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Chairman’s Report

James Hill - Chairman Manukau Water Limited I am pleased to present Manukau Water Limited’s second Annual Report. It has been a year of considerable challenge and change for the Company, but I believe this report shows that we are delivering the benefits that were expected when the Company was formed as a Council Controlled Organisation two years ago. In particular, my Board of Directors has made considerable progress on increasing value to customers by improving operational efficiencies and effectiveness of management. The result is reflected in our full year financial loss of $2 million, which is a $4.6 million improvement from the previous year and is more than $3.4 million better than budget. These financial gains mean the Company has been able to offset, in part, the considerable external price pressures that have been placed on the business. Manukau Water Limited’s retail water price remains the lowest in the Auckland region, and our wastewater prices are also, on average, the lowest in the region.

Wastewater Tariff Manukau Water Limited prides itself on providing high-quality and cost effective water and wastewater services to the people of Manukau, and in this respect we ensure our prices are transparent. During the year we undertook a comprehensive review of our wastewater tariff structures and this enabled our shareholder, the Manukau City Council, to incorporate new wastewater tariff options in its annual plan. Deciding the wastewater charging structure was extremely difficult for the Council, which had to weigh up the impacts on different groups of customers and also keep in mind the environmental issue of water conservation.

Water Conservation It is extremely pleasing to see that in the 12 months to the end of June, 2008, businesses in Manukau City led the way in water conservation. Water demand in the City fell on average more than 5 litres per person, per day during the year. That is equivalent to Manukau City using five fewer Olympic-sized swimming pools of water every week. This latest fall in water demand means that since Manukau Water Limited was formed two years ago, demand for water in the City has declined by nearly five percent. That is a great environmental outcome.

Outlook The Board is confident that the Company will continue to deliver similar outcomes in the year ahead and that we will increasingly move even closer to our goal of being a world-class water and wastewater company. There are still major investments to be made in the essential infrastructure, including the completion of the Kawakawa Bay wastewater treatment plant and the upgrade to the Beachlands/Maraetai plant.

Appreciation The Board’s confidence in being able to achieve the improvements we have planned is supported by the fact that we have an excellent team at Manukau Water Limited that is committed to achieving our goals. On behalf of the Board, I want again to thank our people for their outstanding efforts in transforming the Company so as to improve the delivery of water and wastewater services to the people of Manukau.

James Hill CHAIRMAN


Highlights at a Glance

Value for Customers

Processes & Procedures

Manukau Water Limited’s water price is the lowest in the Auckland

ˇ

region, and has been since it was

Induction & Training

formed as a Council Controlled Organisation. Similarly, the

ˇ

Company’s wastewater charges

Control Registered Systems

are on average the lowest in the Auckland region. For customers

=

in Manukau who pay Watercare Services Limited trade waste

Central to Improving

charges, Manukau Water Limited’s

Service to our Customers

wastewater volumetric charge has not changed since it was established as a CCO in July 2006.

Process Improvement The company has spent

Manukau Water has the

considerable effort improving internal processes and procedures.

lowest water price in the

There have been reviews in a

Auckland Region.

number of areas including a

continued focus on debt recovery procedures, full documenting of the Customer Account Team processes and procedures, refinement of induction and training manuals and the creation of formal document control register systems. Central to all of these initiatives is the aim of improving the service for customers.

Our Financial Performance Revenues

$M Actual 2008

$M Acutal 2007

Expenses

$M Actual 2008

$M Actual 2007

Total

87.96

84.59

Total

89.96

91.15

Profit [Loss] After Tax

[2.00]

[6.55]


Financially Sustainable Manukau Water Limited’s overall

Environmental Sustainability

financial result for the year to the

Manukau Water Limited has

end of June was a loss of

become the first water company

$2 million. This is $4.55 million

in New Zealand to measure its

better than the loss of $6.55

carbon footprint. The Company’s

million recorded a year earlier.

environmental management continues to focus mainly on

A pleasing aspect of the financial

excellence in wastewater treatment

result was lower spending on consultants, with a focus on staff

Water Conservation

retention and training.

Water demand in Manukau City

and high public and environmental protection standards.

fell by 1.5% in the 12 months to 30 June, 2008. This equates to each person in the City using 1,710 fewer litres per year, or a saving of 5.5 litres a day per person at home and work. The drop in water use is equivalent to Manukau City using 5.1 fewer Olympic-sized swimming pools of water every week of the year.

Total Revenue

Total Assets $M1,000

$973,163

$971,922

$M100

$M800

$M80

$M600

$M60

$M400

$M40

$M200

$M20

$M0

$87,957

$84,597

2008

2007

$M0 2008

2007


Chief Executive’s Report

Raveen Jaduram Chief Executive When Manukau Water Limited commenced its operations two years ago, its stated aim was to deliver further benefits to the communities of Manukau. As a Council Controlled Organisation, it must be a good employer and give effect to financial, environmental and social requirements in its Statement Of Intent. I am pleased to report our significant achievements and progress during our second year of operation.

annual water demand is the same as before we commenced operations. This is despite the increase in population and commercial growth in the City. We have investigated and installed HydroShare Systems on the meters for two of our largest water customers, who are now able to monitor via the internet their water consumption at five minute intervals on a real time basis. This has allowed them to better manage their demand. Our focus is to highlight among our customers

Financial

the need to reduce the wastage of water and to have

Our financial result for the 12 months was better

efficient water use.

than budget by $3.4 million. It has also improved on

The Company has also reduced its own non-revenue

our first year result by $4.6 million. Our focus has

water [e.g: water that is used by the fire service or that

continued to be on controlling costs and on obtaining

leaks from the company’s network], achieving 10.6 per

better and more efficient services from our providers.

cent for the 2007/08 year, down from 11.2 percent the

We competitively out-source many of the Company’s

previous year. Manukau Water Limited, working with

services, while continuing strong management control.

the other five Local Network Operators in Auckland,

During the past financial year, we achieved more cost-

negotiated and agreed with our bulk water supplier,

effective asset maintenance and operations from our

Watercare Services Limited, water tariffs that will

new contractor. We have gone to the market for meter

provide further incentives to minimise wastage and to

reading, bill printing and despatch services during the

manage demand in future years.

year and further improvements to our services for our customers will follow next year.

With the Government signalling its strong intentions on carbon trading, the Company carried out a carbon

As well as taking opportunities to review external supply

footprint assessment, the first for the water industry in

contracts, the Company has also focussed on improving

New Zealand, for its base year of operation from 3 July

internal processes and procedures. Examples of these

2006 to 30 June 2007. The Company is continuing its

have included our debt recovery, customer accounts

assessment for last year.

management and our asset register. Also during the year, we commenced an inflow and We have also improved our cash flow position by

infiltration investigation in Beachlands as part of our

improving our debt management and controlling

effort to reduce the volumes of rainwater entering

expenditure.

our wastewater (sewerage) system. This initiative,

Environment

along with our program of computer modelling of the

We are particularly proud of our success in meeting

sewerage system, will assist in reducing wastewater

our objectives in relation to managing water demand. At the end of our second year of operation, our

overflows to receiving waters during storm events.




“Manukau Water is showing true water industry leadership. Their development of a carbon footprint inventory, convening of the Auckland water industry performance review and active participation in the New Zealand Water and Wastes Association shows great corporate citizenship and we are thrilled and proud to be sharing

this journey with them.

– Steve Carne, Manager of Water, GHD New Zealand Limited

signature to be added


Chief Executive’s Report cont.

Social

establishment of a new school in Flatbush Town

The most significant milestone last year was a

Centre, extensions to the Middlemore Hospital and

comprehensive review of our wastewater tariff

Auckland International Airport, the relocation of New

structures. Although a fixed annual wastewater

Zealand Breweries Limited and significant residential

charge had been retained for residential (domestic)

development across the City.

customers when the Company commenced in July

Business Processes

2006, many of our customers had felt that a volumetric wastewater charge was a fairer tariff. The findings of our review and our recommendations were put to our shareholders, Manukau City Council. The Council included wastewater tariff options in its Annual Plan process and has since made a decision to retain the fixed annual wastewater tariff structure. However, it has accepted the recommendation to remove over four years the subsidy that small businesses have been

We are very mindful of our role in society in terms of protecting public health and the environment and the affordability of our customers. Our objectives include the need to reduce our transaction costs by only doing the right things and doing them the right way. In this regard, we have been documenting, reviewing and optimising numerous business processes over the past year.

making toward residential customers. This change has

The Company is currently in the process of an

resulted in a higher increase for domestic customers

international benchmarking project, along with 40 other

from 1 July 2008.

water and wastewater utilities. This exercise compares

The management of debt has been a priority for the Company. In recognising that some families have difficulty paying their water charges, we have instigated a number of initiatives as part of our hardship policy.

our asset management processes and will identify improvements that we could make to get us closer to our goal of being a world-class provider of water and wastewater services.

Working with Work and Income New Zealand and

Our People

budgetary advisors throughout Manukau, we have

I would like to acknowledge the strategic direction and

implemented solutions and assistance for low income

commitment of the directors, whose role of corporate

families. We have also coordinated with other Local

governance has ensured the ongoing success of the

Network Operators and liaised with the Auckland

Company.

Regional Public Health Service on our processes for restricting water when this becomes necessary.

I would also like to thank my executive management team and all staff for their continued support

The City is growing and so is the demand for

and passion in the challenging early years of this

infrastructure. The Company has made good progress

organisation. Their support for an innovative, caring

on upgrading the Beachlands/Maraetai wastewater

and safe work place is reflected in our success and in

treatment plant to improve the quality of the discharge

delivering another solid result for 2007/08.

and also to expand its capacity to provide domestic wastewater services for a population of 10,000 residents, up from the 5,500 current capacity. We have continued our capacity studies for the City, identifying the areas that require additional investments and working with the Council’s planning professionals, developed a priority list of projects to meet the growth. We are involved with a number of new developments that are planned for Manukau. These include: the

Raveen Jaduram CHIEF EXECUTIVE




“Not withstanding the challenges of launching as a CCO, Manukau Water continues to impress with its contribution to the development of key industry strategies whether in its leadership role with the Association’s Board and Senior Executives’ Forum, as sponsor of the industry Trainee of the Year Award or in building a sector focus on the needs of its customers.” – Simon Carlaw, Chief Executive, NZ Water and Wastes Association


A key difference between a CCO and a department of Council is that a CCO is independently managed …

Did You Know?

The Benefits of a CCO

Manukau Water Limited was established by its owner, Manukau City Council, as a Council Controlled Organisation (CCO). It was established to provide water and wastewater services to the people of Manukau. A key difference between a CCO and a department of Council is that a CCO is independently managed, with a board of skilled individuals to govern the company. This means the Company is overseen by people who are focussed on running the Company as efficiently as possible, while still delivering an excellent service and value for its customers. The Company continues to be fully accountable to its shareholder through ongoing performance measures and targets, and these are fully detailed in the Statement of Service Performance contained in this report. The benefits of a CCO are apparent in the Company’s improved financial performance, but are also reflected in the operational efficiencies that are being seen in the company. Some of the benefits of a CCO are intangible, and reflect the fact that our people are now part of an organisation whose mission is solely to provide high quality and cost effective water and wastewater services to the people of Manukau. Having an understanding of that mission throughout the whole Company means our customers are benefiting through better service.




Vision To be a world-class water and wastewater company

Mission The provision of high quality and cost effective water and wastewater services to the people of Manukau

Values Value for our customers Integrity, honesty and respect in our dealings Courage Trust, openness and teamness Our commitment to excellence Respect for diversity and our environment


Contents Page

Chairman’s Review Manukau Water Highlights Chief Executive’s Report 1 The Benefits of a CCO - Did You Know? 5 Annual Overview

9

Customer Feedback - Did you Know? 17 Customer and Service 19 Key Performance Indicators

23

Respect for Our Environment - Did You Know?

29

Sustainability - A Global Report Card 31 Our People - Did You Know? 37 Directors 39 Executive Management Team

41

Company Structure

43

Our Stakeholder Relationships

44

First Water Company to Measure Carbon Footprint - Did You Know? Corporate Governance Statement

47 49

Financial Statements 53 Auditors Report 54 Statement of Account Policies 56 Income Statement

62

Balance Sheet

63

Statement of Changes in Equity

64

Statement of Cash Flows

65

Notes to the Financial Statements

66




A world class Company


Manukau Water Limited Annual Overview

Manukau Water Limited is a water and wastewater services company that has operational assets throughout Manukau City. We were established on 3 July

considerations such as cash flow,

our commitment to serve our

2006, when the water and

capital expenditure, debt equity

customers in the best manner

wastewater assets of the Manukau

and gearing ratios. However,

possible. The Customer Charter

City Council were transferred to

Manukau Water Limited does not

outlines the quality of service we

Manukau Water Limited, which is

operate for the purpose of making

strive to provide and how we meet

a Council Controlled Organisation

a profit.

responsibilities should any problem

(CCO) for the purposes of the Local Government Act (2002). We are a separate company, 100% owned by Manukau City Council, with our

Manukau Water Limited’s vision is to be a world class water and wastewater company.

own Board of Directors, Statement

Statement of Intent

of Intent, Chief Executive, vision

Manukau Water Limited’s

and mission statements.

