Yarra Valley Water Annual Report 2021-2022

2021-22

Yarra Valley Water Annual Report

Acknowledgement of Traditional Owners/Custodians

Yarra Valley Water proudly acknowledges the Traditional Owners/ 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 Victorians have with the land and waters and recognise and value the care and protection provided by Traditional Owners/Custodians over thousands of generations. We also recognise and value the continuing rich cultures and contribution of Aboriginal people to the Victorian community.

Language statement

We recognise the diversity of Aboriginal people living throughout Victoria. We have used the term “Aboriginal” to include all people of Aboriginal and Torres Strait Islander descent who are living in Victoria. The use of the words “our” and “we” throughout this document refers to Yarra Valley Water.

Introduction

About us

We are one of Australia’s largest water utilities, servicing two million Victorians and 60,000 businesses. We manage $5.6 billion worth of assets across a vast service area stretching more than 4,000 square kilometres, from Wallan in the north to Warburton in the east.

Our primary function is to supply safe, reliable and affordable water and sewerage services to our customers. This includes the provision of high-quality drinking water sourced mostly from protected catchments in Melbourne’s east, delivering reliable water supply to customers and removing and treating sewage in a way that protects the environment. While most sewage is treated at Melbourne Water’s Eastern and Western Treatment plants, we also have nine regional treatment plants that process sewage. Several of these also produce recycled water for non-drinking water uses in homes and public spaces as part of our work to secure water supplies for the future. We have a diverse customer base, including more than 15,000 people who identify as Aboriginal and/or Torres Strait Islander.

Our 2030 Strategy sets out a long-term strategic plan to deliver on our purpose: to support the health and wellbeing of our customers and deliver a brighter future for communities and the natural environment. We’re driven by this vision as we plan the delivery of our essential services to meet the challenges of a growing population, social change and climate change impacts.

We deliver extra value for our customers through innovations such as Victoria’s first food waste to energy facility, which converts 33,000 tonnes of food waste a year to generate our own renewable energy. Our facility helps reduce our carbon footprint, turning food waste

into energy which powers our Aurora Treatment Plant and reduces energy costs. We also export excess energy to the electricity grid. New innovations underway include a second, larger food waste to energy facility, developing a digital water meter to help customers identify leaks and opportunities to save water, and leading the way on green hydrogen production.

Our workforce has maintained high levels of performance despite the challenges of COVID-19. Our people have adapted to a hybrid environment where they come together onsite to connect and collaborate with the option of carrying out other work off-site. This approach provides greater flexibility for our people to balance their work and personal life to achieve better productivity and wellbeing.

We are a water corporation under the Water Act 1989 and our activities are overseen by an independent Board of Directors appointed by the Victorian Government. The Water Act 1989 and the Statement of Obligations issued by the Minister for Water govern our activities. We’re accountable to the Minister for Water. During the 2021-22 financial year, we were accountable to the Hon. Lisa Neville MP and the Hon. Harriet Shing MP as Minister for Water and the Hon. Richard Wynne MP as acting Minister for Water. We are regulated by the Essential Services Commission. Every five years we’re required to make a Price Submission which sets out the services and standards we propose to deliver to customers and proposed prices. This year we’ve been engaging with customers to develop our next Price Submission, due to come into effect on 1 July 2023.

A message from the Chair and Managing Director

We are proud to present Yarra Valley Water’s Annual Report 2021-22 which provides an overview of our performance, including key highlights and audited financial statements. It details how we’re working to deliver on our purpose to support the health and wellbeing of our customers and create a brighter future for communities and the natural environment.

Our approach is centred around our 2030 Strategy which focuses on:

• Transforming Around the Customer

• Helping Communities Thrive

• Leading for our Environment

Challenges created by COVID-19 continued to affect our customers and staff this year. We’ve adapted to manage the impacts, embedding our high-performing hybrid way of work to ensure we keep taps running and toilets flushing 24/7. We've focused on managing supply chain risks and labour shortages emerging from the pandemic and broader global conditions through business continuity planning with our delivery partners. We also continue to collaborate with government and industry associations to take a whole of sector approach to this challenging environment. We continue to support customers facing hardship too. This year we launched a campaign to raise awareness of our award-winning WaterCare program, which ensures all customers have access to affordable water services. In 2021-22 the program assisted more than 16,000 customers experiencing hardship and vulnerability.

Another significant focus this year has been the development of our next Price Submission. It will determine the services we provide and the prices customers will pay from 2023-28. We’ve engaged extensively with a diverse group of customers via a series of community panels and a virtual Citizens’ Jury to develop a new set of six customer commitments for this

pricing period. This year, for the first time, an Aboriginal Community Working Group shared their powerful perspectives on Caring for Country. Through this process the Citizens’ Jury recommended Caring for Country to be a key priority, clearly identifying that it needs to be at the heart of every decision we make.

We continue to adapt to the challenges of climate change and population growth, which put pressure on our network and the availability of water. Planning for natural disasters is more important than ever as the impacts of climate change increase. Severe weather events, such as the destructive storms of June 2021, have tested our network and emergency response. We continue to review and improve our approach to emergency management, taking part in industry-wide training exercises to ensure we maintain a robust emergency response. We’re also investing in our asset maintenance program to strengthen our network to ensure the continued reliable delivery of our essential water and sewerage services.

We’re passionate about protecting the planet and innovating to solve ecological challenges. We’ve increased our green ambitions this year, aiming to be 100 per cent renewable and net zero in 2025, which is world-leading for a water utility. We're exploring the exciting potential for the water sector to contribute to the development of a viable hydrogen economy in Australia, piloting a program at our Aurora Treatment Plant. We've also awarded the contract to build a second large-scale food waste to energy facility alongside Lilydale Treatment Plant. We're preparing to unveil plans

to transform our Aurora Treatment Plant site at Wollert into an innovation hub that showcases the circular economy in action. We've also developed a biodiversity framework for 190 sites across 1427 hectares of land we own so we can look to improve land management practices at significant sites. We continue to advance the United Nations’ Sustainable Development Goals as we help build a more equitable and sustainable community.

Our Stretch Reconciliation Action Plan continues to drive action towards reconciliation. Building on our partnerships with Traditional Owners/Custodians to ensure their ongoing contribution to land and water management has been a key focus this year. We’re working with Wurundjeri Woi Wurrung across a range of projects, and we’ve commissioned research to provide an Aboriginal perspective on the history of the water sector since colonisation.

Our recycled water network, which supplies water for non-drinking purposes such as flushing toilets, watering gardens and washing cars, now services 41,000 homes and businesses and continues to expand. We’ve now applied for permits to build an underground water recycling facility in Doncaster to service about 6000 properties at Doncaster Hill and water local sports grounds and parks. We’ve also been working collaboratively across the metropolitan water sector as we prepare long-term plans to ensure future water supplies for Melbourne.

We’re continuing to explore the potential of Hazelwynde, our vision to help establish a world-class water-efficient community in Melbourne’s north.

Other highlights include:

• Investing $282m in infrastructure to improve services and support growth

• Delivering 147 billion litres of high-quality water to our customers, all 100 per cent compliant with stringent regulations

• Exceeding our key customer satisfaction target this year, with 88 per cent of customers satisfied with their interaction with us

• Engaging a local manufacturer to produce our own digital water meter

• Delivering the Make Every Drop Count water conservation campaign in collaboration with Melbourne's other water corporations to encourage consumers to save water

• Continuing to rate highly in the Essential Services Commission's customer perception survey resultsbeing in the top three across all measures including value for money, trust, reputation and satisfaction.

We’ve achieved our best results yet when it comes to meeting our customer commitments, achieving the targets for six of the seven outcomes customers tell us they expect and value. The result for water use per person per day, the only target we missed, was 219 litres compared with our ambitious target of 211 litres. However, water use has decreased significantly in recent years and we’ll continue to strive to meet our ambitious targets to support a secure water future for our community. We voluntarily pledged to give money back to customers each year via reduced prices if we didn’t meet every target. As promised, we’ll return $1.5m this year.

We’re mindful of evolving community and regulatory expectations, rising inflation and other cost pressures. While bills have fallen significantly in real terms in recent years, we need to maintain a sustainable revenue stream to ensure our services continue to meet the community’s needs, now and into the future. It’s vital to fund ongoing maintenance and expansion of our network to ensure the long-term viability of our service delivery. Despite the cost pressure on our sector, we continue to rank as one of the nation's most efficient water utilities and this underpins the projections in our draft Price Submission.

We delivered our financial target this year with a net profit after tax of $78.2m. Core service and usage revenues overall remained relatively stable. Revenues from the commercial sector were impacted by the ongoing pandemic and developer growth related revenue was not as high as expected. We maintained a strong focus on operational expenditure. Despite the ongoing economic challenges of supply chain, inflation and labour capacity constraints, our operating expenditure was favourable against our plan especially in the areas of labour, information technology and civil maintenance programs. This result has flowed through as dividends back to the State of Victoria.

Finally, we want to thank our people for their commitment and dedication to customers every day. Our Board also contributes to our success, and we thank members for their contribution. We’ve had some Board changes this year, welcoming new members, Kate Vinot and Ari Suss, and farewelling Anita Roper, who retired after serving for six years. We also appreciate our many government, community and private sector partnerships which provide valuable support for our work.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

Our strategic context

Three key pillars bring our purpose to life:

We drive high performance across all three pillars with the enabling streams of People and Culture, Safe and Well, Always Efficient and Digital Enablement powering our work. Together with our Price Submission customer commitments, these aim to deliver exceptional results for our customers, stakeholders, owners and staff.

We are committed to the United Nations Global Compact and work to advance the Sustainable Development Goals (SDGs). We’ve embedded the SDGs in our business strategy to provide a global context for how our activities contribute to a more sustainable and liveable future.

We are also guided by the Victorian Government’s Letter of Expectations, which focuses on:

• Water for Aboriginal cultural, spiritual and economic values

• Customer and community outcomes

• Climate change

• Resilient and liveable cities and towns

• Leadership and culture

• Financial sustainability

• Recognising recreational values

• Compliance

Our purpose is to support the health and wellbeing of customers and create a brighter future for communities and the natural environment.

Strategic theme Price Submission customer commitments

Transforming around the customer

• Safe drinking water

• Reliable water and sanitation services

• Timely response and restoration

• Modern flexible service

Helping communities thrive

• Fair access and assistance for all

• Water availability and conservation

Letter of Expectations

• C1 – Customer satisfaction

• PF1.2 – Water and sewerage network performance indicators

• PF1.4 - Customer responsiveness indicators

Sustainable Development Goals

Leading for our environmental future

• Care for and protect the environment

• C2 – Customer and community engagement

• AC1 – Supporting Aboriginal self-determination

• AC2 – Partnerships with Traditional Owners/Custodians

• AC3 – Aboriginal inclusion plan/ Reconciliation Action Plan

• E3 – Adaption to climate change and variability

• L1 – Integrated water management

• L2 – Water efficiency

• PF1.6 – Community service obligations

• E1 – Emissions reduction

• E2 – Electricity consumption

• L3 – Circular economy outcomes

• PF1.5 – Water reuse indicators

High performance

• G1 – Diversity and inclusion

• PF1.1 – Financial performance indicators

• G3 – Health and safety

2021-22 Highlights

Transforming around customers

Caring for customers is in our DNA and we are proud of our trusted reputation in the community. We’re continuing our ongoing transformation around customers to ensure we provide seamless and affordable services for all.

Key initiatives

Safe and Pleasant Drinking Water

Providing safe and pleasant drinking water is our top priority and we take great pride in our role to help Melbourne maintain its reputation for having some of the world’s best drinking water. Thanks to a legacy of our city planners, Melbourne is one of the few cities in the world with protected catchments, which help to produce the high-quality water we all enjoy. We also have a comprehensive water quality monitoring program to ensure full compliance with Safe Drinking Water regulations. An independent laboratory collected and tested over 7000 water samples this year, and we monitored and tested the water from over 1200 randomly selected customer taps in 34 different water quality zones – achieving 100 per cent compliance. Our customer research shows high satisfaction with the quality of our drinking water.

Resilience

We've continued to strengthen our emergency management response in the face of severe weather events, which threaten our water network. This includes working collaboratively with the broader metropolitan water industry and the Department of Health. We're continually improving our practices and incorporating lessons learnt from the damaging storm events in 2020 and 2021 that led to us issuing precautionary water quality notices for some customers. Additionally, we're part of a strategic interagency working group that has been formed to help guide and focus industry wide improvement to water quality and public health outcomes. We will continue to work collaboratively across the water sector, regulators and government to ensure our approach is a match for the challenges ahead. Further investment in system resilience is planned as part of our 2023-2028 Price Submission.

Affordability

We believe everyone must have access to affordable water and sewerage services. This means having robust support systems in place to ensure everyone can access our services. We know that COVID-19 continues to impact our customers’ financial wellbeing and it’s more important than ever that people can connect with support that meets their needs.

In March 2022 we launched a campaign to raise awareness of our award-winning WaterCare program which helps customers experiencing vulnerability or financial hardship. WaterCare provides a range of tailored options, including instalment plans, short-term payment extensions, access to government grants and concessions, and more comprehensive assistance if needed. Our integrated campaign leveraged new sophisticated targeting techniques combining big data

and machine learning to connect our services to those most in need. In a Yarra Valley Water first, it also included communication in five languages, tailored approaches for Aboriginal audiences, and Auslan translations. For Aboriginal community, we produced ads with tailored messaging and images. We targeted these directly to reach Aboriginal community members through social media, as well as sharing with key Aboriginal community partners. This campaign has helped drive increased traffic to our WaterCare web page and helped vulnerable customers feel more comfortable reaching out for support to proactively manage their accounts.

We know that price is critical for our customers and maintaining affordable bills is central to the development of our next Price Submission.

One Stop One Story Hub

We are actively involved in the Thriving Communities Partnership (TCP), a cross-sector collaboration we helped establish, which works to ensure everyone in Australia has access to the modern essential services they need to thrive.

In October 2021 TCP launched the One Stop One Story (OSOS) Hub pilot, a world-first digital platform that helps people experiencing vulnerability and financial hardship connect with the extensive support they’re eligible for across a range of essential services. It empowers frontline staff to refer customers to a broad range of support services, across sectors and industries, through a single access point. The pilot’s focus has been on supporting members of the community impacted by family and domestic violence, which has been exacerbated by COVID-19.

The OSOS Hub means people only have to tell their story once to one organisation, making it simpler for them to navigate the support on offer, and easing the burden of having to individually contact each organisation. Customers supported by the pilot have expressed their gratitude to our staff, saying the partnership approach really makes a difference at a particularly stressful time.

The OSOS Hub was a finalist in the 2021 Shared Value Awards for Collaboration of the Year (Early Stage) and Highly Commended in this category.

The pilot is now entering its second phase, which will expand support beyond people affected by family and domestic violence into broader financial hardship groups. This phase will also bring more organisations into the partnership, creating more referral opportunities and increased potential for impact.

Transforming around customers continued...

Reliable Water and Sewerage Services

Providing reliable water and sewerage services 24/7 is a key priority. Sewage is removed and treated using the most modern and effective methods available to protect the environment and amenity. Our aim is to ensure that less than 0.96 per cent of customers experience three or more unplanned water or sewerage service interruptions a year. This year we achieved our best result yet with 0.84 per cent of customers experiencing three or more unexpected interruptions.

We have an extensive water and sewer main renewal program to continually update our 21,000km network of mains and supporting infrastructure, including tanks and pump stations. We continue to invest in new water and sewerage infrastructure to service fast-growing northern suburbs including Doreen, Yarrambat, Diamond Creek, Donnybrook, Beveridge, Wallan and South Morang.

Our program to replace ageing assets eliminates leaks and reduces network failures that can cause service interruptions. In 2021-22 we completed sewerage system upgrades including the Eltham Sewer Project, Clyde Street Sewer Project (Stage 1), Plenty Road Sewer, Northbourne Sewer and a major distribution water main upgrade in Toorak Road. We also completed two more major projects - the Lockerbie Main Sewer and Doreen to Diamond Creek Sewerage Project - to service the rapidly growing Northern Growth Corridor.

We installed secondary chlorinators at 14 reservoirs and tanks across our service area to maintain our high-quality drinking water and upgraded the Emergency Relief Structure monitoring equipment at almost 50 sites. This equipment allows us to better monitor flows during wet weather events to enable early intervention to avoid sewage overflows and to improve environmental reporting.

assess the integrity of pipes Renewed more than

Timely Response and Restoration

We aim to fix water and sewerage services quickly when something goes wrong with a target to restore services within four hours for 91.1 per cent of customers. This year we hit that target for 96.1 per cent of customers. Customer satisfaction with our emergency response continues to be very high with 98 per cent satisfaction with our handling of fault calls and 92 per cent satisfaction with emergency repairs. We strive to ensure our services are reliable and aim to minimise disruption to customers when we need to maintain or improve our expansive water and sewerage network. We’ll continue to work closely with our contractors to achieve even better performance and efficiencies.

Digital Transformation

Our ongoing journey of digital transformation ensures that the products and services we provide remain valued and contemporary, creating customer experiences which result in high levels of trust and satisfaction. We’ve been modernising our core technology and moving towards modern, flexible systems which are more resilient to changes in the external environment and will ultimately deliver a lower cost to serve.

In 2021-22 notable deliverables included:

• Implementing the foundations of our new customer portal and progressing the replacement of two of our core customer-facing systems (customer self-service and land development application processing). The customer self-service project (known as myAccount) which is expected to be incrementally rolled out to customers from late 2022, was recognised with a Good Design Award in 2021.

• Moving our customer SMS text functionality to the new customer platform, which resulted in reduced cost and greater in-house control of the SMS function, particularly in the event of network incidents.

• Strengthening the focus on our omnichannel approach, which will help us create a seamless experience for our customer and users across all the channels we interact through.

• Implementing the platform for managing Internet of Things (IoT) devices which collect and return information about the performance of our asset networks. We’re now in the process of implementing capability to integrate IoT devices into the platform, as well as other core systems such as asset management and billing.

• Implementing a platform which provides us with a single view of our water and sewer networks. This enables us to be more proactive, better understand the impact of and linkages between various issues and improve the quality of our operational decisions to minimise customer disruptions.

PipeTracker continues to make life easier for customers and drive down call volumes. This mobile-friendly website allows plumbers in the field to see where our assets are located without having to phone us. As a result, call volumes have consistently fallen in recent years. We took 4,268 calls in 2021-22 compared with 5,745 the previous year.

We also promote use of the Snap Send Solve app so customers can easily report a leak or incident in our network while on the go via their mobile phone. In 2021, this partnership expanded to include an integrated reporting form via our online Faults Map, providing another quick and easy way for customers to contact us. In 2021-22 we received 8,152 reports via Snap Send Solve and we’re now averaging about 680 reports a month.

DIGITAL TRANSFORMATION

In 2021-22 we received

8,152

reports through Snap Send Solve

Digital Water Meters

Digital water meters are an integral part of our future. We have been conducting trials in Vermont South since 2019. Results show a promising reduction in demand with customers being alerted about unnecessary water use (such as leaks), as well as a very low opt out rate (less than 1 per cent). Our trials have been closely monitored and assessed for cost, benefit and overall customer experience.

We’ve developed our own digital water meter which we initially trialled in Vermont South. The design, development and manufacture of this digital water meter has the potential to generate local jobs, and to be offered as a solution across Australia and the region via our commercial partner.

We’re currently planning to expand the trial, rolling out a further 25,000 digital water meters to other suburbs in 2023-24. Our Price Submission engagement process has also identified strong customer support for digital water meters and other products and services with the potential to save water for the future.

Subject to the success of the expanded trial, we’ll roll out digital water meters across our entire service area, which will help manage Melbourne’s water supply more sustainably. They will enable customers to understand their water use, identify wastage, and fix leaks - saving water and reducing bills.

DIGITAL WATER METERS

We’re planning to add another 25,000

digital water meters to our trial

Transforming around customers continued...

Price Submission 5

Every five years we make a Price Submission to our regulator, the Essential Services Commission. It spells out the services we’ll provide, and the prices customers will pay. We’re in the process of developing our next Price Submission for 2023-28. Keeping pressure off prices as much as we can is a key driver. While bills have fallen significantly in recent years, we need to ensure we secure a sustainable revenue stream into the future so our services continue to meet the community’s needs. It’s vital to fund the ongoing maintenance and expansion of our $5.6b asset base to ensure the long-term viability of our systems for both current and future generations.

To build a truly representative and evidence-based Price Submission, we focused on understanding what people across our diverse customer base value most. We sought to engage with often unheard voices and ensure that the needs of future generations were always considered. We co-designed an engagement approach with our Board, staff, stakeholders, regulators and external critical friends. This new approach allowed us to unpack what effective engagement would look like for all stakeholders, unearthing contextual and emerging issues, and identifying the voices that needed to be heard - all leading to the subsequent and final step of a representative 40-member Citizens' Jury. This year, an Aboriginal Community Working Group shared with the Jury their perspectives on Caring for Country, building understanding of what it means to deliver water and sewerage services on Country. This had a powerful impact, resulting in the Citizens' Jury recommending that Caring for Country is a key priority and is considered in all our decision making.

The Jury also identified six key customer commitment areas:

• Safe and pleasant drinking water

• Reliable water and sewerage services

• Timely service response and repair

• Service that meets everyone's needs

• Saving water for the future

• Looking after the natural environment

Helping communities thrive

We are planning for long-term water security now to protect supplies for the future. We’re manufacturing more water and expanding our recycled water network to support population growth. We're also partnering to deliver projects that use sustainable water to ensure Melbourne is a lush blue-green city where communities can thrive.

Key initiatives

Water Security

Climate change, population growth and weather variability continue to put pressure on our network and the availability of water. Relying on rainfall and dams is no longer enough to secure long-term supplies. Desalinated water now makes a critical contribution to the state’s water security. In 2021-22 the Victorian Desalination Project delivered 125 billion litres of water into storages.

We’re continuing to work collaboratively with the other metropolitan water corporations to develop a joint Greater Melbourne Urban Water and System Strategy. Known as Water for Life, this strategy will outline plans for securing water supplies over the next 50 years, including specific actions for the next five years. We’re engaging with Traditional Owners/Custodians, the Aboriginal and broader community and stakeholders to provide input into this important work. The draft strategy was released for public comment in June 2022 and work is due to be completed by the end of 2022.

In 2021-22 the Victorian Desalination Project delivered 125 billion

litres of water into storages

Climate Resilience Plan

In 2021-22 we completed a review of our Climate Resilience Plan to renew our perspective of the biggest climate challenges and risks and capture actions to mitigate and adapt to climate change. This Plan has undergone an external audit which found us “well placed to manage and embed climate change risks across the organisation” and having a “mature” approach to climate risk management.

We successfully piloted adaptive planning in a number of projects in the Northern Growth Corridor, including planning for the potential to treat stormwater at our recycled water plants. We also focused on reducing service vulnerabilities, developing our partnership with the Bureau of Meteorology, and holding climate outlook workshops each quarter to help prepare resources for the following three months. We continue to review emergency management plans with a climate lens. In learning from recent extreme weather events, we’re strengthening our ability to plan for and respond to

these challenges. We’re incorporating findings from a vulnerability assessment in our risk assessment and renewals programs and testing future construction projects against more extreme weather patterns. We also continued working in partnership with the Department of Environment, Land, Water and Planning and the other water authorities on the Victorian Climate Change Adaptation Action Plan, extensive long-term water planning and other industry collaborations.

Recycled Water

Developing recycled water infrastructure is crucial to long-term water security, taking pressure off precious drinking water supplies. Our recycled water network now services 41,000 homes and businesses, mostly in Melbourne’s northern growth corridor, and continues to expand. Class A recycled water can be used for a variety of non-drinking water purposes such as flushing toilets and car washing. We’ve started planning and designing to increase capacity at our Aurora recycled water treatment facility, which will create a 10 megalitre a day recycled water facility at the site. This will provide a significant increase in recycled water production capacity for this important growth area. This project is in its early phases and is expected to be commissioned in approximately four years.

Through integrated growth planning, working with the Victorian Planning Authority and other stakeholders, we’ve also secured a site for a new recycled water treatment facility at Wollert. This critical piece of infrastructure will ultimately enable us to supply recycled water to more than 100,000 customers as per the Integrated Water Management strategy.

We’ve advanced plans to build an underground water recycling facility in Doncaster. Applications for planning and environmental approvals have now been submitted to relevant authorities. The facility is critical to enabling developers to meet Manningham Council’s environmentally sensitive development requirements and will supply Class A recycled water to about 6000 apartments and houses in and around Doncaster Hill. It will also supply water to irrigate and drought-proof local parks and reserves. We’re continuously engaging with the community to keep people informed as the project progresses.

Helping communities thrive continued...

Non-revenue water

In 2021-22 the amount of non-revenue water (NRW) was estimated to be 12.3GL – the second lowest on record (equating to 7.7% of total usage). Our focus on active leak detection and drainage monitoring, main renewals, creation of district metering zones and the use of intelligent network technologies have all helped to minimise NRW (water lost between the source and customer properties mainly through leaks and bursts). We now monitor 26 per cent of our water supply network in real-time allowing us to investigate and repair leaks faster. A recent benchmarking study conducted by Isle Utilities confirmed that our recent NRW performance is world-class, and we’re recognised as one of the top performers across the global water industry. We’ve also engaged a new field contractor for our Active Leak Detection program which is yielding great results finding leaks in locations which are not currently monitored.

Water conservation

Water use has decreased significantly in recent years - from 233 litres in 2018-19 to 219 litres per day in 2021-22. We didn’t quite meet our target for water conservation this year (219 litres of water per person per day against a target of 211) but will continue to strive to support a secure water future for our community.

Initiatives in 2021-22 to support water conservation included:

• Delivering the Make Every Drop Count water conservation campaign in collaboration with Melbourne's other metropolitan water corporations to help people take personal steps to save water and support the Victorian Government’s overarching Target 155 objective. A campaign analysis is yet to be completed, but initial expectations are for it to reach over 75 per cent of Melburnians.

• Continuing to pilot a showerhead exchange program, with more than 750 water-efficient showerheads now provided to customers.

• Inducting 25 new schools into the School Water Efficiency Program (SWEP), bringing the total number of participating schools to over 330.

• Our Water Watchers education program - which was a finalist in the Banksia Sustainability Awards this year – with more than 100 incursions now delivered in schools.

• Re-launching our ‘Shower Shorter’ campaign to encourage customers to reduce their average shower time to four minutes.

Providing recycled water to

41,000 properties

• Providing recycled water to 41,000 properties, with significant investment across the recycled water network and treatment plants to increase reliability and production of recycled water.

• Producing 377 million litres of recycled water for use by councils on public gardens and sporting ovals and for non-drinking purposes at homes.

• Extending our recycled water main network to almost 700km.

• Conducting approximately 12,910 recycled water audits at customer properties, enabling greater use of recycled water in gardens, laundries and toilets.

We also offer water audits through our Community Housing Retrofit Program (CHRP) to support people who need help to gain greater control over their bills by fixing leaks or inefficient appliances. The CHRP program, which we administer on behalf of Melbourne’s water corporations, targets emergency and community housing across Melbourne. This program has been very well received with more than 100 households assisted in 2021-22.

Inclusion and Connection

We are committed to ensuring all our customers can access our essential services. This means embedding inclusion and accessibility into service design and delivery and raising awareness of our support services. We’ve taken steps in 2021-22 to improve the inclusiveness and accessibility of our services. These include:

• Conducting dedicated qualitative research to understand what accessible and inclusive water and sewerage services means to different customers, and the impact of inaccessibility. This included interviews with people with a disability, people with lower English literacy, LGBTIQ+ people and young people, to help us better understand barriers they face engaging with service providers.

•

• Ensuring that our refreshed brand is accessible, including embedding plain English and developing an inclusive language guide.

• Developing an implementation framework to embed gender impact assessments in the design and delivery of our services, programs and policies. This is in line with our obligations under the Gender Equality Act 2020 and will help to ensure we embed inclusion into the way we work.

