YARRA 2014–15 VALLEY ANNUAL REPORT WATER STATEMENT OF PURPOSE
TO PROVIDE EXEMPLARY WATER AND SANITATION SERVICES THAT CONTRIBUTE TO THE HEALTH AND WELLBEING OF CURRENT AND FUTURE GENERATIONS.
MITCHELL MURRINDINDI
WHITTLESEA YARRA VALLEY WATER HUME CITY WEST WATER NILLUMBIK
DAREBIN YARRA MORELAND BANYULE RANGES
PORT PHILLIP BAY SOUTH EAST WATER MANNINGHAM
MELBOURNE CBD BOROONDARA WHITEHORSE
STONNINGTON WESTERN PORT MONASH
CARDINIA
OUR ASSETS KEY STATISTICS 9,391 9,729 1.8 million km of sewer mains km of water supply mains population served
water pressure sewage reducing pumping 698,663 53,263 137 stations 104 stations residential properties business customers 52 75 9 14,489 537.6 water supply water pumping sewage treatment new customers full time tanks stations plants in 2014–15 equivalent staff CONTENTS
About us 2
Nature and Scope of Main Activities 3
A message From the Chairman and the Managing Director 4
2014–15 Highlights 5
Year in Review MITCHELL MURRINDINDI Financial Summary 18
Five-Year Financial Summary 19
WHITTLESEA Corporate Information 21 HUME NILLUMBIK Risk Management Attestation 31
Annual Financial Report
DAREBIN YARRA Directors’ Report 34 MORELAND BANYULE RANGES
MANNINGHAM Statement of Comprehensive Income 36
MELBOURNE Balance Sheet 37 CBD BOROONDARA WHITEHORSE Statement of Changes in Equity 38 STONNINGTON MONASH Cash Flow Statement 39 CARDINIA Notes to the Financial Statements 40
Statutory Certification 78
Auditor-General’s Audit Report 79
Additional Information
Performance Report 82
Auditor-General’s Audit Report 86
Water Consumption and Drought Response 88
Environmental and Social Sustainability Reporting 90
Annual Reporting of Major Non-Residential Water Users 94
Bulk Entitlements Report 95
Disclosure Index 97 ABOUT US
Yarra Valley Water is the largest retail water corporation in Melbourne, providing essential water and sanitation services to more than 1.8 million people.
We manage more than $3.6 billion of infrastructure on behalf of the community, across a service area of approximately 4,000 square kilometres in the northern and eastern suburbs – from Wallan in the north to Warburton in the east.
On 1 July 2012, Yarra Valley Water became a statutory corporation, incorporated under the Water Act 1989. Our activities are overseen by an independent Board of Directors, appointed by the State Government of Victoria. We are accountable to the Minister for Environment, Climate Change and Water, the Hon Lisa Neville MP.
Yarra Valley Water’s obligations regarding the performance of its functions and the exercise of its statutory powers are defined in the Statement of Obligations, issued by the Minister in accordance with Section 4I (2) of the Water Industry Act 1994. Yarra Valley Water is required to monitor compliance with the obligations set out in the Statement, report on non-compliance and take remedial action in relation to non-compliance.
The Essential Services Commission is the economic regulator of the Victorian water sector. The Commission’s role includes the regulation of prices, service standards and market conduct across the water industry in Victoria. Yarra Valley Water is subject to regulation by the Commission.
We buy bulk water from Melbourne Water and are also responsible for taking away sewage for treatment. Most of the sewage is transferred to Melbourne Water’s Eastern or Western Treatment Plants. The balance is treated at our nine regional plants, several of which produce recycled water for use in homes and for the irrigation of sports fields or open space.
2 YARRA VALLEY WATER ANNUAL REPORT 2014–15 NATURE AND SCOPE OF MAIN ACTIVITIES Introduction
Our main business undertakings are: 2014–15 Highlights
Area Scope of activities
Water quality Provide water that meets all drinking water standards set by the Department of Health and Human Services. Manage compliance associated with recycled water.
Reticulated water reliability Manage the number of planned and unplanned water supply interruptions. (bursts and leaks)
Infrastructure Maintain and renew water supply and sewerage infrastructure. Year in Review
Distribution water Minimise the possibility of a major burst in high risk areas. pipe reliability
Sewer blockages Manage the number of planned and unplanned sewerage service interruptions.
Responsiveness to water Meet customers’ expectations in relation to response times for water supply pipe bursts and leaks interruptions. Corporate Information
Responsiveness to sewer Meet customers’ expectations in relation to response times for sewer spills and spills and blockages blockages.
Sewerage system capacity Ensure that the sewerage system meets the environmental standards defined by the Environment Protection Authority Victoria (EPA Victoria).
Reducing the environmental Provide modern sewerage systems to replace poor performing septic tanks. and public health impacts of poorly performing septic tanks
Customer service Provide customer service associated with account management. Annual Financial Report
Assisting financially vulnerable Offer effective assistance to customers facing financial difficulty. and hardship customers
Water efficiency Maintain water efficiency through a variety of residential and commercial programs.
Customer Charter requirements Meet all Customer Charter requirements as approved by the Essential Services Commission.
Protecting the environment Meet all environmental standards imposed by the EPA Victoria and State Environment Protection Policies. Additional Information Statements of Obligations Meet our obligations as defined in the Statements of Obligations issued by the Minister for Environment, Climate Change and Water.
Trade waste Meet our trade waste obligations as legislated in the Water Act 1989. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 3 A MESSAGE FROM THE BOARD
On behalf of the Board of Directors, we are pleased to We remain committed to driving extraordinary performance submit Yarra Valley Water’s 2014–15 Annual Report. through continued development of our vibrant organisational During 2014–15 we responded to our operating environment culture. In June 2015 we received world-leading results in which has been characterised by: the Human Synergistics Organisational Culture Inventory (OCI) survey. Globally, the OCI is the most widely used and •• the need to reduce cost of living pressures on households most thoroughly researched tool for measuring organisational and support vulnerable customers; culture. It is our firm belief that a constructive culture is the key to high performance and achieving great organisational •• evolving customer expectations regarding the services outcomes. In 2014–15, in addition to our financial results, we provide and how we engage with local communities; we outperformed all our environmental targets and achieved the lowest number of water quality complaints on record, •• innovation in water and sanitation services and responding our best ever safety performance and high levels of to climate change; and customer satisfaction. •• rapid growth in Melbourne and the need to provide essential On 8 April 2015, the Hon Lisa Neville MP, Minister for water and sanitation infrastructure for new communities. Environment, Climate Change and Water, announced a Our long-term Strategy is to provide exemplary water and review of all 135 Victorian Water Corporation Board Director sanitation services that contribute to the health and wellbeing positions. Expressions of interest were invited during April and of current and future generations. During 2014–15, delivering May 2015. New Directors were appointed on 1 October 2015. exceptional customer outcomes and looking after the natural The Victorian Auditor-General has proposed to issue a environment remained our top priorities. This Report details modified audit report on Yarra Valley Water Corporation’s projects and outcomes delivered during 2014–15 that have 2014-15 Financial Statements and Performance Report, contributed to deliver our long-term strategy. reflecting a difference in opinion on the method used to derive From a planning perspective, we have completed phase one the fair value of infrastructure assets. Yarra Valley Water is of the Water Future North Strategy, focussing on establishing of the view, supported by independent expert valuation advice, a robust plan for whole of water cycle management in the that its valuation of infrastructure assets remains appropriate rapidly growing northern corridor of Melbourne. and in accordance with relevant accounting standards and directions. The approach adopted in the 2014-15 valuation We continued to apply a $100 credit rebate on bills for has been consistently used in the annual accounts since residential customers with usage charges. This rebate has 2009-10, without qualification. Further information on been enabled by a continued focus on delivering significant this matter is provided within the Financial Report. savings in operating costs. We extend a sincere thank you to our Board of Directors We delivered a better than expected financial result in and our staff for their continued support, efforts and 2014–15. In relation to revenue, this was mainly due to achievements over the past year. In accordance with higher water use as a result of the dry and warm weather the Financial Management Act 1994, we are pleased experienced throughout the year and additional revenue to present Yarra Valley Water’s Annual Report for the from higher volumes of new development activity. From year ending 30 June 2015. It complies with all statutory an expenditure perspective, we achieved savings in reporting requirements. operating expenditure by continuing to implement a range of productivity improvements across the business, changing our debt collection processes to reduce our bad debts expenditure, reducing borrowing levels to achieve lower than budgeted finance charges, obtaining interest rate reductions in the market, proactively managing our debt portfolio and attaining benefits from our improved credit rating. Susan E Friend Director
Patrick J McCafferty Managing Director
4 YARRA VALLEY WATER ANNUAL REPORT 2014–15 2014–15 HIGHLIGHTS Introduction
2020 STRATEGY
Our 2020 Strategy provides long-term direction and targets a high level of performance to meet the needs 2014–15 Highlights of current and future generations.
The Strategy is anchored in a statement of purpose that articulates why we exist:
‘To provide exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations’. Year in Review Six strategic commitments underpin this statement, which we believe, when achieved collectively, will deliver extraordinary results for our customers, the community, our owner, and our stakeholders. Corporate Information Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 5 2014–15 HIGHLIGHTS
THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE
Our philosophy
Workplace culture is a critical enabler of business performance. Over the last decade, Yarra Valley Water IN JUNE 2015 YARRA VALLEY has developed a vibrant workplace culture, high levels of engagement and robust workplace practices. WATER ACHIEVED A WORLD-
To track our workplace culture progress and develop targeted CLASS ORGANISATION improvement strategies, we use a number of internationally recognised benchmarking tools, including: CULTURE RESULT.
•• The Human Synergistics Organisational Culture Inventory During the year, we began developing and implementing a (OCI), which incorporates a series of company-wide capability framework and an integrated human resources surveys to determine an organisation’s prevalent (HR) online system. The framework and system are now behavioural styles. Globally, this is the most widely used operational, providing enterprise-wide workforce intelligence, and most thoroughly researched tool for measuring culture. enabling informed strategic workforce planning and •• The Human Synergistics Management Impact (MI) talent management. As part of an integrated HR system, and Leadership Impact (LI) 360 degree feedback tools, the framework highlights capability gaps to determine which measure managers’ overall effectiveness. development priorities and mitigate people-related risks including safety considerations. •• The Aon Hewitt Best Employer Opinion Survey measuring staff engagement levels and effectiveness We have developed a comprehensive leadership program of workplace practices. to meet the needs of our 2020 Strategy. The Leadership 2020 Program is designed to build both core and leadership capabilities in our people managers. The first modules were Year in Review highlights completed in April 2015. In June 2015, Yarra Valley Water achieved a world-class In 2014–15, we developed a long-term Diversity Strategy OCI result. The bar chart opposite shows the dramatic to ensure our workforce is representative of our community. improvement achieved since we began measuring our culture With input from external experts and from staff across the with the OCI in 2001. In the most recent survey, we achieved business, the strategy aims to take advantage of the proven significant improvement in each of the constructive styles, benefits of operating with a diverse workforce, minimising as well as reduction in each of the passive/aggressive and conscious and unconscious bias and implementing targeted passive/defensive styles, compared with our 2013 result. programs to meet specific needs, such as gender equality The OCI survey groups behaviour in three styles: in senior roles and providing options for older workers. Constructive, Aggressive Defensive and Passive Defensive. As part of our Leadership 2020 Program, all managers Constructive styles emphasise achievement of realistic will undergo workforce diversity training. stretch targets, an open, honest and collaborative approach and high levels of personal satisfaction.
Our constructive styles are now at or above the 83rd percentile (Achievement 86, Self-actualising 88, Humanistic- encouraging 93 and Affiliative 83) and our defensive styles are all below the 10th percentile. Human Synergistics has described these as world-class results. The results indicate that we are working positively together, individuals are taking responsibility for their own development and we are encouraging and supporting each other to achieve. Most importantly, this is being reflected in outstanding business results.
6 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
YARRA VALLEY WATER ORGANISATIONAL CULTURE INVENTORY RESULTS FOR CONSTRUCTIVE BEHAVIOUR STYLES 2015 COMPARED WITH 2001 2014–15 Highlights 86 Achievement 38
88 Self-Actualising 25
Humanistic / 93 Year in Review Encouraging 40
83 Affiliative 21 Corporate Information 0 20 40 60 80 100
2015 2001
YARRA VALLEY WATER YARRA VALLEY WATER OCI 2001 OCI 2015 Annual Financial Report
SATISFACTION NEEDS SATISFACTION NEEDS
CONSTRU CONSTRU CTIVE CTIVE 12 STY 12 STY LES LES SELF-ACTUALISING SELF-ACTUALISING 11 HUM 1 11 HUM 1 T ANI T ANI EN STI EN STI EM C-E EM C-E EV NC EV NC HI OU HI OU C RA C RA A GI A GI NG NG
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SECURITY NEEDS SECURITY NEEDS
YARRA VALLEY WATER ANNUAL REPORT 2014–15 7 2014–15 HIGHLIGHTS
WE PROVIDE EXEMPLARY SERVICE
Our philosophy Customer satisfaction with our response to infrastructure faults has been consistently high, with 90% of customers Yarra Valley Water is a customer service organisation. saying the service they received either met or exceeded their We provide the most essential of essential services that expectations. This service experience achieved an NPS of 45.9, are crucial to the health and wellbeing of the community exceeding best practice levels in this category. We maintained and a fundamental part of everyday life. This responsibility levels of reliability in water and sanitation services by drives us to put the customer and our community at the replacing 55 kilometres of water pipes and 48 kilometres centre of everything we do. of sewer pipes that had reached the end of their service life.
Year in review highlights We also track customer satisfaction with our communications in relation to the works we carry out on water and sewerage During 2014–15 we undertook extensive research with infrastructure. During 2014–15, 77% of customers affected customers and stakeholders to ensure our services align by our construction or service interruption works agreed with what customers value — high quality and reliable that our communications met their needs and 87% confirmed drinking water and sanitation services at a fair price. that any inconvenience was either acceptable or completely acceptable. While events of recent years, such as the price increases associated with new water supplies, have caused concern Customer satisfaction with our telephone service continues in the community, overall customer satisfaction levels to improve with 92% of customers saying our Customer remain strong. Following a range of recently implemented Contact Centre service met or exceeded their expectations. improvements, we are pleased that satisfaction of We achieved an NPS score of 39.2 in 2014–15, a considerable commercial (non-residential) customers has increased improvement from 35.9 in 2013–14. notably, by 10% compared with last year. During the year, we achieved the lowest Energy and Water Ombudsman of Victoria (EWOV) complaint ratio in the Customer satisfaction Melbourne Water industry at 0.51 per 1,000 customers. To Residential – Customer satisfaction 86% achieve this, we focussed on preventing the issues that cause customers to complain. Our complaints handling specialists Non-Residential – Customer satisfaction 84% are readily available and easily contactable via a dedicated telephone number, so that we have the best chance of Residential – Satisfaction with service interactions 91% resolving any complaint prior to escalation to EWOV. Non-Residential – Satisfaction with service 84% Our water quality customer enquiries and complaints are interactions also at a historically low level of 2.6 per 1,000 customers. We have adopted ‘ice-pigging’ water mains cleaning In order to gain holistic customer insights, we have technology, which is providing far more effective water introduced the Net Promoter Score (NPS) as a key strategic mains cleaning to reduce water quality complaints, measure of customer satisfaction with interactions. We have at a much lower cost than the previous technology. a high number of ‘promoter’ customers who indicate they would recommend our services to others, with an overall This year, we enhanced our customer service channels, positive NPS of 48 which is very high on the scale of known launching our online messaging platform ‘live chat’ and NPS across all utilities. our self-service portal, ‘Yarra Valley Online Water’, giving our customers greater choice in how they interact with us. Three years after the development of our Customer Value The portal enables customers to complete the full range Proposition, we continue to see strong positive customer of account related transactions online. Since its launch in feedback. April 2015, we have secured almost 9,000 registrations, with over 8,000 transactions undertaken. Customers are Value proposition component customers who agree: appreciating these new online options with 86% saying they will use Yarra Valley Online Water again and 55% Yarra Valley Water provides a reliable water service 94% saying it is their preferred way of interacting with us. Yarra Valley Water provides great drinking water 91%
Yarra Valley Water provides a reliable sewerage 90% system
8 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
In 2014–15, we continued to promote the benefits of tap water as a positive alternative to bottled water and other 2014–15 Highlights beverages through our ‘Choose Tap’ community outreach CUSTOMER SATISFACTION program. Over 88% of our customers think Choose Tap is a WITH OUR RESPONSE TO good idea. Choose Tap community activities to date include: •• Over 750,000 litres of water consumed at refill stations, INFRASTRUCTURE FAULTS saving many single use plastic bottles and a million people HAS BEEN CONSISTENTLY using portable units at community events.
HIGH, WITH 90% OF •• The free Choose Tap App contains more than 6,000 public Year in Review drinking tap locations across Australia and overseas, CUSTOMERS SAYING THE making drinking water more accessible and convenient SERVICE THEY RECEIVED to the public. The App has a 4.5 rating on iTunes and has EITHER MET OR EXCEEDED been downloaded more than 8,000 times. •• Over 39,000 primary school students undertaking the THEIR EXPECTATIONS. Choose Tap education module and 8,170 fundraising bottles sold by 95 participating schools, providing a Corporate Information healthy alternative for fundraising.
Affordability of water remains a challenge with a •• A partnership with Vic Health and Etihad Stadium has seen 1 recent survey identifying that 39% of Melburnians 10 Choose Tap water refill stations installed through the have had trouble at some time paying their water bill. stadium. We understand this makes Etihad Stadium the We continue to develop support for vulnerable customers first major stadium to promote and supply free tap water and concentrate our efforts on: to its customers.
•• increasing awareness of the services available •• An early childhood education program has been developed to financially vulnerable customers and resource kits provided to over 200 early learning Annual Financial Report centres within the Yarra Valley Water service district, •• making customers comfortable seeking assistance reaching over 14,000 children and their parents with from us and treating them with dignity and respect messages highlighting the benefits of drinking tap water. •• early identification and intervention with those experiencing Yarra Valley Water is trialling a new approach to co- financial difficulty to provide better support. construction with other utilities. In early 2015, when Overall, 85% of our financially vulnerable customers rated preparing to lay a water pipe along Donnybrook Road in their relationship and Yarra Valley Water service as better or the growth area of Kalkallo, we identified that the APA much better than other utilities, with a Net Promoter Score Group, a gas company, was preparing to undertake work of 69.9. along the same stretch of road. Yarra Valley Water
approached the APA Group to do the works concurrently Additional Information During the year, we continued to improve the experience of and they agreed. This innovative and collaborative approach customers who do not speak English as a first language. has many benefits. It is more efficient, reduces disruption Yarra Valley Water provides information in multiple languages to customers and the community, and results in less impact to ensure linguistically diverse customers can access our on the physical environment. support programs such as payment options and arrangements for financially vulnerable customers. In a joint partnership with City West Water, we have developed a new resource which helps newly arrived migrants to develop English literacy and numeracy skills while learning about water. Disclosure Index
1 Supporting Vulnerable Customers — GA Research. Funded by the Smart Water Fund on behalf of the Vulnerable Customer Taskforce.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 9 2014–15 HIGHLIGHTS
WE MAKE EVERY CENT COUNT
Our philosophy In November 2014, we implemented a new debt collection strategy. In doing this, we reduced both the age and amount We provide services where location rather than choice of the outstanding debt. Our philosophy is to engage early with determines our customers and we understand we have customers in the debt collection cycle to resolve unpaid bills. an important role to play in contributing to Victoria’s The strategy focusses on softer debt collection for early aged standards of living and overall productivity. overdue debt and involves making contact with customers, assessing whether a payment arrangement may be a suitable We have a responsibility to ensure that our services are payment option and listening carefully for hardship. delivered as efficiently as possible and that our customers view our prices as fair and reasonable. For residential In partnership with South East Water and City West Water, customers, greater affordability will help reduce pressure we recently extended our shared banking services contract on household expenditure and, for business customers, for two years. A 24% saving was achieved equivalent to it means ensuring that the cost of water and sanitation $0.5 million per year for Yarra Valley Water. services does not impact market competitiveness. We successfully implemented our new asset management We support benchmark competition and continue to advocate system in November 2014, on time and on budget. A number for and participate in industry benchmarking to create the of productivity and business benefits have been delivered as environment required to stimulate innovation and increase a direct result of the implementation including a reduction in productivity across the sector. We are also working in manual intervention, automation of work management and collaboration with the water industry to identify potential hazard reporting. In March 2015, the implementation won a savings through shared innovations and joint procurement. National Infrastructure Smart Infrastructure Project award, recognising excellence in the delivery of major projects. Typically, our investment decisions are long-term. In this context, we recognise our obligation to make financial and Revenue from developer related activities has continued investment decisions that achieve best community value to significantly exceed estimates in 2014–15 following the and inter-generational equity. implementation of the new easyACCESS system, which offers the development industry a self-service option for We manage our finances responsibly to strike a balance transactions. The additional revenue has been generated due between meeting our customers’ needs and ensuring to new products and services being offered and increased appropriate returns to the State Government. Our returns activity volumes. to the Government are in the form of an annual dividend payment resulting from profit made from our operations In 2014–15, the 19 Victorian water businesses undertook a and income tax equivalent payments. The Government shared procurement process for insurance broking services. uses these funds to deliver other benefits to Victorians. By approaching the market in a shared arrangement with a combined premium pool, we have been able to maximise We strive to operate at optimal efficiency by improving premium savings and enhance policy coverage. Yarra Valley our business processes and eliminating waste, while also Water took a lead role in this process and the joint tendering managing and mitigating business risks. We continue to focus arrangement has halved premiums across the water industry on delivering improved project outcomes for similar cost or and will save $250,000 for our business. similar outcomes at a lower cost. Our capital infrastructure planning emphasises strategies that provide investment just During the first quarter of 2014–15, we applied a $100 in time to meet the needs of the community and leverage credit adjustment on residential customer bills with usage innovative design and solutions to avoid future capital cost. charges. This was achieved through a range of initiatives including major productivity savings by Yarra Valley Water. Year in review highlights The Government Water Rebate will continue to be applied annually for the next three years finishing in 2017–18. We have delivered significant efficiency initiatives in 2014–15 This rebate to customers will be delivered without that have reduced expenditure by more than $16 million compromising customer service levels and will assist compared with our independent price determination. in taking pressure off customer water bills. These savings have been delivered through a range of initiatives including business process improvements, exploiting the functionality of new business systems and a critical review of all expenditure which included the deferral or elimination of some activities. These initiatives focus on the delivery of service outcomes at a lower cost, therefore capturing real productivity gains across the business.
