Leading with local solutions Annual Report 2011/12 Year in review Western Water
Established under the Water Act 1989, Western Region Water Corporation (trading as Western Water) is one of Victoria’s thirteen regional urban Our vision, values water corporations. During the reporting period, 1 July 2011 to 30 June 2012, the relevant Minister and pathways was Peter Walsh MLA, Minister for Water. Western Water’s vision reflects principles Western Water provides water, recycled water and and practices of sustainability that are sewerage services to 57,000 properties, with a embedded throughout the corporation. population of 155,000, across a region of 3,000 This vision is based on the belief that all square kilometres to the north west of Melbourne. people, as individuals and communities, Western Water’s service area is one of the fastest must play a part in protecting and preserving growing regions in Victoria. Housing development our finite water resources. in Melton and Sunbury has contributed to Our vision maintains a strong community population growth of 3.2% across the service area focus. Our values embody how we will act, in the past year. and define our behaviours. Our pathways Western Water is responsible to the Minister for drive strategic and corporate planning, Water via the Department of Sustainability and focussing the whole organisation on building Environment, particularly the Water Industry an economically, socially and environmentally Division. The Department of Treasury and Finance sustainable future. also has a shareholder governance role. Our Vision The Department of Health sets and supervises To be a leading service provider working with water quality standards, while the Environment our community towards a sustainable future Protection Authority governs environmental standards, particularly for wastewater discharge, Our Values recycled water and biosolids management. Commitment accountability The Essential Services Commission, the Victorian integrity sustainability Government’s economic regulator for essential Fairness inclusiveness utility services, also regulates Western Water prices, service standards and market conduct. leadership The Energy and Water Ombudsman Victoria Our Pathways receives, investigates and resolves enquiries and complaints against electricity and water suppliers To drive an environmentally across Victoria. sustainable future To actively manage growth To be a valued and innovative service provider as judged by our customers and the wider community
i Western Water ANNUAL REPORT 2011/12 LANCEFIELD Shire of Mitchell Lancefield Reservoir
Western Water Year in review Garden Hut
Reservoir Deep
Service Area Shire of Macedon Ranges River ROMSEY Creek Campaspe WOODEND Reservoir Romsey Reservoir Shire of Hepburn MT MACEDON
MACEDON Riddells RIDDELLS CREEK Campaspe NEW GISBORNE Rosslynne Creek Reservoir
Jacksons Jacksons Creek Creek GISBORNE City of Hume
Lerderderg SUNBURY
Creek
Deep
Creek
Shire of Moorabool COIMADAI Pykes Creek TOOLERN VALE Reservoir Djerriwarrh River Reservoir Creek MYRNIONG Merrimu DIGGERS REST Reservoir BULLA
Werribee Creek Creek LONG FOREST Shire of Melton
Toolern BACCHUS MARSH Pyrites
Djerriwarrh River MELTON
ROCKBANK Melton Reservoir
Legend
Waterway, reservoir or dam
Western Water service area
Municipal boundary
Water Filtration Plant City of Wyndham Recycled Water Plant Shire of Golden Plains
Farewell John Wilkinson Over this time, Western Water grew from a small regional water business to a significant player in the industry. In July 2012, Western Water farewelled Managing Director John John leaves as one of the water industry’s most respected Wilkinson after ten years at the helm. leaders. The Board and staff at Western Water would like to thank him for his years of dedicated service and wish him all Under his decade of leadership, the best in his future endeavours. John successfully managed the significant challenge of ensuring John is replaced by Neil Brennan who is well known in the a secure water supply for the region region - both as a local resident and as the original Chief in a time of severe drought and Executive Officer for Western Water, when it was created in strong population growth. 1995. Neil has been Managing Director of Central Highlands Water for the past 14 years.
Leading with local solutions 1 Year in review Contents
Section 1 Year in Review 3
- Highlights 3 - Business at a glance 3 - Foreword from the Managing Director and Chair 4
Water consumption and drought response 6
Environmental sustainability 8 - Sustainable water use 8 - Other statutory obligations 11 - Greenhouse gas emissions 12
Social sustainability 13 - Service delivery 13 - Customer service 14
Section 2 Governance and organisational structure 16
- Organisational structure 16
- Board 17
Section 3 Human resources 20
- Workforce data 21
Section 4 Capital works & other disclosures 22
- Capital works 22 - Other disclosures 24
Section 5 Performance report 26
- Auditor-General’s report on the performance report 30
Section 6 Financial report 32
- Summary 32 - Understanding the financial report 36 - Financial report contents 37 - Notes to and forming part of the financial report 42 - Auditor-General's report on the financial report 78
Appendices 80
1. disclosure index 80 2. Bulk entitlements report 82 3. Global reporting initiative index 85
Glossary 86
Annual report index 87
2 Western Water ANNUAL REPORT 2011/12 SECTION 1 Business at a Glance Year in review
Year in Review Properties FY11 FY12
Serviced assessments 55,383 57,026 (including vacant land) Serviced assessments 2,818 2,953 Highlights (vacant land) Water Supply Safe delivery of 11,260 million litres Connected water customers 52,565 54,073 of drinking water - Residential 49,571 51,123 Strong rainfall resulting in major local - Non-residential 2,994 2,950* reservoirs exceeding 70% capacity Water consumption (ML) 10,251 11,260 - Residential consumption (ML) 7,846 8,634 Completed construction of infrastructure - Non-residential 1,511 1,673 for Toolern including water, sewer consumption (ML) and recycled water mains - Water losses (ML) 894 953 Delivered new Water Supply Demand Water mains (km)** 1,804 1,855 Strategy Water filtration plants 7 7 Chlorination plants 14 14 Commenced construction of $5.5 million Gisborne Recycled Water Scheme Sewer Service
Completed $1.8 million Romsey Borefield Serviced sewer customers 49,131 50,796 Connected sewer customers 46,628 48,138 Carbon Neutral certification for Class A Sewage treated (ML) 8,442 8,211 Recycled Water Plant in Melton Sewer mains (km) 1,120 1,149 Customer satisfaction reaches 91% Recycled Water Gold Award at Australasian Supply Reporting Awards Recycled water plants 7 7 Inaugural grants programs for schools, Recycled water produced (ML) 7,992 7,544 community and environmental groups Percentage reused 51% 56% Recycled water mains 102 118 - classes A, B & C (km)
* Non-residential numbers decreased due to data record improvements brought about by the new billing system
** Total water mains includes 55 km Class A recycled Financial Summary water mains
Net pre-tax profit of $5.2 million Developer revenue of $21.2 million Capital expenditure of $27.9 million Debt level now $149 million
Leading with local solutions 3 Environmental sustainability
Year in review Foreword from the Western Water’s commitment to the environment begins with making the most of local water supplies and alternative sources. Managing Director However, it extends well beyond water supply considerations with efforts focussing on environmental enhancement, greenhouse gas and Chairman reduction and driving the reuse of recycled water and biosolids. A significant environmental highlight this year was Western Water’s Class A Recycled Water Plant in Melton being awarded official Carbon Neutral certification – a first for the water industry. Western Water’s 2011/12 Annual Report has been prepared at a Economic sustainability time when significant challenges face the Victorian water sector in general, and Western Water in particular. Major issues include fair, Western Water’s financial position remains strong with an overall sustainable water pricing, making the most of all water sources, surplus pre-tax of $5.2 million in 2011/12 which includes developer and delivering real customer value; all in the context of a highly asset and cash contributions of $21 million. The organisation’s variable climate and unprecedented population growth. debt level has increased to $149 million, which is in line with the Essential Services Commission’s pricing principles. The water supply business of the future must be flexible and innovative if it is to provide a service that meets the changing Despite water restrictions easing to Stage 1 in December 2011, expectations of our major stakeholders – our customers, the per capita water consumption in Western Water’s region remains environment, and the Government. at low levels. This continues to impact forecast revenues. In addition, prices must continue to rise to fund the significant capital For this reason, our focus during 2011/12 has been on addressing investment required during the next Water Plan period to manage challenges directly and strategically to ensure Western Water is growth and ensure secure water supplies into the future. The prepared for growth whilst retaining our strong commitment to question of how to fund growth without overburdening existing environmental, economic and social sustainability. customers is a key consideration for the next Water Plan. This strategic approach provided the foundation for the Social sustainability development of Western Water’s Water Plan 2013-2018. Informed by a comprehensive Growth Strategy and renewed Water Supply Western Water’s strategic approach is underpinned by the Demand Strategy, the Plan is currently subject to an unparalleled, recognition that people are integral to future success. We are detailed level of community consultation and will be finalised early delighted with the current high levels of customer satisfaction in the next reporting period. and we will continue to focus on improving customer value and delivering strong social performance. To this end, Western Water’s Integrated water cycle management Corporate Social Responsibility and Community Engagement Strategies were implemented during the reporting period. Integrated water cycle management (IWCM) is the core approach through which we will achieve the strategic vision for Western We would like to take this opportunity to thank the workforce Water as it will drive greater customer value, water supply for their dedication and professionalism. We would also like to security and financial security. acknowledge our customers and our community advisory network whose input will enable us to provide a thriving, viable water The new Water Supply Demand Strategy is a product of the service over the coming years. Finally, we would like to thank IWCM approach. It first optimises the use of local water supplies, the Board for their outstanding commitment and leadership. then explores opportunities for alternate water sources. The strategy will preserve precious drinking water supplies, and ensure water supply security for the next 50 years.
Recycled water remains the major alternate water source in the region. We supply Class A recycled water to new housing estates with 491 properties now connected in Eynesbury and the infrastructure in place for a further 20,000 connections at the new suburb of Toolern.
Toolern will also be home to our first stormwater capture and reuse project. Our aim is to create Victoria’s first water neutral suburb, located in one of the lowest rainfall areas of the state.
4 Western Water ANNUAL REPORT 2011/12 The year ahead
The delivery of high quality drinking water, recycled water and Year in review sewerage services to meet the needs of the community will always be Western Water’s core focus. The challenges we face today and in the future are being met and will continue to be met through strategic planning utilising an integrated water cycle management approach, a focus on the customer and a strong commitment to sustainability on all fronts.
Western Water’s Annual Report clearly demonstrates our commitment to these goals and meeting the challenges of the future.
Underscoring this commitment, we have again reported to Application Level C of the Global Reporting Initiative (GRI).
In accordance with the Financial Management Act 1994, we are pleased to present Western Water’s Annual Report for the year ending 30 June 2012. It is compliant with all statutory reporting requirements.
Managing Director, John Wilkinson, and Chairman, Terry Larkins. John Wilkinson Managing Director
Terry Larkins Chairman
6 July 2012
Leading with local solutions 5 Year in review Water consumption & drought response
Water consumption During 2011/12, Western Water supplied 11,260 million litres of drinking water to the service region. This increase in consumption of 9.8% over last year is the combined result of strong regional population growth of 3.2% and increased per capita use due to less severe water restrictions.
Customer long term commitment to making the most of water supplies remains evident. While the region’s population has grown by over 38% in the past ten years, water consumption has declined by 22%.
Table 1: Regional consumption and population – 10 years
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Consumption (ML) 14,432 11,351 11,813 12,891 11,601 10,730 10,719 10,592 10,251 11,260 Population 112,226 119,775 123,600 128,758 131,312 134,810 139,730 144,948 150,664 155,431
Reservoir levels Western Water’s service area has now experienced two years of strong rainfall after more than a decade of drought. Local reservoirs have recovered, reducing the need to source as much water from Melbourne’s supply system.
In 2011/12, less than half (43%) of all drinking water supplied was sourced from outside the region’s local catchments, compared to 74% last year and as much as 95% in prior years.
Table 2: Major reservoir levels (% capacity) - 10 years
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Rosslynne Reservoir 10% 6% 14% 7% 4% 3% 3% 5% 66% 72% Merrimu Reservoir 14% 7% 22% 17% 13% 13% 10% 9% 85% 78%
Consumption by district Over 80% of the 11,260 million litres of water consumed in the region occurs in the two major areas – Melton and Sunbury/Macedon Ranges. Melton is consuming an increasing proportion of the region’s water, a result of high population growth in the town.
Table 3: Water consumption by district
Bacchus Marsh Sunbury / Melton Romsey / Total Macedon Ranges Lancefield
Residential water customers 6,981 22,033 19,845 2,264 51,123 Residential water consumption (ML) 1,287 3,408 3,604 335 8,634 Residential per capita consumption 165 139 163 133 152 (litres/person/day) Non-residential water customers 473 1,420 894 163 2,950 Non-residential water consumption (ML) 249 660 699 65 1,673 Water losses (ML) 142 376 398 37 953 Non-revenue water (ML) 158 420 444 41 1,063 Total annual consumption (ML) 1,678 4,444 4,701 437 11,260 Average annual consumption (7 years)* 1,621 4,725 4,308 496 11,150 (ML)
* Average calculated for the seven financial years to 30 June 2012
6 Western Water ANNUAL REPORT 2011/12 Water losses Table 5: Major customers and their participation in water efficiency activities Addressing water losses is a key component of Western Water’s Year in review strategic direction to guarantee future supply through the Name of customer Information as to customers participation in identification and implementation of sustainable, local integrated water conservation program water cycle management solutions. ABMT Textiles Completed a trial on the use of recycled In 2011/12, water losses were at 8.4% of total consumption, water in the fabric dyeing process. Having continuing a trend of improvement over many years. Reductions found it feasible to use recycled water during the reporting period were the result of: for this purpose, ABMT is now making • continuation of the Water Meter Replacement Program progress to include recycled water in to ensure accuracy of customer meters (replacing faulty their production process. or old meters as well as those out of calibration) Saizeriya Completed an audit to identify possible • ongoing rollout of the EasyFill system for water carters, Australia Pty Ltd water efficiencies and now have further an automated water accounting system to better track opportunities to explore in the coming year. water extracted from the supply system • improved analysis of consumption data via Western Water’s new billing system. Corporate water consumption Corporate water consumption was 374,000 litres during the With water loss levels this low, it is increasingly difficult to identify reporting period, down on last year’s total despite increasing opportunities to make further savings. Nonetheless, in the coming staff numbers. This result is based on water used at Western year we aim to use latest technology and practices to improve Water’s Sunbury administration office. It does not include system monitoring and identify sub-surface losses from pipes. water consumption from any other sites including depots Major non-residential water users or treatment plants. Western Water has two customers classified as major non- Table 6: Office based water consumption – 5 years residential water users for 2011/12. Both consumed between 50 and 100 million litres. 2007/08 2008/09 2009/10 2010/11 2011/12
Table 4: Customer by volume range Water consumption 326.0 417.1 318.0 382.0 374.0 (kL) Volumetric range – ML per year No. customers Full time equivalent 84 87 89 95 106 Equal to or greater than 50ML and 2 (FTE) staff less than 100ML Equal to or greater than 100ML and 0 Because the water meter at the Sunbury office is shared with other less than 200ML tenants in the building, corporate water consumption is calculated Greater than 200ML 0 on the proportion of Western Water staff in the building. Five years Total no. customers 2 of water consumption data is now available for this site. At other sites, Western Water conserves drinking water supplies The following table sets out the names of the major customers by using recycled water to wash fleet vehicles, washdown of and how they have participated in water efficiency activities recycled water plants, flushing and other sewerage system during the reporting period. maintenance tasks.
Leading with local solutions 7 Bulk entitlements
Year in review Western Water has 10 bulk entitlements which provide rights Environmental to use and supply water. Bulk entitlement agreements specify rules regarding the timing, location, type and amount of water sustainability that can be taken from streams, reservoirs and headworks.
Much of the local water sourced for the region is supplied through a bulk water agreement with Southern Rural Water (SRW) who manage the region’s two major reservoirs: Merrimu Reservoir, Sustainable water use near Bacchus Marsh, and Rosslynne Reservoir, near Gisborne. Agreements also exist for a number of smaller local storages Water conservation and reservoirs. Residential per capita usage increased to 153 litres per day in Western Water also has a bulk entitlement with Melbourne Water 2011/12. While still very low usage levels, this increase reflects the to access water from the Melbourne Headworks system. This impact on customer behaviour of less severe water restrictions as entitlement was critical during the recent drought and continues well as higher rainfall and reservoir levels in the past two years. to provide a significant proportion of drinking water supplied. Table 7: Residential water consumption per capita per day – 5 years Western Water’s Bulk Entitlements Report is contained in 2007/08 2008/09 2009/10 2010/11 2011/12 Appendix 2. It provides details about water sourced in compliance with all 10 bulk entitlements. Water consumption 164 159 149 143 153 per person per day Drought response (litres) Western Water’s Drought Response Plan By-Law was invoked during the year through the change to Stage 1 Water Restrictions in December 2011. This change was communicated to customers Water Supply Demand Strategy through local and metropolitan newspapers, regional signage, Areas to the north and west of Melbourne have been earmarked Western Water’s website, bills and in H2InfO, the customer for rapid growth and provision of water to this dry part of Victoria newsletter. presents many challenges. As an essential service provider, During the reporting period, Western Water updated its Water Western Water has worked with water resource experts and Supply Demand Strategy and Drought Response Plan. These consulted the community to develop a 50 year strategy which is documents provide guidance to ensure adequate long term supply both targeted and optimal. to customers, accommodating the expected population growth Originally developed in 2007, Western Water’s extensive Water across the region. Supply Demand Strategy (WSDS) was updated and approved by The risk of future severe water restrictions for the region has been Government early in 2012 after significant community consultation. greatly reduced due to: More than 300 customers participated, addressing the key proposals for new WSDS. • significant rainfall in recent years, resulting in the availability of local supplies The new WSDS focusses on optimising local water solutions before we source more expensive water from further away - using • major augmentation of the Melbourne Headworks system a combination of drinking water, recycled water and alternative • lower per capita consumption (achieved over the past decade water solutions to ensure future reliability of supply. as a result of water restrictions and effective education and communication campaigns). Sourcing water from the Melbourne supply system remains an integral component of Western Water’s plan to meet growing customer demand and insure against potential severe dry periods in the future.
The key features of the new WSDS are:
• Supply with local water first • Supplement supply with water from Melbourne Headworks system as required • Alternative water sources and “fit for purpose” water to be used wherever possible for drinking water substitution (e.g. recycled water).
8 Western Water ANNUAL REPORT 2011/12 Community education and awareness Local government
Western Water is committed to ensuring the community is well Western Water has developed strong working relationships with Year in review advised regarding the current level of water restrictions and the four local governments in the service region – Hume City the best water efficiency practices. In addition to the existing Council and the Shires of Melton, Macedon Ranges and Moorabool. communication tools of H2infO newsletter, advertising and Western Water provides regular monitoring and reporting of water website updates, Western Water has created an online community use for council properties, and councils provide showerhead panel that participate in decision making, provide feedback on exchange points for Western Water. water quality and receive updates on the latest water matters affecting their area. Panel membership is now close to 1,000. The region’s local governments are major users of recycled water supplies and Western Water continues to work closely with Improved water efficiency is encouraged through Western Water’s councils to align our strategies with regional needs and deliver residential plumbing audit program, WaterTight, and supported by alternative water to support liveable communities. the Living Victoria rebate scheme. During the reporting period, over 700 customers registered for the WaterTight program Several partnerships with councils are currently underway bringing total participation to 1,800 since the program began in including a recycled water extension to Goonawarra Recreation September 2009. Reserve in Sunbury, jointly funded by Hume City Council and the State Government. Western Water recognises that educating young people on the need to make the most of our precious resource, creates a ripple effect Investigations are also underway with Macedon Ranges Shire reaching far beyond the classroom. For that reason, significant Council to extend the Romsey Recycled Water Scheme to Romsey time and resources are devoted to our education program. During Recreation Reserve with government funding being sought in the the reporting period, a total of 3,286 students from 102 preschools coming year. and primary schools participated in Western Water presentations. Local councils are consulted and updated on progress as capital In addition, schools and community groups can also access free, works are planned and implemented. guided group tours of water filtration plants and recycled water plants. In the past year, 22 group tours took place. A strong relationship with Melton Shire Council has seen the integration of alternative water supplies in new housing In addition, Western Water undertakes a range of community developments at Eynesbury and Toolern. education programs on all aspects of recycled water including treatment, delivery and application. A new plumbers’ and Recycled water builders’ guide was developed and Recycled Water News In 2011/12, Western Water’s seven recycled water plants received is issued every four months. 8,211 million litres of wastewater and produced 7,544 million litres Industry of recycled water. Over half of this was used by customers. The reuse rate has reduced in recent years due to high rainfall and low Western Water works with industry across the region to help evaporation rates across the region reducing irrigation demand. conserve water through the voluntary government water Nonetheless, an estimated 1,786 million litres of drinking water conservation program, WaterMAPs. High use industrial customers was saved through substitution with recycled water this year. are identified as those using over 5 million litres of water annually. They are encouraged to develop a water management action plan Table 8: Recycled water volume and % used – 5 years to use water more efficiently and report savings. 2007/08 2008/09 2009/10 2010/11 2011/12 Key achievements with industry include assisting our two major water consumers, ABMT Textiles and Saizeriya Australia. Recycled water 5,904 6,058 7,386 7,992 7,544 Information on their water saving progress is contained in Table (ML) 5. Western Water will be taking a more focussed approach to Recycled water 86% 88% 85% 52% 56% increasing water efficiency with business customers in the coming used (%) financial year.
Western Water also works closely with over 400 trade waste customers providing advice on cleaner production techniques, Western Water continues to set a benchmark for the water industry reducing water consumption and trade waste. New acceptance in Australia aiming to beneficially recycle 100% of all water. criteria were developed in the reporting period and a new Trade The number of Western Water’s recycled water customers has Waste Customer Charter was released. Major salt reduction doubled in the past year as more residential customers move into agreements were signed with Western Water’s two major Eynesbury, where there are now 491 customers supplied with industrial clients. Class A recycled water for fit for purpose uses. Uses include Recycled water offers a viable alternative to surface water for external household use, toilet flushing and irrigation of public many primary industry customers in the region. A total of 44 open spaces. In addition, Class B and C recycled water is supplied agricultural customers are now supplied with recycled water for to 65 customers including agricultural, local government and crop irrigation. The Gisborne Recycled Water Scheme will supply construction businesses. recycled water to 10 new customers to support investment and development of the horticultural precinct south of Gisborne.
