Yarra Valley Water Annual Report 2019-2020 by Yarra Valley Water

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YARRA VALLEY ANNUAL REPORT WATER

YARRA VALLEY WATER ANNUAL REPORT 2019-20

OUR PURPOSE

TO SUPPORT THE HEALTH AND WELLBEING OF OUR CUSTOMERS, AND CREATE A BRIGHTER FUTURE FOR COMMUNITIES AND THE NATURAL ENVIRONMENT ACKNOWLEDGEMENT OF TRADITIONAL OWNERS Yarra Valley Water proudly acknowledges Australia’s first peoples and the people of the Kulin Nations as the original custodians of the land and water on which we rely and operate. We pay our deepest respects to their Elders past, present and emerging. We acknowledge the continued cultural, social and spiritual connections that Aboriginal and Torres Strait Islander peoples have with the lands and waters, and recognise and value that the Traditional Owner groups have cared for and protected them for thousands of generations. We also recognise and value the continuing rich cultures and contribution of Aboriginal and Torres Strait Islander people and communities to the Victorian community. Cover image, PeopleImages, istock photo, uploaded 2019. Photos in this report may have been taken prior to the coronavirus (COVID-19) pandemic.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

OUR ASSETS

10,163

9,943

602

KM OF WATER MAINS

KM OF SEWER MAINS

KM OF RECYCLED WATER MAINS

WATER SERVICE RESERVOIRS

WATER PUMPING STATIONS

CLASS A RECYCLED WATER PLANTS

137

104

WATER PRESSURE REDUCING STATIONS

$5.3

SEWAGE TREATMENT PLANTS

SEWAGE PUMPING STATIONS

BILLION IN INFRASTRUCTURE AND OTHER ASSETS

WASTE TO ENERGY FACILITY

KEY STATISTICS

781,288

58,228

POPULATION SERVED

RESIDENTIAL PROPERTIES

BUSINESS CUSTOMERS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Merri Creek, Brunswick. Image taken March, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

CONTENTS 1 2 3

INTRODUCTION

About us

A message from the Chair and the Managing Director

Our strategic context

2019-20 HIGHLIGHTS 16 Key initiatives

Overview of 2019-20 performance

DELIVERING VALUE 42 OUR LEADERSHIP 44 OUR PEOPLE AND CULTURE 56 LIVEABILITY OUTCOMES 64 Resilient and liveable cities and towns 65 Customer and community outcomes 70 Water for Aboriginal cultural, spiritual and economic values 73 ENVIRONMENTAL OUTCOMES 76 Climate adaptation 76 Bulk entitlements report 78 Greenhouse gas emissions and net energy consumption 80 Other statutory obligations 82 OUR PERFORMANCE 84

4 5

FINANCIAL REPORT 90

DISCLOSURE INDEX 146

YARRA VALLEY WATER ANNUAL REPORT 2019-20

INTRODUCTION

Ceres Nursery, Brunswick. Image taken March, 2017.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

1 INTRODUCTION

YARRA VALLEY WATER ANNUAL REPORT 2019-20

INTRODUCTION

ABOUT US Yarra Valley Water delivers essential water and sanitation services to two million people. We are one of Australia’s largest water utilities with more than 30 per cent of Victoria’s population relying on us 24/7. We manage $5.3 billion worth of assets across more than 4000 square kilometres. Our service area covers most of Melbourne’s northern and eastern suburbs, stretching from Wallan in the north to Warburton in the east. We’re future-focused and continually work to anticipate the changing needs of our customers and stay ahead of evolving community expectations. We’re shifting to a regenerative approach in our work to actively contribute to the improvement of the environment we rely on. We buy bulk water from Melbourne Water which we supply to customers. We also take their sewage away. Most is sent to Melbourne Water’s Eastern or Western treatment plants. The rest is treated at our 10 regional treatment plants, several of which produce recycled water for use in homes and public spaces. Recycled water is a key initiative to help save precious drinking water and maintain a secure water supply – and we continue to focus on expanding its use in the community. We generate our own renewable energy from food waste at our waste to energy plant in Wollert, which now operates at full capacity. We also create solar energy at our staff carpark in Mitcham and at three of our sewage treatment plants. We’re now planning new ways to generate more clean, green energy, including the establishment of a second waste to energy facility in Melbourne’s east to ensure we meet our target of generating 100 per cent of our own energy needs through renewable energy by 2025.

We have a globally recognised culture and a highly engaged workforce. In 2019-20 our staff maintained their focus on our purpose: to provide exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations. We’ve now completed our 2020 Strategy and are preparing to launch our 2030 Strategy to steer us through the next decade. We are a statutory corporation, incorporated under the Water Act 1989, and our activities are overseen by an independent Board of Directors appointed by the Victorian Government. Our obligations regarding the performance of our functions and the exercise of our statutory powers are defined in the Statement of Obligations, issued by the Minister for Water in accordance with Section 4I (2) of the Water Industry Act 1994. We are required to monitor compliance with the obligations set out in the statement, report on non-compliance and take remedial action in relation to non-compliance. During the 2019-20 financial year, we were accountable to the Minister for Water, the Hon Lisa Neville MP. The Essential Services Commission (ESC) is our economic regulator. The ESC’s role includes regulating prices, service standards and market conduct across the Victorian water industry.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

1 INTRODUCTION

Image taken March, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

INTRODUCTION

A MESSAGE FROM THE CHAIR AND THE MANAGING DIRECTOR We are pleased to present Yarra Valley Water’s Annual Report for the financial year ending 30 June 2020, in accordance with the Financial Management Act 1994. This year was shaped by the unprecedented challenges of coronavirus (COVID-19) and Australia’s catastrophic bushfires. During this extraordinary period in history, we’ve worked harder than ever to deliver on our customer commitments and obligations.

Another major focus for us this year has been powerfully completing our 2020 strategy while also switching gears to develop our strategic approach for the next decade. Our new 2030 Strategy will see us continue to transform around customers, help communities thrive and elevate our environmental focus, driven by an exceptional organisational culture. Being safe and efficient and delivering on the United Nations Sustainable Development Goals also underpin our future direction.

Responding to coronavirus changed the way we work. We moved swiftly to manage the impacts and ensure the continued supply of our essential water and sanitation services. This included protecting our people by moving most offsite to work from home in early March and participating in an industry-wide response to support those who needed to continue working in the community.

We made good progress against 2019-20 performance targets despite challenging and uncertain times. These targets are guided by the Statement of Obligations, policy directions set out in the State Government’s Water for Victoria policy and Letter of Expectations, our 2020 Strategy and Price Determination customer commitments.

Our customers are at the centre of everything we do and we also reacted quickly and compassionately to the sudden increase in people who were financially impacted by coronavirus. We’re acutely aware of the ongoing hardship facing many of our customers - both residential and commercial - and we’re offering extra support and flexibility to help them manage their bills. We also worked to reassure the community that their water remains safe to drink and to raise awareness of damaging fatbergs caused by non-flushable products entering the sewer system during nationwide toilet paper shortages. Looking ahead we will continue to carefully manage the impacts of coronavirus on our customers and our business, and have robust plans in place to manage a gradual transition to new ways of working when the time is right.

Priority areas in 2019-20 included developing strategies to manage the ongoing customer and financial risks associated with coronavirus, expanding our recycled water network, trialling digital meters, planning for our second waste to energy facility to support our emissions reduction strategy and keeping bills flat. We’ve also continued to focus on deepening our connection with customers, undergoing digital transformation to improve service response and overall customer experience. We’re proud to have developed our Stretch Reconciliation Action Plan this year as part of our ongoing journey towards reconciliation and creating a spiritually, socially and emotionally safe workplace for Aboriginal and Torres

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Other highlights for the year included: • $246M invested in water and sewerage infrastructure to improve services and support growth • Launching community engagement to advance plans for an underground recycled water facility to service Doncaster residents and local parks • Exceeding customer satisfaction targets and our Customer Care Team being recognised as world leaders, winning both Australian and International Service Excellence awards in 2019 • Leading development of Make Every Drop Count, the water industry’s first major water saving campaign for a decade • Installing 800 digital meters in a successful trial that identified 230 water leaks, saving our customers almost $80,000 and about 150,000 bathtubs of water in the first six months • Our food waste to energy facility being recognised with top industry accolades, winning both the national and state Infrastructure Project Innovation Awards at the Australian Water Association awards • Exceeding our target for timely restoration of water and sewerage services – we restored services within four hours for 95.1 per cent of customers against a target of 91.1 per cent. This January, for the fourth consecutive month, we achieved 100 per cent customer satisfaction rate with our service faults response – a record result for our business • 83 per cent of staff completed a Pulse survey in May with 97 per cent of respondents saying they had confidence in our response to coronavirus 2019-20 was the second year of our current Price Submission in which we commit to achieving an ambitious set of seven key service outcomes over five years. In a world-leading innovation, we voluntarily committed to give money back to customers each year via a community rebate if we did not meet a target in a given year. We‘re proud to have met five of the seven stretch outcomes our customers say they expect and value. In line with our promise, we’ll return $3 million to customers this year. We recognise the challenge of achieving all our ambitious targets, particularly in the context of a warming and drier climate. We’ve identified where we need to do more around service reliability and water conservation awareness.

We also aim to reduce service failures year on year so customers enjoy uninterrupted supply. We have a target of less than 0.96 per cent of customers experiencing three or more unplanned water or sewerage service interruptions a year. This target is based on a rolling five-year average to minimise the impact of annual weather variations. This year, due to our service response work and favourable weather, 0.91 per cent of customers experienced three or more water and sewerage interruptions. This equates to 0.98 per cent on a rolling five-year average, which is just shy of our annual target. Overall water use decreased this year, but we’ll keep working to reduce consumption, developing alternative water sources for non-drinking purposes and using technology to identify and fix more leaks in the network. While total water use per capita was 5 per cent lower than last year, it was 2 per cent higher than our target. We’ll continue working with the other Melbourne water corporations and creating new strategies to drive positive behaviour change. We outperformed our financial targets this year with a net profit after tax of $104.4 million. This result was driven by developer growth related activities, including new customer contributions, additional revenue from other products and services, operating efficiencies and lower interest rates on borrowings. This result has flowed through as an increased community dividend back to the State of Victoria. We want to acknowledge everyone in our team for their dedication and commitment to achieving our purpose. A high-performing culture is the key to accomplishing great things and we thank our people and partners who help us deliver our services every day as we work towards a sustainable and prosperous future for all. Our Board’s governance and leadership is also critical to our success and we thank our members for their insight and diligence this year. As we celebrate the successful completion of our 2020 Strategy and look towards 2030, we’re excited about the new possibilities for Yarra Valley Water to help shape a healthy and prosperous future for Victoria.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

1 INTRODUCTION

Strait Islander peoples. Our work this year also focused on expanding partnerships and collaboration with Traditional Custodians to deliver water for Aboriginal cultural, spiritual and economic value.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

INTRODUCTION

OUR STRATEGIC CONTEXT We exist to provide exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations. This is underpinned by our strategic commitments:

THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE

WE PROVIDE EXEMPLARY SERVICE

WE MAKE EVERY CENT COUNT

WE ARE SAFE

WE WORK IN HARMONY WITH THE ENVIRONMENT

WE SUPPORT THRIVING COMMUNITIES

Together with our seven Price Submission customer service commitments, these aim to deliver extraordinary results for our customers, stakeholders, owners and staff, as well as the broader community. In recent years, we have also focused on examining how we contribute to society in both positive and negative ways. We measured that contribution not only in financial terms, but also using the principles of integrated reporting through our second Planet, People, Prosperity sustainability report. It assesses our impact in terms of human, social and environmental capital.

We are further guided by the Victorian Government’s Letter of Expectations, which focuses on: • climate change • customer and community outcomes • water for Aboriginal cultural, spiritual and economic values • resilient and liveable cities and towns • leadership and culture • financial sustainability • recognising recreational values. These values and outcomes align well with our strategic commitments.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

SUSTAINABLE DEVELOPMENT GOALS

OUR PURPOSE AND STRATEGY

CLIMATE CHANGE

PRICE SUBMISSION CUSTOMER COMMITMENTS

CUSTOMER AND COMMUNITY OUTCOMES WATER FOR ABORIGINAL CULTURAL, SPIRITUAL AND ECONOMIC VALUES

SEE NEXT PAGE FOR OVERVIEW OF SUSTAINABLE DEVELOPMENT GOALS

CUSTOMERS EXPECT

RESILIENT AND LIVEABLE CITIES AND TOWNS LEADERSHIP AND CULTURE FINANCIAL SUSTAINABILITY

CUSTOMERS VALUE

SAFE DRINKING WATER

FAIR ACCESS AND ASSISTANCE FOR ALL

RELIABLE WATER AND SEWERAGE SERVICES

WATER AVAILABILITY AND CONSERVATION

TIMELY RESPONSE AND RESTORATION

MODERN FLEXIBLE SERVICE CARE FOR AND PROTECT THE ENVIRONMENT

RECREATIONAL VALUES

THE SUSTAINABLE DEVELOPMENT GOALS The United Nations’ Sustainable Development Goals (SDGs) are a universal call to action to end poverty, protect the planet and ensure all people enjoy peace and prosperity. Yarra Valley Water was the first water corporation to sign up to the SDGs, which provide the lens for us to ensure our work is contributing to a healthy and sustainable future where no one is left behind.

We play a fundamental role in the liveability and prosperity of Melbourne, through the provision of safe, reliable drinking water and sewerage services, and by making investment decisions that optimise value and resilience for the community, including future generations. Our roles and responsibilities also extend into other realms, including the impact on the environment from our operations, our impact on household affordability, and our contribution to addressing inequality.

INTRODUCTION

MINISTER’S LETTER OF EXPECTATIONS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

OUR STRATEGY

WE PROVIDE EXEMPLARY SERVICE

INTRODUCTION

PRICE SUBMISSION CUSTOMER COMMITMENTS

LETTER OF EXPECTATIONS

• Safe drinking water

• Water quality complaints

• Reliable water and sanitation

• Customer satisfaction • Billing payment issues

• Timely response and restoration • Modern flexible service • Care for and protect the environment

WE WORK IN HARMONY WITH THE ENVIRONMENT

• Water availability and conservation

• Emission reductions • Adaptation to climate change and variability • Integrated water management • Water efficiency

• Fair access and assistance for all

WE SUPPORT THRIVING COMMUNITIES

• Customer community engagement • Payment management and hardship • Engagement of Aboriginal communities • Engagement of Traditional Owners • Aboriginal inclusion plan • Diversity and inclusion • Board performance review

THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE • Water bills • Financial indicators

WE MAKE EVERY CENT COUNT • Health and safety

WE ARE SAFE

SUSTAINABLE DEVELOPMENT GOALS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

1 INTRODUCTION

Image taken January, 2019.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

Image taken March, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2 2019-20 HIGHLIGHTS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE PROVIDE EXEMPLARY SERVICE Our customers are at the centre of everything we do and we aim to deliver an exceptional experience every time they need us. OUR APPROACH Caring for customers and responding to their needs is central to our commitment to provide exemplary service. This approach is more integral than ever as the financial impact of coronavirus continues to affect many Victorians. We aim to fix faults and service interruptions promptly and ensure all interactions with customers are positive and constructive. We listen to our customers, surveying thousands this year to better understand their needs and tailor our services. We’re also planning for population growth and hotter, drier weather to ensure we can continue providing our essential services while supporting our customers with stable bills and help for those most vulnerable.

KEY INITIATIVES SAFE DRINKING WATER Safe drinking water is our number one priority and we take a proactive approach to ensure we provide our customers with a reliable, high-quality and pleasanttasting supply. We’re proud of our record in achieving 100 per cent compliance with the Safe Drinking Water regulations. Our customer research consistently shows high satisfaction with the quality of our drinking water. In 2019-20 we achieved 92 per cent customer satisfaction. We have a comprehensive drinking water risk management plan and continually monitor and sample our systems to ensure the integrity and quality of our water supply. We maintain pristine drinking water through a modern, fit-for-purpose chlorination system and real time monitoring sensors. Every year an independent laboratory collects and tests more than 7000 water samples gathered from customers’ taps in 32 separate water quality zones. We’re also trialling real-time monitoring sensors in our Class A recycled water areas.

100%

COMPLIANCE WITH THE SAFE DRINKING WATER REGULATIONS.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

RESPONDING TO CORONAVIRUS (COVID-19) We responded swiftly to the challenges posed by coronavirus. Our focus is firmly on ensuring the safety and wellbeing of our people, continuing our essential work safely in the community and reassuring customers that our vital water and sewerage services will continue uninterrupted. We swiftly implemented a series of strategies to support our work:

• Created processes to ensure our people and contractors on the frontline were protected as essential workers. This included ensuring they had access to personal protective equipment and practised physical distancing. They were also equipped with documentation so they could safely go about their work • Collaborated with the broader sector to ensure we worked together to safeguard the supply of water and sewerage services for all Victorians • Communicated to customers to reassure them their water was safe to drink, that our essential staff were working safely in the community to ensure the continued supply of our vital services • We enhanced our already robust customer support programs for customers experiencing financial difficulties • Surveyed staff in May to check how our people were feeling about our response to coronavirus. Results were overwhelmingly positive, with 97 per cent of respondents saying they had confidence in Yarra Valley Water. In addition, 95 per cent felt their wellbeing was supported and we were proactive in responding to customers in need

RELIABLE WATER AND SEWERAGE SERVICES We aim to reduce service failures year on year so customers enjoy uninterrupted supply. We have a target of less than 0.96 per cent of customers experiencing three or more unplanned water or sewerage service interruptions a year. This target is based on a rolling five-year average to minimise the impact of annual weather variations. This year, due to our service response work and favourable weather, 0.91 per cent of customers experienced three or more water and sewerage interruptions. This equates to 0.98 per cent on a rolling five-year average. As this is just shy of our annual target, we will return $1.5 million to customers via 2020-21 prices as promised.

During 2019-20 we continued our work to upgrade high failure areas of the network, and: • Renewed 47km of poor performing water mains • Renewed 49km of poor performing sewer pipes • Inserted 650 water valves and 221 new hydrants to reduce unplanned service interruptions • Inspected 178km of sewerage pipes to assess their condition and identify blockage risks • Inspected 1813 house connection sewer branches to assess the integrity of pipes • Renewed 2247 house connection sewer branches

TIMELY RESPONSE AND RESTORATION We understand our customers’ frustration if we don’t respond quickly when their service is interrupted and we’ve worked to lift customer satisfaction across all field work. We aimed to restore water and sewerage within four hours for 91.1 per cent of customers. We exceeded our aim this year with the target being met for 95.1 per cent of customers. We have an ongoing water and sewer mains renewal program targeting high failure areas of the network to ensure we continue to maintain reliable water supply. We ramped up our summer readiness campaign in 2019 in anticipation of increased burst and leaks due to forecasts of a long, hot season. Dry, hot weather makes our infrastructure more susceptible to faults as the ground shifts and causes pipe breakages. This year’s campaign included extra crews to respond when needed and increased community engagement to raise awareness and improve understanding of the challenges we face in summer. This year we rolled out a hydrant capping program to reduce unplanned supply interruptions. Capping our hydrants means we don’t have to switch off water to customers when we need to do hydrant maintenance work. We redesigned our cap in partnership with the Metropolitan Fire Brigade (MFB). Our design makes it easier for the MFB to remove the cap and access the water network quickly if needed. We’re also trialling other innovative technologies in this space to save water and potentially reduce costs.

2 2019-20 HIGHLIGHTS

• Transitioned more than 90 per cent of our workforce to safely work from home

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE PROVIDE EXEMPLARY SERVICE CONTINUED REFRESHED FAULTS MAP

MODERN FLEXIBLE SERVICE

We updated our online Faults Map to include an additional layer of information to improve its accuracy and usefulness to customers and ensure its accessibility for people with disabilities. The map was accessed over 54,120 times in the nine months to April 2020, providing our customers with information about reported faults, supply interruptions and planned network improvements. We also sent more than 129,000 SMSs to customers to let them know about interruptions to their water supply in the same period. Work is also underway to review all our field communications to ensure they are clear and accessible for our customers.

We’re committed to providing great customer service every time a customer needs us. We’ve achieved significant improvements in customer satisfaction across all field work including renewals, where we have focused on improved communications and site restoration.

BEST PRACTICE COMPLAINTS HANDLING We encourage our customers to tell us about their experiences and make it easy for them to lodge a complaint. We use complaints to identify and fix problems with our services, processes and practices and to advocate for change, for the benefit of all our customers. Our approach aligns with the Australian and New Zealand Standard for complaint handling. While this leads to higher recorded complaint volumes than most organisations would recognise, we believe it is appropriate to be conservative and ensure any potential expressions of dissatisfaction with our service are captured so that we can use these for insights to drive improvements in service. This year, through the Water Services Association of Australia, we spearheaded the establishment of a national working group which is working towards a uniform approach to complaints that aligns with this best practice standard. Senior managers from water corporations around Australia are represented on the group, which meets regularly to advance towards a consistent industrywide approach to the classification of complaints, leading to better outcomes for more customers.

We’ve had high customer satisfaction across fault call handing and fault repair. In December, 89.9 per cent of calls were answered within 30 seconds (against a target of 80 per cent). In January, for the fourth consecutive month, we achieved a record 100 per cent customer satisfaction rate with our service faults response. Our customers value our modern flexible service and our ability to anticipate and adapt to their needs, especially in times of uncertainty. Our people pride themselves on their compassion and care for customers, especially those experiencing vulnerability. We’re proud to report that 87 per of customers said they were satisfied with their most recent interaction this year, against a target of 86 per cent. Our Customer Care is recognised as world-leading. We won the Customer Service Institute of Australia’s Customer Service Organisation of the Year Award (Government/Not for Profit) at the 2019 Australian Service Excellence Awards. We subsequently won the international award.

CUSTOMER EXPERIENCE JOURNEY MAPPING Through our commitment to Customer Experience (CX), we have identified more than 90 unique taskbased journeys to better understand what customers experience when they contact us. These journeys track how customers interact with us, such as when they need to pay a bill, report a fault or ask for help to understand their bill. Mapping these journeys has identified pain points for both customers and staff, revealing service gaps as well as improvement and innovation opportunities. Tracing these customer experiences has allowed us to update systems, processes and communications to ensure we’re meeting expectations.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DIGITAL TRANSFORMATION

CARING FOR COMMERCIAL CUSTOMERS

We’re updating a number of systems and processes to elevate our service responsiveness and customer experience in line with our 2030 strategic ambitions. This digital transformation will make interactions smoother for both customers and staff. It will also ensure we can leverage data by connecting core systems together.

We have sharpened our lens on business customers, with our Commercial Customer Team providing exceptional services and experiences for this valued cohort. The team also supports our specialist business relationship managers, skilled in water efficiency, who work with highvalue commercial customers to tailor services and costsaving solutions that support their operations.

We also plan to deliver a new Distribution Management System which will provide a holistic operational view of our assets and enable us to acquire and analyse data from a large number of network sensors, providing us with near real time visibility of our assets, so we can be more responsive. This project will also support the rollout of digital meters.

DIGITAL WATER METERS Our digital metering trial started in Vermont South in 2019 and has been highly successful. We installed meters at almost 800 properties, allowing us to quickly detect hidden water leaks and notify customers so they could resolve problems with their household plumbing and appliances, avoiding bill shock. Within the first nine months we had identified 230 leaks with almost 90 per cent promptly repaired by customers. This saved customers more than $76,000 and the equivalent of about 150,000 bathtubs of water. We surveyed customers involved in the trial and 88 per cent reported satisfaction with their meter upgrade experience. Digital meters are a smart solution which allows us to manage our water more sustainably. This is more important than ever as Melbourne’s population grows and the city gets hotter and drier, placing extra strain on water storages. Customers with digital meters can monitor their daily water use online and through our new Daily Drop mobile phone app which allows them to compare their usage with similar households in their area and provides them with targeted tips on ways they can save water around the home. They will also receive SMS alerts regarding potential leaks on their property.

We streamlined our one-stop shop customer service this year, aligning all our commercial and trade waste information into the one system, resulting in a better customer experience. The team has also worked to improve our service to Water Carters, resulting in a record $1.4 million revenue this year, despite the impact of coronavirus and wetter conditions in February and March.

RESPONDING TO CORONAVIRUS (COVID-19) Coronavirus has had a mixed impact on our business customers, many of whom have found themselves in hardship and needing help. Others at the opposite end of the spectrum faced a hike in demand for their products and needed to manufacture more, resulting in higher water use. As part of our response to those in financial difficulty we developed a range of relief packages including deferred bill payments and payment extensions. We also waived trade waste fees for vulnerable small businesses, such as cafes, affected by coronavirus restrictions.

TRADE WASTE We introduced a bigger and better trade waste system this year. The system is designed to make it clearer and easier for frontline staff to service our trade waste customers and deliver efficiency gains. We made changes to our trade waste billing process to improve response times.

INDUSTRY PARTNERSHIPS AND ENGAGEMENT We are members of various industry groups, including the Australian Industry Group, Victorian and Melbourne Chambers of Commerce and NORTH Link. We leverage these memberships to create connections with businesses and government representatives. Through our waste to energy facility, we have continued to grow our engagement in the waste and resource recovery industry. We’re active members of the Waste Management and Resource Recovery Association of Australia and the Australian Organics Recycling Association.

2 2019-20 HIGHLIGHTS

Our new Customer Experience Digital Platform (CXDP) will deliver ongoing improvements to simplify and speed up customer interactions. This will allow staff and customers to see the same information via a single userfriendly interface and provide staff with a more complete customer history.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE WORK IN HARMONY WITH THE ENVIRONMENT We rely on a healthy environment and working in harmony with nature is key to our purpose. OUR APPROACH We know our customers value our work caring for and protecting the environment. We pride ourselves on our eco-friendly business practices, including providing water for environmental and cultural flows, meeting ambitious emissions reduction targets and generating our own clean, green energy. Our goal is to ensure our environmental impact never exceeds the carrying capacity of nature and we pursue a restorative approach. We’re also embedding the United Nations’ 17 Sustainable Development Goals into our work. As we prepare to embark on our 2030 Strategy, we are now focusing on taking our commitments a step further, shifting from a restorative approach to a regenerative one. This means we will aim to create socially and environmentally healthy ecosystems where we work, making sure we leave things in a better state than they were before we were there. This marks an even stronger commitment to environmental values as we work towards a better future for generations to come.

KEY INITIATIVES ENERGY Providing water and sewerage services is both energyintensive and costly – which impacts both our finances and the environment – and we’re committed to innovate to reduce our ecological footprint. This includes installing solar panels at our Mitcham head office and several sewage treatment plants, our waste to energy facility at Wollert and membership of Zero Emissions Water, which sources energy at a cheaper wholesale rate from a large solar farm in north-west Victoria. Thanks to our concerted efforts, we’re on track to achieve our aspirations to generate all our own clean energy by 2025 and reduce our greenhouse gas emissions (direct and indirect) by at least 64 per cent by mid-2025 (against the business as usual baseline). Highlights this year include: • Completing a feasibility study into creating a largescale 500 kW floating solar system at our Wallan Treatment Plant that will not only produce renewable energy, but will also reduce algal growth in a Class B storage lagoon that feeds our recycled water plant • Developing a concept to install ground mounted solar systems at five more sites to increase solar energy production

YARRA VALLEY WATER ANNUAL REPORT 2019-20

WASTE TO ENERGY We’re proud to be industry leaders in the challenge to reduce waste. Our waste to energy facility continues to showcase innovative waste management, winning both national and state Infrastructure Project Innovation Awards at the Victorian and Australian Water Association Awards in 2019. The plant operated at full capacity this year, diverting 31,000 tonnes of waste from landfill and reducing greenhouse gas emissions. This year the facility generated eight times more renewable energy than it consumed. It met 21.5 per cent of our total electricity demand and returned a total energy benefit of $803,377. Coronavirus has had minimal impact on our operations due to food manufacturing continuing to be an important part of the economy at this time. We are now planning to build a second facility in Melbourne’s east, with public consultation expected to begin in August. This new facility will be larger, capable of processing up to 150 tonnes of waste a day to create 33,000 kWh of renewable energy. It will generate a further 30 per cent of our energy needs. The two facilities will ultimately meet more than half of our overall energy requirements.

CLIMATE RESILIENCE PLANNING In 2019-20 we continued to implement our Climate Resilience Plan, which sets out our response to the impacts of climate change and supports long-term planning for an uncertain future. As part of this work, we successfully piloted adaptive planning in the Upper Merri Creek Place-based Plan and in the Northern Growth Corridor Treatment Strategy. This process is now embedded in Place-based Planning Guidelines for the organisation.

We also focused on reducing service vulnerabilities, developing a partnership with the Bureau of Meteorology and holding climate outlook workshops each quarter to help prepare resources for the following three months. In the wake of last summer’s devastating bushfires, we began reviewing our emergency management plans with a climate lens. We assessed our asset vulnerabilities to climate change in the high-fire risk Healesville region and shared findings with stakeholders. We are incorporating findings in our risk assessment and renewals programs. As part of our collaborative planning approach we completed organisational resilience benchmarking (receiving the highest Australian water utility score) and have been reviewing our governance, risk, and evaluation processes to ensure we are aligned with the recent Department of Environment, Land, Water and Planning (DELWP) guidelines on Managing Climate Risk. We also continued working in partnership with DELWP and the other water authorities on the Victorian Climate Change Adaptation Action Plan, extensive long-term water planning and other industry collaborations.

WATER SECURITY Significant societal challenges - climate variability, rapid population growth and environmental degradation - all have the potential to affect our ability to deliver services. We’re strongly focused on water security work to ensure we continue to meet growing demand in the face of a hotter climate, lower inflows to storages and population growth. Desalinated water makes an essential contribution to Melbourne’s water security as it is a rainfall-independent source of supply capable of producing about one third of Melbourne’s annual demand. In 2019-20 the Victorian Desalination Project delivered 125 GL (125 billion litres) of water into Melbourne’s water storages - its biggest order yet.

2019-20 HIGHLIGHTS

Waste to Energy Facility, Wollert. Image taken August, 2017.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE WORK IN HARMONY WITH THE ENVIRONMENT CONTINUED RECYCLED WATER Developing recycled water infrastructure is crucial to long term water security. Our planning includes increased reliance on recycled water and stormwater and a focus on raising community awareness around its use. This year we provided Class A Recycled Water to 4592 properties as part of our ongoing program to deliver recycled water to customers, including 100,000 new homes in Melbourne’s Northern Growth Corridor. We’re also implementing plans to build an underground recycled water treatment plant to service more than 5000 properties at Doncaster Hill, a large infill development in Melbourne’s north east. We updated our plans this year after consultation with the North East Link Project (NELP) determined that Eram Park in Box Hill North was no longer a suitable site for an underground facility. We’re now in the process of a comprehensive community engagement process to build the facility underground at Tram Road Reserve, which runs alongside the Eastern Freeway in Doncaster. The facility will supply homes with water for gardens, toilets and laundries, saving 2.5 million litres of drinking water and demonstrating how we can build resilience into our communities. The project also has the potential to provide a drought-proof supply of recycled water to local parks and sports fields. We’ve worked closely with the Manningham community on this project, hosting local information sessions to explain our plans and increase knowledge about the benefits of recycled water. We’re pursuing new ways of expanding recycled water use as well as other alternate water sources. We’re currently working with farmers in the Coldstream area to investigate the feasibility of establishing a recycled water scheme supplied by our Lilydale Sewage Treatment Plant to supply up to 1000 megalitres to local vineyards and crop farmers. We’ve partnered with Maroondah Council and Melbourne Water to progress a project to revitalise Tarralla Creek in Croydon.

This work will deliver multiple benefits including improvements to water quality, stormwater harvesting for sporting grounds, urban cooling, passive recreation and indigenous cultural heritage. This pilot project has involved significant public consultation and partner collaboration and, due to its innovative approach and potential benefits, received grant funding from the State Government’s Integrated Water Management Fund to augment partner financial contributions.

WATER CONSERVATION This year we led development of the Make Every Drop Count water conservation campaign, a collaborative program between Melbourne’s water corporations to raise awareness and encourage people to save water. The campaign, which included TV and print advertising and a dedicated website with water-saving tips, was designed to help Victorians reduce their household water use and support the Victorian Government’s overarching T155 objective. Post-campaign research found Make Every Drop Count exceeded expectations against key performance metrics, leading to an increase in public awareness of water supply issues. Consideration for reducing water usage has also increased, with 64 per cent of people now saying they are likely to try to reduce their water use over the next 12 months. We’re now in the initial stages of exploring other ways we can make every drop count including a fun new customer campaign to encourage households to be more water conscious.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

COMMUNITY SEWERAGE

INTEGRATED WATER MANAGMENT Integrated Water Management (IWM) is a coordinated approach to managing water and other resources to support sustainable, connected communities. It involves communities and organisations working together to make the most of public resources and maximising economic and social value to create a happy and healthy society. We’re now expanding our IWM work to include a placemaking approach. This involves looking at the needs of specific sub-catchments, rather than adopting a one-size-fits-all solution to urban resource planning. This approach means our customers will have a voice in helping to develop their community, including management of drinking water, stormwater, recycled water and sewerage services. Placemaking using an

IWM sub-catchment planning framework will support the growth of community-centric, water-sensitive public spaces, where people are invested in solutions to the water challenges facing our rapidly growing city. The Upper Merri Creek pilot, which incorporates the northern growth area, is the first predominantly greenfield sub-catchment to apply this approach. A key aspect of the work is a Cultural Flows Assessment currently being completed by the Wurundjeri Water Unit. The assessment will provide a statement of the Wurundjeri’s spiritual, cultural, environmental, social and economic vision to be incorporated into the planning of the sub-catchment. We spent time on Country with the Wurundjeri team as they completed the assessment, which was a fantastic knowledge sharing exercise. The content of the Upper Merri Creek Cultural Flows Assessment is central to the sub-catchment planning process and an important step in demonstrating effective inclusion of Aboriginal people in water governance. We’re now connecting with stakeholders to begin work in the sub-catchment areas of Gardiners Creek (covering infill areas in Blackburn, Box Hill and Hawthorn) and Koonung Creek (incorporating Doncaster Hill, Bolin Bolin wetland in Bulleen and areas affected by the North East Link project). We’ll proactively work with communities to plan the evolution of these important areas.

