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Business Review Water 2000/01 MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 2

Contents

BUSINESS REVIEW

Performance snapshot 1 Our business 4 Chairman’s and Managing Director’s review 6 Our customers 10 > Retail water companies 11 > Diverters 12 > Water recycling 14 > Developers 15 Our commercial performance 16 > Our financial performance 17 > Our asset management performance 19 Our environmental performance 24 Our social performance 30 > Public health 30 > Community 34 > Accessing information 40 > Freedom of information 42 > Energy and Water Ombudsman () 43 > Safety 44 Corporate governance 48 > Board of directors 50 > Senior executives 51 Financial statements 54 Compliance index 78 Statement of corporate intent 80

Front cover: Mt Hickory Wattle blooms in ’s O’Shannassy catchment.

Right: Feeding a spiral- bound liner into the Hobsons Bay sewer at Black Rock. The relining has strengthened and extended the sewer’s life. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 3

Performance snapshot 2000/01 MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 4

Financial Our key achievements include: Our operating revenue was $460.8 million, which exceeded our budget by $20.6 million. Our operating expenses (before interest and income tax expense) were $204.7 million, marginally better than our budget. While achieving the lowest operating costs per property of any major water company in for wholesale water and sewerage services, we maintained service standards that were among the world’s highest. Our net profit after tax was $129.0 million which was $23.3 million better than our budget. Our rate of return on total shareholder equity (after tax) was 10.5 per cent which exceeded our budgeted return of 9.8 per cent. We reduced our debt by $20.0 million, when we had budgeted to borrow $7.0 million. Our gearing ratio at 41.4 per cent was marginally better than our budgeted ratio of 42.8 per cent. A key disappointment was that our capital expenditure of $105.4 million was $18.6 million below our budget.

Environmental Our key achievements include: > In protecting the environment, we achieved an EPA Victoria accredited licence which recognises excellent performance for our . We also commissioned our first enhanced lagoon at the plant to reduce nitrogen inputs to Bay. > We spent $2.2 million on constructing to improve the quality of stormwater entering Port Phillip Bay. Key disappointments include litter washing up onto the beach near our Boags Rocks outfall and an odour discharge at our . We were fined by EPA Victoria for each of these licence breaches. The lagoon system at our Western Treatment Plant.

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Social Public health Our key achievements include: > Completing the Cardinia to Pearcedale pipeline which has improved the quality of drinking water we supply to South East Water’s consumers on the Mornington Peninsula. > Exceeding our water quality targets. This involved more-sensitive testing procedures that required increased chlorination to meet quality standards.

Safety Our key achievements include: > Working with the Victorian WorkCover Major Hazards Unit as an industry leader in the “exemplar program” to ensure our major sites storing hazardous chemicals meet stringent new major hazard facilities regulations. > Organisation-wide accreditation to SafetyMAPTM Initial Level consistent with Victorian WorkCover Authority’s system that assesses occupational health and safety programs. A key disappointment is the 12 lost-time injuries suffered by our employees and contractors.

Community Our key achievements include: > Making significant progress in developing a master plan for our Devilbend Reservoir site by engaging the community. > Working with the Community Liaison Committee at our Western Treatment Plant to complete an environment improvement plan for the plant. A key disappointment was not maximising the benefit of feedback from the local community through our Eastern Treatment Plant Community Liaison Committee.

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Our business

Melbourne Water is a statutory corporation owned by the Victorian Government. The responsible Minister is the Hon. Sherryl Garbutt, Minister for Environment and Conservation. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 7

We provide drinking water and sewerage services to Melbourne’s three retail water companies–, South East Water and . We also supply water to Western Water. These organisations provide water and sewerage services to consumers. We are responsible for managing major drainage components, waterways, floodplains and stormwater quality in rural and urban areas totalling 7,806 square kilometres. We undertake a range of improvement programs to protect our water supply catchments and the environment. We also work closely with the development industry, local councils and the community to ensure the health of Melbourne’s waterways. Our aim is to show leadership in water cycle management, through effective, sustainable and forward-looking management of the community resources we oversee. We also appreciate that achievements occur through the contribution of our people and those who work with us. Further, we are people who: > recognise that we achieve more by working with others > feel privileged to be the custodians of our water resources > behave with integrity > attain excellence through creativity and innovation > celebrate our achievements and learn from our experiences.

Vision

Leadership in water cycle management

5 Melbourne at dusk reflected in the Yarra River. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 8

Chairman’s and Managing Director’s review MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 9

We are pleased to report our achievements against the targets we set at the beginning of this financial year. Using our vision of being a leader in water cycle management, we set objectives in conjunction with our Portfolio and Shareholding Ministers to achieve the following outcomes: > protect public health > manage Melbourne’s water resources and the environment in a sustainable manner > provide excellent service and maintain the trust and respect of the community > operate as a successful commercial business.

Our performance > Supplied 505,140 million litres of water, up from 501,640 last year, and treated 334,971 million Our performance against these targets include: litres of sewage, up from 326,699 last year. > Completing on time, and within its $46.7 > Exceeding our projected after tax profit budget million budget, the Cardinia to Pearcedale of $105.7 million by 22 per cent, and our revenue pipeline which has significantly improved the budget by 4.7 per cent. These increases over quality of water delivered to South East Water budget were mainly due to higher water sales as and its customers on the Mornington Peninsula a result of the prolonged drought. Our efforts to > Continuing our seven-year $124.0 million improve general efficiency (see reference on upgrade of our Western Treatment Plant which page 17 to the WSAA survey indicating we have will reduce the nitrogen levels in treated water the lowest wholesale water and sewerage costs in discharged to Port Phillip Bay. Australia) also contributed to our profit. > Events that should not have occurred were the However, our net profit after-tax for the year is beach litter incident and odour complaint related 34 per cent below last year which was affected by to operations at our Eastern Treatment Plant. a one-off adjustment to reflect a reduction in These led to two $5,000 EPA Victoria fines, company taxation rates, and a budgeted-for the first imposed for licence breaches by our reduction in developer contributions. Eastern and Western treatment plants. Importantly, we propose returning a total dividend >We conducted our own inquiry and cooperated of $108.0 million to our owner, the Victorian fully with the investigation by EPA Victoria. Government. This is represented by an interim As a result, we immediately amended our dividend of $58.3 million we have paid and a final operating procedures and upgraded security dividend of $49.7 million we propose paying based along the 56-kilometre pipeline from the on our final operating results. plant at Carrum to the discharge point at Boags Rocks, near Cape Schanck. We are continuing an investigation into the benefits of tertiary treatment.

With the four-year drought continuing, we adjusted operating procedures to capture as much water as possible from our available water supply sources 7 such as the . MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 10

Chairman’s and Managing Director’s review

The Victorian Government’s Infrastructure Group tours our Western Treatment Plant as part of its review of Melbourne’s future needs.

Drought management Investing for the future The drought we are experiencing has placed A vital part of resource management is investing additional demands on the way we manage our for the future. water supplies. Part of our response involved Importantly we stepped up our investment in adjusting our operating procedures to ensure we water recycling. This involved cooperative action captured as much water as possible from our with several stakeholders, including the available supply sources. Victorian Government, to develop a comprehensive As part of a long-term program we are playing water recycling strategy. Our actions are part a lead role in developing a water resources strategy of our commitment to recycle 20 per cent of the for the Melbourne area. effluent we produce at our sewage treatment plants Further, we undertook a major public education by 2010. campaign with the retail water companies to help During the latter part of the year, we asked conserve water and help defer the need to build our people to move from a product-based water, new water storages. sewerage and drainage approach, to one based on integrated functions such as research and technology, planning, capital works and asset management. This new approach is directed to delivering better service to our customers. Other benefits flowing from this integrated approach will be more efficient and effective delivery of our capital programs.

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Board changes Reporting We take this opportunity to welcome our three This year we have taken a major step in new board members who were appointed by the developing our public reporting in a way that pulls Victorian Government on 1 January 2001. together our economic, environmental and Ms Julie Garland McLellan, a senior marketing social performance. executive at Minter Ellison, has broad experience in For several years we have reported separately on strategic business development. Ms Merran Kelsall our environmental and public health performance. is an independent company director and consultant This year we are expanding our social reporting to with considerable experience in financial services. encompass two other elements–safety and Mr John So is a businessman with wide commercial community. Each of these stand-alone reviews is and community interests. We extend a warm summarised in this document. We welcome welcome to our new directors and look forward to your feedback. the experience they will bring to our business. Outlook Our appreciation goes to retiring board members Virginia Mansour and Baard Solnordal for their We will continue to focus on initiatives within considerable contribution. Baard assisted greatly our four business objectives with special in the transition to the current Melbourne Water emphasis on building up of water recycling and following the establishment of the new continuing our significant investment in metropolitan water industry in the mid-1990s. upgrading sewage treatment. We thank Virginia and Baard for all they have done for Melbourne Water and wish them well in their future endeavours.

Our people

Like a number of organisations, the Melbourne G W Bowker Water team has had to face the challenge of change. Chairman For a number of our people this has been significant. We thank our people, including our contractors, for the positive way in which they have focused on achieving corporate objectives and at the same time adjusting to changes including our structural re-organisation. A special thanks to Dr David Lynch who B R Bayley departed during the year. David made a significant Managing Director contribution to Melbourne Water in a career spanning some 30 years. During his time, he was a tireless contributor in various senior management roles.

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Our customers

Our corporate objective is to: “provide excellent service and maintain the trust and respect of the community”. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 13

Retail water companies

Melbourne Water is responsible for managing Emergency response Melbourne’s water resources. We provide water During 2000/01, we worked with the three supply and sewerage services to retail water metropolitan retail water companies to create and companies under bulk service agreements that develop industry-wide emergency response plans. clearly define standards and expectations. In turn, The aim is an integrated and coordinated response the retailers–City West Water, South East Water to managing emergencies with the potential to and Yarra Valley Water–provide water and impact on more than one of the companies. sewerage services to consumers. Five response plans were developed covering water During 2000/01, we supplied 505,140 megalitres contamination, sabotage, loss of water supply, of water to the three metropolitan retailers and loss of sewerage services/assets and a generic plan to regional retailer, Western Water. We also removed cover other emergencies. and treated 334,971 megalitres of sewage and trade During the year, a full-scale scenario planning waste that the metropolitan retailers collected from role play was conducted with findings incorporated households and businesses in greater Melbourne. into revised draft plans. A key part of emergency Drought and the water supply management planning, this water contamination Despite one of the warmest summers on record, scenario exercise involved 48 people, including Melbourne’s water consumption of 505,140 representatives from the Department of Human megalitres for the year was only 4.7 per cent above Services. It confirmed that our industry could work average. Peak consumption of 2,509 megalitres on together to manage an emergency while identifying 8 February 2001 was well below historic peak daily areas for improvement. levels, which frequently exceeded 3,000 megalitres. During 2000/01, we also conducted desktop exercises for specific teams and presented emergency During 2000/01, we participated in several water awareness sessions to train our people. conservation education campaigns with the metropolitan water industry. These campaigns were Planning complemented by a new section on our web site. During 2000/01, we undertook studies with the relevant retail water companies on two key projects We support the three retail water companies with technical information and assistance in managing that will remove most of Melbourne Water’s drought response. Our daily information bulletins remaining wet-weather sewage spills. These projects contain consumption, rainfall and catchment will ease pressure on ageing sewers that were inflow information. They also give storage levels designed for smaller populations. and their relation to water restriction trigger points. With Yarra Valley Water, we completed a plan Our monthly customer reports consolidate this for the northern suburbs that aims to reduce spills daily information, and project the expected storage to . Under the plan, which is expected behaviour over coming months under low, to be completed by 2008/09, flows from the average or high rainfall. The monthly reports also Merri Creek sewerage system will be diverted to include a summary of the Bureau of Meteorology’s the North Western Sewer. assessment of the likelihood of future rainfall. The second plan, being developed with City West The drought advisory group, consisting of Water and Yarra Valley Water, is due to be finalised representatives from Melbourne Water and the in 2001/02. Works will address wet-weather sewage three retail water companies, addresses strategic spills in the Upper Moonee Ponds catchment. direction, significant issues and day-to-day actions. Managing trade waste Sub-groups are also formed to address specific We continue to work with the retail water issues associated with communications, monitoring, companies to establish guidelines for managing operations, enforcement and exemptions. trade waste that can pose a risk to the sewerage We have also worked with the retail water companies system. These guidelines will improve the to revise, clarify and formalise responsibility information we receive on trade waste that and accountability for drought response actions. customers of the retail water companies dispose of into the sewerage system.

Our largest water storage reservoir is the Thomson Reservoir. We sold bulk water supplies to our customers, the three 11 metropolitan retail water companies and to Western Water. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 14

Our customers Diverters

Corporate responsibility On 12 January 2001, we imposed level one restrictions for diverters drawing water from the Melbourne Water is responsible for managing the Yarra and lower Maribyrnong rivers. We raised volume of water that businesses pump from the these to level two restrictions on 25 January 2001. Yarra and Maribyrnong rivers. We issue licences to Under these restrictions, the diverters were these customers–known as diverters–that allow allowed to pump water at limited times on alternate them to take water for their homes, farms, market days. We lifted restrictions on Maribyrnong gardens, vineyards or other businesses. diverters on 3 May 2001 and on Yarra diverters on Our task is to manage flow rates in the Yarra and 11 May 2001. Maribyrnong rivers to meet EPA Victoria Significant rain in October allowed Maribyrnong requirements and balance these environmental flows diverters to receive 50 per cent of their entitlements with the economic needs of our diverter customers. from early January until May, in addition to water Operation they had already pumped from the Maribyrnong before we introduced restrictions. During 2000/01, Melbourne Water licensed We carried out regular audits to ensure compliance 1,305 diverters to take a total of 36,979 megalitres with these restrictions. from the Yarra and Maribyrnong rivers. Of these, 46 diverters, mostly market gardeners at Keilor, Improved communication pumped water from the Maribyrnong River. We continued to improve communication with our diverter customers. The Diversions Drought continues to bite Management Advisory Committee and the Keilor Diverters Advisory Group received updates from During 2000/01, drought-driven water restrictions our representatives, along with early warning forced many diverters to cut back crops. of restrictions to enable better preparation. In June 2000, when the Rosslynne Reservoir Drought response plans were discussed and, where capacity was down to eight per cent, we advised necessary, revised well before summer. All Yarra Maribyrnong diverters that they could be restricted diverters had an opportunity to comment on the to as little as 12.5 per cent of their allocations over revised plan developed in consultation with their summer. In September we revised this to Diversions Management Advisory Committee. 16 per cent.

LICENSED DIVERTERS 2000/01 Purpose Number of licences Water allowance (megalitres)

Irrigation* 618 14,512 Domestic and stock 358 1,097 On-stream dam filling* 131 1,599 Off-stream dam filling 98 3,220 Domestic, stock and irrigation 83 356 Industrial/commercial 8 10,254 Power generation 5 8 Fish farm 2 5,876 Commercial bottling 2 57 Total 1,305 36,979

* Our policy is to not issue new on-stream dam licences to protect the rights of existing licence holders and to allow for fish migration.

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Keilor market gardener

Vasil Koroneos believes the $40,000 to build a 30-megalitre winterfill dam on his 20-hectare Keilor market garden is money well spent. His family business, Keilor Fresh Produce, has an annual licence volume of 114 megalitres, and Koroneos says it can manage most years with 90 to 95 megalitres. But, when prolonged drought leads to water restrictions, he has had to produce less and buy more from other farmers to make up the salad mix that he supplies to major supermarkets. “Even at 35 per cent, we’re very limited in what we can spray, although it’s better than dropping down to 15 per cent, which is what we were faced with at one stage last year,” he says. “That’s when we decided that enough was enough and that we’d build a dam. We’re here for the long term and if you haven’t got water, you may as well pack up and go.”

Preparing for the bad years Metering water use We encourage diverters to invest in off-stream Traditionally, licences have restricted holders to “winterfill dams” to store winter rains to provide irrigating a specified area of their property. This was greater security of supply during drought years. used to determine compliance. We recognise that A small number of licence holders have increased many of our diverter customers have introduced their water supply security by investing in irrigation efficiencies and that linking irrigation off-stream dams. rights to specific areas is restrictive. Water trading Only metering can give us the accurate water use we Under an exchange scheme, which we established need to improve our stream management and ensure in 1999, diverters can trade their water entitlements. continued stream health, while helping diverters Subject to conditions, diverters can trade water understand their water needs. Metering also provides temporarily or permanently, in full or in part, and a much fairer way of allocating the restricted water can buy extra water from other licence holders. available during low-flow conditions such as drought. The buyer and seller determine price, with all All Maribyrnong diverters currently irrigating are transfers subject to approval by Melbourne Water and metered. However, at 30 June 2001, only nine per payment of a fee. We approve transfers only if they cent of 669 major Yarra diverters were metered. have no significant impact on the security of supply This is hindering our ability to manage Yarra of other licence holders or on the environment. streams. We expect metering all these diverters to During 2000/01, water trading increased, take several years because of the wide variety and with Maribyrnong diverters temporarily trading age of pumping systems being used. Other issues 12 licences totalling 124 megalitres. Six other include customer concerns, the significant cost, licences, in the Yarra catchment, totalling location and access difficulties and limiting pump 106 megalitres, were also traded temporarily. downtime while installing a meter. We bear the We expect trading to increase as diverters become cost of supplying and installing meters for existing more aware that their water allocations are complying licence holders. We are addressing valuable assets. customer concerns by establishing local catchment committees to formulate stream management plans that include metering. During the year, we installed some 50 meters to measure water use by Yarra catchment diverters. 13 This is our annual meter installation target. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 16

Our customers Water recycling

Our Eastern Treatment Plant has been selling Biosolids reuse recycled water since 1995, when its 12 customers Disposal of sewage sludge or biosolids– used 0.005 per cent of the plant’s output. a by-product of sewage treatment is strictly During 2000/01, our 36 customers bought some regulated by EPA Victoria. 1,721.5 million litres of recycled water, or 1.1 per Biosolids are stockpiled at our sewerage cent of plant output. They use their recycled water treatment plants and their reuse is restricted. for agriculture, horticulture, on vineyards or to However, a blended soil supplier near Eastern irrigate golf courses and sporting fields. Treatment Plant is reusing some of these Water recycling customers biosolids. KT Soils bought 11,000 cubic metres We secured two major new horticulture customers of biosolids (sewage sludge) from our Eastern during the year. Both are on the Eastern Treatment Treatment Plant during 2000/01. Plant outfall pipeline. Future Commissioning the Stage 1 water recycling We are working with Government and other infrastructure at our Western Treatment Plant, key stakeholders to increase water recycling by during 2000/01, enabled us to use recycled water 20 per cent by 2010. We are confident that to irrigate land to the north of the plant. economic viability issues and any environmental During this first year we used 2,700 million litres effects will be addressed during the coming year. of recycled water on that land.