Leading with local solutions 9 Class A at Toolern Sustainable water strategies
Year in review Supply of Class A recycled water has commenced to the Western Water employs a suite of strategies to ensure a secure region’s largest new suburb, Toolern, which is expected to be water supply for the region including a focus on the principles of home to 50,000 people by 2030 through construction of a 2.2km the State Government’s Living Melbourne, Living Victoria plan. recycled water main from Melton’s Class A Recycled Water Plant. Western Water has updated its Health and Management Plan Living Victoria’s plan sets out a new approach to managing water, to include provision for recycled water supply to Toolern. This with an emphasis on making the best possible use of alternative will ensure compliance with the EPA’s dual pipe water recycling water sources such as recycled water, stormwater and rainwater, scheme guidelines. to reduce pressure on drinking water reservoirs. These principles are supported in Western Water’s new Water Supply Demand Other highlights for recycled water during the reporting Strategy which focuses on optimising local water supplies period include: and exploring opportunities for local, alternate water solutions wherever possible. Recycled water, storm water and ground water • Commenced construction on Gisborne Recycled Water solutions are all integral components of Western Water’s strategy Scheme which will provide Class B recycled water for future local water supply. to agribusinesses in Gisborne South, with completion anticipated in 2013 Building a water neutral suburb • investigating potential to further reduce drinking water Living Victoria strongly emphasises the integration of water demand in new residential estates by undertaking a trial management and urban planning, to make sure the best use of Class A for clothes washing. Washing machines account of water resources is considered when planning new suburbs. for 25% of household water use In response to strong growth in the region, Western Water has • expressions of interest were sought for new recycled water partnered with local government and developers to ensure customers across the region with plans underway to expand integrated water solutions are included in new residential schemes at Romsey, Riddells Creek, Melton, Bacchus Marsh developments. and Woodend • Water balance assessments occurred at all seven recycled During the reporting period, water, sewer, recycled water and water plants to assist in planning future recycled water stormwater capture infrastructure was put in place for the new availability and development of distribution schemes development of Toolern, south of Melton. In addition to recycled water supply to all homes, the new residential estate will also • Contributing to the development of EPA’s Environmental house Western Water’s first urban stormwater capture and reuse Offsets Framework by offering Gisborne Recycled Water project. Combined, these alternate water solutions have the Plant as a working trial. potential to make Toolern the region’s first “water neutral suburb”.
Other significant actions and achievements during 2011/12 include:
• Western Water’s ongoing Active Leakage Reduction Plan (including the Pressure Management Program) has delivered installation of three new flow and pressure management points in the supply system • Working with Melbourne Water, the metropolitan retailers and DSE to plan water supply growth requirements for greater Melbourne. These links are vital to the new Water Supply Demand Strategy • Part of optimising local water supply led to the development of a new borefield near Romsey to augment the town’s water supplies. This work included approval from Southern Rural Water for the availability of an additional 300 million litres per year to be taken from groundwater supplies in the area. Western Water has monitoring bores gathering data on the impact of groundwater extraction at Romsey. This was agreed to by Southern Rural Water with results potentially leading to the development of a Groundwater Management Plan. However, this area, unlike nearby Lancefield, is currently an unincorporated area • Western Water worked with DSE to consider options for unallocated inflow and storage volumes in Lake Merrimu. During the reporting period, 10% of inflows were allocated by DSE for environmental use, leaving a balance of 10% of inflows and 20% of storage for future allocation • Continuing membership of the Greater Melbourne Drought Response Committee, responsible for managing compliance and exemption processes for water restrictions across the greater Melbourne area including the Western Water region. Along with VicWater, the Committee was responsible for developing the regime for Stage 1 Water Restrictions, which came into effect in December 2011.
10 Western Water ANNUAL REPORT 2011/12 Other statutory obligations Victorian River Health Strategy
Western Water aims to achieve the objectives specified for the Year in review Regional Catchment Management Strategy protection of river segments in the Waters of Victoria Policy. Rivers During the reporting period, Western Water has undertaken a within Western Water’s region are classified as Cleared Hills and range of actions and strategies supporting the Port Philip and Coastal Plains in the State Environment Protection Policy (Waters Western Port Regional Catchment Strategy. Extensive weed of Victoria). Focussed work continued during the reporting period control, tree planting and fencing programs continue along stream to enhance biodiversity values of both Deep Creek and Werribee frontages on Western Water properties, contributing to healthy River escarpments on Western Water properties. waterways in the region. The River Health Strategy emphasises proactive minimisation of In addition to specifying volumes of water that can be supplied, impacts on waterways by water corporations and Western Water Western Water’s bulk entitlement agreements establish rules is committed to minimising any potential impacts on surface water around environmental or passing streamflows and volumes in quality from the discharge of recycled water to streams. storages, diversions and streamflows. Monitoring of these was enhanced during the reporting period as Western Water upgraded During the reporting period, Western Water consulted stakeholders a number of streamflow monitoring stations in conjunction with to define the beneficial uses of Jacksons Creek and Five Mile the Bureau of Metereology. More information on results from Creek as part of the ecological risk assessment of surface water monitoring environmental and passing flows is contained in the discharges. More than 20 participants from government agencies, Bulk Entitlements Report in Appendix 2. Landcare groups and Friends groups participated in the workshop. Their feedback has been incorporated in the assessment which is The Victorian Government, through the Minister for Planning now completed and undergoing final review. and the Minister for Water, is reviewing State Guidelines for Development in Open Potable Catchments. Western Water The implementation of Western Water’s Sewer Spill Prevention contributes to the industry position through membership of Strategy last reporting period has resulted in reduced impact from VicWater. At a local level, Western Water progressed discussions sewer spills on surface water. to develop a catchment management strategy with Macedon Ranges Shire Council to encourage sustainable development River health obligations within water catchments. Western Water is committed to minimising the impact on the environment and risks to the aquatic ecosystem from its activities. Victorian Biodiversity Strategy The following actions were undertaken during 2011/12 to fulfil Western Water continued to undertake weed and pest control this commitment: programs at its landholdings in compliance with the Victorian • Planting around 2,500 trees and shrubs along stream Biodiversity Strategy. During the reporting period, particular focus frontages with Melbourne Water was on alternative weed control methods to minimise use of herbicides. Methods used include revegetation, sheep grazing and • Controlling noxious weeds and pest animals selective ecological burning. • Water quality monitoring to ensure minimal impacts from recycled water plants discharges. Ecological burns occurred at three sites: Werribee River frontage at Exford, grassy woodland at Pinkerton Forest and grassland at Parwan Recycled Water Plant in Bacchus Marsh. The burns were successful in reducing weeds and promoting native grasses with the ecological burn at Parwan in particular completely eliminating weeds, resulting in domination by native Spear Grass.
Other biodiversity actions include:
• Within Pinkerton Forest, almost half a hectare of land covered with Carpet Weed (Galenia) was cleared. In prior years this weed could not be controlled due to a White Bellied Sea Eagle nesting at the site • Cane Needle Grass, a noxious weed, was identified and removed at another Western Water property.
The abundance of feed brought about by continuing rains has resulted in high populations of rabbits and foxes. As a result, an extensive rabbit control program was undertaken along Werribee River frontage. Rabbit and fox numbers were counted pre and post control verifying the effectiveness of the program.
Through the Stream Frontage Management Program, Western Water continued to work with Melbourne Water along Jacksons Creek, Deep Creek and Werribee River. Around 2,500 trees were planted with assistance from Melbourne Water during 2011/12.
Leading with local solutions 11 Greenhouse gas emissions
Year in review Western Water is reducing its impact on the environment through a combination of energy efficiency measures, renewable energy generation and purchase of carbon offsets. The 2011/12 result of 17,515 tonnes of net greenhouse gas emissions is 42% below 2004/05 levels.
Western Water’s Climate Change Strategy, in its second year of implementation, will be reviewed in 2012/13 to assess the impact of the Federal Government’s Carbon Price Mechanism.
Significant activities generating greenhouse gas emissions The main activities generating greenhouse gas emissions at Western Water are the treatment and supply of water as well as the treatment and management of sewage. Emissions associated with sewage treatment have decreased by 1%, primarily due to lower inflows than last year, while emissions associated with water supply have increased by 7% brought about by increased local water treatment.
Table 9: Significant activities generating GGE (tonnes CO2e) – 5 years
2007/08 2008/09 2009/10 2010/11 2011/12
Water treatment and supply 8,959 10,483 9,651 7,599 8,176 Sewerage treatment and management 12,432 13,584 12,701 14,916 14,688 Transport 644 462 587 638 572 Other - recycled water distribution 1,052 794 814 723 719 Other - office 610 522 533 591 547
Total gross scope 1 and 2 emissions (tonnes CO2e) 23,697 25,845 24,286 24,467 24,702
Net greenhouse gas emission sources The main source of Western Water’s greenhouse gas emissions continues to be the Victorian electricity grid, catering for 73% of total emissions.
The increased water supplied from local sources has reduced emissions by 202 tonnes. However, an additional 538 tonnes of emissions resulted from greater use of local water treatment infrastructure. Holistically, a net reduction of greenhouse gas emissions within the region would be expected if scope 3 (supply chain) emissions associated with the treatment and supply of Melbourne Water supplies were considered.
Table 10: Net GGE source breakdown (tonnes CO2e) – 5 years
2007/08 2008/09 2009/10 2010/11 2011/12
Direct emissions (scope 1) 5,143 5,494 4,590 6,723 6,608 • Nitrous oxide emissions 2,170 2,058 2,148 3,052 3,673 • Methane emissions 2,124 2,667 1,806 2,966 2,318 • Diesel consumed 528 516 386 456 386 • Unleaded petrol consumed 293 250 243 222 200 • Gaseous fuel combustion 0 0 0 25 29 • B20 biodiesel 18 1 2 2 2 • Other 3 2 5 0 0 • Autogas 6 0 0 0 0 Indirect emissions (scope 2) 18,342 19,829 18,903 16,850 16,691 • Vic grid electricity consumed 18,555 20,351 19,696 17,745 18,094 • Reduction from GreenPower purchase (213) (522) (793) (895) (1,403) Offsets created or purchased and retired (820) (2,494) (1,952) (5,783)
Total net scope 1 & 2 emissions (tonnes CO2e ) 23,485 24,504 20,999 21,621 17,515
Table data has been rounded with totals based on actual numbers
12 Western Water ANNUAL REPORT 2011/12 Carbon neutral certification for Class A Recycled Water Plant
Western Water achieved carbon neutral certification for the Social sustainability Year in review Class A Recycled Water Plant in Melton from Low Carbon Australia in September 2011. This is the first such plant to be certified in Australia.
The $2 million Biogas Cogeneration Facility at Melton captures Service delivery methane emissions from the water recycling process to produce 100% renewable electricity to operate the Class A plant. Water quality The facility began operation in 2010. Low Carbon Australia is Western Water is fully compliant with the water quality requirements a Federal Government initiative. set out in the Australian Drinking Water Guidelines.
Cost of price on carbon During the reporting period, Western Water maintained its Hazard Analysis and Critical Control Points (HACCP) certification. Western Western Water’s research into the cost impact of a legislated Water was also deemed compliant with the Safe Drinking Water Act price on carbon estimates a $1.3 million increase in costs. and Regulations as assessed by Department of Health appointed These increases will be from electricity prices, some fuel costs, Regulatory Auditor. Compliance covered the 12 elements of the and increased costs for carbon intensive goods and services Australian Drinking Water Guidelines framework for management in the supply chain. The research used the Triple Bottom Line of drinking water quality. Results will be detailed in Western Water’s Ecofootprint Tool developed by the Integrated Sustainability 2011/12 Water Quality Report, which will be available online in Analysis group at Sydney University. October 2012. Other Climate Change Strategy highlights for 2011/12 include: Quality testing is conducted at reservoirs, water filtration plants, • Preparing a study into the potential of biogas generation from storage tanks, pump stations and customer taps. During the treating other organic waste streams in the region at Melton reporting period, all 19 water quality zones complied with Recycled Water Plant microbiological requirements including that at least 98% of the drinking water samples collected in a 12 month period have zero • investigating the opportunity to gain carbon offsets through E.coli organisms per 100 millilitres. the Carbon Farming Initiative • Progressing with integrating greenhouse impact assessment Water supply system within all major planning and capital infrastructure projects In 2011/12, Western Water supplied 54,073 properties with • Participation in Greener Government Buildings program drinking water through 1,855km of water mains. The extensive • installation of 13,000 litre biodiesel tank at Sunbury Depot. reticulation system is maintained through regular renewals, repairs Tanks are already in place at Melton and Gisborne Depots. and operational actions such as valve exercising, mains flushing The use of biodiesel by all fleet vehicles will reduce carbon and condition assessment. These actions help to reduce water emissions by over 140 tonnes per year losses through leakage and burst pipes, and assist in maintaining • Purchase and retired 5,783 tonnes of carbon recognised under water quality. the Voluntary Carbon Standard, partially funded by Victorian Key achievements during the reporting period include: Energy Efficiency Certificates created through Western Water’s WaterTight program. • all planned interruptions were restored within five hours; the average time for planned interruptions was 150 minutes • 2.2km of mains were renewed. The mains replacement program resulted in 222 fewer customers being affected by repeat bursts this year, and • average interruption time due to unplanned interruptions (burst mains) fell to 52 minutes.
The number of burst water mains during the reporting period is above the prior year due to higher rainfall levels increasing ground moisture and movement. Alternative drinking water is offered to customers when their water supply is unavailable for long periods or when special needs exist.
Table 11: Water mains bursts – 5 years
2007/08 2008/09 2009/10 2010/11 2011/12
Water mains bursts 373 290 202 253 334
Leading with local solutions 13 Sewer system Customer advisory network
Year in review In 2011/12 Western Water supplied 48,138 properties with Western Water has an established customer advisory network sewer service through 1,149km of sewer mains. The successful that provides ongoing advice to the Board on issues important to implementation of the innovative Sewer Spill Prevention Strategy achieving its vision. The network is comprised of one Customer continued with a 44% decline in sewer blockages noted since the Advisory Group (CAG), and three Community Reference Groups strategy commenced two years ago. This has been brought about (CRGs) representing the key locales of Sunbury, Macedon Ranges by a risk based prioritisation of works including: and Melton/Bacchus Marsh.
• relining of 5.6km of sewer mains and renewal of 208 house Across the year, each CAG and CRG meet five times. Member input connection branches is sought on major projects and customer service initiatives. In July, • 33.3km of CCTV inspection in key sewers, and all network members attend a Strategic Planning Day and input from this day is the starting point for Western Water’s strategic planning • root foaming of 34km of sewer mains and 280 house process. connection branches.
Table 12: Sewer blockages – 5 years Customer service performance Customer service performance is measured weekly to ensure 2007/08 2008/09 2009/10 2010/11 2011/12 that essential functions are performed in accordance with agreed standards. Call numbers have decreased in 2011/12 due to increased Sewer blockages 298 298 327 248 182 website use brought about by the development of online standard forms. The online forms project was developed by Small Business Victoria in collaboration with the water industry. Customer service Table 14: Customer service – 5 years Customers 2007/08 2008/09 2009/10 2010/11 2011/12 Western Water’s service area population grew by 3.2% during the reporting period to reach 155,431. Customer numbers have Customer service 75,734 89,010 83,768 78,236 67,341 experienced strong growth, increasing by 38% over the past decade. calls received This growth is set to escalate as the region’s major towns of Melton and Sunbury experience rapid development. The Toolern precinct in Calls answered 89% 93% 95% 96% 98% Melton alone is predicted to grow by 50,000 people by 2030. within 30 seconds (%) Much of this new customer base will be young families, retirees, Average wait time 14 11 10 9 8 migrants and single income households, attracted to the region by (seconds) affordable housing. Western Water is setting in place appropriate customer service approaches to address this changing demographic. Correspondence 1,182 1,466 1,852 1,909 1,766 requiring a Customer satisfaction response Results from Western Water’s annual Customer Satisfaction Survey remained very high with 91% of the 600 customers interviewed Managing complaints satisfied with the overall service provided. The average customer Western Water’s complaints management procedure provides a satisfaction rating of 8.5 out of 10 was a statistically significant process for managing a complaint from receipt through to resolution. improvement on last year, continuing demonstration of strong, During 2011/12, complaint numbers reduced due to lower numbers stable service delivery. of water quality complaints. Issues with the changing water supplies Table 13: Customer satisfaction (score out of 10) – 5 years in the Merrimu supply system in the prior reporting period had inflated complaints numbers. 2008 2009 2010 2011 2012 Table 15: Customer complaints – 5 years Overall customer 8.4 8.3 8.3 8.2 8.5 Complaint category 2007/08 2008/09 2009/10 2010/11 2011/12 satisfaction Water quality 204 215 120 194 166
Satisfaction with overall water quality remains high and customers Water and sewer 5 3 3 2 3 continue to be very satisfied with their sewerage service. Western service Water is perceived as a valuable member of the community. Billing and 25 27 20 25 30 accounts Customer satisfaction scores improved this year for all key indicators with the exception of perception of value for money and General 15 15 11 13 18 usefulness of information provided to homes. Reducing tariffs and Total 249 260 154 234 217 service charges were the main suggestions to improve satisfaction.
The Energy and Water Ombudsman Victoria (EWOV) handled 27 referrals on behalf of Western Water customers in the past year. Of these, 26 were handled as enquiries requiring no further action and only one referred for investigation.
14 Western Water ANNUAL REPORT 2011/12 Water restrictions In May 2012, the Hardship Policy and Customer Support Guidelines were updated to reflect best practice and a new Guaranteed Service
All towns in Western Water’s service area were on Stage 2 Water Year in review Restrictions until 1 December 2011 when restrictions were eased Level addressing hardship will be introduced in July 2012. Western to Stage 1. Water continues to work closely with Kildonan Uniting Care to optimise customer support programs with the innovative Water Customers are able to apply for an exemption from restrictions Babies program developed during the reporting period. under specific circumstances. A total of 94 exemptions were issued in the reporting period, all of which were Warm Season Community service obligations Grass exemptions. In addition, 66 approvals were issued for either Close to a quarter of Western Water’s residential customers hold filling a new swimming pool or refilling an existing pool following a concession card. During 2011/12, Western Water provided a total repair works. of 39,625 pensioner, healthcare and veterans affairs concessions, totalling $2.9 million. The annual concession cap for the financial Formal procedures are in place to address customers who do not year was $270.20. observe water restrictions. During the past year, six non-compliance phone contacts were made resulting in five subsequent letters. While There was a decrease in the number of not for profit organisations there was one property visited, there were no formal notices issued receiving rebates on their annual water and sewer charges or restrictions of water supply, on the spot fines or formal legal due to data cleansing as part of the implementation of the new action undertaken for water restrictions. billing system. Service charges The number of customers receiving Utility Relief Grants (provided From 1 July 2011, water and sewer charges increased in line with by Department of Human Services) increased dramatically this the five year pricing structure incorporated in the ESC approved year, indicating much greater numbers of customers in the region Water Plan 2008-2013. The following water and sewerage charges experiencing financial hardship. applied for 2011/12: Customers receive payments for the Hardship Relief Grant Table 16: Water and sewerage charges Scheme (Sewerage Connection Scheme), Non-Mains Water Concession and Water Wise Program directly from the Department Residential Non-Residential of Human Services.
Table 17: Community service obligations – 2 years Water service & usage Service charge per annum $215.26 $215.26 2010/11 2011/12 Usage/kilolitre (per four No. $ No. $ monthly billing cycle) Concession 11,695 2,510,235 11,942 2,946,563 0-53 kilolitres $1.3838 $1.8358 card holders: 53-106 kilolitres $1.8358 $1.8358 Pensioners, Greater than 106 kilolitres $3.6767 $1.8358 Healthcare, Veterans Affairs Sewerage tariff Not for profit 641 151,809 466 165,389 Service charge $496.33 $496.33 rebates Utility Relief Grant 115 51,694 200 87,447 New customer contributions Scheme (lot size 450-1350 sqm) Water concession 6 52 7 1,688 Water* $1,198.32 on life support Sewer $1,198.32 machines – haemodialysis* Class A recycled water* $1,198.32
Class A recycled water * Change of Western Water’s billing system has impacted results, Service charge $93.06 which are now fully aligned with DHS Concession Guidelines. Usage $1.3838 Grants for school, community & environment groups
* If both water and Class A recycled water are connected, the During 2011/12, Western Water launched grants programs to support customer pays only 50% of the water contribution. the community at grass roots level. Grants were offered across the region to develop school gardens, community gardens and support Hardship environmental projects. Western Water has policies in place to allow staff the flexibility to A major component of Western Water’s Corporate Social provide customers with tailored individual payment solutions when Responsibility program, the grants provide excellent opportunities to required. During 2011/12, 155 customers entered Western Water’s build better relationships within the community promoting messages hardship program whilst 39 customers graduated from the program. regarding local sustainability, water efficiency and inclusiveness. There were 536 applications for financial assistance with 468 approved. In addition, staff visited the properties of 115 customers in need of support.
Leading with local solutions 15 Section 2
anisational structure g anisational Governance & organisational structure Governance & or Governance
Organisational
structure Board Members Terry Larkins Led by Managing Director, John Wilkinson, Western Dorothy Bell Water’s management team is accountable to the Board Marcos Anastassiou Board Committees and consists of General Managers in four areas: Russell Anderson Audit Committee Corporate Services, Strategy and Performance, Customer Tom Mollenkopf Capital Works Committee and Community Relations, and Sustainable Water Solutions. Ross Johns Policy Review Committee The organisational structure was adapted in the reporting Andrew Osborne Remuneration Committee period to create the new Strategy and Performance division.
Western Water’s management team is comprised of Managing Director Customer Advisory Group experienced professionals committed to achieving our John Wilkinson Community Reference Groups corporate and strategic objectives.
General Manager General Manager Customer & General Manager General Manager Strategy & Community Sustainable Water Corporate Services Performance Relations Solutions David Anderson Les McLean Peter Donlon Rob Franklin
Finance Strategic & Customer Asset Management Human Resources Regulation Corporate Planning Communications Asset Planning Employee Relations IT Strategic & Market/Customer Dam Safety Organisational Company Secretariat Operational Risk Research SCADA Development Credit Management Renewable Contact Centre Water Systems Records Resources Customer Billing Capital Investments Management Performance Hardship Hub Water Conservation/ Monitoring Field Services Demand Business Process Trade Waste Management Improvement & Administration Innovation Metering & Property Ebusiness Services Corporate Wide IP Key Account Water Trading Management Third Party Access Customer Segmentation
16 Western Water ANNUAL REPORT 2011/12 Terry Larkins (PSM JP) – Chairman - June 2001 Board Terry has over 40 years experience in the water industry and local government. Currently he is a board member of Melbourne Water, Chief Executive of the Eva Tilley Memorial Home and a board member of both VicWater (and a previous Chair) and Macedon structure g anisational Ranges Further Education Centre. Previously, Terry was Chief Board members Executive of the Shire of Gisborne and Secretary of the Gisborne A skills-based board of directors, supported and advised by Water Board. Terry has a Diploma in Business Studies from RMIT, management, is appointed by the Minister to set Western Water’s is an Associate of the Institute of Water Administration (IWA), and strategic direction and business policy. Board members have a Fellow of the Local Government Administrators. & or Governance broad range of relevant skills, experience and expertise to meet our objectives. They are appointed for a three year term. John Wilkinson (B Com, FCPA, RCA, FIWA, FAICD) – Managing Director - June 2002 During the reporting period, three new board members joined With 32 years experience in the water industry, John was Western Water’s board – Ross Johns, Tom Mollenkopf and Andrew appointed Chief Executive of Western Water in June 2002. He was Osborne. The new members replaced Carol Mathew and Judy appointed Managing Director in July 2007 when Western Water Tyers, as well as Lucia Cade who resigned during the previous became a corporation. John has a Bachelor of Commerce from reporting period. Western Water acknowledges the excellent Melbourne University with majors in economics and accountancy. contribution made by past board members. In 1998 John received the Institute of Water Administration’s most prestigious award, the Barry Leach Award, acknowledging exceptional service to the Institute and the Victorian water industry.