Statement of Intent (SOI) is a

Our Company’s operating structure has four functional groups reporting to the Chief Executive, comprising Infrastructure, Finance, Customer Services and Human Resources. We have a variety of operational and supply agreements with a wide range of business partners and we share with them our vision, mission and values. In return they are required to assist us to deliver on our core principles. Our company provides costeffective and high quality water and wastewater services to the people of Manukau, while also promoting Council’s wider strategic, community and environmental goals, and ensuring that statutory obligations such as maintaining sanitary conditions are met. The Council has set expectations for Manukau Water Limited around operating

public and legislative expression of our Company’s accountability to its shareholder, Manukau City Council. It provides the framework for the relationship between our Board of Directors and our shareholder, and

arise. Our contractual obligations to our customer are contained within our Customer Contract. Both of these documents are available on our website

Our People - VICTORs As of 1 July, 2008 there are 83 full-time equivalents working for Manukau Water Limited. Every member of our team is dedicated to delivering on our core values which are:

it is against this document that the

Board reports to the shareholder

and we are held accountable to

our dealings

all of our stakeholders. The SOI is

available on our website at

www.manukauwater.co.nz.

We also actively participate in joint planning and collaborative work

Value for our Customers Integrity, honesty and respect in

Courage Trust, openness and teamness, Our Commitment to excellence Respect for diversity and our environment

with other water operators and

We refer to these as our VICTOR

councils in the Auckland region, to

values and it is our commitment to

ensure the business is operated,

delivering on these values which

maintained and extended to best

will ensure we ultimately deliver on

fit the needs of the wider Auckland

our Vision and our Mission.

Region and industry best practice.

Our Services

Customer Charter and Customer Contract

The key service areas in which we

We have a Customer Charter

Water

that states our intentions and

We service the Manukau City urban

operate are:




Respect for our environment


Annual Overview cont.

community (approximately 319,000

Asset Management Planning

Setting Direction and Behaviours

people) with a reticulated public

Our asset management planning

The Board of Directors of

water supply system, with water

includes:

Manukau Water Limited, with the

supplied from a single bulk supplier, Watercare Services Limited. Our objective is to maintain an “a”

> Growth and demand projections > Asset information regarding the

grade from the Ministry of Health

age and condition of existing

for the distribution network.

assets

chief executive and executive management, is responsible for setting the strategy for the organisation. The employees of the Company make thousands of

Urban Wastewater

> Expected levels of service

decisions each day to meet the

Wastewater pipes carry

> Regulatory requirements

objectives of the organisation

contaminated water and wastes

We co-operate as closely as

(from toilets, showers etc) away

possible with other works planned

from residential houses and

for the Manukau District, such

businesses for treatment prior to

as roading, in order to minimise

discharge to the environment. Our

the costs of installing new

urban wastewater system covers

infrastructure and to reduce

the Howick, Mangere, Manurewa,

the impact of such works on the

Otara, Pakuranga, Papatoetoe and

community. Our Asset Management

As mentioned, the Company also

Botany. Our system then delivers

Plan is available on our website.

produces annually, a three year

Our Funding

Statement of Intent (SOI) that

the wastewater to a bulk collection system for transport to the Mangere Wastewater Treatment Plant.

Manukau Water Limited has four main streams of income with which to operate the business and

Rural Wastewater

to fund operations, maintenance

We operate a treatment plant

and capital expenditure. The four

to cater for wastewater from

income streams are:

the Beachlands-Maraetai community. We are currently upgrading this plant to improve its performance and to ensure it will meet the design capacity of 10,000 people. We are also developing a wastewater collection system, treatment plant and land disposal system for Kawakawa

> Water and wastewater charges paid by customers of Manukau Water Limited > Network growth charges paid by customers who increase the usage loads on both the water and wastewater reticulation > Professional services related

Bay to address public health and

to the water and wastewater

environmental concerns in the

provisions of Manukau City

area.

Council’s District Plan

Stormwater Manukau Water Limited manages the maintenance of the storm water system on behalf of the Council.

> Professional services related to the management and maintenance of the Manukau City Council’s stormwater reticulation network

and its shareholder. Hence, the direction of the organisation is set by developing strategic objectives and action plans, top-down and bottom-up, to ensure that great strategic initiatives are not destroyed by poor execution.

states publicly the activities and intentions of the Company, and provides Manukau City Council an opportunity to influence the direction of the Company and to hold it accountable for its performance. The company’s mission, vision, values and culture are communicated to all staff and given effect to in our day to day activities, decisions and behaviours.

Establishing Performance Expectations All employees are required to have their personal and team objectives which are aligned to the targets and initiatives based on the Company’s strategic goals. Everyone in Manukau Water Limited is encouraged to do the right things and do them in the

11


Services to the people of Manukau


Annual Overview cont.

right way – to be effective and

its compliance, including any

reliable and low cost service to

efficient. Our employees see the

breaches or risks related to any

remain competitive. But in a fast,

results of their responsiveness in

of its resource consents. The very

expanding city, our customers

performance metrics developed for

nature of the activities of Manukau

need confidence that their needs

teams and these escalate into key

Water Limited is aligned with the

are being addressed for the longer

performance indicators identified

fundamental needs of society

term so that they do not have

in the SOI. Process improvement

– public health. Further, as a

water shortages and restrictions

plans are developed and executed

council controlled organisation, the

that could adversely affect their

gradually for critical business

Company must give consideration

lifestyle and their economic

functions. As the Company’s

to economic, social, environmental

position.

activities are repetitive, incidents

and cultural factors. Ethical

and customer feedback is used

behaviour is reinforced in the

to debrief and identify areas for

organisation by a combination

improvements and behaviours that

of policies, the Company’s values

need to be changed.

and code of ethics of respective

Monitoring Performance Manukau Water Limited has

professional organisations that staffs are members of.

Business objectives are developed by the staff, management and Board of Directors using an array of strategic tools such as Michael Porter’s five forces, SWOT analysis, stakeholder matrix, risk analysis and scenario-planning. The

developed a Strategy Map, and its

Developing Future Directions

process is developed independently

performance is measured using a

Manukau Water Limited will be

from bottom-up and from top-

Balanced Scorecard approach. The

successful when our customers

down, identifying what we need

objectives in its SOI and industry

are its advocates, the shareholders

to achieve, what we have as

benchmarks from Auckland and

are proud of the Company,

core capability, and identifying

Australia are used as targets.

the Company is a sustainable

the capability gap. Similarly we

organisation and we have positive

identify what we say and what

brand recognition.

we deliver, recognising the

The Company has also participated in international benchmarking

competency gap between the two.

initiatives, having covered

Our Company is proactively

customer service benchmarking

campaigning to reduce wastage

In the main, Manukau Water

in its first year of operation and

of water and therefore reduce

Limited does not have a competitor

asset management planning in

demand. The reduction in water

– although customers can

the current year. Its performance

demand maximises the use of

substitute their service needs,

is also reported in the Auckland

existing assets, and pushes out the

for example by buying bottled

Water Industry Report which is

need for investing in new capital-

water instead of using tap water

detailed on our website.

intensive infrastructure. So, key to

or by installing rainwater tanks

our success is the need to improve

for outdoor use. However,

productivity and to becoming very

the Company “competes by

efficient in our business processes.

comparison” with other water

Public, Ethical, Regulatory and Legal Responsibilities The Company has identified the respective legislative requirements

Our domestic customers see

that it must comply with and

greatest value in receiving

has put in place compliance

safe and reliable water and

monitoring and reporting systems.

wastewater services at low costs.

Senior executives report monthly

Our commercial and industrial

to the Board of Directors on

customers also require safe,

retailers in the Auckland region, of which there are six. And for many years, Manukau Water Limited has continued to provide drinking water at the lowest cost. By being an efficient and effective organisation, with highly skilled

13


Respect for our environment


Annual Overview cont.

and motivated staff supported by

As objectives are set and/or

a wider audience we have a full

smart information systems and

achieved, milestones met, or

Communications Strategy and

processes, the Company will be a

results achieved, these are shared

programmes that include media

world class water and wastewater

by celebrating. The celebration

releases, advertising, direct

service provider.

could take different forms, from

mailing, a website and briefings.

highlighting the achievement to

At all stages we encourage and

all staff via emails, at full staff

welcome feedback.

Communicating the Plan Our goal is to have our staff fully conversant with the Company’s vision and general operations. To communicate with our team members and to report on our performance, Manukau Water Limited makes use of a simple, graphical Strategy Map and outcome-based metrics and Balanced Scorecard reporting systems, tiered up and down the organisation, aligning individual

briefing sessions, to having

If you have any feedback about

morning tea and the like. The

our company then you can send it

reinforcement of success stories,

to us via our website at

and debriefs on incidents, help ensure that employees understand

www.manukauwater.co.nz.

the complex but critical interrelationships between their roles and objectives. By empowering our staff with this information they are

15

able to communicate fully with our other stakeholders.

objectives with organisational

To communicate our plans and

goals.

our successes, or challenges, to

“

At all stages we encourage and welcome feedback.

�


Respect for diversity


Thanks for the tidy job. Well done!

Did You Know?

Customer Feedback

Manukau Water Limited is committed to excellence in its operations and to providing value to its customers. As part of ensuring these promises are met the company has been continuously improving its customer service process and in particular has been working to improve customer feedback opportunities. This work has involved working closely with the teams who are often the “public face” of Manukau Water Limited. These include meter installation and meter reading team members and the operations team who ensure the company’s network is running smoothly. Increasingly these teams are receiving feedback directly from customers through feedback forms and phone surveys. Here is a selection of some of the comments customers are making about our service:

• “Very impressed with the prompt service and the attitude of the staff involved. Thank you.” • “Very polite guys with sense of humour and caring advice.” • “Your staff member was most helpful and knowledgable and carried out the work in an efficient, friendly manner. Well done!” • “Crew were very cheerful, courteous and informative. An excellent outcome.” • “Thanks for the tidy job. Well done.” • “I am writing to express my thanks to your crew for their speedy attention to our water problem. Special thanks for the courtesy that they all showed. They are a good advertisement for your company.” • “Prompt and efficient service and friendly staff who kept us informed.”

17


“During the year, Manukau Water consulted with us as a stakeholder representing around 650 industrial and commercial clients. They listened to our concerns about wastewater charges and commissioned a professional report which identified the charges were inequitable. We commend the professional approach of the Board and Management in

�

addressing this major issue.

– Elspeth Mount, Executive Chairman, Greater East Tamaki Business Association


Manukau Water Limited Customer and Service

The profile of customer service at Manukau Water Limited has recently been raised to a new level with the creation and implementation of a company-wide Customer Service Strategy. This strategy outlines our

The segmentation of these groups

customer service vision and the

promotes the effective sharing of

associated programmes of work

information and support for each

required to deliver to that vision.

segment, with the overall aim of

It also provides insight into how

improving customer satisfaction

Manukau Water Limited currently

levels.

determines, communicates, measures and meets its promises to its customers and stakeholders, and the associated gaps between the customer’s perception and the actual standards of delivery.

customer/supplier relationship.

Satisfying existing customers Water is a necessity purchase (rather than a purchase of choice) so the task of attaining a high level of ‘customer satisfaction’ is a

Key Account Management

very challenging one for Manukau

We have recognised key account

Water Limited. Our focus is on

management as an essential

welcoming, educating, servicing

function. Key customers, although

and communicating with our

primarily managed by the Key

current customers and this is

Account Manager, are easily

being achieved by way of customer

Segmenting the customer groups

identified throughout the business

welcome packs, community

Formal segmentation of

by way of system identity codes,

education and engagement

the customer groups within

thus enabling core functional

schemes. These programmes

Manukau Water Limited is due

teams such as Customer Accounts,

of work aim to improve service

to occur in conjunction with the

Operations and Finance to assist in

delivery, with a primary focus

implementation of a Customer

the seamless management of these

on responsiveness, friendliness,

Relationship Management system

accounts.

resolution and the development of

(CRM) in 2009. At present, customers of Manukau Water are informally segmented into a

We have undertaken a number of initiatives including the

a customer centric culture amongst the Manukau Water team.

implementation of a remote

Positive Endorsement

meter monitoring programme;

Positive endorsement (is our

initiating a key account educational

‘customer as advocate’) are an

These segments include (but are

programme; conducting

organisational goal for Manukau

not limited to):

internal key account training

Water Limited. This goal is

programmes for Executives and

being driven through a ‘Delivery

Senior Managers; and creation

on Promises’ programme of

of a Key Customer Relationship

work, which aims to understand

Management plan to be

customers’ interpretations of

implemented in December 2008.

company promises and compare

By segmenting the groups, we are

Seeking new customers

these to Manukau Water’s intent.

better able to profile individual

Manukau Water is investigating

group requirements and then tailor

further business opportunities

Customer complaints and feedback

the provision of services in order to

relevant to the water industry in

There are a number of avenues

meet those needs.

order to add value to the current

through which Manukau Water

number of different groups for a variety of purposes.

Residential Commercial Key Accounts Community Zone (location)

19


Respect for our customers


Customer and Service cont.

party feedback is also used as

feedback, including formal

Using customer feedback to improve business

surveys, informal call-backs,

As the majority of customer

addition, external benchmarking

customer calling cards, and

feedback is received on a daily

is undertaken as part of an

through dedicated feedback lines

basis, staff are able to capture,

annual international programme

via email, phone and mail. This is

review and react to customer

with similar companies focussed

being tied in with a staff education

needs almost immediately. Such

on one key discipline each

programme to ensure all staff

feedback has been used to change

year i.e. customer service was

are aware of company service

the delivery of our services in

undertaken in 2007. Customer

standards and the roles that they

order to meet the expectations

complaints are also analysed as

play in responding to customer

of customers. The improvements

a tool to encourage continuous

feedback.

included additional customer

improvement. Continuous

Determining customer satisfaction

service training and script

improvement is a cultural

changes to ensure a more friendly

behaviour encouraged within the

experience.

company.