10 YARRA VALLEY WATER ANNUAL REPORT 2014–15 WE SAVED MORE THAN $16 MILLION IN OPERATING Introduction EXPENDITURE TO REDUCE RESIDENTIAL CUSTOMER BILLS BY $100. 2014–15 Highlights Year in Review Corporate Information Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 11 2014–15 HIGHLIGHTS
WE ARE SAFE
Our philosophy Year in review highlights
Workplace safety and wellbeing is a fundamental element In 2012 we refocussed our efforts on revitalising our safety of business performance. To successfully fulfil our 2020 culture which delivered an outstanding result in the GSI/ Strategy commitment ‘We Are Safe’, we must deliver the SCI survey in July 2014. Our results significantly improved following outcomes: from 39.2 in 2012 to 72.4 in 2014. The result shows that the majority of staff believe that health and safety is critical to •• Safety exists as each person’s responsibility the long-term sustainability of the organisation, management is decisive around safety issues and staff accept responsibility •• We make our workplaces safe for their own and others’ safety.
•• We carry out our work without harming ourselves or others. The diagram opposite shows Yarra Valley Water exceeded the aspirational benchmark of 80 in three of the nine safety Measuring our safety performance culture index survey dimensions (Management Commitment, Safety as a Priority, and Supportive Environment). We measure our safety performance using the Significant Improvements were also achieved across each of Injury Frequency Rate (SIFR). SIFR is the number of the other six survey dimensions. significant injuries (lost time injuries and medical treatment injuries) per million hours worked. We benchmark our safety This strong result in our safety culture has been reflected culture using the Global Safety Index (GSI) Safety Culture in a significant improvement in our SIFR performance over Index (SCI). the past 12 months. The line graph opposite shows injury frequency rate for Yarra Valley Water and its contractors has reduced from 10.6 in July 2014 to 3.3 as at June 2015 compared with the annual 2014–SIFR target of 7.5.
Other key achievements in 2014–15 include:
•• Examining the architecture of our Safety Governance THE INJURY FREQUENCY RATE Framework and educating our managers so they are FOR YARRA VALLEY WATER competent to discharge their duties in accordance with AND ITS CONTRACTORS HAS Occupational Health and Safety Legislation. •• Appraising our Safety Management Systems to identify REDUCED FROM 10.6 IN JUNE inconsistencies and duplication. We have commenced 2014 TO 3.3 AS AT JUNE 2015 a program of works to implement a new single Safety Management System.
•• The launch of a new framework for contractor classification and revision of contracts to reflect the new safety governance arrangements.
12 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
YARRA VALLEY WATER SAFETY CULTURE INDEX 2012–14 2014–15 Highlights Management Committee 100
Work Environment 80 Communication
60
40 Year in Review
Personal Appreciation 20 Safety as of Risk a Priority 0 Corporate Information
Safety Personal Rules and Priorities Procedures
2011–12
2013–14 Involvement Supportive Environment 2020 Target Annual Financial Report
TOTAL (YARRA VALLEY WATER+CONTRACTORS) SIGNIFICANT INJURY FREQUENCY RATE (SIFR)
SIFR per Million 20 Hours Worked
18 Additional Information 16 14 12 10 8 6 4 2 0
JUL 14 AUG 14 SEP 14 OCT 14 NOV 14 DEC 14 JAN 15 FEB 15 MAR 15 APR 15 MAY 15 JUN 15 Disclosure Index
Contractors YVW+Contractors 2014/15 Target YVW
YARRA VALLEY WATER ANNUAL REPORT 2014–15 13 2014–15 HIGHLIGHTS
WE WORK IN HARMONY WITH THE ENVIRONMENT
Our philosophy Yarra Valley Water has taken a leading role in undertaking integrated water management planning for Melbourne’s We believe that the long-term wellbeing of our community Northern Growth Corridor. We have partnered with the and the strength of the economy depends on the environment. Department of Environment, Land, Water and Planning Therefore, we aim to provide our services within the carrying (DELWP), Melbourne Water, the Metropolitan Planning capacity of nature. In doing so, we aim to work across Authority (MPA) and relevant Councils to consider a range the whole of the water cycle, with others, to provide fully of potential water servicing approaches and apply a whole of integrated and resilient water systems. catchment approach to water management. The goal of this work is to reduce the use of drinking water, increase the use The work we have carried out over the past 10 years shows of alternative local water sources, reduce stormwater runoff that our major environmental impacts are caused by our into waterways and improve liveability and community health. greenhouse gas emissions, nutrients that we discharge This initiative builds on previous work carried out by Yarra into creeks and rivers, and from extracting water from rivers Valley Water for the corridor and the final outcome validated for consumption by customers. For each of these areas, the current strategy to supply recycled water through we have initiatives to improve our performance. a third pipe system throughout the region.
At the same time, we recognise that, while we manage We also collaborated with DELWP, Melbourne Water our own operations for positive environmental outcomes, and Councils to investigate the potential for large scale we can magnify our effectiveness by actively encouraging stormwater harvesting to potable standards in the our customers, stakeholders, partner organisations and Kalkallo catchment as well as the potential for integrated others to do the same in providing their services to us. water management in the proposed La Trobe National Employment Cluster. Year in review highlights Through our water leakage detection investigation programs, In 2014–15, we met our targets for controlling our we have saved over four gigalitres of water (equivalent to greenhouse gas and nutrient emissions to the environment. 1,600 Olympic swimming pools) by finding hidden leaks For the seventh year in a row, our operations continued in our water supply system. to be greenhouse gas emission net neutral. Despite the easing of water restrictions, per capita water consumption Our focus also remains on providing modern sewerage remained low at 161 litres per day which is well below services to properties not capable of managing their pre-drought levels. wastewater onsite. This eliminates poorly performing septic tanks that cause pollution in local waterways. Our objective to run our operations in a way that protects In 2014–15, we connected 622 of these properties to and enhances waterways has been achieved. The quantity our services and there are many more new services of nitrogen that we discharged in 2014–15 was well under currently under construction. the target limit of 87 tonnes per year (representing our contribution to sustainable levels in Port Phillip Bay). In May 2015, we published our first Supplier Code of Conduct. The new code sets out our expectations of the companies we work with to deliver services, in the key areas of environment, workforce, occupational health and safety, community, governance and supply chain management. As part of this work, we became a signatory to the United Nations Global Compact.
14 YARRA VALLEY WATER ANNUAL REPORT 2014–15 WE FINALISED OUR Introduction SERVICING STRATEGY
FOR MELBOURNE’S 2014–15 Highlights NORTHERN GROWTH CORRIDOR WITH OVER 100,000 PROPERTIES
TO BE PROVIDED WITH Year in Review RECYCLED WATER AND IMPROVED OUTCOMES
FOR WATERWAYS. Corporate Information Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 15 2014–15 HIGHLIGHTS
WE STAND FOR AN EXCEPTIONAL WATER INDUSTRY
Our philosophy Year in Review highlights
Our strategic commitment to ‘stand for an exceptional Over the last 12 months, we have worked across the water water industry’ recognises that we play a role within a sector on several fronts. We have: broader context in providing water and sanitation services that contribute to Melbourne’s liveability. •• Worked with the industry to explore opportunities for asset recycling and joint procurement initiatives that Our contribution can be magnified by working closely with can improve industry efficiency. others, both in terms of providing leadership and in learning from others. We believe that benchmark competition in •• Led the industry-wide joint procurement for insurance Melbourne provides a spur for performance improvement broking services that will deliver savings in the order by enabling comparison across service and cost outcomes, of $6 million across the water industry from 2015–16. helping to identify leading practices and performance improvement opportunities. When best practices or •• Set the industry benchmark for the support of customers innovations are identified, these can then be more broadly experiencing financial hardship (with the most extensive adopted to lift the overall performance of the sector. hardship grant scheme as identified by the Essential Services Commission). We also understand that we are part of a natural cycle that does not start or stop with the borders of our service •• Made over 40 presentations on a range of themes across area. Close collaboration with other water utilities, DELWP, a number of conferences nationally and internationally local government, developers and local communities is to share our insights. critical to achieving improved outcomes for whole of •• Shared our expertise and knowledge with over 10 articles water cycle management. included in a range of publications. The key outcomes we are targeting as part of our •• Worked in collaboration with the welfare sector and 2020 Strategy are: other water utilities to implement vulnerable customer •• Our achievements and insights have enhanced assistance programs funded through the Essential water industry performance Services Commission’s additional hardship measures.
•• We have adopted others’ best practices and innovations •• Undertaken customer insights research with 950 customers to understand how the 2013 price increase •• We have actively worked with others to achieve affected their level of satisfaction, assessment of value extraordinary outcomes. and water use behaviours. The results will inform future planning, tariff design and customer engagement.
•• Further expanded the Choose Tap Program with a growing number of other Victorian water utilities now part of the Choose Tap coalition. The coalition is made WE’VE SET THE UTILITY up of 12 water utilities and over 40 corporate supporters. The Program continues to receive acclaim both locally BENCHMARK FOR THE and internationally.
SUPPORT OF CUSTOMERS •• Led a number of Smart Water Fund projects and Technology EXPERIENCING HARDSHIP. Approval Group (TAG) initiatives including the development of a cross-connection detection device to ensure water quality, understanding the energy water nexus at a household level and an assessment of the condition of household rainwater tanks in partnership with CSIRO.
16 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
•• Adopted several innovations from other utilities including •• Supported City West Water to develop a feasibility study City West Water’s English as a Second Language resource, to utilise our recently implemented billing system. 2014–15 Highlights ‘Ice Pigging’ (water mains cleaning) from the United Kingdom and transient pressure monitoring of water •• Provided DELWP with several secondees to work on key networks from Singapore. projects developing integrated water management policy.
•• Shared innovations at the VicWater conference on a •• Chaired the national Customer and Community Network platform for sharing new ideas, technology breakthroughs of the Water Services Association of Australia, with and service innovations. a focus on building customer focus across Australia’s urban water utilities.
•• Contributed to the Water Services Association of Australia Year in Review review of the National Performance Report identifying •• Actively contributed to the Institute of Water opportunities for improved processes and benchmarking Administration’s leadership and special interest methodologies. groups’ forums on a variety of subject areas.
•• Actively participated in the Intelligent Water Networks collaboration between Victorian water businesses to trial technologies and share insights and learnings. Corporate Information Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 17 YEAR IN REVIEW
FINANCIAL SUMMARY
Yarra Valley Water recorded a net profit after tax of $50.8 A final dividend of $19.2 million for 2013–14 and an interim million in 2014–15. The net profit after tax result is $5.2 dividend of $12.5 million for 2014–15 were paid during the million higher than the 2013–14 result and $28.8 million year. The amount of the final dividend for the year ended higher than budgeted. The additional profit above budget 30 June 2015 will be determined after consultation between was generated primarily as a result of increased water the Board, the Minister for Environment, Climate Change consumption demand (residential customer usage 3.8% and Water and the Treasurer of Victoria. increase and non-residential customer usage 8.5% increase above budget). Other key factors contributing to the During 2014–15, total assets have increased by $147 million favourable annual profit against budget were: as a result of the growth in infrastructure, property, plant and equipment and the infrastructure asset valuation. •• Continued focus on reducing operating costs by implementing productivity improvements and a more Total liabilities increased by $82 million in 2014–15. This was targeted and effective collection strategy for debtors largely as a result of additional borrowings of $64 million has reduced write offs. in 2014–15 which were used to fund capital investments for our water and sewerage infrastructure. This growth in •• Growth in developer related activity primarily customer borrowings was significantly below the budgeted increase of contributions and new metering connection products $171 million. Increased cash flow from higher than planned and services revenue. revenues, primarily from water sales demand and developer related activity, along with lower capital expenditure •• Lower than budgeted borrowings due to improved cash payments and savings in finance charges, has ensured flow and lower capital expenditure payments and the we have minimised the growth in our borrowing levels. effective management of the debt portfolio from the benefit of a lower credit rating and movements in the market which have reduced finance costs in the short and long term.
Capital expenditure of $174 million was incurred during the year to renew, augment and upgrade water and sewer infrastructure. Yarra Valley Water focusses on the efficient and effective use of its capital expenditure to deliver the planned outcomes through innovative management of its capital program of works.
18 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
FIVE-YEAR FINANCIAL SUMMARY
2015 2014 2013 2012 2011 2014–15 Highlights Statement of Comprehensive Income $’000 $’000 $’000 $’000 $’000
Service revenue 844,346 916,868 700,836 697,588 586,923
Other revenue 88,142 71,991 61,955 77,590 72,207
Total revenue 932,488 988,859 762,791 775,178 659,130 Operating and other expenses 643,780 716,520 512,181 507,367 406,159
Depreciation and amortisation 94,294 86,009 75,632 75,980 72,429 Year in Review
Finance costs 121,373 120,368 108,349 104,783 94,226
Total expenses 859,447 922,897 696,162 688,130 572,814 Profit before income tax 73,041 65,962 66,629 87,048 86,316
Income tax (22,249) (20,363) (20,248) (26,284) (26,012) Corporate Information Net profit after tax 50,792 45,599 46,381 60,764 60,304
2015 2014 2013 2012 2011 Balance Sheet $’000 $’000 $’000 $’000 $’000
Current assets 171,892 181,733 138,015 141,243 107,928
Non-current assets 4,298,605 4,141,830 3,873,914 3,605,832 3,566,300 Annual Financial Report Total assets 4,470,497 4,323,563 4,011,929 3,747,075 3,674,228 Current liabilities 369,639 392,565 307,624 510,475 393,517
Non-current liabilities 2,500,078 2,395,242 2,301,388 1,901,698 1,842,916
Total liabilities 2,869,717 2,787,807 2,609,012 2,412,173 2,236,433
Net assets 1,600,780 1,535,756 1,402,917 1,334,902 1,437,795 Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 19 YEAR IN REVIEW
RETURN ON EQUITY (%) RETURN ON AVERAGE ASSETS (%)
5 6
4 5 4.5 4.4 4.4 5.2 5.2 5.0
4 4.8 4.5 4.5 4.5 4.4
3 3.6 3.4 3.9 3.2
3.1 3 3.0 2 2
1 1 1.4
0 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Return on equity has increased slightly compared Return on average assets reduced slightly from with the previous year. the previous year.
GEARING RATIO (%) INTEREST BEARING DEBT TO ASSETS NET PROFIT AFTER TAX ($M)
60 80 70 50 60
40 50.8 50 48.3 60.8 60.3 46.1 45.5 45.0 44.9 44.4 40
30 40.3 39.9 50.8 46.4 30 45.6 20 41.7 20
10 9.1 10 22.1 19.8 0 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Gearing ratio has reduced slightly as the borrowing levels The profit performance has increased from the previous have decreased at a greater rate than the assets due to our year as a result of higher developer activity and productivity improved internal financing position. savings delivered.
INTEREST COVER (TIMES) CAPITAL EXPENDITURE ($M)
2.5 300 2.5 2.0 2.4 250 2.2 2.2 2.2 2.1 200 278.6 1.9
1.5 1.8 239.1 228.0 150 228.2 1.5 1.0 197.0 180.3 100 173.7 162.7 153.3 0.5 50
0 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
Interest cover has improved compared with the prior year Capital expenditure has reduced compared with the prior due to the higher net operating cash flows and lower capital year. We continue to focus on the achievement of efficient expenditure payments. outcomes through innovative design and delivery of our capital expenditure program.
20 YARRA VALLEY WATER ANNUAL REPORT 2014–15 CORPORATE INFORMATION Introduction
ORGANISATIONAL CHART 2014–15 Highlights BOARD OF DIRECTORS
SUSTAINABILITY, PLANNING, HUMAN RESOURCES, INFRASTRUCTURE RISK MANAGEMENT REMUNERATION AND & AUDIT COMMITTEE AND ENVIRONMENT SAFETY COMMITTEE COMMITTEE Year in Review
MANAGING DIRECTOR
Pat McCafferty Corporate Information
STRATEGY & SUSTAINABLE INFRASTRUCTURE FINANCIAL & PEOPLE & BUSINESS RETAIL COMMUNCIATION DEVELOPMENT SERVICES CORPORATE CULTURE TECHNOLOGY SERVICES SERVICES SERVICES
David Snadden Sam Austin Glenn Wilson Kevin Jones Anne Farquhar Leigh Berrell Steve Lennox Annual Financial Report
A HIGH STANDARD OF CORPORATE GOVERNANCE
The Yarra Valley Water Board has overall responsibility While being a statutory water corporation under the Water for corporate governance which includes: Act 1989, nevertheless, we have compared our practices with the 3rd Edition of the Australian Securities Exchange (ASX)
•• setting the strategic direction Corporate Governance Principles and Recommendations, Additional Information issued in March 2014. This has shown that our Corporate •• establishing goals for management and monitoring Governance Framework is substantially compliant with the the achievement of these goals relevant ASX Principles and Recommendations.
•• monitoring the performance of the business. This Statement sets out the main corporate governance practices in place during the 2014–15 financial year. We are committed to ensuring that a robust Corporate Governance Framework is in place and we review the framework regularly to ensure it aligns with best practice. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 21 CORPORATE INFORMATION
BOARD
The Board comprises seven independent non-executive David Middleton BE (Civil), ME (Env), MBA (Tech Mgt), Directors and one executive Director, who is the Managing GAICD Director. The non-executive Chairman and non-executive Directors are appointed by the Minister for Environment, David Middleton was appointed as a Director of Yarra Valley Climate Change and Water and the Managing Director is Water Limited on 1 October 2011. His appointment was appointed by the Board. transferred to Yarra Valley Water Corporation with effect from 1 July 2012 and David was appointed Deputy Chairman The Directors come from a wide range of backgrounds and of the Board from 23 October 2013. He is Executive Director, bring to the Board an appropriate mix of skills and experience. Water Markets for CH2M Hill Australia Pty Ltd, a design, construction and operations firm. Peter Wilson AM, BCom (Hons), MA, FCPA, FAICD, FAHRI He has previously held senior roles with Thames Water Asia Peter Wilson became a Director of Yarra Valley Water Limited Pacific Pty Ltd and operational roles with Melbourne Water on 1 January 2007 and was appointed Chairman on 1 July Corporation, Western Region Water Corporation and Goulburn 2008. His appointment transferred to Yarra Valley Water Valley Region Water Corporation. Corporation with effect from 1 July 2012. David is a Director of CH2M Hill Australia Pty Ltd and Halcrow He has a background in economics, commerce and strategy Pacific Pty Ltd. development and has held senior executive positions in a number of organisations. He was Executive Director General Committee Membership: Manager at AMCOR, Chief Executive Officer of the Energy •• Human Resources, Remuneration and Safety Committee 21 Group and Managing Director, Asia Pacific Division at the (Chairman) ANZ Banking Group. •• Sustainability, Planning, Infrastructure and Environment Committee Peter is the National President of the Australian Human Resources Institute, a Director and Secretary General of the •• Risk Management and Audit Committee World Federation of People Management Associations based (from 25 February 2015). in Geneva, the Chair of Australian Network on Disability, a Gregory Camm MBA, BBus, CPA, SFFin, MAICD Director of the Vincent Fairfax Ethics in Leadership Foundation and was Chairman of Vision Super Pty Ltd until the end of Greg Camm became a Director of Yarra Valley Water his rotational term on 30 June 2014 and continues as a Corporation on 1 October 2013. He retired from his role Director of Vision Super Pty Ltd. as Chief Executive Officer of Superpartners Ltd in 2012.
Peter advised the Hon Lisa Neville MP, Minister for Greg was previously the Managing Director and Chief Environment, Climate Change and Water, early in 2015, that Executive Officer of AMP Financial Services New Zealand he would be retiring as Chairman and Director of Yarra Valley (2005 – 2007) and held a number of senior executive positions Water as from the end of his fourth term which concludes with the Australia and New Zealand Banking Group (1989 – on 30 September this year. Subsequently, the Minister 2005) including Managing Director, Australian Retail Banking announced a spill of all Victorian Water Board directorships (2004 – 2005). and Mr Wilson accepted a subsequent invitation from the Minister to participate in the Government’s selection process He is an Associate Director of the Bevington Group and a for new directors and to chair the panel during 2015 that Director of mecu Ltd (2011 – current) and Bottlecyclers Pty would recommend candidates to become Directors on the Ltd (2010 – current), a Trustee for the Australian Cancer boards of the major metropolitan water corporations, Research Foundation and is on the Business Advisory Council as well as selected rural and regional boards. of Greenfleet Australia.
Committee Membership: Committee Membership: •• Risk Management and Audit Committee •• Risk Management and Audit Committee •• Human Resources, Remuneration and Safety Committee •• Sustainability, Planning, Infrastructure and •• Sustainability, Planning, Infrastructure and Environment Committee. Environment Committee.
