CONTENTS
Chairman and Managing Director’s Message 2
Company Highlights 3
Corporate Governance
6
Bulk Entitlements
13
Directors’ Biographies
21
Executive Biographies
22
Organisational Chart
24
Sustainability Reporting
25
Our Water Our Future
25
Regional Catchment Management Strategy
31
Victorian Biodiversity Strategy
32
Victorian River Health Strategy/Statement of Obligations (River Health)
32
Corporate Water Consumption
33
Greenhouse Gas Emissions
33
Major Non-Residential Water Users
34
Company Performance against Corporate KPIs
36
Financial Report
41
Directors’ Statutory Report
43
Auditor Generals Independence Declaration
46
Statement of Comprehensive Income
47
Balance Sheet
48
Statement of Changes in Equity
49
Cash Flow Statement
50
Notes to the Financial Statements
51
Directors’ Declaration 92
Independent Auditor’s Report
93
Risk Management Attestation
95
CHAIRMAN AND MANAGING DIRECTOR’S MESSAGE
This Annual Report provides a summarised account of
South East Water’s performance and achievements in
2009/10, including the audited Financial Report, the
Corporate Governance Statement and other statutory
information as required by relevant legislation. We
have also included sustainability information requested
by the Department of Sustainability and Environment
and highlighted how we have performed against our
Corporate KPIs.
Water conservation remained a high priority for the
business throughout the year. We exchanged 37,677 water
efficient showerheads, installed 2,788 dual flush toilets,
worked with 131 schools as part of the Schools’ Water
Efficiency Project, and partnered with 478 commercial
waterMap customers to deliver significant water savings.
To help support a sustainable city, South East Water
is facilitating the development of an Integrated Water
Management (IWM) Strategy for the south-east region
of Melbourne with our key project partners, Melbourne
Water and Southern Rural Water. A wide range of
initiatives are being considered, including expanded
stormwater harvesting, local customer solutions,
intelligent networks, greater coordination with landuse planning, and maximising fit-for-purpose recycled
water opportunities.
We continued to invest in the provision of Backlog
sewerage services to areas where failing septic tanks
can cause environmental and health impacts. Our
Backlog Program in the townships of Flinders and
Shoreham has seen over 80 per cent of eligible residents
connect to the sewerage system and environmental
monitoring has already shown improvements in the
water quality in Stoney Creek and Dodds Creek. We
are also undertaking a significant program to reduce
the risk of rising sewer main failures to further protect
the environment and local waterways.
Our investment of approximately $138 million in water,
sewerage, recycling and IT infrastructure was the highest
in our 15 year history, and will continue to grow over the
next few years. Of significance, growth related investment
was approximately $81 million while another $40 million
was invested in the renewal and upgrade of ageing
infrastructure. We have successfully responded to this
challenge by leveraging our existing alliance relationships
using targeted incentives, and establishing a new alliance
for the delivery of sewage treatment plant upgrades.
This approach allows us to provide our customers with
a range of innovative solutions and is testament to our
commitment to both renew ageing infrastructure and
cater for the needs of a growing population.
Financial Performance
South East Water reported an operating profit of
$95.4 million for the year ended 30 June 2010 (up 50 per
cent on the previous year), highlighting the strength of
our core business. Earnings were also supplemented by
our unregulated business portfolio, which generated a
net operating profit of $3.2 million. Income from water
sales increased in line with the rise in water prices, but
was reduced by a drop in water demand.
financial sustainability. Our financial performance is
regularly “stress tested” to assess and respond to the
potential impact of changing macro and micro economic
conditions. Over the long-term, the organisation’s
ongoing financial viability is dependent on future water
pricing determinations.
Over recent years, the Board and Executive Team
have placed a heavy emphasis on developing and
embedding a culture in the business that actively
encourages pursuing and realising productivity and
efficiency gains, for the benefit of our customers.
The Board and Executive Team continued to monitor new
and emerging trends which may affect South East Water’s
2
Douglas Shirrefs
Acting Chairman
Shaun Cox
Managing Director
COMPANY HIGHLIGHTS
Integrated Water Management (IWM)
Business Growth
South East Water is facilitating the development of an
IWM Strategy for the south-east region of Melbourne.
IWM aims to provide the most sustainable mix of
all possible water solutions for our customers and
communities, and to better understand and integrate
the relationship between the environment, energy and
water. As the optimal solutions typically depend on
local factors such as stormwater availability and local
waterway values, the IWM Strategy is focusing on the
precinct level of development.
In 2009/10, we continued to pursue business growth
as a key strategic priority, with the appointment of a
General Manager, Business Growth. We are committed
to expanding our traditional products and services
offering to provide our customers with greater choice
and a diversity of solutions. We are also operating
beyond our service region to offer new products and
services and best practice expertise to businesses.
As these new products and services are outside the
traditional regulated business, a key focus over the past
12 months has been the development of appropriate
governance and risk management processes to address
aspects such as competitive neutrality and financial
ring-fencing.
We are working in partnership with Melbourne Water and
Southern Rural Water on the development of the Strategy
and have established a Stakeholder Reference Group that
will recommend the preferred Strategy. The Stakeholder
Reference Group is made up of Government, community
and industry representatives to ensure broad input. A wide
range of opportunities are being considered, including
expanded stormwater harvesting, local customer solutions
(such as grey water use), intelligent networks, greater
coordination with land-use planning and maximising fitfor-purpose recycled water opportunities. The Strategy is
due to be delivered in mid 2011.
For our residential customers, our unique rainwater
tank offering will soon be complemented by gas and
solar hot water services. When it comes to our business
customers, we plan to increasingly use our internal
expertise and growing commercial acumen to provide
business solutions, such as managed billing and IT
consulting.
3
COMPANY HIGHLIGHTS
Hydro Trak
In 2009/10, South East Water launched our new Hydro
Trak system. Hydro Trak is an exciting innovation that
keeps track of more than 800 hydrant permit holders
by using a unique device to monitor water being
withdrawn from hydrants. Some of the features include
GPS monitoring, automatic billing and a mapping
interface to show the location of vehicles withdrawing
water. In addition to accurate data collection, Hydro
Trak is simple to install and operate, requires no
maintenance, eliminates all paperwork and comes at
no cost to permit holders.
Community Engagement
In 2009/10, South East Water developed and
implemented a Community Engagement Framework
to support sustainable decision making. By recognising
and communicating the needs and interests of all
impacted and interested parties, we are in a better
position to deliver sustainable solutions, particularly
when it comes to our capital works projects.
For example, South East Water used our Community
Engagement Framework as part of an odour
management project at the Mount Martha Sewage
Treatment Plant. We formed a reference group,
made up of local residents impacted by the Plant’s
odour emissions along with representatives from local
community groups, Melbourne Water, the Mornington
Shire Council and South East Water, to consider a large
range of options for upgrading the solids handling
system at the Plant. A sustainability assessment was
used to select the preferred option that performed best
across a range of social, environmental and economic
4
factors. We are now consulting with neighbours and
local residents on the preferred option and will continue
to consult with the reference group and local residents
throughout the design and construction of the project.
Launch of Customer-Friendly Website
In May 2010, South East Water launched our
contemporary, vibrant and, most importantly,
customer-friendly website. Our residential and business
customers, and the general community, are now able
to easily find information, access their account details
and find useful tips on how to save water.
Recycled Water Projects
In May 2010, the $4.5 million Frankston Recycled Water
Project was officially launched. Through the Project,
Frankston’s Jubilee, Lloyd and Ballam Parks - covering
11 sporting grounds used by more than 150,000 sports
enthusiasts every year will be green and open all year
round, thanks to the supply of Class C recycled water.
This project provides a great example of how we can
use alternative water sources to irrigate local parks
and ovals while saving precious drinking water. Further
along the bay, the Mornington Recycled Water Project
is underway to supply recycled water from the South
Eastern Outfall to the Mornington Racecourse, Civic
Reserve and Dallas Brooks Park.
Intelligent Networks
In order to improve the service we provide to our
customers, South East Water commenced an Intelligent
Networks Review in early 2010 with a view to developing
more efficient systems, processes and technologies. To
identify the initial needs and opportunities of the project,
South East Water held an extensive 12 week community
engagement process with a range of stakeholders
including residential customers, school and university
students, local government representatives, business
representatives and employees across South East
Water and ‘us’ - Utility Services.
Almost 500 ideas were identified and around 50 of these
are now with South East Water’s technical experts to
match with new and emerging technologies. The ideas
will also be put to an external technical expert group,
made up of representatives from telecommunications,
electricity and water industries from around Australia.
An Intelligent Networks Implementation Plan will be
delivered in the second half of 2010.
Narre Warren Sewerage Transfer Scheme
In December 2009, South East Water and the
‘us’ – Utility Services Alliance commenced work on the
Narre Warren Sewerage Transfer Scheme to help meet
the needs of fast growing communities in the Cardinia
growth corridor. The Scheme involves construction of 17
kilometres of pressure sewer pipeline, four kilometres
of gravity sewer, and eight kilometres of Class A
recycled water pipeline. Two new pump stations and
rising mains in both Officer and Pakenham South will
be constructed, as well as upgrades to the Pakenham
Sewage Treatment Plant. The Scheme is supported by
the Pakenham Recycled Water Scheme, which includes
the construction of the Pakenham Class A Recycled
Water Treatment Plant.
As well as meeting the needs of population growth,
the Scheme will minimise potential operational and
environmental risks associated with limited sewer capacity.
In addition, the Pakenham Sewage Treatment Plant
will stop discharging to Deep Creek and Western Port,
meeting Environment Protection Authority requirements.
The scheme is due to be completed in 2011.
Chapel Street Water Main Renewal
In April 2010, South East Water began work to renew the
2.5 kilometre water main that runs along Melbourne’s
iconic Chapel Street (from Alma Road to Toorak Road).
One of the key aims of the project has been to work
closely with the community to minimise any disruption to
businesses, residents and the wider community along one
of Melbourne’s busiest streets. Works are being conducted
in temporary zones of approximately 60 metres at a time
during the quieter periods of street activity. We have
created a dedicated website and a community newsletter
to keep stakeholders updated, and ‘fashionable’ hoardings
were designed to disguise site-work. The project is due for
completion in October 2010.
5
CORPORATE GOVERNANCE
South East Water is a corporation under the Corporations
Act 2001 (Cth). South East Water is also a state owned
company under the State Owned Enterprises Act 1993
(Vic). All of the issued shares in the Company are owned
by a single shareholder on behalf of the State Treasurer.
The Company has been issued a Water and Sewerage
Licence by the Minister for Water under the Water
Industry Act 1994 (Vic). The Minister for Water has also
issued a Statement of Obligations to South East Water
under the Water Industry Act.
As part of South East Water’s strategic framework
the Board has approved a Governance Strategy. The
Governance Strategy comprises three supporting Plans,
a Corporate Governance Plan (including Legal and
Compliance), a Procurement Plan and an Audit Plan.
The principal goal of this Strategy is to ensure South
East Water not only continues to observe all relevant
laws and practices but strives to achieve best practice
benchmarks in the areas of corporate governance,
compliance, procurement and audit.
The Governance Strategy complies with the
Governance Guide to the Victorian Water Industry
produced by the Department of Sustainability and
Environment, which provides an overview of the
governance framework surrounding the water industry.
South East Water operates within a regulatory
framework that comprises an economic regulator and a
number of technical regulators. The overall scheme of
key governance instruments and entities is summarised
in the Flowchart which appears at the end of the
Corporate Governance section of this report.
The Board
Ultimate responsibility for the governance of the
Company rests with South East Water’s Directors.
The key roles of the Directors are described in the
recently updated Directors’ Handbook. These are to
determine the vision, mission, values and strategic
objectives of the Company and ensure that these take
appropriate account of State Government Policy as
summarised below:
• determining all material policies governing the
operations of the Company, including Delegations
of Authority;
• ensuring key risks are being identified and appropriately
managed; and
6
• regularly reviewing the progress and performance of
the Company in meeting its strategic objectives, and
ensuring that appropriate resources are available to
achieve performance measures.
Board Composition
As at 30 June 2010, the Board comprised six Directors:
five non-executive Directors, including an Acting
Chairman, and one Executive Director who is the
Managing Director. The Directors come from diverse
backgrounds and bring to the Board an appropriate
mix of skills and experience.
Directors are appointed by the Shareholder. As South
East Water is a State owned company, all shares are
beneficially owned by the State of Victoria.
Reporting to the Shareholder
The Board seeks to inform its Shareholder of all
major developments affecting the Company. This is
accomplished through:
• quarterly performance reports to the Shareholder;
• annual and half-yearly reports (each containing
information about operations and financial and nonfinancial performance against key indicators);
• a detailed, annual three-year Corporate Business
Plan, as provided by the State Owned Enterprises
Act 1992 and consultation thereon;
• direct contact between the Chairman, Managing
Director and shareholder representatives on key
issues;
• frequent communication at Executive level on
performance, industry and policy issues; and
• Board performance evaluation (described below).
Performance Evaluation
The Board has established a formal process to review
its effectiveness and performance, as well as the
effectiveness and performance of the Board Committee
and individual Directors. The Board review process
incorporates data from Directors and Executives and
Senior Managers of the Company who are closely
involved with the Board or its Committees. The
Chairman of the Board also meets with stakeholders
to discuss issues related to Company and Board
performance. The Chairman of the Board and the
Chairs of the relevant Board Committees report on the
outcomes of those meetings. In compliance with South
East Water’s Statement of Obligations, the Board’s
performance was externally and internally evaluated
last year with the findings reported to both the Minister
for Water and the Treasurer.
Board Procedures and Guidelines
To document and provide transparency on the Board’s
processes, key principles and obligations of Directors,
a revised Directors’ Handbook was prepared and
approved by the Board in April 2010.
All Directors have provided a declaration of adherence
to the Procedures and Guidelines in the Handbook,
which were formally adopted by the Board in April 2010
for the 2009/10 financial year.
South East Water maintains processes to manage
potential conflicts of interest and to ensure Director
independence both prior to and during each meeting
of the Directors.
Board Attendance and Involvement
From 1 July 2009 until 30 June 2010, twelve meetings
of Directors were held to consider, among other things,
matters such as the Business Growth Governance
Strategy, the Alliance Review, South East Water’s Vision
and Brand, its Strategic Priorities and Guiding Principles.
In addition, a strategic corporate planning workshop
was held with the Executive team in December 2009.
In addition to monthly reporting, the Board receives
regular detailed briefings from senior management on
key issues during the year and undertakes inspections
of assets and facilities.
Board Committees
The Board has three Committees: the Finance,
Audit and Risk Management Committee; the Service
Delivery, Capacity and Performance Committee; and
the Remuneration Committee. The first two of these
Committees were formed in November 2009. This was
in response to a number of factors including our new
Strategic Framework and a desire to increase our focus
on the performance and delivery of South East Water’s
asset intensive business.
The Environment, Health and Safety Committee was
disbanded, with its compliance responsibilities and
functions assumed by the Finance, Audit and Risk
Management Committee with an expanded Charter.
The Service Delivery, Capacity and Performance
Committee’s functions include monitoring South East
Water’s asset management performance.
Each Committee operates under a written Charter and
is chaired by a non-executive Director. The Charters of
the Remuneration Committee, the Finance, Audit and
Risk Management Committee and the Service Delivery,
Capacity and Performance Committee are contained
on South East Water’s website.
Finance, Audit and Risk Management Committee
For the 2009/10 financial year, the Finance, Audit and
Risk Management Committee comprised Mr D Shirrefs
(Committee Chairman), Ms E Underwood (up to 24
March 2010), Dr G Gentle and Mr J Turcato.
Meetings are held at least quarterly and as requested
by a Committee member, or internal or external
auditors. The Committee reviews, monitors and, where
necessary, recommends improvements to internal
control processes, financial reporting, the internal
audit function, the external audit process, health,
environment, workplace safety, compliance and the
Company’s risk management process.
The Victorian Auditor-General has been appointed as
the external auditor in accordance with the Audit Act
1994. Chartered accountants PricewaterhouseCoopers
have acted as the Company’s internal auditor for the
2009/10 financial year and report directly to the Finance,
Audit and Risk Management Committee.
Service Delivery, Capacity and Performance
Committee
For the financial year 2009/10, the Committee
comprised: Mr A Beach (Committee Chairman), Ms E
Underwood (until 24 March 2010), Dr J Slocombe and
Mr D Shirrefs (from 1 April 2010).
Meetings are held at least quarterly and as requested
by a Committee member. The Committee reviews,
monitors and, where necessary, recommends
improvements to current corporate strategies and
plans for delivery of services to customers and other
stakeholders and monitors the effective performance
of these services.
7
CORPORATE GOVERNANCE
Remuneration Committee
The Remuneration Committee comprised the nonexecutive members of the Board, namely Mr A Beach,
Dr G Gentle, Mr D Shirrefs, Dr J Slocombe, Mr J Turcato
and Ms E Underwood (up to 24 March 2010), with
the Managing Director attending by invitation where
appropriate. The Committee’s responsibilities include
establishing and reviewing the Managing Director’s and
senior managements’ remuneration packages, which
must comply with the Government Sector Executive
Remuneration Guidelines. Remuneration of nonexecutive Directors is in accordance with Government
policy for State owned companies.
The Committee annually assesses the performance
of the Managing Director and senior executives by
reference to specific company-wide and individual
criteria. A portion of each Executive’s remuneration is
performance-related.
Director Attendance at Board and Committee Meetings
BOARD
REMUNERATION
FINANCE AUDIT
& RISK MANAGEMENT 3
SERVICE DELIVERY,
CAPACITY &
PERFORMANCE 4
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
ELIGIBLE
ATTENDED
EJT Underwood 1
8
8
2
2
3
3
2
2
DK Shirrefs 2
12
12
3
3
4
4
1
1
A Beach
12
11
3
3
N/A
N/A
3
3
SL Cox
12
12
3
3
4
4
3
3
G Gentle
12
11
3
3
4
4
N/A
N/A
J Slocombe
12
11
3
3
N/A
N/A
3
3
J Turcato
12
12
3
3
4
4
N/A
N/A
1
Ms Eleanor Underwood resigned from the Board effective 24 March 2010.
Neither a permanent Chairman nor new Director has yet been appointed.
2
Mr Douglas Shirrefs was elected as the Acting Chairman on 1 April 2010.
3
The inaugural Finance Audit and Risk Management Committee meeting
Risk Identification and Management
The Board has taken an active role in ensuring risk
management is integrated into the management systems
and culture of the Company. The Board has approved
a comprehensive Risk Management Framework that
articulates the risk management responsibilities of the
Board, its Committees and management.
The Framework provides a methodology for the
identification,
analysis,
evaluation,
treatment,
reporting and auditing of risk and is supplemented by
post implementation project reviews. An assessment
of key business risks (including their inherent and
residual risk ranking) is incorporated in the Company’s
Business Risk Profile and is reported quarterly to the
8
was held on 9 November 2009. This Committee incorporated the previous
work of the Risk Finance and Audit Committee, whose last meeting was
10 August 2009, as well as the Environment, Health and Safety Committee.
4
The inaugural Service Delivery Capacity and Performance Committee
meeting was held on 23 November 2009.
Finance, Audit and Risk Management Committee and
annually to the Board.
The Company also has extensive risk control systems
in place, including documentation of key processes
through integrated and externally certified Quality,
Environmental Management, Occupational Health and
Safety and Hazard Analysis and Critical Control Point
(HACCP) systems.
Risk management is fully integrated with asset
management, water quality and security management
systems. Specific controls are in place for financial
management and treasury functions. Audit programs
cover financial and operational matters and are aligned to
the Company’s high-risk areas. A comprehensive insurance
program and emergency response plans complement
other risk mitigation programs. To further enhance
adherence to key legal and associated obligations, a
Compliance Committee, which was established in 2007,
meets at least twice a year to drive a renewed awareness
and commitment among staff to these duties.
Furthermore, the Managing Director and the General
Manager, Corporate Services (in his capacity as Chief
Financial Officer) declared in writing to the Board that,
in their opinion:
(a)the financial records of the Company have been
properly maintained in accordance with the
Corporations Act 2001;
(b)the financial statements and notes of the Company:
(i) comply with the Corporations Act 2001 and
Australian Accounting Standards; and
(ii) give a true and fair view of the Company’s financial
position as at 30 June 2010 and of its performance,
as represented by the results of its operations and
its cash flows, for the financial year ended on that
date; and
(c)with regard to the risk management and internal
compliance and control systems of the Company as
they relate to financial reporting:
(i) the Statements made in (a) and (b)(i) and (ii) above,
regarding the integrity of the financial reports, are
founded on a sound system of risk management
and internal compliance and control systems which
implement the policies adopted by the Board; and
(ii) the systems are operating efficiently and effectively
in all material aspects.
Occupational Health and Safety (OH&S)
The Board of South East Water is fully committed to
ensuring a safe work environment for all employees,
contractors and visitors. A revised OH&S Framework
based on best OH&S practice and incorporating the
requirements of the OH&S Act 2004, endorsed by the
Board during 2004/05, has been implemented. This
will ensure an overall improvement to OH&S at South
East Water, with health and safety responsibilities
appropriately aligned to South East Water’s structure
and a focus on building a safety culture, in addition to
compliance and prevention.
