 Murray Irrigation Limited Annual B.P. Simpson (Deputy Chairman) Further information Report is published electronically and T.W. McKindlay can be accessed via the Murray Irrigation J.A. Sides For further information about Murray Limited website www.murrayirrigation.com.au C.R. Brooks Irrigation go to the Company’s website at J.M. Bradford www.murrayirrigation.com.au ISBN 978-0-9923511-3-7 B.J. Barlow Copyright 2016 S.N. Stone Design and photography Design langdonlorraine Chief Executive Officer www.langdonlorraine.com.au Michael Renehan Photography Nathan Holahan Company Secretary Murray Irrigation Ross Mallett Erica Laing Murray Irrigation Auditor Sam Singleton Grant Thornton Audit Pty Ltd Nick Robinson The Rialto Creative Proof Photography Level 30, 525 Collins Street Melbourne VIC 3000

Cover: Murray Irrigation customer Ellie Singleton ordering water via a smartphone on her dairy farm in Blighty, NSW. Opposite: Wheat crop, Murray Irrigation district. Murray Irrigation is committed to attracting and growing irrigation businesses in the district through innovative thinking, technological advances and working with our customers to ensure they get the service they need. We are modernising our system in order to enhance service levels to support the new age of technology driven irrigated agriculture.

Contents At a glance 2 Chairman’s report 4 Chief Executive Officer’s report 6 Year in review 10 01 Safety 12 02 Engagement 14 03 People 18 04 Network optimisation 22 05 Operations 28 06 Finance 40 07 Governance 44 Directors 50 Company profile and executive management team 52

Financial statements and reports Directors’ report 58 Financial statements 62 Directors’ declaration 91 Auditor’s independence declaration 92 Independent audit report 93

Murray Irrigation Limited Annual Report 2016 1 At a glance

Corporate structure Established 1995 (formerly government owned) Unlisted public company 2016 delivery Head office Deniliquin efficiency 80.5% Regional offices 88.2% last year Finley and Wakool Water access licences Irrigation customers profile NSW Murray Regulated River as at 30 June 850,312 units general security – non-government (as at June 2016) 175,895 units general security – other 292,010 units conveyance 121,704 units supplementary water 117 units high security (irrigation) 3,170 units high security (town) Landholdings supplied 2,208 1,115 2,208 Staff farm businesses landholdings 146 (FTE) 1,299 last year 2,037 last year Area of operations 724,000ha Regional population 29,000 approximately Gross value irrigated agriculture production Over $430 million GVIAP (pro rata 2014/15 ABS) Supply system 7% 39% 2,858km gravity-fed earthen channels of farm of farm Supply points 506 extra-large outlets businesses businesses 2,636 large outlets grew rice grew cereals 284 small outlets 20% last year 29% last year 1,258 unmetered pipes Five year average water use on-farm 832GL Drainage system 1,421km gravity fed earthen channels Sub-surface drainage catchment 25,000ha Sub-surface drainage system 20% 1% 115 km pipes, 54 pumps, 2,100ha evaporation basins of farm of farm Accredited escapes Capacity 3,350ML/day (four escapes) businesses businesses grew permanent grew cotton pasture 17% last year

2% of farm businesses participated in a private wetland watering project

The upgraded Box Creek Bridge, located 2 Murray Irrigation Limited Annual Report 2016 on the Pretty Pine-Moulamein Road. New Box Creek Bridge opened “Safety on the Pretty Pine-Moulamein Road has been dramatically improved thanks to a joint initiative between the NSW Government, Murray Irrigation and Edward River Council. Outcomes like this can be achieved when various organisations work together and have a common goal which, in this instance, was providing safer travel on our roads.” Barry Barlow Deputy General Manager and Director of Operations, Edward River Council

Murray Irrigation Limited Annual Report 2016 3 Chairman’s report

Murray Irrigation has met the challenge In order to balance our budgets into the With less entitlements held against our to refocus the organisation to seek out future, we have reviewed our asset base licence, a key challenge for the Company opportunity and become a customer and made the decision to impair, or write- is the size and scope of our footprint and oriented business. This has meant down, the value of some of our older assets we are committed to ensuring we remain becoming more commercial to ensure realising they are no longer fully utilised as one of the most efficient gravity fed that as a Company we have a positive, a result of reduced consumptive water held earthen channel networks in the country. productive and sustainable future with on our licence due to Government water The PIIOP programs will help the Company our customer shareholders. reform and recovery programs. In doing so, achieve that goal. we will address the impact of increasing We are also committed to ensuring the Future focus depreciation costs on the business. Company maximises volume used within After nearly 18 months in the role, Chief Impairment is a standard accounting our system to realise value from Company Executive Officer, Michael Renehan has practice that allows us to reassess the assets, including returns from PIIOP cemented the organisational structure value of our assets to ensure they reflect savings, conveyance savings through needed to transform the Company to focus the true value of the current business. operational improvements and opportunities on customer service while ensuring we have Asset impairment will have the effect of to access supplementary flows. the capabilities to deliver outcomes from reducing ongoing depreciation without The Snowy Advance was an example major projects, including the Private Irrigation compromising our service based on our of how the Company is being proactive Infrastructure Operators Program (PIIOP). business cycle forecasts. to maximise water use in our footprint. Ultimately, Murray Irrigation is the Corporate priorities Our team worked with Snowy Hydro and custodian of the bulk water licence against the NSW Department of Primary Industries The challenge for the Company is how which our customers hold the property to negotiate an offer that minimised risk to to modernise the system for the future right of their entitlements. This right must the Company and customers while giving while recognising the need to rationalise always be respected. By providing reliable, participants some certainty for the early non-performing assets with low utilisation. flexible and responsive customer service season. The fact that it was fully optioned, and seeking opportunities to add value to We have undertaken a comprehensive shows the product gave customers another our region we hope to retain old and attract review of the PIIOP project to ensure the opportunity to access volume while the new customers and water entitlements on technology choices we have made are fit welcome winter rain has meant that many our licence. We are continuously looking for for purpose and provide better service for did not need to exercise their option. We new ways to attract investment and identify our customers. We are confident that we are confident that we have developed a new opportunities for the region. have adopted the right solutions without product that can be offered again in the gold-plating the system. future and will again be well received. Corporate performance The opportunity to participate in PIIOP In achieving these key initiatives Over the past 12 months, the executive Round 3 presented the Board an throughout the year we have been team, under Michael’s leadership have opportunity to ensure Murray Irrigation encouraged by the support from our worked hard to reduce costs and maximise finalises system upgrades to improve local Members of Parliament, Sussan volume within the system bringing the operational capabilities. We have Ley (Federal) and Adrian Piccoli (State). business closer to breakeven status. negotiated a process that allows us We have a solid working relationship with The Board is focussed on the future, to thoroughly investigate the different both the State and Federal Ministers and working with management to ensure elements of the project to ensure the their staff and we are actively seeking to the Company has a solid foundation to outcomes will lead to more water in our increase the level of engagement between continue to deliver for our customers. system. To this end, I must acknowledge Murray Irrigation and other regional It is our goal to ensure we have the right the willingness of the Department of interests and Government. Agriculture and Water Resources to corporate structure and infrastructure in Another key priority for the Board is the negotiate an arrangement that provides place to balance out the budget bottom line safety of our staff and our customers. us with the ability to be flexible as we over a five-year business cycle recognising We have strengthened our processes to develop robust business cases. that we operate in highly volatile “boom or ensure that all staff and visitors to Murray bust” water availability scenarios. Irrigation, including contractors, are inducted properly and aware of our shared

4 Murray Irrigation Limited Annual Report 2016 Murray Irrigation is prepared to challenge the status quo where there are opportunities for our Company and our region and we are actively working with others to achieve our goals.

responsibility to undertake activities in a increased use of infrastructure. Murray acumen to ensure we continue to be a way to ensure everyone gets home to their Irrigation’s infrastructure is strategically leader in the delivery of irrigation water loved ones at the end of the day. We are placed and we have a history of delivering and related products and services. actively promoting safety through Talking environmental flows that pre-date the As Chair, I am committed to having strong Water and have recently conducted an Basin Plan. We want to build on our track governance processes in place to ensure, audit of all assets on public land to ensure record to ensure that environmental water as a Board, we are working in the best they are safe and fit for purpose. We would managers deliver local environmental interests of the Company. This expectation also like to see this culture embedded outcomes, through responsible commercial flows onto all levels of the organisation through our customer base to make our arrangements without compromising the to ensure everyone is aware of their roles region a safe place to live and work. service we provide traditional customers. and responsibilities for the benefit of our In doing so, we can deliver true triple business and our customer shareholders. Uniting voices bottom line outcomes in our region. I want to thank my fellow Directors who As one of the largest employers in the have committed their time and efforts to region, creating value through delivering Diversity the Board over the past 12 months. As we irrigation water to customers from a variety As our region becomes more diversified, look towards the future, we are actively of commodity groups, Murray Irrigation with new crops including cotton and challenging the operating environment works for a wide range of interests across interest in tree nuts, so too must our to ensure our business becomes more the region. To that end, we have facilitated business, our staff and our Board reflect commercial and our region is seen as an the formation of the Murray Group – a a diverse skills base. We are committed to attractive place to invest – serviced by an way to bring together the many voices in attracting the best to our region through efficient, modern and affordable irrigation the region who are all working for better a competitive, challenging and safe infrastructure scheme. outcomes for irrigation and agriculture. workplace. In recruiting staff and attracting I want to thank the Murray Irrigation staff The Murray Group comprises and appointing Board members we look who have risen to the challenge over the representatives from Southern Riverina for people with the right mix of skills and last 12 months, accepting change and Irrigators, Murray Valley Private Diverters experience. Both Ben Barlow and Sharman working to cut costs while refocusing the and Murray Irrigation enabling discussion Stone bring solid experience from different business on improving safety and customer about issues of importance to the region sectors to complement the existing Board. service and identifying ways to maximise and facilitating knowledge sharing. Dr Stone also looks forward to working operational efficiencies. Together, we have developed the Murray with Murray Irrigation in our goal to Messages, a document that outlines improve the diversity of participation in Finally, I want to thank our customers solutions that, if adopted, will reduce or agri-business in the region, particularly and shareholders. Despite the low water mitigate the negative impacts water reform encouraging women to become actively allocations in the 2015/16 season, Murray has had on our area. involved. We believe this is an important Irrigation was a net importer of water onto our footprint which is testament to the The Murray Group expects a higher step to encouraging more diversity in commitment of our customers to continue level of consultation and engagement by regional businesses and Boards, including to produce high quality food and fibre government agencies than has occurred nominations for the Murray Irrigation Board in our district. I look forward to engaging in the past. By bringing these interested into the future. with you over the next 12 months. parties together, Government and agencies Acknowledgements now have a single point of contact in the Murray Valley to refer to and consult with This year we welcomed four new Directors when making decisions that impact on our to the Board with the election of member Mark Robertson region and the group is actively seeking Directors John Bradford and Chris Brooks Chairman engagement at the highest levels. and the appointment of independent Directors, former Federal MP, Dr Sharman Murray Irrigation is also working with Stone and Ben Barlow who has extensive government agencies to identify ways experience in the financial services we can work together to further benefit sector. We now have a Board with the our region through local outcomes and right balance of business and agricultural

Murray Irrigation Limited Annual Report 2016 5 Chief Executive Officer’s report

In my first 12 months at Murray Irrigation, I am pleased to say that in a year of low I have set about restructuring and water allocations, of 23 percent, Murray refocussing the organisation to prioritise Irrigation was a net importer of 20GL of safety, customers and the financial water onto our footprint. This water trade performance of the business. The key plus an early 63GL in efficiency allocations drivers of cost, volume and price have and customer carryover saw us deliver been central to any changes undertaken 340GL on-farm for the season which to get the business back to breakeven equates to just over 40 percent of our performance. licenced entitlements. We also delivered The new executive team have come 16GL for environmental flows and 244GL together with a joint commitment to provide for River Operations which means we better service to our customers and, delivered a total of 600GL for the year. through major projects, design and build Financial performance a network that is responsive to customer needs in line with anticipated utilisation. Our focus on cost, volume and price has been critical to getting Murray Irrigation We have revised internal operations to to meet the needs of our shareholders. minimise costs without compromising service and have reviewed all agreements One of the priority issues I identified to ensure they meet the expectations when I joined the Company was the need of shareholders in providing sound to manage costs before considering price commercial arrangements. as a mechanism to achieve a breakeven operating bottom line. As we look to the future, we have undertaken a comprehensive review of Murray Irrigation has reduced operational the net worth of our assets recognising costs by $3.5 million in the 2015/16 that utilisation of water infrastructure season by managing expenditure and assets has been reduced as a result of implementing new supplier contracts and ongoing government water reform. In order procurement protocols. We have contained to minimise the impact of operational costs the operational loss incurred in a year on our customers we had to reassess the of low water allocations where on-farm value of our assets to ensure they reflect water deliveries were down by 50 percent the value of the current business, not what on the previous irrigation season. Due to the business used to be. As such we have reduced volumes delivered, operating EBIT written-down the value of these assets this foregone was estimated to be $1.8 million. year which will have the effect of reducing We have also reviewed our commercial the long-term depreciation and improving agreement to supply water through our our Earnings Before Interest and Tax network for the MDBA and WaterNSW. Our (EBIT) in the future. objective is to ensure that all customers, governments and farmers, pay fairly for the use of our assets. We have not yet resolved our position on this agreement but are working with both State and Federal governments to achieve an equitable outcome for all.

6 Murray Irrigation Limited Annual Report 2016 Murray Irrigation has conducted a wholesale business review to ensure our ongoing business sustainability – this includes a revaluation of assets to minimise the impact of reduced water availability and underutilisation of assets on business costs into the future.

The other significant impactor on our MIL MILCast PIIOP RHPL Total bottom line is the value of depreciation 2016 $’000 $’000 $’000 $’000 $’000 of our assets. Our annual depreciation has been tracking around nine million dollars. On-farm Delivery (ML) 339 ––– 339 This year our depreciation loss was higher Revenue than our operating loss. By undertaking a Irrigation activities 27,127 ––– 27,127 write-down of our assets this year we are likely to improve our returns in the future, MILCast 2,510 –– 2,510 containing costs and enabling us to better Total revenue 27,127 2,510 –– 29,637 control the process and fees we charge for our services. Cost of goods sold Murray Irrigation is the custodian of older Irrigation activities, Govt fees (8,759) ––– (8,759) infrastructure that is being underutilised, and charges with a lower rate of return, in the modern MILCast (2,059) –– (2,059) environment. The system is capable of delivering around 1,500GL per year Total cost of goods sold (8,759) (2,059) –– (10,818) (long-term average). Through ongoing Gross profit 18,368 451 –– 18,819 water reform, Murray Irrigation customers and shareholders now hold almost 30 Expenditure percent less entitlements against Murray Wages (10,659) (226) –– (10,885) Irrigation’s bulk licence than at the time of privatisation. The current expectation is Operations (6,105) ––– (6,105) that our long term average water delivery Corporate and admin (1,445) (77) (10,656) (5) (12,183) on-farm will be in the vicinity of 600GL per year, down from around 1,000GL per year Other 0 at privatisation. Total expenditure (18,209) (303) (10,656) (5) (29,173)

EBITDA 159 148 (10,656) (5) (10,354) Depreciation (9,326) (123) –– (9,449) Operating EBIT (9,167) 25 (10,656) (5) (19,803) Other income 2,066 – – 5 2,071 Abnormal items (2,744) ––– (2,744) Provisions/adjustments (66,579) ––– (66,579) EBIT (76,424) 25 (10,656) – (87,055)

Interest received AMRR 1,402 ––– 1,402 Other 1,622 ––– 1,622 Total interest received 3,024 ––– 3,024 Net profit/(loss) before tax (73,400) 25 (10,656) – (84,031) and PIIOP revenue

Note: Murray Irrigation is reporting an impairment PIIOP revenue – grant funding – – 34,210 – 34,210 loss, or asset write-down this year which will have the effect of reducing ongoing depreciation in Net profit/(loss) before tax, (73,400) 25 23,554 – (49,821) future years. inc PIIOP revenue

Murray Irrigation Limited Annual Report 2016 7 Chief Executive Officer’s report (continued)

Murray Irrigation will meet the challenge of modernising the system for the future while rationalising underutilised assets.

Impairment The Australian Accounting Standards The amount allowed for accumulated require that the carrying value of assets depreciation includes any required be assessed at least annually so that depreciation charge taking into account an entity’s assets are measured in technical or commercial obsolescence. accordance with the requirements set In the case of Murray Irrigation Limited, out in the accounting standards. Where an allowance has been included an asset’s carrying value, is higher than in the assessment of accumulated its recoverable value an impairment depreciation for the reduced delivery charge is required to be recorded to volumes of water available to the reduce the carrying value of the asset to Company and the extent to which the the recoverable value. same network would be created if it had to be replaced today given changes in Australian Accounting Standard AASB technology, engineering practices and 136 – Impairment of Assets requires other efficiencies. that a not-for–profit entity assess the recoverable value of plant and Deloitte Corporate Advisory Pty Ltd was equipment upon a basis known as engaged to conduct an independent “depreciated replacement cost”. assessment of the fair value of all Murray Irrigation’s tangible assets to Depreciated replacement cost is determine the depreciated replacement defined as the current replacement cost of the Company’s assets. cost of an asset less, where applicable, accumulated depreciation calculated to As a consequence of the impairment reflect the already consumed or expired charge recorded this year the Company future economic benefits of the asset. will record reduced depreciation in future years which will lead to a positive The current replacement cost of an impact on future EBIT. asset is measured by reference to the lowest cost at which the gross future economic benefits of that asset could currently be obtained in the normal course of business.

8 Murray Irrigation Limited Annual Report 2016 Investing in the future Building on this work, we looked at Safety Murray Irrigation is committed to attracting opportunity for further infrastructure Our safety record has improved in terms of and growing irrigation businesses in optimisation to result in water savings lost time injury (LTI) days. In addition, we the district through innovative thinking, for the benefit of the entire region. have seen our Lost Time Injury Frequency technological advances and working to Commonwealth PIIOP Round 3 funding will Rate (LTIFR) come down from over 20 enable customer access to volume. build on work already undertaken and will when I started, to just under nine. We have re-shape Murray Irrigation’s supply system, The Snowy Advance product was undertaken a complete safety audit within including upgrades to the Mulwala Canal, the Company and have implemented new developed to give our customers and enhance the Company’s service levels certainty to access up to 200GL early systems to ensure that number comes to support a new age of technology driven down in the future. The PIIOP team, which in the irrigation season. Working with irrigated agriculture. Snowy Hydro and the NSW Department has operated with zero LTIs over the life of the project, will roll-out their safety systems of Primary Industries, we were able to Customer service develop a product that allowed voluntary into the core business. participation and minimal risk. We will I was told early in my tenure that as Safety and wellbeing is one of Murray continue to look at new opportunities to an organisation we needed to be less Irrigation’s core values and we have a attract water volume onto our footprint to bureaucratic and improve how we engage joint responsibility to ensure that we, as ensure our region has a productive and with customers. As a result, we have individuals and as a team, work together sustainable future. changed our structure, integrating our to ensure a safe and productive work operational and service teams to provide environment. We are committed to being While some of our older infrastructure a streamlined service experience. The is underutilised, there remains a need to proactive about safety and working with Customer Support team is focussed customers to ensure it is a key focus of modernise our system in order to remain on providing personal, knowledgeable, competitive in an environment where water daily operations and we remove workplace consistent and professional service across hazards across our footprint. allocation is transferable and customers all Murray Irrigation offices. demand a responsive and flexible service. I remain committed to ensuring Murray Our focus is to provide day to day support To ensure we meet the challenge of Irrigation remains focussed on customers, for customer account enquiries including safety and achieving a breakeven bottom operating a modern, customer focused information about merging or consolidating network, we conducted a review of the line over the business cycle and I thank accounts, facilitating permanent and the Board and the Murray Irrigation staff PIIOP Round 2 project to ensure we are temporary trade, as well as daily water on track to install efficient outlets to our for their support and efforts to achieve orders. We are also seeking to get more these goals. The next 12 months will be irrigation customers by October 2017. With feedback from customers through one on new infrastructure and outlets being rolled challenging as we move the business onto one meetings and working with landholder a more commercial footing with a focus out across our divisions, we can provide associations and industry groups so we better service with higher flows and greater on building a strong foundation and a new can continue to improve our service into automated delivery network. command control improving the on-farm the future. outcomes for customers. Our review has shown that this level of service will meet the needs of the majority of customers without over-capitalising our extensive Michael Renehan network. Chief Executive Officer