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Many homes in northern and eastern Melbourne were built before sewerage infrastructure was available and are still using outdated and inefficient septic tanks to manage their wastewater. We have an extensive community sewerage program to replace these outdated systems, which pose a risk to environmental and human health. Work is currently underway in Monbulk, Park Orchards, The Patch, Launching Place, Sassafras, Eltham, Olinda, Sherbrooke and Kallista. In 2019-20 we connected 579 properties to the sewerage system as part of our goal to service about 11,000 properties through the program by 2033.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE SUPPORT THRIVING COMMUNITIES We’re committed to helping our community thrive and prosper so we can keep customers in good hands. OUR APPROACH We’re passionate about taking a sustainable approach to everything we do and working to support health and prosperity for all. Our customers tell us they value our role in contributing to Melbourne’s liveability and promoting social inclusion, financial resilience and equality. We are committed to providing inclusive services and caring for the most vulnerable people in society. The impact of coronavirus has made this commitment more vital than ever. We also acknowledge and recognise the continuing rich cultures and contributions of Aboriginal and Torres Strait Islander peoples to the land and waterways on which we rely. We’re committed to working with local Traditional Custodians to ensure their ongoing contribution to land and water management continues, as we plan for the future together.

KEY INITIATIVES RESPONDING TO CORONAVIRUS (COVID-19) We’ve always strived to put the customer at the centre of all we do and customer care is in our DNA. The impact of coronavirus took our focus to new levels with a significant increase in customers impacted in some way by seeking assistance. Building on our existing hardship programs for residential customers, we adapted rapidly to implement additional levels of support, update programs and introduce new training to ensure we could meet the changing needs of our customers – many of whom are experiencing vulnerability for the first time. This included introducing an additional specially trained team to support customers impacted by coronavirus and temporarily pausing standard collection activities whilst we developed new strategies and products to deal with this newly vulnerable cohort of customers. As well as an increase in residential hardship cases, our Commercial Services team is also working with an unprecedented number of business customers experiencing hardship. We have created a new hardship program to support commercial customers, which includes flexible payment terms. We implemented Victorian Government guidelines to support small businesses through faster processing of invoices to ensure quicker payments to our suppliers.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

We have also been working closely with community organisations providing frontline support, including emergency relief networks, family violence organisations and community centres. To help support the work of emergency relief centres and community organisations we’ve delivered funding and material aid – including distributing an existing stock of toilet paper and providing hand sanitiser.

ADVANCING SUSTAINABLE DEVELOPMENT GOALS

Our second Planet, People, Prosperity report outlines our social and environmental commitments and tracks how we’re working towards creating a more sustainable and prosperous future for everyone. We focused our work in 10 key areas most relevant to our business, identified through reviewing global and local trends and talking to our customers, staff, community and partners. Our comprehensive report won a Silver Award at the 2020 Australasian Reporting Awards.

RECONCILIATION We launched our Reconciliation Action Plan in 2016 and since then we’ve seen an increase in cultural awareness among staff, built a culturally safer and more diverse workplace and fostered meaningful new partnerships with Victorian Aboriginal business owners. This year we developed our Stretch Reconciliation Action Plan 2020-23, which marks a significant next step on our path to reconciliation. Created through a collaborative process led by our Reconciliation Working Group and Leadership Committee, it reinforces our commitment to building and strengthening respectful relationships with Traditional Owners in our shared role as water custodians. We continue to work closely with the Water Units of Wurundjeri and Bunurong, evolving to a more proactive and strategic approach focusing on early engagement and supporting their aspirations in relation to Country. This includes ongoing cultural flows assessments, strengthening our cultural heritage management practices and collaborating to explore business development opportunities.

The appointment of active Aboriginal leaders to our Board - Karen Milward in 2017 and Ian Hamm in 2019 - brings a wealth of experience and knowledge to help guide our work to reduce inequality and support sustainable economic outcomes for Aboriginal and Torres Strait Islander peoples and businesses. We have signed up to the Racism. It Stops With Me campaign developed by the Australian Human Rights Commission as part of our work to help make the community a better place by taking a stand against racism. This campaign has clear links to our Diversity and Inclusion Strategy and aligns with the work of the Reconciliation and Cultural Diversity working groups.

WATERCARE Customers tell us they value us supporting people in financial hardship to ensure we provide fair access and assistance for everyone. This support is vital as we manage the ongoing impact of coronavirus on our residential and business customers. Since March we’ve had over 6000 customers tell us they’ve been impacted in some way by coronavirus. We’ve created a specialist team to help them through our tailored support options. We’ve had a 12 per cent increase in customers accessing WaterCare and are currently helping more than 8500 customers through the program. This number continues to grow through the ongoing impacts of coronavirus and as we connect with more customers through community organisations, emergency relief providers and other trusted partners. In 2019-20 we engaged over 46,000 customers through our WaterCare programs and campaigns and met our primary target – that 89 per cent of customers who have accessed our services believe we help customers experiencing difficulty paying for their water and sewerage services. We have also reached more than 49,000 customers to promote our support programs with the objective of improving awareness and access to the programs – particularly for at-risk parts of the community. Accessibility and awareness are essential to full participation and inclusion and we use partnerships and networking to spread the word about our supportive services and programs. This year staff attended about 50 events and conferences to highlight our support services, targeting at-risk customers in culturally and linguistically diverse communities, those experiencing family violence or financial vulnerability or people transitioning through different stages of life.

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We’re committed to advancing the United Nation’s 17 Sustainable Development Goals and we’re proud to report on our progress each year. This year we took our reporting approach a step further to meet the Global Reporting Initiative Standards, which represent world’s best practice in sustainability reporting.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE SUPPORT THRIVING COMMUNITIES CONTINUED Key initiatives this year included:

OVERALL THIS YEAR: WE SUPPORTED

11,501 CUSTOMERS – 5% MORE THAN THE SAME TIME LAST YEAR

WE WORKED WITH MORE THAN

7400 NEW CUSTOMERS EXPERIENCING DIFFICULTY

90% OF CUSTOMERS MET THEIR AGREED PAYMENT PLANS

WE SUCCESSFULLY TRANSITIONED OVER

4807 CUSTOMERS TO MAINSTREAM PAYMENTS

• Participating in a wide range of community events and networks to raise awareness of our Watercare program amongst groups such as new migrants, new families and the elderly • Partnering with councils, early learning centres and maternal child health centres to reach new mothers with information about our financial support options, through our Waterbabies book • Presenting WaterCare to culturally and linguistically diverse communities at various seminars for organisations working with refugees, migrants and asylum seekers • Developing new communication materials using Aboriginal artwork and imagery that can be easily identified by our local Aboriginal and Torres Strait Islander communities • Piloting different strategies to raise awareness amongst those who are eligible to register for a concession rebate. We estimate there are about 120,000 properties in our service area that may be eligible for concession rates, but have not registered their details with us. This work could help make bills more affordable and manageable for vulnerable customers • Providing training in cultural competency and disability awareness to ensure staff understand the barriers that different customers may face in engaging with us • Partnering with AFL Outer East, Eastern Health and Sports and Life Training to deliver the Leading the Change program. This program provided over 40 sessions on respectful relationships and mental health to sports clubs across the Shire of Yarra Ranges, engaging 1000 players on key messages around the prevention of violence against women, mental health and drug use

FAMILY VIOLENCE RESPONSE About one in four of women are affected by family violence and we’re committed to doing all we can to protect vulnerable customers. This includes having safety flags on customer bills as an extra layer of protection for people experiencing family violence. This means their accounts are locked down and managed by staff who are

YARRA VALLEY WATER ANNUAL REPORT 2019-20

aware of their personal circumstances. It helps to prevent perpetrators from using account information against former partners. This year our family violence response was recognised in the Essential Services Commission’s 2019 Better Practice Guide, a handbook to help water and energy businesses implement safe and effective family violence strategies. The guide highlights various aspects of our work, including our commitment to training and the ways our WaterCare team provide customised solutions to people experiencing family violence.

We are the host and a founding member of the Thriving Communities Partnership (TCP), a voluntary cross-sector collaboration working to ensure everyone in Australia has access to essential services, including water. TCP continues to expand and build capability, bringing together over 250 organisations from all sectors including water, energy, banking, telecommunications and community sectors. TCP has developed support tools to address issues such as family violence and cognitive disability, helping businesses ensure fair access to their services. TCP’s flagship project is development of the One Stop One Story Hub. The Hub will provide a single-entry point for people experiencing vulnerability to ensure they have access to all the services they need without having to tell their story multiple times to different organisations. Our ongoing support for TCP ensures that people in difficult circumstances are not left behind when it comes to having fair access to the modern services they need to thrive in contemporary Australia.

AFFORDABILITY STUDY We completed a research project to learn more about the impact of water bills on household budgets. This project involved measuring affordability to enable us to better understand the circumstances of customers experiencing financial stress. The findings give us new insight into the areas impacted by affordability and an opportunity to investigate ways we can further shape our programs and services to help customers who need support.

CHOOSE TAP Choose Tap is a national partnership of water retailers, initiated by Yarra Valley Water to achieve better outcomes for communities and the environment. This year we drove development of a new Choose Tap campaign encouraging businesses to provide free tap water refills to people with their own water bottles as a way of reducing plastic waste

and encouraging consumption of tap water. More than 50 cafés, bars and businesses have already signed up to the “Refillers Welcome” movement to help encourage Australians to ditch plastic and make the switch to tap water.

SOCIAL PROCUREMENT We developed our first social and sustainable procurement strategy this year so we can make sure we use our purchasing power to create social and environmental benefits over and above the value of the goods and services we need to source. This new approach will also ensure we support social enterprises and maximise economic opportunities for Aboriginal and Torres Strait Islander businesses. We have tailored our systems to provide direct links to external social enterprises and Aboriginal businesses as relevant procurement opportunities arise and we are engaging and training staff in our new approach. We’re also focused on supporting suppliers and contractors who share our commitment to environmental and social goals so that together we can help make a difference to the lives of people, as well as the health of our planet. Our Financial Inclusion Action Plan continues to drive our work to ensure everyone has a fair go. We’re seeking new ways of supporting vulnerable groups in the community through our supply chain and other partners. Our new social procurement strategy and systems will help deliver on these strategic goals.

HUMAN RIGHTS AND MODERN SLAVERY This is the first year of reporting under the Modern Slavery Act 2018. We have completed a state industrywide supply chain risk assessment with the Victorian Procurement Working Group and identified key human rights and modern slavery risks that we will focus on. This work was a collaborative effort between 10 Victorian water corporations and identified risks around cleaning and maintenance, construction and offshore engineering services. We’re reforming tender processes and contract clauses to address modern slavery issues through our procurement processes and, through the working group, identifying and developing industry-wide approaches to managing these risks. Internally we also conducted our first human rights review, identifying the most important human rights areas we can impact. Collaboratively across our business we developed a set of principles to guide our approach to human rights, and the gaps and opportunities for us to address. We’re using this information to revise our corporate risk register and it’s helped inform our new strategy.

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THRIVING COMMUNITIES PARTNERSHIP

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE We are nothing without our people and we pride ourselves onÂ our constructive culture and positive high-performing team.

Staff event. Image taken November, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

OUR APPROACH We are a warm and welcoming workplace which celebrates diversity, gender equality, individuality and entrepreneurial spirit. We foster a psychologically safe and trusting environment which gives people permission to try new things and allows our constructive culture to thrive.

In 2019 we accepted our fourth Human Synergistic Organisations Cultural Inventory Sustainability Award, which recognises our ability to sustain our constructive culture as measured through the Organisational Culture Inventory.

KEY INITIATIVES RESPONDING TO CORONAVIRUS (COVID-19) Coronavirus changed the way we work. Most of our workforce moved offsite to work from home in early March and quickly adapted to delivering our services remotely. We created new processes for staff and contractors who remained on the frontline to ensure they were able to safely go about their work. They practised physical distancing to protect themselves, customers and the broader public. We set up new ways for staff to stay connected, including a new social channel on our intranet and a virtual parenting team group to support staff juggling the unprecedented demands of home schooling while working from home. Staff also had increased access to support through our Employee Assistance Program, including real time SMS counselling. We conducted a staff survey in early May to check how our people were feeling about our response to coronavirus and identify if we could do more to support them. We had a very strong response with 641 people completing the survey – an 83 per cent participation rate. Results were overwhelmingly positive, with 97 per cent saying they had confidence in Yarra Valley Water managing the impact of coronavirus. In addition, 95 per cent felt their wellbeing was supported and we were proactive in responding to customers in need.

OUR VALUES As part of our focus on developing our 2030 Strategy, we undertook a comprehensive and inclusive process to define our values. Led by our Executive team, we worked with more than 150 staff across all levels of the organisation to develop a set of values to encapsulate what’s important to us and guide our work for the future. Our values focus on putting people first, having a “make it happen” attitude and being brave in our approach. We’ll work as one team and concentrate our efforts on what really matters so we make a positive impact for our customers, communities, partners and the planet. Our values will be part of our new 2030 Strategy and will become guiding principles to how we work.

DIVERSTY AND INCLUSION Our Diversity and Inclusion Strategy articulates our commitment to implement programs, practices, measures and targets that attract and retain a diverse workforce. The strategy has four key areas of focus – reflecting the community, gender balance, Aboriginal and Torres Strait Islander participation and workforce flexibility. We are developing an accessibility action plan to ensure our workplace and services are accessible to people with disability. In 2019 we also piloted disability awareness training through Scope, an organisation which supports people with physical and intellectual disabilities. This training, which will be ongoing, will skill staff to improve their understanding of the needs of people living with disability and increase our capability to meet their needs. Supporting employment pathways is a key part of our reconciliation commitment and we are committed to increasing the number of Aboriginal and Torres Strait Islander employees at Yarra Valley Water. We’re building on our efforts to create a culturally safe working space and help position the water industry as an employer of choice. As well as our ongoing relationship with AFL SportsReady, we’ve strengthened our recruitment processes to make them more accessible for Aboriginal and Torres Strait Islander applicants. About 1 per cent of employees identify as Aboriginal or Torres Strait Islander.

2 2019-20 HIGHLIGHTS

We make conscious decisions to ensure that our workforce reflects the richly diverse community we serve, actively seeking out potential candidates from key diversity groups using targeted advertising.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE CONTINUED We have invested in leadership development of Aboriginal staff members, with our Manager of Integrated Water Management Sub-Catchment Planning undertaking the Emerging Indigenous Executive Leadership Program run through UNSW and the Australian Graduate School of Management. We have several staff working groups to ensure we are promoting an inclusive and culturally safe workplace for everyone. In 2019 our Gender Balance Working Group launched YVW Women, a network designed to create a safe environment to empower female employees through support and mentoring. The network is fostering valuable connections, allowing women to share knowledge, experiences, and resources. YVW Women’s executive sponsor, our Chief Financial Officer, Natalie Foeng, has also been selected as a member of the Insight – Executive Leadership for Women in Water Program this year. This Department of Environment, Land, Water and Planning (DELWP) initiative focuses on creating gender equity across the water industry and supporting women who want to lead at the highest level. Insight focuses on self-development and learning and aims to bring together an intellectually rich group of women to create a collaborative and supportive peer network. In addition, Natalie, along with our Growth Futures General Manager, Chris Brace, is also involved in the complementary Bridging the Gap program. This program aims to bring male and female colleagues together to develop strategies to bridge gender gaps at executive level across the water sector. Together, these two programs aim to build a critical mass of engaged, informed leaders - both men and women - to drive cultural change to ensure gender equity at leadership level across the water industry.

AS OF 30 JUNE 2020, THE PROPORTION OF WOMEN AT YARRA VALLEY WATER IS:

62% FEMALE DIRECTORS

57% FEMALE EXECUTIVE

45% FEMALE PEOPLE LEADERS

50% FEMALE WORKFORCE OVERALL

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Pride in Water March, Image taken February, 2020.

PARTNERING FOR PROSPERTY

In 2019 we proudly pioneered Pride In Water, a groundbreaking industry network which aims to create a more welcoming and inclusive water industry for lesbian, gay, bisexual, transgender, intersex and queer (LGBTIQ+) staff, contractors and customers. This initiative now has the support of all 19 Victorian water corporations along with VicWater and DELWP and is growing on a national basis. It has grown through our commitment to culture and wellbeing, which has allowed our LGBTIQ+ working group to thrive and expand its work. We believe everyone has the right to feel valued, included and safe at work and, through partnership and collaboration, Pride in Water will help build a more inclusive water industry.

We’re proud to be part of a utility twinning program which helps Indonesian water authorities provide clean water and sanitation to millions of people. The federally funded Australia-Indonesia Water Utility Improvement Program (WUIP) is facilitated by the Australian Water Association and the Indonesian Water Supply Association. It pairs selected Australian water utilities with Indonesian counterparts to help address Indonesia’s water service challenges and strengthen international ties.

GRADUATE DEVELOPMENT PROGRAM Our Graduate Development Program includes a proactive recruitment strategy which helps us attract the best emerging new talent in the industry. It’s part of a broader water sector effort to attract and retain highachievers through the Melbourne Metro Water Graduate Partnership. This collaboration with City West Water, South East Water and Melbourne Water helps enhance our own program and build awareness of opportunities across the sector. The partnership won the Will Spensley Memorial Award for Innovation - Public Sector for the joint graduate program at the 2019 Australian Association of Graduate Employers Awards.

In September we visited Jakarta to attend the Indonesia Water and Wastewater Expo and Forum and take part in site visits and activities to better understand the challenges facing our twin, the Balinese-based PERUMDA Air Minum Tirta Sanjiwani. We shared our expertise around issues such as water quality, non-revenue water, gender equality and social inclusion. Our discussions and learnings will inform the development of a WUIP action plan to address these critical issues. We also hosted a contingent of Balinese staff at our Mitcham head office to demonstrate our work in action. Apart from helping to improve basic water and sanitation services for Indonesia’s people, our involvement delivers on our commitment to the United Nations’ Sustainable Development Goals (SGDs), advancing equality and prosperity in a neighbouring part of the world. It also creates an opportunity for our people to develop their skills working across diverse cultures and build new professional relationships in Australia and beyond.

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PRIDE IN WATER

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE MAKE EVERY CENT COUNT We aim to deliver fair and reasonable prices and make investment decisions that achieve community value. OUR APPROACH We aim to keep customer bills as low as possible while generating a return to the State of Victoria. We plan our investments carefully and make decisions to achieve community value and intergenerational equity. By optimising operating and capital expenditure and identifying new revenue streams, we can continue to deliver high-quality, affordable services. The impact of coronavirus on our financial situation has been closely monitored with a strong focus on supporting our customers through this challenging period. We’ve implemented initiatives and support programs to assist both residential and business customers. These

include extending the length of or deferring payment arrangements, utilisation of government programs such as concessions and utility relief grants, waiving of some trade waste fees for small businesses and pricing adjustments. Our focus has been to ensure that customers know that we understand these are challenging times and we are focused on the delivery of appropriate and supportive programs. We are actively managing our financial risks wherever possible and working closely with the Government on the potential financial impacts of coronavirus on the short and long-term financial position of the company.

Wollert Treatment Plant, Image taken September, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

KEY INITIATIVES KEEPING CUSTOMER BILLS LOW We are pleased to continue to meet our commitment of flat bills for the community with a slight reduction in the average annual bill for 2020-21. This has been achieved through a combination of control in operating expenditure, lower debt costs and reduced desalination costs. We have also been actively collaborating with Melbourne Water on its price submission given that around 54 per cent of our customer’s bill reflects Melbourne Water’s bulk charges.

To ensure we continue to keep customer bills as low as possible we set an annual 2.5 per cent productivity target as part of our Price Submission commitment. We continue to focus strongly on the delivery of ongoing cost efficiencies throughout the business through the exploration of opportunities including process and technology improvements. We continue to closely monitor and manage our operating expenditure to ensure that we minimise the long-term impact on customer bills. We’re: • Working actively in the major operating expenditure areas of the business to identify and deliver initiatives which will align with our strategy and drive down our operating costs without impacting service delivery • Establishing IT infrastructure that provides a platform to enable the delivery of long-term productivity savings • Understanding the cost drivers and structure across all areas of the business to help identify potential areas of productivity exploration • Ensuring that any benefits achieved from the delivery of initiatives are captured and maintained • Ensuring that the savings we target are able to cover any cost increases incurred above inflation • Minimising the cost impact of increased growth and change in infrastructure caused by evolving expectations and climate variability. We will continue to benchmark our performance through the Water Services Association of Australia, which confirms our efficiency levels are at best practice. We'll also continue to improve our data analytic capabilities through exploration of systems including procurement, billing and maintenance. We’ll also leverage government and industry relationships to actively identify and explore opportunities. These partnerships provide us with insights about where to focus our efforts for the largest reward.

By the start of 2023-24, we will have delivered opportunities for significant productivity gains consistent with our stretch targets in our Price Submission.

CYBER SECURITY We’ve updated our Cyber Security Plan to ensure that all our information and systems are protected from the threat of cyber attack. This rolling three-year plan, to be fully implemented by 2021, follows a structured and proactive approach to cyber security risk management. It will deliver enhanced cyber safety practices across the organisation and ensure ongoing compliance with legal, regulatory and contractual requirements. It also focuses on creating a heightened sense of awareness so every employee understands their cyber security roles and responsibilities. Highlights include: • All servers and desktops are now protected by the market leader in endpoint security • A marked increase in cyber security awareness across the organisation • Implementation of a solution to monitor the security posture of our vendors and service providers.

CAPITAL EXPENDITURE Capital expenditure in 2019-20 was $333.6 million, primarily to renew and upgrade water and sewer infrastructure. We completed the Epping Branch Sewer Merri Creek Main and Kalkallo Creek Branch Sewer Stage 1E projects this year, extended our recycled and drinking water network by 37.7km and our sewerage network by 181km to provide essential services to new customers. Our Portfolio Management Office has led to improved governance and ensures all our processes and systems are in line with industry best practice. It’s part of our work to embed a more disciplined approach to project forecasting, scheduling and reporting to drive performance and efficiencies across the organisation.

37.7KM EXTENSION TO OUR RECYCLED AND DRINKING WATER NETWORK

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PRODUCTIVITY

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

WE ARE SAFE The safety and wellbeing of our people is paramount – nothing is more important than arriving home from work safe and sound. OUR APPROACH

3.1 as at 30 June 2020. This has consistently reduced from 3.7 in August 2019. We continue to provide ongoing targeted training for our people, and education and information internally and externally to improve performance.

We’re increasing our proactive approach to safety, benchmarking our performance against the Water Services Association of Australia’s Health and Safety Maturity Model, a framework to advance health and safety culture and performance in the water industry.

KEY INITIATIVES SAFETY PERFORMANCE

Number of Lost Time Injury (LTI)

There was one lost time injury (LTI) for a contractor on a worksite under our control this year. The significant injury frequency rate (SIFR) for staff remains at 2.0, however the SIFR for Yarra Valley Water and contractors working on sites under YVW control (managed contractors) is

The SIFR for monitor contractors (contractors working on sites under their own control) is 17.8 as at 30 June 2020 and has steadily reduced since October 2019 (from 21.1). We’re implementing a range of campaigns to improve performance. The target of 5.0 was not achieved this year. Our new information sharing approach is raising awareness among all contractors of any incidents that may pose potential risks. We have also introduced role-based, targeted safety leadership training for all people managers to increase knowledge around risk management and legal obligations, including the impact of new industrial manslaughter legislation which took effect on July 1, 2020. We’ve introduced pilot lead indicators and increased our focus on hazard reporting - particularly hazards, incidents and near misses that have a higher potential for injury. We are also progressing our Safe and Well strategy focused on growing our proactive and integrated approach to safety, and deepening our wellbeing work.

8 7

6 5

4 10

3 2

1 0

2013-14

2014-15

LTI- Contractor

2015-16 LTI-YVW & Managed

2016-17

2017-18 SIFR- Contractor

2018-19

2019-20

SIFR-YVW & Managed

Significant Injury Frequency Rate (SIFR)

We work to ensure safety is always top of mind for every single person who works for Yarra Valley Water. We focus on leadership, systems and capability, and empowering our people to protect their own safety and wellbeing.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

OTHER KEY SAFETY PERFORMANCE INDICATORS

2017-18

2018-19

2019-20

Number of reported hazards/incidents for the year per 100 full time equivalent staff members

5.10

10.71

5.55

Number of ‘lost time’ standard claims for the year per 100 full time equivalent staff members

Average cost per claim for the year

$275,951

Outstanding claim cost

$275,951

SAFETY APP

We continue to focus on our transition to the new ISO 45001 Occupational Health and Safety Management Systems certification standard to bring our policies and procedures in line with international best practice. We expect to achieve full compliance by November 2020, well before the effective date of March 2021.

In 2019 we introduced a new Safety Mobility App to provide real-time safety alerts and simplify our reporting systems and procedures. The app, which was rolled out after a successful small-scale trial, allows users in the field to report safety hazards and incidents and complete fatigue assessments, helping to increase safety literacy across the entire business.

We’ve also been preparing for the new Environment Protection Amendment Act 2018, which takes effect on July 1 2021. This new environmental approach increases our focus on prevention by taking steps to eliminate or reduce risks of harm to human health and the environment. A road map has been developed to undertake a review of our impacts and aspects register, undertake environmental risk assessments to identify gaps and develop projects to meet compliance. This is supported by a roll out of information sessions across the business to explain the legislative changes.

MENTAL HEALTH AND WELLBEING As well as physical safety, we continue to explore new initiatives to support mental health and wellbeing. In October we celebrated National Safety and Wellbeing Month to encourage all staff to focus on positive safety and wellbeing initiatives in our workplace. Highlights included a fun and inclusive Diversity Day event showcasing all the initiatives that make our workplace so inclusive and a personal mental health presentation by a leading mental health advocate Wayne Schwass.

SAFETY CULTURE SURVEY Safety culture is measured using the Global Safety Index (GSI). We maintained strong results in this year’s survey, achieving 74.1 overall. This result places us within a ‘Sustainable’ Safety Culture Level. We’ll continue to work to strengthen our focus on safety through our 2030 Strategy. Management Commitment Work Environment

100

Communication

80 60 40

Personal Appreciation of Risk

Safety as a Priority

Safety Rules and Procedures

Personal Priorities Involvement

2012

Supportive Environment

benchmark

2020

2019-20 HIGHLIGHTS

NEW STANDARDS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

OVERVIEW OF 2019-20 PERFORMANCE PRICE SUBMISSION CUSTOMER COMMITMENTS OUTCOME

MEASURE

TARGET

RESULT

1 APRIL 2019 – 31 MARCH 2020 SAFE DRINKING WATER

Compliance with Safe Drinking Water Regulations 2015

100%

RELIABLE WATER AND SEWERAGE SERVICES

Customers who experience three or more unplanned water interruptions or three or more sewerage service interruptions in 12 months (five-year rolling average)

<0.96%

0.98%

TIMELY RESPONSE AND RESTORATION

Customers whose interrupted service (water and sewerage) has been restored within four hours

>91.1%

95.1%

FAIR ACCESS AND ASSISTANCE FOR ALL

Customers who, having accessed its support programs, believe Yarra Valley Water helps customers experiencing difficulty paying for their water and sewerage services

89%

90%

WATER AVAILABILITY AND CONSERVATION

Total water usage (litres/per person/ per day)

217

221

MODERN FLEXIBLE SERVICE

Customers who are satisfied with their most recent interaction

86%

87%

CARE FOR AND PROTECT THE ENVIRONMENT

Reduction in carbon emissions (cumulative) (baseline is 34,083 tonnes CO2e in 2016-17)

14.5%

14.7%

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL SUMMARY Yarra Valley Water recorded a net profit after tax of $104.4 million in 2019-20. The net profit after tax result is slightly lower than the 2018-19 result. The additional profit above budget was generated primarily as a result of the following: • Additional revenue from developer related activity levels including developer contributed assets associated with higher acceptance of works and new customer contributions

• Lower finance charges due to savings in interest rates due to low rates in the market and a lower than budgeted Financial Accommodation Levy rate Capital expenditure of $333.6 million was incurred during 2019-20 primarily to renew, augment and upgrade water and sewer infrastructure. We focus on the efficient and effective use of capital expenditure to deliver planned outcomes in accordance with our approved price submission. A final dividend of $60.6 million for the 2018-19 financial year and an interim dividend of $3.5 million for 2019-20 was paid during the year. The amount of the final dividend for the year ended 30 June 2020 will be determined after

Merri Creek, Brunswick. Image taken March, 2018.

During 2019-20 total assets have increased by $197.3 million due primarily to the growth in infrastructure, property, plant and equipment. Total liabilities increased by $229.4 million in 2019-20 largely as a result of additional borrowings of $273.7 million which were used to fund payments to the Government, operating costs and capital investments for our water and sewerage infrastructure. We have been closely monitoring the impacts of coronavirus on our financial position through ongoing analysis of cashflow, debtors, revenues and our key financial sustainability metrics. We’ve worked with external economic and social experts to help us better understand the potential financial impacts on our business. We’ve also actively engaged with the Government and regulator on our forecast financial position. We remain financially sustainable in the short and medium term with access to funding from the Government. Our financial results are forecast to reduce in 2020-21 due to the impacts of coronavirus followed by a recovery to our previous performance over the next two to four years.

2 2019-20 HIGHLIGHTS

• Operating expenditure savings achieved from efficiencies delivered across a range of areas including maintenance, information technology, operations and land tax

consultation between the Board, the Water Minister and the Treasurer of Victoria.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

2019-20 HIGHLIGHTS

OVERVIEW OF 2019-20 PERFORMANCE CONTINUED FIVE-YEAR FINANCIAL SUMMARY 2020 $’000

2019 $’000

2018 $’000

2017 $’000

2016 $’000

Service and usage revenue

952,783

957,613

936,265

886,081

907,953

Other revenue

190,791

166,440

110,532

103,262

114,414

Total revenue

1,143,574

1,124,053

1,046,797

989,343

1,022,367

Operating and other expenses

747,486

724,304

684,073

676,265

715,774

Depreciation and amortisation

114,505

107,486

107,843

96,872

97,490

Finance costs

132,886

132,207

130,127

127,440

123,942

Total expenses

994,877

963,997

922,043

900,577

937,206

Profit before income tax

148,697

160,056

124,754

88,766

85,161

Income tax

(44,299)

(48,356)

(36,252)

(27,202)

(26,247)

NET PROFIT AFTER TAX

104,398

111,700

88,502

61,564

58,914

2020 $’000

2019 $’000

2018 $’000

2017 $’000

2016 $’000

166,412

171,358

196,849

184,292

188,616

Non-current assets

5,151,903

4,949,698

4,769,483

4,546,209

4,350,521

Total assets

5,318,315

5,121,056

4,966,332

4,730,501

4,539,137

505,071

505,272

477,154

424,582

370,903

3,211,136

2,981,543

2,814,871

2,681,759

2,612,419

Total liabilities

3,716,207

3,486,815

3,292,025

3,106,341

2,983,322

NET ASSETS

1,602,108

1,634,241

1,674,307

1,624,160

1,555,815

STATEMENT OF COMPREHENSIVE INCOME

BALANCE SHEET Current assets

Current liabilities Non-current liabilities

YARRA VALLEY WATER ANNUAL REPORT 2019-20

RETURN ON AVERAGE ASSETS (%)

RETURN ON EQUITY (%)

6.75

6 4

5.37 3.83

6.45

6 4

3.87

4.70

4.66

2015-16

2016-17

5.79

5.26

2015-16

2016-17

2017-18

2018-19

2019-20

2017-18

2018-19

Return on assets has decreased in 2019-20 primarily due to growth in the average assets value associated with the 2019-20 capital works program.

GEARING RATIO (%) INTEREST BEARING DEBT TO ASSETS

NET PROFIT AFTER TAX ($M)

120

47.83

47.84

48.61

51.35

54.59

111.70

100 80 60 40

2019-20

88.50 58.91

61.56

2015-16

2016-17

104.39

20 0

2015-16

2016-17

2017-18

2018-19

2019-20

2017-18

2018-19

2019-20

Gearing ratio has increased in 2019-20 due to an increase in borrowing levels to fund capital and operatingÂ payments.

Net profit after tax has decreased in 2019-20 due to an increase in wholesale costs and a reduction to revenue with lower customer demand (usage charges) as a result of the higher rainfall experienced in 2019-20 and coronvirus impacting revenues from the commercial sector.

INTEREST COVER TIMES

CAPITAL EXPENDITURE ($M)

400

300

2.19

2.50

2.62

2.61

2.41

1 0

200

261.58

233.88

282.26

312.77

333.62

100

2015-16

2016-17

2017-18

2018-19

2019-20

Interest cover ratio in 2019-20 reduced primarily due to lower cash receipts from customers and higher income tax paid due to an increase in our tax instalment rate and payment of the final 2018-19 tax return.

2015-16

2016-17

2017-18

2018-19

2019-20

Capital expenditure increased in 2019-20 across a range of programs including sewer main renewals, community sewerage, water and sewer growth works and major project strategy to meet our customer service level targets.

2 2019-20 HIGHLIGHTS

Return on equity decreased in 2019-20 primarily due to lower profit after tax. The result was driven by an increase in wholesale costs and a reduction to revenue with lower customer demand (usage charges) as a result of the higher rainfall experienced in 2019-20 and coronavirus impacting revenues from the commercial sector.

5.39

2 0

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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Image taken February, 2019.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR LEADERSHIP ORGANISATIONAL CHART BOARD OF DIRECTORS

MANAGING DIRECTOR Pat McCafferty

SERVICE FUTURES

DISTRIBUTION SERVICES

GROWTH FUTURES

PEOPLE, PERFORMANCE & CULTURE

RETAIL SERVICES

STRATEGY & COMMUNITY

FINANCIAL & CORPORATE SERVICES

CORPORATE SECRETARY

Glenn Wilson

Dona Tantirimudalige

Chris Brace

Amy Singe

Steve Lennox

Tiffany White (acting)

Natalie Foeng

Lisa Anelli

A HIGH STANDARD OF CORPORATE GOVERNANCE The Yarra Valley Water Board has overall responsibility for corporate governance including: • setting the strategic direction • establishing goals for management and monitoring • the achievement of these goals • monitoring the business’ performance.