• Supporting the national Pride in Water network, which aims to create a more inclusive water industry for LGBTIQ+ staff, contractors, customers and our broader community. This also helps to build our profile as an inclusive organisation. Our staff members instigated the Pride in Water Network.

• Continuing to build and strengthen partnerships with community organisations to understand the diverse and evolving needs of our customers, including the barriers that limit access to support services. This includes sharing information about programs such as WaterCare, and keeping abreast of the issues driving vulnerability in our community, which also ensures our policies and practice continue to meet the needs of our community.

• Developing a community wellness program pilot with the Olivia Newton-John Cancer Wellness & Research Centre as part of our WaterCare awareness campaign. This enabled us to deliver messages about Watercare to people at a difficult and stressful time, which can be a trigger for financial vulnerability. Together, we distributed WaterCare wellness packs to some of the 10,000 Yarra Valley Water customers diagnosed with cancer each year.

Reconciliation

We are working on the implementation of our Stretch Reconciliation Action Plan (RAP) to achieve our vision that all who live on this land acknowledge our shared history and move forward, together, in a respectful way. Our Stretch RAP includes training, employment and procurement targets and actions to ensure Traditional Owners/Custodians are actively involved in planning and managing water resources.

Strengthening ties with Traditional Owners/Custodians and Aboriginal communities is a key focus. We have continued to work together on two-way capability building. This includes developing partnership agreements with Wurundjeri Woi Wurrung and working with them and our partners in relation to cultural heritage, significantly strengthening how we approach these works and understand their value, including a repatriation policy. We’ll also expand engagement with Aboriginal Community Controlled Organisations and Aboriginal and Torres Strait Islander businesses, building trust and connection to support economic opportunities and enable prosperity.

We continue to work towards putting in place a culturally safe work environment that promotes the structural inclusion of Aboriginal people in the water industry through training opportunities, employment, support for Aboriginal and Torres Strait Islander businesses and working in partnership with Traditional

Ongoing Aboriginal cultural awareness training for all staff, including customer-facing teams in a mix of online and face-to-face formats, as well as participating in external community events.

Helping communities thrive continued...

Owners/Custodians to plan and manage land and water. We celebrated Reconciliation Week with a range of events and activities, including planting the Sea of Hands at the front of our Mitcham office in a show of support for reconciliation, rights and respect.

Although we were limited in opportunities for in-person engagement during COVID-19 restrictions, we still provided a range of formal and informal cultural learning opportunities, through face-to-face and online Aboriginal Cultural Awareness Training and activities such as site visits. Our Finance and Corporate Services Group took part in a tailored Aboriginal Cultural Awareness Training session in person and a learning pilot session to increase the group’s contribution to our reconciliation journey. It involved a workshop to develop a plan of activities and a survey to understand a base line of where the group was at in its reconciliation journey. The group plans to undertake this reconciliation survey and workshop at the beginning of each financial year to set activities for the forthcoming year. The survey results will establish a trend line to track how the group progresses and measure the impacts.

In 2021-22 we worked with Wurundjeri Woi Wurrung across a range of projects, including three artefact reburials. This involved the return of artefacts unearthed during major project works. Information signs will be installed near the sites to tell the story of the artefacts that were uncovered during our work in different areas and their connection to the Wurundjeri Woi Wurrung. During work to expand the sewer system in Donvale more than 2,700 stone artefacts were discovered. We joined Elders at a ceremony at Whitefriars College in Donvale where some of these artefacts were presented to the school to form part of a display showcasing the significance of the area. Elders see the display as an important opportunity to educate students about local Aboriginal cultural heritage and history. Information regarding significant stony rises on Wurundjeri Woi Wurrung Country during excavation for the Lockerbie Main Sewer project was presented at the Victorian Archaeological Colloquium in 2022.

We’re strengthening our partnership with Mullum Mullum Indigenous Gathering Place, planning to provide them with temporary accommodation at our Mitcham head office while their East Ringwood base is being renovated. This will create more exciting opportunities for engagement and connection.

Integrated Water Management

We are implementing a rigorous process for place-based partnerships to develop integrated water management plans across our service area. Integrated Water Management (IWM) helps the water sector, local councils, government and community work together to better plan, manage and deliver water in local areas, helping to create blue-green spaces, urban cooling and water sensitive cities. Critical to this process is partnering with Traditional Owners/Custodians to recognise and support Aboriginal cultural values and economic inclusion in relation to Caring for Country.

We’re actively involved in the collaborative industry-wide IWM forums and working groups facilitated by the Department of Environment, Land, Water and Planning. Our inputs primarily relate to the Yarra (the Birrarung) and, to a lesser extent, the Maribyrnong and Dandenong catchments.

Our key commitments in the Yarra, Maribyrnong and Dandenong catchment areas are:

• Upper Merri Creek IWM sub-catchment plan development

• Doncaster Hill water recycling project

• Improving sanitation through onsite wastewater management

• Wallan restorative project

• Community farm initiative

In 2021-22, we have drawn on the experience of piloting IWM sub-catchment planning in the Upper Merri Creek to inform our ongoing engagement in the industry-wide IWM forums and other IWM initiatives. The forums have collaboratively developed Catchment Scale Plans with measures and targets to progress towards a more water sensitive city.

By participating in the IWM forums, we’ve broadened the benefits of the Upper Merri Creek sub-catchment IWM planning work to inform and influence IWM planning across Victoria. The collaboration in the Upper Merri Creek sub-catchment also involves the Wurundjeri Woi Wurrung Cultural Heritage Aboriginal Corporation, the cities of Hume and Whittlesea, Mitchell Shire Council, Melbourne Water and the Victorian Planning Authority and has included the community in the visioning for how their local areas will evolve.

We’re also partnering in the delivery of other priority projects including:

• Monbulk Community Sewerage Program

• Collaborative waterway quality monitoring programs (understanding pathogen and toxicant impacts and sources to support evidence-based decision making)

• Tarralla Creek Water Park, including advice and input from Mullum Mullum Indigenous Gathering Place Aboriginal Community members

• LaTrobe and Monash National Employment Clusters’ Water Sensitive City Visioning

• Moonee Ponds Creek Channel Naturalisation and modelling improvements via partnership in the Chain of Ponds Group (the Moonee Ponds Creek IWM sub-catchment committee)

• Water4Good, investigating harvesting and infiltration options for stormwater management in the Yarra Ranges

• Edgars Creek Catchment Collaboration, improving the quality of Edwardes Lake through IWM

• Moreland Sub-catchment IWM, creating a local sub-catchment plan for Moreland City Council

Mutual Aid

In 2022 we provided on the ground mutual aid support to flood-stricken parts of the country. This involved sending treatment plant operators to Tweed Shire Council and Richmond Valley Council to help with recovery after floods devastated parts of Queensland and New South Wales. Our staff had a vital role helping to get the Murwillumbah and Casino sewage treatment plants back into operation after they were inundated with flood water. It was the first time we deployed staff across state borders, and we’ve built a model to enable timely support with safety, personnel and risk management systems in place.

Wollert Community Farm

Plans are progressing to develop a community farm at our Aurora Treatment Plant, in partnership with the City of Whittlesea, Melbourne Polytechnic and Whittlesea Community Connections. Our shared vision is to create a farming enterprise and community food hub which uses best practice sustainable agriculture and land management, provides pathways to employment and demonstrates the circular economy in action. The City of Whittlesea has approved a planning permit for the project and the first stage of construction will start later in 2022. We’re also working with the Wurundjeri Woi Wurrung Cultural Heritage Aboriginal Corporation to finalise a cultural values study on the site, which will include a recommendation for cultural burning and land management practices to return to the site. In parallel, the Wurundjeri Narrap Rangers Land, Water and Fire Natural Resource Management team have led the creation of a restoration trial plan for endangered grasslands on the site, with work commencing in July 2022.

Hazelwynde

We are continuing to explore the potential of Hazelwynde to create a water-efficient community in Beveridge, in Melbourne’s north. Our aim is to help establish a sustainable, water efficient community that meets all its own water needs through leading edge water management, taking pressure off Melbourne’s water supplies. Treating the precinct as a water catchment in its own right could deliver a cooler summer climate, mitigating the effects of extreme heat on human health and the local environment. This will be achieved by using sustainable water sources to support greening of the precinct and retaining water in the urban landscape.

Leading for our environmental future

We are passionate about the planet and our ambitious target of being 100 per cent renewable and net zero in 2025 is world-leading for a water utility.

Key initiatives

Beyond Zero Carbon

In 2021 we accelerated our trajectory to net zero emissions by bringing forward our net zero target by five years. Coupled with our renewable energy goals, we have now committed to being 100 per cent renewable with net zero emissions in 2025.

In 2021-22 our Food Waste to Energy Facility at Wollert (known as ReWaste) produced 7,516 MWh of renewable electricity and 66 per cent of our operations are now powered by renewable electricity.

We’ve also joined the United Nations’ Race to Zero campaign, alongside 13 Australian water utilities, adding our voice to the global message that our industry is tackling climate change. The Race to Zero is a global campaign rallying companies and organisations to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero carbon world.

Our paper, Going Beyond Zero Carbon by 2025, which was designed to share learnings with the broader industry, was recognised by the Australian Water Association as the best e-journal paper at its 2022 national awards.

Zero Emissions Water

We are a member of Zero Emissions Water (ZEW) and have committed to purchasing up to 5,700 MWh of solar energy each year from the Kiamal Solar Farm in northern Victoria. This purchase contributes towards our renewable energy and emissions reduction goals, with savings from the long-term deal helping to protect us against rising energy costs. ZEW is now considering how it might be able to help members make further emission reductions through carbon sequestration and tree planting projects.

Food Waste to Energy

Since 2017, our Food Waste to Energy Facility at Wollert has processed more than 150,000 tonnes of commercial food waste which has helped to reduce greenhouse gas emissions and waste. The facility has produced more than 30,000,000 kWh of clean energy. Food waste to energy production is central to our commitment to transition to a circular economy and reduce waste. The facility powers itself as well as the adjoining Aurora Treatment Plant, with excess energy (about 70 per cent) exported to the electricity grid. The facility is performing better than expected which presents an opportunity to explore ways we can harness more energy and realise the benefits of increased biogas production. We’ve

NET ZERO

We aim to be

100%

renewable with net zero emissions in 2025

partnered with more than 20 businesses, including shopping centres, markets and restaurants, which send food waste to the facility, providing an alternative to landfill.

In 2022 we appointed Delorean Corporation to build our second food waste to energy facility alongside the Lilydale Treatment Plant. The new facility will operate at an even greater capacity than Wollert, capable of diverting more than 50,000 tonnes of food waste from landfill each year and generating 10,000 megawatt hours of electricity – that’s around 35 per cent of our energy needs. We will engage with the community again before submitting applications for a planning permit and Environment Protection Authority Victoria development licence in 2022.

Generating Solar Energy

We produced 536 MWh of solar energy in 2021-22 and we’re working to expand our efforts. We’re planning to install a large 1296 kW floating solar panel system at our Wallan Treatment Plant which will be four times the size of the solar car park system at our Mitcham head office. It will generate about 1500 MWh of useable energy a year with the potential for this to increase in the future. This project will have the added benefit of preventing algal growth in our currently uncovered onsite storage pond, which is an integral part of the process for producing recycled water for our customers in the north. We’re also planning to install new large ground-mounted solar systems at five additional sites.

Leading for our environmental future continued...

A Circular Economy

We are transforming our treatment plants to focus on resource recovery and continuing to build our recycled water network as part of our commitment to help create a circular economy for Victoria. We’re increasingly using recycled and reprocessed materials with a lower carbon footprint in our construction and maintenance practices. We’re planning to showcase the circular economy in action at our Aurora Treatment Plant, where we’re already manufacturing water and converting food waste into clean energy. Next steps for Aurora involve the development of our community farm and exploring the potential for hydrogen production onsite.

Circular economy initiatives in 2021-22 include:

• Finalising waste management plans across our operations that consider waste types, methods of disposal and recovery

• Pursuing opportunities to make our supply chain more circular and divert construction waste from landfill

• Completing a pilot project to understand opportunities to reduce carbon across the life of a sewer pump station, which has indicative results of around 30 per cent carbon savings

• Looking to identify more opportunities to reduce carbon across the construction and life of 14 other projects

• Partnering with the Department of Environment, Land, Water and Planning and Melbourne Water to trial a version of the Infrastructure Sustainability Council’s framework developed for the water sector

COMMUNITY SEWERAGE PROGRAM

There are currently 10,000

properties on the program which provides access to modern, piped sewerage

Green hydrogen

We are proud to be a leader in exploring the potential for the water sector to contribute to the development of a viable hydrogen economy in Australia. We believe water utilities have a natural role to play in Australia’s hydrogen future because water is central to hydrogen production. And the by-product from hydrogen production – oxygen – can potentially be used to make our sewage treatment processes more efficient.

We were key contributors to the development of a Water Services Association of Australia paper published in late 2021 which examines the water industry’s role in the nation’s renewable energy future. The paper outlines the basics of hydrogen for the urban water industry, answers some key emerging questions, and points to questions that warrant exploration in the years ahead.

We recently commenced the delivery of a pilot hydrogen generation plant at our Aurora Treatment Plant to prove new electrolyser technology, which, if successful, could supply a range of end users and industries. The trial is due to be completed towards the end of 2022, at which point we will revisit the business case for the construction of a larger scale facility capable of producing about 700 tonnes of hydrogen per annum that will be distributed by pipeline to local demands.

Community Sewerage Program

In some outer suburban areas residents still rely on septic tanks to treat sewage. These systems can be unsuitable if they’re not maintained properly or on properties that are not large enough to support sustainable irrigation of effluent. Our Community Sewerage Program provides these communities with access to our modern, piped sewerage system. We have about 10,000 properties on the program, to be serviced over the next 10-15 years.

In 2021, we opened a pop-up information shop for Community Sewerage Program customers in Monbulk, the commercial heart of the Dandenong Ranges. The first of its type for Yarra Valley Water, it’s been well received by the local community. Customers can drop in to learn more about the program and speak directly with specialist staff to get the answers they need about how their property can connect.

Healthy Ecosystems

We are working to combat biodiversity decline and increase our level of care for plants and animals on our land across Melbourne’s northern and eastern suburbs. We’ve developed a biodiversity framework and business case to improve our land management practices, using the findings of a report by Nature Glenelg Trust, which assessed all 1527 hectares of land we own. The audit aimed to determine which sites currently provide the greatest biodiversity value, and to highlight and prioritise those that can contribute to improved outcomes. Despite the operational focus of our land, much of it retains significant biodiversity values, ranging from remnant woodland, riparian vegetation, native grassland and artificial – but valuable – constructed habitat, such as storage dams and treatment ponds. Threatened and endangered species inhabit some sites, providing additional impetus to better manage and enhance land for these species.

Twelve of our 190 sites were classified as having high biodiversity value, and we’re planning how we can improve our land management at these sites over the coming years. This will include better weed management, revegetation, restoration of waterways and species monitoring. We’re also working with Greening Australia and Zoos Victoria to gain funding for detailed design work to create habitat at our Upper Yarra Treatment Plant. This will provide a haven for the critically endangered Helmeted Honeyeater and Lowland Leadbeater’s Possum - Victoria’s faunal emblems - as well as other wildlife. It will have the added benefit of absorbing carbon. Our regenerative approach will ensure positive biodiversity and ecosystem outcomes are part of our asset planning, design, delivery, operation and maintenance activities.

We’re also exploring future management of some of our land by Traditional Owners/Custodians, aiming to support their self-determined approach to Caring for Country. Initially we’re exploring a partnership with Wurundjeri’s Narrap Rangers at our Aurora site in Wollert to manage land for our community farm project.

Environment Protection Act 2017

The Environment Protection Act 2017 came into effect on 1 July 2021. It changes how the Environment Protection Authority Victoria (EPA) regulates pollution, waste and contamination. The Act now has a stronger focus on prevention, rather than consequences, and, for the first time, recognises impacts not only on the environment but also to human health. The Act is built on the General Environmental Duty (GED) that requires any person who is engaging in an activity that may pose a risk of harm to human health or the environment from pollution or waste, to minimise those risks so far as reasonably practicable. Yarra Valley Water has developed a comprehensive action plan to ensure the transition to the new Act is effective.

We’ve:

• Reviewed and updated our Environmental Management System, internal procedures and practices.

• Updated our environmental risk registers and controls to align to the new Act.

• Identified opportunities to proactively manage our impacts to the environment.

• Trained staff and business partners in environmental awareness and risk management and built this into our contracts and procurement requirements.

• Updated our EPA notification protocols.

• Updated our waste management plan.

We continue to work closely with the EPA on changes to licence conditions and how the new Act will operate in practice.

High Performance

We pride ourselves on our exceptional workplace culture and commitment to high performance. People and Culture is a key theme powering our commitment, along with Safe and Well, Always Efficient and Digital Enablement.

Key initiatives

People and Culture

Our organisational culture fosters an inclusive and collaborative work environment and provides development opportunities, flexibility and support that enable high levels of achievement and personal satisfaction. Our new Hybrid Playbook details our flexible approach grounded in trust, where people come together onsite to connect and collaborate for clearly defined “moments that matter”. We’ve established a workforce that has maintained high levels of performance despite the challenges of COVID-19. We don’t mandate set days in the office nor are we a fully remote organisation. Our approach provides greater flexibility for our people to balance their work and personal lives, performing work where it best suits them to achieve better productivity and wellbeing.

We developed a Growth and Development Program, ‘Better for Being Here’ during the height of coronavirus restrictions in 2021 to offer personalised support programs for staff across the business. We partnered with leading facilitators to offer virtual courses including Better Wellbeing & Resilience (neuroscience and mindfulness), Better Ways of Working (productivity), and Better Careers & Parenting (home schooling, work demands, familial relationships).

Our strong participation in the Victorian Public Sector’s People Matter Survey 2021 once again demonstrated a highly engaged and people-orientated organisation.  The results showed very favourable scores, 95 per cent and above, in the areas of physical safety, service delivery, commitment to high levels of public trust, human rights, inclusive leadership and strong relationships and collaboration. The results reflected significant increases in favourable responses in areas where we have invested time, effort and focus over the past two years.  Some of the largest positive variances were in the areas of senior leaders considering the psychological health of employees to be as important as productivity, showing support for stress prevention and good communication about psychological safety. Much of this data has informed our diversity and inclusion strategy and Gender Equality Action Plan (GEAP) and wellbeing work in 2021.

In 2022 we measured our workplace culture using the Human Synergistics Organisational Culture Inventory - our first measure since 2018. We had an excellent 84 per cent response rate and the results confirmed that we continue to have a world-class constructive culturedespite the challenges of COVID-19. Employees reported predominantly constructive expectations of behaviour and service quality remains a core strength, being above the constructive benchmark and improving since 2018. The survey also identified opportunities to further support the growth of our constructive culture and improve employee experience, particularly in the new hybrid working environment.

Diversity and Inclusion

Our Diversity and Inclusion Strategy purposefully creates an employee base which reflects the diverse community we serve. With the Gender Equality Act 2020 ensuring greater transparency, along with our Stretch Reconciliation Action Plan commitments, diversity and inclusion is integral to our organisation. We have redeveloped our Diversity and Inclusion Committee, comprising employees from across the organisation. The committee operates as a representative voice that provides insight and acts as an agent to deliver on the Diversity and Inclusion Strategy and commitment to inclusive and accessible services.

We’re committed to creating a culturally safe workplace and increasing the number of Aboriginal and Torres Strait Islander employees. We’re reviewing our Aboriginal and Torres Strait Islander Expression of Interest process, which invites people who might be interested in joining our team to submit their resume or information about themselves so we can review if suitable roles are available. We’re also working closely with key partners and the Aboriginal and Torres Strait Islander employment networks to help achieve greater representation and inclusion of Aboriginal and Torres Strait Islander employees within the organisation.

We’re members of WaterAble, a network for people with disability and their allies in the Victorian water industry. WaterAble shares ideas and good practices across the industry to support employment of people living with disability and improve inclusion and access. We participated in the first round of the WaterAble Connections program, which pairs employees with disability with leaders across our industry to share insights and experiences and improve awareness of disability inclusion. We look forward to strengthening our relationship with WaterAble and building a greater understanding of the key issues for disability inclusion in our industry.

To support our efforts in ensuring diversity and inclusion, people leaders and other key teams have undergone Inclusive Leadership training and we’ve been working with VicWater and the Careers Education Association of Victoria on a project to increase awareness of the water sector and its diverse career offerings within Victorian secondary schools.

Gender Equity

We are excited to be part of the Victorian Government’s new Gender Equality Act 2020, which came into effect on March 31, 2021. The landmark legislation is the first of its kind in Australia and aims to improve workplace gender equality across the Victorian public sector. We see our participation in these new requirements as an opportunity to take the next big step forward in the work

High Performance continued...

GENDER EQUITY

Women make up more than 50%

of our Board and Executive

that we’re doing to identify, understand, challenge and address systemic gender equality issues. Since the Act was introduced, we’ve undertaken a workplace gender equality audit and developed our first Gender Equality Action Plan (GEAP).

We’re also working towards implementation of Gender Impact Assessments for new or reviewed policies, practices and services that have a direct and significant impact on the community. Our GEAP includes 43 actions to increase gender equality in our organisation. We’ll achieve these over the next four years by reviewing policies and practices, increasing learning opportunities, introducing new development programs and activities aimed to prevent workplace sexual harassment and closing the gender pay gap. The GEAP will allow us to measure and track our progress in the years to come. Changes in structures, attitudes and behaviours require significant time and investment. However, we believe our strong culture and values provide a solid foundation for this work.

Our commitment to gender equity is demonstrated at Board and Executive level with over 50 per cent female representation and we’re working towards 50 per cent female representation for all people manager positions, which currently stands at 46 per cent.

Prosperous Partnerships

Our participation in the Indonesia-Australia Water Utility Improvement Program (WUIP) from 2019-2021 has helped drive improvements in the delivery of water and sanitation services for Indonesia’s people. This successful twinning program was delivered by the Australian Water Association in partnership with their equivalent in Indonesia, PERPAMSI, and supported by the Federal Government through the Australian Water Partnership. We’ve forged a strong partnership with our twin, the Balinese-based Perumda Air Minum Tirta

Sanjiwani Kabupaten Gianyar. Our knowledge-sharing efforts have seen key achievements across diversity and inclusion, asset management, non-revenue water and system integration.

Apart from helping to protect human and environmental health, our involvement in this program delivers on our commitment to the United Nations’ Sustainable Development Goals, advancing equality and prosperity in a neighbouring part of the world. It also created an opportunity for our people to develop their skills working across diverse cultures and build new professional relationships in Australia and beyond. We’ll continue to pursue opportunities to maintain our close partnership and friendship with Indonesia - in particular with Tirta Sanjiwani. We look forward to helping drive more success in improving the delivery of services for the Indonesian community.

Safe and Well

Health and safety are central to the way we work, and wellbeing underpins our employee engagement and high-performance culture. A safe workplace enhances and promotes positive wellbeing and high performance. We’re focusing on high potential hazard identification and rectification as well as supporting early intervention to prevent physical and psychological injuries.

Significant investment in our contractor safety management processes led to an overhaul of our approach, shifting from a primarily compliance-based model to more of a safety partnership approach with our delivery partners. The new model is founded on trust and positive working relationships, allowing for increased shared learning for improved safety outcomes, not just for us, but also the broader water industry.

Safety leadership was another focus area in 2021-22. We developed actions from three Safe and Well committees established in 2021. These committees are made up of employees from across the business and are chaired by a member of the Executive team. The chair rotates from one committee to the next on an annual basis, providing the Executive with valuable insights into safety issues experienced at the operational level. These committees focus on different aspects of safety, such as operational safety, construction safety, psychosocial safety and office safety. Safety achievements, issues, challenges and trends are tabled through these committees and initiatives identified and endorsed for action.

We commissioned a psychosocial risk review in 2020-21 and are now developing our psychological wellbeing

strategy. It will be finalised in line with new Occupational Health and Safety regulations related to psychological safety. The psychosocial risk review led to a number of initiatives this year including a pilot program aimed at reducing cognitive, temporal and emotional stressors associated with high workloads, and a psychological safety literature review which identified our industry best practice approach to creating psychological safety.

We recognise that our employees’ psychological safety and wellbeing is just as important as their physical safety. During 2021-22 we embarked on a strategic journey to mature the way we relate to psychological health, wellbeing and injury at work. Our work in this area led us to be invited to the 2022 OzWater conference in May, to present our paper, The next frontier of safety – maturing our approach to psychological safety and wellbeing.

Always Efficient

We continue to meet our Price Submission commitment of flat bills. Since 2013-14, the average household bill has reduced by over $200 in real terms and by over $100 in nominal terms. The typical customer’s bill is forecast to increase by $10 in nominal terms for the 2022-23 financial year.

We continue to focus on providing affordable services and optimising community returns on invested funds to deliver economic benefit to our stakeholders. We’re committed to being one of Australia’s most efficient water utilities as confirmed through Water Services Association of Australia (WSAA) benchmarking. We have continued to improve our analytics capability to gain insights from our data to make tangible improvements in asset utilisation, customer and employee experience, cost allocations and productivity. We’ve also leveraged government and industry relationships to actively identify and explore opportunities and gain insights about where to focus our efforts for the best reward.

Cost savings have been delivered in the management of our Information Technology database support through the Victorian Government Purchasing Board contract. We’ve continued to reduce water lost through our system through our focus on active leak detection, mains renewals, district metering, trialling of intelligent network technologies and the continued reduction to the size of District Metered Areas across our network. This enables us to detect smaller losses and proactively address them.

Capital Expenditure

We continue to deliver on our commitments under the Essential Services Commission’s PREMO - performance, risk, engagement, management, outcomes - framework. To maintain service levels and reliability for our customers, we’re making significant investments to replace ageing assets in our network. This includes

replacing more than 100km of water and sewer mains a year and completing major projects to meet increasing demand for our services. Capital expenditure in 2021-22 was $282m, driven largely by growing our sewer network in the north and renewing our existing water and sewer network.

Cyber and Infrastructure Security

As a critical infrastructure provider, we have robust controls in place to protect our systems and ensure everyone in the organisation understands the risks and plays their part - including the implementation of a Cyber Security Risk Management Forum and Cyber Security Awareness Program. We test and update our systems on an ongoing basis to ensure they are protected against current and emerging threats.

We continue to focus on strengthening our protection and detection capabilities. In recent times, this has included replacing our firewalls and implementing best of breed monitoring tools, including working closely with both state and federal agencies. We have also strengthened our response capability and supporting procedures. We took part in a national exercise (AquaX) which tested our preparedness for a cyber security attack. This training further strengthened our approach to such an incident and ensured our cyber response is fully integrated into our corporate Australasian Interservice Incident Management System (AIIMS) response procedures.

During 2021, we became the first water corporation to have a 24/7 Operational Technology (OT) Security Operations Centre up and running and we recently completed works to separate the Information Technology and OT networks. We are aiming to achieve a National Institute of Standards and Technology Cyber Security Framework maturity rating of 4.0 (an international standard for cybersecurity operations and preparedness) and are well progressed in doing so. This standard is aligned with the requirements of the new Security Legislation Amendment (Critical Infrastructure Protection) Act 2022.

Digital Enablement

Digital technologies have the potential to enable massive breakthroughs in service by allowing us to be far more proactive in the way we interact with our customers as well as allowing us to manage our infrastructure in near real time. Harnessing technology is crucial to delivering great customer and employee experiences, automating internal business processes, and ensuring our systems and data remain safe from cybersecurity attacks. Our technology program holistically considers people, processes, technology and data, and will ultimately roll together to produce an integrated multi-year roadmap.

Overview of 2021-22 performance

Price Submission customer commitments

Target Result

1 April 2021 – 31 March 2022

Compliance with Safe Drinking Water Regulations 2015 100% 100%

Safe drinking water

Reliable water and sewerage services

Timely response and restoration

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% 0.84%

Fair access and assistance for all

Water availability and conservation

Customers whose interrupted service (water and sewerage) has been restored within four hours >91.1% 96.1%

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

89% 93%

Modern flexible service

Care for and protect the environment

Total water usage (litres/per person/per day) 211 219

Customers who are satisfied with their most recent interaction 86% 88%

Reduction in carbon emissions (cumulative) (baseline is 34,083 tonnes CO2e in 2016-17) 46.1% 46.3%

Financial summary

Yarra Valley Water recorded a net profit after tax of $78.2m in 2021-22. The net profit after tax result is $15.9m lower than the 2020-21 result and $0.7m higher than budget. The additional profit above budget is mainly due to reduced operating expenditure across a range of areas including labour, Information Technology and civil maintenance.