Murray Irrigation Limited Annual Report 2016 9 Year in review 2015 – 2016

July 2015 September 2015 November 2015 • The NSW Department of Primary • DPI Water announces two percent • DPI Water announces one percent Industries (DPI) Water announces allocation increase for NSW Murray allocation increase for general security zero percent commencing allocation high security allocation, bringing total (Class C) water entitlement holders, for general security (Class C) water allocation to 97 percent of entitlement. bringing total allocation to 13 percent. entitlement holders. The announced • Murray Irrigation holds information • Graeme Pyle is elected Chairman of allocation for domestic (Class A) is 100 workshops for applicants involved in the Southern Riverina Irrigators. percent and high security (Class B) is 80 Round 5 On-Farm Irrigation Efficiency percent. • Murray Irrigation co-hosts a Women in Program. Water seminar at the Blighty Hall. More • PIIOP outlet consultation commences in • DPI Water announces general security than 180 local ladies attend the informal, the Deniboota area of operation (Division (Class C) allocation of four percent of relaxed session to learn more about the 14 and 15), south of Deniliquin. entitlement. water industry. • Murray Irrigation opens the Mulwala • Murray Irrigation announces an election • DPI Water announces one percent Canal offtake for channel filling purposes to fill three Board vacancies, which arise allocation increase for general security on Monday 27 July, signalling the start of by scheduled rotation. The candidates (Class C) water entitlement holders, the 2015/16 irrigation season. are: Mark Robertson, Roger Reynoldson, bringing total allocation to 14 percent. John Bradford, Christopher Brooks and • Murray Irrigation holds its Annual August 2015 Gary Hare. General Meeting (AGM) on Thursday 19 • The Board agrees to a water efficiency November at the Deniliquin RSL Club. • Murray Irrigation opens the Wakool Main allocation of three percent of permanent • Following the AGM, Murray Irrigation’s Canal offtake for channel filling purposes delivery entitlements. Board of Directors hold the bi-annual on Monday 3 August. election of Chairman and Deputy • The Parliamentary Secretary to the Chairman. Mark Robertson is elected Minister for the Environment announces October 2015 the new Chairman of the Company, with that Murray Irrigation will be a delivery • DPI Water announces two percent outgoing Chair Bruce Simpson elected partner for Round 5 of the On-Farm allocation increase for general security Deputy Chairman. Irrigation Efficiency Program. (Class C) water entitlement holders, • New Directors Chris Brooks and John • Murray Irrigation hosts informal bringing total allocation to six percent. Bradford are welcomed to the Board, breakfasts at each of its three centres • MILCast officially opens its new office while Michael Hughes, Roger Reynoldson (Deniliquin, Finley and Wakool) to allow in Murray Hut Drive, Finley. and Robyn Clubb are farewelled as customers the chance to meet new Directors. CEO Michael Renehan. • Chris Brooks, John Bradford and Mark Robertson are elected to the Murray • DPI Water announces allocation trade out • DPI Water announces NSW Murray Irrigation Board of Directors following of the Murrumbidgee valley is re-opened. high security (Class B) allocation will the declaration of the postal ballot by However, trade out of the valley is closed increase by 15 percent to 95 percent of the Australian Electoral Commission. within 24 hours, following unprecedented entitlement. General security allocation Current Director Roger Reynoldson was trading activity. remains unchanged (zero percent). not re-elected and candidate Gary Hare • As part of a comprehensive review was not elected. of Murray Irrigation’s strategy and • Murray Irrigation’s Management Team organisation, the roles of Executive holds a ‘meet and greet’ barbecue for Manager Customer and External customers near Tocumwal. Relations, Executive Manager Operations and Executive Manager Finance are • Murray Irrigation’s PIIOP team officially made redundant. The Company farewells moves into its new demountable building Jenny McLeod, Nick Ritchie and Oliver next to the Murray Irrigation head office Kietzmann. at 443 Charlotte Street, Deniliquin. • Nominations are called to fill three • DPI Water announces six percent shareholder Director vacancies on allocation increase for general security the Murray Irrigation Limited Board of (Class C) water entitlement holders, Directors. bringing total allocation to 12 percent. • Murray Irrigation holds an outlet upgrade program workshop for customers in the Wakool area.

10 Murray Irrigation Limited Annual Report 2016 December 2015 February 2016 April 2016 • DPI Water announces one percent • DPI Water announces new procedures • Applications for participation in Murray allocation increase for general security for Murrumbidgee Inter-valley Trade (IVT). Irrigation’s 2016/17 Snowy Advance (Class C) water entitlement holders, • Murray Irrigation announces that it has project open on Friday 15 April. bringing total allocation to 15 percent. signed a letter of intent to negotiate an • Murray Irrigation reports that as part • Minister for Agriculture and Water advance of nominally 200GL water from of its PIIOP project, 290 regulator sites Resources, Barnaby Joyce, announces Snowy Hydro Limited for the 2016/17 have been upgraded to new Rubicon the appointment of Phillip Glyde as Chief water year. gate technology (out of a total of 580). Executive of the Murray-Darling Basin • DPI Water announces four percent • Murray Irrigation holds a series of Snowy Authority (MDBA). allocation increase for general security Advance customer information sessions. • DPI Water announces four percent (Class C) water entitlement holders, allocation increase for general security bringing total allocation to 23 percent. (Class C) water entitlement holders, • The DPI Water announcement includes May 2016 bringing total allocation to 19 percent. the first outlook for 2016/17, indicating • The Company closes its Mulwala and • Murray Irrigation revamps the ‘PIIOP’ that general security allocation is likely to Wakool Canal offtakes on Monday 9 May, section of its website. The new and commence at zero percent of entitlement. marking the end of the irrigation season. improved PIIOP section includes • The Board agrees to a three percent • Applications (and applicable option fees) detailed information about the project, increase in the water efficiency allocation, maps, photos, an archive of customer for participation in Murray Irrigation’s taking the total to six percent of 2016/17 Snowy Advance project close testimonials, newspaper advertisements, permanent delivery entitlements. media releases, radio interviews and a on Friday 13 May. The product is fully glossary of terms. • Murray Irrigation, Southern Riverina subscribed, with the majority of the volume Irrigators and Murray Valley Private optioned by Murray Irrigation shareholders Diverters establish the Murray Group and the remainder taken up by invited January 2016 to facilitate knowledge sharing and to corporate partners. ensure local interests have a united voice. • Murray Irrigation surpasses 1,000 • Despite intermittent rainfall to start the • The Murray Regional Algal Coordinating customer outlet upgrades through the year, generally dry and hot conditions Committee issues a red alert warning for PIIOP project. result in very low system inflows. DPI blue-green algae in local waterways. Water therefore announces no further • The Company commences channel increase to general security allocation draining out all escapes in preparation in January. for routine winter maintenance and PIIOP March 2016 construction works. • Deputy Prime Minister and Minister for Agriculture and Water Resources, Barnaby Joyce, announces the June 2016 appointment of Murray Irrigation’s • The Murray Water Exchange closes on Corporate Affairs and Stakeholder Friday 3 June. Engagement Manager, Perin Davey, to the Agricultural Industry Advisory Council. • The Murray Regional Algal Coordinating Committee lifts the red alert warnings for • The southern Murray-Darling Basin blue-green algae in both the Murray and experiences a significant week-long Edward rivers. heatwave, with average maximum temperatures up to 12°C above the • Murray Irrigation announces the long-term average for this time of year. appointment of Ben Barlow as a new Deniliquin experienced eight consecutive independent Director. days above 38°C, easily breaking the • Murray Irrigation announces that previous March record of six days in regulatory approval for the 2016/17 1934. Snowy Advance project has been • The ‘Speak Up’ campaign organises a received. community march in Deniliquin for World • Murray Irrigation’s 2016/17 Fees Water Day. More than 300 people were and Prices Schedule and Information in attendance. Statement is mailed to all customers. • Independent Director Chris Badger • Murray Irrigation secures funding From L–R, a cotton crop within the district, resigns from the Murray Irrigation Board under Round 3 of the Private Irrigation Murray Irrigation customer Suzie Falls inspecting of Directors. Infrastructure Operators Program (PIIOP) her barley crop, sheep grazing on a property in NSW. within the Murray Irrigation footprint and a Murray Irrigation channel. Murray Irrigation Limited Annual Report 2016 11 12 Murray Irrigation Limited Annual Report 2016 Safety 01

Strategic objective: Establish a safety culture and progress to zero harm by reducing lost time injuries and improving internal systems. Aims A new culture Wellbeing Murray Irrigation is committed to the safety, Our journey toward a mature safety Murray Irrigation’s focus is on the health and wellbeing of all people involved culture is continuing. Murray Irrigation’s emotional and physical wellbeing of in our business. It is our view that all safety PIIOP team already has an advanced all of our employees as well as providing incidents are preventable through the culture stemming from the high safety them with a safe place to work. correct planning and execution of our work. standards established under our contract In 2016, Murray Irrigation provided Our goal is to build a safety culture with the Commonwealth Government customer service staff with training and and establish programs to conduct our for the PIIOP program and the skills and skills to recognise mental stress and business activities safely with minimal expertise of staff and contractors working hardship both within our team and our risk to staff, customers and the community. within this team. customers. This training provides staff To deliver on our commitment that health Murray Irrigation has staff with extensive with the skills to deal with people in a and safety is our top priority, Murray experience in industries such as compassionate and responsible manner Irrigation is currently developing a Work construction, mining and oil and gas where without compromising our business. Health and Safety (WHS) system based safety is traditionally paramount and the Murray Irrigation has an Employee on AS/NZS 4801 to identify hazards, Company is capitalising on this experience Assistance Program which offers assess the risk and apply suitable controls. to transition the systems and culture within professional and qualified counsellors this team across the broader organisation. Senior management will continue to to deal with issues including depression, provide visible leadership and resources The organisation has introduced a series anxiety and domestic issues. to support the WHS system and ensure of measures to achieve this objective that all employees, suppliers and including: contractors know their health and safety • Improved incident investigation and responsibilities. corrective action processes Through reporting, investigating and • Contractor selection process that rewards implementing corrective actions we will positive performance and high safety reduce incidents and improve work place standards safety. We will continue to audit, inspect • Executive and staff accountability for and review our workplaces and WHS achieving safety outcomes systems to identify areas for continuous improvement. Murray Irrigation will continue to develop a positive safety culture into the future as we progress to achieve our strategic objective. Annual highlights Murray Irrigation’s Board has established a Safety and Infrastructure Committee to oversee the delivery of the safety objectives. Development of a new safety management system has commenced * with the appointment of specialist external Year Lost Time Injuries LTIFR Lost Time injury days advisers and dedicated internal resources. Murray irrigation’s staff and contractors 2015/16 3 9 18 continue to support the organisation’s 2014/15 3 9 38 objectives with safety becoming a feature 2013/14 7 22 37 of our workplace culture. 2012/13 13 47 145

*LTIFR = Lost Time Injury Frequency Rate. This is a recognised performance indicator which takes into account the number of employees and hours worked. LTIFR is set at the end of June each year.

Murray Irrigation representatives, Michael Renehan, Robert Adams, Mark Robertson and John Bradford with The hon. Sussan Ley MP visiting an upgraded regulator site in Wakool, NSW. Murray Irrigation Limited Annual Report 2016 13 14 Murray Irrigation Limited Annual Report 2016 Engagement 02

Strategic objective: Customer, community and stakeholder engagement is strategically planned and aligned to support the business goals to identify opportunities for mutual benefit, to reduce risk and improve governance.

Key performance indicator Deliverables 2015/16 performance 2014/15 performance Effective communication Talking Water 50 52 Special Talking Water 22 13 Chairman’s report 7 16 Media releases 20 16

Annual highlight Engagement Murray Irrigation has concentrated on developing and building relationships The Corporate Affairs and Stakeholder During 2015/16, Murray Irrigation reviewed with key members of government and Engagement team developed a brand and the structure of its communications and government agencies with a role in media strategy designed to complement customer service teams to ensure we water policy and delivery of government the over-arching engagement plan and have the right structure in place to service programs in our region. We have actively connect the Company with our customers our customers’ needs and produce clear engaged with both the Commonwealth and community. communications about corporate activities. Environmental Water Holder and the Office We developed a strategic engagement plan of Environment and Heritage to promote that enables the Company to have dialogue environmental watering opportunities in our with customers about their needs and how region that can also provide benefit to our they want to be serviced by the Company business and our customers. in the context of future sustainability to help define the next strategic plan. The engagement plan clearly identifies each level of the business and its role in building relationships to enhance corporate objectives. This structure also reflects the different levels of technical detail required to fulfil the engagement objectives. Murray Irrigation has identified the wide range of stakeholders with varying degrees of interest and influence on the business to ensure our efforts in advocacy are strategic and targeted and our connection with customers and community is effective to build on our business goals.

Maize crop, Murray Irrigation district. Murray Irrigation Limited Annual Report 2016 15 Engagement

The Murray Group Industry associations Local irrigator The Murray Valley is unique in the water Murray Irrigation is a member of both the representatives policy sphere, operating under NSW National and NSW Irrigators’ Councils. Southern Riverina Irrigators (SRI) is the and Federal legislation while inherently Through these bodies, Murray Irrigation can representative body for Murray Irrigation linked to Victoria and South Australia participate in water policy development and landholders and it advocates for the through inter-jurisdictional agreements. reform at the highest levels of government interests of irrigators in public policy Recognising this complexity, and the bureaucracy. Through these bodies, Murray development. Murray Irrigation has a multiple representative voices representing Irrigation attends industry and stakeholder memorandum of understanding with SRI irrigator and agricultural interests in our briefings with the Murray-Darling Basin which enables the Company to provide immediate region, Murray Irrigation facilitated Authority, Department of Agriculture and financial support to the organisation. the formation of the Murray Group. Water Resources and NSW Department The Murray Irrigation area of operations The Murray Group brings together of Primary Industries. incorporates five landholding associations Southern Riverina Irrigators, Murray Valley Murray Irrigation works closely with local representing the diverse interests of our Private Diverters and Murray Irrigation to branches of industry representative irrigation community to the business and exchange information, share knowledge, organisations including the Ricegrowers’ through their delegations to SRI. These develop consistent messages and Association, Southern Growers Group and include Berriquin Irrigators’ Council, West coordinated positions and ultimately take a Murray Dairy. Murray Irrigation provides Berriquin Irrigators’ Council, Denimein community approach to water policy issues. water information and makes presentations Landholders’ Association, Deniboota to these groups on invitation. Murray The Murray Group does not determine Landholders’ Association and Wakool Irrigation supports these organisations’ policy positions, rather it discusses Landholders’ Association. the individual organisation’s policy efforts to increase production in our area positions and determines where there is of operations. compatibility and consistency and focusses Murray Irrigation works with Local on united messages. Government and other industry In the past year, the Murray Group representative bodies in the Murray region, developed 10 clear messages about the NSW and nationally to provide information implementation of the Basin Plan and steps and participate constructively in policy that can be taken to minimise the negative development and issues relevant to water impacts of this significant Government management in NSW. water reform. These messages were provided to all candidates for Farrer during the 2016 Federal Election campaign and our State and Federal Members of Parliament and relevant ministers.

Murray Irrigation Customer Accounts Manager, Michael Pisasale, explaining the on-farm efficiency program that was undertaken on Glenn Waterfalls property, to David Parker and Mary Colreavy from the Department 16 Murray Irrigation Limited Annual Report 2016 of Agriculture and Water Resources. Sponsorship Women in Water Learn to Murray Irrigation is committed to safety In 2015, Murray Irrigation teamed up with and promoting the water safety message a group of dedicated women seeking to throughout the communities in which increase the knowledge of women working swim program we work. in, or interested in, irrigation-related Sponsored by Murray Irrigation industries in our region. This partnership In 2015/16 Murray Irrigation again “During this program students are delivered its highly successful water safety led to the inaugural Women in Water event held at the Blighty Hall. placed in ability groups so as to cater promotion through our Learn to Swim for their different levels of swimming Sponsorship Program. Sponsorship funds Murray Irrigation used its contacts and achievement. This program assists of more than $13,000 were used by local networks to attract quality guest speakers students to become safer around schools and swimming clubs to cover to present on water allocation policy, the water, and gives tips on how to rescue the cost of travel, pool entry, equipment, use of environmental water in the region and water survival techniques.” instructors and lifeguards. and the local water market. The catered Catherine Peach event was attended by around 180 women In 2015/16 over 1,300 children Barham Public School Principal participated in lessons focussed on keen to better understand the rules that teaching children about water safety, apply to water in our district. “This program not only gives children swimming, rescue, CPR and survival Following on from this successful event, a skill for life, but it also provides an techniques. The program has been Murray Irrigation was asked to provide opportunity for young people to give delivered annually since 2003/04 and presentations to several mini events aimed back to their community as they get increases water confidence and awareness at increasing the knowledge of women older and volunteer as instructors. Here in students in the region, ensuring they will in the region including at events held at in Deni alone, the sponsorship means be safe around water into the future. Moulamein and Finley. we can hold intensive workshops for Murray Irrigation is committed to increasing around 100 children over a two-week the diversity of representation in the period every summer. And knowing agricultural industry in our region, including that similar programs are run through through engaging with landholders from schools or clubs across the district a range of age groups, backgrounds means it is accessible to everyone.” and gender. Cheryl McMillan Coordinator, Deniliquin Swim Club’s Learn to Swim program

Shontai from Mathoura Public School participating in the Learn to Swim program. Murray Irrigation Limited Annual Report 2016 17 18 Murray Irrigation Limited Annual Report 2016 People 03

Strategic objective: Transition our people and culture to a lean, adaptable safety and service oriented organisation.

Key performance indicator Deliverables 2015/16 performance 2014/15 performance Productivity improvement Operational income/full time $216K/FTE $210/FTE labour Productivity through retention Unplanned labour turnover 11% 2% Productivity through attendance Absenteeism 2% 4.7% Safe work methods Lost time injuries = 0 3 injuries 3 injuries

Annual highlights Employee remuneration Training and With the introduction of a new executive benefits development team, the Fresh Start Program was rolled Murray Irrigation is committed to ensuring • First Aid 60 attendees out to kick off the change imperatives of equity and flexibility in employment safety, customer and cost reduction. • Confined Space Refresher 5 attendees arrangements and remuneration practices Murray Irrigation has undertaken a whole which enable the Company to be market • Leadership Management Australia Company organisational restructure with competitive and innovative while supporting program 12 attendees the view to implementing key strategic employee engagement, commitment, • Microsoft Excel training 15 attendees initiatives and to support the business attraction and retention. Murray Irrigation during a modernisation phase. • Fresh Start Program all employees uses the Mercer system to undertake and Directors salary benchmarking and support an informed and competitive pay policy. A • Company Director course 2 Board strategic remuneration review has been members completed to ensure Murray Irrigation is positioned correctly within the market and to support equality in pay position and employment conditions. Murray Irrigation recognises that it is our people who make the difference.

Professional Flexible working Counselling Additional paid development arrangements service parental leave opportunities

Flu vaccinations Hearing tests Disability and Life Superannuation Insurance cover & financial advice Murray Irrigation Channel Attendant, Jim Lewis, pictured on his daily channel run. Murray Irrigation Limited Annual Report 2016 19 People

20 Murray Irrigation Limited Annual Report 2016 Long service Gender diversity

During the year, there were a number of Executive Other employees achieving service milestones Board Management Employees Total 30 years 0 2 25 27 Andrew Beattie Female Lorene Mercer Male 7 7 115 129

20 years Total 7 9 140 156 Penny Sloane 15 years Age diversity Mark Cartwright Lyn Cartwright Executive Other 10 years Board Management Employees Total Colin Murphy 0 0 19 19 James Lewis Under 30 years Anthony Kable 31 – 50 years 4 6 62 72 Phillip Rotherham Over 50 years 3 3 59 65 David Dudley Tony Whiley 7 9 140 156 Retirements Geoffrey Shepherd 46 years Staff numbers at 30 June 2016 Leslie Dart 35 years Graham Taylor 4 years Function Permanent Maximum-term Total

Diversity in the Board 0 7 7 Company Services 106 7 113 workforce: Company sub total 106 14 120 Murray Irrigation recognises the benefits of having a diverse and skilled workforce. Ancillary – MILCast 15 0 15 The Company promotes a positive Ancillary – On-farm 1 1 2 workplace culture based on inclusive PIIOP 1 18 19 practices and behaviours. Ancillary sub total 17 19 36 The following table sets out a breakdown of employees on the Board, in Executive Total 123 33 156 Management positions and across the Company based on gender and age as at 30 June 2016.