We are committed to ensuring a robust Corporate Governance Framework is in place and reviewing the framework regularly to ensure it aligns with best practice. This section sets out the main Corporate Governance practices in place during the 2019-20 financial year.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

The Yarra Valley Water Board comprises eight independent non-executive Directors and one executive Director, with the non-executive Chair and non-executive Directors appointed by the Minister for Water. BOARD The Managing Director is appointed by the Board in accordance with the Water Act 1989. Our Directors have a wide range of backgrounds and bring an appropriate mix of skills and experience to the Board.

ROB SKINNER AM – DEPUTY CHAIR BE (Hons), MSc, FIEAust, MAICD Rob Skinner became a Director on 1 October 2015.

BAppSc, GDipBus Mgt, FAICD Sue became a Director and Chair of Yarra Valley Water on 1 October 2015. She has been a Non-Executive Director/ Chair for over ten years. Sue is a Director of Mercer Superannuation, ClimateWorks Australia, Treasury Corporation of Victoria, Kordia Group Limited and Bush Heritage Australia. Sue is also a member of the Leadership Oversight Committee for the Women in Water Leadership Program and an advisory committee member of the Monash Sustainable Development Institute. She was previously Chair of YMCA Victoria and a Director and Deputy Chair of Goulburn Valley Water (2008-2015). Sue brings to the Board table over 25 years of senior leadership experience of successfully growing and transforming customer focused, technology dependent businesses operating in disrupted markets. This included 13 years at Telstra Corporation where she successfully led the establishment of a number of new businesses and completion of major cross-company transformation programs. Committee membership: • Hazelwynde Steering Committee - Chair • Service, Community, Assets and Regulation Committee • Risk Management and Audit Committee • Leadership, Culture and Diversity Committee.

Rob was Managing Director at Melbourne Water from 2005 to 2011, and Chief Executive Officer of the City of Kingston from 1996 to 2005. Over the past 20 years, Rob has been on a number of boards and involved in numerous advisory panels and reviews related to water policy and strategy in Victoria and elsewhere. Committee membership: • Service, Community, Assets and Regulation Committee – Chair • Risk Management and Audit Committee • Hazelwynde Steering Committee.

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SUE O’CONNOR – CHAIR

He is a Professorial Fellow at the Monash Sustainable Development Institute, Chair of WaterAid Australia and WaterAid International, Deputy Chair of Co-operative Research Centre For Water Sensitive Cities, Chair of Victorian IWM Reference Group, Lead Chair of the DELWP’s Integrated Water Management Forums and Chair of SDG6 Working Group. He is also a Distinguished Fellow of the International Water Association (IWA).

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR LEADERSHIP CONTINUED

IAN HAMM

VICTORIA MARLES

MAICD FIPAA

BA, Dip Ed, Dip Arts (Dramatic Arts), LLB (Hons), LLM, FAICD

Ian Hamm became a Director of Yarra Valley Water on 1 October 2019.

Victoria Marles became a Director on 1 October 2017.

Ian is currently the Chair of First Nations Foundation (National), Connecting Home Ltd (Stolen Generations Service), the Community Broadcasting Foundation and the Koorie Heritage Trust, Non-Executive Director of Aboriginal Housing Victoria Ltd, National Trust of Australia (Vic), Australian Red Cross, Inclusive Australia, Community First Development (formerly Indigenous Community Volunteers), Killara Foundation, and Holmesglen TAFE. Ian is also a sessional member of Planning Panels Victoria and the Australian Financial Complaints Authority.

Victoria is the Chief Executive Officer of Trust for Nature (Victorian Conservation Trust) and is currently the Chair of the Abbotsford Convent Foundation and the Consumer Action Law Centre. She has practised as a lawyer in the private, not for profit and public sectors in media/communications and consumer complaints law. Victoria has held the positions of Chief Executive Officer of the Legal Services Board (Victoria), Legal Services Commissioner (Victoria), Deputy Telecommunications Industry Ombudsman and has been a trustee of the Victorian Arts Centre Trust.

Ian has had a wide level of exposure to Policy Development and Program Management at executive level through his work with the Federal Government (Office of Aboriginal and Torres Strait Islander Health) and the Victorian Government (Department of Justice, Department of Planning and Community Development, Department of Economic Development, Jobs, Transport and Resources). Ian was also previously the President of the Western Region Football League, one of the major Australian Football leagues in Melbourne.

Victoria brings to the Board extensive knowledge in the areas of natural resource management, climate change adaption, biodiversity conservation/offsets and consumer law.

Committee membership: • Risk Management and Audit Committee • Service, Community, Assets and Regulation Committee.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

KAREN MILWARD

VICTOR PERTON

GAICD

BEc, LLB, LLM, Dip Chinese Law, GAICD

Karen Milward became a Director on 1 October 2017.

Victor Perton became a Director of Yarra Valley Water on 1 October 2015.

Karen was formerly the Deputy Chair of First Nations Foundation, a Director of Aboriginal Housing Victoria and was a Member of the Visitor Economy Ministerial Advisory Committee and Small Business Ministerial Council. Karen brings to the Board extensive experience in working with Aboriginal and Torres Strait Islander communities, having worked on complex projects commissioned by public sector agencies responsible for policies, programs and services impacting on Aboriginal communities and also having served on numerous committees and reference groups, including Ken Wyatt’s Local and Regional Voice to Parliament Group, Victorian Aboriginal Economic Board and the Premier’s Aboriginal Advisory Council. Committee membership: • Leadership, Culture and Diversity Committee • Service, Community, Assets and Regulation Committee.

Victor is the founder of the Australian Leadership Project and the Author of “The Case for Optimism: The Optimists' Voices”. His experience in governance includes service on Boards including that of the Transport Accident Commission, the Global Integrity Summit, the Australian Centre for Financial Studies and patron of the Digital Leadership Institute. He has chaired public sector inquiries and committees on technology, justice, equal opportunity, regulatory efficiency, subordinate legislation and several other topics. His current work includes advice on optimistic leadership, Australian leadership, integrity and strategy. Victor brings 18 years’ experience as a Parliamentarian, practice as a barrister, mediator, arbitrator, businessman, private sector board service and mentor. He is a former Commissioner to the Americas promoting foreign direct investment in Victoria, supporting Victorian exporters, building global supply chains and expatriate and alumni networks. Committee membership: • Service, Community, Assets and Regulation Committee • Hazelwynde Steering Committee • Leadership, Culture and Diversity Committee.

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Karen is the owner of Karen Milward Consultancy Services and is currently the Chair of Mullum Mullum Indigenous Gathering Place, Kinaway Chamber of Commerce Victoria Ltd, Community First Development (formerly Indigenous Community Volunteers), and Deputy Chair Major Transport Infrastructure Authority - Aboriginal Advisory Council.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR LEADERSHIP CONTINUED

ANITA ROPER

HELEN THORNTON

FAIM, GAICD

BEc, CA, GAICD

Anita Roper became a Director of Yarra Valley Water on 1 October 2015.

Helen Thornton became a Director of Yarra Valley Water on 1 October 2015.

Anita is currently Deputy Chair of the Stroke Association of Victoria and Independent Director of the Aluminium Stewardship Initiative. She previously served as a Member of the Board of Inquiry into the Hazelwood Coal Mine Fire and has served on numerous boards, councils and working groups including as a non-executive director of Pacific Hydro, Director of the Fitzroy Football Club, member of the Victorian Public Sector Commission Advisory Board, member of AngloGold Ashanti’s Global Panel on Sustainability and Board Member of the Women’s Network for a Sustainable Future.

Helen has more than 30 years’ experience in finance roles across a wide range of industries. Helen is currently a non-executive director and Deputy Chair of the Treasury Corporation of Victoria. She is also a Director of ISPT Pty Ltd, Ansvar Insurance, Austin Health and Legal Practitioners Liability Committee.

Anita has over 30 years’ experience in senior management roles working with business, government, communities and multilateral agencies in Australia, Canada, UK and the USA. Her executive career spans the private and public sectors, including Chief Executive Officer at Sustainability Victoria and Global Director of Sustainability with Alcoa in New York. Committee membership: • Leadership, Culture and Diversity Committee – Chair • Service, Community, Assets and Regulation Committee.

Helen was previously Deputy Chair of Zoos Victoria and a non-executive director of Big Sky Building Society and Rural Finance Corporation. A Chartered Accountant, Helen has extensive experience in finance, governance, audit and risk management. She has held senior roles in Deloittes, KPMG, BHP Ltd and BlueScope Steel Ltd where she was responsible for the global risk management function. Committee membership: • Risk Management and Audit Committee – Chair • Hazelwynde Steering Committee • Service, Community, Assets and Regulation Committee.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DIRECTORS WHO RETIRED DURING THE YEAR ERIC SJERP PAT MCCAFFERTY – MANAGING DIRECTOR BBus (Acc), Exec. MBA, GAICD, FWCLP, FIWA Pat McCafferty was appointed Managing Director of Yarra Valley Water on 1 July 2014.

He has also worked in the USA water sector and advised the Australian Federal Government as part of the National Water Initiative. Pat is Chair of the Water Services Association of Australia (Australia’s peak body for major urban water utilities) and Chair of the Thriving Communities Partnership (a cross sector collaboration to improve support for vulnerable customers of essential services). Pat is also a member of the Monash Infrastructure Advisory Council and a member of the Leadership Oversight Committee for the Women in Water Leadership Program (a Water for Victoria initiative). Committee membership: • Leadership, Culture and Diversity Committee • Hazelwynde Steering Committee • Service, Community, Assets and • Regulation Committee.

Eric became a Director of Yarra Valley Water on 1 October 2015. Eric is an Environmental Scientist with over 25 years’ professional experience throughout Australia and Malaysia. He is currently Managing Director and Principal Consultant of Ethos NRM, specialising in ecological impact assessment, environmental approvals and strategic natural resource management. Eric brought considerable governance experience having served on numerous other boards, including East Gippsland Water, Southern Rural Water, East Gippsland Environmental Sustainability Advisory Board, East Gippsland Catchment Management Authority Lands Advisory Committee, Within Australia and the East Gippsland TAFE Industry Advisory Committee. Eric had also previously served as Executive Officer of the Gippsland Lakes Management Council.

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In a career spanning over 30 years in the water industry, Pat has extensive experience across the water sector and held General Manager roles at Yarra Valley Water from 2001, covering a wide range of strategic leadership positions, including planning, regulation, finance and operations.

BSc (Geol. Geog.), MEIANZ, MAICD

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR LEADERSHIP CONTINUED BOARD CHARTER The Board Charter sets out clearly the role, responsibilities and powers of the Board and incorporates all aspects of Board governance. CODE OF CONDUCT The Board has adopted a Directors’ Code of Conduct based on the minimum standards of behaviour that support the Corporation’s cultural aspirations and the Victorian Public Sector Commission’s Directors’ Code of Conduct which articulates the duties of Directors.

DECLARATION OF PRIVATE INTERESTS All Directors have completed a declaration of private interests.

For the first time, included in the review was individual Director evaluations, using peer feedback on each Board members contribution to the Board with suggested areas to further leverage their strengths and round out their contribution to the Board. The review process involved a one on one interview with each Director and the consultant and for each Director complete a questionnaire followed by a whole of Board round table discussion on the findings and improvement opportunities drawn from the questionnaire. The results from the review described the Board to be purpose-led and high performing with genuine interest in maintaining a strong reputation for success and leadership in the industry. The results were strong across all surveyed topics with positive commentary regarding the way the Board and Executives interact to drive outcomes, alignment on strategic priorities and a thorough approach to managing risk and business performance.

All executives, senior managers, officers and contractors/ consultants with delegation to approve expenditure in excess of $20,000 have completed a declaration of private interests.

The review identified some potential opportunities for exploration by the Board with such opportunities aimed at further elevating the Board’s performance.

INDEPENDENT PROFESSIONAL ADVICE

The Board has adopted a training and development policy for Directors. This policy facilitates appropriate training and development opportunities for Directors to enable them to fulfil their role, broaden their knowledge and share this knowledge with the rest of the Board. All newly appointed Directors are required to undertake an induction program to help them understand their role and encourage fulfilment of their Board responsibilities.

The Board has adopted a number of measures to ensure that independent judgement is achieved and maintained. Directors are entitled to seek independent professional advice on matters relating to the business of Yarra Valley Water at Yarra Valley Water’s expense, subject to the prior approval of the Chair. No Director exercised this right during the year.

BOARD PERFORMANCE REVIEW In accordance with the Board Policy, an externally facilitated Performance Review of the Board was conducted in May 2020. The objective of the review was continuous governance improvement – identifying board performance improvement opportunities and governance framework gaps focusing on effective performance. In addition, given the organisation is embarking on a new era of Strategy a further objective of the review was to delve into the effectiveness of the Board’s leadership for the future operating environment including the evolving external environment.

INDUCTION AND TRAINING

The induction program includes an overview of the Yarra Valley Water business, the water industry and the linkages with Government. Directors also attend seminars and other events to broaden their exposure to water industry issues and initiatives including the VicWater Directors Development Program held earlier this year.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

LEARNING AND DEVELOPMENT In 2019-20 the Directors undertook a number of activities to support their ongoing learning and development, including exposure to senior management presentations and external presentations from water and non-water representatives. These presentations focused on learning about various operations of the business, topics that informed the strategic direction of the business and to ensure the Directors are continually mindful of their obligations regarding key safety risks. Some noteworthy learning and development opportunities undertaken by the Board during the year are discussed further below. With the recent introduction of new laws passed by the Victorian Parliament in November 2019 related to the Workplace Safety Legislation Amendment (Workplace Manslaughter and Other Matters) Bill 2019, the Board was provided training on the amendments and discharging its roles and responsibilities in order to continue its oversight role.

water so we can build better, respectful relationships between ourselves and the Aboriginal Community. During the year the Board undertook Aboriginal Cultural Awareness training as part of its work towards achieving the business’s aspiration to be a culturally confident organisation. In 2019-20 the business embarked on setting the direction of the development of the 2030 strategy, in partnership with the Executive. This was a first for the current Board which had inherited the previous strategy. This was a significant opportunity for the Board to fulfil its primary responsibility to set the organisation's strategic direction and provide valuable insight and foresight to shape a new era for the business. Directors' development took a different meaning this year as coronavirus saw a shift to a more agile way of operating. The Board continues to evaluate what they have done well in this new way of working, with many of the learnings that have come through in responding to coronavirus as we transition back and move forward as a modern, flexible and resilient organisation.

BOARD COMMITTEES The Board has established four Committees of Directors to assist with carrying out its responsibilities and to allow detailed consideration of complex issues. Each Board Committee has its own terms of reference, which set out the Committee’s objectives, duties and responsibilities, composition, meetings, authority and reporting responsibilities. All matters of safety and wellbeing are discussed at Board level. The Committees are as follows:

RISK MANAGEMENT AND AUDIT COMMITTEE

The Risk Management and Audit Committee assists the Board in fulfilling its duties and responsibilities relating to risk management, the effectiveness of internal controls and the accounting and reporting practices of the business, reviewing financial reports and overseeing the audits conducted by the internal and external auditors.

LEADERSHIP, CULTURE AND DIVERSITY COMMITTEE

The Leadership, Culture and Diversity Committee assists the Board in reviewing strategies and policies to ensure critical actions and plans are in place to implement and develop the business’ people and culture, the adequacy of the Executive Remuneration Framework, the Management Succession Plan and the business’ Diversity Policy, Strategy and Action Plans.

SERVICE, COMMUNITY, ASSETS AND REGULATION COMMITTEE

The Service, Community, Assets and Regulation Committee assists the Board with oversight to ensure the business is currently meeting customer needs, community expectations and regulatory obligations. It also provides insight and has oversight of the business’ future plans to meet customer needs, engage with community and address regulatory requirements.

HAZELWYNDE STEERING COMMITTEE

The Hazelwynde Steering Committee assists the Board with strategic oversight and expert input into progressing the Hazelwynde Project including independent expert advice in relation to greenfield development, stakeholder management and best practice project governance.

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One of the key components of our Reconciliation Action Plan is the recognition that the business is on a continuous journey, learning about Aboriginal people’s histories, culture and their connection to Community, Country and

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR LEADERSHIP CONTINUED Directors’ attendance at Board and Committee meetings – 1 July 2019 to 30 June 2020

BOARD MEETINGS

SERVICE, RISK COMMUNITY, ASSETS MANAGEMENT AND REGULATION & AUDIT COMMITTEE COMMITTEE MEETINGS

LEADERSHIP, CULTURE AND DIVERSITY COMMITTEE MEETINGS

HAZELWYNDE STEERING COMMITTEE 2

S O’Connor

15 of 15

4 of 4

3 of 3

4 of 4

R Skinner

14 of 15

3 of 4

4 of 4

I Hamm1

12 of 12

2 of 2

V Marles

15 of 15

4 of 4

K Milward

12 of 15

4 of 4

2 of 3

V Perton

15 of 15

3 of 4

2 of 3

4 of 4

A Roper

15 of 15

4 of 4

3 of 3

1 of 1

H Thornton

15 of 15

4 of 4

P McCafferty3

15 of 15

4 of 4

3 of 3

4 of 4

E Sjerp

I Hamm appointed as of 1 October 2019

E Serp retired as of 30 September 2019

P McCafferty is not a member of the Risk Management and Audit Committee however attends in his capacity as Managing Director.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

OUR LEADERSHIP TEAM PAT MCCAFFERTY Managing Director BBus (Acc), Exec. MBA, GAICD, FWCLP, FIWA As Managing Director, Pat is also a member of the Board. Refer to details in the Board section.

CHRIS BRACE General Manager Growth Futures BE (Chem), BS, GCert (Man) Chris is responsible for the provision of water and sewerage services to new customers.

He is accountable for the procurement of new infrastructure to service growth as well as the delivery of major upgrade projects for existing infrastructure. Chris has extensive experience in water and sanitation engineering and growth servicing. He has held a series of technical and senior leadership roles across all aspects of the asset lifecycle.

NATALIE FOENG Chief Financial Officer BCom (Acc), CA, GAICD Natalie leads Finance and Corporate Services. This remit includes providing business partnering support on key strategic projects across the organisation as well as seamless financial planning, management accounting, statutory accounting and treasury and taxation support, all of which are focused on the financial sustainability of the organisation and delivering exceptional outcomes for customers and the community. She also leads various critical support functions for the organisation such as payroll, procure to pay, risk and compliance, property and facilities management. Natalie has extensive experience as a finance executive and in senior leadership roles across the water sector and retail, consumer products and telecommunications industries.

STEVE LENNOX General Manager Retail Services BBus (Acc), CPA, ACIS, AGIA Steve is responsible for customer operations. He leads a group that delivers meter reading, billing management, debt collection, customer care centre operations and commercial and development services, along with the development and implementation of support programs for customers in financial difficulty. Steve has wide ranging experience in the water sector across a number of disciplines at senior leadership level including finance, technology and operations.

AMY SINGE General Manager People, Performance and Culture BCom/LLB, GDipLegalPrac Amy is responsible for developing and implementing the human resources strategy for the business, including workplace planning, organisational culture, capability development and diversity. She is also responsible for developing and maintaining systems for recruitment, onboarding, succession planning and performance management. Amy has extensive experience as a People and Culture executive and in senior leadership roles across a number of industries spanning the water sector, transport, hospitality, sports, retail, pharmaceutical and FMCG.

DONA TANTIRIMUDALIGE General Manager Distribution Services BEng (Hons), M. Public Policy and Management, MAICD, MIWA Dona currently holds one non-Executive Director role in a not-for-profit organisation and is the President of the Institute of Water Administration. Dona is responsible for managing our water, recycled water and sewerage infrastructure to ensure it delivers our desired customer service levels and meets applicable environmental performance standards. She is primarily responsible for optimisation of the existing infrastructure networks, maintenance and renewal of infrastructure, and safety and quality for Yarra Valley Water. Dona has extensive experience across the water industry and not-for-profit sectors as an executive, senior leader, and Board Director, across a variety of functions including strategic planning, asset management, customer service delivery, compliance, and transformation.

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A key focus for his function is partnering with the community to develop new urban water futures that generate greater shared benefits for all stakeholders.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR LEADERSHIP CONTINUED TIFFANY WHITE

LISA ANELLI

Acting General Manager, Strategy and Community BA (EngLit), MA (Comms), GradDip (Project Management)

Corporate Secretary BCom (Acc), CA, GAICD

Tiffany is responsible for providing strategy leadership and programs that achieve greater customer and community connection and value. Her role includes long-term strategy development, business planning, pricing and economic regulatory affairs, corporate sustainability, strategic research, marketing and customer programs, community inclusion and engagement, communication and stakeholder engagement. She also represents the business in water industry policy and reform activities. Tiffany has been a strategic communications and corporate affairs professional for over 25 years, with extensive experience in senior leadership roles across a range of sectors, including health, water, local government and tertiary education.

GLENN WILSON General Manager Service Futures BE (Civil), BBus (Admin) Glenn is responsible for transforming our core products and services – ultimately leading to productivity, customer experience and/or employee experience benefits. This work is led by our Customer Experience practice, involves business process design, and is enabled through a range of information and operational technologies. He is also accountable for our technology function which supports day to day business operations as well as our range of digital customer offerings. Glenn has over 20 years' experience in the water industry and in senior leadership roles across a range of functions including strategic asset planning, asset operations and maintenance, and technology.

Lisa is responsible for ensuring compliance with statutory and regulatory requirements and governance related administrative tasks of the Board and the organisation. This includes supporting the effective and efficient operation of the Board and providing advice and support on governance issues to the Board and the organisation.

LEADERSHIP TEAM MEMBERS WHO DEPARTED THE BUSINESS DURING THE YEAR DAVID SNADDEN General Manager Strategy and Community BE (Civil), MBA, GAICD On 10 June 2020 David resigned from the business after 25 years. Prior to leaving, David in his role as General Manager Strategy and Community was instrumental in leading the business to develop its 2030 Strategy. David has contributed to the business’s success on many levels and has been an integral part of the Executive leadership team for 13 years. This has included being a champion for our culture, taking a leading role in our strategic direction, and bringing the community lens to the fore. In his earlier days, he was heavily involved in the shifts we made in our care for the natural environment and managing our infrastructure to achieve exceptional customer outcomes, especially during the millennium drought.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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Wallan Sewerage Treatment Plant, Image taken September, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR PEOPLE AND CULTURE We believe that a great culture delivers great outcomes. Over the last decade, we have developed a high performance culture, high levels of employee engagement and effective workplace practices. ORGANISATIONAL CULTURE Our culture provides the foundation for a high-performing workplace where we collaborate with partners and stakeholders to deliver exceptional outcomes for our customers and the environment. Creating this constructive workplace culture requires a holistic approach, encompassing all aspects of the employment life cycle, such as recruitment, communication, role clarity, recognition, development, equity and leadership. Our focus on culture and engagement ensures we employ the right staff and provide them with clear direction and challenging work. It also enables, performance through strong leadership and honest feedback, and provides ongoing development through targeted learning opportunities. We're committed to continually developing our achievement oriented culture to create the best possible outcomes for our community. We use several internationally recognised benchmarking tools to track our progress and develop targeted strategies to improve our culture and engagement including: • The Human Synergistics’ Leadership Impact and Life Styles Inventory, 360-degree feedback tools that measure managers’ overall effectiveness and the ways their managerial approaches affect the behaviours and performance of those around them. These tools help us align our management and leadership practices with the organisation’s overall vision, strategy and values

• The People Matter Survey undertaken by the Victorian Public Sector Commission. In 2019 Yarra Valley Water employee engagement levels were above benchmarked organisations and all other participants from the Victorian public sector • The Culture Amp platform, which we used to measure employee engagement and make sure people felt safe during coronavirus restrictions. We received a 97 per cent confidence score, indicating that employees felt supported and confident in our proactive response to coronavirus

FAIR TREATMENT AT WORK We aim to create a vibrant culture achieving exceptional business outcomes and successful partnerships through highly capable and engaged people. We're committed to providing fair and equitable treatment for everyone in the workplace including partners, contractors, work experience students, suppliers and agents, both on and off site. We do not tolerate discrimination and take a proactive approach to ensure reasonable and proportionate measures are in place to monitor and improve practices and behaviours. All employees are required to comply with relevant federal and state legislation that establishes grounds on which discrimination is illegal including the Acts relating to Occupational Health and Safety, Equal Employment Opportunity, Discrimination and Human Rights. Employees are also required to complete discrimination awareness training which is renewed every two years.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

RECRUITMENT We're committed to applying merit and equity principles when appointing staff. The selection processes ensure that applicants are assessed and evaluated fairly and equitably on the basis of key selection criteria and other accountabilities without discrimination.

DIVERSITY AND INCLUSION The diversity of our people is fundamental to our business performance. Our Diversity and Inclusion Strategy aims to build an inclusive workplace that reflects the community it serves. We are in the second year of the Diversity to Inclusion Strategy 2019-22 and well on the way to creating a truly inclusive organisation. In 2019 we launched:

• YVW Women – a network that supports, mentors, empowers and recognises female staff We initiated and launched Pride In Water, a cross sector pride network aimed at creating a more welcoming and inclusive water industry for lesbian, gay, bisexual, transgender, intersex and queer (LGBTIQ+) staff, contractors and customers. The Gender Equality Act 2020 will play a key role in shaping our gender equality work to ensure we have an inclusive workplace. As we move in to the next phase in the continuous journey of diversity to inclusion we have a roadmap of programs, policies, measures and targets that reflect the community we serve. This strategy will see us continue to develop, expand and embrace our diverse workforce and broader community through the Board endorsed vision:

We stand for a fair and equitable society. We embrace diversity and inclusion in everything we do, as we strive to reflect the community we serve.

Over 50 per cent of candidates shortlisted for technical and leadership roles are women. This is due to managers and the recruitment team adjusting their approach to shortlisting, as well as changes to our job advertisement and careers’ website. The proportion of women in senior leadership positions include: • Directors – 62.5 per cent female • Executive leadership team – 57.1 per cent female • People leadership – 45.3 per cent female • Overall workforce – 50.6 per cent female. Strategic initiatives have been implemented to ensure cultural diversity is a core component of our employee base to ensure we truly reflect our community. At Yarra Valley Water: • 28 per cent of employees weren’t born in Australia • 52 per cent of employees have one or both parents who weren’t born in Australia • 27 per cent of employees speak another language other than English conversationally We're also committed to providing employment opportunities for Aboriginal peoples and will continue to take action to ensure we have a culturally safe environment and promote the attraction and retention of Aboriginal and Torres Strait Islander staff. About 1 per cent of our workforce identifies as Aboriginal or Torres Strait Islander, based on our Diversity Census. We have created an Aboriginal and Torres Strait Islander employment and learning strategy that spans the entire employment lifecycle including staff development. This includes leadership training for key Aboriginal staff and strengthening the cultural safety of our organisation. Our culturally specific Employee Assistance Program for Aboriginal and Torres Strait Islander employees and their families provides additional support when needed. With these support structures in place, we partnered with AFL Sportsready and undertook a trainee program - this program was so successful that the trainee was offered a role at the end of their traineeship and continues to be employed within the business. Recently we appointed two cadets and look forward providing meaningful employment opportunities whilst they undertake their studies. We've also taken a number of steps to increase our presence at Aboriginal and Torres Strait Islander career fairs and events and to highlight the water industry as a supportive and culturally safe place to work.

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• Pride at YVW – a network that fosters connections between staff to share their lived experiences, create opportunities for learning and gather people together to celebrate days of significance for the LGBTIQ+ community

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR PEOPLE AND CULTURE CONTINUED Our first Reconciliation Action Plan identified the opportunity to discuss the inclusion of criteria for director appointments that takes account of the diverse community we serve, including Aboriginal and Torres Strait Islander peoples. Ian Hamm, a Yorta Yorta man, was recently appointed to our Board. Ian brings a wealth of knowledge and experience and is currently the Chair of First Nations Foundation (National), Connecting Home Ltd (Stolen Generations Service), the Community Broadcasting Foundation, the Koorie Heritage Trust, Non-Executive Director of Aboriginal Housing Victoria Ltd, National Trust of Australia (Vic), Australian Red Cross, Inclusive Australia, Indigenous Community Volunteers, Killara Foundation, and Holmesglen TAFE. Karen Milward continues to serve on our Board, after her appointment in 2017-18. She is a Yorta Yorta woman and a strong advocate for developing culturally appropriate solutions to issues facing Aboriginal and Torres Strait Islander peoples. Our Reconciliation Leadership Committee is a key element of our governance for delivering our RAP actions.

Image taken August, 2017.

It includes Aboriginal and Torres Strait Islander staff and external representatives. The Committee’s purpose is to ensure ongoing collaboration, capacity and relationship building at a senior level within the organisation with representatives from Victorian Aboriginal communities, and their active involvement in assessing the overall direction and effectiveness of outcomes being achieved.

WE ARE SAFE We're committed to the safety and wellbeing of our staff, partner organisations and members of the public. Our safety commitment, We are Safe, is embedded in everything we do. Our safety outcomes are: • Safety exists as each person’s responsibility • We make our workplaces safe • We carry out our work without harming ourselves or others These safety outcomes are supported by our We are Safe behaviour statement, compliance with occupational health and safety legislation and our accredited Safety Management System.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

EMPLOYMENT DATA The following table discloses the head count and full-time equivalent (FTE) staff of all active Yarra Valley Water employees employed in the last full pay period in June 2020.

FULL TIME

PART TIME

CASUAL

FTE TOTAL 2019-20

FULL TIME

PART TIME

CASUAL

TOTAL

FTE 2018-19

Male

361

387

377.0

329

352

340.6

Female

257

105

386

343.7

235

102

351

312.5

TOTAL

618

117

773

720.7

564

115

703

653.1

15-24

37.7

25.4

25-34

189

207

200.8

184

208

200.1

35-44

184

234

219.7

158

205

190.9

45-54

141

172

163.3

122

151

141.3

55-64

80.0

78.4

65+

19.2

17.0

618

117

773

720.7

564

115

703

653.1

7.0

9.0

34.0

31.0

Administration and field staff2

577

117

732

679.7

524

115

663

613.1

TOTAL

618

117

773

720.7

564

115

703

653.1

GENDER

AGE

CLASSIFICATION Executive Senior manager

A senior manager, acting as an executive under long-term arrangements, has been reported in their substantive/contracted role

2 Two administrative and field staff, acting as senior managers under long-term arrangements, have been reported in their substantive/ contracted role

Staff levels changed over the course of the year with roles insourced from external contractors to lower overall costs, additional customer service staff recruited to service growing work volumes and vacancies filled from the previous year. The following table discloses the annualised total salary (excluding super) for senior employees, categorised by classification. The salary amount is reported as the full-time annualised salary.

INCOME BAND (SALARY EXCLUDING SUPERANNUATION)

EXECUTIVE

SENIOR MANAGER

$160,000 - $179,000

$180,000 - $199,999

$200,000 - $219,999

$220,000 - $239,999

$240,000 - $259,999

$260,000 - $279,999

$280,000 - $299,999

$380,000 - $399,999

$400,000 - $419,999

TOTALS

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TOTAL

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR PEOPLE AND CULTURE CONTINUED CORPORATE INFORMATION INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) EXPENDITURE For the 2019-20 reporting period, Yarra Valley Water had a total ICT expenditure of $56.146 million, details shown below:

BUSINESS AS USUAL (BAU) BAU ICT EXPENDITURE $’000

NON BAU TOTAL NON BAU ICT EXPENDITURE $’000

OPERATIONAL EXPENDITURE $’000

CAPITAL EXPENDITURE $’000

ICT DEPRECIATION $’000

40,648

159

17,680

22,809

15,498

CONSULTANCY EXPENDITURE The following is a summary of consultancy expenditure incurred by Yarra Valley Water during 2019-20. Details of consultancies (valued at less than $10,000) In 2019-20 Yarra Valley Water engaged five consultancies where the total fees payable to the consultants were less than $10,000. Total expenditure incurred during the reporting period in relation to these consultants was $44,654 (GST exclusive). Details of consultancies (valued at $10,000 or greater) In 2019-20 Yarra Valley Water engaged 20 consultancies where the total fees payable to the consultants were $10,000 or greater. Total expenditure incurred during the reporting period in relation to these consultants was $2,369,225 (GST exclusive). Details of individual consultancies are outlined on our website.

GOVERNMENT ADVERTISING EXPENDITURE In 2019-20, Yarra Valley Water participated in a Melbourne wide water efficiency campaign `Make Every Drop Count' to raise awareness of and influence water use behaviours in the community. The campaign ran between December 2019 and March 2020, with Yarra Valley Water's share of the campaign comprising: Media advertising

$374,857

Creative and campaign development

$120,143

Research and evaluation

$20,000

Print and collateral

Other campaign costs

Total campaign costs

$515,000

YARRA VALLEY WATER ANNUAL REPORT 2019-20

LEGISLATIVE COMPLIANCE Privacy and Data Protection Act 2014 Yarra Valley Water falls into the definition of a Victorian Public Sector agency under section 13 of the Privacy and Data Protection Act 2014 (Vic), and consequently complies with the Act. As the holder of our customers’ confidential and personal information, we are conscious of the need to ensure that this information is protected, and to prevent any unauthorised access to, and improper use of, that information.

professional privilege; personal information about other people; and information provided in-confidence. The Act specifies that Freedom of Information (FOI) requests should be processed within 30 days. In some cases, this time may be extended. If an applicant is not satisfied by a decision made by Yarra Valley Water, they have the right to seek a review by the Office of the Victorian Information Commissioner (OVIC) within 28 days of receiving a decision letter. Making a request FOI requests can be lodged online at ovic.vic.gov.au An application fee of $29.60 applies. Access charges may also be payable if the document pool is large, and the search for material is time consuming.

