YARRA VALLEY ANNUAL REPORT WATER 2017-18
OUR PURPOSE
TO PROVIDE EXEMPLARY WATER AND SANITATION SERVICES THAT CONTRIBUTE TO THE HEALTH AND WELLBEING OF CURRENT AND FUTURE GENERATIONS OUR ASSETS
$4.97b 143
103
OF INFRASTRUCTURE AND OTHER ASSETS
SEWAGE PUMPING STATIONS AND FLOW-CONTROL FACILITIES
WATER PRESSURE REDUCING STATIONS
9,962km 427km
43
OF WATER SUPPLY MAINS
WATER SUPPLY TANKS
OF RECYCLED WATER SUPPLY MAINS
9,687km 76
10
OF SEWER MAINS
SEWAGE TREATMENT PLANTS
WATER PUMPING STATIONS
ACKNOWLEDGEMENT OF TRADITIONAL OWNERS Yarra Valley Water proudly acknowledges Aboriginal people as Australia’s first peoples and the local Traditional Owners as the original custodians of the land and water on which we rely and operate. We pay our deepest respects to their Elders past, present and future. We acknowledge the continued cultural, social and spiritual connections that Aboriginal people have with the lands and waters, and recognise and value that the Traditional Owner groups have cared for and protected them for thousands of generations. In the spirit of reconciliation, we remain committed to working in partnership with local Traditional Owners to ensure their ongoing contribution to the future of the water management landscape while maintaining their cultural and spiritual connections.
CONTENTS Introduction 2
KEY STATISTICS
1.9m POPULATION SERVED
746,925 RESIDENTIAL PROPERTIES
55,205 BUSINESS CUSTOMERS
About Us
2
A Message from the Chair and the Managing Director
4
Service, Community and Environment
6
2017-18 Highlights
8
Financial Summary
20
Five-Year Financial Summary
21
Corporate Information
23
Performance Report
37
Annual Financial Report
45
Directors’ Report
46
Statement of Comprehensive Income
48
Balance Sheet
49
Statement of Changes in Equity
50
Cash Flow Statement
51
Notes to the Financial Statements
52
Statutory Certification
95
Auditor-General’s Audit Report
96
Additional Information
99
Water Consumption and Drought Response
100
Environmental and Social Sustainability Reporting
102
Annual Reporting of Major Non-Residential Water Users 107
Bulk Entitlements Report
108
Index 110
YARRA VALLEY WATER ANNUAL REPORT 2017-18
1
ABOUT US Introduction 2017-18 Highlights
Yarra Valley Water is one of the largest water utilities in Australia, servicing the east and north of the city of Melbourne. Every day, more than 1.9 million people – around 30% of Victoria’s population – and 55,000 businesses rely on Yarra Valley Water’s essential water and sanitation services.
Corporate information
Our service area covers 4,000 square kilometres and our network consists of approximately 20,000 kilometres of water and sewer mains. In total, approximately $4.97 billion of infrastructure and other assets. Our region includes some of the fastest growing suburbs in Australia and we continue to plan for forecast population growth of more than 500,000 people by 2036.
Performance Report
We provide water to the people and businesses of Melbourne and take their sewage away. Melbourne Water harvests, stores and transfers bulk water, which we then distribute to our customers. We are also responsible for the removal of sewage, most of which is sent to Melbourne Water’s Eastern or Western Treatment plants. The rest is treated at our ten regional treatment plants, most of which also recycle water for use in public spaces, sports fields and homes. In addition to our core services we now also operate a waste to energy facility that converts food waste into renewable energy.
Annual Financial Report
Our customers expect us to provide reliable services at fair and reasonable prices. They have told us they value us operating in a way that cares for and protects the environment, safeguards water availability, delivers a modern flexible service and ensures fair access and assistance for all. Our 2020 Strategy, which defines our aspirations for the rest of this decade, keeps us focused on our purpose – to provide exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations. This provides long-term direction and a clear vision for the organisation.
Additional Information
On 1 July 2012, Yarra Valley Water became a statutory corporation, incorporated under the Water Act 1989. Our activities are overseen by an independent Board of Directors, appointed by the State Government of Victoria. During the 2017-18 financial year, we were accountable to the Minister for Water, the Hon Lisa Neville MP.
Index
Our obligations regarding the performance of our functions and the exercise of our statutory powers are defined in the Statement of Obligations, issued by the Minister for Water in accordance with Section 4I (2) of the Water Industry Act 1994. We are required to monitor compliance with the obligations set out in the Statement, report on non-compliance and take remedial action in relation to non-compliance. The Essential Services Commission is the economic regulator of the Victorian water sector. The Commission’s role includes the regulation of prices, service standards and market conduct across the water industry in Victoria. We are subject to regulation by the Commission. YARRA VALLEY WATER ANNUAL REPORT 2017-18
2
Introduction
“ EVERY DAY, AROUND 30% OF VICTORIA’S POPULATION AND 55,000 BUSINESSES RELY ON OUR ESSENTIAL SERVICES.”
2017-18 Highlights Corporate information Performance Report Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
3
A MESSAGE FROM THE CHAIR AND THE MANAGING DIRECTOR
Key highlights from this year include:
•• Sustaining our leadership in workplace culture. Following our accreditation as an AON Hewitt Australian Best Employer in 2017, our Organisational Cultural Inventory (OCI) results in June 2018 showed that we have sustained a highly constructive culture, which is the foundation of our performance.
•• Initiating the Thriving Communities Partnership, a cross-sector collaboration bringing together government, corporates and the community sector to ensure everyone has fair access to the modern essential services they need to thrive in contemporary Australia. •• Delivering actions outlined in our Reconciliation Action Plan (RAP), including cultural awareness training for staff. •• Progressing work on Integrated Water Management solutions (including alternative water supplies such as recycled water) to support a growing Melbourne, in line with Melbourne’s Urban Water Strategy and Water for Victoria. •• Commencing a program aimed at enhancing our field response to network issues that affect services. We were challenged by the unusually dry Autumn conditions in 2018, with reduced soil moisture contributing to a higher incidence of leaks. While our responsiveness to major water outages was in line with targets, some minor leaks took longer to repair than normal. Several improvements are being implemented to ensure our repair times for these issues are in line with customer expectations.
Index
•• Renewing ageing water and sewerage infrastructure including the renewal of 70km of water mains and 62km of sewer mains to ensure continued reliability.
•• Completing the 2013-2018 price period with the achievement of total productivity savings of $73.5 million, which have been passed through to customers in the form of lower bills.
Additional Information
•• Continuing to construct vital infrastructure for the northern growth corridor, to enable the sustainable development of the area as part of our Water Future North Strategy, including the Craigieburn Sewage Hub and Epping Branch sewer tunnel, part of a five-year, $395 million investment in water and sewerage infrastructure for a fast-growing area of Melbourne.
•• Achieving our best-ever safety performance for YVW staff and contractors working on sites under our control, with a total significant injury frequency rate of zero and zero lost time injuries.
Annual Financial Report
•• Submitting our proposed five-year plan on services, investments and future prices to the Essential Services Commission (ESC), which followed a comprehensive customer research program and deep community engagement culminating in a citizens’ jury. The ESC fasttracked the approval of our submission based on the level of engagement and outcomes proposed, which include a commitment to keep typical bills flat in 2018-19 and deliver ongoing real bill reductions to 2023.
•• Working closely with communities to decide on the most appropriate servicing solutions for our community sewerage program, including Park Orchards and Monbulk.
Performance Report
In line with Water for Victoria, our priority areas in 2017-18 included addressing the impacts of climate change, improving customer and community outcomes, delivering water for Aboriginal cultural, spiritual and economic value, contributing to resilient and liveable towns and cities, and demonstrating leadership and financial sustainability. These priorities strongly align with Yarra Valley Water’s 2020 Strategy, which targets breakthrough performance across a range of areas.
•• Ranking, once again, as one of Australia’s Top 10 organisations for Corporate Social Responsibility and receiving one of Australia’s highest environmental honours, winning the Banksia Award for the circular economy.
Corporate information
These targets are guided by our Statement of Obligations, the policy directions set out in the State Government’s Water for Victoria policy and Letter of Expectations, and our 2020 Strategy.
•• Reaching full operating capacity at ReWaste, our waste-toenergy plant, which converts up to 180 tons of food waste per day into renewable energy, with 25% of the energy produced fully powering our Aurora sewage treatment facilities and the remaining 75% sent to the grid as renewable energy. The plant is providing multiple benefits including reduced operating costs for Yarra Valley Water, reduced greenhouse gas emissions and a reduction in the amount of food waste that would otherwise be sent to landfill.
2017-18 Highlights
In 2017-18 we made good progress on our performance targets, as we continued to service a growing and increasingly diverse population that depends on us to deliver essential and affordable water and sanitation services.
Introduction
We are pleased to present Yarra Valley Water’s Annual Report for the financial year ending 30 June 2018, in accordance with the Financial Management Act 1994.
•• Providing essential water and sanitation services to a growing population in our service area, which increased by 68,000 over the past year, taking the total population served to 1.93 million.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
4
Introduction
More detail on the above outcomes is contained in the 2017-18 Highlights section of this report.
CUSTOMERS EXPECT
2017-18 Highlights
We will continue to place the customer at the centre of our decision making and planning, with a focus on delivering a high-quality service reliably and affordably, and achieving our customer experience vision – that we make it easy for customers, and they feel we care. We are also working on safeguarding our services for the future, ensuring that we have the capacity, technology and culture in place to face the challenges of a changing climate, increasing customer expectations and a growing population.
Corporate information
CUSTOMERS VALUE
Annual Financial Report
A committed, skilled and diligent board that provides both leadership and governance oversight is also critical to our success. We thank the members of the Board for their important contribution over the past 12 months, and would like to acknowledge Directors Greg Camm and Sue Friend, who retired from the Board during the year, for their service and dedication.
Performance Report
A high-performance culture is the key to accomplishing great outcomes, and our 2017-18 achievements were made possible thanks to our committed employees – engineers, technicians, accountants, information technology specialists, customer service professionals and managers – who reflect our diverse community, and our partner organisations who help us to deliver our services.
We recognise the importance of our decision making being in step with government, regulator, stakeholder and customer expectations and values, and we look forward to building on the many achievements made in 2017-18 as we continue to work towards valued outcomes for our customers.
Additional Information
Sue T O’Connor Chair
Index
Patrick J McCafferty Managing Director
YARRA VALLEY WATER ANNUAL REPORT 2017-18
5
SERVICE, COMMUNITY AND ENVIRONMENT
2020 STRATEGY
2017-18 Highlights Corporate information
In recent years, we have examined the way we contribute to society in positive and negative ways. We have measured that contribution not only in financial terms, but using the principles of integrated profit and loss accounting, which assesses our impact in terms of human, social and environmental capital.
Introduction
We make a unique contribution to society, articulated in our statement of purpose. Our purpose keeps us focused on what is important: providing exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations. Six strategic commitments, discussed over the next few pages, underpin our purpose. These commitments, when achieved collectively, represent extraordinary results for our customers, stakeholders, owners and staff, and for the community.
OUR PURPOSE IS TO PROVIDE EXEMPLARY WATER AND SANITATION SERVICES THAT CONTRIBUTE TO THE HEALTH AND WELLBEING OF CURRENT AND FUTURE GENERATIONS
Performance Report
WE ARE SAFE
HARMONY WITH THE ENVIRONMENT
THRIVING COMMUNITIES
Index
EVERY CENT COUNTS
Additional Information
EXEMPLARY SERVICE
Annual Financial Report
EXTRAORDINARY PERFORMANCE
WE ARE YARRA VALLEY WATER
YARRA VALLEY WATER ANNUAL REPORT 2017-18
6
Our roles and responsibilities also extend into other realms, including the impact on the environment from our operations, our impacts on household affordability, and our contribution to addressing inequality. We are also impacted by the areas raised by the SDGs; for example SDG13, where the significant changes in weather patterns affect water supply reliability.
2017-18 Highlights
The Sustainable Development Goals (SDGs) have been agreed to by the member states of the United Nations, as a universal call to action and a pathway to end poverty, protect the planet and ensure all people enjoy peace and prosperity. They provide a lens for us to look at how we can ensure our contribution is making the greatest impact.
Introduction
The Sustainable Development Goals (SDGs)
Corporate information
Our activities interact with the priority areas identified by the SDGs in a range of important ways. We play a fundamental role in the liveability and productivity of Melbourne, through the provision of safe, reliable drinking water and sanitation, and by making investment decisions that optimise value and resilience for the community, including future generations.
Performance Report
14
13
9
10 12
Promoting health benefits of drinking tap water
2
11
8
10 11 16
Research and innovation
8
6
8
11
Community engagement and education programs
2
Reconciliation Action Plan
4
Water security planning
6
9
6
13
6
9
11 12 17
Employee training and development
3
16
Operating and maintaining infrastructure to ensure service reliability
9
Integrated water management through strong partnerships
4
5 Index
10
Renewable energy generation
7
8
13 16 17
Supporting financially vulnerable and hardship customers
1
5
Servicing strategies and infrastructure for growth areas, and connecting new customers to the network
Additional Information
6
Working with our supply chain on corporate social responsibility issues
Annual Financial Report
Protecting waterways from impact of sewage spills, discharges, poor performing septic tanks
Best practice management of drinking and recycled water
6
9
11
9
YARRA VALLEY WATER ANNUAL REPORT 2017-18
7
2017-18 HIGHLIGHTS
Our approach
Key initiatives – customer at the centre Customer service metrics
Our emergency response service to repair burst water mains and fix sewer blockages was consistent over the course of the year, but ongoing dry conditions affecting moisture in the clay soils prevalent in our area contributed to a higher incidence of minor leaks in Autumn 2018, which in turn affected service levels. We established the Faults Operational Excellence (FOX) Project, which defined immediate and medium-term actions within each of our operational areas to drive a world class customer experience across all categories of service faults, including minor leaks. The associated improvements to processes are currently being implemented in conjunction with our maintenance contractor. New residential bill In 2017-18 we introduced a clearer, simpler residential bill to increase our customers’ understanding of their charges and of the products and services we deliver. Customer centred price determination We undertook a comprehensive customer research program and deep community engagement to determine our prices and services for the next five years. This engagement culminated in our citizens’ jury, which helped us find a balance between price and service that’s fair for everyone. Our customers told us they expect: •• water that is safe to drink (safe drinking water) •• water and sewerage services they can rely on (reliable water and sewerage services)
Our customer stand
•• support for customers having difficulty paying their bill (fair access and assistance for all)
•• We work together
•• fast response and effective restoration of their service when it is interrupted (timely response and restoration). Our customers also told us they value:
•• saving water now so it’s available in the future (leak reductions, alternative supplies and conservation)
Index
•• We have empathy
Additional Information
Our customers were highly satisfied with the quality and reliability of our products and service, with 95% of residential customers and 97% of non-residential customers agreeing that Yarra Valley Water provided a reliable water service; and 88% of customers agreeing that we provided great drinking water in 2017-18.
Our vision for customer experience is simple: ‘we make it easy for our customers and they feel we care’. During 2017-18 we undertook an organisation-wide change initiative called ‘Our Customer Stand’ to embed a series of customer-focused principles to achieve this vision across every customer touchpoint:
Annual Financial Report
In an era of increased service expectations, our overall customer satisfaction levels remained strong in 2017-18. Independent research showed that 84% of residential and 81% of business customers were satisfied or highly satisfied with their most recent interactions with us. We have a robust process to manage customer complaints and proactively analyse them to identify areas for improvement.
Reimagining the service faults process
Performance Report
Our long-term planning addresses the dual challenges of a hotter, drier climate and significant population growth. We are proactively navigating these challenges to ensure our assets and systems are adaptable and resilient. Our focus on the future and our commitment to continuous improvement make a positive contribution to our customers’ lives.
•• We understand the impact our actions have.
Corporate information
We can’t provide exemplary service without listening to our customers and understanding their needs – so we involve customers and communities in planning at an early stage, and continually gauge their views and expectations.
•• We take responsibility
2017-18 Highlights
We put our customers and community at the centre of everything we do, from sustaining high quality drinking water and sanitation services to planning for the next half-century of population growth. We strive to resolve any faults and service interruptions quickly and simply, and focus on ensuring that all interactions with our customers are positive, consistent and constructive.
Introduction
WE PROVIDE EXEMPLARY SERVICE
•• modern, flexible service and advice that suits their needs (modern flexible service) •• looking after the environment (care for and protect the environment).