Corporate Governance Principles and
Recommendations
The second edition of the ASX Corporate Governance
Council’s Corporate Governance Principles and
Recommendations was published in August 2007. Unlike
an Australian listed company, South East Water is not
required to report on the extent of compliance with the
Best Practice Recommendations.
Nevertheless, as a matter of good corporate
governance, South East Water has assessed its practice
against the Corporate Governance Principles and
Recommendations and analysis confirms that South
East Water satisfies those Principles, save that:
• There is no nomination board Committee as set
out in Recommendation 2.4. As the Company’s
constitution provides for the shareholder to appoint
the Directors and as the Victorian Government is the
sole shareholder, it is not considered appropriate to
establish such a Committee.
Director Independence
South East Water has adopted the following definition
of ‘independence’:
“A Director who does not have a relationship where
there are, or are perceived to be, matters that could
materially interfere with the Director:
• making decisions on matters that regularly come
before the Board or its Committees;
• objectively assessing information and advice given or
obtained by management;
• setting policy for general application across the
Company; and
• generally, carrying out the performance of his or her
role as a Director.”
This definition needs to be read in the context of the
Company, which is a company registered under the
Corporations Act 2001 and declared to be a ‘State
owned company’ under the State Owned Enterprises
Act 1992, being wholly-owned by the State of Victoria.
In assessing whether a particular Director meets the
definition of independence adopted by the Company,
the Board considers all business, professional or
personal relationships of that Director which may be
relevant. The Board considers that prior employment
9
CORPORATE GOVERNANCE
by Government or the holding of a directorship with
another State owned or controlled entity does not, of
itself, constitute a lack of independence.
Applying the definition on this basis, and after
considering the status of each non-executive Director
during the financial year the Board is of the view that
each non-executive Director is independent, having no
relationships or interests, business or otherwise, which
could compromise their autonomy.
Independent Advice
Directors are encouraged and expected to raise all
matters with the Board, with a view to resolving any
difference of opinion. Should an issue arise warranting
a Director seeking independent advice, this may be
obtained with the prior approval of the Chairman or
the Board, in which case all reasonable costs will be
reimbursed.
Ethical Standards
The Directors acknowledge the need for, and continued
maintenance of, the highest standards of corporate
governance practice and ethical conduct by all Directors,
employees and contractors. The Board seeks to ensure
high standards of ethical behaviour through adoption
of a Board Code of Ethics, an Employee Code of
Conduct and appropriate policies, supported by specific
awareness and compliance programs in areas such as
equal employment opportunity and trade practices.
Key areas covered in the Employee Code of Conduct
include our Values and Guiding Principles, acting
ethically and with integrity, conflicts of interest
and confidentiality, transparency in operations,
demonstrating respect, safety and environmental care.
10
Automated Board Paper Process
In mid 2009, South East Water implemented an automated
Board Paper System to provide more consistent, reliable
and efficient processes in the preparation of Board
and Committee papers. More specifically, South East
Water introduced new technology such as workflows
and calendars for automation of regular processes. The
solution addressed the need for document management
practices throughout the preparation process through
version control, permission based access and audit trails.
It also streamlined the approval process through an online
approval system with reminders, notifications and tasks.
In 2010, the system incorporated both the Finance and
Risk Management Committee and the Service Delivery
Capacity and Performance Committee. A Board
of Directors Portal was also developed to facilitate
access by Directors to relevant current and historical
documents, including each month’s Board papers.
Transition to a Statutory Corporation
The Government has advised that it remains committed
to the conversion of the Melbourne metropolitan retail
water companies into statutory corporations and that
legislation will be introduced to implement this proposal
when all the relevant policy issues have been resolved.
Community and Stakeholder Engagement
South East Water is committed to working
collaboratively with our stakeholders and communities
to ensure their views are incorporated into our decision
making processes. We have embraced the International
Association for Public Participation (IAP2) Core Values
and Public Participation Spectrum and adopted a
structured and disciplined approach to community
engagement. During the year, South East Water has
conducted extensive community engagement and
formed a range of Committees and Reference Groups
to provide stakeholders and the community with an
opportunity to influence key strategies and service
delivery projects.
The following projects are examples of where South
East Water has conducted extensive community and
stakeholder engagement to design and implement key
projects:
• Chapel Street Water Main Renewal Project – South
East Water consulted extensively with traders,
stakeholders and the broader community to
understand their project concerns and incorporate
these into the construction methodology. The
engagement process has involved letters and
newsletters, a project webpage, regular meetings
with key stakeholders and traders and a full-time
Community Liaison Officer; and
• Mount Martha Sludge and Odour Upgrade Project
– South East Water collaborated with stakeholders
and the community in determining the preferred
option for the sludge upgrade. We used a Reference
Group with representation from stakeholders and the
community to determine the preferred option for the
upgrade. Broader community engagement was then
conducted with local residents using letters, project
information sheets, one-on-one meetings and a
community workshop to obtain broader community
input for the preferred option.
Whistleblowers Protection Act 2001 Procedures
South East Water (South East Water Limited ABN
89 066 902 547) has established these procedures
(procedures) under the Whistleblowers Protection Act
2001 (Vic) (Act). The procedures are to be read together
with the Act and the Ombudsman’s Guidelines issued
in November 2001 (guidelines). A separate Explanation
of the Procedures document is available on request
from South East Water. The procedures relate to
disclosures which could be made under the Act to
the Ombudsman or South East Water in relation to
activities of certain employees of South East Water.
Three key concepts are improper conduct, corrupt
conduct and detrimental action (see the Act for definitions).
A member of the public or an employee of South East
Water can make a disclosure under the Act if he or she
believes on reasonable grounds that a public officer of
South East Water has engaged in such conduct or action.
Improper conduct or detrimental action by South East Water
or its employees may be disclosed to the following officers:
Protected Disclosure Coordinator
Protected Disclosure Officer
John Robertson
Ann Timoney
Manager, Customer Regulation and Advocacy
Manager, Human Resources
20 Corporate Drive, Heatherton
20 Corporate Drive, Heatherton
Victoria 3202
Victoria 3202
Ph: (03) 9552 3674
Ph: (03) 9552 3683
Fax: (03) 9552 3771
Fax: (03) 9552 3692
Email: [email protected]
Email: [email protected]
11
CORPORATE GOVERNANCE
The Protected Disclosure Officer or Coordinator decides
if the disclosure falls under the Act (i.e. it is a protected
disclosure). Any protected disclosure must be made by
a natural person on reasonable grounds, must relate to
South East Water or its public officer and must allege
improper conduct or detrimental action (section 5 of
the Act). If it is a protected disclosure, the Protected
Disclosure Coordinator will appoint a welfare manager to
look after the general welfare of the Whistleblower. If it is
concluded that the disclosure shows or tends to show that
a public officer has or will engage in improper conduct
or has or will take detrimental action, then the Protected
Disclosure Officer or Coordinator refers the matter to
the Ombudsman as a public interest disclosure. The
Ombudsman then decides if the matter is a public interest
disclosure. If it is, in most cases the Ombudsman will refer
the matter back to South East Water for investigation.
South East Water would then investigate the matter
in accordance with the Act, Ombudsman’s Guidelines
and these procedures. South East Water will appoint an
investigator to collect information and make a report to
the Protected Disclosure Coordinator. The report will
include what South East Water should do to remedy
loss or prevent similar conduct in future. The Protected
Disclosure Coordinator will then report in writing to
the Ombudsman and Whistleblower, and if there was
disclosed conduct they would report in writing to the
Managing Director and the Minister as well, including
reporting on what South East Water should do.
If the matter is not a protected disclosure, South East
Water may still investigate it in line with the normal
complaints management process.
Where a protected disclosure has been made, the
Whistleblower has protections under the Act. Their
identity is kept confidential as far as possible and they are
protected from detrimental action. The Whistleblower
(unless anonymous) will receive regular reports on the
progress of the matter.
Improper conduct or detrimental action by South East
Water or its employees may also be disclosed directly to
the Ombudsman:
12
The Ombudsman Victoria
Level 9, 459 Collins Street
Melbourne Victoria 3000
(DX 210174)
Internet: www.ombudsman.vic.gov.au
Email: [email protected]
Ph: (03) 9613 6222
Toll Free: 1800 806 314
The Act requires any person who receives information
due to the handling or investigation of a protected
disclosure, not to disclose that information except in
certain limited circumstances. Disclosure of information
in breach of this Act is an offence.
There were no disclosures, disclosed matters, requests,
recommendations or investigations described in section
104(b)-(j) of the Act during the year.
Freedom of Information
South East Water is a prescribed authority under the
Freedom of Information Act 1982. During 2009/10,
South East Water received nine (9) requests for access
to documents under the Freedom of Information Act
1982. Access to documents was granted in full in seven
(7) cases. One (1) request for access did not proceed and
one (1) was not finalised as at 30 June 2010.
Requests for access to South East Water documents
under the Freedom of Information Act 1982 are to be
made and addressed to:
John Robertson
Manager, Customer Regulation and Advocacy
South East Water Limited
Locked Bag 1
Heatherton Victoria 3202
Each application must be accompanied by a $23.90
application fee and clearly identify the documents sought.
General enquiries relating to Freedom of Information
can be made by contacting the Manager, Customer
Regulation and Advocacy on telephone (03) 9552 3674
between 8:30am and 4:30pm, Monday to Friday.
Disability Act 2006
Under recent amendments to the Disability Act
2006, South East Water was required to develop and
implement a Disability Plan by February 2009. In addition
to its existing policies in this area, South East Water has
established a Disability Action Group with its own Terms
of Reference, implemented a Disability Action Plan
after employee and community consultation, is actively
participating in a range of public seminars and programs
designed to enhance its awareness and response to
disability issues, and has conducted accessibility audits
at our facilities.
Human Rights
New laws which came into effect on 1 January 2008
required South East Water, as a public authority, to have
human rights in mind when dealing with our customers
and in our decision making. Our contractors too, as
representatives of a public authority, are required to
follow our Charter, which is available on our intranet, to
enhance a culture which supports and respects these
human rights.
Bulk Entitlements
The three metropolitan retail water businesses (Retailers)
hold Bulk Entitlements to the water resources of the Yarra
River, Thomson River, Tarago and Bunyip Rivers and Silver/
Wallaby Creeks (Goulburn River Basin). The entitlements
have been established as a collective ‘pool’. On 27
January 2010 the Retailers received Bulk Entitlements
for savings resultant from their share of funding of the
Northern Victorian Irrigation Renewal Project (NVIRP).
On 25 June 2010, the Victorian Legislative Council
exercised its powers under Section 23 of the Subordinate
Legislation Act 1994 to disallow these bulk entitlements.
The Retailers have reported compliance against these
bulk entitlements while they were in place.
The Retailers have established a Management
Agreement and Management Rules as required by the
bulk entitlement orders.
Compliance with the Combined Diversion Limit under the Retailers’ Bulk Entitlements
REPORTING OBLIGATION
1
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
(a) i. The volume of water taken by the
Retailers from the Thomson River Basin, Yarra
River Basin and Silver and Wallaby Creeks for
the Melbourne Supply System in 2009/10
358,200 ML
N/A
(b) i. Compliance with the long term average
annual bulk entitlement diversion limit
425,900 ML1
555,000 ML
The total annual consumption in 2009/10
350, 700 ML
COMMENT
The compliance value is
N/A because it is dealt
with in part (b).
Full compliance
achieved.
Total consumption of
the three Retailers.
Compliance is assessed using the 15 year rolling average annual diversion
13
CORPORATE GOVERNANCE
Table 1 - Compliance with the Retailers’ Thomson River Bulk Entitlements
REPORTING OBLIGATION
a) i. The volume of water
taken by the Retailers
from the Thomson River
Basin in 2009/10
ii. The Retailers’ share
of flow into Thomson
Reservoir in 2009/10
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
COMMENT
62,400 ML
N/A
The compliance value is N/A because it is
dealt with in part (b).
114,900 ML1
N/A
The compliance value is N/A because the
Retailers can take the remaining inflow
after water has been set aside for the
environment and Southern Rural Water.
Under the Temporary Qualification of Rights
in the Thomson Basin, an additional 14,000
ML of water was attributed to the Retailers’
share of flow into Thomson Reservoir,
compared with the inflow allocation under
the bulk entitlement.
iii. The Retailers’ share
of storage volume in
Thomson Reservoir at
30/06/10
213,600 ML
1,068,100 ML
Full compliance achieved.
(b) i. Compliance with
the long term average
annual bulk entitlement
diversion limit
134,800 ML2
171,800 ML
Full compliance achieved
(c) Any temporary or permanent transfers of this bulk entitlement
Nil
(d) Any temporary or permanent transfer of the bulk entitlement
which may alter the flow in the waterway
Nil
(e) Any amendment to the bulk entitlement
Nil
(f) Any new bulk entitlement granted to the Retailers
Nil
(g) Any failures to comply with any provision of the bulk
entitlement
Nil
(h) Any difficulty experienced in complying with the bulk
entitlement and if so, any remedial action taken or proposed
Nil
1
The Retailers’ share of flow into Thomson Reservoir is calculated as the
total inflow to the reservoir minus Southern Rural Water’s 6 per cent inflow
share minus releases to meet minimum passing flows minus water returned
to the environment on the 2 April 2010 (740 ML, representing a pro rata
14
proportion of the annual 3,000 ML of returned flow, calculated over the
period from 2 April 2010 to 30 June 2010).
2
Compliance is assessed using the 15 year rolling average annual
diversion.
Temporary Qualification of Rights in the Melbourne
System – Thomson Basin
On 30 March 2007, the Minister for Water agreed,
by qualifying the Bulk Entitlement (Thomson River
– Environment) Order 2005, to relax the operating
tolerance placed on achieving minimum environmental
flows downstream of Thomson Dam until Stage 2 water
restrictions are lifted in Melbourne. This contingency
measure continued to enable Melbourne Water to
operate the system more efficiently in 2009/10 to
provide water savings for Melbourne while still meeting
environmental flows.
On 20 December 2007, the Minister for Water qualified
the Bulk Entitlement (Thomson River – Environment)
Order 2005 to give Melbourne access to 10 billion
litres of the environment’s water in Thomson Dam on
31 December 2007 and eight billion litres annually
thereafter. In September 2009, the Minister for Water
further qualified rights to give Melbourne access
to eight billion litres of the environment’s water in
Thomson Dam each year and to reduce passing flows
in the Thomson River to retain up to 10 billion litres of
water in storage each year for Melbourne.
On 2 April 2010, as part of easing water restrictions
in Melbourne, the Victorian Government returned
three billion litres of water to the Thomson River as
environmental flows. This is in addition to the decision
by the Melbourne Retailers in February 2010 to forgo
up to three billion litres per year under the qualification
to mitigate the impacts of low summer flows on
environmental values and downstream diverters.
Compliance with revised environmental flows under
these arrangements was achieved.
Table 2 - Compliance with the Retailers’ Yarra River Bulk Entitlements
REPORTING OBLIGATION
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
COMMENT
(a) i. The volume of water
taken by the Retailers
from the Yarra River Basin
in 2009/10
290,500 ML
N/A
ii. Supply to Western
Water (Primary
Entitlement)
10,100 ML
11,250 ML
iii. The Retailers’ share of
flow into the Yarra Basin
Reservoirs and weirs in
2009/10
350,400 ML1
N/A
iv. The Retailers’ share of
storage volume in the Yarra
Basin Reservoirs at 30/06/10
350,100 ML
725,960 ML
The compliance value for each reservoir is the
capacity of the reservoir.
Full compliance achieved.
(b) i. Compliance with the
long term average annual
bulk entitlement diversion
limit
290,500 ML2
400,000 ML
Full compliance achieved
The compliance value is N/A because it is
dealt with in part (b).
Full compliance achieved.
The compliance value is N/A because the
Retailers can take the remaining inflow after
water has been set aside for the environment.
Under the Temporary Qualification of Rights in
the Yarra Basin, an additional 36,000 ML of water
was attributed to the Retailers’ share of flow into
the Yarra Basin reservoirs, compared with the
inflow allocation under the bulk entitlement.
15
CORPORATE GOVERNANCE
Table 2 - Compliance with the Retailers’ Yarra River Bulk Entitlements
REPORTING OBLIGATION
1
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
COMMENT
(c) Any temporary or permanent transfers of this bulk entitlement
Nil
(d) Any temporary or permanent transfer of the bulk entitlement
which may alter the flow in the waterway
Nil
(e) Any amendment to the bulk entitlement
Nil
(f) Any new bulk entitlement granted to the Retailers
Nil
(g) Any failures to comply with any provision of the bulk
entitlement
Nil
(h) Any difficulty experienced in complying with the bulk
entitlement and if so, any remedial action taken or proposed
Nil
The share of flow into the reservoirs and weirs is calculated as the total inflow
to the reservoirs plus the volume of water harvested at weirs minus releases
from storage to meet minimum environmental flows minus spills at reservoirs
minus the water returned to the environment on the 2 April 2010 (1,730 ML,
Temporary Qualification of Rights in the Melbourne
System – Yarra Basin
On 20 October 2007, the Minister for Water agreed, by
qualifying the Yarra River Environmental Entitlement
2006, to give Melbourne access to 17 billion litres per
year of the environment’s water in the Yarra storages,
and to reduce environmental flows by up to 10 billion
litres each year until the declaration of water shortage
for Melbourne is revoked.
On 10 March 2010, the Minister for Water remade the
qualification after declaring that a water shortage still
16
representing a pro rata proportion of the annual 7,000 ML of returned flow,
calculated over the period from 2 April 2010 to 30 June 2010).
2
Compliance is assessed using the 15 year rolling average annual diversion.
existed in the Melbourne system. The qualification will
remain in force until Melbourne is no longer on Stage 2
water restrictions or a stage of restriction more severe
than Stage 2.
On 2 April 2010, as part of easing water restrictions in
Melbourne, the Melbourne Retailers returned seven
billion litres of water to the Yarra River as environmental
flows.
Compliance with revised environmental flows under
these arrangements was achieved.
Table 3 - Compliance with the Retailers’ Tarago and Bunyip Rivers Bulk Entitlements
REPORTING OBLIGATION
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
(a) i. The volume of
water taken by the
Retailers from the
Tarago River in 2009/10
13,580 ML
N/A
ii. Supply to Gippsland
Water (Primary
Entitlement)
210 ML
275 ML
Full compliance achieved.
iii. Supply to Southern
Rural Water (Primary
Entitlement)
150 ML
2,500 ML
Full compliance achieved.
iv. The volume of water
taken by the Retailers
from the Bunyip River in
2009/10
81 ML
N/A
See below.1
ii. The Retailers’ share
of flow into the Tarago
Reservoir in 2009/10
17,600 ML
N/A
See below.2
The compliance value is N/A because the
Retailers can take the remaining inflow after
water has been set aside for the environment.
iii. The Retailers’ share
of storage volume in
the Tarago Reservoirs at
30/06/10
20,060 ML
N/A
The water in the Retailer’s share of storage
capacity includes water for passing flow
releases and water to supply Primary
Entitlements for Gippsland Water and Southern
Rural Water. The compliance value for each
reservoir is the capacity of the reservoir.
Full compliance achieved.
(b) i. Compliance with the
five year rolling average
annual bulk entitlement
diversion limit for Tarago
River
14,500 ML3
24,950 ML
Full compliance achieved.
This calculation is based on the summation
of the 2009/10 annual supply to Southern
Rural Water and the Melbourne water supply
system and the average of the last five years
for supply to Gippsland Water and diversions
from Crystal Creek weir.
5,560 ML
Full compliance achieved.1
ii. Compliance with the
5 year rolling average
annual bulk entitlement
diversion limit for Bunyip
River
COMMENT
The compliance value is N/A because it is
dealt with in part (b).
17
CORPORATE GOVERNANCE
Table 3 - Compliance with the Retailers’ Tarago and Bunyip Rivers Bulk Entitlements
REPORTING OBLIGATION
COMMENT
(c) Any temporary or permanent transfers of this bulk entitlement
Nil
(d) Any temporary or permanent transfer of the bulk entitlement
which may alter the flow in the waterway
Nil
(e) Any amendment to the bulk entitlement
Nil
(f) Any new bulk entitlement granted to the Retailers
Nil
(g) Any failures to comply with any provision of the bulk entitlement
Nil
(h) Any difficulty experienced in complying with the bulk
entitlement and if so, any remedial action taken or proposed
Nil
1
The Bunyip River was not used for metropolitan supply in the last 5 years.
A small volume has been extracted for use by private diverters from the
Bunyip Main Race and any unused water has been returned to a tributary of
the Bunyip River.
2
The Retailers’ share of flow into Tarago Reservoir is calculated as the total
inflow to the reservoir minus releases to meet minimum environmental flows
minus the environment’s inflow share of 10.3 percentage of the net inflow.