Work Process Management & Improvement

The Company has a documented

front line staff. The company’s Statement of Intent (SOI) features

Our KPI’s have been developed to

This document details our response

customer service aspects which

ensure the customer’s expectations

to particular ‘disaster-type’

in turn drive understanding and

are being met, if not exceeded..

events. Being an essential services

knowledge of service delivery

To measure these, we undertake

provider, we are prepared to

throughout the company.

customer surveys and regular

respond to emergencies. We have a

Improvements in the second half

audits. Exception reporting is

comprehensive Incident Response

of the year included customer call

also used. Monthly reporting

Plan. We have been involved

abandonment rates dropping from

of business performance is also

in testing this plan through an

25% to under 1% in less than 6

undertaken. There are regular

Auckland wide civil defence

months and customer satisfaction

improvement meetings held and

disaster simulation last year.

ratings increasing to more than

business process reviews are

92%.

undertaken. Customer and third

Limited collects customer

Customer satisfaction is a prority from Board level right through to

well as external benchmarking. In

business continuity plan (BCP).

Customer satisfaction is a prority from Board level right through to front line staff.

21


“As an integral partner of Manukau Water Limited service delivery team, we work to meet high standards of public health, environmental care and excellence in delivering world class customer service – while always

focusing on adding value.

– Onno Mulder, Chief Executive, City Care Limited


Manukau Water Limited Key Performance Indicators

These outline the accountabilities we have to our shareholder, our customers and other stakeholders.

Performance Indicator & Target

Results

Relationships Undertake an annual stakeholder survey with Council and identify areas for improvement following a

review of the survey results

The annual stakeholder survey with Manukau City Council was completed. The minutes show an open and harmonious relationship exists between Manukau Water Limited and Manukau City Council

Governance All reports and information required under the LGA and the SOI are delivered to Council on time and to

the standard specified in the LGA and SOI. 90% of

Financial reports were provided to the Council on time and the Asset Management Plan was updated in December 2007

special requests are delivered on time and to the standard specified Board representatives attend Council’s CCO Review Panel meetings as required, to present required

information All material and restricted transactions are approved by Council

(EBITDA/Interest Payable) Total debt to total assets Interest bearing debt to total assets Ratio of shareholder’s funds to total assets Review of Funding Plan to be carried out every three years in conjunction with similar reviews of

Chairman and Chief Executive of Manukau Water Limited

Economic Funds from Operations (FFO) Interest Cover

CCO Review Panel meetings were attended by the

All material and restricted transactions are approved by Council Actual

SOI Targets

2.96

2.0-3.0

✓ ✓ ✓ ✓

0.56

0.55-0.60

13.7%

8-15%

0.44

0.40-0.45

The first review is not due until 2008/09 year

Watercare Draft funding plan and proposed tariffs provided to Council, for comment, by 28 February each year. The

final funding plan is to be provided by 31 July No price rises above Consumer Price Index unless they are required to meet bulk price increases imposed by Watercare

The draft funding plan was presented to Council for comment prior to 28 February 2008 with the final funding plan presented by 31 July

As Watercare Services Ltd increased its prices by 13%, Manukau Water could not keep to the Consumer Price Index

23


Commitment to excellence


Key Performance Indicators cont.

Performance Indicator & Target

Results

Operational Capability Annual staff turnover rate – annual staff turnover will not be greater than 15% Annual staff survey using the John Robertson & Associates Workplace Survey – weighted mean score

Actual

SOI

Targets

≤15.0%

Turnover for the year was

Survey score was

The Executive sign a Declaration to the Board each

9.7% 67.5%

≥70.0%

of 70% or more Compliance with all relevant legislation

month that as far as they are aware, all relevant legislation has been complied with

Lost time injury frequency rate less than 20 per 1,000,000 hours

The lost time injury frequency rate was

6.1

<20

Asset Management

25

Council confirm that the AMP is consistent with Council’s growth management strategy for the rural and urban areas

Council population forecasts for urban and rural Manukau were used as a basis for developing the Asset Management Plan

Issue the AMP by 21 December each year for Council approval and ensure it is available for the Council’s Long-Term Council Community Plan (LTCCP)/Annual Plan consultation process

Manukau Water Limited’s Asset Management Plan for the 20-year period 2009 to 2028 was issued to Council on 19 December 2007

90% of major projects completed on time and within budget - to be measured via report on achievements

There were no major projects due for completion this finacial year. Kawakawa Bay Wastewater Treatment Plant project has been delayed by Resource Consent issues . The upgrade to Beachlands/ Maraetai Treatment plant is  due to be completed in September 2008

Asset management planning process and procedures meet industry best practice

The Water Services Association of Australia asset management process benchmarking is currently underway, with the results expected in October 2008

External review to be carried out every three years

A review of our Asset Management Plan is currently being undertaken by Halcrow. The report will be issued to Council by October 2008

Full compliance with the Drinking Water Standards for New Zealand 2005 for potable reticulated water

The management of the water reticulation system has complied with the Drinking Water Standards for New Zealand 2005 and has been operated and maintained with a Ministry of Health “a” grading

Operate water reticulation system to maintain the Ministry of Health “a” grading

Manukau Water Limited maintained its “a” grade water rating for the 2007 calender year. District Health Board officials conducted a detailed water assessment of the company’s reticulation on behalf of the Ministry of Health

Social and Cultural


â&#x2C6;&#x161;

There were no infringement notices or prosecutions issued to Manukau Water Limited under the RMA 1991.


Key Performance Indicators cont.

Performance Indicator & Target

Results

Social and Cultural cont.

Manu Whenua has been consulted on key projects such as Kawakawa Bay wastewater scheme

All resource consents complied with

There were transgressions at the Beachlands/ Maraetai Wastewater Treatment Plant throughout the year. The Auckland Regional Council was advised and operational changes were made, where possible, to address the cause

No successful prosecutions arising from breaches of consents issued pursuant to the Resource Management Act 1991

There were no infringement notices or prosecutions issued to Manukau Water Limited under the RMA 1991

To promote an effective, ongoing relationships with Mana Whenua, by providing early and regular opportunities for them to be involved in consultation and discussion on key projects, particularly as these affect: the impact of wastewater outflows on receiving waters, flora and fauna; the impact of infrastructure construction on water resources, flora and fauna; and waahi tapu (areas of cultural significance). The achievement of the above to be measured as part of the annual stakeholder survey

Environmental

Actual SOI Targets

Customer Service Less than six water quality customer complaints per 1000 customers

All enquiries and complaints are responded to in a meaningful way within ten working days

New processes to monitor and respond to enquiries and complaints have been implemented and will be continually reviewed. Significant improvements were made compared to the first year. However, the 100% target was unable to be met for responding in a meaningful manner 66% 100%

Restore 90% of water shutdowns within five hours

✓ ✓

99%

≥90%

Respond to 98% of wastewater blockages within one hour

98%

≥98%

Less than 30 watermain breaks per 100km of pipe annually

19.0

<30.0

55.0

<60.0

100%

100%

Less than 60 wastewater blockages per 100km of pipe annually New service connections actioned within 15 working days of payment or as agreed with customers

3.9

<6.0

27


Value to our customers


Our Company is proactively campaigning to reduce wastage of water and therefore reduce demand.

Did You Know?

Respect for Our Environment Manukau Water Limited is committed to being a sustainable company that has a positive impact on its surroundings. In this respect the Company made good progress during the year on a number of projects which will enhance the natural environment. Foremost among these projects was an upgrade of a wastewater pipe along the waterfront at Fisher Parade in Pakuranga. This project both protects the East Tamaki estuary waterway from potential wastewater overflows and provides increased capacity in the wastewater system for a forecast increase in the area’s population. The project involved the replacement of a 200 millimetre diameter sewer which had been installed in 1962. This sewer was in poor condition, as well as being too small for the expected population growth. In replacing the pump station, and now the incoming sewer pipeline, Manukau Water Limited has worked in collaboration with St Kentigern College. The pump station is on a coastal reserve below the College, and Manukau Water Limited worked closely with the College to make improvements to the wetland area adjacent to the pump station and to enhance public access in the area. To further protect the environment, the pump station incorporates a 250 cubic metre storage tank to store any overflows that would otherwise have been discharged during heavy rain events to the environment. The Fisher Parade upgrade means the future needs of Manukau Water Limited’s wastewater customers in the area will be met, and a public amenity has been enhanced and protected.

29


Our Global Reporting Indicators Materials

❍ ❍

Materials used by weight or volume. (Core) Percentage of materials used that are recycled input materials. (Core)

EN3

EN4

EN5

EN6

Direct energy consumption by primary energy source. (Core) Indirect energy consumption by primary source. (Core) Energy saved due to conservation and efficiency improvements. (Additional) Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. (Additional) Initiatives to reduce indirect energy consumption and reductions achieved. (Additional)

EN1 EN2 Energy

EN7

EN17

EN18

EN19

EN20

EN21

EN22

EN23

EN24

Water EN8 EN9

● ●

Other relevant indirect greenhouse gas emissions by weight. (Core) Initiatives to reduce greenhouse gas emissions and reductions achieved. (Additional) Emissions of ozone-depleting substances by weight. (Core) NOx, SOx, and other significant air emissions by type and weight. (Core) Total water discharge by quality and destination. (Core) Total weight of waste by type and disposal method. (Core) Total number and volume of significant spills. (Core) Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally. (Additional) Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff. (Additional)

Total water withdrawal by source. (Core) Water sources significantly affected by withdrawal of water. (Additional) EN10 na Percentage and total volume of water recycled and reused. (Additional)

EN25 na

Biodiversity

Products and Services

EN11

EN26

EN12

EN13 EN14

EN15

na Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas. (Core) na Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas. (Core) na Habitats protected or restored. (Additional) ● Strategies, current actions, and future plans for managing impacts on biodiversity. (Additional) na Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk. (Additional)

Emissions, Effluents, and Waste EN16

Total direct and indirect greenhouse gas emissions by weight. (Core)

●: fully or partially reported

❍: Not reported

Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. (Core) EN27 na Percentage of products sold and their packaging materials that are reclaimed by category. (Core) Compliance EN28

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. (Core)

Transport EN29 na Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce. (Additional) Overall EN30

Total environmental protection expenditures and investments by type. (Additional)

na: Not applicable or none


Sustainability A Global Report Card

Manukau Water Limited will need to be a sustainable organisation to be successful.

To measure this success, the

activated sludge process which

quality effluent will be disposed

Company uses a sustainability

delivers highly treated effluent.

to a land treatment system

reporting framework provided

The reduction of nutrients and

complimented by a discharge to

by the Global Reporting Initiative

the consistent low ammoniacal

the Rautawa Stream when weather

(GRI). The GRI framework is used

nitrogen concentrations will assure

conditions constrain full land

by thousands of organisations

good water quality in the Te Puru

disposal. This scheme will eliminate

around the world and enables

Stream and the receiving coastal

public health risks caused by on-

Manukau Water Limited to provide

environment. Manukau Water

site systems and greatly benefit

transparency about the economic,

Limited will continue to undertake

the environment. To assist the

environmental, cultural and social

environmental assessments as

running of the future treatment

impact of its performance.

required by the discharge resource

plant Manukau Water Limited

consent.

currently monitors the weather and

The GRI standards provide 28

stream flow at Kawakawa Bay.

are considered as core indicators

Kawakawa Bay ( EN14, EN21, EN26, EN30)

with the other 13 additional

The Company achieved a

Catchment Upgrades (EN14, EN23, EN26, EN30)

indicators which can be included

significant milestone toward

One of Manukau Water Limitedâ&#x20AC;&#x2122;s

as an organisations reporting

addressing the degradation of the

key environmental goals is to

standards developed.

environment and serious public

minimise wet weather overflows

health risks caused by failing

due to capacity restrictions and

privately-owned sewerage systems

overflows caused by blockages,

at Kawakawa Bay. Manukau

breakages or similar in its network.