WATER RECYCLING FROM OUR EASTERN TREATMENT PLANT Volume of water recycled (megalitres) Scheme Product 2000/01 1999/2000 1998/99

Horticulture Nursery/turf farm/flowers/vineyard/orchard 150 393 350 Agriculture Hydroponics/market garden 873 698 698 Silviculture Foliage 6 7 2 Dust control Biosolids dust control 141 5 0.1 Municipal Golf course/recreational reserves 550 549 514 Aquaculture/ornamental Wetlands 1.5 1 1 Total effluent reused 1,721.5 1,653.0 1,565.1

Bunurong Memorial Park

Owned and managed by the Cheltenham and Regional Cemeteries Trust, the 119-hectare park was established in 1995 at Bangholme, between the growing population centres of Frankston, Dandenong, Cranbourne and the Mornington Peninsula. A factor in the park’s location was availability of abundant recycled water, from the nearby Eastern Treatment Plant, to help maintain its 20 hectares of lawns, landscaped gardens and three . “We recognised that water was going to become more scarce and expensive,” Chief Executive John Gilbertson says. “So we put in place a long-term water management plan that revolves around using recycled water from the treatment plant. We also ensure that all runoff flows into our system.” “Our grounds are always in good condition and our lawns stay green,” he says. “We used to fertilise the lawn every two months–we have only done so twice in the past 18 months. We’re very happy with the support we receive, the water quality and the economics. The whole world has got to get on board recycling.” 14 MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 17

Developers

Melbourne Water is responsible for ensuring that Developers may undertake drainage work within land development in the greater Melbourne area a scheme. In other instances we employ contractors addresses flood protection and stormwater runoff to do the work. Completing a drainage scheme can water quality. take up to 30 or more years from the initial We work with property developers to ensure planning to laying the last pipe. drainage plans for new land development meet two Forward planning for our drains and those of the key criteria. They must be capable of handling councils, helps speed design and construction which, water flows from a one-in-100 year flood event and in turn, cuts the time needed for land development. produce water of sufficient quality to not have a Water-sensitive design negative impact on the environment. We work with developers and their consultants, Working with developers we help create including town planners, landscapers, engineers community oriented solutions that can incorporate and marketing people to achieve the best outcome water-sensitive environmental features, for all parties. Our early involvement can assist including wetlands, sediment traps, grassed swales developers in gaining council approval for their or water bodies. drainage plans. Operation Increasingly, we are helping to produce water- We develop drainage schemes for a catchment, sensitive drainage schemes that provide an then levy each developer as they subdivide land aesthetically attractive solution to meeting water within that catchment. Similarly, drainage works quantity and quality requirements. These solutions are constructed as subdivision proceeds. The process often include water features that detain and filter is revenue neutral, with levies equalling the stormwater. This approach improves runoff overall cost of acquiring land for drainage works quality to waterways and the bay, and integrates and constructing those works. water quality treatment into new and existing urban developments.

DEVELOPER-RELATED CUSTOMER SERVICE DURING 2000/01 Town planning and subdivision applications from councils 7,540 Drainage agreements with property developers 3,937 Property development feasibility advice 914 Planning scheme amendment applications from councils 157 Building permit applications from surveyors 399 Subdivision releases to create property titles 4,848 Requests for flood level information 3,548 Planning and building appeal notices of interest* 271 Other miscellaneous enquiries 540 Total 22,154

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Our commercial performance

Our corporate objective is to: “operate as a successful commercial business”. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 19

Our financial performance

ACHIEVEMENTS > Making a net profit after tax of $129.0 million. > Paying a dividend of $58.3 million to the Victorian > Reducing our debt by $20.0 million. Government. We propose paying a further $49.7 million based on our final operating results. > Generating revenue of $460.8 million, 4.7 per cent greater than our budget. > Achieved savings on the Cardinia to Pearcedale pipeline project and the Western Treatment Plant lagoon augmentation works of $3.4 million.

DISAPPOINTMENTS >Falling $15.2 million short of our budgeted capital > Renewing outsource contracts at rates above expenditure, which was largely due to project delays our current contracts, which will put pressure on and deferments. our ongoing cost containment.

KEY CHALLENGES > Ensuring that we optimise our capital expenditure. > Ensuring our financial systems and processes can > Continuing to strive for operating efficiencies to support changed reporting requirements resulting drive down our costs. in a move to economic regulation.

Our operating revenue for 2000/01 was While our capital expenditure for 2000/01 $460.8 million, compared with $477.8 million remained consistent with last year, at $105.4 million for the previous year. While this year’s result is a it was below our budget of $124.0 million. Part of reduction of $17.0 million from last year, it is this shortfall was due to savings and efficiencies, $20.6 million better than our budget. Two main which reduced the cost of some major capital works factors contributed to the increase–water sales as by $3.4 million. The remaining $15.2 million was a result of the prolonged drought and continued not spent due to projects being delayed or deferred. high levels of activity in the development industry. Our major capital works undertaken during 2000/01 While significantly lower than their exceptionally are outlined in the next section of this review. high level in the previous year, developer We reduced our debt by $20.0 million during contributions still exceeded our budget for 2000/01. 2000/01, compared with $23.4 million the previous Our operating expenses (before interest and income year. We had budgeted to borrow $7.0 million tax expense) for 2000/01 were $204.7 million, during 2000/01 to meet our obligations, particularly compared with $195.8 million for the previous year. in respect to funding our capital works program. Our costs increased due to greater expenditure on However, due to our deferred capital expenditure operating the water supply system during the and active cash management we were able to reduce current drought and increased costs associated with debt during 2000/01. our energy use. We partially offset these increases At 30 June 2001, the total book value of our by general efficiency improvements. Our expenses interest bearing liabilities was $1,223.5 million. for 2000/01 were marginally better than the Our gearing ratio (debt to total assets) was $207.7 million we had budgeted due to our 41.4 per cent, which was an improvement from increased efficiency and reduced operating costs. our budgeted position of 42.8 per cent. Net profit after tax for 2000/01 was $129.0 million, Cash from operations remained consistent with compared with $196.9 million for the previous year. last year at 3.5 times interest costs, which was In addition to revenue and cost changes, the previous below our budgeted 2000/01 target of 3.8 times. year’s result reflected a decrease in the company taxation rate. Our 2000/01 result exceeded our The Water Services Association of Australia budget of $105.7 million by $23.3 million. compared Melbourne Water’s operating costs with This result equates to an after tax rate of return on those of other major water companies in Australia total shareholder equity of 10.5 per cent. during 1999/00. We continue to achieve the lowest operating costs per property for wholesale water and sewerage services. These low costs have been achieved without compromising our wholesale water and sewerage service delivery standards, which are Part of the sewerage pumping station at our among the leaders internationally. 17 Brooklyn operational hub. MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 20

Our financial performance

Five year financial summary

Statement of Financial Performance 1997 1998 1999 2000 2001 For the year ended 30 June 2001 $m $m $m $m $m Revenue from ordinary activities 679.8 567.0 449.6 477.8 460.8 Profit from ordinary activities 267.8 242.5 166.9 204.2 176.3 before income tax expense Income tax expense relating to ordinary activities 97.0 81.9 54.1 7.3 47.2 Net profit 166.4 160.6 112.8 196.9 129.0

Dividend paid or proposed 141.3 141.1 106.2 126.2 58.3

Statement of Financial Position 1997 1998 1999 2000 2001 As at 30 June 2001 $m $m $m $m $m Current assets 46.1 37.4 27.6 35.7 39.2 Non current assets 2,668.1 2,684.0 2,728.1 2,816.4 2,914.4 Total assets 2,714.2 2,712.4 2,755.6 2,852.1 2,953.6

Current liabilities 454.6 308.2 326.2 348.2 231.3 Non current liabilities 1,564.9 1,355.4 1,363.1 1,336.9 1,425.5 Total liabilities 2,019.5 1,663.6 1,689.3 1,685.1 1,656.8

Net assets 694.7 1,057.8 1,066.3 1,167.0 1,296.8 Total equity 694.7 1,057.8 1,066.3 1,167.0 1,296.8

The following should be considered when reviewing the five year financial summary: > Major reforms were introduced by the State Government to water and sewerage pricing for Melbourne on 1 January 1998. > Legislation reducing the company tax rate received Royal Assent on 10 December 1999. > Accounting and Financial Reporting Bulletin, Issue 36, detailing changes to the recognition of proposed dividends, was released in respect of the 2001 year.

FINANCIAL PERFORMANCE Actual Plan Actual Plan 1999/2000 $m 2000/01 $m 2000/01 $m 2001/02 $m

Revenue 477.8 440.2 460.8 470.0 Operating expenditure (before interest and tax) 195.8 207.7 204.7 226.4 Financial charges (interest) 77.8 79.9 79.8 78.2 Capital expenditure 105.2 124.0 105.4 100.1

Rate of return on assets 7.0% 3.7% 4.4% 4.2% Rate of return on equity (after tax) 17.6% 9.8% 10.5% 10.2% Capital investment to revenue 22.0% 28.2% 22.9% 21.3% Interest cover (times) 3.5 3.8 3.5 4.0 Debt to total assets 43.2% 42.8% 41.4% 40.2%

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Our asset management performance

ACHIEVEMENTS > Implementing a five-year study of key mechanical and > Upgrading the Arden Street main drain in electrical equipment to see if we can further improve North Melbourne; first stage of the plant reliability. Esplanade West main drain in Port Melbourne; > Implementing a program to improve our managing computer control systems at some of our water of corrosion in steel service reservoirs to maximise treatment plants; and installing backup their life. mechanical and electrical systems at all our water treatment plants to reduce the risk of > Starting to rehabilitate the Bunyip main drain open plant failure. watercourse following considerable community discussion and detailed design.

DISAPPOINTMENTS > Inconvenience caused to cyclists and the local Heavy rain during December/January severely community when design issues, soil conditions damaged the drain and resulted in closing the and weather delayed our completing repairs to the bicycle path that crossed it until repairs 100-year-old Palmer Street drain in Richmond. were completed.

KEY CHALLENGES > Ongoing improvement of our approach existing maintenance programs that will ensure to asset management by fully understanding each long-term reliability. asset including its condition, use, the influence > Continuing to develop asset information systems of surrounding geology and geography, stress and and asset registers. strain it is subject to, and by enhancing the

The oldest assets we operate date from the 1850s and include elements of the Yan Yean water system to Melbourne’s north. This older infrastructure is a relatively minor component of our overall asset base. Most assets were constructed between 1920 and 1980, making them relatively modern. Key elements include: > 13 dams > 1,018 kilometres of large water mains > 361 kilometres of aqueducts, siphons and tunnels > 56 steel or concrete service reservoirs > 68 water treatment plants > 5 water filtration plants > 20 water supply pump stations > 2 large sewerage treatment plants > 405 kilometres of sewers > 2 large and various minor sewerage pump stations > 1,141 kilometres of drains > 140 flood retarding basins > 4,381 kilometres of waterways > 677 kilometres of open drainage channels.

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Our asset management performance

Capital expenditure Major work within the Westernport catchment include ensuring the structural stability of stream As part of our reorganisation we now classify our beds and banks with large rocks, securing steep capital expenditure under four business objectives: embankments and adding vegetation. Work sites 1. Our expenditure to protect public health covers include the Bunyip Main Drain, Lang Lang River infrastructure to provide water that meets current and Musk Creek. quality standards. Modifying one of our Eastern Treatment Plant’s Completing a 30-kilometre pipeline from Cardinia six aeration tanks has reduced ammonia and Reservoir to the Tarago Westernport pipeline in improved aeration efficiency. We also replaced Pearcedale has allowed us to remove the Devilbend the plant’s process control system to enhance Reservoir from service and so improve drinking system performance and reliability, increase system water supply quality to South East Water’s automation and provide capability for Mornington Peninsula consumers. future expansion. Constructing a 10-megalitre steel water storage 3. Our expenditure to operate as a successful tank to replace an open reservoir at Johns Hill, commercial business covers infrastructure has improved water quality for Yarra Valley Water’s associated with our risk management and capital consumers by eliminating potential contamination efficiency, improving new technology, achieving from birds and animals. We also constructed a efficiency and growing the business in areas pump station to provide security of supply in that benefit Melburnians. emergency circumstances to Kallista, Gembrook We are completing stage six of the Woodlands and Emerald. These facilities are due for completion Development, which involved constructing in December 2001. and planting three lakes in the Woodlands Industrial 2. Our expenditure to manage Melbourne’s water Estate to improve stormwater runoff quality. resources and the environment in a sustainable We installed underfloor cathodic protection at the manner covers infrastructure to meet our long-term Essendon tank to prevent further corrosion and objective of protecting and improving waterways deterioration of its floor. and the marine environment. An ongoing project is to load waterways and By constructing wetlands at Hampton Park East, drainage, water supply and sewerage asset Mordialloc Creek, Narre Warren township, Troups information into geographical information systems Creek West and Heatherton Road, Dandenong, (GIS). This project includes updating site we have improved stormwater quality within the information from drawings, loading key asset Dandenong catchment. information and developing a reporting/retrieval system for the information.

Plan Actual Plan Service category 2000/01 $m 2000/01 $m 2001/02 $m

Protect public health 36.5 33.6 10.7 Manage Melbourne’s water resources and the 37.9 34.4 26.3 environment in a sustainable manner Operate as a successful commercial business 40.0 29.6 49.4 Provide excellent customer service and maintain 9.6 7.8 13.7 the trust and respect of the community Total 124.0 105.4 100.1

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Our $124 million upgrade of the Western Treatment Plant where we are changing our treatment processes from the historic land and grass filtration system to lagoon treatment with activated sludge technology. Shown are two of the four large clarifiers that will separate effluent from the activated sludge. The upgrade will reduce nitrogen levels in treated water discharged to Port Phillip Bay.

4. Our expenditure to provide excellent service Other items and maintain the trust and respect of the Consultants community covers infrastructure that improves During 2000/01, Melbourne Water engaged flood protection to the community and services 45 consultants to undertake operational and we offer developers. capital activities at a total cost of $0.9 million. Projects include replacing the deteriorating Hoyt No individual consultancy exceeded $0.1 million. Street main drain in Hampton with a reinforced Government grants concrete pipe. This involved jacking pipes Melbourne Water received $1.2 million in beneath the Sandringham to Melbourne railway Government grants from the Department of the line and under Beach Road. Environment and Heritage for the Port Phillip Constructing a retarding basin, incorporating Bay Stormwater project. wetland and other features within the Fulton Reserve, National competition policy Blackburn South, to improve flood protection and In August 2000, Melbourne Water participated stormwater quality discharging to Gardiners Creek. in the Department of Natural Resources and Computerised procedures for land development Environment’s response to national competition applications will automate 60 to 70 per cent policy by commenting on an issues paper of the applications received. This will enhance reviewing water legislation. The results of this planning outcomes, improve protection of water review are pending. and sewerage assets and result in speedier response to councils and applicants.

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Our asset management performance

Asset condition Importance We determine an asset’s importance by considering: Central to our asset management is an annual asset > community health and safety condition review. Each year we rate and assess the > environmental and social values “importance” and “condition” of each of our assets. > impact on service levels The review requires that we have a specific and >cost of lost production measurable action plan to ensure we maintain >effect on community confidence in effective service for: Melbourne Water > any high-importance assets considered likely > financial implications. to fail within 20 years Condition > any medium to low importance assets considered We use a structured inspection program to likely to fail within five years determine asset condition. Where visual > high-importance natural waterways that are inspection is insufficient, we employ advanced below the required standards. condition assessment techniques including: Operation > ultrasonic scanning of components We operate a modern and efficient information > radar testing management system to effectively coordinate our > closed circuit camera inspections of drains asset management practices. The core products are: and sewers >a geographical information system that > vibration analysis graphically represents asset locations > thermographic (heat sensing) testing >a powerful maintenance management system of electrical switchboards. that manages more than 10,000 annual When necessary, we support these condition maintenance tasks. assessments with reviews from independent These systems are linked to allow effective collection industry specialists. of asset data. Some of our assets including water storages, service reservoirs and our water main system. These spread from the Yarra Ranges and across Melbourne.

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Water mains Sewers Underground drains Estimated remaining asset life (kilometres)(kilometres)(kilometres)

Fifty to 100 years 803 349 948 Twenty to 50 years 127 36 166 Five to 20 years 59 19 23 One to five years 29 1 4 Total length (kilometres) 1,018 405 1,141

Water mains, sewers and drains We make detailed inspections of all major dams once a year, and report on dam performance. Overall, 94.7 per cent of our pipeline assets, We also identify and prioritise maintenance issues as outlined in the table above, have an estimated and required capital expenditure. life of 20 to 100 years. More than 81 per cent of these assets have a remaining life of over 50 years. Our dam safety management plans include: > Routine measurement and reporting of seepage These assets are relatively modern, with many flows under the dam and ground water levels, and major sewers and drains built over the last 25 years, comparison with past and expected performance. to meet the needs of a growing Melbourne. > Routine measurement of movement of the As outlined in the table above, a slightly higher structures by surveyors and the review of the number of our water mains will need to be replaced data against past and expected performance. over the next 20 years. These were built in the 1880s > Routine reading of geotechnical instruments and 1920s and are reaching the end of their lives. within and adjacent to the dam structure and We have replacement projects for these mains in the review of the data collected against past various stages of planning, design and construction. and expected performance.

Dams Buildings We use guidelines prepared by the Australian Melbourne Water complies with the building and National Committee on Large Dams for dam safety maintenance provisions of the Building Act 1993 management. These guidelines are based on the (Vic.) for buildings and structures we own. principles that dams: > do not present an unacceptable risk to the population downstream of the dam > do not present an unacceptable environmental risk to the downstream river catchment >are monitored so any deficiency or problem is detected quickly and fixed before a potentially dangerous situation develops > do not put at risk the safety of any site visitor. The guidelines require that we adequately inform the emergency services and people living downstream of a dam of any risks and possible consequences should the dam fail.

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Our environmental performance

Our corporate objective is to: “manage Melbourne’s water resources and the environment in a sustainable manner”. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 27

ACHIEVEMENTS >We achieved an EPA Victoria accredited licence, > Our sewerage system, including treatment plants, which recognises excellent performance, for our coped well with additional loads from significant Western Treatment Plant and commissioned our first rainfall during April 2001. enhanced lagoon at the plant to reduce nitrogen >We completed nine wetlands to improve the quality inputs to Port Phillip Bay. of stormwater flowing into Port Phillip Bay. >We began work on a long-term improvement plan >We began implementing a coordinated approach for our Eastern Treatment Plant and implemented to managing litter in the Moonee Ponds catchment. he first stage of a pilot project to reduce ammonia >We constructed fish ladders at four sites to enable levels in effluent discharged from the plant. migratory fish to pass. >We implemented a major monitoring program for >We project-managed the development of the initial receiving waters around Boags Rocks where our phase of a water resources strategy for Melbourne. Eastern Treatment Plant’s effluent is discharged. The program will measure the effectiveness >We developed a greenhouse gas strategy to of our recent initiatives in protecting the area’s reduce emissions. marine environment. >We completed a remediation plan to manage our >We developed two key strategies that will disused Dandenong Treatment Plant. eliminate most of the remaining wet-weather sewage spills from our sewerage transfer system.