•• We make it easy for customers
YARRA VALLEY WATER ANNUAL REPORT 2017-18
8
More customers go online
Modern flexible service
Cyber security
In 2017-18 we continued to deliver the large-scale water and sanitation infrastructure required to support Melbourne’s rapid population growth. Much of our activity continues to focus on the northern growth corridor, supporting the delivery of the Water Future North Strategy. These projects form part of a $395 million investment that will eventually service more than 300,000 new residents with drinking water, recycled water and sewage disposal. During the period we made significant progress towards finishing the Craigieburn Sewage Transfer Hub, which builds capacity into the sewerage network to ensure it can service 128,000 new homes. We also commenced construction of the Epping Branch Sewer Tunnel — a 2.4km deep gravity sewer that will provide a link between the existing Epping Branch Sewer and the Merri Creek Main Sewer. Other major projects in the corridor include: Kalkallo to Bald Hill Drinking Water Major Assets, Lockerbie Main Sewer, Doreen Sewer Pressure Main, Kalkallo Creek Branch Sewer and Craigieburn Flow Storage and Distribution Hub. Reliable water and sewerage services We continued to supply our water and sanitation services in a dependable and cost-effective way. During 2017-18 we met our new targets: that fewer than 1% of customers should experience three or more interruptions to water or sewerage supply, and ensuring that a minimum of 91% of interruptions are restored within four hours. Major programs and projects delivered in 2017-18 that helped us achieve this goal include:
Index
In 2017-18 we worked through our obligations under the government-mandated Victorian Protective Data Security Framework (VPDSF), a commitment to data security. Executive and information technology and operational technology staff participated in cyber awareness training, which will be used to inform broader cyber security training across the organisation.
Planning for population growth
Additional Information
We have committed to introducing the option for customers to receive a discount when they elect to receive an e-bill and pay by direct debit from a bank account. We will continue to pursue a customer-centred approach to our customer contacts and enquiries, while ensuring that customers are able to have an effective self-serve relationship with us.
For further information about the quality of our drinking water, see our Water Quality Annual Report.
Annual Financial Report
Our customers have told us they want us to provide a modern, flexible service. Currently, they can contact us by phone, email, via our website, online chat or social media. Most customers still prefer to call us, especially when they want an immediate response.
Our customers have told us that safe and pleasant drinking water is our most important deliverable. In 2017-18 we increased our focus on inspection of service reservoirs and undertook targeted remediation works. We delivered on our commitment to provide safe and pleasant drinking water.
Performance Report
In 2017-18 we saw an increase in simple online transactions, such as changes of address, being processed via Yarra Valley Online Water (YVOW). Our customers’ increased willingness to embrace YVOW helped to free up our contact centre staff to deal with more complex customer issues. Work to further improve our self-service functionality continues.
Safe and pleasant drinking water
Corporate information
Key initiatives – modern flexible service
Key initiatives – service reliability
2017-18 Highlights
Our price submission was one of only four across the state that were fast-tracked by the Essential Services Commission, due to its comprehensive nature, high level of community engagement and demonstrated commitment.
Introduction
We have identified one measure for each of these seven outcome areas that best aligns with our customers’ expectations. These seven measures form the core of our customer service performance targets. We will hold ourselves accountable for achieving these targets and will return $1.5 million to customers for each of the seven outcome targets we do not achieve each year.
•• 70km of water reticulation pipe renewals •• 2,000 house connection branch renewals •• 62km of sewer main, branch and reticulation renewals.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
9
2017-18 HIGHLIGHTS CONTINUED
The water we supply is harvested from the environment, and the wastewater we discharge goes back into it, meaning working in harmony with nature is at the very core of our business. We are committed to improving, not just maintaining, our natural ecosystems – the quality of the water we supply, and the sustainability of our business, depend on it.
Our long-term goals are to generate renewable energy, have no net impact on the streams that we discharge into, and always meet environmental flows in the streams we extract water from. For further detail, refer to the Performance Report and Additional Information sections.
Energy generation In 2017-18 we generated around 25% of our daily energy through our first waste to energy project, the ReWaste renewable energy facility at the Aurora Treatment Plant. This facility supports our greenhouse gas emissions reduction strategy, which emphasises energy generation. This strategy also supports the delivery of the Water for Victoria emissions reduction targets requiring metropolitan water corporations to produce net zero emissions by 2030, and is helping Victoria meet its broader renewable energy targets of 25% by 2020 and 40% by 2025.
Annual Financial Report
Our customers support our commitment to working in harmony with the environment, with 85% indicating that they have concerns about the environment and climate change. Our Aboriginal and Torres Strait Islander communities consider Yarra Valley Water’s work with the environment to be of critical importance.
Part of our approach to managing long-term water availability includes reconciling the latest climate change scenarios – which include more frequent and severe droughts, heatwaves, larger and more unpredictable bushfires and more intense rainfall and floods – with water industry guidelines. We continually monitor the current and potential future impacts of climate change on water resources, water and sewerage infrastructure, and our business. In 2017-18 we continued to work closely with industry colleagues on developing adaptation plans, including the Department of Environment Land, Environment and Water’s (DELWP) Water Sector Climate Change Adaptation Action Plan. We also commenced work to refresh our own adaptation plan, which will be completed in 2018-19.
Performance Report
Our 2020 Strategy commits us to ensuring that our environmental impact never exceeds the carrying capacity of nature; pursuing a restorative approach where the planetary or local carrying capacity of nature is exceeded; and redefining the possibilities in sustainable water and sanitation services.
Climate change adaptation plan
Corporate information
Our approach to environmentally-sound business practices includes a focus on ensuring environmental water flows, greenhouse gas emissions, climate change and nutrient discharge.
Key initiatives – greenhouse gas emissions and climate change
2017-18 Highlights
Our approach
Introduction
WE WORK IN HARMONY WITH THE ENVIRONMENT
In 2017-18 we started plans for a solar carpark at our Mitcham headquarters, and commenced building solar farms at our treatment plants in Healesville, Upper Yarra and Whittlesea, and assessing further solar potential at other smaller sites.
Additional Information
As part of our partnership with the VicWater Intelligent Water Network (IWN) Program, we have made a commitment to enter into a Power Purchase Agreement with a large scale renewable energy generator in North-West Victoria which will provide us with access to renewable energy and certificates. We have made an annual commitment to purchase 7,000MWh of the solar farm output over a contract period that is expected to commence in late 2019 and run through to the end of 2030.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
10
Introduction
“ IN 2017-18 WE GENERATED 25% OF OUR DAILY ENERGY THROUGH OUR FIRST WASTE TO ENERGY PROJECT.”
2017-18 Highlights Corporate information Performance Report Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
11
Introduction
“ IN 2017-18 WE CONTINUED TO WORK WITH THE MONBULK COMMUNITY TO DELIVER NEW SEWERAGE SERVICES TO 731 PROPERTIES WITH POOR-PERFORMING SEPTIC SYSTEMS.”
2017-18 Highlights Corporate information Performance Report Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
12
2017-18 HIGHLIGHTS CONTINUED
In 2017-18 we continued to balance water supply and demand by engaging with the community on responsible water use, planning for future growth and maximising the integrity of our assets. This included an increased focus on alternative sources of water, such as stormwater and recycled water. Our citizens’ jury supported an additional $5 million investment over five years for water conservation activities, including reducing our own non-revenue water wastage (bursts and leaks), finding alternative sources of water and helping customers save water, with a target of 210 equivalent litres per person per day by 2023, compared to 221 litres per person per day in 2017-18.
As part of our restorative environmental strategy, we have committed to a broadened focus on managing our impacts on the overall health of the waterways we discharge into. We have committed to a self-imposed nitrogen discharge limit of 87 tons per year, which we achieve through water recycling and ongoing management of our sewage treatment plants, which directly reduce nutrient discharges. Community sewerage
An outcomes-based approach to waterways investment
We are continuing to progress this important and complex recycled water project, which showcases servicing infill development in a sustainable and resilient way. The project is one of the ways we are responding to Melbourne’s rapid population growth, 70% of which is predicted to occur in infill areas. This project will harness the benefits of this growth to deliver a drought-proof source of alternative water to the local community, reducing pressure on our precious drinking water supplies as our city grows.
Additional Information
We are currently considering conceptual options for the delivery of the project’s recycled water treatment plant, taking into consideration the additional recommendations of the independent panel for the preferred location of the plant (Eram Park, in the Whitehorse City Council area). This includes assessing the best way to sensitively integrate the plant with the park. Options include constructing the plant underground and integrating this work with the changes to the park occurring as a result of the North East Link Project. We will also continue to work closely with local councils to explore what further benefits can be delivered to the broader community as part of the scheme. Possibilities include drought-proofing local open space and undertaking improvements to the local parkland.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
In partnership with Melbourne Water, DELWP, the EPA, and local councils, we continued to develop an outcomes-based approach to waterways investment that focuses on waterway health, urban amenity and biodiversity. The approach was recently tested with a pilot study focused on Merri Creek, which revealed that wastewater overflows were a lesser threat to the environment than polluted urban runoff. We are exploring the opportunities that arise from this pilot study with key stakeholders.
Doncaster Hill recycled water project
Annual Financial Report
In 2017-18 we continued to work with the Monbulk community to deliver new sewerage services to 731 properties with poor-performing septic systems. Two options were presented to the community for consideration: a decentralised sewerage option involving onsite systems and local treatment, or a smart pressure sewer. We received direct feedback from 102 people, and the overwhelming preference was for the pressure sewer option. Design and construction of the new sewerage system is targeted for completion by mid-2021 and is one of our Top 10 projects for delivery in the next pricing period.
Our residential customers already use significantly less water than they did in the years before the Millennium Drought, with 2017-18 consumption tracking at 161 litres per day. This is a considerable reduction on the peak of 250 litres per day in past years. In 2017-18 we continued to promote the efficient and sensible use of water by supporting vulnerable customers with optional water audits and usage management tools, encouraging the use of water efficient appliances, products and services, and supporting water efficiency programs such as Target 155. This voluntary program encourages households to use a maximum of 155 litres of water per person per day.
Performance Report
Because many homes in Melbourne were built before sewerage was available, more than 14,000 properties in the outer northern and eastern suburbs are still using septic tank systems. Many of these septic tank systems do not meet current standards and they are a potential risk to public health, local waterways and the environment. The Yarra Valley Water Community Sewerage Program is working to provide these properties with a sustainable sewerage solution. More than $400 million is being spent on the program.
Corporate information
Nitrogen discharge limit
2017-18 Highlights
Key initiatives – water conservation
Introduction
Key initiatives – healthy waterways
13
2017-18 HIGHLIGHTS CONTINUED
Our approach
Thriving Communities Partnership
Through our price submission engagement, our customers told us they value supporting people experiencing vulnerability to access support services and want us to make greater investments to reach additional customers. We are committing to an additional $6 million investment over five years to improve awareness and access to services and programs for disadvantage.
Our Integrated Profit and Loss (IP&L) research has enabled us to capture the value our business contributes to society in ways not captured by traditional accounting methods. This, in turn, has assisted us to identify and grow our contribution to the long-term health and wellbeing of the community through targeted programs relating to our core services (such as hardship customer support, water conservation and promoting the health benefits of drinking water). Choose Tap In 2017-18 the Choose Tap program expanded its reach, with City West Water, Melbourne Water and South East Water joining us in spreading the message about the health, environmental and monetary benefits of choosing tap water over bottled drinks. We also assisted the Gold Coast Council in adopting the Choose Tap brand in the lead-up to the Commonwealth Games. We share the Choose Tap message by sponsoring community sporting events, running incursions in primary schools, and distributing early learning centre kits to inform younger children. Key initiatives – partnerships and participation Reconciliation Action Plan
Index
In 2017-18 our well-established WaterCare program continued to respond to the complex issues facing customers experiencing vulnerability through an increased focus on early identification of financial stress and efforts to boost the visibility of the type of help available to those experiencing, or at risk of, hardship. Since 2013 the number of customers transitioning to mainstream payment plans has increased by 168%, and 91% of WaterCare customers are meeting the terms of their payment plans.
Integrated profit and loss
Additional Information
WaterCare and financial Inclusion
Key initiatives – doubling social value
Annual Financial Report
In 2017-18 we continued to grow the Thriving Communities Partnership (TCP), a voluntary, cross-sectoral collaboration bringing together diverse organisations to ensure everyone has access to the modern essential services they need to thrive in contemporary Australia, including water, energy, banking and telecommunications providers. This member-funded initiative now has more than 150 organisations involved, with growing interest from corporates, the community sector and government. While the TCP is currently administered by Yarra Valley Water, it is planned to transition to an independent entity during 2018-19.
We have increased our capability to support customers experiencing family violence, recognising that one form of family violence is economic abuse, which can involve bills and accounts from essential service providers such as water utilities. We improved our internal customer support systems and delivered company-wide awareness training to help identify and assist customers, colleagues and employees who may be affected by family violence, and we continue to develop and promote our policies and programs to help us address family violence as a trigger for financial exclusion.
Performance Report
Key initiatives – a fair go for everyone
Family violence
Corporate information
We take a long-term view of our business and plan decades in advance. We contribute to making Melbourne the world’s most liveable city. We support local sport and recreation, and contribute to clean, green urban environments that encourage community connection. We value the many contributions that Aboriginal and Torres Strait Islanders make to our community, and recognise that their cultural values and connection to Country can make us a better water utility. We make sure our services are inclusive and look after the most vulnerable members of our society, reducing the stigma around financial hardship while working with others to tackle the root causes of socioeconomic disadvantage.
In 2017 we also became one of the first water organisations to support Good Shepherd Microfinance’s Financial Inclusion Action Plan (FIAP) program, with a view to developing an integrated approach to addressing financial vulnerability.
2017-18 Highlights
We have a commitment to help our community thrive. We have pledged to advance the Sustainable Development Goals (SDGs), and are measuring our impact against these goals wherever we can. We have committed to enhancing our diverse communities’ health and wellbeing as a part of providing water and sanitation services.
Introduction
WE SUPPORT THRIVING COMMUNITIES
In 2017-18 we continued to implement our first Reconciliation Action Plan (RAP) which is endorsed by Reconciliation Australia. Our RAP has helped us make a meaningful contribution to reconciliation and Aboriginal and Torres Strait Islander affairs. Implementation of the plan has thus far seen a total of 90 staff undergo cultural awareness training to better understand Aboriginal people and their relationship with Country. We also appointed an Aboriginal Liaison Officer to establish a point of contact with the community and foster enduring relationships with Aboriginal and Torres Strait Islander peoples. YARRA VALLEY WATER ANNUAL REPORT 2017-18
14
Integrated water management partnerships
Our approach We believe that a positive workplace culture focused on staff engagement, satisfaction and effective workplace practices also ensures high performance. We have trained our leaders to inspire and support staff and implemented policies that reflect balance and diversity. We remain committed to further growing our supportive, innovative workplace to ensure the best possible outcomes for our customers, the community and our business. Key initiatives – leadership and capability
Key initiatives – culture and engagement
In 2017-18 we continued to partner with customers, seeking their input into our decision making. We achieved this through ongoing customer research that tracks our customer value proposition using quantitative and qualitative methods. Our Community Advisory Group helped us to test these insights and provided direction to maximise value for our customers.
Employee engagement and culture surveys
Performance Report
In 2017-18 we introduced the latest module of our 2020 Leadership Program – Optimising Performance. With the aim of enabling the delivery of our price determination and strategy commitments, the program focuses on improving leadership skills including interpersonal communication, strategic thinking, and coaching.
Customer engagement
In 2017 we were proud to be recognised by Aon Hewitt as a Best Employer, with an overall company engagement score of 83%. These results are more than three times the national average for the Aon Hewitt engagement survey, which measures and benchmarks how organisations can create positive workplaces. The results of the survey have been used to inform our Human Resource (HR) strategies and improvement plans for the coming years.
Annual Financial Report
In 2017-18 we also continued to use the Human Synergistics’ Organisational Culture Inventory to determine our organisation’s prevalent behavioural styles. Our results in 2018 recorded highly constructive cultural norms, particularly the people-oriented norms.
Additional Information
In 2017 we also conducted one of the most comprehensive customer engagement initiatives ever undertaken in the water industry to develop our price submission for the ESC. We considered the feedback of more than 24,000 customers before convening our citizens’ jury, where 30 diverse customers were challenged to find ‘the balance between price and service that is fair for everyone’. The process, which took place over several weekends, also provided broader insight into the way we should support vulnerable customers, provide modern and flexible services and care for the environment.
Corporate information
Our participation in DELWP Integrated Water Management (IWM) forums in the Yarra River, Dandenong Creek and Maribyrnong River catchments helped us to identify opportunities to collaborate and partner with key agencies – including planners and local councils – on shared value projects with liveability benefits. Strategic directions statements developed from the forums will provide direction on agreed visions and strategic outcomes, priority policies and frameworks, and priority projects for which we will play a lead or supporting role.