Western Water’s Board (L to R): Andrew Osborne, John Wilkinson, Ross Johns, Terry Larkins, Russell Anderson, Dorothy Bell and Tom Mollenkopf (Absent: Marcos Anastassiou)
Leading with local solutions 17 Dorothy Bell - June 2001 Andrew Osborne – October 2011 Dorothy has 30 years of experience in teaching, consultancy, Andrew has over 40 years experience in the water industry. curriculum administration and governance in state and He has held senior management and director positions in national independent school sectors. She is a JP, a Fulbright Scholar and international consulting and contracting, and has worked anisational structure g anisational (Education), holds a Bachelor of Arts, Master of Education, in London, the Middle East and more broadly in the Asia Pacific Professional Counselling Diploma and Company Directors’ Course basin. Andrew brings extensive experience in the delivery of major Diploma. A professional counsellor, Dorothy recently trained with infrastructure in the areas of procurement, risk management the Department of Justice as a community mediator. She has and commercial business arrangements; and currently provides lived in Melton since 1998, been involved in local environmental strategic and technical advice to government and the private sector
Governance & or Governance groups and reconciliation initiatives, and brings a local community for the provision of water infrastructure including irrigation and perspective to Western Water, with added skills of social research recycling through separate consulting arrangements. Andrew holds methodology, psychology and community education. undergraduate and post graduate qualifications in engineering and engineering science and is a member of the Australian Institute of Marcos Anastassiou - October 2007 Company Directors. Marcos holds degrees in Mathematics, Social Sciences and Organisation Behaviour. He is a member of the Australian Institute Carol Mathew (PSM) - July 2005 to September 2011 of Company Directors and worked in higher education as a planner Carol was named Victorian Rural Woman of the Year in 2002, and academic and consultant. He currently holds a senior planning whilst operating an alpaca stud farm in Lancefield. Prior to this, position at RMIT. Marcos has lived in the Macedon Ranges since she spent 17 years in local government both as a councillor 1992 and has been active in the community. He was a councillor for and a senior executive officer. She has a PhD in Sociology and the Macedon Ranges Shire Council from 1997 to 2000 and a board a Bachelor of Social Work. Carol’s experience includes eight member of the Djerriwarrh Health Service from 2000 to 2003. years on the Australian Alpaca Cooperative Board, six years as Commissioner Local Government Best Value Victoria and nine Russell Anderson - October 2007 years as Chair, Rural Industries Research and Development Russell has extensive experience in financial management, Corporation – RNF Committee. She has provided consultancy governance, risk management and internal auditing. He has held work on strategic planning and performance improvement to local senior governance roles at Air New Zealand, Marsh Pty Ltd, government. Carol completed her second term on Western Water’s CSIRO, PricewaterhouseCoopers and the Qantas Group. Russell Board in September 2011. has provided independent governance reporting to listed public companies and government authorities incorporating financial Judy Tyers - October 2007 to September 2011 and strategic risk analysis. Russell is actively involved in ensuring Judy is currently Director of Applied Learning at the Australia sustainability principles are being adopted in corporate governance New Zealand School of Government. Judy brings senior public frameworks utilised in the public and private sectors and has a policy and management experience from her time as Director of Bachelor Degree in Commerce. Intergovernmental Relations and Strategic Planning in the Victorian Department of Premier and Cabinet. Judy also worked for five Tom Mollenkopf – October 2011 years as General Manager of the Business Council of Australia. Tom Mollenkopf is the Chief Executive of the Australian Water Judy has previously been a director of the National Foundation of Association. He is a Fellow of the Institute of Chartered Secretaries Australian Women, the Australian Council of Business Women and and member of the Institute of Company Directors. He is a Director the Central Highlands Water Corporation, and a trustee of the Mt of WaterAid Australia and Water Australia Solutions Ltd, and chairs Macedon Memorial Cross. Judy completed her term on Western the Water Industry Skills Taskforce and the Smart Approved Water Water’s Board in September 2011. Mark scheme. Tom is also a member of the Governing Assembly, International Water Association and the International Committee, American Water Works Association as well as serving on numerous advisory committees and panels. He is active in Surf Life Saving and is Chair of the Life Saving Victoria Review Committee.
Tom was previously Deputy Executive Director of the International Water Association, based in London. Prior to that, he was an executive at South East Water in Melbourne. Tom’s background is in law, first in private practice and then as corporate counsel. Tom has a Masters of Business Administration, Bachelor of Jurisprudence and Bachelor of Laws.
Ross Johns – October 2011 Ross is currently President of the Victorian Farmers Federation. He has a primary production background, owning a farm in Warracknabeal in the Northern Wimmera region of Victoria. Ross was Director of ABB Grain, an ASX top 100 company, from 1996 to 2009, serving on the audit committee. He was also Director and Deputy Chairman of the Grain Research and Development Corporation from 2003 to 2006 and chaired its finance and audit committee.
18 Western Water ANNUAL REPORT 2011/12 Board committees Remuneration committee The remuneration committee reviews the remuneration and Western Water has four board committees to assist in carrying out performance arrangements of executives and the terms of its corporate governance functions: employment for all employees. Terry Larkins is the Chairman • Policy review committee and Tom Mollenkopf, Russell Anderson and Marcos Anastassiou structure g anisational • Remuneration committee are the other committee members. • Audit committee Policy review committee • Capital works committee The policy review committee investigates, reviews and develops Each committee is chaired by a board member and operates under policies for best practice corporate governance. Dorothy Bell is the & or Governance approved terms of reference. In addition, two board members Chairperson and Terry Larkins and Tom Mollenkopf are the other attend Western Water’s customer advisory group meetings. committee members. Committee members are chosen for their skills, experience and other qualities they bring to the committees. Capital works committee The capital works committee is responsible for providing strategic Board committees are entitled to any resources and information input to Western Water’s capital works plan and monitors the required including direct access to Western Water staff. The implementation of the plan in accordance with timeframes and Managing Director, members of the management team and other budgets. Marcos Anastassiou is the Chairman and Dorothy Bell, staff attend committee meetings as required. Andrew Osborne, Terry Larkins, and Ross Johns are the other committee members. Board members receive committee agendas and can attend all meetings, subject to reviewing any conflict of interest requirements. Customer advisory group A verbal report by the chair of each committee is presented at each board meeting and all committee minutes are tabled. The customer advisory group (CAG) enables community input to service planning and decision making processes by providing a Audit committee direct link between the Board, customers and consumer advocacy groups. Dorothy Bell is the Chairperson of the CAG and Terry The audit committee assists the Board in fulfilling its Larkins and Andrew Osborne are members of the group. responsibilities by reviewing all matters relating to corporate finance, auditing functions, review of financial statements and Board & committee meeting attendance accounting policies. This committee also considers compliance with legislation and other activities and procedures, including insurance The Board has eleven scheduled meetings each year, and risk management. Russell Anderson is the Chairman and with additional meetings convened as required. Terry Larkins, Ross Johns and Andrew Osborne are the other committee members. All board members on the audit committee are independent, non-executive directors.
Table 18: Board meeting and committee attendance
Board Member Board Policy review Capital works Audit committee Remuneration committee committee committee
Terry Larkins (Chairman) 11 2 3 5 4 Russell Anderson 11 3 5 4 (Deputy Chairman) Dorothy Bell 10 2 2 1 Marcos Anastassiou 10 3 1 2 Andrew Osborne# 7 2 3 1 Ross Johns# 8 2 3 Tom Mollenkopf# 8 1 1 1 3 John Wilkinson 11 2 3 5 4 Carol Mathew* 3 1 Judy Tyers* 2 1
# Andrew Osborne, Ross Johns and Tom Mollenkopf commenced their terms as board members on 1 October 2011
* Carol Mathew and Judy Tyers completed their terms as board members on 30 September 2011
Leading with local solutions 19 Incident management Section 3 During 2011/12, workplace incidents reduced significantly compared to the prior reporting period. Of the 19 incidents Human resources reported, 15 were minor injuries or near misses. Table 19: Workplace incidents – 5 years Human resource 2007/08 2008/09 2009/10 2010/11 2011/12 Workplace 20 18 20 27 19 management incidents
The number of WorkCover claims lodged during the year remained stable. Occupational health and safety Table 20: WorkCover claims – 5 years Western Water is committed to providing a healthy and safe Human resources workplace for employees, contractors and the wider community. 2007/08 2008/09 2009/10 2010/11 2011/12 Key safety messages are reinforced across the business via safety alerts, the intranet and site toolbox meetings. Particular focus is New standard* 1 3 7 1 2 given to workplace health and safety education and training. claims
Consultation remains a significant aspect of the safety culture. New minor 8 4 4 5 4 The OH&S committee, comprising management and employee claims representatives, meets monthly and plays a key role in improving Total 9 7 11 6 6 the safety of the work environment. The OH&S Policy, committee members and meeting minutes are displayed on worksite noticeboards, the intranet and/or via monthly team meetings. * For a claim to be classified as a standard claim it must exceed a threshold of $629 of medical payments or ten days lost time. Western Water’s OH&S training program is aligned with its Health Any claim that falls below these thresholds is classified as a and Wellbeing Strategy and has a strong emphasis on prevention minor claim. and early intervention. Table 21: WorkCover lost days – 5 years Significant OH&S activities during 2011/12 include: 2007/08 2008/09 2009/10 2010/11 2011/12 • implementation of the Joint Action Program to reduce manual handling injuries for outdoor staff Lost time 9 5 11 2 2 • increased focus on encouraging positive performance injuries and behavioural safety Lost time injury 204.6 27.5 468 109 78 • Completion of a safety culture survey days • Significant capital investment to reduce working at heights risks • Successful implementation of Work Safe Week program WorkCover lost days reduced dramatically in 2011/12. In addition, only 36 of the days lost were the result of injuries sustained • increased input into projects at the design phase during the current reporting period which indicates an actual • increased governance of contractors improvement of 66%. This gratifying result was brought about • introduction of OH&S hazard identification process with by early intervention and return to work programs. 45 OH&S hazards identified. This will enable elimination of the hazard, or reduce the risk before an incident or injury occurs.
20 Western Water ANNUAL REPORT 2011/12 Table 22: WorkCover premiums Workforce data 2007/08 2008/09 2009/10 2010/11 2011/12 Western Water aims to attract, retain and develop talented and committed employees. At 30 June 2012, 162 people were Premiums ($) 175,964 220,078 194,280 164,943 173,178 employed in a variety of roles including professional, technical, trade and administrative. This figure includes permanent, casual and temporary employees. In the coming year, Western Water will continue to focus on high OH&S risks as well as increasing OH&S governance and The employee base has grown by 8 over the prior reporting period. monitoring of external contractors. While the impact of OH&S The business is well placed to meet the significant challenges Harmonisation in Victoria remains uncertain, the ongoing review presented by rapid population growth in the region. Of the total of Western Water’s OH&S management system and documentation employee base, 46% are female (this figure excludes board will reflect changing legislative obligations. members). Employment and conduct principles Table 23: Workforce composition by function – 2 years Western Water is committed to applying merit and equity principles 2010/11 2011/12 when appointing staff. Selection processes ensure that applicants Male Female Male Female are assessed and evaluated fairly and equitably on the basis of key Human resources selection criteria and other accountabilities without discrimination. Board members 3 3 6 1
Western Water’s values and employment principles are critical to Managing Director/ 4 0 5 0 maintaining and improving performance of the workforce. Policies General Managers and practices are in place so that the corporation continually Managers 6 4 6 6 strives to uphold the principles of equal opportunity, employee Operational, administration 74 66 76 68 diversity and work/life balance. and field staff A new Enterprise Agreement was signed off in March 2012 Total 87 73 93 75 and backdated to September 2011 with strong support from staff. Highlights are the inclusion of paid staff volunteering leave, annual 4% salary increase, the offer of a choice of funds for Training & career development superannuation schemes and a greater emphasis on a healthy and safe workplace. Western Water supports employees through training and development, performance management and recognition programs to fully develop their potential and deliver leading services to customers. In 2011/12, the training budget represented 2.6% of payroll.
Identified as a key strategic driver, Western Water is making a considerable commitment to building leadership capability across all levels of the business.
Leading with local solutions 21 Implementation of the Victorian Section 4 Industry Participation policy In October 2003, Parliament passed the Victorian Industry Capital works Participation Policy (VIPP) Act 2003. This requires public bodies and departments to report on the implementation of the VIPP. The policy was developed to ensure that applicable Government and other projects use local suppliers whenever and wherever they offer the disclosures best value for money. Department and public bodies are required to apply VIPP in all tenders over $3 million in metropolitan Melbourne and $1 million in regional Victoria. In Western Water’s service area, Hume City Capital works and Melton Shire Councils are considered metropolitan, while Moorabool and Macedon Ranges are regional.
Table 25: VIPP applicable contracts
Western Water is undertaking an ambitious capital works program to ensure water, sewer and recycled water services are in place New projects: to meet the needs of the growing population. Western Water has invested $166 million in capital works over the past five years with Western Water had one new VIPP applicable project in $27.9 million dedicated to the program in 2011/12. 2011/12 which was the Bacchus Marsh Recycled Water Plant upgrade. This $3.6 million project commenced in Table 24: Capital works investment ($M) – 5 years December 2011 and is expected to be completed by October 2012. Seven new full time equivalent jobs were created for 2007/08 2008/09 2009/10 2010/11 2011/12
Capital works & other dis c losures & other works Capital this project, which will have 100% local content.
Capital works 34.0 37.3 35.5 31.3 27.9 Completed projects: investment ($M) Two VIPP applicable contracts were completed during the reporting period: the $13 million Stage 2 upgrade of 2011/12 capital works achievements include: Surbiton Park Recycled Water Plant as well as a $7.3 million contract for 10 million litre potable water tanks at Rosslynne • Commenced construction of $5.5 million Gisborne Recycled and Merrimu Water Filtration Plants. Both contracts were Water Scheme to provide reliable water supplies to completed in October 2011. No new jobs were created for agribusinesses south of Gisborne these projects but 42 full time equivalent existing jobs were • Commenced $3.3 million upgrade of Bacchus Marsh Recycled retained for the contracts. Water Plant to address compliance requirements and cater for future demand • Completed $1.8 million Romsey Borefield project to augment Disclosure of major contracts water supplies to Romsey Western Water did not enter into any contracts greater than • Completed construction of $1.8 million Coburns Road and $10 million during the year ended 30 June 2012. $0.6 million Exford Road water mains, as well as $0.6 million Griegs Road recycled water main, to service new customers Compliance with the Building Act 1993 in Toolern Western Water complies with the building and maintenance • Commenced construction of $1.0 million Jacksons Hill provisions of the Building Act 1993. rising sewer main in Sunbury to cater for demand from growing population. National Competition Policy
Major projects for 2012/13 include: Competitive neutrality seeks to enable fair competition between government and private sector business. Western Water continues • Commence $4.0 million Melton Recycled Water Plant Upgrade to implement and apply this principle in its business undertakings. to cater for growing population • Continue construction of $5.5 million Gisborne Recycled Water Scheme • Continue $3.3 million upgrade for Bacchus Marsh Recycled Water Plant • Construction of $0.5 million Sewer Pump Station at O’Keefe Crescent, Bacchus Marsh to reduce sewer spills and cater for needs of growing population • Commence $3.5 million upgrade for Rosslynne Water Filtration Plant to optimise water supply capability of the plant.
22 Western Water ANNUAL REPORT 2011/12 Consultancies There were 32 consultancies costing in excess of $10,000 for 2011/12. In addition, there were 29 consultancies of less than $10,000 engaged during the year totaling $91,790.
Table 26: Details of the consultancies greater than $10,000
Consultant Purpose of consultancy Start date End date Total Expenditure Future approved 2011/12 expenditure project fee
Achemar Advisory Strategic planning Jul-11 Jun-12 $13,728 $13,728 - Atkinson Consultancy Leadership capability survey Jan-12 Jun-12 $111,074 $111,074 - BCM Solutions Emergency and business continuity Feb-11 Jun-12 $28,550 $28,550 - consulting CCE Consulting Leadership survey Jan-12 Jun-12 $38,700 $38,700 - CCE Consulting Strategic planning Jul-11 Jun-12 $13,800 $13,800 - CMP Consulting Group Bacchus Marsh RWP upgrade - design Mar-10 Ongoing $145,000 $139,380 $5,000 & construction assistance CMP Consulting Group Bacchus Marsh Avenue of Honour sewer Mar-11 Mar-12 $320,712 $105,703 - pump station upgrade CMP Consulting Group Bacchus Marsh RWP disposal pipeline Feb-12 Mar-12 $14,012 $14,012 - CMP Consulting Group Design and superintending Western Freeway Jun-11 Feb-12 $40,000 $33,412 -
CMP Consulting Group Sewer Spills Prevention Strategy Jul-11 Jun-12 $54,993 $54,993 - dis c losures & other works Capital CMP Consulting Group Water Plan 3 preparations Jul-11 Feb-12 $65,000 $60,033 - Enhance Solutions Risk Management consulting for risk Jul-11 Jun-12 $47,600 $47,600 - transformation project Ernst & Young Review of Analytical Services Agreement Jan-12 Jun-12 $40,000 $39,282 - Full Circle Feedback 2011 culture survey Sep-11 Dec-12 $12,860 $12,860 - GHD Bacchus Marsh RWP upgrade - construction Feb-12 Ongoing $17,946 $10,216 $7,000 assistance GHD Surbiton Park stage 3 upgrade - design Feb-11 Sep-12 $230,000 $225,973 $5,000 GHD Water Supply Demand Strategy Jul-11 Jun-12 $202,892 $202,892 - GHD Rosslynne WFP options study Mar-12 Jun-12 $35,000 $31,956 - Gnarwarre Group Board performance review Jul-11 Sep-11 $14,400 $14,400 - H2O Team Active leak reduction program Jul-11 Jun-12 $12,297 $12,297 - Marsden Jacob Tariff and price modelling for Water Plan Jul-11 Jun-13 $106,513 $56,513 $50,000 2013-2018 Marsden Jacob Growth strategy Jan-11 Ongoing $200,000 $73,687 $16,148 Montgomery Watson Risk Management consulting for risk Jul-11 Jun-12 $32,627 $32,627 - Harza transformation project Montgomery Watson Bacchus Marsh RWP upgrade - Aug-11 Ongoing $92,910 $18,606 $74,000 Harza superintendency Montgomery Watson Bacchus Marsh RWP upgrade - Aug-09 Ongoing $125,359 $15,618 $2,000 Harza superintendency Osborne Management Growth strategy Jan-11 Ongoing $150,410 $56,702 - Russell Kennedy IR advice for Enterprise Agreement Aug-11 Apr-12 $9,276 $9,276 - SACS Consulting HR and OD internal review Jan-12 Jun-12 $13,722 $13,722 - SACS Consulting HR and OD structure review Jul-11 Jun-12 $13,050 $13,050 - SACS Consulting Recruitment Jul-11 Jun-12 $23,567 $23,567 - SKM Surbiton Park Stage 3 upgrade - design Jun-11 Sep-11 $16,808 $16,808 - URS Bacchus Marsh RWP Upgrade - land Feb-11 Aug-11 $13,095 $13,095 - capability assessment Total $2,225,900 $1,554,129 $159,148
Leading with local solutions 23 From 1 July 2012 a fee of $25.10 applies to any application Other disclosures for documents. Additional information and how to make an FOI request is available on Western Water’s website and at www.foi.vic.gov.au. Compliance with Whistleblowers Freedom of Information Protection Act 2001 The Victorian Freedom of Information Act gives customers the The Whistleblowers Protection Act 2001 recognises that improper right to access documents held by Government agencies as well conduct by staff or actions that involve reprisals against those as the right to request that incorrect or misleading information who come forward to disclose such conduct will not be tolerated. be amended or removed. Western Water is considered to be a Government agency under the Act and the decision to release The objectives of the Act are to: information is made by an authorised officer. • promote a culture in which staff feel safe to make disclosures During 2011/12, there was one request for access to information in • protect people who disclose information about serious accordance with the Act. There was also one request outstanding wrongdoing within the public sector from recrimination at 30 June 2011 that was dealt within during the reporting period. or other adverse consequences Access was granted in full to one request. As at 30 June 2012, all • provide a framework for investigating disclosed matters requests were finalised. • ensure that investigated matters are dealt with properly. Table 27: Freedom of information summary Western Water is committed to the aims and objectives of the Personal requests received 0 Whistleblowers Protection Act 2001. It does not tolerate improper conduct by its employees, officers or members, nor the taking Non personal requests received 1 of reprisals against those who come forward to disclose Requests outstanding at 30 June 2012 0 such conduct. Capital works & other dis c losures & other works Capital Internal reviews received 1 Western Water recognises the value of transparency and Internal reviews where the original decision 1 accountability in its administrative and management practices, was confirmed and supports the making of disclosures that reveal corrupt Internal reviews where the original decision 0 conduct, conduct involving a substantial mismanagement of public was varied or overturned resources, or conduct involving a substantial risk to public health and safety or the environment. VCAT appeals lodged 1 VCAT appeals confirmed decision 1 All reasonable steps will be taken to protect people who make such disclosures from any detrimental action in reprisal for making the VCAT appeals varied or overturned decision 0 disclosure. It will also afford natural justice to the person who is Exemptions in requests, internal reviews s.25(A)1, s.33(1), the subject of the disclosure. and VCAT appeals s.75 Western Water’s Whistleblowers Protection procedure is available Total dollar of application fees collected $25 to staff on Western Water’s intranet and can be made available to and waived members of the public upon request. Total dollar of charges collected and waived $103 No disclosures were reported in accordance with the Act during this or the prior reporting period.
Names and titles of decision makers: Whistleblower reporting procedures Authorised person: Les McLean, Disclosures of improper conduct or detrimental action by Western General Manager Strategy and Performance Water or its employees may be made to the following officers:
Principal officer: John Wilkinson, • The protected disclosure coordinator: Managing Director General Manager Corporate Services
Requests for access to information held by Western Water should • The protected disclosure officer(s): be made in writing to: General Manager Corporate Services • The welfare manager: FOI Officer - David Anderson, General Manager Human Resources Manager Corporate Services Western Water All correspondence, phone calls and emails from internal PO Box 2371 or external whistleblowers will be referred to the protected Sunbury DC Victoria 3429 disclosure coordinator.