The net inflow is defined as the total Inflow minus releases to meet the
minimum environmental flows.
3
The annual volumes supplied to Southern Rural Water and the Melbourne
water supply system in 2009/10 were used in the compliance calculation as
there is only one year of available record for these diversions.
Table 4 - Compliance with the Metropolitan Retailers’ Silver and Wallaby Creeks Bulk Entitlements
REPORTING OBLIGATION
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
(a) i. The volume of water
taken by the Retailers
from the Silver and
Wallaby Creeks in 2009/10
5,300 ML
N/A
(b) i. Compliance with
the three year total bulk
entitlement diversion limit
7,500 ML
66,000 ML
COMMENT
-
Full compliance achieved.
(c) Any temporary or permanent transfers of this bulk entitlement
Nil
(d) Any temporary or permanent transfer of the bulk entitlement
which may alter the flow in the waterway
Nil
(e) Any amendment to the bulk entitlement
Nil
(f) Any new bulk entitlement granted to the Retailers
The Retailers received Bulk Entitlements
for the Goulburn System for their share of
the water savings resultant from NVIRP on
27 January 2010.
(g) Any failures to comply with any provision of the bulk
entitlement
Nil
(h) Any difficulty experienced in complying with the bulk
entitlement and if so, any remedial action taken or proposed
Nil
18
Table 5 - Compliance with the Retailers’ River Murray Bulk Entitlements
REPORTING OBLIGATION
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
(a) The status of this bulk
entitlement including
the amount of water
transferred by the
Retailers
188 ML1
N/A
(b) Any temporary or
permanent transfers of
this bulk entitlement
-188 ML
COMMENT
On 25 June the Victorian Legislative Council
exercised its powers under Section 23 of the
Subordinate Legislation Act 1994 to disallow
the Retailers River Murray Bulk Entitlements.
Temporary transfer of allocation to Goulburn
System Bulk Entitlement to enable supply to
Melbourne via the Sugarloaf Pipeline.
(c) Any amendment to the bulk entitlement
Nil
(d) Compliance with the bulk entitlement
Yes
(e) Any failures to comply with any provision of the bulk
entitlement
Nil
(f) Any difficulty experienced in complying with the bulk
entitlement and if so, any remedial action taken or proposed
Nil
1
Reported as volume from 27 January to 25 June 2010.
Table 6 - Compliance with the Metropolitan Retailers’ Goulburn System Bulk Entitlements
REPORTING OBLIGATION
(a) The status of this bulk
entitlement including
the amount of water
transferred by the
Retailers
(b) Any temporary or
permanent transfers of
this bulk entitlement
VOLUME
2009/10
BULK ENTITLEMENT
VOLUME
16,340 ML1
+ 188 ML
COMMENT
On 25 June the Victorian Legislative Council
exercised its powers under Section 23 of
the Subordinate Legislation Act 1994 to
disallow the Retailers Goulburn System Bulk
Entitlements.
Temporary transfer of River Murray Bulk
Entitlement allocation to enable supply to
Melbourne via the Sugarloaf Pipeline.
(c) Any amendment to the bulk entitlement
Nil
(d) Compliance with the bulk entitlement
Yes
(e) Any failures to comply with any provision of the bulk
entitlement
Nil
(f) Any difficulty experienced in complying with the bulk
entitlement and if so, any remedial action taken or proposed
Nil
1
Reported as volume from 27 January to 25 June 2010.
19
CORPORATE GOVERNANCE
Key Governance Instruments and Entities
Water
Industry Act
Water
Act
Minister for Water
/ Department of
Sustainability and
Environment
Treasurer of
Victoria (owner/
shareholder)
South East Water
Board
Remuneration
Committee
Service Delivery
Capacity and
Performance
Committee
Finance,
Audit and Risk
Management
Committee
South East Water
Management
Strategic
Framework
Strategic Priorities
Stakeholder
Engagement
20
Strategies
and Plans
Directors’ Biographies
Ms Eleanor Underwood
Dr Geraldine Gentle
BCom, MBA, CPA, FAICD
BEcon (Hons), PhD, GAICD
Chairman
Director
Ms Underwood was previously Deputy Chairman of
South Gippsland Water and a Director of Audit Victoria
and The Water Training Centre. She is a Director of
her own management consultancy firm, specialising
in strategic planning, community and stakeholder
consultation and organisation review.
Dr Gentle is an economist with 35 years experience
in economic analysis and public policy, particularly in
issues relating to industry, trade and natural resources
and environmental management.
She has private sector experience in general
management, accounting and marketing and was a
Senior Academic Planner at RMIT.
Ms Underwood was appointed Chairman of South East
Water Limited in 2005, having been a Director of the
Board since December 2000.
Ms Underwood resigned from the South East Water
Board on 24 March 2010 to take up the role of Chairman
of Melbourne Water effective 1 April 2010.
Mr James Turcato
Dip. Business Studies (Accounting), Grad.Dip.Ed, Grad.
Dip.Computer Ed, Dip. Training & Assessment, CPA,
AIMM, GAICD
Director
Mr Turcato is a business consultant and professional
facilitator with extensive corporate experience in
financial management, strategic financial decision
making, business case development, accounting
systems, budget management and control. His
professional interests include the development of
financial skills for directors.
He is a regular facilitator for the Australian Institute of
Company Directors and has facilitated management
development programs for some of Australia’s leading
organisations including BHP Billiton, SCA Hygiene
Australasia, ANZ, Programmed Group, NEC, Infosys
and Lumley General. Mr Turcato was appointed to the
Board of South East Water Limited in January 2007.
Dr Gentle has held senior positions with the
Commonwealth,
Victorian
and
Queensland
Governments and was Commissioner of the Murray
Darling Basin Commission. She has also worked in the
private sector as a consultant and currently runs her own
consulting business.
Dr Judith Slocombe
BVSc, Post Grad Dip Mgt, MBA, FAICD, FAIM
Director
Dr Slocombe has extensive experience in business,
running her own veterinary diagnostic company and
then moving on to a career in executive management
within a public company. She is currently CEO of
The Alannah and Madeline Foundation and holds
Directorships on numerous Boards.
In 2001, Dr Slocombe was named the Telstra Australian
Business Woman of the Year. In 2003, she was awarded
a Centenary Medal for service to Australian society in
business leadership.
Mr Douglas Shirrefs
BAg and Res Eco, LLB, MAICD
Director
Mr Shirrefs is a barrister and economist who practices
commercial law with a particular interest in competition
and regulatory law.
Before commencing practice as a lawyer, he held
senior positions as a regulatory economist for both
the Commonwealth and Victorian Governments. He
has extensive experience in public policy and public
administration, particularly in relation to the utilities
and infrastructure sectors.
21
CORPORATE GOVERNANCE
As well as his position at South East Water Limited, Mr
Shirrefs is a Director of the Tintern Schools. Mr Shirrefs
was appointed to the Board of South East Water
Limited in August 2005.
and has held senior executive roles with the HydroElectric Commission (Tasmania), Powercor Australia,
AGL, Pacific National, Asciano and Jemena. He is also
a Director of Aurora Energy (Tasmania).
Mr Anthony Beach
He has worked in the international sector with the
Snowy Mountains Engineering Corporation and as a
consultant to the World Bank.
BEng (Civil), MIE Aust, MAICD
Director
Mr Beach has extensive experience in asset intensive
industries such as electricity, gas, water, rail and ports
Executive Biographies
Mr Shaun Cox
BE (Civil), METM, MIE Aust, CP ENG (Civil), MAICD
Managing Director
Mr Cox was appointed as Managing Director of South
East Water Limited in April 2008. Prior to this, he was
Director of Gold Coast Water for 12 years. He has
also held roles with local councils and Government
agencies.
He is the immediate past Chairman of the Water Services
Association of Australia, a member of Engineers
Australia and an Adjunct Professor at the University of
Queensland.
22
Mr Beach was appointed to the Board of South East
Water Limited in January 2007.
Mr Rex Dusting
BE (Civil), MBA, MIE Aust, CP Eng (Civil)
General Manager Infrastructure
Mr Dusting leads the Infrastructure Group, which is
responsible for ensuring our infrastructure (pipes,
pumps and treatment plants) meets the ongoing service
needs of our customers. The Group uses its technical
expertise to review asset performance, develop master
plans and budgets and arrange delivery of programs.
Before joining South East Water Limited in 1996,
Mr Dusting worked for other water authorities and
engineering consultants. His roles included planning,
design, operation and construction of water industry
infrastructure.
Mr Russell Eddington
BBus (Acc), CPA, MBus (InfoTech)
General Manager Corporate Services
and Chief Finance Officer
Mr Eddington’s portfolio encompasses Finance, Risk
and Business Services, Quality, Information Technology,
Human Resources, Major Projects, Company Secretariat
and Procurement.
Following other senior roles in Finance and Customer
Systems, he joined South East Water Limited in 1995.
He was appointed Chief Information Officer in 1998
and appointed to the position of General Manager
Corporate Services in 2004.
Mr Murray Goddard
BA
General Manager Customer and Community
Mr Goddard joined South East Water Limited soon after
its establishment in 1995 and has held various positions
including General Manager Sales and Marketing
and, more recently, General Manager Customer and
Community. His responsibilities include Metering, Billing,
Credit Management, Call Centre, Connections, Property
Development, Recycled Water and Corporate Affairs.
Prior to joining South East Water Limited, Mr Goddard
worked predominantly in the transport industry and for a
number of years managed his own business.
Mr Kevin Hutchings
GAICD
General Manager ‘us’ - Utility Services
Mr Hutchings leads ‘us’ - Utility Services, which oversees
the design, construction, operation and maintenance of
South East Water’s infrastructure, sewer and water pipeline
renewals, water quality and the operation of eight Sewage
Treatment Plants. Additionally, he has responsibility for
new growth area for external works, including Australia
and New Zealand. The formation of ‘us’ - Utility Services
took place in 2005 and is an alliance between South East
Water Limited, Thiess Services and Siemens.
Prior to his appointment at South East Water Limited in
1995, Mr Hutchings was employed for 19 years at Email
Electronics, which specialised in the development of
new hardware and software technologies in both retail
and distribution markets for major oil companies. He
held several senior positions including National Sales,
Service and Manufacturing Manager.
Mr Robert Mittag
BBus (Accounting), CPA, FFin, MEI, MBA
General Manager Business Growth
Mr Mittag joined South East Water Limited in
November 2009 in the role of General Manager
Business Growth with a view to expanding the
Company’s commercial business opportunities.
This includes developing new products and services
to meet the needs of our residential customer base
as well as delivering solutions for our business
customers. Mr Mittag brings with him a wealth of
business development experience, having created new
commercial opportunities that now turn over in excess
of $1 billion annually.
Mr Mittag has extensive experience in marketing,
e-commerce and customer loyalty as well as corporate
finance and mergers and acquisitions from his previous
roles in the retail and investment banking industries.
Dr Hamish Reid
BSc (Hons), PhD
General Manager Strategy
Dr Reid leads the Strategy Group, which provides
strategic direction to South East Water Limited through
the development of the Corporate Plan, the five yearly
price review submission to the Essential Services
Commission and business performance monitoring and
analysis. The Group also leads a number of strategic
areas, including Integrated Water Management, Water
Resource Policy, Environment, Sustainability and
Greenhouse Gas Management.
Dr Reid joined South East Water Limited in 2005, working
for four years as the Manager, Research and Technology.
He has held a range of previous water industry and
Government roles with the likes of Melbourne Water,
Environment Protection Authority Victoria and the New
Zealand Ministry for the Environment.
23
CORPORATE GOVERNANCE
Organisational Chart
Shaun
Cox
Managing
Director
Anthony
Kelly
Legal /Audit
ROBERT
MITTAG
Business
Growth
RUSSELL
EDDINGTON
Corporate
Services
Murray
Goddard
Customer &
Community
Rex
Dusting
Infrastructure
Hamish
Reid
Strategy
KEVIN
HUTCHINGS
‘us’ - Utility
Services
Christine
Cussen
CEO Smart
Water Fund
Andrew
Hagland
Tankering
Services
Chris
Feil
Company
Secretariat &
Procurement
Wayne
McGLONE
Customer
Accounts
Gordon
Logan
Capital &
Reliability
Planning
Greg
Ryan
Environment
& Technology
Charlie
Littlefair
Capital
Works
Kate
O’Keeffe
Innovation
Michael
Quinn
Financial
Controller
Lou
Vacca
Customer
Contact
David
Smith
Product
Quality
Alison
Le Fevre
Strategic
Planning
Phil
Johnson
Commercial
& Technical
Services
Ann
Timoney
Human
Resources
Peter
O’Donoghue
Customer
Systems
Shane
Cowie
Sewer
Systems
Development
Ian
Johnson
Water
Resource
Strategy
Mark
McCORMACK
Operations &
Maintenance
Chris
Liatis
Quality
Hayden
Cock
Corporate
Affairs
Andrew
Chapman
Water Systems
Development
Keith
Johnson
Integrated
Water
Management
Strategy
Jean-Paul
Lambe
Acting Group
Manager
PLuS+
Marcus
Darbyshire
Chief
Information
Officer
Glenn
Goldsmith
Key Customer
Relationships
Ric
Clarke
Sustainable
Water Solutions
Phil
Walsh
Major
Projects
Terry
Dalgleish
Property
Development
Paul
Hansen
Treatment
Systems
Matt
Gould
Network Services
Manager
Utility Services
New Zealand
MARTIN
POOLE
Risk & Business
Services
General Manager
Branch Manager
24
SUSTAINABILITY REPORTING
The following pages detail sustainability information
requested by the Department of Sustainability and
Environment (DSE), which reflects our contribution
towards achieving the Government’s environmental
sustainability commitments.
Additional information regarding South East Water’s
approach to sustainability can be found in our
Sustainability Report, which is made available at
southeastwater.com.au in October each year.
Our Water Our Future
In 2004, the Victorian Government put in place a longterm plan for water, Our Water Our Future, which sets
out 110 actions for sustainable water management
aimed at every sector of the community, seeking to
secure water supplies and sustain growth over the
next 50 years.
Details of South East Water’s commitment to Our Water
Our Future are outlined over the following pages. This
includes programs tailored to residential and industrial
customers, work undertaken with local government,
community education and water awareness campaigns,
and water recycling projects.
Residential Water Conservation Programs
Showerhead Exchange Program
The South East Water Showerhead Exchange Program
is available to residential and non-residential customers.
Our target for the 2009/10 financial year was 37,500
showerheads and this was surpassed with 37,677
showerheads exchanged.
A variety of exchange methods were used including:
• shopping centre kiosks;
• partnerships with local councils;
• partnerships with Victorian Energy Efficiency Target
(VEET) scheme service providers;
• promotion via other programs including the Toilet
Replacement Program, waterMAP, the Department
of Human Services (DHS) Waterwise Program and the
Water and Energy Saver Program; and
• Bunnings Warehouse.
Based on anticipated savings of 10,900 litres of water
per year per showerhead, the Showerhead Exchange
Program will have achieved savings of around 411 million
litres in 2009/10.
25
SUSTAINABILITY REPORTING
Toilet Replacement Program
The South East Water Toilet Replacement Program
offers customers the opportunity to replace their single
flush toilets with four-star (4.5/3 litre) dual-flush toilets
at a reduced price and with the assistance of a licensed
plumber. A dual-flush toilet rebate for the Water Smart
Gardens and Homes Rebates Scheme is also offered
with this Program.
The Toilet Replacement Program commenced in August
2009 with a total of 2,788 toilet installations completed
at 30 June 2010. Based on an expected saving of 37,000
litres per year per toilet, the conversion to four-star
WELS* rated dual-flush toilets will achieve savings of
around 103 million litres of water per year.
Water and Energy Saver Program
The South East Water ‘Water and Energy Saver Program’
is a water audit and retrofit program designed to identify
and implement water saving initiatives within residential
households through a combination of education and
retrofitting.
The Program commenced on 3 May 2010, targeting
households in some of South East Water’s high water
pumping zones. With subsidies provided by South East
*Water Efficiency Labelling Scheme
26
Water and rebates granted via the Victorian Government’s
Water Smart Gardens and Homes Rebates Scheme,
eligible customers paid as little as $29 for the audit and
retrofit service. A total of 320 customers participated in
the Program by 30 June 2010.
This Program is expected to reduce household
consumption by 30,000 litres per household per year,
with water savings of around 9.6 million litres achieved
per year. Energy savings due to reduced water volumes
being pumped into the high water zone are also
expected as a result of this Program.
Waterwise Program
DHS offers a free water conservation audit and retrofit
program called the DHS Waterwise Program. In 2009/10,
South East Water delivered the program on behalf of
DHS to 1,570 selected concession customers who were
offered $500 worth of services at no charge, with the aim
of reducing their water usage. This Program is expected
to reduce household consumption by 30,000 litres per
household per year. Potential water savings equate to
around 47 million litres per year.
High Residential Users Program
South East Water proactively contacted 94 high water
using properties (annual consumption >1 million litres per
year) during 2009/10. The primary reason for excessive
water usage at these properties was incorrect irrigation
settings (77 per cent), followed by leaks (11 per cent) and
poor water saving habits.
By working with our high water use customers on a oneon-one basis, we can provide water conservation advice
and tangible data regarding their irrigation patterns. As
a result, we have seen a reduction in water use from 112
million litres to 56 million litres for these 94 properties.
This is equivalent to a 50 per cent reduction in overall
water usage.
Industry Programs including Water
Conservation, Recycling and Waste
Minimisation
Saving Water Saving Lives
As part of South East Water’s innovative Brainwaves Cup
Program for employees, a project called ‘Saving Water,
Saving Lives’ was developed. This project involves
the capture and storage of discarded reverse osmosis
process water as a result of dialysis treatment.
The project commenced at Southern Health’s
Cranbourne Integrated Care Centre with the installation
of a 50,000 litre tank. The City of Casey collects the
process water in the tank and the water is utilised for dust
suppression and irrigation purposes. South East Water
also installed tanks at the properties of 11 customers
using dialysis systems in their homes. These customers
now use the captured process water for toilet flushing,
washing machines and garden irrigation.
South East Water Assist
waterMAP Program
South East Water Assist is a water appliance retrofit
program designed to assist customers experiencing
financial difficulties to reduce water consumption and
therefore the size of their water bills.
Business customers using 10 million litres or more of water
per year are required to prepare water Management
Action Plans (waterMAP). South East Water has 478 active
customers in our waterMAP Program and customers take
advantage of our innovative online system to register
for the program, lodge their Plans and report on their
progress each year.
Over the course of 2009/10, 602 customers received
free plumbing services, including the replacement of
tap washers and exchanging single-flush toilets for dualflush toilets. Customers eligible for this Program also
receive assistance in relation to paying their bill.
Our waterMap customers continue to deliver the highest
proportion of water consumption savings compared
to other customer segments across South East Water,
totalling around 30 per cent since the inception of the
Program in 2006/07.
In 2009/10, we saw a significant increase in the number
of businesses delivering stormwater initiatives,
particularly in the irrigation sectors. Customers have
27
SUSTAINABILITY REPORTING
installed considerable infrastructure to collect, treat
and deliver stormwater to minimise drinking water use,
enabling them to continue operating effectively during
water restrictions.
To highlight the initiatives being undertaken by our
waterMAP customers, case studies were profiled in our
Aquabiz magazine, with three editions published in
2009/10. These are available at southeastwater.com.au
Funding Support for waterMAP Customers
In 2009/10, South East Water offered three funding
programs to waterMAP customers. The funding
programs aim to assist with the implementation of
agreed water conservation projects from customer
waterMAPs. Funds were offered on a ‘dollar-for-dollar’
basis with customers, and included:
• Business Water Grants (BWG) – funding from the BWG
is provided for larger water efficiency projects (up to
$100,000 funding for individual projects) which must
meet strict criteria to be eligible; and
• Water Efficiency Fund (WEF) – funding from the WEF
was made available to help customers implement
smaller water efficiency projects such as the installation
of water efficient appliances, toilets and rainwater tanks.
A total of 62 customers took advantage of this funding
with 154 million litres of water savings achieved;
• Feasibility Fund (FF) - funding from the FF enables
customers to gain financial support to determine the
feasibility of potential large water saving projects.
Twelve applications were approved and 30.2 million
litres of water savings identified through the BWG
and FF.
Support 155 Business Program
Schools’ Water Efficiency Project
The Support 155 Business Program supports the
Victorian Government campaign target encouraging
Melburnians to limit their water use to 155 litres of
water per person, per day. The Program was targeted
at businesses using less than 10 million litres of water
per year.
Hydroshare is an innovative web-based reporting system
that enables major customers to further their knowledge
and understanding of their water consumption. The
Schools’ Water Efficiency Project aims to work with
schools already using Hyrdroshare (or an equivalent unit)
to reduce water consumption. There are 131 schools in
South East Water’s service area with a smart meter (38
have Hydroshare).
A total of 2,174 businesses registered in the
voluntary Program and 1,137 customers benefited
from our complementary onsite audits and retrofits
with a licensed plumber. In addition, 15 voluntary
waterMAPs were prepared by customers participating
in the Program.