A Privacy Policy and Code of Practice are in place for our employees, contractors and agency staff to ensure customer information is protected.

Access to documents can also be obtained through a written request to Yarra Valley Water’s FOI team, as detailed in s17 of the Freedom of Information Act 1982.

Public Interest Disclosure Act 2012

When making a FOI request, applicants should ensure requests are in writing, and clearly identify what documents or materials are being sought.

We have procedures in place to help employees and contractors understand the requirements and obligations under the Public Interest Disclosure Act 2012, and to facilitate making and handling disclosures and notifying such disclosures to the Independent Broad-based Anticorruption Commission. These procedures are available to the public on our website. Freedom of Information Act 1982 The Freedom of Information Act 1982 (the Act) gives the public a right to access documents held by us. The purpose of the Act is to extend as far as possible the right of the community to access information held by government departments, local councils, Ministers and other bodies subject to the Act. An applicantcan apply for access to documents both created by us or supplied to us by an external organisation or individual. This includes maps, films, microfiche, photographs, computer printouts, computer discs, tape recordings and videotapes. The Act allows Yarra Valley Water to refuse access, either fully or partially, to certain documents or information. Examples of documents that may not be accessed include: cabinet documents; some internal working documents; law enforcement documents; documents covered by legal

FOI requests should be addressed to: Frank Portelli Manager, Risk and Corporate Services Yarra Valley Water Private Bag 1 Mitcham, Victoria, 3132 General enquiries relating to FOI can be made by calling us on (03) 9872 2634 between 8.30am and 4.30pm, Monday to Friday. Freedom of Information statistics During 2019-20, we received 17 applications. All requests were received from the general public. We made 17 FOI decisions this year. Full access to all documents was provided in response to all requests. The average time taken to finalise requests was 30 days. No requests were subject to a complaint/internal review by OVIC and none were appealed.

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In respect to the Notifiable Data Breach Scheme, we're legally obliged to disclose privacy breaches related to Tax File Numbers (TFN).

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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OUR PEOPLE AND CULTURE CONTINUED Building Act 1993 We own government buildings located at Lucknow Street, Mitcham and is consequently required to include a statement on its compliance with the building and maintenance provisions of the Building Act 1993 in relation to its buildings. We require that appropriately qualified consultants and contractors to be engaged for all proposed works on land controlled by Yarra Valley Water and we require their work and services to comply with current building standards. All consultants and contractors are expected to have appropriate mechanisms in place to ensure compliance with the Building Act 1993, Building Regulations 2018 and the National Construction Code. Our Facilities Department is responsible for mandatory testing of emergency and exit lighting and lift equipment in accordance with relevant standards, monthly, quarterly and bi-annual inspection and preventative maintenance of mechanical services and monthly and annual fire service audits. These inspections inform the works program which is delivered annually through existing maintenance.

IN 2019-20: Number of major works projects undertaken by Yarra Valley Water (greater than $50,000)

Number of building permits, occupancy permits or certificates of final inspection issued in relation to buildings owned by the entity

Nil building permits Nil occupancy permit Nil certificates of occupancy

Number of emergency orders and building orders issued in relation to buildings

Nil emergency orders Nil building orders

Number of buildings that have been brought into conformity with building standards during the reporting period

Nil buildings brought into conformity

Disclosure of major contracts A major contract is a contract entered into during the reporting period valued at $10 million or more (excluding GST). Yarra Valley Water awarded one major contract during 2019-20, to the Broadspectrum (Australia) Pty Ltd and Jaydo Construction Pty Ltd Joint Venture for the construction of the Lockerbie main sewer. The contract was valued at $59 million (excluding GST).

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Local Jobs First Policy Disclosures

Other information

Yarra Valley Water implements the Local Jobs First Policy in accordance with the Local Jobs First Act 2003.

The following information is available from Yarra Valley Water on request, subject to the Freedom of Information Act 1982:

During 2019-20, we commenced 11 Local Jobs First Standard or Strategic projects where a Local Industry Development Plan (LIDP) was required. The value of these projects totalled $181.8 million and they were all located in metropolitan Melbourne.

• a statement that declarations of pecuniary interests have been duly completed by all relevant officers • details of shares held by any senior officer as nominee or held beneficially in a statutory authority or authority

The outcomes expected from implementing the Local Jobs First -VIPP to these projects are:

• details of publications produced by the entity about itself, and how these can be obtained

• an average of 93.1 per cent local content commitment

• details of changes in process, fees, charges, rates and levies charged by the entity

• a total of 128 jobs (annualised employee equivalent [AEE]) were committed, including creating 21 new jobs and retaining 107 jobs (AEE) • a total of seven positions for apprenticeships/trainees were committed

During 2019-20, we completed three Local Jobs First Standard or Strategic projects that required either a VIPP plan or a LIDP. The value of these projects totalled $88 million and all were all located in metropolitan Melbourne. The outcomes from implementing the Local Jobs First -VIPP to these projects were: • an average of 87.4 per cent local content commitment was achieved • a total of 194 jobs (AEE) were achieved, including creating 30 new jobs and retaining 164 jobs (AEE) • a total of five positions for apprenticeships/ trainees were achieved, all of which were retained apprentices/trainees For these commenced and completed projects, there were 436 small to medium sized businesses engaged as either the principal contractor or as part of the supply chain. Competitive Neutrality Policy Competitive neutrality seeks to enable fair competition between government and private sector business. Any advantages or disadvantages that a government business may experience, simply as a result of government ownership should be neutralised. Yarra Valley Water continues to comply with the requirements of the Competitive Neutrality Policy.

• details of major research and development activities undertaken by the entity • details of overseas visits undertaken including a summary of the objectives and outcomes of each visit • details of major promotional, public relations and marketing activities undertaken by the entity to develop community awareness of the entity and its services • details of assessments and measures undertaken to improve the occupational health and safety of employees • a general statement on industrial relations within the entity and details of time lost through industrial accidents and disputes • a list of major committees sponsored by the entity, the purposes of each committee and the extent to which the purposes have been achieved • details of all consultancies and contractors including: − consultants/contractors engaged − services provided − expenditure committed to for each engagement.

FINANCIAL MANAGEMENT COMPLIANCE ATTESTATION STATEMENT I Sue O’Connor, on behalf of the Responsible Body, certify that Yarra Valley Water has no Material Compliance Deficiency with respect to the applicable Standing Directions under the Financial Management Act 1994 and Instructions.

Sue T O’Connor Chair

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The Major Projects Skills Guarantee has been applied to one project. A total of 6495 hours are committed to be completed by apprentices, trainees or cadets on this project and a total of 1.5 opportunities for apprentices, trainees or cadets has been created by this project.

• details of any major external reviews carried out on the entity

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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LIVEABILITY OUTCOMES Yarra Valley Water exists to enhance the liveability of our community, now and in the future.

Ceres Nursery, Brunswick. Image taken March, 2017.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

RESILIENT AND LIVEABLE CITIES AND TOWNS Our purpose is to support the health and wellbeing of our customers, and create a brighter future for communities and the natural environment. We're proud of our role in helping to make Melbourne one of the world's most liveable cities.

• Reimagining Taralla Creek • Monash National Employment and Innovation Cluster IWM strategy • Doncaster Hill Recycled Water Project • Improving Sanitation through onsite Wastewater Management • Stormwater Harvesting - Monbulk Recreation Reserve • Wallan Restorative Project – native vegetation regeneration initiative • Whittlesea Community Farm • Merri Creek emergency management and pollution event mitigation works

Water is essential for liveability. The impact of climate change and increased urban density will require effective management of localised flooding and impacts of stormwater runoff - particularly during more frequent high intensity rainfall events. Access to cool, green open spaces will also be essential to support wellbeing as fewer homes will have private garden space. Providing an urban form with green open space has proven health and economic benefits. The design of our local areas plays a key role in a community's connectedness and resilience during times of stress. Through our integrated water management (IWM) planning work we are continuing to ensure our role in the placemaking and urban development planning processes across Melbourne addresses these challenges.

In April 2020 we supported the adoption of clear measures that support the Strategic Directions Statements (SDSs) for the five Metropolitan IWM forums across Melbourne. This was the culmination of many months of collaboration through the IWM forums and working groups, with our inputs primarily relating to the Yarra catchment, and, to a lesser extent, the Maribyrnong and Dandenong catchments. We're now working to build these measures into our planning and reporting processes.

With community-based participation at its centre, we're striving to ensure planning processes incorporate IWM to harness water's role in supporting the creation of quality public spaces that contribute to people's health, happiness and wellbeing. This includes working closely with Traditional Owner groups to ensure their requirements and vision for water management in each area is embedded in the planning process. During 2019-20, we worked on a range of IWM approaches as part of a broader sub-catchment place-based planning approach. This included participation in the Maribyrnong, Yarra and Dandenong IWM Forums, specifically through these projects: • IWM Servicing Scheme for Moonee Ponds Creek • Northern Recycled Water Trunk Main investigation – with potential to connect Yarra Valley Water and Western Water recycled water supply networks • Collaborative sub-catchment IWM planning framework - Upper Merri Creek IWM pilot project • Coldstream recycled water scheme

WATER USE, CONSERVATION AND EFFICIENCY We are operating in a drying climate, with the challenge of population growth, so water efficiency is more important than ever. We have had a relatively stable level of per capita usage over the past five years which is comparable with the metropolitan average. We continue to promote sensible and efficient use of water through the Target 155 program, our schools’ education programs where we help schools and early learning centres integrate water as a topic into the curriculum for educators and students, by implementing the Schools Water Efficiency Program, and continuing to assist businesses and councils to become more water efficient and explore alternative sources. We support our customers and the community to use water sensibly for the things that they value. Melbourne's water industry is working together to secure water supplies for the next 50 years. This approach is captured in the ‘Water for a Future–Thriving Melbourne’ document which provides the common elements of the Urban Water Strategies of Yarra Valley Water, City West Water and South East Water, Melbourne Water’s Melbourne Water System Strategy and the joint action of supporting the efficient use of water across the community.

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PLACEMAKING THROUGH INTEGRATED WATER MANAGEMENT (IWM)

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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LIVEABILITY OUTCOMES CONTINUED In 2019-20 we worked with the Department of Environment, Land, Water and Planning (DELWP), and Victorian water corporations to launch the industry's first major water saving campaign since the implementation of Target 155 during the Millennium Drought. The Make Every Drop Count campaign, under the banner of Target 155, aims to appeal to people's sense of community and love of water whilst providing a `nudge' to think about their personal water use. We remain focused on targeting efficient water use behaviours to ensure we make the most of our state's precious water supplies. We continue to promote the efficient and sensible use of water through: • Water efficiency and behaviour change programs such as Make Every Drop Count and Target 155, a voluntary program that encourages Melbourne households to use a maximum of 155 litres of water per person per day • Developing materials and products to educate children both in the classroom and at home about how they can use water efficiently • Encouraging schools to participate in the Schools Water Efficiency Program (SWEP), a Victorian Government initiative that enables schools to track and manage their water consumption • Assisting businesses and local councils to become more water efficient and explore alternative water sources – this includes promoting a water efficiency benchmarking website for businesses • Engaging customers around water efficiency through bills, social media, videos, sponsorships, local media and website content, including the Target 155 program • Preparing a pilot program to encourage customers to install water efficient showerheads in their homes Besides water conservation, extensive customer research has told us that our customers want us to focus our efforts on improving and innovating when it comes to alternative sources of water, such as stormwater and recycled water. We have a continued focus on alternative water sources and are actively participating in the government’s Integrated Water Management forums.

Under the WaterCare support program, we offer water audits – directly to residential customers experiencing vulnerability or hardship (Community Rebate Program – CRP) and via not-for-profit community housing (the Community Housing Retrofit Program – CHRP). Both these programs are funded by DELWP on an annually reviewed basis, and we also contribute an additional $100,000 funding to the CRP program each year. The objective of the CRP program is to support customers to gain greater control over their bills by addressing leaks or inefficient appliances. We organise the plumber on behalf of the customer (with their agreement) where they are unable to afford the cost of a plumber, and pay the plumber directly, to avoid out of pocket costs for the customer. There is strong demand for this program, with the allocated funding spent each year it has run. The number of customers assisted depends on the level of funding. The program has been very well received by the community sector with 417 customers assisted in 2019-20. The CHRP program has a similar objective, however targets emergency and community housing across the Melbourne metropolitan areas (serviced by Yarra Valley Water, City West Water and South East Water) that are owned or managed by community welfare agencies. The objective is to support their ability to effectively support vulnerable customers via their core business rather than unnecessarily high bills. The program has been very well received by the community sector. Beyond water efficiency, these programs also enable customers experiencing vulnerability and hardship to take action to reduce their water use, and in turn, have greater control of their bill.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

WATER CONSUMPTION REPORT 2019-20 NUMBER OF CUSTOMERS (AS AT 30 JUNE 2020) Residential customers

781,288

Non-residential customers

58,228

TOTAL

839,516

DRINKING WATER VOLUME (ML) 1 Residential customers

115,297

Non-residential customers

28,220

(1) TOTAL

143,517

Average annual drinking water consumption2

142,725

RECYCLED WASTEWATER VOLUME (ML) Residential customers

336 1,087

(2) Total

1,423

(1)+(2) TOTAL CONSUMPTION (ML)3

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Non-residential customers

144,940

NON-REVENUE WATER (ML) Leakage

6,151

Bursts

3,584

Other

3,184

(3) Total

12,919

(1)+(2)+(3) TOTAL WATER ALL SOURCES (ML) 1 2 3

157,859

Includes a small amount of unchlorinated water supplied directly from aqueducts. Average customer usage calculated over five years from 2015-16 to 2019-20. Total consumption does not include water sourced from rainwater tanks or from greywater reuse.

250 237

200 150

244

246 217

230 210

200

207 186 164

157

152

147

153

166

164

161

168

160

161

166

159

100 50 0

98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20

The above figures include an estimate for customer usage for Quarter 4 (April – June 2020) which was not available at the time of preparing this report. Water consumption for residential and non-residential customers during the April to June quarter is expected to be impacted by coronavirus. The scale of the impact will be known in October when the Quarter 4 billing cycle is complete.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

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LIVEABILITY OUTCOMES CONTINUED DROUGHT RESPONSE REPORT The metropolitan water retailers have prepared common Drought Preparedness Plans (incorporating a Drought Response Plan) based around an adaptive framework to manage water shortages and potential use of four levels of water restrictions to control the use of drinking water outdoors. During 2019-20, there was no requirement for drought preparedness measures. In March 2020, the Minister for Water announced a 125GL desalinated water order. Permanent Water Use Rules continued to apply for the whole of 2019-20.

Average water use per employee (kL per employee) Total office space Average water use per m2

(Section 122ZJ of the Water Act 1989) Table 1: Customer by volume range

VOLUMETRIC RANGE – ML PER YEAR

NUMBER OF CUSTOMERS 13

Equal to or greater than 200ML and less than 300ML

Equal to or greater than 300ML and less than 400ML

Equal to or greater than 400ML and less than 500ML

4.56kL

Equal to or greater than 500ML and less than 750ML

10,000m2

Equal to or greater than 750ML and less than 1,000ML

Greater than 1,000ML

The amounts in the table below represent consumption at our Mitcham office excluding any treatment plants or other work sites.

Number of FTE staff on site

REQUIREMENT 1: NUMBER OF CUSTOMERS WHO FALL WITHIN EACH RANGE

Equal to or greater than 100ML and less than 200ML

CORPORATE WATER CONSUMPTION

Total water consumption for 2019-20

ANNUAL REPORTING OF MAJOR NON-RESIDENTIAL WATER USE

3,350.2kL 734

0.34kL

TOTAL NUMBER OF CUSTOMERS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

REQUIREMENT 2: NAMING OF MAJOR WATER USERS AND WHETHER OR NOT THEY PARTICIPATE IN WATER EFFICIENCY PROGRAMS

WATER RECYCLING

(Section 122ZJ of the Water Act 1989)

We constructed 70km of recycled water mains and connected 5346 properties to Class A recycled water. This brings the total number of connected properties to 31,671.

Table 2: Names of major customers and their participation in water efficiency programs

NAME OF CUSTOMER

STATUS OF CUSTOMERS’ PARTICIPATION IN WATER EFFICIENCY PROGRAM Yes

Austin Hospital

Yes

Bertocchi Smallgoods

Yes

Chadstone Shopping Centre

Yes

Chiquita Mushrooms Pty Ltd

Yes

Colonial Farm

Yes

Continental Poultry Pty Ltd

Yes

CSL Behring Pty Ltd

Yes

Eastland Shopping Centre

Yes

Huhtamaki Australia Pty Ltd

Yes

Lang Tech Bottling Pty Ltd

Yes

Latrobe University

Yes

Monash University

Yes

Peters Ice Cream

Yes

Premo Fresh

Yes

Sorbent Paper Company Pty Ltd

Yes

The Glen Shopping Centre

Yes

Visy Packaging Properties Pty Ltd

Yes

Visy Paper Coolaroo

Yes

Westfield Doncaster

Yes

To build business knowledge and support large water users to adopt local water solutions, we coordinate and facilitate seminars, undertake site visits at various businesses (exploring process and procedural improvements), and document case studies that share the learnings of others’ achievements in this area. Furthermore, all large water users have access to a national benchmarking website to compare their water consumption with others in similar industries.

We continued to lead a recycled water industry working group, allowing for collaboration and alignment between Victorian water corporations. We also worked hand-inhand with our regulators to revise the existing recycled water guidelines, to reduce barriers to recycled water use, while continuing to protect public health and the environment to the highest possible standard. Water recycling continues to be a key component of our integrated water cycle management servicing strategy for the Northern Growth Corridor, and new estates in the eastern suburbs. Public open space irrigation, and providing recycled water to all homes via a third pipe system for toilet flushing, garden watering and laundry use, provides significant efficiency and environmental benefits to the entire community.

WATER QUALITY During 2019-20, we maintained our commitment to provide safe, high-quality drinking water. This year we received 5.0 complaints for every 1000 customers, against our target of 3.2 complaints. Coronavirus restrictions meant more customers were working from home, which led to a higher than usual number of complaints reported for individual day time water quality events. We continue to work to reduce the impact of water quality changes on our customers, including keeping customers informed about operational changes to their water supply, targeted cleaning of 500km of water mains using a combination of cleaning methods, and installing additional particle dispersion devices around our network. We achieved 92 per cent customer satisfaction with the overall quality of drinking water provided.

92%

CUSTOMER SATISFACTION ACHIEVED WITH THE OVERALL QUALITY OF DRINKING WATER PROVIDED

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A & K Obaidi Pty Ltd

This year we produced 11,606ML of recycled water at our sewage treatment plants of which 3,666ML or 31.6 per cent was reused.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

LIVEABILITY OUTCOMES CONTINUED CUSTOMER AND COMMUNITY OUTCOMES CUSTOMER AND COMMUNITY ENGAGEMENT Acting with transparency and openness is central to our engagement approaches. We place a high priority on ensuring timely communication and creating mutually beneficial relationships with our customers and stakeholders. This provides important feedback to assist us in our decision making and planning and builds confidence and trust in the work we do. In 2019-20 our Community Engagement team supported 46 significant infrastructure projects, frequently in challenging locations or environmentally sensitive areas. To build deeper engagement capabilities across the business, we've started trialling a new approach this year, embedding three Community Engagement specialists within key project teams. We've also established a community engagement framework so staff working on significant infrastructure projects are guided in best practice engagement and communication.

AFFORDABILITY AND ASSISTANCE PROGRAMS Melbourne’s water bills are currently the lowest in Australia for all capital cities. We have an important role in sustaining Victoria’s productivity and a responsibility to deliver our services as efficiently as possible. In doing this we strive to relieve the pressure on household budgets and to ensure that the cost of water and sanitation services does not impact the competitiveness of our business customers. Because most of our investment decisions are long term we have an obligation to make financial decisions that optimise community value and intergenerational equity. There was strong feedback from customers during our Price Submission process that they didn’t want water bills to increase, though they valued increased service levels over a bill decrease. Nearly all customers told us that small annual bill changes are better than a single large change. As a result, we devised a price path for the fiveyear period of flat or below inflation annual bill increases. In 2019-20, the typical annual residential bill (based on 150kL consumption per annum) was $1064 - an increase from 2018-19 of $5 or 0.5 per cent. For homes with 200kL consumption per annum, the 2019-20 bill is $1257 an increase from 2018-19 of $8 or 0.6 per cent, primarily due to desalinated water costs. Despite this, keeping on top of bills remains a challenge for many Victorians. We continue to evolve our programs to support customers who are experiencing vulnerability and who find it difficult to pay their water bill. We are also committed to improving awareness of our programs among groups with a higher risk of vulnerability (such as Victorians from culturally and linguistically diverse backgrounds, concession card holders and those accessing emergency relief) and offer tailored support for these people. Coronavirus has led to a significant increase in customers seeking support. We've built on the strength of our existing Watercare program to rapidly respond and we're continually reviewing our processes as the situation evolves.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Key elements of our response include:

COMMUNITY INCLUSION

• Temporarily pausing standard collection activities while we developed new strategies and products to deal with newly vulnerable customers. Although standard debt collection would never apply to customers experiencing hardship, we were especially conscious of the adverse impacts during this difficult time

We are developing a holistic, integrated approach to ensure all areas of our business operate with common principles of community inclusion.

• Immediately ceasing restrictions and lifting them where they had been applied • Training our team to help customers through our tailored support options, supplementing our specialised hardship case management team. This included a focus on maximising concession registration and Utility Relief Grant (URG) applications, as well as options such as payment extensions and adjustments to tariff to reflect higher usage due to lockdown • Introducing new measures for our customers to selfserve on our website including waiving trade waste fees for six months to ease the pressure on small to medium businesses like cafes and restaurants

• Ensuring our call centre staff could safely work deliver our services from home. This included monitoring the wellbeing of our staff interacting with people experiencing hardship and vulnerability • Adapting our engagement strategy – moving away from face to face engagement and using virtual meetings, calls and a stakeholder newsletter to stay in touch. We also offered some immediate material assistance to frontline providers - including deliveries of toilet paper and hand sanitiser – to keep us connected and show our support for their vital work By the end of June 2020, we had 8784 customers being managed within our Watercare Customer Support Team, which is 35 per cent higher than June 2019. In addition: • 5163 customers have told us they are impacted by coronavirus (across a total of 7262 accounts - 5216 residential and 2046 commercial) • In June 2020, we processed 1287 applications for URGs - the highest number we've ever seen (after the previous high of 873 in May) • The total number of URGs granted for 2019-20 was $2.7m, benefitting 5043 customers • We've seen a significant increase in customers registering for concessions • At 30 June 2020, 49,073 instalment plan arrangements were in place

This includes: • building strong relationships with community stakeholders to support the evolution of our programs • promoting community inclusion principles within the business to strengthen, influence and guide our policy and practices • co-creating programs and action plans that enable pathways for inclusion and addressing socioeconomic and inclusion barriers to the way we work and our services • developing an approach for measurement, evaluation and reporting

THRIVING COMMUNITY PARTNERSHIP The Thriving Communities Partnership (TCP) grew out of Yarra Valley Water’s vulnerability roundtable, where we hosted 130 representatives from business, government agencies and the community sector to address some of the complex issues within our community – by moving from talk to action on tackling vulnerability. TCP is now a separate not-for-profit company limited by guarantee. It's a cross-sector collaboration with the goal that everybody has fair access to the modern essential services they need to thrive in contemporary Australia, including utilities, financial services, telecommunications and transport. TCP now has over 250 organisations participating across Australia and is currently hosted by Yarra Valley Water. As Australia has faced the impact of bushfires and coronavirus, TCP has played a pivotal role in bringing organisations together to collaborate in how to best respond to these and other challenges. In particular, TCP's new Navigating COVID Together webinar series is bringing leaders together across sectors to discuss the different impacts of coronavirus on our community and share learnings.

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• Introducing new support options for commercial customers impacted by coronavirus, including waiving trade waste fees for businesses such as cafes and restaurants

Our Community Inclusion Division aims to embed better inclusion practice across the business, including customers, staff and our supply chain. This builds on our strong foundation of supporting customers experiencing vulnerability, by looking at all areas of the business through the lens of community and financial inclusion.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

LIVEABILITY OUTCOMES CONTINUED FAMILY VIOLENCE We have a well established practice around supporting customers and staff experiencing family violence. This includes the use of `safety flags' to identify and provide greater safety to people at risk of family violence and training for our customer support team to help them assist customers who may be affected by family violence. We also internally promote our proactive family violence policies to all staff. In 2019-20, we continued to provide training for all new starters and managers, and worked with Uniting to update our training material to ensure it remains relevant. We also carried out family violence refresher training for our customer-facing staff with specialist family violence service, EDVOS. This builds on the baseline training we provided to all staff, and ensures that staff are as equipped as they can be to safely and respectfully respond to someone who may disclose family violence to them. This training was particularly timely given the significant increase in rates of family violence due to coronavirus.

• Partnering with AFL Outer East, Eastern Health and Sports and Life Training to deliver the “Leading the Change” program, which provided over 40 sessions on respectful relationships and mental health to 12 football and netball clubs across the Yarra Ranges • Sharing our family violence journey with the water industry nationally and internationally through the OzWater conference.

COMMUNITY SERVICE OBLIGATIONS In addition to our own assistance programs, many customers are eligible for support via government initiatives and programs. In 2019-20, the amount of assistance provided to customers in these programs increased. This was partially due to a significant increase in customers seeking support as well as the implementation of targeted programs to increase the number of eligible concessions registered.

We continue to be actively involved in raising awareness and collaborating with other organisations to strengthen and evolve our collective responses to family violence. Some examples from 2019-20 include:

COMMUNITY SERVICE OBLIGATIONS Provision of concessions to pensioners

51,299

49,229

49,563

• Providing case studies for the Essential Services Commission's Better Practice Guide, designed to help water and energy businesses implement safe and effective family violence strategies. The guide highlights various aspects of our work, including our commitment to training and the way our WaterCare team case manage and provide customised solutions to people experiencing family violence

Rebates paid to not-forprofit organisations under the Water and Sewerage Rebate Scheme

1,263

1,235

1,295

Utility relief grant payments

2,701

1,377

1,128

55,281

51,857

52,004

• Participating in the Essential Services Commission's Better Practice workshop and sharing our work with No To Violence, Victoria's peak body for men's behaviour change. This work developed training for staff to help build capability to safely and effectively engage with customers who use violence and understand how we can play a positive role on their path to change • Participating in a range of activities supporting action against family violence, including the Walk against Family Violence and other events during the 16 Days of Activism against Gender-Based Violence. • Actively working with different networks to promote our family violence supports for customers and to collaborate on strengthening response and prevention

Water concessions for life support machines – haemodialysis TOTAL

2019-20 2018-19 $’000 $’000

2017-18 $’000

YARRA VALLEY WATER ANNUAL REPORT 2019-20

PROVISION OF CONCESSIONS TO PENSIONERS Customers who hold either a Pension Concession Card, a Gold Repatriation Health Care Card for All Conditions or a Health Care Card are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the Department of Human and Health Services (DHHS).

REBATES PAID TO NOT-FOR-PROFIT ORGANISATIONS UNDER THE WATER AND SEWERAGE REBATE SCHEME Customers who are not-for-profit entities are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the State Revenue Office.

The Utility Relief Grant scheme provides assistance for residential customers unable to pay their utility accounts due to a temporary financial crisis. Customers need to demonstrate that unexpected hardship has left them seriously short of money so that they cannot pay their utility account without assistance.

WATER CONCESSIONS FOR LIFE SUPPORT MACHINES – HAEMODIALYSIS The State Government of Victoria provides a rebate for customers required to use a dialysis/life support machine at home, to compensate for water use and sewage disposal charges relating to its use. The rebate amount is determined by DHHS based on the estimated annual water usage of a dialysis machine (168kL). This rebate is in addition to any other pension or concession entitlements.

WATER FOR ABORIGINAL CULTURAL, SPIRITUAL AND ECONOMIC VALUES We proudly acknowledge the Traditional Owners of the land and waterways on which we work and live, we pay respects to Elders past, present and emerging. We recognise and value traditional responsibilities in caring for water and land. We also value the continuing rich cultures and contribution of Aboriginal and Torres Strait Islander peoples and communities to the Victorian community.

ABORIGINAL INCLUSION PLAN/ RECONCILIATION ACTION PLAN We launched our first Reconciliation Action Plan (RAP) in April 2017. Since then, the RAP has provided the cornerstone of our commitment to make a meaningful contribution towards reconciliation and also Aboriginal and Torres Strait Islander affairs. The RAP outlines the overall, holistic approach that we committed to; to strengthen how we engage and work with Aboriginal and Torres Strait Islander peoples, organisations and Traditional Custodian groups. The focus of our current plan has been on foundational measures, of building relationships and capability and deepening our understanding of how we can meaningfully contribute to reconciliation. We have learnt a lot over this period including the fundamental importance of long-term, committed relationships. These build trust and our understanding in how we can contribute through listening and responding to the needs and aspirations of Aboriginal community organisations and Traditional Custodians. We have gained a better understanding of the mutual capability and capacity building that is required to achieve inclusion of the inherent rights of Traditional Custodians, enabling full participation by Aboriginal and Torres Strait Islander peoples within the water sector. Our second RAP received conditional endorsement from Reconciliation Australia in June 2020. Our new vision for reconciliation will guide this next phase of our commitment:

Our vision for Reconciliation is that all who live on this land acknowledge our shared history and move forward, together, in a respectful way.

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UTILITY RELIEF GRANT SCHEME

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

LIVEABILITY OUTCOMES CONTINUED CROSS-CULTURAL TRAINING A key part of our RAP is to engage employees in cultural learning opportunities to increase understanding and appreciation of Aboriginal and Torres Strait Islander cultures, histories and achievements. We have developed a cultural learning strategy that outlines our approach to build cross-cultural awareness and capability. It identifies the different training needs for specific parts of the business – including formal and informal training opportunities. As we have begun to work more closely with Wurundjeri, Bunurong and Boon Wurrung peoples, there have been a range of opportunities for informal learning, including our understanding of Traditional Custodian aspirations and inherent rights in water planning and management. As we continue to build on how we work together, these opportunities enable us to develop our understanding of their histories, current focus and aspirations. Our second Cultural Flows breakfast, featuring Aboriginal presenters who work in the National Cultural Flows Project, was well supported, both in attendance and with engagement with Traditional Owners. To date 162 staff have completed full-day cultural awareness training since 2015-16. This covers history from an Aboriginal perspective, Aboriginal people and communities today and mechanisms to support engagement. This training has been extremely well received, and provides a good basis for our staff to build their awareness and capability to engage further and understand broader issues related to reconciliation. This training is supported by a short cultural induction delivered to our Customer Care centre staff and a broader internal communications program relating to the RAP, sharing stories and information about Aboriginal peoples, culture and histories. We have worked with Melbourne Water on their online cultural learning program, which will be a very valuable resource for our staff going forward. This formal learning is supplemented by other opportunities for cross-cultural learning throughout the year. For example, during NAIDOC Week 2019, employees attended the annual Victorian NAIDOC March from Fitzroy to Federation Square and had the great opportunity to attend the state NAIDOC Ball.

To mark our signing up to the Racism. It Stops With Me campaign, we held screenings of The Final Quarter, and throughout NAIDOC Week 2019 we ran short films profiling Aboriginal and Torres Strait Islander peoples and businesses to showcase and celebrate cultural diversity. A number of staff have also had the opportunity to attend the Koori Court, to gain an appreciation and understanding of some of the barriers that our customers face. Our internal communications include regular stories relating to Aboriginal and Torres Strait Islander culture, history, achievements and current issues. As we go forward, our focus is on building our understanding of shared history and the impact this has on the present. Our new Strategy has been guided and influenced by Aboriginal philosophies, and this will continue to provide opportunities for staff to engage and learn.

ENGAGEMENT OF ABORIGINAL COMMUNITIES Our RAP includes a commitment to support procurement opportunities that will effectively engage with Aboriginal and Torres Strait Islander businesses. We have relationships with a number of Aboriginal and Torres Strait Islander businesses which provide cultural awareness training, stationery supplies (with a Supply Nation certified supplier), photography, graphic design and other consultancy services. Developing staff capacity in social procurement has been identified as an area for development. We are memers of the Kinaway Aboriginal Chamber of Commerce, which has provided training and helped connect our business with relevant Victorian Aboriginal and Torres Strait Islander businesses. Our Aboriginal Partnerships Manager attended the World Indigenous Business Development forum in October 2019 as part of a Kinaway study tour. The forum provided valuable opportunities to expand our relationships and networks and learn from Aboriginal organisations from around the world. We launched our Sustainable and Social Procurement Strategy (2019-20), which guides us to pursue opportunities for Aboriginal and Torres Strait Islander businesses to supply us with goods and services. This is in line with our Reconciliation Action Plan actions and refers to the Victorian Government's Aboriginal Procurement Strategy and Social Procurement Framework. In implementing this strategy, we incorporated known

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Aboriginal and Torres Strait Islander businesses into our procurement system, which flags relevant procurement categories to help make staff aware of opportunities to engage them. The strategy will be updated yearly in accordance with the Social Procurement Framework.

Additionally we have provided support for Bunurong's Country Plan, in partnership with South East Water and we're working with Wandoon Estate at Coranderrk to provide an environmentally sustainable wastewater treatment option.

We have undertaken a number of activities to support Aboriginal Community Controlled Organisations and will continue to expand this work. Staff have volunteered to assist Aboriginal Housing Victoria with an annual family day event. We also provided Choose Tap bottles for the children's showbags and we support Belgrave's Survival Day event.

We strengthened our approach to cultural heritage management planning and delivery, through increased engagement with contractors and repatriation. Within our Donvale sewerage project, we uncovered more than 2700 Aboriginal stone artefacts, believed to be up to 4000 years old. Throughout this project we have worked closely with the Wurundjeri Woi-wurrung Cultural Heritage Aboriginal Corporation, including reburying the artefacts and holding a smoking ceremony. This enables us to demonstrate greater respect and maximise opportunities for learning and reflection on the history within our service area.

