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Enhancing life and liveability Melbourne Water Annual Report 2012-2013 Contents Overview Chairman’s Report Managing Director’s Report Service delivery: Water Service delivery: Alternative water sources and integrated water cycle management Service delivery: Sewerage Service delivery Waterways Corporate: Environmental stewardship Corporate: Relationships Corporate: Financial sustainability Corporate: Organisational capability Financial Report: Five Year financial summary Directors Report Financial Statements Financial Statements Notes to the Financial Report Melbourne Water Corporation Performance reporting Performance Report Certification of Performance Report for 2012–13 Melbourne Water’s Key Performance Indicators Statutory information ISSN: 1838–3718 (Print) ISSN: 1838–3734 (Online) © Copyright September 2013 Melbourne Water Corporation. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, photocopied or otherwise dealt with without prior written permission of Melbourne Water Corporation. Disclaimer: This publication maybe of assistance to you but Melbourne Water and its employees do not guarantee that the publication is without flaw of any kind or is wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication. Design: Celsius Design Digital Printing: Immij Melbourne Water 990a La Trobe Street, Docklands, Victoria, 3008 PO BOX 4342 Melbourne Victoria Telephone: 131 722 Facsimile: 03 9679 7499 melbournewater.com.au Overview About us Melbourne Water is owned by the Victorian Government. We manage water supply catchments, treat and supply drinking and recycled water, remove and treat most of Melbourne’s sewage, and manage waterways and major drainage systems in the Port Phillip and Westernport region. In all our business decisions we consider social, environmental and financial effects, and short-term and long-term implications. Our customers include metropolitan water retailers, other water authorities, land developers and businesses that divert river water, and the 1.8 million households that receive waterways and drainage services in the greater Melbourne region. We deliver our services in partnership with others including government agencies, local councils, catchment authorities, contractors and suppliers. About this report Melbourne Water’s Annual Report 2012–13 describes our annual progress towards achieving our vision of Enhancing Life and Liveability in the greater Melbourne region, and how we met our regulatory obligations from 1 July 2012 to 30 June 2013. The Honourable Peter Walsh MLA, Minister for Water, was the Minister responsible for Melbourne Water from 1 July 2012 to 30 June 2013. The report reviews our performance against key performance indicators (KPIs) detailed in our Corporate Plan and KPIs that meet Ministerial Reporting Directions. We also report against sustainability or water industry-based indicators including The Global Reporting Initiative (GRI): Sustainability Reporting Guidelines. The GRI Content Index and our Independent Assurance Statement are available on our website melbournewater.com.au Online document As part of Melbourne Water’s commitment to sustainability, we will print a limited number of copies of this report, including 50 for the Victorian Parliament. An online version will be available on the Melbourne Water website melbournewater.com.au Accessibility An accessible text format of this report is available on our website at melbournewater.com.au If you want to obtain a copy of this report, or sections of it, in a different accessible format, please contact Melbourne Water on 131 722 (in Victoria), (03) 9679 7100 if calling from interstate or email [email protected] Our strategic guide Melbourne Water’s vision of Enhancing Life and Liveability outlines a commitment to do our part to improve the quality of life within the greater Melbourne region. The document guides and informs our decisions towards achieving this vision. Melbourne Water’s Strategic Direction is available on our website melbournewater.com.au Chairman’s Report When our new direction and vision were established in March 2012 the Board was under no illusion about the hard work and commitment required to achieve our goals, and great strides have been made over the past year. Since joining the Melbourne Water Board in September I have been thrilled with the progress the organisation has made in the first full year of working to our Strategic Direction and vision, Enhancing Life and Liveability. When our new direction and vision were established in March 2012 the Board was under no illusion about the hard work and commitment required to achieve our goals, and great strides have been made over the past year. In particular, two organisation-wide initiatives emerged in the last year: Commercial Transformation and Service Delivery, aimed at changing the way we do business, building the capacity of our people and improving the level of service and products for our customers. Our customers are demanding greater choice and value for money in the delivery of our products and services in an environment under pressure from population growth, urbanisation, ageing infrastructure and climate variability. This environment has driven the emergence of integrated water cycle management, with growing demand for greater diversity of products and services. Being more commercially focused and re-thinking our existing service offerings is critical to meeting these challenges. Of course, we are one part of a broader industry and two major Victorian Government announcements in 2012–13 have provided the ideal regulatory framework for us to continue working toward our vision. The draft strategy, Melbourne’s Water Future, outlines greater use of rainwater, stormwater and wastewater to conserve drinking water for human use, reduce pollution flowing into our waterways and help maintain green open spaces. What we do is consistent with these goals and I look forward to the final strategy at the end of 2013 following wide consultation on the draft with the community. A Cleaner Yarra River and Port Phillip action plan helps align our river health and stormwater programs with the great work being done by other agencies, local councils and the community to help protect our most iconic natural assets. With regard to our financial performance in 2012–13, total cash returns to our shareholder were $94.7 million ($289.3 million in 2011–12). Net loss after tax was $30.1 million (compared with a $274.9 million profit in 2011–12). The loss for 2012– 13 is primarily a result of the return to customers of revenue that was collected in 2011–12 to make forecast obligatory payments relating to the Victorian Desalination Plant. These payments were not required due to delays in the plant’s commissioning. In December 2012 we completed a $418 million upgrade of the Eastern Treatment Plant in Melbourne’s outer south-east to treat wastewater to a much higher standard. The upgrade has dramatically strengthened the protection of the marine environment at Boags Rocks in Gunnamatta, where the majority of the water is currently discharged. A significant additional benefit is the higher quality of recycled water produced. We have been working with others to increase reuse of this resource, particularly South East Water, which has started construction of a recycled water pipeline to commercial and residential development north of the Eastern Treatment Plant. We also drew closer to completing the $75 million Frankston Drainage Improvement Project – the single biggest project we have undertaken to improve flood protection. The project is scheduled for completion by the end of 2013 and will better protect businesses and homes from flooding in severe wet weather. We are now entering a new regulatory period with a lower capital spend, representing a shift from large-scale infrastructure investment to asset maintenance and renewal, and an unwavering commitment to delivering high quality services on behalf of the community. In accordance with the Financial Management Act 1994, I am pleased to attest that Melbourne Water Corporation’s Annual Report is compliant with all statutory reporting requirements. Paul Clark Chairman Managing Director’s Report It was a year of transition, not only in the scale of what we do, but how we do it. Working closely with the Office of Living Victoria, we are transforming the way our water cycle is managed and how services are provided across the whole water cycle. Transition was a key theme of 2012–13, the culmination of an era of significant infrastructure investment and the beginning of a consolidation phase. The past year was the last of the 2008 to 2013 regulatory pricing and investment period – in which time we delivered $3.7 billion of water, sewerage and drainage infrastructure. We now shift investment to a focus on asset maintenance and renewal. It was a year of transition, not only in the scale of what we do, but how we do it. Working closely with the Office of Living Victoria, we are transforming the way our water cycle is managed and how services are provided across the whole water cycle. This transformation involves a shift from predominately centralised catchmentto-building water and wastewater systems to an approach that integrates management of water supply, sewerage, drainage and natural water systems such as waterways and bays. The recently established Commercial Transformation and Service Delivery programs will provide our people with the tools and processes to ensure we are continually improving our understanding of our customers’ needs and our ability to meet their needs. The capability of our people in these areas can only be achieved in a workplace where safety and wellbeing are paramount. On that note, one of the year’s achievements I’m most proud of was receiving certification of our newly-adopted Australian and New Zealand Safety Standard (AS/NZS 4801), which focuses on continuous improvement and commitment, not simply compliance. For an organisation as diverse and complex as Melbourne Water, AS/NZS 4801 was an ambitious target, so I’m highly appreciative of the efforts of many people across the business who worked hard to achieve certification. It was a particularly busy and successful year in our Waterways area, and we were all pleased when a survey of 1,420 Melburnians found 77% of respondents were satisfied with waterways in the region. This is the highest community satisfaction rating we have ever recorded since the biennial Community Perceptions of Waterways survey was first undertaken in 1993. The Waterways group was also busy finalising the Healthy Waterways and Stormwater strategies, which guide how the region’s rivers, creeks and stormwater systems will be managed over the next five years. I’d like to thank many people in local and state government and the community who helped inform these strategies. It’s always a pleasure to see the hard work of our people recognised by their peers and the public, and several Melbourne Water projects received awards over the past year. The Eastern Treatment Plant Tertiary Upgrade received the Water/Wastewater Project of the Year at the 2013 Global Water Summit; the Melbourne Main Sewer Replacement received a Victorian Civil Contractors Federation Earth Award and was awarded the 2012 Trenchless Society for Technology Project of the Year – New Installation. The Northern Sewerage Project won an Australian Institute of Project Management Award and our Info Program picked up a 2013 Sir Rupert Hamer Award and a Gold Knowledge Management Excellence Award. I look forward to working with the Board and our people as we continue to drive improvement across the business to enhance Melbourne’s liveability. Shaun Cox Managing Director Service delivery: Water Side Caption: “Our water storages continued to rise during the first half of 2012–13, exceeding 80% full for the first time since June 1997.” Our aim Provide services that are valued by our customers. We will do this by: • Providing high-quality, safe and reliable drinking water and fit-for-purpose water from alternative sources • Providing safe sewage transfer, treatment and disposal • Protecting and enhancing the health and amenity of waterways and bays • Managing flood risk • Adapting our assets to address climate change and variability • Planning, operating and maintaining our built and natural assets efficiently by incorporating innovative and whole-of-life system approaches • Providing for continuity of service by improving the way we plan for, respond to, and recover from extreme events. Key achievements • Met all water quality targets for E. coli, turbidity, aluminium and disinfection by-products • Worked closely with water retailers to develop an annual Water Outlook, which gives the community better access to water use and supply information • Achieved a $12 million capital saving on a new water pipeline servicing Melbourne’s growing area of Wyndham • Worked with fire fighting agencies to successfully protect water catchments from bushfires. Disappointments • Failed to meet our target of less than 1% for measurable transfer losses of total water delivered, partly due to water quality issues at the Tarago Treatment Plant and leakage from the Tyabb Service Reservoir • Two water main bursts caused minor damage and disruption in Glen Waverley and Viewbank. Challenges • Working with water retailers, local councils and the development industry to maximise use of stormwater and recycled water while balancing use from traditional catchments and dams • Continuing to research and assess the impact of seasonal and long term climate change on hydrology projections. Our water supply system Melbourne Water’s supply system comprises: • 157,000 hectares of protected catchments in the Yarra Ranges • 10 reservoirs with a total capacity of 1,812 billion litres • 34 water treatment plants • 1,057 kilometres of water mains • 214 kilometres of aqueducts • 64 service reservoirs. Managing demand and supply Our water storages continued to rise during the first half of 2012–13, exceeding 80% full for the first time since June 1997. However, even though total reservoir storage was 70.1% or 1,271 billion litres at 1 July 2012, it had only increased to 70.8% or 1,282.9 billion litres by 30 June 2013. Rainfall across Melbourne’s catchments for 2012–13 was below the long-term average following two wetter years with back-to-back La Niña events in 2010–11 and 2011–12. Rainfall over the major catchments in 2012–13 was between 8.6% and 14.7% below average, with the catchment weighted average being 3.1% below. Thomson catchment highlighted the variability in monthly rainfall, receiving only 8 millimetres in January, yet 220 millimetres in June. Reflecting below average rainfall, 2012–13 stream flow of 478 billion litres into the major harvesting reservoirs was 3.1% below the long-term average. The year started well with above average stream flow for the first three months, although the last nine months of 2012–13 were below average. The total system storage volume of 70.8% at 30 June 2013 is the highest for this time of year in 16 years. It represents a significant recovery from June 2009 when storage levels fell to their minimum of 25.6% during the 1997 to 2009 Millennium Drought. Figure 1: Melbourne Water water supply system Transcribers Note: Map has been omitted Figure 2: Monthly average streamflow at Melbourne’s major harvesting reservoirs Transcribers Note: Graph has been omitted Figure 3: Monthly average rainfall at Melbourne’s major harvesting reservoirs Transcribers Note: Graph has been omitted Figure 4: Melbourne’s water storage Transcribers Note: Graph has been omitted Figure 5: Annual stream flow at Melbourne’s major harvesting reservoirs (Upper Yarra, Thomson, Maroondah, O’Shannassy Reservoirs) Transcribers Note: Graph has been omitted Desalination plant on standby The Victorian Desalination Plant was commissioned in 2012. The AquaSure consortium undertook performance testing from September to December 2012, with desalinated water meeting all required drinking water standards. The final commissioning test involved running the plant at maximum capacity for 30 consecutive days. During commissioning, a total of 24.9 gigalitres of desalinated water was transferred to Cardinia Reservoir. However, as the Victorian Government placed a zero gigalitre order for 2012–13, the plant ceased production on completion of testing. A further zero gigalitre order was placed for 2013–14. In the lead up to the first supply of desalinated water, Melbourne Water worked closely with AquaSure, the Department of Environment and Primary Industries1 and impacted water retailers to develop protocols for coordinated operation of systems and infrastructure. This included innovative hydrodynamic modelling of Cardinia Reservoir to predict the mix of the desalinated water in the reservoir and the potential impacts on water quality. While the desalination system will operate on an as-needs basis, further work will be undertaken with the operator to refine and integrate operating arrangements. New pipeline to service growth in Wyndham Construction of a water pipeline to service Wyndham, one of the fastest growing municipal areas in Australia, will cost $12 million less than originally forecast due to savings identified as part of a joint integrated water cycle management approach with City West Water. Water demand from the City West Water zones of Cowies Hill and West Werribee is forecast to increase significantly over the next 25 years, requiring construction of a new main to service growth. Stage 2 of the St Albans to Werribee Pipeline project will now cost $12 million less following an analysis of the benefits of integrated water cycle management and the impacts of changing growth rates and peak demands. The diameter of the new pipeline will be reduced by installing a ‘third-pipe’ carrying recycled water to households for non-drinking purposes, resulting in significant reductions in peak potable water demand. Working collaboratively to maintain supply Following ground movement in October 2012 from the construction of a new hospital, City West Water had to isolate its Elizabeth Street transfer mains, which provide water to Melbourne’s CBD. To ensure a continued water supply to the CBD, Melbourne Water worked with City West Water on contingency measures including: • Ensuring all connections of alternative supply mains were open and operational • Daily surveillance along pipelines supplying the CBD to ensure no impact from third party works such as unknown excavation • Cancelling programmed works associated with supply to the CBD • Melbourne Water’s Water Control Centre undertaking daily checks of the controlling pressures at key locations to ensure adequate supply • Reconfiguring water supply zones to meet increasing summer demands. Water main bursts On 29 October 2012, a water main burst in Knights Drive, Glen Waverley, due to a faulty valve. The damaged section was shut down within an hour and isolated to ensure no impact to water supply in the local area. Melbourne Water worked to assist the owners of the one property that was damaged. It is estimated that about two million litres of water, equating to 0.2% of Melbourne’s daily water use, flowed into the stormwater system. On 20 December 2012, a water main burst in Martins Lane, Viewbank. To avoid leaving Melbourne’s CBD and northern and western suburbs without water, crews first redirected water from other parts of the system before the damaged section could be shut down. The burst main, caused by a faulty valve on the Silvan-Preston main, resulted in some land erosion damage to several properties and Melbourne Water worked with emergency services to assist residents. 1Formerly two separate departments known as the Department of Sustainability and Environment and the Department of Primary Industries. Water consumption and quality Stage 1 water restrictions were lifted and Permanent Water Use Rules were implemented in Melbourne from 1 December 2012. Even though water restrictions were lifted, Melburnians continued to conserve water in 2012–13, with an average daily consumption of 1,106 million litres per day. This is above the 1,004 million litres average daily consumption in the last five years, but significantly lower than the 1,320 million litres per day in the 1990s. While consumption increased compared to 998 million litres per day in 2011–12, this may be attributable to higher temperatures and drier conditions in the 2012–13 summer compared to cooler and wetter conditions in 2011–12. It could also be due to the replacement of Stage 1 water restrictions with Permanent Water Use Rules from 1 December 2012. Melbourne recorded nine consecutive days of above 32°C in March 2013. This was the city’s longest spell of 30°C or above days in any month since records began in 1855. Residential daily per capita water consumption for Melbourne in 2012–13 was 161 litres compared to 149 litres in 2011–12. Melbourne Water met water quality targets for E. coli, turbidity, aluminium and disinfection by-products in 2012–13. We work closely with water retailers to consistently meet stringent requirements in the distribution of safe, high quality water. Melbourne’s water supply system is managed according to Hazard Analysis and Critical Control Point principles. Audits and accreditation are used to ensure quality management from collection, treatment and distribution to customers. Retail water consumption Melbourne Water supplied 404,260 million litres of drinking water to water retailers in 2012–13. This compares with 365,559 million litres in 2011–12, and 351,761 million litres in 2010–11. This year’s consumption of 404,260 million litres is similar to levels last seen without water restrictions in the 1980s (refer to Figure 7 Financial Year Consumption graph), even though Melbourne’s population has grown by 60%. Figure 6: Average daily water use for Melbourne Transcribers Note: Graph has been omitted Figure 7: Financial year consumption Transcribers Note: Graph has been omitted Figure 8: 2012–13 Retail water consumption Transcribers Note: Graph has been omitted Water Security Committee and Water Outlook Melbourne Water and the water retailers prepared an annual Water Outlook for Melbourne which was published on 1 December 2012. The Water Outlook indicates the overall level of water supply system security based on the storage volume at 30 November each year in relation to three zones: high, medium and low. These zones are used to determine appropriate water management measures. Melbourne’s storage volume was in the high zone as at 30 November 2012. The Water Outlook outlines a range of demand management and supply augmentation actions for the period, including alternative supply projects and water efficiency programs. Environmental sustainability Melbourne Water continues to work with water retailers, local councils and the development industry to maximise use of water sources such as stormwater and recycled water while balancing use from traditional catchments and dams. Sustainable water use During 2012–13, Melbourne Water worked with the Victorian Government on developing strategies that plan for Melbourne’s water cycle. We took the opportunity to make a submission to the Victorian Government’s new Metropolitan Planning Strategy, which provides an ideal opportunity to promote a new way of managing and planning for the water cycle. We also worked with the Office of Living Victoria to develop a new approach to urban water planning. This approach will be incorporated into the Victorian Government’s Melbourne’s Water Future strategy and is founded on an understanding of the entire water cycle and its drivers: geography, topography, location of community assets, hydrology, economics, climate and demography. It is expected both the Metropolitan Planning Strategy and Melbourne’s Water Future will be finalised in 2013–14. Water Supply Demand Strategy During 2012–13, Melbourne Water supported the development of Melbourne’s Water Future. This strategy adopts a whole-of-watercycle approach to the linked challenges of securing a safe and plentiful water supply, managing stormwater runoff and wastewater discharge, reducing urban flooding, keeping parks and gardens green, and improving the health of waterways. The previous Water Supply Demand Strategy was reviewed as a key input to Melbourne’s Water Future. Sustainable water strategies Sustainable water strategies are intended to secure water supplies for consumption and environmental purposes over a 50-year period. The Central Region Sustainable Water Strategy 2006 sets out a series of actions to 2055 to deliver sustainable water use and management objectives. The objectives of this strategy are addressed through Melbourne’s Water Future. For more information on Melbourne Water’s role in balancing consumption and environmental needs, refer to the Alternative water sources and integrated water cycle management chapter and the Waterways chapter. Limiting system losses and repairing leaks Melbourne Water annually reviews the rate of leakage and water loss from its water supply system in line with Bulk Water Supply Agreements with water retailers, water conservation targets, our corporate strategic goals and the Essential Service Commission’s requirements. The scope of this review includes leaks from pipelines, valves and fittings, aqueducts, tank cleaning, and operational water usage for cleaning and other purposes. A number of other losses are not included, such as reservoir evaporation, dam see page and environmental flows. Melbourne Water did not meet its KPI target of less than 1% of transfer losses in total water delivered during 2012–13 (recording 1.14%). This was due to water quality issues at the Tarago Treatment Plant, requiring large volumes of water to fix, and leakage from the Tyabb Service Reservoir, among other factors. A renewal project is already programmed for Tyabb in Water Plan 3 (2013–14 to 2017–18) so it is not economically feasible to repair the leak beforehand. However, Melbourne Water has made significant water savings through operational changes to the Winneke to Preston Water Main to reduce cleaning requirements. Melbourne Water continues to reduce and better account for water loss in the trunk water network through a variety of means such as: aqueduct lining and improved flow measuring technologies; a dedicated in-house pipe repair crew; cathodic protection of tanks and pipelines; flow meter validation/salt trials; and other best practice asset management activities. Adapting to a variable climate Climate variability has the potential to impact on water, sewerage, drainage and waterway systems managed by Melbourne Water. Climate variability can have a significant impact on hydrology projections, so Melbourne Water continues to work with climate researchers, industry partners and customers to understand the risks and implications of a variable climate on our business, and to provide climate resilience. During 2012–13 we supported the completion of two Australian Research Council Linkage Projects led by the University of Melbourne which will inform water resources planning decisions. One project put recent climate variations into a longerterm context by providing reconstructions of historical annual rainfall, stream flow, temperature and pressure variations data for south-eastern Australia. The second project analysed recent climate patterns and assessed the range of uncertainty in projected annual rainfall and river flows under climate change. Melbourne Water also supported the Water Services Association of Australia’s ‘AdaptWater’ project. Through this project a tool was developed that assists in the quantification of climate risks to assets and enables comparison of potential adaptation options. Working groups have been established within Melbourne Water and with water retailers to set direction and review climate change adaptation activities. In 2012–13, we reviewed our climate information needs and adaptation activities, and we commenced an external review of the Climate Change Risk Register. Protecting our catchments from bushfire Although Melbourne Water is not a statutory fire fighting authority, we have a legislated responsibility to limit the occurrence and spread of fire from our land to neighbouring properties. Melbourne Water is also involved in fire prevention and suppression to protect vulnerable built and natural assets as well as water supply catchments. In the lead-up to the 2012–13 summer, preparations were made for what was forecast to be an average bushfire season. Preparations included maintaining more than 2,400 kilometres of roads and fire trails, ensuring Melbourne Water’s 100 fire fighters were physically fit and well trained, and ensuring all equipment was checked and ready for use. The Thomson catchment came under serious threat on its western flank with the Aberfeldy fire, and this was followed by a series of lightning strikes across the Upper Yarra and Thomson catchments resulting in a fire within the Thomson catchment itself. Melbourne Water fire fighters were heavily involved in defending the catchment. During the year, strong relationships were forged with the Country Fire Authority (CFA), Department of Environment and Primary Industries (DEPI), Parks Victoria (PV), the State Control Centre and the Fire Services Commissioner. This enabled Melbourne Water to quickly alert all parties to the serious threat posed to the water supply catchments by the Thomson fires. The Fire Services Commissioner realised the serious risk and responded proactively. In the autumn post-fire season, a planned burning program was undertaken to minimise the bushfire risk in the water supply catchments, with Melbourne Water assisting DEPI and PV to achieve annual targets. Two successful planned burns were conducted on Melbourne Water land at Silvan and Sugarloaf reservoirs with the CFA. Office water use Melbourne Water did not meet its office water use target in 2012–13. Consumption was 3,594 litres per full-time employee (FTE) per year compared to a target of 3,177 litres per FTE. This was mainly due to commissioning issues with our new head office, resulting in more potable water use instead of rainwater and stormwater. This included commissioning issues with water tanks and excessive use of water for cooling the building’s sewage pumps. These issues have now been resolved and we have a new building management system (software application) that alerts us when more water is being used than expected. In terms of office space, corporate water use equates to 183.3 litres per square metre. This data is collected for the 990 La Trobe Street, Docklands, head office. Service delivery: Alternative water sources and integrated water cycle management Side Caption: “Melbourne Water continues to work with its customers to help deliver the Victorian Government’s vision of a smart, integrated and resilient water system for a liveable, sustainable and productive Melbourne.” Our aim Contribute to a more sustainable, prosperous, liveable and healthy community by planning and delivering water supply, waterways and sewage services holistically. We will do this by: • Collaborating with customers and stakeholders to promote new and diverse water resources • Integrating water planning and urban development planning • Finding ways to obtain multiple benefits from our natural and built assets • Managing the water supply system to meet urban, environmental and agricultural needs • Undertaking long-term planning with stakeholders to meet the needs of a growing population and address the forecast impacts of climate change and variability. Key achievements • Collaborated with the Office of Living Victoria, water retailers and local councils on regional integrated water strategies to guide investment in water projects across Melbourne • Provided input into the new Metropolitan Planning Strategy and identified integrated water servicing options for Melbourne’s growth areas • Developed a strategy with local councils, water retailers and community groups to maximise liveability through land management • Achieved an Australian-first planning amendment for Little Stringybark Creek, which requires developers that expand impervious surface areas by more than 10 square metres to treat runoff before it enters the stormwater system. Disappointments • Recycled water usage remains lower in wet years and higher in dry years. Although Melbourne Water’s capacity to supply recycled water is unaffected by weather and seasons, greater expansion into industrial and residential supply would create more reliable demand. Challenges • Integrating all sources of water to diversify supply, improve climate resilience and promote fit-for-purpose use to preserve drinking water supplies, particularly in times of higher rainfall • Developing a framework to share the costs and benefits of integrated water cycle management projects across organisations • Keeping pace with the speed of urban growth and supporting development of integrated water cycle management plans in growth areas • Encouraging expanded use of recycled water beyond irrigation during dry periods. 16 Melbourne Water Annual Report 2012–13 Using alternative water sources to benefit Melbourne Melbourne Water continues to work with its customers to help deliver the Victorian Government’s vision of a smart, integrated and resilient water system for a liveable, sustainable and productive Melbourne. We are collaborating with customers and stakeholders to deliver the best value we can from the whole water cycle. This means we are driven by the perspectives of our customers and stakeholders and have been making tangible progress through onground projects. A key lesson we have learned is the need to be flexible and outcome focused. This has seen us use different service approaches for different localities to match local drivers and ensure affordable water cycle management. Drinking water makes up less than one-third of Melbourne’s total water demand. The Department of Health requires drinking water to be used for indoor taps and showers. Treated alternative water sources can be used for toilet flushing, laundry use, domestic gardens, parks and gardens, some environmental purposes, industry and peri-urban agriculture. Taking this approach enables Melbourne to preserve drinking water for specific uses. There are multiple benefits to managing the water cycle in a more integrated way, such as: • Community – healthy open spaces and sports fields, a reduced urban heat island effect and improving the resilience of the water supply system to climate change and variability • Economic – opportunities for growth, especially in industry and agriculture • Environment – increasing the amount of water available for environmental flows and reducing the impact of discharges such as stormwater and treated wastewater. Melbourne Water is working with local councils and water retailers to deliver stormwater harvesting projects for residential and open space uses. We are also working with City West Water, Southern Rural Water, South East Water and the Water Infrastructure Group to provide customers with recycled water from our wastewater treatment plants and encourage expanded use of recycled water beyond irrigation during dry periods (e.g. for residential dual-pipe schemes). Regional strategies to guide investment in water projects During 2012–13 Melbourne Water collaborated with the Office of Living Victoria and our customers to develop regional integrated water cycle strategies to guide investment in water projects across Melbourne to 2050. The strategies are being developed to outline a program of staged works that contribute to the vision of a ‘productive, liveable and sustainable’ region by 2050. North The preliminary Integrated Water Cycle Management Plan, completed by Yarra Valley Water and Melbourne Water with the Office of Living Victoria, has been released for consultation. The plan investigates sustainable ways to provide water supply and sanitation services to new homes and businesses in Melbourne’s northern growth corridor through integrated water cycle management. Melbourne Water is also working with Yarra Valley Water on promoting integrated water cycle management in infill development through the Coburg stormwater harvesting project. The Coburg Principal Activity Centre Harvesting and Reuse project will examine how to select a large redevelopment site for viable stormwater harvesting and reuse in inner Melbourne. South East After the development of an Integrated Water Cycle Management Strategy in 2012 with South East Water and Southern Rural Water, attention has shifted to on-ground delivery of integrated water cycle management approaches in urban growth area planning. In 2012–13, Melbourne Water worked with South East Water, the Growth Areas Authority and local councils to develop integrated water servicing strategies for the Botanic Ridge and Casey-Clyde growth areas. These strategies consider the role of recycled water and stormwater harvesting to reduce potable water use and sewage discharges, and reuse urban stormwater. Investigations at the Botanic Ridge site deemed stormwater harvesting unfeasible for domestic use when the full range of costs and benefits were considered. Options analysis of the Casey area identified opportunities for extensive use of alternative water sources, which will be progressed in 2013–14. West An investigation by Melbourne Water, City West Water, Southern Rural Water, Western Water and the Office of Living Victoria found a regional Integrated Water Cycle Management Plan in Melbourne’s west could deliver substantial value. The five organisations took the first steps towards developing a regional plan, which included work on integrated water cycle management with the Growth Areas Authority and investigation of the contribution water authority owned or influenced land makes to recreational opportunities in the region. Work in 2012–13 also included investigating ways to share recycled water treatment capacity at the Western Treatment Plant. This work will form the basis of the Integrated Water Cycle Management Plan, which will require work with local councils and other key stakeholders in 2014 to progress priority opportunities. Melbourne Water and City West Water are also working collaboratively to deliver integrated water cycle management in Melbourne’s western growth areas. A Melbourne Water employee has been seconded to work with City West Water to facilitate integration of water management services to benefit the community and the environment. The secondment is recognised by both organisations as an excellent example of Melbourne Water’s commitment to strong working relationships with its customers. Inner Melbourne To inform the Metropolitan Planning Strategy, Melbourne Water has worked with the Office of Living Victoria, the Department of Transport, Planning and Local Infrastructure2 and the water retail businesses to undertake a water cycle study of inner Melbourne. The Victorian Government has previously identified a number of precincts for urban renewal within inner Melbourne. The broad-scale development of these precincts will be accompanied by redevelopment of existing activity centres, with growth anticipated to reshape an area far beyond the Hoddle Grid traditionally recognised as the Melbourne CBD. Water companies have undertaken hydraulic modelling of the water and sewerage networks to estimate the cost of managing the water cycle constraints associated with further development of inner Melbourne. These investigations have identified the types and locations of works needed to ensure water cycle services are provided. The investigations have been used in conjunction with economic modelling undertaken by the Office of Living Victoria. The same work has also been used to show the total community cost of managing the water cycle through business as usual approaches. The inner Melbourne submission for the Metropolitan Planning Strategy advocates for an integrated water cycle management approach across the urban planning process to limit increased demand for drinking water, reduce wastewater flows and retain a higher proportion of stormwater flows either onsite or in the landscape. Such an approach is expected to: • Substantially reduce expenditure on augmentation of transfer/distribution mains and balancing storages • Reduce expenditure on augmentation of trunk and reticulation sewers • Reduce both total and peak stormwater flows into local drainage networks with an associated reduction in flooding (where flooding is not caused by external catchments or tidal influences) • Help preserve and enhance the amenity of inner Melbourne by providing local councils with an expected lower cost water supply for irrigating parks and street trees • Improve inner Melbourne waterways by reducing peak stormwater flows and associated pollutants • Facilitate the improvement and creation of green corridors alongside healthy waterways to provide key linkages for the community. The next step is to expand the current working group to include local councils and deliver an Integrated Water Cycle Management Plan for inner Melbourne by September 2014. Defining liveability To support regional planning, Melbourne Water initiated a project in 2012–13 to better understand the concept of ‘liveability’ and what it means within our business and the water industry. Consultation included discussions with water industry stakeholders and other agencies, focus groups and interviews with local councils, community and social planners. Several key themes emerged including affordability, open space, diversity, growth areas, built and natural environments and business activities. By understanding how our activities and actions contribute to liveability, we can develop ways to demonstrate this contribution and help drive improvements. Melbourne Water has also developed a strategy to maximise liveability through land management. There is a significant opportunity to improve liveability for the community through land management, as research shows that land is at the heart of our customers’ perceptions of liveability. Access to open space, recreational opportunities and providing a connection to the natural environment are very important. Evidence suggests people are more likely to participate in exercise if they have greater access to open space, thereby reducing the strain on health services. Melbourne Water is well-positioned to provide more public open space opportunities by re-examining our land management practices. 