22 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
Dean Comrie BSc (Hons), Grad Cert (Env Eng), MBA, MAICD Therese Ryan LLB, GAICD 2014–15 Highlights Dean Comrie became a Director of Yarra Valley Water Limited Therese Ryan became a Director of Yarra Valley Water on 1 October 2011. His appointment was transferred to Corporation on 1 October 2013. She was formerly Vice Yarra Valley Water Corporation with effect from 1 July 2012. President, General Counsel for General Motors International Operations, Shanghai. Dean is currently a Project Director with AusNet Services where he is responsible for the maintenance and capital Therese previously held general counsel roles with delivery contracts for AusNet Services’ gas and electricity GM Holden Ltd (2001 – 2006) and Qenos Pty Ltd. She distribution networks. is currently a Director of Burson Group Ltd, Victorian
Managed Insurance Authority, VicForests, Metropolitan Year in Review Dean has extensive experience in the utilities sector and Fire Brigade, a Director/Trustee of WA Local Super, an has held a variety of executive and non-executive positions, independent member of the audit committee of the City including as Managing Director of Ecowise Environmental, of Melbourne and Chair of the Advisory Committee of a specialist consulting and technical service provider to the Office of Correctional Services Review. the water sector. Committee Membership: Committee Membership: •• Sustainability, Planning, Infrastructure and Corporate Information •• Sustainability, Planning, Infrastructure and Environment Environment Committee Committee (Chairman) •• Human Resources, Remuneration and Safety Committee. •• Human Resources, Remuneration and Safety Committee. Pat McCafferty BBus (Acc), Exec.MBA, GAICD Susan Friend BCom, LLB, CA (NZ), MAICD Managing Director
Sue Friend became a Director of Yarra Valley Water Limited Pat McCafferty was appointed Managing Director of Yarra on 1 January 2010. Her appointment was transferred to Valley Water on 1 July 2014. He has extensive experience Yarra Valley Water Corporation with effect from 1 July across the water sector and has held General Manager roles 2012. Sue has a background in audit, internal audit and at Yarra Valley Water since 2001, covering a wide range
forensic accounting gained from 15 years working with of operational and strategic leadership positions including Annual Financial Report PricewaterhouseCoopers. strategic planning, economic regulation, finance, marketing and customer service. She is a Director of Not For Sale Australia Pty Ltd and is currently a consultant with Sapere Research Group, Committee Membership: a global expert services firm. •• Human Resources, Remuneration and Safety Committee. Committee Membership: Kevin Jones FCCA, FGIA, FCIS, GAICD, BA (Hons), ALCM •• Risk Management and Audit Committee (Chairman) Corporate Secretary •• Sustainability, Planning, Infrastructure and Kevin Jones has been Corporate Secretary of Yarra Valley Environment Committee. Water Corporation since 1 July 2012. He is responsible Additional Information Steve McArthur MAICD for ensuring compliance with statutory and regulatory requirements, for governance functions and for ensuring that Steve McArthur became a Director of Yarra Valley Water the decisions of the Board of Directors and its Committees Corporation on 1 October 2012. He is the Managing Director of are implemented. Samanco Pty Ltd and Business Adviser to Glencoe Group Pty Ltd.
He is the Chairman of the Melbourne Market Authority and has served as a committee member, President and Chairman of a number of local community and sporting groups.
Steve was Shadow Minister for Water Resources Disclosure Index (1999 - 2002) and Shadow Minister for Agriculture (2000 - 2002).
Committee Membership: •• Risk Management and Audit Committee •• Sustainability, Planning, Infrastructure and Environment Committee.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 23 CORPORATE INFORMATION
BOARD
Board Charter Board performance review
The Board Charter sets out clearly the role, responsibilities In accordance with the Board Policy, the annual externally and powers of the Board and incorporates all aspects of Board facilitated Performance Review of the Board was conducted governance, along with referencing the source of the items in early 2015. As part of the Review, a survey was completed included in the Charter. by all Directors and members of the Executive Team and interviews were conducted. The results were excellent The Board Charter is reviewed at least every three years and an improvement on the very high standard already and the Board may, by resolution, amend the Charter if set in previous years. required at any time. While no specific recommendations were forthcoming Code of Conduct from the review, the Board nevertheless held an informal meeting of Directors in May 2015 to discuss a number of The Board has adopted a Directors’ Code of Conduct future key issues. based on the Code of Conduct issued by the Public Sector Standards Commissioner. Induction and training
Declaration of private interests The Board has adopted a training and development policy for Directors. This policy facilitates appropriate training All Directors have completed a declaration of private and development opportunities for Directors to enable interests. them to fulfil their role, broaden their knowledge and share this knowledge with the rest of the Board. All executives, senior managers, officers and contractors/ consultants with delegation to approve expenditure in excess All newly appointed Directors are required to undertake of $20,000 have completed a declaration of private interests. an induction program to help them understand their role and encourage fulfilment of their Board responsibilities. Independent professional advice The induction program includes an overview of the Yarra Valley Water business, the water industry and the linkages The Board has adopted a number of measures to ensure that with Government. independent judgement is achieved and maintained. Directors are entitled to seek independent professional advice on Directors also attend seminars and other events to broaden matters relating to the business of Yarra Valley Water at the their exposure to water industry issues and initiatives. Corporation’s expense, subject to the prior approval of the Chairman. No Director exercised this right during the year.
24 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
BOARD COMMITTEES
The Board has established the following Committees of Directors to assist it in carrying out its responsibilities 2014–15 Highlights and to allow detailed consideration of complex issues. Each Board Committee has its own terms of reference, which set out the Committee’s objectives, duties and responsibilities, composition, meetings, authority and reporting responsibilities.
At Board meetings, where the minutes of Committee meetings are presented, the Chairman of the Committee highlights the key issues considered by the Committee. Year in Review
Risk Management and Audit Committee The Risk Management and Audit Committee assists the Board in fulfilling its duties and responsibilities relating to risk management, the effectiveness of internal controls and the accounting and reporting practices of the business. Corporate Information The majority of Committee members have financial expertise.
Human Resources, Remuneration The Human Resources, Remuneration and Safety Committee and Safety Committee assists the Board in reviewing strategies and policies to ensure that critical actions and plans are in place to implement and develop the business’ people and culture and in fulfilling its duties and responsibilities associated with policy, compliance, risk and audits for Occupational Health and Safety. Annual Financial Report Sustainability, Planning, Infrastructure The Sustainability, Planning, Infrastructure and and Environment Committee Environment Committee assists the Board in reviewing objectives, strategies, policies, compliance, actions, risks and audits in relation to minimising the business’ impacts on the environment and the effectiveness and efficiency of the business’ asset management practices in relation to water and sewerage infrastructure and in reviewing and recommending the adoption of the business’ Price Submission. Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 25 CORPORATE INFORMATION
DIRECTORS’ ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
Human Resources, Sustainability, Planning, Risk Management Remuneration and Infrastructure and Board of Directors and Audit Committee Safety Committee Environment Committee Meetings Meetings Meetings Meetings
P S Wilson 10 of 11 4 of 4 4 of 4 2 of 2
G J Camm 10 of 11 4 of 4 – 2 of 2
D M Comrie 10 of 11 – 4 of 4 2 of 2 S E Friend 10 of 11 4 of 4 – 2 of 2
S J McArthur 11 of 11 2 of 4 – 0 of 2
P J McCafferty 11 of 11 – 4 of 4 –
D A Middleton(1) 9 of 11 1 of 1 4 of 4 2 of 2
T A Ryan 11 of 11 – 4 of 4 2 of 2
(1) David Middleton was appointed as a member of the Risk Management and Audit Committee on 25 February 2015.
26 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
OUR EXECUTIVE TEAM
Pat McCafferty BBus (Acc), Exec.MBA, GAICD Steve Lennox BBus (Acc), CPA, ACIS, AGIA Managing Director General Manager, Retail Services 2014–15 Highlights
As Managing Director, Pat is also a member of the Board. Steve is responsible for customer billing and responding to customers’ enquiries. He is primarily responsible for meter Refer to details under Directors. reading, billing management as well as debt collection, Customer Contact Centre operations and the development Sam Austin BE (Civil) and implementation of support programs for customers General Manager, Sustainable Development in financial difficulty.
Sam is responsible for the provision of water and sewerage David Snadden BE (Civil), Exec. MBA Year in Review services to new customers. He manages the planning and General Manager, Strategy and Communications procurement of new infrastructure and the connection of new customers to the network. Sam works closely with the David is responsible for corporate strategy, regulation, development industry and has the challenge of developing planning, marketing and communications. His role includes new and innovative sustainable servicing strategies to meet long-term strategic planning, water security, pricing and commercial and environmental objectives. economic regulatory affairs, customer insights, marketing programs, community and stakeholder engagement and Corporate Information Leigh Berrell BAppSc (CompSci) (Hons), GradCert BT, communications programs. David is also responsible for MBA, GAICD representing the business in water industry policy and Chief Information Officer reform activities.
Leigh is responsible for the strategic direction of information Glenn Wilson BE (Civil), BBus (Admin) technology to achieve the business objectives of Yarra Valley General Manager, Infrastructure Services Water. This includes the development and delivery of the Digital Strategy, Enterprise Architecture and IT projects. Glenn is responsible for managing the water and sewerage Leigh is also responsible for the operation, maintenance infrastructure to ensure that it achieves our desired and support of IT systems, sourcing and procurement of IT customer service levels and environmental performance. products and services and the management of IT vendors. He is primarily responsible for strategy development, Annual Financial Report planning, operation, maintenance and renewal of water Anne Farquhar Cert Bus Mgt and sewerage infrastructure. General Manager, People and Culture
Anne is responsible for developing and implementing the human resources strategy for the business, including workplace planning, organisational culture and learning and development. Anne is also responsible for developing and maintaining systems for recruitment, succession planning and performance management. Additional Information Kevin Jones FCCA, FGIA, FCIS, GAICD, BA (Hons), ALCM Chief Financial Officer and Corporate Secretary
Kevin is responsible for overall business management reporting, statutory accounting, financial planning, treasury and taxation. His role also includes statutory compliance, occupational health and safety, corporate governance, insurance, risk management, auditing, property management, legal services and records management. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 27 CORPORATE INFORMATION
FAIR TREATMENT AT WORK – ‘WE ARE SAFE’ DISCRIMINATION
Yarra Valley Water is committed to the safety and At Yarra Valley Water, it is our strategic intent to create a wellbeing of our staff, partner organisations and vibrant workplace achieving exceptional business outcomes, members of the public. Our safety commitment successful partnerships and personal satisfaction. We are ‘We Are Safe’ is embedded in everything we do. committed to providing fair and equitable treatment for all employees in the workplace including partners, contractors, Our 2020 Strategy Safety outcomes are: work experience students, suppliers and agents, both on and off site, when on Corporation business. •• Safety exists as each person’s responsibility We do not tolerate discrimination and take a proactive •• We make our workplaces safe approach to ensure reasonable and proportionate measures are in place to monitor and improve practices and behaviours. •• We carry out our work without harming ourselves or others. All employees are required to comply with relevant Federal These safety outcomes are supported by our ‘We Are Safe and State legislation that establishes grounds on which Behaviours’ Statement, compliance with occupational health discrimination is illegal including, but not limited to, the and safety legislation and operating our accredited Safety Acts relating to Occupational Health and Safety, Equal Management System. Employment Opportunity, Discrimination and Human Rights.
OUR PEOPLE RECRUITMENT
We believe that a great culture delivers great outcomes. Yarra Valley Water is committed to applying merit and equity It provides the foundation for a high-performing workplace principles when appointing staff. Our selection processes where we collaborate with partners and stakeholders to ensure that applicants are assessed and evaluated fairly deliver exceptional outcomes for our customers and the and equitably on the basis of the key selection criteria environment. Creating this constructive workplace culture and other accountabilities without discrimination. requires a holistic approach, encompassing all aspects of the employment life cycle, such as recruitment, communication, role clarity, recognition, development, equity and leadership. EMPLOYMENT DATA Our focus on culture ensures we employ the right staff, provide them with clear direction and challenging work, enable performance through strong leadership and honest Full Part FTE FTE feedback, and provide ongoing development through Time Time Casual Total 14/15 13/14 targeted learning opportunities. Female 178 70 25 273 240.8 215.1
Male 283 11 9 303 296.8 308.9
Total 461 81 34 576 537.6 524.0
FTE FTE 14/15 13/14
Executive 8 8
Senior Manager 104.3 102.9
Administration and Field Staff 425.3 413.1
Total 537.6 524.0
28 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
LEGISLATIVE COMPLIANCE
Privacy and Data Protection Act 2014 Requests for access to Yarra Valley Water documents under the Freedom of Information Act 1982 are to be 2014–15 Highlights Yarra Valley Water complies with the Information Privacy made in writing and addressed to: Principles set out in the Victorian Privacy and Data Protection Act 2014. Peter Thatcher Assistant Corporate Secretary As the holder of our customers’ confidential and personal Yarra Valley Water information, Yarra Valley Water is conscious of the need to Private Bag 1 ensure that this information is protected and to prevent any Mitcham, Victoria, 3132 unauthorised access to, and improper use of, that information.
Each application must be accompanied by a $27.20 Year in Review A Privacy Policy and Code of Practice is in place for our application fee and clearly identify the documents sought. employees, contractors and agency staff to ensure that General enquiries relating to Freedom of Information customer information is protected. can be made by telephoning (03) 9872 1238 between 8.30 am and 4.30 pm, Monday to Friday. Protected Disclosure Act 2012 Building Act 1993 Yarra Valley Water has procedures in place to help employees and contractors understand the requirements and obligations Yarra Valley Water maintains its Head Office Complex Corporate Information under the Protected Disclosure Act 2012 and to facilitate in accordance with the Building Act 1993. the making and handling of disclosures and the notification of such disclosures to the Independent Broad-based Anti- Victorian Industry Participation Policy Disclosures corruption Commission. These procedures are available to the public at Yarra Valley Water’s Office. Yarra Valley Water implements the Victorian Industry Participation Policy (VIPP) in accordance with section 9 There have been no disclosures received by Yarra Valley Water of the Victorian Industry Participation Policy Act 2003. in 2014–15 for notification to the Independent Broad-based Anti-corruption Commission in relation to the operation, During 2014–15, there were no contracts commenced
activities or officers of Yarra Valley Water. or completed for which a VIPP plan was required. Annual Financial Report
Freedom of Information Act 1982 National Competition Policy
Yarra Valley Water is committed to ensuring information Competitive neutrality seeks to enable fair competition is accessible to customers in compliance with the Freedom between government and private sector businesses. Any of Information Act 1982. advantages or disadvantages that a government business may experience, simply as a result of government ownership During 2014–15, 18 requests were received for access to should be neutralised. documents under the Freedom of Information Act 1982. Yarra Valley Water continues to comply with the requirements Requests were fulfilled as follows:
of the National Competition Policy. Additional Information
Full access to all documents 12
Full access to some documents – others in part 4
No documents identified 2
Total 18 Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 29 CORPORATE INFORMATION
OTHER INFORMATION
The following information is available from Yarra Valley Water on request, subject to the Freedom of Information Act 1982:
•• a statement that declarations of pecuniary interests have been duly completed by all relevant officers;
•• details of shares held by any senior officer as nominee or held beneficially in a statutory authority or subsidiary;
•• details of publications produced by the entity about itself, and how these can be obtained;
•• details of changes in prices, fees, charges, rates and levies charged by the entity;
•• details of any major external reviews carried out on the entity;
•• details of major research and development activities undertaken by the entity;
•• details of overseas visits undertaken including a summary of the objectives and outcomes of each visit;
•• details of major promotional, public relations and marketing activities undertaken by the entity to develop community awareness of the entity and its services;
•• details of assessments and measures undertaken to improve the occupational health and safety of employees;
•• a general statement on industrial relations within the entity and details of time lost through industrial accidents and disputes;
•• a list of major committees sponsored by the entity, the purposes of each committee and the extent to which the purposes have been achieved; and
•• details of all consultancies and contractors including:
–– consultants/contractors engaged; –– services provided; and –– expenditure committed to for each engagement.
30 YARRA VALLEY WATER ANNUAL REPORT 2014–15 RISK MANAGEMENT ATTESTATION Introduction
The Directors of the Corporation certify that Yarra Valley Water has risk management processes in place consistent 2014–15 Highlights with the National Risk Management Standard AS/NZS ISO 31000:2009 and an internal control system in place that enables our executive to understand, manage and satisfactorily control our risk exposures.
The Directors of the Corporation verify that Yarra Valley Water’s Strategic and Operational Risk Profiles have been critically reviewed within the last 12 months. Year in Review This attestation has been made in accordance with the resolution of the Directors of the Corporation on the 24th day of August 2015.
Corporate Information
Peter S Wilson AM Chairman Annual Financial Report Patrick J McCafferty Managing Director Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 31
ANNUAL FINANCIAL REPORT 2014–15
YARRA VALLEY WATER ABN 93 066 902 501 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
The Directors of Yarra Valley Water Corporation present Review of operations their report for the financial year ended 30 June 2015. A review of the operations of Yarra Valley Water during Directors the year ended 30 June 2015 and the results of those operations are contained in this Annual Report. The names of the Corporation’s Directors in office during the financial year and until the date of this report are as State of affairs follows. Directors were in office for this entire period. Prices in 2015–16 will increase by an average of 2.2%. The Peter Snowden Wilson Chairman average residential customer’s bill will increase in 2015–16 David Anthony Middleton Deputy Chairman by 1.9% and residential customers will continue to receive the Gregory Joseph Camm $100 Government Water Rebate, which will be delivered by Dean Matthew Comrie passing on significant savings in operating costs as part of Susan Elizabeth Friend the Corporation’s ongoing commitment to productivity. Stephen James McArthur Therese Anne Ryan Except as provided above, there were no significant changes Patrick John McCafferty Appointed as Managing in the state of affairs of the Corporation during the year ended Director on 1 July 2014 30 June 2015 not otherwise disclosed in the Annual Report.
Particulars of the Directors’ and Corporate Secretary’s Events subsequent to balance sheet date qualifications, experience and special responsibilities (if any) are set out in the Corporate Information Section of this On 8 April 2015, the Hon Lisa Neville MP, Minister for Annual Report. Environment, Climate Change and Water, announced a review of all 135 Victorian water corporation board director positions. Expressions of interest were invited during Directors’ attendance at meetings April and May 2015. New Directors were appointed The number of Directors’ meetings and Board Committee on 1 October 2015. meetings held, and the number of meetings attended Except as provided above, no matter or circumstance has by each of the Directors of the Corporation during the arisen that, in the opinion of the Directors, has significantly financial year is set out in the Corporate Information affected or may significantly affect the operations of the Section of this Annual Report. Corporation, the results of those operations, or the state of affairs of the Corporation in future financial years. Principal activities Valuation of Infrastructure Assets The principal activities of the Corporation during the course of the financial year were the provision, within its district, of The Victorian Auditor-General has proposed to issue a retail water supply and sewerage services and the collection modified audit report on the Corporation’s 2014-15 Financial of trade waste. Statements and Performance Report, reflecting a difference in opinion on the method used to derive the fair value of There were no significant changes in the nature infrastructure assets. of these activities during the year. Particular attention is drawn to Note 1 and Note 12 of the Dividends Financial Statements which describe the Corporation’s accounting policy, approach and actual results relating to The following dividends have been paid by the the valuation of infrastructure assets. The Corporation’s Corporation since the start of the financial year: infrastructure assets are measured at fair value, using the income approach, in accordance with relevant Australian •• a final dividend of $19.2 million for the year ended Accounting Standards and Department of Treasury and 30 June 2014 was paid on 31 October 2014 Finance (DTF) Financial Reporting Directions. The income •• an interim dividend of $12.5 million for the year approach estimates the fair value of infrastructure assets ended 30 June 2015 was paid on 29 June 2015. by discounting reliable estimates of the Corporation’s future cash flows to their present value and arriving at an enterprise The amount of the final dividend for the year ended value range. Net debt is deducted from the enterprise 30 June 2015 will be determined after consultation value range to obtain the equity value. The valuation of between the Board, the Minister for Environment, Climate infrastructure assets is derived from the equity value after Change and Water and the Treasurer of Victoria. deducting all other assets and liabilities and then grossing
34 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
up for deferred tax by applying a simplistic 30% tax rate to During the financial year, Yarra Valley Water complied estimate the value of tax benefits available to a hypothetical with all conditions of the EPAV corporate licence. 2014–15 Highlights purchaser in resetting the tax cost base. In order to assess the reasonableness of the valuation outcome, cross checks Yarra Valley Water maintains an Environmental are performed by comparing the earnings before interest, tax Management System certified to ISO 14001: (2004). and depreciation/amortisation (EBITDA) and regulatory asset value multiples implied by the value determined under the Further particulars of specific environmental performance income approach against multiples implied by share prices measures are set out in the Additional Information section at which comparable organisations are trading, and recent of this Annual Report. transactions in comparable assets which have occurred. Judgement is applied in selecting the appropriate valuation Directors’ Deed Year in Review within the enterprise range. Yarra Valley Water entered into a Deed with each Director The approach adopted in the 2014-15 valuation has been under which it is required to provide access to its books consistently used in the annual accounts since 2009-10, and to maintain insurance coverage for at least seven without qualification. Advice on the approach, discounted years after the Director ceases to be a Director. cash flow model, relevant assumptions, discount rate and Insurance of officers
cross-check data has also been independently provided by Corporate Information our independent expert valuer, Deloitte Touche Tohmatsu. During the financial year, the Corporation paid premiums in The Victorian Auditor-General has expressed an opinion respect of contracts to insure Directors, former Directors that the deferred tax gross-up assumption in the valuation and Officers of the Corporation against certain liabilities. represents an error in the primary valuation methodology Some of the contracts of insurance prohibit disclosure and may result in a material overstatement of the value of the nature of the liabilities insured and the amount of infrastructure assets for current and prior periods. of the premium. In response to the Auditor-General’s concerns over the gross up of the tax benefit assumption, our independent expert Rounding of amounts to nearest thousand dollars valuer, Deloitte Touche Tohmatsu, has considered an alternate Annual Financial Report valuation scenario to test the approach preferred by the The amounts in this Report and the Annual Financial Report Victorian Auditor-General’s Office in regard to determining the have been rounded to the nearest thousand dollars, unless tax benefits available to a hypothetical purchaser and revising otherwise stated. the terminal value growth assumptions. The Corporation This Report is made in accordance with a resolution believes that to adjust one assumption without considering of the Directors of Yarra Valley Water on the 16th day all of the assumptions (and the effect on the cross-checks) of October 2015. would be likely to result in a misstatement in asset value.