Water Limited obtained resource

The network in Manukau has

consents with a duration of 35

sufficient capacity to cater for dry

years for all discharge consents

weather flow conditions.

performance indicators of which 15

Manukau Water Limited is continuing to refine its GRI reporting methods and the following is the 2007/08 assessment of the indicators it reports on (The GRI indicators are described in the table in this section).

except for the stream discharge to operate a wastewater treatment scheme for the settlement. The

Beachlands/ Maraetai Wastewater Treatment Plant (EN14, EN21, EN26, EN30)

remaining consent was obtained

The most significant environmental

the reticulation which will eliminate

benefit achieved this year can

discharges of raw wastewater to

be contributed to the upgrade

the environment. The treatment

of the Beachlands/Maraetai

process will occur in a membrane

Wastewater Treatment Plant.

bioreactor internationally

Manukau Water invested $9

recognised as superior technology

million to upgrade the plant to an

for domestic wastewater. The high

post balance date in August 2008. A vacuum system was chosen for

Manukau Water Limited is committed to upgrading the wastewater network to the high containment standard of a 1 year storm event which is beyond the minimum requirements of the Proposed Auckland Regional Plan: Air, Land and Water. This objective was established in consultation with the community which seeks high protection of public health and the environment. Manukau Water Limited processes two

31


Respect for our environment


A Global Report Card cont.

of the 35 catchment resource

a lack of any hydraulic capacity in

contamination caused by incorrect

consent applications a year. These

the wastewater network. About

connections. These were rectified.

model-based applications result

1000 blockages were recorded

in an upgrade of the individual

which were due to obstructions

catchments which reduces the

in the network such as tree roots,

number of overflows that occur

fat or rubbish. These blockages

in a network through capacity

equal 53 blockages per 100 km of

upgrades, increased pump station

pipe work which is below Manukau

storage and inflow and infiltration

Water Limited’s performance

RURAL MONITORING UNRETICULATED SYSTEMS (EN26, EN30)

minimisation. The designs also

target of 60 per 100 km of pipe

Most rural communities in the

address overflows which may occur

work. On 17 occasions wastewater

Manukau area rely on on-site

during excessive storm events to

reached waterways under dry

systems for wastewater treatment

minimise the impact on the public.

weather conditions. Wastewater

and disposal which is often a

No designated overflows will be

from these blockages and wet

challenge as some of the systems

located on private properties.

weather discharges flows overland

are very old. And the clay soils of

The coastal marine area benefits

or through the stormwater systems

the region are not very suitable

from very stringent protection.

into creeks and streams. During

for disposal. Manukau Water

All pump stations overflow pipes

wet weather the wastewater is

Limited assists MCC with monthly

which potentially could discharge

generally substantially diluted

stormwater sampling at sites

to the coastal marine area have

by stormwater and the pathogen

in Kawakawa Bay, Orere Point,

been blocked off and all sections of

concentration is minimal upon

Whitford and Clevedon to identify

the network which are in that are

reaching the coast. However the

the impacts of onsite wastewater

sealed.

risk of adverse public health or

systems on water ways.

In the 2007/2008 financial year Manukau Water Limited submitted applications for three catchments. Three further catchments are being processed by the regional council and a further three will be lodged by the end of 2008.

Overflows from the network (EN23, EN25, EN26) The performance of the wastewater network is continuously recorded and annually analysed. There were 66 reported wet weather overflows events in the 2007 calendar year. However 60% of these wet weather overflow events correlated with a significant rainfall period at the end of July 2007. There were no dry weather overflows due to

environmental effects increases significantly for overflows during dry weather. All overflows are managed and effects minimised through Manukau Water Limited’s Operation and Maintenance Plan.

MWL also assists Manukau City Council (MCC) with its beach sampling programme.

EMISSIONS AND WASTE (EN3, EN5, EN7, EN16, EN17, EN18, EN19, EN20, EN22, EN24, EN30) Manukau Water Limited in conjunction with GHD Limited undertook a Carbon Footprint

URBAN MONITORING (EN26, EN30)

Assessment for 1 July 2006

Manukau Water Limited’s urban

of this project was to develop a

monitoring strategy aims to

baseline inventory for Manukau

identify wastewater discharges into

Water Limited’s key activities,

the environment and to minimise

with specific reference to energy

potential public health risks and

consumption, total direct and

potential risks to the ecology of

indirect greenhouse gas (GHG)

the receiving waters. Over the past

emissions and the total weight

year stormwater monitoring was

of waste by type and disposal

undertaken at a number of sites in

method. As yet, there is no legal

Otara and Papatoetoe. A number

requirement for Manukau Water

of samples revealed stormwater

Limited to join the scheme.

– 30 June 2007. The objective

33


“At Auckland Airport we are taking our environmental and sustainability responsibilities seriously, and water conservation is key to this. Features such as roof rainwater collection in our Terminal expansion project are just a start to our conservation programme and we will continue to work closely with Manukau Water Limited as we develop and implement further measures.” – Stephen Reindler, General Manager Engineering, Auckland International Airport Limited


A Global Report Card cont.

However, by calculating a baseline inventory, Manukau Water Limited is taking first steps towards fulfilling its goal to become a more sustainable business:

Compliance (EN28) Manukau Water Limited did not receive any infringement notices or fines within the 2007/2008 financial year.Â

Water usage (EN8, EN9) Manukau Water Limited purchased

â&#x20AC;&#x153;

Manukau Water Limited is taking first steps towards fulfilling its goal to become a more sustainable business.

â&#x20AC;?

36.5 million cubic metres from Watercare Services Limited. Water sources were not significantly affected by the withdrawal of the water.

35


Trust, openness and teamness


Did You Know?

Our People

We are confident of our ability to attract and retain staff.

When Manukau Water Limited commenced operations in July 2006, it was important for us to establish our own values. This was completed with the involvement of our Board of Directors, the Executive Team and members of our staff. Our values form the acronym VICTOR and this helps our staff to understand and practice our values. When a new team member commences employment, they have a one-on-one session with the Chief Executive. At this session, the Chief Executive takes the new team member through our VICTOR values and his vision for the organisation. Many of our new recruits have said that this session has been invaluable. The VICTOR values are also emphasised through our monthly recognition programme – VICTOR of the Month. Team members are nominated by their peers for behaviour that reflects our values. We are obligated under the Local Government Act to be a good employer, we strive to be recognised as a great employer. We have a wellness programme in place as we believe in taking care of our people. The wellness programme has included initiatives such as substituting the “candy bar urge” with fresh fruit, having monitored walking challenges, annual health checks, and seminars by nutritionists, physiotherapists and wellness experts. An in-house learning and development programme to specifically address the needs of our staff is being prepared for implementation. The programme will cover topics such as risk management, basic knowledge of water and wastewater systems, financial management, and conflict resolution. The intention is for the majority of the courses to be facilitated by our own people. In order to get feedback from our team, we conduct a climate survey annually. The 2008 Survey had a 92.6% response rate and a performance index of 67.5. The performance index was up from 67.0 on 2007 and the baseline survey of 52.6 in 2006. Each year the results are analysed and a plan is established for improvement. In our first year of operation (2006/07) team turnover was 28.5%. We have reduced this in 2007/08 to 9.52%. Whilst some of the initial turnover was a direct result of a shift in organisational culture from being a business unit of Manukau City Council to a Council Controlled Organisation, we are confident of our ability to attract and retain staff.

37


[3] [4]

[1]

[6]

[2]

[5]


Directors

James Hill - Chairman [1]

Peter S. Drummond [4]

“My experience in governance helps me to offer leadership to the Company so that the Board sets the strategy, in consultation with the executive staff, and that we critically review performance. My management experience assists me in the goal of motivating staff.”

“My experience in the water industry, coupled with my extensive involvement in the community, gives me a unique ability to help guide the company on its mission with the people of Manukau.”

James is an experienced director with knowledge of local government and the Auckland water industry. Besides Manukau Water Limited, James is also Chairman of Sealegs Corporation Limited (a publicly listed company) and Chairman of four private companies. He has roles with several charitable organisations in a governance capacity. James was previously Chairman of Metrowater, a director of Transit NZ, The Yellow Bus Company and managing partner of KPMG Auckland.

Alan Bickers [2] “My lengthy experience in water supply & wastewater engineering, local government management and corporate governance allows me to contribute to the development of key strategies to further the Company’s vision.” Alan has extensive experience as a company director in the public sector. He is Chairman of Manukau Building Consultants Limited and the Building Practitioners’ Board. Alan spent more than 25 years as a professional engineer and senior executive in local authorities and has extensive experience in the public infrastructure provision, especially water and wastewater services. Alan’s former significant roles include Chairman of Transit New Zealand, Chief Executive of Tauranga City Council and President of the Institution of Professional Engineers NZ. Alan works as a strategic management consultant in the public sector

Peter is an experienced director and chairperson with extensive knowledge of Auckland water industry. Currently he is Chairman of the Museum of Transport and Technology, Chairman Appliance Connexion Ltd , Director United Fire Brigade Association Inc, Director New Zealand Rugby League and previously chairman of Watercare Services, Northern Disposal Systems, Envirowaste Services and a range of other organisations in the public and private sectors. He has also served on a large range of community organisations like  Variety , the Children’s charity, He is currently President of Variety Children’s Medical Missions South Pacific. He was also previously on the board of Vector, Mid Central Health and Hort Research Ltd

Kevin Johnson [3] “I believe that as an engineer with a broad background in business and having held numerous directorships in local government, I have the depth of experience required to deal with the complexities of the water business and apply this knowledge to the effective and rigorous governance of Manukau Water.” Kevin is a professional engineer and businessman with extensive experience in senior management and governance with wide knowledge of local government. Mr. Johnson has held a number of directorships and was previously chairman of City Design, Manukau Works, Northern Disposal Systems and Envirowaste Services. He has held the positions of CEO of Enerco New Zealand, Elders Resources NZFP and NZFP Pulp and Paper and various companies in the

forestry industry. More recently he has been Executive Director of Bridge Petroleum, a privately held oil and gas company.

Ron Pearson [5] “I bring to the board table a unique background into public and private sector governance, my significant experience in senior financial roles in public and listed companies and a social insight as a local resident, into the issues that effect the people of Manukau.” Ron Pearson is a professional accountant with experience in both public and private sectors at a senior level. Ron is currently Finance Director for the Counties Manukau District Health Board, Director of HealthAlliance Ltd, a trustee of South Auckland Health Foundation and the Manukau Health Trust and previously was in senior finance roles for NZ Apple and Pear Board, AFFCO NZ, and Feltex International Group.

Rabin Rabindran [6] “My background experience in local government, the corporate sector and infrastructure development is the ideal background to help guide the company’s business and vision.” Rabin Rabindran is a commercial barrister and international legal consultant specialising in infrastructure, construction and energy.  Rabin has worked on major projects in over 25 countries. He was previously a partner of Simpson Grierson and Director of an Australian public company. He is currently Deputy Chairman of Auckland Regional Transport Authority, Director of Tomorrow’s Manukau Properties, Director of TMPL (Flat Bush) and Chairman of the Singapore Chapter on the ASEAN New Zealand Combined Business Council. Rabin is also on the boards of private companies involved with business in the Asia Pacific region.

39


[5]

[2]

[1]

[4] [3]

[5]


Executive Management Team Raveen Jaduram [1] Chief Executive “I provide leadership to the Company in achieving its purpose by utilising my skills, knowledge and values.” Raveen was appointed Chief Executive of Manukau Water Limited in 2006. Raveen has extensive experience in the New Zealand water industry and has held senior management roles at Metro Water Limited and Watercare Services Limited. He also has had significant local government involvement, having held various management and engineering positions at Auckland City, Manukau City and Auckland Regional councils. Currently he is chairman of the Auckland Water Group and the Senior Executives Forum of large New Zealand water suppliers. Raveen is a former president and board member of the New Zealand Water and Wastes Association, and New Zealand delegate to the Water Environment Federation, USA.

Marlon Bridge [2] Chief Financial Officer “The benefit of my past experience in the corporate and business environments brings a truly commercial focus to Manukau Water Limited.” Marlon has been Chief Financial Officer for Manukau Water Limited since 2006 and his responsibilities include directing the company’s financial goals, objectives and budgets. Most recently he was the General Manager - Financial

and Administration for Just Water as well as previously holding the position of Chief Financial Officer for Just Water International Limited. Prior to this he held the role of Financial Controller for the National Institute of Water and Atmospheric Research Limited and has held roles with Deloittes and Audit New Zealand.

Jan Corrick [3] General Manger Customer Services

Amanda also maintains systems for performance management, remuneration, recruitment, and occupational health and safety. Prior to her current role, Amanda worked in human resources roles for Supercheap Auto (NZ) and Spencer Gulf Enterprises (Australia).

Martin Smith [5] General Manager Infrastructure “My energy and focus on continuous improvement and the

“I bring to the company a passion

ethos of learning organisations is a

for ensuring our customers are

significant contributor to the rapid

treated with respect and receive

pace of Manukau Water Limited’s

world-class service.”

journey towards being a world class

Jan has been General Manager of Customer Services at Manukau Water Limited since July 2006. Her responsibilities include metering, billing, contact and call centre and communications and marketing. Most recently Jan ran her own business consultancy. Prior to that she was Manager of People and Peformance at Datamail Limited.

Amanda Green [4] Human Resources Manager “I can draw on my human resources and operational management background to implement human resources strategies that will support and enable the achievement of the business strategic plan.” Amanda Green is responsible for developing and implementing the human resources strategy for the business, including employee relations, organisational development, and culture change.

water and wastewater company.” Martin is the General Manager of Infrastructure for Manukau Water Limited. He has contributed to the success of international consultancies, New Zealand local authorities, national contracting companies, and now Manukau Water Limited through his collective 25 years of experience in using scarce resources to sustainably deliver Best Value to clients, customers, and stakeholders. His responsibilities at Manukau Water Limited include asset planning, operations, environmental compliance and the capital works delivery programmes. He is also involved nationally in the water and wastewater sector through his Board role on the New Zealand Water and Wastes Association, being President 2008-2010, and the New Zealand Water and Environment Training Academy.