Contact details: 9218 5400 or [email protected]
24 Western Water ANNUAL REPORT 2011/12 Where a person is contemplating making a disclosure and is Risk management concerned about approaching the protected disclosure coordinator or a protected disclosure officer in the workplace, he or she can In 2011/12, Western Water developed a new risk framework based call the relevant officer and request a meeting in a discreet location on the international risk management standard ISO 31000:2009 away from the workplace. Risk Management – Principles and Guidelines. The new framework provides a consistent, transparent and efficient approach for A disclosure about improper conduct or detrimental action by managing and mitigating the key risks facing the organisation. Western Water or its employees may also be made directly to Integration of the new framework across Western Water will Ombudsman Victoria: continue in 2012/13. Ombudsman Victoria Risk management attestation GPO Box 469 Melbourne Vic 3001 We certify that Western Water has risk management processes in place consistent with the Australian/New Zealand Risk Web: www.ombudsman.vic.gov.au Management Standard (4360:2004) and an internal control system Email: [email protected] is in place that enables the executive to understand, manage and Telephone: 03 9613 6222 satisfactorily control risk exposures. Toll free: 1800 806 314 (regional only) Western Water’s audit committee verifies this assurance and that Additional information available the risk profile of Western Water has been critically reviewed on request within the last 12 months. Subject to the Freedom of Information Act 1982, the following information is available on request:
• a statement that declarations of pecuniary interests have been duly completed by all relevant officers Capital works & other dis c losures & other works Capital • details of shares held by a senior officer as nominee, Terry Larkins or held beneficially in a statutory authority or subsidiary Chairman • details of all publications produced by Western Water Western Water about itself, and how these can be obtained • details of changes in prices, fees, charges, rates and levies charged by Western Water • details of any major external reviews carried out on Western Water • details of major research and development activities Russell Anderson undertaken by Western Water Chairman, Audit Committee • details of overseas visits undertaken including a summary Western Water of the objectives and outcomes of each visit • details of major promotional, public relations & marketing 22 August 2012 activities undertaken by Western Water to develop community awareness of Western Water 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 Western Water and details of time lost through industrial accidents and disputes • a list of major committees sponsored by Western Water, the purpose of each committee and the extent to which the purposes have been achieve • details of all consultancies and contractors including consultants/contractors engaged; services provided; and expenditure committed.
Leading with local solutions 25 Section 5 Performance report Financial performance indicators
Performance Indicator Notes 2010-11 Result 2011-12 Result 2011-12 Target Variance %
Internal financing ratio 1 15.8% 52.7% 31.9% 65% (Net operating cash flow - dividends)/capital expenditure
Gearing ratio 20.5% 22.1% 21.5% 3% Total debt (including finance leases)/total assets
Interest cover (EBIT) 1.55 times 1.56 times 1.6 times (2%) Earnings before net interest & tax expense/net interest expense
Interest cover (cash) 2 1.74 times 2.57 times 2.0 times 35% Cash flow from operations before net interest and tax payments/net interest payments
ort Notes: 1. operating cash flow was better than plan. This was due to lower than expected capital expenditure payments as a result of June 2011 accruals being less than plan.
2. operating cash flow was better than plan as interest payments were lower than expected due to lower interest rates and borrowings occurring later in the year than planned. Performance re p Performance
26 Western Water ANNUAL REPORT 2011/12 Service & environmental performance indicators
Performance Indicator Notes 2010-11 Result 2011-12 Result 2011-12 Target Variance %
Water supply interruptions 3 10 10 2.0 (400%) Number of customers receiving >5 unplanned interruptions in the year
Interruption time indicators 4 57 minutes 48 minutes 90 minutes 47% Average duration of unplanned water supply interruptions
Restoration of water supply 98% 99% 98% 1% Unplanned water supply interruptions restored within 5 hours
Reliability of sewerage collection 5 145 94 n/a 35% services indicators Sewer spills from reticulation and branch sewers (priority 1 and 2)
Containment of sewer spillages 100% 100% 100% 0% ort Sewerage spills contained within 5 hours
Customer complaints indicators 6 3.47 2.95 3.92 25% Water quality complaints per 1000 customers
Sewerage service quality and reliability 5 0.02 0.00 0.05 100% re p Performance complaints per 1000 customers
Billing complaints per 1000 customers 7 0.38 0.53 0.25 (110%)
Sewage odours complaints per 1000 customers 5 0.00 0.00 0.05 n/a
Notes: 3. 10 customers from Lancefield received >5 interruptions in 2011/12 due to multiple bursts in the same pipe. This length of main has been scheduled for replacement in the capital investment program this year.
4. The 90 minute target allows for the occurrence of difficult or complex burst scenarios where temporary water cannot be provided. During 2011/12, no such situations occurred, hence the improved result.
5. With Western Water’s Sewer Spill Prevention Strategy in place, the focus is to reduce sewer spills and blockages per 100km. For 2011/12, this program showed continuous improvement.
6. There has been little variation in taste and odour for customers during the reporting period as there have been no major changes to supply systems.
7. A total of 17 complaints were received with no systemic issues identified. However, Western Water continues to focus on process improvements and flexible payment options to address known billing concerns.
Leading with local solutions 27 Service & environmental performance indicators (cont.)
Performance Indicator Notes 2010-11 Result 2011-12 Result 2011-12 Target Variance %
Reuse indicators: Effluent reuse (volume) - Bacchus Marsh 75% 96% 100% (4%) - Gisborne 66% 10% 67% (57%) - Melton 73% 77% 100% (23%) - Riddells Creek 7% 43% 100% (57%) - Romsey 41% 29% 100% (71%) - Sunbury 27% 35% 89% (54%) - Woodend 2% 1% 100% (99%) Total 8 51% 56% 95% (39%)
Reuse indicators: Biosolids reuse (dry mass) - Bacchus Marsh - Gisborne 76% 69% 100% (31%)
ort - Melton 219% 99% 100% (1%) - Riddells Creek 0% - Romsey 0% 100% - Sunbury 99% 99% 100% (1%)
Performance re p Performance - Woodend 9 2,980% Total 126% 117% 100% 17%
Sewage treatment standards (number of analyses complying with licenceagreements as % of samples) - Bacchus Marsh 100% 100% 100% 0% - Gisborne 100% 100% 100% 0% - Melton 100% 100% 100% 0% - Riddells Creek 100% 100% 100% 0% - Romsey 100% 100% 100% 0% - Sunbury 10 100% 86% 100% (14%) - Woodend 100% 100% 100% 0% Total 100% 97% 100% 3%
Notes: 8. demand has reduced due to increased inflows from heavy rain events and reduced irrigation demand after several years of above average rainfall, particularly during the irrigation season.
9. Woodend’s second lagoon was de-sludged and biosolids accumulated over many years were beneficially reused.
10. E.coli at Sunbury Recycled Water Plant exceeded EPA licence limits due to malfunctions on the chlorine analyser.
28 Western Water ANNUAL REPORT 2011/12 Performance report 2011/12 certification
We certify that the accompanying Performance Report for Western Region Water Corporation in respect of the 2011-12 financial year is presented fairly in accordance with the Financial Management Act 1994.
The statement outlines the relevant performance indicators as determined by the responsible Minister, the actual results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets.
As at the date of signing, we are not aware of any circumstances which would render any particulars in the Performance Report to be misleading or inaccurate.
Terry Larkins Director
ort
Neil Brennan Performance re p Performance Accountable Officer
29 August 2012
Leading with local solutions 29 Auditor-General’s Report on the Performance Report ort Performance re p Performance
30 Western Water ANNUAL REPORT 2011/12 ort Performance re p Performance
Leading with local solutions 31 Section 6 Financial report Performance Summary 2011/12
Net profit of $5.2 million developer revenue of $21.2 million Capital expenditure of $27.9 million debt level now $149 million
The following summary table and graphs illustrate that in the 2011/12 financial year, Western Water made an overall surplus of $5.2 million before tax, including developer assets and cash contributions of $21.2 million.
Western Water invested $27.9 million capital works during the year, which was partly financed from operating cash flows of $14.1 million. The debt level has now increased to $149 million.
Table F1: Summary of financial results
Financial result $’000 2007/08 2008/09 2009/10 2010/11 2011/12 % change Plan 2011/12
REVENUE
Service charges 33,551 39,691 44,159 48,410 55,180 14.0% 56,761 New customer contributions 17,538 14,204 16,017 17,095 21,168 23.8% 16,820 Government contributions 140 1,270 142 (88.8%) 0 Interest 132 119 33 49 137 179.6% 40 Other 1,543 1,520 2,795 2,249 772 (65.7%) 2,128
Financial report TOTAL 52,764 55,674 63,004 69,073 77,399 9.6% 75,749
EXPENSES
Operating expenses 29,714 33,216 38,024 41,496 45,736 10.2% 45,237 Corporate expenses 9,454 10,510 11,707 13,794 15,537 12.6% 13,522 Finance 2,177 3,847 5,706 7,893 9,326 18.2% 9,773 Environment contribution 1,300 1,615 1,615 1,615 1,615 0.0% 1,615 TOTAL 42,645 49,188 57,052 64,798 72,214 11.4% 70,147
NET PROFIT BEFORE TAX 10,119 6,486 5,952 4,275 5,185 21.3% 5,602
32 Western Water ANNUAL REPORT 2011/12 Table F2: Summary of financial performance
Financial Result $’000 2007/08 2008/09 2009/10 2010/11 2011/12 % change Plan 2011/12
Current assets 12,521 9,770 16,235 16,143 21,534 33.4% 17,918 Non current assets 434,581 470,548 505,094 613,953 652,857 6.3% 664,879 Total assets 447,102 480,318 521,329 630,096 674,391 7.0% 682,797
Current liabilities 20,063 18,464 15,617 32,941 35,828 200.0% 13,322 Non current liabilities 73,102 105,840 144,168 176,070 206,073 4.6% 223,725 Total liabilities 93,165 124,304 159,785 209,011 241,901 15.7% 237,047
Net cash flow from 10,648 7,312 7,853 5,448 14,132 159.4% 9,657 operations Payments for property plant 33,078 39,746 35,988 34,247 24,571 (28.3%) 31,766 & equipment
Table F3: Financial performance indicators
Performance indicator 2007/08 2008/09 2009/10 2010/11 2011/12 Plan 2011/12
Internal financing ratio 32.2% 18.4% 21.8% 15.9% 55.1% 30.4% Gearing ratio 9.6% 14.4% 19.6% 20.5% 22.1% 21.5% Interest cover (EBIT) 5.95 2.74 2.05 1.55 1.56 2.00 Interest cover (cash) 7.07 3.05 2.21 1.64 2.57 1.60 Return on average assets 1.7% 1.1% 1.0% 0.5% 0.6% 2.3% Return on average equity 2.1% 1.4% 1.3% 0.7% 0.9% 0.9% Financial report
Leading with local solutions 33 Revenue Expenditure Chart F1: Revenue - 5 years Chart F3: Expenses 5 years
$M $M 80 80 70 70 60 60 2011/12 2011/12
2010/11 50 50 2010/11 40 Budget 2011/12 40 2009/10 Budget 2011/12
30 30 2008/09 2009/10 2007/08
20 2008/09 20 2007/08 10 10 0 0
Fixed charges for a single residential property increased by 7.5% Expenses were $2.1 million above plan due to the $1.9 million in the year. However, Western Water’s total fixed service income provision for a contribution to the Defined Benefit Superannuation increased by 12.8% due to growth in customer numbers. Scheme. Whilst the contribution is not due until 1 July 2013, Western Water intends to pay the contribution during the 2012/13 The easing of water restrictions combined with an 11% increase financial year. in consumption tariff charges resulted in a total increase in water consumption revenue of 17%. Interest expense increased by 18.2% due to higher debt level. However, this was under plan by $0.45 million due to lower New customer contribution revenue remained strong. However, interest rates and delayed timing of borrowings. these included a one off contribution of $4.0 million from the Eynesbury developers for recycled water reticulation assets. Depreciation expense was $1.3 million under plan as the plan was based on a forecast revaluation as at 30 June 2011. Expenses that Chart F2: Revenue sources were over budget included repairs and maintenance on both water 1% 17% Water treatment plants and recycled water plants.
20% Water consumption 17% Chart F4: Expenses breakdown 21% 33% Waste water 0% 18% Administration expenses 12% 1% Recycled water 18% 3% Defined super 7% Contributions for works provision 7% 20% 21% Assets received from 1% 2% Environmental 17% developers 3% 2% contribution 0% Investments 15% Water purchases 15% 1% Other revenue 33% 21% Depreciation 12% Financial report 12% Contractors & consultants 21% 17% Other expenses 12% Finance charges
34 Western Water ANNUAL REPORT 2011/12 Net profit before tax Shareholder dividend Chart F5: Net profit before tax – 5 years Western Water is required to pay a dividend in accordance with $M a determination of the Treasurer of Victoria under the Public 12 Authorities (Dividend) Act 1983, based on a prescribed percentage of the previous years’ adjusted net profit. An obligation to pay a 10 dividend only arises after consultation with the portfolio Minister and the Treasurer, and a formal determination is made by 8 the Treasurer. No shareholder dividend was paid for the year 2007/08 6 1 July 2011- 30 June 2012.
4 Major changes or factors affecting 2008/09 2009/10
2011/12 performance 2 2010/11 Budget 2011/12 Ongoing water restrictions have continued to see reduced water 0 consumption income over the past five years. However developer cash and contributions remain strong. Western Water made an overall surplus pre-tax of $5.2 million, including developer asset and cash contributions of $21 million. Significant changes in financial position New customer contributions There were no significant changes in financial position for the year ending 30 June 2012. New customer contributions continue to grow with 2011/12 figures including $4.0 million from the developers of Eynesbury for Consultancies recycled water reticulation assets. Historically, contributed assets consist mostly of residential subdivision assets. There were 32 consultancies costing in excess of $10,000 for 2011/12. In addition, there were 29 consultancies of less Chart F6: New customer contributions – 5 years than $10,000 engaged during the year totaling $91,790. Details of consultancies over $10,000 are contained in Table 26 of $M this report. 25 Disclosure of major contracts 20 Western Water did not enter into any contracts greater than $10 million during the year ending 30 June 2012. 15 2011/12 2010/11
2007/08 Post balance date events
10 2009/10
2008/09 There are no post balance date events that materially affect
5 Budget 2011/12 Western Water’s 2011/12 financial statements. It should be noted, however, that Western Water made payments 0 to Melbourne Water for bulk water during the financial year that were based on the costs of operation of the Wonthaggi Desalination
Plant. Delays in construction of the plant meant that the money Financial report collected by Melbourne Water for those costs was not required. This over recovery will be returned to customers by a freeze on prices in 2012/13 and a one-off bill adjustment if required. There should be no material impact on the financial position of Western Water, although details of the return to customers are still to be finalised. Access to information Other information as required under the Financial Management Act 1994 and FRD22B, but not specifically referred to, is available to the relevant Minister, Members of Parliament and the public upon request. Requests can be made to the General Manager, Corporate Services, Western Water, PO Box 2371, Sunbury DC Vic 3429. Outlook 2012/13 The challenge in future years for Western Water will be managing the timing of growth, addressing the requirement to invest in infrastructure upgrades before new customers arrive.
Leading with local solutions 35 Understanding the Financial Report
Statement of comprehensive income Notes to the accounts The statement of comprehensive income measures Western The notes to the accounts provide further information in relation Water’s performance over the year. It shows if a profit or loss has to the rules and assumptions used to prepare the financial report, been made in delivering products and services. The statement as well as additional information and detail about specific items includes all sources of income less all expenses incurred within the statements. in earning that income. For the year ending 30 June 2012, Western Water made a profit after tax of $3.7 million. The notes also advise the reader if there have been any changes to Accounting Standards, policy or legislation which may change Balance sheet the way the statements are prepared. Information in the notes is particularly useful when there has been a significant change from The balance sheet sets out Western Water’s net accumulated the previous year’s comparative figure. financial worth at a point in time. It shows the assets Western Water holds as well as liabilities or claims against those assets. Statutory certificate Both assets and liabilities are expressed as current or non- and Auditor General’s report current. Current means that assets or liabilities are expected to These attachments provide the reader with a written be converted to cash within the next 12 months. Non-current undertaking in relation to the correctness and trustworthiness assets or liabilities are long-term. of the financial statements.
Equity is total capital and reserves plus profits that have been In particular, the report from the Auditor General provides an reinvested in the business over the years. independent view and will advise the reader if there are any issues of concern. Statement of changes in equity The statement of changes in equity shows the changes in equity between two financial periods reflecting the increase or decrease in its net assets during the year.
The total overall change in equity during a financial year represents the total amount of income and expenses through the operating statement, and items charged directly to the equity account from revaluation of assets. Cash flow statement
Financial report The cash flow statement summarises Western Water’s cash receipts and payments for the financial year and the net ‘cash in hand’ position. It differs from the statement of comprehensive income in that it:
• excludes non-cash expenses such as depreciation • excludes the accruals taken into account by the income statement • includes payments or receipts in relation to capital items • includes any financing activities such as movements in loans held by Western Water.
For the year ending 30 June 2012, Western Water had a net cash inflow of $7.9 million.
36 Western Water ANNUAL REPORT 2011/12 Financial Report contents
Comprehensive Operating Statement 38
BALANCE SHEET 39
STATEMENT OF CHANGES IN EQUITY 40
CASH FLOW STATEMENT 41
Notes to the Financial Report 42
NOTE 1 Significant accounting policies 42 NOTE 2 Financial risk management objectives and policies 51 NOTE 3 Comprehensive operating statement – disclosures 54 NOTE 4 Income tax 56 NOTE 5 Cash & cash equivalent assets 57 NOTE 6 Receivables 58 NOTE 7 Property, plant & equipment 60 NOTE 8 Intangible assets 63 NOTE 9 Deferred tax assets 63 NOTE 10 Payables 63 NOTE 11 Interest bearing liabilities 64 NOTE 12 Employee benefits provisions 66 NOTE 13 Deferred tax liabilities 67 NOTE 14 Contribution by owners 67 NOTE 15 Reserves 67 NOTE 16 Accumulated funds 67 NOTE 17 Financial instruments 68
NOTE 18 Commitments 70 Financial report NOTE 19 Contingent liabilities and contingent assets 71 NOTE 20 Post-employment benefit 71 NOTE 21 Responsible persons and executive officer disclosures 73 NOTE 22 Reconciliation of profit/(loss) for the period after related income tax to net cash flows from operating activities 76 NOTE 23 Dividends 76 NOTE 24 Events occurring after the balance sheet date 76
STATUTORY CERTIFICATION 77
Auditor-General’s report on the financial report 78
Leading with local solutions 37 Comprehensive operating statement for the reporting period ended 30 June 2012
2011/12 2010/11 Notes $’000 $’000
Revenue Service charges 1(c), 3(a) 39,340 34,874 Water consumption 1(c), 3(a) 15,840 13,536 New customer contributions 1(c), 3(a) 21,168 17,095 Government contributions 1(c), 3(a) 142 1,270 Interest 1(c), 3(a) 137 49 Other revenue 1(c) 772 2,249 Total revenue 77,399 69,073
Expenses Depreciation 1(f), 3(c) 14,351 14,041 Amortisation 1(f), 3(c) 917 550 Employee benefits 1(m), 3(c) 13,418 10,787 Water purchases 10,894 10,628 Electricity 2,178 1,996 Environmental contribution 1(p), 18 1,615 1,615 Repairs and maintenance expenses 1(e) 1,483 1,372 Other operating & administration 17,859 15,016 Borrowing costs 1(d), 3(c) 9,326 7,893 Total expenses 72,041 63,898
5,358 5,175 Net gain(loss) on disposal of property, plant and equipment, 3(b) (173) (900) infrastructure
Financial report Net result before tax 5,185 4,275 Income tax expense 4 1,499 1,352 Net result for the period 16 3,686 2,923 Other Comprehensive Income Asset revaluation increment (net of tax) 7,719 55,333 Total Comprehensive income for the period 11,405 58,256
The above comprehensive operating statement should be read in conjunction with the accompanying notes.
38 Western Water ANNUAL REPORT 2011/12 Balance sheet as at 30 June 2012
2012 2011 Notes $’000 $’000
ASSETS Current assets Cash and cash equivalents 1(g), 5 12,463 4,564 Receivables 1(h), 6 8,562 10,955 Prepayments 509 624 Total current assets 21,534 16,143
Non-current assets Receivables 1(h), 6 216 243 Property, plant and equipment 1(f), 7 643,101 606,040 Intangible assets 1 (i), 8 6,227 4,052 Deferred tax assets 9 3,313 3,618 Total non-current assets 652,857 613,953
TOTAL ASSETS 674,391 630,096
LIABILITIES Current liabilities Payables 1(j), 10 15,746 7,747 Income in advance 1(c) 1,377 1,230 Interest bearing liabilities 11 15,500 21,000 Employee benefits 1(m), 12 3,205 2,964 Total current liabilities 35,828 32,941
Non-current liabilities Financial report Interest bearing liabilities 11 133,500 108,000 Deferred tax liabilities 13 72,573 68,070 Total non-current liabilities 206,073 176,070 TOTAL LIABILITIES 241,901 209,011
NET ASSETS 432,490 421,085 Equity Contributed capital 1(o), 14 160,413 160,413 Reserves 15 100,299 92,580 Accumulated funds 16 171,778 168,092 TOTAL EQUITY 432,490 421,085
The above balance sheet should be read in conjunction with the accompanying notes.
Leading with local solutions 39 Statement of changes in equity for the period ended 30 June 2012
Contributed Accumulated capital Reserves funds Total Notes $’000 $’000 $’000 $’000 Balance as at 30 June 2010 159,128 37,247 165,169 361,544 Net result for the year 2,923 2,923 Revaluation (net of tax) 55,333 55,333 Transactions with the State in its capacity as owner Contributions by owner 1,285 1,285 Balance as at 30 June 2011 160,413 92,580 168,092 421,085 Net result for the year 3,686 3,686 Revaluation net of tax (see note 7) 7,719 7,719 Balance as at 30 June 2012 160,413 100,299 171,778 432,490
The above statement of changes in equity should be read in conjunction with the accompanying notes. Financial report
40 Western Water ANNUAL REPORT 2011/12 Cash flow statement for the reporting period ended 30 June 2012
2011/12 2010/11 Notes $’000 $’000
Cash Flows from Operating Activities Receipts Tariffs and charges 62,904 54,894 GST received from ATO 4,342 5,296 Interest 137 49 67,383 60,239 Payments Employees (11,068) (10,327) Suppliers (31,256) (35,233) Interest and other costs of finance paid (9,136) (7,425) Environmental contribution (1,615) (1,615) Income tax payments - - GST paid to the ATO (176) (195) (53,251) (54,795)
Net cash (outflow) / inflow from operating activities 22 14,132 5,444 Cash Flows from Investing Activities (Payments) for property, plant & equipment (26,466) (34,243) Proceeds from sale of non-current assets 567 515 (Payment) for intangible assets (334) (1,276) Net cash (outflow) / inflow from investing activities (26,233) (35,004) Cash Flows from Financing Activities Proceeds from borrowings 41,000 26,750
(Repayment) of borrowings (21,000) - Financial report Proceeds from contributed capital by State Government - - Net cash (outflow) / inflow from financing activities 20,000 26,750
Net increase / (decrease) in cash held 7,899 (2,810)
Cash and cash equivalents at the beginning of the financial year 4,564 7,374 Cash and cash equivalents at end of the financial year 5 (a) 12,463 4,564
The above cash flow statement should be read in conjunction with the accompanying notes.