THE WAY WE WORK ENABLES EXTRAORDINARY PERFORMANCE
2017-18 Highlights
A copy of our Reconciliation Action Plan and further information about our work with Aboriginal and Torres Strait Islander peoples is available on our website.
Introduction
During the year, Karen Milward, a Yorta Yorta woman and Aboriginal and Torres Strait Islander advocate, joined the Yarra Valley Water Board, and we welcomed Inala Cooper to our Reconciliation Leadership Committee.
International partnerships
Index
In 2017-18 we continued to demonstrate our commitment to increasing access to safe water and sanitation services in developing countries through our participation in mentoring programs in Vietnam and Sri Lanka run by the Asian Development Bank and WaterLinks. Our commitment to improving access to safe water, sanitation and hygiene runs through all level of our business, with our employees actively supporting the WaterAid charity.
YARRA VALLEY WATER WAS ACCREDITED AS AN AON HEWITT BEST EMPLOYER FOR 2017.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
15
2017-18 HIGHLIGHTS CONTINUED
External services
We recognise that risk is dynamic and that we need to be flexible enough to ensure that our risk management framework remains relevant and useful to all areas of the organisation. Key initiatives – diversity and inclusion The economic, productivity and social benefits of diversity and inclusion in the workplace are well documented. In 2017-18 we continued to drive a balanced diversity agenda to elevate business performance. During the year, each of our six diversity working groups – gender diversity, cultural diversity, disability and access, flexible working, life stages and generational diversity, LGBTIQ+ diversity, and reconciliation – continued to drive changes in our business. Gender equality As at June 2018 the proportion of women employed at Yarra Valley Water was: •• Directors – 56% female •• Executive – 50% female
In 2017-18 we launched a new Supplier Code of Practice that sets out what we expect in the areas of environment, workforce occupational health and safety, community, supply chain and governance. We evaluate performance against the code and recognise and reward good performance.
•• People management – 37% female
In 2017-18 we:
•• enhanced our existing risk framework to ensure a structured and consistent approach that is relevant to all areas of the organisation
•• Technical – 33.2% female. In addition, 2018 saw a significant increase in the number of women shortlisted for technical and leadership positions (50.5%, up from 46%). This was the result of changes to our careers website and job advertisements, a renewed approach to shortlisting candidates, and the provision of unconscious bias training to all managers. LGBTIQ+ diversity Our 2018 diversity census showed that the percentage of our workforce identifying as LGBTIQ+ has nearly doubled since 2015, possibly a direct result of the presence of an LGBTIQ+ working group, which has worked towards promoting a sense of inclusion for many Yarra Valley Water staff who identify as part of this community.
Index
•• continued to embed a risk management culture across the organisation where everyone is engaged in considering risk at the front end of decision making
•• Overall workforce – 48% female
Additional Information
At Yarra Valley Water, we are striving to embed a risk management culture, based on a structured and consistent risk management framework, that delivers insights and is valued as an integral part of core business decisions. Our goal is to ensure that our risk management function is ‘the best fit for us’ managing risk in a ‘world class’ manner to drive value across the organisation.
Annual Financial Report
Supplier Code of Practice
Managing risk
Performance Report
We continued commercially providing strategic HR services to government department agencies and water corporations with a focus on helping transform culture and elevating inhouse HR capability. Since the initial launch the service has grown successfully, providing executive level support to many organisations. Culture change has been a cornerstone of the services, with development and implementation of culture surveys, team effectiveness surveys and workshops, 360 degree feedback and coaching, behavioural change programs, and leadership development workshops.
•• provided ongoing risk awareness training and assistance across the organisation.
Corporate information
In the last year we also created the TalentMap app, a simple, cost-effective cloud-based platform for assessing employee capability, and enabling forward planning and talent development. The app, which works by standardising capability judgements to agreed definitions and providing a shared language and systemic approach to assessing capability, streamlined the manual systems already utilised by the business in this area.
•• delivered easy-to-access and intuitive tools that support the conversation about risk
2017-18 Highlights
In 2017-18, 77% of our executives and divisional managers were internal appointments, a demonstration of our commitment to succession planning, talent management and building the skills and expertise of existing staff.
Introduction
Succession planning
Our LGBTIQ+ working group was particularly active in 2017-18, promoting visibility and awareness through initiatives such as organisational events to recognise International Day Against Homophobia, Biphobia and Transphobia (IDAHOBIT), Wear it Purple Day and the AFL Pride match.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
16
Key initiatives – productivity and improvement
During the year we conducted family violence training for all staff, better equipping them to recognise the signs of family violence and provide effective support. This builds on our work to improve customer support systems in this area.
Productivity commitment
Our approach
Key initiatives – real price decrease
Online efficiencies In 2017-18, our online platform, Yarra Valley Online Water (YVOW), processed 320,460 transactions compared with 271,067 in 2016-17. This, in turn, reduced transactional call volumes into the Customer Contact Centre by almost 40% compared with 2012-13, helping us to improve productivity and customer service and meet customer self-serve demands. With 24% of customers receiving an electronic bill in 2017-18, we continue to encourage customers to adopt this service with convenience and cost-saving in mind. 2017-18 also saw an increased take-up of our easyACCESS online self-service system, which enables developers, plumbers and builders to self-manage connection approvals. This system provides convenience, improves internal resource efficiency and helps us to better service the booming land development sector.
Additional Information
During the year we submitted our proposed five-year plan on services, investments and future prices to the Essential Services Commission (ESC). The final price determination from the ESC, released on 29 May 2018, confirmed that we have succeeded in delivering an advanced, fast-tracked submission, due to our leadership in community engagement and commitments to customers, combined with our operating and capital expenditure efficiency commitments.
In 2017-18 we continued our revenue cap price control, which sees customer prices reflect actual rather than forecast demands, to minimise price shocks between determinations and ensure we have sufficient revenue to cover our costs. Going forward, customer prices will continue to adjust annually to pass back excess revenue or recover revenue shortfall resulting from variances in customer numbers and demand.
Annual Financial Report
We plan our investments well in advance, considering the impact of our capital investment projects on customer prices, while ensuring they optimise community value and intergenerational equity.
Revenue cap
Performance Report
Keeping customer bills as low as possible is balanced with generating a return for our owner – the Victorian Government, and our ultimate shareholders – the people of Victoria. We pay annual dividend and tax equivalent payments to the government, which is returned to the community through government-funded services. Our prices are approved by the Essential Services Commission, which provides us with sufficient funds to deliver quality products and services to our customers.
Corporate information
By optimising operating and capital expenditure and identifying new revenue streams, we continue to deliver high-quality, affordable services now and into the future. Through improving business processes, eliminating waste, managing risk and utilising innovation and technology, we are focused on delivering the best community outcomes at a lower cost each year.
In 2017-18 we again out-performed our baseline 1% per annum controllable operating costs efficiency target. To drive ongoing cost efficiencies, we will pursue emerging technologies and process improvements to achieve a 2.5% compounding productivity per annum on our controllable operating costs. This amounts to approximately $50.6 million over the course of the next regulatory period.
2017-18 Highlights
WE MAKE EVERY CENT COUNT
Introduction
Supporting staff experiencing family violence
Index
Through our citizens’ jury process, our customers told us they did not want bill increases. As a result of these deliberations we have devised a price path that commits us to keeping typical bills flat in 2018-19, and annual bill increases below inflation for the remaining four years of the pricing period. The average annual residential bill reduction between 2013-14 and 2018-19 is $76 (or $172 in real terms). In 2017-18 a typical residential customer using 150KL of water per annum would have received an annual bill of $1,059 (200KL: $1,282).
YARRA VALLEY WATER ANNUAL REPORT 2017-18
17
2017-18 HIGHLIGHTS CONTINUED
Capital Investment program
WE ARE SAFE Our approach
Key initiatives – health and safety culture
Safety Performance Indicators After a period of steady reduction, in November 2017 our SIFR for YVW employees and contractors working on sites under our management reached zero, and our SIFR for our primary contractors continues to reduce. Lost Time Injuries (LTIs) for our staff and contractors working at Yarra Valley Water controlled sites were also at zero for 2017-18. Significant Injury Frequency Rate (YVW)
Actual
6 5 4
Index
In 2017-18 we continued to promote a culture that focuses on safety. This included initiatives to improve safety literacy, increase employee engagement and promote awareness of wellbeing. With a Global Safety Index (GSI) score of 76.5, which defines our safety culture as ‘sustainable’, we are an organisation that proudly encourages and supports staff in the reporting of hazards and incidents.
We formed our Safety, Health, Environment and Quality (SHEQ) division to control the certification and integration of our business management systems to deliver better health and safety outcomes for staff, customers and communities. In 2017-18, this division ensured we complied with and exceeded all relevant Australian and international standards, while saving time, money and resources. It also fulfilled our broader commitment to safety through a focus on prevention, as well as ensuring appropriate systems were in place for reporting and dealing with injuries and occupational illnesses.
Additional Information
We focus on leadership, systems and capability, and empower and involve our staff in their own safety and wellbeing. We believe nothing is more important than returning home safely after work, that all accidents are preventable, and that individuals can make a difference.
SHEQ division
Annual Financial Report
Our broadened approach to health and safety – to include both physical and mental wellbeing – demonstrates our multifaceted commitment to the health of our staff and contractors. This is underpinned by our organisational purpose, which prioritises ‘the health and wellbeing of current and future generations’ – including staff, contractors and members of our community.
Over the past year we also worked on improving our safety management system by developing frameworks for working at heights, asbestos management, lone worker and safe work procedures.
Performance Report
To help us keep customer bills down, in 2017-18 we designed an efficient capital program for the next five years, focused on our top 10 capital projects and embedding the ESC’s PREMO framework for assessment. This includes balancing risk and ensuring customers are not paying for projects that may be uncertain in terms of scale and timing.
Our new consultative structure replaced our health and safety committees with safety and wellbeing community forums and we increased the number of elected safety and wellbeing advocates from six to thirteen, providing more opportunity for staff to work with the safety team. We’ve also placed a stronger focus on supporting staff wellbeing.
Corporate information
The software will be released in 2018-19 to more than 200 users, delivering streamlined procurement processes, built-in approval mechanisms, targeted reporting and full visibility of our procurement activity. This will in turn enable us to deliver higher service levels, better value for money from our supply chain, more effective management of contracts and improved productivity.
an appropriate level of information to our contractor workforce to enable them to work safely. We also defined our safety relationship with external customers, including land developers and water carters.
2017-18 Highlights
In 2017-18 we continued work on our new procurement software, designed to transform our procurement and contract management from manual, transactional, compliance-driven functions into a world-class strategic tool.
Introduction
Procurement system
3 2
Consultative structure
1
In 2017-18 we implemented frameworks for safe work practices that improve productivity, optimise cost and provide
0
13/14
14/15
15/16
16/17
17/18
YARRA VALLEY WATER ANNUAL REPORT 2017-18
18
2015-16
Introduction
Other Key Safety Performance Indicators
Key initiatives – wellbeing
2016-17 2017-18
5.10
Number of ‘lost time’ standard claims for the year per 100 full-time equivalent staff members
0.32
-
-
Average cost per claim for the year
$55,608
$4,807
$275,951
Outstanding claim cost
$342,032 $28,361
$275,951
We engaged local professional services to impart knowledge around physical and holistic health services and provided staff with opportunities to sample these services in order to develop their own wellbeing strategies and routines. Peer interest groups – in areas such as gardening, healthy eating and bike riding – provided support and encouragement systems, while resilience and mindfulness seminars were held in line with our focus on mental health. Our ‘Share Your Story’ campaign further supported mental health by encouraging staff to share their mental health experience to create awareness and reduce workplace stigma, as well as increase conversation and peer support. Our Employee Assistance Program was also retained and expanded to include increasing support services.
Performance Report
10.83
Corporate information
4.64
2017-18 Highlights
Number of reported hazards / incidents for the year per 100 full-time equivalent staff members
In 2017-18 we focused on new and different ways for staff to explore various facets of wellbeing. As a result, our Employee Assistance Program was expanded to include increased support services.
Annual Financial Report
“ WE FOCUSED ON NEW AND DIFFERENT WAYS FOR STAFF TO EXPLORE THEIR WELLBEING.”
Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
19
2017-18 HIGHLIGHTS CONTINUED
•• Higher water sales as consumption exceeded budget by 8,189ML or 6.1%
•• Additional development-related activity revenue including contributions and the sale of new metering products and services to plumbers
During 2017-18 total assets have increased by $236 million as a result of the growth in infrastructure, property, plant and equipment. Total liabilities increased by $186 million in 2017-18 largely as a result of additional borrowings of $151 million which were primarily used to fund capital investments for our water and sewerage infrastructure.
Performance Report
•• Operational expenditure savings due to labour vacancies, improvements to the strategy and process in relation to the delivery of road reinstatement works and optimisation of chemical costs by utilising secondary chlorination rather than spot dosing
A final dividend of $31.4 million for the 2016-17 financial year and an interim dividend of $10.2 million for the 2017-18 financial year were paid during the year. The amount of the final dividend for the year ending 30 June 2018 will be determined after consultation between the Board, the Minister for Water and the Treasurer of Victoria.
Corporate information
•• Water and sewer service charges revenue from higherthan-budgeted customer growth and the identification of additional customers liable for a service charge from the establishment of improved billing integrity processes
Capital expenditure of $282 million was incurred during 2017-18 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 through innovative management of its capital program of works.
2017-18 Highlights
Yarra Valley Water recorded a net profit after tax of $88.5 million in 2017-18. The net profit after tax result is $26.9 million higher than the 2016-17 result and $36.6 million higher than budgeted. The additional profit above budget was generated primarily as a result of the following:
Introduction
FINANCIAL SUMMARY
Annual Financial Report
•• Savings in finance charges due to lower-than-budgeted borrowings due to higher customer receipts, lower operational and capital payments and the effective management of the debt portfolio to take advantage of market conditions to decrease finance costs in the short and long term.
Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
20
Introduction
FIVE-YEAR FINANCIAL SUMMARY 2014 $’000
Service and usage revenue
936,265
886,081
907,953
844,346
916,868
Other revenue
110,532
103,262
114,414
89,992
71,991
Total revenue
1,046,797
989,343
1,022,367
934,338
988,859
Operating and other expenses
684,073
676,265
715,774
643,780
716,520
Depreciation and amortisation
107,843
96,872
97,490
94,294
86,009
Finance costs
130,127
127,440
123,942
121,373
120,368
922,043
900,577
937,206
859,447
922,897
Profit before income tax
124,754
88,766
85,161
74,891
65,962
Income tax
(36,252)
(27,202)
(26,247)
(22,804)
(20,363)
88,502
61,564
58,914
52,087
45,599
Balance Sheet
2018 $’000
2017 $’000
2016 $’000
2015 $’000
2014 $’000
Current assets
196,849
184,292
188,616
170,982
181,733
4,769,483
4,546,209
4,350,521
4,182,941
4,141,830
4,966,332
4,730,501
4,539,137
4,353,923
4,323,563
477,154
424,582
370,903
372,117
392,565
2,814,871
2,681,759
2,612,419
2,462,634
2,395,242
Total liabilities
3,292,025
3,106,341
2,983,322
2,834,751
2,787,807
Net assets
1,674,307
1,624,160
1,555,815
1,519,172
1,535,756
Total expenses
Net profit after tax
Non-current assets Total assets Current liabilities Non-current liabilities
Annual Financial Report
2015 $’000
Performance Report
2016 $’000
Corporate information
2017 $’000
2017-18 Highlights
2018 $’000
Statement of Comprehensive Income
Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
21
2017-18 HIGHLIGHTS CONTINUED
4.70
4.66
12/13
13/14
14/15
15/16
16/17
5.26
4.52
5.17 11/12
4.47
5.20
09/10 10/11
5.02
5.37 3.87
3.83
3.41
3.10
3.39
4.40
4.50
4.37
2
4
2017-18 Highlights
3
5
4.51
RETURN ON AVERAGE ASSETS (%)
5 4
Introduction
RETURN ON EQUITY (%)
3 2 1
1
11/12
12/13
13/14
14/15
15/16
16/17
17/18
Return on equity has increased in 2017-18 primarily due to additional net water sales generated by higher customer demand, identification of customers liable for service charges from billing integrity work and growth in developer activity levels generating higher customer contributions and new metering product and services revenue.
Return on assets has increased in 2017-18 primarily due to additional net water sales generated by higher customer demand, identification of customers liable for service charges from billing integrity work and growth in developer activity levels generating higher customer contributions and new metering product and services revenue. This revenue increase has generated higher cash flows which has limited the growth in borrowings and therefore finance charges.
NET PROFIT AFTER TAX ($M)
61.56
13/14
58.91
45.60
12/13
52.09
46.38
60.80
14/15
15/16
16/17
17/18
16/17
17/18
Net profit after tax has increased in 2017-18 primarily due to additional revenues generated from net water sales, service charges and developer related activities.
