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2004-05 Annual Report HUNTER WATER Contents 2004-05 annual report HUNTER WATER contents 3 about us 4 chairman’s message 5 managing director’s message 6 corporate highlights 9 financial performance 10 operating licence performance 12 our business 19 our governance structure 22 our customers 30 our community 36 our staff 46 our operations 56 our environment 68 our subsidiaries Cover photo by Paul Foley/Lightmoods - Grahamstown Dam Labyrinth Spillway about us Hunter Water is a State Owned Corporation (SOC) and the water and wastewater service provider for over half a million people in the lower Hunter region. There are 211,212 properties connected to the water network and 199,212 to the wastewater network. Our area of operation covers 5,366km2 with a population of 512,432 in the local government areas of Cessnock (48,089), Lake Macquarie (192,797), Maitland (60,222), Newcastle (147,621) and Port Stephens (63,703). Bulk water is also supplied to Dungog Council and to small parts of Singleton and the Great Lakes area. We are also supplying an average six megalitres per day to the Central Coast. We also provide some stormwater services to the lower Hunter, with 100km of stormwater channels in Cessnock, Newcastle and Lake Macquarie. We deliver on average 200 megalitres (one megalitre equals 1 million litres) of water a day using assets worth about $2 billion. Our raw water sources are: Grahamstown Dam (190,000ML capacity), Chichester Dam (21,500ML), Tomago Sandbeds (60,000ML) and Anna Bay Sandbeds (16,000ML). We collect, treat and then deliver drinking water to our customers and then transport, treat and dispose of the region’s wastewater. Our water consistently meets the most recent guidelines for drinking water set by the National Health and Medical Research Council (NHRMC). Wastewater is treated and clear effluent is discharged to waterways or reused where it is economically and environmentally beneficial. How our storages work While our total water storage levels were at 95% at the end of June 2005, it’s important to note that our three main storages (Chichester Dam, Grahamstown Dam and Tomago Sandbeds) are relatively small compared to other dams in NSW that supply similar sized communities. Chichester fills from streamflows in the Chichester River and Grahamstown fills when we pump from the Williams River, or from runoff in its own catchment. The Sandbeds fill as a result of direct rainfall. Two of our storages are relatively coastal (Grahamstown Dam and Tomago Sandbeds) and that means they often receive rainfall when storages further inland do not. Chichester Dam is also located in the Barrington Tops area and attracts above average rainfall. This means that when we don’t get flows in our streams and rivers, our storages can diminish quite rapidly. On the other hand, while our storages can drop very quickly, they can also recover quickly following good rainfall. 2004-05 annual report HUNTER WATER 3 chairman's message On behalf of Hunter Water Corporation’s Board of Directors, I am once again very pleased to present the 2004-05 Annual Report. The Corporation has had another successful year and has continued to maintain its strong commercial performance while providing the people of the lower Hunter with high quality water and sewerage services. The total reported profit for the year, after applicable income tax expense, was $43 million and was achieved on a total revenue from ordinary activities (including capital contriutions) of $193.4 million. Hunter Water has a strong underlying financial position with relatively low levels of indebtedness. Based on this year’s outcome and Hunter Water’s ongoing strong financial base, the Board of Directors is pleased to recommend a dividend of $33.8 million, which is in line with recent years. As Chairman of the Board, I am proud to lead an organisation which has an established reputation in water industry reform, both at a national and international level. The Corporation’s future focus will be to manage a significant program of capital expenditure which will provide for the renewal of assets to meet higher standards and future growth in the region. In particular, we will continue with our program to ensure the future security of water supply for the people of the lower Hunter. This will include completing the augmentation of Grahamstown Dam which will increase the dam’s capacity by fifty per cent. It was very pleasing during the year to announce plans to construct a new water transfer system between the Central Coast and the Hunter. While we have been fortunate over the year with rain falling on our catchments, the Central Coast supply continued to deplete. This transfer system will benefit both areas as it will be reversible. In effect, it will allow the two organisations to optimise the water resources of both areas. The Corporation’s key goals for the future will be to continue to: = Maintain high levels of customer service = Operate in an environmentally responsible manner = Maintain a valued, skilled and competitive workforce = Be a commercially successful, efficient and growing business As always, I would like to take this opportunity to formally pass on my thanks and congratulations to my fellow Directors and the Corporation’s management and staff for another successful year. RON ROBSON 4 2004-05 annual report HUNTER WATER managing director's message Hunter Water’s Business Plan is about continual improvement. We recognise that on-going strong performance means that we need to continually change and innovate as our customers’ needs change, as technology develops and as we face the challenges of a varying climate. 