Capital expenditure of $281.9m was incurred during 2021-22 primarily to renew, augment and upgrade water and sewer infrastructure. Yarra Valley Water focuses on the efficient and effective use of its capital expenditure to deliver the planned outcomes in accordance with our approved price submission.

A final dividend of $27.5m for the 2020-21 financial year along with a capital repatriation payment of $36.4m was paid. The amount of the final dividend for the year ended 30 June 2022 will be determined after consultation between the Board, the Water Minister and the Treasurer of Victoria.

During 2021-22 total assets have increased by $256.2m due to the growth in infrastructure, property, plant, and equipment.

Total liabilities increased by $221.1m in 2021-22 as a result of additional borrowings of $230.7m which were used to fund operating costs and capital investments for our water and sewerage infrastructure and payments to the Government.

Overview of 2021-22 performance continued...

Five-year financial summary

Statement of comprehensive income 2022 $’000 2021 $’000 2020 $’000 2019 $’000 2018 $’000

Service and usage revenue 954,406 968,728 951,083 957,613 936,265

Other revenue 132,838 162,683 192,491 166,440 110,532

Total revenue 1,087,244 1,131,411 1,143,574 1,124,053 1,046,797

Operating and other expenses 727,304 749,083 747,486 724,304 684,073

Depreciation and amortisation 115,130 116,318 114,505 107,486 107,843

Finance costs 132,877 130,264 132,886 132,207 130,127

Total expenses 975,311 995,665 994,877 963,997 922,043

Profit before income tax 111,933 135,746 148,697 160,056 124,754 Income tax (33,687) (41,632) (44,299) (48,356) (36,252)

Net profit after tax 78,246 94,114 104,398 111,700 88,502

Balance sheet 2022 $’000 2021 $’000 2020 $’000 2019 $’000 2018 $’000

Current assets 201,941 189,127 166,412 171,358 196,849

Non-current assets 5,654,332 5,410,964 5,151,903 4,949,698 4,769,483

Total assets 5,856,273 5,600,091 5,318,315 5,121,056 4,966,332

Current liabilities 592,036 548,119 505,071 505,272 477,154

Non-current liabilities 3,558,067 3,380,871 3,211,136 2,981,543 2,814,871

Total liabilities 4,150,103 3,928,990 3,716,207 3,486,815 3,292,025

Net assets 1,706,170 1,671,101 1,602,108 1,634,241 1,674,307

YARRA VALLEY WATER

Return on equity

Return on average assets (%)

15

10

5

2021-22 2020-21 2019-20 2018-19 2017-18

Return on equity decreased in 2021-22 primarily due to lower profit after tax as a result of delays in completion of developer contributed assets, lower demand for commercial water usage, and lower growth in new commercial customers affected by pandemic.

Gearing ratio (%) interest bearing debt to assets

4.27 4.87 5.39 5.79 5.26

0

Return on assets has decreased due to growth in the average asset value associated with the delivery of 2021-22 capital works program.

Net profit after tax ($M)

150

60

40

20

0

80 2021-22 2020-21 2019-20 2018-19 2017-18

Gearing ratio has increased in 2021-22 due to an increase in borrowing levels to fund capital and operating payments.

100

50

57.51 56.02 54.59 51.35 48.61 0

78.25 94.11 104.39 111.7 88.5

2021-22 2020-21 2019-20 2018-19 2017-18

Net profit after tax has decreased in 2021-22 due to lower developer contributed assets revenue as a result of delays in completion of the developer works, lower demand for commercial water usage, and lower growth in new commercial customers affected by the pandemic.

Interest cover times

Capital expenditure ($M)

400

300

4

4.63 5.75 6.45 6.75 5.37 0

6 2021-22 2020-21 2019-20 2018-19 2017-18

281.9 332.82 333.62 312.77 282.26

2

Interest cover ratio in 2021-22 has decreased primarily due to lower operating cash flows associated with lower demand for commercial water usage, and lower growth in new commercial customers affected by the pandemic.

200

100

2.21 2.44 2.41 2.61 2.62 0

2021-22 2020-21 2019-20 2018-19 2017-18

2021-22 Capital expenditure has decreased due to the completion of major works in previous years in accordance with our approved price submission target.

Delivering Value

Our leadership

Our leadership team is focused on sustaining our high-performance culture and driving decisions and actions that lead to better outcomes for our customers and community.

Organisational chart

Board of Directors

Managing Director

Pat McCafferty

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 2021-22 financial year.

The Yarra Valley Water Board comprises nine independent non-executive Directors and one executive Director, with the non-executive Chair and non-executive Directors appointed by the Minister for Water.

Service Futures

Glenn Wilson

Distribution Services Bridie Fennessy

Growth Futures

Chris Brace

People, Performance & Culture

Amy Singe

Retail Services

Steve Lennox

Strategy & Community Tiffany White

Financial & Corporate Services

Natalie Foeng

Corporate Secretary

Lisa Anelli

Board

The Yarra Valley Water Board comprises nine independent Non-Executive Directors and one Executive Director, with the Non-Executive Chair and Non-Executive Directors appointed by the Minister for Water. 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.

Chair

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 13 years.

Sue is a Director of Mercer Superannuation, ClimateWorks Australia, CDC Data Centres, (effective 1 June 2022) and President of Bush Heritage Australia and was a Director of Kordia Group Limited until 31 May 2022. 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.

Sue is an experienced business leader who has served as a Chair, Director and senior business leader with ASXTop10 and global unlisted companies as well as high profile statutory authorities and not for profits. This included 13 years as a senior executive at Telstra Corporation.

Committee membership:

• Hazelwynde Steering Committee - Chair

• Service, Community, Assets and Regulation Committee

• Risk Management and Audit Committee

• Leadership, Culture and Diversity Committee

Sue O’Connor

Deputy Chair

BE (Hons), MSc, FIEAust,

FAICD

Rob Skinner became a Director on 1 October 2015.

He is a Professorial Fellow at the Monash Sustainable Development Institute, Chair of Victorian IWM Reference Group, Lead Chair of DELWP’s Integrated Water Management Forums, Chair of SDG6 Working Group and Chair of NSW Independent Metropolitan Water Advisory Panel.  He has also been a Distinguished Fellow of the International Water Association (IWA) and Member of the Sydney Water Planning Partnership Independent Evaluation Panel.

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

MAICD FIPAA

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

Ian is currently the Chair of First Nations Foundation (National), the Indigenous Land and Sea Corporation, Connecting Home Ltd (Stolen Generations Service), and the Koorie Heritage Trust, President of the Community Broadcasting Foundation, 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, Victorian Aboriginal Employment and Economic Development Council, Holmesglen TAFE and VicHealth. Ian is also a sessional member of Planning Panels Victoria and the Australian Financial Complaints Authority.

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.

Committee membership:

• Risk Management and Audit Committee

• Service, Community, Assets and Regulation Committee

Rob Skinner AM

Ian Hamm

Our leadership continued...

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

Victoria Marles became a Director on 1 October 2017.

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 Deputy Chair of 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.

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

GAICD

Karen Milward became a Director on 1 October 2017.

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), Co-Chair of the Victorian Aboriginal Employment and Economic Council and Deputy Chair Major Projects VictoriaAboriginal Advisory Council and a lead evaluator with the DELWP Biodiversity 2037 Implementation Evaluation Panel.

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

Victoria Marles AM Karen Milward

BEc, LLB, LLM, Dip Chinese Law, GAICD

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

Victor is the founder and Chief Optimism Officer of The Centre for Optimism asking, “What makes you Optimistic?” He is the author of “The Case for Optimism: The Optimists Voices” and “Optimism: The How and Why.” The Centre for Optimism is the legacy of the Australian Leadership Project founded by Victor too.

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. He was a Senior Adviser to the Australian G20 presidency.

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.

Committee membership:

• Leadership, Culture and Diversity Committee – Chair

• Service, Community, Assets and Regulation Committee

• Hazelwynde Steering Committee

MPPM Master of Public Policy and Management,

GAICD

Ari Suss became a Director of Yarra Valley Water on 1 October 2021.

Ari is Chief Executive Officer of Fox Special Projects Group, supporting the family investment arm of the Linfox Group of Companies. He also holds roles as a Board Member of Avalon Airport Australia and Director Fed Square Pty Ltd.

Ari has provided specialist expertise in regulatory, legislative, and political matters for Linfox’s logistics, property, and aviation businesses, joining as Manager of Government and Corporate Affairs in 2004. He became Executive Director of Fox Private Group in 2008.

Ari was a senior adviser to former Premier Steve Bracks between 1999 and 2004. During this time, he specialised in policy and advice in the areas of infrastructure development, transport, ports, major projects, multicultural affairs, and parliamentary strategy.

In 2011, Ari also commenced in his role as General Manager of the Australian Automotive Research Centre, a 1000-hectare vehicle test facility in Anglesea, Victoria.

Committee membership:

• Service, Community, Assets and Regulation Committee

• Leadership, Culture and Diversity Committee

Victor Perton Ari Suss

YARRA VALLEY WATER ANNUAL REPORT 2021-22

Our leadership continued...

BEc, ICA, GAICD

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

Helen has more than 30 years’ experience in finance roles across a wide range of industries. Helen is currently Deputy Chair of the Treasury Corporation of Victoria. She is also a Director of Industry Super Property Trust (ISPT) Pty Ltd, Ansvar Insurance Ltd, McPhersons Ltd and Legal Practitioners Liability Committee. Helen is also Independent Chair of the Audit & Risk Committee for the Department of Education and Training.

Helen was previously Deputy Chair of Zoos Victoria and a non-executive director of Austin Health, 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 at 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

Kate Vinot became a Director of Yarra Valley Water on 1 October 2021.

Kate has more than 20 years’ experience in leadership roles in service organisations that support more resilient, sustainable communities in the face of natural hazards and climate change. She also has extensive knowledge of regulatory and policy frameworks for complex infrastructure and service delivery organisations.

Kate’s current roles include being a non-executive director for Natural Hazards Research Australia, Governor of the Cerebral Palsy Alliance Research Foundation and Principal, Ageos Consulting. Her previous governance roles include: Chair of Zoos Victoria; Chair of Water Stewardship Australia; Director of Parks Victoria; Director of GWM Water; Chair, Reference Group for Commissioner of Environmental Sustainability and Member, Uniting Agewell Audit and Risk Committee.

She has held senior executive roles at Visy, South East Water, Veolia Water, the City of Melbourne and the Bureau of Meteorology, and was a Principal at Nous Group and Sector Lead for Utilities, Environment and Infrastructure.

Committee membership:

• Risk Management and Audit Committee

• Service, Community, Assets and Regulation

BE (Hons) Civil Engineering, MSc Economics for Development (Hons), MBA, FIEAust, GAICD

Helen Thornton

Kate Vinot

Managing Director

BBus (Acc), Exec. MBA, GAICD, FWCLP, FIWA

Pat McCafferty was appointed Managing Director of Yarra Valley Water on 1 July 2014.

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

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 Thriving Communities Partnership, a Director of WaterAid Australia and past Chair and Board member of the Water Services Association of Australia (Australia’s peak body for major urban water utilities). Pat is also a member of the Leadership Oversight Committee for the Women in Water Leadership Program (a Water for Victoria initiative) and member of the Committee for Melbourne’s Standing Committee on Infrastructure and Sustainability.

Committee membership:

• Leadership, Culture and Diversity Committee

• Hazelwynde Steering Committee

• Service, Community, Assets and Regulation Committee

Director who retired during the year

Anita Roper

FAIM, GAICD

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

Anita is currently Chair of the Stroke Association of Victoria and Chair 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.

Anita brought considerable 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.

Pat McCafferty

Our leadership continued...

Board Charter

Board performance review

In accordance with the Board Policy, an internally facilitated Performance Review of the Board was conducted in July 2022. The objective of the review is continuous governance improvement - identifying Board performance improvement opportunities and governance framework gaps.

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.

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.

Independent professional advice

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.

The review process involved each Director completing an assessment questionnaire followed by a round table discussion on the findings and improvement opportunities drawn from the questionnaire. The results were strong across all surveyed topics with positive commentary regarding the way the Board and Executives interact to drive outcomes, demonstrating the organisation's values through those interactions, alignment on strategic priorities and a thorough approach to managing risk and business performance.

The review identified some opportunities of focus by the Board, with such opportunities aimed at further elevating the Board's performance.

Induction and training

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 induction program includes an overview of the Yarra Valley Water business, the water industry and the linkages with Government and site tours. 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, and also exposure to seminars, webinar events outside of the water sector.

The Board Charter sets out clearly the role, responsibilities and powers of the Board and incorporates all aspects of Board governance.

Learning and development

In 2021-22 the Directors undertook activities to support their ongoing learning and development, including exposure to senior management submissions and 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, deep dives into the key areas of the business’s Essential Services Commission’s Price Submission 5 due to be submitted to the Essential Services Commission in September 2022, and to ensure the Directors are continually mindful of their obligations regarding key strategic risks including sustaining a high performing culture, safety and wellbeing, climate change, safe drinking water, environmental, innovation and cyber security risks. Some noteworthy learning and development opportunities undertaken by the Board during the year are discussed further below.

One of the key components of our Reconciliation Action Plan is the recognition that the business is on a continuous journey, learning about Aboriginal and Torres Strait Islander peoples’ histories, cultures and their connection to Community, Country and water so as to use this understanding to build better, strengthened, respectful relationships that contribute to achieving reconciliation in Australia.

During the year some of our Directors attended the Reconciliation Australia Conference, sharing key insights from the Conference with fellow Directors, and participated in events held during National Reconciliation Week including attendance at a reburial ceremony at Whitefriars College to bury cultural heritage artefacts recovered during one of our construction projects in Donvale.

Connection with Aboriginal and Torres Strait Islander peoples not just at the Traditional Owner/Custodian level but also with various Aboriginal and Torres Strait Islander groups/communities to build trust, rapport and understanding is vital to further the Board’s journey towards reconciliation. It is therefore an ongoing priority for the Board. A recent engagement had the Directors and the Executive team meet with Mullum Mullum Indigenous Gathering Place Elders Aunty Janet TurpieJohnstone and Aunty Daphne Milward to discuss Caring for Country in a Yarning Circle.

The lifting of public health restrictions early in 2022 enabled site tours to be placed back on the agenda. Board members attended operational tours of our plants and the Hazelwynde site. Melbourne Water organised a tour of Silvan Reservoir, to discuss improvements to combat the impacts of climate change, which cause more frequent extreme weather events with the potential to affect operations and service to our customers.

Each year the Board participates in a strategy workshop with the Executive. In 2021-22 the theme was on climate change. It was an opportunity for Directors to increase their knowledge, identify risks and opportunities and impacts on the business's 2030 Strategy. It included an introduction to the Climate Resilience Plan.

Directors' development continues in the post-COVID environment, presenting an opportunity for the Board to shift to a more agile way of operating. The Board continues to evaluate what they have done well over the past 12 months in this space. Many of the learnings that have come through responding to the pandemic continue to be applied through the transition from lifting  restrictions in 2021-22, to a modern, flexible and adaptable organisation.

Our leadership continued...

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.

The Committees are:

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 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 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.

Directors’ attendance at Board and Committee meetings – 1 July 2021 to 30 June 2022 Board

Risk Management & Audit Committee

Service, Community, Assets and Regulation Committee

S O’Connor

Leadership, Culture and Diversity Committee

Hazelwynde Steering Committee

8 of 8 3 of 4 5 of 6 4 of 4 4 of 4

R Skinner 8 of 8 4 of 4 6 of 6 4 of 4

I Hamm 8 of 8 4 of 4 6 of 6

V Marles 8 of 8 4 of 4 6 of 6

K Milward 7 of 8 5 of 6 4 of 4

V Perton 8 of 8 6 of 6 4 of 4 4 of 4

A Roper1 1 of 1 2 of 2 1 of 1

A Suss2 7 of 7 2 of 2 0 of 1

H Thornton 8 of 8 4 of 4 6 of 6 4 of 4

K Vinot3 7 of 7 2 of 2 2 of 2

P McCafferty4 8 of 8 6 of 6 4 of 4 4 of 4

Notes:

1. A Roper retired as of 30 September 2021

2. A Suss appointed as of 1 October 2021

3. K Vinot appointed as of 1 October 2021

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

Our leadership team

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.

General Manager Distribution Services BA/LLB,

GDip LegalPrac

Bridie 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 long-term asset management, the optimisation of the existing infrastructure networks, maintenance and renewal of infrastructure, and the integrated management systems for Yarra Valley Water.

Bridie has a professional background in alternative dispute resolution and customer advocacy, policy and protection.

General Manager Growth Futures

BE (Chem), BS, GCert (Man)

Chris is responsible for the provision of water and sewerage services to new customers.

A key focus for his function is partnering with the community to undertake place-based planning that generates greater shared benefits and enhances water related community resilience.

He is accountable for the procurement of new infrastructure to service growth, the delivery of major upgrade projects for existing infrastructure as well as the delivery of other major capital projects.

Chief Financial Officer BCom (Acc), CA, GAICD

Natalie leads the Finance and Corporate Services at Yarra Valley Water. This remit includes providing business partnering support on key strategic projects across the organisation as well as seamless financial planning, management accounting, statutory accounting, treasury and taxation support, all of which are focused on the financial sustainability of the organisation and delivering exceptional outcomes for customer and the community.

Her remit also includes leading 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 a number of industries spanning the water sector, retail, consumer products and telecommunications.

Pat McCafferty

Bridie Fennessy

Natalie Foeng

Chris Brace

General Manager People, Performance and Culture BCom/LLB, GDipLegalPrac

Amy is responsible for developing and delivery of our people strategy –‘better for being here’ including the delivery of people management, safety, talent, diversity and inclusion and HR operations.  She also fosters a culture of engagement and holistic wellbeing to enable a high-performing workforce to deliver exceptional value and outcomes to our customers, community and the natural environment.

General Manager Retail Services BBus (Acc), CPA, ACIS, AGIA

Steve is responsible for customer operations functions.

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.

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

Tiffany is responsible for providing strategy leadership and programs that achieve greater customer and community connection and value.

Her role includes corporate strategy, enterprise portfolio management and business planning, pricing and regulatory economic affairs, corporate sustainability, strategic research, marketing and communication programs, community inclusion and stakeholder engagement. She also represents the business in industry policy development such as long-term water security planning.

General Manager Service Futures BE (Civil Hons), BBus (Admin)

Glenn is responsible for leading the transformation of our core product and service offering in partnership with the business to deliver on our long-term strategic objectives. This work brings together customer experience, business process design, and technology - delivering end-to-end solutions and reimagining the way we work.

He is also accountable for our core technology function which supports business continuity, our renewable energy strategy, and our digital metering program.

Corporate Secretary BCom (Acc),

CA, GAICD

Lisa is responsible for ensuring compliance with statutory and regulatory requirements and governancerelated 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.

Steve Lennox

Amy Singe

Glenn Wilson

Lisa Anelli

Tiffany White

Our people and culture

We believe that a great culture delivers great outcomes. Over the past decade, we have developed a highperformance culture, high levels of employee engagement and effective workplace practices.

Organisational culture

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, a 360-degree feedback tool 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

• The Culture Amp platform, which we use to measure employee employee engagement

• The Human Synergystics Organisational Culture Inventory which measures our organisational culture

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, suppliers and agents, both on and off-site.

We do not tolerate discrimination and all employees are required to comply with relevant federal and state legislation that establishes grounds on which discrimination is illegal. This includes 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.

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. We're also continuing to refine our processes to reduce any unconscious bias in our job advertisements to attract the most diverse candidate pool possible.

Diversity and inclusion

Diversity and inclusion in the water sector and beyond is vital to ensure a fair and equitable society where everybody can achieve their full potential.

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 final year of the Diversity to Inclusion Strategy 2019-22 and well on the way to creating a truly inclusive organisation. We do this through a range of initiatives including our Pride at YVW network for lesbian, gay, bisexual, transgender, intersex and queer (LGBTIQ+) staff and allies to connect and create opportunities for learning as well as holding events to celebrate days of significance for the LGBTIQ+ community. In 2021-22 we established a new Diversity and Inclusion Committee with representative employees to drive our strategy forward.

Our Price in Water alliance, which works to create an inclusive water industry where LGBTIQ+ people feel safe and valued, became part of the national Water Services Association of Australia network in 2021. This move provides an opportunity to grow the influence and impact of Pride in Water, ensures it has a sustainable business model and is accessible to everyone in the industry.

The Gender Equality Act 2020 will play a key role in shaping our gender equality work to ensure we have an inclusive workplace. In 2021-22 we developed and launched our four-year Gender Equality Action Plan, committing to deliver 42 initiatives over seven focus areas to drive greater gender equity. Our plan includes work to ensure we have gender parity in remuneration for equal or like work, and removal of primary and

Our culture provides the foundation for a high-performing workplace where we collaborate with partners and stakeholders to deliver exceptional outcomes for our customers, community and the environment.

Our people and culture continued...

secondary caregiver requirements to provide more equitable access to paid parental leave.

Under the Act, we have an obligation to conduct Gender Impact Assessments (GIA) - a structured process that applies a gendered lens to new and up-for-review policies, programs and services.

To support implementation of the Act, we have established a GIA Reference Group, with representation from across the organisation, to develop an implementation plan. We will undertake pilot GIAs to inform our approach. This work will help us to embed the principles of inclusion and equity in our public facing activities.

Our Board-endorsed vision is:

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.

Through our focus on gender balance, we have made a deliberate effort in the recruitment process to include balanced interview panels. Our managers and the recruitment team have adjusted their approach to shortlisting and we have made changes to our job advertisement and careers' website.

The proportion of women in senior leadership positions include:

• Directors – 55.5 per cent female

• Executive leadership team – 57.1 per cent female

• People leadership – 46 per cent female

• Overall workforce – 50 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 and Torres Strait Islander peoples and will continue to take action to ensure we work towards having a culturally safe environment and promote the attraction and retention of Aboriginal and Torres Strait Islander employees.

DIVERSITY AND INCLUSION 27%

of staff can speak a language other than English

About 1.15 per cent of our workforce identifies as Aboriginal and/or Torres Strait Islander, based on our Diversity Census.

We're reviewing our current recruitment processes to enhance the experience of Aboriginal and/or Torres Strait Islander candidates and increase support for successful candidates and their reporting leaders. This includes providing extra coaching support through our Graduate Program selection process. This work will include working with key partners and suppliers on how we might encourage different employment pathways.

We also undertook talent market mapping exercises to better understand the availability of Aboriginal and/or Torres Strait Islander talent in Melbourne. This will enable us to reach out when we have vacancies.

Ian Hamm, a Yorta Yorta man and Karen Milward, a Yorta Yorta woman, continue to serve on our Board, bringing a wealth of experience and knowledge to our organisation.

Our Reconciliation Leadership Committee is a key element of our governance for delivering our RAP actions. 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

There is a shared belief across all levels of our business that every incident, and therefore every injury, is preventable. Safety and wellbeing underpin everything we do.

We are committed to making:

• Our workplaces safe

• Working towards being a culturally safe organisation for Aboriginal and/or Torres Strait Islander employees and businesses and the Aboriginal and Torres Strait Islander community

• Carrying out our work without harming ourselves or others

The behaviours that support our safety culture include:

• Taking responsibility for the safety and wellbeing of ourselves and others

• Taking action when we see something unsafe

• Recognising and rewarding safe behaviours

• Taking opportunities to do things safely

• Talking regularly about safety

• Using the corporate risk framework to assess our safety risks

The three key enablers for safety and wellbeing that we focus on are:

• Leadership (safety culture, strategy, planning and risk management)

• Safety management systems (including contractor engagement and monitoring)

• People (wellbeing and capability)

Our people-based safety framework sets up positive and effective behaviours driven by our workforce, that enable desired safety excellence outcomes.

The approach includes, but is not limited, to:

• Safety culture – Building culture programs that engage with the workforce, identify our people as the solution to safety matters and build psychological safety and wellbeing

• High risk work – embedding systems across our sites for identifying hazards, assessing risk and developing risk mitigating controls for high risk work

• Contractor engagement – involving contractors in our “One Team” safety culture transformation and collectively identifying positive performance indicators to measure and promote safe work environments

• Innovation – decluttering safety systems, removing duplication of processes and streamlining towards standardised physical and psychological safety performance

The key measures we use to monitor safety performance are:

• Safety climate: This is measured by the roll-out and impact of our psychology of safety program and initiatives driven by our Safe and Well committees

• Social and emotional safety and wellbeing: using cognitive, emotional and temporal measures to monitor our mental fitness

• Safety leadership

• Total Recordable Injury Frequency Rate – the number of recordable injuries (lost time injuries and medical treatment injuries) per million hours worked

Our safety and wellbeing focus continues to be on our people and contractors, using work insights to understand safety challenges facing them. We maintain our Safety Management System certification to the ISO45001 standard and we're realigning our internal audit functions to maximise continuous improvement opportunities.

In the year ahead, we will implement our revised contractor safety management framework in alignment with industry best practice, develop and embed our psychological injury prevention plans, and redesign the way we deliver safety inductions and training in line with our people-based safety approach. We will continue to focus on engaging more broadly across the industry and sector to elevate the focus on safety and wellbeing, not just within the water industry, but with our contractors.

Other key safety performance indicators 2019-20 2020-21 2021-22

Number of reported hazards for the year per 100 full time equivalent staff members1 21.29 45.29 77.29

Number of reported incidents for the year per 100 full time equivalent staff members1 10.71 3.96 0.55

Number of ‘lost time’ standard claims for the year per 100 full time equivalent staff members 0.14

Average cost per claim for the year $4,798

Outstanding claim cost $4,630

1. In previous years we’ve combined reporting of incidents, near misses and hazards in a single indicator. This year we have separated our reporting into two indicators - incidents/near misses; and hazards. This is to better reflect the proactive nature of hazards reporting. We have made every effort to calculate historical numbers for both indicators to provide historical information for comparison.

Our people and culture continued...

The following table discloses the head count and full-time equivalent (FTE) staff of all active Yarra Valley Water employees in the last full pay period in June 2022.

Full time Part time Casual Total FTE 2021-22 Full time Part time Casual Total FTE 2020-21

Gender

Men 367 8 7 382 376.2 377 11 15 403 393.0

Women 273 102 9 384 350.8 287 102 10 399 362.9 Total 640 110 16 766 727.0 664 113 25 802 755.9

Age 15-24 18 4 12 34 26.8 20 7 20 47 34.9 25-34 142 20 4 166 159.6 168 21 5 194 185.8 35-44 232 40 272 259.5 226 42 268 254.4 45-54 162 30 192 183.3 160 26 186 178.4 55-64 65 11 76 73.2 73 11 84 80.7 65+ 21 5 26 24.6 16 6 23 21.7

Total 640 110 16 766 727.0 664 113 25 802 755.9

Classification

Executive 8 8 8.0 8 8 8.0

Senior manager 34 1 35 34.8 36 36 36.0 Administration and field staff 598 109 16 723 684.2 620 113 25 758 711.9

Total 640 110 16 766 727.0 664 113 25 802 755.9

There are currently no employees who identify as self-described gender within our payroll system. However, through the People Matter survey 2021, we understand that approximately 1% of our workforce identify as non-binary, trans or gender diverse. In line with our commitments under the Gender Equality Act 2020, we are working towards creating safe and confidential avenues for employees to voluntarily disclose additional gender and intersectional data over the coming years.

Employee levels have reduced over the course of the year as a result of higher than average employee turnover due to a competitive job market. This has

resulted in a high level of vacancies at 30 June 2022, however we expect these vacancies to be filled during the 2022-23 financial 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. Note one Senior Manager works part time and has an FTE of 0.8.