100
0.5
282.26
Index
150 1.0
233.88
200
173.72
250
261.58
300
197.02
2.62
2.50
2.19
2.40
1.95
2.23
2.24
15/16
Additional Information
2.17
14/15
CAPITAL EXPENDITURE ($M)
2.5
2.48
0
228.24
13/14
239.14
12/13
228.00
11/12
278.60
09/10 10/11
INTEREST COVER TIMES
0
11/12
10
Gearing ratio has increased in 2017-18 due to increased borrowing levels to fund capital and operating payments, dividends and capital repatriation payments.
1.5
09/10 10/11
41.70
48.61
47.84
47.83
46.14
45.00
45.57
44.40
20
10
2.0
40 30
20
0
50
Annual Financial Report
30
39.90
50
40.32
70 60
60.30
80 60
40
Performance Report
GEARING RATIO (%) INTEREST BEARING DEBT TO ASSETS
17/18
88.50
09/10 10/11
Corporate information
0
0
50 09/10 10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
Interest cover has increased in 2017-18 primarily due to higher net operating cash flows from additional receipts generated from higher water sales to customers due to growth in demand.
0
09/10 10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
Capital expenditure in 2017-18 has increased a result of major projects being undertaken to service the Northern Growth Corridor including Craigieburn Sewerage Hub, Epping and Kalkallo Branch Sewer infrastructure projects. We continue to focus on the achievement of efficient outcomes through innovative design and delivery of our capital expenditure program. YARRA VALLEY WATER ANNUAL REPORT 2017-18
22
CORPORATE INFORMATION Introduction
ORGANISATIONAL CHART
2017-18 Highlights
BOARD OF DIRECTORS
Corporate information
MANAGING DIRECTOR Pat McCafferty
EXTERNAL SERVICES Anne Farquhar
Cameron Mclean
SERVICE FUTURES
GROWTH FUTURES
PEOPLE, PERFORMANCE & CULTURE
Glenn Wilson
Chris Brace
Kylie Row
DISTRIBUTION SERVICES
RETAIL SERVICES
STRATEGY & COMMUNITY
CORPORATE SECRETARY
Dona Tantirimudalige
FINANCIAL & CORPORATE SERVICES
Steve Lennox
David Snadden
Natalie Foeng
Lisa Anelli
Performance Report
CIO
Annual Financial Report
A HIGH STANDARD OF CORPORATE GOVERNANCE The Yarra Valley Water Board has overall responsibility for corporate governance which includes:
Additional Information
•• setting the strategic direction •• establishing goals for management and monitoring the achievement of these goals •• monitoring the performance of the business. We are committed to ensuring that a robust Corporate Governance Framework is in place and we review the framework regularly to ensure it aligns with best practice.
Index
This Statement sets out the main Corporate Governance practices in place during the 2017-18 financial year.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
23
CORPORATE INFORMATION CONTINUED
Sue O’Connor – 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 ten years.
Committee membership: •• Risk Management and Audit Committee
•• Sustainability, Planning, Infrastructure and Regulation Committee. Rob Skinner – Deputy Chair BE (Hons), MSc, FIEAust, MAICD
Victor Perton BEc, LLB, LLM, Dip Chinese Law, GAICD Victor Perton became a Director of Yarra Valley Water on 1 October 2015. Victor is the founder of The Australian Leadership Project and the Author of “The Case for Optimism: The Optimists’ Voices.” His experience in governance includes service on Boards including those of the Transport Accident Commission, the Federal Government’s Council on Australia Latin American Relations, the Global Integrity Summit, the Australian Centre for Financial Studies and patron of the Digital Leadership Institute. He has chaired public sector inquiries and committees on technology, justice, equal opportunity, regulatory efficiency, subordinate legislation and several other topics. His current work includes advice on optimistic leadership, Australian leadership, integrity and strategy. Victor brings 18 years’ experience as a Parliamentarian, practice as a barrister, mediator, arbitrator, businessman, private sector board member and mentor. He is a former Commissioner to the Americas promoting foreign direct investment in Victoria, supporting Victorian exporters, building global supply chains and expatriate and alumni networks. Committee membership: •• Risk Management and Audit Committee •• Sustainability, Planning, Infrastructure and Regulation Committee.
Index
Rob Skinner became a Director on 1 October 2015 and was appointed as Deputy Chair of Yarra Valley Water on 16 December 2016.
•• People and Culture Committee.
Additional Information
•• People and Culture Committee
•• Sustainability, Planning, Infrastructure and Regulation Committee (Chair)
Annual Financial Report
Sue brings to the Board over 25 years of senior leadership experience of successfully growing and transforming customer focused, technology dependent businesses operating in disrupted markets. This included 13 years at Telstra Corporation where she successfully led the establishment of a number of new businesses and completion of major cross-company transformation programs.
Committee membership:
Performance Report
Sue is a Director of Mercer Superannuation, ClimateWorks Australia, State Trustees Victoria, the Treasury Corporation of Victoria and an advisory committee member of the Monash Sustainable Development Institute. She was previously Chair of YMCA Victoria and a Director and Deputy Chair of Goulburn Valley Water (2008-2015).
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.
Corporate information
The Directors come from a wide range of backgrounds and bring to the Board an appropriate mix of skills and experience.
Rob was Managing Director at Melbourne Water from 2005 to 2011, and Chief Executive Officer of the City of Kingston from 1996 to 2005. He was appointed to the Australian Water Partnership Committee in October 2015.
2017-18 Highlights
The Yarra Valley Water Board comprises eight independent non-executive Directors and one executive Director, who is the Managing Director, with the non-executive Chair and nonexecutive Directors being appointed by the Minister for Water. The Managing Director is appointed by the Board in accordance with the Water Act 1989.
Introduction
BOARD
He is a Professorial Fellow and Director at Monash University’s Water Sensitive Cities Centre, Chair of WaterAid Australia and WaterAid International, Deputy Chair of the Co-operative Research Centre for Water Sensitive Cities and Board member of the International Centre of Excellence for Water Resources Management. He is a Distinguished Fellow of the International Water Association (IWA) and Chair of the IWA’s Cities of the Future program.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
24
Introduction
Anita Roper became a Director of Yarra Valley Water on 1 October 2015.
Helen Thornton became a Director of Yarra Valley Water on 1 October 2015. She has been a non-executive director for over 18 years. Helen is currently Deputy Chair of Treasury Corporation of Victoria and a director of Legal Practitioners Liability Committee, Austin Health, ISPT Pty Ltd, Ansvar Insurance Ltd and Zoos Victoria (retirement from the board effective 30 June 2018). She is an independent member of the Risk and Audit Committees of the Departments of Environment, Land, Water and Planning, Health and Human Services and Education and Training.
Anita is currently a member of the Victorian Public Sector Commission Advisory Board and Chair of the Victorian Leadership Academy Advisory Group. She was previously a non-executive director of Pacific Hydro, member of AngloGold Ashanti’s Global Panel on Sustainability, a Board Member of the Women’s Network for a Sustainable Future, a Board Member of the Fitzroy Football Club and a member of the Board of Inquiry into the Hazelwood Coal Mine Fire.
Helen brings extensive experience in finance, governance and risk management having been the Vice President Risk Management at BlueScope Steel Ltd and senior roles at BHP Ltd and significant finance and audit experience having worked in professional services firms for over 12 years. Committee membership:
Committee membership:
•• Risk Management and Audit Committee (Chair)
•• People and Culture Committee (Chair)
•• Sustainability, Planning, Infrastructure and Regulation Committee.
•• Sustainability, Planning, Infrastructure and Regulation Committee.
Eric became a Director of Yarra Valley Water on 1 October 2015.
Committee membership: •• Risk Management and Audit Committee •• Sustainability, Planning, Infrastructure and Regulation Committee.
Karen is the owner of Karen Milward Consultancy Services and is currently the Chair of Mullum Mullum Indigenous Gathering Place, Co-Chair of the Victorian Aboriginal Economic Board and Chair of Kinaway Chamber of Commerce Victoria Ltd, Co-Chair Indigenous Community Volunteers, Deputy Chair, Ganbina Ltd and the Melbourne Metro Rail Authority’s Aboriginal Advisory Council. Karen was formerly the Deputy Chair of First Nations Foundation, a Director of Aboriginal Housing Victoria, and was a member of the Visitor Economy Ministerial Advisory Committee and Small Business Ministerial Council. Karen brings to the Board extensive experience in working with Aboriginal and Torres Strait Islander communities, having worked on complex projects commissioned by public sector agencies responsible for policies, programs and services impacting on Aboriginal communities and also having served on numerous committees and reference groups, including the Premier’s Aboriginal Advisory Council.
Index
Eric brings considerable governance experience having served on numerous other Boards, including East Gippsland Water, Southern Rural Water, East Gippsland Environmental Sustainability Advisory Board, East Gippsland Catchment Management Authority Lands Advisory Committee, Within Australia and the East Gippsland TAFE Industry Advisory Committee. Eric has also previously served as Executive Officer of the Gippsland Lakes Management Council.
Karen Milward became a Director on 1 October 2017.
Additional Information
Eric is an Environmental Scientist with over 25 years’ professional experience throughout Australia and Malaysia. He is currently Managing Director and Principal Consultant of Ethos NRM, specialising in ecological impact assessment, environmental approvals and strategic natural resource management.
Karen Milward GAICD
Annual Financial Report
Eric Sjerp BSc (Geol. Geog.), MEIANZ, MAICD
Performance Report
Anita has over 30 years’ experience in senior management roles working with business, government, communities and multilateral agencies in Australia, Canada, UK and the USA. Her executive career spans the private and public sectors, including Chief Executive Officer at Sustainability Victoria and Global Director of Sustainability with Alcoa in New York.
Corporate information
Helen Thornton BEc, CA, GAICD
2017-18 Highlights
Anita Roper FAIM, GAICD
Committee membership: •• People and Culture Committee •• Sustainability, Planning, Infrastructure and Regulation Committee. YARRA VALLEY WATER ANNUAL REPORT 2017-18
25
CORPORATE INFORMATION CONTINUED
Retirement of Directors on 30 September 2017
Victoria Marles became a Director on 1 October 2017.
Greg Camm became a Director of Yarra Valley Water on 1 October 2013. Greg brings to the Board financial and business acumen. He retired from his role as Chief Executive Officer of Superpartners Ltd in 2012 and was previously the Managing Director and Chief Executive Officer of AMP Financial Services New Zealand 2005–2007 and held a number of positions with the Australia and New Zealand Banking Group 1989–2005 including Managing Director, Australian Retail Banking 2004–2005.
•• Risk Management and Audit Committee •• Sustainability, Planning, Infrastructure and Regulation Committee.
Pat McCafferty was appointed Managing Director of Yarra Valley Water on 1 July 2014. Pat is Chair of the Water Services Association of Australia, Chair of the Thriving Communities Partnership and a member of the Monash Infrastructure Advisory Council.
Sue Friend became a Director of Yarra Valley Water on 1 January 2010. Sue has worked in professional services firms for more than 25 years. She has a background in audit, internal audit and forensic accounting gained from 15 years working with PricewaterhouseCoopers. Sue is currently a Director of Sapere Research Group providing advice to legal and regulatory clients. Sue is a Board member of Melbourne Market Authority, an independent Audit Committee Member of the Municipal Association of Victoria and independent chair of the Audit and Risk Committee of the County Court of Victoria. Sue was appointed a Director of South Gippsland Water effective from 1 October 2017.
Additional Information
Pat has extensive experience across the water sector, covering a wide range of strategic and operational leadership positions, including planning, economic regulation, finance, marketing and customer operations.
Susan Friend Bcom, LLB, CA (NZ), MAICD
Annual Financial Report
Pat McCafferty – Managing Director BBus (Acc), Exec. MBA, GAICD, FWCLP, FIWA
Greg is a Trustee/Director of the Australian Cancer Research Foundation, Chairman of AMIST Super, a Director of Bank Australia Ltd, a Director of SEDA Group Ltd, and a member of the Customer Forum of Ausnet Services Ltd.
Performance Report
Committee membership:
Corporate information
Victoria brings to the Board extensive knowledge in the areas of natural resource management, climate change adaption, biodiversity conservation/offsets and consumer law.
Greg Camm MBA, CPA, SFFin, MAICD
2017-18 Highlights
Victoria is the Chief Executive Officer of Trust for Nature (Victorian Conservation Trust) and is currently the Chair of the Abbotsford Convent Foundation, and the Consumer Action Law Centre. She has practised as a lawyer in the private, not for profit and public sectors in media/communications and consumer complaints law. Victoria has held the positions of Chief Executive Officer of the Legal Services Board (Victoria), Legal Services Commissioner (Victoria), Deputy Telecommunications Industry Ombudsman and has been a trustee of the Victorian Arts Centre Trust.
Introduction
Victoria Marles BA, Dip Ed, Dip Arts (Dramatic Arts), LLB (Hons), LLM, FAICD
Committee membership: •• People and Culture Committee.
Index
•• Sustainability, Planning, Infrastructure and Regulation Committee.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
26
Introduction
Induction and training
The Board Charter sets out clearly the role, responsibilities and powers of the Board and incorporates all aspects of Board governance, along with referencing the source of the items included in the Charter.
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.
Code of Conduct
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.
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 the Corporation’s expense, subject to the prior approval of the Chair. No Director exercised this right during the year.
In accordance with the Board Policy, an externally facilitated Performance Review of the Board was conducted in January/ February 2018. As part of the review, a survey was completed by all Directors and members of the Executive Team and interviews were conducted. The results were excellent and an improvement on the very high standard already set in previous years.
Learning and Development In the 2017-18 financial year the Directors undertook a number of activities that supported their ongoing learning and development. Such activities included site visits to a sewage treatment plant and a tour of emergency maintenance works in a residential zone in our district. The Directors were also exposed to Senior Management presentations for the purpose of learning about various operations of the business, and external presentations from both water and non-water industry representatives focusing on topics that inform the strategic direction of the business.
Additional Information
The review identified some potential enhancements for the Board to explore regarding the structure of Committees and meetings schedules. The Board agreed it was timely to consider the recommendations to ensure the Board is well placed for the current business environment and priorities, to fulfil its oversight role of the business’ priorities over the longer term and to continue to build on Board effectiveness.
With new Directors being appointed in October 2017, an induction program was conducted which included the provision of Reference Manuals, briefings by the Managing Director and the Leadership Team, attendance at the Water Industry Director Development Program, participation in a ‘buddy’ system (pairing the new Board member with an existing Board member to be a guide on how the Board operates) and ongoing briefings on key business issues.
Annual Financial Report
Board performance review
Directors also attend seminars and other events to broaden their exposure to water industry issues and initiatives.
Performance Report
Independent professional advice
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.
Corporate information
The Board has adopted a Directors’ Code of Conduct based on the Code of Conduct issued by the Public Sector Standards Commissioner.
2017-18 Highlights
BOARD CHARTER
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
27
CORPORATE INFORMATION CONTINUED Introduction
BOARD COMMITTEES
2017-18 Highlights
The Board has established three Committees of Directors to assist it in 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 as follows:
People and Culture Committee
The People and Culture Committee assists the Board in reviewing strategies and policies to ensure that 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 Corporation’s Diversity Policy, Strategy and Action Plans.
Sustainability, Planning, Infrastructure and Regulation Committee
The Sustainability, Planning, Infrastructure and Regulation Committee assists the Board in reviewing the effectiveness and efficiency of the business’ asset management practices in relation to water and sewerage infrastructure, reviewing and recommending the adoption of the business’ Price Submission, overseeing the audits conducted in the Integrated Audit Program and monitoring innovative developments.
Performance Report
The Risk Management and Audit Committee assists the Board in fulfilling its duties and responsibilities relating to risk management, the effectiveness of internal controls and the accounting and reporting practices of the business, reviewing financial reports and overseeing the audits conducted by the internal and external auditors.