Leading with local solutions 41 Notes to the Financial Report for the year ended 30 June 2012
Note 1 Significant Accounting Policies Rounding Unless otherwise stated, amounts in the report have been rounded (a) Basis of Accounting to the nearest thousand dollars. General Historical cost convention The financial report includes the separate financial statements These financial statements have been prepared under the historical for Western Region Water Corporation (Western Water or the cost convention, as modified by the revaluation of certain classes corporation) as an individual reporting entity. This financial of property, plant and equipment. report is a general purpose financial report that consists of a comprehensive operating statement, balance sheet, statement of Accounting estimates changes in equity, cash flow statement and notes accompanying The preparation of financial statements in conformity with these statements. AAS requires the use of certain critical accounting estimates The general purpose financial report has been prepared in that affect the application of accounting policies and the reported accordance with Australian Accounting Standards (AAS), amounts of assets, liabilities, income and expenses. Actual results Interpretations and other authoritative pronouncements of the may differ from these estimates. It also requires management to Australian Accounting Standards Board, and the requirements exercise its judgement in the process of applying Western Water’s of the Financial Management Act 1994 and applicable Ministerial accounting policies. Directions. Western Water is a not for-profit entity for the purpose Financial statements presentation of preparing the financial statements. Western Water has applied the revised AASB 101 Presentation of The accrual basis of accounting has been applied in the preparation Financial Statements which became effective for reporting periods of these financial statements whereby assets, liabilities, equity, beginning on or after 1 January 2011, and AASB 1054 Australian income and expenses are recognised in the reporting period to Additional Disclosures which became effective for reporting which they relate, regardless of when cash is received or paid. periods beginning on or after 1 July 2011.
The annual financial statements were authorised for issue by (b) Changes in accounting policy the board 29 August 2012. The accounting policies are consistent with those of the previous The principal address is: year, unless stated otherwise. Western Region Water Corporation 36 Macedon Street (c) Revenue recognition Sunbury VIC 3429 Water and sewerage charges Accounting policies Tariff and service charges are recognised as revenue when levied or determined. Water usage charges by measure are recognised as
Financial report Unless otherwise stated, all accounting policies applied are consistent with those of the prior year. Where appropriate, revenue when the product is provided. Meter reading is undertaken comparative figures have been amended to align with current progressively during the year. An estimation, calculated by utilising presentation and disclosure. the bulk meter reading at the end of the reporting period, is made at the end of each accounting period in respect of meters which Functional and presentation currency have not been read at balance date. Items included in the financial report are measured using the Trade waste charges are recognised as revenue at the end of the currency of the primary economic environment in which Western service delivery period. Region Water Corporation operates (‘the functional currency’). The financial statements are presented in Australian dollars, Amounts received from customers in advance of accounts being which is Western Regional Water Corporation’s functional and issued are recognised as a liability. presentation currency. New customer contributions/fees paid by developers Classification between current and non-current Water infrastructure assets built by developers in a new land In the determination of whether an asset or liability is current or subdivision that on completion are provided to Western Water non-current, consideration is given to the time when each asset or fees paid by developers to connect new developments to or liability is expected to be realised or paid. The asset or liability Western Water’s existing water supply and sewerage systems is classified as current if it is expected to be realised or settled are recognised as revenue when the contributions are received. within the next twelve months, being Western Water’s operating cycle - see 1(m) for a variation in relation to employee benefits.
42 Western Water ANNUAL REPORT 2011/12 Government grants and contributions Measurement of non-current physical assets Government grants and contributions are recognised as All non-current physical assets are recognised initially at cost and operating revenue on receipt or when Western Water obtains subsequently revalued at fair value less accumulated depreciation control of the contributions and meets certain other criteria as and impairment in accordance with the requirements of Financial outlined by AASB 1004, whichever is the sooner, and disclosed Reporting Direction (FRD) 103D. in the comprehensive operating statement as Government grants and contributions. However, grants and contributions received Revaluations are conducted in accordance in accordance with FRD from the Victorian State Government which were originally 103D. Scheduled revaluation is undertaken every five years with appropriated by the Parliament as additions to net assets or where an annual assessment of fair value to determine if it is materially the Minister for Finance and the Minister for Water have indicated different to carrying value. If the difference to carrying value is are in the nature of owners’ contributions are accounted for greater than 10%, a management revaluation is undertaken while as equity - contributed capital. a movement greater than 40% will normally involve an approved valuer (usually the Valuer General of Victoria) to perform detailed Sale of assets assessment of the fair value. If the movement in fair value since The profit or loss on sale of an asset is determined when control the last revaluation is less than or equal to 10%, then no change has passed to the buyer. is made to carrying amounts.
Interest Plant, equipment and motor vehicles are measured at fair value. Interest income is recognised as revenue using the effective For the plant, equipment and vehicles asset class, where the interest rate method. corporation is able to demonstrate that there is no evidence that a reliable market-based fair value (or other fair value indicators) Lease or rental income exist for these assets, depreciated replacement cost could Income from operating leases (i.e. rentals) is recognised as income represent a reasonable approximation of fair value. on a straight line basis over the lease term. Water infrastructure assets, at both the entity reporting level (d) Borrowing costs and whole of government reporting level, are measured at fair value less accumulated depreciation and impairment in Borrowing costs are recognised as an expense in the period in accordance with FRD 103D. These assets comprise substructures which they are incurred. Borrowing costs include interest on bank or underlying systems held to facilitate harvesting, storage, overdrafts and short term and long term borrowings, amortisation treatment and transfer of water to meet customer needs. of discounts or premiums relating to borrowings, amortisation of They also include infrastructure assets that underlie sewage ancillary costs incurred in connection with the arrangement of and recycled water systems. borrowings and finance lease charges. The initial fair value assessment for water infrastructure in the (e) Recognition and measurement of assets prior period was undertaken with involvement from Valuer General Property, plant and equipment represent non-current physical of Victoria (VGV) and under the instructions of Department of assets comprising land, buildings, water, sewerage and recycled Treasury and Finance (DTF). The assessment was performed on water infrastructure, plant, equipment and motor vehicles, used by a portfolio basis for various categories of water infrastructures. the water corporation in its operations. Items with a cost or value Further details of the valuation exercise are provided in note 7. in excess of $1,000 and a useful life of more than one year are recognised as an asset. All other assets acquired are expensed.
Acquisition Financial report The purchase method of accounting is used for all acquisitions of assets, being the fair value of the assets provided as consideration at the date of acquisition plus any incidental costs attributable to the acquisition.
Where assets are constructed by Western Water, the cost at which they are recorded includes an appropriate share of fixed and variable overheads.
Assets acquired at no cost by Western Water are recognised at fair value at the date of acquisition.
Repairs and maintenance Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Where the repair relates to the replacement of a component of an asset and the cost exceeds the capitalisation threshold, the cost is capitalised and depreciated.
Leading with local solutions 43 Notes to the Financial Report for the year ended 30 June 2012
Revaluation of non-current assets (f) Depreciation and amortisation of non-current assets Revaluation increments are credited directly to equity in the revaluation reserve, except to the extent that an increment All non current physical assets that have a limited useful life are reverses a revaluation decrement in respect of that class of depreciated. Where assets have separate identifiable components asset previously recognised as an expense in determining the that have distinct useful lives and/or residual values a separate net result, the increment is recognised as revenue in determining depreciation rate is determined for each component. the net result. Depreciation on other assets is calculated using the straight line Revaluation decrements are recognised immediately as an expense method to allocate their cost or revalued amounts, net of their in the net result, except that, to the extent that a credit balance residual values, over their estimated useful lives, commencing from exists in the revaluation reserve in respect of the same class the time the asset is held ready for use. The assets residual values of asset, they are debited to the revaluation reserve. and useful lives are reviewed, and adjusted where required, at each balance date. Revaluation increases and revaluation decreases relating to individual assets within a class of property, plant and equipment Intangible assets with finite useful lives are amortised as are offset against one another within that class but are not offset an expense on a systematic basis (typically straight line), in respect of assets in different classes. commencing from the time the asset is available for use. The amortisation periods are reviewed and adjusted if appropriate at Revaluation reserves are not transferred to accumulated funds each balance date. Intangible assets with indefinite useful lives on derecognising of the relevant asset. are not amortised. However all intangible assets are assessed To better align asset classes disclosed in note 7 with the for impairment annually as outlined in note 1(e). independent valuation, asset previously disclosed as Equipment Major depreciation periods used are listed below and are have been reclassified as infrastructure assets where they directly consistent with the prior year unless otherwise stated: relate to treatment or distribution network. Comparative amounts have been adjusted accordingly and disclosed in note 7(b). D depreciation periods
Impairment of assets Buildings 50 years
Intangible assets with identifiable useful lives are tested annually Infrastructure as to whether their carrying values exceed their recoverable Water & recycled water: amount. All other assets are assessed annually for indicators - storage 50-100 years for impairment except for deferred tax assets. - distribution network 60 years If there is an indication of impairment, the assets concerned - treatment plants 10-60 years are tested as to whether their carrying values exceed their Seweage: Financial report recoverable amount. Where an asset’s carrying amount exceeds its - storage 50-100 years recoverable amount, the difference is written off by a charge to the - distribution network 80 years comprehensive operating statement except to the extent that the - treatment plants 10-60 years write down can be debited to an asset revaluation reserve amount Plant & equipment applicable to that class of asset. - equipment 5-20 years The recoverable amount for most assets is measured at the higher - machinery 10-15 years of depreciated replacement cost and fair value less costs to sell. - furniture & computers 3-10 years Recoverable amount for assets held primarily to generate net cash - motor vehicles 2 years inflows is measured at the higher of the present value of future Intangibles cash flows expected to be obtained from the asset and fair value - software 5 years less costs to sell. It is deemed that, in the event of the loss of an - water entitlement infinite asset, the future economic benefits arising from the use of the asset will be replaced unless a specific decision to the contrary Operating leases has been made. Leases in which a significant portion of the risks and rewards A reversal of an impairment loss on a revalued asset is credited of ownership are retained by the lessor are classified as directly to equity under the heading revaluation reserve. However, operating leases. Payments made under operating leases (net to the extent that an impairment loss on the same class of asset of any incentives received from the lessor) are charged to the previously recognised in the comprehensive operating statement, comprehensive operating statement on a straight line basis over a reversal of that impairment loss is also recognised in the the period of the lease, in periods in which they are incurred, comprehensive operating statement. as this represents the pattern of benefits derived from the leased assets.
44 Western Water ANNUAL REPORT 2011/12 Leasehold improvements (j) Payables
Leasehold improvements are recognised at cost and are amortised Payables consist predominantly of trade and sundry creditors. over the unexpired period of the lease or the estimated useful life These amounts represent liabilities for goods and services of the improvement, whichever is the shorter. At balance date, provided to Western Water prior to the end of the financial leasehold improvements are amortised over a 10 year period. year, which are unpaid at financial year end. The amounts are (g) Cash and cash equivalent assets unsecured and are usually paid within 30 days of recognition. Payables are initially recognised at fair value, being the cost of the Cash and cash equivalents include cash on hand, deposits held goods and services, and subsequently measured at amortised cost. at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that Under construction contracts, there is generally a requirement are readily convertible to known amounts of cash and which to withhold retention funds from payments during construction, are subject to an insignificant risk of changes in value, and bank and a requirement to hold a security deposit, being a percentage overdrafts. Bank overdrafts are shown within interest bearing of the contract price, for up to 12 months after completion of liabilities on the balance sheet, but are included within cash and construction. These funds are recognised as current liabilities cash equivalents for cash flow statement presentation purposes. (see note 10).
(h) Receivables Any Waterways & Drainage Charge that has been collected in cash from customers and not paid to Melbourne Water, or amounts Trade receivables are recognised initially at fair value and that remain outstanding from customers, are recognised as a subsequently measured at amortised cost, less an allowance for current liability. impaired receivables. Trade receivables are due for settlement no more than 28 days from the date of recognition for water utility (k) Interest Bearing Liabilities debtors, and no more than 30 days for other debtors. Non current Borrowings are initially recognised at fair value, net of transaction debtors are private schemes, payable on terms of up to 20 years. costs incurred. Borrowings are subsequently measured at Collectability of trade receivables is reviewed on an ongoing basis. amortised cost. Any difference between the proceeds (net of Debts which are known to be uncollectable are written off. An transaction costs) and the redemption amount is recognised in allowance for impaired receivables is established when there is the comprehensive operating statement over the period of the objective evidence that the corporation will not be able to collect borrowings, using the effective interest method. all amounts due according to the original terms of receivables. Borrowings are classified as non-current liabilities only if Western The amount of the allowance is the difference between the Water has an unconditional right to defer settlement of the liability asset’s carrying amount and the present value of estimated future for at least 12 months after the balance sheet date. In past years cash flows, discounted at the original effective interest rate. The if the Treasurer’s borrowing approval to refinance liabilities amounts credited to the allowance are recognised as an expense was received prior to balance sheet date, this was taken as an in the comprehensive operating statement. unconditional right to defer, however during 2011-12 this policy Payments received from customers in advance have been was changed to include only loans where an arrangement with separated out from debtors and disclosed as a liability. the financier was in place to refinance. Prior year comparison has been amended accordingly. Commenced in July 2008, Western Water bill both existing customers and non customers a Waterways & Drainage Charge The following table shows the different treatment of for all properties that fall within a designated boundary. The charge June 2011 interest bearing liability disclosure from the 2010/11 is not recognised as revenue by Western Water as the funds are financial statements. Financial report only collected on behalf of Melbourne Water and is therefore recognised as a corresponding liability. Western Water only remits $000 funds once the account has been paid. If the account is not paid, 30 June 2011 interest 2011 financial 2012 financial it is not included in the mercantile agent’s collection procedures. bearing liability statements statements
Fixed and variable service charges for water, sewer, recycled Current – interest bearing - 21,000 water (excluding Class B and C) and Melbourne Waterways liability charges are levied under the Water Act 1989 and therefore remain Non-current – interest 129,000 108,000 an outstanding charge on the property to be collected at a future bearing liability time when the property is sold.
(i) Intangibles
Intangible assets represent identifiable non monetary assets without physical substance.
Intangible assets are recognised at cost. Subsequently intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to Western Water.
Western Water recognises computer software purchased for normal operations as an intangible asset along with any water entitlements paid for consideration.
Leading with local solutions 45 Notes to the Financial Report for the year ended 30 June 2012
(l) Financial Instruments Long service leave (LSL)
Recognition Current liability – unconditional LSL (representing 7 or more years of continuous service) is disclosed as a current liability even where Financial instruments are initially measured at fair value, plus the Corporation does not expect to settle the liability within 12 in the case of a financial asset or financial liability not at fair months because it does not have the unconditional right to defer value through profit and loss, transaction costs that are directly the settlement of the entitlement should an employee take leave attributable to the acquisition or the issue of the financial asset or within 12 months. liability. Subsequent to initial recognition, the financial instruments are measured as set out below. The components of this current LSL liability are measured at:
Loans and receivables • Present value – component that the corporation does not Loans and receivables are non-derivative financial assets with expect to settle within 12 months; and fixed or determinable payments that are not quoted in an active • nominal value – component that the corporation expects to market. They are included in current assets, except for those with settle within 12 months. maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are Current liability – conditional LSL (representing less than 7 years included in trade and other receivables and other receivables of continuous service) is also disclosed as a current liability as in the balance sheet. Loans and receivables are recorded at staff have the ability to transfer accumulated long service leave amortised cost less impairment. to other water corporations under Water (Long Service Leave) Regulations 2001 No. 79 should they transfer employment within Impairment of financial assets the water sector. Western Water’s policy is to recognise conditional At each reporting date, Western Water assesses whether there is long service leave as a current liability based on the portability objective evidence that a financial instrument has been impaired. and frequent staff movements. Conditional LSL is required to be In the case of available-for-sale equity instruments, a significant measured at present value. or prolonged decline in value of the instrument is below its cost In calculating present value, consideration is given to expected is considered as an indicator that the investment is impaired. future wage and salary levels, experience of employee departures If any such evidence exists for available for sale financial assets, and periods of service. Expected future payments are discounted the cumulative loss measured as the difference between the using market yields at the reporting date on national government acquisition cost and the current fair value, less any impairment bonds with terms to maturity and currency that match, as closely loss on that financial asset previously recognised in profit or loss as possible, the estimated future cash outflows. is removed from equity and recognised in the comprehensive operating statement. Impairment losses are recognised in the (ii) Superannuation comprehensive operating statement. Impairment losses recognised in the comprehensive operating statement on equity instruments The amount charged to the comprehensive operating statement Financial report classified as available for sale are not reversed through the in respect of superannuation represents the contributions made to comprehensive operating statement. the superannuation plan, in respect to the current services of entity staff. Superannuation contributions are made to the plans based on (m) Employee benefits the relevant rules of each plan.
(i) Wages and salaries, annual leave and sick leave. Details of the last actuarial review conducted by Vision Super for Liabilities for wages and salaries, annual leave and accumulating Defined Benefit members as at 31 December 2011 are contained sick leave expected to be settled within 12 months of the reporting at note 20. date are recognised in employee benefit liabilities in respect of (iii) Employee benefit on-costs employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled, Employee benefit on-costs, including payroll tax and worker’s at their nominal values plus on costs. Employee benefits which compensation are recognised and included in employee benefit are not expected to be settled within 12 months are measured as liabilities and costs when the employee benefits to which they the present value of the estimated future cash flows to be made relate are recognised as liabilities. by Western Water, in respect of services rendered by employees (iv) Performance payments up to the reporting date. Regardless of the expected timing of Performance payments for Western Water’s executive officers settlements, liabilities in respect of the employee benefits are are based on a percentage of the annual salary package provided classified as a current liability, unless there is an unconditional right under their contract(s) of employment. A liability is recognised and to defer the settlement of the liability for at least 12 months after is measured as the aggregate of the amounts accrued under the the reporting date, in which case it would be classified as a non- term of the contracts to balance date. current liability.
46 Western Water ANNUAL REPORT 2011/12 (n) Provisions (q) Taxation
Provisions are recognised when Western Water, as a result of Western Water is subject to the National Tax Equivalent Regime a past event, has a legal or constructive obligation that can be (NTER), which is administered by the Australian Taxation Office. estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The income tax expense or revenue for the period is the expected tax payable or receivable on the current period’s taxable income The amount recognised as a provision is the best estimate of the based on the national income tax rate of 30%, adjusted by changes consideration required to settle the present obligation at the end of in deferred tax assets and liabilities attributable to temporary the reporting period, taking into account the risks and uncertainties differences between the tax bases of assets and liabilities and surrounding the obligation. their carrying amounts in the financial statements, and unused tax losses. (o) Contributions by Owners Deferred tax assets and liabilities are recognised for temporary Additions to net assets which have been designated as contributions differences at the tax rate expected to apply when the assets by owners are recognised as contributed capital. Other transfers are recovered or liabilities are settled, based on those tax rates that are in the nature of contributions or distributions have also which are enacted or substantially enacted. The relevant tax rates been designated as contributions by owners. Transfer of net assets are applied to the cumulative amounts of deductible and taxable arising from administrative restructures are treated as distributions temporary differences to measure the deferred tax asset or to or contributions by owners. liability. No deferred tax asset or liability is recognised in relation (p) Environmental contributions to these temporary differences if they arose in a transaction that at the time of the transaction did not affect either accounting profit The Water Industry (Environmental Contributions) Act 2004 or taxable profit or loss. Deferred tax assets are recognised for (the Act) was amended by the Water Industry Act 1994 to make deductible temporary differences and unused tax losses only if it provision for environmental contributions to be paid by water is probable that future taxable amounts will be available to utilise supply corporations. The Act establishes an obligation for those temporary differences and losses. Current and deferred tax corporations to pay into consolidated fund annual contributions balances attributable to amounts recognised directly in equity are for the first period from 1 October 2004 to 30 June 2008 in also recognised directly in equity respectively. accordance with the pre-established schedule of payments, which sets out the amounts payable by each corporation. The contribution (r) Dividend policy period has been extended to cover the period 1 July 2008 until Western Water is required to pay a dividend in accordance with 30 June 2012. a determination of the Treasurer of Victoria under the Public The purpose for the environmental contribution is set out in Authorities (Dividend) Act 1983, based on a prescribed percentage the Act, and the funding may be used for the purpose of funding of the previous years’ adjusted net profit. initiatives that seek to promote the sustainable management An obligation to pay a dividend only arises after consultation with of water or address adverse water-related matters. the portfolio Minister and the Treasurer and a formal determination The environmental contributions are disclosed separately in the is made by the Treasurer. Western Water’s preliminary estimate for comprehensive operating statement. the reporting period is $nil. (s) Goods and services tax
Revenues, expenses and assets are recognised net of goods and services tax (GST), except where the amount of GST incurred Financial report is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense.
Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows arising from operating activities are disclosed in the cash flow statement on a gross basis - i.e. inclusive of GST. The GST component of cash flows arising from investing and financing activities which is recoverable or payable to the taxation authority is classified as operating cash flows.
Leading with local solutions 47 Notes to the Financial Report for the year ended 30 June 2012
(t) New accounting standards and interpretations issued that are not yet effective.
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2012 reporting period. As at 30 June 2012, the following standards and interpretations had been issued but were not mandatory for financial year ending 30 June 2012. The corporation has not and does not intend to adopt these standards early.
Applicable for annual Standard/ reporting periods Impact on interpretation Summary beginning on or after financial statements
AASB 9 Financial Instruments, AASB 9 Financial Instruments addresses 1 January 2013 Western Water is yet AASB 2010-7 Amendments the classification, measurement and to assess its full impact. to Australian Accounting derecognition of financial assets and financial Standards arising from liabilities. The standard is not applicable AASB 9 (December 2010) until 1 January 2013 but is available for early adoption. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. Western Water has not yet decided when to adopt AASB 9.