DISAPPOINTMENTS > Some waterways in greater Melbourne did not >We were fined by EPA Victoria after litter was meet all long-term water quality targets set in the washed up on the beach near our Boags Rocks State Government’s environment protection policies. outfall and for an offensive odour discharged > On one day we failed to meet our requirements for from our Eastern Treatment Plant. environmental water flow below the >We do not yet have an energy management and have made slower than expected progress in system in place. completing streamflow management plans.

KEY CHALLENGES > Maintaining adequate supplies of water to our >Staying in touch with changing community views customers–the retail water companies–and for the and expectations on the environment. environment, during one of the most severe >Developing a robust water recycling strategy for droughts in 100 years. greater Melbourne, which has broad community and > With EPA Victoria and the Department of Natural government support, and allows us to meet our Resources and Environment, working to reduce the target to recycle 20 per cent of effluent by 2010. amount of nitrogen discharged to Port Phillip Bay > Managing land use at our Western Treatment Plant. by waterways, stormwater and drains by 500 tonnes > Capturing opportunities to recycle biosolids. a year through catchment management initiatives. > Maintaining long-term efforts to conserve water. > Understanding why the seagrass meadows in Western Port are declining. > Ensuring that the at our Western Treatment Plant continue to be an ideal habitat for birdlife as we upgrade our sewage treatment practices.

Our Western Treatment Plant 25 is a world-recognised bird habitat. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 28

Our environmental performance

Sunset at Boags Rocks between Gunnamatta and St Andrews beaches, site of the treated discharge pipeline from our Eastern Treatment Plant.

Protecting and improving our This project includes a waste-accreditation program waterways and bays for businesses to reduce litter entering the creek and litter traps being installed across the catchment. Melbourne Water is responsible for managing waterways in greater Melbourne. We aim to We continued to support the Australian Platypus improve the quality and environmental health Conservancy, which has developed a platypus- of these waterways as a key part of our objective reintroduction program, and undertakes waterway to manage sustainably Melbourne’s water monitoring of long-term change in platypus resources and the environment. populations. Platypus were found for the first time in Ruffeys Creek, Templestowe, probably as a result The Port Phillip Bay Environmental Study of 1996, of stream improvement works we have undertaken. which we funded, recommended reducing nitrogen entering the bay by 1,000 tonnes a year of which In January 2001, streams within the Cardinia Creek 500 tonnes would be achieved through catchment catchment were assessed for impediments to the management initiatives. We will contribute to this health of fish communities. Factors affecting fish reduction through targeted stormwater initiatives communities include degrading instream habitat, such as pollution-reducing wetlands. clearing land, barriers to migration, and introducing During the year, we completed earthworks and exotic species. began planting nine wetlands in the south-east We completed four fish ladders during the year to growth corridor. The wetlands are due to be enable fish to pass around instream obstructions. completed by June 2003. Two were in Darebin Creek, another on the lower In January 2000, a major initiative to remove Maribyrnong at McNabs Weir and the other at litter from Moonee Ponds Creek was announced. Coburg Lake on Merri Creek. Our partners in the project, which we are managing, are four local councils, the Australian Government, EPA Victoria, Clean-Up Australia and EcoRecycle Victoria. 26 MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 29

Protecting the environment Western Treatment Plant We are transforming the treatment processes we We are responsible for treating most of Melbourne’s use at the plant by discontinuing unsustainable sewage to minimise environmental impacts and processes such as the historic land and grass protect public health. We also aim to reduce filtration systems. Under the Western Treatment impacts on the marine environment and minimise Plant Environment Improvement Plan, these will odour and land contamination. be decommissioned by 2005, and replaced with The retail water companies collect sewage from lagoon treatment systems enhanced with activated households, and sewage and trade waste from sludge technology. These modified lagoons will businesses in greater Melbourne. Some 94 per reduce nitrogen loads to Port Phillip Bay by cent of this waste is transferred to our Eastern including a process similar to an activated sludge Treatment Plant at Carrum and Western Treatment process. Effluent from the enhanced lagoons will be Plant at Werribee whose operations come under used for onsite and offsite recycling schemes. EPA Victoria licences. The remaining sewage is We developed this plan with EPA Victoria and collected and treated by the retail water companies the Western Treatment Plant Community Liaison at their local treatment plants. After treatment, Committee and published it in September 2000. effluent is discharged to Bass Strait and Port Phillip The plan includes water recycling, monitoring Bay respectively. programs, odour management and a conservation Addressing sewage spills management plan During the 1990s, we reduced our Our plant has a licence from EPA Victoria to “non-compliance” wet-weather sewage spills by discharge treated effluent to Port Phillip Bay from 95 per cent. We achieved most of this by building four discharge points between the Werribee River the North Western Sewer and improving the and Point Wilson. EPA Victoria granted us an Kew pumping station. accredited licence in August 2000 in recognition During the year, we had eight spills totalling 66.3 of the Western Treatment Plant’s excellent megalitres from our transfer system. One spill of environmental performance. The new licence 10.0 megalitres was due to hydraulic deficiency and comprises concise statements of discharge limits, seven spills totalling 56.3 megalitres, were due to the environment improvement plan, an audit extreme rainfall. program and an environmental management system. A major storm, in April 2001, saw our North Western Sewer and the rest of our system, including the treatment plants, perform well with only seven spills to the environment. Flows in our system as a result of the storm were about two-and-a-half times greater than for dry weather.

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Our environmental performance

Eastern Treatment Plant Monitoring programs The plant uses an activated sludge treatment process. We contracted the CSIRO to plan and deliver a Sludge from this process is digested on site, dried long-term monitoring program of receiving waters at and stockpiled as biosolids. Effluent is discharged Boags Rocks. The program monitors sub-tidal reefs, under EPA Victoria discharge licence requirements effluent dispersion, and toxicity and bio-accumulation to Bass Strait at Boags Rocks between St Andrews in mussels. The program will enable us to measure and Gunnamatta beaches via a pipeline from the the impact of process improvements at our plant and plant. Businesses along the pipeline recycle about to enhance knowledge of the impact of the effluent one per cent of the effluent for golf course irrigation |on the marine environment. and horticultural activities. A significant amount of effluent is also used onsite at the plant. Towards sustainability The EPA Victoria discharge licence specifies the One of our key objectives is to manage Melbourne’s quality of effluent discharged by the plant and also water resources and the environment in a way describes other requirements relating to off-site that can continue into the future, reducing impacts impacts such as odour and litter, and site research on the environment over time and balancing such as monitoring and improvement investigations. environmental, financial and social factors. During the year, we were fined by EPA Victoria for Several of our major activities involve using scarce litter which was washed up on St Andrews beach resources such as water and energy that are critical next to our outfall and for an odour complaint to global sustainability. Areas where we are received from a resident near the plant, although we developing specific sustainability initiatives include complied with all discharge parameter limits of our managing energy, waste, water resources, EPA Victoria discharge licence. These parameters greenhouse gas emissions and water recycling. relate to the effluent’s physical and chemical nature. Water resources framework We have upgraded litter screens at the front of the In response to our recommendations, the Victorian plant to collect more material to reduce the potential Government established a Water Resources Strategy for litter to pass through the plant. We are also committee during the year to formulate a long-term developing an odour management strategy. framework for directing and managing Melbourne’s Effluent quality water resources. We play a lead role on the During the year, we implemented actions required committee by chairing a project management group by EPA Victoria following the CSIRO Effluent and an industry working group. Committee Management Study we commissioned. This study, recommendations will be presented to the Minister released in June 1999, showed that the effluent, by mid 2002. especially ammonia and freshwater, had affected the marine environment around Boags Rocks. We began a $4.8 million project that should achieve a significant improvement in the marine environment by potentially reducing ammonia levels by more than 75 per cent.

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Developing a greenhouse gas strategy Remediation A fire-watch station During the year, we developed a strategy to protects our Upper Yarra In 1991, when the Dandenong Springvale Water catchment. reduce our greenhouse gas emissions which includes Board was integrated with Melbourne Water, joining the Australian Greenhouse Office we assumed responsibility for the Dandenong Greenhouse Challenge. Treatment Plant. We decommissioned the plant Other initiatives are: in 1996 and have been assessing the residual site >To significantly reduce methane or biogas contamination from past sludge treatment and emissions at our Eastern and Western treatment disposal practices at the plant. Next year, we will plants by introducing energy programs. begin implementing a five-year remediation plan. Under a partnership, AGL Ltd has constructed Our next steps include: facilities at our Western Treatment Plant to > developing a remediation works program and generate electricity from biogas collected from a town planning application the covered lagoons. > implementing a community stakeholder >To reduce greenhouse gas emissions by building program hydro-generation plants in our water supply > developing detailed design and system. We identified up to 14 potential sites construction contracts. and we expect to build the first plant by June 2003. We expect to complete the 14 plants by June 2006. For more detailed information on our environmental performance, and how we are As a generator of renewable energy through our protecting and improving Melbourne’s waterways hydro-electricity and biogas plants, we are eligible and bays, protecting the environment and to take part in the Australian Government’s moving towards sustainability please consult the Renewable Energy Certificates Program. Under this Melbourne Water Environment Review 2000/01. program, organisations generating renewable energy receive certificates for each kilowatt-hour that they produce, enabling them to sell surplus certificates to other generators.

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Our social performance: public health

Our corporate objective is to: “protect public health”. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 33

ACHIEVEMENTS > Completing the Cardinia to Pearcedale pipeline > Achieving certification of our drinking water which has improved the quality of the Mornington quality management system to international Peninsula’s water supply. standard ISO 9001. > Continuing our ongoing program to replace or cover > Implementing an expanded monitoring program open service reservoirs. During the year, we began of waters near Boags Rocks. work on lining and covering Garfield Reservoir and replacing Johns Hill Reservoir.

DISAPPOINTMENTS > Unauthorised entry into our Boronia, Hallam North > The impact of additional chlorination on and St Albans service reservoir sites. drinking water taste. > Minor disinfection plant failures that had the > Continual blooms of blue-green algae in our potential to affect supply to our customers. Monbulk Retarding Basin.

KEY CHALLENGES > Balancing the possible requirement for more chlorine We remain well within the EPA water quality to be added to the water supply under new drinking objectives that protect the health of those using water guidelines with the potential impact on the the water recreationally. taste and aesthetics of Melbourne’s drinking water. > Managing public health risks in the use of > Ensuring that the discharge of treated water from our recycled water from our sewerage treatment plants sewerage treatment plants into Bass Strait and Port for agriculture or other purposes. Phillip Bay does not cause illness in people using the >Potential public health risks on suburban beaches waters for recreational purposes. and in Port Phillip Bay from stormwater run-off and litter washed through the drainage system.

Drinking water supplies Our system is certified by Lloyds Register Quality Assurance and is subject to six-monthly surveillance Melbourne is widely regarded as having high- by Lloyds to verify its ongoing integrity. We are quality drinking water. The main reason is the leading the risk-management based approach to water purity of the water source. Approximately 90 per quality at an international level. Our approach is cent of our water is harvested from more than attracting considerable attention from peak industry 140,000 hectares of natural forest that have been bodies such as the World Health Organization. closed to humans and farm animals for generations. Multiple barriers to contamination which Monitoring protect water quality include protected wilderness We undertake comprehensive drinking water catchments, long retention times in storage quality testing. During 2000/01, we carried out reservoirs, reliable disinfection and treatment more than 50,000 tests on samples from some processes and closed distribution systems. 160 sites. We took the samples from our reservoirs, aqueducts, transfer mains, service reservoirs and Risk management points of supply to the retail water companies. We have adapted a risk-management system used in We examine a range of parameters to determine the food industry–HACCP, or Hazard Assessment the water’s microbiological, physical, chemical and Critical Control Point System–to ensure water radiological quality. quality. This system assesses hazards and establishes control points that focus on potential consequences For reporting and compliance purposes, our target and prevention, rather than relying on end-point is 99 per cent of water samples being free of faecal testing to ensure that safe drinking water is coliform or E.coli bacteria. This target is more delivered to people’s taps. stringent than required by the Australian Drinking Water Guidelines 1996. During 2000/01 we met this target.

Our protected catchments in the Yarra Ranges cover some 140,000 hectares of uninhabited mountain ash forests. These catchments are the key to providing high quality 31 drinking water. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 34

Our social performance: public health

Water quality improvement works The marine environment During 2000/01, we spent $33.6 million on capital We are responsible for treating most of Melbourne’s works to protect public health. Our major project sewage. The treated sewage is discharged into Port was duplicating the 30-kilometre Cardinia to Phillip Bay and Bass Strait under licences issued to Pearcedale Pipeline, for which we completed the us by EPA Victoria. We are responsible for ensuring third and final phase in December 2000. This has these discharges are not a threat to public health. enabled us to take the Devilbend Reservoir, which has an unprotected catchment, out of service. We accept sewage from the three retail water It also means we do not have to use water from companies serving the greater Melbourne , even at times of high demand. metropolitan area. Effectively we operate two The result is significantly improved drinking water sewerage systems, the eastern and the western, quality for the Mornington Peninsula. which processed a total of 334,971 million litres of sewage during 2000/01. Major works we began during the year include: > Lining and covering Garfield Reservoir and Our eastern system includes some 193 kilometres replacing the open Johns Hill Reservoir with of sewers, the Kew and North Road pumping a 10-megalitre steel water storage tank. stations and the Eastern Treatment Plant at Carrum. These works will improve water quality by This system transfers and treats about 39 per cent eliminating potential contamination from birds of Melbourne’s sewage. Our Eastern Treatment Plant and animals. covers 1,000 hectares. It uses both mechanical and > Upgrading outlet screening chambers at the bio-chemical processes to produce secondary-quality . disinfected effluent which is piped 56 kilometres to Bass Strait where it is discharged to the sea between Research St Andrews and Gunnamatta. Research is a key focus of our organisation. During the year we began, or continued, Our western system includes some 212 kilometres several research projects aimed at understanding of sewers, the Brooklyn and Hoppers Crossing and improving catchment management and water pumping stations and the Western Treatment Plant quality. Research is generally carried out by at Werribee. This system transfers and treats about external organisations such as the Cooperative 55 per cent of Melbourne’s sewage. Our Western Research Centre for Water Quality and Treatment. Treatment Plant is a lagoon and land treatment During 2000/01 we contributed $228,000 to facility covering 10,850 hectares. It discharges water quality and treatment projects by the centre secondary-quality effluent to Port Phillip Bay at and we are represented on its board. four shoreline outlets between the Werribee River and Point Wilson. During the year we spent $356,000 on catchment and storage-related water quality research, and a The remaining sewage is treated at local treatment further $123,000 on other water quality research. plants operated by the retail water companies.

Ancient tree ferns overhang a waterfall in our Yan Yean catchment.

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Bacteriological monitoring–beach samples Waterways We sampled the receiving waters for treated effluent We are responsible for managing Melbourne’s from our Eastern Treatment Plant throughout the drains and waterways. While water quality in year at six locations along the Gunnamatta and creeks, rivers and lakes is generally an St Andrews beaches, and had the samples analysed environmental issue, there are potential health for E.coli. Every seven days we sampled seawater at risks associated with swimming and other forms two points off-shore from where we discharge of recreation. There are also risks from litter treated effluent from our Western Treatment Plant. (syringes) and stormwater that can be washed onto These samples were analysed for E.coli. During the suburban beaches and impact on Port Phillip Bay year all samples were well within EPA Victoria through the drainage system. The quality of water quality objectives. stormwater run-off can have a significant impact, Health monitoring at Boags Rocks sometimes forcing EPA Victoria to advise against We discharge treated effluent from our Eastern swimming at some beaches. Treatment Plant through an outfall at Boags Rocks. Syringes The area immediately offshore from Boags Rocks Syringes discarded on city streets are a serious has become a favourite spot for experienced surfers. problem. Rain can wash them into drains and During 1999, the Department of Epidemiology waterways, from where they are carried to beaches, and Preventive Medicine at Monash University creating the risk of needle-stick injuries. We work carried out a microbiological health risk assessment with EPA Victoria, local councils and other for waters around the outfall. The research found it organisations to reduce litter and contamination very unlikely that swimmers and surfers faced an problems on the beaches. During the year, increased risk of illness due to faecal microorganisms we trialled syringe litter traps which reduce the in the treated effluent, compared to swimmers or number of syringes reaching beaches. surfers at other ocean beaches. Algal blooms Gunnamatta, the nearest recreational beach to All freshwater bodies naturally contain low Boags Rocks, is popular though dangerous for concentrations of various algae species. In some swimming. In February 2000, we began an environmental and weather conditions, the algae expanded 12-month microbiological monitoring can “bloom”, resulting in high concentrations in program. In June 2001, Monash University the water. Some blue-green species produce toxins completed the report we commissioned on the that are harmful to humans and animals. first 12 months of data. This report reached the We coordinate the management of blue-green same conclusion as the 1999 study. algae outbreaks in most areas of metropolitan The study recommends an ongoing microbiological Melbourne, including the Bunyip, Yarra and part monitoring program, which we are undertaking. of the Maribyrnong catchments. We are required On behalf of the Water Services Association of to advise EPA Victoria, the Department of Natural Australia, we project managed a review of World Resources and Environment, and the Department Health Organization recreational water quality of Human Services if our monitoring detects algae guidelines. Our work included commissioning concentrations above “alert” levels. Monash University to review the draft guidelines, which are due to be finalised next year. The review For more detailed information on our public looked at implications of the draft guidelines for health performance, water quality standards, the Australian water industry. bacteriological monitoring and incident reporting please consult the Melbourne Water Public Health Review 2000/01.

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Our social performance: community

Our corporate objective is to: “provide excellent service and maintain the trust and respect of the community”. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 37

ACHIEVEMENTS >We worked with the community in developing a We also distributed community grants among master plan for the future use of our Devilbend groups involved in protecting and improving Reservoir site. waterways and wetlands. > Our community consultation programs played >We restructured our organisation to reflect an important role in helping us complete complex our vision of managing the water cycle as a whole capital works projects, including the Cardinia to and held forums to bring together our people to Pearcedale pipeline. gain broader perspectives and set future directions >We sought community input for an environmental for the organisation. improvement plan for the Western Treatment Plant. >We introduced an innovation development program >We partnered the Melbourne Museum in and negotiated a new three-year enterprise developing the Forest Gallery/Water Zone and agreement that includes salary increases based Sewer Tour exhibits to increase community on the achievment of corporate objectives. understanding of the importance of the water supply and sewerage systems.