41


“Manukau Water Limited’s partnership with the First Foundation Scholarship Programme demonstrates the company’s commitment to the young people within its community. By providing paid part-time work experience and funding towards university studies, Manukau Water is providing young people with a hand up so they can realise their aspirations.” – Nicki McDonald, General Manager, First Foundation


Company Structure Shareholder

Board of Directors

Chief Executive Raveen Jaduram

General Manager Customer Services

General Manager Infrastructure

Chief Financial Officer

Human Resources Manager

Jan Corrick

Martin Smith

Marlon Bridge

Amanda Green 43

Customer Accounts

Asset Planning

Company Accounting

Key Accounts

Project Management

Management Accounting

Communications

Operations Management

Commercial Management

Customer Service

Environmental Management

Business Process

Debt Management

ICT

HR Advisor


Our Stakeholder Relationships The Companyâ&#x20AC;&#x2122;s ability to create and maintain good relationships will be a key determinant of its success. Manukau Water Limited is wholly-owned by the Manukau City Council and recognises its purpose and role in that context. Manukau Water Limited is wholly-

interest the company approaches

recognises that it needs to

owned by Manukau City Council

those issues mindful of the wider

build relationships with its key

and recognises its purpose and role

interests of Council, residents and

stakeholders and the following

in that context. Where Manukau

customers.

table outlines its relationship

Water Limited and the Council are addressing issues of mutual

Manukau Water Limited also

environment:


Stakeholder

Relationship

Our Engagement

Customer

Manukau Water Limited provides high quality and cost-effective water and wastewater services to the people of Manukau

Communication through company mailings, the website, advertising and releases to media including the councilâ&#x20AC;&#x2122;s Manukau Matters publication, customer research and engagement though various avenues including in person, by phone, email, mail and fax

Residents

Manukau Water Limited has respect for diversity and has a key role in improving the quality of life throughout the Manukau community

Communication through company mailings, the website, advertising and releases to media including the councilâ&#x20AC;&#x2122;s Manukau Matters publication, customer research and engagement though various avenues including in person, by phone, email, mail and fax

Shareholder Manukau City Council

Manukau Water is wholly owned by the Manukau City Council

Regular meetings between the chairman, CEO and council members. Quarterly reporting and regular staff interaction

Iwi

Manukau Water Limited recognises the importance of water to Mana Whenua and takes Mana Whenua values and experience into account in its decision making

Consultation with Manu Whenua consistent with Council policies, procedures and treaty relationship agreements

Community Groups

Manukau Water Limited recognises the diversity of its community and the special interest and requirements of some groups

Consultation and regular meetings and briefings with community groups

Regulators

Manukau Water Limited is a good citizen and works with regulators to ensure it meets legislative needs

Regular measurement and reporting to meet requirements as well as ongoing dealings with staff at various levels

Environmental Groups

Manukau Water Limited has respect for the environment and works with interested groups to ensure the environmental impact of its operations address any concerns

Regular measurement and reporting of standards and assessments as well as regular liason and information sharing

Business Partners

Manukau Water Limited has a working relationship with business partners who provide products and services, including its bulk water and wastewater provider Watercare

Regular contact, consultation and negotiation, supported by ongoing operational activity

Our People

The team of people at Manukau Water are dedicated to ensuring the organisation is a worldclass water and wastewater company

Regular meetings both at a team and one-to-one level along with company newsletter and sharing of information through both electronic and printed means. Team surveying and feedback opportunities

45


Where does Manukau Water emit Green House Gases? WW Treatment Plant 31.3%

Company Vehicle Travel 5.7%

Maintenance Contractor 26.5%

Methane Emmissions from Sewers 2.5%

Waste 3.0%

Taxi 0.0% Private Car Travel Air Travel 0.4% 0.3%

Electricity Transmission and Distribution Losses 2.6%

Telemetry Sites Electricity 0.3%

Office Electricity 4.5%

Treatment Plant Electricity 10.6%

Pump Stations Electricity 12.3%


. . . is a first for a water and/or wastewater company in New Zealand.

Did You Know?

First Water Company to Measure Carbon Footprint Manukau Water Limited’s environmental management has in the past focused mainly on excellence in wastewater collection and treatment , with high public and environmental protection standards. However this financial year our Environmental Key Performance Indicators also included an emissions impact – which we believe is a first for a water and/or wastewater company in New Zealand. The objective of this project was to develop a baseline inventory for Manukau Water Limited’s Carbon Footprint. There are currently no legal requirements for such an assessment, but by doing one we have been proactive and taken steps to become a more sustainable business. This will comply with the Manukau Water Limited Environmental Policy, Vision as well as the Resource Management Act 1991. Green House Gas (GHG) emissions are any gas that absorbs infrared radiation in the atmosphere. They include water vapour, carbon dioxide, methane and nitrous oxide. A Carbon Footprint is calculated using a Global Warming Potential (GWP). Green House Gases are expressed in terms of a Carbon Dioxide Equivalent. For example, methane has a GWP of 21, meaning that 1 kg of methane has the same global warming impact as 21 kg of Carbon Dioxide. Where practicable, Manukau Water Limited will minimise GHG emissions. These may include considerations such as energy efficient lighting, turning off computers and monitors at the end of the work day, using lights only when needed, recycling paper and purchasing paper from a sustainable production sources. Now that the base assessment has been carried out, Manukau Water Limited will continue assessments for future years. These will include GHG and GWP information from our bulk water and wastewater supplier as they become available.

47


â&#x20AC;?The role of a director of a Council Controlled Organisation is to assist the organisation to meet its objectives and any other requirements in its Statement Of Intent.â&#x20AC;? - James Hill, Chairman, Manukau Water Limited


Corporate Governance Statement The governance of Manukau Water Limited is well defined and the Company has adopted a series of corporate governance policies, practices and processes to give effect to this. The Company has a board

The Board’s decisions therefore

system will preclude all errors

of directors, and their role is

create a framework for action

and irregularities. The system

defined in Section 58 of the Local

throughout Manukau Water

is based on written procedures,

Government Act 2002, which

Limited. Through the development

policies and guidelines,

covers the role of directors of a

and implementation of policy,

organisational structures that

Council Controlled Organisation

the Board ensures that Manukau

provide an appropriate division

(CCO) such as Manukau Water

Water Limited is well-managed.

of responsibility, sound risk

Limited. It states that:

The Board is committed to

management, a programme of internal audit, and careful

“The role of a director of a

governing through policies that

Council-Controlled Organisation

reflects Manukau Water Limited’s

is to assist the organisation to

core values, to give direction

meet its objectives and any other

on crucial strategic issues. The

The Company is managed within

requirements in its Statement Of

Board carries out its governance

delegated authority levels

Intent [SOI].”

responsibilities based on the

approved by the Board.

As such, Manukau Water Limited’s Board of Directors is responsible for the preparation of a SOI, which

following three categories of policies: Governance Processes policies;

must receive approval from the

describing the way the Board

Company’s Shareholder (being the

carries out its governing role

Manukau City Council). In addition

including a definition of its

to the obligations required of a

relationship with the Chief

CCO, Manukau Water Limited must

Executive.

also comply with the Companies

Strategic Results policies;

selection and training of qualified personnel.

The Board has a number of Committees that focus on specific areas of the Board’s responsibilities. An audit committee operates under a charter approved by the Board. The Committee is required to establish a framework of internal control mechanisms

Act 1993.

describing the results the Board

to ensure proper management

The Board governs by setting

wants to be achieved.

of the Company’s affairs and

and maintaining policy defining

Executive Limitation policies;

Manukau Water Limited’s

making clear constraints

strategic direction, priorities

or limits on the choice of

and performance criteria. This

operational means available

responsibility includes areas

to the Chief Executive for

of stewardship such as the

the achievement of Company

identification and control of

outcomes or results.

the company’s business risks, the integrity of management, information systems, and reporting to the Shareholder.

While the Board acknowledges that it is responsible for the overall control framework of the company, it recognises that no cost-effective internal control

support effective business risk management. The Committee is accountable to the Board for addressing the recommendations of the external auditors, directing and monitoring the internal audit function and reviewing the adequacy and quality of the internal and external audit processes. The Committee provides the Board with additional

49


Value for our customers


Corporate Governance Statement cont.

assurance regarding the accuracy

to consider this matter exclusively

Directors’ remuneration

of financial information, including

without the further need for a

The following amounts of

information incorporated in the

Committee.

remuneration were authorised:

Company’s Annual Report. This

The shareholder reviews and

2008

2007

approves the SOI, Funding

Director

$000

$000

and Asset Management Plans.

J Hill (Chair)

55

48

Quarterly and Annual Reports

A Bickers

28

24

of financial and operational

P Drummond

28

24

A technical advisory committee

performance are also provided to

K Johnson

28

24

was approved, under a terms

the Shareholder.

R Pearson

28

24

Directors Interests

R Rabindran

28

24

The following entries were

Board and Committee Meetings

Committee meets an average of four times a year, with additional meetings being convened when required.

of reference specified, by the Board. This includes maintaining an overview of network and asset management planning as well as network risk management.

recorded in the interest register of the Company during the year:

Full Board

Meetings 12

J Hill (Chairman), A Bickers,

capital works programme and

Directors’ interests in transactions

major contracts and maintains

There were no significant

R Pearson, R Rabindran

an overview of efficiency,

transactions entered into in which

effectiveness and economy of

Audit

any director had an interest. Any

service delivery. This Committee

R Pearson (Chairman),

transaction deemed relevant was

meets an average of 4-5 times

A Bickers, K Johnson, J Hill

based on normal market rates for

a year, with additional meetings

such services and were due and

Remuneration

being convened when required.

payable under normal payment

P Drummond (Chairman), J Hill

The remuneration committee

terms.

makes recommendations to the

A Bickers (Chairman),

Board on remuneration policies and

Directors’ insurance and indemnity

packages applicable to the Chief

The Company has provided to

R Rabindran

Executive and Senior Management

directors insurance and personal

of the Company. This Committee

indemnity against costs and

The Committee reviews the

meets on average three times a

liability, in the course of ordinary

year, with additional meetings

business.

being convened when required. The Statement Of Intent committee makes recommendations to the Board on the SOI. The Committee met two times this year. A decision

Share dealings of directors There were no share dealings with directors during the year (2007: nil).

was made by the Committee to

Loans to directors

move the matters associated with

There were no loans provided to

the SOI back to the Board. This

directors during the year (2007:

was because the practices had

nil).

been established to allow the Board

51

P Drummond, K Johnson,

Technical Advisory

5

3

7

P Drummond, K Johnson,

Statement of Intent

2

K Johnson (Chairman), J Hill, A Bickers, P Drummond, R Rabindran


Respect in our dealings


Financial Statements Auditors Report 54 Statement of Accounting Policies 56 Income Statement

62

Balance Sheet

63

Statement of Changes in Equity

64

Statement of Cash Flows

65

Notes to the Financial Statements

66

53 53


Audit Report

TO THE READERS OF MANUKAU WATER LIMITED’S FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION FOR THE YEAR ENDED 30 JUNE 2008 The Auditor-General is the auditor of Manukau Water Limited (the company). The Auditor General has appointed me, F Caetano, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements and performance information of the company, on his behalf, for the year ended 30 June 2008. Unqualified Opinion In our opinion:

54

• The financial statements of the company on pages 56 to 81: • comply with generally accepted accounting practice in New Zealand; and • give a true and fair view of: • the company’s financial position as at 30 June 2008; and • the results of its operations and cash flows for the year ended on that date. • The performance information of the company on pages 23 to 27 gives a true and fair view of the achievements measured against the performance targets adopted for the year ended 30 June 2008. • Based on our examination the company kept proper accounting records. The audit was completed on 23 September, 2008, and is the date at which our opinion is expressed. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and the Auditor, and explain our independence. Basis of Opinion We carried out the audit in accordance with the AuditorGeneral’s Auditing Standards, which incorporate the New Zealand Auditing Standards. We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements and performance information did not have material misstatements, whether caused by fraud or error. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s


overall understanding of the financial statements and performance information. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

view of service performance achievements for the year ended 30 June 2008. The Board of Directors’ responsibilities arise from the Financial Reporting Act 1993 and the Local Government Act 2002.

The audit involved performing procedures to test the information presented in the financial statements and performance information. We assessed the results of those procedures in forming our opinion.

We are responsible for expressing an independent opinion on the financial statements and performance information and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and section 69 of the Local Government Act 2002.

Audit procedures generally include: • determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data; • verifying samples of transactions and account balances; • performing analyses to identify anomalies in the reported data; • reviewing significant estimates and judgements made by the Board of Directors; • confirming year-end balances; • determining whether accounting policies are appropriate and consistently applied; and • determining whether all required disclosures are adequate. We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and performance information.

Independence When carrying out the audit we followed the independence requirements of the Auditor General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand. Other than the audit, we have no relationship with or interests in the company.

We evaluated the overall adequacy of the presentation of information in the financial statements and performance information. We obtained all the information and explanations we required to support our opinion above. Responsibilities of the Board of Directors and the Auditor The Board of Directors is responsible for preparing the financial statements in accordance with generally accepted accounting practice in New Zealand. The financial statements must give a true and fair view of the financial position of the company as at 30 June 2008 and the results of its operations and cash flows for the year ended on that date. The Board of Directors is also responsible for preparing performance information that gives a true and fair

F Caetano Audit New Zealand On behalf of the Auditor-General Auckland, New Zealand

55 55


Statement of Accounting Policies for the Year Ended 30 June 2008 REPORTING ENTITY These Financial Statements are for Manukau Water Limited, a Council Controlled Organisation as defined by section 6 of the Local Government Act 2002. The company is wholly owned by Manukau City Council. Manukau Water Limited was incorporated 24 November 1997 but only commenced operations on 3 July 2006. The reporting entity is Manukau Water Limited only, a company that provides water and wastewater services to the people of Manukau. 56

These Financial Statements of Manukau Water Limited are for the year ended 30 June 2008. These Financial Statements were authorised for issue by the Company on the date they were signed. STATUTORY BASE Manukau Water Limited is a company registered under the Companies Act 1993 and is a reporting entity as defined by the Financial Reporting Act 1993. These Financial Statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993, the Local Government Act 2002 and the Companies Act 1993. STATEMENT OF COMPLIANCE Manukau Water Limited is designated as a public benefit entity (PBE) as defined under the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). These financial statements have been prepared in accordance with NZ GAAP. They comply with NZ IFRS, and other applicable Financial Reporting Standards, as appropriate for public benefit entities.