AASB 10 Consolidated Financial AASB10 introduces a single definition of 1 January 2013 Western Water is yet to Statements, AASB 11 Joint control that applies to all entities and focuses assess its full impact. Arrangements, AASB 12 on the need to have both power and rights or Western Water will apply Disclosure of Interests in Other exposure to variable returns. amended standard from Entities, AASB 127 Separate 1 January 2013. Financial Statements, AASB 128 AASB 11 introduces a new approach for Investments in Associates and which the focus is no longer on the legal Joint Ventures and AASB 2011-7 structure of joint arrangements, but rather on Amendments to Australian how rights and obligations are shared by the Accounting Standards arising parties to the joint arrangement. Based on the from the Consolidation and Joint assessment of rights and obligations, a joint Arrangements Standards. arrangement will be classified as either a joint operation or joint venture. Financial report AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128.
These standards provide more reliable and relevant information for users to assess the composition of the group and the amounts, timing and uncertainty of future cash flows.
48 Western Water ANNUAL REPORT 2011/12 Applicable for annual Standard/ reporting periods Impact on interpretation Summary beginning on or after financial statements
AASB 1053 Application of On 30 June 2010 the AASB officially 1 July 2013 The impact of this standard Tiers of Australian Accounting introduced a revised differential reporting will depend on instructions Standards, AASB 2010-2 framework in Australia. Under this provided by DTF on its Amendments to Australian framework, a two-tier differential reporting applicability to Western Accounting Standards arising regime applies to all entities that prepare Water. Western Water will from Reduced Disclosure general purpose financial statements. assess its impact once DTF Requirements, AASB 2011-2 has provided guidance on Amendments to Australian Tier 1 are the Australian Accounting this standard. Accounting Standards arising Standards as currently applied and Tier from the Trans-Tasman 2 is the reduced disclosure regime which Convergence Project – Reduced retains the recognition and measurement Disclosure Requirements and requirements of Australian Accounting AASB 2011-6 Amendments Standards but with reduced disclosure to Australian Accounting requirements. Standards – Extending Relief AASB 2011-6 extends the relief for from Consolidation, the Equity intermediate parent entities from Method and Proportionate consolidation, equity accounting and Consolidation – Reduced proportionate consolidation to parent entities Disclosure Requirements that report under tier 2, where the parent higher up the group is reporting either under tier 1 or tier 2.
AASB 13 Fair Value The standard explains how to measure 1 January 2013 / Western Water is yet Measurement, AASB 2011-8 fair value and aims to enhance fair value 1 July 2013 to assess its full impact. Amendments to Australian disclosures. Western Water will apply Accounting Standards arising amended standard from from AASB 13 and AASB 2012-1 1 January 2013. Amendments to Australian Accounting Standards – Fair Value Measurement – Reduced Disclosure Requirements
AASB 119 Employee Benefits, These standards require the recognition of all 1 January 2013 / This standard does not affect AASB 2011-10 Amendments to remeasurements of defined benefit liabilities/ 1 July 2013 Western Water. Australian Accounting Standards assets immediately in other comprehensive arising from AASB 119 and income (removed of the so called ‘corridor’ AASB 2011-11 Amendments method) and the calculation of a net interest Financial report to AASB 119 (September 2011) expense or income by applying the discount arising from Reduced Disclosure rate to the net defined benefit liability or asset. Requirements.
AASB 2010-8 Amendments to In December 2010, the AASB amended 1 January 2012 Western Water will apply Australian Accounting Standards AASB 112 Income Taxes to provide a the amendment from – Deferred Tax: Recovery of practical approach for measuring deferred 1 July 2012. It is currently Underlying Assets [AASB 112] tax liabilities and deferred tax assets when evaluating the impact of investment property is measured using the amendment. the fair value model. AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale.
Leading with local solutions 49 Notes to the Financial Report for the year ended 30 June 2012
Applicable for annual Standard/ reporting periods Impact on interpretation Summary beginning on or after financial statements
AASB 2010-10 Further AASB 1 First-time Adoption of Australian 1 January 2013 This amendment will Amendments to Australian Accounting Standards was amended in not affect the financial Accounting Standards – Removal December 2010 by eliminating references statements of Western Water. of Fixed Dates for First-time to fixed dates for one exemption and one Adopters [AASB 2009-11 & exception dealing with financial assets AASB 2010-7] and liabilities.
AASB 2011-3 Amendments to The amendments clarify the definition of 1 July 2012 Western Water will apply Australian Accounting Standards the ABS GFS Manual, facilitate the orderly the amended standard – Orderly Adoption of Changes adoption of changed to the Manual and from 1 July 2012. When to the ABS GFS Manual and improve related disclosures. the amendments are applied, Related Amendments the corporation will need Applicable only to not-for-profit entities and/ to disclose (in the note or public sector entities. containing the summary of accounting policies) a statement of compliance to this standard, a reference to the version of the ABS GFS Manual used or that the last version has not been used and the impact of this. Financial report
50 Western Water ANNUAL REPORT 2011/12 Note 2 Financial risk management objectives (A) Market Risk and policies Market risk is the risk that changes in market prices will affect the fair value or future cash flows of Western Water’s financial Western Water’s activities expose it to a variety of financial risks: instruments. Market risk comprises of foreign exchange risk, market risk, credit risk and liquidity risk. This note presents interest rate risk and other price risk. Western Water’s exposure information about Western Water’s exposure to each of these to market risk is primarily though interest rate risk, there is no risks, and the objectives, policies and processes for measuring exposure to foreign exchange risk and insignificant exposure to and managing risk. other price risks. Western Water’s board has the overall responsibility for the Objectives, policies and processes used to manage these risks establishment and oversight of Western Water’s risk management are disclosed in the paragraphs below: framework. Western Water’s overall risk management program focuses on the unpredictability of financial markets and seeks to (i) Interest rate risk minimise potential adverse effects on the financial performance Western Water’s exposure to market interest rates relates primarily of Western Water. Western Water uses different methods to to Western Water’s long term borrowings and funds invested on measure different types of risk to which it is exposed. These the money market. methods include sensitivity analysis in the case of interest rate and foreign exchange. As part of the 2012/13 approval from the Treasurer to borrow funds for capital expenditure projects and refinancing maturing debt, Risk management is carried out by the Manager Organisational Western Water was approved to enter into Forward Settling Loans Development and Risk under policies approved by the board. (“FSL”) to hedge/protect the value of the corporation’s assets and The board provides written principles for overall risk management, liabilities against adverse movements in interest rates in accordance as well as policies covering specific areas, such as foreign with its treasury management policies. As at 30 June 2012, no FSL exchange risk, interest rate risk, credit risk, use of derivative arrangements were in place (2011: N/A). financial instruments and non derivative financial instruments, and investment of excess liquidity. Western Water minimises its exposure to interest rate changes on its long term borrowings by holding a mix of fixed and floating rate The main risks Western Water is exposed to through its financial debt. Debt is sourced from Treasury Corporation Victoria and is instruments are as follows: managed within a range of Board approved limits with debt levels and interest rates being monitored regularly.
Western Water has minimal exposure to interest rate risk through its holding of cash assets and other financial assets. Western Water manages its interest rate risk by maintaining a cash investment from time to time.
(ii) Foreign exchange risk Western Water has no exposure to changes in the foreign exchange rate.
(iii) Other price risk Western Water has no significant exposure to other price risk. Financial report
Leading with local solutions 51 Notes to the Financial Report for the year ended 30 June 2012
The sensitivity analysis below has taken into consideration past performance, future expectations, economic forecasts and management’s knowledge and experience of the financial markets, the corporation believes that:
- a movement of 1% in interest rates is reasonable over the next 12 months.
30-Jun-12 Interest rate risk +1% -1% Carrying amount Result Equity Result Equity $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 12,463 18 18 (18) (18) Receivables 8,778 Financial liabilities Payables 15,746 Interest bearing liabilities 149,000 (6) (6) 6 6 Total increase/(decrease) 12 12 (12) (12)
30-Jun-11 Interest rate risk +1% -1% Carrying amount Result Equity Result Equity $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 4,564 11 11 (11) (11) Receivables 11,198
Financial report Financial liabilities Payables 7,747 Interest bearing liabilities 129,000 (18) (18) 18 18 Total increase/(decrease) (7) (7) 7 7
Sensitivity on cash balances is based on historical average cash balance during the year.
52 Western Water ANNUAL REPORT 2011/12 (B) Credit Risk (D) Fair Valuation measurements
Credit risk is the risk of financial loss to Western Water as a result The fair value of financial instruments traded in active markets of a customer or counterparty to a financial instrument failing to (such as publicly traded derivatives) is based on quoted market meet its contractual obligations. Credit risk arises principally from prices at the balance sheet date. The quoted market price used for Western Water’s receivables. financial assets held by Western Water is the current bid price.
Western Water’s exposure to credit risk is influenced by the The carrying value less impairment provision of trade receivables individual characteristics of each customer. The receivable and payables is a reasonable approximation of their fair values balance consists of a large number of residential and business due to the short term nature of trade receivables. The fair value customers which are spread across a diverse range of industries. of financial liabilities for disclosure purposes is estimated by Receivable balances are monitored on an on-going basis to discounting the future contractual cash flows at the current ensure that exposure to bad debts is not significant. Western market interest rate that is available to Western Water for similar Water has in place a policy and procedure for the collection financial assets. of overdue receivables. The carrying amounts and aggregate net fair values of financial An analysis of the ageing of Western Water’s receivables at assets and financial liabilities at balance date have been provided reporting date has been provided in note 6. in note 17.
(C) Liquidity Risk
Liquidity Risk is the risk that Western Water will not be able to meet its financial obligations as they fall due. Western Water’s policy is to settle financial obligations within 30 days and in the event of dispute make payments within 30 days from the date of resolution.
Western Water manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecasts and actual cash flows and matching the maturity profiles of financial assets and financial liabilities.
During the course of the financial year, Western Water relies on the Treasury Corporation of Victoria’s ability to provide borrowings within the annual Treasurer’s approval limits. Treasurer approvals are usually provided in June prior to the commencement of the subsequent financial year, based on Western Water’s Corporate Plan submission however there is no guarantee approval will be received for the full amount sought.
Western Water’s financial liability maturities have been disclosed in note 17. Financial report
Leading with local solutions 53 Notes to the Financial Report for the year ended 30 June 2012
2011/12 2010/11 Note 3 Comprehensive operating statement – disclosures $’000 $’000
(A) Significant revenues Service charges Water 12,806 11,021 Sewerage 25,548 23,090 Recycled water 986 763 39,340 34,874 Water consumption 15,840 13,536 Total Service Charges 55,180 48,410 Government contributions - Operating 142 1,270 New Customer Contributions Fees paid by developers 5,120 4,472 Assets received from developers 16,048 12,623 21,168 17,095
Interest Investments 137 49 Other revenue Information statements 268 309 Tapping and connection fees 891 1,048 Property rental 60 52 Other (447) 840 772 2,249
Financial report Total revenue 77,399 69,073
(b) Net gain/(loss) on disposal of non-current assets The surplus/(deficit) from ordinary activities includes the following specific net gains and expenses. Net gain (loss) on disposal Property, plant and equipment Proceeds from sale of assets 567 515 Less written down value of asset sold (740) (1,415) (173) (900)
54 Western Water ANNUAL REPORT 2011/12 Note 3 Comprehensive operating statement 2011/12 2010/11 – disclosures (cont) $’000 $’000
(c) Expenses Depreciation - Buildings 222 446 - Infrastructure, p&e 13,746 13,177 - Motor vehicles 383 418 Total depreciation 14,351 14,041 Amortisation - Intangible & leasehold assets 917 550 917 550 Employee benefits - Salary & wages 9,424 8,653 - Long service leave provision 364 301 - Superannuation contributions 805 731 - Unfunded superannuation 1,998 351 - Other 827 765 13,418 10,801 Bad & doubtful debts 340 262 Borrowing costs 9,326 7,893 Operating lease rental expense 522 536
Auditors’ remuneration - Auditor-General for audit of annual financial statements 46 43 - Internal audit - Moore Stephens 109 70 - Deloitte - taxation reviews/regulatory audit 90 52 245 165 Financial report
Leading with local solutions 55 Notes to the Financial Report for the year ended 30 June 2012
2011/12 2010/11 Note 4 Income tax expense $’000 $’000 The income tax expense for the financial year differs from the amount calculated on the net result. The differences are reconciled as follows:
(a) Components of tax expense Deferred tax relating to temporary differences 1213 2,330 Deferred tax asset 345 (1,036) Adjustments for current tax on prior periods 0 132 (Over)/under provision on prior year tax return (59) (74) 1,499 1,352
(b) Reconciliation of income tax to prima facie tax payable Net result before income tax expense 5,185 4,275 Tax at the Australian tax rate of 30% (2011: 30%) 1,556 1,283 Tax effect of amounts which are not deductable / (taxable) in calculating taxable income: - Adjustment in respect of income tax of previous year (59) 58 - Research and development concession (7) (10) - Other 9 21 Income tax as reported in the comprehensive operating statement 1,499 1,352
(C) Tax expense (income relating to items of other comprehensive income Gain/(loss) on revaluation of property, plant and equipment (note 13) 3,308 32,856 3,308 32,856 Financial report
56 Western Water ANNUAL REPORT 2011/12 2011/12 2010/11 Note 5 Cash & cash equivalent assets $’000 $’000 Cash on hand 2 2 Cash at bank 1,148 562 Deposit at call 10,000 4,000 Fixed deposit 1,313 - 12,463 4,564
(a) Reconciliation to cash at the end of year The above figures are reconciled to cash at the end of the financial year as shown in the cash flow statement, as follows: Cash assets as above 12,463 4,564 Balances as per cash flow statement 12,463 4,564
(b) Cash at bank and on hand These are non interest bearing 2 2
(c) Deposits at call The deposits are bearing floating interest rate currently 3.45% (2011: 4.70%.) 10,000 4,000 Financial report
Leading with local solutions 57 Notes to the Financial Report for the year ended 30 June 2012
2011/12 2010/11 Note 6 Receivables $’000 $’000 Current Trade receivables 8,017 10,430 Provision for impaired receivables (70) (74) GST receivable 615 599 Other receivables - - 8,562 10,955 Non-current Other receivables 216 243
(a) Provision for impaired receivables As at 30 June 2012, current receivables of the corporation with a nominal value of $70,514 (2011: $74,431) were impaired. The amount of the provision was $70,514 (2011: $74,431). The individually impaired receivables relate to provision of recycled water service and cost recovery and 3rd party damage to Western Water assets. The ageing of these receivables is as follows: 1 to 3 months - - 3 to 6 months - - Over 6 months 70 74 70 74 Movements in the provision for impaired receivables are as follows: At 1 July (74) (49) Provision for impairment recognised during the year (340) (262) Receivables written off during the year as uncollectible 344 237 Balance at the end of the year (70) (74) Financial report
The creation and release of the provision for impaired receivables has been included in ‘other expenses’ in the comprehensive operating statement. Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash.
The other amounts within receivables do not contain impaired assets and are not past due. Based on credit history, it is expected that these amounts will be received when due.
(b) Past due but not impaired trade receivables
As of 30 June 2012, trade receivables of $3,836,000 (2011: $3,431,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these receivables is as follows:
1 to 3 months 2,070 1,941 4 months 74 12 Over 4 months 1,692 1,478 3,836 3,431
The other amounts within receivables do not contain impaired assets and are not past due. Based on credit history, it is expected that these amounts will be received when due.
58 Western Water ANNUAL REPORT 2011/12 2011/12 2010/11 Note 6 Receivables (cont) $’000 $’000 (c) Foreign exchange and interest rate risk for trade and other receivables The carrying amounts of the corporation’s current and non-current receivables are denominated in the following currencies: Australian dollars 8,778 11,198 8,778 11,198 Current receivables 8,562 10,955 Non current receivables 216 243 8,778 11,198
(d) Fair value and credit risk
Due to the short-term nature of the current receivables, their carrying value is assumed to approximate their fair value.
Non-current receivables 2012 2011 Carrying amount Fair value Carrying amount Fair value Private schemes 148 148 179 179 Bond paid 68 68 65 65 216 216 244 244 Financial report
Leading with local solutions 59 Notes to the Financial Report for the year ended 30 June 2012
2012 2011 Note 7 Property, plant & equipment $’000 $’000 (a) Classes of property, plant and equipment Land At fair value (as at 30 June 2011) 20,909 20,909 20,909 20,909 Buildings At fair value (as at 30 June 2011) 10,074 11,193 At cost 65 - Less: accumulated depreciation (223) (51) 9,916 11,142 Infrastructure At fair value (as at 30 June 2011) 562,054 552,716 At cost 30,154 - Less: accumulated depreciation (14,553) (3,802) 577,655 548,914 Equipment At cost# 12,069 10,654 Less: accumulated depreciation (6,721) (6,291) 5,348 4,363 Motor vehicles At fair value 2,447 2,415 Less: accumulated depreciation (770) (766) 1,677 1,649 Leasehold assets At cost 1,698 1,410 Less: accumulated depreciation (663) (521)
Financial report 1,035 889
Under construction 26,561 18,174
Total property, plant & equipment 643,101 606,040
# written down value approximates fair value Land was valued at 30 June 2011 by Valuer-General Victoria after analysing GST free land sales in comparible proximity and other relevant factors together with making an allowance for Community Service Obligations for the risk associated with the removal of the public use restrictions of the various sites. Non infrastructure buildings were valued at 30 June 2011 by Valuer-General Victoria at fair value by using depreciated replacement cost method. Infrastructure was valued at 30 June 2011 by Valuer-General Victoria at fair value using straight line depreciated replacement cost method after taking into consideration age, remaining useful life and the current replacment costs based on asset class and associated material types. Due to the methodology of the infrastructure valuation, some previously disclosed infrastructure has been reclassified as plant and equipment. No assets of Western Region Water Corporation have been pledged as security.
60 Western Water ANNUAL REPORT 2011/12 Note 7 Property, plant & equipment (cont) (b) Movements during the reporting period 2011-2012
Closing Opening Additions/ WDV WDV Adjustment capital 30 June $’000 1 July 2011 Re-classification to revaluation Transfers Disposals expenditure Depreciation 2012
Land At fair value 20,909 ------20,909 Building At fair value 11,142 - (1,069) 65 - - (222) 9,916 Infrastructure At cost/fair value 548,914 (723) 12,098 14,108 (216) 16,046 (12,571) 577,656 Equipment At fair value 4,363 723 - 1,439 (2) - (1,175) 5,348 Motor vehicles At fair value 1,649 - - 935 (522) - (385) 1,677 Leasehold assets At cost 889 - - 287 - - (141) 1,035 Under construction 18,174 - - (16,834) - 25,220 - 26,560 Total property, plant and equipment 606,040 - 11,029 - (740) 41,266 (14,494) 643,101
At 1 July 2011 Cost or fair value 617,471 Accumulated (11,431) depreciation and impairment Net carrying amount 606,040
At 30 June 2012 Cost or fair value 666,031 Accumulated (22,930) Financial report depreciation and impairment Net carrying amount 643,101
Leading with local solutions 61 Notes to the Financial Report for the year ended 30 June 2012
Note 7 Property, plant & equipment (cont) (b) Movements during the reporting period 2010-2011
Opening Closing WDV Additions/ WDV 1 July capital 30 June $’000 2010 Re-classification Transfers Disposals expenditure Revaluation Depreciation 2011
Land At fair value 36,180 - 227 - - (15,498) - 20,909 Building At fair value 16,793 - 1,238 (78) 1 (6,366) (446) 11,142 Infrastructure At cost/fair value 411,027 - 37,055 (790) 12,622 100,911 (11,911) 548,914 Equipment At fair value 4,667 - 1,001 (39) - - (1,266) 4,363 Motor vehicles At fair value 1,727 - 848 (508) - - (418) 1,649 Leasehold assets At cost 936 - 90 - - - (137) 889 Under construction 29,280 - (40,459) 29,353 - - 18,174 Total property, plant and equipment 500,610 - - (1,415) 41,976 79,047 (14,178) 606,040
At 1 July 2010 Cost or fair value 705,833 Accumulated (205,223)
Financial report depreciation and impairment Net carrying amount 500,610
At 30 June 2011 Cost or fair value 617,471 Accumulated (11,431) depreciation and impairment Net carrying amount 606,040
62 Western Water ANNUAL REPORT 2011/12 Computer software Bulk Entitlements Total Note 8 Intangible assets $’000 $’000 $’000 Year ended 30 June 2012 At 1 July 2011, net of accumulated amortisation 4,052 - 4,052 Additions acquired 334 2,617 2,951 Amortisation (776) - (776) At 30 June 2012, net accumulated amortisation 3,610 2,617 6,227
Year ended 30 June 2011 At 1 July 2010, net of accumulated amortisation 1,708 - 1,708 Additions acquired 2,757 - 2,757 Amortisation (413) - (413) At 30 June 2011, net accumulated amortisation 4,052 - 4,052
2011/12 2010/11 Note 9 Deferred tax assets $’000 $’000 The balance comprises temporary differences attributable to: Amounts recognised in comprehensive operating statement Employee benefits 1,584 889 Tax losses 1,700 2,699 Other 29 30 Total deferred tax assets 3,313 3,618 Movements Opening balance at 1 July 3,618 2,530 Credited / (debited) to the comprehensive operating statement (305) 1,088 Closing balance at 30 June 3,313 3,618
Deferred tax asset to be recovered after more than 12 months 3,313 3,618
Note 10 Payables Current/unsecured
Trade creditors 8,801 3,223 Financial report Payables - GST 22 22 Contractor deposits & retentions 1,302 1,559 Accrued expenses-interest 2,030 1,840 Accrued expenses-other 1,593 1,103 Unfunded superannuation call 1,998 - 15,746 7,747
Leading with local solutions 63 Notes to the Financial Report for the year ended 30 June 2012
2011/12 2010/11 Note 11 Interest bearing liabilities $’000 $’000
Current Secured Bank overdraft (a) - - Loans (b) 15,500 21,000 Total current interest bearing liabilities 15,500 21,000 Non-current Secured Loans (b) 133,500 108,000 Total non-current interest bearing liabilities 133,500 108,000 Total interest bearing liabilities 149,000 129,000 Credit standby arrangements Total facilities Bank overdraft 500 500 Unused at balance date - - Bank overdraft balance 500 500 Bank loan facilities Total facilities 149,000 129,000 Used at balance date 149,000 129,000 Unused at balance date - -
(a) Overdraft limit - $0.5 million secured by a mortgage over the general revenue of Western Region Water Corporation.
(b) Security for Loans is by way of Treasurer’s guarantee in favour of the Treasury Corporation of Victoria dated 22nd June 2000. Loan interest is payable every six months and loans have a maturity profile of up to 13 years. Financial report All bank loans are with Treasury Corporation of Victoria under the Treasurer’s approval. Any unused facilities are not automatically carried over into the next financial year with a fresh approval required for each financial year. Treasurer’s approval was received on 28 June 2012 to re-finance $15.5 million of maturing loans and new loans of $16.7 million between 1 July 2012 and 30 June 2013.