Corporate information
Risk Management and Audit Committee
S O’Connor
9 of 9
3 of 4
2 of 3
3 of 4
R Skinner
8 of 9
-
3 of 3
4 of 4
G Camm (1)
2 of 2
-
1 of 1
1 of 1
S Friend (2)
2 of 2
1 of 1
-
1 of 1
V Marles (3)
6 of 7
3 of 3
-
3 of 3
K Milward (4)
6 of 7
-
2 of 3
1 of 3
P McCafferty
9 of 9
-
3 of 3
4 of 4
V Perton
8 of 9
3 of 4
-
2 of 4
A Roper
9 of 9
-
3 of 3
4 of 4
E Sjerp
9 of 9
4 of 4
-
4 of 4
H Thornton
8 of 9
4 of 4
-
4 of 4
Index
Sustainability, Planning, Infrastructure and Regulation Committee Meetings
Additional Information
Board of Directors Meetings
Risk Management and Audit Committee People and Culture Meetings Committee Meetings
Annual Financial Report
DIRECTORS’ AND MEMBERS’ ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
(1) Greg Camm retired as a Director on 30 September 2017. (2) Sue Friend retired as a Director on 30 September 2017. (3) Victoria Marles was appointed as a Director from 1 October 2017 and a member of the Risk Management and Audit Committee and Sustainability, Planning, Infrastructure and Environment Committee on 15 December 2017. (4) Karen Milward was appointed as a Director from 1 October 2017 and a member of the People and Culture Committee and Sustainability, Planning, Infrastructure and Environment Committee on 15 December 2017.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
28
As Managing Director, Pat is also a member of the Board. Refer to details under Directors. Chris Brace – General Manager Growth Futures BE (Chem), BS, GCert (Man)
Natalie Foeng – Chief Financial Officer BCom (Acc), CA
Steve Lennox – General Manager Retail Services BBus (Acc), CPA, ACIS, AGIA
Kylie Row – General Manager People, Performance and Culture BA, DipBus Kylie is responsible for developing and implementing the human resources strategy for the business, including workforce planning, organisational culture, capability development and diversity. Kylie is also responsible for developing and maintaining systems for recruitment, onboarding, succession planning and performance management.
Dona currently holds one non-executive Director role in a not-for-profit organisation and is a Director of the Institute of Water Administrators. Glenn Wilson – General Manager Service Futures BE (Civil), BBus (Admin) Glenn is responsible for enabling the transformation of our core services (both retail and distribution) in line with our corporate objectives to improve productivity and the overall customer experience - including the implementation of process improvements, new technologies and innovations. He is also responsible for our long-term asset management planning. Cameron McLean – Chief Information Officer BBus (Admin), Graduate Certificate Change Management Cameron is responsible for the strategic direction of information technology to achieve the business objectives of Yarra Valley Water. This includes the development and delivery of the Digital Strategy, Enterprise Architecture and IT projects. He is also responsible for the operation, maintenance and support of IT systems, sourcing and procurement of IT products and services and the management of IT vendors.
Index
Steve is responsible for customer operations functions. He leads a group that delivers meter reading, billing management, debt collection, Customer Contact Centre operations and commercial and development services, along with the development and implementation of support programs for customers in financial difficulty.
Dona is responsible for managing our water, recycled water and sewerage infrastructure to ensure it delivers our desired customer service levels and meets applicable environmental performance standards. She is primarily responsible for optimisation of the existing infrastructure networks, maintenance and renewal of infrastructure, and safety and quality for Yarra Valley Water.
Additional Information
Natalie is responsible for overall oversight of Financial and Corporate Services at Yarra Valley Water. This includes business management reporting, statutory accounting, financial planning, treasury and taxation. Her role also includes statutory compliance, governance, insurance, risk management, auditing, property management, legal services and records management.
Dona Tantirimudalige – General Manager Distribution Services BEng (Hons), M. Public Policy and Management, GAICD, MIWA
Annual Financial Report
Anne is currently working with a number of regional water utilities providing strategic HR advice in shared services arrangements. This work aims to strengthen culture and capability across the Victorian water sector, ultimately delivering new efficiencies and improving customer and staff satisfaction.
His role includes long-term strategy development, business planning, pricing and economic regulatory affairs, corporate sustainability, strategic research, marketing and customer programs, community inclusion and engagement, communication and stakeholder engagement.
Performance Report
Anne Farquhar – General Manager External Services: Culture and Capability Cert Bus Mgt, GAICD
David is responsible for providing strategy leadership and programs that achieve greater customer and community connection and value, and represents the business in water industry policy and reform activities.
Corporate information
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 develop new urban water futures that generate greater shared benefits for all stakeholders. He is accountable for the procurement of new infrastructure to service growth as well as the delivery of major upgrade projects for existing infrastructure.
David Snadden – General Manager Strategy and Community BE (Civil), MBA
2017-18 Highlights
Pat McCafferty – Managing Director BBus (Acc), Exec. MBA, GAICD, FWCLP
Introduction
OUR LEADERSHIP TEAM
Lisa Anelli – Corporate Secretary BCom (Acc), CA, GAICD Lisa Anelli was appointed Corporate Secretary of Yarra Valley Water on 23 February 2018. She is responsible for ensuring compliance with statutory and regulatory requirements and governance related administrative tasks of the Board and the organisation. YARRA VALLEY WATER ANNUAL REPORT 2017-18
29
CORPORATE INFORMATION CONTINUED Introduction
RECRUITMENT
We believe that a great culture delivers great outcomes. It provides the foundation for a high-performing workplace where we collaborate with partners and stakeholders to deliver exceptional outcomes for our customers and the environment. Creating this constructive workplace culture requires a holistic approach, encompassing all aspects of the employment life cycle, such as recruitment, communication, role clarity, recognition, development, equity and leadership. Our focus on culture ensures we employ the right staff, provide them with clear direction and challenging work, enable performance through strong leadership and honest feedback, and provide ongoing development through targeted learning opportunities.
Yarra Valley Water is 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 the key selection criteria and other accountabilities without discrimination.
“WE ARE SAFE” Yarra Valley Water is committed to the safety and wellbeing of our staff, partner organisations and members of the public. Our safety commitment “We Are Safe” is embedded in everything we do. Our 2020 Strategy Safety outcomes are:
Annual Financial Report
•• Safety exists as each person’s responsibility •• We make our workplaces safe •• We carry out our work without harming ourselves or others. These safety outcomes are supported by our “We Are Safe” behaviours statement, compliance with occupational health and safety legislation and using our accredited Safety Management System.
Additional Information
We do not tolerate discrimination and take a proactive approach to ensure reasonable and proportionate measures are in place to monitor and improve practices and behaviours. All employees are required to comply with relevant Federal and State legislation that establishes grounds on which discrimination is illegal including but not limited to the Acts relating to Occupational Health and Safety, Equal Employment Opportunity, Discrimination and Human Rights. Employees are required to complete awareness training regarding Discrimination which is renewed every two years.
The diversity of our people is fundamental to extraordinary performance and we recognise the responsibility we have in creating an inclusive workplace and ensuring equality and fair treatment across the business. Our Diversity Strategy is the roadmap to implementing the programs, practices, measures and targets we need to attract and retain a diverse workplace. Employees complete awareness training, with renewals every two years.
Performance Report
At Yarra Valley Water, it is our strategic intent to create a vibrant workplace achieving exceptional business outcomes, successful partnerships and personal satisfaction. We are committed to providing fair and equitable treatment for all employees in the workplace including partners, contractors, work experience students, suppliers and agents, both on and off site, when they are working for us.
DIVERSITY Corporate information
FAIR TREATMENT AT WORK – DISCRIMINATION
2017-18 Highlights
OUR PEOPLE
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
30
Introduction
EMPLOYMENT DATA
Full time
Part time
Casual
Total
FTE 2017-18
Full time
Part time
Casual
Total
FTE 2016-17
Male
307
13
16
336
324.2
298
16
11
325
314.5
Female
199
93
16
308
271.0
194
91
9
294
261.5
TOTALS
506
106
32
644
595.2
492
107
20
619
576.0
15-24
15
1
15
31
21.7
18
2
8
28
22.5
25-34
152
17
8
177
167.4
151
21
7
179
170.4
35-44
143
41
3
187
171.9
149
39
2
190
176.0
45-54
113
26
6
145
134.4
94
25
3
122
112.8
55-64
70
16
-
86
83.0
72
15
-
87
83.3
65+
13
5
-
18
16.8
8
5
-
13
11.0
506
106
32
644
595.2
492
107
20
619
576.0
9
-
-
9
9.0
10
-
-
10
10.0
Senior manager
29
-
-
29
29.0
21
1
-
22
21.8
Administration and field staff
468
106
32
606
557.2
461
106
20
587
544.2
TOTALS
506
106
32
644
595.2
492
107
20
619
576.0
2017-18 Highlights
The following table discloses the head count and full-time equivalent (FTE) staff of all active employees of the corporation, employed in the last full pay period in June 2018.
Gender
Corporate information
Age
Performance Report
TOTALS Classification
Annual Financial Report
Executive
Additional Information
Staffing levels changed over the course of the year with the insourcing of roles from external contractors to lower overall costs, additional customer service staff to service growing volumes, and filling vacancies from the previous year. The following table disclosed the annualised total salary (excluding super) for senior employees of the corporation, categorised by classification. The salary amount is reported as the full-time annualised salary. Income band (salary)
Senior Manager
$140,000 - $159,999
-
16
$160,000 - $179,999
-
10
$180,000 - $199,999
-
1
$200,000 - $219,999
-
1
$220,000 - $239,999
5
-
$240,000 - $259,999
2
-
$260,000 - $279,999
1
1
$380,000 - $399,999
1
-
Total
9
29
Index
Executive
YARRA VALLEY WATER ANNUAL REPORT 2017-18
31
CORPORATE INFORMATION CONTINUED Introduction
INFORMATION AND COMMUNICATION, TECHNOLOGY(ICT), EXPENDITURE
Business as usual (BAU) BAU ICT Expenditure $’000
NON BAU Total ICT Expenditure $’000
Operational Expenditure $’000
Capital Expenditure $’000
ICT Depreciation $’000
40,036
491
17,222
22,323
CONSULTANCY EXPENDITURE The following is a summary of consultancy expenditure incurred by Yarra Valley Water during 2017-18. Details of consultancies (valued at less than $10,000)
Details of consultancies (valued at $10,000 or greater)
Details of individual consultancies are outlined on Yarra Valley Water’s website.
GOVERNMENT ADVERTISING EXPENDITURE
LEGISLATIVE COMPLIANCE Privacy and Data Protection Act 2014
As the holder of our customers’ confidential and personal information, Yarra Valley Water is 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 Yarra Valley Water is legally obliged to disclose privacy breaches - related to Tax File Numbers (TFN).
There have been no disclosures received by Yarra Valley Water in 2017-18 for notification to the Independent Broad-based Anti-Corruption Commission in relation to the operation, activities or officers of Yarra Valley Water. Freedom of Information Act 1982 The Freedom of Information Act 1982 (the Act) allows the public a right of access to documents held by Yarra Valley Water. 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 has a right to apply for access to documents held by Yarra Valley Water. This comprises documents both created by Yarra Valley Water or supplied to Yarra Valley Water by an external organisation or individual, and may also include maps, films, microfiche, photographs, computer printouts, computer discs, tape recordings and videotapes.
Index
Yarra Valley Water falls into the definition of a Victorian PublicSector agency under section 13 of the Privacy and Data Protection Act 2014(Vic), and consequently complies with the Act.
Yarra Valley Water has procedures in place to help employees and contractors understand the requirements and obligations under the Protected Disclosure Act 2012 and to facilitate the making and handling of disclosures and the notification of such disclosures to the Independent Broad-based Anti-Corruption Commission. These procedures are available to the public at Yarra Valley Water’s website.
Additional Information
Yarra Valley Water’s expenditure in the 2017-18 reporting period on government campaign expenditure did not exceed $100,000.
Protected Disclosure Act 2012
Annual Financial Report
In 2017-18 the Corporation engaged 12 consultancies where the total fees payable to the consultants were $10,000 or greater. Total expenditure incurred during the reporting period in relation to these consultants was $842,513 (GST exclusive)
A Privacy Policy and Code of Practice is in place for our employees, contractors and agency staff to ensure that customer information is protected.
Performance Report
In 2017-18 the Corporation engaged six 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 $38,557 (GST exclusive).
Corporate information
14,183
2017-18 Highlights
For the 2017-18 reporting period, Yarra Valley Water had a total ICT expenditure of $54.219 million (with the majority being depreciation) with the details shown below:
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, such as legal advice; personal information about other people; and information provided to Yarra Valley Water in-confidence.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
32
FOI requests can be lodged online at www.foi.vic.gov.au. An application fee of $28.90 applies. Access charges may also be payable if the document pool is large, and the search for material, time consuming. Access to documents can also be obtained through a written request to Yarra Valley Water’s Freedom of Information team, as detailed in s17 of the Freedom of Information Act 1982.
Requests for documents in the possession of Yarra Valley Water should be addressed to:
General enquiries relating to Freedom of Information can be made by telephoning (03) 9872 1238 between 8.30 am and 4.30 pm, Monday to Friday.
In 2017-18: Number of major works projects undertaken by Yarra Valley Water (greater than $50 000)
Nil
Number of building permits, occupancy permits or certificate of final inspection issued in relation to buildings owned by the entity;
Nil building permits
Number of emergency orders and building orders issued in relation to buildings
Nil emergency orders
Number of buildings that have been brought into conformity with building standards during the reporting period
Nil buildings brought into conformity
Annual Financial Report
Frank Portelli Manager, Risk and Corporate Services Yarra Valley Water Private Bag 1 Mitcham, Victoria, 3132
In relation to existing buildings, Yarra Valley Water’s 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 preventive maintenance routine of mechanical services and monthly and annual fire service audits. These inspections then inform the works program which is delivered annually through existing maintenance contracts.
Performance Report
When making an FOI request, applicants should ensure requests are in writing, and clearly identify what types of material/documents are being sought.
Yarra Valley Water owns government buildings located at Lucknow Street, Mitcham and consequently is required to include a statement on its compliance with the building and maintenance provisions of the Building Act 1993 in relation to that building. Yarra Valley Water requires that appropriately qualified consultants and contractors are engaged for all proposed works on land controlled by Yarra Valley Water and that their work and services comply with current building standards. All such consultants and contractors are expected to have appropriate mechanisms in place to ensure compliance with the building and maintenance provisions of the Building Act 1993, Building Regulations 2018 and the National Construction Code.
Corporate information
Making a request
Building Act 1993
2017-18 Highlights
If an applicant is not satisfied by a decision made by Yarra Valley Water, under section 49A of the Act, 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.
Introduction
From 1 September 2017, the Act has been amended to reduce the Freedom of Information (FOI) processing time for requests received from 45 to 30 days. In some cases, this time may be extended.
Nil occupancy permits Nil certificates of occupancy
Nil building orders
Index
During 2017-18, Yarra Valley Water received 28 applications. All requests were received from the general public. Yarra Valley Water made 25 FOI decisions during the 12 months ending 30 June 2018. Full access to all documents was provided in response to 23 requests and in two cases, no documents were identified. The average time taken to finalise requests in 2017-18 was 30 days. During 2017-18, nil requests were subject to a complaint/internal review by OVIC and nil progressed to VCAT.
Additional Information
Freedom of Information statistics
Further information Further information regarding the operation and scope of FOI can be obtained from the Act; regulations made under the Act; and foi.vic.gov.au.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
33
CORPORATE INFORMATION CONTINUED Other Information
Yarra Valley Water implements the Victorian Industry Participation Policy (VIPP) in accordance with section 9 of the Victorian Industry Participation Policy Act 2003.
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
•• An average of 91.2% of local content commitment was made
•• details of changes in process, fees, charges, rates and levies charged by the entity
During 2017-18 Yarra Valley Water completed one Local Jobs First -VIPP applicable procurements totalling $4.3 million, located in metropolitan Melbourne with a commitment of 100% local content.
During 2017-18, there were three small to medium sized businesses that prepared a VIPP Plan for contracts, successfully appointed as Principal Contractor.
Yarra Valley Water commenced three contracts with a total of 98% estimated to be of local content to which a VIPP Plan or Local Industry Development Plan(LIDP) was not required, as the procurement activity was local by nature.
•• 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
Additional Information
During 2017-18, four had the minimum formal weighting of 10% applied for local content in the tender evaluation of the VIPP Plan.
•• details of major research and development activities undertaken by the entity
Annual Financial Report
The outcomes expected from the implementation of the Local Jobs First -VIPP to this project was 100% of local content outcome was recorded, a total of 10 (AEE) retained and no positions, including apprenticeships/traineeships were created.
•• details of any major external reviews carried out on the entity
Performance Report
•• A total of two positions for apprenticeships/trainees were committed, including the creation of one new apprenticeships/trainees.
Corporate information
The outcomes expected from the implementation of the Local Jobs First -VIPP to these projects where information was provided are as follows:
•• A total of 118 jobs (annualised employee equivalent (AEE)) were committed, including the creation of 96 new jobs and the retention of 22 jobs (AEE)
2017-18 Highlights
During 2017-18 Yarra Valley Water commenced ten Local Jobs First -VIPP applicable procurements totalling $110.25 million. All of the projects were located in metropolitan Melbourne.
Introduction
Victorian Industry Participation Policy Disclosures
–– services provided –– expenditure committed to for each engagement.