ENGAGEMENT OF TRADITIONAL OWNERS

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During 2019-20 we significantly strengthened the level of engagement with Traditional Custodians across Melbourne. This continues to influence our work, helping to reshape the narrative around water and planning and future decision-making. We're finalising the cultural flows assessment for the Upper Merri Creek sub-catchment, which outlines and provides for future inherent water rights for Wurundjeri Woi-Wurrung.

Staff event for Reconciliation Week. Image taken July, 2019.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

ENVIRONMENTAL OUTCOMES CLIMATE ADAPTATION Climate change projections from the Bureau of Meteorology predict a hotter and drier climate over the long term, lower stream flows to our reservoirs and greater variability, including an increased number of storm events. These challenges will require new approaches in the way we provide our services and we are committed to being forward thinking and customer focused in how we face these challenges.

• Obtaining an independent assessment of our approach to managing climate risk based on the 2019 DELWP guidelines for board members and executives. Implemented recommendations, such as including cumulative risks, transitional risks and opportunities in our strategic risk assessment, building more consistency across our long-term strategies and strengthening our governance and reporting

The Stockholm Resilience Centre planetary boundaries model defines a `safe operating space for humanity'. We now know that humanity is overstepping four of the nine boundaries we rely on including nitrogen and phosphorous flows and climate change. Recognising this, we are working towards a regenerative approach, which partners people and their places to help both thrive.

• Embedding adaptive planning in our business processes, including our Place-Based Planning Guidelines and our Servicing Strategy Guidelines, in addition to our servicing strategy for the Northern Growth Corridor

Therefore, we have embraced the Victorian Government’s vision for long-term water management in developing our 50-year Urban Water Strategy:

We will manage water to support a healthy environment, a prosperous economy and thriving communities, now and in the future. Our 50-year Urban Water Strategy and Drought Preparedness Plan apply the Department of Environment, Land, Water and Planning's guidelines for forecasting the impacts of climate change on water supplies, and we have monitored progress against these. Consideration of climate change impacts has also been embedded in the Melbourne Sewerage Strategy, in the scenarios explored and in the adaptive planning responses developed during implementation. Our Climate Resilience Plan outlines our approach to further integrate climate change adaptation into our decision making across the business. In 2019-20 we implemented key actions from this plan, including:

• Applying results from our vulnerability analysis to our Asset Management Framework, including how we can incorporate climate hazards and adaptive capacity in our risk assessments, how we can provide decision support structures in our renewals planning, and how we can build a greater understanding of our interdependencies with other service utilities • Holding quarterly seasonal outlooks with the Bureau of Meteorology to enable operational staff to prepare for the likely weather patterns in the upcoming season • Supporting actions arising from DELWP's Pilot Water Sector Climate Change Adaptation Action Plan, including Project Control Board member for the development of the Adaptation Business Case Guidelines, contributing to the Scenario Planning Guidelines, contributing to the development of catchment targets in the IWM forums, participating in the water grid stress test, and contributing to industry knowledge sharing Through these actions we have embedded climate change considerations more deeply into our decision making processes across our asset planning, water and sewerage resource planning and product delivery functions. We have also worked closely with industry colleagues to ensure our actions are aligned with broader adaptation actions undertaken across the industry. The following table outlines how each of the key actions in our Climate Resilience Plan relates to core functional areas.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

CORE FUNCTIONAL AREAS CUSTOMER & PRODUCT DELIVERY

Pilot adaptive planning

Short term

Embed adaptive planning

Long term

ENHANCE ADAPTIVE PLANNING

REDUCE SERVICE VULNERABILITIES Asset vulnerability assessment

Medium term

Contingency planning support

Short term

Emergency management responses

Short term

X X X

X X

FOSTER COLLABORATIVE PARTNERSHIPS Climate change resilience benchmarking

Short term

Partner with DELWP

Ongoing

Develop industry and customer partnerships

Ongoing

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NATURAL ENVIRONMENT

INTERDEPENDENCIES

BUILT ASSETS

Medium term

ACTION TIMEFRAME

PEOPLE & WORKPLACE

SOURCE WATERS & DEMANDS

Scenario based modelling

ACTIONS

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

ENVIRONMENTAL OUTCOMES CONTINUED BULK ENTITLEMENTS REPORT Yarra Valley Water holds Bulk Entitlements to the water resources of the Greater Yarra River — Thomson Basin and to the Victorian Desalination Project. In addition, we hold Bulk Entitlements in the River Murray and Goulburn System of up to 25,000ML annually of water savings, as a result of investment in Goulburn-Murray Water’s (GMW) Connections Project.

GREATER YARRA SYSTEM – THOMSON RIVER POOL 1, 2

VICTORIAN DESALINATION PROJECT 4

GOULBURN SYSTEM 7, 8

RIVER MURRAY 13, 14

The volume of water taken by Yarra Valley Water in 2019-20

Clause 16.1 (a) 156,409ML

Clause 13.1 (a) 0ML

Clause 14.1 (b) 11ML 9,10

0ML

Annual water allocation made available to Yarra Valley Water

Clause 16.1 (b) 187,850ML

Clause 13.1 (a) 44,961ML 5

Clause 14.1 (c) 7,132ML

Clause 11.1 (a) 5,219ML

Share of storage volume at 30 June 2020 for carryover

Clause 16.1 (b) 132,610ML

Clause 13.1 (a) 44,961ML

5,502ML 11

3,771ML 15

Compliance with the entitlement volume

Clause 16.1 (c) Yes

N/A

Any assignment of water allocation or temporary/ permanent transfers of the bulk entitlement

Clause 16.1 (d) Nil

Clause 13.1 (b) Nil

Clause 14.1 (d)12 Net 8,620ML Clause 14.1 (e) Nil

Clause 11.1 (b) Net 6,565ML 16, 17 Clause 11.1 (c) Nil

Approval, amendment and implementation of approved metering program

Clause 16.1 (e) Continued implementation 3

N/A

Any amendment to the bulk entitlement

Clause 16.1 (f) Nil

Clause 13.1 (c) Nil

Clause 14.1 (f) Nil

Clause 11.1 (d) Nil

Any new bulk entitlement granted to Yarra Valley Water

Clause 16.1 (g) Nil

Clause 13.1 (d) Nil

Nil

N/A

Clause 13.1 (e) Continued compliance 6

N/A

Clause 16.1 (h) Nil

Clause 13.1 (f) Nil

Clause 14.1 (g) Nil

Clause 11.1 (e) Nil

Clause 16.1 (i) Nil

Clause 13.1 (g) Nil

Clause 14.1 (h) Nil

Clause 11.1 (f) Nil

REPORTING OBLIGATION

Compliance with the bulk entitlement Any failures to comply with any provision of the bulk entitlement Any difficulty experienced in complying with the bulk entitlement and if so, any remedial action taken or proposed

YARRA VALLEY WATER ANNUAL REPORT 2019-20

NOTES FOR COMPLIANCE WITH BULK ENTITLEMENTS GREATER YARRA SYSTEM – THOMSON RIVER POOL

VICTORIAN DESALINATION PROJECT 4. Yarra Valley Water holds the following Bulk Entitlement to the Victorian Desalination Project. Bulk Entitlement (Desalinated Water – Yarra Valley Water) Order 2014 – WSE000054 (previously BEE050816). 5. The Hon Lisa Neville MP, Minister for Water, announced a 125GL desalinated water order for the 2019-20 year, of which Yarra Valley Water's share is 47,459ML. 2,501ML of this order was delivered into Melbourne's water supply system in June 2019. The remaining volume was delivered across 2019-20. 6. Compliance with our Desalinated Water long term average diversion limit of 56,951ML is assessed using a 5-year rolling average diversion.

GOULBURN SYSTEM 7. Yarra Valley Water holds the following Bulk Entitlement to the Goulburn System. Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 – WSE000010 (previously BEE072239). 8. Yarra Valley Water’s Bulk Entitlements in the Goulburn System provide for the progressive annual assignment of entitlement volumes as water saving works and measures from GMW’s Connections Project are completed. The 2019-20 entitlement volume was 11,927.1ML. 9. 11ML of the bulk entitlement was used to maintain the operational capacity of the North-South Pipeline and keep the pipeline charged for fire-fighting purposes, as allowed under clause 6.1 (b) of the Statement of Obligations (System Management).

RIVER MURRAY 13. Yarra Valley Water holds the following Bulk Entitlements to the River Murray. Bulk Entitlement (River Murray – Yarra Valley Water) Order 2012 – WSE000145 (previously BEE072242). 14. Yarra Valley Water's Bulk Entitlements in the River Murray provide for the progressive annual assignment of entitlement volumes as water saving works and measures from GMW's Connections Project are completed. The 2019-20 entitlement volume was 9,072.9ML (4,477.4ML in Zone 6 (Vic Murray Dartmouth to Barmah) and 4,595.5ML in Zone 7 (Vic Murray - Barmah to SA Border). 15. Yarra Valley Water's commencement volume on 1 July 2019 was 5,116ML (2,594ML in Zone 6 and 2,522ML in Zone 7). At 30 June 2020, Yarra Valley Water held 3,771ML (1,683ML in Zone 6 and 2,088ML in Zone 7). 16. Yarra Valley Water has in place water management strategies to manage water allocation holdings in the River Murray and Goulburn System to maximise the value of the resources held to their customers and minimise the risk of spilling water allocation. These strategies include the transfer of allocations between Bulk Entitlement Allocation Accounts and trading water allocations. 17. Net total trade out for River Murray system was 6,564.5ML (3,494.5ML in Zone 6 and 3,070ML in Zone 7).

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1. Yarra Valley Water holds the following Bulk Entitlement to the Greater Yarra System – Thomson River Pool. Bulk Entitlement (Greater Yarra System – Thomson River Pool – Yarra Valley Water) Order 2014 – WSE000081 (previously BEE072377). 2. The metropolitan retailers make water available in Tarago Reservoir to Gippsland Water under a Bulk Water Supply Agreement. This is used by Gippsland Water to supplement their Tarago Bulk Entitlement during periods of high demand. Yarra Valley Water provided 87.6ML under the Agreement in 2019-20. Yarra Valley Water also made available water to Goulburn Valley Water, under a Water Supply Agreement, to help secure water supplies for Kilmore. In 2019-20 Yarra Valley Water provided 63.12ML in July and August. 3. Continued compliance with approved metering program through Bulk Water Supply Agreement between Melbourne Water and Yarra Valley Water and Melbourne Water’s System Management Rules.

10. Compliance with the combined annual diversion limit of 75,000ML for the holders of Bulk Entitlement (Goulburn System – City West Water) Order 2012, Bulk Entitlement (Goulburn System – South East Water) Order 2012 and Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 is assessed using the actual measured annual diversion. Diversions are subject to clause 6.1 of Yarra Valley Water’s Statement of Obligations (System Management). 11. Yarra Valley Water's commencement volume on 1 July 2019 was 7,001ML. At 30 June 2020, Yarra Valley Water held 5,502ML. 12. Yarra Valley Water has in place water management strategies to manage water allocation holdings in the River Murray and Goulburn System to maximise the value of the resources held to their customers and minimise the risk of spilling water allocation. These strategies include the transfer of allocations between Bulk Entitlement Allocation Accounts and trading water allocations. Net total trade out was 8,620ML.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

ENVIRONMENTAL OUTCOMES CONTINUED GREENHOUSE GAS EMISSIONS AND NET ENERGY CONSUMPTION We pledged to reduce our greenhouse gas (GHG) emissions by 64 per cent by 1 July 2025. This commitment is necessary as we operate against a backdrop of population growth and increased demand for our services. To measure our performance, we set a target of emitting no more than 29,149 tCO2-e (tonnes of carbon dioxide equivalents) in 2019-20. We achieved our target mostly through increased renewable energy use - reporting 29,050 tCO2-e for the financial year. To achieve net zero emissions for the eleventh year in a row, we offset the reported emissions through a voluntary surrender of Certified Emission

Reduction credits. Further, we are working with our partners and suppliers to encourage them to reduce their emissions year on year. We rely on electricity to pump and treat water and wastewater as well as power our head office. We currently operate close to 400 network connection points that use electricity and this carbon-intensive consumption is the largest source of our emissions. We continue to look for additional ways to be more efficient, reduce consumption where possible and source our electricity from renewable generators.

PROGRESS TOWARDS 2025 GREENHOUSE GAS EMISSIONS TARGET 40000 35000 30000 25000 20000 15000 10000 5000 0 2011-16 BASELINE

2016-17

2017-18

ACTUAL GHG EMISSIONS

2018-19

2019-20

2020-21

PROJECTED GHG EMISSIONS

2021-22

2022-23

2023-24

2024-25 TARGET

YARRA VALLEY WATER ANNUAL REPORT 2019-20

GREENHOUSE GAS EMISSIONS (t CO2e) 2019-20 RESULT

2019-20 PROJECTED EMISSIONS

SCOPE 1 EMISSIONS

SCOPE 2 EMISSIONS

TOTAL

VARIANCE

NOTES

Water treatment and supply

8,500

8,398

-1.20%

Sewage collection, treatment and recycling

19,400

4,326

15,176

19,502

0.53%

1,100

1,004

-8.73%

149

146

-2.01%

29,149

5,476

23,574

29,050

-0.34%

29,149

5,476

23,574

29,050

-0.34%

Transport Other (eg. office) TOTAL GHG EMISSIONS Offsets retired â&#x20AC;&#x201C; self generated NET EMISSIONS

NOTES 1

Response to coronavirus, particularly working from home directives, has reduced transport related emissions.

PERFORMANCE INDICATOR

2018-19 RESULT (MWH)

2019-20 RESULT (MWH)

NOTES

8,496

8,233

17,753

19,254

1,485

1,313

27,734

28,800

Water treatment and supply Sewage collection, treatment and recycling Transport Other (eg. office) TOTAL NOTES

1 Increased energy associated with commissioning of new assets, including the Craigieburn Hub flow control facility and increase demand required to operate our Waste to Energy facility at capacity. 2

Response to coronavirus, particularly working from home directives, has reduced energy consumption at our head office.

RENEWABLE ENERGY We aspire to generate 100 per cent of our energy needs from renewable sources by 2025. This year, almost 35 per cent of our electricity needs were supplied from renewable sources. 24.5 per cent came from our waste to energy facility, which operating at near capacity generated 7,047 MWh of renewable energy. 42 per cent of this was used to run the facility and the adjacent sewage treatment plant leading to a 2,993 tCO2-e reduction in emissions compared to sourcing this electricity from the grid.

Solar systems at our head office and three sewage treatment plants produced 800 MWh of renewable electricity for the year. We consumed 92 per cent (734MWh) of this renewable energy onsite, with the surplus 8 per cent exported to the grid. This year our head office was 100 per cent powered by renewable energy, with 27 per cent coming directly from our solar carpark and the rest being sourced from the grid by utilising exports from our waste to energy facility.

DELIVERING VALUE

TOTAL ENERGY USE

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

ENVIRONMENTAL OUTCOMES CONTINUED In the coming year we hope to deliver a cutting edge floating solar system at our Wallan treatment plant that will not only produce renewable energy but assist in the production of recycled water by reducing algal growth in the feed stock water stored in our lagoon. We have also started planning our second Waste to Energy Plant to be located at our Lilydale Sewage Treatment Plant.

We're investigating how we could use electrolysers to produce sustainable oxygen and hydrogen. This would increase the efficiency of wastewater treatment and produce a commercially viable renewable fuel that could potentially replace diesel or natural gas in various applications.

TOTAL RENEWABLE ELECTRICITY USE PERFORMANCE INDICATOR

2018-19 RENEWABLE ELECTRICITY USED (MWH)

2019-20 RENEWABLE ELECTRICITY USED (MWH)

NOTES

227

734

Hydroelectric

Wind

2,142

2,934

Other

4,726

6,399

TOTAL

7,095

10,067

25.58%

34.96%

Solar

Biogas Greenpower

Percentage renewable electricity % NOTES 1

Solar systems installed at head office and three sewage treatment plants (produced and consumed behind the meter)

ReWaste facility (produced and consumed behind the meter)

3 Renewable electricity sourced from the grid that includes voluntary contributions and mandatory participation in the Large-scale Renewable Energy Target (LRET)

OTHER STATUTORY OBLIGATIONS VICTORIAN BIODIVERSITY STRATEGY Yarra Valley Water follows the directive of ‘Victoria’s Native Vegetation Management: A Framework for Action’, which was developed as an offset measure to support the Victorian Biodiversity Strategy. We work with multidisciplinary companies and involve ecologists early in the preliminary design phase of projects to complete them in a more sustainable manner. This includes conducting complete risk assessments, life-cycle analyses, netgain assessments and offset management plans, and preliminary flora and fauna options assessments. We liaise with stakeholders such as the Department of Environment, Land, Water and Planning (DELWP) local

councils and other water utilities on a project by project basis to determine how best to conserve Victoria’s biodiversity. We liaise directly with DELWP on ongoing growth and development of all native offset areas established as part of these projects.

VICTORIAN WATERWAY MANAGEMENT STRATEGY Yarra Valley Water strives to deliver our services within the carrying capacity of nature and reducing our environmental footprint is a priority. To improve waterway health, we continued to manage our nitrogen discharges to Port Phillip Bay in accordance with our self-imposed nitrogen cap of 87 tonnes. In 2019-20, our discharge was 66.5 tonnes.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

To comply with river and aquifer health requirements as per our Statement of Obligations, we undertook regular (weekly, monthly) sampling at each of our sewage treatment plants to ensure they comply with our Environment Protection Authority Victoria (EPA) Corporate Licence Requirements.

While the new regulations focus predominantly on a riskbased approach to environmental harm, the regulations still maintain a wet weather compliance standard (18.1 per cent Annual Exceedance Probability). Work has progressed on a number of projects to minimise or eliminate non-compliant spills. We have:

In 2019-20 we also prepared to transition to the new Environment Protection Authority Victoria legislation and corresponding license reform that is occurring by completing:

• Completed options assessment and feasibility assessment for the Darebin Creek branch sewer upgrade

• commencing detailed Ecological Risk Assessments (ERAs) for those deemed to be high risk discharges

• Completed a number of inflow reduction projects to reduce frequency and volume of wet weather spills in Coldstream, Blackburn North and the Darebin Creek Catchment

• gap analysis to the new Environment Protection Act General Environmental Duties requirements

• Completed functional design for Burwood East sewer duplication

• desktop risk assessments of all waterway discharges

STATE ENVIRONMENT PROTECTION POLICY (WATERS) During 2019-20 YVW played an active role engaging in the development of the subordinate legislation for the new EPA Act – which will supersede the existing SEPP (Waters). The new act, and its associated legislation, is a shift towards a prevention-based approach to environmental protection (rather than enforcement based). As such, we have been focusing on undertaking a gap analysis between our existing practices and the draft legislation requirements as well as completing risk assessments for all relevant sewerage aspects (dry weather spills, wet weather spills, odour, noise etc). During the past year we delivered the following projects to reduce the impacts of sewer overflows and to align our practices with the Sewerage Management Guidelines: • Construction of the Roycroft Avenue emergency relief structure (ERS) • Construction of the Great Ryrie Street ERS • Construction of three ERS screens to reduce impacts to waterways from wet weather spills • Commenced procurement for deployment of monitoring at critical locations within the sewer network • Completed several hydraulic options assessments that will progress into design in 2020-21

• Construction of the Scotchmans Creek hydraulic capacity upgrade project. In addition, we partnered with Monash University and other authorities in research initiatives designed to determine key threats to urban waterways. The first, which is in the closing stages, is a QRMA which is focused on determining the sources of risks to public health within urban waterways. The second, which is at the grant application stage, has a more holistic focus of determining a framework for understanding, reducing and communicating risks in receiving waterways. Both will play a key role in informing our risk assessments and decision making going forward. We also continued to construct new sewerage infrastructure for previously unsewered areas as part of the Community Sewerage Program. The Community Sewerage Program provides wastewater services to areas that are deemed by local councils to have a high risk of environmental impact to waterways and public health. The areas contain a large number of failing septic systems and properties unable to contain wastewater within property boundaries. During 2019-20, we continued to provide reticulated sewerage services to parts of Donvale, Park Orchards, Yarra Junction, Kallista and The Patch while also commencing construction works for similar reticulation projects in Wesburn, Don Valley and Launching Place. We also continued to plan for new sewerage services in Eltham South and in the Dandenong Ranges at Sherbrooke and Monbulk.

3 DELIVERING VALUE

The findings from these ERAs will form the basis for compliance criteria for our new license. A summary of our sewage treatment plants’ performance is reported to the EPA on an annual basis. Additionally, water quality and flow data relating to waterways is reported to the Essential Services Commission, the National Pollutant Inventory and the Bureau of Meteorology.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

OUR PERFORMANCE FINANCIAL PERFORMANCE INDICATORS PERFORMANCE INDICATOR F1

Cash interest cover

2019-20 RESULT

VARIANCE TO PRIOR YEAR

2.06 times 2.61 times 2.41 times

- 7.7%

17.0%

2019-20 TARGET

2018-19 RESULT

VARIANCE NOTES TO TARGET

NOTES

Cashflow from operations before net interest and tax payments / net interest payments F2

Gearing ratio

53.38%

51.35%

54.59%

6.3%

2.3%

18.15%

39.29%

17.59%

-55.2%

-3.1%

0.44

0.40

0.39

-2.5%

-11.4%

4.55%

5.79%

5.39%

-6.9%

18.5%

4.24%

6.75%

6.45%

-4.4%

52.1%

32.66%

35.56%

34.64%

-2.6%

6.1%

Total debt (including finance leases) / total assets *100 F3

Internal financing ratio (Net operating cash flow – dividends) / capital expenditure *100

Current ratio (Current assets / current liabilities) excluding longterm employee provisions and revenue in advance

Return on assets Earnings before net interest and tax / average total assets *100

Return on equity Net profit after tax / average total equity *100

Earnings before interest, tax, depreciation and amortisation Earnings before interest, tax, depreciation and amortisation / total revenue *100

VARIANCE EXPLANATIONS 1b H igher net operating cash flows due to additional receipts generated primarily from additional customer contributions and other revenue. We also had lower than planned operational payments as a result of savings achieved in cloud based payments, maintenance, operations and land tax,. Savings were also achieved in interest payments due to prevailing market conditions resulting in lower interest rates on new borrowings. 2a T he difference between this year’s and last year’s result is primarily due to lower receipts from customers, higher 2018-19 final dividend payment and higher capital payments due to growth in the capital program required to meet our price submission commitments. 3b C urrent assets were below budget due to lower opening trade debtors resulting from improved debt collection activity in 201819. Current liabilities were higher than budget due to additional

contract liabilities and the holding of short-term borrowings as a result of the lower interest rates experienced in the market. 4b Higher revenues primarily from developer related activities and other revenue. We also achieved savings in operating expenses due to efficiency initiatives and finance charges due to market conditions resulting in low interest rates on new borrowings. The average asset value was impacted by $103.4 million decrease as part of the 30 June 2020 infrastructure valuation. 5b Higher profit after tax due to additional revenue from developer related activities and other revenue. We also achieved savings in operating expenses due to efficiency initiatives and finance charges due to market conditions resulting in low interest rates on new borrowings and the financial accommodation levy rate on new borrowings being lower than budgeted.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

WATER AND SEWERAGE SERVICE PERFORMANCE INDICATORS PERFORMANCE INDICATOR SS1

Containment of sewer spills

VARIANCE 2019-20 TO PRIOR RESULT YEAR

2019-20 TARGET

2018-19 RESULT

VARIANCE NOTES TO TARGET

97.7%

97.0%

99.0%

2.1%

1.3%

83.8%

84.8%

93.0%

9.7%

11.0%

0.015%

0.036%

0.037 %

2.8%

146.7%

104.4 minutes

95 minutes

105.9 minutes

11.5%

1.4%

96.0%

97.9%

97.7%

-0.2%

1.8%

NOTES

Sewer spills from reticulation and branch sewers (priority 1 and 2) contained within 5 hours / total sewer spills from reticulation and branch sewers SS2

Sewer spill interruptions Number of residential sewage customers affected by sewerage interruptions restored within 4 hours

WS1 Unplanned water supply interruptions

WS2 Interruption time Average duration of unplanned water supply interruptions WS3 Restoration of unplanned water supply Unplanned water supply interruptions restored within 5 hours / total unplanned water supply interruptions * 100 VARIANCE EXPLANATIONS

6a & 6b The favourable results are due to a strong focus on this KPI by our maintenance partner and the delivery of improvements to work procedures which has been driven by access to improved data quality. 7b We experienced results consistent with 2018-19 in the actual number of customers experiencing >5 water supply interruptions, however it was significantly higher than the target. The customers affected were within five separate, large water supply isolation areas. We are continuing to implement our tactical plan to proactively manage customers with > 4 interruptions and deliver the high priority initiatives to improve future performance. We are continuing to invest in water main renewals, as well as programs to reduce the number of properties impacted by any single interruption such as the valve insertion program, valve proving program and the missing hydrant program.

8a The increase is a result of our focus on partnering with local councils to minimise the need, when possible, to remove trees as a result of asset failure within our network. This strategy increases the water off duration time as we engage with the council to identify the appropriate action to be undertaken.

3 DELIVERING VALUE

Number of customers receiving > 5 unplanned interruptions in the year / total number of water (residential and business) customers *100

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

CUSTOMER RESPONSIVENESS PERFORMANCE INDICATORS PERFORMANCE INDICATOR

2019-20 TARGET

2018-19 RESULT

2019-20 RESULT

VARIANCE TO PRIOR YEAR

CR1 Water quality complaints

3.20

4.95

5.03

1.6%

57.2%

0.90

0.70

0.76

8.6%

10a

-15.6%

10b

0.22

0.18

-18.2%

11b

3.40

3.20

2.02

-36.9%

12a

-40.6%

12b

VARIANCE NOTES TO TARGET

NOTES

Number of complaints per 1,000 customers CR2 Sewerage service qualityÂ complaints Number of complaints per 1,000 customers CR3 Sewerage odour complaints Number of complaints per 1,000 customers CR4 Billing and account complaints Number of complaints per 1,000 customers

VARIANCE EXPLANATIONS 9b We have continued to implement improvements to the accuracy of our water quality complaint reporting to ensure all incidents are captured. We have also experienced an increase in complaints from March 2020 due to more customers being home due to coronavirus and noticing localised maintenance water related quality issues.

11b

e have continued to improve our processes including W the proactive monitoring and treating problem areas has resulted in a better performance level than targeted.

12a & 12b T he favourable performance is a result of improved processes and a strong customer focus on the handling of billing and account complaints. Changes to the management of customer complaints included identifying and actioning the cause of dissatisfaction.

10a We have experienced a slight increase in sewer service complaints (536 cases in 2018-19 compared with 594 cases in 2019-20), spread across a number of categories. 10b W e have delivered improvements in our maintenance contractors' response times and rectification works which has reduced complaint volumes.

ENVIRONMENTAL PERFORMANCE INDICATORS PERFORMANCE INDICATOR E1

Effluent re-use volume (end use)

Total net CO2 emissions

VARIANCE 2019-20 TO PRIOR RESULT YEAR

2019-20 TARGET

2018-19 RESULT

VARIANCE NOTES TO TARGET

28.8 %

33.6%

31.6 %

-6.0%

13a

9.7%

13b

NOTES

Includes accredited sequestration activities and offset schemes VARIANCE EXPLANATIONS 13a Higher rainfall levels in 2019-20 compared with 2018-19 resulted in lower reuse and outdoor irrigation requirements. 13b O n-site reuse schemes are implemented to ensure we avert the need to carry out emergency discharge to waterways. Reuse within onsite Sewage Treatment Plant processes are continuing to avoid

unnecessary potable water usage. All Class A recycled water treatment plants are now operational, with production volumes continuing to improve. Although volumes of reuse has increased over time and is better than the target in 2019-20 it is weather dependent which causes variations year on year.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

CERTIFICATION OF PERFORMANCE REPORT FOR 2019-20 We certify that the accompanying Performance Report of Yarra Valley Water Corporation in respect of the 2019-20 financial year is presented fairly in accordance with the Financial Management Act 1994. The Performance Report outlines the relevant performance indicators for the financial year as determined by the Minister for Water and as set out in the 2019-20 Corporate Plan, the actual and comparative results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets and/ or between the actual results in the current year and the previous year. As at the 28th day of August 2020, we are not aware of any circumstances that would render any particulars in the Performance Report to be misleading or inaccurate.

Patrick J McCafferty Managing Director

Natalie Foeng Chief Financial Officer

DELIVERING VALUE

Sue T O’Connor Chair

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DELIVERING VALUE

AUDITOR'S REPORT

Independent Auditor’s Report To the Board of the Yarra Valley Water Corporation Opinion

I have audited the accompanying performance report of the Yarra Valley Water Corporation (the corporation) for the year ended 30 June 2020, which comprises the: • • • • •

financial performance indicators water and sewage service performance indicators customer responsiveness performance indicators environmental performance indicators certification of performance report.

In my opinion, the performance report of the Yarra Valley Water Corporation in respect of the year ended 30 June 2020 presents fairly, in all material respects, in accordance with the performance reporting requirements of Part 7 of the Financial Management Act 1994.

Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Standards on Assurance Engagements. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the performance report section of my report. My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the performance report in Victoria and have also fulfilled our other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Board's responsibilities for the performance report

The Board is responsible for the preparation and fair presentation of the performance report in accordance with the performance reporting requirements of the Financial Management Act 1994, and for such internal control as the Board determines is necessary to enable the preparation and fair presentation of the performance report that is free from material misstatement, whether due to fraud or error.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Auditor’s responsibilities for the audit of the performance report

As required by the Audit Act 1994, my responsibility is to express an opinion on the performance report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the performance report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Standards on Assurance Engagements will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of this performance report.

•

identify and assess the risks of material misstatement of the performance report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the corporation’s internal control evaluate the overall presentation, structure and content of the performance report, including the disclosures, and whether the performance report represents the underlying events and results in a manner that achieves fair presentation.

Paul Martin as delegate for the Auditor-General of Victoria

DELIVERING VALUE

As part of an audit in accordance with the Australian Standards on Assurance Engagements, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

MELBOURNE 4 September 2020

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

Image taken March, 2018.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

4 FINANCIAL REPORT

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 The Directors of Yarra Valley Water Corporation present their report for the financial year ended 30 June 2020. DIRECTORS Directors in office during the financial year were as follows. Directors were in office for the entire period, unless otherwise stated. Sue Therese O’Connor

Chair

Robert Clive Skinner

Deputy Chair

Patrick John McCafferty

Managing Director

Victor John Perton Anita Michele Roper Helen Lynette Thornton Karen Milward Victoria Fay Marles Ian Hamm (appointed 1 October 2019) Eric Sjerp (retired 30 September 2019) Particulars of the Directors’ and Corporate Secretary’s qualifications, experience and special responsibilities are set out in the Delivering Value - Our Leadership section of this Annual Report.

DIRECTORS’ ATTENDANCE AT MEETINGS The number of Directors’ meetings and Board Committee meetings held, and the number of meetings attended by each of the Directors during the financial year is set out in the Delivering Value - Our Leadership section of this Annual Report.

PRINCIPAL ACTIVITIES The principal activities during the course of the financial year were providing retail water supply and sewerage services and collecting trade waste within the Yarra Valley Water district. There were no significant changes in the nature of these activities during the year.

DIVIDENDS The amount of the final dividend for the year ended 30 June 2020 will be determined after consultation between the Board, the Minister for Water and the Treasurer of Victoria. An interim dividend of $3.5 million for the year ended 30 June 2020 was paid on 30 June 2020. A final dividend of $60.6 million for the year ended 30 June 2019 was paid on 30 October 2019.

CAPITAL REPATRIATION There is no capital repatriation for the year ended 30 June 2020. A capital repatriation of $23.87 million for the year ended 30 June 2019 was paid on 28 June 2019.

REVIEW OF OPERATIONS During the 2020 financial year, Australia was impacted by coronavirus. This resulted in lockdown restrictions within our region including the closure of schools, gyms, playgrounds, restaurants and many businesses. Employees were moved to work from home where possible and all residents of Victoria were asked to remain home, leaving only for activities deemed essential. As a result, we saw a shift in how our water and sewerage services were used, with a smaller proportion of our total water demand coming from non-residential customers due to the decrease in demand from business customers impacted by restrictions, as well as increased working from home and remote learning. We waived trade waste fees for six months to ease the pressure on vulnerable small to medium businesses and accelerated our payment terms with them, provided greater support to customers under our hardship programs and assisted our staff in their transition to work from home. We're proactively managing the implications of coronavirus and will continue to maintain our essential services. Our financial sustainability is supported by the Victorian Government. Further detail on our operations during the year ended 30 June 2020 and the results of those operations are contained in this Annual Report.

STATE OF AFFAIRS There were no significant changes in our state of affairs during the year ended 30 June 2020. For a discussion of the program and initiatives we rolled out this year, refer to the 2019-20 Highlights section in this Annual Report.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

EVENTS SUBSEQUENT TO BALANCE SHEET DATE Since 30 June 2020 to the date of this report, coronavirus lockdown restrictions in Yarra Valley Water's district have been lifted and subsequently reintroduced. Staff continue to work from home in line with health guidelines and many businesses continue to be impacted in their ability to operate. We expect to continue to see an increased number of customers accessing our hardship programs and increasing older debt balances.

DIRECTORS’ DEEDS Yarra Valley Water has entered into a Deed with each Director under which it is required to provide access to its books and to maintain insurance coverage for at least seven years after the Director ceases to be a Director.

INSURANCE OF OFFICERS During the financial year, we paid premiums in respect of contracts to insure Directors, former Directors and Officers of Yarra Valley Water against certain liabilities.

We anticipate that we will see greater impacts of coronavirus in our financial statements in 2020-21. Restrictions were considered in the preparation of our 2019-20 financial statements.

Some of the contracts of insurance prohibit disclosure of the nature of the liabilities insured and the amount of the premium.

Except as provided above, no matter or circumstance has arisen that, in the opinion of the Directors, has significantly affected or may significantly affect the operations of Yarra Valley Water, the results of those operations, or Yarra Valley Water’s state of affairs in future financial years.