DISAPPOINTMENTS > The licence breach due to the St Andrews Beach >We did not provide a clear focus for the Eastern incident is a reminder to our people of the Treatment Plant Community Liaison Committee. importance of the community’s views about the impact of our operations.

KEY CHALLENGES >We need to maintain open and regular > Attracting and retaining the right people. communication with specific community groups > Providing opportunities for talented people in an and the broader community. organisation that has limited potential for growth >Engaging communities in our works program and harnessing the potential of our people. and the long-term issues such as water supply, >Develop leadership competencies within our effluent management and water recycling. organisation to improve business performance. > Being open and flexible to new ideas and alternative views.

Advisory groups Our standing with the community was affected in November 2000 when litter, including cotton We are committed to engaging communities in bud stems and plastic from sanitary products, all aspects of our business, including in our was found at St Andrews Beach. strategic planning and capital works. We do this by establishing formal consultative, advisory or As a result of the incident, we amended operating liaison committees to provide community input. procedures, installed additional screens to contain These committees usually include representatives litter and upgraded security and surveillance of the of residents, councils, interest groups, outfall pipeline to prevent dumping. EPA Victoria and the Department of Natural We also implemented a program to inform the Resources and Environment. community and key stakeholders of actions we had Our goals in forming these committees include: taken and to express our regret. We organised > engaging communities in our works program community briefings and our Managing Director and the long-term issues we face such as wrote to stakeholders including the Community water conservation, effluent management and Liaison Committee, local Members of water recycling Parliament, local councils, and environment and > being open and flexible to new ideas and community groups. alternative views > ensuring mutual respect and trust by maintaining open and regular communication.

Our engineer Dona Tantirimudalige with Jaydo Construction’s Andrew Slade discussing progress at the Hoyt Street, Hampton drainage project. The project 35 involved extensive consultation with local residents. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 38

Our social performance: community

During the year, we worked to increase the The group includes representatives of the accountability and transparency of our activities Bunurong people, local communities, environment on the Peninsula. We established a Gunnamatta groups, council, downstream users of the reservoirs, Beach home page on our web site. It carries fly fishers, nearby landowners and Victorian weekly updates of water quality monitoring at Government departments. six sites around the Boags Rocks outfall as well as the results of a year-long microbiological study Capital works by Monash University of 13 sites at and around In the pipeline the outfall. This public health monitoring We completed a major community consultation program compared water quality at Boags Rocks program in April 2001 as we commissioned one with draft World Health Organization guidelines of our largest water construction projects for many for recreational waters. years–the Cardinia to Pearcedale pipeline. We withdrew the Devilbend and Bittern reservoirs Our concerted consultation campaign helped us from the Mornington Peninsula water supply system finish the project on time and on budget. during the year. These open storages were not suited to maintaining high-quality drinking water. Supporting local communities Peninsula residents are now supplied with drinking Friends in cyberspace water from Melbourne’s uninhabited catchments A partnership that developed during the year via a pipeline from . between Melbourne Water and volunteer We recognise the need to work with the Mornington “friends of” groups has led to groups developing Peninsula community on a plan that ensures the their own Internet sites. 1057-hectare site around the Devilbend and Bittern We established a site template to enable these reservoirs continues to be a community asset. groups to publish information about their A community reference group is developing activities and membership, along with newsletters a master plan for the site. and photos.

Western Treatment Plant Community Liaison Committee

Committee chairman John McElvaney sees an environment improvement plan, which was completed during the year, as giving the Western Treatment Plant a model for the future. Preparing the plan included three years during which the committee assessed and quantified the most important risks, an action that has helped people better understand the plant. He sees improvements such as installing a reuse channel enabling more and higher quality effluent to be reused within, and potentially outside, the plant. He believes introducing activated sludge technology to enhance the lagoon system will make the plant more efficient and reduce its impact on the environment. He has challenged his fellow committee members to suggest further long-term enhancements. He wants the committee and Melbourne Water to create a vision to at least the year 2020, and believes the environment improvement plan can be used as a basis for what he is calling the 2020 vision strategy. “It’s an excellent plant that is one of the leaders in the world, but that doesn’t mean it can’t be a lot better than it is,” he says. “To its credit, Melbourne Water seems to be prepared to try any reasonable idea that people come up with. Top management certainly seems to value the consultative process, although there is a varying degree of support further down the line.”

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Children enjoy the boardwalk over wetlands at Lynbrook Estate, Lyndhurst. We shared a national award for the estate’s innovative stormwater and drainage systems.

By December 2000, only six groups had established In June 2001, we installed a copy of the sites, which are linked to the Melbourne Water Sewer Tour exhibit at Scienceworks Museum’s website. We need to work harder to increase Spotswood Pumping Station site, at a cost of Internet access among these groups. $60,000. About half of the 300,000 people visiting Mark Williams, a committee member of the Friends Scienceworks each year are school students. of Koolunga, one of the first groups to establish Community research a website under the partnership, said: “There is so much experience out there in the friends’ groups, We undertake market research to ensure our but it has been really hard to exchange information. activities are consistent with community attitudes. This could be the best resource for us to date.” Interviews, in October 2000, found that seven in 10 people believe that Melbourne has good-quality Major exhibits water. More than nine out of 10 people were aware During 2000/01, we established two exhibits at of the need to conserve water, up from 75 per cent Melbourne Museum. The Forest Gallery/Water in December 1998. Eight out of 10 people Zone captures the tall mountain ash forests east believe litter from stormwater drains causes serious of the city that are home to Melbourne’s water pollution in Port Phillip Bay. supply catchments. The exhibits help visitors Other market research we undertook on attitudes appreciate how water shapes the environment and to water conservation indicated that some how the forests act as a natural filtration system 91 per cent of Melburnians were aware of the city’s for Melbourne’s clean and safe drinking water. water storage levels. A survey of community The interactive Sewer Tour takes visitors on attitudes to Gunnamatta and St Andrews beaches a virtual journey through Melbourne’s sewers, indicated a positive attitude to the beach’s amenity. helping them understand the importance and However, some 33 per cent of respondents complexity of the sewerage system. It has been considered water at Gunnamatta beach as not clean, designed to capture the interest of children and 25 per cent believed it was clean while 42 per cent young teenagers. The tour features computer did not have an opinion. graphics based on footage from closed circuit We are also planning a study of community and cameras in the sewers and two large-scale models consumer responses to environmentally sensitive of the services under the city streets. residential developments.

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A rich and fertile history

For Helen Penrose, recording the 108-year history of the Werribee Farm–now known as the Western Treatment Plant–proved a genuine surprise. “It really is an amazing story and even though I live not too far away in Newport, I didn’t know anything about it,” the historian says. Werribee Farm was built in the 1890s, as the first major project by the Melbourne and Metropolitan Board of Works, our predecessor. It was a recommendation of the 1888 royal commission into typhoid and diphtheria epidemics in Melbourne. Penrose spent six months compiling the history, scouring archives and listening to the recollections of former employees. The huge property, which grew to its present size of 10,850 hectares in 1960, was their backyard. The Werribee Historical Society approached us when the plant’s archives–containing thousands of documents, photographs and slides–were due to be transferred to the Public Record Office Victoria. We decided it was an appropriate time to commission a history of the plant and spent $30,000 on this joint project with the Public Record Office. The result is a 56-page history of the place of family farming in Australian history and of how generation after generation of men worked at the site, variously known as Metropolitan Farm, Werribee Farm, Werribee Treatment Complex and the Western Treatment Plant. Locals still refer to it as “the farm”. The history tells the highs and lows of a facility that did much more than treat sewage. It was home to hundreds of employees and their families, who had their own town of Cocoroc, four schools, a hall, swimming pool and sporting fields and teams. The highs included stock winning prizes at the Royal Melbourne Show; civil engineering journals describing it as a world leader in sewage treatment; and hundreds of visitors, many from overseas, coming to see the protected birdlife. Lows included beef measles, storms, floods and the Great Depression. We also felt the Werribee Historical Society should hold and manage these archives, which are of local significance. “I think it’s fabulous especially for family history researchers that the records will be retained locally,” Ms Penrose says. “This history means a huge amount to hundreds of local people who are proud of the farm–and rightly so.”

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Aligning with our vision The program consisted of three workshops where participants explored ideas, prepared business cases During the year, we reorganised our working and were taught techniques for gaining approval arrangements to more adequately address for their ideas. As a result, 10 initiatives will be management of the entire water cycle. The new supported or further investigated in the next year. arrangements, which came into effect on 1 May 2001, will make our business more efficient; New enterprise agreement give a more coordinated approach to service delivery, capital works, asset management and planning; and During the year, we negotiated a new three-year increase our emphasis on research and development. enterprise agreement. Some 84 per cent of the people who voted were in favour of the agreement, The structure aims to be responsive to changing which supports skills and career development and community expectations and more relevant for flexible working arrangements. sustainable resource management. The general salary increases in the agreement are As part of moving towards a more coordinated based on reaching corporate performance targets, business, we have secured a lease on a building in which focus our people on our business objectives East Melbourne. Most of our people will move to and allow them to share in our achievements. the new building in early 2002. This will help us The agreement also supports remuneration based maximise synergies and share knowledge. on individual skills, performance and contribution Communicating with our people to our business. The enterprise agreement allows for general salary During March 2001, we conducted forums to increases for eligible people of up to four per cent, bring together our people and help set directions one per cent effective 1 July 2001 and three per cent for the organisation. effective 1 December 2001, based on the coprorate Speakers presented a range of views on water, targets for 2000/01. Public health targets were met the environment, the community and sustainability but others, relating to the licence breach at the to stimulate debate among our people on issues Eastern Treatment Plant, capital project delivery affecting the business and its future. The forums, and correspondence, were not achieved, resulting in attended by 78 per cent of our employees, provided a general salary increase of about three per cent. an opportunity to learn about other parts of the business and work with colleagues in workshops. Merit and equity policy During the year, we introduced a questions forum We are an equal opportunity employer and are on our Intranet so our people could pose questions committed to providing a work environment which directly to our executive team. We also issued news is free of discrimination and harassment for anyone releases on the Intranet as we sent them to the media. who may enter our work areas. Our Managing Director delivered quarterly Discrimination and harassment are unacceptable presentations to all our people on the organisation’s forms of behaviour and our organisation will not business performance. These presentations will tolerate any unfair treatment or discrimination. continue in 2001/02, with a more interactive focus. Melbourne Water employees Fostering innovation Our people were invited to participate in an Women Men Total innovation development program during the year. At 30 June 2000 93 (19%) 388 (81%) 481 The program aims to encourage and support At 30 June 2001 105 (22%) 383 (78%) 488 people who are prepared to search for, evaluate and implement innovative, value-creating ideas For more detailed information on our community consistent with our business objectives. performance, advisory groups, communication and education activities, support for local communities and our people please consult the Melbourne Water Community Review 2000/01. 39 MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 42

Our social performance: accessing information

During 2000/01, we undertook several projects as part of our ongoing commitment to open and transparent reporting of our performance. These included a major upgrade of our web site. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 43

Upgrading our web site During 2000/01, we improved and extended our web site as part of our commitment to open, transparent and understandable reporting of our activities and our performance. We see providing a much greater range of material via the Internet as an effective way of satisfying community interest in, and understanding of, our operations and actions. We are also aware of the need to make our site attractive and easy for the public to use and to access information. This is the key to encouraging public use of our site, and to gaining comment and feedback, which will help improve our performance. Further information on the site changes we have made can be found in the Melbourne Water Community Review 2000/01.

Water storage information Publications During the year, the low levels of Melbourne’s While we have a strong emphasis on reservoirs and the possibility of water restrictions communicating via our website, we recognise that consistently attracted media interest. not all members of the community have access to the We continue to publish our weekly water reports Internet so we continue to produce and distribute which contain information on Melbourne’s publications. During the year we produced: water storages, water consumption, rainfall and > The Source–a bi-monthly magazine stream-flows. > Making Melbourne a Better Place to Live– an organisation profile Regular briefings were provided to television > Melbourne Water Annual Report 1999/2000 weather presenters on the state of Melbourne’s > Melbourne Water Environment Report 1999/2000 water storages. > Melbourne Water Public Health Report 1999/2000 Newspapers also featured Melbourne Water > Environment and Public Health 2000 media releases relating to the Western and Eastern > Catchment to Coast–Long Term Strategic Directions treatment plants and local waterway programs. > Supplying safe, healthy drinking water– During the year, the Victorian Government brochure outlining the water supply system Minister for Environment and Conservation, > Conserve water website– the Hon. Sherryl Garbutt, launched an awareness www.conservewater.melbournewater.com.au program on Melbourne’s water storage levels and > Down Under, Down Under–brochure outlining water conservation in the ethnic media. how the stormwater and sewerage systems work > Healthy Bay Wetlands Initiative–brochure on “Not everyone is fluent in English and, by targeting how wetlands help to treat stormwater pollution multicultural communities in their own languages, > Care about the bay… don’t throw it away– we can do a great deal to spread the message that brochure containing tips on preventing pollution our water storage levels are low and that we can all of our waterways act to reduce water use,” she said. > Bin it, recycle it… don’t flush it away– Minister Garbutt also noted that, “coverage by the brochure containing tips on what not to put ethnic media will mean that these communities are into the sewerage system getting regular, timely and helpful information, particularly during the summer months when it is possible that Melbourne’s water storage levels may lead to water restrictions.”

Our virtual “Sewer Tour” at the Melbourne Museum has 41 become one of the most popular exhibits for visiting school tours. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 44

Our social performance: accessing information

> The Issues Now and for the Future– We are publishing these in accordance with booklet on sewerage treatment issues Part 2 of the Freedom of Information Act 1982 (Vic.). (Eastern Treatment Plant) Information on our consultative arrangements > Western Treatment Plant–A Vision for the required under Section 7 of the Act is set out in Future booklet the Melbourne Water Community Review 2000/01. > Western Treatment Plant–Environment Information on our publications, also required Improvement Plan 2000 booklet under Section 7, are listed earlier in this section. > Western Treatment Plant–Conservation Management Of the 19 applications received, six related to Action Plan 2000 booklet personal property developments and six to > Werribee Farm: a history 1892-2000 booklet WorkCover or personal employment matters. Fact sheets covering all aspects of Melbourne Other applications related respectively to Water’s role in the water cycle are available by a burst water main, water diversion licences, contacting Melbourne Water on 131 722 or the ocean outfall at Boags Rocks and other by visiting Melbourne Water’s web site. miscellaneous matters. Many community newsletters were produced Categories of documents during the year to inform the public about our We use a computerised records management system capital works projects and other initiatives. to manage our correspondence and documents. We use other on-line computer systems to manage Freedom of information our financial, human resource and other operational Melbourne Water is subject to the Freedom of activities and plans relating to our water supply, Information Act 1982 (Vic.) and is committed to waterways and drainage and sewerage functions. making documents and information available Historical archives on our activities are available to the community whenever it can. through the Public Record Office Victoria. The designated persons for the purpose Access to documents of the act are: People wanting access to Melbourne Water documents under the Freedom of Information Act Principal officer: 1982 (Vic.) should write to: Brian Bayley Managing Director Freedom of Information Officer Melbourne Water Corporation Melbourne Water Corporation PO Box 4342 Authorised officer: Melbourne Victoria 3001 Jane Denton Freedom of Information Officer Each application must clearly identify the Melbourne Water Corporation documents sought and be accompanied by a $20 application fee. General inquiries concerning During 2000/01, we received 19 requests freedom of information can be made by for access to documents under the freedom telephoning the Freedom of Information Officer of information legislation. on (03) 9235 7184 between 8am and 5pm, We processed these requests as follows: Monday to Friday. Access in full 7 Access in part 5 Other information Access refused – Information listed in Clause 9.1.3 (iv) Accounting Documents not located 4 and Financial Reporting Bulletin, Issue 24, under the Transferred to another agency 1 Financial Management Act 1994 (Vic.) is available Applicant did not proceed 2 from Melbourne Water upon request from the Not finalised 0 Corporate Secretary. 42 MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 45

Energy and water ombudsman The scheme is funded by industry participants. The Environment and Its board includes representatives from the water, Conservation Minister, In April 2001, Melbourne Water joined the the Hon. Sherryl Garbutt gas and electricity industries as well as consumer Energy and Water Ombudsman (Victoria) scheme. and a young Seaford North bodies. Its independent chairman is appointed The scheme was established by expanding the Primary School pupil urge by the Victorian Government, which also appoints the rain to fall during the existing Energy Industry Ombudsman’s office to the ombudsman. launch of our “Rain, Rain, include metropolitan, non-metropolitan urban Don’t Go Away” and rural water bodies. Since becoming a member of the scheme we have educational resource kit, established a procedure for responding to which includes rain gauges. The ombudsman’s role is to receive, investigate complaints. During the first five months of the and facilitate resolution of complaints and disputes scheme’s operation only two complaints involving between consumers of energy and water and scheme Melbourne Water have been received. One has been members. The scheme provides consumers with a resolved and the other is still under investigation. free, specialised and independent dispute resolution process as an alternative to legal proceedings or other complaint processes.

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Our social performance: safety

Our corporate objective is to: “operate as a successful commercial business and provide excellent customer service and maintain the trust and respect of the community”. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 47

ACHIEVEMENTS >We achieved organisation-wide accreditation to >We have improved our analysis of the injuries SafetyMAP™ Initial Level under the Victorian occurring in the work place. WorkCover Authority’s SafetyMap™ system that > Acceptance by WorkCover of our assesses occupational health and safety programs. “safety case” outlines for the Winneke and >We held an inaugural occupational health and safety Eastern treatment plants. workshop to improve our management of contractor > Using Winneke Water Treatment Plant’s occupational health and safety performance. major hazard facility safety case as a model for the Victorian Water Industry.

DISAPPOINTMENTS > Our employees had six lost-time injuries. There were >We deferred nine flood-mitigation projects until also six such injuries among our major contractors. 2001/02 and failed to reach our planned >A serious chemical incident at our Winneke Treatment expenditure for the year of $3.9 million. This would Plant following the release of chlorine have reduced flood risks to the one-in-100-year gas to the atmosphere. standard for a total of 34 vulnerable properties.

KEY CHALLENGES > Gaining acceptance that it is possible and then > The need to increase our annual expenditure achieving our objective of no lost-time injuries for on flood mitigation works to between $6 to our people and contractors. $8 million a year to meet the 10-year target in > Determining why injuries keep happening despite our Waterways and Drainage Operating Charter. our improved systems and procedures? > The need to inform property owners and > Meeting Victorian WorkCover Authority requirements developers about flood risks, and to involve to implement safety systems and site improvements the community in the special building at our major hazard facilities at Winneke, overlay process. Silvan Reservoir and the Eastern treatment plants.