64 Western Water ANNUAL REPORT 2011/12 2011/12 2010/11 Note 11 Interest bearing liabilities (cont) $’000 $’000 On balance sheet Non traded financial liabilities Bank loans – carrying value 149,000 129,000 Bank loans – fair value 164,493 130,202 Off balance sheet - - Contingencies - - - -
On balance sheet The fair values of non-current borrowings are based on cash flows discounted using borrowing rates varying from 0% to 7.25%, depending on the type of the borrowing (2011– 0% to 7.25%).
Risk Exposures
The exposure of the corporation’s borrowings to interest rate changes and the contractual repricing dates at the balance dates are as follows:
2012 2011 $’000 $’000 6 months or less 2,500 12,000 6-12 months 13,000 9,000 1-5 years 45,000 65,500 Over 5 years 88,500 42,500 149,000 129,000
Current borrowings 15,500 21,000 Non current borrowings 133,500 108,000 149,000 129,000
Treasurer’s approval was received on 28 June 2012 to refinance all loans maturing in 2012/13. In line with 2012/13 Corporate Plan, all maturities will be refinanced.
The carrying amounts of the corporation’s borrowings are denominated in the following currencies:
Australian dollar 149,000 129,000 Financial report For an analysis of the sensitivity of borrowings to interest rate risk and foreign exchange risk refer to note 2.
Leading with local solutions 65 Notes to the Financial Report for the year ended 30 June 2012
2011/12 2010/11 Note 12 Employee benefits provisions $’000 $’000
Current Annual leave and unconditional long service leave entitlements, representing 7 or more years of continous service Employee benefits – Short term employee benefits that fall due within 12 months after the end of the period, measured at nominal value. 2,371 2,245 Other long term employee benefits that do not fall due within 12 months after the end of the period, measured at present value 394 291 Provisions related to employee benefit on-costs – Short term employee benefits that fall due within 12 months after the end of the period, measured at nominal value. 354 381 Other long term employee benefits that do not fall due within 12 months after the end of the period, measured at present value 86 47 Total current 3,205 2,964
Movement in provisions Annual leave Carrying amount at start of year 848 747 Leave paid out to departing employees (66) (9) Additional provision recognised 41 110 823 848 Long service leave Carrying amount at start of year 2,116 1,846 Leave taken by employees (172) (59)
Financial report Additional provision recognised 438 329 2,382 2,116
The number of full time equivalent employees at reporting date 151 136 The following assumptions were adopted in measuring the present value of long service leave and retirement gratuity entitlements: Weighted average increase in employee costs 5.00% 4.60% Weighted average discount rates 3.06% 5.28% Weighted average settlement period 11 years 11 years
The corporation made no ex-gratia payments.
66 Western Water ANNUAL REPORT 2011/12 2011/12 2010/11 Note 13 Deferred tax liabilities $’000 $’000
The balance sheet comprises temporary differences attributable to: Amounts recognised in comprehensive operating statement Depreciation 35,111 34,431 Labour costs in capital works 200 253 Accrued revenue 717 1,064 Other 381 (534) 36,409 35,214
Amounts recognised directly in equity Revaluation of property, plant & equipment 36,164 32,856 36,164 32,856 Net deferred tax liabilities 72,573 68,070 Movements Opening balance at 1 July 68,070 41,917 Charged to the comprehensive operating statement 1,195 2,439 Charged to equity 3,308 23,714 Closing balance at 30 June 72,573 68,070 Deferred tax liabilities to be settled after more than 12 months 72,573 68,070
Note 14 Contributed capital Balance at beginning of reporting period 160,413 159,128 Capital contributions/ (repayment) in the year - 1,285 Balance at end of reporting period 160,413 160,413
Note 15 Reserves Composition of reserves Asset revaluation-land 18,587 18,587 Asset revaluation-buildings 2,606 3,355 Asset revaluation-infrastructure 79,106 70,638
100,299 92,580 Financial report Movements in reserves Asset revaluation surplus Balance 1 July 92,580 37,247 Revaluation increment/(decrement) on non-current assets, net of tax effect 7,719 55,333 Transfer to accumulated surplus - - Balance 30 June 100,299 92,580 The asset revaluation surplus is used to record asset revaluation increments and decrements in the value of non-current physical assets.
Note 16 Accumulated funds Opening balance at 1 July 168,092 165,169 Net result for the period 3,686 2,923 Closing balance at 30 June 171,778 168,092
Leading with local solutions 67 Notes to the Financial Report for the year ended 30 June 2012
Note 17 Financial instruments Interest rate risk exposure
The following table sets out Western Water’s exposure to interest rate risk, including the contractual repricing dates and the effective weighted average interest rate by maturity periods.
Exposures arise predominantly from liabilities bearing variable interest rates as the corporation intends to hold fixed rate liabilities to maturity
Contractual repricing or maturity periods Non Fixed Floating Over Over Over Over interest interest interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over 5 bearing rate rate or less years years years years years Total 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash - 1,313 11,148 ------12,461 Recievables 8,562 ------8,562 Other receivables 216 - 216 Total financial assets 8,778 1,313 11,148 ------21,239 Financial liabilities Payables 15,746 ------15,746 Interest bearing liabilities - - - 15,500 18,000 5,500 11,500 10,000 88,500 149,000 Total financial liabilities 15,746 - - 15,500 18,000 5,500 11,500 10,000 88,500 164,746 Net financial liabilities (6,968) 1,313 11,148 (15,500) (18,000) (5,500) (11,500) (10,000) (88,500) (143,507) Weighted average - 3.56% 3.45% 4.54% 5.10% 5.91% 5.48% 4.86% 6.09% interest rate
Contractual repricing or maturity periods
Financial report Non Fixed Floating Over Over Over Over interest interest interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over 5 bearing rate rate or less years years years years years Total 2011 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash - - 4,564 ------4,564 Recievables 10,955 ------10,955 Other receivables 243 ------243 Total financial assets 11,198 - 4,564 ------15,762 Financial liabilities Payables 7,747 ------7,747 Interest bearing liabilities - - - 21,000 2,500 11,000 5,500 7,500 81,500 129,000 Total financial liabilities 7,747 - - 21,000 2,500 11,000 5,500 7,500 81,500 136,747 Net financial liabilities 3,451 - 4,564 (21,000) (2,500) (11,000) (5,500) (7,500) (81,500) (120,985) Weighted average - - 3.42% 5.17% 6.11% 5.81% 5.91% 6.63% 6.28% interest rate
68 Western Water ANNUAL REPORT 2011/12 Fair value
The carrying amounts and fair values of financial assets and financial liabilities at balance dates are:
2012 2011 Carrying amount Fair value Carrying amount Fair value Financial assets Cash 1,313 1,313 4,564 4,564 Other financial instrument - - - - Recievables 8,778 8,778 11,198 11,198 Total financial assets 10,091 10,091 15,762 15,762 Financial liabilities Payables 15,746 15,746 7,747 7,747 Other loans 149,000 164,493 129,000 130,202 Total financial liabilities 164,746 180,239 136,747 137,949
None of the classes of interest bearing liabilities are readily traded on organised markets in standardised form. The fair value of borrowings is based upon market prices, where a market exists or by discounting the expected future cash flows by the current interest rates for liabilities with similar risk profiles. Fair value is inclusive of costs which would be incurred on settlement of a liability. Financial report
Leading with local solutions 69 Notes to the Financial Report for the year ended 30 June 2012
2011/12 2010/11 Note 18 Commitments $’000 $’000 Operating Lease commitments At 30 June, Western Water had the following operating lease commitments. - within one year 503 491 - one to five years 1,960 2,062 - greater than five years - 401 Minimum lease payment 2,463 2,954
The lease for the head office in Sunbury is for ten years, expiring May 2017. This lease is indexed to CPI and was subject to a five yearly market review in May 2012. The remainder of the leases are for photocopiers for a period of 60 months expiring in April 2016.
Capital commitments
At 30 June, Western Water had the following capital commitments:
Construction contracts
Outstanding capital commitments are to be paid as follows: Payments due: - within one year 5,211 3,406 - one to five years - - 5,211 3,406
Operating commitments
At 30 June, Western Water had the following operating commitments:
Operational contracts
Operational commitments are due for payment as follows: - within one year 3,797 4,316 Financial report - one to five years 2,052 4,360 - greater than five years - - 5,849 8,676
Environment Contribution
At 30 June 2012, Western Water had outstanding environmental contribution commitments, to be paid as follows: - within one year 1,615 1,615 - one to five years 7,230 - 8,845 1,615
Operating Lease receivables
within one year 151 147 one to five years 606 555 Total minimum future lease receivables 757 702
Operating leases for land are mostly for ten years.
Building leases are generally for a twelve month period with an option to cancel with 28 days notice.
70 Western Water ANNUAL REPORT 2011/12 2011/12 2010/11 Note 19 Contingent liabilities and contingent assets $’000 $’000
Contingent liabilities A return to customers of desalination plant charges collected during the year ended 30 June 2012 is required as a result of the announcements made by the Minister for Water. Customers are to be returned funds in the form of a price freeze for the 12 months from July 2012 to 30 June 2013. Past customers; being those customers that no longer reside in metropolitan Melbourne, have passed away or will no longer receive a bill, cannot be returned funds through a price freeze and therefore will be entitled to a return of money. As at reporting date, the Western Water is unable to reliably determine the expected total amount required to be returned to past customers. Western Water is in the process of developing a plan with the Essential Services Commission to return these funds. Until such a plan is developed, Western Water is unable to determine the number of affected customers and the timing of such payments. Total estimated contingent liabilities - - Contingent assets Western Water enters into agreements with land developers whereby assets are transferred to Western Water at no cost. These assets are brought to account as revenue and capitalised on completion of the project. At the reporting date, land developers had commenced construction of assets that would eventually be transferred to Western Water contingent upon the release of Statements of Compliance by Western Water. This amount has been calculated as the sum of the estimate of the project costs by their percentage complete at 30 June. Total estimated contingent assets 2,175 1,629
Note 20 Superannuation Western Water makes employer superannuation contributions in respect of most employees to the Local Authorities Superannuation Fund (the Fund). Obligations for contributions are recognised as an expense in the comprehensive operating statement when they are due. The Fund has two categories of membership, each of which is funded differently.
The Fund’s accumulation category, Vision Super Saver, receives both employer and employee contributions on a progressive basis. Employer contributions are normally based on a fixed percentage of employee earnings (9% required under Superannuation Guarantee Legislation). No further liability accrues to the employer as the superannuation benefits accruing to employees are represented by their share of the net assets of the Fund.
Defined Benefit Plan
The Fund’s Defined Benefit Plan is a multi-employer sponsored plan. As the Fund’s assets and liabilities are pooled and are not allocated Financial report by employer, the actuary is unable to reliably allocate benefit liabilities, assets and costs between employers. As provided under Paragraph 32 (b) of AASB 119, Western Water does not use defined benefit accounting for these contributions.
Western Water makes employer contributions to the defined benefit category of the Fund at rates determined by the Trustee on the advice of the Fund’s Actuary. On the basis of the results of the most recent full actuarial investigation conducted by the Fund’s actuary as at 31 December 2011, Western Water makes the following contributions:-
- 9.25% of members’ salaries (same as previous year);
- the difference between resignation and retrenchment benefits paid to any retrenched employees (same as previous year).
The Local Authorities Superannuation Fund (Vision Super) latest 31 December 2011 actuarial investigation identified an unfunded liability of $406 million excluding the contributions tax in the defined benefit fund of which we are a member. Western Water was made aware of the expected shortfall through the year and was informed formally of their share of the shortfall on 1 August 2012 which amounted to $2,147,821 including contributions tax payable on 1 July 2013.
Western Water has accounted for this shortfall in the Statement of Comprehensive Income in Employee Benefits and in the Balance Sheet in Employee Benefits (see note 10). The amount recognised is $1,998,00 adjusted for interest and inclusive of contributions tax. Western Water has elected to pay this shortfall in a lump sum within 12 months of the balance sheet date.
Leading with local solutions 71 Notes to the Financial Report for the year ended 30 June 2012
Note 20 Superannuation (cont) Accounting standard disclosure The Fund’s liability for accrued benefits was determined by the Actuary at 31 December 2011 pursuant to the requirements of Australian Accounting Standard AAS25 as follows: 31-Dec-11 $’000 Net market value of assets 4,315,324 Accrued benefits (per accounting standards) 4,642,133 Difference between assets and accrued benefits (326,809) Vested benefits (minimum sum which must be paid to members 4,838,503 when they leave the fund)
The financial assumptions used to calculate the accrued benefits for the defined benefit category of the fund were:
Net investment return 7.50% p.a. Salary inflation 4.25% p.a. Price inflation 2.75% p.a.
Western Water contributes in respect of its employees to the following superannuation schemes:
2010/11 2009/10 Type of scheme Rate $’000 $’000 Vision Super Defined benefit 9.25% 159 157 Vision Super Defined contribution 9.00% 731 679 Vision Super Clearing House Defined contribution 9.00% 10 - BT Classic Defined contribution 9.00% 2 2 P & J Tyers Super Fund Defined contribution 9.00% - 2 UniSuper Defined contribution 9.00% 2 2
Financial report Total contributions to all funds 904 842
As at the reporting date, there was $83,730 (2011: $33,855) payable to Vision Super for payments in the normal course of business, and $1.99 million for the Defined Benefit Call.
As at the reporting date, there were no loans to or from Western Water to any of the above funds.
72 Western Water ANNUAL REPORT 2011/12 Note 21 Responsible persons 2011/12 2010/11 and executive officer disclosures $’000 $’000 (a) Responsible Persons The names of persons who were responsible persons at anytime during the financial year were: The Hon Peter Walsh MP, Minister for Water (1 July 2011 to 30 June 2012) T Larkins (Chairman) (1 July 2011 to 30 June 2012) R Anderson (1 July 2011 to 30 June 2012. Appointed Deputy Chair 1 October 2011) M Anastassiou (1 July 2011 to 30 June 2012) C Mathew (1 July 2011 to 30 September 2011) D Bell (1 July 2011 to 30 June 2012) J Tyers (1 July 2011 to 30 September 2011) R Johns (1 October 2011 to 30 June 2012) T Mollenkopf (1 October 2011 to 30 June 2012) A Osborne (1 October 2011 to 30 June 2012) J Wilkinson (Managing Director) (1 July 2011 to 30 June 2012) Remuneration of responsible persons Remuneration paid to the Minister is reported in the annual report of the Department of Premier and Cabinet. Other relevant interests are declared in the Register of Members’ Interests which each member of the Parliament completes. Remuneration received, or due and receivable from Western Water in connection with the management of Western Water (includes termination payments and bonuses paid at the end of contracts). 504 495 The number of responsible persons whose remuneration from Western Water was within the specified bands are as follows: Income band ($) No. No. 0 - 9,999 2 1 10,000 - 19,999 3 - 20,000 - 29,999 3 5 50,000 - 59,000 1 1 320,000 - 329,999 - 1 Financial report 330,000 - 339,999 1 - 10 8
Retirement benefits of responsible persons $’000 $’000 The retirement benefits paid by the corporation in connection with the retirement of 39 37 responsible persons for the corporation amounted to:
Leading with local solutions 73 Notes to the Financial Report for the year ended 30 June 2012
Note 21 Responsible persons 2011/12 2010/11 and executive officer disclosures (cont) $’000 $’000 Other related party transactions (i) Western Water transacted business of water purchase from Melbourne Water and development and management of the Waterways Charge throughout the financial year to the value of $13,111,000 (2010/11: $12,428,000). T Larkins is a director of Melbourne Water. These transactions were undertaken in the ordinary course of business, are at arms length and carry normal commercial terms. Transactions with Melbourne Water: Purchase of water 9,343 9,085 Remittance of Waterways Charge on behalf of customers 3,645 3,243 Receipt of Waterways Charge administration fee and cost recovery for 123 100 implementation Aggregate amounts recognised. 13,111 12,428 (ii) Western Water engaged the services of Osborne Management Pty Ltd during the year to provide advice on the Growth Strategy. Osborne Management was engaged prior to Andrew Osborne being appointed as a board member in October 2011 and completed the work in early 2012. These transactions were undertaken in the ordinary course of business, are at arms length and carry normal commercial terms. Transactions with Osborne Management during period of board appointment: Consulting advice on growth impact 63 - 63 -
Amounts receivable from and payable to responsible persons or their responsible person related parties at 30 June: Current-payable (328) (349) Financial report Non current - -
74 Western Water ANNUAL REPORT 2011/12 (b) Executive officers’ remuneration
The numbers of executive officers, and their total remuneration during the reporting period are shown in the first two columns in the table below in their relevant income bands. The base remuneration of executive officers is shown in the third and fourth columns. Base remuneration is exclusive of bonus payments, long-service leave payments, redundancy payments and retirement benefits. The total annualised employee equivalent provides a measure of full time equivalent executive officers over the reporting period.
Total remuneration Base remuneration 2012 2011 2012 2011 Income band ($) No. No. No. No. 160,000 - 169,999 - - 1 2 170,000 - 179,999 - 2 2 - 180,000 - 189,999 1 - - - 190,000 - 199,999 2 - - - 200,000 - 209,999 - - 1 1 220,000 - 229,999 - 1 - - 230,000 - 239,999 1 - - - Total numbers 4 3 4 3 Total annualised employee 3.4 3.0 3.4 3.0 equivalent Total amount $'000 794 578 725 533 Financial report
Leading with local solutions 75 Notes to the Financial Report for the year ended 30 June 2012
Note 22 Reconciliation of profit / (loss) for the period after 2011/12 2010/11 related income tax to net cash flows from operating activities $’000 $’000 Profit / (loss) for the period after income tax 3,686 2,923 Add/(less) non cash flows in net profit/(loss) Net (profit)/loss on sale of non-current assets 173 900 Depreciation and amortisation 15,268 14,591 Developer contributions (non cash) (16,048) (12,623) Bad debts write off 340 262 Change in assets and liabilities Decrease / (increase) in receivables 1,704 (1,601) Decrease / (increase) in prepayments 116 170 Decrease / (increase) in deferred tax asset 305 (1,088) Increase / (decrease) in trade creditors 3,691 (1,059) Increase / (decrease) in income in advance 147 159 Increase / decrease in deferred income 7 1 Increase / (decrease) in deferred tax liabilities 4,502 2,438 Increase / (decrease) in provisions 241 371 Net Cash flows from operating activities 14,132 5,444
Note 23 Dividends The process to determine the 2012 dividend has not yet been completed at the reporting date. The board’s preliminary dividend estimate for this period is nil. Note 24 Events occurring after the balance sheet date No matters or circumstances have arisen since the end of the reporting period which significantly affected or may significantly affect
Financial report the operations of the corporation, the results of those operations, or the state of affairs of the corporation in future.
76 Western Water ANNUAL REPORT 2011/12 Statutory certification
We certify the attached financial statements for Western Region Water Corporation have been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Australian Accounting Standards, Interpretations and other mandatory professional reporting requirements.
We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2012 and the financial position of Western Water as at 30 June 2012.
We are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate.
Terry Larkins
Chairman Western Region Water Corporation
Neil Brennan
Managing Director Western Region Water Corporation Financial report
David Anderson
Chief Finance & Accounting Officer Western Region Water Corporation
29 August 2012
Leading with local solutions 77 Auditor-General’s report Financial report
78 Western Water ANNUAL REPORT 2011/12 Auditor-General’s report Financial report
Leading with local solutions 79 APPENDIx 1 Disclosure index
Western Water’s annual report is prepared in accordance with all relevant Victorian legislations and pronouncements. This index has been prepared to facilitate identification of compliance with all statutory disclosure requirements.