ROUNDING OF AMOUNTS TO NEAREST THOUSAND DOLLARS

ENVIRONMENTAL REGULATION

This Financial Report is made in accordance with a resolution of the Directors of Yarra Valley Water on 28 August 2020.

Yarra Valley Water’s operations are subject to environmental regulation.

During the 2020-19 financial year, Yarra Valley Water complied with all conditions of the EPA’s Corporate Licence, except for an odour complaint relating to Brushy Creek sewage treatment plant (STP) received from the EPA on 22 December 2019. Investigations confirmed the vent stack at the STP as the source of the odour issue and remedial works were undertaken. The EPA provided advice in writing in February 2020 that they had assessed Yarra Valley Water’s response to the odour breach and had found that Yarra Valley Water were taking reasonable steps to investigate the source of the odour and implementing actions as a result. Yarra Valley Water maintains an Environment Management System certified to ISO 14001: (2015). Further particulars of specific environmental performance measures are set out in the Delivering Value Environmental Outcomes and Our Performance sections of this Annual Report.

4 Sue T O’Connor Chair

Patrick J McCafferty Managing Director

FINANCIAL REPORT

We hold a Corporate Licence issued by the Environment Protection Authority Victoria (EPA) under the Environment Protection Act 1970 (Vic). The licence imposes conditions relating to discharges, reporting obligations and other matters concerning the operation of seven sewage treatment plants.

The amounts in this Financial Report and the Annual Report have been rounded to the nearest thousand dollars, unless otherwise stated.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 NOTE

2020 $’000

2019 $’000

Service and usage revenue

2.1

952,783

957,613

New customer contributions by developers

2.1

36,505

32,204

Developer contributed assets

2.1

85,598

83,603

Other revenue

2.1

63,015

46,592

Other income

2.2

5,673

4,041

1,143,574

1,124,053

Revenue

Total revenue Expenses

Bulk water and sewerage expenses

3.1

(541,363)

(522,119)

Contract expenses

3.1

(56,090)

(58,718)

3.2.1 & 3.2.3

(52,710)

(51,432)

Environmental contribution

8.2

(42,855)

Depreciation

4.2

(94,174)

(87,755)

Amortisation

4.3

(20,331)

(19,731)

Finance costs

6.1.2

(132,886)

(132,207)

Other expenses

3.1

(54,468)

(49,180)

Total expenses

(994,877)

(963,997)

Profit before income tax

148,697

160,056

8.1

(44,299)

(48,356)

104,398

111,700

Salary and employee benefits expense

Income tax expense NET PROFIT AFTER TAX

OTHER COMPREHENSIVE INCOME

Decrease from revaluation of infrastructure assets

4.2

(103,396)

(127,587)

Increase from revaluation of buildings

4.2

297

Defined benefit superannuation plan actuarial loss

9.2

(373)

(2,098)

Deferred income tax on items of other comprehensive income

8.1

31,041

38,906

(72,431)

(90,779)

31,967

20,921

Other comprehensive income, net of tax TOTAL COMPREHENSIVE INCOME The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

BALANCE SHEET AS AT 30 JUNE 2020

NOTE

2020 $’000

2019 $’000

ASSETS

Current assets

Cash

6.2

2,211

1,036

Receivables

5.1

159,741

165,777

Other non-financial assets

5.2

4,460

4,545

166,412

171,358

Total current assets Non-current assets

Infrastructure, property, plant and equipment

4.2

4,980,611

4,772,209

Intangible assets

4.3

166,763

171,818

3.2.3.2c

4,529

5,671

Total non-current assets

5,151,903

4,949,698

TOTAL ASSETS

5,318,315

5,121,056

Defined benefit superannuation asset

Current liabilities

Contract liabilities

5.4

58,433

56,208

Current tax payable

8.1

3,609

22,614

3.2.2

22,083

20,268

5.5

9,464

4,629

5.6 & 6.1

Payables

5.3

111,521

113,446

Borrowings

6.1

299,959

288,107

505,071

505,272

Provisions - employee benefits Other provisions Lease liabilities

Total current liabilities Non-current liabilities Contract liabilities Provisions - employee benefits Lease liabilities

5.4

450

3.2.2

2,602

1,882

5.6 & 6.1

Deferred tax liabilities

8.1

604,871

638,261

Borrowings

6.1

2,603,200

2,341,400

3,211,136

2,981,543

3,716,207

3,486,815

1,602,108

1,634,241

Total non-current liabilities Total liabilities NET ASSETS

EQUITY

Contributed equity

9.1

420,967

Retained earnings

9.2

438,321

398,284

Asset revaluation surplus

9.3

742,820

814,990

1,602,108

1,634,241

TOTAL EQUITY The above Balance Sheet should be read in conjunction with the accompanying notes.

4 FINANCIAL REPORT

LIABILITIES

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 CONTRIBUTED EQUITY $’000

RETAINED EARNINGS $’000

ASSET REVALUATION SURPLUS $’000

$’000

444,832

332,152

904,301

1,681,285

111,700

9.2 & 9.3

(1,468)

(89,311)

(90,779)

Capital repatriation

9.1

(23,865)

Dividends paid

9.2

(44,100)

420,967

398,284

814,990

1,634,241

104,398

9.2 & 9.3

(261)

(72,170)

(72,431)

9.2

(64,100)

420,967

438,321

742,820

1,602,108

NOTE Balance as at 1 July 2018 Net profit after tax Other comprehensive income, net of tax

BALANCE AS AT 30 JUNE 2019 Net profit after tax Other comprehensive income, net of tax Dividends paid BALANCE AS AT 30 JUNE 2020

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

TOTAL

YARRA VALLEY WATER ANNUAL REPORT 2019-20

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2020

NOTE

2020 $’000

2019 $’000

Receipts from customers

1,025,576

1,050,775

Payments to suppliers and employees

(737,407)

(750,216)

Goods and services tax refunded (net)

32,930

42,021

(65,651)

(43,109)

(133,126)

(131,153)

122,417

168,331

Cash flow from operating activities

Income tax paid Interest and other costs of finance paid Interest received Net cash inflow from operating activities

6.2.1

Cash flows from investing activities

Proceeds from sale of infrastructure, property, plant and equipment Payments for acquisition of infrastructure, property, plant and equipment

874

992

(321,167)

(301,550)

Payments for acquisition of intangible assets

(11,303)

(15,654)

Net cash outflow from investing activities

(331,596)

(316,212)

Cash flows from financing activities

Refinancing of borrowings - inflow

367,642

(193,200)

(152,300)

Developer security deposits

850

554

Principal element of lease payments

(48)

Refinancing of borrowings - outflow

Dividends paid

9.2

(64,100)

(44,100)

Capital repatriation

9.1

(23,865)

210,354

147,931

Net increase in cash held

1,175

Cash at beginning of year

1,036

986

2,211

1,036

Net cash inflow from financing activities

CASH AT END OF YEAR The above Cash Flow Statement should be read in conjunction with the accompanying notes.

6.2

4 FINANCIAL REPORT

466,852

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. ABOUT THIS REPORT

FUNCTIONAL AND PRESENTATION CURRENCY

INTRODUCTION

All amounts are presented in Australian dollars, unless otherwise stated, and have been rounded to the nearest thousand dollars or, in other cases, to the nearest dollar.

This section outlines the framework underpinning these financial statements.

STRUCTURE 1.1 Basis of accounting 1.2 Impact of coronavirus on the 2019-20 Financial Report

1.1 BASIS OF ACCOUNTING This financial report is a general purpose financial report, consisting of Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and Cash Flow Statement and notes accompanying these statements for the period ending 30 June 2020. The general purpose financial report has been prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board, the requirements of the Financial Management Act 1994 and applicable Ministerial Directions. The financial report has been prepared on an accrual and going concern basis and is prepared on a historical cost convention, except for infrastructure, property, plant and equipment, and the defined superannuation asset which have been measured at fair value. The financial report of Yarra Valley Water Corporation, as an individual reporting entity for the year ended 30 June 2020, was authorised for issue in accordance with a resolution of the Directors on 28 August 2020.

ACCOUNTING POLICIES Accounting policies are applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The accounting policies have been consistently applied, unless otherwise stated. Refer to note 5.6 for the transition to AASB 16 Leases. No transitional adjustments were required.

CLASSIFICATION BETWEEN CURRENT AND NON-CURRENT In the determination of whether an asset or liability is current or non-current, consideration is given to the time when each asset or liability is expected to be realised or paid. The asset or liability is classified as current if it is expected to be turned over within the next 12 months.

ACCOUNTING ESTIMATES We evaluate estimates and makes judgements which are incorporated in the financial report based on historical knowledge and the best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data obtained both externally and within Yarra Valley Water. The significant judgements made in preparing these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Actual results may differ from these estimates. The most significant accounting estimates undertaken in preparing this financial report relate to: • accrued water usage and sewage disposal charges – notes 2.1 and 5.1 • the timing of satisfaction of performance obligations and their associated transaction price, impacting: − new customer contributions– note 2.1 − developer contributed assets – note 2.1 − other revenue – note 2.1 − unearned income – note 5.4 • assumptions on the likely tenure of existing staff, pattern of leave taken, future salary movements and future discount rates, impacting: − employee benefit provisions – note 3.2.2 − defined benefit superannuation fund – note 3.2.3.2 • asset residual values and useful lives – notes 4.2 and 4.3 • asset impairment – notes 4.2 and 4.3 • other provisions – note 5.5

YARRA VALLEY WATER ANNUAL REPORT 2019-20

• lease liabilities and right of use assets, determining whether the arrangement is in substance a short-term arrangement and estimating the discount rate when not implicit in the lease – note 5.6 • contingent assets and liabilities – note 7.3 • fair value of infrastructure, property, plant and equipment – note 7.4 • deferred tax – note 8.1.

1.2 IMPACT OF CORONAVIRUS ON THE 2019-20 FINANCIAL REPORT BACKGROUND On 16 March 2020, an initial state of emergency was declared in Victoria to deal with the spread of coronavirus. The State Government has implemented a number of measures to reduce the spread of the virus. These measures included bans on public gatherings, rules on social distancing and unnecessary personal travel and instructions for individuals to work from home where possible. While the initial state of emergency was lifted and certain restrictions eased, in July 2020 the State Government reintroduced stricter measures as cases of coronavirus began to increase and in August 2020 declared a state of disaster with further restrictions introduced.

Many businesses remain closed or limited in their operations, and as a result overall economic activity continues to be down on pre-coronavirus levels. Several sectors could not sustain current levels of employment. Many employees were left either unemployed or on a reduced wage as supressed economic activity endures. We have seen an increased number of customers accessing our hardship programs and increasing older debt balances. The Commonwealth and State governments have implemented plans to assist these affected individuals and businesses.

To offer relief to customers, trade waste contract fees were waived for vulnerable small businesses for six months. We also accelerated our payment terms to small and medium size businesses, provided greater support to customers under our hardship programs and assisted our staff in their transition to work from home.

IMPACT ON THE FINANCIAL REPORT Management have assessed the impact of coronavirus on the financial report. The areas affected are listed below. Further information has been documented where relevant under the respective note referred to: • Note 2.1 – Revenue from contracts with customers • Note 2.3 – Commitments for lease and licence receivables • Note 3.2.1 – Employee benefits – Statement of Comprehensive Income • Note 3.2.2 – Employee benefits – Balance Sheet • Note 3.2.3.2 – Defined benefit superannuation assets • Note 4.2 – Infrastructure, Property Plant and Equipment • Note 5.1 – Receivables • Note 5.3 – Payables • Note 6 – Financing our operations • Note 7.2 – Financial risk management objectives and policies • Note 7.4 – Fair value • Note 9.7 – Ex-gratia expenses • Note 9.9 – Events subsequent to balance sheet date

GOING CONCERN We are managing the implications of coronavirus and will continue to maintain our essential services. The impact is not expected to have a material impact on our ability to continue as a going concern. Our financial sustainability is supported by the Victorian Government.

4 FINANCIAL REPORT

IMPACT ON CUSTOMERS

100

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. FUNDING DELIVERY OF OUR SERVICES

Trade waste charges are recognised as revenue at a point in time when the service delivery period ends. Volume meters are read, and appropriate charges levied per trade waste agreements. Meters are read on a cyclical basis with accounts sent on a quarterly basis.

INTRODUCTION This section provides additional information about how we are funded and the accounting policies that are relevant for understanding the items recognised in the financial statements.

STRUCTURE 2.1 Revenue from contracts with customers 2.2 Other income 2.3 Commitments for lease and licence receivables

2.1 REVENUE FROM CONTRACTS WITH CUSTOMERS SERVICE AND USAGE REVENUE

2020 $’000

2019 $’000

Fixed service charges

403,292

396,359

Water usage charges

403,974

416,014

Sewage disposal charges

121,350

120,598

24,167

24,642

952,783

957,613

Trade waste charges TOTAL

Water and sewerage service charges (fixed service charges) are billed quarterly in advance and recognised as revenue over time as the customer receives access to our services. Service charges represent charges for access to the water supply and sewerage systems. Water usage charges and sewage disposal charges are recognised as revenue over time as the customer simultaneously receives and consumes the services provided. As meter reading is cyclical, an estimate is made at the end of the accounting period for water usage and sewage disposal by customers, refer note 5.1. This estimate is determined based on bulk water purchases from Melbourne Water less the estimated non-revenue, including bursts and leaks, water required for operational use, firefighting, unauthorised consumption/theft and meter inaccuracies.

The payment in advance by customers of accounts is classified as contract liabilities, refer note 5.4. Service and usage revenue is impacted by our Arrange and Save Program, refer note 9.7. As result of coronavirus, refer note 1.2, we saw a shift in how our water and sewerage services were used, with a smaller proportion of our total water demand coming from nonresidential customers due to the decrease in demand from business customers impacted by restrictions, as well as increased working from home and remote learning. Whilst the impact has been minimal in the current financial year, the impact may be more visible in the next financial year.

NEW CUSTOMER CONTRIBUTIONS (NCC) New customer contributions represent charges applicable when a customer builds or develops a property and connects to our water supply and sewerage infrastructure. These contributions help pay for shared infrastructure and are recognised as revenue at the point in time when we've met the performance obligations associated with the contribution. Performance obligations are typically recognised as being met by issuing of a Statement of Compliance (our consent for the relevant council to continue processing a developer’s application) or connection to services. Payments in advance are classified as contract liabilities, refer note 5.4.

DEVELOPER CONTRIBUTED ASSETS (DCA) Revenue from developer contributed assets arise where developers pay for the cost of constructing new assets and subsequently gift these assets to us. We maintain these assets in perpetuity. Revenue is recognised at the point in time when we've met the performance obligations associated with the asset. Performance obligations are recognised as being met by issuing of a Statement of Compliance or Acceptance of Works (our acknowledgement that the assets are operational) depending upon the developer’s application and specific performance obligations. This non-cash revenue is recorded as developer contributed assets. DCAs awaiting Statement of Compliance are classified as contract liabilities, refer note 5.4. We measure the income by assessing the value of the works using a schedule of rates.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

101

OTHER REVENUE

2020 $’000

2019 $’000

Other products and services

21,719

15,287

Park and drainage collection fees

8,552

7,768

Information statements and applications

4,981

4,817

Water trading

8,767

4,083

Waste to energy

2,612

2,716

Recoverable works

10,290

9,183

Other

6,094

2,738

TOTAL

63,015

46,592

Other revenue items are recognised on an accrual basis. Other products and services relate to various plumbing services including new meter connections and recycled water inspection fees. Revenue is recognised at the point in time when we've met the performance obligations associated with the products and services, for example, issue of Statement of Compliance or installing a new water meter.

Water trading revenue relates to sales of water allocation in northern Victoria. We recognise the revenue at the point in

Waste to energy revenue is generated from our waste to energy plant which converts organic waste into renewable energy. Revenue is recognised at a point in time, when we accept the waste into our facility. Recoverable works relates to revenue generated from third parties reimbursing us for works we have carried out on their behalf. These works are a mixture of operating expenditure and capital items. We recognise the revenue at the point in time that the works are completed. Other revenue is predominately generated from fire service revenue, council hydrant maintenance, legal settlement and sales of assets.

4 FINANCIAL REPORT

Park and drainage collection fees relate to billing and collection administration fees from both Melbourne Water and the Department of Environment, Land, Water and Planning for revenue collected from customers on their behalf.

time that the volume of water is deducted from our account and transferred to the account of the purchaser.

102

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 REVENUE FROM CONTRACTS WITH CUSTOMERS

2020 $’000

2019 $’000

Total revenue recognised over time

928,616

932,973

Total revenue recognised at point in time

209,285

187,039

TOTAL

1,137,901

1,120,012

2020 $’000

2019 $’000

1,883

2,882

3,695

1,146

5,673

4,041

2.2 OTHER INCOME

NOTE

Lease and licence income Interest income Impairment writeback TOTAL

4.2 & 7.4.1

Other income, is revenue that is not arising from contracts with customers. It is recognised on an accrual basis. Income from leases and licences is recognised in net profit in the Statement of Comprehensive Income on a straight-line basis over the agreement term.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

103

2.3 COMMITMENTS FOR LEASE AND LICENCE RECEIVABLES The following table summarises the lease and licence receivables contracted for at balance date but not provided in the financial statements. Revenue for leases and licences, where substantially all risks and benefits remain with the lessors or licensors, are recognised as revenue in the periods in which they are incurred. The commitments recorded below are at their nominal value and are inclusive of GST. We have non-cancellable agreements with various utility bodies whom use our land and buildings to house their telecommunication infrastructure. In addition to these agreements, we also have a small number of agreements with non-utility bodies which use our sites for a variety of purposes. In line with government policy introduced as a response to coronavirus, refer note 1.2, we've offered to waive the rent for our non-utility leaseholders from 1 January to 31 December 2020. Our financial statements for the financial year ended 30 June 2020 has assumed that all non-utility lease holders and licence holders will access this benefit and we have included this assumption in the disclosure below. As a result receivables no later than one year, has been reduced by approximate $0.1 million.

NON-CANCELLABLE LEASE AND LICENCE RECIEVABLES

2020 $’000

2019 $’000

No later than one year

1,501

2,050

Later than one year and no later than five years

4,535

3,290

Later than five years

6,715

4,797

TOTAL (GST INCLUSIVE)

12,751

10,137

4 FINANCIAL REPORT

104

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 3. THE COST OF DELIVERING OUR SERVICES INTRODUCTION

Contract expenses

This section provides additional information about how our funding is applied and the accounting policies that are relevant for understanding the items recognised in the financial statements.

Contract expenses include costs such as maintenance contracts, software licences and various other contracts which are expensed in the reporting period in which they are incurred.

STRUCTURE

OTHER EXPENSES

3.1 Summary of other expenses incurred in the delivery of our services

NOTE

2020 $’000

2019 $’000

Billing and revenue collection costs

8,495

9,026

3.2 Our People 3.2.1 Employee benefits – Statement of Comprehensive Income

Information technology costs

5,486

5,400

Electricity

4,868

5,501

3.3 Other commitments payable

Consulting services

4,330

3,853

3.4 Remuneration of auditors

Government taxes, fees and contributions

2,068

3,070

3.2.2 Employee benefits – Balance Sheet

3.2.3 Superannuation

3.1 SUMMARY OF OTHER EXPENSES INCURRED IN THE DELIVERY OF OUR SERVICES Bulk water and sewage charges are levied by Melbourne Water for water we buy and for sewage treated at Melbourne Water’s treatment plants. Variable charges are levied in arrears and are payable on a weekly basis. Fixed charges are levied once a month and are payable on the fifteenth of the month to which they refer. Any variable charges that remain outstanding at the end of the period are accrued.

BULK WATER AND SEWERAGE EXPENSES

2020 $’000

2019 $’000

Variable bulk water and sewerage expenses

74,891

72,964

Fixed bulk water and sewerage expenses

466,472

449,155

TOTAL

541,363

522,119

Impairment write down of assets to recoverable amount

4.2 & 7.4.1

4,713

Bad and doubtful debts

5.1.2

5,959

2,417

Deferred property debt forgiveness

5.1.2

167

3,985

4.2

911

2,076

17,471

13,767

54,468

49,180

Write off / disposal of assets Other expenses TOTAL

Billing and revenue collection costs Billing and revenue collection costs include printing, postage and collection fees which are expensed in the reporting period in which they are incurred. Other expenses Other expenses includes legal, insurance, materials, transport and other expenses.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

3.2 OUR PEOPLE 3.2.1 EMPLOYEE BENEFITS – STATEMENT OF COMPREHENSIVE INCOME Employee expenses include all costs related to employment including wages and salaries, superannuation, fringe benefits tax, leave entitlements, termination payments and WorkCover premiums. In addition to the standard leave entitlements of our employees under legislation, our staff were provided with access to additional leave to support them with coronavirus. This leave covered staff should they contract coronavirus, be caring for family with coronavirus or who were forced to take on additional caring commitments during this time.

3.2.2 EMPLOYEE BENEFITS – BALANCE SHEET A provision is recognised for benefits accruing to employees in respect of annual leave and long service leave when it is probable that settlement will be required and the liability is capable of being reliably measured. Wages and salaries, annual leave and sick leave

The annual leave liability is classified as a current liability and measured at an undiscounted amount for those entitlements expected to be wholly settled within 12 months. Annual leave that is expected to be settled after 12 months is measured as the present value of estimated future cash flows. No provision has been made for sick leave as all sick leave is non-vesting and it is not considered probable that the average sick leave taken in the future will be greater than the benefits accrued in the future. As sick leave is non-vesting, an expense is recognised in the Statement of Comprehensive Income as it is taken.

Employment on-costs such as payroll tax, workers’ compensation and superannuation are not employee benefits however contribute to the cost of employment provisions. They are disclosed separately as a component of the provision for employee benefits when the employment to which they relate has occurred. Unconditional long service leave Unconditional long service leave (LSL) is disclosed as a current liability – even where we do not expect to settle the liability within 12 months because we don’t have the unconditional right to defer the settlement of the entitlement should an employee elect to take leave within 12 months. The components of this current LSL liability are measured at: • undiscounted value – if we expect to wholly settle within 12 months • present value – if we don't expect to wholly settle within 12 months. Conditional long service leave Conditional LSL is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed seven years of service. This non-current long service leave is measured at present value. As a result of coronavirus travel restrictions, refer note 1.2, staff have taken less leave resulting in an increase in leave provisions at 30 June 2020.

4 FINANCIAL REPORT

Liabilities for wages and salaries (including non-monetary benefits, annual leave and on-costs) are recognised as part of the employee benefit provision as current liabilities, because we do not have an unconditional right to defer settlements of these liabilities. The liability for salaries and wages are recognised in the balance sheet at remuneration rates which are current at the reporting date. As we expect the liabilities to be wholly settled within 12 months of the reporting date, they are measured at an undiscounted amount.

105

106

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 EMPLOYEE BENEFITS

2020 $’000

2019 $’000

Annual leave

Unconditional and expected to settle within 12 months

2,280

1,557

Unconditional and expected to settle after 12 months

3,829

3,477

Long service leave

Unconditional and expected to settle within 12 months

360

Unconditional and expected to settle after 12 months

12,986

12,749

Provision for on-costs

Unconditional and expected to settle within 12 months

373

234

Unconditional and expected to settle after 12 months

2,255

2,182

TOTAL

22,083

20,268

NON-CURRENT LIABILITIES - PROVISIONS

Employee benefits - long service leave

2,300

1,663

On-costs

302

219

TOTAL

2,602

1,882

RECONCILIATION OF MOVEMENT IN ON-COST PROVISION

Opening balance at 1 July

2,635

2,429

Additional provision

1,252

1,435

Amounts utilised during year

(876)

(935)

Effect of changes in discount rate and remeasurement

(81)

(294)

CARRYING AMOUNT AT 30 JUNE

2,930

2,635

CURRENT LIABILITIES - PROVISIONS

Reconciliation of on-cost provision relates to the sum of current $2,628,000 (2019: $2,416,000) and non-current $302,000 (2019: $219,000) on-costs.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

107

3.2.3 SUPERANNUATION 3.2.3.1 Accumulation plans Contributions to the accumulation plans are expensed as the contributions are paid or become payable. 3.2.3.2 Defined benefit superannuation asset A liability or asset in respect of the defined benefit superannuation plan is recognised in the Balance Sheet and is measured as the present value of the defined benefit obligation at the reporting date, plus unrecognised actuarial gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date. The present value of the defined benefit obligation is based on expected future payments to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Actuarial gains and losses are recognised immediately in other comprehensive income. a. Superannuation plan information

Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. Some defined benefit members have the option of a pension benefit in certain circumstances. The defined benefit section of the plan is closed to new members. All new members of the fund receive accumulation only benefits. The Superannuation Industry (Supervision) Act 1993 (SIS) governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions unless an exemption has been obtained. We value our plan annually.

• administration of the plan and payment to the beneficiaries from plan assets when required in accordance with the plan rules • management and investment of the plan assets • compliance with superannuation law and other applicable regulations The prudential regulator, the Australian Prudential Regulation Authority (APRA), licences and supervises regulated superannuation plans. There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year. b. Description of risks There are a number of risks to which the plan exposes Yarra Valley Water. The more significant risks relating to the defined benefits are: • Investment risk – The risk that investment returns will be lower than assumed and we will need to increase contributions to offset the shortfall. Coronavirus, refer note 1.2, has increased the risk of lower investment income on bonds and equity due to the downturn in the economy. • Salary growth risk – The risk that wages or salaries (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions. • Legislative risk – The risk that legislative changes could be made which increase the cost of providing the defined benefits. • Pension risk – The risk that a greater proportion of eligible members will elect to take a pension benefit, which is generally more valuable than the corresponding lump sum benefit. Secondly, if a member elects to take a pension, the risks are the pensioner mortality will be lighter than assumed or pension increases will be greater than assumed. The plan assets are invested by the Trustee in the Defined Benefit and Cash investment options. The assets are diversified within these investment options and therefore the plan has no significant concentration of investment risk.

4 FINANCIAL REPORT

For employees who are members of the Equipsuper Superannuation Fund defined benefit plan, an agreed percentage of salaries is contributed to the fund as recommended by an actuary.

The plan’s Trustee is responsible for the governance of the plan and has a legal obligation to act solely in the best interest of plan beneficiaries. The Trustee has the following roles:

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YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 c. Reconciliation of assets and obligations

FAIR VALUE OF PLAN ASSETS $’000

DEFINED BENEFIT OBLIGATION $’000

NET DEFINED BENEFIT ASSET $’000

37,496

(29,179)

8,317

(733)

Interest income / (expense)

918

(733)

185

Actuarial return on plan assets less interest income

925

Contributions by plan participants

197

(197)

Actuarial losses arising from changes in financial assumptions

(2,998)

Actuarial losses arising from liability experience

(25)

(3,652)

3,652

(148)

148

35,736

(30,065)

5,671

(833)

Interest income / (expense)

439

(375)

Actuarial return on plan assets less interest income

459

Contributions by plan participants

194

(194)

Actuarial losses arising from changes in financial assumptions

(412)

Actuarial losses arising from changes in demographic assumptions

(999)

Actuarial gains arising from liability experience

579

(4,601)

4,601

(120)

120

32,107

(27,578)

4,529

Opening balance at 1 July 2018 Current service cost

Benefits paid Taxes, premiums and expenses paid CLOSING BALANCE AT 30 JUNE 2019 Current service cost

Benefits paid Taxes, premiums and expenses paid CLOSING BALANCE AT 30 JUNE 2020

Superannuation defined benefit expense is included in salary and employee benefits expense and is represented by the sum of current service cost, interest income and interest expense $769,000 (2019: $548,000).

The asset ceiling has no impact on the net defined benefit liability / (asset). The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. d. Fair value plan assets as at 30 June 2020 Investment funds are measured using significant observable inputs – Level 2.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

109

e. Plan assets

2020 %

2019 %

Australian equity

International equity

Fixed income

Property

Growth alternatives

Defensive alternatives

Cash

TOTAL

100

Asset allocation as at 30 June 2020 is currently unavailable. Asset allocation at 31 May 2020 has been used.

f. Fair value of Yarra Valley Water’s own financial instruments The fair value of plan assets includes no amounts relating to: • any of Yarra Valley Water’s own financial instruments • any property occupied by, or other assets used by Yarra Valley Water g. Actuarial assumptions to determine defined benefit cost and obligation

DEFINED BENEFIT OBLIGATION

2020

2019

2020

2019

Discount rate

1.30%

2.60%

0.80%

1.30%

Expected salary increase rate

4.60%

4.25%

4.60%

h. Sensitivity analysis The defined benefit obligation as at 30 June 2020 under several scenarios is presented below.

BASE CASE

0.5% PA LOWER

0.5% PA HIGHER

Discount rate - per annum

0.80%

0.30%

1.30%

Salary increase rate - per annum

4.25%

Defined benefit obligation ($’000) 1

27,578

DISCOUNT RATE

28,845

SALARY RATE

26,388

0.5% PA LOWER

0.5% P. HIGHER

3.75%

4.75%

26,539

28,661

Includes contribution tax provision.

The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions. No asset and liability matching strategies have been adopted by the plan.

FINANCIAL REPORT

DEFINED BENEFIT COST

110

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 i. Funding arrangements The Equipsuper Contribution and Funding Policy provides for a review of the financial position of the plan each six months, as at 30 June and 31 December, with Yarra Valley Water’s contribution rate comprising a long-term contribution rate and an adjustment to meet the financial objective of a Funding Ratio of 104 per cent.

3.3 OTHER COMMITMENTS PAYABLE Payments for licenses where substantially all the risks and benefits remain with the licensor are charged as expenses in the period in which they are incurred.

2020 $’000

2019 $’000

Not later than one year

Later than one year and not later than five years

Where the Funding Ratio is greater than 100 per cent, the financing objective is to achieve the Target Funding Ratio over five years. Where the Funding Ratio is less than 100 per cent the primary financing objective is to achieve 100 per cent over three years and the Target Funding Ratio over five years.

Greater than five years

116

118

In the most recent review of the financial position as at 31 December 2019, the actuary recommended continuing our contribution rate of nil. The next review of the plan's financial position and our contribution rate is due at 30 June 2020. This review will occur post 30 June once the required information becomes available.

3.4 REMUNERATION OF AUDITORS

The Target Funding Ratio reflects the proportion of salary related benefits and the allocation to ‘growth’ assets for the plan. The Funding Ratio is the ratio of assets to accrued liabilities, being the greater of vested benefits and the present value of past membership benefits.

We continue to contribute salary sacrifice contributions at the required rates for accumulation members. j. Expected contributions Employer contributions for the financial year ending 30 June 2021 are expected to be nil.

TOTAL (GST INCLUSIVE)

Contractual commitments are disclosed in note 4.5 and environmental contributions in note 8.2 .

2020 $’000

2019 $’000

Financial statements Victorian Auditor-General’s Office

149

145

Internal audit - Pitcher Partners

344

279

TOTAL

493

424

k. Maturity profile of defined benefit obligations The weighted average duration of the defined benefit obligation as at 30 June 2020 is seven years (2019: seven years).

$’000

30 June 2021

1,810

30 June 2022

1,869

30 June 2023

1,942

30 June 2024

2,297

30 June 2025

2,511

Following five years

11,315

Disclosure only includes auditors involved in the audit of financial statements or financial controls.

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4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY INTRODUCTION

STRUCTURE

We control infrastructure and other assets that are utilised in fulfilling its objectives and conducting our activities. They represent the key resources that have been entrusted to us to be utilised for delivery of those outputs.

4.1 Total infrastructure, property, plant and equipment: carrying amount 4.2 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment 4.3 Intangible assets 4.4 Net gain / loss on disposal of non-current physical assets 4.5 Contractual commitments payable

4.1 TOTAL INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT: CARRYING AMOUNT

GROSS CARRYING AMOUNT

ACCUMULATED DEPRECIATION

NET CARRYING AMOUNT

2019 $’000

2020 $’000

2019 $’000

2020 $’000

2019 $’000

4,245,100

3,890,500

4,245,100

3,890,500

424,344

410,871

424,344

410,871

Buildings

35,392

36,599

(3,848)

35,392

32,751

Plant and equipment

49,774

52,891

(20,094)

(26,809)

29,680

26,082

(44)

246,013

412,005

246,013

412,005

5,000,749

4,802,866

(20,138)

(30,657)

4,980,611

4,772,209

At fair value Infrastructure Land

Leasehold improvements At cost Right of use asset Capital works in progress TOTAL

4 FINANCIAL REPORT

2020 $’000

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FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.2 RECONCILIATION OF MOVEMENTS IN CARRYING VALUES OF INFRASTRUCTURE, PROPERTY, PLANT AND EQUIPMENT INFRASTRUCTURE $’000

Balance at 1 July 2018

LAND $’000

3,817,200 408,968

PLANT AND LEASEHOLD RIGHT OF USE BUILDINGS EQUIPMENT IMPROVEMENTS ASSETS $’000 $’000 $’000 $’000

CAPITAL WORKS IN PROGRESS $’000

TOTAL $’000

32,573

19,730

299,631 4,578,102

Additions

411,525

Transfers

284,773

1,903

1,570

10,905

(299,151)

Write off / disposal of assets

(1,156)

(920)

(2,076)

Depreciation

(82,730)

(1,392)

(3,633)

(87,755)

Revaluation decrease recognised in equity

(127,587)

3,890,500 410,871

32,751

26,082

412,005 4,772,209

CARRYING AMOUNT AT 30 JUNE 2019 Additions

407,604

Transfers

545,823

15,581

9,389

(571,009)

(109)

(802)

(911)

Depreciation

(87,718)

(1,423)

(4,989)

(44)

(94,174)

Impairment (writedown) / writeback of assets to recoverable amount

(2,108)

3,677

(2,587)

(1,018)

(103,396)

297

- (103,099)

4,245,100 424,344

35,392

29,680

246,013 4,980,611

Write off / disposal of assets

Revaluation increase / (decrease) recognised in equity CARRYING AMOUNT AT 30 JUNE 2020

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Initial recognition

Depreciation

Infrastructure, property, plant and equipment are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment losses, where applicable. Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition. The cost of constructed non-financial physical assets includes the cost of all materials used in construction, direct labour on the project and appropriate proportion of variable and fixed overheads.