Occupational health and safety SafetyMAP™ is an occupational health and safety audit tool, used by the Victorian WorkCover Melbourne Water has an over-riding moral Authority, to measure the effectiveness and responsibility for the safety of its people. comprehensiveness of an organisation’s occupational This is a responsibility also enshrined in law. health and safety program. The Occupational Health and Safety Act 1985 (Vic.) requires us to provide a safe working environment SafetyMAP™ certification is also used by and systems at all our sites. We have set a target WorkCover to audit the safety performance of zero injuries for our employees and contractors. of self-insured companies with approved safety procedures and financial status that pay any Our comprehensive approach to safety management, successful claims from their own resources. based on the SafeAS™ occupational health and During 2000/01, our self-insurance licence was safety system, includes: renewed for a further four years. >a framework with guides and a checklist covering all aspects of occupational health and Overall responsibility for occupational health and safety management safety and the SafeAS™ system within Melbourne >a system with documented procedures Water is an individual requirement of all of our for managing occupational health and people. Each of our workplaces has an occupational safety incidents health and safety committee. > confined-space entry procedures, particularly for underground pipes, drains and sewers >a permit system controlling entry to sewers, pipes and drains > standard operating procedures and maintenance instructions, operations and maintenance manuals, contingency plans, and emergency procedures.

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Our social performance: safety

Lost-time injuries > specific training requirements within our organisation and our service providers, Our occupational health and safety record during to support outsourced arrangements 2000/01 was unacceptable. > improve consistency of occupational health Lost-time injuries 2000/01 1999/2000 and safety systems across Melbourne Water. Melbourne Water employees 6 8 We are implementing action plans to address Major contractors 6 8 these issues. A lost-time injury is where the person injured is Major hazard facilities absent from work for all of the next day. The most common injuries were sprains and strains. Any workplace that stores, handles or processes large quantities of dangerous goods that could In response to our poor occupational health and cause a major incident–which may lead to loss safety performance we: of life, injury and property damage rivalling > improved training for our employees a natural disaster–is defined as a major hazard and contractors facility. Recurring themes in the reports of > improved analysis of trends in incidents disasters at such facilities include: and injuries > failure to identify and fully understand > gave our executive occupational health and all potential hazards safety committee a more strategic policy role > failure to implement and maintain sufficient with a formalised charter controls over potential hazards > delegated greater responsibility for operational > failure of prescriptive regulations to prevent issues to workplace committees. a disaster. We have also standardised and improved the In response, the Victorian Government introduced “permit to work” system for our employees and the Occupational Health and Safety (Major Hazard contractors. This system details occupational health Facilities) Regulations in July 2000. Under these and safety requirements that all our people have regulations, we are required to seek operating to meet before they can start work. Standardisation licences for our Eastern Treatment Plant at Carrum, means people working at more than one site have Silvan Reservoir Water Treatment Plant and a single, clear set of guidelines. Winneke Water Treatment Plant at Christmas Hills. Contractor performance We store large quantities of liquid chlorine, which we use to protect public health by disinfecting During November 2000, we held our first workshop water supplies at Winneke and Silvan. We also store on occupational health and safety performance for liquid chlorine we use in sewage treatment at our our major contractors. Eastern Treatment Plant. This plant also produces Those attending included our people who and stores sewage-sludge gas and has a large store manage contractor safety, representatives from of distillate. our occupational health and safety committees, To receive an operating licence we must demonstrate our external advisers, representatives of our that we have reduced, as far as is practicable, the risk major operation and construction contractors, of a major accident and its potential consequences. WorkCover and our external project managers. We are required to develop and submit a safety case Workshop issues included: to WorkCover for each plant. > improving communication of our ideals, We have played a leading role in the safety case goals and experience plus an emphasis on program by providing Victorian industry with reporting all incidents and near misses, a model through our developing of the Winneke not just lost-time injuries. safety case. 46 MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 49

Chlorine gas incident Existing properties We have completed drainage survey mapping to In March 2001, our people responded to a chlorine identify vulnerable properties that would be subject alarm at our Winneke Water Treatment Plant. to flooding in such extreme rainfall. Our estimate Wearing breathing apparatus and carrying a is that there are up to 115,000 vulnerable properties portable chlorine detection unit, two team members across Melbourne that could be flooded by flows entered the leak area. The team, which carried a from our waterways and drainage systems in a chlorine meter, began emergency procedures to one-in-100-year storm event. isolate the leak and to vent chlorine fumes from the equipment and building. Our aim is to reduce this figure by 800 vulnerable properties over the 10 years from July 1999. A diaphragm in the pressure gauge on a stock tank We estimate an annual expenditure of $6 to was found to be partially corroded, allowing the $8 million is required to achieve the target. release of five to six kilograms of chlorine gas to the atmosphere. This was the first leak at the plant since During 2000/01, we planned to spend $3.9 million 1995. No one was affected by the chlorine gas leak. on detailed design work or construction for 14 major projects. However, at year-end, we had An external debrief involving the Country Fire spent $2.2 million, largely due to delays in Authority, WorkCover’s major hazards group resolving issues raised by the local council and and Melbourne Water identified procedural and community for our largest planned project, equipment issues: the Palmer Street main drain in Murphy Street, > the team’s chlorine meter malfunctioned Richmond. This three-year $8.5 million project > chlorine leak procedures were not strictly will relieve flood risks for 105 vulnerable properties. adhered to We also experienced delays with work on the > accurate up-to-date copies of the emergency Fulton Road drain due to unexpected design issues. procedures were not available to our people > the Country Fire Authority was not advised New developments of the alarm. We work with local councils to prevent development that would create flood-prone homes WorkCover issued three improvement notices. and other buildings, and to ensure flood risk In response to the incident we are preparing a new information is available in local planning schemes. draft procedure for CFA involvement in a chlorine We provide the information through “special leak at Winneke and updating our contact building overlays” which are incorporated in the procedures. The chlorine meter is now scheduled schemes as amendments. These overlays ensure for six-monthly services. We are addressing the that development proposals in areas affected by continued acceptability of venting chlorine fumes overland flows are also referred to us for advice. to the atmosphere or if they should be passed A key challenge is to promote flood awareness through a scrubber, and notifying relevant among the community in times of drought or authorities including Environment Protection when memory of such an event has faded. Authority Victoria.

Flood protection For more detailed information on our safety performance, training and systems, major hazards In 1975, the Victorian Government adopted the issues and flood-mitigation projects please one-in-100-year storm event standard for flood consult the Melbourne Water Safety Review 2000/01. protection. As a result, all new property development or redevelopment in Melbourne has to be designed not to flood in the worst storm event Melbourne could expect in 100 years. Before 1975, Melbourne generally had a one-in-five-year standard of protection in the piped drainage network. 47 MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 50

Corporate governance

The board of directors is responsible for governance of Melbourne Water, and determines its strategies and policies.

Melbourne Water’s board of directors From left to right: Carolyn J Schultz, Graeme W Bowker, Brian R Bayley, Julie Garland McLellan, Anthony A Browne, Merran H Kelsall, John So. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 51

Our approach is centred on five foundations: > values, the behaviour we expect from all Melbourne Water people > clarity of vision, outcomes and objectives > rewards linked to performance against objectives > a risk management framework integrated with management processes > monitoring by the board together with external professionals. Melbourne Water is a statutory corporation owned by the Victorian Government. The board approves the strategic direction comprising the vision, outcomes and objectives developed by management in conjunction with the Victorian Government. Approval of the strategic and business plans follows a process of challenge and debate between board members and management. The managing director, with his management team, is charged with the responsibility of delivering against these plans. The board has an operational charter that defines its role and management responsibilities. Committees help ensure the board carries out its functions effectively. At the board’s request, management–with our people’s input–has developed values which enable the organisation to operate in a professional manner, and in the best interests of its customers, employees, shareholder, suppliers and stakeholders. The following values guide our decision-making. We are people who: > recognise we achieve more by working with others > feel privileged to be custodians of our water resources > behave with integrity > attain excellence through creativity and innovation > celebrate our achievements and learn from our experiences.

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Corporate governance

Board of directors Julie Garland McLellan, BSc (Hons) Civil Engineering, MBA The board of directors comprises a non-executive Director chairman, five non-executive directors and the managing director. Julie Garland McLellan was appointed to the board on 1 January 2001. Director–Marketing and Directors Business Development at Minter Ellison, Solicitors, Graeme W Bowker, B.Com Ms Garland McLellan has extensive experience Chairman in strategic business development. Graeme Bowker was appointed chairman of the Merran H Kelsall, B.Com (Hons), MBA, FCA board on 1 January 2000. Previously regional Director partner–global strategic clients and Victorian office Merran Kelsall was appointed to the board on managing partner of Deloitte Touche Tohmatsu, 1 January 2001. An independent company director Mr Bowker has extensive financial and and consultant, Ms Kelsall has considerable director experience. experience in financial services, health and contract Brian R Bayley management. She has also been appointed to Managing Director the Council of Trustees of the National Gallery Brian Bayley was appointed managing director on of Victoria. 28 July 1998, after being appointed chief executive Carolyn J Schultz, BSc (Hons), PhD officer on 1 February 1998. Formerly head of the Director corporation’s Water Group, Mr Bayley has extensive Carolyn Schultz was appointed to the board on water industry experience in a broad range of senior 1 January 2000. A lecturer at the Adelaide management positions. University, Department of Plant Science, Dr Schultz Anthony A Browne, BA, LLB (Hons) has extensive experience in scientific research. Director John So, BSc, DipEd Tony Browne joined the board on 22 March 1995. Director A senior partner with Allens Arthur Robinson, John So was appointed to the board on 1 January Solicitors, Mr Browne is also a director of the 2001. A councillor of the City of Melbourne Epworth Hospital. He has extensive experience since 1996, Mr So has subsequently been elected in corporate and financial law. Lord Mayor for a three-year term. He is also a businessman with extensive commercial and community interests.

Managing Director Human Research and Resources Technology ing Service lann Deliv P ery

Corporate Commercial Secretariat Services Ass ry et M elive anagement and Capital D Pricing and Information Strategy Technology Communications

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From left to right: Christine Gibbs, Grant Wilson, Tony Antoniou, Bill Forrester, Brian Bayley, Malcolm Haynes, Jane Denton, Ross Young, Peter Scott, Howard Rose, Ian Morrison.

Senior executives Ian Morrison Group Manager, Information Technology Executive Team Responsible for delivering information technology Brian Bayley services to all areas of Melbourne Water, Managing Director including providing high reliability and availability Tony Antoniou of information technology infrastructure and Group Manager, Service Delivery enterprise information systems. Responsible for operating water, sewerage Howard Rose and drainage hydraulic systems in accordance Group Manager, Pricing and Strategy with public health, environmental, safety and Responsible for formulating, and promoting to regulatory obligations. Government, Melbourne Water’s position on pricing, Jane Denton industry regulation and metropolitan planning. Corporate Secretary and Legal Counsel Peter Scott Responsible for supporting Melbourne Water’s Group Manager, Research and Technology board; providing legal advice; and managing Responsible for improving Melbourne Water’s insurance, WorkCover, risk and emergency productivity through scientific excellence and new management services. and improved technology, and managing the Bill Forrester national and state interface with regulators Chief Finance Officer particularly in relation to water quality, public Responsible for providing commercial services health and the environment. including financial, property management, Grant Wilson supply and business development services. Group Manager, Asset Management Christine Gibbs and Capital Delivery Group Manager, Communications Responsible for strategic asset management Responsible for developing and implementing and maintenance of water supply, sewerage, communications programs, including policy, drainage and waterway assets, and managing community consultation, media relations, Melbourne Water’s Capital Delivery Program, education, community support, advertising, including project and contract management. displays, the website and publications. Ross Young Malcolm Haynes Group Manager, Planning Group Manager, Human Resources Responsible for the long-term planning Responsible for developing, implementing of waterways, drainage, wholesale water supply and maintaining human resources strategies, and sewerage systems. policies and procedures that support Melbourne Water in achieving its business objectives.

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Corporate governance

Reward Occupational health and safety Melbourne Water’s Executive Occupational Within the limits agreed with the Victorian Health and Safety Committee comprises the Government and our enterprise agreement we managing director as chairman, senior management reward our people based on performance against and employee representatives. The committee measurable objectives. This is a cornerstone in meets monthly and is responsible for the achieving growth in shareholder value. development, implementation and auditing of Risk management an effective occupational health and safety management system. The board is provided with Management has developed a risk management monthly reports on occupational health and safety framework, which focuses on twelve areas. performance and initiatives. This helps management manage, as part of their day-to-day responsibilities, the critical risks that Powers face our business. There are defined delegations The board operates under the provisions of the of authority from the board to the managing Melbourne Water Corporation Act 1992 (Vic.). director who in turn devolves authority to his Additionally, its operational powers derive primarily management team members. from the Melbourne and Metropolitan Board of Two specific areas are: Works Act 1958 (Vic.). This Act enables Melbourne Financial risk management Water to make by-laws in relation to its functions. The corporation has a comprehensive framework The two current by-laws are Water Supply for managing financial risk. It includes a financial Protection (1997 No 1) and Waterways and risk management policy approved by the board Drainage Protection (1998 No 2) respectively. annually and a Financial Risk Management Under an agreement with the relevant Minister, Committee chaired by the managing director which effective as of 30 November 1995, the Minister’s includes senior executives and an external adviser. functions and powers as a Floodplain Management Melbourne Water’s treasury takes an active approach Authority under the Water Act 1989 (Vic.) have to managing financial risk through procedures been delegated to Melbourne Water. Pursuant to outlined in the policy. this delegation, Melbourne Water, as an agent of the Minister, provides floodplain management services over the Melbourne Water drainage area.

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The Minister has also delegated powers of Board committees management under the Water Act relating to To assist the board in its duties two committees, licensed private water diversions from waterways each comprising three non-executive directors, to Melbourne Water effective from 1 July 1999. meet at least twice a year to focus on audit and These acts and by-laws can be purchased from the corporate risk and remuneration. Information Victoria Bookshop, 356 Collins Street, Audit and corporate risk Melbourne (Telephone 1300 366 356). Key responsibilities include review of key risk The Minister responsible for Melbourne Water is focus areas and adequacy of controls, review of audit The Hon. Sherryl Garbutt, Minister for plans, and performance of both internal and Environment and Conservation. We work with external auditors. her departmental officials in the Department of This committee comprises Tony Browne (chair), Natural Resources and Environment, together with Merran Kelsall and Julie Garland McLelland. those in the Department of Treasury and Finance Remuneration representing the Treasurer. They receive statutory This committee recommends to the board the and other reports covering performance of the terms of employment and remuneration of the corporation against objectives and performance senior executive team including the managing indicators in the business plan. director, taking into account performance against objectives set out in plans. For details of directors’ Monitoring and executives’ remuneration refer to Notes 23 The board monitors both performance against and 24 of the Financial Statements objectives and risk. Key features of the board’s Performance of the board is also reviewed using activities are: an external expert. > meets 11 times a year and undertakes site visits >board papers are available to all directors seven Members comprise Graeme Bowker (chair), days prior to the meetings Carolyn Schultz and John So. > conflicts of interest are declared and a director The managing director attends the meetings will not participate in discussion or decisions of both committees by invitation. where such a conflict exists Through governance arrangements the Portfolio > directors have the right to seek independent and Shareholding Ministers are kept informed professional advice, at Melbourne Water’s of the direction, plans and performance of expense, in connection with their duties Melbourne Water. and responsibilities. Melbourne Water also provides for declarations of pecuniary interest by directors.

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Financial statements

Table of contents Page Directors’ report 55 Statement of financial performance for year ended 30 June 2001 58 Statement of financial position as at 30 June 2001 59 Statement of cash flows for year ended 30 June 2001 60 Notes to the accounts 1 Summary of significant accounting policies 61 2 Revenue 63 3Profit from ordinary activities before income tax expense 63 4 Income tax 64 5 Current assets – cash 64 6 Current assets – receivables 64 7 Current assets – other 64 8Non-current assets – property, plant and equipment 65 9Non-current assets – deferred tax assets 66 10 Current liabilities – payables 66 11 Current liabilities – interest bearing liabilities 66 12 Current liabilities – current tax liabilities 66 13 Current liabilities – provisions 67 14 Non-current liabilities – payables 67 15 Non-current liabilities – interest bearing liabilities 67 16 Non-current liabilities – deferred tax liabilities 67 17 Non-current liabilities – provisions 67 18 Contributed equity 67 19 Reserves 67 20 Retained profits 67 21 Total equity 68 22 Remuneration of auditors 68 23 Remuneration of directors 68 24 Remuneration of executives 68 25 Commitments 69 26 Contingent liabilities 70 27 Dividend 70 28 Contractual arrangements for the supply of electricity by the private sector 70 29 Employee entitlements 71 30 Reconciliation of net cash provided by operating activities to net profit 72 31 Related parties disclosure 72 32 Economic dependency 73 33 Events occurring after balance date 73 34 Financial instruments 73 35 Transactions with other Victorian Government entities 75 Statement by directors and chief finance officer 76 Auditor-General’s report 77

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Directors’ report

Directors The directors of Melbourne Water Corporation in office at the date of this review are: G W Bowker (Chairman) B R Bayley (Managing Director) A A Browne J So C J Schultz M H Kelsall J Garland McLellan Particulars of the directors’ qualifications, experience and special responsibilities are set out on pages 50–53 of this annual review. Directors’ meetings During the financial period the Corporation held 11 meetings of directors. Attendance at meetings of the Board and its committees were: Principal Audit & Corporate Remuneration board Risk Committee Committee Attended Maximum Attended Maximum Attended Maximum possible possible possible G W Bowker 11 11 – – 2 2 B R Bayley 10 11 – – 2 2 A A Browne 10 11 4 4 2 2 V M Mansour * 5 6 2 2 – – C J Schultz 11 11 – – 2 2 B Solnordal * 6 6 2 2 – – J So ** 5 5 – – – – M H Kelsall ** 5 5 2 2 – – J Garland McLellan ** 5 5 2 2 – –

* V M Mansour & B Solnordal retired with effect 31 December 2000. ** J So, M H Kelsall and J Garland McLellan were appointed Directors on 1 January 2001. Principal activities The principal activities of the Corporation during the course of the financial year were to provide water and sewerage services on a wholesale basis to three retail companies: Yarra Valley Water Ltd, South East Water Ltd and City West Water Ltd. The Corporation also manages the main drainage network and waterways, providing flood protection and waterways quality improvement services for the greater Melbourne area. Operating results and dividend The net profit for the Corporation after providing for income tax amounted to $129.0 million. The proposed dividend in relation to 2000/01 is $108.0 million. This amount comprises of $58.3 million which was paid as an interim dividend during 2000/01 and the proposed final dividend payable of $49.7 million which is subject to final determination by the Treasurer after consultation with the Board of Directors and the Minister for Environment and Conservation. The proposed final dividend has not been booked as a provision as at 30 June 2001.