To increase public awareness of the water savings made by
the non-residential sector, newspaper advertorials were
placed in metropolitan media and high profile signage
was installed at 36 business and local government sites
to promote the Support 155 Business Program. Signage
included decals on trucks, police stations and a number
of waterMAP customer sites.
From January to 30 June 2010, South East Water:
• arranged for a plumber to carry out site visits at 16
schools with a significant base flow (>2,000 litres per
day) and completed plumbing work at six of these
schools;
• carried out onsite visits resulting in collective water
savings of 83.2 million litres and $173,218.26 per
annum;
• delivered professional development to around 40
schools; and
• connected four new schools to Hydroshare.
28
Fire Services Program
The aim of the Fire Services Program is to reduce nonrevenue water which is wasted through the testing of
fire sprinkler systems and maintenance alterations. The
Program has predominantly funded system assessments
and basic solutions to reduce water use during fire
sprinkler testing as well as addressing leakages and
unauthorised connections.
In 2009/10, South East Water completed 25 assessments
saving 24.7 million litres per year of non-revenue water,
with an average water saving of 62 per cent. A further
44.5 million litres of non-revenue water was saved via the
identification of leakages and unauthorised use of fire
services.
Local Government Water Conservation Programs
Strategic relationships with local government continue
to be strengthened by our ongoing commitment to
work cooperatively and collaboratively with councils
within our service area. South East Water participates in
a number of strategic groups and our Managing Director
maintains regular contact with local Government CEOs.
In 2009/10, South East Water successfully:
• provided input into local Government strategic
documents;
• assisted with the coordination of volunteering
opportunities such as tree planting;
• provided information about water restrictions;
• delivered information workshops including best
practice for the management of swimming pools;
• provided water consumption data for councils and
their communities; and
• provided ongoing positive engagement and liaison.
In 2009/10, South East Water played a pivotal role in
coordinating a large funding application on behalf of local
Government to the Department of Environment, Water
and Heritage, for consideration in their Stormwater
Harvesting and Reuse Fund. The application, titled
Melbourne Water Security Through Stormwater
Harvesting (Melbourne WaSSH), represents 29 projects
across 15 municipalities, including councils in Yarra Valley
Water’s service area. Treatment and reuse will supply
570 million litres of fit-for-purpose water annually.
Community Education and Water Awareness
Campaigns
Our Water Our Future behavioural change programs
have been running in metropolitan Melbourne since
2003. These include mainstream communications (Target
155); water restrictions advertising; Water – Learn it! Live
it! (an education accreditation program for primary and
secondary schools); and Water Saver Garden Centres
(an accreditation program for nurseries and gardening
centres).
The Our Water Our Future behavioural change programs
have made a significant difference to water conservation
in Melbourne - water use is 40 per cent lower than the
1990s average. This has exceeded the water conservation
target set in the Central Region Sustainable Water
Strategy – Action to 2055.
In 2009/10, total per capita consumption was 231 litres
per person, per day, while total residential per capita
water consumption was 155 litres per person, per day
(compared to 159 litres in 2008/09). South East Water
contributed $2.1 million to the behavioural change
programs in 2009/10.
Locally, South East Water’s Education Team has:
• run water education activities for students at 64
schools and 31 early childhood centres;
• hosted 1,404 people on tours of the education centre
at the Mount Martha Sewage Treatment Plant;
29
SUSTAINABILITY REPORTING
• trained 101 teachers to educate students about water
conservation through professional development
sessions;
• encouraged water conservation behaviour at 93
schools within our service area, who are committed
to the Water – Learn it! Live it! accreditation program
for schools; and
• engaged 14 community groups in community
presentations and hosted stands at 10 community
events to promote water conservation.
Water Recycling Projects
Boneo Recycling Scheme
In December 2009, we completed Stage 1 of the Boneo
Recycling Scheme which involved the upgrade of the
Boneo Sewage Treatment Plant to Class A standard.
Commissioning issues with the Sewage Treatment Plant
are currently being addressed by UGL, the contractor,
and South East Water. Stage 1 has a planned demand
of about 1.5 billion litres per year to market gardens,
schools and council open spaces. Stage 2 relies on
Melbourne Water’s Eastern Treatment Plant upgrade by
2012 for a total supply of about 3 billion litres per year.
Frankston Recycled Water Project
Infrastructure provided by South East Water for the
Frankston Recycled Water Project was completed
during the year. Irrigation systems and assets installed
by the council in mid February at Lloyd Park, Ballam
Park and Jubilee Park were ready, with water being
supplied, from early March 2010. An official launch was
held at Jubilee Park on 19 May 2010, with a number
of local and state Government officials present. This
Project is expected to ultimately use up to 59 million
litres per year of recycled water (70 per cent of which
is drinking water substitution), which would otherwise
be discharged at the South Eastern Outfall, upon
completion of Melbourne Water’s Eastern Treatment
Plant upgrade by 2012.
2009/10 is now around 2,650 customers. Additionally,
around 1,280 properties are already connected but
awaiting supply of recycled water from the future
upgraded Eastern Treatment Plant and/or Pakenham
Recycled Water Treatment Plant. These customers are
now being serviced by drinking water temporarily interconnected to the recycled water reticulation system.
Officer-Pakenham
Design and construction for the upgrade of the Pakenham
Sewage Treatment Plant to Class A recycled water
continued in 2009/10. The future Class A Recycled Water
Treatment Plant will supply the dual-pipe residential
schemes in the Officer-Pakenham area. The scheduled
date for completion is the end of August 2010, with
supply to commence by mid December 2010.
Somers Recycled Water Project
Recycling in Cranbourne-Lyndhurst and Sandhurst
The Somers Recycled Water Project involves upgrading
the existing infrastructure at the Somers Sewage
Treatment Plant to accommodate the needs of a
growing population, and constructing a new Recycled
Water Treatment Plant on the same site to produce
Class A recycled water. On completion, the recycled
water will be supplied to BlueScope Steel at its Hastings
plant, substituting around 660 million litres of drinking
water per year and achieving a reduction in the volume
of treated water discharged to Western Port by around
280 million litres per year.
We commenced supply of Class A recycled water to the
Collison Road Precinct, another residential estate in the
Cranbourne-Lyndhurst and Sandhurst area, via dual-pipe
reticulation. The number of properties connected to and
supplied with residential dual-pipe supply for the year
In April 2010, work commenced to upgrade the
Somers Sewage Treatment Plant and to construct the
new Recycled Water Treatment Plant and associated
pipelines. The Project is scheduled for completion in
late 2011.
30
Mornington Racecourse and Shire Reserves Scheme
Regional Catchment Management Strategy
Design and construction of the supply infrastructure for
the Mornington Racecourse and Shire Reserves Scheme
continued in 2009/10. About 190 million litres per year of
Class C recycled water is expected to be used. Recycled
water pipelines will service Mornington Racecourse and
two Mornington Peninsula Shire Council open space
areas.
South East Water is a founding stakeholder of the Port
Phillip and Western Port Catchment Management
Authority (PPWCMA) “Living Links” and “Spirit of the
Bunyip” catchment programs. These programs seek
to enhance landscapes, livelihoods and lifestyles by
increasing the uptake of sustainable catchment practices
at property, local area and catchment scale.
Revitalising Central Dandenong Project
“Spirit of the Bunyip” encompasses 136,000 hectares
of land north of Western Port between Berwick and
Drouin and takes in the Bunyip River and Cardinia Creek
catchments. Its goal is to reduce the amount of sediment
that flows into Western Port to prevent degradation of
its coastal and marine environments.
Negotiations with VicUrban and the City of Greater
Dandenong continued in 2009/10 on a concept and
commercial agreement for the supply of recycled water
to the Revitalising Central Dandenong Project.
Troups Creek Stormwater Harvesting Project
The Troups Creek Stormwater Harvesting Project has
highlighted a major legislative hurdle with respect to
the water diversion approval process. Waterways within
the south-east region are capped and the definition of
water for diversion unintentionally includes stormwater.
This legislative barrier effectively bans stormwater
harvesting from waterways. South East Water has been
working with DSE for some time to resolve this issue and
a proposal is now with the Minister for Water. Despite
this delay, construction works are planned to commence
in October 2010.
“Living Links” is a large-scale environmental
improvement program in Melbourne’s south-east which
involves municipal councils, government agencies and
community organisations. It is building collaboration
to establish a world-class ecosystem in the urbanised
and industrialised landscapes between the coast of
Port Phillip Bay and the foothills of the Dandenongs.
It does this by identifying the important natural assets
in the region and developing a collaborative Master
Plan to protect and connect these landscapes to make
them more functional habitats for wildlife and more
accessible areas for people to enjoy.
In 2009/10, South East Water contributed $10,000 to both
the “Spirit of the Bunyip” and “Living Links” programs
and we continued to provide senior representation on
the overarching Coordinating Committee.
In addition, South East Water provided important data
to the Coordinating Committee to help inform the
programs’ development. This included data in relation
to biodiversity on our own properties as well as major
environmental projects within our service region, most
notably our Sewerage Backlog Program. In addition,
we assisted in providing information on the progress
of actions within the Regional Catchment Strategy,
including improvements in sewerage infrastructure
programs and revegetation activities.
More broadly, South East Water aligns and delivers
activities related to water use and conservation, including
community education and water saving activities, to
contribute to the achievement of Regional Catchment
Strategy targets.
31
SUSTAINABILITY REPORTING
Victorian Biodiversity Strategy
South East Water recognises that the wellbeing of our
community is largely dependent upon the health of our
environment and natural ecosystems.
In 2009/10, South East Water completed two major
biodiversity projects at the Mount Martha Sewage
Treatment Plant which saw the establishment of
approximately 93,000 trees. These were the Southern
Paddock and Biodiversity Enhancement Projects,
outlined below.
Southern Paddock Project
This Project in partnership with Greening Australia,
focused on the 12 hectare Southern Paddock that
extends between the intersection of Tuerong Creek
and the Mornington Freeway. This site is particularly
interesting because of the application of biosolids
to the surface soil, which not only increases fertility,
but demonstrates a practical use for biosolids (which
were previously stock-piled). Around 15,000 trees were
planted on the site by South East Water volunteers. The
Project was completed in August 2009.
Biodiversity Enhancement Project
This Project, in partnership with Australian Ecosystems,
focused on areas surrounding the ornamental lake to
the north-east of the Mount Martha Sewage Treatment
Plant. A total of 78,000 trees were planted over a three
year period on this site, with the final 15,000 plants
going in the ground in June 2010. A robust maintenance
program will now follow to ensure the plantings become
well established.
Threatened Species
South East Water did not undertake any monitoring
of threatened species in 2009/10. Historically, we have
undertaken biodiversity site assessments to identify
significant flora, fauna and ecological ecosystems and
developed active management plans to protect and
enhance sensitive ecosystems.
Pest Control
South East Water controls pest plants and animals on
all of our major infrastructure sites, including the sites of
Sewage Treatment Plants. The program aims to reduce
the number of introduced species while improving the
32
condition of indigenous flora and fauna. This is achieved
through weed management, pest animal control and
the revegetation of indigenous species.
Victorian River Health Strategy / Statement
of Obligations (River Health)
South East Water implements waterway quality
improvement initiatives to reduce impacts on waterway
health that arise both directly from our activities and
indirectly by our customers. In 2009/10, key waterway
quality improvement initiatives South East Water
undertook included the following.
Minimising the risk of sewer spills through:
• implementing actions of our Enforceable Undertaking
with the Environment Protection Authority (EPA);
• a sewer renewal program;
• reducing blockages due to fats, oils or grease; and
• installing Blok-Aid devices, which provide an early
warning notification to South East Water when there
is a sewer blockage.
Minimising treated discharges from Sewage Treatment
Plants by:
• reviewing performance variability of the Sewage
Treatment Plants and investigating the costs and
benefits of achieving an effluent quality greater than
EPA requirements;
• continually expanding reuse schemes and winter
storage for treated sewage, including implementing
dual-pipe systems in new residential estates;
• diverting remaining discharges to the ocean outfall
at Boags Rocks rather than inland waterways or
Western Port;
• upgrading recycled water from Class C to Class A at
key Sewage Treatment Plants;
• implementing an ISO 22000-based sewage quality
management system;
• leading a Cleaner Production Program that targets
industrial discharges of salts, colour and metals; and
• assessing the viability of large scale proposals for
using recycled water following the upgrade of the
Eastern Treatment Plant.
Managing our land through:
• river and creek restoration;
• encouraging sustainable development when selling
land; and
• continual improvement through our Environmental
Management System.
Addressing customer or indirect impacts by:
• undertaking a Backlog Sewerage Program to improve
sewerage services;
• offering rebates for developers to install rainwater
tanks connected to toilets and laundries; and
• installing the Rivershield system at the Prahran
Main Drain. This device diverts dry-weather flows of
stormwater into the sewerage network rather than
allowing contaminated stormwater to enter the river
system.
Demonstrating leadership and influence by:
• engaging and partnering with other stakeholders;
• organising community
collection events; and
revegetation
and
litter
• engaging in research and development.
Corporate Water Consumption
The volume of metered corporate water consumption for
the 2009/10 year at South East Water’s Heatherton Office
was 2248 kilolitres*. The volume of metered office based
water consumed per full time equivalent employees
(FTE) was 3.89 kilolitres. The volume of metered water
consumed per unit of office space was 320 litres per m2.
*Includes water used in the employee cafeteria
Greenhouse Gas Emissions
South East Water’s net greenhouse gas (GHG) emissions
for 2009/10 are higher than the target identified in our
Corporate Plan. When using the same methodology
as for 2008/09, the net GHG emissions were 25,000
T CO2-e, resulting in 3,000 T CO2-e above the target.
This result is due to a change in strategic approach to the
purchase of carbon offsets. The 2009/10 target was set
assuming sufficient offsets would be purchased to meet
the target, however, offset purchases were capped at
2,000 T CO2-e to allow investment in resource efficiency
initiatives. In addition, the mini-hydro scheme was not
operating for six months of the year as part of a planned
offline maintenance period, reducing our offsets by a
further 700 T CO2-e.
The methodology developed during 2009/10 provides
for more accurate and robust accounting of GHG
emissions. This includes improved accounting of fugitive
emissions from our sewage treatment plants and, for the
first time, estimates of fugitive emissions from the sewer
network. The methodology also accounts for electricity
consumption from previously non-reported sources
including the Inkerman Wastewater Treatment Plant,
Backlog sewage system pumps and the Dandenong
South office.
Due to these changes, South East Water’s net emissions
for 2009/10 should be reported as 39,730 T CO2-e,
however the previous methodology has been used to
allow a comparison with previous years. Future KPIs
will be adjusted to ensure a consistent performance
benchmark.
Over the next few years the water industry will move
toward a more comprehensive evidence-based
accounting system for GHG emissions. This move is
being led by the Water Services Association of Australia
(WSAA). South East Water is the first water utility in
Australia to trial the proposed methodology, which
will provide greater accuracy in the measurement of
fugitive emissions.
KPI
Target
Actual
GHG
22 000
(net tonnes CO2)
25 000
39 730#
Total energy purchased
(GJ per ML water supplied)
0.92
0.83
# Number is as reported using the new WSAA based
methodology.
33
MAJOR NON RESIDENTIAL WATER USERS
CUSTOMER BY VOLUME RANGE
VOLUMETRIC RANGE – ML PER YEAR
NO OF CUSTOMERS
Equal to or greater than 50 ML and less than 100 ML
32
Equal to or greater than 100 ML and less than 200 ML
7
Equal to or greater than 200 ML and less than 300 ML
6
Equal to or greater than 300 ML and less than 400 ML
1
Equal to or greater than 400 ML and less than 500 ML
1
Equal to or greater than 500 ML and less than 750 ML
1
Equal to or greater than 750 ML and less than 1000 ML
0
Greater than 1000 ML
0
Total number of customers
48
NAMES OF MAJOR CUSTOMERS AND THEIR PARTICIPATION IN WATER CONSERVATION PROGRAMS
NAME OF CUSTOMER
INFORMATION AS TO CUSTOMER’S PARTICIPATION
IN WATER CONSERVATION PROGRAM
Alfred Health (The Alfred)
Yes, implementing water management plan
Aluminium Profiles Australia Limited
Yes, implementing water management plan
Amcor Packaging (Australia) Pty Ltd
Yes, implementing water management plan
AMP Capital Investors Limited (Knox City Shopping Centre)
Yes, implementing water management plan
AMP Capital Investors Limited (Knox Towerpoint Ozone)
Yes, implementing water management plan
Bakels-LeSaffre Yeast Pty Ltd
Yes, implementing water management plan
Bekaert Australia Pty Ltd
Yes, implementing water management plan
BlueScope Steel Limited
Yes, implementing water management plan
BOC Limited
Yes, implementing water management plan
Boral Australia Gypsum Limited
Yes, implementing water management plan
Cadbury Pty Ltd
Yes, implementing water management plan
Castricum Brothers Pty Ltd
Yes, implementing water management plan
CCA Bayswater Pty Ltd Yes, implementing water management plan
Coca-Cola Amatil (Australia) Pty Ltd (Moorabbin)
Yes, implementing water management plan
Crown Melbourne Limited
Yes, implementing water management plan
Defence Corp Support South Victoria (Cerberus)
Yes, implementing water management plan
ESSO Australia Limited
Yes, implementing water management plan
Farm Pride Foods Limited
Yes, implementing water management plan
34
NAME OF CUSTOMER
INFORMATION AS TO CUSTOMER’S PARTICIPATION
IN WATER CONSERVATION PROGRAM
Fletcher Insulation
Yes, implementing water management plan
G & K O’Connor Pty Ltd
Yes, implementing water management plan
GM Holden Limited
Yes, implementing water management plan
GPT RE Limited
Yes, implementing water management plan
Inghams Enterprises Pty Ltd
Yes, implementing water management plan
International Flavours and Fragrances Pty Ltd
Yes, implementing water management plan
Kraft Foods Limited
Yes, implementing water management plan
Melbourne Live Pty Ltd
Yes, implementing water management plan
Melbourne Sports and Aquatic Centre
Yes, implementing water management plan
National Foods Milk Limited - Vic
Yes, implementing water management plan
Nestle Company Australia Limited
Yes, implementing water management plan
Nissan Motor Company Australia
Yes, implementing water management plan
Pacifica Group Limited
Yes, implementing water management plan
Pauls Victoria Limited
Yes, implementing water management plan
Peninsula Health ( Frankston Hospital)
Yes, implementing water management plan
Perpetual Trustee Company Ltd
Yes, implementing water management plan
Princes Laundry Services Pty Ltd
Yes, implementing water management plan
Robert Bosch (Australia) Pty Ltd
Yes, implementing water management plan
Saurin Investments Pty Ltd
Yes, implementing water management plan
SBI/SBF Pty Ltd
Yes, implementing water management plan
Southern Health (Dandenong Hospital)
Yes, implementing water management plan
Southern Health (Monash Medical Centre Clayton)
Yes, implementing water management plan
Symex Holdings Limited
Yes, implementing water management plan
The Langham Melbourne
Yes, implementing water management plan
Venture DMG Pty Ltd
Yes, implementing water management plan
Victorian Arts Centre Trust (Shared with National Gallery of Victoria)
Yes, implementing water management plan
Visy Packaging Pty Ltd
Yes, implementing water management plan
Wagstaff Cranbourne Pty Ltd Yes, implementing water management plan
Westfield Shopping Centre Management Co (Vic) Pty Ltd,
Fountain Gate Trust
Yes, implementing water management plan
Westfield Shopping Centre Management Co (Vic) Pty Ltd,
Southland Shopping Centre Yes, implementing water management plan
35
COMPANY PERFORMANCE AGAINST CORPORATE KPIS
Review of Corporate Plan KPIs
At South East Water, our Strategic Framework
provides a robust foundation to develop, implement
and monitor our strategic direction as outlined in the
Corporate Plan.
Key Performance Indicators (KPIs) are developed
to measure and track the delivery of our Strategic
Priorities and these are reported monthly to the Board
as part of a comprehensive business performance
monitoring process.
The Board encourages a healthy culture of setting
stretch targets in each of our KPIs so that the
organisation is aspiring towards exceeding industry
benchmarks in key areas. This at times results in
targets not being achieved. However, this approach
is fundamental to our pursuit of innovation, leadership
and continuous improvement.
A comprehensive review of our KPIs was undertaken
in 2009/10 as part of the development of the 20102013 Corporate Plan. This review sought to identify
Strategic KPIs that would provide integrated measures
for assessing business performance against the six
Strategic Priorities outlined in our Corporate Plan. The
Strategic KPIs are supported by a range of Diagnostic
KPIs that allow for more targeted monitoring of
business performance.
The review also focused on:
• clarifying
underlying
business
performance
objectives. For example, the water industry
traditionally reports sewer failures as blockages
or spills per 100 kilometres of sewer. However, the
36
underlying objective is actually to minimise customer
disruption and waterway impacts. Therefore, our
KPIs were amended to reflect the number of spills
to customer properties and volumes of spills to
waterways; and
• seeking more aggressive KPI targets to drive business
performance. This includes setting targets that exceed
current performance levels – even though this may
result in a greater number of targets not being met.