Murray Irrigation employees, Gabi Donald and Bruce Maunganidze reviewing Company documents. Murray Irrigation Limited Annual Report 2016 21 22 Murray Irrigation Limited Annual Report 2016 Network optimisation

Strategic objective: We will provide and04 maintain infrastructure that meets our service delivery requirements. Infrastructure services Reactive maintenance jobs completed 2015/16 2014/15 Murray Irrigation’s Infrastructure team Civil 2,885 3,426 is responsible for maintenance of Mechanical 66 17 the Company’s irrigation delivery and drainage networks. This includes reactive SCADA 553 667 maintenance, planned maintenance and Total 3,504 4,110 replacement of unserviceable assets. This group is supported by the Customer Services team who perform reactive and Detailed SCADA reactive maintenance Jobs Number planned maintenance of electro-mechanical completed completed of sites outlets and regulators. FlumeGate™ 274 148 In 2015/16 the Infrastructure team reduced maintenance expenditure significantly SlipMeter™ 127 118 in response to low water allocation, dry Central Remote Control upgrade (SLOS Pilot) 25 13 environmental conditions and reduced TYCO flowmeters 65 114 revenue. The reduction in costs was achieved through reduced planned Other 62 90 maintenance activities which enabled staff Total 553 483 to focus on activities usually carried out by contractors. Planned maintenance works are due to resume in 2016/17. Civil maintenance works completed 2015/16 2014/15 Further restructure of the business meant (km) (km) Murray Irrigation now seeks to utilise internal expertise to deliver outcomes for the Bank building 19 63 Private Irrigation Infrastructure Operators Key trenching 0 16 Program (PIIOP), where possible, to further Desilting/deweeding 116 457 reduce costs. Other cost saving measures introduced included reduced material Grading access tracks 102 1,097 purchases, delayed replacement of vehicles Sanding access tracks 0 58 and equipment and postponing the filling of vacant positions. Access track slashing 107 184 The reactive maintenance capability was Noxious weeds 104 224 retained at full capacity in 2015/16 and Emergent weeds 254 2 ,110 attended to 3,504 jobs. These reactive Submergent weeds 0 38 jobs included repairing channel leaks, channel blockages, removal of dead stock Erosion Control Site 0 0 from infrastructure, repair of damaged Total 702 4,247 infrastructure and safety related matters.

Structure replacements (not under PIIOP) 2015/16 2014/15

Structure type Access structures 14 14 Subways 7 5 Regulators 2 2 Escapes 2 2 80% 29 people Outlets 1 5 Civil works The Infrastructure accounted for Services team Other 10 23 80% of reactive employs 29 people Total 36 51 maintenance jobs and covers the in 2015/16 whole of Murray Irrigation’s area of operations

A Murray Irrigation construction site from the 2016 Winter Works program. Murray Irrigation Limited Annual Report 2016 23 Network optimisation

PIIOP Project Strategic objective: Help position Murray Irrigation for a productive future and improve water efficiency both on and off farm.

Murray Irrigation’s Private Irrigation Annual highlights Works summary Infrastructure Operators Program (PIIOP) Round 2 project involves upgrading the In excess of 1,000 outlets and 613 Regulator Program network regulators, farm outlets, system regulators installed to date. The Regulator Program involves upgrading reconfigurations and system retirements A regular Riverina Irrigation Infrastructure regulators, and where needed, old concrete in certain parts of the network. A large Forum has been convened with several infrastructure along the channel network aspect of this project involves upgrading irrigation companies participating. system. This program is targeted for regulators along the channels, upgrading Discussions to date have been around completion in September 2017. farm outlets and upgrading dated information and policy sharing. infrastructure with modern and efficient • 613 regulator sites upgraded (47 percent outlets. This involves upgrading Dethridge A review of our SCADA system has been complete) of 1,313 total sites outlets with new FlumeGate™ and commissioned to ensure that it will support • Procurement well advanced for the SlipMeter™ outlets, which will accurately future modernised system. remaining 700 sites to be upgraded meter and more effectively deliver water The mid-term review of the PIIOP Round on farm. 2 project has been completed.

Work, Health, Safety and Environment The PIIOP project is a large and complex infrastructure program. Since 600 regulators upgraded its commencement in 2013 there has only been two medically treated injuries as at June 2016 (MTIs) recorded. There have been no MTIs recorded in the 2015/16 financial year. The PIIOP team has developed a strict WHSE compliance regime including audits, corrective actions and hazard identification. In line with the restructured Company, the PIIOP team is assisting with the roll out of the Company-wide safety strategy.

24 Murray Irrigation Limited Annual Report 2016 An updated regulator site within the Murray Irrigation network. Outlet Program Reconfiguration Sub-System Retirement The Outlet Program involves upgrading Reconfiguration allows a customer The Sub-System Retirement Project farm outlets with modern and efficient to remain connected to our channel involves the strategic retirement of 30 FlumeGate™ and SlipMeter™ outlets, system but assume ownership of part Landholdings from Murray Irrigation’s area and is targeted for completion in of the channel system. There may be of operations, which is now scheduled September 2017. opportunities to reduce the length of for completion in December 2016. • 1,080 outlet upgrades achieved to date channel or the number of major channel The voluntary project has facilitated on the project (49 percent complete) assets by altering the supply point. the completion of on-farm works and of 2,200 total upgrade scope >50ML Murray Irrigation has a methodology individually connected Stock & Domestic average usage over four years for assessing the costs and benefits of (S&D) water supply from the river system. reconfiguration projects. In cases where Murray Irrigation channel and asset • Outlet Consultation occurred with most decommissioning on the Northern, Mallan customers in all 21 divisions there are cost savings to Murray Irrigation, there will be financial incentives available and Southern Branch Channel Systems • Upgrade works have commenced in all to customers. has also been completed in association of the 21 divisions with the retirements. Progress • saved 483ML of conveyance water Progress • 25/30 projects completed site works • reduced channel network by 36km • 22/30 projects closed with the • reduced number of outlets by 49 units Commonwealth Government • reduced number of regulators to be • 41km of Murray Irrigation channel and upgraded by 26 units asset decommissioning complete The consultation process is expected to be 1,000 outlets upgraded finalised by January 2017 and completion as at March 2016 of works by October 2017.

130+ outlet upgrades per month achieved in two consecutive months (September and October 2015)

Murray Irrigation Limited Annual Report 2016 25 A construction site from the 2016 Winter Works program. Modernisation “Murray Irrigation’s modernisation process has been great for us. The transition to online watering has been convenient and easy, meaning we can order water right from our smart phones.” Ellie

“The new outlets have been awesome. The shorter lead times have resulted in increased flexibility. It was also an easy transition for us, the Murray Irrigation team have been really helpful and were able to answer any questions we had.” Sam Sam and Ellie Singleton Dairy Farmers, Blighty

26 Murray Irrigation Limited Annual Report 2016 Network optimisation

Steering committee PIIOP Round 2 team PIIOP Round 3 Over the past year, Murray Irrigation has Murray Irrigation participated in the The PIIOP steering committee has been assembled an expert team to the deliver the Commonwealth’ s PIIOP Round 3 program restructured and is now part of Executive PIIOP project, which comprises 23FTE staff with a submission being lodged with the business. It is chaired by the executive plus six contract staff. Commonwealth Government on 1 March Manager – Major Engineering Projects Moving the PIIOP team into the new office 2016. Warren Jose and comprises members of next to the main Murray Irrigation building in The Federal Minister for Health and the Murray Irrigation Executive Management Deniliquin has brought significant results in Aged Care, Ms Sussan Ley announced team and provides monthly updates to efficiency and communication. The team is in June 2016 that Murray Irrigation had the CEO and the Board. The committee focused to deliver PIIOP Round 2 next year been successful with its submission, is performing well and has completed the to a finalised scope of works, plus agreed securing $153 million in funding to upgrade transition of the PIIOP project into the budget. infrastructure within its networks. The PIIOP Murray Irrigation main business, enabling Round 3 sub-projects include: better decision making processes and risk Strategic delivery partners management and mitigation strategies to A note of appreciation to our strategic • Upgrading major channel be developed. delivery partners: infrastructure: review and assess the infrastructure within the main channels, Consultants – Jacobs, GHD, P3Outcomes with the potential to upgrade all 31 Major Suppliers – Rubicon Water, MILCast, regulators. Humes • Channel lining: apply clay lining to Key contractors approximately 38km of channels, • Deniliquin Irrigation Contracting Ltd targeting areas with identified high losses attributed to seepage and leakage. • Millers Pipe and Civil Pty Ltd • Upgrade escapes: upgrade identified • Rendell Construction and Civil escapes, enabling Murray Irrigation to • Fuller Earthworks discharge water from our system in the • PatAsh & Civil future via accurate metering and remote control. • Murray Trotman Services • Channel reconfigurations: expand • CPE Pty. Ltd. upon the work in PIIOP Round 2 and • Moulemein Earthmoving reduce Murray Irrigation’s footprint. This • Northern Construction Group will involve upgrading and relocating supply points leading to significant conveyance savings. • Sub-system retirement and stock & domestic scheme: reviewing Murray Irrigation’s area of operations to identify non-viable areas, which could redefine and reduce the network.

Top: Murray Irrigation’s PIIOP team. Left: Siblings Sam and Ellie Singleton on their property in Blighty. Murray Irrigation Limited Annual Report 2016 27 28 Murray Irrigation Limited Annual Report 2016 Operations 05

Strategic objective: We will seek every additional water supply opportunity, create strong commercial incentives for water demand, and maximise both the volume of water available to our customers and the efficiency of every megalitre we source and deliver.

Key performance indicator Deliverables 2015/16 performance 2014/15 performance End-of-season losses Loss target for 480GL on-farm Actual losses 141GL Actual losses 163GL maintained or improved to be deliveries was 182GL below historic average Non-accredited escape flows Less than or equal to 4% of net Actual flows less 0.05% Actual flows less 0.8% diversions Customer orders delivered 100% of orders delivered on 95% 91% requested delivery dates Total delivery efficiency1 Equal to or greater than 80% 80.5% 88.2% On-farm delivery efficiency2 Equal to or greater than 70% 70.5% 82.0% Gross value and volume Maximise efficiency allocations while 63GL valued at $12.6m 21GL valued at $2.7m of efficiency allocation preserving our obligations for supply 1. Includes accredited escape flows. 2. Excludes accredited escape flows.

Annual highlight Delivery efficiency The SLOS Yallakool channel delivered exceptionally high delivery efficiency (95%), Revising our Standard Level of Service Murray Irrigation delivered 244GL matching the performance of the HLOS (SLOS) operating plans to increase through accredited escapes to assist river Blighty channel, due to the implementation efficiency on Remote Controlled channels. operations. Only 964ML was lost through of a modified operating plan. Implementing 30 percent of our proposed non-credited escapes while a further The increasing number of customer outlets High Level of Service (HLOS), with a view 157ML was credited to customers due to upgraded to compliant metering standards to finalising this roll-out in 2016. account errors. has provided greater clarity around the In a year of low water availability Murray volume of unaccounted water within the Irrigation carefully managed deliveries and delivery system. maintained channel levels below full supply System efficiencies enabled 63GL to when not in use. be distributed as efficiency allocations this season.

Delivery service

8,620 95% 75% 17%* customer orders of orders were delivered on of orders placed via web of orders placed via the day requested (where telephone (*8% of orders Murray Irrigation Remote Control less than four days’ notice placed manually) Operators, Matt Maher and was provided) Robert Stevens. Murray Irrigation Limited Annual Report 2016 29 Operations

Levels of service Three HLOS and SLOS channel divisions are in operation with the remainder of customers supplied through traditional levels of service (TLOS), pending upgrade completion. As outlet upgrades are completed, customers are provided an on-site induction to better understand the characteristics of their upgraded outlets. There were zero supply interruptions during the season.

Operational water delivery (MDBA/State Water)

80.5% 340GL 16GL 244GL delivery efficiency delivered on-farm delivered to environment delivered for river operations

30 Murray Irrigation Limited Annual Report 2016 Harvesting wheat within the Murray Irrigation footprint. Service Delivery Performance standard summary of outcomes 2015/16

Service standard Deliverables 2015/16 2015/16 2014/15 Target Actual

Customer comms Talking Water (including Special Talking Waters) 60 72 65 Chairman’s Report 6 7 16 Water Availability 20 20 20 Customer Meetings 3 3 0 Annual Operating Plan Published annually July 2015/16 July 2015/16 July 2014 Season length Mid August – Mid May 275 days 290 days 293 days Water supply quality Blue green algae 0 Red alert 0 level: 23 February 2016 – 16 May 2016 Irrigation water Water ordering 100% 100% 100% Orders in Advance 100% 98% 100% Restrictions 0 0 0 Meter readings 3,671 3,671 3,693 Stormwater Access points 2,692 2,692 2,692 Call-outs 24 hours 100% 100% 100% Emergencies 24 hours 100% 100% 100% Water exchange 325 338 340 Fees and prices Schedule Published Published Published Billing Quarterly Quarterly Quarterly Compliance (zero Number and volume (ML) of allocation debt notices issued 0/0ML 0/0ML 0/0ML penalties) against Number and volume ($) of cost recovery notices issued 0/$0 0/$0 0/$0 Murray Irrigation Number and days of temporary suspension notices issued 0/0 days 0/0 days 0/0 days Number of court prosecutions 0 0 0 MIL Annual Report Published October October October

Murray Irrigation Limited Annual Report 2016 31 Operations

Customer service “You used to brace yourself to come into Murray Irrigation. However, after coming into the Murray Irrigation office just days after the new Customer Service launch my experience was fantastic. The service from the Customer Support Team was sensational and they made the process as easy as possible. I went to the office with one issue and the team added considerable value to my experience by highlighting other services that could assist me. Just like the RTA, Murray Irrigation has now transformed their customer service model and you can now expect to be dealt with in an experienced and professional manner.” Norm McAllister Mixed Farmer, Deniliquin

32 Murray Irrigation Limited Annual Report 2016 Penny Sloane in lab. Information Murray Irrigation continues to focus Compliance on knowledge management through Communication improved data extraction and reporting Murray Irrigation has a number of Technology capabilities. We will be continuing to drive compliance obligations associated with efficiencies and improve services through the Licences and Approvals issued under Murray Irrigation is committed to providing streamlined processes including improved the Water Management Act 2000 (NSW). customers with a modern irrigation supply network coverage to ensure adequate The Combined Water Supply and Water service responsive to their needs. The resilience and reliability of telemetry Use Approval requires Murray Irrigation Information Communication Technology systems whilst continuing to automate to produce the Annual Compliance Report (ICT) team supports the delivery of the channel network. We are also working which includes details regarding the this service through the telemetry and to improve the online presence of the volume of water extracted and volume automation capacity provided by our organisation giving our customers a of water delivered to, and utilised by, upgraded infrastructure. better experience when transacting our customers. with the Company. More than just service delivery, over the Murray Irrigation is issued an Environment past year, ICT developed Murray Irrigation’s Protection Licence by the NSW Project Management Framework which Environment Protection Authority. The provides a consistent approach to the Environment Protection Licence requires rationale, delivery, and documentation Murray Irrigation to monitor and report on of individual projects and also plays the volume and quality of water discharged a significant role in managing capital from the Murray Irrigation drainage system. expenditure across the organisation. The Combined Water Supply and Water The ICT team was fundamental to the Use Approval requires Murray Irrigation successful delivery of the Snowy Advance to monitor the depth to watertable product which required significant software within the area of operations. Murray development delivered in a very tight Irrigation’s Environment Policy addresses timeframe. Major software changes and a requirement in the Approval to limit enhancements were needed to build in groundwater recharge and discharge of the mechanisms to deal with the product salt. The Environment Policy documents requirements. This new software can now Murray Irrigation’s commitment to achieving be used year on year. a balance between environmental responsibility and agricultural production.

Top: Murray Irrigation’s, Penny Sloane, testing water in the lab. Left: Murray Irrigation customer, Norm McAllister, pictured with Murray Irrigation Customer Support Manager, Geoff Mann. Murray Irrigation Limited Annual Report 2016 33 Operations

Water Licencing for • Water Access Licences (WAL) entitles Environmental water Murray Irrigation as the licence holder Murray Irrigation to both own water entitlements, known deliveries as the Share Component, and entitles Murray Irrigation is an irrigation corporation Murray Irrigation to extract water in 16GL of water was delivered directly via Water Management Act 2000 listed in the accordance with the Water Sharing Plan, on-farm outlets and non-credited escapes (NSW) . As an irrigation corporation, Murray known as the Extraction Component. for the Office of Environment and Heritage Irrigation is a private company holding Murray Irrigation holds the following types for the following programs: bulk water entitlements on behalf of their of Water Access Licences: Private Property Wetlands Watering shareholders. Program (PPWWP) > High security – regulated river The Water Management Act 2000 (NSW) • 16 private wetlands includes the requirement for a Water > Town water supply high security Sharing Plan which describes the rules for > Conveyance – regulated river • 13 landholders the allocation of water. Murray Irrigation > General security – regulated river • objectives included: is subject to the Water Sharing Plan for > improve vegetation condition the New South Wales Murray and Lower > Supplementary water Darling Rivers Water Sources. • The Combined Water Supply and Water > provide breeding habitat for the Southern Bell Frog The Water Management Act 2000 (NSW) Use Approval authorises Murray Irrigation requires Murray Irrigation to hold the to extract water using the authorised Ephemeral Creek Watering following Licences and Approvals: extraction water supply works, the • three ephemeral creek systems Mulwala Canal Offtake and Wakool Canal • The Operating Licence permits Murray (Tuppal, JCGC, Murrien-Yarrien) Offtake and includes the requirement to Irrigation to carry out the business of produce an Annual Compliance Report. • over 40 landholders the supply of water. It requires Murray • objectives included: Irrigation to hold an Environment • The Combined Water Supply and Work Protection Licence issued by the Use Approval for salinity and watertable > improve water quality Environment Protection Authority. management tubewells authorises Murray > provide breeding habitat for the Irrigation to operate the Wakool Tullakool Southern Bell Frog Subsurface Drainage Scheme. > continue working relationship with the community These programs have been monitored and there has been recorded improvement in the water quality in Tuppal Creek, successful breeding of several frog species including the endangered Southern Bell Frog and improved recruitment and condition of wetland and fringing plant species.

Top: Wine vineyards pictured from Restdown, a property located within the Murray Irrigation footprint. 34 Murray Irrigation Limited Annual Report 2016 Right: Don and Jo Hearn exploring the renewed wetland on their property Restdown. Private Property Wetlands Watering Project “We signed onto the Private Property Wetlands Watering Project a few years ago and we have seen fantastic results for our business. The project has resulted in a complete resurrection of the wetland, which had been dry for over 30 years. We now have greater biodiversity in both plants and birds, which has been a fantastic extra incentive for people to visit our winery cellar door, as well as benefiting our 450ha beef operation as a whole. It has become an important part of the farm’s program and we now also utilise surplus recycled irrigation water when possible to maintain the wetland.” Don Hearn Restdown Wines and Jungle Lane Beef Company Private Property Wetlands Watering Project is coordinated by the Office of Environment and Heritage with volumes delivered through Murray Irrigation Infrastructure.

Murray Irrigation Limited Annual Report 2016 35 Operations

On-Farm Irrigation Murray Irrigation has successfully The Commonwealth’s On-Farm Irrigation completed the Pilot Project, Rounds One Efficiency Programs have seen an Efficiency Program and Two and is currently implementing increased investment in on-farm Rounds Four and Five of the projects and water savings on irrigated The Commonwealth Government through Commonwealth Program. landholdings. The portion of water the Department of Agriculture and Water savings transferred to the Commonwealth Resources, has sought organisations The Round Four project is approximately 40 percent complete with 21 of the 52 contribute towards the Murray-Darling experienced in project management Basin Plan target for the NSW Murray related to farm and irrigation systems to projects finalised. This project will provide a total of $9.6 million (ex. GST) of on-ground whilst concurrently improving the efficiency be Delivery Partners for the On-Farm and productivity of irrigation systems Irrigation Efficiency Program (OFIEP). funds and is due to be completed by 31 July 2017. making a positive contribution to our Funding for the program is provided from community’s ability to cope with less Water for the Future the initiative. On Monday 22 August 2016 a Round Five irrigation water in the future. Murray Irrigation’s role as a Delivery Funding Agreement was signed between Murray Irrigation and the Department. The delivery of these funds has been a Partner is to oversee the implementation well-received cash injection to our local of individual farm projects. Such projects This project is for 40 proposed projects for a total value of $8.4 million (ex. GST) communities providing work for suppliers entail funding by the Commonwealth for and contractors in the agricultural sector, on-farm works for more efficient irrigation, on-ground funds. Infrastructure Works Contracts have been issued to project with flow-on from these activities also in return for a portion of the water savings benefiting other businesses in our area. to be transferred to the Commonwealth proponents following the signing of the Environmental Water Holder. Funding Agreement.