MEASUREMENT BASE These Financial Statements have been prepared on a historical cost basis, except that certain property, plant and equipment, and biological assets have been valued as described in the specific accounting policies below. All amounts are reported in New Zealand dollars, rounded to the nearest thousand dollars. These Financial Statements have been prepared on a going concern basis. Assurances have been provided from our Shareholder, Manukau City Council, as to their ongoing financial support due to the level of borrowings in the company. ACCOUNTING POLICIES The accounting policies that materially affect the measurement of financial performance, financial position and cash flows are set out below. They have been applied consistently to all periods presented in these financial statements. 1. REVENUE RECOGNITION Revenue shown in the Income Statement is the amount received and/ or receivable for goods and services supplied to customers in the ordinary course of business. This includes the estimated amounts for unbilled consumption at year end. Revenue mainly comes from selling water as well as the provision of wastewater services within the Manukau area. Revenue is recognised as follows: i. Sale of water and wastewater Sale of water and wastewater is recognised when invoiced. Unbilled sales, as a result of water passing through meters but meters not being read at year end, are accrued on an average usage basis.

ii.Sale of services Sales of services are recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. iii.Other income Interest and dividend revenue is recognised when received. Financial contribution is recognised as revenue when they are received and Manukau Water Limited provides, or is able to provide, the service for which the contribution was charged. 2. BORROWING COSTS Borrowing costs are recognised as an expense in the period they are incurred. 3. INCOME TAX Income tax expense comprises both current and deferred tax, and is calculated using tax rates that have been enacted or substantively enacted by balance date. Current tax is the amount of income tax payable on the taxable income for the current year, plus any adjustment to income tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred tax reflects the tax consequences that


Statement of Accounting Policies

would follow from the manner in which the entity expects to recover or settle the carrying amount of its assets and liabilities.

from the project. Any development assets are amortised on a straightline basis over the period of expected benefit.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

7. CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash on hand, deposits held at call with banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdraft.

4. GOODS AND SERVICES TAX (GST) These financial statements are stated exclusive of GST, with the exception of receivables and payables. The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the balance sheet. The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flow. Commitments and contingencies are disclosed exclusive of GST. 5. LEASES The company leases certain property, plant and equipment where the lessor effectively retains substantially all the risks and benefits of ownership. Amounts payable under the terms of these leases are recognised as an expense as incurred. 6. RESEARCH AND DEVELOPMENT Research costs are expensed as incurred. Development expenditure on individual projects is capitalised and recognised as a development asset when it is probable that the company will receive future economic benefits

8. TRADE AND OTHER RECEIVABLES Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful receivables. Collectibility of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off as an expense in the Income Statement. A provision for doubtful receivables is established when there is objective evidence that Manukau Water Limited will not be able to collect the entire amount owing in accordance with the original terms of the receivable. 9. FINANCIAL ASSETS Currently, Manukau Water Limited holds financial assets only in the category of Loan and Receivables, which are shown as trade and other receivables on its balance sheet. Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. 10. IMPAIRMENT OF FINANCIAL ASSETS Impairment of a loan or a

receivable is established when there is objective evidence that the company will not be able to collect amounts due according to the original terms. For debtors and other receivables, the carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When the receivable is uncollectible, it is written off against the allowance account. Overdue receivables that have been renegotiated are reclassified as current (i.e. not past due). 11. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost or fair value less accumulated depreciation and impairment losses. Items of property, plant and equipment are initially recognised at cost. Cost includes the purchase price plus directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended. Major asset classes will be revalued on a regular basis not exceeding three years. Classes of assets Property, plant and equipment are allocated to classes, being: Operating assets > Land (Freehold Properties) > Building- lease improvements > Motor vehicles > Computer hardware > Office furniture & equipment Infrastructure assets > Water System > Water Pipes > Valves and Hydrants > Water Meters > Water Machinery

57 57


Statement of Accounting Policies

Wastewater system > Wastewater pipes > Manholes > Pump stations > Treatment plants > Wastewater Machinery Work in progress

58

Additions Constructed assets are initially recorded at cost, including the costs of obtaining Resource Management Act consents. The costs are recorded as work in progress until the asset is ready for productive use. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to the company and the cost of the item can be measured reliably. Any property, plant and equipment that have been acquired after the most recent valuation is carried at cost less accumulated depreciation until the next revaluation. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition. Revaluation Land will be valued by independent valuers every three years on a market value basis. Pipelines, meters, pump stations and treatment plants are also carried at fair value, which is deemed to be depreciated replacement cost because of the specialised nature of these assets. The depreciated replacement costs will be determined on the basis of an independent valuation prepared by external valuers at least every three years to ensure

that their carrying amount does not differ materially from fair value. The revaluation process will involve assessing the current replacement cost and remaining useful lives of the recognised property, plant and equipment. The changes in the value of each class of property, plant and equipment, as a result of the revaluations, will be recorded in a revaluation reserve. The company will maintain a revaluation reserve for each class of asset. Where cumulative decreases exceed cumulative increases in the value of a class of assets, the net amount is recognised as an expense in the income statement. Any revaluation increase is credited to the asset class revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously charged as an expense in the income statement. Any accumulated depreciation at the date of the revaluation is transferred to the gross carrying amount of the asset and the asset cost restated to the revalued amount. Disposals Gains and losses on disposal are determined by comparing the disposal proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the income statement. When revalued assets are sold, the amounts included in asset revaluation reserves in respect of those assets are transferred to equity. Subsequent costs Costs incurred subsequent to initial capitalisation are recognised only when it is probable that future

economic benefits or service potential, associated with the asset, can be measured reliably. Impairment Asset carrying values are reviewed at the end of each year to determine whether there is any indication that the assets have suffered an impairment loss or increase in fair value. If any such indication exists, the fair value of the asset is estimated in order to determine the extent of the impairment loss or gain (if any). If the fair value of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its fair value. An impairment loss is recognised as a revaluation decrease and any gain in value as a revaluation increase for all classes of assets, other than motor vehicles and office equipment. For the non-revalued asset classes of motor vehicles and office equipment, impairment losses are recognised as an expense in the income statement. Depreciation Depreciation is provided on a straight-line basis on all property, plant and equipment, at rates calculated to allocate their cost or revalued amounts over their estimated useful lives. All property, plant and equipment except motor vehicles are depreciated to a nil residual value. Land and Capital works in progress are not depreciated. The total cost of a project is transferred to the relevant asset class on its completion and then depreciated. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:


Statement of Accounting Policies

Asset class Range of useful lives in years Water Pipes 40-95 Valves & Hydrants 40-95 Meters 20-25 Wastewater Pipes 65-110 Manholes 65-110 Machinery 12-80 Pump stations 15-80 Treatment Plant 12-100 Building-lease improvements 3 Motor vehicles 5 Computer hardware 3 Office furniture & equipment 5 12. INTANGIBLE ASSETS Software acquisition and development The cost of developing software tools, for example network models comprising data and proprietary software packages, is capitalised where the data collected is new data and the data will have future benefits over more than one financial year. Acquired computer software and software licenses are capitalised on the basis of the costs incurred to acquire, and bring to use, the specific software. Costs that are directly associated with the production of identifiable and unique software products (controlled by Manukau Water Limited), that are expected to generate economic benefits exceeding one year, are recognised as intangible assets. Costs associated with developing or maintaining computer software are recognised as an expense when incurred. Computer software development costs recognised as assets, are stated at cost less accumulated amortisation and impairment losses.

Computer software is amortised on a straight line basis at rates estimated to write off the cost over the useful life of the software ranging from three to six years. Resource consents Costs incurred in obtaining resource consents are capitalised when the consent is granted for greater than one year, otherwise the cost is expensed to the income statement. Resource consents are amortised over the term granted by the resource consent which ranges from five to thirty years and are stated at cost less amortisation and impairment losses. Impairment Intangible assets that have an indefinite useful life, or not yet available for use, are not subject to amortisation and are tested annually for impairment. Assets that have a finite useful life are reviewed for indicators of impairment at each balance date. When there is an indicator of impairment the asset’s recoverable amount is estimated. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. 13. FORESTRY ASSETS Forestry assets are predominantly standing trees which are managed on a sustainable yield basis. These are independently revalued annually at fair value less estimated costs to sell for one growth cycle. Fair value is determined based on the present value of expected net cash flows discounted at a current market determined post-tax rate. The

costs to establish and maintain the forest assets are included in the income statement together with the annual change in fair value. 14. TRADE AND OTHER PAYABLES Trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method. 15. PROVISIONS Provisions are recognised when the company has a present legal or constructive obligation, as a result of a past event, and the amount of the provision can be reliably measured. The amount recognised as a provision is the best estimate of the consideration required to settle the obligation at year-end. Provisions are not recognised for future operating losses. 16. EMPLOYEE ENTILEMENTS The company provides for the cost of employees’ entitlements on a basis consistent with the terms of their current employment contracts. These include salaries and wages accrued up to balance date, annual leave earned to, but not yet taken at balance date. These entitlements expected to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay. The company recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation. Superannuation schemes Obligations for contribution to defined contribution schemes are

59 59


â&#x20AC;&#x153;The team of people at Manukau Water Limited are dedicated to ensuring the organisation is a world class water and wastewater companyâ&#x20AC;?


Statement of Accounting Policies

recognised as an expense in the income statement as incurred. The company doesn’t belong to any defined benefit schemes. 17. CONTRACT RETENTIONS Certain construction contracts entitle the company to retain specified amounts to ensure the performance of contract obligations. These retentions are recognised as a liability, and either used to remedy contract performance or paid to the contractor at the end of the retention period. 18. BORROWINGS Borrowings comprise Shareholder loans that are both interest bearing and interest on demand. Interest is charged at market rates for both the interest bearing and interest on demand loans. As such, the carrying amounts of these loans approximate their fair value. Borrowings are initially recorded at fair value and subsequently at amortised cost using the effective interest method. The interest on demand loans are recognised as current liabilities in the balance sheet due to the ‘on demand’ features for both interest and principal. Manukau City Council has provided assurances of ongoing financial support in relation to these loans. The interest bearing loans are recognised as non-current liabilities in the balance sheet. 19. FINANCIAL INSTRUMENTS Financial instruments include bank accounts, call investments, term investment within 3 months, trade and other receivables, trade and other payables and loans from our Shareholder. Loans and

receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. All financial instruments are recognised in the balance sheet. All revenues and expenses in relation to financial instruments are recognised in the income statement. 20. EQUITY Equity is the shareholder’s interest in the company and is measured as the difference between total assets and total liabilities. The components of equity are: > Retained earnings > Property, plant and equipment reserves 21. STATEMENT OF CASH FLOWS ‘Cash’ refers to amounts held in financial institutions. It includes cash balances, short-term deposits held as part of day-to-day cash management and bank overdrafts. ‘Operating activities’ are amounts received for the supply of products and services, and payments made to employees and suppliers necessary to support those goods and services (including borrowing costs). Operating activities also include any transactions or events that are not investing or financing activities. ‘Investing activities’ are the acquisition/ purchase and disposal/ sale of property, plant and equipment and investments. ‘Financing activities’ are the receipt and repayment of the principal on borrowings, and contributions from, and/ or distributions to, the Shareholder.

22. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS: In preparing these financial statements, Manukau Water Limited has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations or future events that are believed to be reasonable under the circumstances. Infrastructure assets There are a number of assumptions and estimates used when performing depreciated replacement cost (DRC) valuations over infrastructure assets. These include: Age and remaining useful life based on construction date/total useful life for each component (defining condition standards and affect of condition in remaining useful life of the assets) Assessment of optimisation (e.g. Redundant assets, abandoned, removed, replaced, overcapacity) Consideration of any residual value. 23. CHANGES IN ACCOUNTING POLICIES There have been no changes in accounting policies during the year.

61 61


Income Statement

For the Period Ended 30 June 2008

Note

Actual 2008 $000

Actual 2007 $000

81,163 6,718 75

75,043 9,386 168

87,956

84,597

5,654 19,874 55,144 9,288

4,769 20,459 55,968 9,956

Total operating expenditure

89,960

91,152

Operating (profit/ loss) before tax Taxation 7

(2,004) -

(6,555) -

(Profit/ Loss) after tax

(2,004)

(6,555)

Income Water and wastewater charges Other revenue Other gains

1 2 3

Total income Expenditure Employee benefits expenses Depreciation and amortisation Other expenses Finance costs

62

4 10 & 11 5 6

The accompanying notes form an integral part of, and should be read in conjunction with, these Financial Statements. Explanations of significant variances compared to the prior year are detailed below: INCOME - the $6.12 million increase in water and wastewater charges was mainly due to the increase of water charges by 5% and wastewater charges by 9%, excluding wastewater charges to trade waste customers of Watercare, with the consumption level being stable. - the $2.7 million decrease in other revenue was mainly due to: - lower level of development activities resulted in lower network growth charge and past financial contributions. - no debt collection fees for collecting Manukau City Council water debts (at establishment). - no forestry stumpage at Kawakawa Bay. EXPENDITURE Employee benefit expenses reflect: - a 4.5% average increase in salary costs (including KiwiSaver) plus vacant positions from the previous year being filled. This is offset by a reduction in the use of consultants. - a lower level of labour recharges to capital projects than the prior year, due to less project activities. Other expenses reflect: - a reduction in the use of consultants. - a procurement strategy involving renegotiation with key suppliers that has resulted in lower costs. Finance costs reflect: - a refund on interest expense. - improved cash flow management resulting in lower than expected interest expense charges.


