MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 1 Business Review Melbourne 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 (Victoria) 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 Melbourne Water’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 Australia 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 Western Treatment Plant. We also commissioned our first enhanced lagoon at the plant to reduce nitrogen inputs to Port Phillip Bay. > We spent $2.2 million on constructing wetlands 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 Eastern Treatment Plant. We were fined by EPA Victoria for each of these licence breaches. The lagoon system at our Western Treatment Plant. 2 MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 5 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. 3 MW_BR_2000/01_PDF.qxd 1/11/01 8:18 AM Page 6 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–City West Water, South East Water and Yarra Valley Water. 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 Upper Yarra Reservoir. 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.