The result of the alternate valuation scenario indicates that the existing fair value assessment of infrastructure assets is within the valuation range. This result, in conjunction with the cross checks and advice from our independent expert Additional Information valuer, confirms the Corporation’s view that the fair value of infrastructure assets remains appropriate and in accordance with Australian Accounting Standards and other mandatory Susan E Friend professional reporting requirements. Director
Environmental regulation
Yarra Valley Water is subject to environmental regulation in respect of its operations. Yarra Valley Water holds a
Corporate Licence issued by the Environment Protection Disclosure Index Authority Victoria (EPAV) under the Environment Protection Patrick J McCafferty Act 1970. The licence imposes conditions about discharges, Managing Director reporting obligations and other matters concerning the operation of seven sewage treatment plants.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 35 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015
2015 2014 Note $’000 $’000
Revenue 1, 4 932,488 988,859
Expenses 1, 5 (738,074) (802,529)
Finance costs (121,373) (120,368)
Profit before income tax 73,041 65,962
Income tax expense 1, 6(a) (22,249) (20,363)
Net profit after tax 50,792 45,599
Other comprehensive income Items that will not be reclassified to net result
Increase from revaluation of infrastructure assets 12(b) 64,900 145,579
Increase from revaluation of land 12(b) 135 –
Defined benefit superannuation plan actuarial gain 1, 20 616 4,434
Deferred income tax on items of other comprehensive income 1, 6(b) (19,719) (45,073)
Other comprehensive income, net of tax 45,932 104,940
Total comprehensive income 96,724 150,539
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
36 YARRA VALLEY WATER ANNUAL REPORT 2014–15 BALANCE SHEET AS AT 30 JUNE 2015 Introduction
2015 2014 2014–15 Highlights Note $’000 $’000
ASSETS Current assets Cash 8 360 345 Receivables 3(b), 9 166,598 176,780 Other 10 4,934 4,608 Year in Review Total current assets 171,892 181,733 Non-current assets Infrastructure, property, plant and equipment 12(a) 4,094,557 3,935,163 Intangible assets 11(a) 199,622 202,563
Defined benefit superannuation asset 1, 13(c) 4,426 4,104 Corporate Information Total non-current assets 4,298,605 4,141,830
TOTAL ASSETS 4,470,497 4,323,563
LIABILITIES Current liabilities Unearned income 16 168 436 Current tax payable 6(d) 4,912 10,200
Provisions 15 16,070 17,444 Annual Financial Report Payables 3(b), 14 117,789 120,485 Borrowings 3(a) 230,700 244,000 Total current liabilities 369,639 392,565
Non-current liabilities Provisions 17 1,998 1,548 Refundable advances 3(c) 1,923 2,389
Unearned income 16 7,953 7,543 Additional Information Net deferred tax 1, 6(e) 709,904 682,262 Borrowings 3(a) 1,778,300 1,701,500 Total non-current liabilities 2,500,078 2,395,242
TOTAL LIABILITIES 2,869,717 2,787,807
NET ASSETS 1,600,780 1,535,756
EQUITY Disclosure Index Contributed equity 18 477,297 477,297 Retained earnings 1, 20 199,510 179,448 Asset revaluation reserve 19 923,973 879,011 TOTAL EQUITY 1,600,780 1,535,756
The above Balance Sheet should be read in conjunction with the accompanying notes.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 37 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015
Asset Contributed Retained revaluation equity earnings reserve Total 2015 Note $’000 $’000 $’000 $’000
Balance at 1 July 2014 477,297 179,448 879,011 1,535,756
Net profit after tax – 50,792 – 50,792
Other comprehensive income 19, 20 – 367 45,565 45,932
Total comprehensive income – 51,159 45,565 96,724 Transfer asset revaluation reserve 19, 20 – 603 (603) – to retained earnings Transactions with owners in their capacity as owners Dividends paid 7 – (31,700) – (31,700)
Balance at 30 June 2015 477,297 199,510 923,973 1,600,780
Asset Contributed Retained revaluation equity earnings reserve Total 2014 Note $’000 $’000 $’000 $’000
Balance at 1 July 2013 477,297 148,514 777,106 1,402,917
Net profit after tax – 45,599 – 45,599
Other comprehensive income 19, 20 – 3,035 101,905 104,940
Total comprehensive income – 48,634 101,905 150,539 Transactions with owners in their capacity as owners Dividends paid 7 – (17,700) – (17,700)
Balance at 30 June 2014 477,297 179,448 879,011 1,535,756
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
38 YARRA VALLEY WATER ANNUAL REPORT 2014–15 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2015 Introduction
2015 2014 2014–15 Highlights Note $’000 $’000
Cash flow from operating activities Receipts from customers 927,436 929,696 Payments to suppliers and employees (658,885) (728,480) Goods and services tax refunded (net) 22,695 23,730
Income tax paid (19,614) (19,225) Year in Review Interest and other costs of finance paid (121,397) (115,445) Interest received 12 11 Net cash inflow from operating activities 29(a) 150,247 90,287
Cash flows from investing activities
Proceeds from sale of intangibles, infrastructure, property, plant and equipment 2,165 819 Corporate Information
Payments for acquisition of infrastructure, property, plant and equipment (165,798) (169,828)
Payments for acquisition of intangible assets (18,709) (25,362)
Net cash outflow from investing activities (182,342) (194,371)
Cash flows from financing activities
Proceeds from borrowings 241,700 219,450
Repayment of borrowings (178,200) (98,200) Annual Financial Report
Proceeds of developer security deposits 310 743
Dividends paid 7 (31,700) (17,700)
Net cash inflow from financing activities 32,110 104,293
Net increase in cash held 15 209
Cash at beginning of year 345 136
Cash at end of year 8, 29(b) 360 345 Additional Information The above Cash Flow Statement should be read in conjunction with the accompanying notes. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 39 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of accounting The most significant accounting estimates undertaken in the preparation of this financial report relate to: This financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting •• asset residual values and useful lives Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards •• asset impairment Board, the requirements of the Financial Management Act 1994 and applicable Ministerial Directions. •• unearned revenue
The financial report of Yarra Valley Water Corporation •• accrued revenue (the Corporation) for the year ended 30 June 2015 was •• provisions authorised for issue in accordance with a resolution of the Directors on 16 October 2015. •• deferred tax
b. Basis of accounting preparation and measurement •• fair value of infrastructure, property, plant and equipment
The financial report has been prepared on an accruals and •• contingent assets and liabilities going concern basis and is prepared on a historical cost basis, except for infrastructure, property, plant and equipment, and •• defined benefit superannuation fund. the defined superannuation asset which have been measured at fair value. All amounts are presented in Australian dollars, d. Fair value measurement unless otherwise stated and have been rounded to the nearest thousand dollars, or in other cases to the nearest dollar. The Corporation measures some of its assets and liabilities at fair value either on a recurring or non-recurring basis, The following is a summary of the material accounting depending on the requirements of the applicable Accounting policies adopted by the Corporation in the preparation of the Standard. financial report. Accounting policies are applied in a manner which ensures that the resulting financial information Fair value is the price that would be received to sell an satisfies the concepts of relevance and reliability, thereby asset or paid to transfer a liability in an orderly transaction ensuring that the substance of the underlying transactions between market participants at the measurement date. or other events is reported. Fair value measurement is based on the following The accounting policies have been consistently applied, assumptions: unless otherwise stated. •• that the transaction to sell the asset or transfer the liability takes place either in the principal market (or the c. Critical accounting judgements and estimates most advantageous market, in the absence of the principal The Corporation evaluates estimates and judgements which market), either of which must be accessible to the entity are incorporated in the financial report based on historical at the measurement date; and knowledge and the best available current information. •• that the entity uses the same valuation assumptions that Estimates assume a reasonable expectation of future events market participants would use when pricing the asset or and are based on current trends and economic data obtained liability, assuming that market participants act in their both externally and within the Corporation. Actual results economic best interest. may differ from these estimates.
40 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
Judgements about highest and best use must take into Deferred tax is calculated at the tax rates that are expected account the characteristics of the assets concerned, including to apply to the period when the asset is realised or liability is 2014–15 Highlights restrictions on the use and disposal of any assets arising settled. Deferred tax is credited in net profit in the Statement from their physical nature and any applicable legislative / of Comprehensive Income, except where it relates to items contractual arrangements. that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred All assets and liabilities for which fair value is measured income tax assets are recognised to the extent that it is or disclosed in the financial statements are categorised probable that future tax profits will be available against within the fair value hierarchy, described as follows, which deductible temporary differences can be utilised. and based on the lowest level inputs that are significant to the fair value measurement as a whole: The amount of benefits brought to account or which may Year in Review be realised in the future is based on the assumption that no •• Level 1 – Quoted (unadjusted) market prices in active adverse change will occur in income taxation legislation and markets for identical assets or liabilities; the anticipation that the Corporation will derive sufficient future assessable income to enable the benefit to be realised •• Level 2 – Valuation techniques for which the lowest level and comply with the conditions of deductibility imposed by input that is significant to the fair value measurement is the Law. directly or indirectly observable; and Corporate Information •• Level 3 – Valuation techniques for which the lowest level f. Revenue recognition input that is significant to the fair value measurement Water and sewerage is unobservable. Revenue is brought to account when services have been e. Income tax provided or when a usage or service charge has been made. The payment in advance by customers of accounts which at The Corporation is subject to the National Tax Equivalent reporting date were unbilled is classified as trade payables. Regime (NTER), which is administered by the Australian Taxation Office. Water usage charges and sewage disposal charges are
recognised as revenue when the service has been provided. Annual Financial Report The current income tax expense is based on the profit for As meter reading is cyclical, an estimate is made at the end the year adjusted for any non-assessable or disallowed items. of the accounting period for water usage and sewage disposal It is calculated using tax rates that have been enacted or by customers. The estimate is made by multiplying the are substantively enacted by the Balance Sheet date. number of days since the last reading by daily average water consumption for that period. Deferred tax is accounted for using the Balance Sheet liability method in respect of temporary differences arising between Developer contributed assets the tax bases of assets and liabilities and their carrying amounts in the financial statements. Developers are required to provide water supply and sewerage facilities to new subdivisions which are No deferred income tax will be recognised from the initial
subsequently gifted to, and maintained by, the Corporation. Additional Information recognition of an asset or liability where there is no effect These assets are recognised as revenue at fair value upon on accounting or taxable profit or loss. the gaining of control of the asset and are recorded as ‘developer contributed assets’. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 41 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New customer contributions j. Infrastructure, property, plant and equipment
New customer contributions represent fees paid by Financial Reporting Direction 103F Non-Current Physical developers so that they can connect new developments Assets requires non-current physical assets to be measured to the Corporation’s existing water supply and sewerage at fair value. Accordingly, the Corporation uses the revaluation systems. Generally, these are recognised as revenue when model in accordance with AASB 116 Property, Plant and the contribution has been received; however, in respect of Equipment and measures fair value in accordance with assets to service new urban growth, amounts are received AASB 13 Fair Value Measurement. in advance and recognised as unearned income initially, then recognised as revenue when the development lots Infrastructure, land and building assets are measured are released for sale. initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment losses, Other revenue where applicable. Plant and equipment assets are measured at fair value less depreciation and impairment losses Other revenue includes fees for information statements, where applicable. new meter installation services, water trading, billing and collection administration fees from both Melbourne Water and Due to the specialised nature of the Corporation’s the Department of Environment, Land, Water and Planning infrastructure assets, fair value is estimated using the income and charges for the relocation of assets requested by third approach (based on discounted cash flows). Refer Note 12. parties. Property sales are recognised on the signing of an unconditional contract of sale with a non refundable deposit Subsequent costs are included in the asset’s carrying amount of at least 10%. Income from operating leases is recognised or recognised as a separate asset, as appropriate, only when it in net profit in the Statement of Comprehensive Income is probable that future economic benefits associated with the on a straight line basis over the lease term. item will flow to the Corporation and the cost of the item can be measured reliably. Repairs and maintenance are charged to g. Leases net profit in the Statement of Comprehensive Income during the financial year in which they are incurred. Payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged The cost of fixed assets constructed within the Corporation as expenses in the periods in which they are incurred. includes the cost of materials, direct labour and an The Corporation does not have any finance leases. appropriate proportion of fixed and variable overheads. Revaluations h. Cash and cash equivalents Revaluations are performed with sufficient regularity such Cash and cash equivalents include cash on hand, deposits that the carrying amounts do not differ materially from those held at call with banks, other short-term highly liquid that would be determined using fair values at the end of the investments with original maturities of three months or reporting period. less, and bank overdrafts. Bank overdrafts are shown in current liabilities in the Balance Sheet. Any revaluation increase is recognised in other comprehensive income, except to the extent that it reverses a revaluation i. Receivables and provision for impairment of receivables decrease for the same asset previously recognised in net profit in the Statement of Comprehensive Income, in which All debtors are recognised at the amounts receivable less any case the increase is credited to profit to the extent of the provision for impairment of receivables. Credit is generally decrease previously expensed. A decrease in the carrying allowed for a period of 16 days. The collectability of debt is amount arising on the revaluation is recognised in net profit in assessed each accounting period for usage and other charges. the Statement of Comprehensive Income to the extent that A provision for impairment of receivables is raised where it exceeds the balance, if any, held in the asset revaluation doubt as to its collection exists. Bad debts are written off reserve relating to a previous revaluation of that asset. when the individual debt is determined to be uncollectable, for reasons of hardship or for disconnected customers In measuring the fair values of non-financial assets, accounts greater than 180 days. independent valuers are engaged for scheduled valuations in a five-year cycle. Infrastructure assets are measured to fair market value in the intervening years by the Corporation.
42 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
Depreciation k. Intangible assets 2014–15 Highlights
The depreciable amount of all fixed assets, but excluding Intangible assets acquired separately freehold land and crown land, is depreciated on a straight line basis over their useful lives, commencing from the Intangible assets acquired separately are initially recognised time the asset is held ready for use. The useful lives, which at cost. Subsequently, intangible assets with finite useful are consistent with the prior period, used for each class of lives are carried at cost less accumulated amortisation and depreciable assets are: accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less impairment losses, where applicable. Costs incurred subsequent to initial Class of fixed asset Useful life acquisition are capitalised when it is expected that additional Year in Review Buildings 5 to 100 years future economic benefits will flow to the Corporation.
Infrastructure 3 to 100 years Research and development costs
Plant and equipment 2 to 25 years Expenditure on intangible assets’ research activities is recognised as an expense in the period in which it is incurred. The assets’ residual values and useful lives are reviewed, An internally generated intangible asset arising from a and adjusted if appropriate, at each Balance Sheet date. development project is recognised only if all the following Corporate Information An asset’s carrying amount is written down immediately are demonstrated: to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. •• the technical feasibility of completing the intangible asset so that it will be available for use or sale Following consultation with relevant internal subject matter experts, based on new information the following •• the intention to complete the intangible asset and use infrastructure asset categories’ lives were changed as at or sell it 30 June 2015: •• the ability to use or sell the intangible asset •• valves 30 years (2014: 50 years), •• how the intangible asset will generate probable future Annual Financial Report •• OH&S electrical work 25 years (2014: 20 years), economic benefits
•• pipework 100 years (2014: 95 years), •• the availability of adequate technical, financial and other resources to complete the development and to use or sell •• hoists electrical 25 years (2014: 50 years), the intangible asset
•• pump set 20 years (2014: 30 years). •• the ability to measure reliably the expenditure attributable to the intangible asset during its development. The impact on depreciation in 2014–15 is an increase of $29,963 and for future years the expected impact Subsequent to initial recognition, internally generated
is an approximate increase of $347,000 per annum. intangible assets are reported at cost less accumulated Additional Information amortisation and impairment losses on the same basis as Gains and losses on disposals are determined by comparing intangible assets that are acquired separately. proceeds with the carrying amount. These gains or losses are included in net profit in the Statement of Comprehensive Income. When revalued assets are sold, amounts included in the asset revaluation reserve relating to that asset are transferred to retained earnings. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 43 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Amortisation m. Assets classified as held for sale
Intangible assets with finite useful lives are amortised on a Assets classified as held for sale are measured at the lower straight line basis over the asset’s useful life. Amortisation of their carrying amount and fair value less costs to sell, as begins when the asset is available for use; that is, when it is their carrying amount will be recovered principally through in the location and condition necessary for it to be capable a sale transaction, rather than through continuing use. The of operating in the manner intended by management. The Corporation considers an asset to be held sale where the sale amortisation period and the amortisation method for an is highly probable, the asset is available for immediate sale in intangible asset with a finite useful life are reviewed at least its present condition and the sale is expected to be completed at the end of each annual reporting period. The useful life within 12 months. Assets classified as held for sale are used for the software asset class is between three and ten required to be revalued immediately prior to the transfer with years. Water entitlements are classified as an intangible asset any increase in value recorded through other comprehensive with an indefinite useful life. Intangible assets with indefinite income via the Asset revaluation reserve. This revalued useful lives are not amortised. There has been no change to amount becomes the carrying value of the asset. Assets useful lives during 2014–15 or 2013–14. are not depreciated or amortised while they are classified as held for sale. Assets classified as held for sale are l. Impairment of non-financial assets classified as current assets.
Infrastructure, property, plant and equipment and intangible n. Creditors and accruals assets with finite useful lives are assessed annually for indications of impairment. Whenever there is an indication of Creditors and accruals are recognised for future amounts impairment, the assets concerned are tested as to whether to be paid in respect of goods and services received. The their carrying value exceeds their recoverable amount. amounts are unsecured and are usually paid 30 days after invoice date. Intangible assets that have an indefinite useful life and intangible assets not yet available for use are tested annually o. Employee benefits for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service Where an asset’s carrying value exceeds its recoverable leave when it is probable that settlement will be required and amount, an impairment loss is recognised in net profit in the the liability is capable of being measured reliably. Statement of Comprehensive Income for the excess amount, except to the extent that the write-down can be debited to Short-term and long-term employee benefits an asset revaluation reserve amount applicable to that asset. The recoverable amount of assets held primarily to generate Liabilities recognised in respect of short-term (wholly settled net cash inflows is measured at the higher of the present within twelve months) employee benefits are measured at value of future cash flows expected to be obtained from the their nominal values using the remuneration rate expected asset and fair value less costs to sell. The recoverable amount to apply at the time of settlement. of assets that are not primarily held to generate net cash flows is measured at the higher of depreciated replacement Liabilities recognised in respect of long-term employee cost and fair value less costs to sell. benefits are measured as the present value of the estimated future cash outflows to be made by the Corporation in respect No material indicators of impairment were present at the of services provided by employees up to the reporting date. time financial statements were authorised for issue. Long service leave that an employee is not currently entitled to is recognised as non-current until the employee reaches seven years of services, at which time the liability is classified as current.
44 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
Superannuation r. Borrowings and finance costs 2014–15 Highlights Accumulation plans – Contributions to the accumulation Borrowings are recognised at fair value being the nominal plans are expensed as the contributions are paid or value of funds drawn at balance date. Where the Corporation become payable. has both the intention and discretion to refinance loans maturing within 12 months from balance date under a Defined benefit superannuation plan – A liability or asset Government approved financing facility, such loans are in respect of the defined benefit superannuation plan is classified as non-current. Interest is payable semi-annually recognised in the Balance Sheet and is measured as the and is accrued over the period it becomes due. Accrued present value of the defined benefit obligation at the reporting interest is recorded as part of accruals. date plus unrecognised actuarial gains (less unrecognised Year in Review actuarial losses) less the fair value of the superannuation Finance costs are directly attributable to the acquisition, fund’s assets at that date. The present value of the defined construction or production of qualifying assets measured benefit obligation is based on expected future payments to the at fair value and are therefore recognised as expenses in reporting date, calculated annually by independent actuaries the Statement of Comprehensive Income in the period using the projected unit credit method. Consideration is given in which they are incurred. to the expected future wage and salary levels, experience of employee departures and periods of service. s. Commitments Corporate Information
Actuarial gains and losses are recognised immediately in Commitments for future expenditure arising from contracts retained earnings in the Balance Sheet in the year in which are disclosed at their nominal value and inclusive of goods they occur. and services tax.
Employee benefits on-costs t. Contingent assets and contingent liabilities
Employee benefits on-costs such as payroll tax and workers Contingent assets and contingent liabilities are not recognised compensation are recognised separately from the provision in the Balance Sheet, but are disclosed by way of a note and, for employee benefits. if quantifiable, are measured at nominal value. Contingent
assets and contingent liabilities are presented inclusive of Annual Financial Report p. Unearned income – developer contributions goods and services tax receivable or payable respectively. Refer Note 24. Unearned developer contributions represent amounts advanced to the Corporation by developers for capital u. Dividend and recurrent works not completed. The advances are non interest bearing. An obligation to pay a final dividend only arises after a formal determination is made by the Treasurer following q. Provisions consultation between the Board, the relevant portfolio Minister and the Treasurer. Provisions are recognised when the Corporation has a present
legal or constructive obligation as a result of past events Additional Information v. Smart Water Fund for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. The Smart Water Fund was established by Melbourne’s four water businesses and the State Government of Victoria for the purpose of providing grant funding to support the development of sustainable water use projects.