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Directors’ report

Review of operations The directors’ review of the operations of the Corporation during the financial period ended 30 June 2001 and the results of those operations are set out in the Chairman’s and Managing Director’s review on pages 6, 7, 8 and 9 of this annual review. State of affairs There were no significant changes in the state of affairs of the Corporation during the financial period ended 30 June 2001 not otherwise disclosed in this report or the financial statements. Environmental regulation Melbourne Water is subject to significant environmental regulation in respect of management of its sewerage treatment plants and the maintenance of environmental flow requirements in the Yarra River. More detailed information is included in Melbourne Water’s Annual Environment and Public Health Reports. Sewerage Treatment Plants Melbourne Water achieved 100% compliance at Eastern Treatment Plant and 100% compliance at Western Treatment Plant with discharge parameters detailed in their respective EPA Victoria discharge licences. Eastern Treatment Plant received two infringement notices from EPA Victoria for non-parameter breaches during the year. An odour complaint received from a resident resulted in one infringement notice and litter washed up on the beach near the Boags Rocks outlet in Bass Strait resulted in the other. Both infringements were for $5,000. Actions have been put in place to reduce the potential for these incidents to re-occur. Other general requirements of these licences were met during the year to the satisfaction of the EPA. Ramsar Site at Western Treatment Plant Management of the Western Treatment Plant was broadly carried out within the parameters of the “wise use” test from an International Convention aimed at protecting internationally significant wetlands. Implementation activity in the joint Conservation Management Action Plan between Melbourne Water, Parks Victoria and the Department of Natural Resources and Environment focused on the action items required to be completed during the year. Melbourne Water also provided comments to Parks Victoria on the draft management plan for the Port Phillip Bay (Western Shoreline) and Bellarine Peninsula Ramsar site which includes Western Treatment Plant. Dandenong Treatment Plant The disused Dandenong Treatment Plant is subject to a Pollution Abatement Notice issued by the EPA. During the year the requirements of the Notice were met. Further site investigations to clarify the volumes of contaminated soil were conducted during the year and options to remediate the site were developed. The preferred remediation option will be included in a works approval to EPA Victoria and implemented over the next five years. A provision has been made for this project. Environmental Flow Requirement–Yarra River Flow in the Yarra has to be managed so that “to the extent practicable” it does not drop below 245ML/d at Warrandyte. During the year the flow fell below 245ML/d for four days in January, four days in February and 14 days in March. This was due to the drought conditions in the Yarra catchment. During these times actions taken by Melbourne Water included not pumping from Yering Gorge, restricting diverters according to stage one and two of the Yarra Drought Response Plan and minimising harvesting from the Upper Yarra tributaries.

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Events subsequent to balance date Since the end of the financial year the directors are not aware of any matter or circumstance not otherwise dealt with in the report or financial statements that, in the opinion of the directors has significantly affected or may significantly affect the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation in subsequent future years. Statutory information – report of operations The statutory information provided elsewhere within this review is listed in the Compliance index on pages 78 and 79 of this review. Directors’ benefits No director has received or become entitled to receive a benefit (other than a benefit included in Notes 23 and 31 to the financial statements) because of a contract that the director, a firm of which the director is a member, or an entity in which the director has a substantial financial interest, has made (during the period ended 30 June 2001 or at any other time) with: (a) the Corporation; or (b) an entity that the Corporation controlled, or a body corporate that was related to the Corporation, when the contract was made or when the director received, or became entitled to receive, the benefit. Directors’ and officers’ liability insurance During the financial year the Corporation paid insurance premiums in respect of directors’ and officers’ liability insurance. The policies do not specify the premium for individual directors and officers. The directors’ and officers’ liability insurance provides cover against all costs and expenses involved in defending legal actions and any resulting payments arising from a liability to persons (other than the Corporation) incurred in their position as director or officer unless the conduct involves a wilful breach of duty or an improper use of information or position to gain advantage. Interest in contracts No contracts involving directors’ interests were entered into since the end of the previous financial year or existed at the end of the financial year other than the transactions detailed in Note 31 to the financial statements.

G W Bowker B R Bayley Chairman Managing Director

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Statement of financial performance

2001 2000 Note $000 $000 Statement of financial performance For the year ended 30 June 2001 Revenue from ordinary activities 2 460,821 477,843

Depreciation and amortisation expense 3 (62,896)(63,275) Operational expense (36,820)(38,044) Employee benefits expense (33,854)(34,408) Repairs and maintenance expense (25,980)(22,363) Administrative expense (18,839)(19,481) Borrowing costs expense 3 (79,809)(77,807) Other expenses from ordinary activities (26,346)(18,231) Profit from ordinary activities before income tax expense 176,277 204,234 Income tax expense 4 (47,249)(7,348) Net profit 129,028 196,886 Increase in asset revaluation reserve 19 – 27,539 Total changes in equity other than those resulting 21 129,028 224,425 from transactions with owners as owners

The above statement of financial performance should be read in conjunction with the accompanying notes.

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Statement of financial position

2001 2000 Note $000 $000 Statement of financial position As at 30 June 2001

Current assets Cash assets 5, 34 539 10,657 Receivables 6, 34 26,317 14,966 Other assets 7 12,328 10,092 Total current assets 39,184 35,715

Non-current assets Property, plant and equipment 8 2,903,218 2,805,434 Deferred tax assets 9 11,194 10,936 Total non-current assets 2,914,412 2,816,370 Total assets 2,953,596 2,852,085

Current liabilities Payables 10, 34 82,887 74,136 Interest bearing liabilities 11, 25, 34 133,367 193,121 Current tax liabilities 12 4,834 5,680 Provisions 13 10,198 75,252 Total current liabilities 231,285 348,189

Non-current liabilities Payables 14, 34 1,396 857 Interest bearing liabilities 15, 25, 34 1,090,148 1,049,651 Deferred tax liabilities 16 300,916 259,947 Provisions 17 33,035 26,472 Total non-current liabilities 1,425,495 1,336,927 Total liabilities 1,656,781 1,685,116 Net assets 1,296,815 1,166,969

Equity Contributed equity 18 662,692 603,574 Reserves 19 32,366 32,366 Retained profits 20 601,757 531,029 Total equity 21 1,296,815 1,166,969

The above statement of financial position should be read in conjunction with the accompanying notes.

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Statement of cash flows

2001 2000 Note $000 $000 Statement of cash flows For the year ended 30 June 2001

Cash flows from operating activities Receipts from customers 425,274 407,987 (inclusive of Goods and Services Tax) Payments to suppliers and employees (138,105)(133,137) (inclusive of Goods and Services Tax) Income tax paid (7,384)(745) Interest received 45 34 Borrowing costs (77,793)(77,328) Other revenue 34,401 41,275 Net cash inflow from operating activities 30 236,438 238,086

Cash flows from investing activities Payment for property, plant, equipment and works in progress (113,329)(99,967) Proceeds from sale of property, plant and equipment 7,741 8,663 Net cash (outflow) from investing activities (105,588)(91,304)

Cash flows from financing activities Proceeds from borrowings 496,987 478,000 Repayment of borrowings (518,209)(502,611) Dividend paid (119,746)(114,475) Net cash (outflow) from financing activities (140,968)(139,086) Net increase/(decrease) in cash held (10,118) 7,696 Cash at the beginning of the financial year 10,657 2,961 Cash at end of the financial year 5 539 10,657

Details of financing arrangements are detailed in Note 25 and Note 34. The above statement of cash flows should be read in conjunction with the accompanying notes.

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Notes to the accounts

1. Summary of significant accounting policies As the recoverable amount for each major asset group was in 1.1 General excess of the written down carrying value, a write down of These general purpose financial statements are prepared in ‘in service’ assets was not required. accordance with the Financial Management Act 1994, Australian 1.7 Depreciation Accounting Standards, Urgent Issues Group Consensus Views Non-current assets are depreciated on a straight line basis over and relevant statutory and other requirements. the estimated useful lives of the assets to the Corporation. The financial statements have been prepared on the basis of Depreciation commences in the month subsequent to the date historical cost and do not take into account changing money values where service can be obtained. or current valuations of non-current assets, except where stated. The estimated useful lives are as follows: Unless otherwise stated, amounts in the financial statements have Buildings & leasehold improvements 5 – 80 years been rounded to the nearest thousand dollars. Minor plant & equipment 3 – 50 years Infrastructure assets 20 – 100 years 1.2 Change in accounting treatment There have been no changes in accounting treatment The useful lives of the assets are reviewed annually. The results during 2000/01. of the review undertaken during 2000/01 are detailed in Note 3. 1.8 Leased non-current assets 1.3 Income tax Under Section 88(1) of the State Owned Enterprises Act 1992, A distinction is made between finance leases which effectively Melbourne Water became subject to the Victorian Income Tax transfer from the lessor to the lessee substantially all the risks Equivalent System from 1 July 1993. The tax equivalent rules and benefits incidental to ownership of leased non-current assets, are based on the Income Tax Assessment Act 1936 (as amended). and operating leases under which the lessor effectively retains The essential difference between the State Equivalent Rules and the substantially all such risks and benefits. Commonwealth legislation is that the tax liability is to be paid to Finance leases are capitalised. A lease asset and liability are the State Government and not the Commonwealth Government. established at the present value of minimum lease payments. Melbourne Water has adopted the liability method of Tax Effect Lease payments are allocated between the principal component Accounting in accordance with the requirements of Australian of the lease liability and the interest expense. Accounting Standard AAS3 ‘Income Taxes’. The leased asset is amortised on a straight line basis over the term 1.4 Goods and Services Tax of the lease, or where it is likely that the Corporation will obtain Revenues, expenses and assets are recognised net of the amount ownership of the asset, over the life of the asset. The Corporation ( of Goods and Services Tax (GST), except where the amount of has one finance lease at 30 June 2001 a water treatment plant at ) GST incurred is not recoverable from the Australian Tax Office Yan Yean which is being amortised over a 21 year period. (ATO). In these circumstances the GST is recognised as part of the 1.9 Receivables and revenue recognition cost of acquisition of the asset or as part of an item of the expense. Trade Debtors Receivables and payables are stated with the amount of GST Drainage rate debtors–revenue is recognised on a monthly basis, included. The net amount of GST recoverable from, or payable to, derived from the total expected rates to be collected for the year. the ATO is included as a current asset or liability in the Rates are levied quarterly based on property valuations as at Statement of Financial Position. 30 June 1990. Settlement varies between 21 and 35 days ( ) Cash flows are included in the Statement of Cash Flows on a gross depending upon the billing cycle of the retail company . basis. The GST components of cash flows arising from investing To secure the debtor, a lien is held over the property. and financing activities which are recoverable from, or payable to, Water usage charges and sewage disposal charges–the charges the ATO are classified as operating cash flows. comprise a variable metered component and a fixed fee. 1.5 Valuation of non-current assets The metered usage revenue is recognised when the service has Property, Plant and Equipment, excluding Crown Land, been used with settlement at 7 days. The fixed fee is recognised are recorded at historical cost. Those assets acquired from external on a monthly basis with settlement at 14 days. Collateral is not sources are valued either at values shown in the Statement of obtained for this class of debtor. Financial Position of the acquired entity or at an arms length value. Other Receivables and Revenue Crown Land was revalued by the Office of the Valuer General at Interest received/receivable–income receivable is accrued in 30 June 2000 using the ‘Deprival Value Concept’ basis (refer to accordance with the terms and conditions of the underlying Note 8). Transfers to and from other Victorian State Government financial instrument or other contract. entities are adjusted against contributed equity in accordance with Developer charges and contributions–assets acquired at no cost to formal approval by the Minister of Finance. Crown land the Corporation are recognised as revenue upon completion of the revaluations are adjusted against the Asset Revaluation Reserve. works and their acceptance by the Corporation. Cash contributions 1.6 Recoverable amount of non-current assets are recognised when received. To ensure compliance with the provisions of Australian Accounting Proceeds from sale of non-current assets–property sales are Standard AAS10 ‘Recoverable Amount of Non-Current Assets’ recognised on signing of an unconditional contract of sale. Melbourne Water undertook an internal analysis of asset values in Debtors are provided with commercial terms. June 2001. Expected net cash flows at major asset grouping level were discounted to their present value to calculate the recoverable 61 amount as prescribed in AAS10. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 64

Notes to the accounts

Other receivables are recognised at their carrying amount. Collateral Superannuation is not normally obtained for other receivables. In accordance The superannuation fund position in respect of defined benefit with UIG Abstract 31 a receivable has been created to record the superannuation is recognised and measured as the difference anticipated GST on the finance lease liability and payables. between employees’ vested benefits at the reporting date and the Bad and Doubtful Debts net market value of the superannuation funds’ assets at that date, A provision for doubtful debts is based on a review of all after allowing for the impact of the 15% tax on contributions. amounts outstanding at balance date. Bad debts are written off Refer to Note 29 for further details on the superannuation fund. in the period in which they are identified. WorkCover 1.10 Accounts payable Melbourne Water is registered as a self-insurer for workers Creditors and accruals–represent liabilities for goods/services and compensation and is liable to the workers or workers’ dependants accrued interest on borrowings which are unpaid at 30 June 2001. to pay compensation under the Accident Compensation Act 1985. The accrued interest on borrowings are unsecured and the Based upon actuarial assessment, a provision of $4.6 million trade creditors are usually paid within 30 days from the receipt ($4.3 million in 1999/00) is made for outstanding claims of invoices. incurred and not settled and for claims incurred but not reported. Advances–represent security deposits and other advances paid Other claims incurred and settled during the period are charged by developers/land owners for the construction of drainage works. to the Statement of Financial Performance. The amounts are unsecured and refunded to the developer at the Workers Compensation completion of the project. Melbourne Water continues to be liable for workers 1.11 Borrowings compensation claims incurred prior to the introduction of All borrowings are required to be transacted through the WorkCare (now WorkCover). Based upon actuarial assessment, Treasury Corporation of Victoria whose liabilities are guaranteed a provision of $0.3 million is made for all outstanding workers by the Government of Victoria. compensation claims at 30 June 2001 ($0.2 million in 1999/00). All borrowings are carried at their principal amount. Interest is 1.14 Stores (consumables) accrued based on the applicable interest rate for each loan. Stores consist mainly of materials and supplies for asset 1.12 Derivative financial instruments construction, systems operation and general administration and As at 30 June 2001, Melbourne Water had no derivative are valued at cost. positions and there were no additional positions in place to hedge 1.15 Livestock future transactions. Livestock include cattle and sheep held in connection with the Refer to Note 34 for additional details on financial instruments. operation of the Corporation’s Werribee Agriculture division. They are revalued at market value annually. The net 1.13 Employee Entitlements increment/decrement in market value has been disclosed in the Wages, Salaries and Annual Leave Statement of Financial Performance. Liabilities for wages, salaries and annual leave are recognised 1.16 Provision for property decommissioning and measured as the amount unpaid at the reporting date at Melbourne Water is required by the Occupational Health and Safety current pay rates in respect of employees’ services up to that date. Act 1985 and the ‘Wrongs Act 1958 Part IIA–Occupiers The liability for annual leave has been oncosted in accordance with Liability’ to exercise ‘duty of care’ for the safety of employees, the Australian Accounting Standard AAS30 ‘Accounting for contractors and members of the public entering its workplaces, Employee Entitlements’. including any surplus sites held for disposal. In line with the Sick Leave Corporation’s risk management strategy and commercial practice, Sick leave payments are made in accordance with relevant awards, Melbourne Water conducts regular reviews of its surplus sites determinations and Corporation policy. No provision is made in and provides for any necessary decommissioning costs that may be the financial statements for outstanding sick leave entitlements as incurred prior to disposal. This is in line with the guidelines these are not vested benefits. adopted by the Environment Protection Authority. Long Service Leave During 2000/01 an additional $1.5 million has been provided, A liability for long service leave is recognised and measured as the bringing the total provision to $23.2 million. present value of expected future payments to be made in respect of 1.17 Comparative figures services provided by employees up to reporting date. As prescribed Where applicable, comparative figures have been adjusted to by AAS30, expected future payments are discounted using interest conform with changes in the presentation in the current year. rates attaching, as at reporting date, to Australian Government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.

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2001 2000 $000 $000 2. Revenue Revenue from operating activities Water usage charges 155,847 154,931 Sewage disposal charges 157,229 157,008 Drainage rates 97,816 96,283 410,892 408,222

Revenue from outside the operating activities Developer charges and contributions 27,567 46,555 Proceeds from sale of non-current assets 10,104 8,211 Rent received 1,824 1,505 Interest received/receivable 45 34 Miscellaneous 10,389 13,316 49,929 69,621 Revenue from ordinary activities 460,821 477,843

3. Profit from ordinary activities before income tax expense

3(a). Gains and expenses Profit from ordinary activities before income tax expense includes the following specific gains and expenses:

Gains Gain on disposal of non-current assets 7,094 6,822 Revaluation of livestock – Cattle 903 1,058 – Sheep (446) (434) Net increment in the revaluation of livestock to net market value 457 624 Depreciation – Buildings 780 780 – Plant and equipment 61,007 61,386 Total depreciation 61,787 62,166 Amortisation – Plant and equipment under finance leases 1,109 1,109 Total depreciation and amortisation expense 62,896 63,275 Assets written off/written down 5,142 1,587 Other charges against assets – Bad and doubtful debts-other debtors (1) 47 Borrowing costs – Interest and finance charges paid/payable 79,809 77,807 Loss on disposal of non-current assets 1,172 184 Rental expenses relating to operating leases 1,388 1,244

3(b). Revision of accounting estimates During the financial year the estimated total useful lives of certain classes of infrastructure assets were revised. The net effect of the changes in the current financial year was a decrease in depreciation expense to the Corporation of $126,000. The asset classes that were revised as part of this review are as follows: > Sewerage treatment lagoons: revised from 50 years to 80 years > Billing flow meters: revised from 20 years to 8 years > Effluent holding bays: revised from 50 to 80 years Assuming the assets are held until the end of their estimated useful lives, the Corporation’s depreciation in future years in relation to these assets will be decreased by $181,000 per annum.