Balance Sheet For as at 30 June 2008

Note

Actual 2008 $000

Actual 2007 $000

Asset Current assets Cash and cash equivalents Trade and other receivables Forestry assets intended for sale

8 9 12

Total current assets

6,299 17,402 -

155 16,908 36

23,701

17,098

946,700 1,407 1,355

951,865 1,664 1,295

Total non-current assets

949,462

954,824

Total assets

973,163

971,922

Non-current assets Property, plant and equipment Intangible assets Forestry assets

10 11 12

63

Represented by: Liabilities Current Liabilities Trade and other payables 13 Employee benefit liabilities 14 Borrowings 15 GST payable Total current liabilities Non-current liabilities Employee benefit liabilities Borrowings Deferred tax liability Taxation

14 15 7 7

Total non-current liabilities

9,001 754 463,076 455

12,065 400 457,473 103

473,286

470,041

- 75,000 - -

75,000 -

75,000

75,000

548,286

545,041

433,436 (8,559)

433,436 (6,555)

Total equity

424,877

426,881

Total equity and liabilities

973,163

971,922

Total liabilities Equity Share Capital Accumulated Loss

16 16

The accompanying notes form an integral part of, and should be read in conjunction with, these Financial Statements. Signed on behalf of the Board by: James Hill Chairman

Ron Pearson Director


Statement of Changes in Equity For the Year Ended 30 June 2008

Note

Actual 2008 $000

Actual 2007 $000

Balance at 1 July Share capital issued Loss after tax

426,881 - (2,004)

433,436 (6,555)

Total recognised income/(expense) for the year

(2,004)

(6,555)

16

424,877

426,881

Manukau City Council (100% Shareholder)

424,877

426,881

Balance at 30 June Attributable to:

The accompanying notes form an integral part of, and should be read in conjunction with, these Financial Statements.

64


Statement of Cashflows For the Year Ended 30 June 2008

Note

Actual 2008 $000

Actual 2007 $000

Cash flows from operating activities Receipts from customers Interest received Dividends received Dividend paid Payments to suppliers and employees Interest paid Income tax paid

88,333 334 43 - (61,328) (13,374) -

74,423 20 42 (55,849) (5,870) -

Net cash from operating activities

14,007

12,766

Cash flows from investing activities Proceeds from sale of property, plant and equipment Purchase of intangible assets Purchase of forestry Purchase of unbilled water Purchase of property, plant and equipment

61 (71) - - (12,833)

187 (2,208) (1,389) (3,175) (971,409)

Net cash used in investing activities

(12,843)

(977,994) 65

Cash flows from financing activities Proceeds from borrowings Share capital issued

4,980 -

531,947 433,436

Net cash from financing activities

4,980

965,383

Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year

6,144 155

155 -

Cash and cash equivalents at the end of the year

6,299

155

8

The accompanying notes form an integral part of, and should be read in conjunction with, these Financial Statements. The cash flows for the prior year include the cash inflow and outflow of acquiring the assets from Manukau City Council in July 2006. During the year, the Company acquired property, plant and equipment vested in Manukau City Council totalling $4.98 million (2007 $4.21 million) funded by an interest on demand loan from Manukau City Council.


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

1. Water and wastewater charges Water Sales Wastewater Sales

34,240 47,735

33,009 42,717

81,975

75,726

(812)

(683)

81,163

75,043

Less - Wastewater rebates for schools in Manukau Total revenue from water and wastewater sales

Water and wastewater revenue includes unbilled water and wastewater accruals at 30 June 2008.

66

2. Other revenue Revenue from activities Network Growth Charge Network Connection Network Development Interest received Dividends Miscellaneous Revenue

2,634 1,482 1,023 345 43 1,191

3,068 1,842 2,449 20 43 1,964

Total other revenue

6,718

9,386

61 14

168

Total gains

75

168

4. Employee benefit expenses Salaries and wages Severance and redundancy payments Capitalised on water and wastewater construction projects Defined contribution plan - employer contribution Increase/(decrease) in employee benefit liabilities

5,639 - (466) 152 330

5,174 83 (612) 124 -

Total employee benefit expenses

5,654

4,769

3. Other gains Gain on changes in fair value of forestry assets Gain on sale of property, plant and equipment

Project time directly attributable to construction projects was capitalised on predetermined hourly rates. Employer contributions to defined contribution plans include contributions to KiwiSaver (maximum 4% of employeesâ&#x20AC;&#x2122; salaries) and the Supertrust Superannuation Schemes (maximum 5% of employeesâ&#x20AC;&#x2122; salaries).


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

5. Other expenses Water wholesaler and wastewater purchaser Auditors - Audit fees Auditors - other assurance services Directorsâ&#x20AC;&#x2122; fees Loss on change in fair value of forestry assets Impairment of receivables Minimum lease payments under operating leases Land rates Other operating expenses

40,741 98 10 195 - (35) 372 2,092 11,672

41,193 71 10 170 59 1,107 398 2,221 10,739

Total other expenses

55,144

55,968

9,259 29

9,847 109

9,288

9,956

7. Tax Current tax expense Adjustments to current tax in prior years Deferred tax expense

- - -

-

Income tax expense

-

-

2,004 (661) 10 (4) (595) 593 - 657

6,555 (2,163) 3 (56) 1,006 201 1,008

-

-

6. Finance costs Interest on Manukau City Council loan Interest on bank overdraft Total finance costs

Relationship between tax expense and accounting deficit Operating loss before tax Tax at 33% Non-deductible expenditure Non-taxable income Prior year adjustment Unused tax losses and tax offsets not recognised as deferred tax assets Deferred tax expense on change in tax rate Loss offset utilised by Manukau City Council Tax expense

67


Notes to the Financial Statements For the Year Ended 30 June 2008

7. Tax cont. Deferred tax assets/(liabilities)

Property

Employee

Other

plant and entitlements provisions equipment

Tax

Total

Loss

$000

$000

$000

$000

$000

Balance at 1 July

(15,951)

42

332

15,577

-

Charged to income statement

(16,661)

50

(10)

16,621

-

-

-

-

-

-

(32,612)

92

Charged to equity Balance at 30 June

322

32,198

-

A deferred tax asset has not been recognised in relation to tax losses of $6.329 million (2007 $3.048 million). There is a likely benefit of tax loses being utilised within the next 12 months once this is determined by the Manukau City Council.

68

Imputation credit account Balance at 1 July Credit attached to dividend received

Actual 2008 $000 13 14

Actual 2007 $000 13

Balance at 30 June

27

13

199 6,100

155 -

6,299

155

8. Cash and cash equivalents include the following: Cash at bank and in hand Term deposits with maturities less than 3 months Total cash and cash equivalents

The carrying value of cash at bank and term deposits with maturities less than three months approximates their fair value. 9. Trade and other receivables Water and wastewater receivables Other receivables Related party receivables - (note 20)

8,570 1,590 149

9,194 1,171 383

Unbilled water and wastewater accrued

8,102

7,238

Prepayments

63

29

18,474

18,015

Less provision for impairment of receivables

(1,072)

(1,107)

Total trade and other receivables

17,402

16,908

Trade and other receivables are non-interest bearing and receipt is normally on 21-day terms, therefore the carrying value of trade and other receivables approximates their fair value. Unbilled water and wastewater accrued represents the value of water meters unread, and as such unbilled, at year end.


Notes to the Financial Statements For the Year Ended 30 June 2008

9. Trade and other receivables cont. All overdue receivables have been assessed for impairment and an appropriate provision has been applied, as detailed below: Gross Impairment $000 $000 Not past due 5,867 7 Past due 31-60 days 1,406 53 Past due 61-90 days 807 67 Past due > 90 Days 2,229 945

2008 Net Gross $000 $000 5,861 5,341 1,353 2,218 739 964 1,284 2,225

Total

9,237

10,308

1,072

10,748

2007 Impairment Net $000 $000 0 5,341 89 2,129 67 897 950 1,274 1,107 Actual 2008 $000

9,641 Actual 2007 $000

Movements in the provision for impairment of receivables are as follows: Balance at 1 July 1,107 Additional provisions made during the year - 1,107 Provisions reversed during the year (35) Receivables written off during period - Balance at 30 June

1,072

1,107

Manukau Water Limited holds no collateral as security or other credit enhancements over receivables that are either past due or impaired.

69


Notes to the Financial Statements For the Year Ended 30 June 2008

10. Property, plant and equipment Movements for each class of property, plant and equipment are as follows: Cost/ Accumulated Carrying Current Current revaluation depreciation amount year year 01-Jul-07 and 01-Jul-07 additions disposals impairment charges 1-Jul-07 3

Year ended 30 June 2008 Operational assets Land Buildings-leasehold improvement

-

8,638

-

-

184

(55)

129

1

-

Motor Vehicles

232

(21)

210

46

(45)

Other Plant and Equipment

245

(55)

189

11

(3)

Office Furniture and Fittings

105

(22)

83

3

-

9,401

(154)

9,247

61

Total operational assets 70

8,638

(48)

Infrastructural assets Water Supply

316,947

(7,600)

309,347

2,537

Wastewater Reticulation

630,654

(12,161)

618,493

6,345

-

Capital Work in Progress

14,779

-

14,779

9,540

(4,060)

Total infrastructural assets

962,379

(19,761)

942,618

18,422

(4,060)

Total property, plant & equipment

971,780

(19,915)

951,865

18,484

(4,107)

Total water and wastewater assets added for the 2008 financial year totalled $8.882million and included the self-constructed assets of $4.032M and the vested assets purchased from Manukau City Council at the amount of $4.980million.

-


Current year Current year Revaluation Cost/ Accumulated Carrying impairment depreciation surplus revaluation depreciation amount charges 30-Jun-08 and 30-Jun-08 impairment charges 30-Jun-08

-

-

-

8,638

-

-

(61)

-

184

(116)

8,638 68

-

(24)

-

233

(41)

192

-

(73)

-

253

(128)

125

-

(27)

-

108

(49)

59

9,414

(334)

9,080

(185)

71

-

(7,655)

-

319,484

(15,256)

-

(11,705)

-

636,999

(23,866)

304,228 613,133

-

-

20,259

-

20,259

-

(19,361)

-

976,742

(39,122)

937,620

-

(19,545)

-

986,156

(39,456)

946,700


Notes to the Financial Statements For the Year Ended 30 June 2008

10. Property, plant and equipment cont. Movements for each class of property, plant and equipment are as follows: Cost/ Accumulated Carrying Current Current revaluation depreciation amount year year 01-Jul-07 and 01-Jul-07 additions disposals impairment charges 1-Jul-07 3

Year ended 30 June 2007 Operational assets

72

Land

-

-

8,636

-

Buildings-leasehold improvement

-

-

136

47

-

Motor Vehicles

-

-

252

-

(20)

Other Plant and Equipment

-

-

80

165

-

Office Furniture and Fittings

-

-

78

27

-

9,182

239

(20)

Total operational assets

-

Infrastructural assets Water Supply

-

-

312,396

4,551

Wastewater Reticulation

-

-

627,546

3,108

- -

Capital Work in Progress

-

-

5,420

12,807

(3,449)

Total infrastructural assets

-

-

945,362

20,466

(3,449)

Total property, plant & equipment

-

-

954,544

20,705

(3,469)

Total water and wastewater assets added for the 2007 financial year totalled $7.658 million and included self-constructed assets of $3.449 million (including $653,000 purchased work in progress) and the vested assets purchased from Manukau City Council at the amount of $4.210 million. Valuation The land and the infrastructure assets are shown at fair value determined on a depreciated replacement cost basis by an independent valuer. The most recent valuation was performed by Maunsell Limited, and the valuation is effective as at 30 June 2008. Impairment An impairment test has been applied to all categories of assets, and no impairment loss has occurred.


Current year Current year Revaluation Cost/ Accumulated Carrying impairment depreciation surplus revaluation depreciation amount charges 30-Jun-08 and 30-Jun-08 impairment charges 30-Jun-08

-

-

8,636

-

-

(55)

-

184

(55)

8,636 129

-

(21)

-

232

(21)

210

-

(55)

-

245

(55)

189

-

(22)

-

105

(22)

83

-

(154)

-

9,401

(154)

9,247

-

(7,600)

-

316,947

(7,600)

309,347

-

(12,161)

-

630,654

(12,161)

618,493

-

-

-

14,779

-

14,779

-

(19,761)

-

962,379

(19,761)

942,618

-

(19,915)

-

971,780

(19,915)

951,865

73


Notes to the Financial Statements For the Year Ended 30 June 2008

11. Intangible assets Movements for each class of intangible asset are as follows: Computer Computer Resource

TOTAL

Models

Software

Consents

$000

$000

$000

$000

502

143

1,020

1,664

Balance at 1 July 2007

Changes during the year Additions 48 23 - 71 Amortisation charge

(251)

(32)

(46)

(328)

Total changes during the year

(203)

(9)

(46)

(257)

299

134

974

1,407

-

-

-

-

Balance at 30 June 2008 Balance at 1 July 2006 Changes during the year Additions

995

148

1,065

2,208

(494)

(4)

(46)

(544)

Total changes during the year

502

143

1,020

1,664

Balance at 30 June 2007

502

143

1,020

1,664

Amortisation charge 74

The intangible assets were purchased at 3 July 2006 from Manukau City Council when operations commenced. Additions during the year comprise a $48,000 wastewater computer model and a $23,000 financial system upgrade. There are no restrictions over the title of the Companyâ&#x20AC;&#x2122;s intangible assets, nor are any intangible assets pledged as security for liabilities. An impairment test has been applied to all categories of intangible assets, and no impairment loss has occurred.