Income band (salary excluding superannuation)

Executive Senior Manager

$160,000 - $179,000 9

$180,000 - $199,999 16

$200,000 - $219,999 7

$220,000 - $239,999 1

$240,000 - $259,999 1

$260,000 - $279,999 5

$280,000 - $299,999 2 1 $460,000 - $479,999 1

Total 8 35

Corporate information

Information and Communication Technology (ICT) Expenditure

For the 2021-22 reporting period, Yarra Valley Water had a total ICT expenditure of $59.009m, details shown below:

Business As Usual (BAU) Non BAU

BAU ICT expenditure $’000

Total non-BAU ICT expenditure $’000

Consultancy Expenditure

The following is a summary of consultancy expenditure incurred by Yarra Valley Water during 2021-22.

Details of consultancies (valued at less than $10,000)

In 2021-22 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 $37,228 (excluding GST).

Details of consultancies (valued at $10,000 or greater)

In 2021-22 Yarra Valley Water engaged 25 consultancies where the total fees payable to the consultants were $10,000 or greater (excluding GST). Total expenditure incurred during the reporting period in relation to these consultants was $2,286,956 (excluding GST).

Details of individual consultancies are outlined on Yarra Valley Water’s website at yvw.com.au

Operational expenditure $’000

Capital expenditure $’000

ICT depreciation $’000 18,948 40,061 146 19,074 20,841

Government advertising expenditure

In 2021-22, 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 January 2022 and April 2022, with Yarra Valley Water’s share of the campaign comprising:

Media advertising $136,750 Creative and campaign development $91,750 Research and evaluation $12,400 Print and collateral Other campaign costs

Total campaign costs $240,900

Our people and culture continued...

In 2021-22, Yarra Valley Water delivered the water efficiency campaign ‘Shower Shorter’ to educate customers on the impact showers have on household water consumption and that reducing the time spent in the shower can generate significant water savings (as well as produce energy savings, reduce greenhouse gases and save money).

The campaign ran between May 2022 and June 2022, with the campaign comprising:

Media advertising $150,000

Creative and campaign development $37,110

Research and evaluation $500

Print and collateral

Other campaign costs

Total campaign costs $187,610

Social Procurement

Our Social Procurement Strategy guides us in creating new opportunities to generate social value and deliver outcomes that help build a fair, inclusive and sustainable community. It also commits us to progressing the performance of suppliers to deliver their own positive social and environmental impacts via our affiliations. We work across the business to identify potential social procurement opportunities.

In 2021-22 we appointed a Social Procurement and Policy Manager to support this work and provide guidance in relation to the Victorian Government’s public procurement regulations.

We have also developed an internal working group that meets quarterly to help drive social procurement opportunities.

We recently renewed our platinum memberships with Social Traders and Kinaway Chamber of Commerce Victoria Ltd. We continue supporting these partnerships and leveraging our strong alliance to further promote social and Aboriginal and Torres Strait Islander enterprises throughout our organisation. We have spent more than $780,000 with Aboriginal businesses in 2021-22 including more than $600,000 with Wurundjeri Woi Wurrung Cultural Heritage Aboriginal Corporation.

Fair Payments Policy

The Victorian Government amended its Fair Payments Policy from 1 January 2021 for departments and major agencies to pay invoices up to $3m within 10 business days of receiving a correct invoice. This policy was amended to support and improve cash flows for small and local businesses during the pandemic.

We have implemented changes to our systems and processes to comply with this policy. In 2021-22 we paid 9,554 invoices within 10 business days which is 91 per cent of total invoices paid during the year and represents a significant increase from the 66 per cent of invoices paid within 10 business days between 1 January and 30 June 2021 when the amended policy came into effect. The average days taken to pay invoices under $3m has reduced to 13 days in 2021-22 from 21 days between 1 January and 30 June 2021.

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) (the Act), and consequently complies with the Act in the way that we handle personal information about our customers and other individuals. If we collect any health information we are bound by the Health Records Act 2001 (Vic)

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.

In respect to the Notifiable Data Breach Scheme, we’re legally obliged to disclose privacy breaches.

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

Public Interest Disclosure Act 2012

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 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 applicant can 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 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. An application fee applies. Access charges may also be payable if the document pool is large, and the search for material is time consuming.

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.

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

FOI requests should be addressed to: 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 2021-22, we received 26 applications. All but one were received from the general public, with one

received from a regulatory agency. We made 21 FOI decisions this year. Full access to all documents was provided in response to all requests. The average time taken to finalise requests was 28 days. One request was subject to a complaint/internal review by the Office of the Victorian Information Commissioner and none were appealed.

Building Act 1993

We own government buildings at Lucknow Street, Mitcham and are consequently required to include a statement on compliance with the building and maintenance provisions of the Building Act 1993 in relation to the buildings. We require that appropriately qualified consultants and contractors 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 2021-22

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

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

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

Nil

Nil building permits

Nil occupancy permit

Nil certificates of occupancy

Nil emergency orders

Nil building orders

Nil buildings brought into conformity

Our people and culture continued...

Disclosure of major contracts

A major contract is a contract entered into during the reporting period valued at $10m or more (excluding GST).

Yarra Valley Water awarded three major contracts during 2021-22 being:

• Biogass Renewables Pty Ltd (trading as Delorean Engineering) for the design and construction of the Lilydale Waste to Energy project, subject to approvals, valued at $45m (excluding GST), followed by two years’ operation and maintenance, totalling $7.3m

• Jacobs Group (Australia) Pty Ltd for engineering design services across our infrastructure projects until 31 December 2026, valued at $66.2m (excluding GST)

• Beca Stantec JV for engineering design services across our infrastructure projects until 31 December 2026, valued at $66.2m (excluding GST)

Local Jobs First Policy Disclosures

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

During 2021-22, we commenced 12 Local Jobs First Standard or Strategic projects where a Local Industry Development Plan (LIDP) was required. The value of these projects totalled $44.5m and they were all located in metropolitan Melbourne and regional areas in Hume, Whittlesea and Yarra Ranges.

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

• An average of 96.2 per cent local content commitment

• A total of 135 jobs (annualised employee equivalent [AEE]) were committed, including creating three new jobs and retaining 131 jobs (AEE)

• A total of one retained position for trainees was committed

During 2021-22, 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 $85.9m and were all located in metropolitan Melbourne.

The outcomes from implementing the Local Jobs First - VIPP to these three projects were:

• An average of 96.9 per cent local content commitment was achieved

• A total of 40 jobs (AEE) were achieved, including creating two new jobs and retaining 38 jobs (AEE)

• A total of four full-time equivalent positions for apprenticeships/trainees were achieved, including two created and two retained trainee positions

For the three completed projects, there were 162 small to medium sized businesses engaged as either the principal contractor or as part of the supply chain.

Five large projects, with combined value of $23.9m are due to be completed in the coming months and will be reported in 2022-23.

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.

Other information

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

• 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

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

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

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

• 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

Liveability outcomes

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

Resilient

Integrated Water Management (IWM)

We want to ensure that our customers can continue to enjoy the places that they live, work and visit, and recognise the importance of providing for their social, environmental and economic needs. Further, we recognise the importance of community values and preferences for liveability, wellbeing and sense of belonging. And we appreciate the need for better understanding, enhancing and celebrating the cultural values that Traditional Owners/Custodians have with Country. Integrated Water Management (IWM) aims to address these wide-ranging community needs within the context of climate change, population growth and urbanisation.

Water is fundamental to the health of our customers, the broader community and our environment. COVID-19 public health restrictions saw people spending more time in their local areas and heightened the value of local green open spaces. We are committed to working collaboratively through placemaking and urban development planning processes to ensure all Melburnians can continue to enjoy these valuable spaces - despite the increasing pressure on future water availability. Maintaining a focus on all IWM directions, we have been further partnering with Wurundjeri Woi Wurrung to identify how cultural knowledge and values can be incorporated into project delivery.

In 2021-22, we collaborated with partners including local councils to develop various strategies that incorporate the objectives outlined in the Strategic Directions Statements, set targets, and identify opportunities and mechanisms that progress the industry towards achieving the IWM outcomes. We also worked with partner organisations to investigate delivery of infrastructure. This has occurred through our involvement in the following strategies, forums and approaches:

• Central and Gippsland Region Sustainable Water Strategy

• Greater Melbourne Urban Water and System Strategy (Water for Life)

• Dandenong, Maribyrnong and Yarra IWM Forums

• Embedding IWM in Urban Planning

IWM planning projects including:

• Catchment Scale IWM Action Planning

• Upper Merri Creek IWM pilot project

• Moonee Ponds Creek Chain of Ponds

• Gardiners Creek (KooyongKoot) Regional Collaboration project

Collaborative implementation of IWM priority projects and opportunities:

• Wallan Wetland Regeneration and Stormwater Harvesting. Utilising the Wallan Sewerage Treatment Plant site, which is located within a natural wetland, to restore native vegetation and investigate the opportunity to capture, treat and re-use stormwater as an alternative water source in the region. Discussions with Melbourne Water, Mitchell Shire Council and developers to incorporate the wetland within the wider region in addressing IWM outcomes for delivery.

• Water For Good. Reviewing challenges within the eastern suburbs related to stormwater to identify opportunities that may mitigate flooding, improve the quality of water entering waterways and support agricultural customers.

• Reimaging Your Creeks. Partnering with Melbourne Water and other stakeholders to improve accessibility and enhance life and liveability along the Tarralla and Moonee Ponds creeks.

• Large-scale city-wide alternative water network. Commencing investigations to understand whether a proposed alternative water main can be adapted and extended to supply alternative water into Yarra Valley Water’s area of operation.

Conservation and efficiency

Higher than average rainfall and the contribution of desalinated water ordered annually has resulted in an increase in the volume of water in storage. However across Melbourne our climate is drying and on average, Melbourne is using more water than rainfall is providing. We've had a relatively stable level of per capita usage over the past five years, which is comparable with the metropolitan average. We promote sensible and efficient use of water through the Target 155 program, advertising campaigns and education programs. We also help businesses and councils to become more water efficient.

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.

Liveability outcomes continued...

Melbourne’s water industry is working together to secure water supplies for the next 50 years through the development of the Greater Melbourne Urban Water and System Strategy, Water for Life as well as implementation of joint and common activities from the 2017 Urban Water Strategies. This included joint actions supporting efficient water use across the community.

To support the Victorian Government's target of ‘155 litres per person, per day’, in 2021-22 we focused on efficient and sensible water use by Melburnians to preserve our state’s precious water. We do this through:

• Engaging customers around water efficiency through social media, videos, sponsorships, bills, local media and website content, including the Target 155 program

• Make Every Drop Count, our summer water conservation campaign, running in collaboration with Greater Western Water, Melbourne Water and South East Water. It communicates a simple message and call to action about the need to use water efficiently in our households and how to do so

• Our primary school incursion program which takes a long-term approach, aiming to make it easy for children to form positive water saving habits that will last a lifetime. The program delivered a total of 128 incursions reaching 3,200 students in schools across 56 schools in the area. With each incursion a friendly Water Watcher figure is provided to students to install on their taps, creating a visual reminder in the home for families to reduce their water usage

• Participation in the Schools Water Efficiency Program, a Victorian Government initiative that enables schools to track and manage their water consumption

• Our Shower Shorter campaign to educate customers about the impact of showers on household water consumption and highlight that reducing shower time can generate significant water savings

• Encouraging the use of water efficient appliances, products and services, including participation in a research pilot of a state-of-the-art showerhead which uses under five litres of water per minute

Besides water conservation, extensive customer research has told us that customers want us to focus 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 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 fixing leaks or inefficient appliances. We organise a plumber if the customer can’t afford to and pay them directly so there are no out-of-pocket expenses 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 339 customers assisted in 2021-22.

The CHRP program has a similar objective, however targets emergency and community housing across the Melbourne metropolitan areas (serviced by Yarra Valley Water, Greater Western 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, giving them greater control of their bill.

Water consumption report 2021-22

Number of customers (as at 30 June 2022)

Residential customers 807,686 Non-residential customers 60,014 Total 867,700

Drinking water volume (ML)1

Residential customers 119,301 Non-residential customers 27,494

(1) Total 146,795

Average annual drinking water consumption2 145,664 Recycled wastewater volume (ML)

Residential customers 418 Non-residential customers 1,176 (2) Total 1,594 (1)+(2) Total consumption (ML)3 148,389

Non-revenue water (ML)

Leakage 7,253 Bursts 2,235 Other 2,844 (3) Total 12,332 (1)+(2)+(3) Total water all sources (ML) 160,721

1. Includes a small amount of unchlorinated water supplied directly from aqueducts.

2. Average customer usage calculated over five years from 2017-18 to 2021-22.

3. Total consumption does not include water sourced from rainwater tanks or from greywater reuse.

Liveability outcomes continued...

The below figures include an estimate for customer usage for Quarter 4 (April – June 2022) which was not available at the time of preparing this report.

Customers are billed three months in arrears and therefore customer usage for April to June 2022 is not known until early October. There is additional uncertainty this year due to coronavirus (COVID-19) and not all the results of the 2021 Census being available.

Drought response report

The metropolitan water retailers have prepared common Drought Preparedness Plans (incorporating a Drought Response Plan). Plans are 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.

As part of the development of the Greater Melbourne Urban Water and System Strategy we have worked with Greater Western Water, South East Water and Melbourne Water to update the Drought Preparedness Plan, Drought Response Plan and adaptive framework to reflect current demand forecasts and projected inflows. The updated framework will apply from 2022-23.

During 2021-22 there was no requirement for drought preparedness measures. In April 2022 the Minister for Water announced a 15GL desalinated water order for 2022-23. Permanent Water Use Rules continued to apply throughout 2021-22.

Corporate water consumption

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

Total water consumption for 2021-221 2722kL

Number of FTE staff on site1 100

Average water use per employee (kL per employee) 272kL

Total office space 10,000m2

Average water use per m2 0.272kL

1 Coronavirus response, particularly working from home directives and social distancing requirements, has impacted total water consumption and annual number of FTE staff reported. FTE reported number is an estimate based on hybrid working models.

Annual reporting of major non-residential water use

Requirement 1: number of customers who fall within each range (Section 122ZJ of the Water Act 1989)

Table 1: Customer by volume range

Volumetric range – ml per year

Number of customers

Equal to or greater than 100ML and less than 200ML 11

Equal to or greater than 200ML and less than 300ML 1

Equal to or greater than 300ML and less than 400ML 2

Equal to or greater than 400ML and less than 500ML 1

Equal to or greater than 500ML and less than 750ML 1

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

Greater than 1,000ML 2

Total number of customers 18

Requirement 2: naming of major water users and whether or not they participate in water efficiency programs (Section 122ZJ of the Water Act 1989)

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

Name of customer

Status of customers’ participation in water efficiency program

Austin Health Yes

Bertocchi Smallgoods Yes Cabrini Yes

Chadstone Shopping Centre Yes Chiquita Mushrooms Pty Ltd Yes

Continental Poultry Pty Ltd Yes CSL Behring Pty Ltd Yes

Eastland Shopping Centre Yes Monash University Yes Peters Ice Cream Yes

Premo Fresh Yes

Repurpose It Yes

Sorbent Paper Company Pty Ltd Yes Turosi Yes

The Glen Shopping Centre Yes Visy Packaging Properties Pty Ltd Yes Visy Paper Yes

Westfield Doncaster Yes

Liveability outcomes continued...

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.

Water recycling

This year we treated 11,126ML of sewage at our treatment plants of which 3,259ML or 29.29 per cent was reused.

We constructed 49km of recycled water mains and connected 3,616 properties to Class A recycled water for non-drinking purposes such as toilet flushing and car washing. This brings the total number of connected properties to 40,958.

We continued to participate in a recycled water industry working group, allowing for collaboration and alignment between Victorian water corporations. We also worked with our regulators to revise 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 2021-22, we maintained our commitment to provide safe and pleasant drinking water. This year we received 0.35 complaints for every 100 customers, against our target of 0.53 complaints.

We work to keep customers informed about any operational changes to their water supply. This year we also carried out targeted cleaning of 665km of water mains and installed additional particle dispersion devices around our network.

We achieved 90 per cent customer satisfaction with the overall quality of drinking water provided.

Customer and community outcomes

Customer and community engagement

We've continued to invest in community engagement practices and build our capacity to maximise our impact. Central to our engagement approach is open, transparent, and timely communications - both online and in person. Strong relationships with our customers and stakeholders provide important feedback that assists us in our decision making and builds confidence and trust in the work we do.

In 2021-22, our Community Engagement team supported 150 projects and programs across the business, working to ensure key stakeholders, residents, businesses and communities were kept informed, and quickly responding to any concerns.

Affordability and assistance programs

Melbourne’s water bills are 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.

We continue to hear from customers that they don't want bills to increase, and that small annual bill changes are better than a single large change. Since 2013-14, customers' bills have increased below the rate of inflation - that is they have fallen in real terms. The annual bill for a 'typical' residential customer using 150 kilolitres of water per annum are almost $110 per annum lower now than in 2013-14 even after inflation and despite larger water orders from the desalination project in recent years. These reductions are a combination of efficiencies, including reductions in the cost of debt.

In 2021-22, the typical annual residential bill (based on 150kL consumption per annum) was $1,026 - a decrease from 2020-21 of $36. For homes with 200kL consumption per annum, the 2021-22 bill is $1,213a decrease from 2020-21 of $41.

Despite this, keeping on top of bills remains a challenge for many Victorians. We continue to evolve our programs to support customers who find it difficult to pay their water bill.

WATERCARE

More than 10,000

customers are being managed within our WaterCare team

This included hearing different perspectives directly from voices that we have not traditionally heard from through our Price Submission engagement, and undertaking qualitative research to understand what access and inclusion means for people from different backgrounds, including LGBTIQ+ and multicultural communities, young people and people living with a disability. We established an Aboriginal community working group with Aboriginal Community Controlled Organisations and community members to engage deeply and contribute directly to our Citizens' Jury.

This work has highlighted opportunities to strengthen our services and the way we work to meet the needs of people who may experience barriers to access or inclusion. This work program spans policy and guidelines, communications, capability, engagement and inclusive service design and delivery.

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 customers.

We are maintaining the support options that were introduced in response to coronavirus, including support for commercial customers.

By the end of June 2022, we had 10,393 customers being managed within our WaterCare Customer Support Team which is 8 per cent higher than June 2021. In addition:

• 6,873 customers applied for and received grant assistance

• The total number of URGs granted for 2021-22 was almost $3.4m, benefiting 7,817 customers

• We referred 362 customers to our external support partner who can provide additional services, including financial counselling emergency relief, housing support, energy audits, employment coaching, drug and alcohol support, to customers at no cost

• At 30 June 2022, 49,239 instalment plan arrangements were in place

Accessible and inclusive services

Our 2030 Strategy embeds our commitment to inclusive and accessible services. It ensures that everyone can access our services in the way they need and that we leave no one behind.

During 2021-22, we took significant steps in building our understanding of accessibility and inclusion in relation to our services and embedding the foundations in the way we work.

Examples of specific activities undertaken during 2021-22 include:

• Incorporating accessibility and inclusion into our refreshed Brand.

• Developing an implementation approach for embedding gender impact assessments into the design and delivery of public facing policies, programs and services. As well as meeting our obligations under the Gender Equality Act 2020, this work will help us to embed the principles of inclusion and equity in our public facing activities.

• Introducing a universal design approach into our service design, including improved useability testing with a representative range of perspective including people with disabilities.

• Inclusive leadership training for our senior leadership cohort and key staff – recognising that staff capability and an inclusive workplace culture is a critical part of delivering inclusive and accessible services to our customers.

• Continued involvement in initiatives such as Pride in Water, WaterAble and our engagement with community partners to receive feedback and better understand issues within the community. This includes our regular Community Advisory Group, and working with the Ethnic Communities Council of Victoria through the All One Together anti-racism campaign.

Thriving Communities Partnership

We are the proud founders of the 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, including utilities, financial services, telecommunications and transport.

Liveability outcomes continued...

In 2021, alongside other funding, participating and co-design partners, we were excited to commence the pilot of the One Stop One Story Hub. This world-first digital platform makes it easier for people to connect to the extensive support they’re eligible for across a range of essential services and means that they only have to tell their story once to one organisation.

Other participating partners include Anglicare WA, Anglicare Victoria, Brotherhood of St Laurence, Commonwealth Bank of Australia, Financial Counselling Network, Infoxchange, Telstra, The Salvation Army, Transurban, Energy Australia, Sydney Water, WEstjustice and Variety - the Children's Charity.

Family violence

We have a well established practice around supporting customers and staff experiencing family violence, which we continue to evolve. We use `safety flags’ to identify and provide greater safety to people experiencing family violence and provide 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 2021-22 we continued to provide training for all new starters and managers and ran refresher training for 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 if someone discloses family violence to them. We have also worked with our maintenance provider Ventia, to develop a training approach for staff who respond to after-hours faults calls, with the first training being delivered in June 2022.

During 16 Days of Activism this year, we took the opportunity to engage with different teams across the business including our Executive to present an update on family violence and articulate the link with gender equality. This was an effective means of raising awareness of this issue and how it relates to us and sharing the responses we have in place to support affected customers and staff.

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 2021-22 include:

• Actively working with networks across our service area to promote our family violence supports for customers and to collaborate on strengthening responses and prevention

• Working with external networks and community organisations to gain insight into intersectionalities present for those experiencing family violence and expanding our presence into those communities to raise awareness about our support options. This includes culturally and linguistically diverse communities and people living with disabilities

• Commencing the Thriving Communities Partnership's One Stop One Story Hub pilot, alongside other funding, participating and co-design partners.

Community service obligations

In addition to our own assistance programs, many customers are eligible for support via government initiatives and programs. In 2021-22, the amount of assistance provided to customers in these programs increased for all initiatives except concessions. Despite targeted programs to increase the number of eligible concessions registered, there has been a reduction as people emerge from vulnerabilities created by coronavirus impacts. The Utility Relief Grants approved for customers increased by 10 per cent due to a dedicated campaign proactively reaching out to customers where records indicated they may be eligible.

Community service obligations 2021-22 $’000 2020-21 $’000 2019-20 $’000

Provision of concessions to pensioners1

Rebates paid to not-for-profit organisations under the Water and Sewerage Rebate Scheme2

53,048 56,168 51,299

Water for Aboriginal cultural, spiritual and economic values

1,287 1,270 1,263

We proudly acknowledge the Traditional Owners/ Custodians of the land and waterways on which we work and live and 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 contributions of Aboriginal and Torres Strait Islander peoples and communities to the Victorian community.

Utility relief grant payments3 3,377 3,074 2,701

Water concessions for life support machines –haemodialysis4

19 18 18

Total 57,731 60,530 55,281

Notes:

1. Provision of concessions - 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 Families, Fairness and Housing (DFFH).

2. 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.

3. Utility relief grant scheme - 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.

4. 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 the Department of Families, Fairness and Housing based on the estimated annual water usage of a dialysis machine (168kL). This rebate is in addition to any other pension or concession entitlements.

Our commitment to reconciliation is woven throughout the different elements of our 2030 Strategy and underpins our purpose as an organisation.

Aboriginal and Torres Strait Islander inclusion plan and Reconciliation Action Plan

We’re working into our Stretch Reconciliation Action Plan (RAP) to achieve our vision that all who live on this land acknowledge our shared history and move forward, together, in a respectful way. Our Stretch RAP includes training, employment and procurement targets and actions to ensure Traditional Owners/ Custodians are actively involved in planning and managing water resources.

Strengthening ties with Traditional Owners/Custodians and Aboriginal and Torres Strait Islander communities is a key focus. We have also built our engagement with Aboriginal Community Controlled Organisations and Aboriginal and Torres Strait Islander businesses.

Cross-cultural training

Cross-cultural training and building our cultural competency remains a key focus, underpinning our commitment to reconciliation. This is relevant to all parts of our organisation, including our Board.

We offer all staff Aboriginal Cultural Awareness Training covering history from an Aboriginal perspective, Aboriginal people and communities today and mechanisms to support engagement with Traditional Owners/Custodians and the Victorian Aboriginal and Torres Strait Islander community. 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. During 2021-22 61 staff completed our face-to-face Aboriginal Cultural Awareness Training. In addition to face-to-face training, 497 employees completed our Aboriginal and Torres Strait Islander Cultural Awareness online module.

Liveability outcomes continued...

Although we were limited in opportunities for in person engagement due to public health restrictions, we were still able to provide a range of learning opportunities. These included face-to-face training, online modules and activities such as site visits as part of cultural heritage management, events during National Reconciliation Week and the anniversary of the National Apology. In 2021-22 we finalised our cultural learning strategy which provides a strong framework for building cultural competency across all levels in the organisation. This was piloted through our Finance and Corporate Services Group, who used it to co-design their learning plan.

Engagement of Aboriginal and Torres Strait Islander communities

Our RAP includes a commitment to increase Aboriginal and Torres Strait Islander business supplier diversity to support improved economic and social outcomes and includes a target of 3 per cent of the total number of our contracts by 2023 and to maintain commercial relationships with at least 10 businesses. During 2021-22, the number of active contracts with Aboriginal and Torres Strait Islander businesses was maintained at 19, which represents 3 per cent of the active contracts within this period. These contracts cover a range of Aboriginal suppliers including Muru Office Supplies, Position Promo, Murray Lower Darling Indigenous Nations, Dreamtime Art, Belmara Industries, Have A Dig Excavations, Mullum Mullum Indigenous Gathering Place, the Koori Mail and Wandoon Aboriginal Estate.

Developing staff capacity in Aboriginal and Torres Strait Islander business social procurement procurement has been identified as an area for continual development, and in 2021-22 we established a social procurement working group to champion this. We are platinum members of the Kinaway Chamber of Commerce Victoria Ltd (Kinaway), which has provided training and presentations, to connect our organisation with Victorian Aboriginal and Torres Strait Islander businesses.

Within our procurement system, we actively maintain a database of Aboriginal and Torres Strait Islander businesses (based on our Kinaway membership) and have implemented a number of enhancements to highlight opportunities to promote the use of these suppliers.

We continue to work closely with Mullum Mullum Indigenous Gathering Place, and look forward to welcoming the Mullum Mullum community to our Mitcham office while they carry out the build of their new facility in Ringwood East.

Engagement of Traditional Owners/Custodians

While recognising the pressure we are placing on Traditional Owners/Custodians and their time, we continue to work with the other metropolitan water authorities through an Aboriginal Working Group to try and streamline our approach and collectively build our capability in the way we learn and engage. This includes a coordinated and prioritised approach to the parallel activities of the Central and Gippsland Region

Sustainable Water Strategy, Greater Melbourne Urban Water and System Strategy and now our Price Submissions. The working group meets monthly and is committed to long-term relationships between the water industry and Traditional Owners/Custodians.

We are committed to working in direct partnership with Traditional Owners/Custodians in our service area, to support them to participate equitably in the water industry and to build our internal cultural capability. The geography of our service area means that we work particularly with Wurundjeri Woi Wurrung, and throughout 2021-22, we worked with them across a range of projects, covering cultural heritage management, language, education and with their Water Unit and Narrap teams.

During 2021-22, we commenced a voluntary cultural value study, in partnership with Wurundjeri and Jacobs at our Aurora Treatment Plant site. This will capture intangible heritage and help to inform a restorative approach, self-determined by the Narrap team. This partnership approach will also guide work with the Narrap team across our other sites.

We have also worked with the cultural heritage team to strengthen our approach to heritage compliance and realise the opportunities this provides to grow our relationships with Traditional Owners/Custodians and enhance our mutual knowledge of and connection to Country.

Environmental outcomes

We rely on a healthy environment to deliver our services and we’re proud of our innovative approach to ecological challenges.

Climate adaptation

Adaptation to climate change and variability

Recent reports from the Intergovernmental Panel on Climate Change highlighted that climate change is widespread, rapid and intensifying, with weather extremes occurring simultaneously, causing cascading impacts that are increasingly difficult to manage.

In Victoria, the Bureau of Meteorology is predicting a hotter and drier climate over the long term, with up to double the number of very hot days in the 2050s, lower stream flows to our reservoirs and greater variability, including an increased number of storm events with more intense downpours. These challenges will require

new approaches in the way we provide our services. We’re committed to being forward-thinking and customer-focused in how we face these challenges.