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Notes to the accounts

2001 2000 $000 $000 4. Income tax The aggregate amount of income tax expense attributable to the financial year is reconciled to the prima facie tax payable on the profit from ordinary activities. Profit from ordinary activities before income tax 176,277 204,234 Prima facie income tax calculated at 34% (1999/2000–36%) 59,934 73,524 Adjustment for the tax effect of permanent differences: – Non-deductible expenses 2,180 552 – Net exempt income (9,285) (16,729) – Research and development concession (152) (197) Income tax adjusted for permanent differences 52,677 57,150 Net adjustment to deferred income tax liabilities and future income tax benefits (5,428) (49,802) to reflect the decrease in the tax rate to 30%. Income tax expense 47,249 7,348 Income tax expense comprises: – Current taxation provision 6,538 6,505 – Deferred income tax provision 40,969 (593) – Future income tax benefit (258) 1,436 47,249 7,348

Adjustment to deferred income tax balances Legislation reducing the company tax rate was announced on 21 September 1999 and received Royal Assent on 10 December 1999. This legislation introduces a reduced company tax rate over a two year period from 36% to 30% (2000/01 reduction from 36% to 34%; 2001/02 reduction from 34% to 30%). As a consequence, deferred tax balances at 30 June 2000 have been remeasured at the new company tax rate applicable in the expected year of their reversal. 2001 2000 $000 $000

5. Current assets–cash Cash at bank and on hand 539 1,757 Deposits – 8,900 Total current assets–cash 539 10,657

6. Current assets–receivables Trade debtors 10,431 10,175 10,431 10,175 Other receivables 15,929 4,794 Less: Provision for doubtful debts 43 3 15,886 4,791 Total current assets–receivables 26,317 14,966

7. Current assets–other Prepayments 924 916 Deferred expenses 515 604 Stores (consumables) 2,031 1,963 Livestock 8,296 6,609 Property, plant and equipment–held for resale 562 – Total current assets–other 12,328 10,092

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2001 2000 $000 $000 8. Non-current assets–property, plant and equipment

Buildings and leasehold improvements Crown land at valuation * 107,701 48,583 Freehold land and buildings at cost 27,084 27,285 Less: Accumulated depreciation–buildings 12,515 11,796 Total land and buildings 122,270 64,072

Minor plant and equipment Plant and equipment at cost 31,189 29,789 Less: Accumulated depreciation 21,565 18,083 Total minor plant and equipment 9,624 11,706

Infrastructure assets Infrastructure assets at cost 3,480,970 3,352,902 Less: Accumulated depreciation 796,070 753,857 Subtotal infrastructure assets 2,684,900 2,599,045 Infrastructure assets under finance lease 23,280 23,280 Less: Accumulated amortisation 3,326 2,217 Subtotal infrastructure assets under finance lease 19,954 21,063 Total infrastructure assets 2,704,854 2,620,108 Capital works in progress 66,470 109,548 Total non-current assets–property, plant and equipment 2,903,218 2,805,434

8(a). Initial recognition of Crown land–fundamental error During 2000/01 a comprehensive reconciliation of Crown land was undertaken in conjunction with the Department of Natural Resources and Environment. This revealed an understatement of Crown Land vested in a predecessor entity to Melbourne Water under the MMBW Act. This error had the effect of understating Crown land assets and contributed equity by $59.1 million in prior periods. The error has been adjusted as a fundamental error as at 30 June 2001 in accordance with Australian Accounting Standards AAS 36 “Statement of Financial Position”. The recognition of the asset and the adjustment as a contribution of equity of $59.1 million in the Statement of Financial Position as at 30 June 2001 is endorsed by the Department of Treasury and Finance. Restated financial information is presented below to show the information that would have been disclosed in the 30 June 2000 financial report if the error had not been made. 2001 2000 $000 $000

Buildings and Leasehold improvements Crown land at valuation * 107,701 107,701 Freehold land and buildings at cost 27,084 27,285 Less: Accumulated depreciation–buildings 12,515 11,796 Total land and buildings 122,270 123,190

Contributed equity Opening balance 662,692 601,085 Adjustment relating to recognition of government contribution of Crown land – 61,607 Closing balance 662,692 662,692

* Crown Land The Corporation controls 9,233 hectares of Crown land. A revaluation was undertaken by the Office of the Valuer General at 30 June 2000. The ‘Deprival Value Concept’ valuation basis was used consistent with the requirements of both the Financial Management Act 1994 and the “Recognition and Reporting of Crown Land by Government Entities” publication (Public Sector Accounting Centre of Excellence 1995).

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Notes to the accounts

8(b). Reconciliation of movement in property, plant and equipment Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year is set out below.

Freehold land, buildings and Minor Infrastructure leasehold plant and Infrastructure assets under Works in Crown land improvements equipment assets finance lease progress Total 2000/01 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Carrying amount at 1 July 2000 48,583 15,489 11,706 2,599,045 21,063 109,548 2,805,434 Additions 60,285 874 3,382 – – – 64,541 Disposals (1,167)(553)(257)(6,709) – – (8,686) Depreciation/amortisation expense (Note 3) – (780)(5,765)(55,242)(1,109) – (62,896) Transfers between classes – 101 – (101) – – – Assets identified for sale – (562) – – – – (562) Capital expenditure – – – – – 105,387 105,387 Capitalisation of works in progress – – 558 147,907 – (148,465) – Carrying amount at 30 June 2001 107,701 14,569 9,624 2,684,900 19,954 66,470 2,903,218

Freehold land, buildings and Minor Infrastructure leasehold plant and Infrastructure assets under Works in Crown land improvements equipment assets finance lease progress Total 1999/2000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Carrying amount at 1 July 1999 18,555 16,323 13,098 2,558,584 22,171 86,711 2,715,442 Additions 30,028 256 4,283 15,090 – – 49,657 Disposals (310)(257)(669) – (388)(1,624) Depreciation/amortisation expense (Note 3) – (780)(5,414)(55,972)(1,109) – (63,275) Transfers between classes – – (4) 4 – – – Assets identified for sale – – – – – – – Capital expenditure – – – – – 105,233 105,233 Capitalisation of works in progress – – – 82,008 – (82,008) – Carrying amount at 30 June 2000 48,583 15,489 11,706 2,599,045 21,063 109,548 2,805,434

2001 2000 $000 $000

9. Non-current assets–deferred tax assets Future income tax benefit 11,194 10,936 Total non-current assets–deferred tax assets 11,194 10,936

10. Current liabilities–payables Trade creditors 20,876 9,785 Interest payable 22,404 22,415 Accruals 39,113 41,632 Advances 494 304 Total current liabilities–payables 82,887 74,136

11. Current liabilities–interest bearing liabilities Lease liabilities (refer to Note 25) 1,467 1,221 Borrowings 131,900 191,900 Total current liabilities–interest bearing liabilities 133,367 193,121

12. Current liabilities–current tax liabilities Income tax 4,834 5,680 Total current liabilities–current tax liabilities 4,834 5,680 66 MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 69

2001 2000 $000 $000 13. Current liabilities–provisions Employee entitlements (refer to Note 29) 4,391 4,184 Dividend – 61,446 Insurance claims 1,146 1,278 Property decommissioning 2,368 6,313 Other provisions 2,293 2,031 Total current liabilities–provisions 10,198 75,252

14. Non-current liabilities–payables Trade creditors 900 820 Advances 496 37 Total non-current liabilities–payables 1,396 857

15. Non-current liabilities–interest bearing liabilities Lease liabilities (refer to Note 25) 20,148 19,651 Borrowings 1,070,000 1,030,000 Total non-current liabilities–interest bearing liabilities 1,090,148 1,049,651

16. Non-current liabilities–deferred tax liabilities Deferred income tax 300,916 259,947 Total non-current liabilities–deferred tax liabilities 300,916 259,947

17. Non-current liabilities–provisions Employee entitlements (refer to Note 29) 11,982 11,644 Insurance claims 265 276 Property decommissioning 20,788 14,552 Total non-current liabilities–provisions 33,035 26,472

18. Contributed equity Opening balance 603,574 601,085 Adjustment relating to recognition of government contribution of Crown land 59,118 2,489 Closing balance 662,692 603,574

Also refer to Notes 1.5 and 8 for explanation of adjustments to Crown land.

19. Reserves Asset revaluation reserve Opening balance 32,366 4,827 Adjustment relating to recognition of government contribution of Crown land – 27,539 Closing balance 32,366 32,366 The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets, as described in Note 1.5. Also refer to Note 1.5 and Note 8 for explanation of adjustments to Crown land.

20. Retained profits Retained profits at the beginning of the year 531,029 460,389 Net profit 129,028 196,886 Dividends provided or paid (58,300) (126,246) Retained profits at the end of the year 601,757 531,029

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Notes to the accounts

2001 2000 $000 $000 21. Total equity Total equity at the beginning of the year 1,166,969 1,066,301 Net profit 129,028 196,886 Net increment in contributed equity due to Crown land 59,118 2,489 Net increment in asset revaluation reserve due to Crown land – 27,539 Dividends provided or paid (58,300)(126,246) Total equity at the end of the year 1,296,815 1,166,969

22. Remuneration of auditors Audit fees paid or payable to the Victorian Auditor-General’s Office for the audit of the Corporation’s Annual Financial Report. Paid as at 30 June 22 – Payable as at 30 June 70 86

23. Remuneration of directors The number of directors of the Corporation and income received is shown below in their relevant income bands. Remuneration between Number Number $10,000 – $19,999 4 3 $30,000 – $39,999 3 4 $60,000 – $69,999 1 – $290,000 – $299,999 1 1 Total number 9 8

$000 $000 Total amount 597 534

24. Remuneration of executives The number of executive officers whose remuneration during the period was in excess of $100,000 are shown below in their relevant income bands. Remuneration between Number Number $100,000 – $109,999 5 7 $110,000 – $119,999 10 9 $120,000 – $129,999 4 5 $130,000 – $139,999 3 1 $140,000 – $149,999 – – $150,000 – $159,999 3 5 $160,000 – $169,999 3 3 $170,000 – $179,999 1 – $180,000 – $189,999 – 2 $190,000 – $199,999 2 1 Total number 31 33

$000 $000 Total amount 4,136 4,382

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2001 2000 $000 $000 25. Commitments

Capital commitments Total capital expenditure contracted for the construction of water, sewerage and drainage infrastructure at balance date but not provided for in the accounts: – Not later than 1 year 18,300 61,086 – Later than 1 year but not later than 5 years 6 755 Total capital commitments 18,306 61,841

Operating lease commitments Total lease expenditure contracted for at balance date but not provided for in the accounts: – Not later than 1 year 3,622 2,548 – Later than 1 year but not later than 5 years 11,521 2,213 – Later than 5 years 9,194 20 Total lease commitments 24,337 4,780

Land and property lease agreements Land and property lease agreements are renewable upon completion of the lease term providing the terms and conditions identified in the lease agreement are met by Melbourne Water. The lease agreements contain restrictions imposed on Melbourne Water in regards to subletting, the use of and alterations to the premises as identified in the lease agreement.

Motor vehicles and photocopier lease agreements Under these lease arrangements, the term of the lease is finite and there are no renewal clauses or purchase options. The lease terms do not contain any further restrictions.

Finance lease commitments Commitments in relation to finance lease are payable as follows: – Not later than 1 year 3,521 3,204 – Later than 1 year but not later than 5 years 15,243 13,580 – Later than 5 years 13,714 15,945 Minimum lease payments 32,478 32,729 Less: Future finance charges 10,863 11,857 Total finance lease liability 21,615 20,872 Representing lease liabilities: Current (refer to Note 11) 1,467 1,221 Non-current (refer to Note 15) 20,148 19,651 Total finance lease liability 21,615 20,872

Other operating commitments Total operating expenditure (excluding leases) contracted for at balance date but not provided for in the accounts: – Not later than 1 year 16,764 15,935 – Later than 1 year but not later than 5 years 7,360 18,240 – Later than 5 years – 55 Total other commitments 24,124 34,230 Other operating commitments excludes the Treasury Corporation Victoria administration fee as negotiations on the contract amount are still in progress ($273,820 in 1999/2000).

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Notes to the accounts

2001 2000 $000 $000 26. Contingent liabilities Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts, are as follows:

Outstanding Claims Claims or possible claims against the Corporation arising out of various matters 10 366 connected with the Corporation’s business dealings. In accordance with Section 146(5)(a) of the Accident Compensation Act 1985 the Corporation must provide a bank guarantee to the Victorian WorkCover Authority. The value of this bank guarantee at 30 June 2001 was $6,411,000.

27. Dividend Interim dividend paid during the year 58,300 64,800 Proposed final dividend paid/payable 49,742 61,446 Total dividend proposed or paid 108,042 126,246 The proposed final dividend payable in relation to the 2000/01 financial year is $49.7 million. This amount is subject to final determination by the Treasurer after consultation with the board of directors and the Minister for Environment and Conservation and consequently has not been booked as a provision as at 30 June 2001.

28. Contractual arrangement for the supply of electricity by the private sector On the 25 February 2000, Melbourne Water signed a Build, Own and Operate (BOO) contract with AGL Ltd to purchase a minimum of 23.5 Gwh of electricity per year for a period of 10 years. AGL will build, own and operate the power generation plant which is being constructed on land owned by Melbourne Water at Werribee Treatment Plant. The arrangement is expected to be fully commercially operational in the last quarter of 2001. The contract, which has a minimum usage component, commits Melbourne Water to the payment of significant charges over 10 years. At 30 June 2001 the minimum obligation (excluding the effect of inflation) for the term of the arrangement is $10,199,000. This calculation has been based on best estimates of volume throughput, peak and off-peak consumption and other relevant variables as detailed in the contract. The fair value of the purchase consideration provided by the supply of services under the date of entering the contract has been determined on the following basis: $’000

Expected future minimum obligations Fixed costs, payable within: – Not later than 1 year 896 – Later than 1 year but not later than 5 years 3,848 – Later than 5 years 5,455 Total value of expected future minimum obligations 10,199

Assets acquired Rights to receive electricity 10,199 These assets and obligations will be booked to the accounts of Melbourne Water once the facility is commercially operational.

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2001 2000 $000 $000 29. Employee entitlements

Aggregate employee entitlements liability Accrued wages and salaries (part of Note 10) 197 182 Provision for employee entitlements current (Note 13) 4,391 4,184 Provision for employee entitlements non-current (Note 17) 11,982 11,644 Total employee entitlements liability 16,570 16,010

The aggregate employee entitlement liability includes amounts for annual leave, shift leave, long service leave, salaries and wages, WorkCover and superannuation. All employees of the Corporation are entitled to superannuation benefits upon retirement, disability or death through membership of the following funds:

Defined benefits fund Equipsuper Fund provides lump sum benefits based on length of service and final superannuable salary for employees engaged up until 31 December 1993. Employees contribute at rates between 0% to 7.5% of their salary. The Corporation contributed to the Equipsuper Fund based upon an actuarial assessment rate of 8% of members’ salaries. Actuarial assessment of the fund is made at yearly intervals. The last such assessment was made as at 30 June 2001 by William M Mercer Pty Ltd. 2001 2000 $000 $000 Net market value of assets held by the fund 71,234 66,478 Present value of employees’ accrued benefits 59,441 57,184 Excess of net market value of assets over employees’ accrued benefits to meet 11,793 9,294 future benefit payments Vested benefits 63,434 60,999 The superannuation fund position ($7.8 million surplus for 2000/01) is measured as the difference between the Equipsuper Fund assets and the employees’ vested benefits, after allowing for the impact of the 15% tax on contributions. Net market value of assets held by the fund 71,234 66,478 Vested benefits 63,434 60,999 7,800 5,479 Impact of contributions tax – – Excess/(deficit) of net market value of assets over employees vested benefits 7,800 5,479

Accumulation funds Employees engaged from 1 January 1994 are entitled to benefits under accumulation funds. The majority of these employees are covered by LASPLAN. Employees have the opportunity to contribute to the funds at a self-nominated rate or amount. The minimum employer contribution to the funds, pursuant to the Superannuation Guarantee Charge, was 8.0% in 2000/01 (7.0% in 1999/00). 2001 2000 $000 $000

Employer contributions Employer contributions to the funds 1,101 2,623

There were no additional contributions made during 2000/01 ($0.1 million in 1999/00).

Loans There were no loans by the superannuation funds to Melbourne Water during 2000/01.

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Notes to the accounts

2001 2000 $000 $000 30. Reconciliation of net cash provided by operating activities to net profit Net profit 129,028 196,886 Depreciation 62,896 63,275 Provision for doubtful debts 40 (21) Profit on sale of assets (7,094)(6,822) Loss on sale of assets 1,172 184 Assets written off/written down 5,142 1,587 Value of works taken over from developers (5,441)(19,562) Changes in assets and liabilities: (Increase) in trade debtors (255)(235) (Increase) in other receivables (1,460)(537) (Increase) in stores (consumables) (68)(184) (Increase) in livestock (1,687)(892) (Increase) in prepayments (8)(21) Decrease/(increase) in deferred expenses – 254 Decrease/(increase) in future income tax benefit (258) 1,436 Increase/(decrease) in trade creditors 11,795 (4,979) Increase in interest payable 2,016 479 (Decrease) in deferred revenue (27)(2) Increase in other provisions 640 2,073 Increase/(decrease) in provision for income tax (846) 5,761 (Decrease)/increase in provision for deferred income tax 40,969 (594) Increase/(decrease) in deferred reimbursements (116) – Net cash provided by operating activities 236,438 238,086

31. Related parties disclosure

Responsible persons Persons who held office as a director of Melbourne Water Corporation at any time during the year ended 30 June 2001 are as follows: B R Bayley, G W Bowker, A A Browne, V M Mansour, B Solnordal, C J Schultz, J So, M H Kelsall and J Garland McLellan. V M Mansour and B Solnordal completed their respective terms as directors of Melbourne Water Corporation on 31 December 2000. J So, M H Kelsall and J Garland McLellan were appointed directors of Melbourne Water Corporation for three year terms commencing 1 January 2001. The responsible Minister during the period 1 July 2000 to 30 June 2001 was the Hon S Garbutt, Minister for Environment and Conservation.

Remuneration of responsible persons Information on the remuneration of directors is disclosed in Note 23.

Loans to responsible persons There were no loans to responsible persons at 30 June 2001.

Other transactions of responsible persons and their related parties A director, A A Browne, is a partner in the firm Allens Arthur Robinson, solicitors, which has provided legal services to Melbourne Water during the reporting period on normal commercial terms and conditions. During the year, the chairman, G W Bowker, was a partner in the firm Deloitte Touche Tohmatsu, which has provided professional services to Melbourne Water during the reporting period on normal commercial terms and conditions. The aggregate amount spent on these services is as follows: 2001 2000 $000 $000 Legal and professional fees (Allens Arthur Robinson) 622 413 Professional services (Deloitte Touche Tohmatsu) 103 –

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32. Economic dependency The normal trading activities of the Corporation depend to a significant extent on the sale of bulk water and sewerage services to Yarra Valley Water Ltd, South East Water Ltd and City West Water Ltd. In addition, the Corporation depends on Yarra Valley Water Ltd, South East Water Ltd and City West Water Ltd for the provision of billing and collection services with respect to drainage rates.

33. Events occurring after balance date No material events occurred after balance date.

34. Financial instruments

34.1 Interest rate exposure The Corporation’s interest rate and the effective weighted average annual interest rate for each class of financial asset and liability is set out below.