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

12. Forestry Assets Balance at 1 July 1,295 Purchase from Manukau City Council - 1,389 Gains/(Losses) arising from changes attributable to physical changes 45 15 Gains/(Losses) arising from changes attributable to price changes 15 138 Less assets held for sale - (35) Decreases due to harvest - (212) Balance at 30 June

1,355

1,295

The forestry assets were valued by Woodmetrics Limited at 30 June 2008. The forestry assets were purchased at 3 July 2006 when operations commenced. 75

The following assumptions were made in the forest valuation: 1. Market value has been estimated using a stand expectation approach whereby costs and revenues throughout the current rotation for each stand are forecasted and discounted at a discount rate of 7.5% applied to post-tax cash flows. 2. T  he market value applies only to the tree crop and excludes the value of land, improvements and forest revenues other than from the sale of logs. 3. T  he yield data has been estimated from inventories undertaken in the forest in February 2000 and February 2008 analysed using MARVL to estimate standing volumes, and forest mapping from aerial photography flown in 1988 and 1995 to determine net stocked area. 4. The log prices used in the valuation have been derived from current log prices for the 1979 stand and 24 month average log prices for all other stands as supplied by Agri-Fax. 13. Trade and other payables Trade payables Deposits and bonds Accrued expenses Amounts due to related parties (refer note 20) Manukau City Council Others Revenue in advance

925 24 2,558

2,342 62 786

267 3,778 1,449

4,940 3,794 141

Total trade and other payables

9,001

12,065

Trade and other payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of trade and other payables approximates their fair value. Revenue in advance relates to water meters that have been charged but not installed and network growth charges that have been charged but not given effect to at 30 June.


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

14. Employee Benefits Liabilities Accrued pay Annual leave

300 454

400

Total employee benefit liabilities

754

400

Comprising: Current Non-current

754 -

400 -

754

400

Manukau Water Limited has an unspecified sick leave policy. There are no other types of leave. 15. Borrowings Current portion 76

Interest on demand loans from Manukau City Council

-

-

463,076

457,473

463,076

457,473

75,000

75,000

Total non-current portion

75,000

75,000

Total borrowings

538,076

532,473

Total current portion Non-current portion Interest bearing loans from Manukau City Council

The interest on demand loans comprise three amounts. The first amount of $452,737,000 arises from the purchase of water and wastewater assets from Manukau City Council at 3 July 2006. The second and the third amounts of $5,602,913 and $4,736,000 arise from the purchase of the assets vested in Manukau City Council by developers over the current and prior financial year respectively. These new water and wastewater assets are currently being funded by way of raising additional loans with Manukau City Council. The interest on demand loans are classified as current because Manukau Water Limited has a contractual obligation to pay principal and interest at the sole discretion of Manukau City Council. However, it is mutually expected that Manukau City Council ensures the Company will have sufficient financial resources available to perform its obligations. Given the demand feature and the expectation that Manukau City Council charges market interest rates at 7.28%, the interest on demand loan was recorded initially at face value, and will continue to be recognised at face value, being the amount that could be demanded by Manukau City Council. This financial year Manukau City Council demanded the interest cost on $58 million of interest on demand loans. Manukau Water Limited has a bank overdraft facility with the Bank of New Zealand. This bank overdraft is unsecured. The maximum amount that can be drawn down against the overdraft facility is $10 million. There are no restrictions on the use of this facility. The balance drawn down on the overdraft facility at balance date is nil.


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

15. Borrowings cont. Fair values of non-current borrowings The carrying amounts and the fair values of non-current borrowings are as follows: Carrying amounts Fair values 2008 2008 $000 $000 Secured loans (Manukau City Council) 75,000 75,000 Total

75,000

75,000

The fair value of the interest bearing loans is $75 million from the Manukau City Council. The carrying amounts approximate their fair values. 16. Equity Share Capital

77

Balance at 1 July Share capital issued

433,436 -

433,436

Balance at 30 June

433,436

433,436

Accumulated Loss Balance at 1 July Loss after tax

6,555) (2,004)

(6,555)

Balance at 30 June

(8,559)

(6,555)

424,877

426,881

(2,004)

(6,555)

19,874 (35) (61)

20,459 1,107 59

19,778

21,625

Add/(less) items classified as investing Gains on disposal of property, plant and equipment Capitalised salaries

(14) (466)

(167) (612)

Total classified as investing activities

(480)

(789)

Total equity Share capital is 433,435,584 fully paid ordinary shares at $1 each. 17. Reconciliation of loss after tax to net cash flow from operating activities Loss after tax Add/(less) non-cash items: Depreciation and amortisation Impairment charges (Gain)/Loss in fair value of forestry assets Total non-cash items


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

Add/(less) movement in working capital items Receivables and prepayments Payables and accruals Employee entitlements

(440) (2,902) 55

(11,046) 9,121 400

Working capital movement - net

(3,287)

(1,525)

Net cash inflow from operating activities

14,007

12,766

777

6,575

17. Reconciliation of loss after tax to net cash flow from operating activities cont.

18. Capital Commitments Capital commitments Approved and Committed: Capital expenditure contracted for at year end, but not yet incurred, for property, plant and equipment 78

The construction of the Kawakawa Bay Wastewater Treatment Plant is not included because the project has been suspended. The two major projects are listed below: Project Value Projects Beachlands/ Maraetai Wastewater Treatment Plant upgrade Gracechurch wastewater upgrade

$000

Balance at, 30 June 08 $000

7,819

712

157

65

Total Committed

777

Operating leases as lessee Manukau Water Limited leases property, plant and equipment in the normal course of business. The majority of these leases have a non-cancellable term of 36 months. The future aggregate minimum lease payments to be collected under non-cancellable operating leases are as follows: Non-cancellable operating leases as lessee Not later than one year Later than one year and not later than five years Later than five years Total non-cancellable operating leases

392

392

16 -

402 -

409

794

No contingent rents have been recognised in the income statement during the year. The office building lease expires on 15 July 2009, so the term balance is 1 year. The monthly rent is fixed at $31,018 per month. The printers and copiers lease started December 2006, and has a 3 year lease term, so the term balance is 1.5 years. The minimum charge is $1,665 per month.


Notes to the Financial Statements For the Year Ended 30 June 2008

19. Contingencies Manukau Water Limited does not have any contingent liabilities at 30 June 2008 apart from the following matters. Manukau Water Limited has become aware of a potential legal issue regarding the charging for the transportation of trade waste. This issue is dependent upon the interpretation of legislation. Having taken independent advice, the Directors are of the view that there is no material risk to the Company and no liability to repay these amounts. As such, Manukau Water Limited considers the likelihood of any financial impact to be remote. Manukau Water Limited has suspended a contract with Fulton Hogan on the construction of the Kawakawa Bay Wastewater Treatment Plant. We have an obligation to recommence the contract subject to: the satisfactory renegotiation of price and programme terms; the outcome of appeals on the vacuum pumpstation site and; the successful appeal of the Auckland Regional Council conditions. The Directors are of the view that there is no material risk to the company should the contract not recommence. 20. Related party transactions Manukau City Council is the ultimate shareholder of the Manukau Water Limited. All related parties of Manukau City Council are considered to be related parties of Manukau Water Limited. The following transactions were carried out with related parties: Manukau City Council Interest on demand loans to Manukau Water Limited Interest bearing loans to Manukau Water Limited Sale of Vested Assets to Manukau Water Limited Interest received from Manukau Water Limited Land rates received from Manukau Water Limited Services provided to Manukau Water Limited Services provided by Manukau Water Limited Amounts payable to Manukau Water Limited Amounts receivable from Manukau Water Limited Tax loss offset provided by Manukau Water Limited

Actual

Actual

2008 $000

2007 $000

463,076 75,000 4,980 9,259 2,092 1,988 3,150 149 267 657

457,473 75,000 4,210 9,847 1,976 1,988 5,166 383 4,940 1,008

Services provided by Manukau Water Limited include water and wastewater charges of $932,000 and Stormwater management fees of $1.1 million. The actual tax loss offset provided by Manukau Water Limited was $1.534 million in Manukau Water Limitedâ&#x20AC;&#x2122;s 2007 tax return. Manukau Leisure Services Limited Service provided from Manukau Water Limited

798

-

Watercare Services Limited Services provided to Manukau Water Limited Amounts receivable from Manukau Water Limited

40,741 3,778

41,193 3,794

Tomorrowâ&#x20AC;&#x2122;s Manukau Properties Limited Rent paid to Manukau Water Limited

7

18

Waste Disposal Services Services provided to Manukau Water Limited

2

17

Key management and directors No directors or senior management have entered into related party transactions with Manukau Water Limited, other than in the normal course of the business of paying water and wastewater charges.

79


Notes to the Financial Statements For the Year Ended 30 June 2008

Actual 2008 $000

Actual 2007 $000

992 - 15 -

904 12 -

20. Related party transactions cont. Key management personnel compensation Salaries and other short term employee benefits Post employment benefits Other long term benefits Termination benefits

Key management personnel includes the Chief Executive Officer (CEO) and other senior management personnel. Employees remuneration range During the year the following number of employees received a total remuneration package of at least $100,000

80

Total remuneration and other benefits $100,000-110,000 $110,000-120,000 $120,000-130,000 $150,000-160,000 $180,000-190,000 $190,000-200,000 $200,000-210,000 $270,000-280,000 $310,000-320,000

Number of employees 2008 2007 2 1 3 2 3 2 1 1 - 1 1 1 1 - 1 1 -

21. Events after the balance date There were no significant events that occurred after balance date. 22. Financial instruments 22A. Financial instrument categories The accounting policies for financial instruments have been applied to the line items below: FINANCIAL ASSETS Cash and receivables Cash and cash equivalents Trade and other receivables

6,299 17,402

Total cash and receivables

23,701 17,062

155 16,908

FINANCIAL LIABILITIES Loans and payables Trade and other payables Borrowings: - Interest on demand loans from Manukau City Council - Interest bearing loans from Manukau City Council

9,001

12,065

463,076 75,000

457,473 75,000

Total loans and payables

547,077

544,538


Notes to the Financial Statements For the Year Ended 30 June 2008

22B. Financial instrument risks Manukau Water Limited has policies to manage the risks associated with financial instruments. The Company is risk adverse and seeks to minimise exposure to treasury activities. These policies do not allow any transactions that are speculative in nature to be entered into. Interest rate risk Interest rate risk is the risk that Manukau Water Limited will suffer a financial loss due to adverse movements in interest rates on borrowings or investments. Manukau Water Limited has a call investment account and term investment with maturities less than 3 months with the Bank of New Zealand. The average interest rate received for the year was approximately 8%. The interest risk associated with Manukau Water Limited’s borrowings is disclosed in note 15. Credit risk Credit risk is the risk that a third party will default on its obligation to Manukau Water Limited, causing Manukau Water Limited to incur a loss. Manukau Water Limited has no significant concentrations of credit risk, as it has a large number of credit customers, mainly water and wastewater customers and only invests funds with registered banks with specified credit ratings. The Company’s maximum credit exposure for each class of financial instruments is represented by the total carrying amount of cash equivalents, and trade receivables. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired. Liquidity risk Liquidity risk is the risk that Manukau Water Limited will encounter difficulty raising liquid funds to meet commitments as they fall due. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Manukau Water Limited aims to maintain flexibility in funding by keeping committed credit lines available. 23. Capital management Manukau Water Limited’s capital is represented as equity, which comprises share capital, retained earnings and reserves. Equity is represented by net assets. The constitution requires the Board of Directors to manage the company’s revenue, expenses, assets, liabilities, investments, and general financial dealings prudently. Manukau Water Limited’s equity is largely managed as a byproduct of managing revenues, expenses, assets, liabilities, investments, and general financial dealings.

81


“On behalf of the Board, I want again to thank our people for their outstanding efforts in transforming the Company so as to improve the delivery of water and wastewater services to the people of Manukau.” – James Hill, Chairman, Manukau Water Limited


Directory Directors James Hill (Chairman) Alan Bickers Kevin Johnson Peter Drummond Rabin Rabindran Ron Pearson Chief Executive Raveen Jaduram Web www.manukauwater.co.nz

Registered Office 7 Springs Road East Tamaki Manukau New Zealand

Bankers Bank of New Zealand Queen Street Auckland New Zealand

Postal Address Private Bag 94010 Manukau 2240 Telephone + 64 9 262 5499

Solicitors Simpson Grierson 88 Shortland Street Auckland New Zealand

Auditor Audit New Zealand on behalf of the Auditor-General


Manukau Water Limited 7 Springs Road East Tamaki Manukau 2240 Telephone + 64 9 262 8989

www.manukauwater.co.nz

Manukau Water  

Annual report

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