Our latest Climate Resilience Plan summarises across nine focus areas what we do to reduce our greenhouse gas emissions and embed climate resilience into everything we do. These actions will see our business systems and processes - and also the communities and environment we operate in - become better equipped to handle climate change.

Embedding climate resilience Understanding climate risks Strengthening partnerships for climate resilience

Resilience Plan

In the area of Ensuring Water Security, the Greater Melbourne Urban Water System Strategy, known as Water for Life, and the Drought Preparedness Plans within this strategy have been collaboratively developed with Greater Melbourne’s water corporations, applying the Department of Environment, Land, Water and Planning’s (DELWP’s) Guidelines for Assessing the Impact of Climate Change on Water Suppliers in Victoria. It outlines plans for securing water supplies for the next 50 years, including specific actions on water efficiency, water conservation, fit-for-purpose recycled and alternative water as well as readiness activities for future augmentations. We’re engaging with Traditional Owners/Custodians the community and stakeholders on this important work. 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.

Key actions implemented in 2021-22 that contribute to mitigation of and adaption to climate change include:

• Completion of external audit of our climate resilience work, that found us to be mature and well-placed to manage and embed climate change risk mitigation

• Strengthening our ability to prepare, manage and recover from emergencies, for example through partnerships with relevant agencies, and also through installing additional generators on our sewer pump stations to be better prepared for power outages

• Holding quarterly seasonal outlooks with the Bureau of Meteorology to enable operational staff to prepare for likely weather patterns in the upcoming season

• Assessing our electrical assets regarding their ability to withstand extreme heat days

• Updating the Victorian Critical Infrastructure Resilience reporting

Core

Figure 1: Focus areas of Yarra Valley Water’s Climate

Environmental outcomes continued...

• Understanding the impact of climate change when planning our water and sewer assets

• Further strengthening our governance and reporting on climate resilience

• Including climate resilience into our asset design principles

• Supporting actions arising from DELWP’s Water Sector Climate Change Adaptation Action Plan, including contributing to the Guidelines for Assessing the Impact of Climate Change on Wastewater Systems in Victoria, IWM forums, and industry knowledge sharing

• Moving towards our net zero carbon target in 2025, and committing to go beyond zero carbon to also redress our legacy emissions

• Reducing our carbon emissions from construction activities (including encouraging use of recycled materials in construction under our 2030 Strategy’s Circular Economy goals)

• Encouraging customers to implement water efficiency measures through our Make Every Drop Count campaign

• Contributing to environmental resilience through identification of land we own which has high remnant biodiversity value and adopting a biodiversity management approach, including restoring habitat for the helmeted honeyeater, a critically endangered species, at one of our sewer treatment plants

Through these actions we have embedded climate change considerations more deeply into our decisionmaking 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 new Climate Resilience Plan relates to core functional areas of our business, over the short, medium, and long term (S, M, L).

core functional

Focus areas

Ensuring water security

Managing climateresilient assets

Greenhouse gas emissions reductions

Preparing for, managing and recovering from emergencies

Building financial resilience

Supporting community and environment resilience

Embedding climate resilience across YVW

Understanding climate risks

Strengthening partnerships for climate resilience

Figure 2: Climate Resilience Plan actions in relation to core functional areas of our business, over the short, medium, and long term (S, M, L).

Environmental outcomes continued...

Bulk entitlements report

Reporting obligation

Greater Yarra System –Thomson River Pool 1, 2

Victorian Desalination Project 4 Goulburn System 7, 8 River Murray 14, 15

The volume of water taken by Yarra Valley Water in 2021-22 Clause 16.1(a) 159,126ML Clause 13.1(a) 0ML Clause 14.1(b) 4ML9,10 0ML

Annual water allocation made available to Yarra Valley Water Clause 16.1(b) 228,470ML Clause 13.1(a) 47,459ML 5 Clause 14.1(c) 6,297ML Clause 11.1(a) 4,809ML

Share of storage volume at 30 June 2022 for carryover Clause 16.1(b) 295,134ML Clause 13.1(a) 47,459ML 5,565ML11 4,796ML16

Compliance with the entitlement volume Clause 16.1(c) Yes N/A N/A N/A

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

Approval, amendment and implementation of approved metering program

Clause 16.1(d) Nil Clause 13.1(b) Nil Clause 14.1(d)12 Net 4,548ML Clause 14.1(e) Nil

Clause 16.1(e) Continued implementation3

Clause 11.1(b) Net 3,347ML17 Clause 11.1(c) Nil

N/A N/A N/A

Any amendment to the bulk entitlement Clause 16.1(f) Nil Clause 13.1(c) Nil Clause 14.1(f) Nil13 Clause 11.1(d) Nil18

Any new bulk entitlement granted to Yarra Valley Water Clause 16.1(g) Nil Clause 13.1(d) Nil Nil Nil

Compliance with the bulk entitlement N/A Clause 13.1(e) Continued compliance6

N/A N/A

Any failures to comply with any provision of the bulk entitlement Clause 16.1(h) Nil Clause 13.1(f) Nil Clause 14.1(g) Nil Clause 11.1(e) Nil

Any difficulty experienced in complying with the bulk entitlement and if so, any remedial action taken or proposed

Clause 16.1 (i) Nil Clause 13.1(g) Nil Clause 14.1(h) Nil Clause 11.1(f) Nil

Notes for compliance with bulk entitlements

Greater Yarra System - Thomson River Pool

1. Yarra Valley Water holds Greater Yarra System – Thomson River Pool Bulk Entitlement (Greater Yarra System – Thomson River Pool – Yarra Valley Water) Order 2014 – WSE000081.

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 15.3ML under the Agreement in 2021-22.

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.

Victorian Desalination Project

4. Yarra Valley Water holds Bulk Entitlement (Desalinated Water – Yarra Valley Water) Order 2014 – WSE000054.

5. The Hon Richard Wynne MP, Acting Minister for Water, announced a 125GL desalinated water order for the 2021-22 year, of which Yarra Valley Water’s share is 47,459ML.

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 Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 –WSE000010.

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 the Connections Project are completed. The 2021-22 entitlement volume was 12,044.7ML.

9. 4ML 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).

10. Compliance with the combined annual diversion limit of 75,000ML for the holders of Bulk Entitlement (Goulburn System – City West Water, trading as Greater Western 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 2021 was 3,820ML. At 30 June 2022, Yarra Valley Water held 5,565ML.

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 for the Goulburn System was 4,548ML.

13. The Bulk Entitlement (Goulburn System – Yarra Valley Water) Amendment and Revocation Order 2022 was signed by the Minister for Water on 20 June 2022 to revoke the Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 and to reflect the name change of City West Water to Greater Western Water. The amendment order came into effect of 1 July 2022 and therefore these amendments (and revocation) will be reported in 2022-23.

River Murray

14. Yarra Valley Water holds Bulk Entitlement (River Murray – Yarra Valley Water) Order 2012 –WSE000145.

15. 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 2021-22 entitlement volume was 9,607ML (4,713ML in Zone 6 (Vic Murray - Dartmouth to Barmah) and 4,894ML in Zone 7 (Vic Murray - Barmah to SA Border).

16. Yarra Valley Water’s commencement volume on 1 July 2021 was 3,335ML (1,715ML in Zone 6 and 1,620ML in Zone 7). At 30 June 2022, Yarra Valley Water held 4,797ML (2,425ML in Zone 6 and 2,372ML in Zone 7).

17. 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 for the River Murray was 3,347ML (1,550ML in Zone 6 and 1,797ML in Zone 7).

18. The Bulk Entitlement (River Murray – Yarra Valley Water) Amendment and Revocation Order 2022 was signed by the Minister for Water on 20 June 2022 to revoke the Bulk Entitlement (River Murray – Yarra Valley Water) Order 2012 and to reflect the name change of City West Water to Greater Western Water.

Environmental outcomes continued...

Greenhouse gas emissions and net energy consumption

Our Statement of Obligations (Emissions Reduction) requires us to reduce our greenhouse gas (GHG) emissions by 64 per cent by 1 July 2025. We have also pledged to go beyond this target and reach net zero emissions in 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 18,378 tCO2-e (tonnes of carbon dioxide equivalents) in 2021-22.

We achieved our target mostly through increased renewable energy use - reporting 17,407 tCO2-e for the financial year. To achieve carbon neutrality for the thirteenth year in a row, we offset our reported

emissions through a voluntary surrender of international Certified Emission Reduction units. 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 grid electricity and this carbon- intensive consumption is the largest source of our emissions. This year we used 66 per cent renewable electricity and we continue to look for additional ways to be more efficient, reduce consumption where possible and source an increasing amount of electricity from renewable generators.

Progress toward 2025 greenhouse gas emissions target

YARRA VALLEY WATER ANNUAL REPORT 2021-22

Greenhouse gas emissions (tCO2e)

Service delivery category

2021-22 projected emissions

2021-22 result

Scope 1 emissions4 Scope 2 emissions5 Total Emissions

Variance Notes

Water treatment and supply 8,425 9,018 9,018 7.0% 1

Sewage collection, treatment and recycling 9,086 2,399 5,146 7,545 -17.0% 2

Transport 747 735 735 -1.6%

Other (eg. office) 120 109 109 -9.2% 3

Total GHG emissions (a) 18,378 3,243 14,164 17,407 -5.3%

Carbon Offsets (self-generated) retired

Total offsets (b)

Net emissions (a-b) 18,378 3,243 14,164 17,407 -5.3%

Notes:

1. The higher greenhouse gas emissions in 2021-22 compared to projected emissions is due to higher than forecast water pumping.

2. The lower greenhouse gas emissions in 2021-22 for sewage collection, treatment and recycling compared to projected emissions is due to increased use of renewable electricity over the year.

3. The lower greenhouse gas emissions in 2021-22 compared to the projected emissions is due to a reduction in use of natural gas.

4. Scope 1 greenhouse gas emissions are the emissions released to the atmosphere as a direct result of an activity. For example; emissions from the use of diesel in generators.

5. Scope 2 greenhouse gas emissions are the emissions released to the atmosphere from the indirect consumption of an energy commodity. For example; emissions from the use of electricity produced by the burning of coal.

It is important to note that for Yarra Valley Water the Statement of Obligations (Emission Reduction) accounting method only recognises emission reduction activities that occur in Victoria. While we support this local approach to emissions reduction, we still want to

CACNS eligible offsets retired

Project

Kyoto Project # IN-1116

Kyoto Project # IN-1116

Kyoto Project # CN-1990

offset any emissions that we generate to maintain carbon neutrality. Below are details of our recent voluntary surrender of international Certified Emission Reduction (CER) units that were created under the Kyoto Protocol.

CER-CP2 3,243 10/08/2022

CER-CP2 13,042 10/08/2022

CER-CP2 1,122 10/08/2022

ANREU 284,585,435 - 284,588,677

ANREU 284,588,678 - 284,601,719

ANREU 1,099,538,406 - 1,099,539,527

Environmental outcomes continued...

Total electricity consumption

Service delivery category

2020-21 result (MWh) 2021-22 result (MWh) Notes

Water treatment and supply 8,597 9,394 1 Sewage collection, treatment and recycling 19,193 18,927

Other (eg. Offices, depots) 988 1,000 Total 28,788 29,321

Notes:

1. The increase in electricity consumption from 2020-21 to 2021-22 is due to increased water pumping over 2021-22.

Renewable energy

We aspire to generate 100 per cent of our energy needs from renewable sources by 2025. This year, 66 per cent of our electricity needs were supplied from renewable sources. Of this 25.6 per cent came from our food waste to energy facility, which operating at capacity generated 7,516 MWh of renewable energy. Of this, 39 per cent was used to run the facility and the adjacent sewage treatment plant leading to a 2,804 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 536 MWh of renewable electricity for the year. We consumed 83 per cent (446MWh) of this renewable energy onsite, with the surplus 17 per cent exported to the grid. This year our head office was again 100 per cent powered by renewable energy, with 28 per cent coming directly from our solar carpark and the rest being sourced from the

grid by utilising exports from our food waste to energy facility. Our co-investment in Zero Emissions Water Limited (ZEW) continues to provide us with renewable electricity sourced from the Kiamal Solar Farm, which pushed our renewable electricity consumption beyond 66 per cent for the first time.

We have exchanged contracts to build a second food waste to energy facility at our Lilydale Treatment Plant. We have committed to a hydrogen pilot and we plan on deploying electrolysers to produce sustainable oxygen and hydrogen. This plan would increase the efficiency of wastewater treatment and produce a commercially viable renewable fuel that would displace grid electricity and natural gas in stage one, before moving to displace diesel and liquid petroleum gas in various mobility applications.

Total renewable electricity consumption Service delivery category

2020-21 renewable electricity consumption (MWh)

2021-22 renewable electricity consumption (MWh) Notes

Total grid sourced 4,681 4,825

Biogas 3,455 2,921 1 Hydroelectric 0 0 Solar 586 446 Wind 0 0 Other 5,700 11,200 2

Total corporation led/ self sourced 9,741 14,567 Total renewable electricity consumption 14,422 19,392 Percentage renewable electricity % 50.12% 66.14%

Notes:

1. The Aurora Treatment Plant and Waste to Energy (Wollert) consumed less electricity directly behind the meter this year and exported more to the electricity grid. However, these exports of electricity made a greater contribution to the 'Other' category when consumed from the grid by alternative sites.

2. 'Other' mostly relates to renewable electricity transported by the electricity grid to Yarra Valley Water sites that has been sourced from the Waste to Energy (Wollert) facility and Kiamal Solar Farm via Zero Emissions Water (ZEW) Ltd.

Other statutory obligations

Victorian biodiversity strategy

In accordance with the state's Protecting Victoria's Environment - Biodiversity 2037 Strategy, we've been working to address biodiversity decline on our land. This year we've developed a biodiversity framework to improve our land management practices, using the findings of a report by Nature Glenelg Trust which assessed all 1,527 hectares of land we own. Twelve of our 190 sites were classified as having high biodiversity value, and we're planning how we can improve land management at these sites. This will include better weed management, revegetation, restoration of waterways and species monitoring. We've also been working with Greening Australia and Zoos Victoria on plans to create habitat for the critically endangered Helmeted Honeyeater and Lowland Leadbeater's Possum at our Upper Yarra Treatment Plant.

We have also been exploring future management of some of our land by Traditional Owners/Custodians aiming to support their self-determined approach to Caring for Country. This year we have established a

partnership with Wurundjeri's Narrap Rangers at our Aurora Treatment Plant. The Rangers have led the creation of a restoration trial plan for endangered grasses on site, with work to commence in July 2022.

We consider biodiversity outcomes as part of our asset planning, design, delivery, procurement, operation and maintenance activities, in accordance with our legal obligations. These include the Commonwealth Environment Protection and Biodiversity Conservation Act 1999, the Victorian Environment Protection Act 2017, Flora and Fauna Guarantee Amendment Act 2019, Catchment and Land Protection Act 1994 and State Planning Policy Framework (Clause 12.01); as well as local planning policies and council by-laws to manage noxious weeds. We take steps to conserve important areas of biodiversity, and involve ecologists early in the preliminary decision phase of projects to complete them in a more sustainable manner. This includes conducting risk assessments, life-cycle analyses, net gain assessments and offset management plans, and preliminary flora and fauna options assessments.

Environmental outcomes continued...

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 also liaise directly with DELWP on ongoing growth and development of all native offset areas established as part of these projects.

Victorian waterway management strategy

We strive 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 2021-22, our discharge was 51.8 tonnes.

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

In 2021-22 we continued to transition to the new EPA legislation and corresponding licence reform that is occurring by:

• Undertaking a comprehensive review of all environmental risks associated with our treatment plant assets with reference to the General Environmental Duty

• Developing a site-specific tool to assess and monitor the ecological risks to waterways under dynamic conditions

• Completing the mapping of key environmental and social waterway values within our service area. This work is mainly based on the outcomes from the Melbourne Water Healthy Waterways Strategy and informs our sewer capacity program's projects prioritisation and operational response

The EPA no longer requires licence holders to submit an Annual Performance Statement (APS) for Licenced Sewage Treatment Plants. Instead, the APS has been replaced by a new reporting requirement known as Permission Information and Performance Statements (PIPS). There is no set schedule or standard submission date for PIPS. We only need to submit a PIPS after receiving a request from the EPA. The EPA is currently

working through the design and development of the PIPS program as of 1 July 2022. We are currently undertaking preparatory work to ensure we're ready if we're asked to produce one by the EPA in the near future.

Water quality and flow data relating to waterways is reported to the Essential Services Commission, the National Pollution Inventory and the Bureau of Meteorology on an annual basis.

State Environment Protection Policy (Waters)

During 2021-22 we focused on developing a more detailed understanding of the subordinate legislation for the new EPA Act – which has superseded the existing State Environment Protection Policy (Waters). The new Act, and its associated legislation, is a shift towards a prevention-based approach to environmental protection (rather than consequence based). We also engaged with other water authorities, environmental consultants and the EPA to ensure there was a shared understanding of our obligations under the Act.

As part of this work we have been actively undertaking a gap analysis between our existing practices and the legislation requirements as well as completing risk assessments for all relevant sewerage aspects (dry weather spills, wet weather spills, odour, noise etc).

In 2021-22 we delivered the following projects to reduce the impacts of sewer overflows and to align our practices with the Sewerage Management Guidelines:

• Deployed additional monitoring at critical locations within the sewer network - with a focus on locations at risk of wet weather overflows

• Upgraded monitoring at emergency relief structures to improve reporting and response capabilities

• Completed several hydraulic options assessments that will progress into design in 2022-23

• Completed mapping of all environmental and social waterway values within our service area to inform project prioritisation and operational response

• Further improved our risk-based approach to prioritise our sewerage system hydraulic deficiencies improvement works

• Ongoing asset inspection and renewal programs across our asset base to reduce the risk of environmental impact from blockages and asset failures

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 several projects to minimise or eliminate non-compliant spills. We have:

• Completed concept design, system performance assessment and Department of Treasury and Finance preliminary business case for the construction of the Darebin Creek Sewer Tunnel

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

• Commenced the Rosanna Branch Sewer Hydraulic Option Assessment review and concept design to reduce environmental risks to beneficial uses of downstream waterways and to protect the amenity of the Rosanna sub-catchment

• Collaborated with Melbourne Water on the development of a merged hydraulic model for the North Yarra Main (NYM) sewer catchment

• Commenced the design of a new Emergency Relief Structure (ERS) in Blackburn to prevent uncontrolled spills to waterways. This included the installation of screens in existing ERS in the area to reduce debris entering waterways during extreme weather events.

In addition, we have continued our partnership with Monash University and other authorities in research initiatives designed to determine key threats to urban waterways. The first is a QRMA, which is focused on determining the sources of risks to public health within urban waterways. The second 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. This program provides wastewater services to areas deemed by local councils to have a high risk of environmental impact to waterways and public health. These areas contain a large number of failing septic systems and properties unable to contain wastewater within property boundaries.

In 2021-22 we provided sewer connections for properties in Eltham, Park Orchards and Monbulk. In Monbulk we have commissioned a new large pump station to support the new sewerage system in the Dandenong Ranges. In the coming year we will provide sewer connections to properties in Eltham, Kallista and Sassafras.

The industry-leading onsite treatment trial in Park Orchards was wrapped up with a final report published in early 2022. The key findings from the trial established that modern onsite sewerage services, as an alternative to a piped sewerage network, can be a feasible solution for some areas, but are generally not suited to many suburban areas due to property size. We will consider onsite sewerage systems as a servicing option in periurban areas where it is cost-prohibitive to extend the sewerage network.

We continue trialling our onsite treatment system developed in-house in response to the under-performing onsite systems available in the market. We are in the process of building a trial installation at our Kinglake Treatment Plant and we're undergoing design and cultural heritage approvals for an installation at Coranderrk for the Wandoon Estate Aboriginal Corporation. It will replace an ageing septic system, reducing the risks of environmental impacts to the adjacent creek and enabling development of community engagement programs at Coranderrk. We are monitoring waterways in unsewered areas to inform planning for our Community Sewerage Program. This will also allow us to demonstrate the positive impact sewer works have on waterways and public health. We are trialling new monitoring methods and testing different sewage indicators in partnership with local councils, universities and Melbourne Water.

In 2021-22 we also helped develop state and national guidelines that support Australian water utilities to address their sewerage system capacity issues and increase system resilience against challenges such as extreme weather events and climate change.

Our contributions included:

• Providing technical support to develop the Water Services Association of Australia's "ANZ Wet Weather Sewer Overflow Management Guidelines" project

• Participation in the development of the Department of Environment, Land, Water and Planning's "Guidelines for Assessing the Impact of Climate Change on Wastewater Systems in Victoria"

United Nations Global Compact Communication on Progress

As a signatory to the United Nations Global Compact (UNGC), we are committed to reporting our Communications on Progress (COP) to describe and measure our actions on the key principles of the UN Global Compact. For this reporting year, information relevant to our COP is detailed throughout this report. Refer to the page references in the table below for details on how we’re taking action:

Requirement

High-level Commitment and Strategy

We’re proud about our ongoing commitment to the United Nations Global Compact and work to advance the Sustainable Development Goals (SDGs). We believe the water industry has a vital role in helping to achieve the SDGs and deliver environmental and social value.

We've embedded the SDGs in our business strategy to provide a global context for how our activities contribute to a more sustainable future.

We're excited to create a brighter future through contributing to the SDGs, for the benefit our of customers, communities and the planet. This COP illustrates the outcomes we achieved this year, including our ongoing actions and commitments to the UNGC Principles.

Measurement of Outcomes

Our 2030 Strategy defines and drives our sustainability commitments and actions now and in the future, and how we measure their success. It has embedded key research and engagement, including trends, materiality and human rights reviews, and feedback from staff, customers and stakeholders.

How we measure our performance is evolving as we learn more and advance our approaches. We have strategic and operational targets and measures in place for areas where we're more advanced, and we're developing targets and measures for areas where we're continuing to refine our approach.

We have developed and are developing measures for focus areas of Caring for Country, circular economy, biodiversity, inclusion and connection, alternative water use and water availability and security.

Human Rights

Access to safe, reliable and affordable drinking water and sanitation services are basic human rights, and essential to realising all human rights.

In 2019 we completed a human rights review of our organisation and the findings have helped inform our 2030 Strategy. We've also developed a roadmap to strengthen our human rights approach in areas such as community safety, land access and cultural heritage, workers health and safety, exploitation, discrimination and data protection and privacy.

10-12

36, 84-86 & 94-95

17-19, 23-26, 33-35 & 67-68

Environment

Protecting and enhancing the health of the planet is central to our approach. We rely on a healthy environment to deliver our services and we recognise that we must not only maintain but also improve the natural ecosystems on which we depend, and we must be innovative to adapt to ecological challenges. Our customers are demanding more environmental action and custodianship.

We're working towards going beyond zero carbon, contributing to a circular economy and creating healthy ecosystems. We also have an appetite to be leaders in regenerative thinking, which means thinking and acting as part of nature to enable nature and humans to thrive together.

We are actively pursuing environmental outcomes aligned with our strategic objectives and commitments. We're working for positive change including generating renewable energy, reducing our emissions, growing carbon offsets, conserving and creating habitats, proactive maintenance of our assets to prevent sewage spills, using more recycled content across our business and reducing waste. This is all built on a foundation of best practice environmental management, which is facilitated by our Environmental Management System.

Anti-Corruption

We strive for a culture of transparency, integrity, accountability and access. We're committed to ensuring a robust Corporate Governance Framework is in place.

Our Directors’ Code of Conduct is based on the Code of Conduct issued by the Victorian Public Sector Standards Commissioner, and our Company Code of Conduct reflects minimum standards of behaviour we expect of each other.

We comply with the Statement of Obligations under section 41 of the Water Industry Act 1994; Privacy and Data Protection Act 2014; Protected Disclosure Act 2012 and Freedom of Information Act 1982

Labour

We recognise the importance of employee rights for freedom of association and the right to collective bargaining.

We have a range of policies and strategies to avoid worker exploitation, including our Enterprise Agreement. The Agreement sets the wages, terms and conditions of Yarra Valley Water employees for a period of up to four years. It is supported by a majority of employees who vote to approve the Agreement, and approved by an independent authority, the Fair Work Commission. Our Enterprise Agreement Monitoring Committee consistent of management and employee representatives. The committee has an ongoing role in monitoring the application and implementation of the Agreement and acts as the primary consultative forum.

Our Diversity and Inclusion Strategy embraces diversity and inclusion, including the key focus areas of reflecting community, gender balance, Aboriginal participation and workforce flexibility.

We work to provide social value and reduce human rights risks in our supply chain. Our Social and Sustainable Procurement Strategy sets our ambitions and targets, with its delivery supported by our Social Procurement Working Group, suppliers and partnerships with Social Traders and Kinaway. We work to mitigate modern slavery in our supply chain through a risk-based approach, having identified and put in place tender questions and contract requirements for procurement categories at higher risk of modern slavery.

28-31, 36, 67-68, 78-89, 94-95, 103 & 146

43-55, 62, 148149 & 151

24-25, 32-35, 56-59 & 62

Our performance

Financial Performance Indicators

Performance indicator

F1 Cash interest cover

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

F2 Gearing ratio

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

F3 Internal financing ratio

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

F4 Current ratio

(Current assets / current liabilities) excluding long-term employee provisions and revenue in advance

F5 Return on assets

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

F6 Return on equity

Net profit after tax / average total equity *100

F7 Earnings before interest, tax, depreciation and amortisation

2020-21 Result 2021-22 Result

Variance to prior year Notes 2021-22 Target Variance to target Notes

2.44 times 2.21 times -9.4% 1.79 times 23.5% 1b

56.02% 57.51% 2.7% 58.77% -2.1%

30.42% 30.53% 0.4% 11.67% 161.6% 3b

0.40 0.40 0.0% 0.49 -18.4% 4b

4.87% 4.27% -12.3% 5a 4.27% 0.0%

5.75% 4.63% -19.5% 6a 4.69% -1.3%

33.79% 33.11% -2.0% 34.28% -3.4%

Variance explanations

1b Higher net operating cash flows compared to target due to higher cash receipts from customers as our cash flow position was not as significantly impacted by COVID-19 as budgeted due to customers receiving support from Government and through a range of YVW customer support programs. We also achieved savings in interest payments due to lower interest rates during the first nine months of the year on new borrowings.

3b Higher net operating cash flows compared to target due to higher cash receipts from customers as our cash flow position was not as significantly impacted by COVID-19 as budgeted due to customers receiving support from Government and through a range of YVW customer support programs. Lower interest payments during the first nine months of the year on new borrowings and lower than budgeted capital expenditure also contributed to higher net operating cash flows.

4b Current ratio was below target due to lower trade debtors because of higher than anticipated cash receipts from customers as our cash flow position was not as significantly impacted as expected from COVID-19.

5a Lower earnings due to delays in completion of the developer works, lower demand for commercial water usage, and lower growth in new commercial customers affected by COVID-19. This is compounded by growth in asset base with the delivery of 2021-22 capital program.

6a Lower profit after tax compared to last year due to lower developer contributed assets revenue as a result of delays in completion of the developer works, lower demand for commercial water usage, and lower growth in new commercial customers affected by the COVID-19.

VALUE

Our performance continued...

Operational Performance

Performance indicator

Water and Sewerage

WS1 Unplanned water supply interruptions

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

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

SS1 Containment of sewer spills

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

Customer Responsiveness

CR1 Water quality complaints

Number of complaints per 1,000 customers

CR4 Billing and account complaints Number of complaints per 1,000 customers

Environmental Performance

E1

2020-21 Result 2021-22 Result

Variance to prior year Notes 2021-22 Target Variance to target Notes

0.019% 0.025% 31.6% 1a 0.030% -16.7% 1b

97.5 minutes 105.4 minutes 8.1% 2a 100 minutes 5.4% 2b

99.0% 96.8% -2.2% 97.0% -0.2%

99.8% 99.7% -0.1% 97.7% 2.1%

97.2% 97.5% 0.3% 91.0% 7.1% 5b

4.69 3.55 -24.3% 6a 5.30 -33.0% 6b

2.71 2.17 -19.9% 7a 3.40 -36.2% 7b

Percentage of Effluent re-use volume (end use) 31.8% 29.29% -7.9% 8a >25% 17.2% 8b

0.0 0.0 0% 9a 0.0 0.0% 9b

Variance explanations

1a The increase from the previous year is due to larger isolation areas affected by bursts, and the relatively moderate weather conditions experienced in 2021-22.