Contributions made to the Smart Water Fund are initially recognised as assets in the water businesses’ Balance Sheets. Expenses are subsequently recognised by the water businesses when incurred by the Fund. Refer Note 10. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 45 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
w. Environmental contributions y. Financial instruments
The Water Industry (Environmental Contributions) Act 2004 Financial instruments are initially measured at cost amended the Water Industry Act 1994 to make provision for on transaction date which includes transaction costs, environmental contributions to be paid by water authorities. when the related contractual rights or obligations exist. The Act establishes an obligation for authorities to pay into Subsequent to initial recognition, these instruments are a consolidated fund annual contributions for the first period, measured as set out below. from 1 October 2004 to 30 June 2008 in accordance with the pre-established schedule of payments, which sets out the Loans and receivables amounts payable by each corporation. The contribution period has been extended to cover the period 1 July 2012 until Loans and receivables are non-derivative financial assets 30 June 2016. with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using The purpose of the environmental contribution is set out in the effective interest rate method, less any impairment. the Act and the funding may be used for the purpose of financing initiatives that seek to promote the sustainable Financial liabilities management of water or address water-related initiatives. Non-derivative financial liabilities are recognised at amortised The Corporation has a statutory obligation to pay cost comprising original debt less principal repayments an environmental contribution to the Department of and amortisation. Environment, Land, Water and Planning. This contribution is recognised as an expense during the reporting period z. Government grants as incurred. Government grants are recognised once reasonable assurance has been reached that the Corporation will comply with x. Goods and services tax (GST) the conditions attaching to them and that the grants will Revenues, expenses and assets are recognised net of the be received. Government grants of a revenue nature are amount of GST, except where the amount of GST incurred is recognised as income over the periods necessary to match not recoverable from the Australian Taxation Office (ATO). them with the related costs. Government grants related In these circumstances, the GST is recognised as part of the to assets are recognised in the Balance Sheet by deducting cost of acquisition of the asset or as part of an item of the the grant in arriving at the carrying amount of the asset, expense. Receivables and payables in the Balance Sheet are thereby incurring a reduced depreciation charge. shown inclusive of GST. The net amount of GST receivable from or payable to the ATO is included in the Balance Sheet as part of receivables or payables.
Cash flows are presented in the Cash Flow Statement on a gross basis except for the GST component of investing and financing activities which are disclosed as operating cash flows.
46 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
2. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Applicable for annual reporting 2014–15 Highlights Standard / periods beginning Impact on Yarra Valley Water Interpretation Summary on or after financial report
AASB 9 The key changes include the simplified 1 January 2018 The assessment has identified that the Financial requirements for the classification and financial impact of available for sale Instruments measurement of financial assets, a new assets will now be reported through hedging accounting model and a revised other comprehensive income and no impairment loss model to recognise longer recycled to the profit and loss.
impairment losses earlier, as opposed While the preliminary assessment has Year in Review to the current approach that recognises not identified any material impact arising impairment only when incurred. from AASB 9, it will continued to be monitored and assessed.
AASB 15 The core principle of AASB 15 requires 1 January 2017 The changes in revenue recognition Revenue from an entity to recognise revenue when the requirements in AASB 15 may result Contracts with entity satisfies a performance obligation Exposure Draft in changes to the timing and amount Customers by transferring a promised good or 263 – potential of revenue recorded in the financial Corporate Information service to a customer. deferral to statements. The Standard will also 1 Jan 2018. require additional disclosures on services revenue and contract modifications.
Our preliminary assessment is that we do not expect that the way we account for core revenue will change as a result of the new standard.
AASB 2014-4 Amends AASB 116 Property, Plant and 1 January 2016 The assessment has indicated that Annual Financial Report Amendments Equipment and AASB 138 Intangible there is no expected impact as the entity to Australian Assets to: does not use revenue-based method to Accounting calculate depreciation and amortisation. Standards – •• establish the principle for the basis of Clarification depreciation and amortisation as being of Acceptable the expected pattern of consumption Methods of of the future economic benefits of an Depreciation and asset; Amortisation •• prohibit the use of revenue-based methods to calculate the depreciation Additional Information or amortisation of an asset, tangible or intangible, because revenue generally reflects the pattern of economic benefits that are generated from operating the business, rather than the consumption through the use of the asset.
There are no other standards that are not yet effective and In addition to the new standards above, the Australian that are expected to have a material impact on the entity Accounting Standards Board has issued a list of amending Disclosure Index in the current or future reporting periods or on foreseeable standards that are not effective for the 2014–15 year. In future transactions. general, these amending standards include editorial and references changes that are expected to have insignificant impacts on the Corporation’s financial report.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 47 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
3. FINANCIAL INSTRUMENTS
a. Capital risk management These external capital requirements are incorporated into the management of capital through the Board and Corporate Plan. The Corporation controls its capital in order to maintain a satisfactory debt to equity ratio to provide the State The Corporation effectively manages its capital by assessing Government of Victoria with adequate returns and to ensure its financial risks and adjusting its capital structure in that it can fund its operations as a going concern. response to changes in these risks and the market. These responses include the management of debt levels and The capital structure of the Corporation consists of net distributions to the State Government of Victoria. There have debt (borrowings as detailed in the table below and offset been no changes to the strategy adopted by the Corporation by cash and bank balances - see Note 8) and equity of the to control its capital during the year. The gearing ratios for the Corporation (comprising contributed equity, asset revaluation years ended 30 June 2015 and 30 June 2014 were as follows: reserve and retained earnings detailed in Notes 18 to 20).
The only externally imposed capital requirements of the Corporation are that:
•• financial accommodation does not exceed the approval limits set by the Treasurer of Victoria pursuant to the Borrowing and Investment Powers Act 1987; and
•• the Corporation, with the exception of a trading account with overdraft facilities, is required to borrow exclusively with the Treasury Corporation of Victoria.
2015 2014 Note $’000 $’000
Borrowings – Current 230,700 244,000 Borrowings – Non-current 1,778,300 1,701,500 Less: cash 8 (360) (345) Net debt 2,008,640 1,945,155
Total equity 1,600,780 1,535,756
Total capital 3,609,420 3,480,911
Gearing ratio 56% 56%
48 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
b. Financial risks Interest rates sensitivity analysis 2014–15 Highlights The main risks the Corporation is exposed to through its As at 30 June 2015, if interest rates had changed by +/- 50 financial instruments are interest rate risk and credit risk. basis points from the year end rates with all other variables The Corporation uses different methods to measure different held constant, the post-tax profit impact for the year would types of risk to which it is exposed. These methods include have been $1.3 million (2014: $1.6 million) higher / lower sensitivity analysis in the case of interest rate risk, as a result of higher / lower interest expense from variable ageing analysis for credit risk and maturities analysis interest rate borrowings. for liquidity risk. ii Liquidity risk i Interest rate risk Year in Review Liquidity risk is the risk of not being able to meet the specific The Corporation’s exposure to market risk is primarily through financial commitments including short-term working capital interest rate risk due to adverse movements in interest rates needs and the financing of new and maturing loans as they in the market. YVW is exposed to interest rate risk through its fall due. The Corporation manages liquidity risk by actively borrowing activities and changes in the market in comparison monitoring forecast and actual cash flows and ensuring to the assumptions in the Essential Services Commission that adequate borrowing facilities are maintained. regulatory pricing determination in relation to the underlying Corporate Information cost of debt. Interest rate risk applies to floating rate debt, Financing arrangements rolling over of fixed rate debt and new borrowings. The Corporation had access to a total of $118.5 million The Corporation effectively manages interest rate risk by (2014: $87 million) of unused approved borrowings by the maintaining the debt portfolio within the strategic targets Treasurer of Victoria as at 30 June 2015. The Corporation and policy bands that have been approved by the Board. has a formal bank overdraft facility with the Australia and Strategic and tactical debt portfolio options are assessed New Zealand Banking Group Limited. in consultation with Treasury Corporation of Victoria (TCV), with borrowing decisions based on future borrowing Maturities of financial liabilities requirements, treasury management policy compliance and TCV’s market interest rate outlook. The following table allocates the Corporation’s financial Annual Financial Report liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed are the contractual Interest rate details and maturities analysis undiscounted cash flows. on financial instruments: liabilities
Weighted average Less effective than 12 1 to 3 3 to 5 Over 5 interest months years years years Total
rate % $’000 $’000 $’000 $’000 $’000 Additional Information
2015 Refundable advances - non-interest bearing – – 1,923 – – 1,923 Payables - non-interest bearing – 117,789 – – – 117,789 Borrowings - fixed interest rate 5.29 113,200 276,400 235,500 1,036,400 1,661,500
Borrowings - floating interest rate 2.42 117,500 70,000 60,000 100,000 347,500
Total 348,489 348,323 295,500 1,136,400 2,128,712 Disclosure Index 2014 Refundable advances - non-interest bearing – – 2,389 – – 2,389
Payables - non-interest bearing – 120,485 – – – 120,485
Borrowings - fixed interest rate 5.56 148,200 256,400 285,500 929,600 1,619,700
Borrowings - floating interest rate 2.79 95,800 30,000 60,000 140,000 325,800
Total 364,485 288,789 345,500 1,069,600 2,068,374
YARRA VALLEY WATER ANNUAL REPORT 2014–15 49 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
3. FINANCIAL INSTRUMENTS
iii Credit risk The credit risk attributable to the Corporation’s deposits with the TCV and other financial institutions is considered Credit risk is the risk that a counterparty or customer will fail to be very low due to the minor amounts involved and the to meet contractual obligations. For the Corporation credit contractual arrangements in place for its counter parties. risk arises mainly from customer outstanding receivables The maximum exposure to credit risk at the reporting date as it is legally obliged to service all customers in its district is the carrying amount of the items in the Balance Sheet. without regard to their credit quality. The Corporation has For receivables, the maximum exposure is the gross amount in place extensive debt collection strategies to minimise of receivables before allowing for doubtful debts. customer credit risk and recover outstanding receivables. The Corporation uses ageing analysis to measure The credit quality of financial assets that are neither past receivables credit risk as follows: due nor impaired can be assessed by reference to historical information about counterparty default rates. Receivables that are neither past due nor impaired had an average rate of default to revenue in the three years 2012–13 to 2014–15 of 0.736 per cent. For the 2014–15 financial year, the Corporation had $4.1 million (2014: $9.5 million) of bad debts and revenue of $891.4 million (2014: $956.6 million), being a default rate of 0.46 per cent.
Ageing analysis and impairment detail of receivables
1 to 16 17 to 60 61 to 90 91 to 180 Over 180 days days days days days Total Not aged $’000 $’000 $’000 $’000 $’000 $’000
2015 Trade debtors
Not past due and not impaired – 31,877 – – – – 31,877
Past due but not impaired – – 30,038 3,627 4,945 8,922 47,532
Impaired – (106) (374) (92) (413) (946) (1,931)
Net trade debtors – 31,771 29,664 3,535 4,532 7,976 77,478
Accrued revenue 80,096 – – – – – 80,096
Other receivables 9,024 – – – – – 9,024
Total receivables 89,120 31,771 29,664 3,535 4,532 7,976 166,598
2014 Trade debtors
Not past due and not impaired – 35,686 – – – – 35,686
Past due but not impaired – – 35,475 4,208 6,178 10,350 56,211
Impaired – (42) (187) (53) (250) (1,466) (1,998)
Net trade debtors – 35,644 35,288 4,155 5,928 8,884 89,899
Accrued revenue 77,994 – – – – – 77,994
Other receivables 8,887 – – – – – 8,887
Total receivables 86,881 35,644 35,288 4,155 5,928 8,884 176,780
The Corporation’s policy on the provision for impairment of trade receivables is described in Note 1(l).
50 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
c. Fair value 2014–15 Highlights All financial assets and liabilities with the exception of leases are recognised in the Balance Sheet. Cash, cash equivalents and non-interest bearing financial assets and financial liabilities are carried at a cost which approximates the fair value. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of the interest bearing financial liabilities is determined by discounting the expected future cash flows Year in Review at current interest rates.
The carrying amounts and fair values of interest-bearing financial liabilities at balance date are as follows:
2015 2015 2014 2014 Carrying amount Net fair value Carrying amount Net fair value Corporate Information $’000 $’000 $’000 $’000
Interest-bearing financial liabilities Borrowings 2,009,000 2,212,106 1,945,500 2,112,578
Total 2,009,000 2,212,106 1,945,500 2,112,578 Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 51 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
4. REVENUE
2015 2014 $’000 $’000
Rendering of services
Fixed service charges 351,696 347,664
Water usage charges 356,892 368,602
Sewage disposal charges 179,306 177,894
Trade waste charges 22,104 22,708
Government Water Rebate provided to customers* (65,652) –
Total rendering of services 844,346 916,868
Interest income 12 11
Other revenue
New customer contributions by developers 25,986 20,786
Other products and services 17,613 14,325
Developer contributed assets 15,105 11,490
Rent 1,350 1,373
Other 28,076 24,006
Total other revenue 88,130 71,980
Total revenue 932,488 988,859
*The Government Water Rebate is an initiative to identify productivity savings across the water sector to take pressure off customer bills. The $100 rebate will be applied for a period of four years from 2014–15.
52 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
5. EXPENSES
2015 2014 2014–15 Highlights Note $’000 $’000
Bulk water and sewerage charges 21(b) 523,348 538,667
Government Water Rebate contribution received from 21(b) Melbourne Water Corporation * (49,070) –
Depreciation 12(b) 74,442 67,051
Contract payments 51,229 49,894 Year in Review
Salary and employee benefits expense 41,630 42,920
Environmental contribution 29,880 29,880
Amortisation 11(b) 19,852 18,958
Billing and revenue collection costs 10,228 10,344
Consulting services 4,311 3,919 Corporate Information
Write off / disposal of assets 4,182 4,730
Bad and doubtful debts 4,091 9,483
Electricity 3,388 3,840
Information technology costs 3,356 4,969
Government taxes, fees and contributions 2,581 3,392
Superannuation defined benefit expense 13(c) 725 905 Annual Financial Report
Transport costs 546 669
Smart Water Fund contributions 342 555
Rental expenses relating to operating leases 272 426
Impairment write down of assets to recoverable amount 12(b) 17 –
Other expenses 12,724 11,927
Total expenses 738,074 802,529 Additional Information Net (gain) / loss on disposal of infrastructure, property, plant and equipment (294) (23)
*The Government Water Rebate is an initiative to identify productivity savings across the water sector to take pressure off customer bills. The $100 rebate will be applied for a period of four years from 2014–15. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 53 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
6. INCOME TAX
2015 2014 $’000 $’000
a. The components of income tax expense comprise: Current income tax - current income tax charge 21,720 23,490 Deferred income tax - reversal of temporary difference 625 (3,873) Adjustments for current tax of prior periods (96) 746 Income tax expense reported in net profit 22,249 20,363
b. Deferred Income tax recognised in other comprehensive income Defined benefit superannuation plan actuarial gain 249 1,399 Gain on revaluation of infrastructure assets 19,470 43,674 Total deferred income tax recognised in other comprehensive income 19,719 45,073
c. Reconciliation of income tax expense to prima facie tax payable Accounting profit before income tax expense 73,041 65,962 At the statutory income tax rate of 30% (2014: 30%) 21,912 19,789 Adjustments for current tax of prior periods (96) 746 Non-deductible expenses (138) (186) Non-deductible depreciation 14 14 Assessable income 557 – Income tax expense reported in net profit 22,249 20,363
d. Income tax payable Current tax payable 4,912 10,200
e. Deferred tax items Non-current liabilities - deferred tax Accelerated depreciation for tax purposes 365,221 356,987 Revaluation of infrastructure to fair value 315,252 295,783 Revaluation of land to fair value 36,684 36,684 Revaluation of buildings to fair value 61 61 Total non-current liabilities - deferred tax 717,218 689,515 Recognised directly in equity 351,994 332,525 Recognised in net profit 365,224 356,990 Total non-current liabilities - deferred tax 717,218 689,515
Deferred tax assets Defined benefit superannuation asset 1,328 1,231 Provisions (6,008) (6,356) Buildings future deductible amounts (969) (1,041) Unearned Government grant income (1,665) (1,087) Total deferred tax assets (7,314) (7,253) Net deferred tax liabilities 709,904 682,262
54 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
7. DIVIDENDS PAID
2015 2014 2014–15 Highlights $’000 $’000
Dividends paid by the Corporation to the State Government of Victoria were:
Unfranked interim dividend paid 12,500 –
Unfranked final dividend paid for prior year 19,200 17,700
Total dividends paid 31,700 17,700 Year in Review The Corporation, under the National Tax Equivalent Regime, is not required to maintain a franking account.
8. CURRENT ASSETS – CASH
Cash at bank 358 344 Corporate Information
Cash on hand 2 1
Total current assets - cash 360 345
9. CURRENT ASSETS – RECEIVABLES Annual Financial Report
Trade receivables - debtors 79,409 91,897
Trade receivables - accrued revenue 80,096 77,994
Other receivables 9,024 8,887
Less: Provision for impairment of receivables (1,931) (1,998)
Total current assets - receivables 166,598 176,780
Refer Note 3 Financial instruments for ageing analysis and assessment of risks associated with receivables. Additional Information
Movements in the provision for impairment of receivables
Balance at beginning of the year (1,998) (1,848)
Reversal of provision and write offs recognised as an expense 4,091 9,483
Increase in provision (4,024) (9,633)
Total provision for impairment of receivables (1,931) (1,998) Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 55 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
10. CURRENT ASSETS - OTHER
2015 2014 $’000 $’000
Water Efficiency Program for Schools - advance 1,927 910
Other Water Efficiency Programs - advance 141 160
Prepayments 2,866 3,538
Total current assets - other 4,934 4,608
The Water Efficiency Program for Schools - advance represents amounts advanced from the Department of Environment, Land, Water and Planning and from the Department of Education and Training for the audit and delivery of the works required to improve the water efficiency of schools. The amount is recognised as both an asset and a liability in the Balance Sheet.
The Other Water Efficiency Programs - advance includes amounts advanced from the Department of Environment, Land, Water and Planning with the objective to find a more sustainable way to service remote unsewered communities such as back log areas.
Prepayments include $51,964 (2014: $174,139 ) which relate to amounts paid to the Smart Water Fund but not yet distributed. Yarra Valley Water’s share of the fund disbursements for the year is $342,175 (2014: $555,236) and is included in the Statement of Comprehensive Income.
11. (A) NON-CURRENT ASSETS - INTANGIBLE ASSETS
Software
Cost 164,602 131,261
Less accumulated amortisation (74,573) (56,569)
Works in progress 12,676 30,954
Total software 102,705 105,646
Water entitlements and other intangible assets 96,917 96,917
Total intangible assets 199,622 202,563
56 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
11. (B) MOVEMENTS IN CARRYING AMOUNTS
Water entitlements and Intangible works 2014–15 Highlights other intangible assets Software in progress Total $’000 $’000 $’000 $’000
2015
Balance at 1 July 2014 96,917 74,692 30,954 202,563 Additions – – 18,727 18,727
Transfers – 35,910 (35,910) – Year in Review Disposals – (721) (1,095) (1,816)
Amortisation expense – (19,852) – (19,852)
Carrying amount at 30 June 2015 96,917 90,029 12,676 199,622
2014 Corporate Information
Balance at 1 July 2013 96,961 82,298 16,995 196,254
Additions – – 25,362 25,362
Transfers – 11,403 (11,403) –
Disposals (33) (62) – (95)
Amortisation expense (11) (18,947) – (18,958)
Carrying amount at 30 June 2014 96,917 74,692 30,954 202,563 Annual Financial Report
The amortisation expense has been included in the line item ‘Amortisation’. Refer to Note 5.
Yarra Valley Water made a contribution of $100 million towards the cost of the Goulburn-Murray Water Connections Project (Connections Project), formerly known as the Northern Victorian Irrigation Renewal Project. In exchange for this contribution, Yarra Valley Water is entitled to a one-ninth share of the water savings generated by Stage 1 of the Connections Project (estimated to be 225 gigalitres of long-term water savings in total when complete in 2018) on an ongoing basis.