This robust annual review of strategic KPIs is now
embedded as part of South East Water’s Strategic
Planning Framework. This ensures that KPIs remain
consistent with all our Strategic Priorities, and
underlying Strategies, Plans, programs and budgets.
The Framework is supported with strong processes
to quantify the appropriate targets and provide an
integrated picture of the diverse factors influencing
performance.
Benchmarking studies in 2009/10 ranked South East
Water a leader within the water industry. Additionally,
exceptional results were achieved in a number of key
areas, such as achieving the lowest per capita water
consumption of the three Melbourne metropolitan
water retailers. Our strong environmental program
has also yielded great results with a reduction in the
volume of sewage spilled to waterways and ammonia
loads to waterways.
A summarised commentary of South East Water’s
performance against our Strategic KPIs is provided on
the following pages.
CORPORATE PLAN STRATEGIC KPIS
OUR CUSTOMERS & COMMUNITY
2009 AS BASE
Customer satisfaction (%)
2007/08
ACTUAL
2008/09
ACTUAL
2009/10
ACTUAL
2009/10
TARGET
88
85
80
88
Reputation survey (residential customers)
(index score out of 100)
-
59.1
55.2
64
Reputation survey (commercial/industrial customers)
(index score out of 100)
-
61.8
70
67
Account calls answered within 30 seconds (%)
96.9
96.5
94.9
93
Fault calls answered within 30 seconds (%)
96.9
97.1
97.2
96
Complaints to EWOV* (per 1,000 customers)
0.15
0.19
0.22
0.164
Response times to customer account and fault calls
continue to exceed targets and industry benchmarks.
The decline in the reputation score with residential
customers, and customer satisfaction levels, reflects the
fact that customers are concerned with the rising price
of water at a time when supply is being restricted. The
increased reputation score from commercial/industrial
customers can be attributed to the strengthening of
our approach to key customer relationships.
*Energy and Water Ombudsman (Victoria)
37
CORPORATE PLAN STRATEGIC KPIS
SERVICE DELIVERY
2009 AS BASE
2007/08
ACTUAL
2008/09
ACTUAL
2009/10
ACTUAL
2009/10
TARGET
Compliance with drinking water quality regulations
(the Safe Drinking Water Regulations include E.coli,
chemical and turbidity parameters) (%)
100
100
100
100
Drinking water quality complaints (per 1,000 customers)
1.8
1.3
1.3
2.8
Unmet customer demand due to out of specification
(health criteria) recycled water (ML per annum)
-
-
0
0
Recycled water quality complaints (per 1,000 customers)
-
-
1.9
-
24.7
25.5
22.9
25.3
23
20
17
22
n/a
3 560
3 478
4 300
Ammonia loads to waterways (tonnes per annum)
55.6
50.6
7.46
15
Treatment Plant compliance (%)
100
100
100
100
27 153
24 488
25 000
22 000
0.79
0.85
0.83
0.92
Customer time off supply (minutes)
Spills within buildings from sewerage system
(spills per annum)
Total volume of sewage spilled
to waterways due to sewer system failure (kL per annum)
Greenhouse Gas Emissions (net tonnes)
Total energy purchased (GJ per ML of water supply)
South East Water’s rigorous approach to maintaining
high standards of water quality is reflected in the
continuous achievement of low customer complaints.
In 2009/10, our Net GHG emissions increased relative to
2008/09. There are three factors affecting this outcome:
As noted earlier, our strong environmental program has
resulted in a reduction in sewage spilled to waterways
and ammonia loads to waterways.
• improved accounting for emissions, coupled with
real changes in Scope 2 emissions; and
38
• a change in reporting methodology;
• a reduction in the amount of offsets purchased.
BUSINESS GROWTH
2009 AS BASE
2007/08
ACTUAL
2008/09
ACTUAL
2009/10
ACTUAL
2009/10
TARGET
26.9
36.1
34.5
32.4
2007/08
ACTUAL
2008/09
ACTUAL
2009/10
ACTUAL
2009/10
TARGET
Total per capita consumption (l/p/d)
258
246
231
234
Residential per capita consumption (l/p/d)
168
159
155
155
4 024
4 710
4 309
5 500
5
200
272
200
Non regulated revenue ($M)
Our non-regulated revenue exceeded the target due
to greater than expected revenue from external works,
consulting and tankering services.
INTEGRATED WATER MANAGEMENT
2009 AS BASE
Total water recycled (ML)
Total potable substitution (ML)
South East Water has continued to implement and
promote innovative water saving initiatives to both
our residential and commercial customers. This is
highlighted by the achievement of key targets over
the past three years, and the lowest per capita water
consumption levels of the three metropolitan water
retailers.
Forecast recycling volumes were not met in 2009/10
due to:
• issues associated with commissioning the treatment
plant of a major contributing project which reduced
actual recycling volumes by around 1,100 ML;
• delays in finalising two smaller recycling projects
reduced actual recycling volumes by a further 200
ML; and
• cool/wet summer conditions
demand for recycled water.
reduced
overall
Notwithstanding these factors, South East Water’s
recycling projects contributed to the successful
achievement of the joint metropolitan target of 20 per
cent recycling by 2010 for the fourth consecutive year
(21.4 per cent). In addition, the total potable substitution
target was exceeded by a considerable amount.
39
CORPORATE PLAN STRATEGIC KPIS
ORGANISATIONAL CAPABILITY
2009 AS BASE
2007/08
ACTUAL
2008/09
ACTUAL
2009/10
ACTUAL
2009/10
TARGET
Lost Time Injury Frequency Rate
0.60
0.56
1.37
0
-
60/39/34
Operating profit before tax ($M)
58.7
63.4
95.4
100.8
Gearing (%)
40.2
43
32.2
45.5
3.4
2.8
3.2
3.3
Culture survey (Humanistic Encouraging, Achievement
and Self Actualisation behaviours)
(% improvement in survey outcomes)
FFO Net Interest Cover (Times)
Three contractors working for South East Water
suffered Lost Time Injuries in 2009/10.
South East Water’s operating profit before tax was
slightly below budget but well within management’s
expectations after taking into account variations in
ESC financial planning assumptions, our strong cost
control culture, lower interest rates and other gains.
In the future, stronger planning assumptions will
be used particularly when projecting income from
developer charges.
52/40/33
(66/43/37)
Gearing was affected by a State Government
requirement to adopt fair value accounting for
infrastructure assets as at 30 June 2010. The timing of
this requirement was not known at the time the target
was set. Financial projections and targeted gearing
levels have been reset to accommodate the impact of
this valuation methodology.
The cash flow target was set in error using a profit and
loss based metric. The correct cash flow based target
was 3.1 times. This compares favourably to the actual
result of 3.2 times. Financial projections for 2010/13
have been based on the cash flow based measure.
INFLUENCE & LEADERSHIP
2009 AS BASE
2007/08
ACTUAL
2008/09
ACTUAL
2009/10
ACTUAL
2009/10
TARGET
Reputation survey
(Government stakeholder focus)
(index score out of 100)
-
73.5
78.05
78
South East Water’s reputation score from Government
Departments (including DSE, DTF and DPC) increased
very favourably from a benchmark high score of 71.7
in 2008 to 79.3 in 2010. This score places South East
Water in the higher quartile of the ‘very good’ category
across international benchmarks.
This increased score reflects South East Water’s efforts
to develop stronger relationships with government
40
stakeholders, take a more proactive role in contributing
to policy discussions, and adopting a leadership
position in key industry initiatives.
In particular, South East Water was recognised for its
strong leadership in projects such as the development
of an Integrated Water Management Strategy for
Melbourne’s south-east and recycled water initiatives.
FINANCIAL REPORT 2009/10
41
South East Water Limited ACN 066 902 547
FINANCIAL REPORT
for the year ended 30 June 2010
Financial Report
Directors’ Statutory Report
43
Auditor General’s Independence Declaration
46
Statement of Comprehensive Income
47
Balance Sheet
48
Statement of Changes in Equity
49
Cash Flow Statement
50
Notes to the Financial Statements
51
Directors’ Declaration 92
Independent Auditor’s Report
93
Risk Management Attestation
95
42
DIRECTORS’ STATUTORY REPORT
The Directors present their report on the financial year
ended 30 June 2010 on South East Water Limited (“the
Company”).
Directors
and institutional customers. The Company is also
involved in the provision of civil maintenance services
to a water utility in New Zealand for which it receives a
management fee.
The directors of the Company in office at the date of
this report are:
There was no significant change in the nature of the
Company’s activities during the financial year.
Douglas Shirrefs
Results and dividend
Acting Chairman
Shaun Cox
Managing Director
Tony Beach
Director
Dr Geraldine Gentle
Director
Dr Judith Slocombe
Director
James Turcato
Director
As at the date of the report, no Director has any interests
in the shares of the Company.
Particulars of the Directors’ and Company Secretary’s
qualifications, experience and special responsibilities
(if any) are set out on pages 21 and 22 of the Annual
Report.
Directors’ meeting
The number of Directors’ meetings and Board committee
meetings, and number of meetings attended by each
of the Directors of the Company during the financial
year are set out in the Corporate Governance section
of the Annual Report.
Principal activities
The core principal activities of the Company during the
financial year were, within the State of Victoria, to:
* treat, distribute and supply potable water;
* provide, manage and operate systems for the
conveyance, treatment and disposal of sewage, and
trade waste; and
* treat, distribute and supply recycled water.
The non-core activities of the Company during the
financial year include the tankered supply of ground
and recycled water to commercial and local government
authorities, the supply and installation of water tanks
to residential customers, business consulting services,
property leasing and the provision of products and
services, through ‘us’ - Utility Services, such as traffic
management, major construction, hydrographic
services, pipe relining, air scouring, plumbing works
and flow/level monitoring products for commercial
The Company’s profit after tax for the financial year was
$95.4 million.
Dividends paid or declared by the Company since the
end of the previous financial year were:
i) an ordinary dividend of $15.7 million in respect of
the financial year ended 30 June 2009 was paid on 30
October 2009; and
ii) an ordinary interim dividend of $21.95 million in
respect of the financial year ended 30 June 2010 was
paid on 25 June 2010.
In accordance with Australian equivalents to
International Financial Reporting Standards (AIFRS), no
provision for a final dividend was made, as it was not
declared prior to 30 June 2010. However, the Board
expects the final dividend in respect of 2009/10 to be in
the order of $16.7 million.
Review of operations
A review of the operations of the Company during the
financial year and the results of those operations is set
out in the main body of the Annual Report.
State of affairs
In the opinion of the Directors there were no significant
changes in the state of affairs of the Company that
occurred during the financial year not otherwise
disclosed in this report or the main body of the Annual
Report.
In August 2007, the Victorian Government
commissioned the Victorian Competition and Efficiency
Commission to undertake an inquiry into the Reform of
the Metropolitan Retail Water Sector.
One of the recommendations was to make the
Melbourne metropolitan retail water companies
statutory corporations under the Water Act 1989 (Vic).
As a publicly owned statutory corporation, South East
Water Limited will be required to report under the
requirements of the Financial Management Act 1994
43
DIRECTORS’ STATUTORY REPORT
rather than under the Corporations Act 2001. This
change is not expected to have a material impact on
the comparative amounts that will be disclosed in the
financial statements.
The Government has advised that it remains committed
to the conversion of the Melbourne metropolitan retail
water companies into statutory corporations and
that legislation will be introduced to implement this
proposal when all the relevant policy issues have been
resolved.
Furthermore, there is proposed legislation before
Parliament in the form of the Public Finance and
Accountability Bill, which when it comes into operation
will replace the Financial Management Act 1994.
Events subsequent to balance date
No matter or circumstance has arisen that has
significantly affected or may significantly affect the
operations of the Company, the results of those
operations or the state of affairs of the Company in
financial years after the financial year.
Likely developments
Certain likely developments in the operations of the
Company known as at the date of this report have been
covered generally within the main body of this Annual
Report.
Environmental regulation performance
The Company is subject to significant environmental
regulation in respect of its operations. In particular,
the Company holds a Corporate Licence for its eight
Sewage Treatment Plants issued by the Victorian
Environment Protection Authority (EPA) under the
Environment Protection Act 1970 (Vic). The Corporate Licence imposes conditions about
waste
discharges,
sustainability
commitments,
reporting obligations and other matters concerning
the operation of the Sewage Treatment Plants. The
Corporate Licence combines regulatory requirements
with projects that will assist South East Water to realise
its longer-term business sustainability goals.
In 2009/10, the Corporate Licence environmental
performance conditions were met at each of the
Company’s Sewage Treatment Plants.
No enforcement action was taken against South East
Water regarding non compliance with environmental
44
regulations. However, South East Water entered into an
Enforceable Undertaking with the EPA in May 2010, to
address a sewer spill that occurred in September 2008.
The Company has in place a Corporate Environmental
Improvement Plan within its Environmental Management
System that is certified under ISO 14001.
Further particulars of specific environmental programs
and performance are included through the main body
of the Annual Report.
Directors’ benefits
No Director has received, or has become entitled to
receive, a benefit (other than a remuneration benefit
included in Note 22 of the Financial Report) because of
a contract the Director, a firm of which the Director is a
member or an entity in which the Director has a financial
interest, has made (during the financial year ended 30
June 2010 or at any other time) with the Company.
Additional information about Director related disclosure
is provided in Note 22 of the Financial Report.
Insurance and indemnity
The Company’s Constitution provides that every person
who is, or has been, an officer or auditor of the Company,
will be indemnified out of the property of the Company
to the extent allowed by the Corporations Act 2001.
No amount has been paid pursuant to this indemnity
during, or since the end of the financial year.
During or since the financial year, the Company has
paid or contributed to the premium in respect of a
contract or contracts insuring against certain liabilities
of each of the Directors, whose names appear earlier in
this report, and certain officers of the Company.
The terms of the policy of insurance prohibit the
disclosure of the nature of the liabilities insured and the
amount of the premium.
Auditor’s independence declaration to the
directors of South East Water
The Company has obtained an independence
declaration from the Victorian Auditor-General’s Office
as required under section 307C of the Corporations
Act, a copy of which is provided on page 46.
Rounding of amounts to nearest thousand dollars
The Company is of a kind referred to in Class Order
98/100, issued by the Australian Securities and
Investment Commission, relating to the “rounding
off” of amounts in the Directors’ Report and Financial
Report. Amounts have been rounded off in the
Directors’ Report and Financial Report in accordance
with that Class Order to the nearest thousand dollars,
or in certain cases, to the nearest dollar.
Dated at Melbourne this 23th day of August 2010.
Signed in accordance with a resolution of the Directors.
Tony Beach
Acting Chairman
Shaun Cox
Managing Director
45
46
South East Water Limited ACN 066 902 547
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2010
NOTE
2010
$’000
2009
$’000
Sales revenue
3
531,524
455,563
Other income
3
3,894
37
535,418
455,600
(398,505)
(358,039)
(41,487)
(34,178)
95,426
63,383
(29,167)
(21,007)
66,259
42,376
Total income
Expenses
4
Finance costs
Profit before income tax expense
Income tax expense
5
Net profit after income tax
Other comprehensive income
Gain on revaluation of infrastructure assets
11
977,450
-
Gain on revaluation of land
11
19,735
4,455
Transfer from asset revaluation reserve to retained earnings
20
-
175
(294,569)
(1,336)
Other comprehensive income after tax
702,616
3,294
Total comprehensive income for the year
768,875
45,670
Income tax relating to components of other
comprehensive income
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
47
South East Water Limited ACN 066 902 547
BALANCE SHEET
as at 30 June 2010
NOTES
2010
$’000
2009
$’000
Cash assets
7,21
1,942
74
Receivables
8,21
51,636
54,339
545
128
Current Assets
Inventories
Prepayments
9
1,563
16,955
Non‑current asset classified as held for sale
10
5,072
-
60,758
71,496
Total Current Assets
Non‑Current Assets
Defined benefit superannuation asset
26
588
-
Infrastructure, property, plant and equipment
11
2,724,135
1,611,031
Intangible assets
12
67,253
9,146
Total Non‑Current Assets
2,791,976
1,620,177
Total Assets
2,852,734
1,691,673
Current Liabilities
Payables
13,21
67,226
58,284
Borrowings
14,21
43,879
71,129
Provisions
15
13,749
12,896
5,774
8,657
9,129
9,658
139,757
160,624
14,21
675,975
522,875
Deferred tax liabilities
5
533,494
232,932
Defined benefit superannuation liability
26
-
3,306
Provisions
17
1,034
687
Total Non‑Current Liabilities
1,210,503
759,800
Total Liabilities
1,350,260
920,424
Net Assets
1,502,474
771,249
Income tax payable
Other
16
Total Current Liabilities
Non‑Current Liabilities
Borrowings
Equity
Contributed equity
18
121,509
121,509
Reserves
19
1,103,737
401,121
Retained profits
20
277,228
248,619
1,502,474
771,249
Total Equity
The above Balance Sheet should be read in conjunction with the accompanying notes.
48
South East Water Limited ACN 066 902 547
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2010
NOTES
Balance at 1 July 2008
ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
CONTRIBUTED
EQUITY
$’000
RESERVES
$’000
RETAINED
PROFITS
$’000
TOTAL
EQUITY
$’000
114,074
398,002
234,968
747,044
-
-
42,376
42,376
-
3,119
175
3,294
-
3,119
42,551
45,670
Total comprehensive income
for the year
Net profit after income tax
Other comprehensive income
for the year after tax
19,20
Total comprehensive income
for the year after tax
Transactions with equity
holders in their capacity as
equity holders
Contribution of equity ‑
Share issue
18
7,435
-
-
7,435
Dividends paid
6
-
-
(28,900)
(28,900)
7,435
-
(28,900)
(21,465)
121,509
401,121
248,619
771,249
-
-
66,259
66,259
-
702,616
-
702,616
-
702,616
66,259
768,875
-
-
(37,650)
(37,650)
121,509
1,103,737
277,228
1,502,474
Total transactions
with owners
Balance at 30 June 2009
Total comprehensive income
for the year
Net profit after income tax
Other comprehensive income
for the year after tax
19
Total comprehensive income
for the year after tax
Transactions with equity
holders in their capacity as
equity holders
Dividends paid
Balance at 30 June 2010
6
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
49
South East Water Limited ACN 066 902 547
CASH FLOW STATEMENT
for the year ended 30 June 2010
NOTE
2010
$’000
2009
$’000
513,398
421,751
(384,509)
(328,550)
22,084
18,333
Income tax paid
(26,057)
(18,350)
Interest received
67
90
(38,376)
(33,216)
86,607
(60,058)
8
273
(131,281)
(123,290)
(41,666)
-
(172,939)
(123,017)
Proceeds from borrowings
209,000
100,000
Repayment of borrowings
(55,900)
(50,000)
Dividends paid
(37,650)
(28,900)
115,450
21,100
Net increase/(decrease) in cash held
29,118
(41,859)
Cash at the beginning of the financial year
(71,055)
(29,196)
(41,937)
(71,055)
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
GST refunded
Interest and other costs of finance paid
Net cash inflow from operating activities
28
Cash flows from investing activities
Proceeds from sale of infrastructure, property, plant and equipment
Payments for infrastructure, property, plant and equipment
Payments for water entitlements
Net cash outflow from investing activities
Cash flows from financing activities
Net cash inflow/(outflow) from financing activities
Cash at the end of the financial year
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
50
7
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
1 STATEMENT OF SIGNIFICANT ACCOUNTING
POLICIES
The Financial Report is presented in Australian dollars.
The significant policies which have been adopted in
the preparation of the Financial Report are:
The Financial Report complies with Australian
Accounting Standards, which include Australian
equivalents to International Financial Reporting
Standards (AIFRS). Compliance with AIFRS ensures
that the Financial Report, comprising the financial
statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
(a) Basis of Preparation
The Financial Report is a general purpose Financial
Report that has been prepared in accordance
with the requirements of Australian Accounting
Standards (including Australian Interpretations) and
the Corporations Act 2001. The Financial Report has
also been prepared on a historical cost basis, except
for property, plant and equipment which have been
measured at fair value.
AASB
AMENDMENT
AFFECTED STANDARD (S)
Compliance with AIFRS
Accounting standards not yet effective
The following Australian Accounting Standards and
interpretations have not been adopted for the annual
reporting period ending 30 June 2010:
NATURE OF CHANGE TO
ACCOUNTING POLICY
APPLICATION DATE
OF STANDARD
APPLICATION DATE
FOR COMPANY
AASB 2009‑5
AASB 2009‑5: Further
Amendments to Australian
Accounting Standards
Arising from the Annual
Improvement Project [AASB
5, 8, 101, 107, 117, 118, 136
& 139]
No change to accounting
policy required as
amendments only relate to
terminology and editorial
changes.
1 January 2010
1 July 2010
AASB 124
Related party disclosures
Government related entities
granted partial exemption
with certain disclosure
requirements. Detail of
impact is being assessed.