1b The favourable result against the target is due to a number of continuing improvement initiatives to proactively manage customers with >5 interruptions.

2a Water reactive maintenance volumes surged to multi-year highs during the summer escalation period between February and March, adversely impacting interruption times due to resource stretch.

2b Water reactive maintenance volumes surged to multi-year highs during the summer escalation period between February and March, adversely impacting interruption times due to resource stretch.

5b The favourable result was due to a continued strong focus on delivering improvements to work procedures driven by improved data quality. Field responsiveness and site restoration improved due to improved traffic conditions and easier transit to work sites with remote working during coronavirus (COVID-19).

6a Complaints reduced due to a continued focus on cleaning water mains, which resulted in lower than anticipated leaks in our network. Improvements to increase accuracy of water quality complaint reporting helped to streamline and address issues earlier.

6b Complaints reduced due to a continued focus on cleaning water mains, which resulted in lower than anticipated leaks in our network. Improvements to increase accuracy of water quality complaint reporting helped to streamline and address issues earlier.

7a The favourable performance is a result of improved and proactive case management to support customers, and particularly supporting vulnerable customers to help resolve billing and account issues, which improved customer satisfaction and reduced complaints.

7b Performance is a result of improved and proactive case management to support customers, and particularly supporting vulnerable customers to help resolve billing and account issues, which improved customer satisfaction and reduced complaints.

8a Recycled water re-use volumes are volatile and impacted by sewage volumes, weather and customer behaviour. Other factors such as Treatment Plant performance and reliability also impact the result.

8b There were plans in place to reduce the volume of water used for irrigation at one of our sites, that was originally forecast to occur during 2020-21. This has been delayed while we are reviewing opportunities and preferred options across our sites. As a result higher levels of irrigation remained during 2021-22.

9a We achieve a net emission of zero under E2 by going beyond the Statement of Obligations (Emissions Reduction) to make voluntary surrender of international CERs.

9b We achieve a net emission of zero under E2 by going beyond the Statement of Obligations (Emissions Reduction) to make voluntary surrender of international CERs.

Our performance continued...

Certification of performance report for 2021-22

We certify that the accompanying Performance Report of Yarra Valley Water Corporation in respect of the 2021-22 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 2021-22 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 29th day of August 2022, we are not aware of any circumstances that would render any particulars in the Performance Report to be misleading or inaccurate.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

Natalie Foeng Chief Financial Officer

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 2022, which comprises the:

• financial performance indicators

• water and sewerage 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 for the year ended 30 June 2022 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.

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

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:

• 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.

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.

MELBOURNE 2 September 2022

Paul Martin as delegate for the Auditor General of Victoria

Financial Report

Directors' Report for the year ended 30 June 2022

The Directors of Yarra Valley Water Corporation present their report for the financial year ended 30 June 2022.

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

Helen Lynette Thornton

Karen Milward

Victoria Fay Marles

Ian David Hamm

Ari Daniel Suss (appointed as a Director 1 October 2021)

Kate Deborah Vinot (appointed as a Director 1 October 2021)

Anita Michele Roper (retired as a Director 30 September 2021)

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 2022 will be determined after consultation between the Board, the Minister for Water and the Treasurer of Victoria. An interim dividend of $7.9m was paid on 30 June 2022 for the year ended 30 June 2022. An interim dividend of $10.6m and a final dividend of $27.5m for the year ended 30 June 2021 was paid on 30 April 2021 and 29 October 2021, respectively.

Capital repatriation

On 30 June 2022 a capital repatriation of $36.4m was paid for the 2021-22 financial year. There were no capital repatriations for the year ended 30 June 2021.

Review of operations

During the 2022 financial year, Australia continued to be impacted by coronavirus (COVID-19) with restrictions changing throughout the year in accordance with government policy. We continue to monitor the impact of COVID-19 along with recent increases to inflation and interest rates, and supply chain issues on our employees and customers. Our financial sustainability is supported by the Victorian Government.

Further detail on our operations during the year ended 30 June 2022 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 2022.

For a discussion of the program and initiatives we rolled out this year, refer to the 2021-22 Highlights section in this Annual Report.

Events subsequent to balance sheet date

In July 2022 settlement occurred with Development Victoria on the land held for sale at Ivanhoe, refer note 4.5, and we received approval from the Minister for Water for unregulated revenue via our Lilydale waste to energy facility.

Except as provided above, no matter or circumstance has arisen since 30 June 2022 that has or might 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.

Environmental regulation

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

We hold eight Operating Licences issued by the Environment Protection Authority Victoria (EPA) under the Environment Protection Act 2017 (Vic). Seven licences impose conditions relating to discharges, reporting obligations and other matters concerning the operation of seven sewage treatment plants. The eighth licence is to operate ReWaste, our Food Waste to Energy facility at Wollert with a production capacity of 1MW. It allows for the acceptance of commercial food wastes, some of which are classed as prescribed industrial waste.

Yarra Valley Water had a minor breach of a discharge licence and three unlicenced discharges to waterways at two of our Treatment Plants during 2021-22 period. Breaches were proactively notified to the EPA and root causes have been identified and rectified, as far as reasonably practicable.

All other conditions of the EPA's Operating Licences were met in the 2021-22 financial year.

Yarra Valley Water addressed the following to ensure continued compliance:

• Completed odour rectification works at Brushy Creek Treatment Plant following an odour complaint in 2019-20.

• Continued to liaise with the EPA regarding odour management at our ReWaste facility at Wollert. We have implemented a new dosing process to oxygenate the end storage tank to reduce odour-producing bacteria and we’re now designing a bio air odour filtration system for the tank. We received an Improvement Notice from the EPA in June 2022.

• Responded to two EPA Improvement Notices stemming from the June 2021 severe weather events and associated sewer spills. In both instances the EPA found we were compliant and the Notices have since been revoked.

• We are currently confirming with the EPA that under the new Act we do not need to meet the financial assurance requirements for our ReWaste facility.

• As part of the decommissioning of the Monbulk Treatment Plant we are required to report monthly to the EPA the outcome of land contamination investigations and we are developing a Sampling and Quality Plan to address this requirement.

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 Delivery Value - Environmental Outcomes and Our Performance sections of this Annual Report.

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 ceasing 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.

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

Rounding of amounts to nearest thousand dollars

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

This Financial Report is made in accordance with a resolution of the Directors of Yarra Valley Water on 29 August 2022.

Sue T O’Connor Chair Patrick J McCafferty Managing Director

Statement

of Comprehensive Income

for the year ended 30 June 2022

Note 2022 $’000 2021 $’000

Revenue

Service and usage revenue

2.1 954,406 968,728

New customer contributions by developers 2.1 30,355 35,076

Developer contributed assets 2.1 48,239 69,809

Other revenue 2.1 49,152 51,674

Other income 2.2 5,092 6,124 Total revenue 1,087,244 1,131,411

Expenses

Bulk water and sewerage expenses 3.1 (508,989) (528,335)

Contract expenses 3.1 (56,158) (56,381)

Salary and employee benefits expense 3.2.1 & 3.2.3 (56,047) (55,125)

Environmental contribution 8.2 (47,430) (47,430)

Depreciation 4.2 (97,232) (97,189)

Amortisation 4.3 (17,898) (19,129)

Finance costs 6.1.2 (132,877) (130,264) Other expenses 3.1 (58,680) (61,812)

Total expenses (975,311) (995,665)

Profit before income tax 111,933 135,746

Income tax expense 8.1 (33,687) (41,632)

Net profit after tax 78,246 94,114

Other comprehensive income

Decrease from revaluation of infrastructure assets 4.2 (59,680) (143,218)

Increase from revaluation of land 4.2 91,167 123,778

Increase from revaluation of buildings 4.2 297

Defined benefit superannuation plan actuarial gain 9.2 824 7,776

Deferred income tax on items of other comprehensive income 8.1 (2,642) 22,346

Other comprehensive income, net of tax 29,669 10,979

Total comprehensive income 107,915 105,093

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Balance Sheet as at 30 June 2022

Assets

Current assets

Note 2022 $’000 2021 $’000

Cash 6.2 4,090 2,366

Receivables 5.1 173,852 163,823

Current tax receivable 8.1 3,763

Non-financial physical assets classified as held for sale 4.5 14,417 17,739

Other non-financial assets 5.3 5,819 5,199

Total current assets 201,941 189,127

Non-current assets

Infrastructure, property, plant and equipment 4.2 5,460,857 5,212,311

Intangible assets 4.3 179,304 186,087

Other financial assets 5.2 571 11

Other non-financial assets 5.3 1,582 1,007

Defined benefit superannuation asset 3.2.3.2c 12,018 11,548

Total non-current assets 5,654,332 5,410,964 Total assets 5,856,273 5,600,091

Liabilities

Current liabilities

Contract liabilities 5.5 70,271 60,414

Current tax payable 8.1 863

Provisions - employee benefits 3.2.2 22,123 22,503

Other provisions 5.6 9,861 12,694

Lease liabilities 5.7 & 6.1 23 2 Payables 5.4 95,030 108,743

Borrowings 6.1 394,728 342,900

Total current liabilities 592,036 548,119

Non-current liabilities

Contract liabilities 5.5 225

Provisions - employee benefits 3.2.2 2,548 2,877

Lease liabilities 5.7 & 6.1 10 12

Other financial liabilities 5.2 586

Payables 5.4 6,690 6,715

Deferred tax liabilities 8.1 575,594 576,581

Borrowings 6.1 2,973,000 2,794,100

Total non-current liabilities 3,558,067 3,380,871

Total liabilities 4,150,103 3,928,990

Net assets 1,706,170 1,671,101

Equity

Contributed equity

9.1 384,602 420,967

Retained earnings 9.2 544,120 501,778 Asset revaluation surplus 9.3 777,448 748,356

Total equity 1,706,170 1,671,101 The above Balance Sheet should be read in conjunction with the accompanying notes.

Statement of Changes in Equity for the year ended 30 June 2022

Note

Balance as at 1 July 2020

Contributed equity $’000

Retained earnings $’000

Asset revaluation surplus $’000 Total $’000

420,967 438,321 742,820 1,602,108

Net profit after tax 94,114 94,114

Other comprehensive income, net of tax 9.2 & 9.3 5,443 5,536 10,979

Dividends paid 9.2 (36,100) (36,100)

Balance as at 30 June 2021 420,967 501,778 748,356 1,671,101

Change in accounting policy 1.2 (1,101) (1,101)

Net profit after tax 78,246 78,246

Other comprehensive income, net of tax 9.2 & 9.3 577 29,092 29,669

Capital repatriation 9.1 (36,365) (36,365)

Dividends paid 9.2 (35,380) (35,380)

Balance as at 30 June 2022 384,602 544,120 777,448 1,706,170

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

Cash Flow Statement for the year ended 30 June 2022

Note 2022 $’000 2021 $’000

Cash flow from operating activities

Receipts from customers 997,880 1,018,195

Proceeds from grants 3,245 3,765

Payments to suppliers and employees (738,619) (736,848)

Goods and services tax refunded (net) 32,353 34,887

Income tax paid (41,942) (50,317)

Interest and other costs of finance paid (133,126) (131,078)

Interest received 6 6

Net cash inflow from operating activities 6.2.1 119,797 138,610

Cash flows from investing activities

Proceeds from sale of infrastructure, property, plant and equipment 1,509 456

Payments for acquisition of infrastructure, property, plant and equipment (264,055) (328,074)

Payments for acquisition of intangible assets (13,921) (9,400)

Payments for investments (11)

Net cash outflow from investing activities (276,467) (337,029)

Cash flows from financing activities

Refinancing of borrowings - inflow 514,828 582,041

Refinancing of borrowings - outflow (284,100) (348,200)

Developer security deposits (571) 834

Principal element of lease payments (18) (1)

Dividends paid 9.2 (35,380) (36,100)

Capital repatriation 9.1 (36,365)

Net cash inflow from financing activities 158,394 198,574

Net increase in cash held 1,724 155

Cash at beginning of year 2,366 2,211

Cash at end of year 6.2 4,090 2,366

The above Cash Flow Statement should be read in conjunction with the accompanying notes.

Notes to the financial statements for the year ended 30 June 2022

1 About This Report

Introduction

This section sets out the framework of our report.

Structure

1.1 Basis of accounting

1.2 Changes in accounting policies

1.3 Impact of COVID-19 on the 2021-22 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 2022. 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, land held for sale, derivative financial instruments 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 2022, was authorised for issue in accordance with a resolution of the Directors on 29 August 2022.

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.

Functional and presentation currency

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.

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 make 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. Judgements and estimates require assumptions to be made about highly uncertain external factors such as discount rates, probability factors, the effects of inflation, changing technology, political and social trends and climate change. There are many uncertainties in the estimation process and assumptions that are valid at the time of estimation may change significantly when new information becomes available. 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

accrued revenue – note 5.1 unearned income – note 5.5

• Lease and licence receivables - note 2.3

• 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

• Recognition and measurement of Software-as-aService (SaaS) arrangements – notes 1.2 and 4.3

• Asset residual values and useful lives – notes 4.2 and 4.3

• Asset impairment – notes 4.2 and 4.3

• Other provisions – note 5.6

• Contingent assets and liabilities – note 7.3

• Fair value of infrastructure, property, plant and equipment – note 7.4

• Fair value of derivative financial instruments – notes 2.2, 3.1, 5.2 and 7.4

• Deferred tax – note 8.1

1.2 Changes in accounting policies

The International Financial Reporting Standards Interpretations Committee (IFRIC) has issued two final agenda decisions which impact Software-as-a-Service (SaaS) arrangements:

• Customer’s right to receive access to the supplier’s software hosted on the cloud (March 2019) – this decision considers whether a customer receives a software asset at the contract commencement date or a service over the contract term.

• Configuration or customisation costs in a cloud computing arrangement (April 2021) – this decision discusses whether configuration or customisation expenditure relating to SaaS arrangements can be recognised as an intangible asset and if not, over what time period the expenditure is expensed.

Our historical accounting policy has been to capitalise all costs related to SaaS arrangements as intangible assets in the Balance Sheet at the time of development and recognise subsequent licence fees related to SaaS arrangements as an operating expense in the Statement of Comprehensive Income. The adoption of the above agenda decisions has resulted in a reclassification of intangible assets to either a prepaid asset in the Balance Sheet and/or recognition as an expense in the Statement of Comprehensive Income, impacting both the current and/or prior periods presented.

A detailed review identified one project that was currently a work in progress that would not be eligible for capitalisation as a result of these agenda decisions.

For the current year, $71,845 (pre-tax) of costs that would previously have been capitalised (under AASB 138 Intangible assets) were expensed and included in payments to suppliers and employees in the Statement of Cash Flows that previously would have been included as payments to acquire intangible assets. The impact on prior financial years has resulted in a $1.1m adjustment to retained earnings, note 9.2 and the recognition of prepayments of $0.3m. Prior year balances were not restated as the amount is not material. Overall intangible assets were adjusted $1.4m.

1.3 Impact of COVID-19 on the 2021-22 Financial Report

Background

COVID-19 was first reported in late 2019 and continues to have an unprecedented health and economic impact both internationally and domestically. To reduce the spread of the virus, a series of public health measures were imposed across the world and in Australia, including travel restrictions, calls to work from home and significantly reduced levels of activity in both the economy and community. In response to the global health pandemic, the Federal and Victorian governments have been providing a number of economic stimulus packages and policies in support of Victorian families and businesses. We are now experiencing labour shortages, supply chain delays, interest rate rises and inflationary pressures. We continue to monitor the impact of COVID-19 on our employees and customers and have transitioned to a hybrid workforce.

Impact on employees and customers

The consequential impacts on us have included, but are not limited to:

• Ensuring a strong response and putting provisions in place to continue to provide essential water and sewerage services to our customers

• Supporting our employees to work in a hybrid manner

• Uplifting our IT network capability to support hybrid working

• Supporting customers experiencing financial difficulties through arrangements such as our hardship program, more time to pay arrangements and new payment plans

• Providing waivers to our trade waste customers and commercial tenants experiencing financial hardship

Notes to the financial statements for the year ended 30 June 2022

Impact on the financial report

Management have assessed the impact of COVID-19 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 3.2.3.2 – Defined benefit superannuation asset

• Note 4.2 – Reconciliation of movements in carrying values of infrastructure, property, plant and equipment

• Note 5.1.2 – Reconciliation of the expected credit loss allowance

• Note 7.2 – Financial risk management objectives and policies

• Note 7.4 – Fair value

• Note 9.7 – Ex-gratia expenditure

Going concern

Management continuously review budgets and forecasts while monitoring cash flow requirements and customer payment trends during this period of uncertainty and conclude that the going concern assumption remains appropriate. We have in place financing arrangements with the Victorian Government, refer note 7.2, with unused borrowings available to us.

These financial statements have been prepared on a going concern basis and do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate.

2 Funding delivery of our services

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 2022 $’000 2021 $’000

Fixed service charges 416,352 417,885

Water usage charges 398,085 413,979

Sewage disposal charges 118,820 118,103

Trade waste charges 25,917 23,805

Customer rebates (4,768) (5,044)

Total 954,406 968,728

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.

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.

The payment in advance by customers of accounts is classified as contract liabilities, refer note 5.5.

Service and usage revenue is impacted by customer rebates including our Arrange and Save Program, refer note 9.7.

As a result of COVID-19, refer note 1.3, we saw a shift in how our water and sewerage services were used. A smaller proportion of our total water demand came from non-residential customers due to the decrease in demand from businesses impacted by restrictions, as well as increased working from home and remote learning. As restrictions have lifted we have seen this trend begin to reverse.

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 5.5.

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 5.5. Upon initial recognition the assets are recorded at fair value.

Government policy and mandates in response to COVID-19, economic factors including inflation, supply chain delays and labour capacity constraints, refer note 1.3, have the ability to impact the development sector’s supply and demand, developer’s ability to deliver to

schedule and volume of development activity.  Whilst we have seen strong levels of developer activity continue during the 2022 financial year, there have been less projects closing out their performance obligations in the reporting period, therefore reducing the level of revenue generated from DCAs. Due to the lead time required in closing out performance obligations, we anticipate that the current high levels of developer activity will impact revenues in future financial years.

Other revenue

2022 $’000 2021 $’000

Other products and services 16,073 20,731

Park and drainage collection fees 8,930 8,473

Information statements and applications 5,319 5,439

Water trading 605 1,497

Waste to energy 3,406 2,409

Recoverable works 11,610 11,382

Other 3,209 1,743

Total 49,152 51,674

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, issuing a Statement of Compliance or installing a new water meter.

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.

Water trading revenue relates to sales of water allocation in northern Victoria. We recognise the revenue at the point in time that the volume of water is deducted from our account and transferred to the account of the purchaser. Water trading revenue is impacted by the weather, which impacts demands and market pricing.

Waste to energy revenue is generated from our ReWaste facility at Wollert which converts food 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

Notes to the financial statements for the year ended 30 June 2022

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.

Revenue from contracts with customers 2022 $’000 2021 $’000

Total revenue recognised over-time 933,257 949,967

Total revenue recognised at point in time 148,895 175,320

Total 1,082,152 1,125,287

2.2 Other income

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.

Note 2022 $’000 2021 $’000

Lease and licence income 2.3 1,976 2,002

Interest income 6 6

Zero Emissions Water settlement income 5.2 90

Gain on fair value of derivative financial instruments

5.2 & 7.4 1,120

Impairment writeback 4.2 1,990 4,026

Total 5,092 6,124

Impairment writebacks occurred as a result of scheduled valuations for land and buildings, refer note 7.4.1.

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 include GST.

We have non-cancellable agreements with various utility bodies who 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 who use our sites for a variety of purposes. In line with government policy introduced as a response to COVID-19, refer note 1.3, we offered to waive the rent and licence fees for our non-utility lease holders and licence holders from 1 January to 31 December 2020. From 1 January 2021 all lease holders and licence holders were invoiced.

A number of our leases are subject to rate increases based on CPI. We make assumptions about future CPI based on current market knowledge, which impacts the estimated future revenue. During the 2022 financial year we also commenced negotiations with a number of our telecommunication tenants to sign up new leases to replace previous leases that are on overhold. For new leases, the rents are revised at current market rents. During the year a number of properties were vacated.

Non-cancellable lease and licence receivables 2022 $’000 2021 $’000

No later than one year 1,780 1,649

Later than one year and no later than five years 3,291 4,295

Later than five years 4,468 5,969

Total (GST inclusive) 9,539 11,913

3 The cost of delivering our services

Introduction

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.

Structure

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

3.2 Our People

3.2.1 Employee benefits – Statement of Comprehensive Income

3.2.2 Employee benefits – Balance Sheet

3.2.3 Superannuation

3.3 Other commitments payable

3.4 Remuneration of auditors

Contract expenses

Contract expenses include maintenance contracts, insurance premiums and various other contracts which are expensed in the reporting period in which they are incurred.

Other expenses

Other expenses Note 2022 $’000 2021 $’000

Billing and revenue collection costs 8,202 8,307

Information technology costs 12,853 11,874

Electricity 5,530 4,628 Consulting services 5,704 5,864

Summary of other expenses incurred in the delivery of our services

3.1

Bulk water and sewerage 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

Bulk water and sewerage expenses 2022 $’000 2021 $’000

Variable expenses 57,519 75,559

Fixed expenses 451,470 452,776

Total 508,989 528,335

Government taxes, fees and contributions

2,384 2,954 Laboratory services 1,414 911 Subscriptions 1,361 1,470 Valuations 1,484 1,266

Legal fees and insurance claims 1,825 4,200

Impairment write down of assets to recoverable amount

4.2 & 4.3 1,005 7,129

Bad and doubtful debts 5.1.2 4,500 3,974

Write-off / disposal / surrender of assets 4.2 & 4.3 1,818 1,035

Land swap associated with assets held for sale

Initial recognitionexpense from derivative financial instruments

4.5 3,322

5.2 & 7.4 612

Other expenses 7,278 7,588

Total 58,680 61,812

Notes to the financial statements for the year ended 30 June 2022

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.

Information technology costs

Information technology costs include licences, maintenance agreements related to IT and telecommunication costs. In 2022, we reallocated maintenance agreements associated with IT expenditure previously included under contract expenses to this expenditure line, comparatives have been adjusted to align. Refer note 1.2 for changes in treatment related to Software-as-a-Service.

Derivative financial instruments

This relates to our investment in Zero Emissions Water Limited (ZEW). Refer to 5.2 for further details on the arrangement between us and ZEW. We pay or receive the difference between the floating electricity price and the fixed price set under the agreement for the units of energy supplied into the National Electricity Market by the solar farm. The future settlements of Contract for Difference (CfD) are classified as derivative financial instruments.

We have initially recognised the CfD derivative financial instrument at fair value based on the best available information. The initial recognition expense represents the fair value of the expected future settlements at the initial recognition which resulted in a liability position. At June each year we revalue the derivative to reflect the fair value of further settlements. The derivative is an asset at 30 June 2022 and the gain recognised in note 2.2.

Refer to note 7.4 for more information about the judgements and assumptions used in measuring fair value determination of derivative financial instruments.

Other expenses

This includes legal costs, insurance claims, materials, transport and other expenses.

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 those dealing with COVID-19 impacts, refer note 1.3. This leave covers staff should they contract COVID-19, be caring for family who have contracted COVID-19 or who are required to take on additional caring commitments during this time.

Directly attributable costs for bringing an asset to the location and condition necessary for operation (such as costs of employee benefits arising directly from the construction or acquisition of the item of infrastructure, property, plant and equipment) are capitalised.

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

Liabilities for wages and salaries (including nonmonetary 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.

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

The present value is impacted by historical trends of employees taking leave after seven years of service, wage inflation estimates and discount rates. There has been greater volatility in these rates as a result of COVID-19, note 1.3.

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.

Employee benefits 2022 $’000 2021 $’000

Current liabilities - provisions

Annual leave

Unconditional and expected to settle within 12 months 2,127 2,292

Unconditional and expected to settle after 12 months 5,171 5,025

Long service leave

Unconditional and expected to settle within 12 months 518 304

Unconditional and expected to settle after 12 months 11,073 11,961

Provision for on-costs

Unconditional and expected to settle within 12 months 407 370

Unconditional and expected to settle after 12 months 2,827 2,551

Total 22,123 22,503

Non-current liabilities - provisions

Employee benefits - long service leave 2,155 2,497

On-costs 393 380

Total 2,548 2,877

Reconciliation of movement in on-cost provision

Opening balance at 1 July 3,301 2,930

Additional provision 1,031 982

Amounts utilised during year (1,017) (712)

Effect of changes in discount rate and remeasurement 312 101

Carrying amount at 30 June 3,627 3,301

Reconciliation of on-cost provision relates to the sum of current $3,234,000 (2021: $2,921,000) and non-current $393,000 (2021: $380,000) on-costs.

Notes to the financial statements for the year ended 30 June 2022

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

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.

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) legislation 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.

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:

• 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

• 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 than assumed, 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 Equisuper 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.

c. Reconciliation of assets and obligations

Fair value of plan assets $’000

Defined benefit obligation $’000

Net defined benefit asset $’000

Opening balance at 1 July 2020 32,107 (27,578) 4,529

Current service cost (788) (788)

Interest income / (expense) 243 (212) 31

Actuarial return on plan assets less interest income 2,836 2,836

Contributions by plan participants 195 (195)

Actuarial gains arising from changes in financial assumptions 3,476 3,476

Actuarial gains arising from liability experience 1,464 1,464

Benefits paid (1,337) 1,337

Taxes, premiums and expenses paid (75) 75

Closing balance at 30 June 2021 33,969 (22,421) 11,548

Current service cost (492) (492)

Interest income / (expense) 451 (313) 138

Actuarial return on plan assets less interest income (1,279) (1,279)

Contributions by plan participants 172 (172)

Actuarial gains arising from changes in financial assumptions 3,277 3,277 Actuarial losses arising from liability experience (1,174) (1,174)

Benefits paid (3,516) 3,516

Taxes, premiums and expenses paid (216) 216

Closing balance at 30 June 2022 29,581 (17,563) 12,018

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 $354,000 (2021: $757,000).

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 2022

Investment funds are measured using significant observable inputs – Level 2.

e. Plan assets

2022 % 2021 %

Australian equity 16 16

International equity 19 17

Fixed income 10 14

Property 7 7

Growth alternatives 20 10 Defensive alternatives 20 14

Cash 8 22

Total 100 100

Asset allocation as at 30 June 2022 is currently unavailable. Asset allocation at 31 May 2022 has been used.

Notes to the financial statements for the year ended 30 June 2022

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 cost Defined benefit obligation

2022 2021 2022 2021

Discount rate 1.40% 0.80% 4.40% 1.40%

Expected salary increase rate 2.95% 4.25% 3.85% 2.95%

Expected pension increase rate 2.00% 2.00% 2.50% 2.00%

The expected salary increase is impacted by market variables, including COVID-19, refer note 1.3, which has resulted in greater volatility in these rates in recent times. Market variables include changes to government policies, unemployment rates, inflation levels, changes in business productivity, and business and consumer confidence.

h. Sensitivity analysis

The defined benefit obligation as at 30 June 2022 under several scenarios is presented below. Base case

Discount rate - per annum 4.40% 3.90% 4.90% Salary increase rate - per annum 3.85%

Defined benefit obligation ($’000) 1 17,563 18,245 16,916 16,997 18,149

1 Includes contribution tax provision.

The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions.

In 2022 we transitioned our discount rates from government bond rates to high quality corporate bond rates as it was determined a deep market existed. In accordance with AASB 119 Employee Benefits, where high quality bond rates are available and are supported by a deep market, they should be used to discount post-employment obligations. The use of corporate bond rates has resulted in a lower defined benefit obligation at 30 June 2022, $17.6m compared to a government bond defined benefit obligation of $19.1m.