2Formerly two separate departments known as the Department of Transport and the Department of Planning and Community Development. Stormwater harvesting Melbourne Water is responsible for the licensing of surface water from some catchments and from its own works, which includes the requirement to licence stormwater. There are currently 32 active stormwater licences issued by Melbourne Water, mainly to councils and sports clubs, totalling 1,455 million litres. Melbourne Water is actively working with local councils and water retailers to identify and implement stormwater harvesting projects. Best Practice Environmental Management Review A review of the Best Practice Environmental Management (BPEM) Guidelines for Urban Stormwater is progressing following the release of the Ministerial Advisory Council’s roadmap for water reform, the Living Melbourne, Living Victoria Implementation Plan and the Victorian Government’s Yarra and Bay Action Plan. A joint project between Melbourne Water, EPA Victoria, the Office of Living Victoria and the Department of Environment and Primary Industries3, the review is required to meet aspirations for integrated water cycle management. The project provides an opportunity to review the scope, form and specifics of the objectives of the guidelines, based on the latest research and industry experience. Changing the BPEM standards involves a two-phased approach. The first is a technical review of the BPEM standards. Melbourne Water has commissioned a large portion of the research that underpins the review. The second phase is to determine recommended changes to the existing BPEM. Review of stormwater planning clause Clause 56.07-4 of the Victorian Planning Provisions is an important clause for managing stormwater as part of urban development. In response to growing concern among our internal and external customers about the application of this clause, Melbourne Water led a review in partnership with the Office of Living Victoria, the Department of Environment and Primary Industries, and the Department of Transport, Planning and Local Infrastructure. The objective of the review was to determine the barriers and enablers to the clause, with input from Melbourne Water, local councils, developers and industry organisations. Recommendations were provided to partner agencies on steps that could be taken to achieve better stormwater management outcomes in the planning provisions. Little Stringybark Creek trials new Environmental Significance Overlay The Little Stringybark Creek Environmental Significance Overlay is an Australian-first planning amendment that requires developers in the catchment to treat water runoff before it enters the stormwater system. The overlay requires developers who increase impervious surface area by more than 10 square metres to treat runoff onsite through rainwater tanks, rain gardens or passive drainage, rather than flows entering the stormwater system. The overlay is designed as a two-year pilot to determine if this type of planning control is effective in reducing stormwater flows and improving urban waterway health. Managed aquifer recharge Managed aquifer recharge involves refilling aquifers for later recovery and use, or environmental benefit. Water deposits are made in times of surplus – commonly during winter – and extraction occurs during peak demand in summer when traditional supplies struggle to meet demand. Multi-year balancing is also possible for long-term storage. Typically, managed aquifer recharge involves the capture and use of treated stormwater or recycled water to recharge an aquifer. Melbourne Water is continuing to support City West Water’s West Werribee Aquifer Storage and Recovery project. This project aims to use managed aquifer recharge to store excess salt-reduced recycled water from a salt reduction plant at the Western Treatment Plant. The project could balance short-term seasonal demands as well as secure supply for coming decades. Detailed design of the site is underway, with construction expected to start in early 2014. Trials are also being planned for three additional aquifer storage and recovery sites on Melbourne Water land at Ravenhall, Greek Hill and Ballan Road. 3Formerly two separate departments known as the Department of Sustainability and Environment and the Department of Primary Industries. Figure 9: Melbourne Water’s recycling schemes Transcribers Note: Map has been omitted Managing water quality and reliability of supply Work is now complete on the Eastern Treatment Plant Tertiary Upgrade project, which has increased the quality of recycled water to Class A standard. This higher quality water can now be used for a broader range of non-drinking applications such as toilet flushing, watering sports grounds and irrigating vegetables. Operational handover to Melbourne Water occurred in April 2013 and Class A supply contracts with recycled water customers will start from July 2013. Melbourne Water is continuing to work closely with South East Water to progress further recycled water opportunities from Eastern Treatment Plant. In 2012–13 we continued to work with water retailers and other key stakeholders to reduce salt discharges to sewerage, and we are reviewing our Salinity Reduction Strategy to provide more fit-for-purpose recycled water for customers. Consultation with key stakeholders indicated that a risk assessment for the Eastern Treatment Plant and Western Treatment Plant catchments was needed. The results highlighted specific risk factors for the Western Treatment Plant catchment, which are now the subject of further investigation. The process will determine the effectiveness of previous salt reduction mechanisms such as cleaner production, pricing and trade waste variations as well as other options such as treatment and on-site management. Once the investigation is complete, a triple bottom line analysis will determine the most cost-effective method for salinity management and a draft management plan for Western Treatment Plant will be released in late 2013. Water recycling west of Melbourne Western Treatment Plant supplied 11,080 million litres of recycled water to customers in 2012–13 (23,168 million litres last year). This comprised 8,438 of recycled water used onsite (23,007 million litres last year) by the agricultural business MPH Agriculture, mostly Class C water for pasture irrigation and salinity management, and 2,642 million litres of Class A recycled water supplied to Southern Rural Water and City West Water for offsite customers (161 million litres last year). This year saw an encouraging increase in demand for Class A recycled water from both City West Water and Southern Rural Water. 20 Melbourne Water Annual Report 2012–13 Supply to Southern Rural Water Melbourne Water supplied 2,376 million litres of Class A recycled water to Southern Rural Water (9 million litres last year). A total of 67 million litres was supplied to customers in the Werribee Tourist Precinct. This year 2,309 million litres of Class A recycled water was supplied to the Werribee Irrigation District (0 million litres last year). This was due to a drier 2012–13 irrigation period and Southern Rural Water’s new contracts with Werribee Irrigation District farmers, which will see river water diluted with recycled water. This new arrangement ensures farmers have access to irrigation water even during harsh droughts and reduces dependency on river water. Supply to City West Water Melbourne Water supplied 267 million litres of Class A recycled water to City West Water (152 million litres last year) for the West Werribee Dual Supply, Werribee Employment Precinct, MacKillop College and standpipes for water carters. This year, City West Water’s West Werribee Dual Supply scheme came online. This scheme supplies housing developments in Werribee’s west with recycled water for toilet flushing, garden watering, streetscape and open space irrigation. During this year 2 million litres was supplied to City West Water for this scheme. In the Werribee Employment Precinct, recycled water is used by City West Water’s commercial customers for wash-down, industrial processes at Melbourne Water’s Hoppers Crossing Pump Station and open space irrigation. During the year, 154 million litres was supplied to City West Water for this precinct (98 million litres last year). City West Water was supplied with 30 million litres of recycled water for MacKillop College (22 million litres last year). Water carters were supplied with 80 million litres of recycled water from City West Water standpipes at the Western Treatment Plant (32 million litres last year) for a range of applications. This year saw a perceived decrease in the use of Class C recycled water for onsite agricultural use (8,438 million litres) when compared to last year’s usage (23,007 million litres). The perceived variance is due to a difference in how the recycled water volumes are calculated. In 2011–12, volume determination depended heavily on mass balance calculations. This year, upgrade works have seen the installation of flow meters throughout the recycled water delivery channels and volumes can be more accurately assessed. It is estimated that Class C recycled water flows to MPH Agriculture are actually within 10% of previous year volumes. In addition, 16,416 million litres were provided for conservation purposes in the Ramsar-listed wetlands (16,500 million litres last year). Including the conservation flow, 16% of Melbourne Water’s treated wastewater from both the Western Treatment Plant and the Eastern Treatment Plant was recycled. Water recycling east of Melbourne Historically, the Eastern Treatment Plant at Bangholme has produced Class C recycled water. With the completion of the Tertiary Treatment Upgrade, the plant now produces Class A quality water. Melbourne Water is working closely with water retailers to transition into the supply of Class A water commercially. This year 21,352 million litres of recycled water (18,139 million litres in 2011–12) was supplied from the Eastern Treatment Plant, including 14,379 million litres onsite (14,331 million litres last year). Supply to Water Infrastructure Group Melbourne Water supplied 5,767 million litres of Class C recycled water (3,089 million litres last year) to the Water Infrastructure Group. This was supplied for treatment to Class A recycled water for use in the Eastern Irrigation Scheme. The Eastern Irrigation Scheme operates under the brand TopAq, a wholly owned subsidiary of the Water Infrastructure Group. TopAq distributes recycled water to more than 80 customers for horticulture, open space irrigation and industrial processes. TopAq also supplies South East Water with recycled water for dual pipe schemes in residential developments where the water is used for toilet flushing, garden watering, streetscape and open space irrigation. Supply to South East Water Melbourne Water supplied 1,206 million litres of Class C recycled water to South East Water via the South Eastern Outfall pipeline (719 million litres last year). The pipeline transports recycled water from the Eastern Treatment Plant and smaller South East Water treatment plants to Boags Rocks on the Mornington Peninsula. South East Water customers along the pipeline use this recycled water for agricultural and horticultural activities, root crop irrigation, flower growing, drip irrigation of vineyards, and for watering golf courses and sports grounds. There are 50 customers using recycled water from the South Eastern Outfall, the same number as last year. Recycled Water Volumes Actual 2011–2012 Actual 2012–2013 Forecast 2012–13 ML %* ML %* ML %* 23,007 7.2% 8,438 2.8% 30,000 9.9% Werribee Irrigation District 0 0.0% 2,309 1.0% 10,650 3.4% Werribee Tourism Precinct 9 0.0% 67 0.0% 200 0.1% Western Treatment Plant Onsite recycling (Supply to MPH) Supply to Southern Rural Water Actual 2011–2012 Actual 2012–2013 Forecast 2012–13 ML %* ML %* ML %* West Werribee Dual Pipe Project 0 0.0% 2 0.0% 80 0.0% Werribee Employment Precinct 98 0.0% 154 0.1% 360 0.1% MacKillop College 22 0.0% 30 0.0% 50 0.0% Water 32 tankers/standpipes 0.0% 80 0.0% 200 0.1% Western Treatment Plant Total 23,168 7.2% 11,080 3.9% 41,540 13.6% 14,331 4.5% 14,379 4.7% 13,800 4.5% 3,089 1.0% 5,767 1.9% 5,000 1.6% Supply to City West Water Eastern Treatment Plant Onsite recycling Supply to Water Infrastructure Group Eastern Irrigation Scheme Supply to South East Water Actual 2011–2012 Actual 2012–2013 Forecast 2012–13 ML %* ML %* ML %* South Eastern Outfall 719 0.2% 1,206 0.4% 1,600 0.5% Eastern Treatment Plant Total 18,139 5.7% 21,352 7.0% 20,400 6.6% Total recycled 41,307 12.9 % 32,432 10.9% 61,940 20.2% Treated wastewater available for recycling 320,356 304,506 Conservation flows at Western Treatment Plant 16,500 16,416 Total incl. conservation flow 57,807 48,848 * Refers to percentage of treated wastewater produced at Melbourne Water’s treatment plants. ML = million litres Service delivery: Sewerage Side quote: “The Eastern Treatment Plant Tertiary Upgrade received an industry award at the Global Water Summit in Seville, Spain, where it was named 2012 Water/Wastewater Project of the Year.” Key achievements • Awarded the Water/Wastewater Project of the Year for the Eastern Treatment Plant Tertiary Upgrade at the 2013 Global Water Summit • Received national and state awards for the Melbourne Main Sewer Replacement project • Trialled the use of biosolids as fertiliser to improve soil structure and boost the yield of crops such as wheat and corn. Disappointments • Failed our odour complaints target, with 14 complaints against a target of 10 • Delayed completion of new aeration tanks at Eastern Treatment Plant until December 2013 due to substantial defects requiring rectification. Challenges • Rehabilitating the Eastern Drop Structure on Hobsons Bay Main Sewer in a ‘live’ sewer environment to facilitate the construction of an air treatment facility • Reviewing our Corrosion and Odour Management Program to manage issues such as the impacts of reduced sewer flows on odourcausing compounds • Positioning Melbourne Water to take advantage of new markets for resources produced from sewage and biosolids. Figure 10 Melbourne Water’s sewerage system Transcribers Note: Map has been omitted Our sewerage system Melbourne Water’s sewerage system consists of: • 400 kilometres of sewers • Eight sewage pumping stations • The Eastern Treatment Plant at Bangholme and the Western Treatment Plant at Werribee • Nine air treatment facilities. Melbourne Water treated a total of 305,901 million litres of sewage at Eastern Treatment Plant and Western Treatment Plant in 2012–13. This was similar to 2011– 12 flows (320,067 million). About 43% of this sewage was treated at Eastern Treatment Plant and 57% was treated at Western Treatment Plant. Eastern Treatment Plant Melbourne Water’s $418 million upgrade of the Eastern Treatment Plant was completed on time and within budget. Delivered by the Eastern Tertiary Alliance (a partnership between Baulderstone, United Group Infrastructure, Black & Veatch, KBR and Melbourne Water), the project was handed over to Melbourne Water in April 2013 following commissioning and successful performance trials in late 2012. The upgrade has introduced an advanced tertiary stage of sewage treatment at Eastern Treatment Plant, improving the quality of water it produces and making it one of the most sophisticated large-scale treatment facilities in the world. The aim of the project was to benefit the marine environment by significantly improving the Eastern Treatment Plant’s discharge quality. Combined with an innovative treatment approach, the upgrade also provides a new source of high quality recycled water for fire-fighting, flushing toilets, washing machines, watering gardens and lawns, and washing cars. The upgrade received an industry award at the Global Water Summit in Seville, Spain, where it was named 2012 Water/Wastewater Project of the Year. It was recognised for its groundbreaking trials and innovative processes, which use a combination of ozone treatment, filters, and UV and chlorine disinfection. Rising to the challenge In 2012, a joint on the South Eastern Outfall rising main began to leak, just downstream of the Eastern Treatment Plant Outfall Pump Station. The South Eastern Outfall rising main is used to pump treated and disinfected effluent 10 kilometres uphill from the Eastern Treatment Plant to Frankston, where it flows into the much larger South Eastern Outfall and is then gravity-fed to the Ocean Outfall at Boags Rocks near Gunnamatta. The same main also supplies recycled water to South East Water customers directly or via the TopAq tertiary plant. A number of solutions for fixing the leak were investigated; however, the only viable option was to cut and remove the leaking joint and replace the faulty valve. This involved the complete shutdown and drainage of the rising main while still maintaining normal treatment plant operations and storing the treated effluent onsite. The shutdown was well planned with recycled water customers, South East Water and TopAq, and took 48 hours of non-stop work to complete. Aeration tank works now on track A contract was awarded to construct four additional aeration tanks in early 2007 to support the conversion of existing aeration tanks to an ammonia reduction process, and provide for ongoing population-based load growth to the Eastern Treatment Plant. However, a number of defects relating to the construction of the concrete aeration tanks became apparent, causing significant delays and increased costs. Identifying the potential causes of the defects and developing appropriate solutions has been complex. It has also required a high level of cooperation between Melbourne Water, the project manager, designer and constructor. The current completion date for the construction phase of the project is December 2013 with all parties working constructively towards this goal. Western Treatment Plant Covers renewal project progressing well Works to replace and double the size of the existing covers on treatment lagoons at the Western Treatment Plant are progressing well. Four times the size of the MCG, the new covers will help reduce odour and capture more biogas to generate renewable energy. About 70% of the upgrade has been completed, with the remaining segments expected to be completed in early 2014. In 2012, the project was also chosen as a finalist in the WorkSafe Victoria Awards for improvements to work methods that have significantly reduced the high risk of manual handling injuries (see Organisational capability chapter). Supporting biodiversity and improving the marine environment An innovative approach to risk assessment has been developed for the Western Treatment Plant to manage the dual challenges of receiving water quality and biodiversity objectives. Intensive scientific studies were undertaken in 2012 to develop a more rigorous understanding of the interactions between treated effluent discharges and receiving waters, and an Environmental Risk Assessment found the risk to Port Phillip Bay was low. Studies also showed that nutrients in the effluent provided an important benefit to the receiving waters, increasing the productivity of aquatic animals living in the bay’s mudflats and supporting internationally significant populations of migratory shorebirds. These shorebirds are one of many important values that contribute to the listing of Western Treatment Plant as a wetland of international importance under the Ramsar Convention. The studies also revealed an opportunity to maintain the bay’s biodiversity while improving water quality. It was shown that adjusting the distribution of treated effluent, so it is delivered more directly to foreshore areas, will deliver the most benefit to the bay. Meeting these biodiversity requirements more efficiently will also require less water and increase the amount of recycled water that can be reused. Projects to implement these improvements are now planned for 2014–15, and will make a significant contribution to Melbourne Water’s vision of Enhancing Life and Liveability through an integrated water cycle management approach. Program of works to increase capacity at the Western Treatment Plant With sewage loads to the Western Treatment Plant growing in recent years, a threestage program of works has been developed to cater for increased demand. Scheduled to take place between 2014 and 2021, the works will efficiently match capacity with customer demand. The works are planned to balance environmental performance with customer service levels, as well as minimising financial impacts on our customers. The first stage of works at the Western Treatment Plant will optimise existing lagoons through low-cost changes to enable major expenditure on new assets to be deferred. The work will include flow distribution modifications within the treatment process. This will provide targeted nutrient delivery to the Lake Borrie lagoon to support internationally significant waterfowl populations. The second stage of works will include construction of a new activated sludge plant to deliver additional treatment capacity in the medium term, and enhance the reliability of Class A recycled water supply. The new sludge plant will enable stage three refurbishment of older assets between 2019 and 2021. Transfer system During 2012–13, considerable planning has taken place for future upgrades to the sewerage transfer system. These upgrades will commence during Water Plan 3 (2013–14 to 2017–18). Funding for these projects will be determined by the Essential Services Commission (ESC). Progress on North Yarra Main Sewer replacement Melbourne Water is replacing the century old North Yarra Main Sewer and the Kew North Branch Sewer, located in Alphington and Kew North. The relevant section of the North Yarra Main Sewer runs within the Latrobe Golf Course and Coate Park in Alphington, adjacent to the Yarra River. The relevant section of the Kew North Branch lies between a point south of the Eastern Freeway, near Princess Street, and a connection point on the North Yarra Main Sewer. The project will reduce the risk of a potential sewer failure as the asset approaches the end of its useful life and will provide increased capacity, enabling the sewer to keep up with demand and reducing the potential for spills. Since 2010, Melbourne Water has worked closely with the City of Yarra, Parks Victoria and Latrobe Golf Course through an initial options assessment process, a series of design workshops and more detailed design options. The proposed works will involve a combination of tunnelling and trenching. Substantial progress has been made on the planning phases of the project, with works expected to start in late 2013 and scheduled to take about three years to complete. Ringwood Sewer/Dandenong Creek Strategy Preliminary work has started to gain a better understanding of the biodiversity and threatened species habitat of the Dandenong Creek as part of implementing the Ringwood Sewer/ Dandenong Creek Strategy. Future work will include determining the range of pollutants in the creek and possible options for prevention. Establishing a clear focus on the natural amenity for receiving waters and habitats will also be important. The approach is innovative in that it allows for the deferral of a $100 million sewer upgrade while achieving improved environmental outcomes. The strategy will be implemented during Water Plan 3 (2013–14 to 2017–18), with initial works due to be completed in mid-2014. Melbourne Main Sewer Replacement project complete The Melbourne Main Sewer Replacement project, one of the most complex sewer tunnelling projects undertaken in Australia, was completed on 7 July 2012. The project replaced a 2.3 kilometre section of the 110 year-old Melbourne Main Sewer which will triple sewerage capacity and cater for inner growth for the next century. An additional 1.9 kilometres of smaller branch and reticulation sewers were also constructed to connect existing sewers to the new sewer tunnel. A major component of the project was building a 140 metre pipeline under the Yarra River that took specialist divers and engineers two years to build. The project was recognised by the following industry awards: • Winner of the 2012 Australian Society for Trenchless Technology Project of the Year – New Installation • Winner of the 2012 Victoria Civil Contractors Federation Earth Awards (Category 5) projects greater than $75 million. Melbourne Water delivered the works with John Holland, GHD and Aurecon. Managing corrosion and odour Melbourne Water received 14 odour complaints related to the sewerage transfer system this year. This was the same as in 2011–12, but more than our target of no more than 10. Most of the odour complaints related to manhole covers being dislodged or damaged by traffic as well as normal discharge of sewer gases from vent stacks or ventilation associated with works undertaken in sewer network. A key component of our Corrosion and Odour Management Program is the development of sewer management plans at a catchment scale with water retailers. Other program activities include analysing factors contributing to the generation and release of gases, identifying hotspots, and determining the most effective ways to manage corrosion risk and odour over the next 20 years. Works to address sewer corrosion and odour from the Eastern Drop Structure (EDS) manhole on the Hobsons Bay Main Sewer continued this year, with the completion of below-ground rehabilitation works and the commencement of a $23 million air treatment facility. The EDS allows sewage from Melbourne’s city fringe and bayside areas to drop down and flow beneath the Yarra River. It handles about 175 million litres of sewage a day and is the main crossing point for sewage on the way to the Western Treatment Plant. Melbourne Water is also contributing to the Sewer Corrosion & Odour Research (SCORe) Project, established to help the Australian water industry achieve costeffective and efficient corrosion and odour management in sewers. The tools generated by the SCORe Project cover four key areas: • Liquid phase controls • Gas phase controls • Corrosion control, prediction and coating performance • Odour and corrosion control through integrated management of assets. Managing biosolids Melbourne Water is trialling the application of biosolids as fertiliser to improve soil structure and boost crop yields on land currently leased to MPH Agriculture at the Western Treatment Plant. The biosolids, most of which come from the Western Treatment Plant, have been stockpiled for just over three years and are being used on wheat crops in winter and corn crops in summer. A small amount of biosolids stockpiled at the Eastern Treatment Plant for about four years are also being used. All of the biosolids have been tested for metals, organochlorides and pathogens and meet relevant EPA Victoria guidelines. The trial will reuse more than 1,500 dry tonnes of biosolids spread over 100 hectares of agricultural land. The method chosen for spreading the biosolids allows for direct comparison of seven different application rates/field treatment options, including a control. Preliminary results will be known after the winter crop has been harvested and full results will be available after April 2014, when the summer crop is harvested and field testing is complete. It is expected that biosolids reuse will have a beneficial impact on grain yield, protein content and soil structure. Sewer mining Melbourne Water updated its Strategic Sewerage Assessment Tool this financial year to reflect current treatment system performance. The updated modelling tool is now capable of analysing the system-wide effects of sewer mining and localised sewage treatment, including energy consumption, greenhouse gas emissions, nutrient and water flows. Together with the Hydraulic and Sewage Quality Model, the Strategic Sewerage Assessment Tool will be used to support the development of integrated water cycle strategies in Melbourne. Side Caption: “The Melbourne Main Sewer Replacement project, one of the most complex sewer tunnelling projects undertaken in Australia, was completed on 7 July 2012.” Service delivery Waterways Side quote: “Melbourne Water works with many organisations, groups and individuals to look after our waterways, and the plants and animals that depend on a healthy river environment.” Key achievements • Completed Flood Management Plans with all 38 local councils in our region • Removed 1,021 kilometres of weeds and planted 259 kilometres of native vegetation along waterways • Developed a new Waterways and Drainage Strategy, approved by our Board in September 2012, which sets 39 performance targets that will be independently assessed each year for the next five years • Finalised our Healthy Waterways Strategy, which identifies priority areas and management actions to improve waterway health from 2013–14 to 2017–18 • Finalised our Stormwater Strategy, which focuses on the integrated management of stormwater to achieve multiple community outcomes from 2013–14 to 2017–18 • Completed a successful pilot program to limit pollutants from rural land entering waterways • Built a new fishway at Dights Falls, Abbotsford on the Yarra River to improve passage for migratory fish to breed. Disappointments • Several heavy rainfall events caused flooding in the Koo Wee Rup and Longwarry Flood Protection District. Challenges • Integrating flood management with broader stormwater quality/quantity management and overall integrated water cycle management • Managing expectations about water quality during and after heavy rainfall events • Meeting the growing needs of urban development in a way that considers waterways, regional drainage and floodplain management • Developing a measure of the social value of waterways and a deeper understanding of how our management practices can improve amenity. 30 Melbourne Water Annual Report 2012–13 Figure 11: Melbourne Water’s waterways and drainage systems map Transcribers Note: Map has been omitted Our waterways and drainage system Melbourne Water oversees river health in the Port Phillip and Westernport region. In this role, we manage: • 8,400 kilometres of rivers and creeks • 1,484 kilometres of drains • 435 constructed waterway treatment systems and wetlands • 308 monitoring stations on waterways and drains • 160 urban lakes. Improving river health Melbourne Water works with many organisations, groups and individuals to look after our waterways, and the plants and animals that depend on a healthy river environment. These organisations include local councils, landowners, community groups, developers, farmers, government agencies and research institutions. Melbourne Water removed and managed weeds across 1,021 kilometres and revegetated 259 kilometres of land along waterways. These works help improve river health and protect riverbanks from erosion. Our River Health Incentives Program provides funds and support for landowners and managers to improve the health of land adjoining waterways. We provided 966 grants this year valued at $4.49 million (compared to 964 grants valued at $4.19 million in 2011–12). Under our Stream Frontage Management Program, we provided $2.44 million to support 700 projects on private property (compared to $2.56 million to support 725 projects in 2011–12) and we provided $773,254 to support 44 Rural Land Program projects. We also provided funding for 133 Community Grant waterway management projects totalling $617,255 (125 grants totalling $590,000 in 2011–12) and supported public land managers through 89 Corridors of Green projects totalling $659,158 (114 grants totalling $969,000 in 2011–12). New Waterways and Drainage Strategy In September 2012 the Melbourne Water Board approved a draft Waterways and Drainage Strategy to challenge the business to perform at the highest standard and make us more accountable to our customers, stakeholders and the community. The strategy was a specific requirement of Melbourne Water’s Statement of Obligations and formed the basis of the Waterways and Drainage component of our Water Plan 3 (2013–14 to 2017–18) submission to the Essential Services Commission (ESC). The Waterways and Drainage Strategy sets robust key performance indicators, presented as 39 targets (and associated performance measures) against which progress is independently assessed each year. The Waterways Advisory Committee, which consisted of representatives from the land development industry, community groups, local councils, the Department of Environment and Primary Industries4, EPA Victoria, Parks Victoria, the Port Phillip and Westernport Catchment Management Authority and the University of Melbourne, helped develop the strategy and contributed to its strategic direction and targets. A major challenge was bringing together the diverse views of the committee members to develop and finalise the strategy. Healthy Waterways Strategy adopted Melbourne Water finalised our Healthy Waterways Strategy, which outlines how we will work in partnership with the community, our customers and stakeholders to manage rivers, estuaries and wetlands in the Port Phillip and Westernport region. The new strategy will be used as a guide to protect the environmental health of our waterways and the amenity they provide. Activities guided by the strategy include vegetation management, environmental flows, habitat enhancement and working with communities to achieve healthy waterways. The strategy identifies priority areas and management actions from 2013–18. Melbourne Water consulted extensively with interested landowners, community groups, government agencies and local councils to ensure broad customer and stakeholder support. The consultation process (which was run in conjunction with the Stormwater Strategy) included 22 workshops and more than 11,000 people visited our website and forum page to provide comment. Defining the social value of waterways Although the social value of waterways has long been recognised, Melbourne Water completed research in 2012–13 to refine our understanding of ‘social value’ in relation to amenity. While developing our Healthy Waterways Strategy, we undertook additional analysis so we could include amenity as a key waterway value alongside fish, frogs, birds, platypus, macroinvertebrates and vegetation. Previous research has shown that people feel waterways are places of value where they can undertake passive and active recreation. However, developing our understanding of how waterway management can influence this kind of amenity for the better is a challenge. Although we have a good understanding of the factors that influence amenity, such as vegetation and sensory access to the waterway, further research is needed to determine how much and what quality of vegetation enhances amenity. By managing the amenity of waterways, Melbourne Water hopes to provide a setting that supports a range of other community values such as liveability and recreation. Dights Falls fishway working well A new fishway at Dights Falls in Abbotsford on the Yarra River was officially launched by the Honourable Peter Walsh MLA, Minister for Water, on 14 December 2012. The Dights Falls fishway and weir replacement project was one of the most significant river health projects in Water Plan 2 (2008–09 to 2012–13). It involved replacing the old weir and improving passage for migratory fish through the installation of a vertical slot fishway. The heritage-listed Dights Falls Weir, built in 1895, had reached the end of its life and needed to be replaced. The new weir continues to play an important role controlling water levels in the Yarra – pooling water for approximately 17 kilometres upstream and protecting important social, economic and environmental values of the river. The Yarra River supports 17 species of native fish – 11 of which need to make movements up and downstream to breed. The new fishway directly benefits the Yarra and its upstream tributaries by boosting native migratory fish numbers and species diversity. Preliminary studies show it is working well and allowing many species to migrate past the weir. Works were done with extensive consultation and carried out under a Cultural Heritage Management Plan approved by Heritage Victoria. The project was delivered by the Waterways Alliance – a partnership between Fulton Hogan, Ecodynamics, SMEC and Melbourne Water. 4Formerly two separate departments known as the Department of Sustainability and Environment and the Department of Primary Industries. Works at Mullum Mullum Creek improve habitat for platypus Melbourne Water planted 16,000 native trees and removed 3.5 kilometres of weeds along a stretch of Mullum Mullum Creek between Deep Creek Road in Mitcham and Park Road in Donvale. A key aim of the project is to improve platypus habitat. Eight platypuses were found in the creek during surveys in November 2012 – the highest count since Melbourne Water started surveys in 1995. It is hoped that improved conditions will continue to support breeding and expand the platypus habitat into other areas of the creek. Baby boom for Melbourne’s platypus Our Urban Platypus Program’s autumn survey found the percentage of juvenile platypuses sighted in Melbourne is the highest in at least five years. Melbourne Water conducts platypus surveys twice a year to determine the status of platypus populations across greater Melbourne and the threats platypuses face in urban areas. To help ecologists gain a better understanding of the platypus population and aid conservation, platypusspot.org was launched in conjunction with cesar (a research organisation that runs Melbourne Water’s Urban Platypus Program) to encourage people to share their platypus sightings online. Water quality Living Rivers is a Melbourne Water program that operates in partnership with 38 local councils to identify needs and deliver sustainable stormwater management outcomes. Over the past 12 months, Living Rivers has provided $4.5 million in project support to local councils for projects aimed at building capacity for sustainable stormwater management. Key projects include: • The development of water sensitive urban design maintenance guidelines and life cycle costing of water sensitive urban design assets (all councils) • Tattersons Park wetland (City of Greater Dandenong) • Dobsons Creek stormwater disconnection retrofit (City of Knox and South East Water). Stormwater Strategy completed Melbourne Water recently finalised our new Stormwater Strategy 2013–18 to help manage stormwater and protect and improve the health of waterways and bays. The strategy sets out a high level strategic direction for managing stormwater in rural and urban areas to deliver multiple community outcomes, including alternative water supply, public safety, healthy waterways and bays, and wellbeing and liveability. The consultation process was run in conjunction with the Healthy Waterways Strategy. Successful trial reduces waterway pollution from rural land A trial to reduce pollutants from rural land entering waterways has been a huge success. More than 100 landholders were recruited in three catchments to take action to reduce pollutant loads to waterways during the pilot of the Rural Land Program. Modelling for the activities funded in the pilot (e.g. stock exclusion fencing, revegetation, paddock re-alignment, etc.) has estimated an annual reduction of 21,925 kg/year nitrogen, 8198 kg/ year phosphorus and 2321 tonnes/year sediment from entering into Port Phillip Bay and Western Port. The Rural Land Program is set to become a core program of Water Plan 3 (2013–14 to 2017–18), and will be delivered as part of the broader Stormwater Strategy implementation program and the River Health Incentives Program. The trial was funded by the Department of Environment and Primary Industries5, and will be funded by Melbourne Water in the future. Alternative delivery methods are also being tested including a partnership with Mornington Peninsula Shire Council to develop and deliver a customised version of the program in two rural catchments on the peninsula, and better integration with the Tarago Sustainable Farms Program through the Neerim South Landcare Group. 5Formerly two separate departments known as the Department of Sustainability and Environment and the Department of Primary Industries. Environmental flows In 2012–13, Melbourne Water delivered 14 separate environmental flows in the Werribee, Tarago and Yarra rivers, delivering about 17,000 mega litres of water to improve river health and meet our ecological objectives. The Werribee system received seven environmental flows using water from the environmental entitlement, and additional water secured through a temporary trade. This allowed us to provide flows from the Werribee Diversion Weir for the first time, providing benefits for water quality, fish and platypus around Werribee. Community feedback has been positive, and monitoring has revealed unexpected benefits such as support for the frog population of Coimadai Creek. The first ever environmental flow in the Tarago River took place in November 2012, targeting the migration of Australian Grayling, a threatened native fish species. Since the success of the first release, two additional releases have taken place. Four environmental releases occurred in the Yarra River in 2012–13, including the largest to date. Designed to mimic an autumn high flow, this release was intended to promote the spawning of Australian Grayling. For the first time ever, water was simultaneously released from four separate delivery points to achieve the required flow magnitude. Recent monitoring indicates these environmental flows have helped improve water quality by flushing stagnant water from the river bed to maintain fish and macroinvertebrate. Waterway diversions Melbourne Water manages about 1,900 licenced waterway diverters that extract licensed water from the Yarra River, Maribyrnong River, Stony Creek, Kororoit Creek, Laverton Creek and Skeleton Creek catchments. Water is mainly used for agricultural, industrial, commercial, domestic and stock purposes. Dry change presents challenges for water users After two years of wetter conditions, the dry 2012–13 irrigation season caught some water diversion licence holders off guard, presenting challenges for Melbourne Water. The Yarra Valley experienced a long, dry summer with little autumn rain and above average temperatures. For example, rainfall at Coldstream between October 2012 and April 2013 was 257.4 millimetres, 146.3 millimetres below the long-term average (Bureau of Meteorology, 2013). Site inspections by Melbourne Water across summer and autumn uncovered a significant number of diverters who were approaching or had reached their water entitlement. Thankfully most users were able to be directed to additional water through trade on the temporary water market. However, several diverters still exceeded their allocation. This resulted in warning letters being issued to some growers and a small number of cases are still being considered for legal action. Action is considered necessary by Melbourne Water when the breach is significant and places access for the environment and other water users at risk. The dry conditions also resulted in a higher number of water trades on the water market with a 20% increase in trade applications on last year. Other tasks included: • Implementation of the Stream Flow Management Plans for the Woori Yallock Creek and the Little Yarra and Don River catchments, introducing revised flow triggers for bans/ restrictions and new water trading rules in these catchments • Closer monitoring of users along the Yarra River during environmental flow releases to ensure preservation of the releases for their intended purpose. Stormwater licensing Melbourne Water continued to work with local councils and water retailers around new stormwater harvesting schemes. As of June 2012 we have issued 30 stormwater licences for a total of 1,291 million litres. This represents an increase of 571 million litres over last year’s figures. New schemes included: • DeWinton Park, Rosanna • Chelsworth Park, Ivanhoe • Kalparrin Lake, Greensborough • Elsternwick Park, Elsternwick. Councils including City of Hobsons Bay, City of Boroondara and City of Moonee Valley have schemes currently being assessed. Ongoing demand for stormwater is expected to continue as it remains a key element in integrated water cycle management strategies. In the face of ongoing demand we are continuing to assess the potential impacts of harvesting on receiving urban waterways and adapting policy and harvesting rules. Service standards Melbourne Water has met the service standards set out in our Customer Charter for Diversion Services. The number of applications received in total was up from last year but we have maintained performance with 96.9% of all applications determined within the specified time limits. Flood management Floods are a natural and inevitable event, and we can’t always control them. Therefore, we must learn how to live with them while minimising risks to public health and safety, property and infrastructure. Flooding deeply affects individuals, households, and the community long after flood waters have subsided. The tangible damages, clean-up costs and loss of earnings have a direct financial impact on those flooded and on the community. The intangible damages, such as emotional suffering, loss of irreplaceable memorabilia and perceived loss of security, can’t be measured in monetary terms. In determining flood risk, Melbourne Water considers economic impacts, flood hazard and the social impacts of flooding. Our long-term aim is to minimise all currently known intolerable flooding risks to public health and safety, property and infrastructure. Although our focus for structural works is on extreme flood risk properties, we are also working with councils and the Victoria State Emergency Service on nonstructural measures such as flood management plans, flood emergency plans, education and awareness programs and flood overlay updates in council planning schemes. A key activity of the strategy was to complete 38 local flood management plans, which we successfully achieved in 2012–13. Even though these non-structural activities do not reduce the size of a flood, they do promote better understanding of flood risk and provide guidance on what people can do to lessen the impact of flooding. Work continuing on Koo Wee Rup and Longwarry flood protection The Koo Wee Rup and Longwarry Flood Protection District is a unique area within Melbourne Water’s operating region. A former swamp, the area was drained for farming in the mid-late 1800s and drains were cut through the land to manage flooding that remains common in the area. Melbourne Water is responsible for maintaining these drains and charges a special rate to fund the increased level of service across the district. Following concerns regarding flooding in early 2012, Melbourne Water fast-tracked works to improve drainage across the Koo Wee Rup and Longwarry area. We adopted a staged approach, tackling areas that did not require extensive ecological assessments first. One of the projects completed was an upgrade of the Bunyip Main Drain in Vervale, which raised the drain’s levee and rebuilt its 4 kilometre southern bank. The upgrades allow the new drain to withstand a one-in-15 year flood, whereas previously it could only cope with a one-in-7 year event. Nearly 100 kilometres of works are now complete, which has helped prepare the district for future high rainfall. We will now focus on a series of more complex works in 2013–14. Frankston Drainage Improvement project reduces flood risk Now in the final stage, the Frankston Drainage Improvement project has greatly reduced flood risk to central Frankston. Central Frankston contains important regional infrastructure that is subject to flooding in a one-in-100 year storm event, including Bayside North Shopping Centre, the law courts, police station and Chisholm Institute of TAFE. Monash University’s Peninsula Campus is also affected by flooding. A total of 1,427 properties were prone to flood in a one-in-100 year storm event including 1,104 residential properties and 323 industrial and commercial properties. This flooding posed a significant economic and social risk to Frankston and the broader community. To reduce this risk, the Pipelines Alliance (a partnership between Melbourne Water, Fulton Hogan, Jaydo and GHD) completed major drainage works. The works took place in three stages: • Stage 1 – a 1.5 kilometre drain as built between Monash University’s Peninsula Campus and Kananook Creek • Stage 2 – drainage infrastructure was upgraded within Frankston’s Central Activity District • Stage 3 – construction of a drain upstream of Monash University along Bloom Street, Roberts Street, Heatherhill Road and Manly Avenue. Flood risk reduced in Maribyrnong Melbourne Water has reduced the flood risk in the Maribyrnong River catchment by introducing a full range of non-structural flood risk reduction measures. In a one-in-100 year storm event, 478 properties in the area are flood prone. Key measures to reduce risk have included planning scheme overlays, flood management and flood emergency plans, a flood warning system and a Flood Safe/Storm Safe program. Under the latest improvements, each flood-affected property owner now has details of the flood implications for their property linked to river gauge levels. Forecasted flood level information is conveyed to the community as flood warnings by the media, providing time for residents to prepare for any future flooding event. Guiding urban growth In 2012–13, Melbourne Water continued its focus on working with the Growth Areas Authority, the Office of Living Victoria, local councils, water retailers and the land development industry to provide appropriate infrastructure for Melbourne’s urban growth in a way that onsiders waterways, regional drainage and flood management. Melbourne Water received approximately $39 million in developer contributions (excluding contributed assets) in 2012–13, which was less compared to previous years ($57 million in 2011–12). These contributions are paid to Melbourne Water to fund infrastructure and water quality projects. Despite less developer contributions, it has still been a big year for capital expenditure in developer works, with about $82 million spent on projects across greater Melbourne (compared to $76 million in 2011–12). Melbourne Water prepares drainage master plans known as Development Services Schemes which include a catchment drainage strategy with a pricing arrangement to support land development. A scheme is prepared to plan the required infrastructure to ensure new urban development meets appropriate standards of flood protection, stormwater management and waterway health. The current model enables the infrastructure to be fully funded by financial contributions from developers or landowners, with all developable properties contributing on the basis of land area and land zoning. Corporate: Environmental stewardship Side quote: “Melbourne Water is committed to protecting, conserving and improving natural assets and using natural resources sustainably.” Our aim Protect the natural environment and ensure resource availability for future generations. We will do this by: • Meeting environmental obligations and minimising environmental impacts • Conserving biodiversity • Responding to climate change and variability through mitigation measures • Using natural resources efficiently • Minimising waste through recycling and reusing initiatives • Preserving and promoting cultural heritage • Encouraging our suppliers and partners to apply sustainable business practices. Key achievements • Developed a new Energy Productivity Plan which identifies a potential 5% reduction in energy use and operational cost savings • Invested significantly in biodiversity conservation at the Western Treatment Plant including pest animal and weed control. Disappointments • Did not meet our office water use target in 2012–13, with consumption of 3,594 litres per full-time equivalent employee (FTE) per year, compared to a target of 3,177 litres per FTE per year. Challenges • Maximising value from the sale of Renewable Energy Certificates and the purchase of offsets to meet our 2018 greenhouse target • Minimising waste volumes and converting waste to valuable resources • Respecting Aboriginal heritage as we deliver on-the-ground projects • Protecting and improving biodiversity on land and waterways managed by Melbourne Water. 