In exchange for access to the three Melbourne metropolitan water retailers’ water entitlements from the Melbourne water supply system, four regional urban water businesses (Barwon Water, South Gippsland Water, Western Water and Westernport Water) made contributions of $9.3 million to the retailers, with Yarra Valley Water’s share being $3.1 million. The investment has therefore been recognised at its net value ($100 million less $3.1 million). Additional Information
Water entitlements and other intangible assets are recognised at cost less accumumulated amortisation. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 57 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
12. (A) NON-CURRENT ASSETS - INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT
2015 2014 $’000 $’000
Infrastructure
At fair value 3,642,174 3,464,273
Total infrastructure 3,642,174 3,464,273
Freehold land
At fair value 276,636 277,128
Total freehold land 276,636 277,128
Crown land
At fair value 408 408
Total crown land 408 408
Buildings
At fair value 38,994 35,039
Less accumulated depreciation (2,490) (1,575)
Total buildings 36,504 33,464
Capital works in progress at cost 106,452 123,744
Plant and equipment
At fair value 56,179 56,741
Less accumulated depreciation (23,796) (20,595)
Total plant and equipment 32,383 36,146
Total infrastructure, property, plant and equipment 4,094,557 3,935,163
58 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
12. (B) NON-CURRENT ASSETS - INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT - MOVEMENTS IN CARRYING AMOUNTS
Capital Land 2014–15 Highlights works in Crown held Plant and progress Land land for sale Buildings equipment Infrastructure Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
2015
Balance at 1 July 2014 123,744 277,128 408 – 33,464 36,146 3,464,273 3,935,163
Additions 171,184 – – – – – – 171,184 Year in Review Transfers (188,477) – – – 3,975 5,481 179,021 –
Disposal / write off – – – (610) – (1,390) (366) (2,366)
Depreciation expense – – – – (935) (7,853) (65,654) (74,442)
Revaluation increase – 135 – – – – 64,900 65,035 recognised in equity Corporate Information Transfer to land held – (627) – 627 – – – – for sale
Impairment writedown – – – (17) – – – (17)
Carrying amount at 106,451 276,636 408 – 36,504 32,384 3,642,174 4,094,557 30 June 2015
2014
Balance at 1 July 2013 171,762 265,103 408 – 18,077 24,392 3,197,802 3,677,544 Annual Financial Report
Additions 183,726 – – – – – – 183,726
Transfers (229,705) 12,066 – – 16,136 20,317 181,186 –
Disposal / write off (2,039) (41) ≠– – (110) (1,724) (721) (4,635)
Depreciation expense – – – – (639) (6,839) (59,573) (67,051)
Revaluation increase – – – – – – 145,579 145,579 recognised in equity Additional Information Carrying amount at 123,744 277,128 408 – 33,464 36,146 3,464,273 3,935,163 30 June 2014
Infrastructure Future estimated cash flows were based on the Essential Services Commission’s pricing determination and The 30 June 2015 valuation of infrastructure assets, using updated management forecasts. In order to assess the the income approach was estimated by discounting the reasonableness of our valuation, the enterprise value is Corporation’s future cash flows to their present value and reviewed by comparison to other related industries using arriving at an enterprise value. Net debt is deducted from earnings before tax and depreciation / amortisation Disclosure Index the enterprise value to obtain the equity value. The value of (EBITDA) and regulatory asset base (RAB) multiples. infrastructure assets is derived from the equity value after deducting all other assets and liabilities. The discount rate Advice on weighted average cost of capital and multiples selected represents the rate that market participants would has been independently provided by Deloitte. reasonably expect to use in determining the fair market value of the Corporation. If infrastructure assets were measured at historical cost, the carrying amount would be $2.67 billion (2014: $2.54 billion).
YARRA VALLEY WATER ANNUAL REPORT 2014–15 59 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
12. (B) NON-CURRENT ASSETS - INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT
Land – specialised / non-specialised Buildings (non-specialised)
The 30 June 2011 valuation of freehold land was The 30 June 2011 valuation of buildings was independently independently determined by the Victorian Valuer-General’s determined by the Victorian Valuer-General’s Office using Office using fair market value as at 30 June 2011. In fair market value based on highest and best use at undertaking the valuation of land, the Victorian Valuer- 30 June 2011 for buildings. Buildings where checked against General’s Office adopted the market based direct comparison indices provided by the Victorian Valuer-General’s Office to approach, whereby the properties were valued by analysing determine any material or exceptionally material movements. land sales in comparable proximity to the subject sites and As at 30 June 2015 no material movements have occured. allowing for shape, size, topography, location and other If buildings were measured at historical cost, the carrying relevant factors specific to the land being valued. Where amount would be $45.3 million (2014: $42.7 million). applicable specalised land is adjusted for the community service obligation to reflect the specialised nature of the Plant and equipment land being valued. Land was checked against indices provided by the Victorian Valuer-General’s Office to determine any Plant and equipment is held at carrying value (depreciated material or exceptionally material movements. As at cost) which approximates fair value. Unless there is market 30 June 2015 no material movements have occured. evidence that current replacement costs are significantly different from the original acquisition cost, it is considered If land was measured at historical cost, the carrying unlikely that depreciated replacement cost will be materially amount would be $53.6 million (2014: $53.6 million). different from the existing carrying value. As at 30 June 2015 no material movements have occured. Land held for sale Crown land During the year a parcel of excess land (the asset) was reclassified as held for sale after approval was granted for The 30 June 2013 valuation of Crown land was independently the sale. The asset was subsequently listed for sale with an determined by the Victorian Valuer-General’s Office using agent on 23 January 2015. The carrying amount of the asset fair market value as at 30 June 2013. In undertaking the prior to revaluation was $492,150. At the time the asset was valuation of Crown land, the Victorian Valuer-General’s reclassified as held for sale, a valuation was provided by the Office adopted the market based direct comparison method Victorian Valuer-General’s Office in September 2014, valuing whereby the properties were valued by analysing land sales the property at $627,273 (excluding GST). The increase in in comparable proximity to the subject sites and allowing for the asset of $135,123 was recognised through the Asset shape, size, topography, location and other relevant factors revaluation reserve. The asset was subsequently sold on specific to the land being valued. From the sales analysed 15 April 2015 for $690,000 (including GST), incurring selling an appropriate rate per square metre was applied. Where costs of $17,226. The asset was settled on 15 June 2015. applicable, crown land is adjusted for the community At the time of the sale the fair value less costs to sell was service obligation to reflect the specialised nature of valued at $610,047 (excluding GST). The selling costs are the land being valued. As at 30 June 2015 no material recognised as impairments and recorded through the profit movements have occurred. and loss. The increase in the asset value was transferred out of the Asset revaluation reserve to Retained earnings at 30 June 2015.
60 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
12. (C) FAIR VALUE MEASUREMENT – INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT
The Corporation’s land, buildings, plant and equipment and In accordance with AASB 13 Fair Value Measurement, the infrastructure are stated at their revalued amounts, being Corporation’s non-financial assets have been categorised 2014–15 Highlights the fair value at the date of revaluation, less any subsequent into the three levels of the fair value hierarchy depending accumulated depreciation and impairment losses. This Note on the degree to which inputs into the fair value explains the judgements and estimates made in determining measurements are observable, and the significance the fair values of non-financial assets. of the inputs to the fair value measurement.
Fair Value as Level 1 (i) Level 2 (ii) Level 3 (iii) at 30 June Year in Review $’000 $’000 $’000 $’000
Infrastructure – – 3,642,174 3,642,174
Land (Specialised) – – 109,794 109,794
Land (Non-specialised) – 166,843 – 166,843
Buildings (Non-specialised) – 36,504 – 36,504 Corporate Information
Plant and equipment – – 32,384 32,384
Crown land specialised – – 408 408
Total 30 June 2015 – 203,347 3,784,760 3,988,107
Infrastructure – – 3,464,273 3,464,273
Land (Specialised) – – 109,793 109,793 Annual Financial Report Land (Non-specialised) – 167,335 – 167,335
Buildings (Non-specialised) – 33,464 – 33,464
Plant and equipment – – 36,146 36,146
Crown land (specialised) – – 408 408
Total 30 June 2014 – 200,799 3,610,620 3,811,419
(i) Quoted prices (unadjusted) in active markets for identical assets or liabilities. (ii) Inputs based on observable market data (either directly using prices or indirectly derived from prices). Additional Information (iii) Input not based on observable market data. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 61 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
12. (C) FAIR VALUE MEASUREMENT – INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT
The following table presents a reconciliation of changes in Level 3 items for the period ending 30 June 2015: Plant and Land equipment Crown Land (Specialised) Infrastructure Total $’000 $’000 $’000 $’000 $’000
Opening Balance 1 July 2014 36,146 408 109,793 3,464,273 3,610,620 Acquisitions 5,481 – – 179,021 184,502
Disposals / write off (1,390) – – (366) (1,756)
Depreciation (7,853) – – (65,654) (73,507)
Revaluation gains recognised in – – – 64,900 64,900 other comprehensive income
Closing Balance 30 June 2015 32,384 408 109,793 3,642,174 3,784,759
Opening Balance 1 July 2013 24,392 408 109,793 3,197,802 3,332,395
Acquisitions 20,317 – – 181,186 201,503
Disposals / write off (1,724) – – (721) (2,445)
Depreciation (6,839) – – (59,573) (66,412)
Revaluation gains recognised in – – – 145,579 145,579 other comprehensive income
Closing Balance 30 June 2014 36,146 408 109,793 3,464,273 3,610,620
The following table summarises the valuation techniques used and significant unobservable inputs of recurring Level 3 fair value measurements. There have been no changes in valuation technique.
Significant Range Valuation unobservable (weighted technique inputs average) Sensitivity of the input to fair value
Land Market approach Community service 20% to 90% A significant increase or decrease in (Specialised obligation (CSO) $130 to the CSO adjustment would result in and Crown) adjustment $8,432,640 a higher or lower land valuation. ($300,521) Infrastructure Income approach Weighted average 6.00% to 6.25% The higher the WACC the lower the valuation. using a discounted cost of capital cash flow model (WACC) Useful life 3 to 100 years A significant increase or decrease in useful (53 years life impacts the fair value of infrastructure. remaining life) Inflation 2.5% A significant increase or decrease in inflation rates would result in a higher or lower valuation.
Plant and Depreciated cost Useful life 2 to 25 years A significant increase or decrease in useful life equipment (deemed fair value) (2.5 years impacts the fair value of plant and equipment. remaining life)
Cost per unit $100 to A significant increase or decrease in cost $1,409,766 per unit impacts the fair value of plant and ($12,000) equipment.
62 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
13. DEFINED BENEFIT SUPERANNUATION ASSET a. Superannuation plan information b. Description of risks 2014–15 Highlights For employees who are members of the Equipsuper There are a number of risks to which the Plan exposes Superannuation Fund defined benefit plan, an agreed the Corporation. The more significant risks related to percentage of salaries is contributed to the fund by the defined benefits are: the Corporation as recommended by an actuary. •• Investment risk - The risk that investment returns will Defined benefit members receive lump sum retirement be lower than assumed and the Corporation will need benefits on retirement, death, disablement and withdrawal. to increase contributions to offset this shortfall. The defined benefit plan is closed to new members. All new members of the fund receive accumulation only benefits. •• Salary growth risk - The risk that wages or salaries (on Year in Review which future benefit amounts will be based) will rise more The Superannuation Industry (Supervision) Act 1993 (SIS) rapidly than assumed, increasing defined benefit amounts governs the superannuation industry and provides the and thereby requiring additional employer contributions. framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be •• Legislative risk - The risk that legislative changes performed for each defined benefit superannuation plan could be made which increase the cost of providing every three years, or every year if the Plan pays defined the defined benefits. benefit pensions. Corporate Information The Plan assets are invested by the Trustee in a pool of assets The Plan’s Trustee is responsible for the governance of with plans providing defined benefits for other employers. the plan. The Trustee has a legal obligation to act solely The assets have a benchmark weighting to equities of 50% in the best interest of plan beneficiaries. The Trustee and therefore the plan has significant concentration of equity has the following roles: market risk. However, within the equity investments, the allocation both globally and across sectors is diversified. •• administration of the plan and payment to the beneficiaries from Plan assets when required in accordance with the plan rules;
•• management and investment of the Plan assets; and Annual Financial Report
•• compliance with superannuation law and other applicable regulations.
The prudential regulator, the Australian Prudential Regulation Authority, licences and supervises regulated superannuation plans.
There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year. Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 63 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
13. DEFINED BENEFIT SUPERANNUATION ASSET
2015 2014 $’000 $’000
c. Reconciliation of the net defined benefit asset
Net defined benefit asset at start of year 4,104 116
Current service cost (856) (917)
Net interest 131 12
Actual return on plan assets less interest income 2,223 3,283
Actuarial gains arising from changes in demographic assumptions – 79
Actuarial gains / (losses) arising from changes in financial assumptions (2,335) 799
Actuarial gains arising from liability experience 728 273
Employer contributions 431 459
Defined benefit superannuation asset 4,426 4,104
Superannuation defined benefit expense (Note 5) is represented by the sum of Net interest ($856,000) and past service cost $131,000.
d. Reconciliation of the fair value of plan assets
Fair value of plan assets at beginning of the year 31,471 31,584
Interest income 1,133 1,046
Actual return on plan assets less interest income 2,223 3,283
Employer contributions 431 459
Contributions by plan participants 249 255
Benefits paid (2,919) (4,906)
Taxes and premiums paid (233) (250)
Fair value of plan assets at year end 32,355 31,471
e. Reconciliation of the defined benefit obligation
Present value of defined benefit obligations at beginning of the year 27,367 31,468
Current service cost 856 917
Interest cost 1,002 1,034
Contributions by plan participants 249 255
Actuarial gains arising from changes in demographic assumptions – (79)
Actuarial (gains) / losses arising from changes in financial assumptions 2,335 (799)
Actuarial gains arising from liability experience (728) (273)
Benefits paid (2,919) (4,906)
Taxes and premiums paid (233) (250)
Superannuation liability 27,929 27,367
64 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
13. DEFINED BENEFIT SUPERANNUATION ASSET f. Fair value plan assets as at 30 June 2015 2014–15 Highlights
Quoted prices in active markets for Significant identical assets - observable Unobservable Total Level 1 inputs - Level 2 inputs - Level 3 Asset category $’000 $’000 $’000 $’000
Investment funds 32,355 – 32,355 –
Total 32,355 – 32,355 – Year in Review
2015 2014 % %
g. Plan assets
Australian equity 29 30 Corporate Information
International equity 25 24
Fixed income 11 11
Defensive alternatives 9 10
Property 9 9
Growth alternatives 9 8
Cash 8 8 Annual Financial Report Total 100 100
h. Fair value of Corporation’s own financial instruments
The fair value of plan assets includes no amounts relating to: •• any of the Corporation’s own financial instruments •• any property occupied by, or other assets used by, the Corporation. Additional Information 2015 2014 % %
i. Actuarial assumptions to determine defined benefit cost
Discount rate 3.70 3.40
Expected salary increase rate 4.60 4.60
j. Actuarial assumption to determine defined benefit obligation Disclosure Index
Discount rate 2.80 3.70
Expected salary increase rate 4.60 4.60
YARRA VALLEY WATER ANNUAL REPORT 2014–15 65 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
13. DEFINED BENEFIT SUPERANNUATION ASSET
k. Sensitivity analysis
The defined benefit obligation as at 30 June 2015 under several scenarios is presented below.
Scenario A: 0.5% per annum lower discount rate assumption Scenario B: 0.5% per annum higher discount rate assumption Scenario C: 0.5% per annum lower salary increase rate assumption Scenario D: 0.5% per annum higher salary increase rate assumption
Base Case Scenario A Scenario B Scenario C Scenario D
Discount rate - Per annum 2.80% 2.30% 3.30% 2.80% 2.80%
Salary increase rate - Per annum 4.60% 4.60% 4.60% 4.10% 5.10%
Defined benefit obligation ($’000) 27,929 29,346 26,599 26,603 29,327
The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions.
l. Funding arrangements m. Expected contributions
The Equipsuper Contribution and Funding Policy provides Expected employer contributions for the financial year for a review of the financial position of the plan each six ending 30 June 2016 is expected to be nil. months, as at 30 June and 31 December, with the Corporation contribution rate comprising a long-term contribution rate and n. Maturity profile of defined benefit obligation an adjustment to meet the financing objective of a Funding Ratio of 105%. The weighted average duration of the defined benefit obligation as at 30 June 2015 is eight years. The Funding Ratio is the ratio of assets to accrued liabilities, being the greater of vested benefits and the present value of $’000 past membership benefits. Where the Funding Ratio is greater than 100%, the financing objective is to achieve a Funding 30 June 2016 1,657 Ratio of 105% over five years. Where the Funding Ratio is 30 June 2017 1,940 less than 100%, the primary financing objective is to achieve 30 June 2018 2,070 100% over three years and 105% over five years. 30 June 2019 2,108 30 June 2020 2,327 In the most recent review of the financial position as at Following 5 years 13,824 31 December 2014, the actuary recommended a Corporation contribution rate of nil. The Corporation continues to contribute salary sacrifice contributions and at the required rates for accumulation members. The next review of the financial position and Corporation contribution rate is as at 30 June 2015.
66 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
14. CURRENT LIABILITIES - PAYABLES
2015 2014 2014–15 Highlights $’000 $’000
Trade payables 40,335 37,826
Accruals 73,670 79,185
Security deposits 3,784 3,474
Total current liabilities - payables 117,789 120,485 Year in Review Refer Note 3 financial instruments for interest rate details and maturities analysis on financial instruments: liabilities
15. CURRENT LIABILITIES - PROVISIONS Corporate Information
Employee benefits – annual leave 4,712 5,084
Employee benefits – long service leave 10,326 10,303
Other provisions 1,032 2,057
Total current liabilities - provisions 16,070 17,444
Employee benefits include amounts relating to accrued annual leave and long service leave. Employee benefits expected to be wholly settled within 12 months: $1,545,750 (2014: $2,083,238). Annual Financial Report
16. CURRENT AND NON-CURRENT LIABILITIES - UNEARNED INCOME
Grant income - current 168 436
Total current liabilities - unearned income 168 436 Additional Information Developer contributions - non-current 7,953 7,543
Total current and non-current liabilities - unearned income 8,121 7,979
Unearned developer contributions’ income is amounts received or receivable from developers for the reimbursement of costs that will be incurred by the Corporation for the construction of assets to service new urban growth. The amounts paid to the Corporation will be offset in future years by new customer contributions that will be payable when the development lots are released for sale. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 67 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
17. NON-CURRENT LIABILITIES - PROVISIONS
2015 2014 $’000 $’000
Employee benefits – long service leave 1,998 1,548
Total non-current liabilities - payables 1,998 1,548
Movements in provisions (current and non-current)
Employee benefits
Carrying amount at beginning 16,935 15,607
Additional provision 5,806 5,741
Amounts utilised during year (5,704) (4,413)
Carrying amount at year end 17,037 16,935
Other provisions
Carrying amount at beginning 2,057 3,392
Additional provision 157 814
Amounts utilised during year (1,182) (2,149)
Carrying amount at year end 1,032 2,057
18. CONTRIBUTED EQUITY
Contributed equity 477,297 477,297
Total contributed equity 477,297 477,297
Additions to net assets which have been designated as contributions by owners are recognised as contributed equity. Other transfers that are in the nature of contributions or distributions have also been designated as contributions by owners.
68 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
19. ASSET REVALUATION RESERVE
2015 2014 2014–15 Highlights $’000 $’000
Asset revaluation reserve 923,973 879,011
Total asset revaluation 923,973 879,011
Movements in asset revaluation reserve Infrastructure Crown land Land Buildings Total
2015 $’000 $’000 $’000 $’000 $’000 Year in Review
Balance at 1 July 2014 690,159 408 188,256 188 879,011
Revaluation, net of tax effect 45,430 – 135 – 45,565
Transfer to retained earnings on disposal of – – (603) – (603) land held for sale
Balance at 30 June 2015 735,589 408 187,788 188 923,973 Corporate Information
2014
Balance at 1 July 2013 588,254 408 188,256 188 777,106
Revaluation, net of tax effect 101,905 – – – 101,905
Balance at 30 June 2014 690,159 408 188,256 188 879,011
The asset revaluation reserve is used to record changes in the carrying amount of fixed assets arising on revaluation. Any revaluation increment is credited to the asset revaluation reserve. A decrement would be debited to the surplus to the extent of Annual Financial Report the balance of prior increments. Any further decrements would be taken to the Statement of Comprehensive Income.
20. RETAINED EARNINGS
2015 2014 $’000 $’000
Opening balance 179,448 148,514 Additional Information
Net profit 50,792 45,599
Defined benefit superannuation plan actuarial gain 616 4,434
Transfer from asset revaluation reserve on disposal of land held for sale 603 –
Net deferred tax assets recognised through retained earnings (249) (1,399)
Dividend paid (31,700) (17,700)
Closing balance 199,510 179,448 Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 69 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
21. RELATED PARTY DISCLOSURES
a. Parent entity
The Corporation is owned by the State Government of Victoria.
b. Relationship with the State Government of Victoria related parties
i. Minister for Environment, Climate Change and Water
The Corporation, under a normal commercial agency arrangement, bills and collects rates on behalf of the Minister for Environment, Climate Change and Water relating to Parks Victoria services. The Corporation charges the Department of Environment, Land, Water and Planning for the services it provides in billing and collecting rates and on charges costs incurred regarding supplementary council valuations.
2015 2014 Note $’000 $’000
Amounts recognised as revenue in the Statement of Comprehensive Income
Administration fees for billing and collecting rates and reimbursement of costs of supplementary council valuations 2,594 2,703
Cash amounts paid during the year
Parks Victoria levy billed to customers 55,701 58,734
ii. Melbourne Water Corporation
The Corporation transacts solely with the Melbourne Water Corporation for the purchase of potable water and disposal of sewage. The Corporation, under a normal commercial agency arrangement, bills and collects drainage rates and charges on behalf of the Melbourne Water Corporation. The Corporation charges the Melbourne Water Corporation for the services it provides in billing and collecting drainage fees on behalf of the Melbourne Water Corporation and on charges costs incurred regarding supplementary council valuations.
Amounts recognised as an expense in the Statement of Comprehensive Income
Bulk water and sewerage wholesaler charges expense 5 523,348 538,667
Government Water Rebate provided to customers (49,070) –
Amounts recognised as revenue in the Statement of Comprehensive Income
Administration fees for billing and collecting drainage rates and reimbursement of the costs of supplementary council valuations 4,480 4,576
Cash amounts paid during the year
Drainage billed to customers 82,236 76,270
70 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
iii. Department of Environment, Land, Water and Planning 2014–15 Highlights The Corporation is required to make payments to the Department of Environment, Land, Water and Planning.