No asset and liability matching strategies have been adopted by the plan.

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 105 per cent.

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.

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.

In the most recent review of the financial position as at 31 December 2021, 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 2022. This review will occur post 30 June once the required information becomes available.

We continue to contribute salary sacrifice contributions and at the required rates for accumulation members.

j. Expected contributions

Employer contributions for the financial year ending 30 June 2022 are expected to be nil.

k. Maturity profile of defined benefit obligations

The weighted average duration of the defined benefit obligation as at 30 June 2022 is seven years (2021: eight years).

$’000

30 June 2023 1,655 29 June 2024 1,929

29 June 2025 1,997

30 June 2026 1,903

30 June 2027 1,986

Following five years 10,438

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.

2022 $’000 2021 $’000

Not later than one year 76 78

Later than one year and not later than five years 82 89

Greater than five years 420 430

Total (GST inclusive) 578 597

Contractual commitments are disclosed in note 4.6 and environmental contributions in note 8.2.

3.4 Remuneration of auditors

2022 $’000 2021 $’000

Financial statements - Victorian Auditor-General’s Office 223 185

Internal audit - Pitcher Partners 278 250

Total 501 435

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

Notes

to the financial statements for the year ended 30 June 2022

4 Key assets available to support output delivery

Introduction

We control infrastructure and other assets that are used to fulfill our objectives and carry out our activities. They represent the key resources that have been entrusted to us to be utilised for delivery of those outputs.

Structure

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 Non-financial physical assets classified as held for sale

4.6 Contractual commitments payable

4.1 Total infrastructure, property, plant and equipment: carrying amount

Gross carrying amount Accumulated depreciation Net carrying amount 2022 $’000 2021 $’000 2022 $’000 2021 $’000 2022 $’000 2021 $’000

At fair value

Infrastructure 4,536,230 4,282,800 4,536,230 4,282,800 Land 638,591 544,236 638,591 544,236 Buildings 33,757 33,553 (1,602) 32,155 33,553

Plant and equipment 56,647 49,941 (28,446) (25,280) 28,201 24,661

Leasehold improvements 63 63 (7) (4) 56 59 Right of use asset 54 17 (21) (3) 33 14

At cost

Capital works in progress 225,591 326,988 225,591 326,988 Total 5,490,933 5,237,598 (30,076) (25,287) 5,460,857 5,212,311

4.2 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment

Infrastructure $’000 Land $’000 Buildings $’000

Plant and equipment $’000

Right of use assets $’000

Leasehold improvements $’000

Capital works in progress $’000 Total $’000

Balance at 1 July 2020 4,245,100 424,344 35,392 29,680 19 63 246,013 4,980,611

Additions 2 369,909 369,909 Transfers 1 271,894 (6,208) 471 655 (284,551) (17,739)

Write-off / disposal of assets (632) (403) (1,035)

Depreciation (90,344) (1,565) (5,271) (5) (4) (97,189)

Impairment (write-down) / write-back of assets to recoverable amount

Revaluation increase / (decrease) recognised in equity

2,322 (1,042) (4,383) (3,103)

(143,218) 123,778 297 (19,143)

Carrying amount at 30 June 2021 4,282,800 544,236 33,553 24,661 14 59 326,988 5,212,311

Additions 2 315,207 315,207 Transfers 403,664 1,912 204 10,329 37 (416,146)

Write-off / disposal of assets (424) (1,310) (1,734)

Depreciation (90,130) (1,602) (5,479) (18) (3) (97,232)

Impairment (write-down) / write-back of assets to recoverable amount

Revaluation increase / (decrease) recognised in equity

1,676 (458) 1,218

(59,680) 90,767 31,087

Carrying amount at 30 June 2022 4,536,230 638,591 32,155 28,201 33 56 225,591 5,460,857

1 Refer note 4.5 for transfer of land to asset held for sale.

2 Additions include transfers from work in progress in note 4.3.

Initial recognition

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. We have a capitalisation threshold of greater than

Notes to the financial statements for the year

ended 30 June 2022

$100 exclusive of GST and the asset must be used for more than one reporting period.

Subsequent measurement

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.

Revaluations

In accordance with FRD 103 Non-Financial Physical Assets, 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. Scheduled valuations occurred in June 2021 for land and buildings, refer note 7.4.1. Infrastructure assets are measured at fair value every year.

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.

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.

Depreciation

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, used for each class of depreciable assets, are:

Class of fixed asset Useful life

Buildings 5 to 100 years

Infrastructure assets:

• Water meters

• Odour control facilities

• Water tanks, reservoirs and sewer treatment plants

• Pumping and pressure reducing stations and flow control facilities

• Water and sewer mains

• Other (including small assets within infrastructure assets above)

Plant and equipment

10 to 15 years 10 to 30 years 3 to 100 years 10 to 100 years 100 years 1 to 100 years

2 to 25 years

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.

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 2022.

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.

4.3 Intangible assets

Other than the impairment write-downs already recognised within this note in the financial statements, there are no other material indicators of impairment at the time these financial statements were authorised for issue.

Water entitlements $’000 Software $’000 LGCs $’000

Software works in progress $’000 Total $’000

Balance at 1 July 2020 96,917 51,628 18,218 166,763

Additions1 38,453 38,453

Transfers 9,361 39 (9,400)

Amortisation expense (19,129) (19,129)

Carrying amount at 30 June 2021 96,917 41,860 39 47,271 186,087

Change in accounting policy2 (1,101) (1,101)

Additions1 12,847 12,847

Transfers 13,876 45 (13,921)

Surrender of assets (84) (84)

Write-off / disposal of assets (547) (547)

Amortisation expense (17,898) (17,898)

Carrying amount at 30 June 2022 96,917 37,838 44,549 179,304

1 Additions include transfers to work in progress in note 4.2

2 Refer note 1.2 for changes in accounting policy

Water entitlements

We contributed $100m 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 on an ongoing basis. Stage 1 was completed in October 2020.

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, Greater Western Water and Westernport Water) made contributions of $9.3m to the retailers, with our share being $3.1m. The investment has therefore been recognised at its net value ($100m less $3.1m).

Bulk entitlements are issued by the Minister for Water and registered in the Victorian Water Register. Yarra Valley Water has an existing bulk entitlement for the water savings realised from the Connections Project.

In February 2022 the Minister for Water announced that all water committed through the Connections Project for irrigators, the environment and Melbourne retail water corporations - can now be delivered - with

Traditional Owners/Custodians also to benefit. The Minister has issued water entitlements in the form of new bulk entitlements and was published in the Victorian Government Gazette G25 dated 23 June 2022 and come into effect on 1 July 2022. From the 2023 financial year, the new bulk entitlements set out Yarra Valley Water’s share of water savings, being 30.5GL made up of a mix of high reliability (19.3GL) and low reliability (11.2GL) entitlements from trading zones 1A Goulburn, 1B Goulburn, 6 Murray and 7 Murray. Yarra Valley Water intends to hold these water shares for water supply security purposes.

Amendment orders have been made to include a sunset date for the existing bulk entitlements of 20 June 2023. The new bulk entitlements are issued as a result of the agreement for participating in the Connections Project and as such the existing entitlements will be revoked, and the value (cost paid to participate in Connections Project less any disposals) will be transferred to the new bulk entitlements.

The new bulk entitlements will continue to be recognised as an intangible asset and measured at cost. The bulk entitlements have an indefinite useful life and will be tested for impairment annually.

Notes to the

Software

financial

statements for the year ended 30 June 2022

Costs incurred for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised as intangible software assets.

Software as-a-Service (SaaS) arrangements are service contracts providing us the right to access the cloud provider’s application software over the contract period. As such we do not receive a software intangible asset at the contract commencement date. A right to receive future access to the supplier’s software does not, at the contract commencement date, give the customer the power to obtain the future economic benefits flowing from the software itself and to restrict others’ access to those benefits. Please refer to note 1.2 for SaaS accounting policy change.

We have made the following key judgements that may have the most significant effect on the amounts recognised in the financial statements:

• Determination of whether configuration and customisation services are distinct from the SaaS access

Implementation costs including costs to configure or customise the cloud provider’s application software are recognised as operating expenses when the services are received.

Where the SaaS arrangement supplier provides both configuration and customisation services, judgement has been applied to determine whether each of these services are distinct or not from the underlying use of the SaaS application software. Distinct configuration and customisation costs are expensed as incurred as the software is configured or customised (i.e. upfront). Non-distinct configuration and customisation costs are expensed over the SaaS contract term.

Non-distinct customisation activities significantly enhance or modify a SaaS cloud-based application. Judgement has been applied in determining whether the degree of customisation and modification of the SaaS cloud-based application is significant or not.

Configuration and customisation activities undertaken in implementing SaaS arrangements which are considered not to be distinct from the access to the SaaS application software over the contract term are recognised as prepayments and recognised over the contract term.

• Capitalisation of configuration and customisation costs in SaaS arrangements

In implementing SaaS arrangements, we have developed software code that either enhances, modifies or creates additional capability to the existing owned software. This software is used to connect with the SaaS arrangement cloud-based application. Judgement has been applied in determining whether the changes to the owned software meets the definition of and recognition criteria for an intangible asset in accordance with AASB 138 Intangible Assets

Intangible assets acquired are initially recognised at cost.

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

• The ability to use or sell the intangible asset

• How the intangible asset will generate probable future economic benefits

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

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

Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to us.

Large-scale generation certificates (LGCs)

Large-scale generation certificates (LGCs) are megawatt hours (MWh) of net electricity generated by a renewable energy generation system. We generate LGCs from our ReWaste facility at Wollert and solar carpark and we purchase LGCs at a set price under the arrangement with Zero Emissions Water (ZEW), refer note 5.2. LGCs are recognised as intangible assets at cost as per FRD 109, and will not be subject to amortisation, as they have an indefinite life. LGCs can be surrendered to meet our energy targets. We use our LGCs in two ways:

• Mandatory use of renewable energy under the Large-scale Renewable Energy Target

• Voluntary surrender of LGCs to meet emissions reduction targets

Amortisation

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 annually, 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

LGCs and water entitlements indefinite

Impairment

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.

4.4 Net gain/loss on disposal of noncurrent physical assets

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.

2022 $’000 2021 $’000

to sell, as their carrying amount will be recovered principally through a sale transaction, rather than through continuing use. To be classified as being held for sale, we must consider that the sale is highly probable, that the asset is available for immediate sale in its present condition and the sale is expected to be completed within 12 months from the date of classification as an asset held for sale. Assets are not depreciated or amortised while they are classified as held for sale. Assets classified as held for sale are classified as current assets.

At 30 June 2021 we had a parcel of land in Ivanhoe that we no longer required for our operational needs that was assessed as meeting the criteria of being an asset held for sale. The land was revalued as part of the ValuerGeneral Victoria formal valuation, refer note 7.4 at 30 June 2021 before being transferred to this category.

In 2021-22, agreement was reached with Development Victoria to purchase the land at Ivanhoe subject to approval from our Board and the Victorian Government Land Monitor and a land swap with Banyule City Council. These approvals were obtained, and the land swap was completed. Settlement of the sale with Development Victoria occurred in July 2022, impacting the 2023 financial year. The land swap with Banyule City Council has impacted our financial statements in the 2022 financial year by decreasing the net assets within our Balance Sheet and creating an expense associated with the land swap which has been recognised in the Statement of Comprehensive Income amounting to $3.3m, refer note 3.1.

This overall transaction will result in a positive community outcome including larger parkland in a better location for local residents, to be developed in the future and at least 10 per cent community housing being incorporated in future development.

4.6 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:

Gain / (Loss) on sale of infrastructure, property, plant and equipment

(2,991) 53

Total (2,991) 53

4.5 Non-financial physical assets classified as held for sale

Assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs

2022 $’000 2021 $’000

Not later than one year 209,796 216,823

Later than one year and not later than five years 321,049 191,380

Greater than five years 48

Total (GST inclusive) 530,893 408,203

Notes to the financial statements for the year ended 30 June 2022

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 financial assets and liabilities

5.3 Other non-financial assets

5.4 Payables

5.4.1 Ageing analysis of contractual payables

5.5 Contract liabilities

5.6 Other provisions

5.7 Leases

5.1 Receivables

Note 2022 $’000 2021 $’000

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 expected credit losses.

Bad debts are written off when determined uncollectable, in accordance with delegation authorities.

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.

Contractual receivables

Trade receivables - debtors 106,392 82,274

Contract assetsaccrued revenue 2.1 68,394 80,732

Other receivables 5,549 5,187

Less: allowance for expected credit losses

Statutory receivables

5.1.2 (9,657) (8,417)

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 credit losses) but are not classified as financial instruments because they do not arise from a contract.

GST receivables 3,132 4,013

Fringe benefits tax receivables 42 34

Total 173,852 163,823

5.1.1 Ageing analysis and impairment of contractual receivables

2022

Not Aged $’000

1 to 21 days 1 $’000

22 to 60 days $’000

61 to 90 days $’000

91 to 180 days $’000

Over 180 days $’000 Total $’000

Expected credit loss rate 2.83% 5.03% 11.67% 25.65% 31.61%

Trade debtors

Not past due 58,558 58,558

Past due 21,875 4,447 6,990 14,522 47,834

Allowance for expected credit losses (1,655) (1,100) (519) (1,793) (4,590) (9,657)

Net trade receivables - debtors 56,903 20,775 3,928 5,197 9,932 96,735

Accrued revenue 68,394 68,394 Other receivables 8,723 8,723

Total receivables 77,117 56,903 20,775 3,928 5,197 9,932 173,852

1 The 1 to 21 days category includes customers who have renegotiated arrangements and payment terms as a consequence of needing extra support.

2021 Not Aged $’000

1 to 21 days 1 $’000

22 to 60 days $’000

61 to 90 days $’000

91 to 180 days $’000

Over 180 days $’000 Total $’000

Expected credit loss rate 2.87% 5.24% 9.32% 24.75% 31.75%

Trade debtors

Not past due 37,396 37,396 Past due 20,500 4,356 7,068 12,954 44,878

Allowance for expected credit losses (1,074) (1,075) (406) (1,749) (4,113) (8,417)

Net trade receivables - debtors 36,322 19,425 3,950 5,319 8,841 73,857

Accrued revenue 80,732 80,732 Other receivables 9,234 9,234

Total receivables 89,966 36,322 19,425 3,950 5,319 8,841 163,823

1 The 1 to 21 days category includes customers who have renegotiated arrangements and payment terms as a consequence of needing extra support.

All contractual receivables are recognised at the amount’s 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.

Notes to the financial statements for the year ended 30 June 2022

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 expected credit losses and forward looking estimates.

When estimating the expected credit loss we incorporate assumptions which consider:

• Specific management actions that changed the way we responded to overdue accounts

• Our observations of customer behaviours including taking longer to pay

• Inflated asset prices in equity and property markets

• Low unemployment

• Significant increases in the official cash rate

• Inflation rates

The volatility brought about by COVID-19 and our amended collection practices is likely to continue and could have a material impact on our expected credit allowance in subsequent years.

Credit risk is disclosed in note 7.2.

Note 2022 $’000 2021 $’000

collaboratively promote energy and emission reduction initiatives in Victoria and to reduce emissions.

On 30 October 2018, a Members’ Agreement was entered into between the water corporations and ZEW in order 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 directors.

On 30 October 2018, ZEW entered into an 11-year Power Purchasing Agreement (PPA) with a solar farm energy generator, whereby 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 large-scale generation certificates (LGCs) from the facility.

Under the Members’ Agreement, Yarra Valley Water’s liability as a member is limited to $10 in the event of a winding up. As required by Australian accounting standards, Yarra Valley Water has assessed the nature of its relationship with ZEW, and has concluded that it does not have control, joint control or significant influence over ZEW. Yarra Valley Water will account for its investment in ZEW as a financial instrument within the scope of AASB 9 Financial Instruments. ZEW is a related party of Yarra Valley Water.

Opening balance

1 July (8,417) (7,275)

Write offs recognised as an expense 9.7 3,260 2,832

Net provision movements including bad debts recovered

(4,500) (3,974)

The Members’ Agreement specifies that ZEW may call on us to make a loan available to ZEW amounting to $124,726.37. 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 2022, ZEW had requested and received a loan payment of $11,000. As this loan is concessional it has been treated as an investment in ZEW and measured at cost.

Closing balance

30 June (9,657) (8,417)

5.2 Other financial assets and liabilities

Yarra Valley Water is one of 12 water corporation members of Zero Emissions Water Limited (ZEW), a public company limited by guarantee. ZEW’s substantial objective is 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

The solar farm energy generator experienced a construction delay due to the redesign of electrical infrastructure and a connection delay relating to generator restrictions and revised connection procedures advised by the Australian Electricity Market Operator (AEMO). In 2020-21, along with the settlement funds, Yarra Valley Water was also able to purchase 1,674 replacement LGCs at the PPA price which have been recognised as intangible assets, refer note 4.3.

On 22 January 2021, the conditions precedent in the PPA was completed and the CfD derivative was recognised as a financial liability measured at its fair value. Subsequent changes in the derivative’s fair value have been recognised in profit and loss, refer note 2.2. Refer to note 7.4 for more information about the

judgements and assumptions used in measuring fair value determination of derivative financial instruments.

Yarra Valley Water now has an obligation to purchase its percentage of energy allocation under the Members’ Agreement, via the CfD derivative. The financial impact of the Members’ Agreement with ZEW has resulted in increased revenue and expenses, and the recognition of a derivative financial instrument and LGCs as intangible assets.

2022 $’000 2021 $’000

Investment in ZEW (asset) 11 11

Derivative financial instrument (asset/(liability)) 560 (586)

5.3 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 subscriptions and maintenance agreements, SaaS arrangements (refer notes 4.3 and 1.2) and various other subscriptions. Where assets last beyond 12 months they have been treated as noncurrent.

5.4 Payables

2022 $’000 2021 $’000

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 between 14 to 30 days from the date the invoice is received.

Payables consist

of:

• Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost.

Trade payables and accruals 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.

Security deposits predominately relate to capital works

• 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.

Current

Contractual payables

Trade payables 18,615 23,761 Accruals 75,300 83,321

Security deposits 1,115 1,661

Total current 95,030 108,743

Non-current

Security deposits 6,690 6,715

Total non-current 6,690 6,715

Total 101,720 115,458

Notes to the financial statements for the year ended 30 June

2022

5.4.1 Ageing analysis of contractual payables

2022

Not Aged $’000

Less than 1 month $’000

1 to 3 months $’000

3 to 12 months $’000

Over 12 months $’000 Total $’000

Trade payables 18,463 152 18,615 Accruals 75,300 75,300 Other payables 1,115 6,690 7,805 Total 76,415 18,463 152 6,690 101,720 2021

Trade payables 23,761 23,761 Accruals 83,321 83,321 Other payables 1,661 6,715 8,376 Total 84,982 23,761 6,715 115,458

5.5 Contract liabilities

Current Note 2022 $’000 2021 $’000

Grant income 3,262 2,918

Customers paid in advance 2.1 21,306 20,399

Unearned DCA, NCC, recoverable works and licence income 2.1 & 2.2 45,228 36,362

Developer contributions 475 735

Total current 70,271 60,414

Non-current

Developer contributions 225 Total non-current 225 -

Total 70,496 60,414 2022 $’000 2021 $’000

Balance at 1 July 60,414 58,883

Revenue recognised during the reporting period (44,033) (49,525)

Increase in contract liabilities 54,115 51,056

Closing balance at 30 June 70,496 60,414

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 deferred income until earned. 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 notes 2.1 and 2.2.

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.

5.6 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. The recognition of provisions requires significant estimates and assumptions such as requirements of the relevant legal and regulatory frameworks, timing, cost estimation, legal disputes and climate related risks. These uncertainties may result in future actual expenditure differing from the amounts currently provided. Provisions are periodically reviewed and updated based on the facts and circumstances available at the time. 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.

Our provisions are predominately related to compulsory land and easement purchases.

5.7 Leases

Yarra Valley Water has a small number of concessionary leases with other government departments. These leases enable us to access an asset at less than its fair value principally to enable us to further our objectives. We measure right-of-use assets from concessionary leases at cost.

We have leased carparking for a term of five years with ability to enter hold over. We anticipate this lease will extend beyond the five-year term. We make an annual contribution of less than $2,000 per annum for this space. There are restrictions on the area’s use due the water assets that sit below the surface. Use of the carpark is restricted to Yarra Valley Water. We also have a lease for a sewer flow control facility within government parkland. This lease runs for 21 years (expiring in 2027), and the annual payments are nil unless demanded at a rate of $1 per annum.

In 2022 we leased space as part of a capital project with a non-government entity, at market rental. The lease is due to expire in June 2023.

The value of right-of-use-assets is measured at cost which is determined as follows:

• The amount of the initial measurement of lease liability

• Any lease payments made at or before the commencement date, less any lease incentives received

• Any initial direct costs

• Restoration costs

The lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease if that rate is readily determinable or our incremental borrowing rate.

Right-of-use-assets are depreciated over the estimated lease term, which is determined by considering all the facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment.

Notes to the financial statements for the year ended 30 June 2022

6 Financing our operations

Introduction

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).

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

Financing arrangements are impacted by market activities, with impacts in our cost of debt and the level of borrowing we need, refer note 7.2.

6.1

Interest bearing liabilities

Structure

6.1 Interest bearing liabilities

6.1.1 Maturities of financial liabilities

6.1.2 Finance costs

6.2 Cash flow information and balances

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

Carrying amount Net fair value 2022 $’000 2021 $’000 2022 $’000 2021 $’000

Current

Borrowings

394,728 342,900 398,703 348,156

Lease liabilities 23 2 23 2

Total current 394,751 342,902 398,726 348,158

Non-current

Borrowings 2,973,000 2,794,100 2,815,153 3,044,809

Lease liabilities 10 12 10 12

Total non-current 2,973,010 2,794,112 2,815,163 3,044,821

Total 3,367,761 3,137,014 3,213,889 3,392,979

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.

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 %

2022 Borrowings

Less than 12 months $’000

1 to 3 years $’000

3 to 5 years $’000

Over 5 years $’000 Total $’000

Fixed interest rate 2.93 304,100 650,000 660,000 1,653,000 3,267,100

Floating interest rate 1.02 90,628 10,000 100,628

Total 394,728 660,000 660,000 1,653,000 3,367,728

2021 Borrowings

Fixed interest rate 3.01 214,100 604,100 620,000 1,550,000 2,988,200

Floating interest rate 0.27 128,800 20,000 148,800

Total 342,900 624,100 620,000 1,550,000 3,137,000

Less than 12 months $’000 1 to 3 years $’000 3 to 5 years $’000 Over 5 years $’000 Total $’000

2022 lease liabilities 23 3 3 4 33

2021 lease liabilities 2 3 4 5 14

6.1.2 Finance costs

2022 $’000 2021 $’000

Interest on borrowings 92,056 90,998

Financial accommodation levy 40,821 39,281

Other interest income (15)

Total 132,877 130,264

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.

Notes to the

financial

statements for the year ended 30 June 2022

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.

2022 $’000 2021 $’000

Cash at bank 4,089 2,365

Cash on hand 1 1

Total 4,090 2,366

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

Note 2022 $’000 2021 $’000

Net profit after tax 78,246 94,114

Adjustments for non-cash items

Depreciation / amortisation 4.2 & 4.3 115,130 116,318

Bad debts and expected credit allowance 5.1.2 4,500 3,974

Write-off of assets 4.2 & 4.3 457 632

Defined benefit superannuation plan expense 3.2.3.2 354 757

Net loss on land swap 4.4 & 4.5 3,322

Net gain on disposal of non-current physical assets 4.4 (148) (53)

Impairment write-back 2.2 (1,990) (4,026)

Impairment write-down 3.1 1,005 7,129

Developer contributed assets and other authority works 2.1 (48,239) (69,809)

Initial recognition of derivative financial instrument 3.1 & 5.2 612

Fair value adjustment of derivative financial instrument 2.2 & 5.2 (1,120)

Initial recognition of lease liability 5.7 37

Change in accounting policy 1.2 (1,101)

Changes in operating assets and liabilities

Increase in other current assets (1,195) (1,746)

Decrease in GST receivables 881 350

Increase in trade receivables (15,410) (8,372)

Decrease in accrued interest (249) (799)

Increase / (decrease) in provisions (3,542) 3,925

Increase in contract liabilities 10,082 1,531

Decrease in derivative financial instruments (26) (26)

Decrease in net deferred tax liabilities (987) (28,290)

Increase / (decrease) in payables (20,210) 22,389

Net cash inflow from operating activities 119,797 138,610

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.

Structure

7.1 Financial instrument specific disclosures

7.2 Financial risk management objectives and policies

7.3 Contingent assets and liabilities

7.4 Fair value

7.4.1 Fair value – Determination of non-financial physical assets

7.4.2 Fair value – Financial assets and liabilities

7.4.3 Fair Value – Reconciliation of changes in level 3 items

7.4.4 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

Financial assets at amortised cost

Financial assets at amortised cost are assets with fixed and determinable payments that are not quoted on an active market. These assets 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.

We recognise the following as financial assets at amortised cost:

• Cash and deposits – refer note 6.2

• Receivables (excluding statutory receivables) – refer note 5.1

• Investment in Zero Emissions Water (ZEW) – refer note 5.2

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 recognise the following as financial liabilities at amortised cost:

• Payables (excluding statutory payables) – refer note 5.4

• Contract liabilities – refer not 5.5

• Lease liabilities – refer note 5.7

• Borrowings – refer note 6.1

Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities measured at fair value through profit or loss are categorised at fair value through profit or loss at trade date, or if they are classified as held for trading or designated as such upon initial recognition.

Derivative financial instruments are classified as held for trading financial assets and liabilities, refer note 5.2. They are initially recognised at fair value on the date on which all contractual obligations under Conditions Precedent are met and on subsequent measurement. The initial expense recognised represents the fair value of the expected future settlements at initial recognition, refer note 3.1.

Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in fair value of derivatives after initial recognition are recognised in the Statement of Comprehensive Income, refer note 2.2.

Notes to the financial statements for the year ended 30 June 2022

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 operations can be funded 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

These external capital requirements are incorporated into the management of capital through the Board approved Corporate Plan.

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 2022 and 30 June 2021 were as follows: 2022 $’000 2021 $’000

Borrowings - current 394,728 342,900

Borrowings - non-current 2,973,000 2,794,100

Total borrowings 3,367,728 3,137,000

Leases - current 23 2

Leases - non-current 10 12

Total leases 33 14

Total borrowings and leases 3,367,761 3,137,014

Total assets 5,856,273 5,600,091

Gearing ratio 58% 56%

Climate-related risk

Climate change is a risk to Yarra Valley Water. Climate change risk includes the physical risk which can cause direct damage to assets or property as a result of rising global temperatures as well as transition risks which arise from the transition to the low-carbon economy.

The impacts of climate change create resilience challenges for our services and within the communities we serve. Extreme weather events, rising sea levels, reduced rainfall and increasing temperatures are already affecting our infrastructure, natural environment and water supplies. We expect these changes to continue, and therefore we are taking action now to ensure we are prepared for the future. We have considered the impact of climate-related risks in the preparation of the 2021-22 financial statements, in particular the impact on our infrastructure assets.

We have recently refreshed our Climate Resilience Plan, which will be available on our website, that identified 35 actions in 9 focus areas. These actions address adaptation to climate change e.g. through better understanding of climate change risks, emergency management and also actions that enhance community and environment resilience to climate change. The plan also includes actions to mitigate climate change through our work to go beyond zero carbon. Reducing our carbon footprint will also enhance our resilience to transition risks, as we are transitioning to the low-carbon economy.

Financial risks

The main risks we’re exposed to through financial instruments are interest rate risk, liquidity risk, price risk and credit risk. These risks have been impacted by COVID-19, refer note 1.3. The Board reviews and approves policies for managing these 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 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 underlying 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 Treasury Corporation of Victoria (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 2022 $’000 2021 $’000

+ 50 basis points (981)

- 50 basis points 981

+ 100 basis points (817)

100 basis points 817

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. The new approved accommodation borrowing limit of $261.9m relates to the period ended 30 June 2022.