Competitive Neutrality Policy Index
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.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
34
Introduction
FINANCIAL MANAGEMENT COMPLIANCE ATTESTATION STATEMENT
2017-18 Highlights
I Sue T O’Connor, on behalf of the Responsible Body, certify that Yarra Valley Water has complied with the applicable Standing Directions of the Minister for Finance under the Financial Management Act 1994 and Instructions.
Corporate information
Sue T O’Connor Chair
Performance Report Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
35
YARRA VALLEY WATER ANNUAL REPORT 2017-18
36
PERFORMANCE REPORT 2017-18
YARRA VALLEY WATER ANNUAL REPORT 2017-18
37
PERFORMANCE REPORT Introduction
FINANCIAL PERFORMANCE INDICATORS 2017-18 Target
2016-17 Result
2017-18 Variance to Result Prior Year Notes
Variance to Target
Notes
26.6%
1b
47.84%
48.61%
1.6%
-
-6.4%
-
26.85%
59.37%
52.00%
-12.4%
2a
93.7%
2b
0.44
0.48
0.44
-8.3%
-
-
-
Return on Assets Earnings before net interest and tax / average total assets * 100
4.44%
4.66%
5.26%
12.9%
3a
18.5%
3b
F6
Return on Equity Net profit after tax / average total equity * 100
3.28%
3.87%
5.37%
38.8%
4a
63.7%
4b
F7
Earnings Before Interest, Tax, Depreciation and Amortisation Earnings before interest, tax, depreciation and amortisation/total revenue *100
31.66%
31.65%
34.65%
9.5%
-
9.4%
-
F2
Gearing Ratio Total debt (including finance leases) / total assets * 100
51.94%
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
Annual Financial Report
-
Performance Report
4.8%
Cash Interest Cover Cash flow from operations before net interest and tax payments / net interest payments
Corporate information
2.07 times 2.50 times 2.62 times
F1
2017-18 Highlights
Performance Indicator
VARIANCE EXPLANATIONS Additional Information
1b Higher than budgeted operating cash flows from additional receipts. The additional receipts are primarily generated from customer demand increasing, resulting in higher water usage sales and higher than budgeted levels of developer activity, resulting in additional new customer contributions and sales of new metering related products and services to plumbers. Savings have also been achieved in interest payments due to lower than budgeted borrowings primarily because of additional water sales and savings in the delivery of the capital program. 2a The difference between this year’s result and last year’s result is due to higher capital payments in 2017-18 due to growth in the capital program. In 2017-18 we achieved an increase in operating cash flow compared with the prior year due primarily to higher water sales to customers due to growth in demand. However, this increase in operating cash flows was offset by higher dividend payments made in 2017-18 ($18.8m) compared with prior year. The increase in dividends was the result of higher year end profit in 2016-17 impacting final dividend payment in 2017-18 ($8.6m) and an interim dividend ($10.2m) being paid in 2017-18. No interim dividend was paid in 2016-17.
Index
2b Higher net operating cash flows from additional water sales, higher than budgeted developer activity levels and savings achieved in the delivery of the capital program. 3a The difference between this year’s result and last year’s result is primarily due to increasing revenue from additional water sales from higher customer demand in 2017-18. The average asset value also decreased as a result of a $32.8m reduction as part of the 30 June 2018 infrastructure valuation. 3b Additional water sales and higher levels of developer activity. The additional cash receipts from these items along with lower capital expenditure compared to budget resulted in lower than budgeted borrowing levels. As a result, savings were achieved in finance charges. 4a The difference between this year’s result and last year’s result is due to higher profit after tax from additional service charges, higher water sales and growth in developer related revenue. Average equity has decreased as a result of the capital repatriation payment to the Government in June 2018 and a reduction in the asset revaluation reserve as at 30 June 2018. 4b The difference between this year’s result and last year’s result is due to higher profit after tax from additional service charges, higher water sales, growth in developer related revenue and savings in finance charges from lower than budgeted borrowings. A decrease in the asset revaluation reserve as part of 30 June 2018 infrastructure revaluation adjustments reduced average equity.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
38
Introduction
WATER AND SEWERAGE SERVICE PERFORMANCE INDICATORS 2017-18 Target
2016-17 Result
2017-18 Variance to Result Prior Year
Notes
Variance to Target
Notes
95.3%
98.1%
2.9%
-
0.4%
-
SS2
Sewer spills interruptions Number of residential sewage customers affected by sewerage interruptions restored within 4 hours
96.8%
76.1%
86.0%
13.0%
5a
-11.2%
5b
WS1
Unplanned water supply interruptions Number of customers receiving > 5 unplanned interruptions in the year / total number of water (domestic and non-domestic) customers * 100
0.042%
0.007%
0.021%
200.0%
6a
-50.0%
6b
WS2
Interruption time Average duration of unplanned water supply interruptions
104.4 minutes
118.2 minutes
102.9 minutes
-12.9%
7a
-1.4%
-
WS3
Restoration of unplanned water supply Unplanned water supply interruptions restored within 5 hours / total unplanned water supply interruptions * 100
96.3%
96.1%
96.5%
0.4%
-
0.2%
-
Annual Financial Report
97.7%
Performance Report
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
Corporate information
SS1
2017-18 Highlights
Performance Indicator
VARIANCE EXPLANATIONS Additional Information
5a & 7a There has been improved performance of our maintenance contractor in a number of areas including the efficient dispatching of work, reliability of field computing system and field crew management, skills and competencies. 5b Although overall improvements from the previous year have been achieved, the target has not been met. We are working closely with the maintenance contractor to continue to improve performance in 2018-19. It is expected that this KPI will continue to improve. 6a
We have had an increase in the number of customers experiencing >5 water supply interruptions. The customers affected are within 6 separate water supply isolation areas. As a priority we have instituted works in each of these isolation areas to target the root cause of the issues and mitigate the risk of these customers experiencing any further interruptions. Notwithstanding, this result remains well below the target.
6b Our continued proactive approach in the management of customers receiving multiple interruptions has ensured we have delivered outcomes significantly below the target.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
39
PERFORMANCE REPORT CONTINUED Introduction
CUSTOMER RESPONSIVENESS PERFORMANCE INDICATORS 2016-17 2017-18 Result Result
Variance to Prior Year
Variance Notes to Target Notes
Water Quality Complaints Number of complaints per 1000 customers
4.30
3.00
3.23
7.7%
8a
-24.9%
8b
CR2
Sewerage service quality complaints Number of complaints per 1000 customers
0.10
0.65
0.84
n/a
9a
n/a
9b
CR3
Sewerage odour complaints Number of complaints per 1000 customers
0.30
0.17
0.17
-
-
-43.3%
10b
CR4
Billing and account complaints Number of complaints per 1000 customers
1.20
3.46
2.83
-18.2%
11a
n/a
11b
Corporate information
CR1
2017-18 Highlights
2017-18 Target
Performance Indicator
VARIANCE EXPLANATIONS
Performance Report
8a The increase was predominantly due to some localised water quality issues resulting in complaints about aerated/cloudy water and dirty water following burst water mains. 8b A combination of factors including improved management of operational changes, and targeted cleaning of 250km of water mains using a combination of cleaning methods have all contributed to maintaining lower than targeted customer complaints. 9a & 9b Comparisons between the current and prior year are not valid as the 2017-18 result is calculated using a different definition of a complaint. We upgraded our approach to recording sewer service and reliability complaints in the April to June 2017 quarter which increased the volume of complaints recorded. This change ensures we fully align with the Essential Services Commission definition of a complaint. The target and prior year results have not been restated under the new method as the data is unable to be calculated and as such the comparison between current year and the target is not possible. We now have data which provides greater insights into service failures, customer impacts and asset performance and how we can address the root cause. We are focusing on delivering best practice complaint handling practices and seeking to resolve complaints fairly and in partnership with our customers.
Annual Financial Report
10b The continuation of our odour management strategy including proactive monitoring and treatment of problem areas have resulted in a performance level significantly better than target. 11a & 11b In 2016-17, based on the Essential Services Commission audit feedback, we revised our definition and reporting of a complaint, which has increased the number of reported complaints. As a result, comparisons with the target are no longer valid. The 2017-18 target of 1.2 was not changed as it aligns with the forecast performance in our Water and Corporate Plans which were established prior to 30 June 2017. Under the revised methodology to determine complaint numbers we have established a target for the 2018-19 financial year of 3.4. If this target is applied to our 2017-18 actual results we are 24.5% below the target. The 2016-17 and 2017-18 actual results are comparable as the same methodology has been applied in both years. We continue to actively manage the billing and account complaint process with the 2017-18 performance improving over the prior year due to the implementation of a proactive service recovery strategy, the introduction of a new approach for managing high bill interactions and ongoing billing integrity projects.
Performance Indicator E1
Effluent re-use volume (end use)
E2
Total net CO2 emissions Net tons CO2 equivalent
2017-18 2016-17 Target Result
2017-18 Result
Variance to Prior Year
Notes
Variance to Target
Notes
28.8%
27.4%
33.3%
21.5%
12a
15.6%
12b
-
-
-
-
-
-
-
Additional Information
ENVIRONMENTAL PERFORMANCE INDICATORS
Index
VARIANCE EXPLANATIONS 12a & 12b There has been an increase in recycled water re-use for onsite irrigation and increased opportunities for use of recycled water within the Sewage Treatment Plant process. In addition, the Wallan and Brushy Creek Recycled water treatment plants came back-online resulting in higher customer demand for Class B recycled water.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
40
Introduction
CERTIFICATION OF PERFORMANCE REPORT FOR 2017-18
2017-18 Highlights
We certify that the accompanying Performance Report of Yarra Valley Water Corporation in respect of the 2017-18 financial year is presented fairly in accordance with the Financial Management Act 1994.
Corporate information
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 2017-18 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.
Performance Report
As at the 24th day of August 2018, we are not aware of any circumstances that would render any particulars in the Performance Report to be misleading or inaccurate.
Annual Financial Report
Sue T O’Connor Chair
Additional Information
Patrick J McCafferty Managing Director
Natalie Foeng Chief Financial Officer
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
41
AUDITOR-GENERAL’S AUDIT REPORT Introduction 2017-18 Highlights
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 2018, which comprises the: financial performance indicators water and sewage service performance indicators customer responsiveness performance indicators environmental performance indicators certification of performance report.
Corporate information
• • • • •
Basis for Opinion
Performance Report
In my opinion, the performance report of the Yarra Valley Water Corporation for the year ended 30 June 2018 presents fairly, in all material respects, in accordance with the performance reporting requirements of Part 7 of the Financial Management Act 1994. 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.
Annual Financial Report
My independence is established by the Constitution Act 1975. I and my staff 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.
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.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
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 statement of performance that is free from material misstatement, whether due to fraud or error.
Additional Information
Board's responsibilities for the performance report
42
Introduction 2017-18 Highlights
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: •
Performance Report
•
Corporate information
•
identify and assess the risks of material misstatement of 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 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.
Annual Financial Report
MELBOURNE 28 August 2018
Paul Martin as delegate for the Auditor-General of Victoria
Additional Information Index
2
YARRA VALLEY WATER ANNUAL REPORT 2017-18
43
YARRA VALLEY WATER ANNUAL REPORT 2017-18
44
ANNUAL FINANCIAL REPORT 2017-18
ABN 93 066 902 501
YARRA VALLEY WATER ANNUAL REPORT 2017-18
45
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2018
The names of the Corporation’s Directors in office during the financial year are as follows. Directors were in office for this entire period, unless otherwise stated. Sue Therese O’Connor – Chair Robert Clive Skinner – Deputy Chair
Victor John Perton Anita Michele Roper Eric Sjerp Helen Lynette Thornton
A capital repatriation of $23.87 million for the year ended 30 June 2018 was paid on 29 June 2018. Review of operations A review of the operations of Yarra Valley Water during the year ended 30 June 2018 and the results of those operations are contained in this Annual Report. State of affairs There were no significant changes in the state of affairs of the Corporation during the year ended 30 June 2018.
Gregory Joseph Camm – retired as a Director on 30 September 2017
For a discussion of the program and initiatives we rolled out this year, see the 2017-18 Highlights section in this Annual Report.
Particulars of the Directors’ and Corporate Secretary’s qualifications, experience and special responsibilities (if any) are set out in the Corporate Information Section of this Annual Report.
Events subsequent to balance sheet date
Victoria Fay Marles – appointed as a Director 1 October 2017
Directors’ attendance at meetings
Principal activities
There were no significant changes in the nature of these activities during the year. Dividends A final dividend of $31.4 million for the year ended 30 June 2017 was paid on 30 November 2017.
Environmental regulation Yarra Valley Water is subject to environmental regulation in respect of its operations. Yarra Valley Water holds a Corporate Licence issued by the Environmental Protection Agency Victoria (EPAV) under the Environment Protection Act 1970. The licence imposes conditions relating to discharges, reporting obligations and other matters concerning the operation of seven sewage treatment plants.
Index
The principal activities of the Corporation during the course of the financial year were the provision of retail water supply and sewerage services and the collection of trade waste within the Corporation’s district.
Except as provided above, no matter or circumstance has arisen that, in the opinion of the Directors, has significantly affected or may significantly affect the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation in future financial years.
Additional Information
The number of Directors’ meetings and Board Committee meetings held, and the number of meetings attended by each of the Directors of the Corporation during the financial year is set out in the Corporate Information Section of this Annual Report.
Annual Financial Report
Susan Elizabeth Friend – retired as a Director on 30 September 2017
The $100 Government water rebate finished in 2017-18 and the efficiencies that contributed to the rebate will be passed on to all customers in 2018-19 via reduced prices. Prices in 2018-19 will decrease by a weighted average of 6.9%. The average residential customer’s annual bill will not change in 2018-19.
Performance Report
Karen Milward - appointed as a Director 1 October 2017
Capital repatriation
Corporate information
Patrick John McCafferty – Managing Director
An interim dividend of $10.2 million for the year ended 30 June 2018 was paid on 29 June 2018. The amount of the final dividend for the year ended 30 June 2018 will be determined after consultation between the Board, the Minister for Water and the Treasurer of Victoria.
2017-18 Highlights
Directors
Introduction
The Directors of Yarra Valley Water Corporation present their report for the financial year ended 30 June 2018.
During the 2017-18 financial year, Yarra Valley Water did not comply with all conditions of the EPAV Corporate Licence. On 14 September 2017, a discharge to stream from the Wallan Treatment Plant contained an ammonia concentration which exceeded the EPA Licence allowable maximum limit. Mitigations have since been implemented. On 12 December
YARRA VALLEY WATER ANNUAL REPORT 2017-18
46
Introduction 2017-18 Highlights
2017, the EPA issued charges to Yarra Valley Water Corporation under the Environmental Protection Act 1970 (Vic) relating to an alleged water pollution event; a sewage spill in Chirnside Park on 5 July 2016. The charges remain before the Court. Yarra Valley Water maintains an Environment Management System certified ISO 14001: (2015). Further particulars of specific environmental performance measures are set out in the Additional Information and Performance Report sections of this Annual Report.
Corporate information
Directors’ Deed Yarra Valley Water has entered into a Deed with each Director under which it is required to provide access to its books and to maintain insurance coverage for at least seven years after the Director ceases to be a Director. Insurance of officers
Performance Report
During the financial year, the Corporation paid premiums in respect of contracts to insure Directors, former Directors and Officers of the Corporation 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
Annual Financial Report
The amounts in this Report and the Annual Financial Report have been rounded to the nearest thousand dollars, unless otherwise stated. This Report is made in accordance with a resolution of the Directors of Yarra Valley Water on the 24th day of August 2018.