40 Melbourne Water Annual Report 2012–13 Environmental stewardship Our environmental commitment Melbourne Water is committed to protecting, conserving and improving natural assets and using natural resources sustainably. Our Environment Policy specifies actions and outcomes to achieve maximum net environmental benefits to society and to promote sustainable resource management and use. We have an Environmental Management System certified to the international standard ISO 14001, which establishes management requirements to protect the environment, prevent pollution and improve environmental performance. We also use our Community, Environment and Public Health Assessment checklist and triple bottom line guidelines to help assess and plan for potential environmental impacts from our activities, while balancing community benefits and meeting efficiency requirements for public spending. Energy and greenhouse gas management To minimise the potential impacts of climate change on our business and on the people of Victoria, Melbourne Water has introduced a number of mitigation strategies. As a business we are committed to actively managing our own contribution to greenhouse gas emissions by establishing a target to reduce net greenhouse gas emissions to zero by 2018. We completed a comprehensive Greenhouse and Renewable Energy Strategy in 2008–09 to identify how to meet our targets most efficiently. Most of the actions in this strategy have now been achieved and a new Energy Productivity Plan is in place. This plan discusses issues raised by the Carbon Pricing Scheme, the purchase of emission permits and offsets, and methods to further reduce greenhouse gas emissions. The plan also identifies a potential 5% reduction in energy use and operational cost savings. Our performance Melbourne Water uses significant amounts of energy to deliver water and sewerage services to its customers and the community. We are among the top 15 electricity users in Victoria and the top 150 in Australia. In 2012–13, we used 1.457 million gigajoules of energy (compared to 1.390 million gigajoules in 2011–12) and emitted total net greenhouse gas emissions including: • Water treatment and pumping 49,697 tonnes of carbon dioxide equivalent • Wastewater treatment and pumping 322,837 tonnes of carbon dioxide equivalent • Transport 3,493 tonnes of carbon dioxide equivalent • Other energy use (including offices) 7,535 tonnes of carbon dioxide equivalent • Offsets purchased 5,765 tonnes of carbon dioxide equivalent Melbourne Water spent $24 million this year on energy compared with $22.9 million in 2011–12. Figure 12: Energy by source 2012/2013 in gigajoules Transcribers Note: Figure 12 has been transcribed into a list below. 49% Grid Electricity: 714469gj 12% On-site Generation WTP: 181163gj 25% Trigeneration at ETP: 369341gj 0% Hydro on-site at Winneke: 0gj 3% Vehicle Fuels: 38374gj 5% Stationary Fuels: 69466gj 6% Natural gas: 84110gj Figure 13: Energy by use 2012/2013 in gigajoules Transcribers Note: Figure 13 has been transcribed into a list below. 82% Water 1,195,797gj 10% Sewage 152,364gj 4% Vehicles 63,246gj 1% Offices 9,095gj 3% Other incl. stationary fuels 38,374gj Greenhouse gas emissions reduction Melbourne Water’s target is to reduce net greenhouse gas emissions to zero by 2018. In 2012–13, the progressive target is a reduction of 45% compared to the calculated 2000–01 emissions of 725,225 tonnes of carbon dioxide equivalent. Our preliminary estimation of 2012–13 emissions is 382,867 tonnes of carbon dioxide equivalent and corresponds to a 47% reduction compared to 2000–01. Final emission data is calculated in October and is not expected to materially differ. Melbourne Water emitted 431,679 tonnes of carbon dioxide equivalent in 2009–10, 468,094 tonnes in 2010–11 and 418,807 tonnes in 2011–12. National Greenhouse and Energy Reporting System We report to the Federal Clean Energy Regulator under the National Greenhouse and Energy Reporting System (NGERS). During 2012–13, direct discussions with the Clean Energy Regulator assisted in clarifying greenhouse emission accounting methodologies to more accurately represent emissions from our sewage treatment plants. Studies commenced into measuring nitrous oxide emissions and measuring the capture of methane from the wastewater treatment plants. Melbourne Water is working with the University of Queensland and the CSIRO respectively on these studies. The overall aims of these studies are to improve the accuracy of current fugitive emissions calculation methodologies which will inform the business on ways to minimise or eliminate fugitive emissions. Carbon pricing mechanism Melbourne Water is a liable entity under the Carbon Pricing Mechanism (CPM) for some wastewater treatment activities. During the year, Melbourne Water was required to estimate and pay for its Interim Emissions Number (an estimate of 75% of Melbourne Water’s liable emissions for the year), of 140,000 tonnes of carbon dioxide equivalent. Final greenhouse gas emissions for 2012–13 will finalised under the CPM in February 2014. Carbon emission history Melbourne Water historic greenhouse gas emissions have been (tCO2e): Water treatment and pumping 2008–09 2009–10 2010–11 2011–12 2012–13 74,893 108,991 124,462 62,437 49,697 303,395 324,201 341,878 322,141 Wastewater 316,215 treatment 2008–09 2009–10 2010–11 2011–12 2012–13 Waste disposal - - - - - All other energy use (non-fleet) 9,528 15,741 15,977 10,999 7,535 Vehicle fleet 3,710 3,552 3,454 3,493 3,493 Offsets purchased 13,952 78,677 79,546 62,893 - N.B. NGER determination used to calcuate emissions from wasterwater treatment plus current energy and fuel data. Figure 14: Melbourne Water water supply system with mini hydroelectric power stations Transcribers Note: Map has been omitted. Securing onsite energy sources Melbourne Water operates biogasfuelled generation facilities at its Eastern and Western Treatment Plants. During 2012–13, the Eastern Treatment Plant power station generated 148,583 gigajoules of electricity, 30.5% of its need. The Western Treatment Plant power station (owned and operated by AGL) generated 181,163 gigajoules of electricity, 65.3% of its need, including 1,951 gigajoules exported to the grid. The Western Treatment Plant’s production for the year was reduced due to limited biogas supplies during the replacement of the 55 East Lagoon cover. We generated and used 610,726 gigajoules of onsite generated energy in 2012–13 (633,916 gigajoules in 2011–12). The amount of onsite generated energy we used and generated as a proportion of total energy was 37.8%. In October 2012, the refurbishment of the Thomson Dam hydro-electricity plant was completed. Since recommissioning, the plant has generated 37,766 gigajoules of electricity in 2012–13. After commissioning six mini hydro-electricity plants at our reservoirs, Melbourne Water has identified five suitable sites for additional mini-hydros. These projects are awaiting construction. Energy efficiency studies In 2012–13, Melbourne Water submitted its fifth public report, completing its first fiveyear cycle under the Federal Government’s Energy Efficiency Opportunities (EEO) program, which requires large energy-using businesses to conduct energy efficiency studies and identify energy saving opportunities. As part of the second cycle, Melbourne Water completed its second Assessment Plan which was approved by the Department of Resources, Energy and Tourism. The Assessment Plan details Melbourne Water sites that are required to undergo an energy audit over the next five years, including major sites such as sewage and water treatment plants, and pump stations. This year’s report examined efficiency improvements at the Eastern Treatment Plant, the Western Treatment Plant and the Winneke Treatment Plant. Completed in December 2012, the report found the potential cost savings associated with improvements at the three plants was $1.4 million per year. EEO projects with total savings of $690,000 have been implemented to date. Twenty-five opportunities were included in the report, including: • Upgrading fixed speed pumps to variable output • Refurbishing pumps • Optimising operational control settings and algorithms • Implementing new control codes • Removing redundant energy consuming assets • Upgrading office lighting. At the end of 2012–13, more than 96% of Melbourne Water’s electricity use had been audited. Energy data management system Melbourne Water has appointed a vendor for implementing the new Energy Data Management System (EDMS). The EDMS will replace an ageing energy data management system that has been in use since 2000 and reached the end of its useful life. The EDMS will provide expanded data management and reporting capabilities as well as storage of site-related data. Environment resource efficiency plans EPA Victoria concluded the Environment Resource Efficiency Plans (EREP) program early in 2012–13, which meant Melbourne Water did not have to provide an annual report on EREPs for this financial year. Ongoing management of water, energy and waste will continue without the formal requirement to report against an EREP for the Eastern Treatment Plant, the Western Treatment Plant and the Winneke Treatment Plant. Corporate Licence Melbourne Water’s Corporate Licence was amended in May 2013 after EPA Victoria introduced Amalgamated Licences. These have removed the Sustainability Commitment section of the Corporate Licence and adopted common language for all licence clauses. Parameters for the Eastern Treatment Plant have been amended to account for the upgraded treatment process. Melbourne Water will report against the parameters in the superseded Corporate Licence as this applied for the majority of 2012–13. Sustainability in our workplace Leading the way in sustainability Melbourne Water was a finalist in the 2012 Banksia Environmental Awards for integrating sustainable practices into our operational activities and reducing our environmental footprint. We were shortlisted in the category of ‘Leading in Sustainability – Setting the Standard for Large Organisations’, recognising our coordinated approach to making sustainability ‘business-as-usual’. Melbourne Water was also awarded gold Waste Wise certification in November 2012 for two years by the Metropolitan Waste Management Group. This certification recognises ongoing improvement in sustainable practices such as waste minimisation and office-based resource efficiency. In 2012–13, 73% of office waste was either composted or recycled. Office water use Melbourne Water did not meet its office water use target in 2012–13. Consumption was 3,594 litres per full-time employment (FTE) per year compared to a target of 3,177 litres per FTE. This was mainly due to commissioning issues with our new head office, resulting in more potable water use instead of rainwater and stormwater. This included commissioning issues with water tanks and excessive use of water for cooling the building’s sewage pumps. These issues have now been resolved and we have a new building management system (software application) that alerts us when more water is being used than expected. New waste to resources plan During 2012–13, Melbourne Water drafted a Waste to Resources Plan and commissioned the development of a comprehensive waste database. This plan will result in Melbourne Water looking outside its business to other waste managers in an effort to find cost-effective and environmentally sound solutions and markets for reusing its waste products. Conserving biodiversity Melbourne Water is a significant landholder and waterways manager within the Port Phillip and Westernport region. We develop and implement strategies that support biodiversity, in compliance with Victorian and Commonwealth biodiversity obligations. Consistent approach to protect biodiversity Melbourne Water’s Biodiversity Strategy ensures a consistent approach to managing biodiversity across the organisation and sets priority actions for improvement. During 2012–13, Melbourne Water also started development of an Environmental Stewardship Strategy. This strategy will help protect the natural environment and ensure resource availability for future generations. Managing important conservation sites Melbourne Water manages major portions of two Ramsar-listed wetlands of international importance – the Port Phillip (Western Shoreline) and Bellarine Peninsula Ramsar site at the Western Treatment Plant, and the Edithvale- Seaford Wetlands Ramsar site. Three of our reservoirs are designated ‘biosites’: Sugarloaf, Cardinia and Yan Yean. A further 34 Melbourne Water properties are listed as ‘sites of biodiversity significance’. All of these sites support biological communities or populations of at least regional significance as well as rare or threatened species of animals or plants. The Ramsar-listed Western Treatment Plant is possibly the most important refuge for waterfowl in Victoria. It supports migratory shorebird populations and a significant population of the nationally-endangered Growling Grass Frog. Its native grasslands support the endangered Spiny Rice-flower and its coastal salt marsh areas support Orange-bellied Parrots. Significant investment in biodiversity conservation at Western Treatment Plant has included pest animal and weed control, environmental watering of wetlands and ecological burn-offs of grassland. The Ramsar-listed Edithvale-Seaford Wetlands are part of the larger Carrum Wetlands Important Bird Area. This area includes the Eastern Treatment Plant and several adjacent wetlands, which are important habitats for waterbird and wetland vegetation communities and also for a community of bats and Eastern Grey Kangaroos. Major hydrological reset works are planned to improve water management at Eastern Treatment Plant to ensure appropriate habitat is maintained for a variety of waterbirds. Melbourne Water continues to update management plans for sites of biodiversity significance. During 2012–13, we reviewed our Sites of Biodiversity Significance Strategy, which establishes targets in our Healthy Waterways Strategy. This will build greater understanding of the importance of these sites and drive priority onground works. A strategy for the protection and enhancement of biodiversity values across the Hallam Valley floodplain was also prepared and is now the basis of triple bottom line planning for this area for which significant Commonwealth funding is being sought through the Biodiversity Fund. The effectiveness of our biodiversity management program is assessed through fiveyearly monitoring of key fauna and flora, regular reviews of site management plans, and waterbird monitoring at relevant sites. Figure 15: Melbourne Water biodiversity Transcribers Note: Map has been omitted Cultural heritage Melbourne Water continues to look for mutually beneficial heritage outcomes beyond compliance, by working in partnership with key stakeholders. While there are still some challenges in terms of integrating legislative requirements into planning processes, opportunities have opened up for key stakeholder input. Our corporate goal of protecting and promoting cultural heritage is detailed in our Strategic Direction and further embedded in our Cultural Heritage Strategy, which integrates Aboriginal and post-contact cultural heritage into our core business. By integrating cultural heritage into our Environmental Stewardship Strategy, we acknowledge cultural heritage as one of many intrinsic values in the environment. Our Cultural Heritage Risk Matrix recognises that cultural heritage plays a key role in water resource planning and delivery. Our commitment to cultural heritage management is demonstrated by participation in the following activities: • National Aborigines and Islanders Day Observance Committee (NAIDOC) week • Government Agency Heritage Asset Managers Forum • Cultural heritage tours • Wurundjeri country plan • Kulin Nation Koorong project – bark canoe making • Cultural awareness training • Community interpretive theatre – big pond play. Improving sanitation and drainage in Dili In January 2013, a joint venture between Melbourne Water and Yarra Valley Water developed a Sanitation and Drainage Master plan for the city of Dili in Timor Leste. The Government of the Democratic Republic of Timor Leste funded development of the master plan as well as construction of two sanitation pilot projects. Melbourne Water and Yarra Valley Water provided in-kind support to manage the overall project. The pilot projects provided two community sanitation facilities for disadvantaged communities in the Maskarinas and Bidau Santana districts of Dili. These communities previously had very limited access to toilet facilities. One community had a single, shared toilet in very poor condition, while the other had no proper toilet facilities at all. The new facilities have well-functioning and clean toilets, as well as personal washrooms and a laundry, and will greatly improve the quality of life in these communities. The master plan recommends a staged approach to providing sanitation services and improved drainage and flood protection for Dili over the next 25 years. The project has also provided recommendations for institutional arrangements to support implementation of the master plan. Corporate: Relationships Side Caption: “Melbourne Water has continued to implement its Customer Strategy to adopt a more commercial, whole-of business approach to managing relationships with customers and stakeholders.” Our aim To be valued by our customers and stakeholders, and a business of choice for our partners. We will do this by: • Strengthening relationships with customers, stakeholders and suppliers • Developing a deeper understanding of our customers’ needs • Seeking and respecting customer and stakeholder views in our decisionmaking • Collaborating widely to find better solutions through knowledge sharing and genuine partnership. Key achievements • Received our highest ever community satisfaction rating with regard to the management of waterways – 77% in a June 2012 community study • Developed a portable Water Smart City model that improves the delivery of our key education messages on the whole urban water cycle • Received several awards for our new Edithvale-Seaford Wetland Education Centre, recognising its sustainable implementation and unique design • Developed a Relationship Agreement with City West Water as part of the implementation of our new Customer Strategy • Formed a Customer Experience Team to lead and build customer focus across the organisation. Disappointments • Underestimated the impact of the Frankston Drainage Improvement project on a group of 17 local traders. Challenges • Communicating the value of our services to customers, who are entitled to know how funds collected through the Waterways and Drainage Charge are spent • Working with retailers to implement changes to the Waterways and Drainage Charge. Building strong relationships Melbourne Water’s success in achieving its vision of Enhancing Life and Liveability depends on building strong partnerships and relationships with customers and stakeholders. We are committed to listening to their needs, being responsive and pooling our knowledge and expertise to create better solutions. Customer Strategy leads to new relationship agreement Melbourne Water has continued to implement its Customer Strategy to adopt a more commercial, whole-of-business approach to managing relationships with customers and stakeholders. One of our key achievements for the year has been a new relationship agreement with City West Water. This agreement includes guiding principles for the relationship and identifies priority joint initiatives over the next 12 months. Review of Patterson Lakes responsibilities underway Traditionally, Melbourne Water has managed Patterson Lakes waterways and flood protection structures using funds collected through a special precept rate. The precept rate helps us provide services such as flood protection and maintenance to residents in the Tidal Waterways and Quiet Lakes areas. When Patterson Lakes was developed, it was agreed we would manage the waterways within these areas. However, over the past 12 months, Melbourne Water and area residents have been participating in an Independent Review of management arrangements for Patterson Lakes. The review was initiated to consider the rates we charge Patterson Lakes residents and make recommendations about future management and maintenance arrangements, and how they should be funded. This was in direct response to community requests to clarify who is responsible for the care of local lakes and waterways. More consultation will occur throughout 2013–14 to identify how the waterways can be managed into the future to enhance local amenity and clarify responsibilities and obligations. Package of measures negotiated with Heatherhill traders After initially underestimating the impact of the Frankston Drainage Improvement project on a group of 17 local traders, Melbourne Water engaged an independent facilitator to negotiate a traffic management plan and package of mitigation measures to minimise the project’s impact on the traders. The works were part of the final stage of the project and involved building new stormwater drains through residential streets and past the businesses, known locally as the Heatherhill traders. Before agreeing to the package, the traders had lobbied to change the location of works or halt the project. Although the project benefitted central Frankston, the traders felt it had considerable impacts on them at a time when the economic climate and other major projects were already damaging their bottom line. Works and road closures will now have less impact on the traders, and new traffic measures will ensure businesses remain open and accessible during construction. Communicating value to our customers A key challenge for Melbourne Water is communicating the value of its services to customers, who are entitled to know how we spend funds collected through the Waterways and Drainage Charge. This is a considerable challenge given the scope of our services, which range from major capital projects such as the $75 million Frankston Drainage Improvement project, to new wetlands constructed to benefit the environment, and other services such as grass cutting or weed removal along waterways. While communicating value is critical, doing so in a resource-strained environment requires innovative ways to get our messages out into the community. Recently we improved our efforts to communicate the value of our maintenance and low risk capital program by informing local members of parliament and installing better signage to explain the value of these activities. We have also increased our presence on social media such as Twitter and Facebook to inform a new audience about our role and the value of our services. Explaining the new Waterways and Drainage Charge Effective from 1 July 2012, the residential Waterways and Drainage Charge is now billed as a ‘flat rate’ for each occupancy, spreading the cost more equitably across property owners in Melbourne. Every dwelling on each property title is now billed a flat rate. Previously, the residential Waterways and Drainage Charge was calculated according to property values, and subject to a minimum charge. The actual charge was calculated based on 1990 property values and a ‘rate in the dollar’ figure. The new method for calculating the charge has been approved by the Essential Services Commission (ESC) and is in line with flat rate charges paid by retail water customers outside metropolitan Melbourne. It is also similar to the way other utility companies charge for their products and services. In the last 12 months Melbourne Water developed a detailed Communications and Engagement Plan in consultation with water retailers. This involved writing to every multiple dwelling owner/ customer in the South East Water and Yarra Valley Water regions (City West Water not yet complete) to explain the new billing system. The letter included: • what we had discovered • a fact sheet explaining impacts • relevant contact information, and • a mechanism for managing financial impacts. Improved customer focus In response to customer feedback, our Customer and Community Group was restructured over the last 12 months. Reflecting our Strategic Direction, a Customer Experience Team has now been formed to be a central, first point of contact for customer enquiries and to act as a centre of excellence, leading and building customer focus across the organisation. In addition, the Customer and Community Group’s new regional delivery model focuses on developing closer connections and a deeper understanding of the needs and expectations of our customers and stakeholders. Community engagement Highest ever satisfaction rating for waterways Melbourne Water received its highest ever community satisfaction rating of 77% for waterways in the greater Melbourne area in 2012. The Community Perceptions of Waterways study was conducted from May to June 2012 and surveyed more than 3,800 Melburnians who had visited their local waterway in the previous 12 months. The biennial study has reviewed community attitudes and perceptions to waterway maintenance, amenity and health since 1993, as well as stormwater and flooding. In response to the question: How satisfied or dissatisfied are you with the rivers and creeks in the greater Melbourne area overall?’ 77% of respondents answered ‘satisfied’, an increase of 7% on our KPI of 70%. Sponsorship for pioneering energy project Melbourne Water has joined forces with Poo Power, a pioneering Melbourne based project that aims to turn dog poo into a renewable energy source. The man behind Poo Power, Duncan Chew, has designed an anaerobic methane digester that uses biogas from dog waste to light up a local dog park in the City of Yarra. The benefits are two-fold, with the digester educating park users on local biogas production and similar work at the Western Treatment Plant, and expected improvements to waterway health. The project will include a 12-month education tour of community events prior to installation, followed by interpretative signage at the park. Sculpture raises awareness about willows and river health Over the course of three weeks, artist Patrick Dougherty wove more than five tonnes of willows into a spectacular sculpture at Federation Square to raise awareness of the harmful effects of willows on river health. Melbourne Water provided some of the willows for the artwork, which were removed, from vegetation work, to reinforce its role as Melbourne’s waterways manager and educate the community about maintaining healthy rivers. Expanding our online presence Melbourne Water is using its online presence to improve stakeholder engagement and customer service. Our new website, launched in August 2013, has been restructured based on extensive user-testing to help people access relevant and helpful information fast. An increased focus on social media is also attracting new users to our Facebook page, and helping us collaborate with community partners. We generated greater awareness about urban water management through Facebook and the launch of a short film competition in June. We also trialled a local Twitter page in Melbourne’s south-east to better inform local community members, media and stakeholders about ongoing water management issues. The successful program will be extended to our other regions late 2013. Community education New model for delivering community education Melbourne Water has developed a portable Water Smart City model to improve community education about the urban water cycle. The new model takes participants through the stages of urban development, from the catchment to city streets. The model includes Lego building pieces, which people pour water over, so they can see and discuss the impacts of stormwater on the landscape. The final step is to adapt the city by replacing pavement, adding green roofs and installing water tanks to make the city ‘water smart’. School education programs expanded Melbourne Water’s school education programs were expanded in 2012–13 to include river health excursions, which complement ongoing treatment plant tours and new activities at the Edithvale-Seaford Wetland Education Centre. Designed for primary and secondary students, the excursions cover topics such as water as a resource and waterways biodiversity to help young people understand water use issues and make positive change. Melbourne Water’s role in protecting, managing, treating and supplying water to greater Melbourne is also showcased. All activities support the Department of Education and Early Childhood Development’s new AusVELS curriculum in the areas of science and geography as well as the water and biodiversity modules in Sustainability Victoria’s ResourceSmart AuSSI Vic framework. Edithvale-Seaford Wetland Education Centre continues to win awards Since its completion in October 2011, the Edithvale-Seaford Wetland Education Centre has won several awards for its unique design and sustainable implementation. Recent awards have included the 2012 Premier’s Design Award, a 2012 Victorian Architecture Award for new Public Architecture, and a 2012 Master Builders Association of Victoria Excellence in Construction Award for Best Sustainable Energy Project. Home to more than 7,000 birds, the centre’s latest feature is an interactive display, allowing students and visitors to zoom into the wetlands through a high-resolution camera, offering a detailed view of the birdlife. Other new displays allow visitors to hear the sounds of the wetlands – birds, bats and frogs – or compare historical and current maps of the site. The centre is now open to the public every Sunday, giving people more opportunity to visit this internationally significant site. Raingardens Program builds momentum Stage two of the 10,000 Raingardens Program was undertaken throughout 2012–13. The program promotes a new, responsible way of gardening to help people create their own sustainable garden and do their bit to protect our rivers and creeks. Believed to be the first program of its type in Australia, the Raingardens Program started in 2008 and originally focused on working with local councils and schools to create raingardens in public spaces. In 2012, the program went public with a marketing campaign aimed at creating greater public awareness, and turning that awareness into action and registrations of built raingardens. We have now reached our target of 10,000 registrations. Energy and Water Ombudsman The Energy and Water Ombudsman (Victoria) investigates and resolves disputes between Victorian consumers and their energy, gas and water service providers. Melbourne Water is one of 19 Victorian water businesses that are members of the scheme. This year we responded to 25 investigated cases, 37 less than the previous year. Enquiries covered issues such as vegetation management, water licensing, drainage charges, project impacts, development works, security of property, flooding-related issues and property damage. We are working to resolve two of these cases which remain open – both relating to flooding issues. Side quote: “Melbourne Water has developed a portable Water Smart City model to improve community education about the urban water cycle.” Corporate: Financial sustainability Side quote: “Melbourne Water’s operating environment continues to provide significant challenges to the business.” Our aim Maintain financial viability and increase business value. We will do this by: • Maintaining sound financial governance • Operating efficiently and managing commercial risk effectively • Investing prudently and efficiently • Continuously improving business productivity • Earning a commercial return on investments. Key achievements • Developed a Financial Sustainability Strategy to strengthen our commercial focus • Established a Commercial Transformation Program to drive value for customers and deliver services more efficiently • Delivered $331.1 million of capital works in 2012–13, the final year of the $3.7 billion Water Plan 2 (2008–09 to 2012–13) capital program • Achieved above our financial performance targets for Return on Equity, Interest Cover, and Gearing ratios as a result of lower than expected net loss for 2012–13 (explained further under Financial performance) • Signed a 20-year lease agreement for the use of agricultural land at the Western Treatment Plant, enabling greater sustainable and productive use of the land and providing an improved commercial return for Melbourne Water. Disappointments • Recorded a loss of $30.1 million, mainly due to the full return to customers of revenue collected in advance in 2011–12 to make forecast obligatory payments relating to the Victorian Desalination Plant. Challenges • Managing significant impacts on our financial performance due to delays in commissioning the Victorian Desalination Plant • Managing impacts on our financial viability due to lower than proposed price increases • Determining how best to pass on desalination costs from 2016–17 onwards to minimise the impact on customers while still maintaining financial viability • Ensuring financial sustainability within our current operating environment. Ongoing operational challenges Melbourne Water’s operating environment continues to provide significant challenges to the business. These include responding to the financial impacts of the Victorian Desalination Plant, higher input costs across a spectrum of activities, service delivery, meeting customer expectations in relation to affordability, and effectively planning for an increasing population. The key financial challenge of 2012–13 related to delays in commissioning the Victorian Desalination Plant, contributing to a loss of $30.1 million (compared to a profit of $269.9 million in 2011–12). Revenue had been collected in 2011–12 to make forecast obligatory payments relating to the Victorian Desalination Plant. These payments were not required at that time due to delays in the plant’s commissioning, resulting in revenue from customers being higher than costs. Our draft plan for the next pricing period (2013–14 to 2017–18) outlined the intention to return this revenue to customers over the five year pricing period, but we returned the funds earlier, in 2012–13, in response to strong community feedback. This was achieved by freezing 2012–13 prices at 2011–12 levels and paying a rebate for the net amount not repaid through the price freeze. As a result, $310.8 million was returned to water consumers in 2012–13 and this contributed to a financial loss for Melbourne Water. The final pricing determination for 2013–14 to 2017–18 was made by our economic regulator, the Essential Services Commission (ESC), in June 2013. Lower than proposed prices were announced which will challenge Melbourne Water’s future financial viability. For Melbourne Water specifically, the ESC also only approved prices for wholesale water and sewerage for the next three years (2013–14 to 2015–16). The ESC’s decision to only approve these prices for three years instead of five years was influenced by its considerations around paying desalination costs. While being satisfied that capitalisation will become increasingly sustainable from 2016–17, the ESC was not able to form a view with sufficient confidence about the amount which could be capitalised without impacting on Melbourne Water’s financial viability. To determine how best to pass on desalination costs from 2016–17, we will be working with the ESC, focusing on minimising the impact to customers while still maintaining financial viability for Melbourne Water. Financial performance While Melbourne Water made a loss of $30.1 million in 2012–13, it was significantly less than the $144.1 million loss we had planned for. The loss for 2012–13 is primarily a result of the return to customers of revenue that was collected in advance in 2011–12 to make forecast obligatory payments relating to the Victorian Desalination Plant. Total revenue for 2012–13 was $1,270.8 million ($1,240.2 million in 2011–12). While the water and sewerage prices were frozen at 2011–12 levels, increases to revenue arose primarily through increased demand for water and an improvement in the market value of our defined superannuation benefit fund. Total expenditure was $1,315.9 million ($867.4 million in 2011–12). The key driver for the increase compared to 2011–12 was the inclusion of $436 million of expenses (operating, financing and amortisation) paid to the State in relation to the desalination plant following its commissioning in November 2012. Other business as usual expenditures for 2012–13 remained materially consistent with 2011–12. Total assets increased to $14,478.1 million at 30 June 2013 from $10,034.1 million at 30 June 2012. This increase is mainly due to the recognition of $4.4 billion of finance lease assets for the desalination plant (following commissioning in November 2012) combined with the investment of $331.1 million ($547.1 million in 2011–12) in capital works. Total liabilities increased to $10,116.7 million at 30 June 2013 from $5,495.1 million at 30 June 2012. This increase is mainly due to the recognition of $4.4 billion finance lease liabilities associated with the desalination plant finance lease arrangement. During 2012–13, Melbourne Water made cash payments to the Victorian Government of $94.7 million (compared with $289.3 million in 2011–12 and a target of $183.2 million). This consisted of income tax equivalent payments of $53.9 million, a financial accommodation levy of $37.1 million and local council rate equivalents of $3.7 million. There was no dividend paid in 2012–13. The target of $183.2 million was not achieved as a result of the Department of Treasury and Finance deferring payment of 2011–12 dividends declared of $94.5 million to July 2013. We also incurred expenditure to the Victorian Government of $20.6 million in land tax ($19.4 million in 2011–12) and $4.7 million in payroll tax ($4.1 million in 2011–12). Due to the loss in 2012–13 our return on equity was (0.7)% compared with 5.9% in 2011–12 and our planned target of ≥(3.4)%. The result was better than planned as a result of the lower than planned loss (as explained above). Our gearing ratio of 66.0% (45.8% in 2011–12) and our interest cover (cash) ratio of 1.5 times (3.7 times in 2011–12) worsened primarily due to recognition of the desalination finance lease and associated additional expenses. These results were better than our planned target ranges of ≤ 66.1% and ≥ 1.3 times (respectively) due to the improved operational financial performance compared to plan. Figure 16: Revenue ($M) Transcribers Note: Graph has been omitted Figure 17: Expenditure ($M) Transcribers Note: Graph has been omitted Figure 18: 2012/13 Desalination Plant Expenses Breakdown $M Transcribers Note: Graph has been omitted Figure 19: Capital Expenditure ($M) Transcribers Note: Graph has been omitted Financial Sustainability Strategy Melbourne Water’s vision of Enhancing Life and Liveability is underpinned by providing efficient, affordable and valued services to all customers and stakeholders. However, changes to our operating environment can affect our ability to achieve this. Global economic volatility, introduction of the Victorian Desalination Plant and affordability pressures are among several drivers that have required Melbourne Water to improve its financial performance. In 2012–13, Melbourne Water prepared a Financial Sustainability Strategy which outlines the objectives, operating activities, governance structure and key performance indicators necessary to achieve financial sustainability as set out in Melbourne Water’s Strategic Direction, and to bring a commercial focus to all its activities. The Financial Sustainability Strategy was approved by the Board in August 2012 and is being implemented under seven focus areas including financial risk management and business efficiency. Measures include: • A review of financial risk management policy and guidelines resulting in significant future financing costs being avoided during the next Corporate Plan period • Implementation of productivity and efficiency activities via an organisationalwide review • Establishment of a dedicated Investment Steering Committee to enhance financial management practices across the organisation through disciplined and informed decision-making processes for capital investments • Redesigning our investment prioritisation model and increasing the rigour on investment criteria for all business cases • A change management plan that focuses on collaboration and empowerment to think differently. Transformational change Established commercial transformation program One of the key components of our Financial Sustainability Strategy is the Commercial Transformation Program. The aim of the program is to enhance Melbourne Water’s commercial performance and ensure key elements of the Financial Sustainability Strategy are delivered efficiently and effectively. The initiative will be self–funded and deliver a fully costed, target–driven program to: • Drive value for customers by knowing what customers want and delivering these services efficiently • Commercially position Melbourne Water to improve its financial performance and provide sustainable, long–term returns to government • Build organisational capacity to deliver transformational initiatives. Elements of the Commercial Transformation Program include a review of expenditures, asset and land utilisation, identification of new revenue opportunities and procurement benefits. Efficiency through collaboration Capital works achievements During Water Plan 2 (2008–09 to 2012–13), Melbourne Water faced the challenge of drought and an unprecedented capital program, which required a unique delivery model to complete a remarkable range of projects. This year, $331.1 million of capital works were delivered through teams working on projects such as the Eastern Treatment Plant Tertiary Upgrade and