Distribution Supervisor, David Whelan, 36 Murray Irrigation Limited Annual Report 2016 showcasing the new outlet technology to a group of international visitors from Pakistan. Summary of trade Ancillary Transaction 2015/16 2014/15 activities Number Volume Number Volume Exchange Seller listings 1,506 N/A 1,766 N/A Annual highlight Exchange Buy bids 125 N/A 166 N/A Exchange purchases 1,920 111,444 ML 2,531 175,321 ML Murray Irrigation’s Water Exchange traded 111,444ML. This was an historically 8,266 DE 44,681 DE significant volume considering the ML – megalitre, DE – delivery entitlement, N/A – not applicable announced allocation only reached 23 percent. Share register 2015/16 season Exchange activity Activity The 2015/16 season saw Murray Permanent LTX (Shares, water entitlements and delivery entitlements) 0 Irrigation’s Water Exchange provide an transfers ETX (Water entitlements) 174 effective additional service for customers to trade and purchase water. Price per STX (Shares) 16 megalitre opened at an historically relative DTX (Delivery entitlements) 31 high price of $195 and on average traded above this level throughout the season ETO (External permanent transfer out water entitlements) 8 with a weighted average price of $208 ETI (External permanent transfer in water entitlements) 3 for the season. ETM (cancellation acquired by Murray Irrigation water entitlements) 11 Despite the relatively high price for allocation, a net of 20GL was transferred Total 243 into Murray Irrigation during the season. Mergers 269 LRN into 67 merged accounts The highest sale price was $294 in October. The highest volume of water Amalgamations 98 LRN into 27 new LRN sales occurred in October with Consolidation 139 LRN – unusually high occurrence due to changing all LRN approximately 17,500 megalitres within the register to have a consolidated ID. transferring. March and April also saw LRN – Landholding reference number a peak in trading activity. Throughout the season, intervalley trade restrictions also limited opportunity for transferring and trading of water.

Murray Irrigation employees, Nathan McNamara, Murray Irrigation Limited Annual Report 2016 37 Emma Simpson and Scott Howard. Operations

MILCast MILCast objective • Resourcing MILCast, a business unit of Murray Irrigation Limited, design, manufacture • Promotion and supply precast concrete products for • Resellers network agricultural and other commercial uses, • Major projects including headwalls, culvert ends, culverts, bay outlets (aluminium door or rubber flap), • New productions rice stops, bankless channels, rice flumes, • On-farm sales pipe ends, pits (for recycle and pumps), regulators, flumes, channel checks, grain/ fertilizer bunker wall slabs and drop boxes.

Business statistics for the year 2015/16

Tur nover $ 2.51m Internal sales $1.07m

Gross profit $0.45m EBIT $24,838

Top: MILCast employees manufacturing precast 38 Murray Irrigation Limited Annual Report 2016 products. Right: An upgraded outlet pictured on a dairy farm in Blighty, NSW. Murray Irrigation Limited Annual Report 2016 39 40 Murray Irrigation Limited Annual Report 2016 Finance 06

Strategic objective: Achieve breakeven annual profitability across a seven-year business cycle by managing the three key levers of cost, volume and price.

Key performance indicator Deliverables 2015/16 performance 2014/15 performance EBIT excl. PIIOP and excl. impairment Breakeven -9.845m -9.467m Operating result (before tax)1 Breakeven -49.821m 18.157m Variable costs 30% of costs variable 39% 40% Working capital Positive (ration exceeds 1) 2.30 1.37 (current assets/current liabilities)2 Corporate debt 0 0 0 1. Includes government funding revenues and impairment provision expense 2. Excludes government funds held in trust

Murray Irrigation operates Financial management in an industry that is built In a lean year when water delivery revenue on boom and bust cycles of was well down, Murray Irrigation had to be volatile water availability. more efficient about costs and spending. Murray Irrigation sought opportunities to 2015/16 represented a year reduce costs and tighten expenditure to of low water availability achieve an operating expense figure $3.5 million lower than the previous year, when with allocations only water allocation was at 61 percent and reaching 23 percent and 739GL was delivered on-farm. on-farm deliveries of only This enabled Murray Irrigation to return 339GL compared to the long an operating EBIT result of $9.167 million loss, compared to an operating EBIT loss term average of 600GL, at of $10.759 million in 2014/15. Whilst which the Company’s budget both results are disappointing, Murray is set. Irrigation’s ability to tighten the belt in a tough allocation year allowed the Company to produce a better result. Murray Irrigation reduced operating expenses by lowering or deferring maintenance costs, reviewing operations and conducting only essential preventative and planned maintenance activities. Murray Irrigation also reviewed supply and procurement processes to ensure contracts are negotiated to provide value for money and efficient service. We have renegotiated all supply contracts and reduced variable costs through these processes.

A lateral irrigator watering canola on a property in Conargo, NSW. Murray Irrigation Limited Annual Report 2016 41 Finance

The valuation returned a fair value of Figure 01 Key income items Impairment 2 $192.0 million against a written down book Breakdown of Murray Irrigation’s total Since privatisation, the available water value in our accounts of $266.8 million. revenue for 2015/16 of $68.9 million, held by our member farmers against The difference between the two numbers including government funding for PIIOP Murray Irrigation’s licence has reduced by shows the book carrying value of the Round 2. This figure demonstrates the almost 30 percent. This means that whilst assets is much higher than the assets are significance of revenue from customers Murray Irrigation has a system capable reasonably estimated to be worth, thus an and investment streams. of delivering 1,500GL in a season, the impairment was needed to be recognised to likelihood of actually doing so is reduced, the value of the difference of $74.8 million. Figure 02 Key expenditure items as the water is no longer there to allow that As Murray Irrigation had previously Breakdown of Murray Irrigation’s total level of delivery unless it is bought in from expenditure for 2015/16 of $105.7 million. outside the district. recognised an impairment over assets that will be decommissioned or replaced This figure is heavily skewed by the one off In accounting terms, this represents an under the PIIOP program, the uplift in the writedown of the book value of assets. “impairment trigger”. Under the Australian provision required to be recognised in the 1 Accounting Standards , a company that accounts as at 30 June 2016 was $66.6 Figure 03 Key expenditure items identifies an impairment trigger is obligated million which is shown as an expense in (excluding writedown) to test the impact of that trigger on the the accounts for 2015/16. Breakdown of Murray Irrigation’s total company. They usually do so by conducting This is a book entry only, and has no expenditure for 2015/16 of $39.1 million an independent valuation of the assets to excluding the asset writedown. ascertain whether or not an impairment bearing on the future use of the asset. does in fact exist. Figure 04 Contribution to operating In late 2015/16, Murray Irrigation result by division recognised it had an impairment trigger, Breakdown of Murray Irrigation’s total and contracted Deloitte to conduct an operating result for each of the business independent valuation of the assets base. units – Murray Irrigation, MILCast, PIIOP The net result of the valuation took into and the inactive RHPL, with the one off account things such as the replacement writedown of the book value of assets cost, whether the same network would shown separately. be created if it had to be replaced today, how much technology and efficiencies had changed since the assets were first installed, industry practices and comparable events.

1. AASB136 2. Using the depreciated replacement cost method

42 Murray Irrigation Limited Annual Report 2016 Figure 01 Key income items Figure 02 Key expenditure items Figure 03 Key expenditure items (excluding writedown) 2% 2%1% 2%1% 3% 3% 3% 3% 5% 4% 8% 8% 28% 12% 9% 9%

51%

10% 63%

25% 22% 24%

51% / $35.4m Government funding 63% / $66.6m Impairment provision 0% Impairment provision excluded 25% / $17.6m Water delivery charges 10% / $11.0m Salaries and wages 28% / $11.0m Salaries and wages 12% / $8.1m Government water 9% / $9.4m Depreciation 24% / $9.4m Depreciation charge recovery 8% / $8.7m Government charges 22% / $8.7m Government charges 4% / $2.5m MILCast revenue (ext) 3% / $3.7m Materials & Contract expenses 9% / $3.7m Materials & Contract expenses 3% / $2.3m AMRR interest 3% / $3.2m Other expenses 8% / $3.2m Other expenses 2% / $1.5m Snowy option fee 2% / $1.8m Legal 5% / $1.8m Legal 2% / $1.2m Investment income 1% / $1.2m Snowy Advance expenses 3% / $1.2m Snowy Advance expenses 1% / $0.4m Miscellaneous income

Figure 04 Contribution to operating result by division

MIL MIL MILCast PIIOP RHPL $’000s 30000 impairment provision MIL -6,821 20000 MIL impairment provision -66,579 10000 MILCast 25 PIIOP 23,554 0 RHPL 0 -10000 Total -49,821 -20000 -30000 -40000 -50000 -60000 -70000 -80000

Murray Irrigation Limited Annual Report 2016 43 44 Murray Irrigation Limited Annual Report 2016 Governance 07

Murray Irrigation’s Role and responsibilities To assist the Board in the execution of its duties, it enlists, through delegated powers, approach to corporate of the Board and the assistance of Management and various governance Management committees of the Board. The Board agrees the responsibilities and functions of Murray Irrigation’s Board of Directors The authority of the Board derives from the Board as well as those of Directors, the and Management strongly support the the Corporations Act 2001, the Company’s Chairman and those delegated to the CEO principles of good corporate governance. Constitution and the State legislation, and Board committees. This is particularly important given the governing the licences issued to Murray Powers delegated by the Board to highly regulated industry in which Murray Irrigation to conduct its operations and Management include the authority to Irrigation and its businesses operate, the related activities. manage the day to day operation of the Constitutional requirement for a majority The role of the Board is to govern and business including to undertake both of shareholder Directors who are also oversee the management of the Company’s financial and non-financial transactions customers, the relatively high barriers to business on behalf of, and for the benefit and incur expenditure on behalf of the entry for shareholders, and for the long of, shareholders. Company up to specified thresholds. term sustainability of our businesses. The principal responsibilities of the Board These authorities are set down in Murray The Board seeks to operate as a are to: Irrigation’s Delegation of Authority professional, efficient and effective instrument. a) Review, critique, enhance (where body whose practices accord with, and Powers that remain the preserve of the reflect, accepted principles and standards appropriate, in collaboration with Management) and approve the Board as ‘key decisions’ (defined in the of corporate governance. The Board Company Constitution) include: ensures that Murray Irrigation’s corporate strategies, budgets and business plans governance policies and practices are prepared by Management a) A determination, increase or decrease reviewed regularly and will continue to be b) Assure itself of the effectiveness of the of Annual Allocation developed and refined to meet the needs Company’s governance models, systems b) A determination of charges of Murray Irrigation Limited, taking account and practices including, amongst other c) The investment of reserves of best practice. things: Murray Irrigation’s commitment to good i. The appropriateness of organisational corporate governance is set out in its arrangements and structures Corporate Governance Policy which ii. The adequacy of internal controls, is published on our website and in the policies, procedures and processes Director’s Handbook. In the setting of its corporate governance policies and iii. Review, ratify and monitor systems of practices, the Board and Management risk management have taken guidance from: iv. Oversee performance against targets a) The Australian Securities Exchange and objectives Corporate Governance Principles and v. Oversee the reporting to shareholders Recommendations (2007, with 2010 and stakeholders on the strategic amendments) direction, governance and b) Australian Standard AS 8000 Good performance of Murray Irrigation Governance Principles c) Appoint and oversee the quality, c) Applicable standards advocated by performance and remuneration of the the Australian Institute of Company Chief Executive Officer (CEO) and the Directors (AICD) and the Governance performance of the executive team Institute of Australia (GIA)

A lateral irrigator above a canola crop within the Murray Irrigation district. Murray Irrigation Limited Annual Report 2016 45 Governance

Composition, skills The Board supports the continuing Directors’ retirement education of all Directors and staff to and performance of enable them to conduct their duties and re-election the Board in an efficient and knowledgeable manner. Directors are encouraged to Directors are required to retire at the fourth AGM following their election or most recent The composition of the Board is set, within obtain accreditation or membership with re-election. Any Director appointed to fill the parameters approved by shareholders the AICD, including completion of the a casual vacancy since the previous AGM in the Company’s Constitution, to provide ‘Company Directors Course’ or equivalent. must submit themselves to shareholders an appropriate mix of skills and expertise All Directors have either completed the for election at the next AGM. Dr Sharman in order for the Board to discharge its AICD’s Company Directors course or are Stone and Mr Ben Barlow who were duties. Currently six Directors are member scheduled to undertake the course before appointed after the 2015 AGM will stand appointed Directors and two are appointed the end of the 2016 calendar year. for re-election at the 2016 AGM. by the Board. The Board has committed to undertake an Board support for a Director’s re-election is The Board maintains a set of ‘candidate independent evaluation of its performance not automatic and is subject to satisfactory criteria’ for prospective Directors that and that of individual Directors at least Director performance. addresses all legal and Constitution once every two years, with the last review requirements, as well as desirable completed in June 2015. The Board attributes and skills sought by the Board. collectively discusses the findings from each This criteria is made available to all evaluation and puts in place an action plan potential Director candidates prior to to implement appropriate recommendations each election or appointment. arising from such reviews. The Chairman of the Board is appointed Details of the Directors, their qualifications by the Board as a whole in accordance and experience are published on pages with procedures developed and adopted 50 and 51 of this report and on the by the Board. Company’s website.

Murray Irrigation Board members, James Sides, Tim McKindlay, John Bradford, Ben Barlow, Dr Sharman Stone, Mark Robertson (Chair), 46 Murray Irrigation Limited Annual Report 2016 Bruce Simpson (Deputy) and Chris Brooks. Director independence A water trading protocol exists which Code of Conduct prevents not only Directors but also and conflict of interest any employee, from acting on or using The Company’s Code of Conduct sets information prior to it being publicly out the standard of behaviour expected As six of the eight Directors are both available. Directors must notify the of the Company’s Directors, employees members and customers of the Company, Company Secretary of any permanent or and contractors. The Code requires them, by virtue of the requirements set down in annual transfers carried out. The Board as a minimum, to: the Constitution, only two Directors, being sets an embargo period preventing trade • Act in the best interests of the Company Dr Sharman Stone and Ben Barlow who from the time of a Board decision affecting were appointed by the Board, are regarded and create value for the Company’s allocations or other market sensitive shareholders as independent Directors. decisions until public announcement, Bearing in mind the composition of the usually by a Chairman’s Report or Special • Act honestly and with integrity and Board and potential for related party Talking Water. fairness in all dealings with each other and third parties transactions, the Company has put in place Murray Irrigation member Directors John appropriate procedures and protocols Bradford, Chris Brooks, Tim McKindlay, • Avoid or manage conflicts of interest to assist Directors to declare, manage Mark Robertson, James Sides and Bruce and in some cases prevent any potential The Company has in place a process for Simpson are customers of the Company, Directors, employees and third parties conflicts of interest and enable the enjoying the same terms and conditions Company and Directors to manage any to report potential breaches of the Code as those applying to all Murray Irrigation of Conduct. related party transactions in a transparent customers in receipt of similar services. and appropriate manner. This includes appropriate blackout periods where It is a Board Governance Policy, consistent Directors are not permitted to trade in with the requirements of the Corporations Independent Murray Irrigation marketable products. Act 2001, that Directors declare their professional advice interest as customers when information Directors are also required to adhere which may affect water pricing or volumes The Board supports individual Directors, strictly to the constraints on their made available is discussed and decided after following documented protocols, participation and voting in relation to upon by the Board. The Directors will either obtaining independent professional matters in which they may have an interest, absent themselves during such discussion, advice at the expense of the Company in accordance with the Corporations Act and subsequent voting on resolutions, to assist them to discharge their duties and Company policies. and or warrant that they will not buy or in a responsible manner. Protocols forming part of the organisation’s sell water entitlements or other tradeable code of conduct are enforced in relation products prior to such information to receipt of gifts and corporate hospitality becoming publicly available. The Board to ensure that no inappropriate or unethical Governance Policy provides for an embargo behaviour occurs or could be inferred period within which the Directors may or perceived. not trade as customers. It is also the Board’s policy to disclose volumes held of water and delivery entitlements in the Annual Report.

Harvesting wheat from a property within the Murray Irrigation district. Murray Irrigation Limited Annual Report 2016 47 Governance

Committees of Safety and Infrastructure Committee Internal control (S&I Committee) the Board Membership: Tim McKindlay (Chair), framework To assist it further in attending to its duties Mark Robertson (ex-officio), John Bradford. The Board is committed to ensuring – and as a means of providing Directors The Safety and Infrastructure Committee that appropriate frameworks are in place with first-hand insight into critical aspects reviews and advises on matters relating and regularly reviewed in relation to: of the Company’s business, the Board has to safety, water availability, usage and a) Internal controls established four committees: efficiency; and infrastructure maintenance, refurbishment and construction. Activities b) Sound annual budgeting and financial a) Finance, Audit and Risk Management management processes including capital Committee include reviewing work health and safety and asset management controls and budgeting and expenditure, procurement, b) Safety and Infrastructure Committee policies, assessment of funding priorities, investment of reserves and taxation c) Remuneration and Nominations costs and performance, safety and management Committee asset management strategies, review of c) Adequate and appropriate monthly d) Customer Service Committee government infrastructure funding and reporting of both financial and operational agreements and policies operational performance is provided by Each committee has its own charter, relating to monitoring of environmental Management to the Board which sets out its composition, role, compliance. responsibilities and key processes. The d) Safety, risk and compliance management and business continuity planning Board has not delegated executive Remuneration and Nominations authority to any of its committees. Committee e) Preparation of annual and half-yearly financial statements The role of the committees is to report to Membership: Mark Robertson (Chair), the Board and provide appropriate advice Bruce Simpson and Chris Brooks. f) Assurance reporting on the above and recommendations on matters relevant topics by both Management and the The Remuneration and Nominations to the committee charters in order to Company auditor Committee considers policies, strategies facilitate effective decision making by the and conditions of employment and Board. Committees of the Board serve remuneration of all staff, in particular senior an essential purpose in supplementing management and Directors, including the resources of the Board where policy annual remuneration and bonuses or other development and implementation, the incentives. The committee also acts as a monitoring and control of the application Nominations Committee overseeing the of policy, and the carriage of special briefs process of Director succession. are concerned. During the year the Board determined Customer Service Committee that the PIIOP Steering Committee would Membership: John Bradford (Chair), James change from being a Board committee to Sides, Bruce Simpson and Chris Brooks. a management committee. The Committee’s role is to improve the Finance, Audit and Risk Management relationship between the Company and its Committee (FARM Committee) customers through alignment of business goals and provision of value adding Membership: Bruce Simpson (Chair), services on a commercial basis. Mark Robertson (ex-officio), Ben Barlow and Tim McKindlay. The FARM Committee is responsible for oversight of the Company’s accounting and statutory reporting practices, risk management, and related issues including audits, financial information and accounting controls, management of investments, the Company’s ancillary activities, share register, agreements with government and identifying risks to the Company and the risk management framework. A representative from the auditor may attend meetings of this committee from time to time by invitation.

48 Murray Irrigation Limited Annual Report 2016 Management of risk Strategic planning and Diversity Murray Irrigation has adopted concepts and corporate culture Refer to page 21 of this Annual Report for principles identified in the AS/NZS ISO information on diversity at Murray Irrigation. At the 2015 AGM, Murray Irrigation 31000:2009 – Risk Management standard Murray Irrigation provides an annual report outlined its strategy to focus on the in its Risk Management Framework. to the Workplace Gender Equality Agency. areas of safety, engagement, profitability, The Framework of policy, processes and efficiency of maintenance and delivery, guidelines was established to ensure major projects (including PIIOP) and that the Company’s Risk and Compliance employee engagement. Since then the Shareholder functions, systems, attributes and Board has built on the strategic framework communications responsibilities are monitored and updated by developing a two year operating appropriately, including in relation to major plan and a stakeholder engagement Murray Irrigation maintains a variety projects. These risk management systems plan following input from a range of of communication methods with its identify the: stakeholders. shareholders to ensure appropriate and timely information is provided including via: a) Nature and likelihood of occurrence for In August 2015, the Company initiated a specific material risks ‘Fresh Start’ program designed to broaden a) Website b) Key controls that are in place to mitigate and strengthen the already positive b) Annual Report and manage the risk culture at Murray Irrigation. The program, c) Annual General Meeting which involves members of the Board, c) Sources and levels of assurance management and employees, is focused d) Regular customer information and provided on the effective operation of on improving and building relationships consultation meetings key controls with internal and external stakeholders and e) Weekly bulletins (Talking Water) d) Responsibilities for managing these risks has been extremely well received by all f) Mail-outs e) Applicability of a Business Continuity participants. Plan g) Email and other means where appropriate During the year the Company restructured Board and senior its Risk Management Policy, Framework Murray Irrigation’s website provides and Procedures and completed a ground executive remuneration stakeholders with a range of information up review of key business risks. Key about Murray Irrigation, including its potential risks that were identified in Remuneration levels and terms of operations, history, strategies, values, the exercise included: failure to control employment for Directors and senior market information about tradeable and manage assets, reduction in water executives are formalised in individual products, and shareholder reports. resource availability, risk of injury to staff Service Agreements. Dedicated shareholder relations personnel or public, significant infrastructure failure, The Remuneration Committee reviews are available to assist in responding political decisions that might negatively the Company’s remuneration strategy, promptly to all shareholder enquiries. Such impact the business. policy and framework on a regular basis. personnel include Customer Support and During the year the Company appointed an Water Trade Officers and the Company Executive Manager Human Resources to Secretary. Policies of the Company review and upgrade Murray Irrigation’s key Murray Irrigation encourages its human resource systems and frameworks. The Board of Directors will ensure that shareholders to participate fully at its Company policies and procedures are Annual General Meeting and other relevant reviewed and updated on a regular basis Sustainability meetings held by the Company throughout to ensure currency and appropriateness. each year. During the year the Board endorsed a Murray Irrigation is committed to the long All ‘external’ policies applying to customers program of renewal for key corporate term sustainability of its operations and or third parties outside the Company policies. aims to optimise the social, environmental, are approved by the Board and changes workplace and economic impact of communicated to relevant stakeholders its operations for the benefit of all as soon as possible. stakeholders. The Company is in the process of reviewing, developing and maintaining appropriate policies and protocols to achieve these aims, having regard to compliance with the Company’s various licences and the regulated environment in which it operates.