The depreciable amount of all non-current physical assets, excluding freehold land and Crown land, is depreciated on a straight-line basis over their useful lives, commencing from the time the asset is held ready for use. The useful lives, which are consistent with the prior period other than right of use assets and leasehold improvement assets (see note 5.6) used for each class of depreciable assets, are:

Subsequent measurement

Buildings

Infrastructure, property, plant and equipment are subsequently measured at fair value less accumulated depreciation and impairment. Fair value is determined with regard to the asset’s highest and best use (considering legal or physical restrictions imposed on the asset, public announcements or commitments made in relation to the intended use of the asset) and is summarised by asset category. Refer note 7.4 for fair value disclosures.

Infrastructure:

Revaluations

The cost of a leasehold improvement and right of use asset is capitalised and depreciated over the shorter of the estimated remaining term of the lease or their estimated useful lives.

In measuring the fair values of non-financial assets, we engage independent valuers for scheduled valuations every five years or earlier if interim indices suggest there has been a material movement. Infrastructure assets are measured at fair value every year.

Revaluation increments are credited directly to equity in the asset revaluation surplus, except where a revaluation decrement for that class of asset was previously recognised as an expense. The increment is recognised as revenue up to the value of the previous expense. Any excess is recognised in the assets’ revaluation surplus. Revaluation decrements are recognised immediately as an expense, except where a revaluation increment for that class of asset was previously recognised in the asset revaluation reserve. The decrement is recognised as a debit in the asset revaluation surplus up to the value of the previous decrement. Any excess is recognised as an expense. Revaluation increases and revaluation decreases relating to individual assets within a class of infrastructure, property, plant and equipment are offset against one another within that class but are not offset in respect of assets in different classes. Assumptions in respect of revaluations can be found in note 7.4. Refer note 1.2 in respect of the impact of coronavirus.

Main structure

USEFUL LIFE 5 to 100 years 50 to 100 years

Other

3 to 30 years

Plant and equipment

2 to 25 years

Leasehold improvements Right of use assets

10 years 1 to 10 years

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each Balance Sheet date. There have been no changes to asset category useful lives as at 30 June 2020. Impairment of non-financial assets Infrastructure, property, plant and equipment and intangible assets with finite useful lives are assessed annually for indications of impairment. Whenever there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, an impairment loss is recognised in net profit in the Statement of Comprehensive Income for the excess amount, except to the extent that the write-down reverses an asset revaluation reserve amount applicable to that asset. The recoverable amount of assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell. Other than the impairment write downs already recognised within this note in the financial statements, there are no material indicators of impairment at the time financial statements were authorised for issue.

4 FINANCIAL REPORT

Revaluations are performed with sufficient regularity so that the carrying amounts do not differ materially from those that would be determined using fair values at the end of the reporting period.

CLASS OF FIXED ASSET

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FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4.3 INTANGIBLE ASSETS SOFTWARE $’000

INTANGIBLE WORKS IN PROGRESS $’000

TOTAL $’000

96,917

64,733

18,475

180,125

Additions

11,424

Transfers

15,654

(15,654)

Amortisation expense

(19,731)

96,917

60,656

14,245

171,818

Additions

15,276

Transfers

11,303

(11,303)

Amortisation expense

(20,331)

96,917

51,628

18,218

166,763

WATER ENTITLEMENTS $’000 Balance at 1 July 2018

CARRYING AMOUNT AT 30 JUNE 2019

CARRYING AMOUNT AT 30 JUNE 2020

Water entitlements We contributed $100 million towards the cost of the Goulburn-Murray Water Connections Project. In exchange for this contribution, we're entitled to a one-ninth share of the progressive water savings generated by Stage 1 of the Connections Project (estimated to be 225 gigalitres of long-term water savings in total when complete in 202021) on an ongoing basis. In exchange for access to the three Melbourne metropolitan water retailers’ water entitlements from the Melbourne water supply system, four regional urban water businesses (Barwon Water, South Gippsland Water, Western Water and Westernport Water) made contributions of $9.3 million to the retailers, with our share being $3.1 million. The investment has therefore been recognised at its net value ($100 million less $3.1 million).

Intangible assets with indefinite useful lives are carried at cost less impairment losses, where applicable. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to us. Internally generated intangible assets (software and intangible works in progress) Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from a development project is recognised only if all the following are demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale • the intention to complete the intangible asset and use or sell it

Water entitlements are recognised at cost and have an infinite life and are not amortised.

• the ability to use or sell the intangible asset

Intangible assets acquired separately (software and intangible works in progress)

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset

Intangible assets acquired separately are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses.

• how the intangible asset will generate probable future economic benefits

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

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Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment losses on the same basis as intangible assets that are acquired separately.

4.4 NET GAIN / LOSS ON DISPOSAL OF NON-CURRENT PHYSICAL ASSETS

Amortisation

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in net profit in the Statement of Comprehensive Income. When significant revalued assets are sold, amounts included in the asset revaluation surplus relating to that asset are transferred to retained earnings. The surplus / deficit from ordinary activities includes the following specific net gains and expenses.

Intangible assets with finite useful lives are amortised on a straight-line basis over the asset’s useful life. Amortisation begins when the asset is available for use. That is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period. Intangible assets with indefinite useful lives are not amortised. There has been no change to useful lives during the current or previous financial years.

CLASS OF FIXED ASSET

USEFUL LIFE

Software

3 to 10 years

Water entitlements

indefinite

Impairment

2020 $’000

2019 $’000

Infrastructure, property, plant and equipment

(74)

(16)

TOTAL

(74)

(16)

4.5 CONTRACTUAL COMMITMENTS PAYABLE Significant contractual expenditure arising from contracts are disclosed at their nominal value and inclusive of goods and services tax. Our commitments include growth works and mains renewals for both water and sewer. Total expenditure contracted for at balance date but not provided for in the financial statements:

2020 $’000

2019 $’000

Not later than one year

292,204

232,555

Later than one year and not later than five years

222,362

156,765

5,500

514,566

394,820

Greater than five years TOTAL (GST INCLUSIVE)

4 FINANCIAL REPORT

Intangible assets that have an indefinite useful life and intangible assets not yet available for use are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired.

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FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 5. OTHER ASSETS AND LIABILITIES INTRODUCTION This section sets out any other assets and liabilities that arose from our controlled operations.

STRUCTURE 5.1 Receivables

5.1.1 Ageing analysis and impairment of contractual receivables

5.1.2 Reconciliation of the expected credit loss allowance

5.2 Other non-financial assets 5.3 Payables

5.3.1 Ageing analysis of contractual payables

5.4 Contract liabilities 5.5 Other provisions 5.6 Leases

5.1 RECEIVABLES Contractual receivables such as debtors and accrued revenue in relation to goods and services, are classified as financial instruments and categorised as ‘loans and receivables’. They are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement they are measured at amortised cost using the effective interest method, less any impairment.

Contractual receivables

Bad debts are written off when determined uncollectable, in accordance with delegation authorities. Statutory receivables, such as amounts owing from the State Government of Victoria and goods and services tax (GST) input tax credit recoverable, are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract. Accrued revenue is recognised for water usage and sewage disposal as well as other works and services that have been rendered to balance date but not yet invoiced. Water usage charges, sewage disposal charges, trade waste charges, recycled water charges and water trading revenue are all recognised as income when the service has been provided. An accrual is recognised to account for water and sewage services not billed at the end of the period. This is calculated using the volume of water purchased from Melbourne Water to the end of the period less the estimated non-revenue water. As a result of the changed economic situation, refer note 1.2, we have seen an increase in customers accessing our hardship programs and an increase in overdue balances which we have incorporated into our calculation of expected credit loss allowance. This can be seen in the expected credit loss rate increases from 2019. Credit risk is disclosed in note 7.2.

NOTE

2020 $’000

2019 $’000

83,352

80,715

73,785

80,258

5,516

3,830

(7,275)

(2,063)

4,363

3,037

159,741

165,777

Trade receivables - debtors Contract assets - accrued revenue

2.1

Other receivables Less: allowance for expected credit losses

5.1.2

Statutory receivables GST receivables TOTAL

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5.1.1 AGEING ANALYSIS AND IMPAIRMENT OF CONTRACTUAL RECEIVABLES

2020

NOT AGED $’000

Expected credit loss rate

1 TO 21 DAYS 1 $’000

22 TO 60 DAYS $’000

61 TO 91 TO OVER 180 90 DAYS 180 DAYS DAYS $’000 $’000 $’000

3.40%

3.29%

8.66%

20.29%

32.79%

TOTAL $’000

Trade debtors Not past due

42,558

Past due

18,104

4,522

8,939

9,229

40,794

Allowance for expected credit losses

(1,449)

(595)

(391)

(1,814)

(3,026)

(7,275)

NET TRADE RECEIVABLES DEBTORS

41,109

17,509

4,131

7,125

6,203

76,077

Accrued revenue

73,785

Other receivables

9,879

83,664

41,109

17,509

4,131

7,125

6,203

159,741

Expected credit loss rate

1.37%

0.78%

4.06%

10.37%

13.25%

Trade debtors

Not past due

49,034

Past due

19,317

3,127

3,737

5,500

31,681

Allowance for expected credit losses

(669)

(150)

(127)

(387)

(730)

(2,063)

NET TRADE RECEIVABLES DEBTORS

48,365

19,167

3,000

3,350

4,770

78,652

Accrued revenue

80,258

Other receivables

6,867

87,125

48,365

19,167

3,000

3,350

4,770

165,777

TOTAL RECEIVABLES

2019

he 0 to 21 days category includes customers who have renegotiated arrangements and payment terms as a consequence of entering T hardship programs.

All contractual receivables are recognised at the amounts receivable less any provision for impairment of receivables. Credit is generally allowed for a period of 20 days. The collectability of debt is assessed each accounting period for usage and other charges.

Loans and receivables are measured at amortised cost using the effective interest rate method less any impairment.

FINANCIAL REPORT

TOTAL RECEIVABLES

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FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 5.1.2 RECONCILIATION OF THE EXPECTED CREDIT LOSS ALLOWANCE The expected credit loss allowance is calculated based on debtor days and we then apply an expected default rate based on historical bad debt write offs and forward looking estimates.

NOTE

2020 $’000

2019 $’000

(2,063)

(3,059)

9.7

2,096

7,235

Net provision movements including bad debts recovered

(7,308)

(6,239)

CLOSING BALANCE 30 JUNE

(7,275)

(2,063)

Opening balance 1 July Write offs recognised as an expense

5.2 OTHER NON-FINANCIAL ASSETS Other non-financial assets are predominantly made up of prepayments which represent payments in advance of receipt of goods or services or where part of the expenditure is made in one accounting period covering a term extending beyond that period. This includes insurances, IT subscription and maintenance agreements and various other subscriptions.

5.3 PAYABLES

2020 $’000

2019 $’000

Contractual payables

Trade payables

25,492

26,714

Accruals

78,179

80,017

Security deposits

7,542

6,692

Statutory payables

330

Tax withheld from payments Fringe benefits tax payables / receivables

(22)

TOTAL

111,521

113,446

Payables and accruals Trade payables and accruals are recognised for future amounts to be paid in respect of goods and services received. The amounts are unsecured and are usually paid 30 days after invoice date. As a result of coronavirus the State Government of Victoria required all public entities to pay small to medium size businesses on shorter payment terms, refer note 1.2. This has resulted in a slightly lower payables balance at 30 June 2020. Payables consist of: • Contractual payables which represent liabilities for goods and services provided to us prior to the end of

the financial year that are unpaid, and arise when we become obligated to make future payments in respect of the purchase of those goods and services. Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost. • Statutory payables relate to goods and services tax and fringe benefits tax payables. Statutory payables are recognised and measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract.

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119

5.3.1 AGEING ANALYSIS OF CONTRACTUAL PAYABLES 2020

NOT AGED $’000

LESS THAN 1 MONTH $’000

1 TO 3 MONTHS $’000

3 TO 12 MONTHS $’000

OVER 12 MONTHS $’000

TOTAL $’000

25,492

78,157

7,872

86,029

25,492

111,521

2019

Trade payables

26,269

445

26,714

80,040

6,692

86,732

26,269

445

113,446

NOTE

2020 $’000

2019 $’000

390

896

Trade payables Accruals Other payables TOTAL

Accruals Other payables TOTAL

5.4 CONTRACT LIABILITIES

Grant income Customers paid in advance

2.1

22,598

18,206

Unearned DCA, NCC, recoverable works and licence income

2.1

35,345

36,556

100

550

58,433

56,208

Developer contributions

450

Total non-current

450

58,883

56,208

Developer contributions Total current Non-current

TOTAL Balance at 1 July

2020 $'000

2019 $'000

56,208

20,293

(47,481)

(18,360)

Increase in contract liabilities

50,156

54,275

CLOSING BALANCE AT 30 JUNE

58,883

56,208

Revenue recognised during the reporting period

4 FINANCIAL REPORT

Current

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FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Government grants Government grants are recognised once reasonable assurance has been reached that we will comply with the conditions attached to them and that the grants will be received. Government grants of a revenue nature are recognised as income over the periods necessary to match them with related costs. Government grants related to assets are recognised in the Balance Sheet by deducting the grant in arriving at the carrying amount of the asset, thereby incurring a reduced depreciation charge. Customers paid in advance Customers paid in advance represents payments received from customers in advance of the provision of goods or services or any legal or constructive obligation required to be performed by us to settle the terms of receipt of income. Predominately these relate to water and sewerage services. We will recognise these advance payments once we have performed the performance obligations associated with the payments. Unearned DCA, NCC, recoverable works and licence income Unearned income represents developer contributed assets and payments received for new customer contributions, application fees and lease and licence income where performance obligations associated with the payment are outstanding, refer note 2.1. Developer contributions Unearned developer contributions represent amounts received from developers for the reimbursement of costs that will be incurred by us when we construct assets to service new urban growth. These payments will be recognised as revenue at the point in time that we have completed the performance obligations agreed with the developer.

5.5 OTHER PROVISIONS Provisions are recognised when we have a present legal or constructive obligation because of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using a discount rate

that reflects the time value of money and the risks specific to the provision. When some or all of the economic benefits required to settle a provision are expected to be received from a third party, the receivable is recognised if it is virtually certain that economic benefits will be received and their amount can be measured reliably. The Other Provision balance includes a provision of $2.4 million for a small cohort of commercial customers who are eligible for a service charge refund. These customers owned properties that were part of an owner's corporation and did not have their own water/sewage connection to their property.

5.6 LEASES AASB 16 Leases (AASB 16) was issued in February 2016 and replaces AASB 17 Leases. It results in almost all leases being recognised on the Balance Sheet, as the distinction between operating and finance leases is removed for lessees. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay the obligation for lease payments are recognised. We adopted AASB 16 as at 1 July 2019 and have applied the new rules on a modified retrospective basis as mandated by the Department of Treasury and Finance (DTF) though FRD 123 Transitional requirements on the application of AASB 16 Leases. As a result, comparatives for the 2018-19 financial year in our 30 June 2020 accounts have not been restated. The transition adjustment to retained earnings was nil. In applying AASB 16 for the first time, we have applied the following practical expedients as permitted by the standard and as mandated by the DTF: • applying a single discount rate to a portfolio of leases with reasonably similar characteristics • relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at 1 July 2019 • accounting for leases with a remaining lease term of less than 12 months as at 1 July 2019 as shortterm leases • excluding initial direct costs from the measurement of the right-of-use asset at the date of initial application • using hindsight in determining the lease term where the contract contains options to extend or terminate the lease • accounting for low value leases.

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6. FINANCING OUR OPERATIONS INTRODUCTION

STRUCTURE

This section provides information on the sources of finance used during operations, along with interest expenses (the cost of borrowings and other information related to financing activities).

6.1 Interest bearing liabilities

This section includes disclosures of balances that are financial instruments (such as borrowings, lease liabilities and cash balances).

6.2 Cash flow information and balances

Financing arrangements are impacted by market activities, with impacts on our cost of debt and the level of borrowings we require, refer note 1.2 and 7.2.

6.1.1 Maturities of financial liabilities

6.1.2 Finance costs

6.2.1 Reconciliation of net result for the period to cash flow from operating activities

6.1 INTEREST BEARING LIABILITIES

CARRYING AMOUNT

NET FAIR VALUE

2019 $’000

2020 $’000

2019 $’000

299,959

288,107

305,301

292,380

299,961

288,107

305,303

292,380

2,603,200

2,341,400

2,952,496

2,644,673

Total non-current

2,603,213

2,341,400

2,952,509

2,644,673

TOTAL

2,903,174

2,629,507

3,257,812

2,937,053

Current Borrowings Lease liabilities Total current Non-current Borrowings Lease liabilities

Borrowings and lease liabilities are classified as financial instruments. All interest-bearing borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. The measurement basis subsequent to initial recognition is based on the classification of interest-bearing liabilities as financial liabilities at ‘amortised cost’. Amortised cost is measured using the effective interest rate method. This classification is determined at initial recognition.

Interest on borrowings is payable semi-annually and is accrued over the period it becomes due. Accrued interest is recorded as part of accruals. The fair value of the interest-bearing financial liabilities is determined by discounting the expected future cash flows at current interest rates.

4 FINANCIAL REPORT

2020 $’000

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FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 6.1.1 MATURITIES OF FINANCIAL LIABILITIES The following table allocates financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.

WEIGHTED AVERAGE EFFECTIVE INTEREST RATE %

LESS THAN 12 MONTHS $’000

1 TO 3 YEARS $’000

3 TO 5 YEARS $’000

OVER 5 YEARS $’000

TOTAL $’000

Fixed interest rate

3.42

158,200

488,200

540,000

1,525,000

2,711,400

Floating interest rate

0.56

141,759

50,000

191,759

299,959

538,200

540,000

1,525,000

2,903,159

2020 BORROWINGS

TOTAL

2019 BORROWINGS

Fixed interest rate

3.88

153,200

332,300

464,100

1,445,000

2,394,600

Floating interest rate

1.42

134,907

100,000

234,907

288,107

432,300

464,100

1,445,000

2,629,507

2020 $’000

2019 $’000

Interest on borrowings

95,236

96,811

Financial accommodation levy

37,688

35,182

(39)

214

132,886

132,207

TOTAL

2020 LEASE LIABILITIES Lease liabilities

6.1.2 FINANCE COSTS

Interest on leases Other interest expense / (income) TOTAL

Finance costs are recognised as expenses in the period in which they are incurred. All qualifying assets (being assets that

necessarily take a substantial period of time to get ready for their intended use or sale) are measured at fair value. Therefore, any finance costs directly attributable to the acquisition, construction or production of these qualifying assets are not required to be capitalised and will continue to be expensed in the period in which they are incurred. The financial accommodation levy is paid into the

consolidated fund in accordance with section 40N of the Financial Management Act 1994 in respect of financial accommodation provided to us by the State Government of Victoria.

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6.2 CASH FLOW INFORMATION AND BALANCES Cash and cash equivalents include cash at bank and cash on hand with original maturities of three months or less, and bank overdrafts.

2020 $’000

2019 $’000

Cash at bank

2,210

1,035

Cash on hand

2,211

1,036

TOTAL

6.2.1 RECONCILIATION OF NET RESULT FOR THE PERIOD TO CASH FLOW FROM OPERATING ACTIVITIES Net profit after tax

2020 $’000

2019 $’000

104,398

111,700

Adjustments for non-cash items Depreciation / amortisation

107,486

6,126

6,402

Write off of assets

111

2,076

Defined benefit superannuation plan expense

769

548

Net gain on disposal of non-current physical assets

(74)

(16)

(3,695)

(1,146)

4,713

(85,598)

(84,503)

Bad debts and expected credit allowance

Impairment writeback (building, land and land related provisions) Impairment write-down Developer contributed assets and other authority works Changes in operating assets and liabilities (Increase) / decrease in other current assets

(113)

(1,326)

10,367

Decrease in trade receivables

1,236

17,265

Increase / (decrease) in accrued interest

(202)

840

Increase / (decrease) in provisions

7,370

(108)

Increase in contract liabilities

2,675

35,915

(33,390)

(45,764)

4,714

7,297

122,417

168,331

(Increase) / decrease in GST receivables

Decrease in net deferred tax liabilities Increase in payables NET CASH INFLOW FROM OPERATING ACTIVITIES

4 FINANCIAL REPORT

114,505

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENT INTRODUCTION We are exposed to risk from our activities and outside factors. It's also often necessary to make judgements and estimates associated with recognising and measuring items in the financial statements. This section sets out financial instrument specific information (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which relate mainly to fair value determination.

this category: • cash and deposits – refer note 6.2 • receivables (excluding statutory receivables) – refer note 5.1

7.3 Contingent assets and liabilities

Financial liabilities at amortised cost are initially recognised on the date they are originated. They are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the Statement of Comprehensive Income over the period of the interest-bearing liability, using the effective interest rate method. We recognised the following liabilities in this category:

7.4 Fair value

• payables (excluding statutory payables) – refer note 5.3

STRUCTURE 7.1 Financial instrument specific disclosures 7.2 Financial risk management objectives and policies

7.4.1 Fair value - Determination of non-financial physical assets

7.4.2 Fair value - Reconciliation of changes in level 3 items

7.4.3 Fair value - Valuation techniques and significant unobservable inputs in level 3 items

7.1 FINANCIAL INSTRUMENT SPECIFIC DISCLOSURES Introduction Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity meeting the definition of assets and liabilities under AASB 9 Financial Instruments. Due to the nature of our activities, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes, fines and penalties). Statutory assets and liabilities do not meet the definition of financial instruments in AASB 9 Financial Instruments. Categories of financial instruments Loans, receivables and cash are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets and liabilities are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables (net of impairment) are measured at amortised cost using the effective interest method. We recognise the following assets in

• contract liabilities – refer note 5.4 • lease liabilities – refer note 5.6 • borrowings – refer note 6.1

7.2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Capital risk management We control our capital structure in order to provide the State Government of Victoria with adequate returns and to ensure that it can fund its operations as a going concern. Our capital structure consists of net debt (borrowings as detailed in table below and offset by cash and bank balances - refer note 6.2) and equity (comprising contributed equity, asset revaluation surplus and retained earnings detailed in notes 9.1 to 9.3). The only externally imposed capital requirements are that: • financial accommodation does not exceed the approval limits set by the Treasurer of Victoria pursuant to the Borrowing and Investment Powers Act 1987 • with the exception of an operating account with overdraft facilities, we are required to borrow exclusively with the Treasury Corporation of Victoria (TCV) These external capital requirements are incorporated into the management of capital through the Board approved Corporate Plan.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

We effectively manage our capital by assessing financial risks and adjusting capital structure in response to changes in these risks and the market. These responses include the management of debt levels. There have been no changes to the strategy adopted to control capital during the year. The gearing ratios for the years ended 30 June 2020 and 30 June 2019 were as follows:

2020 $’000

2019 $’000

299,959

288,107

Borrowings - non-current

2,603,200

2,341,400

Total borrowings

2,903,159

2,629,507

Leases - non-current

Total leases

Total borrowings and leases

2,903,174

2,629,507

Total assets

5,318,315

5,121,056

55%

51%

Borrowings - current

Leases - current

GEARING RATIO Financial risks

i. Interest rate risk Interest rate risk is the risk to earnings or capital from movements in interest rates. We're exposed to interest rate risk through our borrowing activities and changes in the market in comparison to the assumptions of the Essential Services Commission’s regulatory pricing determination in relation to the cost of debt. Interest rate exposures are also recognised in terms of the change in the market value of the debt portfolio which arise as a consequence of changes in market interest rates. We effectively manage interest rate risk by maintaining the debt portfolio within the strategic targets and policy bands that have been approved by the Board. Strategic and tactical debt portfolio options are assessed in consultation with the TCV, with borrowing decisions based on future borrowing requirements, treasury management policy compliance and the TCV’s market interest rate outlook.

Refer section 6.1.1 for maturity analysis of contractual financial liabilities.

INTEREST RATE SENSITIVITY ANALYSIS

2020 $’000

2019 $’000

+ 50 basis points

(909)

(1,011)

- 50 basis points

909

1,011

ii. Liquidity risk Liquidity risk is the risk of not being able to meet the specific financial commitments including short term working capital needs and financing new and maturing loans as they are required. We manage liquidity risk by actively maintaining efficient banking practices, regularly monitoring forecast and actual cash flows and ensuring adequate borrowing facilities are maintained. Approval is received from the Treasurer of Victoria for new borrowings, borrowings to refinance maturing and non-maturing loans and temporary purpose borrowing facilities. In assessing future requirements, the Treasurer has worked with us to understand the impact of coronavirus on our borrowing needs, refer note 1.2, to ensure we have adequate funding. The new approved accommodation borrowing limit of $278.9 million relates to the 6 month period 1 July to 31 December 2020 only. DTF have advised that a separate process will run for the period 1 January to 30 June 2021. Financing arrangements We had access to a total of $90.55 million (2019: $60.76 million) of unused borrowings approved by the Treasurer of Victoria as at 30 June 2020. We have a formal bank overdraft facility with Westpac Banking Corporation. iii. Credit risk Credit risk is the risk that a counterparty or customer will fail to meet contractual obligations. For us credit risk arises mainly from outstanding customer receivables as we're legally obliged to service all customers in our district without regard to their credit quality, refer note 5.1.1. Whilst we have in place extensive debt collection strategies to minimise customer credit risk and recover outstanding receivables we have taken into account the need for a compassionate approach due to coronavirus, refer note 1.2, conditions on our customers. Coronavirus has temporarily increased our level of credit risk.

4 FINANCIAL REPORT

The main risks we're exposed to through financial instruments are interest rate risk, liquidity risk and credit risk. These risks have been impacted by coronavirus, refer note 1.2. The Board reviews and approves policies for managing these risks.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 The credit risk attributable to our deposits with TCV and other financial institutions is considered to be very low due to the minor amounts involved and the contractual arrangements in place for counterparties. The maximum exposure to credit risk at the reporting date is the carrying amount of items in the Balance Sheet. For receivables, the maximum exposure is the gross amount of receivables before allowing for doubtful debts.

7.3 CONTINGENT ASSETS AND LIABILITIES Contingent assets and contingent liabilities are not recognised in the Balance Sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and contingent liabilities are presented inclusive of goods and services tax receivable or payable respectively. a. Contingent assets We enter into agreements with land developers whereby assets are transferred to us at no cost. These assets are brought to account as revenue (refer note 2.1) and capitalised. Where developers are in the process of building assets or are yet to commence the build of assets that will be gifted to us in the future, these assets are recognised as contingent assets as we have signed an agreement with the developer in respect of those assets.

2020 $’000

2019 $’000

20,629

32,735

8,011

11,946

Sewerage supply assets under construction

23,991

30,042

Sewerage supply assets committed to

11,778

8,451

Water supply assets under construction Water supply assets committed to

We're unaware of any other material contingent assets. b. Contingent liabilities Contingent on the completion of the contingent assets transferred from developers, we have a liability to reimburse developers for additional works constructed at our request.

2020 $’000

2019 $’000

Water supply assets

7,638

8,405

Sewerage supply assets

9,849

18,451

These reimbursements will occur upon request by the developer following the issuing of the certificate of completion as agreed in accordance with the conditions of the agreement between us and the developer. In addition, we have legal claims pending as a result of a small number of contractual disputes. Due to the uncertainty inherent in litigation an accurate assessment of any outcome is not possible. We're of the view that further disclosure of these disputes may prejudice our position. We're unaware of any other material contingent liability. Claims to which we are aware and which may result in a liability being incurred have been provided for as other provisions, refer note 5.5.

7.4 FAIR VALUE Fair value determination requires judgement and the use of assumptions. This section discloses the most significant assumptions used in determining fair values. Changes to assumptions could have a material impact on our results and financial position. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, and based on the lowest level inputs that are significant to the fair value measurement as a whole: • Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities • Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable • Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

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7.4.1 FAIR VALUE – DETERMINATION OF NON-FINANCIAL PHYSICAL ASSETS In accordance with AASB 13 Fair Value Measurement, our non-financial assets have been categorised into the three levels of the fair value hierarchy depending on the degree to which inputs into the fair value measurements are observable, and the significance of the inputs to the fair value measurement.

LEVEL 1 $’000

LEVEL 2 $’000

LEVEL 3 $’000

FAIR VALUE AS AT 30 JUNE $’000

Infrastructure

3,890,500

Land (specialised)

243,105

Land (non-specialised)

167,766

Buildings (market approach)

2,128

Buildings (depreciated replacement cost)

30,623

Plant and equipment

26,082

CARRYING AMOUNT AT 30 JUNE 2019

169,894

4,190,310

4,360,204

Infrastructure

4,245,100

Land (specialised)

243,242

Land (non-specialised)

181,102

Buildings (market approach)

2,284

Buildings (depreciated replacement cost)

33,108

Plant and equipment

29,680

Leasehold improvements

CARRYING AMOUNT AT 30 JUNE 2020

183,386

4,551,193

4,734,579

4 FINANCIAL REPORT

Our land, buildings, plant and equipment and infrastructure are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and impairment losses. This note explains the judgements and estimates made in determining the fair values of non-financial assets.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Infrastructure The 30 June 2020 valuation of infrastructure assets has been independently provided by KPMG, using a discounted cash flow methodology to determine the fair value of infrastructure. This involved discounting the forecast stream of cash flows of the entire business to both debt and equity investors at a weighted average cost of capital (WACC), which represents an estimate of a hypothetical market participant’s discount rate. The valuation model: • Calculates forecast cash flows to debt and equity investors over a 10-year forecast period. Cash flows to debt and equity investors are those cash flows available after all operating expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made • Calculates a terminal value at the end of the forecast period adopting the Gordon Growth methodology by applying the mid-point of the WACC, terminal growth rate and terminal cash flows. A single terminal value has been adopted due to the sensitive nature of the terminal value in the model • Arrives at an enterprise valuation by discounting the cash flows to the valuation date using the selected high ($4.44 billion) and low ($4.05 billion) WACC estimates and adopts a mid-point ($4.25 billion) • Deducts non-infrastructure related assets and liabilities to derive the implied water infrastructure asset valuation • Includes a tax amortisation benefit (TAB) on water infrastructure assets, being an estimate of the present value of future tax amortisation benefits that may be received. In including a TAB, a delay of five years is overlayed to reflect the likely timing of secondary infrastructure asset sales, the impact being to reduce the calculated TAB by approximately 25 per cent. The calculated TAB is added to the implied water infrastructure assets’ valuation to arrive at the total value of water infrastructure assets. Governments have recently announced measures to counter the spread of coronavirus. The impact of these measures on future financing capacity, macro-economic measures such as GDP, inflation and interest rates, as well as supply and demand drivers is unknown at the date of this report. Whilst KPMG sought to consider these issues in the valuation based on the limited information available, there is uncertainty as to the extent and duration of the impact of these issues on us, refer note 1.2. Infrastructure assets are classified as level 3. There is no active market which has a significant impact on the fair value.

Land – specialised / non-specialised and crown The most recent valuation of land was independently determined by the Victorian Valuer-General’s Office using fair value as at 30 June 2016. In undertaking the valuation of land, the Victorian Valuer-General’s Office adopted the market based direct comparison approach, whereby the properties were valued by analysing land sales in comparable proximity to the subject sites and allowing for shape, size, topography, location and other relevant factors specific to the land being valued. Where applicable specialised land is adjusted for the community service obligation (CSO) to reflect the specialised nature of the land being valued. As adjustments to CSO are considered as significant unobservable inputs, specialised land would be classified as level 3 assets. To the extent that non-specialised land does not contain significant, unobservable adjustments, the assets are classified as level 2 under the market approach. As at 30 June 2020 the fair value of land was checked against indices provided by the Victorian Valuer-General’s Office to determine any material or exceptionally material movements. Whilst it is recognised that coronavirus, refer note 1.2, has increased the uncertainty around land valuation estimates, we believe the Valuer-General's Office indices continue to provide the most appropriate measure. Land was last revalued (based on indices) as at 30 June 2018. The cumulative movements since 30 June 2018 is less than 10 per cent, and therefore no material movements have been identified. If land was measured at historical cost, the carrying amount would be $74.5 million (2019: $58.4 million). Buildings – specialised / non-specialised The most recent valuation of buildings was independently determined by the Victorian Valuer-General's Office using market value or depreciated replacement cost method on 30 June 2016. The depreciated replacement cost method is based on the replacement of buildings to a 'modern equivalent' standard after applying an appropriate depreciation rate, useful life and adjusting for condition. As depreciation adjustments are considered as significant, unobservable inputs in nature, buildings are classified as level 3 fair value. To the extent that non-specialised buildings do not contain significant, unobservable adjustments, these assets are classified as level 2 under the market approach.

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As at 30 June 2020, buildings were checked against indices provided by the Victorian Valuer-General's Office to determine any material or exceptionally material movements. Applying the indices buildings were revalued upwards at 30 June 2020 by $4 million. Whilst it is recognised that coronavirus, refer note 1.2, has increased the uncertainty around building valuation estimates, we believe the Valuer-General's Office indices continue to provide the most appropriate measure. In 30 June 2019 no adjustment was made to building values. If buildings were measured at historical cost, the carrying amount would be $40.5 million (2019: $40.3 million). Plant and equipment Plant and equipment are held at carrying value (depreciated cost) which approximates fair value. Unless there is market evidence that current replacement costs are significantly different from the original acquisition cost, it is considered unlikely that depreciated cost will be materially different from the existing carrying value. As at 30 June 2020 no material movements have occurred other than as disclosed in note 4.2.