1 January 2011
1 July 2011
AASB 9
Financial Instruments
Standard simplifies
requirements for the
classification and
measurement of financial
assets. Detail of impact is
being assessed.
1 January 2013
1 July 2013
51
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
1 STATEMENT OF SIGNIFICANT ACCOUNTING
POLICIES (cont)
Financial Statement Presentation
AASB 101 Presentation of Financial Statements
AASB 101 Presentation of Financial Statements has
been revised to introduce changes in format and
content of the financial statements.
AASB 101 introduces a Statement of Comprehensive
Income. The Statement of Comprehensive Income
comprises items of income and expenses that are
recognised in the net profit plus items of income and
expenses that are not recognised in the net profit, such
as changes in revaluations recognised through the
asset revaluation reserve.
The new Statement of Changes in Equity discloses
reconciliations between the carrying amount at the
beginning and the end of the financial year for each
component of equity.
Other revisions include new presentation requirements
for restatements or reclassifications of items in the
financial statements and changes in the presentation
requirements for dividends.
Changes in Accounting Policy
AASB 116 Property, Plant and Equipment
AASB 1049 Whole of Government and General
Government Sector Financial Reporting removes the
option of valuing assets at cost and requires assets to
be measured at fair value. This new measurement basis
is outlined in Financial Reporting Direction (FRD) 103D
Non‑Current Physical Assets. The Treasurer of Victoria
has advised the Company of the need to comply with
the identical requirements of FRD 103D to implement
fair value reporting. Accordingly, the Company elected
to change its measurement model under AASB 116
from the cost model to the revaluation model, thereby
measuring items of infrastructure assets at fair value less
any accumulated depreciation and impairment losses.
Before the change, measurement after initial recognition
of items of infrastructure asset had been carried at cost
less any subsequent accumulated depreciation and
subsequent impairment losses. At initial recognition, the
Company continues to measure items of infrastructure
assets at cost that approximates fair value.
52
Due to the specialised nature of the Company’s
infrastructure assets, fair value is estimated using the
income approach (based on discounted cash flows),
as explained further in Note 11. The 30 June 2010 fair
value measurement of infrastructure assets has resulted
in an increase of $977.5 million above the depreciated
historical cost book value. This tax affected amount has
been recognised in equity under the asset revaluation
surplus account.
Significant accounting judgements, estimates and
assumptions
In the application of AIFRS, management is required to
make judgements, estimates and assumptions about
the carrying values of assets and liabilities.
Estimates and judgements are continually evaluated
and are based on historical experience and other
factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The key estimates and assumptions that have a
significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within
the next annual reporting period relate to the financial
planning and valuation assumptions used to determine
the fair value of infrastructure assets and the actuarial
assumptions used to determine the Company’s defined
benefit obligations. These assumptions and the related
carrying amounts are discussed in Note 26.
(b)Taxes
Income Tax
South East Water is subject to the National Tax
Equivalent Regime pursuant to Section 88(3D) of the
State Owned Enterprises Act 1992. The Act requires
the Company to pay the Victorian Government its
tax liability based on the rules of the Income Tax
Assessment Act 1936 (as amended).
Income tax on the profit or loss for the year comprises
current and deferred tax. Income tax is recognised in the
Statement of Comprehensive Income except to the extent
that it relates to items recognised directly in equity.
Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous
years.
Deferred tax is provided using the balance sheet
liability method, providing for temporary differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used
for taxation purposes at balance date.
to be completed within one financial year from the date
of classification. These assets are measured at the lower
of their carrying amount and fair value less costs to sell
and are not subject to depreciation.
A deferred tax asset is recognised only to the extent that
it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax
assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
Infrastructure, property, plant and equipment assets
are measured initially at cost and subsequently
revalued at fair value less accumulated depreciation
and impairment losses where applicable.
Deferred tax assets and liabilities are recognised at
the tax rates expected to apply when the assets are
recovered or liabilities are settled based on those tax
rates which are enacted or substantially enacted at
balance date.
Goods and Services Tax (GST)
Revenues, expenses, liabilities and assets are recognised
net of the amount of GST except:
• where the GST incurred on a purchase of goods
and services is not recoverable from the Australian
Taxation Office, in which case the GST is recognised
as part of the acquisition cost of the asset or as part
of the expense item as applicable; and
• receivables and payables are stated with the amount
of GST included.
The net amount of GST recoverable from, or payable
to, the Australian Taxation Office is included as part of
receivables or payables in the Balance Sheet.
Cash flows are included in the Cash Flow Statement
on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the Australian Taxation
Office are classified as operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
Australian Taxation Office.
(c) Land Held for Resale
Non‑current assets are classified as held for sale if their
carrying amount will be recovered principally through
a sale transaction rather than through continuing use.
This condition is regarded as being met only when the
sale is highly probable and the asset’s sale is expected
(d)Infrastructure, Property, Plant and Equipment
Infrastructure, Land and Buildings
Freehold land and buildings are stated at fair value,
being the amount which an asset could be exchanged
between knowledgeable willing parties at an arm’s
length transaction.
All infrastructure assets are recognised initially at
cost and subsequently revalued to fair value less
accumulated depreciation and impairment losses. Fair
value is determined on the basis of an independent
valuation prepared by external valuation experts, based
on discounted cash flows.
Revaluation increments are credited directly to equity
in the revaluation reserve, except to the extent that an
increment reverses a revaluation decrement in respect
of the same asset previously recognised as an expense
in the net result, the increment is recognised as revenue
in determining the net result.
Revaluation decrements are recognised immediately
as expenses in the net result, except that, to the extent
that a credit balance exists in the revaluation reserve in
respect of the same asset, they are debited to the asset
revaluation reserve
Plant and Equipment
All plant and equipment (including leasehold
improvements) are stated at fair value. The carrying
amount of plant and equipment is reviewed annually
to ensure it is not in excess of its recoverable amount.
The recoverable amount of an asset is the net amount
expected to be recovered through the net cash inflows
from its continued use and subsequent disposal.
Recoverable amount is determined using net cash
flowswhich are discounted to present values. At balance
date, the carrying amount of plant and equipment was
not in excess of their recoverable amount.
53
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
1 STATEMENT OF SIGNIFICANT ACCOUNTING
POLICIES (cont)
Assets acquired at no cost to the Company (developer
contributed assets) are brought to account at fair value,
being the actual or estimated cost of construction.
Depreciation
Items of infrastructure, property, plant and equipment,
excluding land, are depreciated over their expected
useful lives to the Company on the following basis:
Buildings
Straight Line
40 years
Leasehold
improvements
Straight Line
The lease term
Infrastructure assets Straight Line
Plant and
equipment
10 ‑ 99 years
Reducing Balance 20 ‑ 40 %
Assets are depreciated from the date of acquisition or,
in respect of constructed assets, from the time an asset
is completed or held ready for use. Depreciation rates
are reviewed annually and, in respect of 2009/10, are
unchanged from the previous financial year.
Impairment of Assets
Assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying
amount exceeds its calculated recoverable amount.
The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purposes
of assessing for impairment, assets are grouped at a
whole‑of business level which is considered to be the
lowest level for which there are separately identifiable
cash flows (cash generating unit).
Derecognition and Disposal
The carrying amount of an item of infrastructure,
property, plant and equipment is derecognised upon
disposal or when no further future economic benefits
are expected from its use or disposal.
Any loss arising on derecognition of an item of property,
plant and equipment is included in profit or loss in the
year the asset is derecognised.
54
Revaluations
Revaluations are performed with sufficient regularity
such that the carrying amounts do not differ materially
from those that would be determined using fair values
at the end of the reporting period.
Any revaluation increase is recognised in other
comprehensive income, except to the extent that
it reverses a revaluation decrease for the same asset
previously recognised in net profit in the Statement
of Comprehensive Income, in which case the increase
is credited to profit to the extent of the decrease
previously expensed. A decrease in the carrying amount
arising on the revaluation of such land and buildings is
recognised in profit or loss to the extent that it exceeds
the balance, if any, held in the properties revaluation
reserve relating to a previous revaluation of that asset.
(e) Intangible Assets
Intangible assets acquired separately are initially
recognised at cost. Subsequently, intangible assets with
finite useful lives are carried at cost less accumulated
amortisation and accumulated impairment losses.
Intangible assets with indefinite useful lives are carried
at cost less accumulated impairment losses. Costs
incurred subsequent to initial acquisition are capitalised
when it is expected that additional future economic
benefits will flow to the Company.
(f) Revenue Recognition
Water and Sewerage
Water and sewerage service charges are brought to
account evenly throughout the financial year in order to
reflect how they are earned. Water usage and sewage
disposal charges are recognised in the financial year
the water is consumed and sewage disposed.
New Customer Contributions
Developers are required to make a contribution towards
the cost of developing the Company’s water supply
distribution systems and sewage disposal systems. The
level of these cash contributions are regulated by the
Essential Services Commission and are recorded as
“New Customer Contributions”.
Consistent with the requirements of AASB 118 ‘Revenue’,
these cash contributions have been recognised as income
in the Statement of Comprehensive Income upon receipt.
Developer Contributed Assets
Developers are required to provide water supply
and sewerage facilities to new subdivisions which are
subsequently gifted to, and maintained by, the Company.
continuous service. The non‑current portion represents
the present value of long service leave entitlements for
employees with less than seven years service.
Superannuation
In accordance with the requirements of Interpretation
18 ‘Transfers of Assets from Customers’, and AASB 118
‘Revenue’, the fair value of these assets is recognised
as income in the accounts when the Company gains
control of the assets. This non‑cash income is recorded
as ‘Developer Contributed Assets’.
Contributions to superannuation plans are charged to the
Statement of Comprehensive Income as the contributions
are paid or become payable. Actuarial gains and
losses arising from the defined benefit superannuation
fund are recognised immediately in the Statement of
Comprehensive Income in the year in which they occur.
(g)Employee Benefits
(h) Cash
Wages, Salaries, Annual Leave and Sick Leave
For the purposes of the Cash Flow Statement, cash
includes cash on hand and at bank. Cash also includes
11am at call borrowings which are integral to the cash
management function of the business.
In accordance with AASB 119 ‘Employee Benefits’,
liabilities for wages and salaries (including nonmonetary benefits) and annual leave entitlements which
are expected to be settled within 12 months of the
reporting date are measured using remuneration rates
expected to apply when the obligation is settled. All
on‑costs including payroll tax, workers compensation
premiums and superannuation are included in the
determination of these liabilities.
Sick leave is a non‑vesting benefit and is not expected
to exceed current and future sick leave entitlements
and, accordingly, no liability has been recognised.
Long Service Leave
The liability for employees’ benefits to long service leave
represents the present value of the estimated future
cash outflows to be made by the Company resulting
from employees’ services provided up to the reporting
date. Expected future cash outflows are discounted
using interest rates attached to national government
guaranteed securities as at reporting date with terms
to maturity that closely match the estimated future long
service leave cash outflows. Discount rates, probability
factors and wage/salary growth assumptions are
provided by the Department of Treasury and Finance
as part of its long service leave financial model.
The current portion of long service leave liability
represents the nominal amount expected to be taken
within 12 months of balance date based on historical data
and known commitments for the forthcoming financial
year as well as the present value of long service leave
entitlements for employees with seven or more years of
(i) Receivables
Trade debtors are recorded at the amount of contracted
sales proceeds less a provision for doubtful debts.
Trade debtors are required to be settled within 14 days.
Accrued earnings represent the estimated value of
water consumed and sewage disposal charges earned
but not yet billed at reporting date.
(j) Bad and Doubtful Debts
Provision for doubtful debts is recognised to the extent
that recovery of the outstanding receivable balance
is considered no longer probable. The provision
represents an estimate of bad debts to be written off
and is made when there is objective evidence that the
Company will not be able to collect the debt. Bad debts
are written off when determined uncollectable, subject
to approval by the Board or delegated officer.
(k) Prepayments
Prepayments represent payments in advance for goods
and services yet to be provided at balance date.
(l) Payables
Payables represent the amounts to be paid in the future
by the Company for goods and services received. Trade
accounts payable are normally settled within 30 days
from the date of invoice.
(m) Provision for Insurance Claims
The provision for insurance claims represents the
value of outstanding insurance claims as advised by
55
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
1 STATEMENT OF SIGNIFICANT ACCOUNTING
POLICIES (cont)
the Company’s insurance claims manager. The value
represents outstanding claims in respect of public
liability, professional indemnity and motor vehicles.
(n) Dividends
An obligation to pay a dividend only arises after
consultation between the Board, the relevant portfolio
Minister and the Treasurer. Following this consultation,
an agreement on the dividend payable is passed by
the members at the general meeting. Although this
process has not yet been completed at the reporting
date, the estimated final dividend in respect of 2009/10
is $16.7million ($15.7million for 2008/09). An interim
dividend of $21.95million was paid in June 2010 while the
final dividend payment will be made in October 2010.
(o)Borrowings
Borrowings are initially recognised at the fair value of
the consideration received less directly attributed costs.
After initial recognition, borrowings are subsequently
measured at amortised cost using the effective interest
method. Interest is expensed as incurred.
The Company has classified borrowings which mature
within 12 months as non‑current on the basis that the
entity expects, and has the discretion, to refinance or
rollover these loans under a Government approved
financing facility.
(p)Deposits and Advances
Deposits and advances represent monies held by the
Company either as security or deposits on capital works.
(q)Developer Reimbursements
In accordance with the Company’s Land Development
Policy, the Company will reimburse developers, subject
to the nature of the works involved, for all or part of
their costs incurred in constructing water and/or
sewerage assets. Reimbursements are generally paid
upon completion of the works, however, in cases where
reimbursements are to be paid at an agreed date in the
future, a liability is recognised.
instrument. Financial assets are derecognised when
contractual rights to the cash flows from the assets
expire. Financial liabilities are derecognised if the
Company’s obligations specified in the contract expire
or are discharged or cancelled.
Financial instruments are initially measured at fair value.
Subsequent to recognition, the financial instruments
are measured as set out below:
Loans and Receivables
Trade receivables and other receivables are recorded
at amortised cost less impairment.
Financial Liabilities at Amortised Cost
All financial liabilities including borrowings and
payables are measured at amortised cost.
Impairment
The Company assesses at each balance date whether
there is objective evidence that a financial asset is
impaired, ie when the amount outstanding will not be
recovered in full.
(s) Alliances
‘us’ ‑ Utility Services
This Alliance contract was established between South East
Water, Thiess Services Pty Ltd and Siemens Ltd in April
2005. Under the contract, Thiess and Siemens provide
civil maintenance and mechanical and electrical services
to South East Water on a cost plus margin basis. Repairs
and maintenance costs are expensed as incurred while
costs which create or enhance an asset, are capitalised.
The Alliance also provides maintenance and construction
services to external parties on a commercial basis. South
East Water is entitled to a 50% share of the operating
profit from these external services, which is recognised as
income progressively as works are completed. The Alliance
also receives a management fee for external contracts.
During 2009/10 ‘us’ - Utility Services established a
sub‑alliance with Montgomery Watson to provide
design services in respect to South East Water’s capital
works program. This sub‑alliance operates on a similar
cost plus ‘at risk’ margin basis.
(r) Financial Instruments
South East Water Recycled Water Alliance (SERWA)
A financial instrument is recognised when the Company
becomes a party to the contractual provisions of the
Established in May 2009, the SERWA Alliance is a
partnership between South East Water, Transfield Services
56
(Australia) Pty Ltd and AECOM to deliver a program of
works to meet the Victorian Government’s Central Region
Sustainable Water Strategy. This includes upgrading and
operating key South East Water sewage treatment plants
over the next three years. The Alliance operates on a similar
cost plus ‘at risk’ margin basis and includes incentives for
enhanced service and performance. Operating costs are
expensed as incurred while costs which create or enhance
an asset are capitalised.
(t) Government Grants
Grants from the Government are recognised at their fair
value as income where there is a reasonable assurance
that the grant will be received and the Company will
comply with all attached conditions.
Government grants relating to cost of operating and
capital projects are deferred and recognised in the
Statement of Comprehensive Income over the period
necessary to match them with the costs that they are
intended to compensate.
(u) Smart Water Fund
The Smart Water Fund was established in 2002 for
the purpose of providing grant funding to support
the development of sustainable water use projects.
Participation in the fund is mandated by the Company’s
Statement of Obligations. Other participants are
Melbourne Water Corporation, Yarra Valley Water, City
West Water and the Department of Sustainability and
Environment. South East Water has a proportionate
interest in any monies held in the Fund. Contributions
made to the Smart Water Fund are initially recognised
as prepayments in South East Water’s Balance Sheet.
Expenses are subsequently recognised by the Company
when incurred by the Fund.
South East Water’s share of the Fund’s disbursements
for 2009/10 was $721,175 ($997,318 for 2008/09) and is
included in the Statement of Comprehensive Income.
As at 30 June 2010, the Company’s Balance Sheet
reflects its share of prepaid Fund expenditure totalling
$304,185 ($657,562 for 2008/09).
(v) Environmental Contribution
South East Water has a statutory obligation to pay
an environmental contribution to the Department of
Sustainability and Environment. This contribution is
used to address adverse water‑related environmental
impacts within Victoria by promoting the sustainable
management of water. These contributions are
recognised as an expense as incurred.
(w)Comparative Figures
Where necessary, comparative amounts have been
reclassified to conform to the current year’s presentation.
During the year ended 30 June 2010 the Company
reclassified the presentation of IT software assets from
infrastructure, property, plant and equipment to intangible
assets. The total value of IT software reclassified in respect
of the 2009 comparative was $9.1 million.
(x) Rounding
Unless otherwise shown in the financial statements,
amounts have been rounded to the nearest thousand
dollars.
2 FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
The Company’s principal financial instruments are loans
sourced from the Treasury Corporation of Victoria. The
loans include overnight borrowings, floating rate notes
and fixed rate loans which are used to meet working capital
requirements and fund capital expenditure programs.
The Company has other financial assets and liabilities
such as receivables and payables which arise directly
from its operating activities.
The main risks arising from the Company’s financial
instruments are market interest rate risk, liquidity risk,
credit risk and foreign currency risk. The Board reviews
and endorses policies for managing these risks and
they are summarised below.
Credit Risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations. The Company’s exposure
to credit risk is limited. With respect to investments, the
Company is required to invest in designated instruments
and with counterparties of sound credit ratings. Individual
counterparty limits, determined by reference to the
counterparty’s credit rating, also applies.
With respect to receivables, the Company has a broad
customer base with in excess of 90% being residential
customers dispersed across the Company’s area of
responsibility. Receivable balances are monitored
on an ongoing basis and as such the Company is not
57
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
2 FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES (cont)
The Company’s exposure to interest rate risk is set out
in Note 21 (b) and (c).
exposed to significant bad debts.
Sensitivity Disclosure Analysis
An ageing of the Company’s receivables at reporting
date has been provided in Note 8.
At 30 June 2010, the Company had no credit risk arising
from investments. Exposure to credit risk from other
financial assets is represented in the carrying amount
of these assets in the Balance Sheet.
Taking into account past performance, future
expectations, economic forecasts and management’s
knowledge and experience of the financial markets, the
Company believes that a movement of 0.5% is reasonably
possible over the next 12 months. The impact on the
Company’s profit and equity is disclosed in Note 21(c).
Liquidity Risk
(b) Foreign Currency Risk
Liquidity risk is the risk that the Company will not be
able to meet its financial obligations as they fall due.
It is the Company’s policy to hedge foreign exchange
exposures in excess of AUD$250,000 provided the
exposure is known with certainty in respect of both
timing and amount. The Company’s policy requires
all hedging to be undertaken through the Treasury
Corporation of Victoria.
The Company manages liquidity risk by maintaining
and conducting efficient banking practices and account
structures, sound cash management practices and
regular monitoring of the maturity profile of assets and
liabilities, together with anticipated cash flows.
The Company obtains annual approval from the
Treasurer of Victoria for new borrowings, borrowings
to refinance maturing and non‑maturing loans and
temporary purpose borrowing facilities.
A contractual maturity analysis of financial liabilities is
disclosed in Note 21(a).
Market Risk
The Company’s exposure to market risk is primarily
through interest rate risk with only insignificant
exposure to foreign currency risk. Objectives, policies
and processes used to manage each of these risks are
disclosed in the paragraphs below:
(a) Interest Rate Risk
The Company’s exposure to the risk of adverse
movements in interest rates relates primarily to its debt
obligations with terms to maturity or next interest rate
reset of less than one year.
In managing interest rate and refinancing risks, the
Company adopts a policy of maintaining a debt
portfolio consistent with the following target bounds:
The Company’s exposure to foreign currency risk is
minimal and to date no hedging transactions have
been undertaken.
Fair Value
The Company considers that the carrying amount
of financial assets and financial liabilities (excluding
borrowings and deferred reimbursements) recorded
in the Financial Report to be a fair approximation of
their fair values, because of the short term nature of the
financial instruments and the expectation that they will
be paid in full.