Murray Irrigation Limited Annual Report 2016 49 Directors

The following people were Directors of the Company during or since the end of the financial year: Mark Robertson Bruce Simpson

Chairman Deputy Chairman GAICD Dipp AppSc (Ag) (Hons), FAICD Mark Robertson is a shareholder Director Bruce Simpson is from Denimein Irrigation who was appointed to the Board in April District and has been a shareholder 2009. He was elected Chairman on Director since August 2012. He has 20 November 2015. Mr Robertson has been a Director of Peppin Planners since been a Director of Ricegrowers’ Limited 2001 and prior to this was a Director (trading as Sunrice) since 1996 and of FS Falkiner & Sons Pty. Ltd. He was holds Director profiles on international Chair of the Murray Group of Concerned subsidiaries including in Papua New Communities from 2010 to 2013. Mr Guinea. Mr Robertson is a graduate of the Simpson is a Fellow of the Australian Australian Rural Leadership Program and Institute of Company Directors and the is an owner/operator of a mixed farming Australian Rural Leadership Foundation. business in the East Berriquin area.

John Bradford Ben Barlow MAICD B. Ec, M. Bus (Ag) MAICD John Bradford is a shareholder Director Ben Barlow is an independent Director appointed to the Board in November appointed to the Board in June 2016. 2015. He is also a Director on the NSW Currently residing in Corowa, he has past Rice Marketing Board and holds Director experience as a farmer and grazier at positions on Ricegrowers’ Limited (trading Hay. He is also a Board member of the as Sunrice) and its Papua New Guinea Local Land Services Western Division. Mr subsidiary. Mr Bradford is a former Barlow previously held senior strategic and Chairman of Southern Riverina Irrigators operational leadership positions in finance and is the Board’s representative to the – both in Australia and overseas. He NSW Irrigators’ Council. Mr Bradford is a has completed a Bachelor of Economics Fellow of the Australian Rural Leadership and holds a master’s degree in Business Foundation and runs a mixed irrigation (Agribusiness). He is also a Fellow of the business, predominately in the Berriquin Australian Rural Leadership Foundation. and West Berriquin irrigation areas.

50 Murray Irrigation Limited Annual Report 2016 Tim McKindlay James Sides Chris Brooks B. Ag. Ec. (Hons) MAICD MAICD MAICD Tim McKindlay is a shareholder Director James Sides is a shareholder Director who Chris Brooks is a shareholder Director appointed to the Board in November 2009. was appointed to the Board in November appointed to the Board in November Mr McKindlay is Murray Irrigation’s delegate 2013. Mr Sides is the Company’s delegate 2015. He was Managing Director of the to the National Irrigators’ Council and was to the WaterNSW Murray Lower Darling family farming, storage, transport and appointed to its Board in 2012 and elected Customer Service Committee. He is trading business, Brooks Grain from 1986 Deputy Chair in 2013. Mr McKindlay a former Chair of the West Berriquin until 2001 and then CEO of Australian was formerly Chair of the Deniboota Irrigators’ Council. Mr Sides is a licenced operations of Glencore Grain until 2011. Landholders’ Association, delegate to Stock and Station, Real Estate Agent Other positions held by Mr Brooks include Southern Riverina Irrigators, and member and Auctioneer and operates his own Managing Director of Corporate Farms of both the NSW State Water Corporation Rural Property Estate Agency and Water Pty. Ltd, Chairman of AACL, and Board Murray Lower Darling Customer Service Brokering business in association with the member of the Australian Grain Exporters Committee and the Barmah-Millewa national brand Landmark. He has based Association and the Grain Industry Consultation Reference Group. Mr his business in Deniliquin and Hay since Association of Victoria. Mr Brooks and his McKindlay is an owner/operator of a mixed 1995. He is an owner/operator of a mixed wife currently own and operate a farming farming business in the Deniboota area. livestock and farming business in the business at Barooga, focused on irrigated Deniliquin area. grain production.

Dr Sharman Stone Former Directors BA (Hons), MA (Rural Sociology), Michael Hughes Roger Reynoldson GradDipEd., PhD (Monash) MAICD GAICD AssDipAppSc (FarmMgt), GAICD The Honourable Dr Sharman Stone is an Mr Hughes was appointed a shareholder Mr Reynoldson was a shareholder Director independent Director appointed to the Director in April 2009. Mr Hughes did from November 2011 until November 2015. Board in August 2016. Dr Stone served not seek re-election at the 2015 Director 20 years as the Federal Member for elections. Chris Badger Murray (Vic) holding a range of positions BEng, CPEng, ADP LBS, GAICD including Parliamentary Secretary for the Robyn Clubb Environment, Parliamentary Secretary Mr Badger was a non-shareholder Director BEc, CA, F Fin, MAICD for Finance, Minister for Workplace who was appointed to the Board in July Participation, Shadow Minister for the Ms Clubb was a non-shareholder Director 2014. Mr Badger resigned in March 2016. Environment and Shadow Minister for who was appointed to the Board in Immigration. Dr Stone has a Bachelor of October 2011. Ms Clubb did not seek Arts, Master of Arts (Rural Sociology), re-election at the 2015 Director elections. and a Graduate Diploma of Education and was awarded a PhD from Monash University. Previously she worked at the Victorian Farmers Federation, the Victorian Rural Water Corporation and the Victorian Department of Agriculture. Murray Irrigation Limited Annual Report 2016 51 Company profile and executive management team

Murray Irrigation is Australia’s largest private irrigation company, formed in 1995 as an unlisted public company.

About us Company structure Michael Renehan Murray Irrigation is Australia’s largest Murray Irrigation has reviewed the MBA, M. Eng (Chem), MAICD private irrigation company, formed in 1995 corporate structure to ensure it is able as an unlisted public company. to deliver on our key priorities focussing Chief Executive Officer Murray Irrigation is based in southern on safety and customer service while Appointed in June 2015, Michael Renehan NSW, and its shareholders are the improving the financial performance of brings more than 15 years’ experience irrigator-customers who own the the Company. The key drivers of cost, in CEO and general management roles landholdings the Company supplies water volume and price have been central to the with a background in engineering and to. This represents over 1,200 family decision making process and any changes manufacturing. He holds a Master of farm businesses who own over 2,200 undertaken to get the business back to Business Administration from Deakin landholdings within our area of operations, breakeven performance. University, a Masters in Chemical covering 724,000 hectares. Engineering from RMIT and is a member of the Australian Institute of Company Board Directors. Vision, mission Murray Irrigation presently has eight The CEO is responsible for providing the and values Directors – six shareholder Directors and organisation with strategic leadership and two independent Directors. The Board organising the structure of the Company Our vision is to be a leader in the delivery of Directors develops and oversees the to deliver services that achieve our vision, of irrigation water and water related implementation of the Company’s strategic mission and values products and services. direction. Our mission is to meet the needs of Shareholder Directors are elected by customers by delivering high quality shareholders for a four-year term. Non- irrigation water and water related products shareholder Directors are nominated by the and services through developing an shareholder Directors according to their organisational culture of safety, efficiency, specialist expertise, and their appointment innovation and customer service. is endorsed by shareholders at the Annual Our core values focus on customers, General Meeting. innovation, integrity, performance, safety, teamwork, community and environment. Key staff Murray Irrigation key staff members are listed over the following pages.

52 Murray Irrigation Limited Annual Report 2016 Ross Mallett Scott Barlow Suni Campbell JD, B. Bus, Dip. Corp Mgt, GradDip. (Leg AssocDip Applied Science B. Bus (Human Resources Mgt) Prac). FCPA, FGIA, FCIS Executive Manager Customer Executive Manager Human Company Secretary & Executive Operations Resources Manager Corporate Services Scott commenced at Murray Irrigation Interim Executive Manager MILCast Ross started with Murray Irrigation in July in April 1996. He holds significant and 2015 and brings extensive experience as diverse experience within the bulk irrigation Suni started with Murray Irrigation a company secretary, lawyer and senior industry. With a background in both in January 2016. Suni has 15 years’ executive having worked for a number irrigated and mixed dryland farming, and experience in human resource of large, medium and small listed public experience in the forestry and agricultural management with a history of devising companies in the resources, energy and sectors prior to commencing with Murray effective HR strategies in line with the agriculture industries including BHP Irrigation, he has played a large role in broader business requirements. She holds Billiton Ltd., WMC, Rio Tinto, Elders and the water efficiency and operational a Bachelor of Business – Human Resource Icon Energy Ltd. Ross is a chartered development of the Murray Irrigation gravity Management and has worked in senior secretary, qualified lawyer and accountant supply network. Scott has an Associate roles within Mining, on shore oil drilling and a fellow and former Director and Diploma in Applied Science. and the not for profit sector. Most recently, National President of the Governance Suni was Senior Manager, HR at SA Water Institute of Australia. Customer Operations where she was key to leading the business The Customer Operations team comprises and staff through a major restructure and Corporate Services four departments: Operations, Business transformational change resulting in an The Corporate Services team is Planning, Customer Support and Account organisational culture more customer, responsible for providing a range Management and is collectively responsible safety and commercially focused. of services to internal and external for water delivery to landholdings and Human Resources stakeholders including governance, legal, supplying the townships of Berrigan, compliance, risk management, internal Finley, Wakool and Bunnaloo. The team The Human Resources team supports audit, procurement, contract management is also responsible for all customer facing the effective and efficient management and water trade administration services. activities including reception, account of our people. This team is responsible management, customer consultation, for employee engagement; leadership and the on-farm irrigation efficiency development; training and development; projects, as well as order scheduling, performance management; culture and account administration and temporary change; remuneration and benefits; water transfer and trade. The operational attraction, selection and retention; responsibilities include operation of workforce planning; payroll; diversity Company drainage infrastructure, and the and entry level programs; workers’ reactive and preventative maintenance compensation and return to work programs for outlets and regulators. programs. The division also completes benchmarking and researches best practice initiatives to ensure we remain competitive in the job market to attract and retain the required talent.

MILCast MILCast is a business unit of Murray Irrigation which designs, manufactures and supplies precast concrete products for agricultural and other commercial uses for customers across NSW and into Victoria.

Murray Irrigation Limited Annual Report 2016 53 Company profile and management team

Warren Jose Trevor Heise Perin Davey B. Eng (Geol), M. Eng Sc (Geotech), MIE B. Eng GradCert Public Relations Aust Executive Manager Infrastructure Executive Manager Corporate Affairs Executive Manager Major Engineering Trevor joined Murray Irrigation in March and Stakeholder Engagement Projects 2015. He has over 20 years’ experience Perin joined Murray Irrigation in October Warren started with Murray Irrigation in in the construction industry in NSW, 2010 as the Water Policy Officer. She April 2015. He brings diverse industry managing a number of large projects. has a background in government relations experience in the delivery of infrastructure He has worked in both public and private and issues management. A former projects and experience working within sectors. Trevor spent seven years as country journalist and media advisor to an organisation on project delivery. Business Manager and Project Manager a Federal Senator, Perin also worked in Warren has tertiary and post graduate of TCM Civil Pty Ltd in Newcastle, NSW. Canberra with an international government qualifications in engineering. Most recently, He has a Bachelor of Engineering (Civil) relations consultancy firm. She has he held the role of General Manager Honours. worked for a wide range of clients on Infrastructure Delivery at Central Highlands Infrastructure Services issues as diverse as single desk wheat Water (CHW) in Ballarat. marketing, online sales and marketing, The Infrastructure Services team Major Projects food and drug approvals and copyright. is responsible for the whole-of-life Perin has a Graduate Certificate in Public The Major Projects team includes project management of the Company’s irrigation Relations from the University of Southern management, engineering, design, and drainage assets including more Queensland. construction, communication, customer than 20,000 structures. The division is consultation, commissioning and safety. responsible for all maintenance works Corporate Affairs and Stakeholder They are responsible for managing the on the irrigation and storm water escape Engagement capital expenditure program across Murray system, and minor construction work. The Corporate Affairs and Stakeholder Irrigation, including all aspects of the Additional responsibilities include the Engagement team is responsible investment through the Private Irrigation operation and maintenance of the Wakool for government relations, advocacy Infrastructure Operators Program (PIIOP). Tullakool Sub-Surface Drainage Scheme, activities, stakeholder engagement and Murray Irrigation’s PIIOP Round 2 project the Company’s groundwater pumping communications. The division also includes will modernise the irrigation network, while scheme and the fleet management and compliance to ensure Murray Irrigation PIIOP Round 3 will undertake system stores. meets the range of regulatory requirements optimisation opportunities. The PIIOP imposed by government regulation that is projects are funded under the Sustainable specific to the irrigation sector. This team Rural Water Use and Infrastructure oversees Murray Irrigation involvement component of the Commonwealth in state and national water policy Government’s Water for the Future development and reviews and contributes program. to the development of Company policy. The team is responsible for producing Murray Irrigation publications including the Annual Report, maintaining website content and customer communications.

54 Murray Irrigation Limited Annual Report 2016 David Leslie Cameron Pepper Michael Piko B.For.Sc (Hons), M.For.Sc. B. Bus (Acc), CPA Australia Dip. Mgt Executive Manager Planning and Financial Controller Chief Information Officer (CIO) Strategy Prior to starting with Murray Irrigation in Michael started with Murray Irrigation David started in his current role in June September 2014, Cameron held Senior in June 2015. He has over 25 years’ 2015. He had previously worked with the Accounting roles with National Foods experience in the IT industry with strong Company in 2014 as a casual consultant (now Lion Pty Ltd) and more recently skills in all areas including technical, project during the implementation and rollout with Carlton United Breweries (CUB Pty management and team management. of our Standard Level of Service pilot Ltd) where he held roles including Team Michael was previously Head, Enterprise in Yallakool. Prior to this, David held the Leader Financial Accounting, Systems Infrastructure and Operations at La Trobe position of General Manager at Murray and Intercompany Accountant, as well as University, leading a team of 50+ that Catchment Management Authority over Senior Commercial Analyst. Cameron has serviced the University’s six campuses a six-year period and more recently he a Bachelor of Business (Accounting) from with 30,000 users. Following that, worked with the NSW Office of Water (now Swinburne University and is a member of Michael had been consulting through a Department of Primary Industries). CPA Australia. range of contracts in Canberra, including Planning and Strategy Finance the Department of Health and General Practice Education and Training. Murray Irrigation’s Planning and The Finance division is responsible for Strategy provides strategic advice, overseeing the Company’s finances and ICT reporting and analysis on the Company’s investments, budgeting and forecasting, The Information, Communications and policies, performance, compliance and managing Company property and contract Technology (ICT) division is responsible achievements. This includes assessment management. The functions within the for the Company’s information systems against Key Performance Indicators, division include accounting, accounts technology, communications platforms, identifying opportunities to improve and receivable, accounts payable, asset geographic information systems (GIS), looking at customer service impacts and management, payroll, procurement and software and databases, and the Telemetry resolutions. Project management advice managing suppliers. This division is also and SCADA control system. The SCADA is also provided and helps develop project responsible for improving financial systems Technologist provide the technical plans and reporting templates to align and processes and the overseeing of expertise in the running of the entire organisational objectives. PIIOP financial reporting including regular channel system. The IT team manages analysis of key performance metrics. the Company’s servers, internet services, website and strategic partnerships with internet and telecommunications providers. The GIS reporting staff are responsible for all mapping requests, coordinating satellite imagery and providing service to staff and customers.

Murray Irrigation Limited Annual Report 2016 55 Directors’ report and financial statements 2015/16

56 Murray Irrigation Limited Annual Report 2016 Contents

Directors’ report 58 Consolidated statement of profit or loss and other comprehensive income 62 Consolidated balance sheet 63 Consolidated statement of changes in equity 64 Consolidated cash flow statement 65 Notes to the financial statements 1. Summary of significant accounting policies 66 2. Revenue 72 3. Expenses 73 4. Income taxes 75 Current assets 5. Cash and cash equivalents 76 6. Trade and other receivables 76 7. Inventories 77 Non-current assets 8. Available for sale financial assets 77 9. Property, plant and equipment 78 10. Deferred tax assets 79 11. Intangible assets 80 Current liabilities 12. Trade and other payables 80 13. Provisions 80 14. Other 81 Non-current liabilities 15. Interest bearing liabilities 81 16. Deferred tax liabilities 81 17. Provisions 81 Equity 18. Contributed equity 82 19. Reserves and retained profits 82 Other 20. Related parties 83 21. Remuneration of auditors 84 22. Commitments 85 23. Land and Water Management Plans 85 24. Financial risk management 86 25. Subsidiary 86 26. Parent entity information 87 27. Segment information 88 28. Subsequent events 90 29. Contingent assets and contingent liabilities 90 Directors’ declaration 91 Auditor’s independence declaration 92 Independent audit report 93

Murray Irrigation Limited Annual Report 2016 57 Directors’ report for the year ended 30 June 2016

Your Directors present Conduct and conflict of interest Details of the Company’s Code of Conduct and approach to conflict in interest are set out their report together in the Corporate Governance Statement of the Annual Report. with the accounts of the consolidated entity Directors’ interests The relevant interests of the Directors in the share capital, water entitlements, and for the financial year 1 delivery entitlements of the Company, as at 30 June 2016, are as follows: July 2015 to 30 June 2016 Shareholder Direct Indirect Water Delivery and the Auditor’s report Directors shareholding shareholding entitlements entitlements thereon. T.W. McKindlay 2,920 – 1,677 2,424 D.M. Robertson 3,487 4,285 5,344 6,371 B.P. Simpson – 2,413 25 485 Directors The following people were Directors of the J.A. Sides 975 – 310 108 Company during or since the end of the C.R. Brooks 371 5633 1825 4988 financial year: J.M. Bradford 2161 735 1607 2407 D.M. Robertson (Chairman) Where a Director is an authorised representative of a corporate entity, the figures above C.D. Badger include the holdings of that entity. (resigned 21 March 2016) Non-shareholder Directors in office during the year and up to the signing of this Report: B.J. Barlow C.D. Badger, R. Clubb, B.J. Barlow and Dr S. Stone, hold no Murray Irrigation shares, water (appointed 16 June 2016) entitlements or delivery entitlements. J.M. Bradford Shareholder Director D.M. Robertson also has an indirect interest in a quarrying (appointed 19 November 2015) agreement with the Company. C.R. Brooks (appointed 19 November 2015) R. Clubb (resigned 19 November 2015) M.L. Hughes (resigned 19 November 2015) T.W. McKindlay R.E. Reynoldson (resigned 19 November 2015) J.A. Sides B.P. Simpson (Deputy Chairman) Dr S. Stone (appointed 18 August 2016) For details of Directors’ qualifications and experience refer to pages 50 and 51 of the Annual Report.

58 Murray Irrigation Limited Annual Report 2016 Training and professional advice Officers The Board of Directors have an Persons who are executive officers of the Company as at the date of signing this report established minimum standard that all are: Directors are required to complete the ‘Company Directors Course’ provided M. Renehan Chief Executive Officer by the Australian Institute of Company S. Barlow Executive Manager – Customer Operations Directors. This training is organised for Executive Manager – Corporate Affairs & Stakeholder Engagement any Director elected or appointed to the P. Davey Board if they do not already hold the C. Pepper Financial Controller qualification. All Directors have either W. Jose Executive Manager – Major Engineering Projects completed the Company Directors Course or are scheduled to do so before the end of T. Heise Executive Manager – Infrastructure calendar 2016. S. Campbell Executive Manager – Human Resources Directors have the right in connection R. Mallett Executive Manager – Corporate Services & Company Secretary with their duties and responsibilities as M. Piko Chief Information Officer Directors to seek independent professional advice at the Company’s expense. Prior D. Leslie Executive Manager – Planning & Strategy written approval of the Chairman is required, which will not be unreasonably withheld.