the Melbourne Main Sewer Replacement. As part of Water Plan 2, we successfully delivered $3.7 billion of water, sewerage and drainage infrastructure. Our new strategy for capital delivery Customer affordability is at the forefront of our new Water Plan 3 (2013–14 to 2017– 18). The new Capital Delivery Strategy is framed by our Services Strategy, which contains the following recommendations: • Deliver smaller, lower risk projects through maintenance contracts • Develop an individual fit-for-purpose delivery strategy for major standalone projects • Bundle the majority of remaining projects into programs based on activity type • Projects delivered by Melbourne Water project managers must use either ‘design then construct’ or ‘design and construct’ methodologies. The current operating environment will see Melbourne Water deliver fewer large projects, with a focus on more efficient and affordable services for customers and the wider community. We are shifting our focus away from large infrastructure projects to renewing ageing infrastructure and maintaining an expanded asset base. New contracts to manage assets more efficiently New contracts were awarded in 2012–13 to drive efficiencies in asset management across Melbourne Water. Contractor, Wood Group PSN, has started delivering our mechanical, electrical and civil maintenance program as well as low-risk capital works for water supply and sewerage systems. Another contract was awarded to Fulton Hogan/Ecodynamics to maintain our waterways and drainage assets. The benefits of these new contract arrangements include incentives to drive efficiency and productivity. Our service providers will also have the opportunity to look for continual improvement opportunities across our asset business, particularly in relation to work identification and programming, for the benefit of our customers. Leasing agricultural land at the Western Treatment Plant Melbourne Water has signed a 20-year lease agreement to enable MPH Agriculture to convert some land at the Western Treatment Plant for sustainable, productive uses. Attached to the lease is a supply agreement for 25 gigalitres of Class C recycled water per annum for agricultural production. The lease agreement is the product of a 2006 strategy to maintain the functionality of the Western Treatment Plant for the community while also preserving existing important environmental values, restoring degraded land and achieving a sustainable commercial return for Melbourne Water. The strategy recommended a structured change of existing agricultural operations to implement a diverse range of agricultural enterprises, with the management of agricultural land outsourced to private enterprise. Corporate governance and risk management Ethics and values Melbourne Water’s directors and employees are committed to operating ethically and in the best interests of customers, the Victorian Government, employees, suppliers and other stakeholders. The Board has adopted a Director’s Code of Conduct. All directors, managers and employees are expected to perform their duties with integrity and honesty. This expectation extends to dealing with our people, customers, suppliers and the community. Melbourne Water employees and managers must comply with Melbourne Water’s Code of Conduct. Policies and procedures exist for directors and employees in relation to the identification of actual and potential conflicts of interest. These documents are regularly updated. The Corporate Secretary maintains a Register of Director’s Interests and a register of gifts and invitations accepted by directors or employees. As part of maintaining a safe and healthy working environment, the Board has approved behavioural and workplace policies for specific purposes, such as occupational health and safety and discrimination. These policies are distributed and widely publicised to our employees. Our governance procedures Melbourne Water’s policy is to adopt appropriate corporate governance practices and regularly review them to ensure we are up-to-date with best practice. As part of these improvements, all Board members now receive papers in electronic form. Board and committee paper formats have been reviewed and updated. Improved Board training and development processes have also been implemented. In addition, a structured approach to Board development (both at a Board and individual Board member level) has been adopted. Powers and accountability Melbourne Water operates under the Water Act 1989. Melbourne Water has two current by-laws, Water Supply Protection No 1 (2006) and Waterways, Land and Works Protection and Management (2009). The Minister for Water has delegated powers of management under the Water Act relating to licensed private water diversions from waterways to Melbourne Water, effective as of 1 July 1999. The Water Act and by-laws can be purchased from the Information Victoria bookshop, 356 Collins Street, Melbourne or phone 1300 366 356. The Honourable Peter Walsh MLA, Minister for Water, was the Minister responsible for Melbourne Water from 1 July 2012 to 30 June 2013. Melbourne Water works with officers of the Department of Environment and Primary Industries6 and the Department of Treasury and Finance. Statutory and other reports are provided, covering Melbourne Water’s performance against the objectives and performance indicators, in the Corporate Plan. Primary responsibilities Melbourne Water’s Board has adopted a charter that defines its role and responsibilities within the legislative framework provided by the Water Act and other applicable legislation including the Public Administration Act 2004. The Board makes plans to achieve specific objectives, including: • Long-term, sustainable, outcomes based on a triple bottom line approach • Approval of corporate plans together with key performance indicators linked to objectives • Approval of annual financial statements and monitoring of performance against objectives and risks • Monitoring of safety, health and environmental standards and management systems. • The Board has ratified a Corporate Governance Policy. Key features of its activities include: • Hold 11 Board meetings a year, undertake site visits and participate in monthly business strategy workshops with Melbourne Water’s Leadership Team. Special Board and committee meetings are convened as required to meet the needs of the business • Monthly updates on Board activities are made available to all employees and the community • Periodic strategy discussions are held with relevant stakeholder groups • A structured induction program exists for new Board and committee members • Development opportunities are made available for Board members on an ongoing basis • Conflicts of interest are declared and a director does not participate in decisions where such a conflict exists • Directors have the right to seek independent professional advice, at Melbourne Water’s expense, in connection with their duties and responsibilities • Declarations of pecuniary interest by directors are made annually, with procedures for updating that information between declarations • There is an annual review of Board performance. Committees The Board has four sub-committees, each comprising at least three non-executive directors, who meet periodically to focus on finance and sustainability, people and safety, integrated water management, and service delivery. The Managing Director and responsible General Managers attend meetings of committees by invitation. The Board approves the charters of each committee. Financial Sustainability Committee This committee assists the Board in fulfilling its responsibilities relating to risk management, financial management and operational control practices, and compliance with relevant laws and regulations. At 30 June 2013, the committee comprised Dana Hlavacek (Chairman), Richard McKinnon, Janice van Reyk and Paul Clark. A report about the activities of the committee in fulfilling its charter is prepared annually. People and Safety Committee This committee assists the Board in fulfilling its responsibilities relating to human resources issues, remuneration, and workplace health and safety. For details of directors’ and executives’ remuneration, refer to the Financial Statements. At 30 June 2013, the committee comprised Peter Vines (Chairman), Dana Hlavacek and Paul Clark. A report about the activities of the committee in fulfilling its charter is prepared annually. Integrated Water Management Committee This committee assists the Board in fulfilling its responsibilities relating to integrated water cycle management. At 30 June 2013, the committee comprised Janice van Reyk (Chairman), Garry Smith and Warren Hodgson. A report about the activities of the committee in fulfilling its charter is prepared annually. 6Formerly two separate departments known as the Department of Sustainability and Environment and the Department of Primary Industries. Service Delivery Committee This committee assists the Board in fulfilling its governance responsibilities relating to the planning and delivery of capital projects and services. At 30 June 2013, the committee comprised Warren Hodgson (Chairman), Peter Vines, Richard McKinnon and Garry Smith. A report about the activities of the committee in fulfilling its charter is prepared annually. Risk management Melbourne Water adopts a balanced approach to risk management that considers its commercial, social and environmental responsibilities with regard to short-term and long-term goals. Risk management is used to ensure Melbourne Water understands its business risks and manages them consistently. Effective and efficient management of risk is central to the achievement of our vision. Melbourne Water adopts a ‘whole of business’ approach by considering risks on a group, team and project basis. Trends and commonalities are also identified across these areas. To effectively manage risks across the organisation, risk assessments are conducted on a regular basis to identify the: • Likelihood or probability of a risk occurring • Consequence of a risk occurring • Effectiveness of mitigating strategies in place to manage risks. The capital prioritisation process uses risk assessment as a key tool for determining the need for, and relative timing of, investments. Operational risks are managed daily by the organisation and through specialised management systems. Strategic risk To assist in the strategic management of risks at an organisational level, Melbourne Water has identified key strategic risks and assessed each risk based on the current risk level. Melbourne Water actively manages strategic risk with a strong focus on continuous improvement. Melbourne Water’s risks will continue to be managed through a Risk Management Framework, comprising major elements such as: • Certified management systems • Appropriately skilled people and sound operational procedures • A robust capital works program • Sound technological applications such as our Supervisory Control and Data Acquisition (SCADA), Asset Management and GIS systems • Close working relationships with the water industry, government departments, local councils, customers, developers and the community. Melbourne Water has identified the following key strategic risks: • Health, safety and security of people, property and environment • Environmental damage to Melbourne’s waterways/bays • Financial and governance framework • Recycled water (quantity and quality) • Engaging, understanding and working with key stakeholders and the community • Water supply • Water quality • Asset lifecycle • Capital delivery • Impact of flood on the community • 2018 greenhouse target • Recruiting, developing and retaining our employees • Delivering obligations in Water Plan 3 (2013–14 to 2017–18) • Biosolids and by-products (quantity and quality). Insurance and incident management framework To help mitigate the commercial, social and environmental impact of risk events, Melbourne Water has several control measures in place including an emergency and incident management framework and a comprehensive insurance portfolio. As part of this framework, Melbourne Water has developed emergency management and contingency plans, which are regularly tested and reviewed. In addition to local emergency management arrangements, Melbourne Water assists in the development of industry response plans and protocols. We work with water retailers and government departments/agencies that assign roles and responsibilities in the event of large-scale incidents. These plans are also tested and reviewed with water retailers. Audits and risk reviews Melbourne Water continually reassesses its risk profile through external reviews by subject matter specialists and a comprehensive risk-based internal audit program. In addition to these reviews, Melbourne Water undertakes quarterly selfassessments on the current management of risks and the identification of new or emerging risks and opportunities. The results of these reviews are presented to the Board via its Financial Sustainability Committee, which oversees Melbourne Water’s risk management processes. Attestation on Compliance with the Australian/New Zealand Risk Management Standard I, Paul Clark, certify that: Melbourne Water Corporation has risk management processes in place consistent with the Australian/New Zealand Risk Management Standard (AS/NZS ISO 31000:2009). An internal control system is in place that enables the executive to understand, manage and satisfactorily control risk exposures. The Financial Sustainability Committee verifies this assurance. The risk profile of Melbourne Water Corporation has been critically reviewed within the last 12 months. Paul Clark Chairman Melbourne Water Corporation Statements of Obligations Two Statements of Obligations, issued by the Minister for Water pursuant to Section 4I of the Water Industry Act 1994, are applicable to Melbourne Water: 1) The Statement of Obligations applicable from September 2012 formalises Melbourne Water’s obligations in relation to the performance of functions and exercise of powers including the areas of: • the Water Plan • governance • customer and community engagement • risk management • planning • water services • compliance. 2) The Statement of Obligations applicable from 1 July 2009: (a) Imposes obligations on Melbourne Water in relation to our water supply function established under section 171B of the Water Act 1989, and the exercise of our powers. (b) Clarifies Melbourne Water’s role as manager of the Melbourne headworks system in relation to the obligations of the water retailers as holders of certain water entitlements. On 26 March 2012, the Minister for Water issued an amendment to this Statement of Obligations, the purpose of which was to set out the new rules for the future use of the North- South Pipeline. Melbourne Water’s Board monitors compliance with these Statements of Obligations and reports any significant non-compliance to the Minister. Board of Directors The Minister for Water, in consultation with the Treasurer, appoints the directors of Melbourne Water for terms of up to four years and the Victorian Government sets their remuneration. Directors are eligible for reappointment for subsequent terms. In making new appointments to the Board, the Victorian Government ensures the Board has the necessary combination of skills and experience. The Managing Director is appointed by the Board, subject to the approval of the Minister in consultation with the Treasurer, for a term of up to five years. Annual reviews are conducted of the performance of the Board as a whole and of individual members. Pursuant to a Statement of Obligations issued by the Minister, the outcomes of these performance reviews are reported to the Treasurer and the Minister. The Board of Directors currently comprises a non-executive Chairman, six non-executive directors and the Managing Director. Figure 20: Organisation Structure Transcribers Note: Figure 20 has been transcribed into a list below. Managing Director Shaun Cox General Manager, Operations and Maintenance Tony Antoniou General Manager, Waterways David Ryan General Manager, Strategic Planning Ben Furmage General Manager, Customer and Community Anne Randall General Manager, Business Services Malcolm Haynes General Manager, People and Safety Linda Heron General Manager, Capital Delivery David Morse General Manager, Asset Planning Paul Pretto General Manager, Commercial Transformation* Cameron FitzGerald General Manager, Service Delivery* Chris Chesterfield Corporate Financial sustainability *Commercial Transformation and Service Delivery were created in March 2013 to enable Melbourne Water to focus appropriate attention on the commercial and service aspects of our business, to better manage our work and to challenge ourselves to achieve even greater results for our organisation, our customers and our stakeholders. There was no overall increase in our head count to support these changes. Paul Clark Chairman Paul Clark was appointed to the Board on 1 October 2012. Mr Clark is a corporate adviser specialising in debt, performance improvement and strategy, and has been on a number of unlisted company Boards and executive committees. Mr Clark has previously held senior executive roles with Ernst Young, HBOS Australia, BankWest, National Australia Bank and Bank of New Zealand. Shaun Cox Managing Director Shaun Cox commenced as Managing Director of Melbourne Water on 8 March 2011. Shaun is currently a Board member (and former Chair) of the Smart Water Fund and the Water Services Association of Australia. He holds a degree in civil engineering, a Masters of Engineering and Technology Management and is an Adjunct Professor at the University of Queensland. Before joining Melbourne Water, Mr Cox held the positions of Managing Director at South East Water and Chief Executive Officer at Gold Coast Water. Dana Hlavacek Director Dana Hlavacek was appointed to the Board on 1 October 2011. Ms Hlavacek is a finance executive with considerable experience with Rio Tinto Treasury and, before that, KPMG. She is a Trustee of the Victorian Arts Centre Trust, a Governor of the Arts Centre Melbourne Foundation and is also on the Board of RSPCA Victoria. Ms Hlavacek is a member of the Salvation Army Corporate and Philanthropic Committee and of the Brotherhood of St Laurence’s Audit Committee. Garry Smith Director Garry Smith was appointed to the Board on 1 October 2012. Mr Smith is a director of DG Consulting, provides advice on water and natural resource management policy and strategy, and has previously held senior management roles in the rural water industry. He is an Advisory Board member for the National Centre for Groundwater Research and Training and Chair of Trustees for the Sampson Leadership Trust. Mr Smith is also Chair of Goulburn Valley Community Fund and is a former Director of eWater Pty Ltd. Peter Vines Deputy Chairman Peter Vines was appointed to the Board in October 2005. Mr Vines has held chief executive and executive management positions in the energy and infrastructure sector, including directorships in various utility companies in Australia and internationally. Mr Vines holds qualifications in civil engineering, economics and management. He is a member of the Australian Institute of Company Directors and a member of the Institution of Engineers Australia. Warren Hodgson Director Warren Hodgson was appointed to the Board on 1 July 2008. Mr Hodgson was previously Secretary, Department of Innovation, Industry and Regional Development, and before that, Under Secretary, Department of Treasury and Finance. Mr Hodgson has a background in the manufacturing industry, qualifications in science and engineering, and is a graduate of the Australian Institute of Company Directors. Janice van Reyk Director Janice van Reyk was appointed to the Board in October 2012. Ms van Reyk is a Non-Executive Director of the Port of Melbourne, Citywide and the Northern Territory Environment Protection Authority, and an Independent Member of the Salvation Army Audit Committee and of Sustainability Victoria’s Audit Finance and Risk Committee. Ms van Reyk previously served two terms as a Non-Executive Director of Gippsland Water and was Chair of its Safety, Health and Environment Committee. She has broad-based business skills gained as a senior executive in ASX100 industrial companies as well as a consultant advising on major projects and public policy. Ms van Reyk is a Leadership Victoria Fellow. Richard McKinnon Director Richard McKinnon was appointed to the Board on 1 October 2012. Mr McKinnon has had a 40 year career in the finance industry including senior executive roles in investment banking and commercial banking. He spent 19 years with National Australia Bank (NAB) where he was Chief Financial Officer, a member of the Group Executive Committee and a Director of a number of NAB subsidiary companies. Since retiring from NAB, Mr McKinnon has been in private practice as a financial consultant and has held Board positions with Carey Baptist Grammar School Ltd and Responsible Gaming Networks Pty Ltd. Corporate: Organisational capability Side quote: “Melbourne Water continues to attract and retain a diverse, motivated and skilled workforce, bringing talent into the organisation through a variety of measures.” Our aim Strengthen the capability of the organisation to deliver better customer and community outcomes. We will do this by: • Continuing to build a collaborative culture • Supporting our people to take responsibility for health and safety • Developing a high-performing organisation that values innovation, customer service and commercial and technical expertise • Promoting diversity and flexibility to attract and retain a motivated and skilled workforce • Fostering a learning organisation that collaborates in research, embraces emerging thinking and adapts to new technology • Using innovative technological solutions to improve the effectiveness and efficiency of business processes. Key achievements • Achieved Australian and New Zealand safety standard 4801 certification of our safety management system in June 2013 • Received an Australian Water Association Safety Excellence Award for our work as part of the Water Resource Alliance • Reached the finals of the 2012 WorkSafe Victoria Awards for the Western Treatment Plant Covers Renewal Project • Team Leader of Water Supply Operations at Silvan, Nick Stuart, was awarded the Australian Water Association’s Victorian Operator of the Year • Rolled out a change management approach and toolkit to support project outcomes • Our work to build a constructive culture was recognised with a Culture Transformation Sustainability Award at the 2012 Human Synergistics conference in Melbourne. Disappointments • Recorded 16 employee and contractor lost time injuries (LTIs), failing to meet our zero harm target. Challenges • Continuing to build a constructive culture by focusing on strategies to develop high performing teams • Continuing to build leadership capability and develop the talent of our people. 64 Melbourne Water Annual Report 2012–13 Safe and healthy workplace Melbourne Water is committed to achieving a zero harm workplace where the safety of people is paramount. In 2012–13, we failed to achieve our goal of zero lost time injuries (LTIs) for employees and contractors, with 16 LTIs, although this was less than 20 LTIs last financial year. The number of days lost due to LTIs is 1607. As part of an internal review of safety performance we developed a Safety Improvement Plan to identify areas of concern, quantify objectives and targets to improve performance, and nominate resources responsible for achieving these targets. Achieved Australian and New Zealand safety standard 4801 Melbourne Water achieved Australian and New Zealand safety standard (AS/NZS) 4801 certification of our safety management system in June 2013. This standard recognises that we systematically identify and address occupational health and safety issues with a focus on continuous improvement. The certification enhances the commitment in our Strategic Direction to achieving zero harm in the workplace. Alliance wins national safety award The Water Resource Alliance received an Australian Water Association Safety Excellence Award for its innovative approach to communicating safety information to staff. The introduction of Quick Response (QR) code technology enables workers to scan a QR code at a construction site and offers a mobile way of communicating high risk procedures to frontline workers. The Water Resource Alliance’s QR code approach has taken safety policies and procedures from a hard copy format to an engaging visual demonstration. The Water Resources Alliance is a partnership between Baulderstone, Sinclair Mertz Knight, United Group, Infrastructure, MWH Australia, Beca and Melbourne Water to deliver works to improve and expand the water storage system and water distribution network. Australian Water Association Operator of the Year 2012 Nick Stuart, Team Leader of Water Supply Operations at Silvan, won the Australian Water Association’s Victorian Operator of the Year 2012. The award recognises the outstanding efforts of an operator working in Victoria who has direct responsibility for operational decisions at community water, sewer or recycled water systems/ networks and/or water, wastewater or recycled water treatment plants or industrial water or wastewater plants. Lagoon covers project recognised for safety Melbourne Water has been chosen as a finalist in the WorkSafe Victoria Awards for work method improvements that have significantly reduced the high risk of manual handling injuries. The Western Treatment Plant Covers Renewal Project involves replacing and doubling the size of lagoon covers. Four times the size of the MCG, the new covers will help reduce odour and capture more biogas to generate renewable energy (see Sewerage chapter). In the early stages of the project, deployment of the new membrane (7 metres wide x 105 metres long x 2 millimetres thick) involved unrolling it on the embankment, cutting it to length and using up to 12 people to drag the heavy membrane into position across the existing cover, over water. To reduce the associated health and safety risks, Melbourne Water developed a Membrane Deployment Device, which acts like a dispenser for 1.5 tonne rolls of membrane. The new device enables the membrane to be seamlessly rolled out onto the cover and significantly reduces the need for workers to drag the sheet into place as it rolls. New People and Safety Strategy Melbourne Water’s People and Safety Strategy was developed to increase capability and enhance services and programs across the business. The strategy was developed following extensive consultation with our people and external research and benchmarking. It supports our Strategic Direction and was approved by the Board in May 2013. There are four focus areas within the strategy: • Promoting Life and Liveability – creating a workplace free from injury and illness, and Enhancing Life and Liveability for everyone, every day • Building Capability – to deliver a better way of doing business • Achieving a High Performance Culture – together we will challenge all our teams to achieve a high performance culture • Transforming Our Customers Experience – together we will transform our customers experience to deliver customer focused outcomes. 7 Only Melbourne Water employee lost time injuries were included in this figure. Days lost due to lost time injuries is not available for contractors. Creating a high performance culture Melbourne Water’s work to build and maintain a constructive culture was recognised with a Culture Transformation Sustainability Award at the 2012 Human Synergistics conference in Melbourne. The award demonstrates Melbourne Water’s real commitment to constructive behaviour from all levels of the organisation and is well deserved recognition for everyone who has worked to transform and maintain our culture over the last five years. The next phase of Melbourne Water’s culture program was also developed during 2012–13, with a focus on building high performance in line with the People and Safety Strategy. A leader capability framework was completed to guide leadership development including the integration of wellbeing, safety, change, resilience, customer engagement and commercial acumen capabilities. This will be supported by formal learning programs, coaching to enable learning from others, and learning on the job through project placements or job rotations. Innovation To help provide efficient services in a complex environment, Melbourne Water introduced a program of initiatives to boost innovation in late 2010. This included an innovation toolkit with resources for creative thinking and team problem-solving, and an online software tool – the Idea Pool – to allow people to share their ideas across the business. In 2012–13, targeted resources and training were provided to Melbourne Water teams and a new Innovation Strategy is due for completion in August 2013. Highlights from the program include: • Our online Idea Pool was enhanced with a new feature, called the ‘Help Tank’, where users can post business problems and seek solutions in the form of a challenge for other employees. • A Help Tank microsite for the Water Services Association of Australia technology assessment group was commissioned to capture suggestions about how Melbourne Water can use industry-developed technology. The system streamlines management of these ideas to ensure efficient voting and feedback on new technologies. Voting and review runs quarterly where innovators select the top five ideas. • Practical innovation training workshops were conducted with over 200 people. The training introduced participants to a range of practical tools and techniques to tackle current service delivery problems and find new ways of doing things. • An innovation needs and capability analysis was undertaken with the findings presented to the Leadership Team in August 2012. Leadership capability statements for innovation have now been incorporated in the organisation’s capability framework. • Innovation was actively championed and supported across Melbourne Water by the Innovation Advisory Group and our Innovation Champions. Building on past efforts, the new Innovation Strategy identifies opportunities to enhance our innovation culture, provide innovation tools and build capability to deliver outcomes that transform the business. Our workforce Melbourne Water continues to attract and retain a diverse, motivated and skilled workforce, bringing talent into the organisation through a variety of measures. These initiatives include engaging graduates, trainees and vacation students, and facilitating a range of development opportunities such as job rotations and secondments between internal teams and external organisations. Our measures encourage people to understand and engage with the organisation, develop their full potential and support the delivery of organisational outcomes. By the numbers At 30 June 2013: • Our total workforce was 865 (832 full-time equivalent) compared with 834 at 30 June 2012. • The average age of Melbourne Water employees was 42.5 years (42 at 30 June 2012). • The proportion of women in our workforce was 34.1% (32.9% at 30 June 2012). During 2012–13: • The average age of new starters was 37 years (33 in 2011–12). • 235 roles were filled, 77% by internal candidates (162 roles filled in 2011–12, with 43.2% internal candidates). • Total voluntary and managed turnover was 7.86% (9.79% in 2011–12). Workforce distribution Melbourne Water workforce distribution 2012–13 2011–12 2010–11 2009–10 M F M F M F M F 38 15 42 10 48 9 42 8 Technical/professional 373 226 361 216 352 214 348 206 Operational 147 3 142 1 148 2 148 3 Administration 12 51 14 48 15 53 18 55 Total 570 295 559 275 563 278 556 272 Total male and female 865 Executives 834 841 828 Developing leadership potential Over the last 12 months we developed a capability framework comprising leader competencies, business skills and functional competences. This work has been undertaken on the basis that all of our people are leaders, not just those in people management roles. Other leadership development measures included: • Introducing the Hogan interpretive tool for our Board and Leadership Team, direct reports and in some recruitment processes. The tool is supported by a robust development planning process and a new talent management system. • Providing support for collective leadership development through leadership forums. The forum series has focused on safety leadership as well as customer focus, financial sustainability and innovation. Toolkit for managing change Two organisation-wide initiatives emerged in the last year: Commercial Transformation and Service Delivery, aimed at changing the way we do business, building the capacity of our people and improving the level of service and products for our customers. A change management approach and toolkit were developed to support our people in making these changes. Melbourne Water established and trained a group of ‘change coaches’ who will ensure we continue to be adaptable and resilient to an everchanging environment. An ongoing measure of the amount of change taking place within Melbourne Water has also been established as part of the project. Information technology Information management program receives multiple awards Melbourne Water’s new information management program received two awards in 2012–13 for its contribution to improving business efficiency. The program won the Medium Government Agency category of the 2013 Sir Rupert Hamer Awards. Presented by Public Record Office Victoria, the award recognises programs that ensure a high level of compliance with government records management policies, regulation and standards. This award followed national recognition at the actKM Gold Knowledge Management Excellence Awards which recognises significant achievements in organisational capability, performance or sustainability through the application of knowledge based projects or activities. The judging panel praised Melbourne Water’s information management program for its “excellence in elegant design and development of an information management culture strongly supported by senior management and enabled through the use of technology”. Data centre goes green Melbourne Water’s new data centre has won the Victorian iAward for Sustainability and Green IT. The award recognises the innovative approach Melbourne Water has taken to limit the environmental impact of its data centre by: • Installing ‘free air’ cooling that uses outside air to regulate the inside temperature • Recycling water from the air cooling systems • Using sustainable building materials and waste recycling • End-to-end virtualisation technologies. These innovations are key factors in reducing power consumption by 40% compared to the previous data facility. The facility also delivers twice the data storage and real time synchronisation of production and disaster recovery storage. New technology helps Operations and Maintenance team Melbourne Water’s Operations and Maintenance team is changing the way it works, with mobile tablets now being rolled out to provide real time access to business systems, workflow management and data capture in the field. The changes give our people access to information in the field to aid decisionmaking, reducing the effort needed to collect and process data, and allowing information to be sent in real time to improve performance and risk management. This leaves more time to focus on optimising system operations and improving customer service. The initiative is likely to provide ongoing savings in time, equipment and fuel costs as mobile computing takes off across the business. Upgrading our asset management system Melbourne Water is replacing its ageing asset management system and streamlining its core asset management processes. This improvement will be applied across the whole asset lifecycle for the entire business. Our aim is to introduce common processes throughout the business, increase the currency and accuracy of asset data, and improve knowledge about asset performance to enable more informed decisions. Research and technology To ensure Melbourne Water continues to provide high quality services, research and development initiatives are undertaken to improve efficiency through scientific excellence, innovation and the adoption of new technology. Key initiatives in 2012– 13 included: • Understanding the Western Port Environment: a summary of current knowledge and priorities for future research was publicly released in March 2012. Since then, the majority of high priority research projects have commenced and some preliminary results were presented at a stakeholder seminar held in March 2013. • The final year of a mangrove planting project took place along the northeastern shores of Western Port to reduce severe coastal erosion. More than 10,000 seedlings were planted and a range of innovative techniques were trialled to provide protection from wind-driven waves that are thought to be contributing to seedling mortality. • Investigation continued into the presence and nature of the protozoan parasite Cryptosporidium in native and feral animals in protected water supply catchments. Results support Melbourne Water’s unfiltered water status. • Melbourne Water took up a position on the Research Advisory Council of the National Centre for Excellence for Recycled Water and is working on a major project to set national validation guidelines for recycled water. • We continued to work with the Victorian Centre for Aquatic Pollution Identification and Management on a major research program to develop a better understanding of the impact of toxicants such as pesticides on aquatic ecosystems in waterways. • Melbourne Water was successful in eight of its 13 Australian Research Council grant applications. The eight projects represent $3.4 million in funding over four years and demonstrate a strong collaborative approach to research. Side Caption: “Melbourne Water’s work to build and maintain a constructive culture was recognised with a Culture Transformation Sustainability Award at the 2012 Human Synergistics conference in Melbourne.” Financial Report: Five Year financial summary Summary of Financial Results Statement of Profit or Loss For the year ended 30 June – Extract 2013 $M 2012 $M 2011 $M 2010 $M 2009 $M Revenue and other income 1,270.8 1,240.2 997.3 858.4 732.2 Operating and other expenses 450.7 375.7 328.0 326.6 330.6 Depreciation and amortisation expenses 315.9 242.6 231.9 122.0 105.8 Finance expenses 549.3 249.2 223.3 171.3 122.0 Net result from operations before tax (45.1) 372.7 214.1 238.5 173.8 Tax 15.0 benefit/(expense) (102.8) (56.2) (52.1) (45.8) (Loss)/Profit for the period after tax 269.9 157.8 186.4 128.0 (30.1) Statement of Financial Position For the year ended 30 June – Extract 2013 $M 2012 $M 2011 $M 2010 $M 2009 $M Current assets 259.8 97.6 109.6 71.4 108.7 Non-current assets 14,218.3 9,936.5 9,644.8 8,876.9 5,312.4 Statement of Financial Position For the year ended 30 June – Extract 2013 $M 2012 $M 2011 $M 2010 $M 2009 $M Total assets 14,478.1 10,034.1 9,754.5 8,948.3 5,421.1 Current liabilities 770.7 1,142.6 1,365.5 1,096.5 862.3 Non-current liabilities 9,346.0 4,352.5 4,014.2 3,833.4 2,557.0 Total liabilities 10,116.7 5,495.1 5,379.7 4,929.9 3,419.3 Net assets 4,361.4 4,539.0 4,374.8 4,018.4 2,001.8 Total equity 4,361.4 4,539.0 4,374.8 4,018.4 2,001.8 Statement of Cash Flows: For the year ended 30 June – Extract 2013 $M 2012 $M 2011 $M 2010 $M 2009 $M Net cash inflows from operating activities 219.3 520.0 266.6 302.9 278.8 Statement of Cash Flows: For the year ended 30 June – Extract 2013 $M 2012 $M 2011 $M 2010 $M 2009 $M Net cash (361.2) outflow from investing activities (620.2) (785.8) (936.2) (935.4) Net cash inflow from financing activities 98.6 520.9 633.3 656.4 286.9 Performance indicators included in Melbourne Water’s Corporate Plan Performance 2013 indicator 2012 2011 2010 2009 Return on (0.7%) Equity % (Net Profit After Tax/Total Equity) 5.9% 3.6% 4.6% 6.1% Internal Financing Ratio % 56.4% 64.5% 29.5% 23.4% 22.0% Gearing Ratio % (Total Debt/(Total Debt + Equity)) 66.0% 45.8% 45.3% 43.3% 54.1% Performance 2013 indicator 2012 2011 2010 2009 Cash Returns 94.7M to Government $M 289.3M 173.1M 175.9M 92.3M Performance indicators mandated by the Minister for Water through Ministerial Reporting Direction 01 Performance 2013 indicator 2012 2011 2010 2009 Return on Assets % 6.3% 4.7% 5.7% 6.0% Return on (0.7%) Equity % (Net Profit After Tax/Average Total Equity) 6.1% 3.8% 6.2% 6.4% Gearing Ratio % (Total Debt/Total Assets) 58.5% 38.2% 37.1% 34.3% 43.5% Interest Cover (Earnings Before Interest and Tax) Times 0.9 2.5 2.0 2.4 2.4 4.1% Performance indicator mandated by the Minister for Water and included in Melbourne Water’s Corporate Plan Performance 2013 2012 2011 2010 2009 indicator Interest Cover (Cash) Times 1.5 3.7 2.8 3.4 3.3 Explanatory Notes: Refer to the Annual Performance Reporting chapter for definitions of financial performance indicators and reporting of all 2012/13 performance indicators (financial and non-financial) against targets with supporting explanations for any significant variations. Directors Report Directors The Directors of Melbourne Water (‘the Corporation’) in office, during the financial year were: Paul Clark^ (Chairman) Shaun Cox (Managing Director) Peter Vines (Deputy Chairman) Warren Hodgson Dana Hlavacek Janice van Reyk^ Richard McKinnon^ Garry Smith^ Eleanor Underwood^^ Terry Larkins^^ Maria Wilton^^ ^Appointed to the Board on 1 October 2012 ^^Appointment to the Board expired on 30 September 2012 Particulars of the Directors’ qualifications, experience and special responsibilities are set out under Board of Directors. Directors’ meetings During the financial period, the Corporation held 12 meetings of Directors. Attendance at meetings of the Board and its Committees were: Board Financial Sustainabili ty Committee (formerly Audit and Corporate Risk Committee) People and Safety Committee Integrated Water Managemen t Committee (formerly Environmen t and Public Health Committee) Service Delivery Committee (formerly Capital Planning and Delivery Committee) Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Paul Clark^ 8 8 3 4 3 3 - - - - Shaun Cox 12 12 5 6 4 4 2 2 3 3 Peter Vines 11 12 2 2 3 3 - - 3 3 Warren Hodgso n 11 12 2 2 - - 1 1 2 3 Dana 12 Hlavace k 12 6 6 4 4 - - - - Board Financial Sustainabili ty Committee (formerly Audit and Corporate Risk Committee) People and Safety Committee Integrated Water Managemen t Committee (formerly Environmen t and Public Health Committee) Service Delivery Committee (formerly Capital Planning and Delivery Committee) Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Atten Maxi ded mum Possi ble Janice van Reyk^ 8 8 2 3 - - 2 1 1 Richard McKinn on^ 8 8 4 4 - - 2 2 Garry Smith^ 8 8 - - - - 1 2 2 2 Eleanor Underw ood^^ 2 4 - 2 1 1 - - - - Terry Larkins ^^ 3 4 - - 1 1 - - - - Maria Wilton^ ^ 4 4 2 2 1 1 - - - - 2 Director benefits No Director has received, or become entitled to receive, a benefit (other than a benefit included in Notes 25a and 25b to the Financial Statements) because of a contract that the Director, a firm of which the Director is a member, or an entity in which the Director has a substantial financial interest, has made (during the period ended 30 June 2013 or at any other time) with: (a) the Corporation; or (b) an entity that the Corporation controlled, or a body corporate that was related to the Corporation, when the contract was made or when the Director received, or became entitled to receive, the benefit. Directors and Officers liability insurance During the financial year, the Corporation paid insurance premiums in respect of Directors’ and Officers’ Liability insurance. The policy does not specify a premium for individual directors and officers. The insurance policy provides cover for directors and officers of the Corporation against loss arising from claims made against them during the period of insurance by reason of any wrongful act committed or alleged to have been committed by them in their capacity as directors or officers of the Corporation and reported to the insurers during the policy period, or if exercised, an extended reporting period. The terms of the insurance policy prohibit the disclosure of the nature of the liabilities insured and the amount of the premium. Interest in contracts No contracts involving Directors’ interests were entered into since the end of the previous financial year, or existed at the end of the 2012/13 financial year, other than the transactions detailed in Notes 25a and 25b to the Financial Statements. Principal activities The Corporation is owned by the State of Victoria. The Corporation manages and maintains Melbourne’s water supply catchments, removes and treats most of Melbourne’s sewage, and manages rivers, creeks and major waterways and drainage systems in the Melbourne region. The Corporation also provides water and sewerage services to Melbourne’s three metropolitan retail water businesses: City West Water, South East Water and Yarra Valley Water. Operating results and dividend The Corporation’s loss, after providing for income tax was $30.1 million (2011/12: profit of $269.9 million). There has been no dividend payment made or determined in relation to the 2012/13 financial year and any dividend for the 2012/13 financial year will be determined by the Treasurer of Victoria after consultation with the Corporation’s Board of Directors and the Minister for Water. The Treasurer of Victoria has determined a dividend of $94.5 million to be paid in relation to