2015 2014 $’000 $’000
Amounts recognised as an expense in the Statement of Comprehensive Income
Environmental contribution 29,880 29,880 Year in Review iv. Treasury Corporation of Victoria
The Corporation borrows from and invests with the Treasury Corporation of Victoria. The aggregate amount of borrowings payable at reporting date and the amounts of interest expense included in the determination of profit before income tax is:
Aggregate amount of borrowings 2,009,000 1,945,500 Corporate Information Interest expense 97,318 99,269 v. Department of Treasury and Finance
The Corporation pays amounts to the State Government of Victoria, via the Department of Treasury and Finance. Amounts were paid as follows: Dividend paid 31,700 17,700
Financial accommodation levy 23,810 20,908 Annual Financial Report vi. Department of Health and Human Services
Customers of the Corporation who hold either a Pension Concession Card, a Gold Repatriation Health Care Card for All Conditions or a Health Care Card are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the Department of Health and Human Services. Concession amounts billed during the year 46,749 45,703 vii. State Revenue Office
In addition to Payroll Tax and Land Tax, which are payable on normal commercial terms and conditions, customers of the Additional Information Corporation who are not for profit entities are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the State Revenue Office.
Concession amounts billed during the year 1,280 1,224 viii. Other State Government of Victoria related parties
Water and sewerage services were provided to wholly owned State Government of Victoria entities for properties within Yarra Valley Water’s district under normal commercial terms and conditions. Disclosure Index All other transactions with State Government of Victoria related party entities were made on normal commercial terms and conditions.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 71 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
22. RESPONSIBLE PERSONS, EXECUTIVE OFFICERS AND OTHER PERSONNEL
a. Responsible Persons Remuneration of Responsible Persons
The relevant Minister and Directors of Yarra Valley Water The remuneration paid to the Minister for Environment, are deemed to be responsible persons by Ministerial Climate Change and Water and the former Minister for Direction pursuant to the provisions of the Financial Water is reported in the Annual Report of the Department Management Act 1994. of Premier and Cabinet. Other relevant interests are declared in the Register of Members’ Interests which The relevant Minister of Yarra Valley Water during the each member of the Parliament completes. reporting period, from 1 July 2014 to 3 December 2014 was the Hon Peter Walsh MLA, Minister for Water. The number of responsible persons whose remuneration from the Corporation was within the specified bands were The relevant Minister of Yarra Valley Water during the as follows: reporting period, from 4 December 2014 to 30 June 2015 was the Hon Lisa Neville MP, Minister for Environment, Climate Change and Water.
The Directors of Yarra Valley Water at any time during the financial year ended 30 June 2015 were:
Peter Snowden Wilson Chairman David Anthony Middleton Deputy Chairman Gregory Joseph Camm Dean Matthew Comrie Susan Elizabeth Friend Stephen James McArthur Therese Anne Ryan Patrick John McCafferty Managing Director
2015 2014 No. No.
$10,000 ‑ $19,999 – 2
$30,000 ‑ $39,999 – 2
$40,000 ‑ $49,999 6 3
$50,000 ‑ $59,999 – 1
$90,000 ‑ $99,999 1 1
$360,000 - $369,999 1 –
$410,000 ‑ $419,999 – 1
$680,000 - $689,999* 1* –
Total numbers 9 10
Total amount ($’000) 1,437 807
*The disclosure relates to the retirement of the Corporation’s Managing Director in September 2014. Upon termination, long service leave and annual leave payments were made and have been disclosed in the total amount.
72 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
b. Transactions with director related entities No amounts remained payable at 30 June 2015 (2014: Nil). Select Solutions, a division of AusNet Services, has 2014–15 Highlights Water and sewerage services were provided to Directors provided services to the Corporation for which an amount of or director related entities for properties within Yarra $18,351,206 (2014: 15,852,954) in fees was paid or payable Valley Water’s district under normal commercial terms on normal commercial terms and conditions. No amounts and conditions. remained payable at 30 June 2015 (2014:Nil).
Mr Wilson was the Chairman of Vision Super Pty Ltd until the There were no other transactions with director related entities. end of his rotational term on 30 June 2014 and continues as a Director of Vision Super Pty Ltd. Vision Super Pty Ltd provides c. Remuneration of Executive Officers superannuation services to the Corporation’s employees for Year in Review which an amount of $334,902 (2014: $346,036) in employee The number of Executive Officers, excluding the Responsible superannuation contributions was paid or payable on normal Persons, whose total annualised remuneration from the commercial terms and conditions. No amounts remained Corporation was within the specified bands were as follows: payable at 30 June 2015 (2014: Nil).
Mr Comrie is a Project Director with AusNet Services. AusNet Services has provided services to the Corporation for which an amount of $1,100 (2014: $124,784) in fees was paid or Corporate Information payable on normal commercial terms and conditions.
Total remuneration Base remuneration
2015 2014 2015 2014 No. No. No. No.
$200,000 - $209,999 – – 1 –
$220,000 - $229,999 1 – 2 1 Annual Financial Report $230,000 - $239,999 – – 3 2
$240,000 - $249,999 – – 1 2
$250,000 - $259,999 – 1 – –
$260,000 - $269,999 2 2 – 2
$270,000 - $279,999 3 2 – –
$280,000 - $289,999 1 – – –
$300,000 - $309,999 – 2 – – Additional Information
Total numbers 7 7 7 7
Total annualised employee equivalent (AEE) 7 7 7 7
Total amount ($’000) 1,859 1,950 1,616 1,705
Total remuneration is inclusive of base remuneration, bonus payments, redundancy payments, retirement benefits and payments of annual leave and long service leave upon termination. Base remuneration is exclusive of bonus payments. Annualised employee equivalent (AEE) is based on working 38 hours per week over the reporting period. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 73 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
22. RESPONSIBLE PERSONS, EXECUTIVE OFFICERS AND OTHER PERSONNEL
d. Key management personnel compensation
2015 2014 $’000 $’000
Short-term employee benefits 2,505 2,508
Post‑employment benefits 791 249
Other employment benefits* 49 49
Total amount ($’000) 3,345 2,806
Total numbers 16 17
Key management personnel includes Responsible Persons and Executive Officers. Where applicable, the table above includes performance bonuses paid during the year, based on performance in the previous year. *Other employment benefits represents long service leave.
e. Other personnel (contractors with significant management responsibilities)
During the year, Yarra Valley Water had no other personnel, by way of contractors, charged with significant management responsibilities.
23. REMUNERATION OF AUDITOR 2015 2014 $’000 $’000
Amount received, or due and receivable, by the Victorian Auditor-General’s Office for auditing the financial statements of the Corporation 132 129
24. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
a. Contingent liabilities b. Contingent assets
The Corporation is unaware of any material contingent The Corporation enters into agreements with land developers liability. Claims to which the Corporation is aware and whereby assets are transferred to the Corporation at no which may result in a liability being incurred have been cost. These assets are brought to account as revenue and provided for as other provisions. Refer Notes 15 and 17. capitalised. At the reporting date, land developers had commenced construction of assets that are transferred to the Corporation after the maintenance period contingent upon the release of Statements of Compliance by the Corporation. Due to the nature of the industry and the assets involved, a contingent asset amount cannot be reliably measured.
74 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
25. COMMITMENTS a. Capital commitments 2014–15 Highlights
2015 2014 $’000 $’000
Total capital expenditure contracted for at balance date but not provided for in the financial statements Payable:
Not later than one year 154,463 75,350 Year in Review
Later than one year but not later than five years 33,688 41,513
Greater than five years – 64
Total (GST inclusive) 188,151 116,927
The Corporation’s capital commitments include growth works and mains renewals for both water and sewer. Corporate Information b. Lease Commitments
Non-cancellable operating leases contracted for at balance date but not provided for in the financial statements Payable: Not later than one year 254 197
Later than one year but not later than five years 258 106
Later than five years 2 63 Annual Financial Report
Total (GST inclusive) 514 366
Non-cancellable operating lease receivable:
Not later than one year 535 776
Later than one year but not later than five years 892 1,088
Later than five years 1,722 1,871
Total (GST inclusive) 3,149 3,735 Additional Information
There are no commitments in relation to finance leases as the Corporation does not have any finance leases. c. Other commitments
Other expenditure commitments at balance date not provided for in the financial statements: Payable: Not later than one year 29,880 29,880 Disclosure Index Later than one year but not later than five years – 29,880
Total (GST inclusive) 29,880 59,760
Other commitments are represented by environmental commitments. The Corporation has a commitment to pay an environmental contribution to the Department of Environment, Land, Water and Planning of $29.9 million per annum until 30 June 2016.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 75 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
26. EX-GRATIA EXPENSES
2015 2014 $’000 $’000
Hardship write offs for customers in the Arrange and Save Program 822 1,704
Write offs for disconnected customer accounts greater than 180 days 9,547 2,142
Bankruptcies and liquidations 53 209
Minimum account write offs 71 94
Total (GST inclusive) 10,493 4,149
Part of the ex-gratia expenses above form part of bad and doubtful debts expense at Note 5.
27. ECONOMIC DEPENDENCY 28. EVENTS SUBSEQUENT TO BALANCE SHEET DATE
The normal trading activities of the Corporation On 8 April 2015, the Hon Lisa Neville MP, Minister for depend to a significant extent on the provision of Environment, Climate Change and Water, announced finance from the Treasury Corporation of Victoria. a review of all 135 Victorian water corporation board director positions. Expressions of interest were invited during April and May 2015. New Directors were appointed 1 October 2015.
76 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
29. CASH FLOW INFORMATION a. Reconciliation of net profit to net cash from operating activities 2014–15 Highlights For the purpose of the Cash Flow Statement. Cash includes cash at bank and on hand, which are used in the cash management function on a daily basis.
2015 2014 Note $’000 $’000
Net profit 50,792 45,599
Adjustments for non-cash items Year in Review
Depreciation / amortisation 5 94,294 86,009
Bad and doubtful debts 5 4,091 9,483
Write off / disposal of assets 5 4,184 4,730
Defined benefit superannuation plan expense 5 725 905 Corporate Information Net (gain) on disposal of non-current assets 5 (294) (23)
Impairment writedown 5 17 –
Value of works taken over from developers 4 (15,105) (11,490)
Changes in operating assets and liabilities
Increase in net deferred tax liabilities 22,249 20,363
(Increase) / decrease in other current assets (326) 5,427
Increase / (decrease) in interest creditors (269) 3,894 Annual Financial Report
Increase in provisions and unearned income 1,645 198
Decrease in payables (17,416) (15,940)
(Increase) / decrease in trade receivables 5,409 (58,574)
Decrease in GST receivable 682 165
Decrease in unfunded defined benefit superannuation plan asset (431) (459)
Net cash inflow from operating activities 150,247 90,287 Additional Information b. Reconciliation of cash
Cash and cash equivalents 8 360 345
Closing cash balance 360 345 c. Financing arrangements
The Corporation’s borrowings are made exclusively with the Treasury Corporation of Victoria in accordance with approvals from the Treasurer of Victoria. Refer Note 3. Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 77 STATUTORY CERTIFICATION
We certify that the attached Financial Statements of Yarra Valley Water Corporation have been prepared in accordance with Standing Directions 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements.
In our opinion, the information set out in the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and accompanying notes presents fairly the financial transactions during the year ended 30 June 2015 and financial position of the Corporation at 30 June 2015.
At the time of signing, we are not aware of any circumstance which would render any particulars included in the Financial Statements to be misleading or inaccurate.
We authorise the attached Financial Statements for issue dated at Melbourne on this 16th day of October 2015.
Susan E Friend Director
Patrick J McCafferty Managing Director
Kevin W Jones Chief Financial Officer
78 YARRA VALLEY WATER ANNUAL REPORT 2014–15 AUDITOR-GENERAL’S AUDIT REPORT AUDITOR-GENERAL’S AUDIT REPORT
80 YARRA VALLEY WATER ANNUAL REPORT 2014–15 ADDITIONAL INFORMATION 2014–15 PERFORMANCE REPORT
FINANCIAL PERFORMANCE INDICATORS
Variance to Variance Performance 2013-14 2014-15 2014-15 Prior Year to Target indicator Result Result Target % Notes % Notes
F1 Cash Interest Cover 1.95 times 2.40 times 1.83 times 23.1 1a 31.1 1b Cash flow from operations before net interest and tax payments / net interest payments
F2 Gearing Ratio 45.00% 44.94% 49.55% -0.1 -9.3 2b Total debt (including finance leases) / total assets *100
F3 Internal Financing Ratio 37.34% 65.01% 33.30% 74.1 3a 95.3 3b (Net operating cash flow – dividends) / capital expenditure * 100
F4 Current Ratio 0.50 0.51 0.32 2.0 59.4 4b (Current assets / current liabilities) excluding long-term employee provisions and revenue in advance
F5 Return on Assets 4.47% 4.42% 3.88% -1.1 13.9 5b Earnings before net interest and tax / average total assets *100
F6 Return on Equity 3.10% 3.24% 1.54% 4.5 6a 110.4 6b Net profit after tax / average total equity *100
F7 Earnings Before Interest, 27.54% 30.96% 28.83% 12.4 7a 7.4 Tax, Depreciation and Amortisation Earnings before interest, tax, depreciation and amortisation / total revenue *100
Notes
1a & 1b Favourable due to higher net operating cash flows largely from 5b Favourable due to higher earnings before interest and tax from additional water usage sales and developer related activity. additional revenue and savings in operating expenditure. 2b Favourable due to lower borrowings as a result of higher net 6a & 6b Favourable due to higher profit after tax from additional revenue, operating cash flows and lower capital payments. savings in operating expenditure and lower finance charges which 3a & 3b Favourable due to higher revenue, lower capital payments and are partially offset by higher depreciation expenditure resulting lower interest payments from reduced borrowings partially offset primarily from the 2013–14 infrastructure valuation. by higher dividend payments in 2014–15. 7a Favourable due to higher earnings before interest and tax due 4b Favourable due to lower short-term borrowings and lower to additional revenue and savings in operating expenditure. debtors have also been achieved as a result of improved debt collection activities.
82 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
WATER AND SEWERAGE SERVICE PERFORMANCE INDICATORS
Variance to Variance 2014–15 Highlights Performance 2013-14 2014-15 2014-15 Prior Year to Target indicator Result Result Target % Notes % Notes
WS1 Unplanned water supply 0.020% 0.007% 0.045% -65.0 8a -84.4 8b interruptions Number of customers receiving > 5 unplanned interruptions in the year
/ total number of water Year in Review (domestic and non-domestic) customers* 100
WS2 Interruption time 99.4 103.2 104.4 3.8 -1.1 Average duration of unplanned minutes minutes minutes water supply interruptions
WS3 Restoration of unplanned 97.0% 96.5% 96.3% -0.5 0.2 Corporate Information water supply Unplanned water supply interruptions restored within 5 hours / total unplanned water supply interruptions *100
SS1 Containment of sewer spills 99.95% 98.83% 97.70% -1.1 1.2 Sewer spills from reticulation
and branch sewers (priority Annual Financial Report 1 and 2) contained within 5 hours / total sewer spills from reticulation and branch sewers
SS2 Sewer spills interruptions1 91.3% 79.0% 96.8% -13.5 9a -18.4 9b Number of residential sewage customers affected by sewerage interruptions restored within 4 hours Additional Information
Notes
8a & 8b Favourable due to an overall drop in water interruptions resulting from a mild summer and having a targeted water mains renewal program. 9a & 9b Unfavourable due to new asset management system issues experienced by field crews which have been resolved and will not impact 2015–16 results.
Disclosure Index 1 The 2013–14 result has changed from what was reported in the 2013–14 Annual Report due to reporting errors. SS2 has decreased by 8.2%.
YARRA VALLEY WATER ANNUAL REPORT 2014–15 83 PERFORMANCE REPORT
CUSTOMER RESPONSIVENESS PERFORMANCE INDICATORS
Variance to Variance Performance 2013-14 2014-15 2014-15 Prior Year to Target indicator Result Result Target % Notes % Notes
CR1 Water quality complaints2 0.371 0.259 0.430 -30.2 10a -39.8 10b Number of complaints per 100 customers CR1.1 Colour 0.303 0.216 0.351 -28.7 10a -38.5 10b
CR1.2 Turbity 0.000 0.000 0.000 0.0 10a 0.0 10b
CR1.3 Taste & Odour 0.054 0.029 0.063 -46.3 10a -54.0 10b
CR1.4 Other 0.014 0.014 0.016 0.0 10a -12.5 10b
CR2 Sewerage service quality 0.000 0.001 0.010 n/a 11a -90.0 11b complaints Number of complaints per 100 customers CR3 Sewerage odour complaints2 0.021 0.028 0.030 33.3 12a -6.7 12b Number of complaints per 100 customers CR4 Billing complaints1 0.07 0.04 0.12 -42.9 13a -66.7 13b Number of complaints per 100 customers
ENVIRONMENTAL PERFORMANCE INDICATORS Variance to Variance Performance 2013-14 2014-15 2014-15 Prior Year to Target indicator Result Result Target % Notes % Notes
E1 Effluent re-use volume (end use) 28.5% 31.9% 28.8% 11.9 14a 10.8 14b
E1.1 Urban & Industrial 4.2% 4.5% 4.2% 7.1 14a 7.1 14b
E1.2 Agricultural 5.6% 6.9% 5.6% 23.2 14a 23.2 14b
E1.3 Environmental flows 0.0% 0.0% 0.0% 0.0 14a 0.0 14b
E1.4 Other uses 18.8% 20.5% 19.0% 9.0 14a 7.9 14b
E2 Total net CO2 emissions 0.0 0.0 0.0 0.0 0.0
Net tonnes CO2 equivalent
Notes 10a & 10b Favourable due to proactive water mains cleaning program and 14a & 14b Favourable due to Aurora Recycled Water Treatment Plant being proactive responses to Melbourne Water system changes. placed back into operation in February 2015 and increased customer 11a Unfavourable due to some minor issues experienced in reporting demand for the supply of recycled water due to a dry and extended systems between Yarra Valley Water and the maintenance services irrigation season. contractor. 11b Favourable due to lower complaint numbers due to the effectiveness 1 The 2013–14 result has changed from what was reported in the 2013–14 of the sewer house connection branch rehabilitation program. Annual Report due to reporting errors. CR4 has decreased by 0.07. 12a Unfavourable due to the installation of pressure sewers as part of 2 The 2013–14 result has changed from what was reported in the 2013–14 the backlog program and some build up of foreign material in the Annual Report due to re-audited ESC data. CR1 has increased by 0.3706 sewer which affected some sewer pumps. and CR3 has increased by 0.019. 12b Favourable due to proactive sewer inspection program. 13a & 13b Favourable due to significant improvement in the internal escalation process and the Customer Relations team offering a direct complaint line, which is promoted on our website and on customers’ bills.
84 YARRA VALLEY WATER ANNUAL REPORT 2014–15 PERFORMANCE REPORT Introduction
CERTIFICATION OF PERFORMANCE REPORT FOR 2014–15
We certify that the accompanying Performance Report of Yarra Valley Water Corporation in respect of the 2014–15 2014–15 Highlights financial year is presented fairly in accordance with the Financial Management Act 1994.
The Performance Report outlines the relevant performance indicators for the financial year as determined by the Minister for Environment, Climate Change and Water and as set out in the 2014–15 Corporate Plan, the actual and comparative results achieved for the financial year against predetermined performance targets and these indicators, and an explanation Year in Review of any significant variance between the actual results and performance targets and/or between the actual results in the current year and the previous year.
As at the 16th day of October 2015, we are not aware of any circumstances which would render any particulars in the Performance Report to be misleading or inaccurate. Corporate Information
Susan E Friend Director
Annual Financial Report
Patrick J McCafferty Managing Director Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 85 AUDITOR-GENERAL’S AUDIT REPORT
86 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction 2014–15 Highlights Year in Review Corporate Information Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 87 WATER CONSUMPTION AND DROUGHT RESPONSE
WATER CONSUMPTION REPORT 2014-15
Number of customers (as at 30 June 2015)
Residential customers 698,667
Non-residential customers 53,263
Total 751,930
Potable water volume (ML)1 Residential customers 104,464
Non-residential customers 28,255
(1) Total 132,719
Recycled wastewater volume (ML)
Residential customers 91
Non-residential customers 1,215
(2) Total 1,306
(1)+(2) Total consumption (ML) 134,025 Average annual consumption2 138,151
Non-revenue water (ML)
Leakage 8,553
Bursts 4,324
Other 2,738
(3) Total 15,615
(1)+(2)+(3) Total water all sources (ML) 149,640
1. Includes a small amount of unchlorinated water supplied directly from Aquaducts 2. Average customer usage calculated between years 2000–01 to 2014–15
88 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
RESIDENTIAL DEMAND – AVERAGE LITRES OF WATER PER CAPITA PER DAY 2014–15 Highlights 250 250 246 244 237 230
200 217 210 207 200 186 150 166 164 164 161 Year in Review 157 153 151 147
100
50 Corporate Information
0 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15
DROUGHT RESPONSE REPORT CORPORATE WATER CONSUMPTION Annual Financial Report
Metropolitan water retailers are required to prepare a The amounts in the table below represent consumption at Drought Response Plan with four levels of water restrictions Yarra Valley Water’s Lucknow Street, Mitcham office and not that control the use of potable water outdoors. at any treatment plants or other work sites.