Company Secretaries The Secretaries of the Company at the end of the reporting period, together with their qualifications and experience, are set out below: R.E. Mallett (appointed 14 July 2015) JD BBus GDLP FCIS FGIA FCPA Mr Mallett joined the Company in July 2015 performing the role of Executive Manager Corporate Services and Company Secretary. M. Renehan (appointed 14 July 2015) MBA MEng (Chem) MAICD Mr Renehan joined the Company in June 2015 as Chief Executive Officer. Mr Renehan performed the role of supporting Company Secretary from June 2015. Secretaries of the Company as at the date of signing of this report are R.E. Mallett and M. Renehan. The qualifications and experience of Messrs Mallett and Renehan are set out on pages 52 and 53 of this Annual Report.

Murray Irrigation Limited Annual Report 2016 59 Directors’ report for the year ended 30 June 2016

Meetings of Directors The following table sets out the number of meetings of the Directors held during the financial year to 30 June 2016, including meetings of committees, and the number of meetings attended by Directors.

Committees Finance, Audit Customer and Risk Safety and Service Board Management Infrastructure PIIOP Steering Remuneration Committee Attended Held Attended Held Attended Held Attended Held Attended Held Attended Held C.D. Badger 451111331111 B.J. Barlow 00–––––––––– J.M. Bradford 66––22–––––– C.R. Brooks 66–––––––––– R. Clubb 3311––––1111 M.L. Hughes 3 3 1 1 – – 1 1 1 1 T.W. McKindlay 99222233–––– R.E. Reynoldson 331111–––––– D.M. Robertson 993333334444 J.A. Sides 891111––3333 B.P. Simpson 993311––4444

Principal activity Asset impairment For further information on the review The principal activity of Murray Irrigation Over the last seven years the water of operations and results from those during the period consisted of the delivery available for delivery in Murray Irrigation’s operations refer to the Chairman’s and of water to landholders within an area from footprint has reduced by around 30 CEO’s Reports and the Operations chapter the Murray River to the Billabong Creek percent primarily due to government set out on pages 4, 6 and 29 of this Annual extending 150 kilometres to the west and water buy-backs. While the Company Report. 100 kilometres to the east of Deniliquin. has a system that is capable of delivering 1,500GL in a season, the likelihood of Review of operations and results actually doing so is significantly reduced. from those operations The underutilisation of water assets A total of 339GL of water was supplied represented an “impairment trigger” on-farm for the year 1 July 2015 to 30 under Australian Accounting Standards June 2016, compared to 739GL in the which needed to be tested through an prior financial year. With water delivery independent valuation of the Company’s revenue down, the Company was able asset base. The valuation report indicated to tighten its expenditure to return an that the depreciated replacement cost operating expense figure that was $3.5 of the assets (the impairment test) was million lower than the previous year, 28 percent lower than the carrying value when water allocation was at 61 percent in the accounts which led to a decision and 739GL was delivered on-farm. The being made by the Board to impair the operating result before tax for 2015/16 assets as at 30 June 2016. The valuation, was a loss of $49.821 million, which took into account the replacement cost includes a once off write down of assets of the assets, whether the same network of $66.579 million, compared to a profit of would be created if it had to be replaced $18.157 million for 2014/15. today, the extent to which technology and engineering efficiencies and advanced industry practices have changed since the assets were first installed.

60 Murray Irrigation Limited Annual Report 2016 Revenue from contributed assets and Changes in the state of affairs Proceedings on behalf of the taxation assessments In the opinion of the Directors, there Company Under the Corporations Act, compliance were no significant changes in the state No person has applied to the Court under with accounting standards is mandatory. of affairs of the Company not otherwise section 237 of the Corporations Act 2001 Accounting Standard AASB 1004 disclosed in this report and financial (Cth) for leave to bring proceedings on requires that infrastructure works, when statements. behalf of the Company, or to intervene in constructed, to the extent to which their any proceedings to which the Company cost has been met from government Matters subsequent to the end of the is a party, for the purpose of taking funding, be treated as revenue of the financial period responsibility on behalf of the Company for company even though the receipt of the At 22 September 2016 the New South all or part of those proceedings. funding is not revenue of the company. Wales Murray general security allocation No proceedings have been brought or Your Directors are concerned that this was 42 percent with a moderate outlook intervened in on behalf of the Company accounting treatment may be misleading for water availability for the 2016/17 year. with leave of the court under Section 237 and are of the view that neither the The Company is in a position to deliver of the Corporations Act 2001. receipt of any government funding for its budgeted volume of water during the reimbursement for infrastructure works nor coming season. Rounding of amounts to the nearest the value of the works constructed should On 12 August 2016, the Executive thousand dollars be recognised as revenue. Accordingly, Manager – MILCast Peter De Vreede The Company is of a kind referred to the Directors feel obliged to express their departed the Company. in Class Order 98/0100, issued by view that the receipt of both the Land and On 18 August 2016, a new independent the Australian Securities & Investment Water Management Plans drainage works, Commission, relating to the rounding of the Asset Renewal Program funding of Director, Dr Sharman Stone, was appointed to the Board of Directors. amounts in the Financial report, which prior years, current funding in relation have been rounded off in accordance with to the Private Irrigation Infrastructure There has been no other item, transaction that Class order to the nearest thousand Operators Program (PIIOP), or any future or event of a material and unusual nature dollars. such funding should not be recognised as likely, in the opinion of the Directors, to revenue by way of contributed assets of affect significantly the operations of the Auditor’s independence declaration Company, the results of those operations Murray Irrigation. The Auditor’s Independence Declaration is or the state of affairs of the Company in The Company has obtained advice over set out following these financial statements subsequent financial years. many years in respect to the application of and forms part of the Directors’ report. the Income Tax Law to previous Land and Likely developments and expected This report is made pursuant to a resolution Water Management Plans and the Asset results of operations of the Directors. Renewal Program in order to form this view. The Company will continue to pursue The Company’s results are influenced by these matters to achieve an equitable the level of its operating costs, the amounts outcome for the Company. required to be set aside in reserves, and income derived from the sale of water Dividends and other sources. The unpredictability of M Robertson The Company is a not-for-profit the available water resource, government Chairman organisation whose Constitution requires requirements and river management mean 14 October 2016 it is not possible to accurately predict the that no operating surplus may be paid or transferred by way of a distribution of profit results of operations. However, Directors to shareholders. will endeavour to protect the viability of the business in all circumstances. Environmental regulation Indemnification and insurance of B Simpson Murray Irrigation is subject to NSW officers Deputy Chairman environmental legislation in relation to 14 October 2016 water and land use. The Company holds During the financial year, the Company an Environment Protection Licence issued paid a premium indemnifying officers of by the NSW Environment Protection the Company. A condition of the contract Authority. This licence requires discharges is that the nature of the liability indemnified to waterways to be below specified and the premium payable not be disclosed. levels of contaminants. There have been no breaches of the licence during the reporting period.

Murray Irrigation Limited Annual Report 2016 61 Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2016

Consolidated Notes 2016 2015 $’000 $’000

Statement of profit or loss and other comprehensive income

Revenue from irrigation undertaking 2 27,183 29,516 Other revenue 2 41,760 3 8 ,119 Employee benefit expenses (10,885) (11, 579) Materials and contracts expenses (18,810) (14,855) Depreciation and amortisation expenses 3(a) (9,449) (9,460) Impairment of water infrastructure assets 3(b) (66,579) – Bulk water supply expenses (8,759) (11,215) Finance costs – (3) Other expenses 3(c) (4,282) (2,366) (Loss)/Profit before income tax (49,821) 18,157 Income tax benefit/(expense) 14,559 (19) (Loss)/Profit for the year (35,262) 18,138

Other comprehensive income Items that may be reclassified subsequently to profit or loss: Available for sale financial assets – gains net of tax 760 93 Other comprehensive income for the year 760 93 Total comprehensive (loss)/income for the year (34,502) 18,231

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

62 Murray Irrigation Limited Annual Report 2016 Consolidated balance sheet as at 30 June 2016

Consolidated Notes 2016 2015 $’000 $’000

Assets

Current assets Cash and cash equivalents 5 54,768 66,415 Trade and other receivables 6 12,198 10,608 Inventories 7 18,593 19,766 Total current assets 85,559 96,789

Non-current assets Available for sale financial assets 8 80,348 85,254 Property, plant and equipment 9 215,286 263,434 Deferred tax assets 10 5,310 3,824 Intangible assets 11 95,955 97,419 Total non-current assets 396,899 449,931 Total assets 482,458 546,720

Liabilities

Current liabilities Trade and other payables 12 14,299 9,752 Provisions 13 2,083 2,239 Other 14 27,042 48,493 Current tax liabilities 182 134 Total current liabilities 43,606 60,618

Non-current liabilities Interest bearing liabilities 15 – 45 Deferred tax liabilities 16 26,736 39,388 Provisions 17 410 461 Total non-current liabilities 27,146 39,894 Total liabilities 70,752 100,512 Net assets 411,706 446,208

Equity

Contributed equity 18 284,723 284,723 Reserves 19(a) 19,766 19,006 Retained profits 19(b) 107,217 142,479 Total equity 411,706 446,208

The above balance sheet should be read in conjunction with the accompanying notes.

Murray Irrigation Limited Annual Report 2016 63 Consolidated statement of changes in equity for the year ended 30 June 2016

Consolidated Contributed Reserves Retained Total equity earnings $’000 $’000 $’000 $’000

Balance at 30 June 2014 284,723 18,913 124,341 427,977 Total comprehensive income – 93 18,138 18,231 284,723 19,006 142,479 446,208

Balance at 30 June 2015 284,723 19,006 142,479 446,208 Total comprehensive income – 760 (35,262) (34,502) Balance at 30 June 2016 284,723 19,766 107,217 411,70 6

The above statement of changes in equity should be read in conjunction with the accompanying notes.

64 Murray Irrigation Limited Annual Report 2016 Consolidated cash flow statement for the year ended 30 June 2016

Consolidated Notes 2016 2015 $’000 $’000

Cash flows from core operating activities

Receipts from customers 32,949 36,825 Income tax received/ (paid) 469 (328) Payments to suppliers and employees (40,261) (40,586) Net cash outflows from operating activities (6,843) (4,089)

Cash flows from non-core operating activities

Grants received from government 14,776 20,239 Net cash inflows from non-core operating activities 14,776 20,239

Cash flows from investing activities

Interest received on investments 3,557 4,305 Proceeds from sale of financial assets 73,334 120,503 Payment for financial assets (68,937) (112, 576) Proceeds from sale of property, plant and equipment 777 1,161 Payment for property, plant and equipment (28,266) (26,779) Net cash outflows from investing activities (19,535) (13,386)

Cash flows from financing activities

Payment for financial assets (45) (46) Net cash outflows from financing activities (45) (46)

Net (decrease)/increase in cash held* (11,647) 2,718

Cash at the beginning on the financial year 66,415 63,697 Cash at the end of the financial year 5 54,768 66,415 The above cash flow statement should be read in conjunction with the accompanying notes. * Decrease in cash is attributable to the drawdown of the AMRR reserve to fund the PIIOP program to date. Murray Irrigation has budgeted a contribution of approx. $37m to the full cost of the program.

Murray Irrigation Limited Annual Report 2016 65 Notes to the financial statements for the year ended 30 June 2016

1. Summary of significant (a) Basis of preparation Deferred tax assets are recognised for These consolidated financial statements deductible temporary differences and accounting policies are general purpose financial statements unused tax losses only if it is probable that future taxable amounts will be available This general purpose financial report which have been prepared in accordance Corporations to utilise those temporary differences and covers the consolidated entity of Murray with the requirements of the Act 2001 losses. Irrigation Limited (“the Company”) and , Australian Accounting Standards controlled entities (“consolidated entity” – Reduced Disclosure Requirements and Deferred tax assets and liabilities are or “group”). Murray Irrigation Limited other authoritative pronouncements of the offset when there is a legally enforceable is a public Company limited by shares, Australian Accounting Standards Board. right to offset tax assets and liabilities. incorporated and domiciled in Australia. The Directors have determined that the Current tax assets and tax liabilities Company is permitted to apply the Tier are offset where the entity has a legally Because the Company’s principal purpose enforceable right to offset and intends is to provide cost effective services to 2 reporting requirements (Australian Accounting Standards – Reduced either to settle on a net basis, or to its shareholders, rather than to generate realise the asset and settle the liability profits, the Company is a not-for-profit Disclosure Requirements) as set out in AASB 1053 “Application of Tiers of simultaneously. Current and deferred entity as defined in the Accounting tax balances attributable to amounts Standards. Accordingly the Company has Australian Accounting Standards” because it is a not-for-profit private sector entity that recognised directly in equity are also applied the Accounting Standards as they recognised directly in equity. apply to not-for-profit entities, although it is does not have public accountability. also tax assessable. In the determination of whether an asset (c) Revenue recognition The following is a summary of the material or liability is current or non-current, consideration is given to the time when Revenue is recognised for the major financial accounting policies that have business activities as follows: been adopted by the consolidated entity each asset or liability is expected to be (i) Water sales in the preparation of the financial report. realised or paid. The asset or liability is These policies have been consistently classified as current if it is expected to Revenue from the sale of water is applied to all the years presented, unless be turned over within 12 months, or if the recognised when the water is delivered to otherwise stated. Company does not have an unconditional customers, measured by meter readings right to defer settlement of a liability for at conducted weekly. All water usage The financial statements have been least 12 months after the reporting date. measurement is completed before the prepared using the measurement bases end of the financial year, as the ‘irrigation specified by Australian Accounting (b) Income tax season’ generally concludes in May. Fixed Standards for each type of asset, liability, The income tax expense for the period access and other fees are recognised on a income and expense. The measurement is the tax payable on the current period’s pro-rata basis throughout the year. bases are more fully described in the taxable income based on the notional accounting policies below. (ii) Recognition of revenue arising from income tax rate adjusted by changes contributed assets The financial report is presented in in deferred tax assets and liabilities Australian dollars, which is also the attributable to temporary differences The Company was incorporated on consolidated entity’s functional currency. between the tax bases of assets and 23 February 1995 by the NSW State liabilities and their carrying amounts in the Government (the State) as a vehicle to financial statements, and to unused tax privatise the irrigation undertaking known losses. as Murray Irrigation Area and Districts, an arm of the then NSW Department of Land Deferred tax assets and liabilities are and Water Conservation (DLWC). The recognised for temporary differences irrigation infrastructure was transferred at the tax rates expected to apply when from the DLWC to the Company on the assets are recovered or liabilities are 23 February 1995. The ownership of settled, based on those tax rates which are the Company was transferred from the currently enacted. The relevant tax rates State to individual irrigators as Company are applied to the cumulative amounts shareholders on 3 March 1995. of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

66 Murray Irrigation Limited Annual Report 2016 The State agreed that as part of the (iv) On-Farm Irrigation Efficiency Program For the portion of the grants relating to privatisation process it would bear the cost The Company has been contracted as payments to be made to landholders, the of refurbishing the irrigation infrastructure a delivery partner for implementation Company’s role is to ensure that irrigation assets to a value of $82.5 million (indexed of the Commonwealth Government rights are surrendered in accordance with for inflation), in order to make good past funded On-Farm Irrigation Efficiency the Funding Agreement. The funds are deterioration of the infrastructure. The Program which is funded under the received through the Company accounts mechanism by which this was affected was Water for the Future Sustainable Rural and paid to the landholders as their water a Funding Deed under which the State was Water Use and Infrastructure Program. rights are surrendered and they meet the to provide the funds to the Company over The Commonwealth of Australia has a funding criteria in their agreements. As the 15 years as reimbursement for the cost Funding Agreement with the Company Company is considered to be acting as the of works carried out in accordance with and a contract for the purchase of Water agent in this component of the program, works programs approved by the State. Entitlements with the landholder. The gross revenue and expenditure relating to Assets constructed were contributed to Company has contracted the landholder the funds received from the government the Company to control and manage. The to complete water efficiency investments and distributed to proponent landholders Deed expired in 2009/10, so is reported on their landholding. The Company’s role is not recognised by the Company. Funds for information purposes only in this is to ensure that funds from government received and unspent are held in bank financial year. are spent in accordance with the Funding accounts controlled by the Company, with (iii) Recognition of revenue arising from Agreement, and the funds are received a corresponding liability recognised as contributed assets through the Company accounts and paid to disclosed in note 14. The Company is the implementing authority the landholders as their projects meet the In relation to the Company’s surrender of in respect of a number of Land and funding criteria in their agreements. As the Conveyance Water Access Entitlements Water Management Plans. Expenditure Company is considered to be acting as the (water rights), there are no specific on these plans was reimbursed to the agent in this program, gross revenue and obligations (other than transfer to the Company by the NSW State Government, expenditure relating to the funds received Commonwealth of the relevant water the Commonwealth Government, relevant from the government and distributed to access licences) or spending requirements local government authorities and irrigation proponent landholders is not recognised by attached to this portion of the grants. customer shareholders. Levies received the Company. Funds received and unspent Accordingly, these funds are recognised as from irrigation customer shareholders are are held in bank accounts controlled by the they are received and the water licences considered to be payments for services Company. Unspent funds are recognised are surrendered. performed, primarily for maintenance as a liability (refer note 14). The Company’s Funding relating to capital works is of drainage assets. In accordance with administration costs are reimbursed from allocated to specific projects and AASB 118 Revenue, when the outcome program funds and are recognised as milestones which are to be completed of a transaction involving the rendering revenue as administration services are by the Company. Under the terms of the of services can be estimated reliably, provided. Funding Agreement, the Commonwealth revenue associated with the transaction (v) Private Irrigation Infrastructure can require the return of funding that: shall be recognised by reference to the Operators Program (PIIOP) • has not been spent, or legally and stage of completion of the transaction at During the 2013 year, the Company and irrevocably committed for expenditure, in the end of the reporting period. Where the then Department of Sustainability, accordance with the Funding Agreement; the Directors have determined that a Environment, Water, Population or constructive obligation to provide these and Communities (representing the • has not been (correctly) spent, or dealt drainage maintenance services exists at Commonwealth) (“the Department”) signed reporting date, revenue has been deferred with, in accordance with the Funding the Funding Agreement for implementation Agreement. in accordance with AASB 118 (refer note of the Company’s Private Irrigation 14). Amounts received from government Infrastructure Operators Program (PIIOP) Each tranche of the funding received bodies are defined as a contribution and project. or receivable is therefore recognised as are accounted for under AASB 1004 revenue only when milestones have been Contributions. Income arising from the Broadly, this Funding Agreement can be completed, or funds spent in accordance contribution of an asset to the Company attributed to three categories: with the Funding Agreement. Amounts are is recognised when the entity obtains • Payments to be made to landholders to deferred to the extent that, as at the end control of the contribution or the right surrender their Irrigation Rights; of a financial year, the Department had the to receive the contribution, it is probable • Payments to the Company to surrender legal right to request that the Company that the economic benefits comprising Conveyance Water Access Entitlements; return funding because it had not achieved the contribution will flow to the Company, and all of the criteria for a milestone by the due and the amount of the contribution can date. be measured reliably. The entity does not • Amounts to be spent on new capital obtain control of a contribution under such works to improve the water infrastructure an agreement until it has met conditions or of the Company. provided services or facilities that make it eligible to receive a contribution. Revenue is therefore deferred until such conditions have been met. Murray Irrigation Limited Annual Report 2016 67 Notes to the financial statements for the year ended 30 June 2016

(vi) Interest income (f) Interest on water debtors (i) Property, plant and equipment Interest income is recognised when accounts Property, plant and equipment represent earned. Interest is charged on water customers’ non-current assets comprising land, (vii) Revenue from the sale of assets accounts which are overdue and outside of buildings, infrastructure for the supply and the normal credit arrangements. drainage of water, plant, motor vehicles, Revenue from the sale of fixed assets is radio technology, office and computer recognised when risks and rewards have (g) Inventories equipment, and land leased from State or been passed to the buyer. Raw materials and stores are stated Local Government over or under which (viii) Termination fees at the lower of cost and net realisable water infrastructure is located. All property, Termination fees are charged and value. As the Company is a not-for-profit plant and equipment with a cost value recognised at the time permanent water entity, it considers the remaining service in excess of $1,000 and a useful life of transfers occur and associated delivery potential of inventories when assessing more than one year are recognised as entitlements are cancelled. the net realisable value of items held for an asset; all other assets acquired are distribution or use in delivering a service expensed. Values are recorded at historical (ix) Sale of goods to members. The cost of manufactured cost less depreciation. Acquisition cost is Revenue is measured at the fair value products includes direct materials, direct determined as the fair value of the assets of consideration received or receivable. labour and an appropriate portion of given up or liabilities undertaken at the Revenue from sale of goods is variable and fixed overheads. Costs are date of acquisition plus costs incidental to recognised upon delivery of the goods assigned on the basis of weighted average the acquisition. As the Company is a not to the customers and associated risks costs. for-profit entity, where an asset is acquired of ownership have passed. All revenue at no cost, or for a nominal cost, the cost is is stated net of the amount of goods (h) Available for sale financial assets its fair value as at the date of acquisition. and services tax (GST), returns, trade Available-for-sale financial assets comprise Land is not depreciated. Depreciation on allowances and other duties and taxes investments in debt instruments such all infrastructure assets, buildings, plant, paid. as fixed and floating rate notes. After equipment and other non-current physical initial recognition, these investments are assets is calculated using the straight-line (d) Cash and cash equivalents measured at fair value with gains or losses method to allocate their costs or re-valued For cash flow statement presentation recognised in other comprehensive income amounts, net of their residual values, over purposes, cash and cash equivalents (available-for-sale reserve), except for their estimated remaining useful lives, includes cash on hand, deposits held at impairment losses, which are recognised in commencing from the time the asset is call with financial institutions, other short- profit or loss. held ready for use. The asset residual term highly liquid investments with original Reversals of impairment losses for values and useful lives are reviewed, and maturities of three months or less that adjusted if appropriate, at each reporting are readily convertible to known amounts available-for-sale debt securities are recognised in profit or loss if the reversal date. Estimates of remaining useful lives of cash and which are subject to an are made on a regular basis for all assets, insignificant risk of changes in value. can be objectively related to an event occurring after the impairment loss with annual reassessments for major items. (e) Trade and other receivables was recognised. For available-for-sale The expected useful lives are as follows: equity investments impairment reversals Trade receivables are measured on are not recognised in profit loss and Water infrastructure 10 to 100 years initial recognition at fair value, and are any subsequent increase in fair value Leased assets 40 to 100 years subsequently measured at amortised cost is recognised in other comprehensive using the effective interest rate method. income. When the asset is disposed of, Buildings 40 years Amortised cost is the total receivable less the cumulative gain or loss recognised in Plant and 8 to 10 years any amounts received and impairment other comprehensive income is reclassified equipment losses. Appropriate allowances for from equity reserve to profit or loss and Office equipment 3 to 14 years estimated irrecoverable amounts are presented as a reclassification adjustment recognised in profit or loss when there within other comprehensive income. Motor vehicles 2 to 5 years is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the amount expected to be recovered. Refer to note 1(z) for further information in regard to the Company’s estimate of the recoverable amount of debtors. Other receivables are carried at nominal amounts.