7.4.2 FAIR VALUE – RECONCILIATION OF CHANGES IN LEVEL 3 ITEMS

Balance at 1 July 2018

LAND INFRASTRUCTURE (SPECIALISED) $’000 $’000

BUILDINGS $’000

PLANT AND LEASEHOLD EQUIPMENT IMPROVEMENTS $’000 $’000

TOTAL $’000

241,202

30,384

19,730

4,108,516

284,773

1,903

1,570

10,905

299,151

(1,156)

(920)

(2,076)

(82,730)

(1,331)

(3,633)

(87,694)

(127,587)

3,890,500

243,105

30,623

26,082

4,190,310

545,823

137

9,389

555,502

(109)

(802)

(911)

(87,718)

(1,318)

(4,989)

(94,025)

3,677

Revaluation gains / (loss) recognised in other comprehensive income

(103,396)

(103,360)

CARRYING AMOUNT AT 30 JUNE 2020

4,245,100

243,242

33,108

29,680

4,551,193

Acquisitions Write off / disposal of assets Depreciation Revaluation loss recognised in other comprehensive income CARRYING AMOUNT AT 30 JUNE 2019 Acquisitions / transfers Write off / disposal of assets Depreciation Impairment writeback of assets to recoverable amount

(127,587)

4 FINANCIAL REPORT

3,817,200

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 7.4.3 FAIR VALUE – VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS IN LEVEL 3 ITEMS

LAND (SPECIALISED)

VALUATION TECHNIQUE

SIGNIFICANT UNOBSERVABLE INPUTS

RANGE (AVERAGE)

SENSITIVITY OF THE INPUT TO FAIR VALUE

Market approach

Community service obligation (CSO) adjustment

1% to 92% (21%)

A significant increase or decrease in the community service obligation adjustment would result in a higher or lower land valuation

$1,000 to $17,568,000 ($254,495)

Income approach using a discounted cash flow model

Weighted average cost of capital (WACC)

4.6% to 5.3%

If the WACC had changed by +/0.25% from the year end valuation, the impact to the valuation would have been a decrease of $983.5 million and an increase by $1,406.4 million

Terminal value growth rate (inclusive of inflation)

3.50%

If the terminal growth rate had changed by +/- 0.25% from the year end valuation, the impact to the valuation would have been an increase of $1,229.9 million and decrease by $868.2 million

Terminal value capex

$250 million

If the terminal value capex changed by +/- 10% the impact would be $956.3 million

Original useful life

1 to 100 years (59.25 years)

A significant increase or decrease in the estimated useful life of infrastructure would result in a significantly higher or lower fair value.

Depreciated cost (deemed fair value)

Original useful life

2 to 25 years (4.65 years)

A significant increase or decrease in the useful life impacts the fair value of plant and equipment

Cost per unit

$100 to $1,600,000 ($11,400)

A significant increase or decrease in cost per unit impacts the fair value of plant and equipment

Depreciated replacement cost approach

Cost per square metre

$100 to $4,200 ($2,165)

A significant increase or decrease in cost per square metre impacts the fair value of buildings

Original useful life

1 to 60 years (28.65 years)

A significant increase or decrease in useful life impacts the fair value of buildings

INFRASTRUCTURE

PLANT AND EQUIPMENT

BUILDINGS

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8. STATUTORY OBLIGATIONS INTRODUCTION This section includes disclosures in relation to our statutory obligations.

STRUCTURE 8.1 Income tax 8.2 Environmental contributions 8.3 Goods and services tax (GST)

8.1 INCOME TAX We're subject to the National Tax Equivalent Regime (NTER), which is administered by the Australian Taxation Office (ATO). The income tax expense for the period is the expected tax payable on the current period’s taxable income based on the national corporate income tax rate of 30 per cent, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

The income tax expense for the financial year differs from the amount calculated on the net result. The differences are reconciled as follows: INCOME TAX Statement of comprehensive income Current income tax expense (paid or payable) Adjustments for prior years

2020 $’000

2019 $’000

46,565

54,044

(150)

315

Deferred income tax expense (2,116)

(6,003)

44,299

48,356

31,041

38,906

Net result before income tax expense

148,697

160,056

Tax at the Australian tax rate of 30%

44,608

48,017

(150)

315

(181)

44,299

48,356

3,609

22,614

INCOME TAX EXPENSE REPORTED IN THE STATEMENT OF COMPREHENSIVE INCOME Statement of changes in equity INCOME TAX REPORTED IN EQUITY Tax reconciliation

Adjustments for income tax of previous years Non-deductible expenses Non-deductible depreciation Assessable income INCOME TAX ON PROFIT BEFORE TAX Income tax payable CURRENT TAX PAYABLE

4 FINANCIAL REPORT

Temporary differences

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. No deferred tax asset or liability is recognised

in relation to these temporary differences if they arose in a transaction that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

2020 $’000

2019 $’000

12,428

8,652

DEFERRED TAX ASSETS Amounts recognised in comprehensive operating statement Provisions Buildings future deductible amounts

1,007

2,141

357

1,802

13,792

12,595

10,124

1,197

2,471

13,792

12,595

DEFERRED TAX LIABILITIES

Amounts recognised in comprehensive operating statement

(372,782)

(373,703)

(164)

Amounts recognised directly in equity

Revaluation of infrastructure to fair value

(189,108)

(220,126)

(54,709)

(705)

(616)

(1,426)

(1,538)

(618,663)

(650,856)

Contract liability TOTAL Movements Opening balance 1 July Credited to the comprehensive operating statement CLOSING BALANCE AT 30 JUNE

Property, plant and equipment Defined benefit superannuation asset

Revaluation of land to fair value Revaluation of buildings to fair value Defined benefit superannuation asset TOTAL Movements Opening balance 1 July Credited / (debited) to the comprehensive operating statement Credited to the comprehensive income CLOSING BALANCE AT 30 JUNE NET DEFERRED TAX LIABILITIES

(650,856)

(690,426)

1,152

664

31,041

38,906

(618,663)

(650,856)

(604,871)

(638,261)

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8.2 ENVIRONMENTAL CONTRIBUTIONS A 2004 amendment to the Water Industry Act 1994 (the Act) provided for environmental contributions to be paid by Victoria's water supply authorities to government for the purposes of funding initiatives that seek to promote the sustainable management of water or address adverse water-related environmental impacts. The responsible Minister may make an Order for up to four years that specifies the details relating to the obligation to pay environmental contributions. The fourth tranche of the environmental contribution, established by the Environmental Contribution Order 2016 - 2020 commenced on 1 July 2016 through to 30 June 2020.

Our environmental contribution for each year of the fourth tranche was $42.86 million per year. This contribution was recognised as an expense as incurred during the reporting period. We have a statutory obligation to pay an environmental contribution to the Department of Environment, Land, Water and Planning of $47.43 million each year for the period 1 July 2020 to 30 June 2024 (fifth tranche). These contributions will be recognised as an expense during the reporting period in which they are incurred.

ENVIRONMENTAL CONTRIBUTION COMMITMENTS AT BALANCE DATE NOT PROVIDED FOR IN THE FINANCIAL STATEMENTS

2020 $’000

2019 $’000

47,430

42,855

Later than one year but not later than five years

142,290

TOTAL

189,720

42,855

Payable Not later than one year

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. In these circumstances, GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Balance Sheet are shown inclusive of GST. The net amount of GST receivable from or payable to the ATO is included in the Balance Sheet as part of receivables or payables, refer note 5.1 and 5.3. Cash flows are presented in the Cash Flow Statement on a gross basis except for the GST component of investing and financing activities which are disclosed as operating cash flows.

FINANCIAL REPORT

8.3 GOODS AND SERVICES TAX (GST)

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 9. OTHER DISCLOSURES INTRODUCTION

9.5 Remuneration of executive officers

This section includes additional material disclosure required by accounting standards or otherwise, for the understanding of this financial report.

9.6 Related party

STRUCTURE 9.1 Contributed equity

9.6.1 Significant transactions with governmentrelated entities

9.6.2 Key management personnel

9.6.3 Transactions with key management personnel and other related parties

9.2 Retained earnings

9.7 Ex-gratia expenditure

9.3 Asset revaluation surplus

9.8 Economic dependency

9.4 Responsible persons

9.9 Events subsequent to balance sheet date

9.4.1 Remuneration of responsible persons

9.10 Australian accounting standards issues that are not yet effective

9.1 CONTRIBUTED EQUITY Additions to net assets which have been designated as contributions by owners are recognised as contributed equity. Other transfers that are in the nature of contributions or distributions (capital repatriation) have been recognised in contributed equity.

2020 $’000

2019 $’000

420,967

444,832

(23,865)

420,967

NOTE

2020 $’000

2019 $’000

Opening balance at 1 July

398,284

332,152

Net profit after tax

104,398

111,700

3.2.3.2

(373)

(2,098)

112

630

Opening balance at 1 July Less capital repatriation CLOSING BALANCE 30 JUNE

9.2 RETAINED EARNINGS

Defined benefit superannuation plan actuarial loss 1 Net deferred tax assets recognised through retained earnings 1 Dividend paid

(64,100)

(44,100)

CLOSING BALANCE AT 30 JUNE

438,321

398,284

Defined benefit superannuation plan actuarial loss net of tax effect $261,000 (2019: $1,468,000 loss).

Dividend An obligation to pay a final dividend only arises after a formal determination is made by the Treasurer following consultation between the Board, the relevant portfolio Minister and the Treasurer.

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9.3 ASSET REVALUATION SURPLUS The asset revaluation surplus is used to record changes in the carrying amount of fixed assets arising on revaluation. Any revaluation increment is credited to the asset revaluation surplus. A decrement would be debited to the surplus to the extent of the balance of prior increments. Any further decrements would be taken to the Statement of Comprehensive Income.

INFRASTRUCTURE $’000

LAND $’000

BUILDINGS $’000

TOTAL $’000

Balance at 1 July 2018

602,940

299,800

1,561

904,301

Revaluation, net of tax effect

(89,311)

BALANCE AT 30 JUNE 2019

513,629

299,800

1,561

814,990

Revaluation, net of tax effect

(72,377)

207

(72,170)

BALANCE AT 30 JUNE 2020

441,252

299,800

1,768

742,820

9.4 RESPONSIBLE PERSONS The relevant Minister and Yarra Valley Water directors are deemed to be responsible persons by Ministerial Direction pursuant to the provisions of the Financial Management Act 1994.

The Minister’s remuneration and allowance are set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the Department of Parliamentary Services’ Financial Report. Other relevant interests are declared in the Register of Members’ Interest which each member of the Parliament completes. The number of responsible persons from Yarra Valley Water whose remuneration was within the specified bands were as follows:

Hon Lisa Neville MP

Minister for Water

Sue Therese O’Connor

Chair of the Board

Robert Clive Skinner

Deputy Chair of the Board

Patrick John McCafferty

Managing Director

Victor John Perton

Director

Anita Michele Roper

Director

Helen Lynette Thornton

Director

Karen Milward

Director

Victoria Fay Marles

2020 NO.

2019 NO.

$10,000 - $19,999

$30,000 to $39,999

Director

$40,000 to $49,999

Ian Hamm Director (appointed 1 October 2019)

$50,000 to $59,999

$90,000 to $99,999

$420,000 to $429,999

$450,000 to $459,999

910

922

Eric Sjerp (retired 30 September 2019)

Director

Total number TOTAL AMOUNT ($’000)

4 FINANCIAL REPORT

The responsible persons of Yarra Valley Water at any time during the financial year ended 30 June 2020 were:

9.4.1 REMUNERATION OF RESPONSIBLE PERSONS

136

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 9.5 REMUNERATION OF EXECUTIVE OFFICERS

9.6 RELATED PARTY

The number of executive officers, other than the Minister and accountable officer, and their total remuneration during the period are shown in the table below. Total annualised employee equivalents provide a measure of full time equivalent executive officers over the reporting period.

• All key management personnel and their close family members, and personal business interests (controlled entities, joint ventures and entities they have significant influence over)

Related parties include:

Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on behalf of the entity in exchange for services rendered, and is disclosed in the following categories: • Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as allowances • Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased • Other long-term benefits include long service leave, other long service benefit or deferred compensation • Termination benefits include termination of employment payments, such as severance packages

2020 $’000

2019 $’000

2,001

2,471

255

195

2,309

2,724

Total number

TOTAL ANNUALISED EMPLOYEE EQUIVALENT (AEE) ¹,2

Short-term employee benefits Post-employment benefits Other long-term employment benefits Total amount ($’000)

1 AEE is based on the time fraction worked over the reporting period. 2 Includes executive officers, acting executive officers and those who ceased employment during the year.

• All cabinet ministers and their close family members • All department and public-sector entities that are controlled and consolidated into the whole of state consolidated financial statements • Controlled business interests. All related party transactions have been entered into on an arm’s length basis.

9.6.1 SIGNIFICANT TRANSACTIONS WITH GOVERNMENT-RELATED ENTITIES i. Department of Environment, Land, Water and Planning Under a normal commercial agency arrangement, we bill and collect rates related to Parks Victoria services on behalf of the Minister for Water. We charge the Department of Environment, Land, Water and Planning for the services it provides in billing and collecting rates, and on charge costs incurred regarding supplementary council valuations. We're required to pay an environmental contribution to the department, refer note 8.2.

2020 $’000

2019 $’000

3,368

3,506

285

539

42,885

42,855

69,633

66,356

1,472

1,445

Amounts recognised as revenue in the Statement of Comprehensive Income Administration fees for billing and collecting rates and reimbursement of costs of supplementary council valuations Water efficiency program funding Amounts recognised as an expense in the Statement of Comprehensive Income Environmental contributions Cash amounts paid during the year Parks Victoria levy billed to customers AMOUNTS PAYABLE AT 30 JUNE

YARRA VALLEY WATER ANNUAL REPORT 2019-20

137

ii. Melbourne Water Corporation

iv. Department of Treasury and Finance

We transact solely with the Melbourne Water Corporation for the purchase of drinking water and disposal of sewage. Under a normal commercial agency arrangement, we bill and collect drainage rates and charges on behalf of the Melbourne Water Corporation. We charge Melbourne Water Corporation for the services we provide in billing and collecting drainage fees on its behalf, and on charge costs incurred regarding supplementary council valuations.

We pay amounts to the State Government of Victoria, via the Department of Treasury and Finance. Amounts incurred were as follows:

2020 $’000

2019 $’000

Amounts recognised as revenue in the Statement of Comprehensive Income 5,162

Administration fees for billing and collecting drainage rates and reimbursement of costs of supplementary council valuations Amounts recognised as an expense in the Statement of Comprehensive Income

5,416

2019 $’000

64,100

44,100

Capital repatriation (note 9.1)

23,865

Amount recognised as an expense in the Statement of Comprehensive Income

Financial accommodation levy (note 6.1.2)

37,688

35,182

Income tax equivalent (note 8.1)

44,299

48,356

AMOUNTS PAYABLE AT 30 JUNE

13,222

31,602

Cash payments Dividend paid (note 9.2)

522,119

Cash amounts paid during the year

Drainage billed to customers

87,359

86,704

10,998

9,377

Customers who hold either a Pension Concession Card, a Gold Repatriation Health Care Card for All Conditions or a Health Care Card are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the Department of Health and Human Services.

Concession amounts billed during the year

iii. Treasury Corporation of Victoria We borrow from and invest with the Treasury Corporation of Victoria, refer note 6.1. The aggregate amount of borrowings payable at reporting date and the amounts of interest expense included in the determination of profit before income tax is:

2020 $’000

2019 $’000

2,903,159 2,629,507

Interest expense (note 6.1.2)

95,236

96,811

AMOUNTS PAYABLE AT 30 JUNE

27,237

28,064

AMOUNTS PAYABLE AT 30 JUNE

2020 $’000

2019 $’000

51,299

49,229

5,196

3,533

4 FINANCIAL REPORT

541,363

Aggregate amount of borrowings (note 6.1)

2020 $’000

v. Department of Health and Human Services

Bulk water and sewerage wholesaler charges expense (note 3.1)

AMOUNTS PAYABLE AT 30 JUNE

138

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 vi. State Revenue Office Not for profit organisations that use land for the community’s benefit to provide outdoor sporting, cultural or recreational activities for a charitable purpose are eligible for a rebate. When a customer receives a rebate and pays this lesser amount, the difference is billed to and paid by the State Revenue Office.

2020 $’000

2019 $’000

Concession amounts billed during the year

1,263

1,235

320

297

AMOUNTS PAYABLE AT 30 JUNE Amount recognised as an expense in the Statement of Comprehensive Income Payroll tax AMOUNTS PAYABLE AT 30 JUNE

3,920

3,387

309

264

vii. Power Purchase Agreement We are one of 13 water corporation Members of Zero Emissions Water (ZEW) Limited, a public company limited by guarantee. ZEW’s main objectives are to acquire electricity, contracts for difference and other derivative products in relation to electricity, and/or green products from an energy and emissions reduction facility in Victoria and in turn supply these products to its members. This vehicle provides the opportunity for water corporation members to collaboratively promote energy and emissions reduction initiatives in Victoria and to reduce emissions. On 30 October 2018, a Members' Agreement was entered into between the water corporations and ZEW to regulate their rights and obligations as members of ZEW and as participants in the project. The Members’ Agreement establishes the operating activities of ZEW and the decision-making responsibilities of ZEW’s directors. Under the Members’ Agreement, our liability as a member is limited to $10 in the event of a winding up. As required by Australian accounting standards, we’ve assessed the nature of our relationship with ZEW, and concluded that we do not have control, joint control or significant influence over ZEW. We’ll account for our investment in ZEW as a financial instrument within the scope of AASB 9 Financial Instruments. ZEW is a related party of Yarra Valley Water. On 30 October 2018, ZEW entered into an 11-year power purchasing agreement (PPA) with a solar farm energy generator. In relation to the PPA, ZEW will act as a central intermediary between the energy generator and the water

corporations. The PPA contains a contract for difference (CFD) payment mechanism in respect of electricity generated by the facility and the sale and supply of largescale generation certificates (LGCs) from the facility. The PPA contains certain conditions precedent which were due to be satisfied during the 2019-20 financial year. The solar farm energy generator experienced a construction delay due to redesign of electrical infrastructure and a connection delay relating to generator restrictions and revised connection procedures advised by the Australian Electricity Market Operator (AEMO). Renegotiated terms have resulted in an extension of the target commercial operation date to 1 October 2020 and a compensation settlement to ZEW for the delay. Our share of the settlement is $217,285 which has been recognised in the Statement of Comprehensive Income as other income. At 30 June 2020, the conditions precedent in the PPA are not complete, and ZEW does not have a contractual obligation for the CFD derivative. Therefore, there are no other transactions to be recognised. Upon satisfying the conditions precedent, the CFD derivative will be recognised as a financial liability and measured at its fair value. Subsequent changes in the derivate’s fair value will be recognised in profit and loss. The Members’ Agreement specifies that ZEW may call on us to make a loan available to ZEW amounting to $124,726. The loan, if requested by ZEW, would meet the definition of a financial asset as it gives rise to a contractual right for us to receive cash from ZEW at the end of the loan term. At 30 June 2020, no request had been made by ZEW. Once the facility is operational, we'll have an obligation to purchase our percentage of energy allocation under the members’ agreement. The financial impact of the Members’ Agreement with ZEW is expected to increase revenue and expenses, and result in the recognition of LGCs as intangible assets or assets held for sale. We contribute to the administration costs of ZEW, currently $11,000 per annum. viii. Other State Government of Victoria related parties During the year we supported Thriving Communities Partnership (TCP), a cross-sector collaboration with the goal that everybody has fair access to the modern essential services they need to thrive in contemporary Australia. Pat McCafferty acts as a director and we have supported TCP with their setup and administration. Water and sewerage services were provided to wholly owned State Government of Victoria entities for properties within our district under normal commercial terms and conditions.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

All other transactions with State Government of Victoria related parties were made on normal commercial terms and conditions and have not been considered material for disclosure.

9.6.2 KEY MANAGEMENT PERSONNEL Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of Yarra Valley Water, directly or indirectly, comprising independent directors and the Managing Director. Key management personnel (as defined in AASB 124 Related Party Disclosures) includes the Portfolio Minister and all directors listed under responsible persons in note 9.4 who have the authority and responsibility for planning, directing and controlling our activities directly or indirectly, during the financial year. The compensation detailed below excludes the salaries and benefits the Portfolio Minister receives. The Minister’s remuneration and allowances are set by the Parliamentary Salaries and Superannuation Act 1968 and reported within the Department of Parliamentary Services’ financial report.

2020 $’000

2019 $’000

821

833

Post-employment benefits

Other long-term employment benefits

910

922

Short-term employee benefits

Total amount ($’000) Total number TOTAL ANNUALISED EMPLOYEE EQUIVALENT (AEE) ¹

1 AEE is based on the time fraction worked over the reporting period.

9.6.3 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND OTHER RELATED PARTIES All key management personnel and other related party transactions have been considered immaterial for disclosure. In this context, transactions are only disclosed when they are considered necessary to draw attention to the possibility that our Balance Sheet and Statement of Comprehensive Income may have been affected by the existence of related parties, and by transactions and outstanding balances, including commitment, with such parties.

9.7 EX-GRATIA EXPENDITURE

2020 $’000

2019 $’000

Hardship write-offs for customers in the Arrange and Save Program

2,652

1,680

Write-offs for disconnected customer accounts greater than 180 days

1,937

2,055

Bankruptcies and liquidations

Minimum account write-offs

131

123

5,000

249

4,997

8,915

Deferred property debt forgiveness Coronavirus related credit, rebate or relief TOTAL

All ex-gratia expenses (except hardship write-offs for customers in the Arrange and Save Program and coronavirus related credit, rebate or relief, refer note 1.2) above form part of bad and doubtful debts expense, refer note 3.1.

9.8 ECONOMIC DEPENDENCY

Our normal trading activities are significantly dependent on the provision of finance from the Treasury Corporation of Victoria.

FINANCIAL REPORT

139

9.9 EVENTS SUBSEQUENT TO BALANCE SHEET DATE Since 30 June 2020 to the date of this report, coronavirus lockdown restrictions in our district have eased and re-tightened. Staff continue to work remotely where possible in line with health guidelines and many businesses continue to be impacted in their ability to operate. As a result economic activity continues to be down on pre-coronavirus levels. We expect to continue to see an increased number of customers accessing our hardship programs and increasing older debt balances. We anticipate that we will see greater impacts of coronavirus in our financial statements in 2020-21. Restrictions were considered in the preparation of our 2019-20 financial statements. No other matters or circumstance has arisen that, in the opinion of the directors, has significantly affected or may significantly affect our operations, the results of those operations, or the state of affairs in future financial years.

140

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 9.10 AUSTRALIAN ACCOUNTING STANDARDS ISSUED THAT ARE NOT YET EFFECTIVE The Australian Accounting Standards Board has issued a list of amending standards. In general, these amending standards include editorial and reference changes that are expected to have insignificant impacts on our financials. Of these we note the following: • AASB 2018-7 definition of material Clarifies the definition of what is `material' to the financial statements, including adding guidance and explanations to accompany the definition. Information will be considered material if by omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. This amendment will come into effect for us on 1 July 2020. • AASB 2020-1 classification of liabilities as current or non-current Alters the definition of a current liability to remove the need for a right to defer settlement of a liability to be unconditional. Instead it will be sufficient for us to have the right to defer at the end of the reporting period. This amendment will come into effect for us on 1 July 2022. There are no other standards that are not yet effective that are expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

141

STATUTORY CERTIFICATION We certify that the attached Financial Statements of Yarra Valley Water Corporation have been prepared in accordance Direction 5.2 of the Standing Directions of the Assistant Treasurer issued pursuant to the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements. In our opinion, the information set out in the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and accompanying notes presents fairly the financial transactions during the year ended 30 June 2020 and financial position of Yarra Valley Water at 30 June 2020. At the time of signing, we are not aware of any circumstance which would render any particulars included in the Financial Statements to be misleading or inaccurate. We authorise the attached Financial Statements for issue dated at Melbourne on 28 August 2020.

Sue T Oâ&#x20AC;&#x2122;Connor Chair

Natalie Foeng Chief Financial Officer

FINANCIAL REPORT

Patrick J McCafferty Managing Director

142

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

AUDITOR-GENERAL'S AUDIT REPORT

Independent Auditor’s Report To the Board of the Yarra Valley Water Corporation Opinion

I have audited the financial report of the Yarra Valley Water Corporation (the corporation) which comprises the: • • • • • •

balance sheet as at 30 June 2020 statement of comprehensive income for the year then ended statement of changes in equity for the year then ended cash flow statement for the year then ended notes to the financial statements, including significant accounting policies statutory certification.

In my opinion, the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2020 and its financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards. Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Auditing Standards. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report. My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Victoria. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other Information

The Board is responsible for the "other information" included in the corporation’s Annual Report for the year ended 30 June 2020. The other information in the Annual Report does not include the financial report, the performance report and my auditor’s reports thereon. My opinion on the financial report does not cover the other information included in the Annual Report. Accordingly, I do not express any form of assurance conclusion thereon. In connection with my audit of the financial report, my responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a materially misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

Key audit matters

Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the financial report of the current period. These matters were addressed in the context of my audit of the financial report as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters.

143

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Key audit matter Revenues from service and usage charges Note 2.1 – Revenue from contracts with customers Revenue from service and usage charges: $953 million. I considered this to be a key audit matter because:  revenue is financially significant to the corporation  the corporation’s IT billing system and business rules are complex, and it uses several inputs, some from different sources  a key input, customer water volume consumption, relies on external service providers to conduct meter readings  revenue includes a significant accrual for unbilled water and sewerage services at year end that involves a higher degree of estimation uncertainty  the applicable accounting standard AASB 15 Revenue from Contracts with Customers requires detailed and complex financial report disclosures.

How I addressed the matter

My key procedures included:  testing the operating effectiveness of key application controls in the billing system and key manual controls in the billing process  assessing management's model, key assumptions and inputs for estimating the value of unbilled water and sewerage services accrued revenue at 30 June 2020  performing substantive analytical procedures by developing an expectation of usage and service charges revenue for the period based on water volumes, number of serviced properties and approved prices, compared against the revenue recorded by the corporation  reviewing the adequacy of revenue recognition and measurement policies  assessing the adequacy of financial statement disclosures against AASB 15 Revenue from Contracts with Customers.

The fair value estimate of infrastructure assets Note 4.1 – Total Infrastructure, property, plant and equipment Fair value estimate of infrastructure assets: My key procedures included: $4.245 billion  obtaining an understanding of management's approach

to estimating the fair value of infrastructure  assessing the competence and capability of management's expert engaged to assist with the valuation process  engaging a subject matter expert to assist us in obtaining sufficient appropriate audit evidence, including: - the appropriateness of using an income-based valuation approach - identification of any changes to the DCF model and/or assumptions. - the reasonableness and consistency of all the assumptions used in the DCF model - the reasonableness of all inputs used in the model, with specific reference to underlying data and supporting documentation - the DCF model’s computational accuracy - assessing the completeness and adequacy of the financial report disclosures with regard to AASB 13 and FRD 103H, including the significant observable and unobservable inputs utilised in the model and the sensitivity analysis  evaluating our subject matter expert's workings and concluding the work was adequate for the purposes of our audit.

4 FINANCIAL REPORT

I considered this to be a key audit matter because:  infrastructure assets are financially significant to the corporation  the fair value estimate is derived from an incomebased valuation approach that uses a discounted cashflow (DCF) model  the fair value estimate relies on management’s use of an external valuation expert  the DCF model is highly complex and involves significant management judgements, underpinned by various subjective assumptions  the calculated value is sensitive to small changes in key assumptions used in the DCF model  the model's forecast period is long, and includes a terminal value, which increases the difficulty in accurately estimating the fair value  accounting standard AASB 13 Fair Value Measurement (AASB 13) and the Assistant Treasurer issued Financial Reporting Direction 103H Nonfinancial physical assets (FRD 103H), both require extensive financial report disclosures.

144

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

AUDITOR-GENERAL'S AUDIT REPORT

Board’s responsibilities for the financial report

The Board of the corporation is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Financial Management Act 1994, and for such internal control as the Board determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Board is responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.

Auditor’s responsibilities for the audit of the financial report

As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also: •

•

• •

•

identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the corporation’s internal control evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the corporation’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the corporation to cease to continue as a going concern. evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

YARRA VALLEY WATER ANNUAL REPORT 2019-20

Auditor’s responsibilities for the audit of the financial report (continued)

145

I communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. From the matters communicated with the Board, I determine those matters that were of most significance in the audit of the financial report of the current period and are therefore key audit matters. I describe these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

MELBOURNE 4 September 2020

Paul Martin as delegate for the Auditor-General of Victoria

4 FINANCIAL REPORT

146

YARRA VALLEY WATER ANNUAL REPORT 2019-20

DISCLOSURE INDEX

YARRA VALLEY WATER ANNUAL REPORT 2019-20

147

DISCLOSURE INDEX

148

YARRA VALLEY WATER ANNUAL REPORT 2019-20

FINANCIAL REPORT

Yarra Valley Waterâ&#x20AC;&#x2122;s 2019-20 Annual Report is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of Yarra Valley Waterâ&#x20AC;&#x2122;s compliance with statutory disclosure requirements. LEGISLATION

DISCLOSURE REQUIREMENT

PAGE

REPORT OF OPERATIONS AND ADDITIONAL INFORMATION Charter and purpose FRD 22H

Manner of establishment and the relevant Ministers

FRD 22H

Purpose, functions, powers and duties

FRD 22H

Key initiatives and projects

FRD 22H

Nature and range of services provided

8 2-3 & 8-41 16-37 2-3 & 12-14

Management and structure FRD 22H

Organisational structure

Financial and other information FRD 10A

Disclosure index

FRD 12B

Disclosure of major contracts

148-149

FRD 22H

Five year summary of financial results

FRD 22H

Employment and conduct principles

FRD 22H

Occupational health and safety policy

FRD 22H

Summary of the financial results for the year

FRD 22H

Current financial year review

FRD 22H

Significant changes in financial position during the year

92-93

FRD 22H

Major changes or factors affecting performance

16-37

FRD 22H

Subsequent events

FRD 22H

Application and operation of Freedom of Information Act 1982

FRD 22H

Compliance with building and maintenance provisions of Building Act 1993

FRD 22H

Statement on Competitive Neutrality Policy

FRD 22H

Application and operation of the Public Interest Disclosure Act 2012

FRD 22H

Details of consultancies over $10 000

FRD 22H

Details of consultancies under $10 000

FRD 22H

Disclosure of government advertising expenditure

FRD 22H

Disclosure of ICT expenditure

FRD 22H

Statement of availability of other information

FRD 22H

Operational and budgetary objectives and performance against objectives

FRD 22H

Environmental performance

FRD 22H

Workforce inclusion policy

FRD 25D

Local Jobs First

FRD 27C

Presentation and reporting of performance information

FRD 29C

Workforce data disclosures

FRD 30D

Standard requirements for the publication of annual reports

62 40-41 30-33 & 56-58 36-37 & 58 38-41 39

93 61-62

38-41 & 84-87 76-83 & 87 30-33 & 56-58 63 84-87 59 entire report

YARRA VALLEY WATER ANNUAL REPORT 2019-20

LEGISLATION

DISCLOSURE REQUIREMENT

149

PAGE

Ministerial reporting directions MRD 01

Performance reporting

84-87

MRD 02

Water consumption and drought response

MRD 03

Environmental and social sustainability reporting

MRD 04

Disclosure of information on bulk entitlement

78-79

MRD 05

Annual reporting of major non-residential water users

68-69

MRD 06

Greenhouse gas and energy reporting

80-82

MRD 07

Disclosure of information

67-68 64-66, 69, 72-73 & 82-83

Climate change

76-77

Customer and community outcomes

70-73

Water for aboriginal cultural, spiritual and economic values

73-75

Resilient and liveable cities and towns

65-69

Leadership and culture

30-33, 44-59 & 73-75

Financial sustainability

Compliance attestation and declaration SD 5.1.4

Attestation for compliance with Ministerial standing direction

SD 5.2.3

Declaration in report of operations

FINANCIAL STATEMENTS Declaration SD 5.2.2

Declaration in financial statements

141

Other requirements under Standing Directions 5.2 SD 5.2.1(a)

Compliance with Australian Accounting Standards and other authoritative pronouncements

141

SD 5.2.1(a)

Compliance with Ministerial directions

141

Other disclosures as required by FRDs in notes to the financial statements FRD 03A

Accounting for dividends

FRD 07B

Early adoption of authoritative accounting pronouncements

92 & 134

FRD 11A

Disclosure of ex gratia expenses

FRD 17B

Wage inflation and discount rates for employee benefits

FRD 21C

Disclosures of responsible persons, executive officers in the financial report

FRD 100A

Financial reporting directions – framework

FRD 103H

Non financial physical assets

111-115

FRD 105B

Borrowings costs

121-122

FRD 106B

Impairment of assets

111-115

FRD 109A

Intangible assets

FRD 110A

Cash flow statements

FRD 112D

Defined benefit superannuation obligations

FRD 114C

Financial instruments

124

FRD 119A

Transfers through contributed capital

134

FRD 120N

Accounting and reporting pronouncements

140

FRD 123

Transitional requirements on the application of AASB 16 Leases

120

105-106 135-136 entire report

107-110

UN GLOBAL COMPACT INDEX Local Jobs First Act 2003 Financial Management Act 1994 Public Administration Act 2004 Environment Protection Act 1970 (Vic)

Please refer to our report, Planet, People, Prosperity, for information on how our policies, programs and actions align with the 10 principles of the UN Global Compact and the Sustainable Development Goals (SDGs).

5 DISCLOSURE INDEX

114-115 97 & 123

LEGISLATION Water Act 1989 Water Industry Act 1994 Freedom of Information Act 1982 Building Act 1993 Public Interest Disclosure Act 2012

98 139

03 9046 4173 03 9046 4173 03 9046 4173 03 9046 4173

TTY/ voice calls

133677

Speak and listen

1300 555 727

yvw.com.au

For hearing and speech impaired services

YARRA VALLEY WATER ABN 93 066 902 501 Lucknow Street Mitcham Victoria 3132 DX 13204 Telephone – 03 9872 1699 Fax – 03 9872 1353 © Copyright August 2020 Yarra Valley Water Corporation ISSN 2202-6304 (Print) ISSN 2202-6312 (Online)