Financing arrangements

We had access to a total of $133.37m (2021: $304.56m) of unused borrowings approved by the Treasurer of Victoria as at 30 June 2022.

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 5.1.2. While 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 the impact of COVID-19, refer note 1.3, on our customers. Our changed collection practices due to COVID-19 have increased our level of credit risk.

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.

Our other credit risk arises from in-the-money receipts due from the Contract for Difference derivative under the Zero Emissions Water Power Purchasing Agreement (PPA), refer note 5.2.

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 the expected credit loss allowance. Our maximum exposure to credit risk relating to the derivative financial instrument at reporting date is the sum of the nominal values of all forecasted net cash receipts where the floating price due by the proponent exceeds the fixed price payable by us over the remaining PPA term.

iv. Price risk

We use the Contract for Difference derivative financial instrument to manage energy related commodities purchased in the normal course of business, and therefore entered into the PPA to minimise a portion of our price risk. Our sensitivity to price risk is set out in 7.4.4.

We are exposed to market risks that impact the prices we pay. This risk has increased as a result of COVID-19, refer note 1.3 due to labour shortages, supply chain delays and inflationary pressures. We manage this risk where possible in contract negotiations.

7.3 Contingent assets and liabilities

Contingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within our control.

Contingent liabilities are:

• Possible obligations that arise from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within our control

• Present obligations that arise from past events but are not recognised because:

It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation

The amount of the obligations cannot be measured with sufficient reliability

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.

Notes to the financial statements for the year ended 30 June 2022

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.

2022 $’000 2021 $’000

Water supply assets under construction 23,348 17,003

Water supply assets committed to 15,625 13,162

Sewerage supply assets under construction 56,725 31,091

Sewerage supply assets committed to 14,200 8,350

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.

2022 $’000 2021 $’000

Water supply assets 11,394 7,449

Sewerage supply assets 21,520 15,881

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.

Unquantifiable contingent liabilities

The negotiated sale of land to Development Victoria, refer note 4.5, includes a maximum amount payable to Development Victoria for environmental remediation works. Whether these works are required, or the level of works needed, is difficult to determine until the tank on the site is removed. The tank will be removed by Development Victoria when they commence development of the site. Under the contract,

Development Victoria is responsible for the removal of the tank and advising us whether environmental remediation works are required and, if so, providing a substantiated claim for the costs to remediate the land up to the capped amount.

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 5.6.

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

7.4.1 Fair value – Determination of nonfinancial physical assets

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.

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 4,282,800 4,282,800

Land (specialised) 242,934 242,934

Land (non-specialised) 301,302 301,302

Buildings (market approach) 2,194 2,194

Buildings (depreciated replacement cost) 31,359 31,359

Plant and equipment 24,661 24,661

Right of use assets (concession) 14 14

Leasehold improvements 59 59

Carrying amount at 30 June 2021 303,496 4,581,827 4,885,323

Infrastructure 4,536,230 4,536,230

Land (specialised) 272,345 272,345

Land (non-specialised) 366,246 366,246

Buildings (market approach) 2,104 2,104

Buildings (depreciated replacement cost) 30,051 30,051

Plant and equipment 28,201 28,201

Right of use assets (market) 21 21

Right of use assets (concession) 12 12

Leasehold improvements 56 56

Carrying amount at 30 June 2022 368,371 4,866,895 5,235,266

Infrastructure

The 30 June 2022 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. In 2021-22 the terminal value methodology changed from using the Gordon Growth method to a forecast of regulatory asset base (RAB) at the forecast period end.

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 based on the forecast RAB in the termination

year and an exit RAB multiple that includes the TAB having regard to the level of cash flows and profitability derived at the end of the forecast period, the business' role in the water supply chain and complexity of operations, typical market participant assumptions for opportunities to outperform regulatory benchmarks, and comparable company and transaction multiples over time

• Arrives at an enterprise valuation by discounting the cash flows to the valuation date using the selected high ($6.0 billion) and low ($5.3 billion) WACC estimates and adopts a mid-point ($5.7 billion)

• Deducts non-infrastructure related assets and liabilities to derive the implied water infrastructure asset valuation

The impact of COVID-19, supply chain disruptions, inflationary pressures and the impact of global issues such as the Russia/Ukraine conflict, refer note 1.3, has been considered in the valuation but it should be noted, that there is uncertainty due to these macroeconomic

Notes to the financial statements for the year ended 30 June 2022

and global issues. Uncertainty from climate change can also impact this valuation.

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 2021. 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 comparable land sales allowing for shape, size, topography, location and other relevant factors. The market that the assets were valued in was impacted by the uncertainty caused by COVID-19, refer note 1.3. The value assessed at the valuation date may therefore change over a relatively short period.

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.

At 30 June 2022 the fair value of land was checked against indices provided by the Victorian ValuerGeneral’s Office to determine any material or exceptionally material movements. Whilst it is recognised that COVID-19 has increased the uncertainty around land valuation estimates, we believe the ValuerGeneral’s Office indices continue to provide the most appropriate measure. This review identified a movement greater than 10 per cent but less than 40 per cent, which in accordance with FRD 103 resulted in a revaluation of our land upwards by $92m.

If land was measured at historical cost, the carrying amount would be $85m (2021: $86m).

Buildings – specialised / non-specialised

The most recent valuation of buildings was independently determined by the Victorian ValuerGeneral’s Office using market value or depreciated replacement cost method on 30 June 2021. 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. The market that the assets are valued in was impacted by the uncertainty caused by COVID-19, refer note 1.3. The value assessed at the valuation date may therefore change over a relatively short time period.

To the extent that non-specialised buildings do not contain significant, unobservable adjustments, these assets are classified as level 2 under the market approach.

As at 30 June 2022, buildings were checked against indices provided by the Victorian Valuer-General’s Office to determine any material or exceptionally material movements. Whilst it is recognised that COVID-19 has increased the uncertainty around building valuation estimates, refer note 1.3, we believe the Valuer-General’s Office indices continue to provide the most appropriate measure. In accordance with FRD 103 no revaluation of our buildings was required.

If buildings were measured at historical cost, the carrying amount would be $41m (2021: $41m).

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 2022 no material movements have occurred other than as disclosed in note 4.2.

7.4.2 Fair value – Financial assets and liabilities

The fair value of derivative instruments, refer note 5.2, is based on the discounted cash flow technique. The selection of variables requires significant judgement and assumptions in estimating the fair value of derivatives. In the absence of an active market, the fair value of our Contract of Difference derivative is valued using unobservable inputs such as future wholesale electricity prices provided by the Department of Environment, Land, Water and Planning’s independent advisor and comparable risk free rates of zero coupon government bonds obtained from the Reserve Bank of Australia. The assumptions underpinning the estimate of future wholesale electricity prices included factors influencing supply and demand fluctuations, and the economic impact of COVID-19, refer note 1.3. In addition, assumptions are applied to forecast the renewable energy generation volumes over the life of the derivative instrument. To the extent that the significant inputs are unobservable, we have categorised these derivatives as level 3 within the fair value hierarchy.

7.4.3 Fair Value – Reconciliation of changes in level 3 items

Infrastructure, property, plant & equipment assets

Infrastructure $’000

Land (specialised) $’000 Buildings $’000

Plant and equipment $’000

Right of Use $’000

Leasehold improvements $’000 Total $’000

Balance at 1 July 2020 4,245,100 243,242 33,108 29,680 19 63 4,551,212

Acquisitions / transfers 271,894 (66,227) 471 655 206,793

Write-off / disposal of assets (632) (403) (1,035)

Depreciation (90,344) (1,447) (5,271) (5) (4) (97,071)

Impairment write-back of assets to recoverable amount

Revaluation gain/ (loss) recognised in other comprehensive income

180 (1,042) (862)

(143,218) 65,739 269 (77,210)

Carrying amount at 30 June 2021 4,282,800 242,934 31,359 24,661 14 59 4,581,827

Acquisitions / transfers 403,664 197 10,329 414,190

Write-off / disposal of assets (424) (1,310) (1,734)

Depreciation (90,130) (1,505) (5,479) (2) (3) (97,119)

Impairment write-back of assets to recoverable amount

Revaluation gain / (loss) recognised in other comprehensive income

Carrying amount at 30 June 2022

121 121

(59,680) 29,290 (30,390)

4,536,230 272,345 30,051 28,201 12 56 4,866,895

Derivative assets / (liabilities)

2022 $’000 2021 $’000

Balance at 1 July (586)

Initial recognition of derivative financial instruments (612)

Net cash settlements paid 26 26

Gain on fair value of derivative financial instruments 1,120

Carrying amount at 30 June 560 (586)

Notes to the financial statements for the year ended 30 June 2022

7.4.4

Fair Value – Valuation techniques and significant unobservable inputs in level 3 items

Valuation technique Significant unobservable inputs Range (average)

Land (specialised) Market approach Community service obligation (CSO) adjustment

Infrastructure Income approach using a discounted cash flow model

Weighted average cost of capital (WACC)

10% to 60% (21%) $100 to $28,987,000 ($449,402)

Sensitivity of the input to fair value

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

5.2% to 5.6% (5.4%)

If the WACC had changed by +/- 0.25% from the year end valuation, the impact to the valuation would have been a decrease of $111.5m and an increase by $171.7m

Terminal value exit RAB multiple (inclusive of inflation)

1.15x to 1.25x (1.20x)

If the terminal value exit rate RAB had changed by +/- 0.05x from the year end valuation, the impact to the valuation would have been an increase by $270.9m and a decrease of $270.8m

Original useful life 1 to 100 years (59 years)

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

Plant and equipment Depreciated cost (deemed fair value)

Original useful life 2 to 25 years (5 years)

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

Cost per unit $100 to $2,126,843 ($11,131)

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

Buildings Depreciated replacement cost approach

Cost per square metre

$110 to $4,875 ($4,104)

Useful life (remaining) 5 to 31 years (26 years)

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

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

Financial derivative instruments

Valuation technique Significant unobservable inputs Range (average)

Discounted cash flow method

Wholesale electricity price forecasts

$34.05 to $130.95 / MWh ($60.32)

Discount rate - risk free rates of zero coupon government bonds

Credit value adjustment - Australian Corporate Bond Spreads and Yields

2.3793%3.6425% (3.2766%)

Sensitivity of the input to fair value

An increase/ (decrease) in the whole-sale electricity price forecasts of 10% would result in an increase/ (decrease) to fair value by $0.3m

An increase/ (decrease) in the discount rate of 1% would result in an increase/ (decrease) to fair value by $1,546

227.60 - 322.80 (277.00)

An increase/ (decrease) in the credit value adjustment of 1% would result in an increase/ (decrease) to fair value by $1,546

Notes to the financial statements for the year ended 30 June 2022

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. This is 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 2022 $’000 2021 $’000

Statement of comprehensive income

Current income tax expense payable 37,207 47,344

Deferred income tax expense

Temporary differences (3,520) (5,712)

Income tax expense reported in the statement of comprehensive income 33,687 41,632

Statement of changes in equity

Income tax reported in equity (2,642) 22,346

Tax reconciliation

Net result before income tax expense 111,933 135,746

Tax at the Australian tax rate of 30% 33,580 40,724

(Deductible) / non-deductible expenses (375) 4

Non-deductible depreciation 6 4

Assessable income 476 900

Income tax on profit before tax 33,687 41,632

Income tax payable

Current tax (receivable) / payable (3,763) 863

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.

Deferred tax assets 2022 $’000 2021 $’000

Amounts recognised in the statement of comprehensive income

Provisions 12,840 14,096

Buildings future deductible amounts 1,544 1,377

Contract liability 37 117

Total 14,421 15,590

Movements

Opening balance 1 July 15,590 13,792

Credited to comprehensive income (1,169) 1,798 Closing balance at 30 June 14,421 15,590 Deferred tax liabilities

Amounts recognised in the statement of comprehensive income

Property, plant and equipment (364,171) (368,863)

Defined benefit superannuation asset 400 294

Amounts recognised directly in equity

Revaluation of infrastructure to fair value (128,238) (146,142)

Revaluation of land to fair value (93,206) (72,907)

Revaluation of buildings to fair value (794) (794)

Defined benefit superannuation asset (4,006) (3,759)

Total (590,015) (592,171)

Movements

Opening balance 1 July (592,171) (618,663)

Credited to comprehensive income 4,798 4,146

Credited to other comprehensive income (2,642) 22,346

Closing balance at 30 June (590,015) (592,171)

Net deferred tax liabilities (575,594) (576,581)

Notes to the

financial statements for the year ended 30 June 2022

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 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 fifth tranche of the environmental contribution imposes a statutory obligation to pay an environmental contribution to the Department of Environment, Land, Water and Planning of $47.43m each year for the period 1 July 2020 to 30 June 2024. 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 are as follows: 2022 $’000 2021 $’000

Payable

Not later than one year 47,430 47,430

Later than one year but not later than five years 47,430 94,860

Total 94,860 142,290

8.3 Goods and services tax (GST)

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 notes 5.1 and 5.4.

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.

9 Other disclosures

Introduction

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

Structure

9.1 Contributed equity

9.2 Retained earnings

9.3 Asset revaluation surplus 9.4 Responsible persons

9.4.1 Remuneration of responsible persons 9.5 Remuneration of executive officers 9.6 Related party

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

9.7 Ex-gratia expenditure 9.8 Economic dependency 9.9 Events subsequent to balance sheet date 9.10 Australian accounting standards issued 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.

2022 $’000 2021 $’000

Opening balance at 1 July 420,967 420,967

Less capital repatriation (36,365)

Closing balance 30 June 384,602 420,967

9.2 Retained earnings

Note 2022 $’000 2021 $’000

Opening balance at 1 July 501,778 438,321

Change in accounting policy 1.2 (1,101)

Net profit after tax 78,246 94,114

Defined benefit superannuation plan actuarial gain 1 3.2.3.2 824 7,776

Net deferred tax assets recognised through retained earnings 1 3.2.3.2 (247) (2,333)

Dividends paid (35,380) (36,100)

Closing balance at 30 June 544,120 501,778

1 Defined benefit superannuation plan actuarial gain net of tax effect $577,000 (2021: $5,443,000).

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.

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 2020 441,252 299,800 1,768 742,820

Revaluation, net of tax effect (100,252) 105,580 208 5,536

Balance at 30 June 2021 341,000 405,380 1,976 748,356

Revaluation, net of tax effect (41,776) 70,868 29,092

Balance at 30 June 2022 299,224 476,248 1,976 777,448

Notes to the financial statements for the year ended 30 June 2022

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 responsible persons of Yarra Valley Water at any time during the financial year ended 30 June 2022 were:

Hon Lisa Neville MP Minister for Water (1 July 2021 to 26 June 2022)

Hon Harriet Shing MP Minister for Water (27 June to 30 June 2022)

Hon Richard Wynne MP Acting Minister for Water (1 July to 22 August 2021)

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

Helen Lynette Thornton Director

Karen Milward Director

Victoria Fay Marles Director

Ian David Hamm Director

Ari Daniel Suss appointed as a Director 1 October 2021

Kate Deborah Vinot appointed as a Director 1 October 2021

Anita Michele Roper retired as a Director 30 September 2021

9.4.1 Remuneration of responsible persons

The Minister’s remuneration and allowance are set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the State's Annual 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:

2022 No. 2021 No.

$10,000 to $19,999 1 $40,000 to $49,999 2 $50,000 to $59,999 6 7 $90,000 to $99,999 1 $100,000 to $109,999 1 $420,000 to $429,999 1 $460,000 to $469,999 1

Total number 11 9

Total amount ($'000) 1,000 908

9.5 Remuneration of executive officers

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.

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

2022 $’000 2021 $’000

Short-term employee benefits 1,905 1,889

Post-employment benefits 183 156

Other long-term employment benefits 52 51

Total amount ($’000) 2,140 2,096

Total number 8 7

Total annualised employee equivalent (AEE) 1 & 2 7 7

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.

9.6 Related party

Related parties include:

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

• 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 provided 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.

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

2022 $’000 2021 $’000

3,483 3,255

Grant funding 408 62

Amounts recognised as an expense in the Statement of Comprehensive Income

Environmental contributions 47,430 47,430

Cash amounts paid during the year Parks Victoria levy billed to customers 72,965 70,689

Amounts payable at 30 June 2,008 1,836

ii. Melbourne Water

We transact solely with Melbourne Water 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 Melbourne Water. We charge Melbourne Water for the services we provide in billing and collecting drainage fees on its behalf, and on charge costs incurred regarding supplementary council valuations.

2022 $’000 2021 $’000

Amounts recognised as revenue in the Statement of Comprehensive Income 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

Bulk water and sewerage wholesaler charges expense (note 3.1)

Cash amounts paid during the year

5,432 5,170

508,989 528,335

Drainage billed to customers   92,361 90,142

Amounts payable at 30 June   14,706 12,851

Notes to the financial statements for the year ended 30 June 2022

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:

2022 $’000 2021 $’000

Aggregate amount of borrowings (note 6.1) 3,367,728 3,137,000

Interest expense (note 6.1.2) 92,056 90,998

Amounts payable at 30 June 25,461 26,133

iv. Department of Treasury and Finance

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

2022 $’000 2021 $’000

v. Department of Families, Fairness and Housing (DFFH)

Customers who hold 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 DFFH.

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.

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 DFFH based on the estimated annual water usage of a dialysis machine (168kL). This rebate is in addition to any other pension or concession entitlements.

2022 $’000 2021 $’000

Cash amounts paid during the year

Dividend paid (note 9.2) 35,380 36,100

Capital repatriation (note 9.1) 36,365

Amount recognised as an expense in the Statement of Comprehensive Income

Financial accommodation levy (note 6.1.2) 40,821 39,281

Income tax equivalent (note 8.1) 33,687 41,632

Amounts payable at 30 June 6,578 10,781

Cash amounts paid during the year

Concession amounts billed during the year 53,048 56,168

Utility relief grants received during the year 3,377 3,074

Water concession for life support haemodialysis machines

19 18

Amounts receivable at 30 June 5,227 4,856

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.

2022 $’000 2021 $’000

Cash amounts paid during the year

Concession amounts billed during the year 1,287 1,270

Amounts receivable at 30 June 323 330

Amount recognised as an expense in the Statement of Comprehensive Income Payroll tax 4,563 4,535

Amounts payable at 30 June 354 471

vii. Power Purchase Agreement

Zero Emissions Water (ZEW) is a related party of Yarra Valley Water, refer note 5.2. Below is a summary of the transaction and holdings with ZEW.

Note 2022 $’000 2021 $’000

Receipts from ZEW 2.2 48 90

Payments to ZEW 4.3 127 75

Investment in ZEW 11 11

viii. Other State Government of Victoria related parties

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.

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 people with 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 deailed 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 State's Annual Financial Report.

2022 $’000 2021 $’000

Short-term employee benefits 900 819

Post-employment benefits 88 78 Other long-term employment benefits 12 11

Total amount ($’000) 1,000 908

Total number 11 9

Total annualised employee equivalent (AEE) 1 10 9

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

During the year we supported the 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. Our Managing Director Pat McCafferty is Chair of TCP and we have supported TCP with their set up, administration and One Stop One Story Hub project.

All other 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.

Notes to the financial statements for the year ended 30 June 2022

9.7 Ex-gratia expenditure

Ex-gratia expenses are voluntary payments of money or other non-monetary benefit (for example a write-off) that is not made either to acquire goods, services or other benefits for Yarra Valley Water or to meet a legal liability, or to settle or resolve a possible legal liability of or claim against us. COVID-19 has impacted our response to customer debt, refer notes 1.3 and 7.2.

Note 2022 $’000 2021 $’000

Hardship write-offs for customers in the Arrange and Save Program 2,925 3,449 COVID-19 related credit, rebate or relief outside of hardship program 1.3 62 176

Write-offs for disconnected customer accounts greater than 180 days 3,092 2,678 Bankruptcies and liquidations 2 11

Minimum account write-offs 166 143 Family violence bill adjustment 30 19

Total 6,277 6,476

All ex-gratia expenses (except hardship write-offs for customers in the Arrange and Save Program and COVID-19 and family violence related credits, rebate or relief) 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.

9.9 Events subsequent to balance sheet date

In July 2022 settlement occurred with Development Victoria on the land held for sale at Ivanhoe, refer note 4.5 and we received approval from the Minister for Water for unregulated revenue via our Lilydale waste to energy facility.

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.

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 AASB 2020-1 classification of liabilities as current or non-current, which 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 2023 (AASB 2020-6).

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.

Statutory Certification

We certify that the attached Financial Statements of Yarra Valley Water Corporation have been prepared in accordance with 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 2022 and financial position of Yarra Valley Water at 30 June 2022.

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 29 August 2022.

Sue T O’Connor Chair

Patrick J McCafferty Managing Director

Natalie Foeng Chief Financial Officer

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 2022

• 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 2022 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 b y 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 2022 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 audi t 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.

Key audit matter

Revenues from service and usage charges

Note 2.1 Revenue from contracts with customers

Revenue from service and usage charges :

$954 million

I considered this to be a key audit matter because:

• revenue is financially significant

• the corporation’s IT billing system and business rules are complex, and inputs to the system are derived from multiple sources

• external service providers conduct meter readings of customer water consumption data

• there is a high degree of estimation uncert ainty in the revenue accrual for unbilled water and sewerage services at year end

• the applicable accounting standard AASB 15 Revenue from Contracts with Customers requires detailed and complex financial report disclosures.

Fair value of Infrastructure Assets

How I addressed the matter

My key procedures included:

• testing the operating effectiveness of key controls in the billing system and billing process

• assessing management's model, key assumptions, and inputs for estimating the accrued revenue

• 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

• assessing the adequacy of revenue recognition and measurement policies

• assessing the adequacy of financial statement disclosures against AASB 15 Revenue from Contracts with Customers

Note 4.1 Total Infrastructure, property, plant and equipment

Fair value of infrastructure assets: $4.536 billion

I considered this to be a key audit matter because:

• infrastructure assets are financially significant

• the fair value estimate is derived from an income based valuation approach that uses a discounted cashflow (DCF) model

• management engage an external valuation expert to prepare the fair value estimate

• the DCF model is highly complex and involves significant judgements and assumptions

• small changes in key assumptions used in the DCF model can materially affect the fair value

• the DCF model's forecast period is long, and includes a terminal value, which increases the difficulty in accurately estimating the fair value

• the method for calculating the terminal value changed in the current year

• accounting standard AASB 13 Fair Value Measurement (AASB 13) requires extensive financial report disclosures.

My key procedures included:

• obtaining an understanding of the approach to estimating the fair value of infrastructure

• assessing the competence, objectivity 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 and assessment of the reasonableness of any changes to the DCF model and/or assumptions, including the new method of calculating the terminal value

• the reasonableness and consistency of all the assumptions used in the DCF model

• the reasonableness of all inputs used in the DCF model, with specific reference to underlying data and supporting documentation

• the DCF model’s computational accuracy

• evaluating our subject matter expert's work and concluding the work was adequate for the purposes of our audit

• assessing the completeness and adequacy of the financial report disclosures against the requirements of AASB 13, including the significant observable and unobservable inputs utilised in the model and the sensitivity analysis.

Auditor-General’s Audit Report continued...

Board’s responsibilities for the financial report

Auditor’s responsibilities for the audit of 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 t o going concern and using the going concern basis of accounting unless it is inappropriate to do so.

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 misstate ment 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.

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

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 con trol 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 d oing so would reasonably be expected to outweigh the public interest benefits of such communication.

MELBOURNE 2 September 2022

Paul Martin as delegate for the Auditor General of Victoria

Disclosure Index

Yarra Valley Water’s 2021-22 Annual Report is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of Yarra Valley Water’s compliance with statutory disclosure requirements.

Legislation Disclosure requirement Page

Report of operations and additional information

Charter and purpose

FRD 22 Manner of establishment and the relevant Ministers 6 & 148

FRD 22 Purpose, functions, powers and duties 2-3 & 6-39

FRD 22 Key initiatives and projects 14-35

FRD 22 Nature and range of services provided 2-3 & 10-13 Management and structure

FRD 22 Organisational structure 43 Financial and other information

FRD 10 Disclosure index 160-161

FRD 12 Disclosure of major contracts 64

FRD 15 Executive Officer disclosure 61

FRD 22 Five-year summary of financial results 38-39

FRD 22 Employment and conduct principles 32-35 & 56-65

FRD 22 Occupational health and safety policy 34-35 & 58-59

FRD 22 Summary of financial results for the year 36-39

FRD 22 Significant changes in financial position during the year 102-103

FRD 22 Major changes or factors affecting performance 14-35

FRD 22 Subsequent events 102

FRD 22 Application and operation of the Freedom of Information Act 1982 62-65

FRD 22 Compliance with building and maintenance provisions of the Building Act 1993 63

FRD 22 Statement on Competitive Neutrality Policy 64

FRD 22 Application and operation of the Public Interest Disclosure Act 2012 62

FRD 22 Details of consultancies over $10,000 61

FRD 22 Details of consultancies under $10,000 61

FRD 22 Disclosure of government advertising expenditure 61-62

FRD 22 Disclosure of ICT expenditure 61

FRD 22 Statement of availability of other information 64-65

FRD 22 Operational and budgetary objectives and performance against objectives 36-39 & 92-96

FRD 22 Environmental performance 78-89, 91 & 94-95

FRD 22 Workforce inclusion policy 33 & 56-59

FRD 22 Workforce data 60

FRD 25 Local Jobs First 64

FRD 27 Performance reporting 92-96

FRD 29 Workforce data disclosures 60

YARRA VALLEY WATER ANNUAL REPORT 2021-22

Legislation Disclosure requirement Page

Social Procurement Framework

Social procurement disclosure 62, 76 & 91

Ministerial reporting directions

MRD 01 Performance reporting 92-96

MRD 02 Water consumption and drought response 69-72

MRD 03 Environmental and social sustainability reporting 66-68, 72, 73-81 & 84-86

MRD 04 Disclosure of information on bulk entitlements and compliance activities 82-83

MRD 05 Annual reporting of major non-residential water users 71-72

MRD 06 Greenhouse gas and energy reporting 84-86

MRD 07 Disclosure of information on Letter of Expectations

Climate change 79-81 Customer and community outcomes 72-75

Water for Aboriginal cultural, spiritual and economic values 75-77 Resilient and liveable cities and towns 67-72

Leadership and culture 33-35, 42-59 & 75-77

Financial sustainability 92-93

Compliance attestation and declaration

SD 5.1.4 Attestation for compliance with Ministerial standing direction 65

SD 5.2.3 Declaration in report of operations 96

Financial Statements

Declaration

SD 5.2.2 Declaration in financial statements 153

Other requirements under Standing Directions 5.2

SD 5.2.1(a) Compliance with Australian Accounting Standards and other authoritative pronouncements 153

SD 5.2.1(a) Compliance with Ministerial directions 153

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

FRD 03 Accounting for dividends 102 & 147

FRD 07 Early adoption of authoritative accounting pronouncements 108

FRD 11 Disclosure of ex gratia expenses 152

FRD 17 Wage inflation and discount rates for employee benefits 118

FRD 21 Disclosures of responsible persons, executive officers in the financial report 148-149

FRD 100 Financial reporting directions – framework entire report

FRD 112 Defined benefit superannuation obligations 116-119

FRD 114 Financial instruments 135

FRD 119 Transfers through contributed capital 146

FRD 120 Accounting and reporting pronouncements 152-153

Legislation

Water Act 1989

Water Industry Act 1994

Freedom of Information Act 1982

Building Act 1993

Public Interest Disclosure Act 2012

Local Jobs First Act 2003

Financial Management Act 1994 Public Administration Act 2004 Environment Protection Act 1970 (Vic)

United Nations Global Compact

Refer to pages 90 & 91 for our Communications on Progress (COP) for 2021-22.

© Copyright September 2022

Yarra Valley Water Corporation

ISSN 2202-6304 (Print)

ISSN 2202-6312 (Online)

For all other languages call our translation service on 03 9046 4173

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