68 Murray Irrigation Limited Annual Report 2016 (j) Leased non-current assets (m) Impairment of assets (p) Goods and Services Tax (GST) Certain assets comprising shire road Assets are reviewed annually for Revenues, expenses and assets are bridges and culverts, have been leased impairment, or whenever events or recognised net of the amount of associated by the Company from public and local changes in circumstances indicate that the GST, unless the GST incurred is not authorities for a period of 99 years from carrying amount may not be recoverable. recoverable from the taxation authority. the date of privatisation. The Company is An impairment loss is recognised for the In this case it is recognised as part of the obliged to maintain these assets during amount by which the asset’s carrying cost of acquisition of the asset or as part the period of the leases. These assets, in amount exceeds its recoverable amount. of the expense. Receivables and payables view of the long term nature of the leasing As the Company is a not-for-profit entity are stated inclusive of the amount of GST arrangements and the future economic and the future economic benefits of receivable or payable. The net amount of benefits that are likely to eventuate, are the Company’s assets is not primarily GST recoverable from, or payable to, the included in non-current assets, on the dependent on their ability to generate taxation authority is included with other basis of control (Note 9). Other leases cash flows, value in use is taken to be receivables or payables in the balance of fixed assets where substantially all the depreciated replacement cost of the sheet. Cash flows are presented on a the risks and rewards incidental to the asset, provided that the Company would, if gross basis, inclusive of GST. The GST ownership of the asset, but not the legal deprived of the asset, replace it. components of cash flows arising from ownership, that are transferred to entities investing or financing activities which are in the consolidated entity are classified Intangible assets with indefinite useful lives recoverable from, or payable to the taxation as finance leases. Finance leases are are reviewed annually as to whether their authority, are presented as operating cash capitalised at the inception of the lease carrying value exceeds their recoverable flows. by recording an asset and a liability at the amount. lower of the amounts equal to the fair value In addition, the commencement of (q) Employee benefits of the leased property and the present the PIIOP project has created an (i) Wages, salaries, superannuation, value of the minimum lease payments, expectation that a significant portion annual leave and sick leave including any guaranteed residual values. of the Company’s capital assets will be Provision is made for the group’s liability Lease payments are allocated between replaced, decommissioned or handed over for employee benefits arising from services the reduction of the lease liability and to the landholders in future years. Where rendered by employees to reporting date. the lease interest expense. The interest the Company has been able to make a Employee benefits that are expected expense is recognised in the profit or loss reasonable estimate of such items, the to be settled within one year have been so as to achieve a constant periodic rate carrying amount of the relevant assets has measured at the amounts expected to of interest on the remaining balance of the been reduced to their recoverable amount. be paid when the liability is settled, plus liability outstanding. Leased assets are That reduction in the cost of the asset is related on costs. Employee benefits depreciated on a straight line basis over recognised as an impairment loss through payable later than one year have been the shorter of the asset’s useful life and the profit and loss. measured at the present value of the lease term. Lease payments for operating estimated future cash outflows to be made leases, where substantially all the risks (n) Maintenance and repairs for those benefits. and benefits remain with the lessor, are Maintenance, repair costs and minor All employees belong to a superannuation charged to profit or loss on a straight line renewals are charged as expenses occur scheme, which is of the defined basis over the lease term. on the basis that asset lives are being contribution type. Contributions to these preserved to expectation, rather than defined contribution superannuation (k) Non-current assets constructed extended. Where the repair relates to the schemes are recognised as an expense by the Company replacement of a component of an asset in the period that they are payable. Where assets are constructed by the and the cost exceeds the capitalisation The amount charged represents the Company, the cost at which they are threshold, the cost is capitalised and contributions made by the group to the recorded includes all materials used in amortised. construction, direct labour on the project, superannuation plan in respect to the and an appropriate share of other directly (o) Trade and other payables current services of group directors and employees. The contributions are based attributable costs, such as design and These amounts represent liabilities for project management. on the choice of plans made by each goods and services provided to the employee and the relevant rules of each Company up to the reporting date which plan. (l) Intangible assets are unpaid. The amounts are unsecured Water licences held by the Company are and are usually paid within 28 days of Employees are entitled to 10 days personal recognised at cost less impairment losses. recognition. leave per annum on a cumulative basis for Water rights have an indefinite useful life, either personal illness or primary care of and are thus not subject to amortisation, immediate family. No liability is brought to but are tested for impairment by comparing account as the expected future payments their recoverable amount with their are unlikely to exceed the personal leave carrying amount. entitlements.

Murray Irrigation Limited Annual Report 2016 69 Notes to the financial statements for the year ended 30 June 2016

(ii) Long service leave (r) Provisions, contingent liabilities (t) Website and information Current liability – unconditional long and contingent assets technology costs service leave (representing 10 or more Provisions are measured at the estimated Costs in relation to website development years of continuous service) is disclosed expenditure required to settle the present and maintenance are recognised as as a current liability even where the group obligation, based on the most reliable expenses in the period in which they does not expect to settle the liability within evidence available at the reporting date, are incurred, unless they relate to the twelve months because it does not have an including the risks and uncertainties acquisition of an asset, in which case they unconditional right to defer the settlement associated with the present obligation. are capitalised and amortised over the should an employee take leave within 12 Where there are a number of similar period of expected benefits. The Company months. The components of this current obligations, the likelihood that an outflow considers that its website does not give liability are measured at: will be required in settlement is determined rise to sufficient identifying value or costs • Present value – component that the by considering the class of obligations as to be regarded as an Intangible Asset group does not expect to settle within 12 a whole. Provisions are discounted to their under AASB 138. months; and present values, where the time value of Information Technology costs including money is material. • Nominal value – component that the hardware and software generally relate group expects to settle within 12 months. Any reimbursement that the group can be to acquisition of assets of different useful virtually certain to collect from a third party lives, and are capitalised and amortised. Non-current liability – conditional long with respect to the obligation is recognised Costs in relation to feasibility studies service leave (representing less than 10 as a separate asset. However, this asset or business process reviews leading to years of continuous service) is disclosed may not exceed the amount of the related specifications forming part of subsequent as a non-current liability. There is an provision. technology implementation are considered unconditional right to defer the settlement as expenses. Costs in relation to building of the entitlement until the employee has No liability is recognised if an outflow of economic resources as a result of present or enhancing Information Technology, to completed the requisite years of service. the extent that they represent probable Conditional long service leave is required obligation is not probable. Such situations are disclosed as contingent liabilities, future economic benefits controlled by the to be measured at present value. In group that can be reliably measured, are calculating present value, pro rata years of unless the outflow of resources is remote in which case no liability is recognised. capitalised as an asset and amortised over service utilising current salary and wage the period of expected benefits. rates are calculated, and indexed using the (s) Reserves Australian Bureau of Statistics Wage Price (u) Rounding of amounts Index. The Constitution allows that the Directors may set aside financial reserve accounts to The consolidated entity is of a kind referred Expected future payments are discounted be applied at the discretion of the Directors to in Class Order 98/0100, issued by using market yields at the reporting date for any purpose to which the reserves the Australian Securities & Investments on high quality corporate bonds with terms may be applied, subject to satisfying the Commission, relating to the “rounding off” to maturity and currencies that match, as requirements of the Operating Licence of amounts in the financial report. Amounts closely as possible, the estimated future issued by the New South Wales State in the financial report have been rounded cash outflows. Government. off in accordance with that Class Order to the nearest thousand dollars. (i) Water reserve The purpose of the Water reserve is to (v) Comparatives set aside funds for future investment Unless otherwise stated, all accounting in water related products and services. policies applied are consistent with The source of funds is from the sale of a those of prior years. Where necessary, proportion of the Murray Irrigation Limited comparatives have been reclassified for Supplementary Water Access Licence. consistency with current year disclosures. (ii) Available for sale asset revaluation reserve (w) Dividend policy All movements in the fair value of financial Under the Company’s Constitution, assets classified as available-for-sale are the Company is prevented from paying recorded in the available for sale reserve, dividends. except where the asset is considered to be impaired, in which case the impairment is recognised in profit and loss. This reserve is net of any deferred tax relating to the revaluation of available for sale assets.

70 Murray Irrigation Limited Annual Report 2016 (x) Principles of consolidation Assessment of Impairment Estimates of remaining useful lives The consolidated financial statements In assessing impairment, management of PPE incorporate the assets and liabilities of all estimates the recoverable amount of each Estimates of remaining useful lives are subsidiaries of Murray Irrigation Limited asset or cash generating unit based on made on a regular basis for all assets, (“parent entity”) as at 30 June 2016 and the depreciated replacement cost of the with annual reassessments for major the results of all subsidiaries for the year assets in the relevant cash generating items. These reassessments require the then ended. Murray Irrigation Limited unit. Estimation uncertainty relates to Company to make significant estimates and its subsidiaries are referred to in assumptions about the replacement cost and assumptions in respect of its intentions this financial report as the “consolidated of the asset and its depreciated balance for certain assets, based on the broader entity” or “group”. The parent entity based on the useful life of the asset. strategic plan and specific funded controls a subsidiary if it is exposed, or projects that are in place at reporting date. has rights, to variable returns from its Recoverable amount of receivables Should these plans not eventuate or be involvement with the subsidiary and has The Company has made an estimate of completed to a different timeframe than the ability to affect those returns through the recoverable amount of all receivables. initially anticipated, useful lives of some its power over the subsidiary. A list of This estimate requires the use of assets, and therefore carrying value, may subsidiaries is contained in Note 25 to assumptions and a considerable degree be significantly different than initially the financial statements. All subsidiaries of uncertainty exists. The Company has estimated. have a June financial year end. All various receivables from customers, As a result of successful PIIOP funding intercompany balances and transactions largely relating to water accounts, a significant number of assets will either between entities in the consolidated entity MILCast debtors and those relating to the be replaced or removed. It is assumed have been eliminated on consolidation, Water Bank operations. The group has the majority of dethridge wheels will including unrealised gains and losses specifically identified all debtor balances be replaced and 7% (2015: 16.5%) of on transactions between group entities. that are considered to be doubtful based regulators will not be required after the Where unrealised losses on intra-group on past history of repayments, status of program is finished. Therefore, a provision asset sales are reversed on consolidation, account and other factors in place at year has been created to provide for the the underlying asset is also tested for end. The Company has therefore made expected impairment of these assets. impairment from a group perspective. the assumption that the full amount of Accounting policies of subsidiaries have those particular loans is not recoverable, Valuation of available-for-sale been changed where necessary to ensure limited to the extent described below. The investments consistency with those policies adopted by consolidated entity holds security over the consolidated entity. The majority of available-for-sale these debtors in the form of the water investments held by the Company are not entitlements held by irrigator customers. (y) Segment reporting listed on an exchange and therefore no The value of these doubtful debtors is market price can be observed. Calculation A business segment is a group of assets therefore only reduced by the fair value of the fair value of these assets is and operations engaged in providing of the security held, as this is considered therefore based on other methodologies, services that are subject to risk and returns to be the amount recoverable by the such as analysing off market trading and that are different to those of other business Company. Where the carrying amount considering the expected cash flows segments. Refer note 27. exceeds the recoverable amount, the attached to the instruments, taking into difference is recognised as an expense in account the instrument’s estimated yield to (z) Critical judgements and profit or loss. Where impairment losses are maturity. significant accounting estimates subsequently reversed they are recognised The preparation of financial statements as a reversal of impairment loss in the in conformity with Australian Accounting profit or loss. Standards requires the use of certain critical accounting estimates. It also requires management and Directors to exercise their judgement in the process of applying the group’s accounting policies. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Murray Irrigation Limited Annual Report 2016 71 Notes to the financial statements for the year ended 30 June 2016

2. Revenue 2016 2015 $’000 $’000

Revenue from irrigation undertaking

Income from water sales 17,582 17,801 Income from Snowy Advance (option fees) 1,460 – Income from water sales – government recoveries 8,084 11,712 Termination fees 57 3 Revenue from irrigation undertaking 27,183 29,516

Other revenue

MILCast external sales 2,520 4,223 Interest received 3,886 4,305 (Loss)/Gain on sale of AFS investments (1,269) 1,483 Net gain on disposal of property plant and equipment 388 341 Infrastructure – contributed assets 95 165 Other income 1,377 606 Government funding PIIOP Rd 2 – sale of conveyance water 13,287 1,833 Government funding PIIOP Rd 2 – water infrastructure assets 20,878 23,533 Government funding – on farm irrigation efficiency program 598 1,630 Other revenue 41,760 3 8 ,119 Total revenue 68,943 67,635

The loss on sale of AFS investments of $1.269m relates to the book loss on some long dated bonds that were an overall profitable return but realised a loss on disposal when the Company took advantage of a rally in the value of those bonds to exit its position with the minimal amount of downside. The loss is of a book nature only, as there were offsetting prior year gains on these investments.

72 Murray Irrigation Limited Annual Report 2016 3. Expenses 2016 2015 $’000 $’000

Profit before income tax includes the following specific expenses:

(a) Depreciation and amortisation:

Depreciation: Buildings 96 91 Plant and equipment 732 708 Office equipment 386 497 Motor vehicles 666 667 Water infrastructure 6,565 6,591 Total depreciation 8,445 8,554 Amortisation of leased assets 1,004 906 Total depreciation and amortisation 9,449 9,460

(b) Impairment of water infrastructure assets

The commencement of the Private Irrigation Infrastructure Operators Program (PIIOP) has created an expectation that a portion of the Company’s water infrastructure assets will be replaced, decommissioned or handed over to customers in future years. – assets identified to be replaced, scrapped or handed over in future periods 5,535 2,484 – assets estimated to be replaced, scrapped or handed over in future periods 2,730 7,001 – Impairment of water infrastructure assets 66,579 – 74,844 9,485

During the year, Murray Irrigation recognised a potential impairment trigger with regards to the amount of water that was available to the district. The Murray Irrigation operational footprint has lost approx. 30% of the total water previously available. In light of the recognition of the impairment trigger, the Company employed an independent asset valuer to assess the fair value of the water infrastructure, land and buildings, motor vehicle and plant and equipment assets under the Company’s control. The relevant cash generating unit is considered to be relating to the water infrastructure assets and the impairment has been applied to this cash generating unit. The valuation as at 30 June 2016 of the assets held by the Company has determined that the fair value of the water infrastructure assets is $191,980,000, using the depreciated replacement cost method. This indicated that the carrying value of the assets in the fixed asset register was overstated by $74,843,932, including the assets affected under the PIIOP program of works. This has resulted in a write-off of $66,579,220 to the Profit & Loss as an abnormal item to recognise the reduced value of these assets. As these assets belong to the MIL operating segment, the impairment has been recognised in this operating segment (note 27). Core assumptions used by the valuers in reaching this outcome were: • Depreciated replacement cost is an appropriate measurement basis of value in use as the entity is not-for-profit; • According to the provisions of AASB 13 Fair Value Measurement, level 2 and 3 inputs have been used for the valuation of assets; • the information is reflective of the assets on site, which were not physically sighted in the valuation process; and • the valuation does not consider the potential impact on value of economic obsolescence. In 2015/16, $1.22m worth of assets were disposed under the PIIOP program and the value of these assets accounted against the provision.

Murray Irrigation Limited Annual Report 2016 73 Notes to the financial statements for the year ended 30 June 2016

2016 2015 $’000 $’000

(c) Other expenses:

Other Expenses in 2015/16 includes abnormal costs such as writeoff of prior year expense from WIP and Company restructure costs. Doubtful debts – (447) Other expenses – other 4,282 2,141 4,282 1,694

(d) Employee benefit expenses capitalised 1,463 1,440

74 Murray Irrigation Limited Annual Report 2016 4. Income taxes 2016 2015 $’000 $’000

Current tax (780) 271 Deferred tax (i) and (ii) (13,813) (164) Under/(over) provision in prior year 34 (88) Aggregate income tax expense (14,559) 19

(i) Deferred tax comprises: (Increase)/Decrease in deferred tax assets (1,486) 1,108 Decrease in deferred tax liabilities (12,652) (1,232) (14,138) (124)

(ii) (Increase)/decrease in deferred tax represented by: Income tax expense (13,813) (164) Other comprehensive income (325) 40 (14,138) (124)

Numerical reconciliation of income tax expense to prima facie tax (benefit)/expense:

The aggregate amount of income tax attributable to the financial year differs from the amount calculated on the operating profit: The differences are reconciled as follows: Net profit before income tax (49,821) 18,157 Income tax expense calculated @ 30% (2015:30%) (14,946) 5,447 Non-deductible expenditure 23,955 844 Non-assessable income (government funding) (10,840) (7,610) Utilised losses in current year – (625) Other temporary differences (12,762) 2,051 (Over) / under provision in prior year 34 (88) (14,559) 19

Murray Irrigation Limited Annual Report 2016 75 Notes to the financial statements for the year ended 30 June 2016

5. Current assets – cash and cash equivalents 2016 2015 $’000 $’000

Cash at bank and on hand: 54,768 66,415

Restrictions are imposed on access to certain of the above funds as follows: On-Farm Irrigation Efficiency Program (OFIEP) 3,086 5,875 Private Irrigation Infrastructure Operators Program (PIIOP) 28,682 40,817 Land and Water Management Plans and AMRR 12,971 7,857 Unrestricted funds 10,029 11, 8 6 6 54,768 66,415

6. Current assets – trade and other receivables

Water debtors 4,789 7,793 Less provision for doubtful debts – Murray Irrigation (565) (564) 4,224 7,229 MILCast debtors 363 644 Less provision for doubtful debts – MILCast (25) (25) 338 619 Accrued income 2,475 637 Other receivables and prepayments 5,161 2,123 12,198 10,608

a) Water debtors are invoiced four times per year: 30 September, 31 December, 31 March and 30 June, with payment due on 30 days’ terms. Interest is calculated at the rate stipulated in the New South Wales Water Management Act 2000 and accumulates on overdue balances. b) MILCast debtors are invoiced on delivery of goods with payment due on 30 day terms.