Legislation Requirement Page reference
Report of operations – FRD guidance
Charter and purpose
FRD 22C Manner of establishment and the relevant Ministers Page i FRD 22C Objectives, functions, powers and duties Page i FRD 22C Nature and range of services provided Page i
Management and structure
FRD 22C Organisational structure Page 16
Financial and other information
FRD 10 Disclosure index Page 80-81 FRD 12A Disclosure of major contracts Page 23 FRD 15B Executive officer disclosures Page 73 FRD 22C, Operational and budgetary objectives and performance against objectives Pages 26-28 SD 4.2(k) FRD 22C Employment and conduct principles Page 21 FRD 22C Occupational health and safety policy Page 20 FRD 22C Summary of the financial results for the year Pages 3, 32-35 FRD 22C Significant changes in financial position during the year Page 35 FRD 22C Major changes or factors affecting performance Page 35 FRD 22C Subsequent events Page 35 FRD 22C Application and operation of Freedom of Information Act 1982 Page 24 FRD 22C Compliance with building and maintenance provisions of Building Act 1993 Page 23 FRD 22C Statement on National Competition Policy Page 23 FRD 22C Application and operation of the Whistleblowers Protection Act 2001 Page 24 FRD 22C Details of consultancies over $10,000 Page 23 FRD 22C Details of consultancies under $10,000 Page 23 FRD 22C Statement of availability of other information Page 25 FRD 24C Reporting of office-based environmental impacts Pages 7, 12 Appendices FRD 25 Victorian Industry Participation Policy disclosures Page 22 FRD 29 Workforce Data disclosures Page 25 SD 4.5.5 Risk management compliance attestation Page 29 SD 4.2(g) General information requirements All SD 4.2(j) Sign off requirements Page 5
Ministerial reporting directions
MRD01 Performance reporting Pages 26-28 MRD02 Water consumption and drought response Pages 6-8 MRD03 Environmental and social sustainability Pages 8-15 MRD04 Bulk entitlements Page 8, Appendix 2 MRD05 Major non-residential water users Page 7
80 Western Water ANNUAL REPORT 2011/12 Legislation Requirement Page reference
Financial Report
Financial statements required under Part 7 of the FMA
SD4.2(a) Statement of changes in equity Page 40 SD4.2(b) Operating statement Page 38 SD4.2(b) Balance sheet Page 39 SD4.2(b) Cash flow statement Page 41
Other requirements under Standing Directions 4.2
SD4.2(c) Compliance with Australian accounting standards and other authoritative pronouncements Page 42 SD4.2(c) Compliance with Ministerial Directions Page 42 SD4.2(d) Rounding of amounts Page 42 SD4.2(c) Accountable officer’s declaration Page 77 SD4.2(f) Compliance with Model Financial Report Page 42
Other disclosures as required by FRDs in notes to the financial statements
FRD 9A Departmental disclosure of administered assets and liabilities N/A FRD 11 Disclosure of ex gratia payments N/A FRD 13 Disclosure of parliamentary appropriations N/A FRD 21A Responsible person and executive officer disclosures Page 74 FRD 102 Inventories N/A FRD 103D Non current physical assets Page 43 FRD 104 Foreign currency Page 42 FRD 106 Impairment of assets Page 44 FRD 109 Intangible assets Page 45 FRD 107 Investment properties N/A FRD 110 Cash flow statements Page 41 FRD 112A Defined benefit superannuation obligations Page 71 FRD 113 Investments in subsidiaries, jointly controlled entities and associates N/A FRD 114A Financial instruments – general government entities and public non financial corporations Page 46 FRD 119 Contributions by owners Page 47
Legislation
Freedom of Information Act 1982 Page 24 Building Act 1983 Page 23 Whistleblowers Protection Act 2001 Page 24 Victorian Industry Participation Policy Act 2003 Page 22
Financial Management Act 1994 Pages 5, 29, 35, Appendices 42, 77
Leading with local solutions 81 APPENDIx 2 Bulk Entitlements Report
Key to table abbreviations ML = Megalitres WW = Western Water component N/A = not applicable SRW = Aspect managed by Southern Rural Water MW = Aspect managed by Melbourne Water
Under Bulk Entitlement (BE) compliance requirements, Western Water is required to report on various aspects for 2011/12. That required information is included in this report on the 10 BEs currently held by Western Water. Note that references to the relevant BE clause are stated in italics. Reporting for Barringo Lancefield Macedon Maribyrnong Myrniong Riddells Creek Romsey Werribee Woodend Melbourne H/works Under BE clause 11.1 14.1 14.1 19.1 12.1 11.1 12.1 13.1 14.1 System 16.1 Water source(s) and storage(s) Barringo Creek and Garden Hut Creek Railway Creek, Slatey Creek, Pykes Creek and Pykes Main Creek, Foster and Bolinda Creek and Lerderderg River, Campaspe River, Falls Various Catchments Pierce Reservoir (G), Monument Creek Turitable Creek, Jacksons Creek, Creek Reservoir Wright Reservoirs Kerrie Reservoir Goodmans Creek, and Smokers Creeks, via Melbourne Water’s (M) and Garden Hut Willimigongon Creek Salty Creek, Gisborne Coimadai Creek, Barbour and Kavanagh supply system, Reservoir and Reservoir, Creek and Rosslynne Lake Merrimu (M) Springs, Straws Lane including Desalinated Kitty English, Frank Reservoir Djerriwarrh Creek, and Bore, Campaspe water Mann, Andersons, Djerriwarrh Reservoir Reservoir (CR) and McDonalds and Orde (DJ) Reservoirs B&C Hill Reservoirs 32,516 (M) Total capacity of storage(s) (ML) 64 46 485 25,400 22,119 77 297 366 1,812,175 983 (DJ) 8,500 (M) Annual bulk entitlement (ML) 320 315 645 6,100 58 300 460 802 18,250 1,486 (DJ) Western Water's entitlement in storage at the start of 31.46 45.9 461 14,360 58 77 297.4 17,237 85.3% (M) 365 18,250 the financial year (ML), and % full for the storage(s) 49% 100% (d) 95% (d) 65.8% (a, iii) 100% 99% 100% 926 94% (DJ) (a, ii) 100% (d) 100% 202 CR (e) Inflows attributable to WW taken from thisBE water 3,305 (M) (a, iii) 0 168.7 723 3819 SRW 10.34 326 41.2 Local catchment 0 N/A source(s) (ML) 427 (DJ) (a, iv) Fall, Springs & Bore 0 from Melbourne 0 from Melbourne Extra inflows (e.g. diversions into the storages) or Headworks System BE 0 (M) 3.17 2.1 0.4 0 0 0 Headworks System BE N/A local catchment runoff 631 from Macedon 0 (DJ) 146 from Macedon storages 146 for Woodend supply 5,428 (M) (a, i) Volume taken from the storage(s) (ML) 0 (e) 167.7 (e) 631 for Rosslynne 152 (a,i) 39 (b) 0 (e) 321 (e) 389 4,910 (a) 171 (DJ) supply (e) Maximum extraction rate from storage or water 0 from 0.7 from Garden 6.3 from Macedon 2.6 from 26.2 from (M) 0.2 from Pykes Res 0.6 from Main Ck 3.9 from Bolinda Ck (c) 2.7 from CR (c) 27 source (ML/day) Barringo Ck (c) Hut Res (c) storages (c) Rosslynne Res 2.9 from (DJ) -60.5 SRW – See Note 3 -4.5 -0.15 SRW (M) See note 3 -8.4 Estimated evaporation (ML) 7.5 3.1 SRW MW See note 4 (a, iv) See note 4 See note 4 76.1 (DJ) See note 4 See note 4 SRW (M) Other losses (e.g. seepage, plant losses) (ML) 3.3 0 0 SRW SRW 9.2 5.1 13.2 MW
Appendices 140.9 (DJ) SRW (M) (a, v) Environmental releases (ML) 0 0 0 SRW SRW 0 0 0 MW (DJ) See note 6 1260 (G) & all SRW (M) Volume of environmental and passing flows (ML) 962 (b) Monument Ck flows 752 SRW (a, v) SRW 505.6 (a) 1248 (b) 2336 (b) MW See note 6 (DJ) (b) SRW (M) Passing/environmental requirements met Yes Yes See note 1 SRW SRW Yes Yes See note 5 MW See note 6 (DJ) Amendments to the bulk entitlement No (h) No (i) No (f) No (d) No (i) No (h) No (i) No (d) No (i) No (e) Failure to comply with the BE, or compliance No No See note 1 No No No No See note 6 See note 5 No difficulties experienced or anticipated in the future Western Water's entitlement unused or remaining 19.88 45.9 461 15,739 19 67% of Myrniong 70.6 297.4 16,278 77.2% (M) 356 13,340 in storage at end of financial year (ML) and % full 31% 100% 95% 72.4% BE used 92% 100% 965 98% (DJ) 97% 27% of BE used for the storage
82 Western Water ANNUAL REPORT 2011/12 Under Bulk Entitlement (BE) compliance requirements, Western Water is required to report on various aspects for 2011/12. That required information is included in this report on the 10 BEs currently held by Western Water. Note that references to the relevant BE clause are stated in italics. Reporting for Barringo Lancefield Macedon Maribyrnong Myrniong Riddells Creek Romsey Werribee Woodend Melbourne H/works Under BE clause 11.1 14.1 14.1 19.1 12.1 11.1 12.1 13.1 14.1 System 16.1 Water source(s) and storage(s) Barringo Creek and Garden Hut Creek Railway Creek, Slatey Creek, Pykes Creek and Pykes Main Creek, Foster and Bolinda Creek and Lerderderg River, Campaspe River, Falls Various Catchments Pierce Reservoir (G), Monument Creek Turitable Creek, Jacksons Creek, Creek Reservoir Wright Reservoirs Kerrie Reservoir Goodmans Creek, and Smokers Creeks, via Melbourne Water’s (M) and Garden Hut Willimigongon Creek Salty Creek, Gisborne Coimadai Creek, Barbour and Kavanagh supply system, Reservoir and Reservoir, Creek and Rosslynne Lake Merrimu (M) Springs, Straws Lane including Desalinated Kitty English, Frank Reservoir Djerriwarrh Creek, and Bore, Campaspe water Mann, Andersons, Djerriwarrh Reservoir Reservoir (CR) and McDonalds and Orde (DJ) Reservoirs B&C Hill Reservoirs 32,516 (M) Total capacity of storage(s) (ML) 64 46 485 25,400 22,119 77 297 366 1,812,175 983 (DJ) 8,500 (M) Annual bulk entitlement (ML) 320 315 645 6,100 58 300 460 802 18,250 1,486 (DJ) Western Water's entitlement in storage at the start of 31.46 45.9 461 14,360 58 77 297.4 17,237 85.3% (M) 365 18,250 the financial year (ML), and % full for the storage(s) 49% 100% (d) 95% (d) 65.8% (a, iii) 100% 99% 100% 926 94% (DJ) (a, ii) 100% (d) 100% 202 CR (e) Inflows attributable to WW taken from this BE water 3,305 (M) (a, iii) 0 168.7 723 3819 SRW 10.34 326 41.2 Local catchment 0 N/A source(s) (ML) 427 (DJ) (a, iv) Fall, Springs & Bore 0 from Melbourne 0 from Melbourne Extra inflows (e.g. diversions into the storages) or Headworks System BE 0 (M) 3.17 2.1 0.4 0 0 0 Headworks System BE N/A local catchment runoff 631 from Macedon 0 (DJ) 146 from Macedon storages 146 for Woodend supply 5,428 (M) (a, i) Volume taken from the storage(s) (ML) 0 (e) 167.7 (e) 631 for Rosslynne 152 (a,i) 39 (b) 0 (e) 321 (e) 389 4,910 (a) 171 (DJ) supply (e) Maximum extraction rate from storage or water 0 from 0.7 from Garden 6.3 from Macedon 2.6 from 26.2 from (M) 0.2 from Pykes Res 0.6 from Main Ck 3.9 from Bolinda Ck (c) 2.7 from CR (c) 27 source (ML/day) Barringo Ck (c) Hut Res (c) storages (c) Rosslynne Res 2.9 from (DJ) -60.5 SRW – See Note 3 -4.5 -0.15 SRW (M) See note 3 -8.4 Estimated evaporation (ML) 7.5 3.1 SRW MW See note 4 (a, iv) See note 4 See note 4 76.1 (DJ) See note 4 See note 4 SRW (M) Other losses (e.g. seepage, plant losses) (ML) 3.3 0 0 SRW SRW 9.2 5.1 13.2 MW
140.9 (DJ) Appendices SRW (M) (a, v) Environmental releases (ML) 0 0 0 SRW SRW 0 0 0 MW (DJ) See note 6 1260 (G) & all SRW (M) Volume of environmental and passing flows (ML) 962 (b) Monument Ck flows 752 SRW (a, v) SRW 505.6 (a) 1248 (b) 2336 (b) MW See note 6 (DJ) (b) SRW (M) Passing/environmental requirements met Yes Yes See note 1 SRW SRW Yes Yes See note 5 MW See note 6 (DJ) Amendments to the bulk entitlement No (h) No (i) No (f) No (d) No (i) No (h) No (i) No (d) No (i) No (e) Failure to comply with the BE, or compliance No No See note 1 No No No No See note 6 See note 5 No difficulties experienced or anticipated in the future Western Water's entitlement unused or remaining 19.88 45.9 461 15,739 19 67% of Myrniong 70.6 297.4 16,278 77.2% (M) 356 13,340 in storage at end of financial year (ML) and % full 31% 100% 95% 72.4% BE used 92% 100% 965 98% (DJ) 97% 27% of BE used for the storage
Leading with local solutions 83 General information for Bulk Western Water has worked with DSE, SRW and Melbourne Water in Entitlements (BEs) the operation of its BEs during the year, and has largely complied with the provisions and requirements they contain, except as noted below. Barringo Transition from extreme drought to average rainfall has presented different challenges in water resources management and planning. Pierce Reservoir is an emergency off stream storage supplied by While not as critical during 2011/12, the continued use of water from Barringo Creek and it was not used for supply during the year. the Melbourne Headworks System will remain vital into the future.
Lancefield Western Water has submitted a metering plan to DSE which has been The Lancefield bores & Garden Hut Creek are used together as the approved by the Minister. Commencement of implementation of the sources of water for this town after being treated at the Lancefield metering plan occurred during 2011/12 with improvements made Water Filtration Plant. to monitoring and measuring stations in conjunction with the Bureau of Metereology program. These upgrades will improve both accuracy Macedon and coverage of bulk entitlement data, enhancing compliance.
See table for sources. Storages are closely monitored to ensure Western Water has previously submitted an Environmental adequate levels are maintained for fire fighting (i.e: > 60%). This was Management Program associated with its bulk entitlements. achieved at all times during the year. DSE have indicated that guidelines will be provided giving further advice on this program. Maribyrnong Minimal use of water from Rosslynne Reservoir occurred during the Notes year. Storage levels increased as a result of greater inflow. 1 Volumes transferred to Rosslynne Reservoir for the one week in August 2011 averaged to 6.3 ML per day following a high rainfall Myrniong period. This exceeded the maximum amount of 5 ML per day via Throughout the year, Pykes Creek Reservoir remained steady in the pipeline. Adjustments were made the following week where volume. Only the volume shown in the table was taken from this BE, transfers averaged 3.5 ML per day to compensate for the excess no changes to security of supply were made, and Western Water was amount transferred. able to comply with the provisions of the BE. 2 An upgrade of monitoring equipment and stations, in conjunction Riddells Creek with Bureau of Meteorology, took place in 2011/12 and will improve No Melbourne Headworks System BE water was transferred accuracy of monitoring and reporting requirements in 2012/13. to Riddells Creek BE. No water from the Riddells Creek BE was 3 SRW provides net inflows which include adjustments for Merrimu transferred to Kerrie Reservoir. and Rosslynne reservoirs.
Romsey 4 This value is measured including the amount of rain in the area. An amount of 139 ML for 2011/12 was able to be added to the drought The negative value indicates there was more rain than evaporation. reserve for this BE. 5 Currently there is no effective capability to release water for Werribee passing flows from Campaspe Reservoir. Western Water investigated storage and operational infrastructure during Djerriwarrh Reservoir is a small raw water supply used for local 2011/12. However, limitations were identified and this constraint properties, and also as an emergency volume if needed for Melton and will be resolved in 2012/13 to enable these flows to be released Bacchus Marsh supplied via Merrimu Water Filtration Plant. and monitored in accordance with the relevant BE obligations. Western Water has 10 bulk entitlements from which it draws water Woodend resources for its customers and sees no difficulty in continuing, No Melbourne Headworks System BE water and 146ML of Macedon and improving compliance with these bulk entitlements in the BE water were diverted to supplement the Woodend supply. future. Campaspe Reservoir spilt several times during 2011/12.
Melbourne Headworks 6 djerriwarrh Reservoir spilt several times during 2011/12. Environmental releases required were estimated to be less than The improved inflows to local BE storages reduced Western Water’s Appendices the amount that passed over the spillway from the reservoir and demand on its Melbourne Headworks System BE. No changes to hence no deliberate releases were made during 2011/12. Works reliability of supply or system restriction to the total BE volume was have been completed to allow measurement and control of required. Western Water applied the same restrictions as Melbourne environmental releases from Djerriwarrh Reservoir in the future. to all customers in towns receiving any Melbourne Headworks System BE water, as required under clause 8.1(a) of the BE. The total taken shown in the table can be split into 853 ML taken via the Hillside interface point to Melton and Bacchus Marsh, and 4,057 ML taken via the Loemans Rd interface point to Sunbury and the Macedon region.
There were no bulk entitlements transferred to any of Western Water’s BEs during 2011/12.
84 Western Water ANNUAL REPORT 2011/12 APPENDIx 3 Global Reporting Initiative Index
The Global Reporting Initiative (GRI) is an internationally recognised framework for sustainability reporting. This report has been prepared using the GRI’s G3 Guidelines. All G3-based reports must self-declare an Application Level. As this report is consistent with the Guidelines and addresses more than 10 indicators it meets Application Level C. The following index indicates which GRI indicators have been reported and where they can be located in this report.
GRI reporting elements & indicators Pg GRI reporting elements & indicators Pg
Strategy & analysis Economic performance indicators
1.1 Statement from Chairman and CEO 4-5 EC1 economic profile 32-35 EC2 Financial implications of climate change 35 Organisational profile EC6 Suppliers: policies & practices & local spend 22 2.1 name of organisation i EC8 infrastructure development and public benefit 22 2.2 Primary brands, products and/or services i Environmental performance indicators 2.3 operational structure of organisation 16 2.4 Location of organisation’s headquarters Rear EN3 energy - Direct consumption 12 2.5 Countries of operation 1 EN5 energy saved - conservation and efficiency 12 2.6 nature of ownership and legal form i EN6 energy efficiency / renewable energy initiatives 12-13 2.7 Markets served 2 and reductions in energy requirements 2.8 Scale of organisation i EN8 Total water withdrawal by source 50-52 2.9 Significant changes during reporting period 3 EN10 Percentage and total volume of water recycled 9 and reused 2.10 Awards received in the reporting period 3 EN12 Impacts to biodiversity 11 Report parameters EN13 Habitats protected or restored 11 EN14 Biodiversity Management 11 3.1 Reporting period i EN16 Greenhouse emissions - direct and indirect 12 3.2 date of most recent previous report 4 EN18 Greenhouse emissions reduction 12 3.3 Reporting cycle 4 EN23 Total number and volume of significant spills 14, 27 3.4 Contact person for report Rear EN25 Biodiversity - Water bodies and related habitats 11 3.5 Process for determining report content 5 affected by discharge and runoff 3.6 Boundary of the report 5 EN26 Products and services - environmental 9, 12 3.7 Limitations on the report 5 impact reduction 3.8 Basis for reporting 5 EN27 Products & Packaging - percentage reclaimed 9, 28 3.10 explanation of the effect of, and reason for, any N/A re-statements of information from earlier reports Social performance indicators
3.11 Significant changes in scope, boundary, N/A Appendices LA7 ohS Statistics - Lost time injury / disease 20-21 measurement method from previous period frequency rates by region 3.12 gRI Content Index 85 LA8 health & Safety - programs to assist workforce 20 members, their families or community members Governance, commitments & engagement regarding serious diseases 4.1 governance structure of organisation 16 LA13 Diversity statistics 21 4.2 Chair / executive officer status 17 PR1 Products & Services: Customer Health 13 4.3 Unitary board - number of independent / non 19 and Safety executive members PR5 Customer Satisfaction 14 4.4 Mechanisms for communication to the board 19 4.14 Stakeholder groups 19 4.15 Process of identification and selection i of stakeholders
Leading with local solutions 85 Glossary
Biodiversity The variety of plants, animals and other living things in Megalitres (ML) One million litres or 1,000 cubic metres. a particular region. In practice, biodiversity suggests sustaining the diversity of species in each ecosystem as we plan human activities Meter A device for measuring the quantity and flow rate of water. that affect the use of land and natural resources. New customer contributions The fees charged to developers Biosolids A solid organic by-product of the treatment of recycled or property owners to assist in recovering the costs of extending water that can be managed and used safely for nutrient, soil and improving water supply and sewer networks servicing conditioning, energy or other value. new developments.
Biogas A mixture of methane and carbon dioxide, produced by Recycled water Recycled water originates from wastewater, anaerobic digestion of organic waste matter. collected from homes and businesses and diverted to a recycled water plant where it passes through a series of purification Bore water Bore water is water which builds up in underground processes, in accordance with recycled water quality standards. aquifers as a result of seepage of rain and rivers through layers of The process includes treatment to reduce undesirable substances soil and rock. It can be treated for use as drinking water. such as coliforms and brings the recycled water up to a standard that makes it suitable for a wide range of uses, but unsuitable for Bulk entitlement The right to water held by water corporations drinking purposes. defined in theWater Act 1989. A bulk entitlement defines the amount of water that a corporation is entitled to from a river or Risk management A process to identify, assess, manage, and storage, and may include the rate of extraction and its reliability. control potential events or situations, to provide reasonable assurance regarding the achievement of the organisation’s Capital works The development and ongoing maintenance and objectives. replacement of infrastructure including water, sewer and recycled water systems. Sewage Liquid and solid waste disposed from domestic uses of water, such as toilets, bathrooms and kitchens and similar Carbon neutral Also referred to as having a net zero carbon uses in trade and industry. footprint, it refers to achieving net zero carbon emissions by balancing the amount of carbon released with an equivalent Sewerage A system of pipes and infrastructure for the collection amount of sequestered or offset carbon, or by buying enough and transportation of domestic and industrial sewage. carbon credits to make up the difference. Stormwater Rainfall that runs off roofs, roads and other surfaces Catchment Area in which water is caught including water sources where it flows into gutters, streams, rivers and creeks, and such as rivers, streams, groundwater and reservoirs. eventually into the bays.
Climate variability Changes in climate such as temperature and Sustainable Capable of being continued with minimum long term rainfall that differ significantly from previous average conditions effects on the environment.
Community engagement The process by which organisations and Trade waste Waste produced by trade and industry. individuals build ongoing, permanent relationships for the purpose of applying a collective vision that will benefit the community. Water losses This is water that is “lost” before it reaches the customer. Losses can be real losses (e.g. through leaks) or Corporate social responsibility A corporation’s sense of apparent losses (e.g. through theft or metering inaccuracies). responsibility towards the community and environment (both ecological and social) in which it operates. Water quality Water quality refers to the physical, chemical and biological characteristics of water. For Western Water, water Customer advisory network Representatives from the community quality refers to compliance with requirements set out in the which meet to consider, discuss and provide feedback on service Australian Drinking Water Regulations. issues affecting their region. WaterTight Western Water’s residential home audit and retrofitting E.coli A strain of the bacterium Escherichia coli, used as an program targeting households who report higher than average indicator of faecal contamination. water use.
Integrated water cycle management The coordinated management of water supply, sewerage, recycled water, drainage and stormwater systems. It optimises the use of all alternative water
Glossary sources, minimises impact on the natural environment, and ultimately, reduces consumption of treated drinking water.
86 Western Water ANNUAL REPORT 2011/12 Annual Report Index
Audit committee 19 Service area map 1 Availability of other information 25 Service charges 15 Biosolids 28 Sewer system 14 Board members 17 Toolern 10 Board committees 19 Victorian Biodiversity Strategy 11 Bulk entitlements 8 Victorian Industry Participation Policy 22 Business at a glance 3 Victorian River Health Strategy 11 Capital works committee 19 Vision 2 Capital works 22 Water consumption 6 Carbon neutral certification 13 Water losses 7 Complaints management 14 Water quality 13 Community education 9 Water restrictions 8 Community service obligations 15 Water Supply Demand Strategy 8 Customer advisory network 19 Water supply system 13 Customer satisfaction 14 WaterTight 9 Customer service 14 Whistleblowers Protection Act 24 Drought response 6 Workforce 21 Employment and conduct principles 21 Workplace incident management 20 Environmental sustainability 8 Financial report 32-76 Freedom of Information Act 24 Grants 15 Greenhouse gas reduction 12 Hardship 15 Highlights 3 Human resources 20 Integrated water cycle management 4 Occupational health & safety 20 Organisational chart 16 Performance report 26 Policy review committee 19 Recycled water 9 Regional Catchment Management Strategy 11 Remuneration committee 19 Reservoir levels 6 River health 11 Risk management 25 l report index a l report Annu
Leading with local solutions 87 Additional Copies Copies of this report are available from:
Website www.westernwater.com.au
Email [email protected]
Telephone 1300 650 425
Mail Annual Report Coordinator, PO Box 2371 Sunbury DC, Victoria, 3429
Office 36 Macedon Street, Sunbury (Mon-Fri 8.15am-5.00pm) Feedback Western Water welcomes your feedback on our performance and the content of this report.
Email [email protected]
Mail Annual Report Coordinator, PO Box 2371 Sunbury DC, Victoria, 3429 Contact Western Water
Mailing address Western Water PO Box 2371 Sunbury DC Vic 3429
Visit us at 36 Macedon Street, Sunbury Hours 8.15am-5.00pm
Website www.westernwater.com.au
Email [email protected]
Telephone 1300 650 425 Mobile phone and interstate callers 03 9218 5400 Facsimile 03 9218 5444
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