the 2011/12 financial year. The determination was made in June 2013 for payment in July 2013. Consequently a payable for $94.5 million has been recorded at 30 June 2013. Review of operations The Directors’ review of the Corporation’s operations during the financial period ended 30 June 2013 is set out in the Chairman and Managing Director’s report. State of affairs During the financial year, the Victorian Desalination Plant was commissioned and integrated into the Corporation’s operations. The desalination plant has been built through a Public Private Partnership managed by the Department of Environment and Primary Industries (DEPI) and the desalination plant assets will transfer from the department to the Corporation at the end of the project contract term presently planned for 2039. There were no other significant changes in the state of affairs of the Corporation during the financial period ended 30 June 2013. Environmental regulation The Corporation is subject to significant environmental regulation in respect of managing its sewage treatment plants, maintaining environmental flow requirements and managing the Ramsar wetlands. Additional information on these topics is included in the Corporation’s 2012/13 Annual Report. Sewage treatment plants EPA Victoria (EPAV) issued an amalgamated licence for the discharge parameters for the Eastern and Western Treatment Plants (ETP and WTP) on 30 May 2013. Included in the amalgamated licence is a change to the licence parameters for ETP which relates to the upgrade of the plant that was effectively completed in December 2012. The parameters included in the previous corporate licence will be used to measure compliance for 2012/13 as there was only one month in 2012/13 that was covered by the new amalgamated licence. Discharge parameters were complied with during the financial year but both plants recorded attributable odour complaints, a breach of a clause in the corporate licence. Ramsar sites at WTP and Edithvale Seaford Wetlands Melbourne Water has two sites that are listed under the Ramsar International Convention and these are managed within the parameters of the Convention’s “wise use” test, which aims to protect wetlands with internationally significant environmental values. During the financial year, extensive work on biodiversity conservation and management of habitat areas at WTP continued in line with the 2010 Ramsar Site Management Plan, the 2008 Land Use Strategy, and the 2008 approved Environment Protection and Biodiversity Conservation (EPBC) Strategic Compliance Plan. Significant on-ground investment continued to be made in water level management, pest plant and animal control, monitoring of key populations/communities and through research projects to support an adaptive management approach. Annual compliance reports are submitted to the Federal Department of Sustainability, Environment, Water, Population and Communities presenting the results of studies and monitoring of key populations/ communities. In addition, 2012/13 saw an independent five year audit of our compliance with the terms of the conditional approval for the 2002 Environment Improvement Project which noted that there were no significant adverse outcomes. Actions in the ‘Edithvale-Seaford Wetlands Ramsar Site Management Plan’ were implemented as required. These included significant investigations and planning to improve hydrological control at the wetlands as required. An EPBC referral was prepared and approved for these works. Other management activities included monthly bird surveys, trial weed control, and establishing a research project with the University of Melbourne to monitor vegetation responses to hydrological management. Environmental flow requirement – bulk entitlements The Corporation manages bulk entitlements to water from the Thomson, Maribyrnong and Yarra Rivers. During the financial year, the requirements were met for all rivers with environmental flow entitlements. Memorandum of Understanding (MOU) – Ringwood South sewer upgrade Melbourne Water and the EPAV have signed a MOU on adopting an alternative approach to achieving compliance with the sewage containment policy. Instead of upgrading the sewer to contain sewage in up to 1–5 year rainfall events, over the next 5 years, Melbourne Water will implement a program of works including pollution identification and control, amenity enhancement around Dandenong Creek and habitat improvements. Environmental incidents During the 2012/13 financial year, there were no significant environmental incidents related to Melbourne Water’s activities. Implementation of the Victorian Industry Participation Policy (VIPP) In accordance with the VIPP Act 2003, the following VIPP contracts commenced or were completed during the 2012/13 financial year: Contracts commenced to which the VIPP applied: The Corporation commenced 7 metropolitan contracts totalling $504.9 million in value to which the VIPP applied. The commitments by contractors under the VIPP included: • An overall level of local content of 95.5% of the total value of the contracts • 460 full time equivalent jobs • 60 full time equivalent apprenticeships and traineeships • A number of benefits to the Victorian economy in terms of skills and technology transfers were provided by contractors including: – On the job training in the use of Global Positioning System equipment for contractors; – Commitments made to offer the Corporation’s employees the opportunity to develop engineering designing and planning skills; – Commitments made for ongoing training, skills development and research and development across all sampling, analysis and laboratory services for the Corporation’s employees and contractors; – Commitments made for contractors to undertake training in civil construction, conservation and habitat management or horticulture relating to the Maintenance and Low Risk Capital Waterways and Drainage contract; – Commitments made for contractors to undertake training in behavioural safety, team effectiveness, team management and health and safety; – Customised training programs developed for the Corporation’s employees in the use of the Asset Management Information System; and – Commitments made for training and skills development in the operation of Supervisory Control and Data Acquisition software for the Corporation’s employees. Contracts completed to which the VIPP applied: The Corporation completed twelve contracts totalling $518.8 million in value to which the VIPP applied. The total number and value of these relate to 7 metropolitan and 1 regional contracts. The outcomes reported by contractors under the VIPP included: • An overall level of local content of 97.0% of the total value of the contracts • 427 full time equivalent jobs • 2 full time equivalent apprenticeships and traineeships • All committed skills and technology transfers were achieved for these contracts. These skills included: – Drainage works and wetland construction skills for contractors; – Training in pipe boring and trenchless technology for the Corporation’s employees; – Training and up skilling in high voltage works and testing for contractors; – Training and development of skills in technologies utilised in the tertiary upgrade project for the Corporation’s employees; – Training undertaken in new technology relating to virus testing, protozoa and pathogen testing and other emerging technologies for the Corporation’s employees; – Training in the operation of a tracked submersible dredge for the contractors; and – Training provided in confined space, entry traffic management, spotter course and manual handling. Paul Clark Chairman Shaun Cox Managing Director Financial Statements Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2013 Notes 2013 $000 2012 $000 Revenue 3(a) 1,236,043 1,231,609 Other Income 3(b) 34,762 8,611 1,270,805 1,240,220 Revenue Total revenue Expenses Depreciation and amortisation expenses 4(a) (315,901) (242,582) Operational expenses 4(b) (192,272) (109,138) Employee benefits expenses 4(c) (86,936) (103,462) Repairs and maintenance expenses 4(d) (71,088) (69,328) Administrative expenses 4(e) (36,309) (36,884) Finance expenses 4(f) (549,334) (249,152) Other expenses 4(g) (64,045) (56,911) (1,315,885) (867,457) Total expenses Notes Net result from operations before tax Tax benefit/(expense) 5 (a,b) (Loss)/Profit for the period after tax 2013 $000 2012 $000 (45,080) 372,763 15,001 (102,844) (30,079) 269,919 Other comprehensive (expense)/income net of tax Items that will not be reclassified to profit or loss Revaluation decrease on infrastructure assets 17 (53,065) - Reversal of deferred tax liabilities recognised on revaluation of land 17 - 13,507 (53,065) 13,507 Items that may be reclassified to profit or loss Notes 2013 $000 2012 $000 17 12 14 12 14 Other comprehensive (loss)/income for the period net of tax (53,053) 13,521 Total comprehensive (loss)/income for the period after tax (83,132) 283,440 Net value gain on cash flow hedges The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes under Financial Statements (Notes to the Financial Report) Statement of Financial Position As at 30 June 2013 Assets Notes 2013 $000 2012 $000 Cash and cash equivalents 6 145,179 228 Trade and other receivables 7(a) 100,974 78,228 Other current assets 8 9,137 7,939 Current assets Assets Notes K Non-current assets classified as held for sale 9 Total current assets 2013 $000 2012 $000 255,290 86,395 4,513 11,242 259,803 97,637 Non-current assets Property, plant and equipment 10(a) 14,206,461 9,920,689 Intangible assets 10(b) 11,410 15,803 Defined benefit superannuation plan asset 15(b), 23(d) 504 - Total non-current assets 14,218,375 9,936,492 Total assets 14,478,178 10,034,129 Liabilities Current liabilities Trade and other payables 11(a) 382,769 264,309 Interest bearing liabilities 12(a) 355,395 789,335 Assets Notes 2013 $000 2012 $000 Provisions 13(a) 3,179 16,961 Current tax liability 5(c) 2,107 45,617 Employee benefits 15(a) 27,246 26,406 770,696 1,142,628 Total current liabilities Non-current liabilities Trade and other payables 11(b) 1,663 1,701 Interest bearing liabilities 12(b) 8,109,893 3,045,753 Provisions 13(b) 1,476 1,082 14 1,224,452 1,272,575 8,554 31,371 Total non-current liabilities 9,346,038 4,352,482 Total liabilities 10,116,734 5,495,110 Net assets 4,361,444 4,539,019 559,173 559,116 Net deferred tax liabilities Employee benefits 15(c) Equity Contributed equity 16 Assets Notes 2013 $000 2012 $000 Reserves 17 2,243,759 2,303,724 Retained profits 18 1,558,512 1,676,179 4,361,444 4,539,019 Total equity The above Statement of Financial Position should be read in conjunction with the accompanying notes under Financial Statements (Notes to the Financial Report) Statement of Changes in Equity For the year ended 30 June 2013 Notes Contributed Reserves Equity Retained Profits Total $000 559,116 2,303,724 1,676,179 4,539,019 Loss for the period after tax - - (30,079) (30,079) Other comprehensive loss net of tax - (59,965) 6,912 (53,053) Total comprehensive loss for the period after tax - (59,965) (23,167) (83,132) Balance at 1 July 2012 Comprehensive loss for the period Notes Contributed Reserves Equity Retained Profits Total $000 Dividends payable 22 - - (94,500) (94,500) Net increase in contributed equity 16 57 - - 57 57 - (94,500) (94,443) 559,173 2,243,759 1,558,512 4,361,444 559,952 2,292,504 1,522,359 4,374,815 Profit for the period after tax - - 269,919 269,919 Other comprehensive income for the period net of tax - 11,220 2,301 13,521 Transactions with equity holders in their capacity as equity holders Total transactions with owners Balance at 30 June 2013 Balance at 1 July 2011 16, 17, 18 Comprehensive income for the period Notes Total comprehensive income for the period after tax Contributed Reserves Equity Retained Profits Total $000 - 11,220 272,220 283,440 Transactions with equity holders in their capacity as equity holders Dividends paid 22 - - (118,400) (118,400) Net decrease in contributed equity 16 (836) - - (836) (836) - (118,400) (119,236) 2,303,724 1,676,179 4,539,019 Total transactions with owners Balance at 30 June 2012 16, 17, 18 559,116 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes under Financial Statements (Notes to the Financial Report) Statement of Cash Flows For the year ended 30 June 2013 Notes 2013 $000 2012 $000 Notes 2013 $000 2012 $000 Receipts from customers (inclusive of goods and service tax) 1,256,017 1,211,642 Payments to suppliers and employees (inclusive of goods and service tax) (478,190) (418,702) Income tax paid (53,889) (133,308) Interest received 234 112 Interest and other costs of finance paid (548,789) (244,722) Other receipts 43,924 104,987 219,307 520,009 (388,961) (627,580) Cash flows from operating activities Net cash inflow from operating activities 28 Cash flows from investing activities Payments for property, plant and equipment Notes 2013 $000 2012 $000 Proceeds from sales of property, plant and equipment 27,751 7,331 Net cash outflow from investing activities (361,210) (620,249) Cash flows from financing activities Proceeds from borrowings 1(q), 2 902,850 2,186,207 Repayment of borrowings 1(q), 2 (591,375) (1,968,983) Repayments for outstanding finance lease liability (810) (205) Repayments for desalination plant finance lease liability (23,811) - - (118,400) 286,854 98,619 Dividends paid Net cash inflow from financing activities 22 Notes 2013 $000 Net increase/(decrease) in cash and cash equivalents 2012 $000 144,951 (1,621) Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 6 228 1,849 145,179 228 The above Statement of Cash Flows should be read in conjunction with the accompanying notes under Financial Statements (Notes to the Financial Report) Financial Statements Notes to the Financial Report 1. Summary of significant accounting policies (a) (i) General These Financial Statements of Melbourne Water Corporation (‘the Corporation’ or ‘Melbourne Water’) represent the audited general purpose financial report that consists of a Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and Notes accompanying these statements. This general purpose financial report complies with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, including Australian interpretations, the requirements of the Financial Management Act 1994 and applicable Ministerial Directions. These Financial Statements have been prepared on accrual and going concern bases. (ii) Accounting policies Unless otherwise stated, all accounting policies applied are consistent with those of the prior year. Where appropriate, comparative figures have been amended to accord with current presentation and disclosure made of material changes. (iii) Classification between current and non-current In the determination of whether an asset or liability is current or non-current, consideration has been given to the time when each asset or liability is expected to be realised or paid. The asset or liability has been classified as current if it is expected to be turned over within the next twelve months, being the Corporation’s operational cycle – see Note 1(p) for a variation in relation to employee benefits, and Note 1(q) for a variation in relation to borrowings. (iv) Rounding Unless otherwise stated, amounts in the report have been rounded to the nearest thousand dollars. (v) Historical cost convention These Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of certain classes of property, plant and equipment and financial instruments. (vi) Accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the Corporation’s accounting policies. Areas involving a high degree of estimates and assumptions, which can materially impact the financial statements relate to the assumptions used to determine the Corporation’s estimate of the defined benefit superannuation asset/liability, fair value of infrastructure assets, employee and other provisions, commitments for the Victorian Desalination Plant, useful lives of plant, property and equipment and recognition of deferred tax balances. These assumptions and their related carrying amounts are discussed in Notes 1(d,e,f,p,r,u), 5, 10, 13, 14, 15, 20(g) and 23. (vii) Financial statement presentation The Corporation has adopted the revised AASB 101 which became effective on 1 July 2012. The revised standard includes a change to the name of the Statement of Comprehensive Income to ‘Statement of Profit or Loss and Other Comprehensive Income’. It requires that entities group items presented in other comprehensive income on the basis of whether they are subsequently reclassifiable to profit or loss (reclassification adjustments) or not. The change does not remove the option to present profit or loss and other comprehensive income in two statements, nor change the option to present items of other comprehensive income either before tax or net of tax. The Corporation has elected to present items of other comprehensive income net of tax. Revenue (b) (i) Bulk water and sewerage services The Corporation collects bulk water and sewerage services revenue for providing storage operator services and bulk water and sewerage services to retail metropolitan and regional water businesses. Bulk water and sewerage services revenues consist of a variable metered component (based on volumes of usage) and a fixed fee (for service availability). The metered usage component of the revenue is recognised when the service has been used with settlement from date of invoice. The fixed fee service availability components of the revenues are recognised on a monthly basis with settlement at 14 days. Bulk water and sewerage services revenues are collected from the various water businesses. The Essential Services Commission (ESC) regulates the prices and service standards for the provision of storage operator services and bulk water and sewerage services. The ESC’s general regulatory powers are set out in: • the Essential Services Commission Act 2001; • Part 1A of the Water Industry Act 1994; and • a Water Industry Regulatory Order made under section 4D of the Water Industry Act 1994. 1. Summary of significant accounting policies (ii) Waterways charges Waterways charges are recognised in the year for which the rate is levied. Charges are levied either quarterly or annually. Waterways charges are collected by various retail water businesses on behalf of the Corporation. A lien is held over each property to ensure that any outstanding amounts are recovered upon sale of the property. The ESC regulates the prices and service standards for the provision of waterways. (iii) Developer charges and contributions and contributed assets Developer charges and contributions are recognised when received. Developer contributed assets consist of assets received free of charge or for nominal consideration and are recognised as revenue at fair value on completion of works and their acceptance by the Corporation. (iv) Interest receivable Interest receivable is recognised as revenue when earned and is accrued in accordance with the terms and conditions of the underlying financial instrument or other contract. (v) Net gain from disposal of property, plant and equipment Property sales in relation to the Corporation’s arrangements with Places Victoria are recognised upon settlement due to the nature of the arrangement between Places Victoria and the Corporation. Other property sales are recognised on signing of an unconditional contract of sale. Property sales are recognised in the Statement of Profit or Loss and Other Comprehensive Income on a net basis of sale proceeds less costs. (vi) Government grants and contributions Grants from the Victorian Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Corporation will comply with all required conditions. Government grants relating to costs are included as deferred income in liabilities and are recognised in the Statement of Profit or Loss and Other Comprehensive Income over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase or construction of property, plant and equipment are deducted in arriving at the carrying amount of the asset. Expenses (c) Finance costs Finance costs are recognised as expenses in the period in which they are incurred. All qualifying assets (being assets that necessarily take a substantial period of time to get ready for their intended use or sale) are measured at fair value. Therefore, any finance costs directly attributable to the acquisition, construction or production of these qualifying assets are not required to be capitalised and will continue to be expensed in the period in which they are incurred. Finance costs include interest on short-term and long-term borrowings, finance lease charges and the Victorian Government’s financial accommodation levy. (d) Taxation The Corporation is subject to the National Tax Equivalent Regime (NTER), which is administered by the Australian Taxation Office (ATO). The difference between the NTER and the Commonwealth legislation is that the tax liability is paid to the State Government rather than the Commonwealth Government. The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the national corporate income tax rate of 30%, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rate expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantially enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences when they arise in a transaction, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. 1. Summary of significant accounting policies (continued) Assets (e) Property, plant and equipment (i) Recognition and measurement of assets Property, plant and equipment represent non-current physical assets comprising land, buildings, water, sewerage and drainage infrastructure, plant and equipment assets used by the Corporation in its operations. Items with a cost or value in excess of $500 (capitalisation threshold) and a useful life of more than one year are recognised as assets with the exception of lifecycle costs for the Victorian Desalination Plant which are expensed. All items with a cost or value less than $500 are expensed. Cost includes such expenditure that is directly attributable to the acquisition of the asset. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges relating to foreign currency purchases of non-current physical assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost of the item can be measured reliably. All other subsequent costs are charged to the Statement of Profit or Loss and Other Comprehensive Income during the financial period in which they are incurred. (ii) Repairs and maintenance Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Where the repair relates to the replacement of a component of an asset and the cost exceeds the capitalisation threshold, the cost is capitalised and depreciated over the remaining life of the asset. (iii) Valuation of non-current physical assets All non-current physical assets are recognised initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment in accordance with the requirements of Financial Reporting Direction (FRD) 103D Non-Current Physical Assets. Revaluations are conducted either independently (as required under FRD103D) or using management expertise and classified as a managerial revaluation. The Corporation also considers more frequent revaluations such as during price determination years. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The fair value of land and buildings is determined as the amount for which an asset could be exchanged between knowledgeable, willing parties, in an arm’s length transaction. Crown land is measured with regard to the property’s highest and best use after due consideration is made for any legal or constructive restrictions imposed on the asset. The last independent valuation of the Corporation’s land and buildings was performed by the Valuer General Victoria (VGV) in 2010/11 to determine the fair value of the land and buildings, in accordance with FRD 103D as explained in note 10(a)(i). The fair value of infrastructure assets is determined annually using the ‘income approach’ (based on discounted cash flows), as explained further at Note 10 (a)(ii). The fair value of the remaining plant and equipment (consisting of plant and equipment, fleet vehicles and works in progress) is determined based on cost less any accumulated depreciation and any accumulated impairment losses. This is deemed the most appropriate basis to approximate fair value given: – there is no evidence that a reliable market based fair value or other relevant fair value indicators for these assets exists; and/or – these assets are acquired and disposed of frequently, typically have short depreciable lives, and these assets are relatively low in value (with the exception of works in progress) compared to land and buildings and infrastructure assets. (iv) Impairment All assets are assessed for indicators of impairment on an annual basis. Such assets are tested to ascertain whether the carrying amount exceeds their recoverable amounts. Impairment losses are recognised immediately in the Statement of Profit or Loss and Other Comprehensive income, except that, to the extent that a credit balance exists in the revaluation reserve in respect of the same assets, they are debited to the revaluation reserve. Refer to Notes 10(a)(iii) and 10(b) for the results of the 2012/13 annual impairment test. (v) Revaluations Revaluation increments are credited directly to equity in the revaluation reserve, except that, to the extent that an increment reverses a revaluation decrement in respect of the same asset previously recognised as an expense in determining 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 class of asset, they are debited to the revaluation reserve. (vi) Non-current assets held for sale Non-current assets that are classified as held for sale are stated at the lower of their carrying amount and fair value less costs to sell, as their carrying amount will be recovered principally through a sale transaction, rather than through continuing use. The Corporation considers that the sale of these assets are highly probable and the assets are available for immediate sale in their present condition. These assets are not depreciated or amortised while classified as held for sale and are disclosed separately in the Statement of Financial Position. (f) Depreciation and amortisation of non-current assets Where assets have separate identifiable components that have distinct useful lives and/or residual values, a separate depreciation rate is determined for each component. Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, commencing from the time the asset is held ready for use. The assets’ residual values and useful lives are reviewed annually, and adjusted if appropriate, at the end of each reporting period. Land is not depreciated. Major depreciation and amortisation periods used are listed below and are consistent with the prior year: Buildings 10 to 100 years Plant and equipment 3 to 50 years Infrastructure assets 3 to 200 years Fleet vehicles 3 to 12 years Intangible assets 3 to 5 years (g) Cash and cash equivalents For the purposes of the Statement of Cash Flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term and highly liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Bank overdrafts (if applicable) are shown within interest bearing liabilities on the Statement of Financial Position. (h) Receivables All receivables are recognised at the amounts receivable less any allowance for doubtful debts. Receivables are reviewed on an ongoing basis to identify any receivables which cannot be collected. Debts which cannot be collected are writtenoff when identified. A provision for doubtful debts is established when there is objective evidence that the Corporation is highly unlikely to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the Statement of Profit or Loss and Other Comprehensive Income. (i) Other current assets Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that accounting period. (j) Inventories Stores and materials are used in the construction of new works and for the repair and maintenance of existing assets. All stores are valued at the lower of cost and net realisable value. (k) Smart Water Fund The Smart Water Fund was established by the Victorian Government and is managed by the Corporation and the three retail water businesses for the purpose of providing grant funding to support the development of sustainable water use projects. Each water business has a 25 per cent interest in the Fund. Contributions made to the Smart Water Fund are initially recognised as prepayments in the Corporation’s Statement of Financial Position. Expenses are subsequently recognised by the Corporation when incurred by the Fund. 1. Summary of significant accounting policies (continued) (l) Intangible assets and research & development costs (i) Intangible assets Intangible assets (primarily consisting of information technology software and renewable energy certificates) represent identifiable non-monetary assets without physical substance. Intangible assets are measured at cost less accumulated amortisation and impairment. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the Corporation. Amortisation is allocated to intangible assets with estimated finite useful lives on a systematic basis over the asset’s estimated useful life. Amortisation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with an estimated finite useful life are reviewed at least at the end of each annual reporting period. In addition, an assessment is made at each reporting period to determine whether there are indicators that the intangible asset concerned is impaired. If so, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Refer to Note 10(a)(iii) for the results of the 2012/13 annual impairment test. (ii) Research & development costs Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from a development project is recognised when it is probable that the project will be completed and generate future economic benefits and its costs can be measured reliably. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period it is incurred. (m) Goods and Services Tax Revenues, expenses and assets are recognised net of goods and services tax (GST), unless GST incurred is not recoverable from the ATO. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables (including commitments) are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement of Financial Position. Cash flows arising from operating activities are disclosed in the Statement of Cash flows on a gross basis i.e. inclusive of GST. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the ATO are presented as operating cash flows. Liabilities (n) Leased assets (i) Finance leases Leases of property, plant and equipment, where the Corporation substantially bears all the risks and rewards incidental to ownership, are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in the Statement of Financial Position. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the Statement of Profit of Loss and Other Comprehensive Income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is amortised on a straight line basis over the estimated useful life of the asset. (ii) Operating leases – expenses Leases in which a significant portion of the risks and rewards incidental to ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the Statement of Profit or Loss and Other Comprehensive Income on a straight-line basis over the period of the lease, in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets. (iii) Lease incentives In the event that lease incentives are received upon entering into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a basis which reflects the time pattern in which economic benefits from the leased asset are consumed. 1. Summary of significant accounting policies (continued) (o) Payables (i) Trade payables Payables are recognised when the Corporation becomes obliged to make future payments resulting from the purchase of goods and services. (ii) Accruals These amounts represent liabilities for goods and services provided to the Corporation prior to the end of the financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition or in accordance with contract terms. (iii) Interest payable Interest is recognised as an expense in the reporting period in which it is payable and accrued in accordance with the terms and conditions of the underlying financial instruments or other contract. (p) Employee benefits (i) Salaries and annual leave Liabilities for salaries, including non-monetary benefits expected to be settled within 12 months of the reporting period, are recognised in employee benefit liabilities in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled, at their nominal values. Employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Corporation, in respect of services rendered by employees up to the end of the reporting period. Regardless of the expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting period, in which case it would be classified as a noncurrent liability. (ii) Sick leave Sick leave payments are made in accordance with relevant awards, determinations and Corporation policy. No provision is made in the financial statements for unused sick leave entitlements as these are non-vesting benefits. (iii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future salary levels, experience of employee departures and periods of service. Expected future cash payments are discounted using market yields attached to the Reserve Bank of Australia’s 10 year rate for semi-annual coupon bonds at the end of the reporting period with terms to maturity that closely match the estimated future cash outflows. Provisions made for unconditional long service leave (where the employee has a present entitlement to the benefit) are classified as a current liability. The non-current liability represents long service leave entitlements accrued for employees with less than seven years of continuous service. Amounts expected to be paid within 12 months are measured at nominal value, and amounts expected to be paid beyond 12 months are measured at present value. (iv) Superannuation Defined contribution plans Contributions to defined contribution superannuation plans are expensed when incurred. Defined benefit superannuation plan A liability or asset in respect of the Corporation’s equip defined benefit superannuation plan is recognised in the Statement of Financial Position and is measured as the difference between the present value of employees’ accrued benefits at the end of the reporting period and the net market value of the superannuation plan’s assets at that date. The present value of benefits is based on expected future payments which arise from membership of the plans at the end of the reporting period. Consideration is given to expected future salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields of the 9 year Commonwealth Government bonds that match the estimated future cash flows. The amount brought to account in the Statement of Profit or Loss and Other Comprehensive Income in respect of superannuation represents the contributions made to the equip defined benefit superannuation fund, adjusted by the movement in the defined benefit superannuation plan liability or asset which is determined annually by independent actuarial assessment. (v) Termination benefits Liabilities for termination benefits are recognised when the Corporation is demonstrably committed to terminating employment of current employees, according to a detailed formal plan without possibility of withdrawal. The liabilities for termination benefits are recognised as payables in the provision for employee benefits. Liabilities for termination benefits expected to be settled within 12 months are measured at the amounts expected to be paid when they are settled. Amounts expected to be settled more than 12 months from the end of the reporting period are measured as the estimated cash outflows, discounted using market yields at the reporting date on the 10 year bond rate. (vi) Employee benefit on-costs Employee benefit on-costs, including payroll tax and workers compensation are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities. (vii) Performance payments Performance payments for the Corporation’s employees are based on achievement of agreed performance targets and are based on a percentage of the annual salary package provided under their contracts of employment in accordance with the Corporations performance bonus policy. A liability is recognised and is measured as the aggregate of the amounts accrued under the term of the contracts at the end of the reporting period. (viii) Work Cover The Corporation is registered as a self-insurer for workers compensation and is liable to the workers or workers’ dependants to pay compensation under the Accident Compensation Act 1985. An independent actuarial assessment has been obtained for outstanding claims incurred and not settled, and for claims incurred but not reported as at 30 June 2013 which are recognised as a liability. Other claims incurred and settled during the period are charged to the Statement of Profit or Loss and Other Comprehensive Income. In accordance with Section 146(5)(a) of the Accident Compensation Act 1985, the Corporation must provide a bank guarantee to the Victorian Work Cover Authority as part of its Work Cover self insurance commitments. Refer to note 15(c)(i) for details of the independent actuarial assessment and bank guarantee. (ix) Workers compensation The Corporation continues to be liable for workers compensation claims incurred prior to the introduction of Work Care (now Work Cover) in 1985. An independent actuarial assessment is obtained for all outstanding workers compensation claims as at 30 June 2013, which are recognised as a liability. Refer to note 15(c)(ii) for details of the independent actuarial assessment. (q) Interest Bearing Liabilities Interest bearing liabilities consist of borrowings and finance lease liabilities. All borrowings are required to be transacted through the Treasury Corporation of Victoria whose liabilities are guaranteed by the Victorian Government. The Corporation’s borrowings are comprised of floating rate note (FRN) loans, fixed interest loans and an overnight loan (11 am account) facility. FRN loans are fixed term loans with a margin that is reset to a variable interest rate every ninety or one hundred and eighty days. Generally, these notes are issued with maturity terms between three and nine years. Fixed interest loans are interest only loans with the full face value repaid at maturity or refinanced for a new term. Most have maturity terms set between 1 and 11 years (2011/12: 1 and 12 years). The overnight loan facility interest rates are floating rates that fluctuate with the cash rate. Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. Where the Corporation has an unconditional right to defer settlement of the liability for at least 12 months after the balance date, borrowings are classified as noncurrent liabilities. Otherwise, borrowings are classified as current liabilities. See Note 2 for further details on financing arrangements and risk management. Refer to Note 1(n)(i) for further details on finance lease liabilities. (r) Provisions, Contingent Assets and Contingent Liabilities Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. Provisions for Gainshare on Capital Projects and Remediation Works are included within the cost of the non-current physical assets to which they are directly attributable to in accordance with criteria in note 1(e). Contingent assets and contingent liabilities are not recognised in the Statement of Financial Position but are disclosed by way of a note, and if quantifiable, are measured at nominal value. Other Significant Accounting Policies (s) Foreign currency translation (i) Functional and presentation currency The functional and presentation currency of the Corporation is the Australian dollar. (ii) Transactions All foreign currency transactions during the reporting period are brought to account using the exchange rate in effect at the date of the transaction. (t) Cash flow hedges In order to hedge the effect of foreign exchange rate movements on the fair values of assets purchased, the Corporation occasionally enters into forward foreign exchange contracts. These hedges are classified as cash flow hedges with the associated gains or losses recognised directly in equity. As the hedged firm commitment results in the recognition of an asset, the associated gains/losses that had previously been recognised in equity are included in the initial measurement of the acquisition cost. These are accounted for at settlement date. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit or Loss and Other Comprehensive Income. At any point in time, any cumulative gain or loss on the cash flow hedge is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the Statement of Profit or Loss and Other Comprehensive Income. (u) Commitments Commitments (capital and other) are disclosed at their nominal value and inclusive of the GST payable. In addition, where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are stated. In accordance with the Water Interface Agreement and Supplementary Water Interface Agreement between Melbourne Water and the State, commitments in respect of the Victorian Desalination Plant project are recorded as per information provided by the Department of Environment and Primary Industries. (v) Contributed equity Additions and disposals to net assets are designated as contributed equity when approved by the Minister for Finance and have met the requirements of FRD 119 Contributions By Owners. Other transfers that are in the nature of contributions or distributions have also been designated as contributed equity. (w) Dividend policy The Corporation is required to pay a dividend in accordance with a determination of the Treasurer of Victoria based on a prescribed methodology. An obligation to pay a dividend only arises after a formal determination is made by the Treasurer following consultation with the Corporation’s Board of Directors and the Minister for Water. (x) New Accounting Standards and Interpretations Certain new accounting standards and interpretations relevant to the Corporation have been published that are not mandatory for the 30 June 2013 reporting period. The Corporation has not adopted and does not intend to adopt these standards early. The Corporation’s assessment of the impact of these new standards and interpretations is set out below: (i) AASB 9 ‘Financial Instruments (December 2009)’, AASB 2009-11 and AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9’ The revised version of AASB 9 incorporates revised requirements for the classification and measurement of financial liabilities, and carrying over of the existing derecognition requirements from AASB 139 ‘Financial Instruments: Recognition and Measurement’. This Standard supersedes AASB 9 (December 2009) and is effective for annual reporting periods commencing on or after 1 January 2013. The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss. In these cases, the portion of the change in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. The Corporation does not expect this to have a material impact as all financial liabilities are currently measured at amortised cost. (ii) AASB 13 ‘Fair Value Measurement’ and related AASB 2011-8 and AASB 2012-1 ‘Amendments to Australian Accounting Standards arising from AASB 13’ This is a new accounting standard applicable for annual reporting periods commencing on or after 1 January 2013. It replaces the guidance on fair value measurement in existing AASB accounting literature with a single standard. The AASB defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, AASB 13 does not change the requirements regarding which items should be measured or disclosed at fair value. The Corporation is currently assessing the impact and does not expect any material changes given that it is already applying the fair value requirements in existing AASB accounting standards which are not expected to change. (iii) AASB 1053 ‘Application of Different Tiers of Australian Accounting Standards’, AASB 2010-2 and AASB 2011-2 ‘Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements’ AASB 1053 and AASB 2010-2 arise from the new Reduced Disclosure Regime requirements. They are applicable to annual reporting periods commencing on or after 1 July 2013. AASB 1053 establishes a differential financial reporting framework consisting of two tiers of reporting requirements for preparing general purpose financial statements. AASB 2010-2 makes amendments to many Australian Accounting Standards, including interpretations, to introduce reduced disclosure requirements to the pronouncements for application by certain types of entities. While the Corporation is currently assessing the impacts, it does not expect any material changes as it is expected that Tier 1 will be mandated to apply. (iv) AASB 119 ‘Employee Benefits (2011)’, AASB 2011-10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’ and AASB 2011-11 ‘Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements’ The revised version of AASB 119 ‘Employee Benefits’ with revised requirements for pensions and other post-employment benefits, termination benefits and other changes is applicable for annual reporting periods commencing on or after 1 January 2013. The key amendments include eliminating the ‘corridor approach’ permitted by the existing AASB 119, introducing enhanced disclosures about defined benefit plans and modifying accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits. Furthermore, the interest cost and expected return on plan assets used in the previous version of AASB 119 are replaced with a ‘net interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. The amendments to AASB 119 require retrospective application. The Corporation is currently assessing the impacts of this change. 