Additional Information
Sue T O’Connor Chair
Index
Patrick J McCafferty Managing Director
YARRA VALLEY WATER ANNUAL REPORT 2017-18
47
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018
2017 $’000
Service and usage revenue
2.1
936,265
886,081
New customer contributions by developers
2.1
32,101
33,889
Developer contributed assets
2.1
23,272
20,507
Other revenue
2.1
55,159
48,866
1,046,797
989,343
Total Revenue
(493,414)
Contract payments
3.1
(57,270)
(58,996)
3.2.1
(48,447)
(45,839)
Environmental contribution
8.2
(29,880)
(29,880)
Depreciation
4.2
(87,051)
(76,536)
Amortisation
4.3
(20,792)
(20,336)
Finance costs
6.1.2
(130,127)
(127,440)
3.1
(45,171)
(48,136)
(922,043)
(900,577)
124,754
88,766
(36,252)
(27,202)
88,502
61,564
Salary and employee benefits expense
Other expenses Total expenses Profit before income tax Income tax expense
8.1
Net profit after tax
Annual Financial Report
(503,305)
Performance Report
3.1
Corporate information
Bulk water and sewerage charges
2017-18 Highlights
2018 $’000
Introduction
Note
Other comprehensive income 4.2
(32,745)
36,334
Increase from revaluation of land
4.2
57,700
-
Increase from revaluation of crown land
4.2
49
-
Defined benefit superannuation plan actuarial gain
9.2
2,213
5,924
Deferred income tax on items of other comprehensive income
8.1
173
(12,677)
27,390
29,581
115,892
91,145
Other comprehensive income, net of tax Total comprehensive income
Additional Information
Increase / (decrease) from revaluation of infrastructure assets
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
48
BALANCE SHEET AS AT 30 JUNE 2018
2018 $’000
2017 $’000
Cash
6.2
986
1,111
Receivables
5.1
191,431
179,018
Other non-financial assets
5.2
4,432
4,163
196,849
184,292
Introduction
Note
2017-18 Highlights
ASSETS Current assets
Total current assets
Corporate information
Non-current assets 4.2
4,578,102
4,353,098
Intangible assets
4.3
180,125
184,149
3.2.3.c
8,317
6,792
5.1
2,939
2,170
Total non-current assets
4,769,483
4,546,209
Total assets
4,966,332
4,730,501
Defined benefit superannuation asset Receivables
Performance Report
Infrastructure, property, plant and equipment
LIABILITIES Current liabilities 5.4
20,293
24,555
Current tax payable
8.1
11,239
7,362
3.2.2
17,014
16,314
Other provisions
5.5
4,737
2,289
Payables
5.3
134,306
107,745
Borrowings
6.1
289,565
266,317
477,154
424,582
Provisions - employee benefits
Total current liabilities
Annual Financial Report
Unearned income
Non-current liabilities Provisions - employee benefits
1,785
1,752
5.4
8,184
7,617
Deferred tax liabilities
8.1
680,302
675,490
Borrowings
6.1
2,124,600
1,996,900
Total non-current liabilities
2,814,871
2,681,759
Total liabilities
3,292,025
3,106,341
Net assets
1,674,307
1,624,160
Additional Information
3.2.2
Unearned income
Contributed equity
9.1
444,832
468,697
Retained earnings
2.1, 9.2
325,174
276,722
9.3
904,301
878,741
1,674,307
1,624,160
Asset revaluation surplus Total equity
Index
EQUITY
The above Balance Sheet should be read in conjunction with the accompanying notes.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
49
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 Introduction
Total $’000
468,697
233,811
853,307
1,555,815
-
61,564
-
61,564
9.2, 9.3
-
4,147
25,434
29,581
9.2
-
(22,800)
-
(22,800)
468,697
276,722
878,741
1,624,160
-
88,502
-
88,502
9.2, 9.3
-
1,550
25,560
27,110
Capital repatriation
9.1
(23,865)
-
-
(23,865)
Dividends paid
9.2
-
(41,600)
-
(41,600)
444,832
325,174
904,301
1,674,307
Note Balance at 1 July 2016 Net profit after tax Other comprehensive income after tax Dividends paid Balance at 30 June 2017 Net profit after tax Other comprehensive income after tax
Balance at 30 June 2018
Performance Report
Asset revaluation surplus $’000
Corporate information
Retained earnings $’000
2017-18 Highlights
Contributed equity $’000
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
50
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018
2017 $’000
Receipts from customers
1,004,622
972,802
Payments to suppliers and employees
(693,979)
(686,085)
Goods and services tax refunded (net)
24,224
30,624
(26,705)
(30,961)
(127,669)
(126,916)
9
7
180,502
159,471
1,069
1,951
(251,445)
(217,616)
(16,768)
(14,540)
(267,144)
(230,205)
344,148
245,511
(193,200)
(153,200)
1,034
1,198
Introduction
2018 $’000
Note
Income tax paid
Interest received Net cash inflow from operating activities
6.2.1
Corporate information
Interest and other costs of finance paid
2017-18 Highlights
Cash flow from operating activities
Cash flows from investing activities Proceeds from sale of intangibles, infrastructure, property, plant and equipment Payments for acquisition of infrastructure, property, plant and equipment
Net cash outflow from investing activities
Performance Report
Payments for acquisition of intangible assets
Cash flows from financing activities Refinancing of borrowings - inflow Refinancing of borrowings - outflow
9.2
(41,600)
(22,800)
Capital repatriation
9.1
(23,865)
-
86,517
70,709
Net (decrease) in cash held
(125)
(25)
Cash at beginning of year
1,111
1,136
986
1,111
Net cash inflow from financing activities
Cash at end of year
6.2
Additional Information
Dividends paid
Annual Financial Report
Proceeds of developer security deposits
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
51
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Introduction
1. ABOUT THIS REPORT
2017-18 Highlights
Basis of accounting This financial report is a general purpose financial report, that consists 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 2018. 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.
Corporate information
The financial report has been prepared on an accrual and going concern basis and is prepared on a historical cost convention, except for infrastructure, property, plant and equipment, and the defined superannuation asset which have been measured at fair value. The financial report of Yarra Valley Water Corporation (the Corporation), as an individual reporting entity for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the Directors on 24 August 2018. Accounting policies
Performance Report
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
Annual Financial Report
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
Additional Information
The Corporation evaluates estimates and 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 the Corporation. The significant judgements made in the preparation of 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 the preparation of this financial report relate to: •• water usage and sewerage disposal charge accruals – note 2.1 •• developer contributed assets – note 2.1 •• employee benefit provisions and other provisions – note 3.2.2 and note 5.5 •• defined benefit superannuation fund – note 3.2.3
Index
•• asset residual values and useful lives – note 4.2 •• asset impairment – note 4.2 •• trade receivables - accrued revenue – note 5.1 •• unearned income – note 5.4 •• contingent assets and liabilities – note 7.3 •• fair value of infrastructure, property, plant and equipment – note 7.4 •• deferred tax – note 8.1 YARRA VALLEY WATER ANNUAL REPORT 2017-18
52
Introduction
2. FUNDING DELIVERY OF OUR SERVICES
2017-18 Highlights
Introduction This section provides additional information about how the Corporation is funded and the accounting policies that are relevant for an understanding of the items recognised in the financial statements. Structure 2.1 Summary of income that funds the delivery of our services 2.2 Commitments for lease receivables
Corporate information
2.1. Summary of Income that funds the delivery of our services 2018 $’000
2017 $’000
Fixed service charges
390,168
376,008
Sewage disposal charges
190,767
177,568
Trade waste charges
24,745
24,411
Water usage charges
400,652
376,402
Government Water Rebate provided to customers
(70,067)
(68,308)
Total service and usage revenue
936,265
886,081
Service and usage revenue
Performance Report Annual Financial Report
Service and usage charges Revenue is brought to account when services have been provided or when a usage or service charge has been made. The payment in advance by customers of accounts is classified as unearned income, refer note 5.4. Water usage charges and sewage disposal charges are recognised as revenue when the service has been provided. As the meter reading is cyclical, an estimate is made at the end of the accounting period for water usage and sewage disposal by customers. This estimate is determined based on bulk water purchases from Melbourne Water less the estimated non-revenue water from leakage.
Additional Information
Water and sewerage service charges are billed quarterly in advance and recognised evenly throughout the financial year to reflect the pattern of revenue being earned. Service charges represent charges for access to water and sewerage charges. Trade waste charges are recognised as revenue at the end of the service delivery period. Volume meters are read and appropriate charges levied as per the trade waste agreements. The meters are read on a cyclical basis with accounts sent on a quarterly basis. Government Water Rebate The Government Water Rebate is recognised as a rebate against revenue when the associated revenue is billed. It represents a rebate back to customers provided by the Corporation on behalf of the state government on water bills of residential water customers. It was first issued in 2014–15 on the first quarter bill (July, August, September), and was provided each year until 30 September 2017.
Index
New customer contributions New customer contributions represent charges applicable when a customer builds or develops a property and connects to the Corporations water supply and sewerage infrastructure. The cash contributions collected contribute towards the cost of providing shared infrastructure and are recognised as revenue when the contribution has been received. Developer contributed assets Revenue from developer contributed assets arise where developers pay for the cost of construction of new assets and subsequently gift these assets to the Corporation. The Corporation maintains these assets in perpetuity. In accordance with the requirements of AASB Interpretation 18 - Transfers of Assets from Customers and AASB 118 - Revenue, recognition of income occurs when the risks and rewards of ownership have been transferred to the Corporation. This non-cash revenue is recorded as developer contributed assets. YARRA VALLEY WATER ANNUAL REPORT 2017-18
53
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
The Corporation measures the income by assessing the value of the works using a schedule of rates determined by the Corporation. Refer to note 7.3 for further detail on how the rates are determined.
2017-18 Highlights
In the financial year 30 June 2018, the Corporation reviewed its processes for recording developer contributed assets and various enhancements to the process have been implemented. The review identified a cumulative understatement of revenue of $9.82 million, attributable to the period 2014-15 to 2016-17. The Corporation has chosen to restate its 2016-17 financial statements to account for any revenue omitted or understated in this period. The restatement resulted in an increase to Retained earnings ($5.2 million) and Developer contributed assets revenue ($4.62 million), with a corresponding decrease to Asset revaluation surplus ($9.82 million), before tax. 2017 $’000
23,375
20,119
Park and drainage fees
7,678
7,431
Information statements and applications
5,929
6,565
Rent
1,712
1,574
9
7
2,720
-
Other
13,736
13,170
Total other revenue
55,159
48,866
Corporate information
2018 $’000
Note Other revenue Other products and services
Impairment writeback
4.2
Performance Report
Interest income
Other revenue Annual Financial Report
Other revenue items are recognised on an accrual basis. Other products and services relate to various plumbing services revenue including new meter connections and recycled water inspection fees. Revenue is recognised on receipt of payment and the acceptance of compliance to conditions of connections. Income from operating leases is recognised in net profit in the Statement of Comprehensive Income on a straightline basis over the lease term. Other revenue includes fees for information statements, water trading, billing and collection administration fees from both Melbourne Water and DELWP and land development application fees.
Additional Information
2.2. Commitments for lease receivables The following table summarises the non-cancellable operating lease receivables contracted for at balance date but not provided in the financial statements. Revenue for operating leases, where substantially all risks and benefits remaining with the lessor, are recognised as revenue in the periods in which they are incurred. These commitments recorded below are at their nominal value and are inclusive of GST.
Non-cancellable operating lease receivable Not later than one year Later than one year and not later than five years
2018 $’000
Index
Yarra Valley Water has non-cancellable agreements with various telecommunication bodies who use Yarra Valley Water land and buildings to house their telecommunication infrastructure. 2017 $’000
425
1,145
1,216
1,464
Later than five years
2,363
1,992
Total (GST inclusive)
4,004
4,601
YARRA VALLEY WATER ANNUAL REPORT 2017-18
54
Introduction
3. THE COST OF DELIVERING OUR SERVICES
2017-18 Highlights
Introduction This section provides additional information about how the Corporation’s funding is applied and the accounting policies that are relevant for an understanding of 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
Corporate information
3.3 Commitments for operating leases expenditure 3.4 Remuneration of auditors
Performance Report
3.1. Summary of other expenses incurred in the delivery of our services Bulk Water and sewerage charges
Annual Financial Report
Bulk water and sewage charges are levied by Melbourne Water for the cost of water the Corporation purchases, 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. Contract payments Contract payments includes costs such as maintenance contract, software licences and various other contracts which are expensed in the reporting period in which they are incurred.
Billing and revenue collection costs
9,198
9,317
Information technology costs
3,271
4,180
Electricity
4,880
3,956
Consulting services
3,165
3,760
Government taxes, fees and contributions
3,777
3,403
1,104
3,181
3,066
2,828
4.2, 4.3
2,944
2,071
3.2.3.c
688
887
111
189
4
165
Other expenses
12,963
14,199
Total other expenses
45,171
48,136
Impairment write down of assets to recoverable amount
4.2
Bad and doubtful debts Write off / disposal of assets Superannuation defined benefit expense Rental expenses relating to operating leases Smart Water Fund contributions
Index
2017 $’000
Additional Information
2018 $’000
Note
Some accounting policies relating to items in the table above are in the relevant notes within other sections of the financial report. Please see note references. YARRA VALLEY WATER ANNUAL REPORT 2017-18
55
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
Billing and collection costs
2017-18 Highlights
Billing and revenue collection costs include printing, postage and collection fees which are expensed in the reporting period in which they are incurred.
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, fringe benefits tax, leave entitlements, termination payments and WorkCover premiums.
Corporate information
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
Performance Report
Liabilities for wages and salaries (including non-monetary benefits, annual leave and on-costs) are recognised as part of the employee benefit provision as current liabilities, because the Corporation does 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 the Corporation expects the liabilities to be wholly settled within 12 months of 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 are measured as the present value of estimate future cash flows.
Annual Financial Report
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 nonvesting, 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
Additional Information
Unconditional long service leave (LSL) is disclosed as a current liability; even where the Corporation does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. The components of this current LSL liability are measured at: •• undiscounted value – if the Corporation expects to wholly settle within 12 months; or •• present value – if the Corporation does not expect to wholly settle within 12 months. Conditional long service leave
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
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.
56
2017 $’000
Unconditional and expected to settle within 12 months
1,672
1,510
Unconditional and expected to settle after 12 months
2,933
2,771
67
370
10,145
9,602
254
270
1,943
1,791
17,014
16,314
1,553
1,530
232
222
1,785
1,752
2,283
2,186
972
770
(863)
(709)
37
36
2,429
2,283
Introduction
2018 $’000
2017-18 Highlights
Current liabilities - provisions Annual leave
Long service leave
Unconditional and expected to settle after 12 months
Corporate information
Unconditional and expected to settle within 12 months
Provisions for on-costs Unconditional and expected to settle within 12 months Unconditional and expected to settle after 12 months Total current liabilities - provisions
Performance Report
Non-current liabilities - provisions Employee benefits - long service leave On-costs Total non-current liabilities - provisions
Annual Financial Report
Reconciliation of movement in on-cost provision Opening balance Additional provision Amounts utilised during year Effect of changes in discount rate and remeasurement
Additional Information
Carrying amount at year end
Reconciliation of on-cost provision relates to the sum of current $2,197,000 (2017: $2,061,000) and non-current $232,000 (2017: $222,000) on-costs.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
57
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
3.2.3. Superannuation 3.2.3.1. Accumulation plans
2017-18 Highlights
Contributions to the accumulation plans are expensed as the contributions are paid or become payable. 3.2.3.2. Defined benefit superannuation asset
Corporate information
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 benefits plan, an agreed percentage of salaries is contributed to the fund by the Corporation as recommended by an actuary.
Performance Report
Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. The defined benefit plan is closed to new members. All new members of the fund receive accumulation only benefits. The Superannuation Industry (Supervision) Act 1993 (SIS) governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions unless an exemption has been obtained. Yarra Valley Water’s defined benefit superannuation plan is valued annually.
Annual Financial Report
The plan’s Trustee is responsible for the governance of the plan. The Trustee 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; and •• compliance with superannuation law and other applicable regulations. The prudential regulator, the Australian Prudential Regulation Authority, licences and supervises regulated superannuation plans. There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year.
Additional Information
b. Description of risks There are a number of risks to which the plan exposes the Corporation. The more significant risks related to the defined benefits are: •• Investment risk - The risk that investment returns will be lower than assumed and the Corporation will need to increase contributions to offset this 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.