Weighted avg. Floating Fixed interest rate maturing Non annual effective interest 1 year 1 to 5 over 5 interest interest rate rate or less years years bearing Total 30 June 2001 % $’000 $’000 $’000 $’000 $’000 $’000

Financial assets Cash 4.20 539 – – – – 539 Investments – – – – – – Trade debtors – – – – 10,431 10,431 Other receivables – – – – 15,886 15,886 Total financial assets 539 – – – 26,317 26,856

Financial liabilities Creditors and accruals – – – – 83,292 83,292 Lease liabilities – – – – 21,615 21,615 Advances – – – – 990 990 Borrowings* 6.11 100,000 151,900 400,000 550,000 – 1,201,900 Total financial liabilities 100,000 151,900 400,000 550,000 105,898 1,307,798

Net financial assets (liabilities) (99,461)(151,900)(400,000)(550,000)(79,581)(1,280,942)

Melbourne Water Corporation has entered into a contract with Treasury Corporation of Victoria to refinance a loan of $20 million on 17 September 2001 for a period of three years at a rate of 5.32%. * Of the total amount of borrowings at floating interest rate, $50 million will mature within 12 months and the remaining $50 million will mature in 2 to 3 years.

Weighted avg. Floating Fixed interest rate maturing Non annual effective interest 1 year 1 to 5 over 5 interest interest rate rate or less years years bearing Total 30 June 2000 % $’000 $’000 $’000 $’000 $’000 $’000

Financial assets Cash 6.13 1,757 – – – – 1,757 Investments 6.17 – 8,900 – – – 8,900 Trade debtors – – – – 10,175 10,175 Other receivables – – – – 4,791 4,791 Total financial assets 1,757 8,900 – – 14,966 25,623

Financial liabilities Creditors and accruals – – – – 74,652 74,652 Lease liabilities – – – – 20,872 20,872 Advances – – – – 341 341 Borrowings* 6.32 100,000 141,900 400,000 580,000 – 1,221,900 Total financial liabilities 100,000 141,900 400,000 580,000 95,865 1,317,765

Net financial assets (liabilities) (98,243)(133,000)(400,000)(580,000)(80,899)(1,292,142)

* Of the total amount of borrowings at floating interest rate, $50 million will mature within 12 months and the remaining $50 million will mature in 1 to 3 years.

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Notes to the accounts

2001 2001 2000 2000 Book value Net market Book value Net market $’000 value* $’000 $’000 value* $’000

34.2 Market value The book values and net market values of financial assets and liabilities at balance date are as follows:

On balance sheet Financial assets Cash 539 539 1,757 1,757 Trade debtors 10,431 10,431 10,175 10,175 Other receivables 15,886 15,886 4,791 4,791 Deposits – – 8,900 8,900 Total financial assets 26,856 26,856 25,623 25,623

Financial liabilities Trade creditors and accruals 83,292 83,292 74,652 74,652 Lease liabilities 21,615 21,615 20,872 20,872 Advances 990 990 341 341 Borrowings 1,201,900 1,232,022 1,221,900 1,237,581 Total financial liabilities 1,307,798 1,337,920 1,317,765 1,333,446

* Net market values are capital amounts. The differences between book values and net market values relate principally to interest rate movements. Melbourne Water had no derivative positions as at 30 June 2001.

Net market values of financial instruments are determined on the following basis: On Balance Sheet Cash, deposit investments, short-term borrowings, cash equivalents and non-interest bearing financial assets and liabilities (trade debtors and trade creditors) are valued at cost. Other borrowings are estimated based on the present value of expected future cash flows discounted at current market interest rates quoted for securities issued by Treasury Corporation of Victoria (TCV). Investments in securities, other financial assets and liabilities are estimates based on present value of expected future cash flows discounted at current market interest rates for assets and liabilities of similar risk and maturity structure.

34.3 Credit risk The carrying amounts of financial assets included in the statement of financial position represent the Corporation’s exposure to credit risk in relation to those assets, net of any provisions for doubtful debts. Melbourne Water controls risk through credit ratings, limits and monitoring procedures consistent with board-approved policy. Collateral or other security is not required to support financial instruments. All financial risk management instruments are transacted with the Treasury Corporation of Victoria (TCV), whose liabilities are guaranteed by the Government of Victoria. Melbourne Water potentially has a concentration of credit risk with TCV as the central borrowing authority of Victoria. The risk is considered minimal. Melbourne Water does not have any significant trade credit exposure to an individual counterparty as at 30 June 2001.

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34.4 Financing arrangements The capacity to borrow funds and manage the associated risks is subject to the provisions of the Borrowing and Investment Powers Act (1987). In accordance with this Act, the Victorian Treasurer issues annual approvals permitting new borrowings and the refinancing of all loan maturities for that year. All funding is sourced from the Treasury Corporation of Victoria. 2001 2000 $000 $000 Intra Intra 35. Transactions with other Victorian Government entities

Material transactions undertaken with other State Government controlled entities in the ordinary course of business Revenue 410,892 408,222 Expenses 5,825 5,975

Inter Inter Assets 11,194 19,836 Liabilities 1,516,771 1,549,359 Revenue 25 12 Expenses 195,631 253,251

Intra denotes entities within the same portfolio (Natural Resources and Environment) as Melbourne Water. Inter denotes entities outside the portfolio.

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Statement by directors and chief finance officer

Melbourne Water Corporation Statement by directors and chief finance officer In the opinion of the directors of Melbourne Water Corporation: (a) the accompanying financial statements are drawn up so as to present fairly the financial transactions of the Corporation for the year ended 30 June 2001 and the financial position of the Corporation as at that date; and (b) at the date of this statement there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they fall due. We certify that the financial statements have been prepared in accordance with the requirements of the Financial Management Act 1994 and applicable accounting standards. We are not aware, at the date of this statement, of any circumstance which would render any particulars in the financial statements to be misleading or inaccurate. Dated at Melbourne on this 24th day of August 2001. On behalf of the board:

G W Bowker Chairman

B R Bayley Managing Director

W Forrester Chief Finance Officer

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Auditor-General’s report

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Compliance index

This review has been prepared in accordance with Accounting and Financial Reporting Bulletin, Issue 24, of the Financial Management Act 1994 (Vic.) and the Directions of the Minister for Finance. This index is provided to facilitate identification of our compliance with statutory disclosure and other requirements. Report of operations Section Page

Charter and purpose Manner of establishment and relevant Minister Our business 4 Corporate governance 48-53 Objectives, functions, powers and duties Our business 4 Services provided and persons or sections of community served Our business 4 Our customers 10-15

Management and structure Names of governing board members, audit committee and chief executive officer Board of directors 50 Names of senior office holders and brief description of each office Senior executives 51 Chart setting out organisational structure Board of directors 50 Workforce data and application of merit and equity principles Our social performance: community 39 Application and operation of FOI Act 1982 Our social performance: accessing information 42

Financial and other information Summary of financial results with previous four year comparatives Our financial performance 18 Summary of significant changes in financial position Our financial performance 17-19 Operational and budgetary objectives for the year and performance Our financial performance 17-18 against those objectives Major changes or factors affecting achievement of objectives Our commercial performance 17 Events subsequent to balance date Directors’ report 57 Notes to the accounts 33 73 Consultancies > $100,000 Full details of each consultancy Our asset management 21 Consultancies < $100,000 Number and total cost of consulting engagements Our asset management 21 Extent of compliance with Building Act 1993 Our asset management 23 Statement that information listed in Part 9.1.3 (iv) is available on request Our social performance: accessing information 42 Statement on implementation and compliance with National Competition Policy Our commercial performance 21 A statement of occupational health and safety matters Our social performance: safety 44-47 Occupational health and safety performance measures Our social performance: safety 46

Financial statements

Preparation Statement of preparation on an accrual basis Notes to the accounts 1.1 61 Statement of compliance with Australian Accounting Standards and Notes to the accounts 1.1 61 associated pronouncements Statement of compliance with accounting policies issued by Notes to the accounts 1.1 61 the Minister for Finance

Statement of financial performance A statement of financial performance for the year Statement of financial performance 58 Operating revenue by class Notes to the accounts 2 63 Other material revenue by class including sale of non-goods assets Notes to the accounts 2 63 and contributions of assets Depreciation, amortisation or diminution in value Notes to the accounts 3 63 Bad and doubtful debts Notes to the accounts 3 63 Financing costs Notes to the accounts 3 63 Net increment or decrement on the revaluation of each category of assets Notes to the accounts 3 63 Auditor-General’s fees Notes to the accounts 22 68

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Report of operations Section Page

Statement of financial position A statement of financial position for the year Statement of financial position 59

Assets Cash at bank or in hand Notes to the accounts 5 64 Receivables, including trade debtors, loans and other debtors Notes to the accounts 6 64 Other assets, including prepayments Notes to the accounts 7 64 Property, plant and equipment Notes to the accounts 8 65-66

Liabilities Bank loans, bills payable, promissory notes, debentures and other loans Notes to the accounts 11 and 15 66 & 67 Trade and other creditors Notes to the accounts 10 and 14 66 & 67 Finance lease liabilities Notes to the accounts 11, 15 and 25 66, 67 & 69 Provisions, including employee entitlements Notes to the accounts 13, 17 and 29 67 & 71

Equity Reserves, and transfers to and from reserves (shown separately) Notes to the accounts 19 67

Statement of cash flows A statement of cash flows for the year Statement of cash flows 60

Notes to the financial statements Ex-gratia payments Notes to the accounts 29 71 Amounts written off Notes to the accounts 3 63 Contingent liabilities Notes to the accounts 26 70 Commitments for expenditure Notes to the accounts 25 69 Government grants received or receivable and source Our asset management performance 21 Employee superannuation funds Notes to the accounts 29 71 Assets received without adequate consideration Notes to the accounts 2 63 Transactions with responsible persons and their related parties Notes to the accounts 31 72 Motor vehicle lease commitments Notes to the accounts 25 69

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Statement of corporate intent

Introduction Melbourne Water’s priorities in achieving its Melbourne Water is a statutory corporation wholly owned by the business objectives are: Victorian Government. The organisation’s main functions are to: Protect public health: > manage Melbourne’s water supply catchments >Provide a reliable supply of safe drinking water primarily > be a wholesale supplier of water using water harvested from protected water supply catchments. > manage the treatment and disposal of more than 94 per cent > Increase drinking water quality standards where there are of Melbourne’s sewage and wastewater demonstrated health benefits. > manage major drainage services and waterways and undertake > Minimise potential health risks associated with urban and the operational functions of floodplain management (by Deed stormwater runoff. of Delegation from the Minister) to the greater Melbourne area. > Collect, treat and dispose of wastewater and store by-products Our vision in accordance with EPA Victoria requirements. > Contribute to improvement of waterway water quality and Leadership in water cycle management minimisation of the impacts of stormwater and effluent on Our values receiving waters.

We are focused on working cohesively to deliver services for Manage Melbourne’s water resources and the environment the benefit of our customers and the community by maximising in a sustainable manner: opportunities throughout the water cycle. >Protect and improve the quality of Melbourne’s waterways We are people who: and bays. >recognise that we achieve more by working with others > Achieve best practice standards for the disposal of treated > feel privileged to be the custodians of our water resources sewage and sewage by-products. > behave with integrity > Minimise the requirement for new dams and/or major water > attain excellence through creativity and innovation supply augmentation for Melbourne. > celebrate our achievements and learn from our experiences. > Undertake effective water conservation programs. Strategic objectives Operate as a successful commercial business: > Be an efficient product and service provider. Melbourne Water is committed to sharing of knowledge, working > Earn a commercial return on investment. in partnership, thinking beyond compliance and considering the >Work with Government on further development of the social dimension of its activities –“The triple bottom line”. Victorian water industry. Key business drivers have been identified as the link between >Grow the business where there are demonstrated benefits to Melbourne Water and the external business environment: the shareholder and the community. > environmental sustainability > Manage risk recognising community expectations and > water conservation maximising shareholder value. > public health > Innovate and apply new technologies to achieve business > corporate citizenship efficiencies. > government policy and regulation Provide excellent customer service and maintain the trust > economic efficiency and respect of the community: > technological advancement. > Further develop open and accountable relationships with The drivers underpin four core objectives that form the basis of customers and key stakeholders in line with their expectations. Melbourne Water’s business and long-term plans. They are to: > Improve the quality, timeliness and accessibility of services >protect public health and information. > manage Melbourne’s water resources and the environment > Ensure the community is informed and consulted. in a sustainable manner > Encourage and foster community involvement and > operate as a successful commercial business understanding of Melbourne Water’s operations. >provide excellent customer service and maintain the trust and respect of the community.

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Commercial arrangements The planned allocation of the $100.1 million capital investment Scale of the business for 2001/02 is: Melbourne Water has: Protect public health 10.7% > total fixed assets of approximately $2.9 billion Manage Melbourne’s water resources and 26.3% > an annual operating revenue of approximately $470.0 million the environment in a sustainable manner derived mainly from bulk water and sewerage services to Operate as a successful commercial business 49.4% the retail water companies and from drainage services to Provide excellent customer service and maintain 13.7% the community the trust and respect of the community > approximately 481 gigalitres per annum of potable water is supplied to the retail water companies Dividend > approximately 331 gigalitres per annum of sewage is collected The dividend to be paid to Government will be in accordance from the retail water companies for treatment and disposal with the amount determined by the Victorian Treasurer after >responsibility for provision of regional drainage services consultation with the corporation’s board of directors. within the greater Melbourne area covering approximately Statutory requirements 7,806 square kilometres. (Municipalities are responsible for Environmental/health regulations local drainage systems.) Melbourne Water is committed to meeting statutory and other Business activities requirements. In particular, Melbourne Water is committed to: Melbourne Water undertakes the following principal > compliance with EPA discharge licences issued for the Eastern business activities: and Western Sewerage treatment plants and other related > manage and operate the bulk water, sewerage and drainage agreements or understandings systems of Melbourne > achieving drinking water quality and supply standards >protect and improve water quality in waterways and provide specified in the bulk water supply contracts between flood protection Melbourne Water and the retail water companies and others > maintain assets in good structural and hydraulic condition including Southern Rural Water, Western Water and > manage infrastructure augmentation for improved service Gippsland Water delivery, compliance with regulatory standards, urban growth > compliance with the Occupational Health and Safety Act 1985 and asset replacement (Vic.) and regulations. > undertake technology innovation through research and development to improve productivity and manage business risks. Performance reporting The operational and financial position of the corporation will be Basis of charges reported to the Victorian Government as owner at the end of each Melbourne Water charges for its services to: financial year. > obtain revenue to cover operations and maintenance costs, finance costs, capital investment, dividend, tax payments and Melbourne Water will demonstrate its commitment to debt retirement environmental and public health performance and to meeting its > earn an appropriate commercial return on new investment community obligations by annual public reporting on its having regard to the risk of the business. regulatory and internal procedures and policies and performance against established benchmarks. The charges for bulk water and sewerage services are set by Government and are structured so that: Business policies > the total economic cost of service delivery is recovered Melbourne Water has established policies to cover its key > approximately half of the costs are recovered through fixed responsibilities and obligations. They include environment, charges and the remainder through variable charges based on public health, community, employees, occupational health and the volume of water delivered and sewage treated. safety, risk management, accounting, legal and commercial. Drainage charges are based on the rateable value of properties.

Capital investment Melbourne Water has made provision for significant capital investment to: > meet the expected growth in demand from population increases > meet environmental standards > improve drinking water quality > improve water quality in Melbourne’s waterways > maintain assets in serviceable condition > improve flood protection.

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Statement of corporate intent

Business targets

2000/01 2001/02 2002/03 2003/04 Indicator plan plan plan plan

Protect public health Per cent of chlorination plants satisfying reliability measures 92% 94% 94% 94% Per cent of all water samples at wholesale/retail interface with no E.coli present 95% 98% 98% 98%

Manage Melbourne’s water resources and the environment in a sustainable manner Per cent of water harvesting points meeting environmental 100% 100% 100% 100% flow requirements to rivers EPA Licence Compliance (number of breaches) > Eastern Treatment Plant 0000 > Western Treatment Plant 0000 Number of sewage spills within defined standard 4444 of service conditions (1:5 rainfall event) Number of sewer spills due to system failure 0000 Odour complaints attributable to Melbourne Water assets 0 28 19 14 Effluent recycled (20 per cent by 2010) N/A 3.5% 5.0% 6.5% Eastern Treatment Plant ammonia reduction N/A 22 mg/l 18 mg/l 15 mg/l (median less than or equal to 5mg/l by 2007) Cumulative design reduction of nitrogen in waterways (tonnes per annum) N/A 10 20 30 Water conservation (annual reduction in consumption per household) N/A 1.5% 1.5% 1.5%

Operate as a successful commercial business Debt to total assets ratio 42.8% 40.5% 39.2% 38.2% Interest coverage (times) 3.9 4.0 3.9 4.0 Lost-time injuries > Melbourne Water employees 0000 > Major contractors 0000 Key management and technical positions with succession plan 100% 100% 100% 100% Average number of sick days per employee 3 3.5 3 3

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Business targets

2000/01 2001/02 2002/03 2003/04 Indicator plan plan plan plan

Provide excellent customer service and maintain the trust and respect of the community Water Per cent of RWC supply points complying with pressure requirements 99.5% 99.5% 99.5% 99.5% Response to water leaks within 2 hours 100% 100% 100% 100%

Waterways Per cent of land development offers processed within 60 days 95.0% 95.0% 95.0% 95.0% Per cent of town planning applications processed within 28 days 97.5% 97.5% 97.5% 97.5% Per cent of other authority works and stormwater connections 95.0% 95.0% 95.0% 95.0% applications processed within 28 days Introduction of special building overlays to councils N/A 30 30 30 (to exhibition stage–30 municipalities in total) Reduction in flood prone properties (cumulative target–800 by 2009) N/A 240 320 400 Protection of rural waterways > Plants (number cumulative) N/A 150,000 200,000 250,000 > Fencing (kilometres cumulative) N/A 75 100 125

Customers and the Community External correspondence responded to within 10 days 100% 100% 100% 100% Telephone calls answered within five rings 100% 100% 100% 100% Satisfaction with community consultation processes (results of independent surveys) N/A 70% 70% 70% Provision of community information on Melbourne Water’s website N/A 10% 10% 10% (increase in website visits) Evaluation of Melbourne Water education programs N/A 70% 70% 70% (ranking from independent surveys) Community awareness of water conservation message N/A 85% 85% 85% (results of independent surveys)

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© Copyright 2001 Melbourne Water Corporation. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, photocopied or otherwise dealt with without the prior written permission of Melbourne Water Corporation.

Design: Cruise Design Partnership Photography: Esther Beaton, Noel Butcher, Boris Hlavica, Rohan Young and Jon Augier Courtesy Museum Victoria. MW_BR_2000/01_PDF.qxd 1/11/01 8:19 AM Page 88

Melbourne Water Corporation 607 Bourke Street Melbourne PO Box 4342 Melbourne Victoria 3001 Telephone 131 722 Facsimile 03 9235 7200 www.melbournewater.com.au ISSN 1324-7905