2. Financial risk management objectives and policies (a) Principal financial instruments The Corporation’s principal financial instruments comprise of (as per Note 19): (i) Cash assets; (ii) Trade debtors and other receivables; (iii) Creditors, accrual and interest payable; (iv) Lease liabilities; (v) Other payables; and (vi) Borrowings. (b) Financial risk management objectives The objectives of the Corporation’s Financial Risk Management Policy and Guidelines are to: (i) Manage the daily and long term liquidity needs of the Corporation; (ii) Optimise cash resources, in such a way as to minimise net financing costs and maximise the repayment of debt within acceptable levels of risk; (iii) Ensure that all financial and treasury management operational exposures are fully identified, quantified, planned, approved and managed; and (iv) Safeguard the organisation’s financial resources by maintaining appropriate internal control over the corporate treasury functions. These objectives are consistent with the Corporate Risk Management Policy and Framework of the Corporation, the Corporation’s Commercial Management Policy, the Treasury Management Guidelines issued by DTF and the Victorian Public Sector Debt Management Objectives. (c) Financial risk management strategy The Corporation manages financial risk by maintenance of approved debt portfolio structure and strategic targets as required by its Financial Risk Management Policy and Guidelines. This includes: (i) Portfolio composition (i.e. fixed, floating, indexed exposure): During the financial year, the Corporation’s debt portfolio was managed within the bands of: Floating interest rate borrowings 10–40% Fixed interest rate borrowings 60–90% (ii) Physical maturity profile: Debt maturity of fixed and floating interest rate borrowings (excluding 11am account) is not to exceed 20% of the total debt portfolio in any year. (iii) Interest rate risk profile: Fixed and floating interest rate borrowings maturing or to be re-priced within one year are not to exceed 40% of the total debt portfolio. Forward rate agreements are used occasionally where it is perceived that a lower interest rate can be achieved. The purchase of forward agreements is limited in terms of volume and time, and is subject to a maximum term of 18 months forward. (d) Financing arrangements The capacity to borrow funds and manage the associated risks is subject to the provisions of the Borrowing and Investment Powers Act (1987). In accordance with this Act, the Treasurer of Victoria issues annual approval, permitting new borrowings and the refinancing of all loan maturities for that year. All funding is sourced from the Treasury Corporation of Victoria (TCV). The Corporation’s total approved maximum borrowing for 2012/13 of $4,249.5 million (2011/12: $4,166.3 million) was not exceeded at any stage throughout the financial year. (e) Capital Management The Corporation manages its finances in order to maintain a satisfactory gearing ratio, to provide adequate returns, maintain its current credit rating and to ensure that it can fund its operations as a going concern. The Corporation is currently reviewing the strategy adopted to manage its finances through the implementation of a Financial Sustainability Strategy. The only externally imposed capital requirements of the Corporation are that: – financial accommodation does not exceed the approval limits set by the Treasurer of Victoria pursuant to the Borrowing and Investment Powers Act 1987; and – the Corporation, with the exception of a trading account with overdraft facilities, is required to borrow exclusively with TCV. The Corporation’s gearing ratio (debt/(debt+equity)) at 30 June 2013 was 66.0% (2011/12: 45.8%). The increase compared to 2011/12 is mainly attributed to additional borrowings as a result of the commencement of the Victorian Desalination Plant finance lease and capital expenditure on projects. Gearing is one of a number of benchmarks that are considered by the Board when considering the capital structure and is approved via the Corporate Plan. (f) Market risk Market risk is the risk that changes in market prices will affect the fair value of/or future cash flows of the financial instruments. Market risk is comprised of the Corporation’s foreign exchange risk, price risk and interest rate risk. The Corporation’s exposure to market risk is primarily through interest rate risk and the exposure to price risk is primarily through commodity and energy price risks. There is insignificant exposure to foreign exchange risks. Objectives, policies and processes used to manage these risks are disclosed below. 2. Financial risk management objectives and policies (continued) (f) Market risk (continued) (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. It is the Corporation’s policy to hedge the effect of foreign currency exchange rate movements on the fair values of any transactions in excess of AUD$1 million. The Corporation’s policy requires all hedging to be undertaken through TCV in the form of forward foreign exchange contracts. At 30 June 2013, the Corporation did not have any material forward exchange contracts. (ii) Price risk Price risk is the risk that the Corporation will suffer financial loss due to adverse movements in the price of commodity inputs and/or outputs related to its business operations. No significant exposure exists within the Corporation’s present operating framework. Lower level exposures exist and supply and service contracts are executed as part of the normal course of business to mitigate this risk where possible. (iii) Interest rate risk Interest rate risk is the risk that the organisation will suffer a financial loss due to adverse movements in interest rates. Exposures arise predominately from liabilities bearing variable interest rates as the Corporation intends to hold fixed rate liabilities to maturity. The mix of floating and fixed rate debt is managed strategically within a range of Board approved parameters, in order to minimise exposure to fluctuations in variable rates and to minimise the long-term net cost of funding. (g) Credit risk Credit risk is the risk of financial loss to the Corporation as a result of a customer or counterparty to a financial instrument failing to meet its contractual obligations in full and on the due date. The Corporation’s exposure to credit risk is influenced by the individual characteristics of each customer. All receivables are recognised at the amounts receivable less any allowance for doubtful debts. Receivables are reviewed on an ongoing basis to identify amounts which cannot be collected. Debts which cannot be collected are written-off. A provision for doubtful debts is established when there is objective evidence that the Corporation will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the Statement of Profit or Loss and Other Comprehensive Income. As Trade Debtors are made up predominantly by the metropolitan retail water businesses, the Corporation’s exposure to credit risk has been assessed to be minimal. These debtors are invoiced in two parts. The first part is a usage charge that is invoiced weekly and paid within seven days. The second part is an availability charge that is invoiced monthly and paid within 14 days. The major exposure to credit risk arises from Other Receivables, which have been recognised net of any provision for doubtful debts. The receivable balance consists of a large number of residential and business customers which are spread across a diverse range of industries. Receivable balances are monitored on an on-going basis to ensure that exposure to bad debts is not significant. The Corporation has in place a policy and procedure for the collection of overdue receivables. All financial risk management instruments are transacted with TCV, whose liabilities are guaranteed by the Victorian Government. The Corporation potentially has a concentration of credit risk with the TCV as the central borrowing authority of Victoria. This risk is considered minimal. (h) Liquidity risk The Corporation 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 Corporation obtains annual approval from the Treasurer for new borrowings, borrowings to refinance maturing and non-maturing loans and temporary purpose borrowing facilities. In addition, the Corporation has an overdraft facility of $1 million with the Westpac Banking Corporation, of which nil was drawn down at 30 June 2013 (2011/12: Nil). The objective of the Corporation’s financial risk management policies is the optimal utilisation of cash with all surplus funds repaid in borrowings. This results in a working capital deficiency of $510.9 million (2011/12: $1,045.0 million) at the end of the reporting period. The deficiency occurs at a point in time only due to timing of revenue receipts and does not reflect the permanent situation of the Corporation. This deficiency is funded by the financing arrangement with TCV and there is no reason to indicate that the Corporation cannot pay its debts as and when they fall due. At 30 June 2013, the Corporation held significant amount of cash as the Corporation had accessed $200 million of long term Floating Rate Notes (FRNs) to lock in Financial Accommodation Levy (FAL) at 1.1% on 28 June 2013 effectively repaying its entire 11AM overnight borrowings and carrying a cash deposit of $145.2 million at 30 June 2013. The Corporation’s financial liability maturities have been disclosed in Note 19. 3. Revenue (a) Notes 2013 $000 2012 $000 Bulk water services 547,619 512,277 Bulk sewerage services 400,169 406,911 Desalination Plant rebate* (14,777) - Waterways charges 220,199 213,845 Total sales revenue 1,153,210 1,133,033 38,736 56,806 Revenue Sales revenue Other revenue Developer charges and contributions Notes 2013 $000 2012 $000 Developer contributed assets 27,114 30,262 Interest revenue 266 112 Biological assets 305 4,941 Licence fees 2,679 2,556 Bad and doubtful debt expenses recovered - 15 Fees and charges and other revenue 13,733 3,884 Total other revenue 82,833 98,576 Total revenue 1,236,043 1,231,609 Notes 2013 $000 2012 $000 23(e) 18,732 - Net gain on disposal of property, plant and equipment 13,267 4,968 Government grants** 2,763 3,643 (b) Other income Defined benefit superannuation plan income Total other income 34,762 8,611 Total revenue 1,270,805 1,240,220 * Desalination plant rebate The desalination plant rebate relates to payments made to the retail water businesses in relation to the early recovery of desalination plant costs in 2011/12. This is the return required in addition to the price freeze. ** Government grants Government grants of $2.8 million (2011/12: $3.6 million) were recognised as other income by the Corporation during 2012/13 for various projects. All conditions attached to Government grants have been satisfied prior to their recognition in the Statement of Profit or Loss and Other Comprehensive Income. The recognition of Government grants with unfulfilled conditions have been recognised as deferred income (included in advances within trade and other payables) in the Statement of Financial Position. Any grants relating to assets that meet the conditions attached are recorded against the asset. 4. Expenses (a) Depreciation and amortisation expenses Notes 2013 $000 2012 $000 Buildings 10(c) 947 1, 497 Leasehold improvements 10(c) - 293 Plant and equipment 10(c) 14,076 9,161 Infrastructure 10(c) 241,388 221,216 Depreciation Notes 2013 $000 2012 $000 10(c) 1,535 1,079 257,946 233,246 assets Fleet vehicles Total depreciation Amortisation Desalination plant infrastructure assets under finance lease 10(c) 48,023 - Other infrastructure assets under finance leases 10(c) 3,488 2,158 Intangible assets 10(c) 6,444 7,178 Total amortisation 57,955 9,336 Total depreciation and amortisation expenses 315,901 242,582 2013 $000 2012 $000 Desalination plant operating expenses 86,043 - Materials, chemicals and laboratory expenses 12,419 12,276 (b) Operational expenses Notes Notes 2013 $000 2012 $000 Energy expenses (including renewable energy) 24,004 22,903 Agricultural expenses 204 3,832 Insurance expenses 5,685 6,030 Transport expenses 4,699 4,916 Grants and contributions expenses 9,822 10,911 External professional services expenses 12,458 10,169 Contract works 29,352 29,210 Other expenses 7,586 8,891 Total operational expenses 192,272 109,138 2013 $000 2012 $000 Salary expenses 64,424 60,115 Post employment benefits 5,074 6,136 (c) Employee benefits expenses Notes Notes 2013 $000 2012 $000 7,864 12,728 - 16,925 Other employee expenses 9,574 7,558 Total employee benefits expenses 86,936 103,462 2013 $000 2012 $000 Repairs and maintenance 67,226 65,949 Information technology maintenance 3,862 3,379 Total repairs and maintenance expenses 71,088 69,328 2013 $000 2012 $000 10,156 10,852 Annual, long service and shift leave expenses Defined benefit superannuation fund expense 23(e) (d) Repairs and maintenance expenses Notes (e) Administrative expenses Notes Waterways charges billings and collection Notes 2013 $000 2012 $000 Information technology and telecommunication expenses 14,164 13,117 Legal expenses 2,887 1,859 Education and training expenses 2,129 2,811 Advertising expenses 394 267 Other expenses 6,579 7,978 Total administrative expenses 36,309 36,884 2013 $000 2012 $000 Interest expense 208,621 214,134 Desalination plant finance lease interest 302,512 - Financial accommodation levy 38,201 35,018 Total finance expenses 549,334 249,152 (f) Finance expenses Notes (g) Other expenses Notes 2013 $000 2012 $000 Government rates and taxes (including carbon price, land tax, FBT and other) 31,221 26,519 Rental and lease expenses 6,830 3,183 Bad and doubtful debt expenses 43 - Assets written off/written down* 15,132 25,000 6,570 - Other expenses 4,249 2,209 Total other expenses 64,045 56,911 Total expenses 1,315,885 867,457 Impairment expense 10(c) * Asset write-offs primarily relate to Drainage Developer Scheme works within a catchment size of less than 60 hectares that are transferred to Councils for ongoing maintenance. 5. Income tax (a) Components of tax benefit/expense Notes Current tax 2013 $000 2012 $000 9,110 147,808 Notes 2013 $000 2012 $000 Deferred tax relating to temporary differences (28,778) 42,458) Adjustments for current tax of prior periods 4,667 (2,506) Total tax (benefit)/expense (15,001) 102,844 (b) Numerical reconciliation of income tax to prima facie tax payable Notes 2013 $000 2012 $000 (Loss)/profit before income tax (45,080) 372,763 Tax at the Australian tax rate of 30% (2011/12: 30%) (13,524) 111,829 Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Adjustment in respect of income tax of previous year 4,667 (2,506) Non assessable and non deductible for income tax purposes (2,398) (1,964) Notes 2013 $000 2012 $000 Assessable income/(deductible expenses) not booked (3,128) 48 Research and development tax incentive (618) (4,563) Income tax as reported in the Statement of Profit or Loss and Other Comprehensive Income (15,001) 102,844 2013 $000 2012 $000 Current tax payable (2,107) (45,617) Total income tax payable (2,107) (45,617) (c) Income tax payable Notes (d) Income tax recognised in other comprehensive income Notes 2013 $000 2012 $000 Notes 2013 $000 2012 $000 Deferred tax 17 arising on items recognised in other comprehensive income: Decrement in deferred tax on infrastructure assets revalued (22,742) - Reversal of deferred tax liabilities on revaluation of land 17 - (13,507) Net value gain on cash flow hedges 17 5 6 (22,737) (13,501) 2013 $000 2012 $000 Cash on hand 20 18 Cash at bank 145,153 160 Cash advances 6 50 145,179 228 Total income tax recognised in other comprehensive income 6. Cash and cash equivalents Notes Total cash and cash equivalents 19 7. Trade and other receivables (a) Trade and other receivables Notes 2013 $000 2012 $000 19 53,114 44,462 Other receivables 31,923 19,268 Net GST receivable from the Australian Tax Office 9,947 8,664 Sugarloaf pipeline security deposit 6,049 5,866 Less: provision for impaired other receivables (59) (32) Total other receivables 47,860 33,766 Total trade and other receivables 100,974 78,228 Trade debtors Other receivables (b) Ageing Analysis of Receivables All receivables are recognised at the amounts receivable less any allowance for impaired receivables. Receivables are reviewed on an ongoing basis to identify debts that cannot be collected. Debts which cannot be collected are written-off. Current Past due but not impaired 0–30 days 31–60 days 61–90 days 91 Impaired Total days + Notes $000 $000 $000 $000 $000 $000 Trade debtors 7(a) 36,961 12,561 3,553 39 - 53,114 Other receivables 7(a) 35,379 132 5,160 7,248 (59) 47,860 72,340 12,693 8,713 7,287 (59) 100,974 30 June 2013 Receivables Total Receivables Current Past Due but not Impaired 0–30 days 31–60 days 61–90 days 91 days+ Impaired Total Notes $000 $000 $000 $000 $000 Trade debtors 7(a) 41,980 2,449 10 23 Other receivables 7(a) 26,483 477 19 6,819 (32) 33,766 68,463 2,926 29 6,842 (32) 78,228 30 June 2012 $000 Receivables Total Receivables 44,462 8. Other current assets Notes 2013 $000 2012 $000 Prepayments 2,630 2,057 Stores 6,507 5,882 Total other current assets 9,137 7,939 9. Non-current assets classified as held for sale Notes 2013 $000 2012 $000 Property, plant and equipment – held for sale* 4,513 11,242 Total assets classified as held for sale 4,513 11,242 * The Corporation currently holds 65 lots of land for sale mainly as part of the Riverwalk (Western Treatment Plant) development. These lots were being marketed for private sale by Places Victoria during the 2012/13 financial year. At 30 June 2013, these lots were still on the market and an active program is underway to locate buyers. The 36 lots of surplus land recorded as held for sale at 30 June 2012 were mainly part of the Riverwalk development and 22 were sold in the 2012/13 financial year and are no longer recorded within held for sale assets. The remaining lots are still on the market and an active program is underway to locate buyers at 30 June 2013. 10. Property, plant and equipment and intangible assets (a) Classes of property, plant and equipment Notes 2013 $000 2012 $000 133,973 133,867 133,973 133,867 1,033,794 1,023,058 1,033,794 1,023,058 Buildings at fair value 21,102 22,890 Less: accumulated depreciation (2,912) (2,023) 18,190 20,867 Plant and equipment at fair value 89,956 83,303 Less: accumulated depreciation (73,100) (63,118) Crown land Crown land at fair value Total Crown land (i) Freehold land Freehold land at fair value Total freehold land (i) Buildings Total buildings (i) Plant and equipment Notes 2013 $000 2012 $000 16,856 20,185 Fleet vehicles at fair value 11,286 7,373 Less: accumulated depreciation (3,435) (1,900) Total fleet vehicles 7,851 5,473 7,859,478 7,644,065 Total plant and equipment Fleet vehicles Infrastructure assets Infrastructure assets at fair value Less: accumulated depreciation Sub total infrastructure assets (215,173) 7,859,478 Infrastructure assets under finance lease Desalination plant 20(g)* assets under finance lease at fair value 4,662,793 7,428,892 Notes 2013 $000 Less: desalination plant assets accumulated amortisation (48,023) Other infrastructure assets under finance lease at fair value 11,303 Less: other infrastructure assets accumulated amortisation and impairment 2012 $000 39,490 (2,158) Sub total finance lease 4,626,073 37,332 12,485,551 7,466,224 Capital works in progress 510,246 1,251,015 Total property, plant and equipment 14,206,461 9,920,689 Total infrastructure assets (ii) * Total desalination plant assets under finance lease at fair value are higher than the finance lease liability recorded at 20(g) as the liability reflects the net of principal repayments and other capital payments already made to 30 June 2013. 10. Property, plant and equipment and intangible assets (continued) (a) Classes of property, plant and equipment (continued) (i) Valuations of land and buildings A valuation of the Corporation’s land and buildings was performed internally by management in 2012/13 to determine the fair value of the land and buildings using Valuer General Victoria (VGV) postcode and building/land use indices. This valuation indicated that the fair value of land and buildings has not materially changed from the last independent valuation of the Corporations’ land and buildings which was performed by the VGV in 2010/11. If land and buildings were measured at historical cost, the carrying amounts would be as follows: 2013 $000 2012 $000 Land 784,705 768,770 Buildings 25,749 25,195 Total 810,454 793,965 (ii) Valuations of infrastructure assets The fair value of infrastructure assets has been determined independently by Deloitte Touche Tohmatsu at 30 June 2013, using the ‘income approach’ (discounted cash flow) method. The discounted cash flow method estimates fair market value by discounting reliable estimates of future cash flows to their present values. The significant assumptions used in determining fair value at 30 June 2013 are summarised below: – Nominal after tax discount rate in the range of 6.0% to 6.5% (2011/12: 6.0% to 6.5%) – Long term inflation of 2.5% – 10 year valuation model life (based on two Water Plan periods, one known and one estimated) The 2012/13 valuation resulted in a decrement of $71.1 million compared to the managerial valuation in 2011/12. If infrastructure assets were measured at historical cost, the carrying amount would be as follows: 2013 $000 2012 $000 Infrastructure assets – Owned 5,443,445 4,871,778 Infrastructure assets – Under finance lease 4,627,994 20,910 Total 10,071,439 4,892,688 (iii) Impairment Property, plant and equipment is assessed for indicators of impairment on an annual basis. At 30 June 2013, the Eastern Irrigation Scheme Interim Treatment Plant was identified as impaired. The total impairment expense identified for the Eastern Irrigation Scheme Treatment Plant was $5.9M. (b) Intangible assets* 2013 $000 2012 $000 Intangible assets at cost 47,742 46,122 Less: accumulated amortisation and impairment (36,332) (30,319) Total intangible assets 11,410 15,803 * Intangibles assets consist primarily of information technology software and renewable energy certificates. Impairment Intangible assets are assessed for indicators of impairment on an annual basis. At 30 June 2013, Renewable Energy Certificates were identified as impaired. The total impairment expense identified for the Renewable Energy Certificates was $0.7M. 96 Melbourne Water Annual Report 2012–13 10. Property, plant and equipment and intangible assets (continued) (c) (i) Reconciliation of movement in property, plant and equipment and intangible assets for 2012/13 2012/13 Crow n land at fair value $000 Freeho ld land at fair value $000 Carrying amount at 1July 2012 133,8 67 Additions 158 Disposals and writeoffs (52) Leasehold improvem ents at fair value $000 Plant and equipm ent at fair value $000 Fleet vehicl es at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 1,023,0 20,867 58 - 20,185 5,473 7,428,892 37,332 1,251,01 9,920,68 5 9 15,803 18,880 415 - 11,699 4,297 744,922 4,662,793 - 5,443,16 4 3,257 (2,204) - (141) (384) (15,070) - - (32,724) - (14,873 ) Buildin gs at fair value $000 Total $000 Intangi ble assets at cost $000 2012/13 Crow n land at fair value $000 Freeho ld land at fair value $000 Buildin gs at fair value $000 Leasehold improvem ents at fair value $000 Depreciati on and amortisati on - - (947) - Transfers between classes - - 59 Assets classified as held for sale - 6,729 - Plant and equipm ent at fair value $000 Fleet vehicl es at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Total $000 Intangi ble assets at cost $000 (241,388) (51,511) - (309,457 (6,444) ) (14,076) (1,535 ) - (811) - 13,196 (11,885) - 559 (559) - - - - - - 6,729 - 2012/13 Crow n land at fair value $000 Freeho ld land at fair value $000 Buildin gs at fair value $000 Leasehold improvem ents at fair value $000 Plant and equipm ent at fair value $000 Fleet vehicl es at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Total $000 Intangi ble assets at cost $000 Revaluati on decremen ts - - - - - - (71,074) (4,733) - (75,807) - Impairme nt losses - - - - - - - (5,923) - (5,923) (647) Capital expenditu re - - - - - - - - 331,121 331,121 - Capitalisa tion of works in progress - - - - - - - - (1,071,8 90) (1,071,8 90) - 2012/13 Crow n land at fair value $000 Freeho ld land at fair value $000 Buildin gs at fair value $000 Carrying amount at 30 June 2013 133,9 73 1,033,7 18,190 94 Leasehold improvem ents at fair value $000 Plant and equipm ent at fair value $000 Fleet vehicl es at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Total $000 Intangi ble assets at cost $000 - 16,856 7,851 7,859,478 4,626,073 510,246 14,206,4 11,410 61 (ii) Reconciliation of movement in property, plant and equipment and intangible assets for 2011/12 2011/12 Crown land at fair value $000 Freehol d land at fair value $000 Buildin gs at fair value $000 Leasehold improveme nts at fair value $000 Plant and equipme nt at fair value $000 Fleet vehicles at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Total $000 Intangib le assets at cost $000 2011/12 Crown land at fair value $000 Freehol d land at fair value $000 Buildin gs at fair value $000 Leasehold improveme nts at fair value $000 Plant and equipme nt at fair value $000 Fleet vehicles at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Total $000 Intangib le assets at cost $000 Carrying amount at 1 July 2011 133,7 74 1,007,9 21 19,552 293 17,338 3,949 6,700,6 57 39,490 1,702,921 9,625,8 95 13,056 Additions - 26,620 2,813 - 12,175 2,603 973,917 - - 1,018,1 28 9,642 Disposals and writeoffs - (3,085) (1) - (167) - (22,428) - (425) (26,106 ) (1,755) Depreciati on and amortisatio n - - (1,497) (293) (9,161) (1,079) (221,216) (2,158) - (235,40 4) (7,178) 2011/12 Crown land at fair value $000 Freehol d land at fair value $000 Buildin gs at fair value $000 Leasehold improveme nts at fair value $000 Plant and equipme nt at fair value $000 Fleet vehicles at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Total $000 Intangib le assets at cost $000 Transfers between classes 93 (93) - - - - (2,038) - - (2,038) 2,038 Assets classified as held for sale - (8,305) - - - - - - - (8,305) - Revaluatio n increments - - - - - - - - - - - Capital expenditur e - - - - - - - - 547,110 547,110 - 2011/12 Crown land at fair value $000 Freehol d land at fair value $000 Buildin gs at fair value $000 Leasehold improveme nts at fair value $000 Plant and equipme nt at fair value $000 Fleet vehicles at fair value $000 Infrastruct ure assets at fair value $000 Infrastruct ure assets under finance lease at fair value $000 Capital works in progres s $000 Capitalisati on of works in progress - - - - - - - - (998,59 1) Carrying amount at 30 June 2012 133,8 67 1,023,0 58 20,867 - 20,185 5,473 7,428,892 37,332 1,251,0 15 Total $000 Intangib le assets at cost $000 (998,59 1) 9,920,6 89 15,803 11. Trade and other payables (a) Current Notes 2013 $000 2012 $000 Creditors 52,567 42,144 Interest payable 63,472 62,928 Accruals – Other 186,612 33,719 Accruals – Capital 68,728 112,309 Other payables 11,390 13,209 Total trade and other payables – current 382,769 264,309 2013 $000 2012 $000 Other payables 1,663 1,701 Total trade and other payables – non current 1,663 1,701 Total trade and other payables 1 9 384,432 266,010 (b) Non-current Notes 12. Interest bearing liabilities (a) Current Desalination plant and other lease liabilities Notes 2013 $000 2012 $000 20 (d),(g) 60,395 535 295,000 788,800 19 355,395 789,335 Notes 2013 $000 2012 $000 20 (d),(g) 4,264,893 5,753 3,845,000 3,040,000 8,109,893 3,045,753 8,465,288 3,835,088 Borrowings* Total interest bearing liabilities – current (b) Non-current Desalination plant and other lease liabilities Borrowings* Total interest bearing liabilities – non-current Total interest bearing liabilities** 19 * Current and non-current borrowings comprise both fixed and floating interest rate notes depending on the dates of maturity. ** Interest bearing liabilities are unsecured (note – The Victorian Government does provide a guarantee to TCV over its liabilities as detailed in note 2(g)). 13. Provisions (excluding employee benefits) (a) Current 2013 $000 2012 $000 Insurance claims 2,234 1,783 Remediation works 655 - Gainshare on capital projects - 13,363 Other provisions 290 1,815 Total provisions – current 3,179 16,961 2013 $000 2012 $000 Insurance claims 1,476 1,082 Total provisions – non current 1,476 1,082 Total provisions 4,655 18,043 (b) Non-current (c) Movements in provisions Carrying amount at 1 July 2012 Insurance Claims Remediation Gainshare Works on Capital Projects Other Provisions Total $000 $000 $000 $000 $000 2,865 - 13,363 1,815 18,043 Insurance Claims Remediation Gainshare Works on Capital Projects Other Provisions Total Additional provisions recognised 1,247 655 19,588 175 21,665 Amounts utilised during the year (402) (402) - (18,363) (1,700) (20,465) Amounts transferred to accruals - - (14,588) - (14,588) Carrying amount at 30 June 2013 3,710 655 - 290 4,655 Insurance Claims Remediation Gainshare Works on Capital Projects Other Provisions Total $000 $000 $000 $000 $000 Carrying amount at 1 July 2011 613 514 68,618 2,553 72,298 Additional provisions recognised 2,744 396 14,289 395 17,824 Insurance Claims Remediation Gainshare Works on Capital Projects Other Provisions Total Amounts utilised during the year (492) (910) (69,544) (1,133) (72,079) Carrying amount at 30 June 2012 2,865 - 13,363 1,815 18,043 (i) Insurance Claims The amount represents a provision for public liability, motor vehicle and property claims. The amount classified as current is expected to be settled within 12 months. The amount classified as non-current is expected to be settled later than 12 months. The provision amounts are based on an independent assessment of claim costs. (ii) Remediation Works The amount represents remediation works at the Riverwalk Estate at Werribee. (iii) Gainshare on Capital Projects The amount represents a provision for ‘gainshare’ on capital projects. (iv) Other Provisions The amount represents other provisions that satisfy the recognition requirements of AASB 137 Provisions, Contingent Liabilities and Contingent Assets. The amount is based on legal advice and is expected to be settled within 12 months. 14. Net deferred tax liabilities – non-current The balance comprises temporary differences attributable to: Notes 2013 $000 2012 $000 Notes 2013 $000 2012 $000 Property, plant and equipment 414,600 440,467 Employee entitlements (8,578) (8,421) Developer contributions 9,674 12,022 Finance lease (1,726) 2,325 Defined benefit obligation 151 (6,596) Provisions (1,512) (1,703) Revenue in advance (1,139) (1,414) Other (1,936) (1,761) Total recognised in Profit or Loss 409,534 434,919 Amounts recognised in Profit or Loss Amounts recognised in Other Comprehensive Income Notes Gain on revaluation of land and buildings 2013 $000 2012 $000 15,366 15,366 Net gain on revaluation of infrastructure assets 799,552 822,295 Net value loss on cash flow hedges - (5) Total recognised in Other Comprehensive Income 814,918 837,656 Net deferred tax liability 1,224,452 1,272,575 2013 $000 2012 $000 Opening balance at 1 July 2013 1,272,575 1,326,930 Credited to Profit or Loss (28,778) (42,459) (22,737) (13,501) Adjustment in respect of deferred tax of prior period 3,392 1,605 Closing balance at 30 June 2013 1,224,452 1,272,575 Movements Notes Debited to Other Comprehensive Income 5(d) Notes 2013 $000 2012 $000 Net Deferred tax liabilities to be recovered after more than 12 months 1,233,105 1,280,841 Net Deferred tax liabilities to be recovered within 12 months (8,653) (8,266) Total non-current liabilities – Deferred tax liabilities 1,224,452 1,272,575 2013 $000 2012 $000 Accrued salaries 667 611 Employee benefits expected to be settled within 12 months after the end of the period measured at nominal value 6,946 6,778 Long service leave representing more than 7 years of continuous service measured at present value 18,526 17,975 15. Employee benefits (a) Current liabilities Notes Notes 2013 $000 2012 $000 Other employee benefits 1,107 1,042 Total employee benefits liability – current 27,246 26,406 Notes 2013 $000 2012 $000 23(d) 504 - 504 - 2013 $000 2012 $000 Other employee benefits 5,300 6,003 Long service leave representing less than 7 years of continuous service measured at present value 3,254 3,380 - 21,988 (b) Current assets Defined benefit superannuation asset Total employee benefits asset – current (c) Non-current liabilities Notes Defined benefit superannuation liability 23(d) Notes 2013 $000 2012 $000 Total employee benefits liability – non current 8,554 31,371 Net employee benefits liability 35,296 57,777 The aggregate employee benefit liability includes amounts for annual leave, shift leave, long-service leave, salaries, Work Cover, superannuation and termination benefits. (i) Work Cover Based upon an independent actuarial assessment, a provision of $5.8 million (2011/12: $5.2 million) has been made for outstanding claims incurred and not settled, and for claims incurred but not reported at 30 June 2013. The value of the bank guarantee to the Victorian Work Cover Authority (as part of the Corporation’s Work Cover self insurance commitments) at 30 June 2013 is $8.9 million (2011/12: $8.9 million). (ii) Workers Compensation Based on an independent actuarial assessment, a provision of $0.6 million ($1.0 million in 2011/12) has been made for all outstanding workers compensation claims at 30 June 2013. 16. Contributed equity Notes Opening balance Capital transactions with the State in its capacity as owner arising from: 2013 $000 2012 $000 559,116 559,952 Notes 2013 $000 2012 $000 Adjustments relating to the transfers of Crown assets (to)/from the Government 57 (836) Total contributed equity at the end of the year 559,173 559,116 2013 $000 2012 $000 384,374 373,168 17. Reserves Asset revaluation reserve Notes Land Opening balance Revaluation reserves transferred to retained profits on derecognition of asset 18 (6,912) (2,301) Decrement in deferred tax on asset revaluation 14 - 13,507 377,462 384,374 2013 $000 2012 $000 Closing balance Buildings Notes Notes 2013 $000 2012 $000 Opening balance 677 677 Closing balance 677 677 1,918,685 1,918,685 (75,807) - Decrement in deferred tax on asset revaluation 22,742 - Closing balance 1,865,620 1,918,685 Closing balance (total asset revaluation reserve) 2,243,759 2,303,736 Infrastructure assets Opening balance Revaluation decrease on infrastructure assets 10(c) Summary of movements in asset revaluation reserve Notes 2013 $000 2012 $000 Opening balance 2,303,736 2,292,530 Revaluation decrement on noncurrent physical assets (75,807) - Notes 2013 $000 2012 $000 Revaluation reserves transferred to retained profits on derecognition of asset (6,912) (2,301) Decrement in deferred tax on asset revaluation 22,742 13,507 Closing balance (total asset revaluation reserve) 2,243,759 2,303,736 The asset revaluation reserve is used to record asset revaluation increments and decrements in the value of non-current physical assets. Cash flow hedge reserve Notes 2013 $000 2012 $000 Opening balance (12) (26) Gain taken to equity 7 9 Decrement in deferred tax on cash flow hedges 5 5 Closing balance - (12) Notes 2013 $000 2012 $000 2,243,759 2,303,724 2013 $000 2012 $000 Retained profits at the beginning of the year 1,676,179 1,522,359 Net (loss)/profit for the period after tax (30,079) 269,919 Transfer from asset 17 revaluation reserve 6,912 2,301 Dividends payable/paid (94,500) (118,400) 1,558,512 1,676,179 The cash flow hedge reserve represents the gain or loss on conversion to Australian dollars of the cash flow hedge. Total reserves at the end of the year 18. Retained profits Notes 22 Retained profits at the end of the year 19. Financial Instruments Financial instruments are shown exclusive of GST (a) Categorisation of financial instruments Derivative Contractual Contractual Total financial financial financial carrying instruments assets – liabilities at Amount loans and amortised receivables cost 30 June 2013 Notes $000 $000 $000 $000 Cash 6 - 145,179 - 145,179 Trade debtors 7 - 53,114 - 53,114 Other receivables 7 - 37,913 - 37,913 Total financial assets - 236,206 - 236,206 Financial assets Financial liabilities Notes Derivative financial instruments Contractua l financial assets – loans and receivables Contractual financial liabilities at amortised cost Total carrying Amount Trade and other payables 11 - - (384,432) (384,432) Desalination plant lease liabilities 12 - - (4,319,537) (4,319,537) Notes Derivative financial instruments Contractua l financial assets – loans and receivables Contractual financial liabilities at amortised cost Total carrying Amount 12 - - (5,751) (5,751) 11am overnight loans 12 - - - - Floating rate notes 12 - - (440,000) (440,000) Fixed interest 12 - - (3,700,000) (3,700,000) Total financial liabilities - - (8,849,720) (8,849,720) Other lease liabilities Borrowings Financial instruments are shown exclusive of GST (a) Categorisation of financial instruments (continued) Derivative Contractual Contractual Total financial financial financial carrying instruments assets – liabilities at Amount loans and amortised receivables cost 30 June 2012 Financial assets Notes $000 $000 $000 $000 Derivative Contractual Contractual Total financial financial financial carrying instruments assets – liabilities at Amount loans and amortised receivables cost 30 June 2012 Notes $000 $000 $000 $000 Cash 6 - 228 - 228 Trade debtors 7 - 44,462 - 44,462 Other receivables 7 - 25,102 - 25,102 Total financial assets - - 69,792 - 69,792 11 - - (266,010) - - - - - (6,288) Financial liabilities Trade and other payables Desalination plant lease liabilities Lease liabilities Borrowings 12 (266,010) (6,288) Derivative Contractual Contractual Total financial financial financial carrying instruments assets – liabilities at Amount loans and amortised receivables cost 30 June 2012 Notes $000 $000 $000 $000 11am overnight loans 12 - - (568,800) (568,800) Floating rate notes 12 - - (80,000) (80,000) Fixed interest 12 - - (3,180,000) (3,180,000) Total financial liabilities - - (4,101,098) (4,101,098) (b) Net holding gain/(loss) on financial instruments by category Net Total Fee Impairment Total holding interest income/ loss gain/(loss) income/ (expense) (expense) 30 June 2013 Notes $000 $000 $000 103 - $000 $000 Financial assets Financial assets - 103 Net Total Fee Impairment Total holding interest income/ loss gain/(loss) income/ (expense) (expense) 30 June 2013 Notes $000 $000 $000 $000 Derivative financial instruments - - - - - Total financial assets - 103 - (549,334) - $000 103 Financial liabilities Financial liabilities at amortised cost 4(f) Total financial liabilities - - (549,334) (549,334) - (549,334) Financial instruments are shown exclusive of GST (b) Net holding gain/(loss) on financial instruments by category (continued) Net Total Fee Impairment Total holding interest income/ loss gain/(loss) income/ (expense) (expense) 30 June 2012 Notes $000 $000 $000 $000 $000 Net Total Fee Impairment Total holding interest income/ loss gain/(loss) income/ (expense) (expense) 30 June 2012 Notes $000 $000 $000 $000 $000 45 - - 45 Financial assets Financial assets - Derivative financial instruments 9 - - 9 Total financial assets 9 -45 - 54 - (249,152) - (249,152) - Financial liabilities Financial liabilities at amortised cost 4(f) Total financial liabilities - (c) Interest rate exposure Interest rate exposure - (249,152) (249,152) Weighted Floating average interest interest rate 30 June 2013 Fixed interest Non interest bearing Total carrying Amount Notes % $000 $000 $000 $000 Cash 6 2.70 145,179 - - 145,179 Trade debtors 7 - - - 53,114 53,114 Other receivables 7 2.70 6,049 - 31,864 37,913 - 151,228 84,978 236,206 - - (384,432) (384,432) Financial assets Total financial assets Financial liabilities Trade and other payables 11 - Desalination 12 plant lease liabilities* 11. 29 (4,319,537) (4,319,537) Other lease liabilities 11.03 (5,751) (5,751) Borrowings Interest rate exposure Weighted Floating average interest interest rate Fixed interest Non interest bearing Total carrying Amount 11am overnight loans 12 2.95 - - - - Floating rate notes 12 2.92 (440,000) - - (440,000) Fixed interest 12 5.44 - (3,700,000) - (3,700,000) (440,000) (8,025,288) (384,432) Total financial liabilities (8,849,720) * The weighted average interest rate for lease liabilities is the interest rate implicit in the lease. Financial instruments are shown exclusive of GST (c) Interest rate exposure (continued) 30 June 2012 Weighted average interest rate Floating interest Fixed interest Non interest bearing Total carrying Amount Notes % $000 $000 $000 $000 6 4.28 228 - - 228 Financial assets Cash Weighted average interest rate Floating interest Non interest bearing Total carrying Amount 44,462 44,462 19,236 25,102 6,094 63,698 69,792 - - (266,010) (266,010) Desalination plant lease liabilities* - - - Lease liabilities 12 11.03 - (6,288) - (6,288) 11am overnight loans 12 3.67 (568,800) - - (568,800) Floating rate notes 12 3.36 (80,000) - - (80,000) Trade debtors 7 - - Other receivables 7 3.45 5,866 Total financial assets Fixed interest - Financial liabilities Trade and other payables 11 Borrowings Fixed interest 12 Weighted average interest rate Floating interest Fixed interest Non interest bearing Total carrying Amount 5.86 - (3,180,000) - (3,180,000) Total financial liabilities (648,800) (3,186,288) (266,010) (4,101,098) Financial instruments are shown exclusive of GST (d) Fair value The carrying amounts and net fair values of financial assets and liabilities at balance date are: Book value $000 Net fair value* $000 Book value $000 Net fair value* $000 Cash 145,179 145,179 228 228 Trade debtors 53,114 53,114 44,462 44,462 Other receivables 37,913 37,913 25,102 25,102 236,206 69,792 69,792 (384,432) (266,010) (266,010) Financial assets Total financial 236,206 assets Financial liabilities Trade and other payables (384,432) Book value $000 Net fair value* $000 Book value $000 Net fair value* $000 Desalination plant finance lease liability (4,319,537) (4,319,537) - - Other lease liabilities (5,751) (5,751) (6,288) (6,288) 11am overnight loans - - (568,800) (568,672) Floating rate notes (440,000) (440,005) (80,000) (80,016) Fixed interest (3,700,000) (4,025,339) (3,180,000) (3,576,151) Total financial (8,849,720) liabilities (9,175,064) (4,101,098) (4,497,137) Financial assets Borrowings *Net book values are capital amounts. The differences between book values and net fair values relate principally to interest rate movements. Net fair values of financial instruments are determined as follows: Cash, deposit investments, short-term borrowings, cash equivalents and noninterest-bearing financial assets and liabilities (trade debtors and trade creditors) are valued at cost. Interest bearing liabilities are estimated based on the present value of expected future cash flows discounted at current market interest rates quoted for securities issued by TCV or interest rates implicit in the lease for finance leases. Derivative financial instruments are measured at fair value. The fair value of the desalination plant finance lease liability has been determined by the Department of Environment and Primary Industries (DEPI) in accordance with the requirements of the relevant accounting standards. Financial instruments are shown exclusive of GST (e) Maturity analysis of financial liabilities The following table discloses the contractual maturity analysis for the Corporation’s financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. 30 June 2013 Total carrying Amount $000 Total contractual cash flows $000 1 year or less $000 1 to 5 years $000 Over 5 years $000 Noninterest bearing (384,432) (384,432) (382,769) (1,663) - Variable rate (440,000) (559,440) (41,168) - (518,272) Fixed rate (8,025,288) (18,512,476) (336,086) (3,879,913) (14,296,477) Total financial liabilities (8,849,720) (19,456,348) (760,023) (3,881,576) (14,814,749) 30 June 2012 Total carrying Amount $000 Financial liabilities Total contractual cash flows $000 1 year or less $000 1 to 5 years $000 Over 5 years $000 (266,010) (264,309) (1,701) - Financial liabilities Non-interest (266,010) bearing 30 June 2012 Total carrying Amount $000 Total contractual cash flows $000 1 year or less $000 1 to 5 years $000 Over 5 years $000 Variable rate (648,800) (676,640) (630,990) (45,650) - Fixed rate (3,186,288) (4,408,713) (191,145) (1,394,148) (2,823,420) Total financial liabilities (4,101,098) (5,351,363) (1,086,444) (1,441,499) (2,823,420) Financial liabilities (f) Interest rate risk sensitivity analysis Exposures arise predominately from liabilities bearing variable interest rates as the Corporation intends to hold fixed rate liabilities to maturity. At 30 June 2013, if interest rates had changed by +/- 50 basis points from the year end rates with all other variables held constant, the net loss after tax and the impact on equity would have changed by the amounts shown below. Profit or Loss Equity -50 basis points +50 basis points -50 basis points +50 basis points 30 June 2013 $M $M $M $M Cash - - - - Interest Bearing Liabilities (2.8) 2.8 (2.8) 2.8 Profit or Loss Equity -50 basis points +50 basis points -50 basis points +50 basis points (2.8) 2.8 (2.8) 2.8 Cash - - - - Interest Bearing Liabilities (3.6) 3.6 (3.6) 3.6 Total (3.6) 3.6 (3.6) 3.6 Total 30 June 2012 Financial instruments are shown exclusive of GST (a) Capital commitments Total capital expenditure contracted for the construction of water, sewerage and waterways and drainage infrastructure at 30 June 2013 but not provided for in the accounts: Property, plant and equipment payable: 2013 $000 2012 $000 Within one year 58,378 107,575 Later than one year but not later than five years 363 7,097 Total capital commitments 58,741 114,672 (b) Operating lease commitments (i) Melbourne Water as lessee The Corporation leases buildings and motor vehicles under non-cancellable operating leases. The building lease agreements have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: 2013 $000 2012 $000 Within one year 8,305 7,594 Later than one year but not later than five years 35,171 32,909 Later than five years 100,458 107,962 Total operating lease commitment 143,934 148,465 There are no lease incentives on non-cancellable operating leases included in trade creditors at 30 June 2013 (2011/12: Nil). (ii) Melbourne Water as lessor Operating leases relate to land owned by the Corporation. All operating lease contracts contain market review clauses. The lessee does not have an option to purchase the land at the expiry of the lease period. Commitments for minimum lease payments in relation to non-cancellable operating leases are receivable as follows: 2013 $000 2012 $000 Within one year 1,284 1,309 Later than one year but not later than five years 2,013 2,158 Later than five years 435 274 Total operating lease commitment 3,732 3,741 (c) Smart Water Fund The Corporation has a commitment to the Victorian Government’s Smart Water Fund. The Smart Water Fund was established by the Victorian Government and is managed by the Corporation and the three retail water businesses for the purpose of providing grant funding to support the development of sustainable water use projects. 