Borrowings are valued by discounting the expected future
cash flows at yields offered by the Treasury Corporation
of Victoria at balance date. Deferred reimbursements
are determined by discounting the expected future cash
flows at current interest rates.
The carrying amounts and fair value of financial assets and
liabilities at balance date are disclosed in Note 21(d).
Capital Management
0 to less than 1 year
10 - 35%
1 to less than 4 years
20 - 50%
4 to less than 8 years
20 - 50%
The Company, in consultation with external consultants,
has developed a Capital Management Plan to guide
and inform the Board and Executives on the most
appropriate long term capital structure for the business.
Based on this, the Board has adopted a long term
capital structure that targets a gearing ratio of between
50% to 65% and funds from operations (FFO) net
interest coverage of 2.5 to 4.0 times.
0 - 20%
The Plan is subject to annual review as part of the
Term to Maturity or Next Interest Rate Reset
Equal to or greater than 8 years
58
Target
Bounds
development of the Company’s annual Corporate Plan
which is subsequently approved by the Board and internal
financing requirements, shareholder expectations
around returns and changes in financial markets.
value accounting for infrastructure assets on gearing
and interest cover. This review will be considered by
the Board in 2010/11 and may result in a change to the
Company’s target gearing range.
There have been no changes to the Company’s target
capital structure during the year. However, a review has
been completed to assess the effect of the move to fair
The gearing and interest coverage ratios for the years
ended 30 June 2010 and 30 June 2009 were as follows:
Gearing [Net Debt/(Net Debt+Equity)]
FFO Net Interest Cover (Times)
The gearing ratio has decreased in 2010 due to the
revaluation of the infrastructure assets as at 30 June 2010.
2010
2009
32.2%
43.5%
3.2
2.8
In respect to measuring working capital efficiency, the
company uses a number of metrics that are reported
on an exception basis every six months.
3 INCOME
2010
$’000
2009
$’000
41,608
35,054
Water usage charges
154,296
130,440
Sewerage service charges (fixed)
142,090
113,577
Sewage disposal charges
103,947
89,002
Trade waste charges
16,739
13,452
New customer contributions
19,973
15,858
Developer contributed assets
23,335
21,824
Other services rendered
13,835
13,232
67
90
Rent
1,791
1,608
Grants
1,550
8,023
12,293
13,403
531,524
455,563
-
37
3,894
-
3,894
37
535,418
455,600
Sales Revenue
Water service charges (fixed)
Interest received/receivable
Miscellaneous
Other Income
Gain from sale of property, plant and equipment
Actuarial gain on defined benefit fund (refer Note 26)
Total Income
59
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
3 INCOME (cont)
Gearing [Net Debt/(Net Debt+Equity)]
FFO Net Interest Cover (Times)
The gearing ratio has decreased in 2010 due to the
revaluation of the infrastructure assets as at 30 June 2010.
2010
2009
32.2%
43.5%
3.2
2.8
In respect to measuring working capital efficiency, the
company uses a number of metrics that are reported
on an exception basis every six months.
2010
$’000
2009
$’000
41,608
35,054
Water usage charges
154,296
130,440
Sewerage service charges (fixed)
142,090
113,577
Sewage disposal charges
103,947
89,002
Trade waste charges
16,739
13,452
New customer contributions
19,973
15,858
Developer contributed assets
23,335
21,824
Other services rendered
13,835
13,232
67
90
Rent
1,791
1,608
Grants
1,550
8,023
12,293
13,403
531,524
455,563
-
37
3,894
-
3,894
37
535,418
455,600
Sales Revenue
Water service charges (fixed)
Interest received/receivable
Miscellaneous
Other Income
Gain from sale of property, plant and equipment
Actuarial gain on defined benefit fund (refer Note 26)
Total Income
60
4 EXPENSES
2010
$’000
Bulk water and sewerage charges
2009
$’000
(206,042)
(160,202)
Employee benefits cost
(45,130)
(40,124)
Operating contracts (refer Note 1(t))
(69,107)
(69,411)
Depreciation and amortisation
(41,252)
(36,380)
Environmental contribution
(16,573)
(16,573)
-
(15,418)
(814)
(1,169)
Taxes, fees and charges
(5,451)
(5,686)
Computer costs
(3,598)
(3,232)
Rental expense on operating
(4,886)
(4,964)
Bad and doubtful debts
(1,180)
(1,068)
(534)
(620)
(22)
-
(3,916)
(3,192)
(398,505)
(358,039)
Actuarial loss on defined benefit fund (refer Note 26)
Asset write offs
Transport
Loss on disposal of property, plant and equipment
Other expenses
61
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
5 INCOME TAX
2010
$’000
2009
$’000
23,400
20,661
Deferred tax
5,993
346
Amounts (over)/under provided in prior years
(226)
-
29,167
21,007
Accounting profit before tax
95,426
63,383
Income tax calculated at 30 %
28,627
19,015
823
1,845
64
47
(90)
(53)
(257)
153
29,167
21,007
Provisions
(422)
(402)
Accrued revenue
5,354
4,704
176
(992)
533,238
234,142
(509)
(517)
(4,343)
(4,003)
533,494
232,932
(a) Income tax expense
The major components of income tax expense are:
Current tax
(b) Reconciliation of income tax expense to prima facie tax payable
Tax effect of amounts not assessable/deductible
for income tax purposes
Non deductible depreciation and amortisation
Non-deductible expenses
Non-assessable income
Amounts (over)/under provided in prior years
Income tax expense
(c) Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Post employment defined benefit superannuation surplus
Infrastructure, property, plant and equipment
Employee benefits
Other
62
6 DIVIDENDS
2010
$’000
2009
$’000
Interim dividend paid
21,950
4,800
Final dividend paid
15,700
24,100
37,650
28,900
No final dividend has been provided for in the financial statements as at 30 June 2010. An
obligation to pay a dividend only arises after consultation between the Board, the relevant
portfolio Minister and the Treasurer. Following this consultation, an agreement on the dividend
payable is passed by the members in the general meeting. Although this process has not yet
been completed at the reporting date, the estimated final dividend in respect of 2009/10 is
$16.7million (08/09 $15.7 million).
7 CURRENT ASSETS ‑ CASH ASSETS
2010
$’000
Cash at bank and on hand
2009
$’000
1,942
74
1,942
74
(43,879)
(71,129)
(41,937)
(71,055)
The above figures are reconciled to the cash at the end of the financial
year as shown in the Cash Flow Statement as follows:
Balances as per above
Less: Short term borrowings (refer Note 14)
Balance as per Cash Flow Statement
63
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
8 CURRENT ASSETS ‑ RECEIVABLES
2010
$’000
2009
$’000
Trade debtors
34,792
39,581
Accrued earnings
17,848
15,682
Less: Provision for doubtful debts (note 8A)
(1,100)
(1,100)
51,540
54,163
96
176
51,636
54,339
Balance at the beginning of the year
1,100
1,100
Amounts written off during the year
1,229
1,111
Amounts recovered during the year
(49)
(43)
Increase/(decrease) in provision recognised in profit or loss
(1,180)
(1,068)
Balance at the end of the year
1,100
1,100
Less than 30 days
6,500
8,700
30 to 90 days
2,100
4,200
Greater than 90 days
2,900
2,300
11,500
15,200
Other debtors
Note 8A: Movement in the Provision for doubtful debts
Movements in the provision for doubtful debts during the financial
year are set out below:
Note 8B: Past due but not impaired
At 30 June 2010, trade debtors of $11.5m (2009 $15.2m) were past
due but not impaired. This amount relates largely to outstanding
water and sewerage charges by residential, commercial and
industrial customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Past due and impaired receivables totalled $0 (2008/09 $10,385). At
30 June 2010 no accounts were considered impaired. The balance of
receivables $40.1m (2008/09 $39.1m) is comprised of amounts which
are not past due or impaired and are expected to be paid when due.
64
9 CURRENT ASSETS ‑ PREPAYMENTS
Prepayments
Contribution to Foodbowl Irrigation Modernisation Project
(refer Note 12)
2010
$’000
2009
$’000
1,563
1,955
-
15,000
1,563
16,955
10 CURRENT ASSETS ‑
NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE
2010
$’000
Land
5,072
2009
$’000
-
The Company is in the process of selling a parcel of land located in
Pakenham. An agent has been engaged to assist with the sale by public
tender. The sale is expected to be completed in early 2010/11.
65
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
11 NON‑CURRENT ASSETS ‑
INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT
2010
$’000
2009
$’000
Infrastructure Assets (a) (b) (c)
At cost
-
1,775,459
2,497,882
-
-
(335,106)
2,497,882
1,440,353
23,164
18,032
(13,041)
(11,879)
10,123
6,153
5,789
4,827
(3,609)
(3,391)
2,180
1,436
At fair value
-
4,068
At independent valuation 2007
-
58,090
At independent valuation 2008
-
22,424
At independent valuation 2009
-
4,750
At independent valuation 2010
104,014
-
104,014
89,332
At independent valuation 2007
313
313
Less: Accumulated depreciation
(26)
(18)
287
295
109,649
73,462
2,724,135
1,611,031
At fair value
Less: Accumulated depreciation
Plant & Equipment (b)
At fair value
Less: Accumulated depreciation
Leasehold Improvements
At fair value
Less: Accumulated depreciation
Land (d)
Buildings (d)
Capital Works in Progress
Total Infrastructure, Property, Plant and Equipment
66
11 NON‑CURRENT ASSETS ‑
INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT (cont)
Note :
(a) Infrastructure Assets are comprised of water and sewerage mains, pump stations and
treatment plants.
(b) Infrastructure and Plant and Equipment asset classes include $9.9 million ($9.9m for 2008/09)
for Research and Development assets recorded at cost. Total accumulated depreciation for
these assets is $3.4 million.
(c) The 30 June 2010 valuation of infrastructure assets to fair value was estimated by
discounting the Company’s future cash flows to their present value. The discount rate selected
represents the rate that market participants would reasonably expect to use in determining the
fair value of the Company. Future estimates cash flows were based on the Essential Services
Commission’s pricing determination and updated management forecasts. The fair market value
of infrastructure assets along with the advice on relevant assumptions and discount factors
has been independently provided by Deloitte Touche Tohmatsu. If infrastructure assets had
continued to be measured at historical cost, the carrying amount would be $1,520.4 million.
(d) The basis of valuation of land and buildings is estimated at fair market value based on existing
use. During 2009/10 land valuations were calculated based on the Valuer General Victoria vacant
land indexation factors. Due to this movement being of a material value, the land has been
re-valued to reflect fair market value. Comparative valuations for 2007 were carried out by the
Valuer General Victoria in 2007 with a 30 June 2007 valuation date. The 2008 valuation of Evans
Rd Cranbourne was carried out by Urbis Ltd. The 2009 valuation of Bald Hill Rd Pakenham was
carried out by the Valuer General Victoria. The 2008 and 2009 valuations were carried out due to
the land being rezoned from public use to residential resulting in a material change from the 2007
valuations. If land and buildings were measured at historical cost, the carrying amount would be
$10.8 million.
67
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
11 NON‑CURRENT ASSETS ‑
INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT (cont)
Reconciliations
Reconciliations of the carrying amounts of each class of infrastructure,
property, plant and equipment between the beginning and the end of
the current financial year are set out below:
2010
Opening
Balance
INFRASTRUCTURE
ASSETS
$’000
PLANT &
EQUIPMENT
$’000
LEASEHOLD
IMPROVEMENTS
$’000
LAND
$’000
BUILDINGS
$’000
CAPITAL WORKS
IN PROGRESS
$’000
TOTAL
$’000
1,440,353
6,153
1,436
89,332
295
73,462
1,611,031
-
6,434
962
19
-
151,758
159,173
Transfers
115,571
-
-
(5,072)
-
(115,571)
(5,072)
Disposals
(643)
(129)
-
-
-
-
(772)
Revaluations
977,450
-
-
19,735
-
-
997,185
Depreciation
(34,849)
(2,335)
(218)
-
(8)
-
(37,410)
2,497,882
10,123
2,180
104,014
287
109,649
2,724,135
1,328,904
6,507
1,613
83,232
304
76,797
1,497,357
7,104
(2,220)
-
283
-
137,749
142,916
Transfers
136,071
3,640
11
1,362
-
(141,084)
-
Disposals
(635)
(522)
-
(175)
-
-
(1,332)
Revaluations
-
-
-
4,630
-
-
4,630
Depreciation
(31,091)
(1,252)
(188)
-
(9)
-
(32,540)
1,440,353
6,153
1,436
89,332
295
73,462
1,611,031
Additions
Closing
Balance
2009
Opening
Balance
Additions
Closing
Balance
68
12 NON‑CURRENT ASSETS ‑ INTANGIBLE ASSETS
IT Software
2010
$’000
2009
$’000
32,176
29,069
(24,361)
(21,419)
7,815
7,650
56,667
-
2,771
1,496
67,253
9,146
Cost
Less: Accumulated amortisation
Water Entitlements (a)
Intangible Works in Progress
Total Intangible Assets
Reconciliations of the carrying amounts of each class of intangible assets between
the beginning and the end of the current financial year are set out below:
2010
Opening Balance
IT
SOFTWARE
$’000
SOFTWARE
WORKS IN PROGRESS
$’000
WATER
ENTITLEMENTS
$’000
TOTAL
$’000
7,650
1,496
-
9,146
-
5,353
41,667
47,020
Transfers
4,078
(4,078)
-
-
Disposals
(73)
-
-
(73)
(3,840)
-
-
(3,840)
-
-
15,000
15,000
7,815
2,771
56,667
67,253
6,729
1,713
-
8,442
-
4,454
-
4,454
Transfers
4,671
(4,671)
-
-
Disposals
(6)
-
-
(6)
(3,744)
-
-
(3,744)
-
-
-
-
7,650
1,496
-
9,146
Additions
Depreciation
Reclassification (b)
Closing Balance
2009
Opening Balance
Additions
Depreciation
Reclassification
Closing Balance
Note :
(a) Water Entitlements represents payments made to the Department of Sustainability and
Environment via Melbourne Water, in respect of the Foodbowl Irrigation Modernisation Project.
Payments made were initially recognised as prepayments until June 2010 when the signing of the
‘Water Savings Supply and Transfer Agreement’ has resulted in an intangible asset. This intangible
asset has been determined to have indefinite useful life as there is no foreseeable limit to the
period over which the asset is expected to generate net cash inflows to the entity under the
agreement between the relevant parties.
(b) Reclassification represents Foodbowl Irrigation Modernisation Project payments previously
recognised as a prepayment (refer Note 12 (a) above).
69
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
13 PAYABLES
2010
$’000
2009
$’000
Trade creditors
14,903
7,839
Accruals
52,323
50,445
67,226
58,284
2010
$’000
2009
$’000
43,879
71,129
675,975
522,875
719,854
594,004
14 BORROWINGS
The Company’s borrowings are sourced from the Treasury Corporation
of Victoria and secured by the Treasurer in the form of Government
guarantee.
Current
11am borrowings
Non-Current
Fixed/Floating rate loans
70
15 CURRENT LIABILITIES ‑ PROVISIONS
2010
$’000
2009
$’000
13,442
12,656
307
240
13,749
12,896
4,023
3,706
483
330
8,936
8,620
13,442
12,656
Carrying amount at the beginning of the period
240
511
Additional provisions recognised
553
470
Provisions used during the period
(332)
(528)
Unused amounts reversed
(154)
(213)
307
240
Employee benefits (Note 15A)
Insurance claims (refer Note 1(m))
Note 15A: Employee Benefits
Employee benefits are comprised of:
Annual leave
Long service leave measured at:
Nominal value
Present value
Note 15B: Insurance Claims
Movements in the provision for insurance claims during the financial
year are set out below:
Carrying amount at the end of the period
16 CURRENT LIABILITIES ‑ OTHER
Deposits and advances
Deferred developer reimbursements (refer Note 1(r))
2010
$’000
2009
$’000
9,129
9,210
-
448
9,129
9,658
2010
$’000
2009
$’000
17 NON‑CURRENT LIABILITIES ‑ PROVISIONS
Employee benefits
1,034
687
71
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
18 CONTRIBUTED EQUITY
2010
$’000
Opening Balance
2009
$’000
121,509
114,074
-
7,435
121,509
121,509
Share capital issued
Ordinary shares of $1 each fully paid. The shares are beneficially
owned by the Victorian Government.
19 RESERVES
2010
$’000
2009
$’000
Capital reserve (a)
322,099
322,099
Asset revaluation reserve (b)(c)
781,638
79,022
1,103,737
401,121
79,022
75,903
684,215
-
18,401
3,242
-
(123)
781,638
79,022
(a) The capital reserve represents an amount equivalent to the net
assets transferred to the Company following its formation and forms
part of the Company’s general reserves and is not part of its capital
under the Corporations Act 2001.
(b) The revaluation reserve relates to infrastructure assets and land and
buildings measured at fair value in accordance with applicable Australian
Accounting Standards.
(c) Movements in the asset revaluation reserve:
Opening balance
Revaluation of infrastructure assets, net of tax effect (refer Note 11(d))
Revaluation of land, net of tax effect (refer Note 11(d))
Transfer to Retained Earnings ‑ disposal of land, net of tax effect
Closing Balance
72
20 RETAINED PROFITS
2010
$’000
Opening Balance
Net profit after income tax
Dividends paid (refer Notes 1(o) and 6)
Transfers to and from reserves
Closing Balance
2009
$’000
248,619
234,968
66,259
42,376
(37,650)
(28,900)
-
175
277,228
248,619
21 FINANCIAL INSTRUMENTS
(a) Maturity Analysis of Financial Liabilities
2010
Payables
Borrowings
Deposits
CARRYING
AMOUNT
$’000
LESS THAN
6 MONTHS
$’000
64,605
64,605
-
-
-
719,854
87,604
31,225
299,475
301,550
9,129
423
8,706
-
-
793,588
152,632
39,931
299,475
301,550
54,093
49,677
4,416
-
-
594,004
132,829
34,200
224,850
202,125
9,210
467
8,743
-
-
448
448
-
-
-
657,755
183,421
47,359
224,850
202,125
6 TO 12
MONTHS
$’000
1 TO 5
YEARS
$’000
MORE THAN
5 YEARS
$’000
2009
Payables
Borrowings
Deposits
Deferred
reimbursements
The amount of payables disclosed excludes statutory payables.
73
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
21 FINANCIAL INSTRUMENTS (cont)
(b) Interest Rate Risk
2009/2010
WEIGHTED
AVERAGE
INTEREST
RATE
FLOATING
INTEREST
RATE
$’000
1 YEAR
OR LESS
$’000
FIXED INTEREST RATE
OVER 1 TO
MORE THAN
5 YEARS
5 YEARS
$’000
$’000
NON‑
INTEREST
BEARING
$’000
TOTAL
$’000
Financial
Assets
Cash
3.80%
1,937
-
-
-
5
1,942
-
-
-
-
48,156
48,156
1,937
-
-
-
48,161
50,098
-
-
-
-
(64,605)
(64,605)
(83,879)
(49,950)
(284,475)
(301,550)
-
(719,854)
-
-
-
-
(9,129)
(9,129)
(83,879)
(49,950)
(284,475)
(301,550)
(73,734)
(793,588)
69
-
-
-
5
74
-
-
-
-
47,767
47,767
69
-
-
-
47,772
47,841
-
-
-
-
-
(54,093)
(54,093)
5.39%
(111,129)
(55,900)
(224,850)
(202,125)
-
(594,004)
-
-
-
-
-
(9,210)
(9,210)
Deferred
reimbursements
-
-
-
-
(448)
(448)
Total Financial
Liabilities
(111,129)
(55,900)
(224,850)
(202,125)
(63,751)
(657,755)
Receivables
Total Financial
Assets
Financial
Liabilities
Payables
Borrowings
5.82%
Deposits and
advances
Total Financial
Liabilities
2008/2009
Financial
Assets
Cash
2.50%
Receivables
Total Financial
Assets
Financial
Liabilities
Payables
Borrowings
Deposits and
advances
Receivables and Payables exclude statutory amounts.
74
21 FINANCIAL INSTRUMENTS (cont)
(c) Sensitivity Analysis
The following table summarises the sensitivity of the
Company’s financial assets and liabilities to interest rate risk.