During 2014–15 water storage levels were high and as such Total water consumption for 2014–15 4,617.88 kL there was no requirement for drought response measures. Consequently, Permanent Water Use Rules applied for the Number of FTE staff and contractors on site 540 whole of 2014–15. Average water use per employee Additional Information (kL per employee) 8.551 kL
Total office space 10,000m2
Average water use per m2 0.462 kL Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 89 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING
SUSTAINABLE WATER USE OTHER STATUTORY OBLIGATIONS
Water recycling Victorian Waterway Management Strategy
In 2014–15, we produced 11,495ML or above of recycled Yarra Valley Water strives to deliver its services within the water at our sewage treatment plants, of which 3,665ML, carrying capacity of nature and reducing our environmental or 31.9%, of the total was reused. This was slightly below footprint is a priority. our target of 28.8%. We connected 2,589 properties to Class A recycled water and constructed 20.5 km of To improve waterways health we: recycled water mains. •• Exceeded our Community Sewerage Program target, with 622 properties this year deciding to switch from poor Water recycling continues to be a key component of our performing septic tanks to modern reticulated sewerage integrated water cycle management servicing strategy for infrastructure. This reduces local pollution and improves the Northern Growth Corridor. This strategy is providing the quality of water in the Yarra River and its tributaries. recycled water to all homes and provides significant efficiency and environmental benefits for the community. Class A •• Continued to manage our nitrogen discharges to Port Phillip recycled water is provided to new homes via a third pipe Bay in accordance with our self-imposed nitrogen cap: 59 system for toilet flushing, garden watering and laundry use. tonnes of nitrogen was discharged in 2014–15 compared with our cap of 87 tonnes. SUSTAINABLE WATER USE To comply with river and aquifer health requirements as per our Statement of Obligations, Yarra Valley Water undertakes Water Quality regular sampling at each of our sewage treatment plants to ensure that our treatment complies with our Environment During 2014–15, we maintained our commitment to provide Protection Authority Victoria (EPAV) Corporate Licence safe, high-quality drinking water. This year we received 2.8 Requirements. complaints per 1,000 customers, the lowest ever number of water quality complaints recorded in the history of Yarra A summary of our sewage treatment plants’ performance is Valley Water. A combination of factors, including improved reported to the EPAV on an annual basis. Additionally, water management of operational changes; cleaning of 215km of quality and flow data relating to waterways is reported to water mains by ice pigging; and lower than average flow rates the Essential Services Commission, the National Pollutant in water mains during summer months preventing sediment Inventory and the Bureau of Meteorology. re-suspension, all contributed to this significant reduction in customer complaints. We also achieved 93% customer State Environment Protection Policy (Waters of Victoria) satisfaction with the overall quality of drinking water provided, an increase of 4% from the previous year. During 2014–15, two projects commenced construction and are due for completion in August 2015, Glenroy Branch WATER CONSERVATION Sewer and Merrilands sewage flow control. Both of these projects are required to prevent wastewater discharges to We continued to encourage our customers to maintain the environment from emergency relief structures during their Water Wise habits, to help protect the long-term rainfall events with less than a 1 in 5 year average recurrence security of our water supplies and reduce the cost of interval. Functional design for another two projects have also supply augmentations including the following: been completed, Camberwell Branch Sewer and Scotchmans Creek, and are scheduled for detailed design and construction •• processed 6,427 rebates under the Living Victoria Water in 2015–16. Rebate Program; •• offered businesses voluntary water management plans An investigation into inflow and infiltration was undertaken and small business grants; in the Croydon-Ringwood sewer catchment and is due for completion in July 2015. Unfortunately, the investigation •• distributed water efficient showerheads under our did not identify the extent of inflow sources that we were Showerhead Exchange Program. A total of 189,863, expecting to find. A trial is underway to install inflow have been issued since the beginning of the program; prevention devices in manhole lids where it is difficult to •• assisted 6,635 customers, since October 2009, in upgrading estimate the quantity of inflow. The benefit of these devices their toilets to the most efficient dual flush models under will be monitored in 2015–16. the Toilet Replacement Program; and A study with Melbourne Water, local Councils and the •• engaged over 120 schools within our service area, which Department of Environment, Land, Water and Planning on the now have integrated material from ‘Water – Learn It! Live Merri Creek waterway also commenced. The objective of the It!’ initiatives into water efficiency curriculum units. Since study is to determine the prioritisation of investment from its inception, 1,080 classroom presentations have been stakeholders to best protect the values in the Merri Creek completed to more than 21,000 primary school children waterway and is due for completion in early 2015–16. within our district.
90 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
GREENHOUSE GAS EMISSIONS AND NET ENERGY CONSUMPTION
The Greenhouse Gas (GHG) reductions brought about by our showerhead exchange program continued to offset our own GHG emissions, ensuring that we had no net GHG emissions for the seventh year in a row. We are also working with our business 2014–15 Highlights partners and suppliers to encourage them to reduce their emissions each year.
GHG (Tonnes of CO2e) 2014-15 2013-14 2012-13 2011-12 2010-11
Water treatment and pumping 7,660 7,399 5,296 5,385 5,457
Wastewater treatment 18,206 17,709 17,204 16,153 15,584 Year in Review
Wastewater pumping 4,469 4,399 3,124 3,107 2,567
Office use 1,927 2,158 2,823 2,940 3,155
Vehicle fleet 993 1,051 1,065 1,042 1,376
Total 33,261 32,716 29,512 28,627 28,138 Corporate Information Offsets purchased 0 0 274 272 283
Other offsets† 33,261 32,716 29,238 28,355 27,855
† We offset our greenhouse gas emissions as a result of the Showerhead Exchange Program, since water efficient showerheads reduce the amount of energy required to heat water.
GHG (MJ) 2014-15 2013-14 2012-13 2011-12 2010-11
Water treatment and pumping 23,369,492 22,766,154 16,021,513 16,021,488 16,102,623 Annual Financial Report
Wastewater treatment 55,543,729 54,489,231 52,045,714 48,058,512 45,985,574
Wastewater pumping 13,634,237 13,535,385 9,450,756 9,243,967 7,574,754
Office use 5,878,983 6,640,000 8,540,168 8,747,107 9,309,836
Vehicle fleet 3,029,492 3,233,846 3,221,849 3,100,165 4,060,328
Total 101,455,932 100,664,615 89,280,000 85,171,240 83,033,115
Conversion factor of 1 kWh = 3.6 Megajoules (MJ) used. Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 91 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING
GREENHOUSE GAS EMISSIONS AND NET ENERGY CONSUMPTION
Energy Use (MJ Per ML) 2014-15 2013-14 2012-13 2011-12 2010-11
Water treatment Bulk water volume* and pumping (ML) 132,384 131,916 132,997 120,489 113,905
Energy Use (MJ/ML) 176.5 172.6 120.5 133.0 141.4
Wastewater Wastewater volume Treatment treated at Yarra Valley Water STP 10,263 10,323 10,073 10,560 10,698 (ML) Energy Use (MJ/ML) 5,412.0 5,278.5 5166.9 4551.0 4298.5
Wastewater Wastewater Volume Pumping transferred to Melbourne Water 119,995 117,281 118,078 123,493 113,696 (ML) Energy Use (MJ/ML) 104.7 106.1 73.7 69.0 60.9
Energy figures only include Yarra Valley Water usage (exclude Melbourne Water treatment and transfer usage) * Metered water supplied to Yarra Valley Water customers
2014-15 2013-14 Community service obligations $’000 $’000
Provision of concessions to pensioners 46,903 45,707
Rebates paid to not-for-profit organisations under the Water and Sewerage Rebate Scheme 1,279 1,243
Utility Relief Grant payments 901 827
Water concessions for life support machines - Haemodialysis 20 23
Total 49,103 47,800
92 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Introduction
PROVISION OF CONCESSIONS UTILITY RELIEF TO PENSIONERS GRANTS SCHEME
Customers who hold either a Pension Concession Card, The Utility Relief Grants Scheme provides assistance a Gold Repatriation Health Care Card for All Conditions for residential customers unable to pay their utility 2014–15 Highlights or a Health Care Card are entitled to pay a concessionary accounts due to a temporary financial crisis. Customers amount instead of the full balance outstanding on their need to demonstrate that unexpected hardship has left accounts. When a customer pays this lesser amount, them seriously short of money so that they cannot pay the difference is billed to and paid by the Department their utility account without assistance. of Health and Human Services (DHHS). WATER CONCESSIONS FOR LIFE
REBATES PAID TO NOT-FOR-PROFIT SUPPORT MACHINES – HAEMODIALYSIS Year in Review ORGANISATIONS UNDER THE WATER AND SEWERAGE REBATE SCHEME The State Government of Victoria provides a rebate for customers required to use a dialysis/life support Customers who are not-for-profit entities are entitled to machine at home, to compensate these customers pay a concessionary amount instead of the full balance for water usage and sewage disposal charges relating outstanding on their accounts. When a customer pays this to the use of such a machine. lesser amount, the difference is billed to and paid by the Corporate Information The rebate amount is determined by the DHHS based State Revenue Office. on the estimated annual water usage of a dialysis machine (168 kL). This rebate is in addition to any other pension or concession entitlements. Annual Financial Report Additional Information Disclosure Index
YARRA VALLEY WATER ANNUAL REPORT 2014–15 93 ANNUAL REPORTING OF MAJOR NON-RESIDENTIAL WATER USES
REQUIREMENT 1: NUMBER OF CUSTOMERS WHO FALL WITHIN EACH RANGE
(Section 122ZJ of the Water Act 1989)
TABLE 1: CUSTOMER BY VOLUME RANGE
Volumetric Range – MLs per year Number of customers
Equal to or greater than 200ML and less than 300 ML 2
Equal to or greater than 300ML and less than 400 ML 3
Equal to or greater than 400ML and less than 500 ML 0
Equal to or greater than 500ML and less than 750 ML 0
Equal to or greater than 750ML and less than 1,000 ML 0
Greater than 1,000 ML 2
Total number of customers 7
REQUIREMENT 2: NAMING OF MAJOR WATER USERS AND WHETHER OR NOT THEY PARTICIPATE IN WATER CONSERVATION PROGRAMS
(Section 122ZJ of the Water Act 1989)
TABLE 2: NAMES OF MAJOR CUSTOMERS AND THEIR PARTICIPATION IN WATER CONSERVATION PROGRAMS
Name of customer Participation in water conservation programs
Continental Poultry Pty Ltd Yes
CSL Behring Pty Ltd Yes
La Trobe University Yes
Monash University Yes
Asaleo Care Ltd Yes
Visy Paper Pty Ltd (Coolaroo) Yes
Visy Paper Pty Ltd (Reservoir) Yes
REQUIREMENT 3. OTHER WATER EFFICIENCY REPORTING
To build business knowledge and support large water users to adopt local water solutions we coordinate and facilitate a range of detailed workshops and seminars, issue informative newsletters, undertake site visits to various businesses (exploring process and procedural improvements), and document case studies that share the learnings of others achievements in this area. Furthermore, all large water users have access to a national benchmarking website to compare their water consumption with others in similar industries.
94 YARRA VALLEY WATER ANNUAL REPORT 2014–15 BULK ENTITLEMENTS REPORT Introduction
Prior to the July 2014 bulk water reforms, the three Effective from 1 July 2014, the bulk entitlements held metropolitan Retail Water Corporations (the Retail by the Retail Corporations to the water resources 2014–15 Highlights Corporations), each held bulk entitlements to the water mentioned above (with the exception of the Victorian resources of the Thomson River, Yarra River, Silver and Desalination Project, River Murray and Goulburn System) Wallaby Creeks (Goulburn River Basin), Tarago and Bunyip were revoked, and replaced with a single delivery entitlement Rivers and the Victorian Desalination Project. In addition, for the Greater Yarra – Thomson system. From 1 July 2014, the Retail Corporations held Bulk Entitlements in the River Yarra Valley Water holds bulk entitlements to the water Murray and Goulburn System of up to 75,000 ML annually resources of the Greater Yarra River – Thomson Basin, of water savings, as a result of the Retail Corporations’ Victorian Desalination Project, River Murray and investment in the Goulburn-Murray Water Connections Goulburn System. Project. The entitlements had been established as a Year in Review collective “pool” and, as such, were jointly managed through the Bulk Entitlement Management Committee.
Greater Yarra System – Victorian
Thomson Desalination Goulburn River Corporate Information Reporting obligation River Pool1,2 Project4 System 7, 8 Murray 14, 15
The volume of water taken by Clause 16.1 (a) Clause 13.1 (a) Clause 14.1 (b) 0 ML Yarra Valley Water in 2014–15 148,336 ML 0 ML5 6 ML9, 10
Annual water allocation made Clause 16.1 (b) N/A Clause 14.1 (c) Clause 11.1 (a) available to the Corporation 126,394 ML 7,033 ML 4,756 ML
11 16 Share of storage volume at Clause 16.1 (b) N/A 8,149 ML 4,005 ML Annual Financial Report 30 June 2015 for carryover 255,405 ML
Compliance with the entitlement Clause 16.1 (c) N/A N/A N/A volume Yes
Any assignment of water allocation Clause 16.1 (d) Clause 13.1 (b) Clause 14.1 (d)12 Clause 11.1 (b)17 or temporary/permanent transfers Nil Nil Net 7,033 ML13 Net 4,756 ML18 of the bulk entitlement Clause 14.1 (e) Clause 11.1 (c) Nil Nil
Approval, amendment and implementation Clause 16.1 (e) N/A N/A N/A Additional Information of approved metering program Continuing3
Any amendment to the bulk entitlement Clause 16.1 (f) Clause 13.1 (c) Clause 14.1 (f) Clause 11.1 (d) Nil Nil Nil Yes
Any new bulk entitlement granted Clause 16.1 (g) Clause 13.1 (d) Nil Nil to Yarra Valley Water Nil Nil
Compliance with the bulk entitlement N/A Clause 13.1 (e) N/A N/A Continued 6
compliance Disclosure Index
Any failures to comply with any Clause 16.1 (h) Clause 13.1 (f) Clause 14.1 (g) Clause 11.1 (e) provision of the bulk entitlement Nil Nil Nil Nil
Any difficulty experienced in complying Clause 16.1 (i) Clause 13.1 (g) Clause 14.1 (h) Clause 11.1 (f) with the bulk entitlement and if so, Nil Nil Nil Nil any remedial action taken or proposed
YARRA VALLEY WATER ANNUAL REPORT 2014–15 95 BULK ENTITLEMENTS REPORT
NOTES
Greater Yarra System – Thomson River Pool 11. Yarra Valley Water’s commencement volume on 1 July 2014 was 8,154.7 ML following the disaggregation 1. Yarra Valley Water holds the following Bulk Entitlement of the joint pooled arrangement for the Melbourne to the Greater Yarra System – Thomson River Pool Retail Corporations. • Bulk Entitlement (Greater Yarra System – 12. Yarra Valley Water has in place water management Thomson River Pool – Yarra Valley Water) strategies to manage water allocation holdings in the Order 2014 – BEE072377 River Murray and Goulburn System to maximise the 2. Yarra Valley Water’s bulk entitlement amounts value of the resources held to their customers and to 223,271 ML. minimise the risk of spilling water allocation. These 3. Metering programs for this bulk entitlement are strategies include the transfer of allocations between continually maintained and reviewed through the Bulk Bulk Entitlement Allocation Accounts and trading Water Supply Agreement between Melbourne Water water allocations. and Yarra Valley Water and Melbourne Water’s System 13. 85.46 ML of water allocation was traded in from Yarra Management Rules. Valley Water’s River Murray System bulk entitlement and is netted off against the trade out volume as it Victorian Desalination Project is included in the River Murray volume. 4. Yarra Valley Water holds the following Bulk Entitlement to the Victorian Desalination Project River Murray • Bulk Entitlement (Desalinated Water – Yarra Valley 13. Yarra Valley Water holds the following Bulk Entitlements Water) Order 2014 – BEE050816 to the River Murray 5. On 1 April 2014, the then Minister for Water made • Bulk Entitlement (River Murray – Yarra Valley Water) a zero desalinated water order for the 2014–15 year. Order 2012 – BEE072242 6. Compliance with the Desalinated Water long-term 14. Yarra Valley Water’s Bulk Entitlements in the River average diversion limit of 56,951 ML is assessed using Murray provide for the progressive annual assignment a 5-year rolling average diversion. of entitlement volumes as water saving works and measures from Goulburn-Murray Water’s Connections Goulburn System Project are completed. The 2014–15 entitlement volume 7. Yarra Valley Water holds the following Bulk Entitlement was 6,906.7 ML (3,309.4 ML in Zone 6 and 3,597.3 ML in to the Goulburn System Zone 7). • Bulk Entitlement (Goulburn System – Yarra Valley 15. Yarra Valley Water’s commencement volume on 1 July Water) Order 2012 – BEE072239 2014 was 4,005.2 ML (2,068.1 in Zone 6 and 1937.1 ML in Zone 7) following the disaggregation of the joint pooled 8. Yarra Valley Water’s Bulk Entitlements in the Goulburn arrangement for the Melbourne Retail Corporations. At System provide for the progressive annual assignment 30 June 2015, Yarra Valley Water held 2,068.1 ML in of entitlement volumes as water saving works and Zone 6 (Vic Murray – Dartmouth to Barmah) and 1,937.1 measures from Goulburn-Murray Water ’s Connections ML in Zone 7 (Vic Murray – Barmah to SA Border) Project are completed. The 2014–15 entitlement volume was 10,097.3 ML. 16. Yarra Valley Water has in place water management strategies to manage water allocations holdings in 9. 5.8 ML of the bulk entitlement was used to maintain the the River Murray and Goulburn System to maximise operational capacity of the North-South Pipeline and the value of the resources held to their customers and keep the pipeline charged for fire-fighting purposes, as minimise the risk of spilling water allocation. These allowed under clause 6.1 (b) of the Yarra Valley Water’s strategies include the transfer of allocations between Statement of Obligations (System Management). Bulk Entitlement Allocation Accounts and trading water 10. Compliance with the combined annual diversion limit allocations. of 75,000 ML for the holders of Bulk Entitlement 17. 1,150 ML of water allocation was traded in from Yarra (Goulburn System – City West Water) Order 2012, Bulk Valley Water’s Goulburn System Murray bulk entitlement Entitlement (Goulburn System – South East Water) and is netted off against the trade out volume as it is Order 2012 and Bulk Entitlement (Goulburn System – included in the Goulburn System volume. Yarra Valley Water) Order 2012 is assessed using the actual measured annual diversion. Diversions are subject to clause 6.1 of Yarra Valley Water’s Statement of Obligations (System Management).
96 YARRA VALLEY WATER ANNUAL REPORT 2014–15 DISCLOSURE INDEX Introduction
INDEX
Yarra Valley Water’s 2014–15 Annual Report is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of Yarra Valley Water’s compliance with 2014–15 Highlights statutory disclosure requirements.
LEGISLATION DISCLOSURE REQUIREMENT PAGE
Report of Operations
Charter and purpose Year in Review FRD 22F Manner of establishment and the relevant Minister 2 FRD 22F Objectives, functions, powers and duties 2–17 FRD 22F Nature and range of services provided 2–3 Management and Structure FRD 22F Organisational structure 21 Corporate Information FRD 22F Directors of the Board 22–26 Financial and other information FRD 10 Disclosure Index 97–98 FRD 22F Summary of financial results for the year 18–20 FRD 22F, SD 4.2(k) Operational and budgetary objectives, and performance against objectives 4–20 FRD 22F Significant changes or factors affecting performance 4–20 FRD 22F Employment and conduct principles 28 FRD 22F Subsequent Events 76 Annual Financial Report FRD 22F Application and operation of Freedom of Information Act 1982 29 FRD 22F Application and operation of Protected Disclosure Act 2012 29 FRD 22F Statement of National Competition Policy 29 FRD 22F Statement of availability of other information 30 FRD 22F Environmental performance 14, 90–92 FRD 22F Building and maintenance provisions of the Building Act 1993 29 FRD 25B Victorian Industry Participation Policy disclosures 29 FRD 27C Presentation and Reporting of Performance Information 81–87
FRD 30A Standard Requirements for the design and print of annual reports All Additional Information SD 4.5.5 Risk management compliance attestation 31 SD 4.2(g) General information requirements 2–30 SD 4.2(j) Sign-off requirements 4 Ministerial reporting directions MRD 01 Performance Reporting 81–87 MRD 02 Reporting on water consumption and drought response 88–89 MRD 03 Environmental and social sustainability reporting 90–93
MRD 04 Disclosure of information on bulk entitlements, transfers of water entitlements, 95–96 Disclosure Index allocations and licences, irrigation water usage and licence requirements MRD 05 Annual reporting of major non-residential water users 94
YARRA VALLEY WATER ANNUAL REPORT 2014–15 97 DISCLOSURE INDEX
LEGISLATION DISCLOSURE REQUIREMENT PAGE
Financial Report
Financial statements required under Part 7 of the Financial Management Act 1994 SD 4.2(b) Statement of Comprehensive Income 36 SD 4.2(b) Balance Sheet 37 SD 4.2(b) Statement of Changes in Equity 38 SD 4.2(b) Cash Flow Statement 39 SD 4.2(b) Notes to the Financial Statements 40–77 SD 4.2(c) Compliance with applicable Australian Accounting Standards 78 and other authoritative pronouncements SD 4.2(c) Compliance with Ministerial Directions 78 SD 4.2(c) Accountable Officer’s declaration 78 SD 4.2(d) Rounding of amounts 40
Other disclosures as required by FRDs in notes to the financial statements FRD 03A Accounting for dividends 45–55 FRD 07A Early adoption of authoritative accounting pronouncements 2 FRD 17B Long Service Leave wage inflation and discount rates 44, 45 FRD 21B Disclosures of Responsible Persons, Executive Officers and other Personnel 72–74 in the Financial Report FRD 103E Non-current physical assets 42–43, 58–62 FRD 105A Borrowing costs 45, 48–49 FRD 106 Impairment of Assets 44 FRD 109 Intangible Assets 43 FRD 110 Cash flow statements 39, 77 FRD 119A Transfers through contributed capital 38, 68 FRD 120H Accounting and reporting pronouncements applicable to the 2014–15 reporting period 2
LEGISLATION
Freedom of Information Act 1982 Building Act 1993 Protected Disclosure Act 2012 Victorian Industry Participation Policy Act 2003 Financial Management Act 1994
98 YARRA VALLEY WATER ANNUAL REPORT 2014–15 Yarra Valley Water ABN 93 066 902 501
Lucknow Street Mitcham Victoria 3132 DX 13204
Telephone: 03 9872 1699 Fax: 03 9872 1353 www.yvw.com.au
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ISSN 2202-6304 (Print) ISSN 2202-6312 (Online)