2013 $000 2012 $000 Within one year 1,000 1,000 Later than one year but not later than five years 2,000 4,000 Later than five years - - Total operating lease commitment 3,000 5,000 20. Commitments Commitments are shown inclusive of GST except for finance lease liabilities. (d) Finance lease commitments (excluding Victorian Desalination Project) The Corporation has a finance lease agreement with TopAq Pty Ltd. The agreement involves the development of a water recycling project that uses effluent sourced from the Corporation’s Eastern Treatment Plant and treats this effluent to produce and supply Class A Water to customers in the project area. Commitments in relation to finance lease are payable as follows: Within one year 2013 $000 2012 $000 5,960 1,203 2013 $000 2012 $000 Later than one year but not later than five years - 4,810 Later than five years - 3,406 Minimum lease payments 5,960 9,419 Less: Future finance charges (209) (3,131) Total finance lease liability 5,751 6,288 Representing finance lease liability: Current (refer to note 12a) 5,751 535 Non-current (refer to note 12b) - 5,753 Total finance lease liability 5,751 6,288 (e) Other operating commitments Total operating expenditure (excluding leases) contracted for at balance date but not provided for in the accounts is payable as follows: 2013 $000 2012 $000 Not later than one year 15,097 13,965 Later than one year but not later than five years 18,461 18,645 Later than five years 11,649 20,289 Total other operating commitments 45,207 52,899 (f) Build, Own and Operate (BOO) commitments The Corporation has allocated a parcel of land at the Western Treatment Plant (WTP) for the operation of a 9.2 Gigawatt biogas electricity generation plant, managed under a BOO contract with AGL. The Corporation delivers biogas extracted from the treatment process to AGL, who in turn provides this generated electricity exclusively to Melbourne Water. In 2010, the contract moved into Stage 3 which enables the export of excess electricity to the national electricity grid. This aligned with a separate grid import electricity contract allowing for the import and export of electricity at agreed contract rates across our remaining sites. Both of these contracts are currently in effect. Based on contracted projections of biogas supply and returned electricity generation, the minimum obligation (excluding the effect inflation) over the term of the whole arrangement is $49.5M. The arrangement commenced on 25 February 2000 and expires on 31 December 2020. This calculation has been based on both historical site data and contracted volumes of peak and off peak electricity throughput. Future minimum obligations 2013 $000 2012 $000 Not later than one year 4,047 3,586 Later than 1 year but not later than 5 years 16,188 14,340 Later than 5 years 10,117 12,547 Total value of future minimum obligations 30,352 30,473 Commitments are shown inclusive of GST except for finance lease liabilities. (g) Victorian Desalination Plant Finance Lease and Other Commitments On 30 July 2009, the State of Victoria (‘the State’) through the Department of Environment and Primary Industries (DEPI) entered into a 30 year Project Deed with the AquaSure consortium to build and operate the desalination plant in Wonthaggi under a Public Private Partnership (PPP) arrangement, with a connection to the Melbourne Water System. Construction of the desalination plant began in September 2009. The project operation term commenced from the date of commercial acceptance which occurred on 17 November 2012, triggering the recognition of the finance lease payable. The Minister for Water issued a Statement of Obligations (SoO) to Melbourne Water Corporation under section 4I of the Water Industry Act 1994 on 26 June 2009. The SoO requires Melbourne Water Corporation to pay all monies payable by the State under the Project Deed with AquaSure. Melbourne Water also entered into a Victorian Desalination Project ‘Water Interface Agreement’ (WIA) and a Supplementary Water Interface Agreement with the State to record the terms of the interface and financial arrangements between the Project and Melbourne Water. Under the arrangement, Melbourne Water Corporation has an obligation to make Project Deed Payments to the DEPI, who are managing the contract with AquaSure on behalf of the State government. The portions of the Project Deed Payments that relate to the right to use the project assets are accounted for as a finance lease as disclosed in the table at (i) below. In addition, the Project Deed Payments also include other commitments for operating, maintenance and lifecycle costs as disclosed in the table at (ii) below. The desalination plant assets will transfer from DEPI to the Corporation at the end of the project contract term presently planned for 2039. As per information provided by DEPI, the Corporation has recognised the following finance lease liability, and an asset of equal value: (i) Victorian Desalination Plant Finance Lease Liability: Minimum future lease payments Present value of minimum future lease payments 2013 $000 2012 $000 2013 $000 2012 $000 Not later than 1 year 539,190 - 54,642 - Later than one year but not later than five years 2,087,670 - 213,633 - Minimum future lease payments Present value of minimum future lease payments 2013 $000 2012 $000 2013 $000 2012 $000 Later than five years 10,723,730 - 4,051,260 - Minimum future lease payments 13,350,590 - 4,319,535 - Less: Future finance charges (9,031,055) - - - Total finance lease liability 4,319,535 - 4,319,535 - Current (refer to note 12a) 54,642 - Non-current (refer to note 12b) 4,264,893 - Total finance lease liability 4,319,535 - Representing finance lease liability: Commitments are shown inclusive of GST except for finance lease liabilities. (g) Victorian Desalination Plant Finance Lease and Other Commitments (continued) (ii) Victorian Desalination Plant Other Commitments Payable: Based on information provided by DEPI, the disclosures for other commitments payable at 30 June 2012 have been restated to include amounts relating to Renewable Energy Certificates (RECs) and the connection services charges. The commitment has also been adjusted to exclude the high voltage alternating transmission line asset transactions as those commitments were not a commitment for Melbourne Water. The adjustments have increased the commitment reported in the comparative year by $1,070.3 million in nominal terms. The Project Deed requires the payment of an annual connection services charge and the purchase of a minimum number of RECs to offset the electricity used by the plant. The number of RECs that are consumed will vary based on the volume of water produced by the plant. If there are any surplus RECs at the end of the project term, the Project Deed requires AquaSure to transfer them to the State, or sell them at arms length commercial terms on behalf of the State with all proceeds paid to the state. DEPI will transfer any surplus RECs or proceeds from sales thereof to Melbourne Water at the end of the project contract term. The other commitments payable are disclosed based on information provided by DEPI. 2013 $000 2012 $000 Within one year 115,361 45,807 Later than one year but not later than five years 497,987 401,454 Later than five years 4,390,942 3,885,117 Total other commitments (inclusive of GST): 5,004,290 4,332,378 Less: GST recoverable from the Australian Taxation Office (454,935) (393,858) Total other commitments(exclusive of GST) 4,549,355 3,938,520 (iii) Victorian Desalination Plant Finance Lease Project Commitment: At 30 June 2012, the Victorian Desalination Plant project operation term had not yet commenced and therefore the finance lease liability was not yet recognised. Refer to Note 20(g)(i) for the finance lease liability disclosures at 30 June 2013 following commencement of the project operation term on 17 November 2012. Refer below for the minimum future lease payments commitments disclosed at 30 June 2012, based on information provided by DEPI. Nominal values Present values 2013 $000 2012 $000 2013 $000 2012 $000 Not later than 1 year - 321,042 - 306,561 Later than one year but not later than five years - 2,260,735 - 1,679,657 Later than five years - 11,941,205 - 2,537,437 Minimum future lease payments - 14,522,982 - 4,523,655 Less: GST recoverable from the Australian Taxation Office - (1,320,271) - (411,241) Total minimum lease payments - 13,202,711 - 4,112,414 Minimum future lease payments: Finance lease payable from commencement date Notes: At 30 June 2012, the present value of the minimum future lease payments was discounted to the date of expected commercial acceptance using the interest rate implicit in the lease. Commitments are shown inclusive of GST except for finance lease liabilities. (h) Food Bowl Modernisation Commitment Stage 1 of the Victorian Government’s Northern Victoria Irrigation Renewal Project (NVIRP) had planned total expenditure of $1.004 billion. The previous Victorian Government mandated that the Corporation will contribute $330 million (including GST) towards the total investment in the project, and there is an agreement for the three metropolitan retail water businesses to make direct payments to the Corporation to finance this contribution. At 30 June 2013, $330 million (including GST) has been invoiced by DEPI to the Corporation, and accordingly the Corporation has invoiced $330 million to the retail water businesses. The amounts invoiced have been paid to DEPI and reimbursed by the retail water businesses. The associated income and expense flows have been offset in the Statement of Comprehensive Income and the Statement of Financial Position to reflect the substance of the transaction being that the Corporation is merely a “pass through” agent. There are no commitments outstanding at 30 June 2013. 2013 $000 2012 $000 Not later than one year - 33,000 Total commitment - 33,000 21. Contingent assets and liabilities Notes (a) Contingent assets 2013 $000 2012 $000 Notes 2013 $000 2012 $000 Legal claims arising out of various matters connected with the Corporation’s business dealings. 30,602 35,119 Total contingent assets 30,602 35,119 2013 $000 2012 $000 Details and estimates of maximum amounts of contingent assets for which no provision is included in the accounts, are as follows: (b) Contingent liabilities Notes Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts, are as follows: Notes Legal claims arising out of various matters connected with the Corporation’s business dealings. 2013 $000 2012 $000 12,938 4,074 Possible gainshare payable by the Corporation on capital projects (not yet able to be measured with sufficient reliability as a provision) Total contingent liabilities 3,718 12,938 7,792 2013 $000 2012 $000 Dividend payable (relating to previous financial year) 94,500 - Dividend paid (relating to previous financial year) - 118,400 94,500 118,400 22. Dividends Notes Total dividends 18 The Corporation’s loss, after providing for income tax was $30.1 million (2011/12: profit of $269.9 million). There has been no dividend payment made or determined in relation to the 2012/13 financial year and any dividend for the 2012/13 financial year will be determined by the Treasurer of Victoria after consultation with the Corporation’s Board of Directors and the Minister for Water. The Treasurer of Victoria has determined a dividend of $94.5 million to be paid in relation to the 2011/12 financial year. The determination was made in June 2013 for payment in July 2013. Consequently, a payable for $94.5 million has been recorded at 30 June 2013. 23. Defined benefit superannuation Defined benefit superannuation The equip superannuation fund (‘the fund’) provides lump sum benefits based on length of service and final superannuable salary for employees engaged up until 31 December 1993. Employees contribute at rates between 0 to 7.5 per cent of their superannuation salary. The Corporation contributes to the fund based on the Corporation’s commitments under the Employee Participation Agreement and Contribution Policy with the Trustee of the Fund. Notes 2013 $000 2012 $000 Employer contributions to defined contribution funds 5,074 6,136 Employer contributions to the defined benefit superannuation fund 3,760 1,913 Total employer contributions 8,834 8,049 (a) Employer contributions (b) Reconciliation of the Present Value of the Defined Benefit Superannuation Obligation Notes 2013 $000 2012 $000 Balance at the beginning of the year 114,953 104,807 Current service cost 2,493 2,651 Interest cost 2,898 4,441 Contributions by Plan participants 1,157 1,185 Actuarial (gains)/losses (9,076) 9,485 Benefits paid (6,971) (7,130) Taxes and premiums paid (734) (486) Present value of the defined benefit obligation at the end of the year 104,720 114,953 (c) Reconciliation of the Fair Value of Plan Assets Notes 2013 $000 2012 $000 Balance at the beginning of the year 92,965 97,831 Expected return on Plan assets 6,310 6,578 Notes 2013 $000 2012 $000 Actuarial gains/(losses) 8,737 (6,926) Employer contributions 3,760 1,913 Contributions by Plan participants 1,157 1,185 Benefits paid (6,971) (7,130) Taxes and premiums paid (734) (486) Fair value of Plan assets at the end of the year 105,224 92,965 (d) Reconciliation of the Assets and Liabilities Recognised in the Statement of Financial Position Notes 2013 $000 2012 $000 Present value of the defined benefit obligation 104,720 114,953 Fair value of Plan assets (105,224) (92,965) (504) 21,988 Net defined benefit superannuation (asset)/liability* 15(b) * The Corporation has recognised an asset in the Statement of Financial Position in respect of its defined benefit superannuation arrangements at 30 June 2013 (2011/12: liability). If the defined benefit superannuation fund is in surplus, the Corporation may reduce the required contribution rate, depending on the advice of the Plan’s actuary. If a deficit exists in the Fund, the Corporation may be required to increase contribution rate, depending on the advice of the Plan’s actuary consistent with the Plan’s deed. 2013 $000 2012 $000 Service cost 2,493 2,651 Interest cost 2,898 4,441 Expected return on Plan assets (6,310) (6,578) Actuarial (gain)/loss recognised in year (17,813) 16,411 Total defined benefit superannuation (income)/expense (Note 3 & 4) (18,732) 16,925 (e) (Income)/Expense Recognised in the Statement of Profit or Loss and Other Comprehensive Income (f) Categories of Plan assets The percentage invested in each asset class at the Statement of Financial Position date was: Australian Equity 2013 $000 2012 $000 29% 35% 2013 $000 2012 $000 International Equity 30% 27% Fixed Income 12% 11% Property 9% 10% Alternatives/Other 15% 10% Cash 5% 7% Total 100% 100% (g) Fair Value of Plan Assets The fair value of Plan assets includes no amounts relating to: a) any of the Corporation’s own financial instruments; and b) any property occupied by, or other assets used by, the Corporation. (h) Expected Rate of Return on Plan Assets The expected return on Plan assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each asset class and allowing for the correlations of the investment returns between asset classes. The returns used for each asset class are net of investment tax and investment fees. An allowance for administration expenses has also been deducted from the expected return. 2013 $000 2012 $000 (i) Actual return on Plan assets 15,047 (348) (j) Principal Actuarial Assumptions at the Balance Sheet Date %pa %pa (j) Principal Actuarial Assumptions at the Balance Sheet Date %pa %pa 2013 $000 2012 $000 Discount rate (active members) 3.0% 2.7% Discount rate (pensioners) 3.3% 3.0% Expected return on Plan assets (active members) 7.0% 7.0% Expected return on Plan assets (pensioners) 7.5% 7.5% Expected salary increase rate 3.25% 4.0% Expected pension increase rate 3.0% 3.0% 2013 $000 2012 $000 2011 $000 2010 $000 Present value of defined benefit obligation 104,720 114,953 104,807 100,174 Less: fair value of Plan assets (105,224) (92,965) (97,831) (90,221) (k) Historical Information 2013 $000 2012 $000 2011 $000 2010 $000 (Surplus)/deficit (504) in Plan 21,988 6,976 9,953 Experience adjustments (gain)/loss – Plan assets (8,737) 6,926 (1,771) (2,144) Experience adjustments (gain)/loss – Plan liabilities (230) 1,296 (159) (1,337) (l) Expected Contributions Employer contributions for defined benefit superannuation plan members during the financial year ending 30 June 2014 are expected to be $1.5 million. (m) Defined contribution superannuation Employees engaged from 1 January 1994 are entitled to benefits under accumulation funds. The majority of these employees are covered by Vision Super Pty Ltd. Employees have the opportunity to make personal contributions to this fund (or other funds) at a self-nominated rate or amount. The minimum employer contribution to the fund, pursuant to the Superannuation Guarantee Charge was 9.0 per cent in 2012/13 (2011/12: 9.0 per cent). 24. Related party transactions (a) Entities with significant influence – Department of Environment and Primary Industries and Department of Treasury and Finance The Department of Environment and Primary Industries (DEPI), formerly called the Department of Sustainability and Environment (DSE) leads and directs the Corporation in the implementation of the framework for achieving the Victorian Government’s responsibilities for sustainability of the natural and built environment. DEPI monitors the Corporation’s compliance with the Water Act 1989, Water Interface Agreement and the Supplementary Agreement to the Water Interface Agreement. The Department of Treasury and Finance (DTF) monitors the Corporation’s compliance with the Financial Management Act 1994. DTF is responsible for protecting the shareholder’s interest in respect of corporate business plans and capital project approvals above $50 million (2011/12: $50 million). DTF also collects income taxes, the financial accommodation levy and dividend payments from the Corporation. (b) Related parties with significant transactions The following entities have the same controlling entities as the Corporation, and therefore are considered to be related parties of the Corporation: City West Water, South East Water, Yarra Valley Water, Western Water, Gippsland Water, Southern Rural Water and Barwon Water City West Water, South East Water, Yarra Valley Water, Western Water, Gippsland Water, Barwon Water and Southern Rural Water are Government owned water corporations with agreements with the Corporation that include bulk water and sewerage, bulk recycled water supply and biosolids storage arrangements. These agreements operated on normal terms and conditions during the reporting period. Treasury Corporation of Victoria TCV provides financial accommodation (loans to the Corporation), executes financial arrangements (derivatives) and provides/arranges the provision of financial services to the Corporation. Any investments above $2 million are also required to be invested with TCV. Places Victoria Places Victoria is the Victorian Government’s sustainable urban development agency. The Corporation is involved with Places Victoria in commercial arrangements associated with the development of land at the Dandenong Treatment Plant (Meridian and Logis developments), surplus land at Werribee Treatment Plant (Riverwalk development)and drainage developer works. (c) Other related parties The following entities have the same significant influencing entities as the Corporation, and therefore are considered to be related parties of the Corporation. – Sustainability Victoria – Environment Protection Agency (EPA) Victoria – Parks Victoria – Port of Melbourne Corporation – Vic Roads Notes 2013 $000 2012 $000 DEPI 1,920 2,299 DTF 5,544 - City West Water 299,647 288,221 South East Water 436,448 421,231 Yarra Valley Water 444,807 428,075 Western Water 13,624 9,287 Southern Rural Water 384 40 Gippsland Water 32 24 Barwon Water 166 - 165 2,761 527,631 24,319 (d) Transactions with related parties Receipts from related parties Places Victoria 11,155 17,864 Other related parties Payments to related parties DEPI Notes 2013 $000 2012 $000 DTF 5,442 172,416 City West Water 9,169 3,758 South East Water 7,175 4,742 Yarra Valley Water 7,971 5,770 Western Water 4,485 147 Southern Rural Water 47 - Barwon Water 2 - TCV 207,409 208,981 Places Victoria 29,006 15,107 Other related parties 1,000 2,906 22 - 118,400 16 57 (836) Dividend paid DTF Equity contributions (transfer of crown land) DEPI (f) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the reporting date in relation to transactions with related parties: Notes 2013 $000 2012 $000 DEPI 311 - City West Water 11,515 9,940 South East Water 14,104 13,366 Yarra Valley Water 25,002 21,157 Western Water 1,616 307 Southern Rural Water 9 4 TCV 7,098 5,866 Places Victoria 11 - Other Related parties 497 - DEPI 54,380 64,058 DTF 105,737 8,898 City West Water 189 142 South East Water 341 58 Yarra Valley Water 313 509 Current receivables Current payables Notes 2013 $000 2012 $000 11(a), 12(a) 358,472 851,728 Places Victoria 1,779 635 Other Related parties 7 - 4,259,739 - 3,845,000 3,040,000 TCV Non current payables DEPI 12(b) TCV (g) Terms and conditions Transactions relating to dividends are subject to final determination by the Treasurer after consultation with the Corporation’s Board of Directors and the Minister for Water. Transactions relating to equity contributions are determined by the Minister for Water in consultation with the Corporation. Transactions relating to trading activities of the Corporation including sale of bulk water, sale of sewerage services and collection of drainage rates are based on normal commercial terms and conditions. Outstanding balances are unsecured and are receivable/payable in cash under normal trading terms. (h) Guarantees There are no guarantees given or received for the current and non-current payables, current receivables and borrowings. 25. Responsible persons disclosures (a) Responsible persons The names of persons who were responsible persons at any time during the financial year were: The Hon. Peter Walsh MLA, Minister for Water (1 July 2012 to 30 June 2013) Board Members Chairman Paul Clark 1 October 2012 to 30 June 2013 Chairman Eleanor Underwood 1 July 2012 to 30 September 2012 Deputy Chairman Peter Vines 1 July 2012 to 30 June 2013 Managing Director Shaun Cox 1 July 2012 to 30 June 2013 Director Dana Hlavacek 1 July 2012 to 30 June 2013 Director Warren Hodgson 1 July 2012 to 30 June 2013 Director Janice van Reyk 1 October 2012 to 30 June 2013 Director Richard McKinnon 1 October 2012 to 30 June 2013 Director Garry Smith 1 October 2012 to 30 June 2013 Director Maria Wilton 1 July 2012 to 30 September 2012 Director Terry Larkins 1 July 2012 to 30 September 2012 Remuneration of responsible persons Remuneration paid to the Minister is reported in the Annual Report of the Department of Premier and Cabinet. Other relevant interests are declared in the Register of Members’ Interests which each Member of Parliament completes. The number of responsible persons whose remuneration from the Corporation was within the specified bands were as follows: Income Band ($) 2013 Number 2012 Number 10,000–19,999 2 2 20,000–29,999 1 - 30,000–39,999 3 1 40,000–49,999 3 4 60,000–69,999 1 - 70,000–79,999 - - 90,000–99,999 - 1 420,000–429,999 - 1 470,000–479,999 1 - Total numbers 11 9 $000 $000 845 778 Total amount (b) Related party transactions There were no amounts paid by the Corporation in connection with the retirement of responsible persons of the Corporation during the 2012/13 financial year. There were no loans in existence by the Corporation to responsible persons or related parties during the 2012/13 financial year. Related party transactions involving Board Members are as follows: 2013 $000 2012 $000 1,000 - Total revenue received from Western Water was: 13,624 9,287 Total payments made to Western Water were: 4,485 147 (i) Janice van Reyk – Director: Janice van Reyk is a Director of the Port of Melbourne Corporation. All dealings with this agency were on normal terms and conditions during the reporting period. Total payments made to Port of Melbourne Corporation were: (ii) Terry Larkins – Former Director (term expired on 30 September 2012) Terry Larkins, is the Chairman of Western Water. He is also a Director and Melbourne Water’s representative at the Victorian Water Industry Association (Vic Water). All dealings with these agencies were on normal terms and conditions during the reporting period. All other transactions with related party entities were made on normal terms and conditions during the financial year. 26. Remuneration of executives The numbers of executive officers (including those that have the authority and responsibility for planning, directing and controlling the activities of the Corporation, directly or indirectly, during the financial year), other than responsible persons (as defined in FRD 21B Responsible Person and Executive Officer Disclosures in the Financial Report) whose remuneration (total and base) falls within the specified bands above $100,000 are as follows: (Total remuneration is inclusive of bonus payments, long-service leave payments, redundancy payments and retirement benefits paid and payable. Base remuneration excludes these components). Total Remuneration Base Remuneration Income Band ($) 2013 Number 2012 Number 2013 Number 2012 Number 100,000– 109,999 - - - - 110,000– 119,999 - - - - 120,000– 129,999 - - - - 130,000– 139,999 - - - 1 140,000– 149,999 1 1 3 4 150,000– 159,999 1 - 7 8 160,000– 169,999 4 5 12 10 Income Band ($) 2013 Number 2012 Number 2013 Number 2012 Number 170,000– 179,999 5 7 9 4 180,000– 189,999 10 7 190,000– 199,999 13 5 3 1 200,000– 209,999 5 3 3 3 210,000– 219,999 5 3 - - 220,000– 229,999 2 1 - - 230,000– 239,999 2 3 3 2 240,000– 249,999 1 - 1 - 250,000– 259,999 - - 1 4 260,000– 269,999 2 2 2 - 270,000– 279,999 1 - - - 280,000– 289,999 - 3 - - Income Band ($) 2013 Number 2012 Number 2013 Number 2012 Number 290,000– 299,999 3 1 - - 300,000– 309,999 - - - - 310,000– 319,999 - - - 1 320,000– 329,999 - - 1 - 330,000– 339,999 - - - - 340,000– 349,999 - - - - 350,000– 359,999 - 1 - - 360,000– 369,999 1 - - - Total numbers 52 45 52 45 Total annualised employee equivalent (AEE)* 51.8 43.8 51.8 43.8 $000 $000 $000 $000 10,801 9,259 9,601 8,227 Total amount * Annualised employee equivalent is based on working 38 ordinary hours per week over the reporting period. There are no other personnel with significant management responsibilities. 27. Key management personnel compensation Key management personnel (as defined in AASB 124 Related Party Disclosures) includes the Managing Director and executives officers who have the authority and responsibility for planning, directing and controlling the activities of the Corporation, directly or indirectly, during the financial year. 2013 $000 2012 $000 Short-term employment benefits 2,974 2,694 Post-employment benefits - - Other long-term benefits* 663 568 Termination benefits - - Share-based payments - - Total amount 3,637 3,262 Total numbers 9 9 * Other long-term benefits represents long service leave. 28. Reconciliation of net cash provided from operating activities to net profit/(loss) Loss/(profit) for the period after tax 1 Notes 2013 $000 2012 $000 8 (30,079) 269,919 Notes 2013 $000 2012 $000 Depreciation and amortisation 4(a) 315,901 242,582 Net gain on sale of noncurrent assets 3(b) (13,267) (4,968) Assets written off/written down 4(g) 15,132 25,000 Impairment 4(g) 6,570 - Developer contributed assets 3(a) (27,114) (30,262) (Increase)/Decrease in trade and other receivables (22,773) 23,425 (Increase)/Decrease in other assets (1,198) 1,159 27 (15) 82,092 2,643 Plus/(less) non cash items: Changes in operating assets and liabilities (net of investing items): Increase/(Decrease) in provision for impaired receivables Increase in trade and other payables 7(a) Notes 2013 $000 2012 $000 (18,866) 5,978 (43,510) 10,385 (Decrease)/Increase in defined benefit superannuation fund (18,228) 15,012 Decrease in deferred tax liabilities 14 (25,380) (40,849) Net cash provided by operating activities 219,307 520,009 (Decrease)/Increase in provisions (Decrease)/Increase in current tax liability 5(c) 29. Remuneration of auditors During the reporting period, the following fees were paid or payable for services provided by the Victorian Auditor General’s Office: 2013 $000 2012 $000 Audit of financial report 155 151 Drainage and Waterways review 40 39 Total amount paid/payable 195 190 30. Events occurring after balance sheet date No matters or circumstances have arisen since the end of the reporting period which significantly affected or may significantly affect the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation in future financial years. Melbourne Water Corporation Statement by Directors and Chief Finance Officer We certify the attached Financial Statements for the Melbourne Water Corporation (‘the Corporation’) have been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Australian Accounting Standards, Interpretations and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and Notes to and forming part of the Financial Statements, presents fairly the financial transactions during the year ended 30 June 2013 and the financial position of the Corporation as at 30 June 2013. We are not aware of any circumstance which would render any particulars included in the Financial Statements to be misleading or inaccurate. Dated at Melbourne on this 6th day of September 2013. The Financial Statements were authorised for issue by the Directors on the 6th day of September 2013. On behalf of the Board: Paul Clark Chairman Shaun Cox Managing Director Malcolm Haynes Chief Finance Officer VAGO Victorian Auditor-General's Office Level 24, 35 Collins Street Melbourne VIC 3000 Telephone 61 3 8601 7000 Facsimile 61 3 8601 7010 Email [email protected],gov.au Website www.audit.vio.gov.au INDEPENDENT AUDITOR'S REPORT To the Board Members, Melbourne Water Corporation The Financial Report The accompanying financial report for the year ended 30 June 2013 of the Melbourne Water Corporation which comprises a statement of profit and loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, notes comprising a summary of significant accounting policies and other explanatory information, and the statement by directors and chief finance officer has been audited. The Board Members' Responsibility for the Financial Report The Board Members of the Melbourne Water Corporation are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994, and for such internal control as the Board Members determine is necessary to enable the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit, which has been conducted in accordance with Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit be planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The audit procedures selected depend on judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, consideration is given to the internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Board Members, as well as evaluating the overall presentation of the financial report. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Independence The Auditor-General's independence is established by the Constitution Ad 1975. The Auditor-General is not subject to direction by any person about the way in which his powers and responsibilities are to be exercised. In conducting the audit, the AuditorGeneral, his staff and delegates complied with all applicable independence requirements of the Australian accounting profession. Opinion In my opinion, the financial report presents fairly, in all material respects, the financial position of the Melbourne Water Corporation as at 30 June 2013 and of its financial performance and its cash flows for the year then ended in accordance with applicable Australian Accounting Standards, and the financial reporting requirements of the Financial Management Act 1994. Matters Relating to the Electronic Publication of the Audited Financial Report This auditor's report relates to the financial report of the Melbourne Water Corporation for the year ended 30 June 2013 included both in the Melbourne Water Corporation's annual report and on the website. The Board Members of the Melbourne Water Corporation are responsible for the integrity of the Melbourne Water Corporation's website. I have not been engaged to report on the integrity of the Melbourne Water Corporation's website. The auditor's report refers only to the subject matter described above. It does not provide an opinion on any other information which may have been hyperlinked to/from this report. If users of the financial report are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited financial report to confirm the information contained in the website version of the financial report. MELBOURNE 10 September 2013 John Doyle Auditor-General Performance reporting Performance Report Financial Performance Indicators MRD 01 Referenc e Performanc 2011-2012 e Indicator 2012-2013 [1] Performanc Targe Resul Targe Resul Varianc e Indicator t t t t e% Targe Note t Met s F1 Internal 22.9 Financing % Ratio – (Net operating cash flow – dividends) / capital expenditure) % 64.5 % 9.2% 56.4 % 513.0% Y F2 Gearing Ratio – (Total debt (including finance leases) / total assets) % 59.5 % 38.2 % 58.9 % 58.5 % -0.7% Y F3 Interest Cover – EBIT (Earnings before net interest and tax expense / net interest expense) – times ≥1.0 2.5 ≥0.6 0.9 50.0% Y [2] [2] MRD 01 Referenc e Performanc 2011-2012 e Indicator 2012-2013 [1] Performanc Targe Resul Targe Resul Varianc e Indicator t t t t e% F4 Interest Cover – Cash (Cash flow from operations before net interest and tax payments / net interest payments) – times ≥1.5 3.7 ≥1.3 1.5 15.4% Y [2],[3] F5 Return on Assets (Earnings before net interest and tax / average total assets) % 4.2% 6.3% 2.9% 4.1% 41.4% Y [2] F6 Return on equity – (Net profit after tax / average total equity) % 0.5% 6.1% -3.3% -0.7% -78.8% Y [2] Service And Environmental And Other Performance Indicators Targe Note t Met s MRD 01 Reference Performanc e Indicator [1] S1 2011-2012 2012-2013 Targe t Targe t Resu lt Resu lt Varian ce % Targ et Met Note s Y [3] Water Quality Complianc e with BWSA water quality requiremen ts: S1.1 Microbiologi cal standards – E.coli % 100% 100% 100% 100% 0% S1.2 Aesthetics – turbidity % ≥91.5 % 98.0 % E1 Reliability of Sewerage Collection Services EPA Victoria SEPP System failure 100% ≥91.5 % 7.1% [3],[4 ] MRD 01 Reference Performanc e Indicator [1] 2011-2012 2012-2013 Targe t Resu lt Targe t Resu lt Varian ce % Targ et Met Note s 0 1 0 0 0.0% Y [3] 0 0 0 0 0.0% Y [3] 980 ≤1000 990 -1.0% Y [3] 0 0 0 0.0% Y [3] E1.1 System failure – zero spills due to sewerage system failure E2 Sewerage Treatment and Disposal – WTP E2.1 Offensive odours beyond the boundary (number) E2.2 Raw sewage ≤1000 TDS (mg/L) E3 Sewerage Treatment and Disposal – ETP E3.1 Offensive odours beyond the boundary 0 MRD 01 Reference Performanc e Indicator [1] 2011-2012 2012-2013 Targe t Resu lt Targe t Resu lt Varian ce % Targ et Met Note s ≤5.0 2.79 ≤5.0 0.80 -84.0% Y [3],[4 ] 0 0 100% 100% 0.0% Y [3] 100% 100% 100% 0.0% Y [3] E3.2 Ammonia limit (mg/L) E4 Waterways – Drainage and Flood Protection E4.1 Currently known intolerable flood risks reduced by 10% by 2013 E4.2 Achieve 100% Water Plan implementati on targets assigned to Melbourne Water from the Regional River Health Strategy and Addendum (%) E5.1 Recycled Water MRD 01 Reference Performanc e Indicator [1] E5.1 Capacity to supply recycled water of specified reliability and quality from ETP and WTP to enable retail water businesses to meet their targets for potable water substitution (volume – ML) 2011-2012 2012-2013 Targe t Resu lt Targe t 830 1,404 964 Resu lt Varian ce % Targ et Met Note s 964 0.0% Y [3] Notes – to Performance Report: [1] Performance indicators as mandated in Ministerial Reporting Direction 01 – Performance Reporting (MRD 01) have been marked with their MRD 01 reference numbers. [2] While the targets have been achieved for these financial performance indicators, the variance between the results achieved and targets set for these financial performance indicators are above the % thresholds mandated under MRD 01 defining significant variances requiring explanatory notes. The key factor for the improvement compared to target across all of these financial performance indicators is due to the better than plan financial performance for 2012/13. While Melbourne Water has made a loss in 2012–13, it was significantly less than the $144.1 million loss we had planned for, with the improvement a result of higher revenues (increased water sales and improvement in the market value of our defined superannuation benefit fund) and lower expenditures compared to Plan (primarily finance charges and operating expenses), while still ensuring that the over recovered desalination revenue from 2011–12 was fully returned to customers. [3] These performance indicators are mandated and measured consistently by both MRD 01 and by the Melbourne Water Board of Directors. Therefore the results have not been repeated within the ‘Melbourne Water’s Key Performance Indicators’ section of the Performance Reporting chapter. [4] The % variance between the results achieved and target set for this performance indicator is above the % threshold mandated under MRD 01 defining significant variances requiring explanatory notes. Given that the target was set at a range of “less than or equal to” rather than a specific number, and results achieved were well within the less than, greater than or equal to range, this is not deemed as a significant variance by Melbourne Water. Target Met = Target has been assessed as met when actual result is greater than or equal to the target set or the performance indicator. Certification of Performance Report for 2012–13 We certify that the accompanying Performance Report of Melbourne Water in respect of the 2012–13 financial year is presented fairly in accordance with the Financial Management Act 1994. The statement includes the relevant performance indicators as determined by the responsible Minister, the actual results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets. As at the date of signing, we are not aware of any circumstances which would render any particulars in the Performance Report to be misleading or inaccurate. Dated this 6th day of September 2013 Paul Clark Chairman Shaun Cox Managing Director Malcolm Haynes Chief Finance Officer Level 24, 35 Collins Street Melbourne VIC 3000 Telephone 61 3 8601 7000 Facsimile 61 3 8601 7010 Email commenfeftaudit.vlo.gov.au Website www.audit.vlc.gov.au VAGO Victorian Auditor-General's Office INDEPENDENT AUDITOR'S REPORT To the Board Members, Melbourne Water Corporation The Performance Report The accompanying performance report for the year ended 30 June 2013 of the Melbourne Water Corporation comprises the performance indicators, the related notes and the certification has been audited. The Board Members' Responsibility for the Performance Report The Board Members of the Melbourne Water Corporation are responsible for the preparation and fair presentation of the performance report in accordance with the Financial Management Act 1994 and for such internal control as the Board Members determine is necessary to enable the preparation and fair presentation of the performance report that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility As required by the Audit Act 1994, my responsibility is to express an opinion on the performance report based on the audit, which has been conducted in accordance with Australian Auditing Standards, Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit be planned and performed to obtain reasonable assurance about whether the performance report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the performance report. The audit procedures selected depend on judgement, including the assessment of the risks of material misstatement of the performance report, whether due to fraud or error. In making those risk assessments, consideration is given to the internal control relevant to the entity's preparation and fair presentation of the performance report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the overall presentation of the performance report. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Independent Auditor's Report (continued) Independence The Auditor-General's independence is established by the Constitution Act 1975. The Auditor-General is not subject to direction by any person about the way In which his powers and responsibilities are to be exercised. In conducting the audit, the Auditor-General, his staff and delegates complied with all applicable independence requirements of the Australian accounting profession. Opinion In my opinion, the performance report of the Melbourne Water Corporation in respect of the 30 June 2013 financial year presents fairly, in all material respects, and in accordance with the Financial Management Act 1994. Matters Relating to the Electronic Publication of the Audited Performance Report This auditor's report relates to the performance report of the Melbourne Water Corporation for the year ended 30 June 2013 included both in the Melbourne Water Corporation's annual report and on the website. The Board Members of the Melbourne Water Corporation are responsible for the integrity of the Melbourne Water Corporation's website. I have not been engaged to report on the integrity of the Melbourne Water Corporation's website. The auditor's report refers only to the subject matter described above. It does not provide an opinion on any other information which may have been hyperlinked to/from this report. If users of the performance report are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited performance report to confirm the information contained in the website version of the performance report. MELBOURNE 10 September 2013 John Doyle Auditor-General Melbourne Water’s Key Performance Indicators Financial Performance Indicators Performance Indicator 2011–2012 2012–13 Financial Target Sustainability Result Target Result Target Met Meet regulated Water Plan operating expenditure $M 368.8 325.4 565.0 428.3 Y Cash Returns to Government $M 158.3 289.3 183.2 94.7 N Gearing % – (Debt/Debt + Equity) 66.9% 45.8% 66.1% 66.0% Y Return on equity % – (NPAT/Total Equity) 0.5% 5.9% -3.4% -0.7% Y Efficient and effective delivery of the capital program; On time 80.0% 55.9% 80.0% 54.5% N [2] On budget 95.0% 82.4% 95.0% 88.8% N [3] Performance Indicator 2011–2012 2012–13 Notes [1] Water Target Result Target Result Target Met Operate 100% water supply system within environmental requirements –% compliance 100% 100% 100% Y Maintain system losses as a % of water supplied to retail water businesses % <1.0% 1.27% <1.0% 1.14% N >99.6% 99.9% >99.6% 99.9% Y Notes Production and Storage Water Transfer Compliance with retail water businesses’ pressure requirements as set out in BWSAs % Water Quality [4] Performance Indicator 2011–2012 2012–13 Water Target Result Target Result Target Met Disinfection by-products % 100% 100% 100% 100% Y Aesthetics – Aluminium % 100% 100% 100% 100% Y Notes Compliance with BWSA water quality requirements: Performance Indicator 2011–2012 2012–13 Sewerage Target Result Target Result Target Met Notes 100% 100% 100% 100% Y [5] ETP EPA Licence Compliance Compliance with EPA Victoria discharge licence requirements % Performance Indicator 2011–2012 2012–13 Sewerage Target Result Target Result Target Met Litter at beach [that results in a licence breach] 0 0 0 0 Y 100% 100% 100% 100% Y 0 0 0 0 Y WTP EPA Licence Compliance Compliance with EPA Victoria discharge licence requirements % Sewerage Transfer System EPA SEPP compliance for sewerage system spills Zero spills due to storm events of a severity of up to 1-in-5 years Notes Performance Indicator 2011–2012 2012–13 Sewerage Target Result Target Result Target Met Notes Complaints relating to transfer system odour <10 14 <10 14 N [6] 35,000m3 0 45,000m3 131m3 N [7] 0 0 1,512 Y Biosolids Management Maximise sustainable reuse of biosolids: ETP- biosolids reuse of 90,000 cubic metres for construction fill by 2013 WTP- biosolids 0 reuse Performance Indicator 2011–2012 Waterways Target 2012–13 Result Target Result Target Met Notes Performance Indicator 2011–2012 2012–13 Waterways Target Result Target Result Target Met Achieve Waterways and Drainage Operating Charter performance targets 100% 97.5% 100% 100% Y 100% 100% 100% Y 109 106 109 Y Drainage & Flood Protection All new development complies with flood protection standards 100% Stormwater Quality Contribute to reducing the waterway nitrogen load to Port Phillip Bay through targeted stormwater action (tonnes) 104 Waterways Condition Notes Performance Indicator 2011–2012 2012–13 Waterways Target Result Target Result Target Met 100% 100% 100% 100% Y 100% 100% 100% Y Achieve Water Plan implementation targets set out in the Waterways Water Quality Strategy and Regional River Health Strategy for water quality programs and works Land Development Development services schemes prepared, implemented and reviewed according to the development planning program 100% Notes Performance Indicator 2011–2012 Waterways Target Statutory and 100% agreed industry response times will be achieved for all development referrals 2012–13 Result Target Result Target Met 100% 100% 100% Y Streamflow Diversions Diversions to be managed: In accordance with rules specified in streamflow management plans, local management rules or drought responses plans 100% 100% 100% 100% Y To meet the service requirements in Melbourne Water’s Customer Charter [Diversion Services] 100% 100% 100% 100% Y Notes Performance 2011–2012 Indicator Recycled Water 2012–13 Target Result Target Result Target Met ETP 100% 92% 100% 100% Y WTP 100% 92% 100% 100% Y Notes Compliance with retail BRWAs requirements for reliability and water quality; Performance Indicator 2011–2012 Environmental Target Stewardship Sustainability 2012–13 Result Target Result Target Met Notes Performance Indicator 2011–2012 2012–13 Environmental Target Stewardship Result Target Result Target Met Achieve sustainability performance score within 20% of the best score by global water utilities and Australian utilities, using the Dow Jones Sustainability World Indices (DJSI) – measured every two years N/A N/A within 20% of best score Achieved Y Renewable energy used or exported as % of total energy used >60.0% 60.0% 61.0% 0.0% N % reduction on 2000/01 greenhouse gas emissions >42.0% 50.2% 45.0% 47.7% Y Notes Greenhouse Renewable energy and greenhouse [8] Performance Indicator 2011–2012 Environmental Target Stewardship 2012–13 Result Target Result Target Met Notes [9] Office Based Resource Efficiency % reduction on 2006/07 office water consumption per FTE 3.50% 9.9% 60.00% 55.0% N % reduction on 2006/07 office paper use per FTE 14.0% 27.7% 16.0% 23.0% Y % reduction on 2006/07 office waste to landfill per FTE 14.0% 33.1% 20.0% 40.0% Y % reduction on 2006/07 office energy use per FTE 4.5% 24.4% 30.0% 49.0% Y For the 9 DEPI designated sites of high biodiversity significance [BioSites], the number of BioSites that have: [10] Performance Indicator 2011–2012 2012–13 Environmental Target Stewardship Result Target Result Target Met Had management plans developed [cumulative] 9 9 9 9 Y Had management plans implemented [cumulative] 8 8 9 9 Y Performance Indicator 2011–2012 Notes 2012–13 Relationships Target Result Target Result Target Met Notes Complaints referred to EWOV responded to within EWOV established time 97.3% 100% 96.0% N [11] 100% Performance Indicator 2011–2012 2012–13 Relationships Target Result Target Result Target Met Notes Maintain at least 70% total community satisfaction with Waterways (measured every two years) 70.0% 77% N/A N/A N/A [12] Effectiveness of community committee and community consultation processes 85.0% 86.0% N/A N/A N/A [13] Effectiveness of community education programs 85.0% 97.7% 90.0% 98.0% Y [14] Target Met Notes Performance Indicator 2011–2012 Organisational Target Capability 2012–13 Result Target Result Number of lost time injuries: Melbourne Water people and contractors [injuries] 0 20 0 Increase in constructive behaviours (measured every two years) Achieved Achieved N/A 16 N N/A N/A [15] Notes – to Melbourne Water Key Performance Indicators: [1] The annual target was not achieved mainly due to deferral of payment of the 2011/12 dividend of $94.5M to July 2013, following determination made by the Treasurer of Victoria in June 2013. [2] The target was not achieved due to optimistic forecasting of project duration. For Water Plan 3, Capital Delivery is investigating how it can prepare risk-adjusted schedules that recognise the inherent time risks of the project. The Water Plan 3 capital delivery strategy also includes back-to-back contractor KPIs to improve ontime delivery accountability. [3] The target was not achieved due to a small number of projects realising greater risk costs than budgeted. The next capital delivery strategy includes back-to-back contractor KPIs to improve on-budget delivery accountability. [4] Melbourne Water’s total water loss reported for 2012/13 is 1.14% of the water supplied to the retail water companies. The water loss volumes reported this year decreased slightly when compared to last year’s figure of 1.27% primarily owing to reduced cleaning following a bow wave of increased post drought cleaning in 2011/12. The reduction in cleaning losses was offset to some extent by an increase in operational losses due to impacts of algal growth in one treatment facility and the need to maintain high quality drinking water. Melbourne Water remains proactive and committed to further improvements in the management of system loss where the benefit outweighs the cost. Results to be audited by Cardno in September. Results to be published first week of October. [5] There were four odour complaints confirmed at ETP, but no action was undertaken by EPA Victoria. [6] Melbourne Water received 14 odour complaints related to the sewerage transfer system this year. The complaints were due to a range of reasons, mainly discharge of sewer gases from vent stacks in accordance with the vents intended function of removing sewer gases to prevent corrosion with the balance arising from manhole covers being dislodged or damaged by traffic. A key component of our Corrosion and Odour Management Program is the development of Sewer Management Plans with the retail water businesses at a catchment scale to analyse the factors contributing to the generation and release of gases, identifying hotspots and determine the most effective options to manage the risk of corrosion and odour over the next 20 years. Melbourne Water is also contributing to the (SCORe) Project, which will be rolled out progressively in 2014. This project is established to provide knowledge and technology to support the Australian Water Industry to achieve cost-effective and efficient corrosion and odour management in sewers. The tools generated by the SCORe Project will cover four key areas: – Liquid phase controls – Gas phase controls – Corrosion control, prediction and coating performance – Odour and corrosion control through integrated management of asset [7] A total of 131m3 of biosolids was reused from Eastern Treatment Plant in 2012– 13. Melbourne Water is seeking to engage a third party to promote and expand the use of biosolids in fill projects, and is contracting for reuse of biosolids on farmland as a soil amendment and fertilizer. It is expected that this will result in no further stockpiling of ETP biosolids by 2017–18 or earlier. [8] Melbourne Water decided not to achieve its Renewable Energy Target, recognising that due to factors such as increasing water costs and the introduction of a carbon price, some concessions were needed to balance our impact on the environment and Melburnians’ water bills. Melbourne Water remains fully committed to reaching our target of zero net emissions by 2018. This commitment is shown through our use of onsite energy sources. This year we used a total of 1,255,748MWh of electricity in 2012-13, of which 369,348MWh was generated onsite from Melbourne Water’s renewable biogas generation plant at ETP. In addition to this, another 28,673MWh of renewable hydro-electricity was generated and exported back to the grid from Melbourne Water’s seven hydro generation facilities. [9] This KPI is based on the office water use at our 990 La Trobe Street office only. The main reason for this target not being achieved is commissioning issues with the water tanks and water used to cool the building’s sewage pumps at our new head office. These issues have now been resolved and we have a new building management system (software application) that will alert us when more water is being used than expected. [10] Melbourne Waters office energy KPI is based on our electricity use at 990 La Trobe Street only. The large decrease in our energy use per FTE is mainly due to moving to our new head office as well as our data centre moving from our head office. [11] In December 2012, 1 out of 4 cases was not responded to within EWOV time frames. EWOV cases are now managed and tracked. This allows actions to be assigned to relevant stakeholders and allow greater visibility of progress and performance against EWOV reporting requirements. Since December 2012, 8 EWOV complaints have been responded to in the required timeframe. [12] Survey is undertaken every two years, last surveyed in 2011–12. [13] Stakeholders in these committees strongly indicated that they did not want to be surveyed again this year. The committees meet four times a year and an annual survey was viewed as excessive by members. Stakeholders indicated their feedback and results would be similar to previous years when the KPI has been met. [14] This figure is approximate. [15] The annual target was not achieved due to 16 lost time injuries to employees and contractors. We are committed to improving our health & safety performance by continuing the focus on a Zero Harm culture. Such improvement is reflected in our recent achievement of attaining AS4801:Occupational Health and Safety Management System certification in June 2013. Target Met = Target has been assessed as met when actual result is greater than or equal to the target set or the performance indicator. Statutory information Disclosure Index Melbourne Water’s Annual Report 2012–13 is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of Melbourne Water’s compliance with statutory disclosure requirements. Legislation Requirement Page Reference FRD 22D Manner of establishment and the relevant Minister 1,58–61 FRD 22D Objectives, functions, powers and duties 1,57–61 FRD 22D Nature and range of services provided 1 Organisational structure 60 FRD 10 Disclosure index 140–141 FRD 22D Statement of workforce data 62–67 FRD 22D Summary of the financial results for the year 52–57 FRD 22D Five year summary of financial results 69–70 FRD 22D Significant changes in financial position during the year 51–57 Report of Operations Charter and purpose Management and structure FRD 22B Financial and other information Legislation Requirement Page Reference FRD 22D SD 4.2(k) Operational and budgetary 1–67, 128–139 objectives and performance against objectives FRD 22D Occupational health and safety policy 64–67, 138–139 FRD 22D Major changes or factors affecting performance 1–67, 128–139 FRD 22D Subsequent events 123 FRD 22D Application and operation of the Freedom of Information Act 1982 143–145 FRD 22D Compliance with building and maintenance provisions of Building Act 1993 150 FRD 22D Statement of National Competition Policy 143 FRD 22D Application and operation of the Whistleblowers Protections Act 2001 151–152 FRD 22D Details of consultancies over $10,000 142–143 FRD 22D Details of consultancies under $10,000 142 FRD 22D Statement of availability of other information 150 Legislation Requirement Page Reference FRD 22D Environmental performance 1–67, 128–139 FRD 25 Victorian Industry Participation Policy disclosures 73 FRD 27B Presentation and Reporting of Performance information 128–139 FRD 29 Workforce data disclosures in the report of operations – public service employees 65–66 FRD 30A Standard requirements for the design and print of annual reports Entire report SD 4.5.5 Risk management compliance attestation 60 SD 4.2(g) General information requirements 1–67 SD 4.2(j) Sign-off requirements 2–3 MRD 01 Performance reporting 128–139 MRD 02 Reporting on water consumption and drought response 8–13 Ministerial reporting directions Legislation Requirement Page Reference MRD 03 Environmental and social sustainability reporting 1–67, 128–139 MRD 04 Disclosure of information on bulk entitlements, transfers of water entitlements, allocations and licenses, irrigation water usage and licence requirements 145–150 SD 4.2(b) Statement of Profit or Loss and Other Comprehensive Income 74 SD 4.2(b) Statement of Financial Position 75 SD 4.2(b) Statement of Changes In Equity 76 SD 4.2(b) Statement of Cash Flows 77 SD 4.2(b) Notes to the financial statements 78–123 Financial Report Financial statements required under Part 7 of the Financial Management Act 1994 Other requirements under Standing Directions 4.2 Legislation Requirement Page Reference SD 4.2(c) Compliance with Australian accounting standards and other authoritative pronouncements 78 SD 4.2(c) Compliance with Ministerial Directions 78 SD 4.2(c) Accountable officer's declaration 124 SD 4.2(d) Rounding of amounts 78 FRD 03A Accounting for dividends 85, 112 FRD 07A Early Adoption of Authoritative Accounting Pronouncements 86 FRD 11 Disclosure of ex-gratia payments N/A FRD 17A Long service leave wage 83, 100 inflation and discount rates FRD 19 Private provision of public infrastructure (BOO/BOOT) Other disclosures as required by FRDs in notes to the financial statements 109 Legislation Requirement Page Reference FRD 21B Responsible person and executive officer disclosures 119–121 FRD 103D Non-current physical assets 80, 94–96 FRD 105A Borrowing costs 79, 91 FRD 104 Foreign currency 85, 87, 88 FRD 106 Impairment of assets 80, 95 FRD 108A Classification of entities as For-Profit 78 FRD 109 Intangible assets 82, 95 FRD 110 Cash flow statements 77, 81 FRD 112C Defined benefit superannuation obligations 83, 113–115 FRD 114A Financial Instruments – General Government Entities and Public NonFinancial Corporations 78–88, 102–107 FRD 119 Contributions by owners 85, 101 FRD 120G Accounting and reporting pronouncements applicable to the 2012–13 reporting period 86 Legislation Requirement Page Reference FRD 121 Infrastructure assets 80–81, 94–96 Key Legislation Water Act 1989 Freedom of Information Act 1982 Building Act 1993 Whistleblowers Protections Act 2001 Victorian Industry Participation Policy Act 2003 Financial Management Act 1994 Consultants During 2012–13, Melbourne Water engaged 16 consultants at less than $10,000 each to undertake operational and capital works projects at a total cost of $96,211 (exclusive of GST). In addition, Melbourne Water engaged 29 consultants (see table below) at over $10,000 to undertake the following projects (expenditure excludes GST): Consultant Project Total fee approved Expenditure 12/13 Future expenditure ACCSR CSR strategy 23,755 23,755 - Consultant Project AECOM Total fee approved Expenditure 12/13 Future expenditure Australia Wet 27,634 Algae Biogas to Biomass – Evaluation 27,634 - AECOM Australia Biosolids – Waste to Resource Market Assessment 88,696 88,696 - ATMECO Pty Ltd Methane Emissions Analysis 13,574 13,574 - ATURA Pty Ltd Land 85,697 application of Biosolids – Risk Assessment 85,697 - Blueshpere environmental Review of the GW monitoring program for WTP 35,000 30,950 4,050 Changeworks Change management for new contract 34,375 23,750 10,625 CPG Australia Wet 14,702 Algae Biogas to Biomass – Evaluation 14,702 - Consultant Project Total fee approved Expenditure 12/13 Future expenditure D J O'brien and Associates Operations and Maintenance Strategy 20,000 18,000 2,000 Deloitte Biosolids – Waste to Resource Market Assessment 15,465 15,465 - 15,703 15,703 - Environmental WTP Soil Earth Sciences Contamination Strategy Frost & Sullivan Biosolids – Waste to Resource Market Assessment 32,500 32,500 - GHD Pty Ltd Winneke Major Hazard Facility Re-licensing engineering consultancy 246,700 34,210 - GHD Pty Ltd Silvan QRA and Chlorine Consequence Modelling 51,746 29,005 22,741 GHD Pty Ltd Methane Emissions Analysis 15,230 15,230 - Consultant Project GHD Pty Ltd Total fee approved Expenditure 12/13 Future expenditure Use of 25,342 Recycled Water for agricultural/land application purposes – Bunyip Food Belt 25,342 - GHD Pty Ltd Biosolids – Sample Analysis 11,136 11,136 - Halcrow Pacific Determination 32,033 of Best Practice Monitoring and Operating of Pumping Stations 32,033 - HRL Technology Methane Emissions Analysis 23,250 23,250 - Ivana Gillard Consulting for Business Services Leadership Team Workshop / Consulting for ISC Workshop 15,750 15,750 - KPMG Financial Sustainability Strategy 223,165 223,165 - Consultant Project Total fee approved Expenditure 12/13 Future expenditure KPMG Greenhouse and Energy Strategy 95,000 95,000 - Monash University Greenhouse Mitigation Plan 10,250 10,250 - Net Balance Management Group P/L Sustainability Assurance Review 25,500 25,500 - Parsons Brinckerhoff Wet Algae Biogas to Biomass – Evaluation 60,000 60,000 - Plant Performance Wet Algae Biogas to Biomass – Evaluation 46,670 46,670 - Press play Industry tour finding report 13,920 13,920 - Protiviti Risk Management – review consequence tables 18,700 18,700 - PWC Authorisation levy policy 28,656 28,656 - Seed Advisory Greenhouse and Energy Strategy 16,875 16,875 - Consultant Project Total fee approved Expenditure 12/13 Future expenditure Sinclair Knight Metz Environmental Stewardship 20,000 20,000 - SMEC Australia Pty Ltd Embankment 30,524 Stability Review – Clay Rich Biosolid Fill 30,524 - 49,800 49,800 - SPIIRE Australia Wet 26,198 Algae Biogas to Biomass – Evaluation 26,198 - The Humphreys Group Extravision project 26,250 26,250 - $1,519,795 $1,267,888 $39,416 SP-BIC Pty Ltd Central Operations process review, Sewerage operations review, Civil Maintenance review TOTAL > $10,000 National Competition Policy Melbourne Water submitted its 2009 Water Plan for water, sewerage and recycled water services to the Essential Services Commission in November 2008 to enable the Essential Services Commission to make a price determination for the four-year period commencing 2009–10. The 2009 Water Plan set out proposed performance relative to the expenditures and outcomes included in the Essential Services Commission’s first determination as well as proposed outcomes, expenditures and prices for the second price determination period. In December 2007, Melbourne Water submitted its 2008 Water Plan for waterways and drainage services, which enabled the Essential Services Commission to make a price determination for these services commencing in 2008–09 for a five-year period. These processes are consistent with the pricing and institutional reform objectives of the National Competition Policy. Melbourne Water is corporatised and therefore has an independent Board, with independent and objective performance monitoring. We face equivalent tax treatment, borrowing requirements and regulations as a private business. As outlined above, we also operate in an environment where the Essential Services Commission determines cost-based pricing. In this regard, our processes are consistent with the requirements of the Victorian Competitive Neutrality Policy. Freedom of Information Melbourne Water is subject to the Freedom of Information Act 1982 and is committed to releasing documents in our possession unless exempt. We also welcome enquiries about the broad range of documents we provide outside the Freedom of Information Act. The designated persons for the purpose of the Freedom of Information Act 1982 are: Principal Officer: Mr P Clark Chairman, Melbourne Water Board Authorised Officer: Mr M Keough FOI and Privacy Advisor and Government Liaison, Melbourne Water The Office of the FOI Commissioner was established this year. Decisions made after 1 December 2012 are subject to review by the FOI Commissioner rather than internal review. Requests for information This year we received 20 requests for access to documents under the Freedom of Information Act 1982 and finalised five requests from the previous year. Three requests from the previous year were not proceeded with. Decisions on requests Requests related to: Reviews of decisions Access in full 1 Environment and planning 5 Internal reviews 2 Access in part 17 Flooding 5 Reviews by FOI Commissioner 1 Access refused 4 Litigation 2 Documents not located 3 Property 4 Complaints Applicant did not proceed 3 Water supply 10 Complaints to FOI Commissioner 0 Not finalised 0 Withdrawn 0 Complaints to VCAT 0 Other 2 Reviews and complaints In 2012–13: • Internal reviews were requested of two decisions. One decision was confirmed and one was varied resulting in more documents being released. • One review was sought of the FOI Commissioner, who affirmed Melbourne Water’s decision. • No notifications of VCAT hearings were received. Year/Number of requests 2005–06 14 2006–07 20 2007–08 20 2008–09 35 2009–10 43 2010–11 32 2011–12 25 Grounds for refusing release of documents included: documents affecting personal privacy, legal proceedings, State security or commercial undertakings, and internal working documents the disclosure of which would not be in the public interest. Access to documents People wanting access to Melbourne Water documents under the Freedom of Information Act 1982 should write to: Freedom of Information Officer Melbourne Water PO Box 4342 Melbourne Victoria 3001. Each application must clearly identify the documents sought and be accompanied by the required application fee ($25.70 from 1 July 2013). General enquiries concerning Freedom of Information can be made by telephoning the Freedom of Information Officer on (03) 9679 6821 between 9am and 5pm, Monday to Friday or via email to: [email protected] Information required under Part II of the Freedom of Information Act is available on our website, melbournewater.com.au under About us, Legislation and policies. The statement includes information about Melbourne Water functions, decisionmaking, consultation arrangements and publications. It also outlines how to make a Freedom of Information request and how to request information outside the scope of the Act. Categories of documents We use a computerised records management system to manage our correspondence and documents. We use online computer systems to manage our financial, human resource and other operational activities and plans relating to water supply, waterways, drainage and sewerage responsibilities. Historical archives of our activities are available through the Public Records Office Victoria. More information is in our Part II Information Statement on our website. Pricing Melbourne Water’s 2012–13 water and sewerage prices remained at 2011–12 prices. This price freeze occurred in order to return funds to customers that were recovered early for the Victorian Desalination Plant. In addition, Melbourne Water’s reform of the residential waterways and drainage charges culminated in 1 July 2012 when all residential customers moved to a flat charge. This resulted in customers facing differing price changes for the year, although the maximum price increase was 5.5% in real terms. Bulk Entitlements The three metropolitan Retail Water Corporations hold Bulk Entitlements to the water resources of the Yarra River, Thomson River, Tarago River and Bunyip River, Silver Creek and Wallaby Creek (Goulburn River Basin) and to the Victorian Desalination Project. The entitlements have been established as a collective ‘pool’. On 2 July 2012, the Minister for Water gazetted new Bulk Entitlements for the Retail Water Corporations in the River Murray and Goulburn System of up to 75,000 megalitres annually, as a result of the Water Retail Corporation’s investment in the GoulburnMurray Water Connections Project. Prior to this (26 March 2013), the Minister for Water amended the retail corporations Statement of Obligations (System Management) to provide clarity on when the retail corporations may draw on this water for Melbourne’s consumptive use. This included; the need for Melbourne’s total system storage levels to be less than 30% as at 30 November that year and that allocations have been made against highreliability water shares in the Goulburn System for the current irrigation season, and water is available in the critical water reserve. The Statement of Obligations (System Management) amendment also allows for up to 300 megalitres to be used annually to maintain the North-South Pipeline in good working order and kept ready for firefighting purposes. Table 1 – Compliance with all Bulk Entitlements held by the three Melbourne retail water corporations (retailers) Melbourne Retail Water Corporations reporting obligation Combined Yarra Yarra River3 River, Silver and Wallaby Creeks, Thomson River Silver Thomson Tarago and River8 and Wallaby Bunyip 5 Creeks Rivers11 Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 The volume of water taken by the Retail Water Corporations in 2012–13 Clause 15.1 (a) 325,855 ML Clause 15.1 (a) 299,636 ML Clause 13.1 (a) 1,071 ML Clause 15.1 (a) 25,148 ML Clause 14.1 (a) 4,612 ML (Tarago) 2,190 ML (Bunyip) Clause 11.1 (a) 0 ML15 16 Compliance with the long term average Bulk Entitlement diversion limit Clause 15.1 (b) 411,571 ML1 Clause 15.1 (b) 297,382 ML4 Clause 13.1 (b) 13,487 ML6 Clause 15.1 (b) 109,694 ML9 Clause Clause 11.1 14.1 (f) (e) 0 ML 7,545 ML (Tarago)12 2,192 ML (Bunyip)13 Clause 14.1 (b) 18 ML20 0 ML N/A N/A Melbourne Retail Water Corporations reporting obligation Combined Yarra Yarra River3 River, Silver and Wallaby Creeks, Thomson River Silver Thomson Tarago and River8 and Wallaby Bunyip 5 Creeks Rivers11 Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 The total annual consumption in 2012–13 404,260 ML N/A N/A The Retail Water Corporations share of flows in 2012–13 N/A Clause Clause 15.1 (a) 13.1 (a) 312,311 N/A ML N/A N/A N/A N/A N/A Clause 15.1 (a) 140,799 ML Clause 14.1 (a) 26,924 ML Clause 11.1 (a) N/A Clause 14.1 (c) 18,099 ML Clause 11.1 (a) 8,943 ML Melbourne Retail Water Corporations reporting obligation Combined Yarra Yarra River3 River, Silver and Wallaby Creeks, Thomson River The Retail Water Corporations share of storage volume at 30/06/13 N/A Silver Thomson Tarago and River8 and Wallaby Bunyip 5 Creeks Rivers11 Clause N/A 15.1 (a) 428,906 ML Clause 15.1 (a) 754,560 ML Clause 14.1 (a) 29,547 ML Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 N/A 27,104 ML21 13,315 ML25 Table 1 – Compliance with all Bulk Entitlements held by the three Melbourne retail water corporations (retailers) (continued) Melbourne Retail Water Corporations reporting obligation Combined Yarra River, Silver and Wallaby Creeks, Thomson River Yarra River3 Volume supplied to Primary Entitlement Holders Melbourne Clause ‘pool’2 15.1 10,433 ML (a) N/A (Western Water) 0 ML (Barwon Water) 0 ML (Westernport Water) 0 ML (South Gippsland Water) Silver and Wallaby Creeks5 Thomson Tarago River8 and Bunyip Rivers11 N/A N/A Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 Clause Clause 11.1 14.1 (a) (a)17 N/A 346 ML (Gippsland Water) 0 ML (Southern Rural Water) N/A N/A Melbourne Retail Water Corporations reporting obligation Combined Yarra River, Silver and Wallaby Creeks, Thomson River Any N/A assignment of water allocation or temporary/ permanent transfers of the Bulk Entitlement Yarra River3 Silver and Wallaby Creeks5 Thomson Tarago River8 and Bunyip Rivers11 Clause 15.1 (c) Nil Clause Clause 13.1 (c) 14.1 (b) NilClause Nil 15.1 (c) Nil Clause 11.1 (b) Nil Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 Clause 14.1 (d)22 25,892 ML Clause 14.1 (e) Nil Clause 11.1 (b)26 +4,372 ML Clause 11.1 (c) Nil Melbourne Retail Water Corporations reporting obligation Combined Yarra River, Silver and Wallaby Creeks, Thomson River Yarra River3 Silver and Wallaby Creeks5 Thomson Tarago River8 and Bunyip Rivers11 Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 Any temporary or permanent transfer of the Bulk Entitlement which may alter the flow in the waterway N/A Clause 15.1 (d) Nil Clause 13.1 (d) Nil Clause 15.1 (d) Nil Clause 14.1 (a) Nil N/A N/A N/A Any amendment to the Bulk Entitlement N/A Clause 15.1 (e) Nil Clause 13.1 (e) Nil Clause 15.1 (e) Nil10 Clause 14.1 (d) Nil Clause 11.1 (c) Nil Clause 14.1 (f) Nil Clause 11.1 (d) Nil Melbourne Retail Water Corporations reporting obligation Combined Yarra River, Silver and Wallaby Creeks, Thomson River Yarra River3 Silver and Wallaby Creeks5 Thomson Tarago River8 and Bunyip Rivers11 Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 Any new Bulk Entitlement granted to the Retail Water Corporations N/A Clause 15.1 (f) Nil Clause 13.1 (f) Yes7 Clause 15.1 (f) Nil Clause 14.1 (e) Nil Clause 11.1 (d) Nil Yes19 Yes24 Any failures to comply with any provision of the Bulk Entitlement N/A Clause 15.1 (g) Nil Clause 13.1 (g) Nil Clause 15.1 (g) Nil Clause 14.1 (g) Nil Clause 11.1 (f) Nil Clause 14.1 (g) Nil Clause 11.1 (e) Nil Melbourne Retail Water Corporations reporting obligation Combined Yarra River, Silver and Wallaby Creeks, Thomson River Yarra River3 Silver and Wallaby Creeks5 Thomson Tarago River8 and Bunyip Rivers11 Victorian Goulburn River Desalination System18 Murray23 19 24 Project14 Any difficulty experienced in complying with the Bulk Entitlement and if so, any remedial action taken or proposed N/A Clause 15.1 (h) Nil Clause 13.1 (h) Nil Clause 15.1 (h) Nil Clause 11.1 (g) Nil Clause 14.1 (h) Nil Clause 14.1 (h) Nil Clause 11.1 (f) Nil Notes for compliance with Bulk Entitlements Combined Yarra River, Silver and Wallaby Creeks, Thomson River 1. Compliance with the long-term average diversion limit of 555,000 megalitres is assessed using a 15-year rolling average annual diversion. 2. The supply of water to Primary Entitlement Holders is obligated under the Victorian Desalination Project Bulk Entitlements via water sources from the Melbourne ‘pool’ of all Melbourne’s Bulk Entitlement sources. Yarra River 3. The Retail Water Corporations hold the following Bulk Entitlements on the Yarra River • Bulk Entitlement (Yarra River – Melbourne Water for City West Water Limited) Conversion Order 2006 – BEE049364 • Bulk Entitlement (Yarra River – Melbourne Water for South East Water Limited) Conversion Order 2006 – BEE049363 • Bulk Entitlement (Yarra River – Melbourne Water for Yarra Valley Water Limited) Conversion Order 2006 – BEE049362 4. Compliance with the long-term average diversion limit of 400,000 megalitres is assessed using a 15-year rolling average annual diversion. Silver and Wallaby Creeks 5. The Retail Water Corporations hold the following Bulk Entitlements on the Silver and Wallaby Creeks • Bulk Entitlement (Silver & Wallaby Creeks – Melbourne Water for City West Water Limited) Conversion Order 2006 – BEE049475 • Bulk Entitlement (Silver & Wallaby Creeks – Melbourne Water for South East Water Limited) Conversion Order 2006 – BEE049474 • Bulk Entitlement (Silver & Wallaby Creeks – Melbourne Water for Yarra Valley Water Limited) Conversion Order 2006 – BEE049473 6. Compliance with the 3-year total diversion limit of 66,000 megalitres is assessed using a 3-year rolling total diversion. 7. The Retail Water Corporation’s received new Bulk Entitlements on 2 July 2013 in the Goulburn System as a result of the investments made in the G-MW Connection’s Project. Thomson River 8. The Retail Water Corporations hold the following Bulk Entitlements on the Thomson River • Transfer of Bulk Entitlement (Thomson River – Melbourne Water Corporation) Conversion Order 2001 to City West Water Limited 2006 – BEE049361 • Transfer of Bulk Entitlement (Thomson River – Melbourne Water Corporation) Conversion Order 2001 to South East Water Limited 2006 – BEE049360 • Transfer of Bulk Entitlement (Thomson River – Melbourne Water Corporation) Conversion Order 2001 to Yarra Valley Water Limited 2006 – BEE049359 9. Compliance with the long-term average diversion limit of 171,800 megalitres is assessed using a 15-year rolling average annual diversion. 10. On 12 May 2013, the Minister for Water amended the Bulk Entitlement (Thomson River – Environment) Order 2005, to provide changes to passing flow obligations. These changes were noted by the Retail Water Corporations and Melbourne Water. Tarago and Bunyip Rivers 11. The Retail Water Corporations hold the following Bulk Entitlements on the Tarago and Bunyip Rivers • Bulk Entitlement (Tarago and Bunyip Rivers – Melbourne Water for City West Water Limited) Conversion Order 2009 – BEE049358 • Bulk Entitlement (Tarago and Bunyip Rivers – Melbourne Water for South East Water Limited) Conversion Order 2009 – BEE049357 • Bulk Entitlement (Tarago and Bunyip Rivers – Melbourne Water for Yarra Valley Water Limited) Conversion Order 2009 – BEE049356 12. Compliance with the Tarago River long-term average diversion limit of 24,950 megalitres is assessed using a 5-year rolling average annual diversion. 13. Compliance with the Bunyip River long-term average diversion limit of 5,560 megalitres is assessed using a 5-year rolling average annual diversion. Victorian Desalination Project 14. The Retail Water Corporations hold the following Bulk Entitlements to the Victorian Desalination Project • Bulk Entitlement (Desalinated Water – City West Water Limited) Order 2010 – BEE050814 • Bulk Entitlement (Desalinated Water – South East Water Limited) Order 2010 – BEE050815 • Bulk Entitlement (Desalinated Water – Yarra Valley Water Limited) Order 2010 – BEE050816 15. On 1 April 2012, the Minister for Water made a zero desalinated water order for the 2012–13 year. 16. 24,850 megalitres was transferred to Cardinia Reservoir for commissioning of the Victorian Desalination Plant, this is not considered to be water taken under the Bulk Entitlement. 17. As the Primary Entitlement Holders are supplied from the Melbourne ‘pool’, this is reported under note two of the combined Yarra River, Silver and Wallaby Creeks and Thomson River. Goulburn System 18. The Retail Water Corporations hold the following Bulk Entitlements to the Goulburn System • Bulk Entitlement (Goulburn System – City West Water) Order 2012 – BEE049478 • Bulk Entitlement (Goulburn System – South East Water) Order 2012 – BEE049477 • Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 – BEE049476 19. The Retail Corporations were granted Bulk Entitlement’s to the Goulburn System on 2 July 2012. 20. 18 megalitres of water was used to maintain the operational capacity of the North-South Pipeline and keep the pipeline charged for fire-fighting purposes, as allowed under clause 9.1 (c) of the Retail Water Corporation’s Statements of Obligations (System Management). 21. The Retail Water Corporations had 16,682 megalitres deducted from their 30 June 2012 volumes as a result of carry over rules and spillable water account spill losses during 2012–13. 22. The Retail Water Corporations have in place water management strategies to manage water allocation holdings in in the River Murray and Goulburn System to maximise the value of the resources held to their customers and minimise risk of spilling water allocation. These strategies include the transfer of allocations between Bulk Entitlement Allocation Bank Accounts and trading allocations. River Murray 23. The Retail Water Corporations hold the following Bulk Entitlements to the River Murray • Bulk Entitlement (River Murray – City West Water) Order 2012 – BEE049481 • Bulk Entitlement (River Murray – South East Water) Order 2012 – BEE049480 • Bulk Entitlement (River Murray – Yarra Valley Water) Order 2012 – BEE 049479 24. The Retail Water Corporations were granted Bulk Entitlement’s to the River Murray on 2 July 2012. 25. The Retail Water Corporations had 0 megalitres deducted from their 30 June 2012 volumes as a result of carry over rules and spillable water account spill losses during 2012–13. 26. The Retail Water Corporations have in place water management strategies to manage water allocations holdings in the River Murray and Goulburn System to maximise the value of the resources held to their customers and minimise risk of spilling water allocation. These strategies include the transfer of allocations between Bulk Entitlement Allocation Bank Accounts and trading allocations. Melbourne Water’s Bulk Entitlement Melbourne Water holds a Bulk Entitlement to the water resources of the Maribyrnong Basin to supply irrigators diverting water from Jacksons Creek, downstream of Rosslynne Reservoir, and the Maribyrnong River between its confluence with Jacksons Creek and Shepherd Bridge. Table 2 – Compliance with the Maribyrnong River Bulk Entitlement held by Melbourne Water Melbourne Water reporting obligation Maribyrnong River The volume of water taken by Melbourne Water to supply licence holders in 2012– 13 Clause 19.1 (b) 106 ML Melbourne Water reporting obligation Maribyrnong River Compliance with the 5-year rolling average annual Bulk Entitlement diversion limit of 1,056 megalitres 141 ML Melbourne Water’s share of flow into the Rosslynne Reservoir in 2012–13 Clause 19.1 (a,iii) 648 ML Melbourne Water’s share of storage volume in the Rosslynne Reservoir at 30/06/13 Clause 19.1 (a,ii) 2,116 ML Transfer and operating losses within the system Clause 19.1 (a,iv) 0 ML Releases made from the Rosslynne Reservoir to supply licence holders in 2012–13 Clause 19.1 (a,i) 0 ML Releases from Melbourne Water’s share of flow to meet minimum flows Clause 19.1 (a,v) 55 ML Any temporary or permanent transfers of the Bulk Entitlement Clause 19.1 (c) nil Any temporary or permanent transfer of the Bulk Entitlement which may alter the flow in the waterway Clause 19.1 (d) nil Alteration to volume of water under licences issued by Melbourne Water Clause 19.1 (e) nil Alteration to security of supply of entitlements under licences Clause 19.1 (e) nil Transfer of licences (number, amount and places) Clause 19.1 (f) Yes1 Melbourne Water reporting obligation Maribyrnong River Any amendment to the Bulk Entitlement Clause 19.1 (g) nil Any new Bulk Entitlement granted to Melbourne Water Clause 19.1 (h) nil Implementation of metering program Clause 19.1 (i) Yes Any failures to comply with any provision of the Bulk Entitlement Clause 19.1 (j) nil Any difficulty experienced in complying with the Bulk Entitlement and if so, any remedial action taken or proposed Clause 19.1 (k) nil 1 Two transfers of licences were made: 1) Subdivide licence with 24 ML in Keilor; 2) Subdivide licence with 19 ML in Keilor. Environmental Entitlements Table 3 – Compliance with the Environmental Entitlements held by the Victorian Environmental Water Holder Yarra River Thomson River Silver and Wallaby Creeks Tarago and Bunyip Rivers Environment’s share of storage volume at 30/06/13 34,965 ML 0 ML1 N/A 1,808 ML Compliance with environmental flows Yes Yes Yes Yes 1 Releases from the Thomson Environmental Water Account in 2012/13 exceeded the environment’s actual share of storage by 187 ML. The over release was reconciled on 1 July 2013 with the new annual allocation. Compliance with Building Act 1993 Melbourne Water’s major premises are compliant with the Building Act 1993. Melbourne Water has a program to refurbish its remote sites to ensure compliance with the Building Code of Australia 2009. All sites that the Property Team is accountable for are Essential Safety Measures compliant with follow-up audits undertaken as required. Defects are rectified as part of ongoing maintenance requirements. Melbourne Water’s leased corporate office at 990 La Trobe Street, Docklands is compliant with the Building Code of Australia 2009, and Essential Safety Measures are in place and compliant. Privacy legislation Melbourne Water is subject to the Information Privacy Act 2000 and the Health Records Act 2001 and is committed to protecting the privacy of personal and health information it collects and handles. Melbourne Water collects and handles personal and health information only to carry out its functions and activities. Melbourne Water is committed to openness and transparency and welcomes any queries about its approach to privacy. We endeavour to resolve any privacy complaints quickly and effectively. People wanting to make a privacy complaint, or seek a copy of Melbourne Water’s Privacy Policy, should write to: Privacy Advisor Melbourne Water PO Box 4342 Melbourne Victoria 3001. Information available on request Further information is available on request about: • Pecuniary interests of relevant officers • Details of shares held by a senior officer as nominee or held beneficially in a statutory authority or subsidiary • Details of changes in prices, fees, charges, rates and levies charged if relevant • Details of Melbourne Water publications • Committees chaired by Melbourne Water • Major external reviews carried out on Melbourne Water • Research and development activities • Overseas visits • Major promotional, public relations and marketing activities • Melbourne Water’s Code of Conduct • Assessments and measures to improve the occupational health and safety of employees • Statement of industrial relations • Details of time lost through industrial accidents and disputes • Major sponsorships. Phone 131 722 (within Victoria) or (03) 9679 7100 (within the rest of Australia) or visit melbournewater.com.au Protected Disclosure Act 2012 The Whistleblowers Protection Act 2001 was repealed and replaced with the Protected Disclosure Act 2012 on 10 February 2013. As the change of legislation occurred midway through the 2012–13 financial year, this disclosure complies with the requirements of the Protected Disclosure Act 2012 and section 104 of the Whistleblowers Protection Act 2001, for each of the relevant time periods. Compliance with the Protected Disclosure Act 2012 The Protected Disclosure Act 2012 was part of a package of integrity reforms introduced by the Victorian Coalition Government, which also established the Independent Broad-Based Anti-Corruption Commission (IBAC). The Protected Disclosure Act 2012 enables people to make disclosures about improper conduct within the public sector without fear of reprisal. It aims to ensure openness and accountability by encouraging people to make disclosures and protecting them when they do. What is a ‘protected disclosure’? A protected disclosure is a complaint of corrupt or improper conduct by a public officer or a public body. Melbourne Water is a “public body” for the purposes of the Protected Disclosure Act 2012. What is ‘improper or corrupt conduct’? Improper or corrupt conduct involves substantial: • Mismanagement of public resources, or • Risk to public health or safety or the environment, or • Corruption. The conduct must be criminal in nature or a matter for which an officer could be dismissed. How do I make a ‘protected disclosure’? You can make a protected disclosure about Melbourne Water or its board members, officers or employees by contacting IBAC using the contact details provided below. Please note that Melbourne Water is not able to receive protected disclosures. How can I access Melbourne Water’s procedures for the protection of persons from detrimental action? Melbourne Water has established procedures for the protection of persons from detrimental action in reprisal for making a protected disclosure about Melbourne Water or its employees. You can access our procedures on our website at melbournewater.com.au (> About us > Who we are > Legislation and policies). Contacts Independent Broad-Based Anti-Corruption Commission Victoria Address: Level 1, North Tower, 459 Collins Street, Melbourne Victoria 3001 Mail: IBAC, GPO Box 24234, Melbourne Victoria 3000 Internet: www.ibac.vic.gov.au Phone: 1300 735 135 Email: See the IBAC website for the secure email disclosure process, which also provides for anonymous disclosures. 152 Melbourne Water Annual Report 2012–13 Disclosures under the Whistleblowers Protection Act 2001 (up to 9 February 2013) The archived procedures established under the Whistleblowers Protection Act 2001 are available upon request. The disclosures detailed in the table below relate to the period commencing on 1 July 2012 and ending on 9 February 2013. The number and types of 2012–13 number disclosures made to Melbourne Water during the year (1 July 2012 to 9 February 2013): 2011–12 number Public interest disclosures Protected disclosures 0 0 The number of disclosures referred during the year by Melbourne Water to the Ombudsman for determination as to whether they are public interest disclosures 0 0 The number and types of disclosed matters referred to Melbourne Water by the Ombudsman for investigation 0 0 The number and types of disclosures referred by Melbourne Water to the Ombudsman for investigation 0 0 The number and types of 2012–13 number disclosures made to Melbourne Water during the year (1 July 2012 to 9 February 2013): 2011–12 number The number and types of investigations taken over from Melbourne Water by the Ombudsman 0 0 The number of requests made by a whistleblower to the Ombudsman to take over an investigation by Melbourne Water 0 0 The number and types of disclosed matters that Melbourne Water has declined to investigate 0 0 The number and types of 0 disclosed matters that were substantiated upon investigation and the action taken on completion of the investigation 0 Any recommendations made by the Ombudsman that relate to Melbourne Water: Recommendation regarding file security and management 0 0