Reconciliation of allowance for doubtful debts Balance as at 1 July 590 1,037 Amounts written back (1) (447) Balance as at 30 June 589 590

76 Murray Irrigation Limited Annual Report 2016 7. Current assets – inventories 2016 2015 $’000 $’000

MILCast inventories 1,224 539 Consumables 824 548 Less provision for obsolescence (75) (75) Water infrastructure assets not yet installed 16,620 18,754 18,593 19,766

8. Non-current assets – available for sale financial assets

Floating rate notes 45,874 37,784 Fixed rate notes 16,031 19,239 Inflation linked notes 18,443 28,231 80,348 85,254

Restrictions are imposed on access to certain of the above funds as follows: Asset maintenance and renewals 50,755 53,283 Land and Water Management Plans – 7,857 Unrestricted Available for sale assets 29,593 24 ,114 80,348 85,254

Murray Irrigation Limited Annual Report 2016 77 Notes to the financial statements for the year ended 30 June 2016

9. Non-current assets – property, plant and equipment 2016 2015 $’000 $’000

Freehold land – at cost 1,959 1,959

Water infrastructure 305,294 293,341 Less accumulated depreciation – WI (85,045) (79,171) Less provision for impairment – WI (74,844) (9,485) 145,405 204,685

Construction in progress 22,781 10,920

Leased assets – at cost 50,955 50,465 Less accumulated amortisation – LA (14,733) (14,058) 36,222 36,407

Buildings and cottages – at cost 3,446 3,205 Less accumulated depreciation – BC (964) (870) 2,482 2,335

Plant and equipment – at cost 10,262 9,833 Less accumulated depreciation – PE (6,346) (5,858) 3,916 3,975

Office equipment – at cost 3,540 3,526 Less accumulated depreciation – OE (3,016) (2,630) 524 896

Motor vehicles – at cost 3,241 3,312 Less accumulated depreciation – MV (1,244) (1,055) 1,997 2,257 215,286 263,434

78 Murray Irrigation Limited Annual Report 2016 9. Non-current assets, property plant and equipment (continued)

Reconciliations

Carrying Additions Disposals Depreciation Transfers Impairment Carrying amount at amount 1 July 2015 30 June 2016 $’000 $’000 $’000 $’000 $’000 $’000 Land 1,959 – – – – – 1,959 Water Infrastructure 204,685 226 – (6,565) 14,859 (67,800) 145,405 Construction in progress 10,920 29,504 – – (17,643) – 22,781 Leased assets 36,407 16 – (1,004) 803 – 36,222 Buildings 2,335 – – (96) 243 – 2,482 Plant and equipment 3,975 31 (173) (732) 815 – 3,916 Office equipment 896 – – (386) 14 – 524 Motor vehicles 2,257 – (503) (666) 909 – 1,997 263,434 29,777 (676) (9,449) – (67,800) 215,286

10. Non-current assets – deferred tax assets 2016 2015 $’000 $’000

The balance comprises temporary differences attributable to:

Accounts recognised in profit or loss: Land and Water Management Plans 2,428 2,357 Employee benefits 748 810 Doubtful debts 177 177 Carried forward tax losses 1,857 – Other temporary differences – 54 5,210 3,398

Accounts recognised in other comprehensive income Available for sale assets 100 426 5,310 3,824

Murray Irrigation Limited Annual Report 2016 79 Notes to the financial statements for the year ended 30 June 2016

11. Non-current assets – intangible assets 2016 2015 $’000 $’000

Conveyance Water Access Licence at cost (a) 84,644 86,108 Supplementary Water Access Licence at cost (b) 11,311 11, 311 95,955 97,419

Conveyance Unit Shares Water Access 2016 2015 Reconciliation of movement in intangible assets $’000 $’000

Balance at 1 July 297,060 298,140 Unit Shares sold (5,050) (1,080) Balance at 30 June 292,010 297,060

At reporting date, the Company held a 292,010 (2015: 297,060) unit share Conveyance Water Access Licence and a 121,704 (2015:121,704) unit share Supplementary Water Access Licence. During the year the Company sold 5,050 unit shares (2015: 1,080) of Conveyance Water as part of the PIIOP funding program. Water rights have an indefinite useful life as a result of their legal form and are thus not amortised. The Company has made this assessment based on past history, which suggests that the licences will continue to be renewed on substantially the same terms and conditions. a) The most recent independent valuation obtained for the Conveyance Water Access Licence was at 19 July 2010 and resulted in a valuation of $2,050 per unit share. The Directors have re-assessed the fair value of the water licences at reporting date and believe that it is approximately $1,987 per unit share. b) The most recent independent valuation obtained for the Supplementary Water Access Licence was at 1 September 2014 and resulted in a valuation of $250 per unit share, equating to a total fair value of $30,426,000.

12. Current liabilities – trade and other payables 2016 2015 $’000 $’000

Trade creditors 7,017 4,486 Other creditors 7,282 5,266 14,299 9,752

Trade creditors are normally settled on 28 day terms. The Company has a $500,000 lease facility which is currently not being utilised.

13. Current liabilities – provisions

Employee entitlements – Current 2,083 2,239

80 Murray Irrigation Limited Annual Report 2016 14. Current Liabilities – other 2016 2015 $’000 $’000 Land and Water Management Plans 8,092 7,857 On-Farm Irrigation Efficiency Programs 2,579 5,954 Private Irrigation Infrastructure Operators Program 16,371 34,682 27,042 48,493

A portion of the Land & Water Management Plan funds is applied to support community activities based on applications from Landholder Associations in support of specific programs, with the remainder apportioned to reconfigurations and other water initiatives.

15. Non-current liabilities – interest bearing

Non-current liabilities – interest bearing liabilities – 45

16. Non-current liabilities – deferred tax liabilities

The balances comprise temporary differences attributable to:

Amounts recognised in profit or loss Consumable stores 225 296 Accrued income 742 63 Accrued interest – 128 Other – Prepayments 453 93 Capital allowances and depreciation 25,316 38,808 26,736 39,388

17. Non-current liabilities – provisions

Employee entitlements 410 461

Murray Irrigation Limited Annual Report 2016 81 Notes to the financial statements for the year ended 30 June 2016

18. Equity – contributed equity

Shares $000’s Share capital 2016 2015 2016 2015 Ordinary shares 1,414,592 1,422,821 284,723 284,723

Shares Reconciliation of movement in Share Capital 2016 2015 Balance at 1 July 1,422,821 1,426,865 Shares cancelled (8,229) (4,044) Balance at 30 June 1,414,592 1,422,821

The share capital of the Company consists only of fully paid ordinary shares; the shares do not have a par value. All shares represent one vote at a shareholders’ meeting. Being a not-for-profit Company, the shares have no rights to dividends or the distribution of capital on winding up of the Company.

19. Equity – reserves and retained profits 2016 2015 $’000 $’000

(a) Reserves:

Water reserve 20,000 20,000 Available for sale assets revaluation reserve (234) (994) 19,766 19,006

Water reserve Balance – 1 July 20,000 20,000 Balance – 30 June 20,000 20,000

Available for sale assets revaluation reserve Balance – 1 July (994) (1,087) Other comprehensive income 760 93 Balance – 30 June (234) (994)

(b) Retained profits

Retained profits – Balance carried forward 142,479 124,341 Net profit/(loss) (35,262) 18,138 Balance – 30 June 107,217 142,479

82 Murray Irrigation Limited Annual Report 2016 20. Related parties

(a) Key management personnel

(i) Directors

The following persons were Directors of Murray Irrigation for the whole year ended June 2016 unless otherwise stated: CD Badger (resigned 21 March 2016), BJ Barlow (appointed 16 Jun 2016), JM Bradford (appointed 19 Nov 2015), CR Brooks (appointed 19 Nov 2015), R Clubb (resigned 19 Nov 2015), ML Hughes (resigned 19 Nov 2015), TW McKindlay, RE Reynoldson (resigned 19 Nov 2015), DM Robertson, JA Sides, BP Simpson, Dr S Stone (appointed 18 Aug 2016).

(ii) Other key management

The following persons also had authority and responsibility for planning, directing and controlling activities of the group, directly or indirectly during the financial year: M Renehan, R Adams, S Barlow, S Campbell (commenced 18 Jan 2016), P Davey, P De Vreede (departed 12 Aug 2016), T Heise, W Jose, O Kietzmann (departed 17 Aug 2015), D Leslie, R Mallett (commenced 14 Jul 2015), JM McLeod (departed 1 Sep 2015), C Pepper, M Piko, NJ Ritchie (departed 1 Sep 2015), G Taylor (retired 18 Dec 2015).

(b) Key management personnel compensation

Long term Short–term Superannuation Total 2016 Total 2015 benefits Gross salary Cash bonus Long Service Leave Directors $ $ $ $ $ $ CD Badger 34,009 – 3,231 – 37,240 76,609 BJ Barlow – – – – – – JM Bradford 19,986 – 1,899 – 21,885 – CR Brooks 19,776 – 1,879 – 21,655 – R Clubb 16,172 – 1,536 – 17,708 41,860 ML Hughes 14,824 – 1,408 – 16,232 41,999 TW McKindlay 49,433 – 4,696 – 54,129 41,361 RE Reynoldson 14,824 – 1,408 – 16,232 38,372 DM Robertson 60,287 – 5,727 – 66,014 40,633 JA Sides 33,466 – 3,179 – 36,645 35,382 AL Read – – – – – 30,220 BP Simpson 52,731 – 5,009 – 57,740 68,272 Directors total 315,508 – 29,972 – 345,480 414,708 Other key management 2,587,506 – 223,633 49,700 2,860,839 1,489,265 Total 2,903,014 – 253,605 49,700 3,206,319 1,903,991

The increase in the management remuneration from $1.5M to $2.8M is due to a number of factors including: a) The remuneration of former interim CEO Steve Gumley was not included in 2014/15 as he was paid as a contractor; b) The definition of “key management” now includes a number of positions that were not previously included in this summary table. c) The 2015/16 remuneration figures includes redundancy payments made to three former management personnel. Additional Payments include temporary salary alterations and entitlements on termination subject to superannuation. Additional Payments include entitlements on termination and redundancy – not subject to superannuation.

Murray Irrigation Limited Annual Report 2016 83 Notes to the financial statements for the year ended 30 June 2016

20. Related parties (continued)

No. shares No. shares 2016 2015 (c) Key management personnel equity

Ordinary shares held 22,980 19,940

(d) Other transactions with key management personnel

During the period the Company delivered water for cropping and other activities to a number of Directors and other key management personnel or their related entities on commercial terms and conditions no more favourable than those which is reasonable to expect would have been adopted if dealing with them at arm’s length in the same circumstances. The value of these transactions totalled $370,006 (2015: $789,304). In prior years, the Company purchased raw materials from a quarry in which shareholder Director, Mr M. Robertson has an indirect interest. There were no such transactions in 2015/16 (2015: $7,890). During the year the Company received payments from a number of Directors in relation to options for delivery of 3,359ML under the Snowy Advance scheme, totalling $26,880 (2015: $ nil). During the year there were no payments to key management personnel, their Director related entities or associates, in their capacity as landholders, in relation to PIIOP (2015: $34,246). Shareholder Directors receive annual allocation and water efficiency allocations based on their water and delivery entitlements, on the same terms as all other shareholders and customers. Aggregate amounts payable or receivable from Directors and other key management personnel or their related entities as at balance date:

2016 2015 $’000 $’000 Water accounts receivable 78 136

(e) Loans to key management personnel

There are no loans to Directors or other key management personnel.

21. Remuneration of auditors 2016 2015 $ $

During the year, the auditor earned the following remuneration: Audit of financial report 66,611 129,000 Other assurance services 24,495 76,752 Total audit and other assurance services 91,106 205,752

Taxation services (*note – this relates to tax advice services, not preparation of returns) 5,225 48,486 Other non-assurance services 7,040 194,509 Total Remuneration 103,371 448,747

During the current year, the Company’s auditor was engaged to assist in the acquittal of government funded programs and to provide advice on tax treatments. 84 Murray Irrigation Limited Annual Report 2016 22. Commitments 2016 2015 $’000 $’000 Capital commitments 28,178 38,140 Operating commitments 563 974 Total commitments 28,741 3 9 ,114

23. Land and Water Management Plans i) Details of income and expenditure on the Land and Water Management Plans are as follows: $’000 Berriquin Cadell Denimein Wakool Total

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Income Government agencies – – – – – – – – – – Irrigator contributions and 195 188 77 76 4 4 37 78 313 346 interest on funds 195 188 77 76 4 4 37 78 313 346

Expenditure Expenses incurred (a) – – – (12) (44) (8) (34) – (78) (20) – – – (12) (44) (8) (34) – (78) (20) Net funds accumulated 195 188 77 64 (40) (4) 3 78 235 326

(a) Includes farm rebates, monitoring, education and administration. ii) Details of Land and Water Management Plans Funds held as implementing authority are as follows:

$’000 Berriquin Cadell Denimein Wakool Total

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Opening balance – 4,870 4,682 1,961 1,897 89 93 940 862 7,860 7,534 July 1 Add net funds accumulated/ 195 188 77 64 (40) (4) 3 78 235 326 (expended) Closing balance – 5,065 4,870 2,038 1,961 49 89 943 940 8,095 7,860 30 June (Note 14)

Murray Irrigation Limited Annual Report 2016 85 Notes to the financial statements for the year ended 30 June 2016

24. Financial risk management 2016 2015 $’000 $’000

(a) Operating lease income Less than 1 year 3 3 More than 1 year to less than 5 years 15 14 More than 5 years 56 59 73 77

The Company has a lease agreement for land to be used by Telstra until 2033.

(b) Net fair values

The net fair values of financial assets and liabilities at the reporting date approximates the respective carrying values in the balance sheet. For further information regarding fair values of available-for-sale assets, refer to note 8.

(c) Credit risk exposure

Credit risk is the risk of financial loss to the Company if a party to a financial instrument fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents and deposits with banks as well as other credit exposures including outstanding receivables and long term investments in interest bearing securities. The maximum exposure to credit risk at balance date is the carrying amount of financial assets. To manage its short term credit risk the Company invests surplus funds in term deposits to maximise its return while reducing the potential effect of the short term unpredictability of financial markets. These investments are made with reputable Australian banks and are considered low risk. The Company also has long term investments in the form of floating and fixed rate securities. The current investment policy restricts funds invested in different types and ratings of investments. Each rating category also has a limit of total funds invested as a ratio of available Company funds. In respect of accounts receivable the balances are managed and monitored in accordance with a credit management policy. In respect of water debtors and loans receivable from landholders, the Company has security over the debt in accordance with the Water Management Act 2000.

25. Subsidiary

The Company has the following subsidiary:

Name of subsidiary Country of Class of share Equity holding % Equity holding % incorporation 2016 2015 Riverbank Holdings Pty Ltd Australia Ordinary 100 100

86 Murray Irrigation Limited Annual Report 2016 26. Parent entity information 2016 2015 $’000 $’000

(a) Summary financial information

The individual financial statements for the parent entity are as follows:

Current assets 85,559 96,816 Total assets 482,458 584,770 Current Liabilities (43,606) (60,693) Total liabilities (70,752) (138,780) Net assets 411,706 445,990

Contributed equity 284,723 284,723 Reserves 19,766 19,006 Accumulated profits 107,217 142,261 Total equity 411,706 445,990

Statement of profit or loss and other comprehensive income Profit for the year (35,262) 17,743 Other comprehensive income 760 93 Total comprehensive income (34,502) 17,836

(b) Guarantees entered into by the parent entity

The parent entity has not entered into any financial guarantees.

Murray Irrigation Limited Annual Report 2016 87 Notes to the financial statements for the year ended 30 June 2016

27. Segment information

Operating segments have been identified on the basis of internal reports about components of a Company that are regularly reviewed by the chief operating decision makers, being the Board and executive management of Murray Irrigation Limited, in order to allocate resources to, and assess the performance of, each segment. Murray Irrigation Limited (MIL) represents the activities encompassing the delivery of water to landholders from Mulwala in the east to Moulamein in the west within Southern NSW. MILCast is a business unit of Murray Irrigation Limited which designs, manufactures and supplies precast concrete products for agricultural and other commercial uses. Private Irrigation Infrastructure Operators Program (PIIOP) consists of a funding agreement entered with the Commonwealth Government and includes upgrading water management and measurement systems, targeted channel refurbishment, system reconfiguration and system retirement. All non-current assets are located in Australia. No single customer represents more than 10% of revenue.

88 Murray Irrigation Limited Annual Report 2016 Segment information for the reporting period is as follows:

MIL MILCast PIIOP RHPL Total 2016 2016 2016 2016 2016 $000 $000 $000 $000 $000

Revenue Irrigation activities 27,127 – – – 27,127 MILCast 2,510 – – 2,510 Total revenue 27,127 2,510 – – 29,637

Cost of goods sold Irrigation activities, Govt fees and charges (8,759) – – – (8,759) MILCast (2,059) – – (2,059) Total cost of goods sold (8,759) (2,059) – – (10,818) Gross profit 18,368 451 – – 18,819

Expenditure Wages (10,659) (226) – – (10,885) Operations (6,105) – – – (6,105) Corporate and admin (1,445) (77) (10,656) (5) (12,183) Total expenditure (18,209) (303) (10,656) (5) (29,173) EBITDA 159 148 (10,656) (5) (10,354) Depreciation (9,326) (123) – – (9,449) Operating EBIT (9,167) 25 (10,656) (5) (19,803) Other income 2,066 – – 5 2,071 Abnormal items (2,744) – – – (2,744) Provisions/adjustments (66,579) – – – (66,579) EBIT (76,424) 25 (10,656) – (87,055)

Interest received AMRR 1,402 – – – 1,402 Other 1,622 – – – 1,622 Total interest received 3,024 – – – 3,024 Net profit/(loss) before tax and PIIOP revenue (73,400) 25 (10,656) – (84,031)

PIIOP revenue – Grant funding – – 34,210 – 34,210 Net profit/(loss) before tax, inc PIIOP revenue (73,400) 25 23,554 – (49,821)

No segment assets or liabilities are disclosed because there is no measure of segment liabilities regularly reported to the chief operating decision makers.

Murray Irrigation Limited Annual Report 2016 89 Notes to the financial statements for the year ended 30 June 2016

28. Subsequent events

At 15 September 2016 the New South Wales Murray general security allocation was 42% with a moderate outlook for water availability for the 2016/17 year. The Company is in a position to deliver its budgeted volume of water during the coming season. On 12 August 2016, the Executive Manager – MILCast Peter De Vreede departed the Company. On 18 August 2016, a new independent Director, Dr Sharman Stone, was appointed to the Board of Directors. There have been no other adjusting or significant non-adjusting events that have occurred between the reporting date and the date of authorisation of these financial statements.

29. Contingent assets and contingent liabilities

Former customers of the Company in respect of three landholdings have commenced Supreme Court of New South Wales proceedings claiming approximately $1.9 million in relation to termination fees charged in respect of the termination of their delivery entitlements when they sold their water entitlements to New South Wales and the Commonwealth. The Company considers that there is no merit in the claims. The proceedings are being defended vigorously in the Supreme Court. It is estimated that the Company’s exposure in these disputes is approximately $150,000, representing further legal fees which will need to be paid in defending the proceedings. The Company has a contingent asset in respect of the ongoing tax dispute with the ATO, which if resolved favourably could result in a refund of approximately $6.6m for the Company.

90 Murray Irrigation Limited Annual Report 2016 Directors’ declaration

In the opinion of the Directors of Murray Irrigation Limited: (a) The consolidated financial statements and notes of the Company are in accordance with the Corporations Act 2001, including: i. Giving a true and fair view of its financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and ii.Complying with Australian Accounting Standards – Reduced Disclosure Requirements (including the Accounting Interpretations) and the Corporations Regulations 2001; and (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors:

M Robertson Chairman 14 October 2016

B Simpson Deputy Chairman 14 October 2016

Murray Irrigation Limited Annual Report 2016 91 92 Murray Irrigation Limited Annual Report 2016 Page 1/2

Murray Irrigation Limited Annual Report 2016 93 Page 2/2

94 Murray Irrigation Limited Annual Report 2016 Murray Irrigation Limited Annual Report 2016 95 Menindee Laes

Menindee Weir 32

Darling River

Wentworth

Mildura

Hay Murrumbidgee River Murray River

New South Wales

Moulamein

Billabong Cree Wagga Wagga Edward River Swan Hill Conargo Waool River Jerilderie

Wakool Deniliquin

Barham Finley Berrigan

Mathoura Tocumwal

Mulwala SA Murray Darling Basin Albury Moama

Echuca ume Reservoir NSW Murray Irrigation

Sydney Shepparton

Canberra Dartmouth Reservoir VIC

Melbourne

96 Murray Irrigation Limited Annual Report 2016 Murray Irrigation provides Menindee Lakes irrigation water to over eninee Weir 32 2,200 farms in southern NSW. Our area of Darling River operations stretches from Mulwala in the east to Moulamein in the west, taking in 724,000 hectares of farmland north of the

Wentworth Murray River. Mildura

ay Murrumbidgee River Murray River

New South Wales

oulamein

Billabong Creek Wagga Wagga Edward River Swan Hill Conargo Wakool River erilerie

Waool Deniliquin

Barham Finley Berrigan

athoura Tocumwal

ulwala Albury oama

Echuca Hume Reservoir

Shepparton

Dartmouth Reservoir

Australasian Reporting Awards 2013 Bronze Award Winner 2013 Finalist Communications Award 2014 Winner Communications Award

Murray Irrigation Limited Annual Report 2016 97 Murray Irrigation Annual Report 2016  T 1300 138 265 F 03 5898138 3301 T 1300 www.murrayirrigation.com.au 

NSW 2710 NSW 2710 Deniliquin 528 Charlotte Street Deniliquin Box 443 PO Murray Irrigation Limited Murray 933 197 ABN 23 067