2004-05 has been a very busy year with: = Major growth occurring in the Hunter = A significant capital program of over $78M completed = A complete re-vamp underway of the Corporations’ major IT platforms (Electronic Document Management, Customer Information System, Financial, Purchasing and Human Resources systems and up-grade to SCADA facilities) = A continued focus on catchment management = Preparedness for a shift to our new Head Office (currently under construction) = Preparedness for increased security issues and focus on business continuity = Announcement of a stronger link between the Hunter Water and the Central Coast to allow transfer of water between the two areas = An increased focus on our safety performance It is pleasing that with all of the challenges, we went very well against our Operating Licence and Customer Service Standards. While 2004-05 was busy, we expect that future years will be just as busy. Our next four years’ Capital Program will average around $90 million per year which is unprecedented in Hunter Water’s history. We are investing heavily to cater for expected major growth, to replace ageing assets and to deliver better standards to the community. Our investment in regional water storages with the augmentation of Grahamstown Dam, came at just the right time. Good rains allowed us to fill the Grahamstown and Chichester Dams during the year. While we can be happy with the present, we realise we need to plan for the future. There are many challenges ahead. We need to continue to meet our customers’ needs, be flexible and dynamic and continue to focus on efficient service delivery. I look forward, as do the rest of the team at Hunter Water, to meeting these challenges and delivering a stronger performance in 2005-06. KEVIN YOUNG 2004-05 annual report HUNTER WATER 5 corporate highlights Healthy water storage levels were maintained at a time when storages around us have been steadily declining - at the end of June 2005, our total storage levels were at 95%. We implemented a number of water demand and supply initiatives identified in the Integrated Water Resource Plan (IWRP) to manage the Hunter’s water supply into the future. We achieved licence compliance on all major elements of the Operating Licence (water quality, pressure, continuity and sewage overflows). We conducted a successful community awareness campaign throughout the Summer, to encourage the community to adopt water efficient practices. Our ‘Think Twice’ campaign specifically targeted residential outdoor water use. A media campaign was supported by our participation in a range of community events, with our highly visible presence and interactive water efficiency displays. Supply to Wyong was increased to an average six million litres of water a day. This helped alleviate the water shortage on the Central Coast. Agreement in principle was reached between Hunter Water and the Central Coast to proceed with construction of a new strategic pipeline link with capability to supply both communities with water. We continued the $16 million spillway augmentation of Grahamstown Dam to increase its water storage capacity by about 50%. This is being achieved by optimising use of previous ‘flood storage’ capacity. This further improves the drought security of the region. We completed a $12 million upgrade to our water supply system, including construction of an additional Wallsend trunkmain, Wallalong water supply system, Hunter River south arm trunkmain crossing, and Pokolbin and Tenambit water distribution systems. Major progress has been made during the year on the sewerage system upgrade for Lake Macquarie, improving customer amenity and environmental protection in this major population centre. We finalised a detailed design of Cessnock wastewater treatment plant upgrade. Completion of the Cessnock works will conclude our $90 million Environmental Improvement Plan to upgrade wastewater treatment works that discharge into inland waterways. Planning for the sewering of Kitchener, Ellalong, Millfield and Lochinvar under the Priority Sewer Program commenced. The sewer system for Kitchener will be completed in late 2006. Design work for the $32 million Newcastle wet weather wastewater system upgrade continued to progress well. 6 2004-05 annual report HUNTER WATER The supply of treated recycled water from Kurri Kurri treatment works to Kurri TAFE for horticultural applications, including the irrigation of campus lawns, ovals and a golf fairway is working successfully.
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