INTEREST RATE RISK
30 JUNE 2010
CARRYING
AMOUNT
$’000
‑0.5%
RESULT
$’000
‑0.5%
EQUITY
$’000
+0.5%
RESULT
$’000
+0.5%
EQUITY
$’000
Financial Assets
Cash
1,942
(8)
(8)
8
8
719,854
(948)
(948)
948
948
(956)
(956)
956
956
Financial
Liabilities
Borrowings
Total increase/
(decrease)
INTEREST RATE RISK
30 JUNE 2009
CARRYING
AMOUNT
$’000
‑0.5%
RESULT
$’000
‑0.5%
EQUITY
$’000
0.5%
RESULT
$’000
0.5%
EQUITY
$’000
Financial Assets
Cash
74
(7)
(7)
7
7
594,004
(647)
(647)
647
647
(654)
(654)
654
654
Financial
Liabilities
Borrowings
Total increase/
(decrease)
75
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
21 FINANCIAL INSTRUMENTS (cont)
(d) Net Fair Value of Financial Assets and Liabilities
2010
CARRYING AMOUNT
$’000
2010
NET FAIR VALUE
$’000
2009
CARRYING AMOUNT
$’000
2009
NET FAIR VALUE
$’000
Financial Assets
Cash
1,942
1,942
74
74
48,156
48,156
47,767
47,767
50,098
50,098
47,841
47,841
(64,605)
(64,605)
(54,093)
(54,093)
(719,854)
(736,177)
(594,004)
(595,548)
(9,129)
(9,129)
(9,210)
(9,210)
Deferred reimbursements
-
-
(448)
(421)
Total Financial Liabilities
(793,588)
(809,911)
(657,755)
(659,272)
Receivables
Total Financial Assets
Financial Liabilities
Payables
Borrowings
Deposits and advances
Net market values of financial instruments are determined on
the following basis:
Cash, receivables, payables, deposits and advances are
valued at their carrying amounts as this approximates net
market value.
Borrowings are valued by discounting the expected future
cash flows at yields offered by the Treasury Corporation
of Victoria at balance date. Deferred reimbursements are
determined by discounting the expected future cash flows at
current interest rates
76
22 KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Responsible Persons
(b) Other Key Management Personnel
The relevant Minister and Directors of South East Water
are deemed to be responsible persons by ministerial
direction pursuant to the provisions of the Financial
Management Act 1994.
The following persons also had authority and
responsibility for planning, directing and controlling
the activities of the Company, directly or indirectly, at
any time during the financial year:
The relevant minister during the reporting period
(1 July 2009 to 30 June 2010) was the Hon. T Holding MP,
Minister for Water. Remuneration paid to the Minister
is shown in the financial statements of the Department
of Premier and Cabinet. Other relevant interests are
declared in the Register of Members’ Interests which
each member of the Parliament completes.
Name
Position
R Dusting
General Manager ‑ Infrastructure
R Eddington
General Manager ‑ Corporate Services
M Goddard
General Manager ‑
Customer and Community
K Hutchings
General Manager ‑ ‘us’‑ Utility Services
The names of persons who were Directors of South East
Water at any time during the financial year are as follows:
I Johnson
General Manager ‑ Regulation
E Underwood, S Cox, G Gentle, T Beach, D Shirrefs,
J Turcato and J Slocombe.
A Kelly
General Manager ‑ Legal and Audit
R Mittag
General Manager ‑ Business Growth
H Reid
General Manager ‑ Strategy
Mr Shirrefs was appointed acting Chairman effective
27 March 2010. Ms E Underwood resigned on 26 March
2010.
Key management personnel also includes an additional
14 senior managers defined as “Executives” as per the
Government Sector Executive Remuneration Panel (GSERP).
77
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
22 KEY MANAGEMENT PERSONNEL DISCLOSURES (cont)
(c) Key Management Personnel Compensation
2010
$’000
Short term employee benefits
2009
$’000
3,983
3,151
689
770
99
82
4,771
4,003
2010
No
2009
No
$0 - $9,999
-
1
$30,000 ‑ $39,999
-
1
$40,000 ‑ $49,999
5
4
$60,000 ‑ $69,999
1
-
$90,000 ‑ $99,999
-
1
$300,000 ‑ $309,999
-
1
$370,000 ‑ $379,000
1
-
Total
7
8
Post‑employment benefits
Other long term benefits
The number of Directors of the Company whose remuneration from
the Company or any related parties was within the specified bands
are as follows:
Total Amount
78
2010
$’000
2009
$’000
687
642
22 KEY MANAGEMENT PERSONNEL DISCLOSURES (cont)
(c) Key Management Personnel Compensation
The number of Executives of the Company, excluding the Managing
Director, whose remuneration from the Company or related parties
was within the specified bands are as follows:
2010
No
2009
No
$130,000 ‑ $139,999
2
1
$140,000 ‑ $149,999
2
3
$150,000 ‑ $159,999
2
3
$160,000 ‑ $169,999
6
3
$170,000 ‑ $179,999
-
1
$180,000 ‑ $189,999
1
1
$190,000 ‑ $199,999
3
1
$200,000 ‑ $209,999
1
3
$210,000 ‑ $219,999
-
1
$220,000 ‑ $229,999
1
-
$230,000 - $239,999
2
-
$240,000 - $249,999
-
1
$250,000 - $259,999
1
1
$270,000 - $279,999
1
-
22
19
2010
$’000
2009
$’000
4,084
3,361
Total
Total Amount
(a) Total remuneration for each Executive includes salary, performance pay entitlements,
superannuation and other benefits.
(d) Other Transactions with Key Management Personnel
Water and sewerage services (including Priority
Plumbing services) were provided to Key Management
Personnel and their related parties for properties within
South East Water’s boundaries on an arm’s length basis
and under normal commercial terms and conditions.
Mr S Cox is a member of the Board of Water Services
Association of Australia to which the Company has paid
$224,611 (2008/09 $176,074) for membership fees and
research contributions. Mr S Cox was also a member of
the Board of Savewater Alliance until February 2010.
The Company paid $1,495,994 (2008/09 $1,740,801) to
Savewater Alliance for services related to the Showerhead
Exchange Program and membership fees.
There were no other transactions, including loan related
transactions, with Key Management Personnel or their
related parties during the reporting period other than
the payments for services referred to in (c) above.
79
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
23 REMUNERATION OF AUDITORS
2010
$’000
Amounts received, or due and receivable, by the Victorian
Auditor‑General for auditing the accounts of the Company
2009
$’000
116
110
116
110
24 CONTINGENT ASSETS AND LIABILITIES
Contingent assets
Contingent liabilities
In the ordinary course of business, developers often
provide a commitment to the Company to construct
water and sewerage assets. The assets are constructed
within an agreed timeframe, generally 12 months, and
upon completion are transferred to the Company at no
charge.
Contingent on the construction of these assets,
South East Water is liable to reimburse developers a
total amount of $9.0 million (2008/09 $4.4 million) for
additional works constructed at the Company’s request.
This reimbursement, together with future investment
for urban growth by the Company or developers,
will be recovered through a combination of new area
contributions, plus service and usage charges from all
customers. This is consistent with the Essential Services
Commission’s final determination for water and
sewerage prices in June 2008 (for the 2009/10 year).
As at 30 June 2010, various developers have agreed to
construct assets to the value of $21.4 million (2008/09
$11.1 million). This value relates to $19.8 million of assets
which are under construction (2008/09 $8.6 million)
and $1.6 million of assets which have not commenced
construction (2008/09 $2.5 million).
80
25 COMMITMENTS (EX GST)
(a) Contracted Commitments:
Total capital expenditure contracted for at balance date but not
provided for in the accounts, payable:
2010
$’000
2009
$’000
38,839
8,424
38,839
8,424
Not later than one year
22,718
18,397
Later than 1 year and not later than 5 years
30,162
37,626
52,880
56,023
Not later than one year
26,680
41,650
Later than 1 year and not later than 5 years
16,670
43,350
43,350
85,000
Not later than 1 year
These commitments include construction of the
Officer South Pump Station $15.2 million.
Other expenditure contracted for at balance date but not
provided for in the accounts, payable:
These contributions include statutory obligations such as the
environmental contribution, and Our Water Our Future payments
of $40.6 million:
Total Foodbowl Irrigation Modernisation Project committed to
by the Company at balance date for water entitlements:
Stage 1 of the Northern Victoria Irrigation Renewal Project (NVIRP) has planned expenditure
of $1.004 billion. The estimated long term annual water savings of 225GL are to be shared
equally between irrigators, the environment and Melbourne via the Sugarloaf Pipeline.
Melbourne’s share of the water savings will be defined as water entitlements and will be
held jointly by the three metropolitan retail water companies. The Water Saving Supply
and Transfer Agreement was signed in June 2010 resulting in the Company recognising an
intangible asset for the value paid to date.
The Company has been advised by correspondence from the Department of
Sustainability and Environment to make a contribution of $100 million (excluding
GST) to the project and in return will hold its share of the Water Entitlements. This
payment is to be paid to Melbourne Water Corporation to finance Melbourne’s
contribution to NVIRP. At balance date, the Company had made a contribution of
$56.7 million (excluding GST) (refer note 12), for onforwarding to the Department of
Sustainability and Environment and has a commitment to pay a further $43.3 million
(excluding GST) over the next four years in line with an agreed payment schedule.
81
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
25 COMMITMENTS (EX GST) (cont)
(b) Lease Commitments
2010
$’000
2009
$’000
4,527
5,113
11,339
12,006
982
3,115
16,848
20,234
Not later than 1 year
1,421
1,295
Later than 1 year and not later than 5 years
3,777
3,041
Later than 5 years
2,890
3,362
8,088
7,698
Not later than one year
19,900
16,800
Later than 1 year and not later than 5 years
44,500
62,000
64,400
78,800
Total lease expenditure contracted for at balance date but not
provided for in the accounts, payable:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
These commitments represent non-cancellable operating leases
which have an average lease term of up to 10 years. Assets that are
subject to operating leases include property, motor vehicles and office
equipment.
Non‑cancellable operating lease receivable:
(c) Other Commitments
Total backlog sewerage expenditure committed to by the
Company at balance date but not contracted for:
These commitments represent the works program over the Water Plan period to 30 June 2013.
82
26 NON-CURRENT LIABILITY DEFINED BENEFIT SUPERANNUATION LIABILITY
2010
$’000
2009
$’000
54,632
45,820
Current service cost
1,284
1,014
Interest cost
2,522
2,790
598
618
Actuarial (gain)/losses
(1,144)
5,792
Benefits paid
(1,872)
(1,423)
(380)
(241)
-
262
55,640
54,632
51,326
57,932
Expected returns on fund assets
3,489
3,883
Actuarial gain/(loss)
1,207
(10,543)
Employer contributions
1,860
838
598
618
(1,872)
(1,423)
(380)
(241)
(a) Superannuation Plan
The Company participates in a number of superannuation funds which
provide benefits either on a defined benefit or cash accumulation basis,
for employees on retirement, resignation, or disablement, or to their
dependants on death. Employee contributions to the fund are legally
enforceable and are based on an agreed percentage of total salaries
and wages as recommended by the funds actuaries.
(b) Reconciliations
Reconciliation of the defined benefit obligation
Present value of defined benefit obligation at the beginning
of the year
Contribution by plan participants
Taxes and premiums paid
Transfers in
Present value of defined benefit obligation at the end of the year
Reconciliation of fair value fund assets
Financial year ending 30 June
Fair value of fund assets at the beginning of year
Contributions by fund participants
Benefits paid
Taxes and premiums paid
83
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
26 NON CURRENT LIABILITY:
DEFINED BENEFIT SUPERANNUATION LIABILITY (cont)
2010
$’000
Transfers in
2009
$’000
-
262
56,228
51,326
55,640
54,632
(56,228)
(51,326)
Deficit/(surplus)
(588)
3,306
Net superannuation liability/(asset)
(588)
3,306
Service cost
1,284
1,014
Interest cost
2,522
2,790
Expected return on assets
(3,489)
(3,883)
Actuarial (gains)/losses
(2,351)
16,335
(2,034)
16,256
1,860
838
(3,894)
15,418
(2,034)
16,256
Fair value of fund assets at end of the year
Reconciliation of the assets and liabilities recognised in the
Balance Sheet
As at 30 June
Defined benefit obligation
Fair value of fund assets
Income/Expense recognised in Statement of
Comprehensive Income
Financial year ending 30 June
Superannuation expense/(income)
The income/expense is recognised in the Statement of
Comprehensive Income and in Note 3/4 in the following line items:
Employee benefits costs
Actuarial (gain)/loss on defined benefit fund
84
26 NON CURRENT LIABILITY:
DEFINED BENEFIT SUPERANNUATION LIABILITY (cont)
Fund assets
The percentage invested in each asset class at the
Balance Sheet date:
2010
2009
As at 30 June
Australian equity
37%
36%
International equity
25%
25%
Fixed income
13%
12%
Property
10%
11%
Growth alternatives
7%
7%
Defensive alternatives
2%
3%
Cash
6%
6%
100%
100%
Fair value of fund assets
The fair value of plan assets includes no amounts relating to
- any of the Company’s own financial instruments; and
- any property occupied by, or other assets used by, the Company.
Expected rate of return on fund assets
The expected return on assets assumption is determined by weighting
the expected long‑term return for each asset class by the target
allocation of assets to each class and allowing for the correlations of the
investment returns between asset classes. The returns used for each
class are net of investment tax and investment fees. An allowance for
administration expenses has also been deducted from the expected
return. The expected return on assets assumption for pension assets
has not been reduced for investment tax.
85
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
26 NON CURRENT LIABILITY:
DEFINED BENEFIT SUPERANNUATION LIABILITY (cont)
2010
$’000
2009
$’000
Financial year ending 30 June
Actual return on fund assets
4,696
(6,660)
Discount rate (active members)
4.7% p.a
4.9% p.a
Discount rate (pensioners)
5.1% p.a
5.4% p.a
Expected rate of return on fund assets (active members)
7.0% p.a
7.0% p.a
Expected rate of return on fund assets (pensioners)
7.5% p.a
7.5% p.a
Expected salary increase rate
4.0% p.a
4.0% p.a
Expected pension increase rate
3.0% p.a
3.0% p.a
Principal actuarial assumptions at Balance Sheet date
The expected rate of return on Plan Assets includes a reduction to
allow for administrative expenses of the plan.
Historic information
2010
$’000
2009
$’000
2008
$’000
2007
$’000
2006
$’000
55,640
54,632
45,820
43,571
45,484
56,228
51,326
57,932
62,053
54,582
(588)
3,306
(12,112)
(18,482)
(9,098)
Experience adjustments (gain)/loss
‑ fund assets
(1,207)
10,543
6,606
(4,880)
(3,627)
Experience adjustments (gain)/loss
‑ fund liabilities
(2,104)
3,746
933
(2,816)
1,703
Financial year ending 30 June
Present value of defined benefit
obligation
Fair value of fund assets
(Surplus)/deficit in plan
Expected employer contributions:
Expected employer contributions
for 2010/11 is $1,423,000.
86
27 RELATED PARTY DISCLOSURES
Parent Entity
The Company’s parent entity is the State Government of Victoria.
The Department of Treasury and Finance is the shareholder
representative.
Other Related Parties
Other related parties relate to other wholly owned State Government
entities with whom the Company has financial dealings.
Transactions with Related Parties
(a) Water and Sewerage Services
Water and sewerage services were provided to related parties for
properties within the Company’s boundary on the same terms and
conditions that apply to all other customers.
(b) Other Transactions
All other transactions with Victorian Government related party entities
were made on normal commercial terms and conditions.
Financial transactions, based on a materiality threshold of greater
than $1,000,000 with each related party, during the reporting periods
are as follows:
Department of Treasury & Finance
The Company pays income tax and dividends to the
Department. Financial accommodation levies and ESC
license fees are also paid.
Dividend and income tax paid
Financial accommodation levies and ESC commission license fees
2010
$’000
2009
$’000
63,707
48,151
4,726
2,852
7,360
13,044
The following amounts remain payable at balance date:
Income Tax, Financial Accommodation and ESC license fees payable
87
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
27 RELATED PARTY DISCLOSURES (cont)
Department of Sustainability and Environment
The Company bills and collects Parks charges on behalf of the
Department. In addition, the Company is required to make and
receive various payments to the Department which are included in
the definition of profit before income tax.
2010
$’000
2009
$’000
Environmental Levy & Our Water Our Future
18,740
18,997
Parks Victoria rates remitted
45,403
39,797
Fee for collecting Parks Victoria rates
1,834
1,775
Water Smart Gardens, Homes Rebate Scheme and Water Tank
Conservation Concession
1,124
1,150
Grants funding
1,075
6,375
0
750
0
9
135
138
206,042
160,202
Drainage rates remitted
68,384
62,772
Water entitlement relating to the Foodbowl Irrigation
Modernisation Project
41,667
15,000
272
257
3,427
2,998
1,443
3,633
543
1,223
86
87
Water Smart Project
The following amounts remain payable/receivable at balance date:
Parks Victoria rates yet to be remitted
Fees receivable for the collection of Parkes Victoria rates,
Water Smart Gardens and Water Tank Conservation Scheme
Melbourne Water Corporation
The company transacts solely with the Melbourne Water Corporation
for purchase of bulk potable water and sewage treatment. The
company, under a normal commercial agency agreement, bills and
collects drainage rates on behalf of Melbourne Water, while income
is received for providing this service.
Bulk potable water purchase and bulk sewage treatment
MW share of information statement income
Fee for collecting drainage rates including recovery of council
valuation fees
The following amounts remain payable/receivable at balance date:
Bulk water and sewage charges and share of information statements
outstanding
Drainage charges yet to be remitted
Fees receivable for drainage collection
88
27 RELATED PARTY DISCLOSURES (cont)
Treasury Corporation of Victoria
As required by the State Government, the Company’s borrowing
are sourced solely from the Treasury Corporation of Victoria.
2010
$’000
Net borrowings during the year
2009
$’000
125,850
90,747
Interest expense
37,286
31,711
Advisory services
27
35
Interest revenue
13
26
719,854
594,004
11,119
8,547
4,020
3,638
759
746
Land/Payroll Tax payable
975
1,513
Not for profit rebate scheme receivable
191
189
The following amounts remain payable at balance date:
Aggregate amount of borrowings payable
Interest expense
State Revenue Office
The Company paid the State Revenue Office the following under
normal commercial arrangement:
Land/Payroll Tax
Not for profit rebate scheme reimbursement
The following amounts remain payable/receivable at balance date:
89
South East Water Limited ACN 066 902 547
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2010
27 RELATED PARTY DISCLOSURES (cont)
Department of Human Services
The Company provides a number of services to the community which
includes the administration of the pension rebate scheme and Utility
Relief Grant Scheme
2010
$’000
Safe Drinking Water administration levy
Pension rebate/Utility Relief Grant Scheme
Pension rebate project reimbursement
2009
$’000
216
211
29,951
25,303
53
217
1,731
1,404
The following amounts remain payable/receivable at balance date:
Pension rebate concession outstanding
No provision for doubtful debts has been raised in relation to any
outstanding balances, and no expense has been recognised in
respect of bad and doubtful debts due from related parties.
Loans to and from Related Parties
Apart from the loan transaction reported above, there were no other
loan transactions with related parties.
Guarantees Given/Received
The State Government of Victoria has provided a guarantee on loans
sourced from the Treasury Corporation of Victoria. There were no
other guarantees given to or received from any related parties.
Ownership Interests in Related Parties
The Company has no ownership interests in any related parties.
90
28 RECONCILIATION OF NET PROFIT AFTER
INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES
2010
$’000
2009
$’000
Net profit after income tax
66,259
42,376
Depreciation
41,252
36,380
814
1,169
Net (profit)/loss on sale of assets
22
(37)
Write back of prepayment
46
46
(23,335)
(21,824)
(Increase)/decrease in receivables
2,703
(13,120)
(Increase)/decrease in inventories
(417)
176
392
(15,808)
(588)
12,112
(2,883)
2,311
5,993
346
(3,306)
3,306
(81)
4,756
1,199
583
(4,574)
6,324
3,111
962
86,607
60,058
Write‑off of non-current assets
Value of works taken over from developers
Changes in operating assets and liabilities
(Increase)/decrease in prepayments
(Increase)/decrease in defined benefit super surplus
Increase/(decrease) in income tax payable
Increase in deferred tax liability
Increase/(decrease) in defined benefit superannuation liability
Increase/(decrease) in deposits and advances
Increase in provisions
Increase/(decrease) in trade creditors
Increase in interest creditors
Net cash flows from operating activities
29 ECONOMIC DEPENDENCE
The normal trading activities of the Company are
dependent on the provision of bulk water and sewage
treatment services from Melbourne Water Corporation.
No alternative supplier exists and this is envisaged to
continue into the foreseeable future.
As required by the State Government, the Company’s
borrowings are sourced solely from the Treasury
Corporation of Victoria.
91
South East Water Limited ACN 066 902 547
DIRECTORS’ DECLARATION
The Directors declare they have been given the
declaration made by the Managing Director and the
Chief Financial Officer of the Company pursuant
to Section 295A of the Corporations Act 2001 and
declare that the financial statements and notes of the
Company:
(a) comply with the Corporations Regulations 2001 and
Australian Accounting Standards; and
(b) give a true and fair view of the Company’s financial
position as at 30 June 2010 and of its performance, as
represented by the results of its operations and its cash
flows for the financial year ended on that date.
At the date of this statement, there are reasonable
grounds to believe that the Company will be able
to pay its debts as and when they become due and
payable.
Signed in accordance with a resolution of the
Board of Directors.
T Beach
Acting Chairman
Melbourne
23 August 2010
92
S Cox
Managing Director
INDEPENDENT AUDITOR’S REPORT
93
INDEPENDENT AUDITOR’S REPORT
94
RISK MANAGEMENT ATTESTATION
95
96