Index
•• Legislative risk - The risk that legislative changes could be made which increase the cost of providing the defined benefits. The Plan assets are invested by the Trustee in the Defined Benefit and Cash investment options, with part of the assets transferred from the Defined Benefit to the Cash investment options in November 2017. The assets are diversified within these investment options and therefore the Plan has no significant concentration of investment risk.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
58
Introduction
c. Reconciliation of assets and obligations
Current service cost Interest income Interest expense
Defined benefit obligation $’000
Net defined benefit asset $’000
33,147
(31,392)
1,755
-
(920)
(920)
662
-
662 3,504
233
(233)
-
Actuarial gains arising from changes in demographic assumptions
-
48
48
Actuarial gains arising from changes in financial assumptions
-
502
502
Actuarial gains arising from liability experience
-
1,870
1,870
(1,251)
1,251
-
(170)
170
-
Closing balance at 30 June 2017
36,125
(29,333)
6,792
Opening balance at 1 July 2017
36,125
(29,333)
6,792
-
(822)
(822)
782
-
782
Contributions by plan participants
Benefits paid Taxes, premiums and expenses paid
Current service cost Interest income Interest expense Actuarial return on plan assets less interest income Contributions by plan participants
-
(648)
(648)
1,763
-
1,763
211
(211)
-
-
708
708
Actuarial losses arising from liability experience
-
(258)
(258)
(1,256)
1,256
-
(129)
129
-
37,496
(29,179)
8,317
Benefits paid Taxes, premiums and expenses paid Closing balance at 30 June 2018
Additional Information
Actuarial gains arising from changes in financial assumptions
Annual Financial Report
(629)
-
Performance Report
(629)
Corporate information
3,504
Actuarial return on plan assets less interest income
2017-18 Highlights
Opening balance at 1 July 2016
Fair value of plan assets $’000
Superannuation defined benefit expense (note 3.1) is represented by the sum of current service cost, interest income and interest expense $688,000 (2017: $887,000)
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
59
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
d. Fair value plan assets as at 30 June 2018 Investment funds are measured using significant observable inputs – Level 2. 2017 %
Australian equity
11
24
International equity
13
19
Fixed income
15
11
6
9
11
15
6
11
Cash
38
11
Total
100
100
2018 %
2017 %
Discount rate
2.30
2.10
Expected salary increase rate
4.60
4.60
Discount rate
2.60
2.30
Expected salary increase rate
4.60
4.60
2017-18 Highlights
2018* % e. Plan assets
Growth alternatives Defensive alternatives
Corporate information
Property
Performance Report
* Asset allocation as at 30 June 2018 is currently unavailable. Asset allocation at 31 May 2018 has been used.
f. Fair value of Corporation’s own financial instruments The fair value of plan assets includes no amounts relating to: •• any of the Corporation’s own financial instruments
Annual Financial Report
•• any property occupied by, or other assets used by the Corporation.
g. Actuarial assumptions to determine defined benefit cost
Additional Information
h. Actuarial assumption to determine defined benefit obligation
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
60
Introduction
i. Sensitivity analysis The defined benefit obligation as at 30 June 2018 under several scenarios is presented below. Salary Rate
0.5% pa. lower
0.5% pa. higher
0.5% pa. lower
0.5% pa. higher
Discount rate - per annum
2.6%
2.1%
3.1%
2.6%
2.6%
Salary increase rate - per annum
4.6%
4.6%
4.6%
4.1%
5.1%
29,179
30,372
28,051
28,058
30,352
Corporate information
Base Case
Defined benefit obligation ($'000)*
2017-18 Highlights
Discount Rate
* Includes contribution tax provision.
The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions. j . Funding arrangements
Performance Report
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 the Corporation contribution rate comprising a long-term contribution rate and an adjustment to meet the financing objective of a Funding Ratio of 104%. A portion of the assets were transferred from the Defined Benefit investment option to the Cash investment option in November 2017, resulting in a reduction in the Target Funding Ratio from 105% to 104%.
Annual Financial Report
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% the financing objective is to achieve the Target Funding Ratio over five years. Where the Funding Ratio is less than 100% the primary financing objective is to achieve 100% over three years and the Target Funding Ratio over five years. In the most recent review of the financial position as at 31 December 2017, the actuary recommended a continuation of the Corporation contribution rate of nil. The next review of the financial position and Corporation contribution rate is due at 30 June 2018. This review will occur post 30 June once the required information becomes available.
Additional Information
The Corporation continues to contribute salary sacrifice contributions at the required rates for accumulation members. k. Expected contributions Employer contributions for the financial year ending 30 June 2018 is expected to be nil. l. Maturity profile of defined benefit obligation The weighted average duration of the defined benefit obligation as at 30 June 2018 is seven years. $’000 2,252
30 June 2020
2,310
30 June 2021
2,501
30 June 2022
2,741
30 June 2023
2,905
Following five years
Index
30 June 2019
14,396
YARRA VALLEY WATER ANNUAL REPORT 2017-18
61
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
3.3. Commitments for operating lease expenditure
2017-18 Highlights
Following a detailed assessment as part of the change in accounting standards we have identified previously recognised leases were licences or contractual commitments as the agreements did not convey the right to control the use of the identified assets.
3.4. Remuneration of Auditors 2017 $’000
Financial Statements – Victorian Auditor-General’s Office
142
139
Internal Audit – Pitcher Partners
296
203
Total remuneration of auditors
438
342
Corporate information
2018 $’000
4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY Performance Report
Introduction The Corporation controls infrastructure and other assets that are utilised in fulfilling its objectives and conducting its activities. They represent the key resources that have been entrusted to the Corporation to be utilised for delivery of those outputs. Structure 4.1 Total Infrastructure, property, plant and equipment: carrying amount
Annual Financial Report
4.2 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment 4.3 Intangible assets 4.4 Net gain/loss on disposal of non-current physical assets 4.5 Contractual commitments
4.1. Total Infrastructure, property, plant and equipment: carrying amount Accumulated depreciation
Net carrying amount
2018 $’000
2017 $’000
2018 $’000
2017 $’000
2018 $’000
2017 $’000
Infrastructure at fair value
3,817,200
3,771,700
-
-
3,817,200
3,771,700
Freehold land at fair value
408,701
347,856
-
-
408,701
347,856
267
218
-
-
267
218
Buildings at fair value
35,028
34,914
(2,455)
(1,063)
32,573
33,851
Plant and equipment at fair value
44,588
44,019
(24,858)
(23,087)
19,730
20,932
Capital works in progress at cost
299,631
178,541
-
-
299,631
178,541
4,605,415
4,377,248
(27,313)
(24,150)
4,578,102
4,353,098
Total
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
Crown land at fair value
Additional Information
Gross carrying amount
62
Introduction
4.2. Reconciliation of movements in carrying values of infrastructure property, plant and equipment Freehold land $’000
178,541
347,856
218
Crown Plant and land Buildings equipment Infrastructure $’000 $’000 $’000 $’000
2017-18 Highlights
Capital works in progress $’000
Total $’000
2018 Balance at 1 July 2017
33,851
20,932
3,771,700 4,353,098
-
-
-
-
-
288,379
(167,289)
1,529
-
113
5,265
160,382
-
Write off / disposal of assets
-
-
-
-
(2,326)
(618)
(2,944)
Depreciation
-
-
-
(1,391)
(4,141)
(81,519)
(87,051)
Revaluation increase / (decrease) recognised in equity
-
57,700
49
-
-
(32,745)
25,004
Impairment (writedown) / writeback of assets to recoverable amount
-
1,616
-
-
-
-
1,616
Carrying amount at 30 June 2018
299,631
408,701
267
32,573
19,730
3,817,200 4,578,102
Balance at 1 July 2016
236,896
346,209
218
34,866
23,385
3,515,800
4,157,374
Additions
241,103
-
-
-
-
-
241,103
Transfers
Performance Report
288,379
Transfers
Corporate information
Additions
2017
4,828
-
48
3,475
291,107
-
-
-
-
-
(845)
(1,151)
(1,996)
Depreciation
-
-
-
(1,063)
(5,083)
(70,390)
(76,536)
Revaluation increase / (decrease) recognised in equity
-
-
-
-
-
36,334
36,334
Impairment (writedown) / writeback of assets to recoverable amount
-
(3,181)
-
-
-
-
(3,181)
Carrying amount at 30 June 2017
178,541
347,856
218
33,851
20,932
Annual Financial Report
(299,458)
Write off / disposal of assets
3,771,700 4,353,098 Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
63
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
Initial recognition
2017-18 Highlights
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. Subsequent measurement
Corporate information
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 below by asset category. Refer note 7.4 for fair value disclosures. Revaluations In measuring the fair values of non-financial assets, independent valuers are engaged for scheduled valuations every five years or earlier if interim indices suggest there has been a material movement. Infrastructure assets are measured at fair value every year. 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.
Performance Report
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.
Annual Financial Report
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, which are consistent with the prior period, used for each class of depreciable assets are:
Additional Information
Class of fixed asset
Useful life
Buildings
5 to 100 years
Infrastructure
3 to 100 years 2 to 25 years
Plant and equipment
Index
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Sheet date. Following consultation with relevant internal subject matter experts an adjustment was made to the depreciation rate of: •• 20mm meters from 18 years to 15 years, an additional $2.2 million in depreciation was recognised in financial year 2018 and $2.1 million will be recognised in subsequent financial years. •• hydraulic modelling assets from 10 years to 5 years, an additional $2.8 million in depreciation was recognised in financial year 2018, a similar amount of depreciation will be recognised in subsequent financial years. Other than the above there have been no other changes to asset category useful lives as at 30 June 2018.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
64
Introduction
Impairment of non-financial assets
2017-18 Highlights
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.
Corporate information
There are no material indicators of impairment at the time financial statements were authorised for issue.
4.3. Intangible assets Movements in carrying amounts Software $’000
Intangible works in progress $’000
Total $’000
96,917
78,235
8,997
184,149
Additions
-
-
16,768
16,768
Transfers
-
7,290
(7,290)
-
Amortisation expense
-
(20,792)
-
(20,792)
96,917
64,733
18,475
180,125
96,917
82,725
10,378
190,020
Additions
-
-
14,540
14,540
Transfers
-
15,846
(15,846)
-
Disposal of assets
-
-
(75)
(75)
Amortisation expense
-
(20,336)
-
(20,336)
96,917
78,235
8,997
184,149
Performance Report
Water entitlements $’000 2018 Balance at 1 July 2017
Annual Financial Report
Carrying amount at 30 June 2018 2017 Balance at 1 July 2016
Additional Information
Carrying amount at 30 June 2017 Water entitlements
Yarra Valley Water contributed $100 million towards the cost of the Goulburn-Murray Water Connections Project. In exchange for this contribution, Yarra Valley Water is entitled to one-ninth share of the progressive water savings generated by Stage 1 of the Connections Project (estimated to be 225 gigalitres of long-term water savings in total when complete in 2020) on an ongoing basis.
Index
In exchange for access to the three Melbourne metropolitan water retailers’ water entitlements from the Melbourne water supply system, four regional urban water businesses (Barwon Water, South Gippsland Water, Western Water and Westernport Water) made contributions of $9.3 million to the retailers, with Yarra Valley Water’s share being $3.1 million. The investment has therefore been recognised at its net value ($100 million less $3.1 million). Water entitlements are recognised at cost and have an infinite life.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
65
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
Intangible assets acquired separately (software and intangible works in progress)
2017-18 Highlights
Intangible assets acquired separately are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less impairment losses, where applicable. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the Corporation. Internally generated intangible assets (software and intangible works in progress) Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from a development project is recognised only if all the following are demonstrated:
Corporate information
•• 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
Performance Report
•• the ability to measure reliably the expenditure attributable to the intangible asset during its development. Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment losses on the same basis as intangible assets that are acquired separately. Amortisation
Annual Financial Report
Intangible assets with finite useful lives are amortised on a straight-line basis over the asset’s useful life. Amortisation begins when the asset is available for use. That is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period. Intangible assets with indefinite useful lives are not amortised. There has been no change to useful lives during 2017-18 or 2016-17. Class of fixed asset
Useful life
Software
3 to 10 years
Water entitlements
Indefinite Additional Information
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 non-current physical assets
2018 $’000
2017 $’000
Infrastructure, property, plant and equipment
218
144
Total net (gain) / loss on disposal
218
144
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
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 reserve relating to that asset are transferred to retained earnings. The surplus/deficit from ordinary activities includes the following specific net gains and expenses are as follows:
66
Introduction
4.5. Contractual commitments
2017 $’000
Not later than one year
213,449
195,016
Later than one year and not later than five years
168,101
52,671
1,214
4
382,764
247,691
Greater than five years Total (GST inclusive)
Corporate information
2018 $’000
Payable
2017-18 Highlights
Significant contractual expenditure arising from contracts are disclosed at their nominal value and inclusive of goods and services tax. The Corporation’s 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:
5. OTHER ASSETS AND LIABILITIES Introduction
Performance Report
This section sets out any other assets and liabilities that arose from the Corporation’s controlled operations. Structure 5.1 Receivables
5.1.1 Ageing analysis and impairment of contractual receivables
5.1.2 Movements in the provision of impairment of receivables Annual Financial Report
5.2 Other non-financial assets 5.3 Payables
5.3.1 Ageing analysis of contractual payables
5.4 Unearned income 5.5 Other provisions
2018 $’000
2017 $’000
Trade receivables - debtors
87,419
88,701
Trade receivables - accrued revenue
88,313
81,052
4,486
5,214
(2,191)
(1,693)
13,404
5,744
191,431
179,018
3,954
2,991
(1,015)
(821)
2,939
2,170
Additional Information
5.1. Receivables Contractual receivables
Other receivables
Index
Less: provision for impairment of receivables Statutory receivables GST receivables Total current assets - receivables Non current assets - receivables Trade receivables - debtors Less: provision for impairment of receivables Total non current assets - receivables
YARRA VALLEY WATER ANNUAL REPORT 2017-18
67
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
Receivables consist of:
2017-18 Highlights
Contractual receivables such as debtors and accrued revenue in relation to goods and services, are classified as financial instruments and categorised as ‘loans and receivables’. They are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement they are measured at amortised cost using the effective interest method, less any impairment. Provision for doubtful debts is recognised to the extent that recovery of the outstanding receivable balance is considered no longer probable. The provision represents an estimate of bad debts to be written off and is made when there is objective evidence that the Corporation will not be able to collect the debt. Bad debts are written off when determined uncollectable, subject to approval by the Board or delegated officer.
Corporate information
Statutory receivables, such as amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax credit recoverable are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments because they do not arise from a contract.
Performance Report
Accrued revenue is recognised for water and sewage usage 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. 5.1.1. Ageing analysis and impairment of contractual receivables
Not aged
1 to 16 days $’000
17 to 60 days $’000
61 to 90 days $’000
91 to 180 days $’000
Over 180 days $’000
Total $’000
Not past due and not impaired
-
49,481
-
-
-
-
49,481
Past due but not impaired
-
-
25,067
3,186
4,191
5,494
37,938
Impaired
-
(144)
(509)
(94)
(504)
(940)
(2,191)
Net trade receivables - debtors
-
49,337
24,558
3,092
3,687
4,554
85,228
Accrued revenue
88,313
-
-
-
-
-
88,313
Other receivables*
20,829
-
-
-
-
-
20,829
Total receivables
109,142
49,337
24,558
3,092
3,687
4,554
194,370
Not past due and not impaired
-
40,131
-
-
-
-
40,131
Past due but not impaired
-
-
33,337
3,309
5,532
6,392
48,570
Impaired
-
(95)
(377)
(60)
(370)
(791)
(1,693)
Net trade receivables - debtors
-
40,036
32,960
3,249
5,162
5,601
87,008
Accrued revenue
81,052
-
-
-
-
-
81,052
Other receivables*
13,128
-
-
-
-
-
13,128
Total receivables
94,180
40,036
32,960
3,249
5,162
5,601
181,188
Annual Financial Report
2018 Trade debtors
Additional Information
2017 Trade debtors
Index
*Includes non current receivables (net of impairment).
YARRA VALLEY WATER ANNUAL REPORT 2017-18
68
Introduction
All contractual receivables are recognised at the amounts receivable less any provision for impairment of receivables. Credit is generally allowed for a period of 16 days. The collectability of debt is assessed each accounting period for usage and other charges.
2017-18 Highlights
Non-current trade receivables relate to property owner customers, that have outstanding fees that will be recovered when their property is sold or when the customers’ circumstances permit payment. Loans and receivables are measured at amortised cost using the effective interest rate method less any impairment. 5.1.2. Movements in the provision of impairment of receivables 2017 $’000
(2,514)
(2,381)
3,066
2,828
Increase in provision
(3,758)
(2,961)
Total provision for impairment of receivables
(3,206)
(2,514)
2018 $’000
2017 $’000
Water Efficiency Program for Schools - advance
197
664
Other water efficiency programs - advance
135
134
Prepayments
4,100
3,365
Total current assets - other
4,432
4,163
Total current assets - other
4,163
4,449
Balance at beginning of year Reversal of provision and write offs recognised as an expense
Corporate information
2018 $’000
Movements in the provision of impairment of receivables relates to current and non current receivables. Refer note 5.1.
Performance Report
5.2. Other non-financial assets
Current assets - other
Annual Financial Report
Water Efficiency Programs for Schools – advance
Additional Information
The Water Efficiency Program for Schools - advance represents amounts advanced from the Department of Environment, Land, Water and Planning and from the Department of Education and Training for the audit and delivery of the works required to improve the water efficiency of schools. The amount is recognised as both an asset and a liability in the Balance Sheet. Other Water Efficiency Programs – advance Other Water Efficiency Programs – includes amounts advanced from the Department of Environment, Land, Water and Planning for leak detection work including finding and repairing leaks earlier than current methods, reducing water loss and infrastructure damage. Prepayments
Index
Prepayments represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period. This includes insurances, IT subscription & maintenance agreements and other various subscriptions.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
69
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
5.3. Payables 2017 $’000
Trade payables
28,907
25,027
Accruals
99,268
77,579
6,138
5,062
(7)
77
134,306
107,745
2017-18 Highlights
2018 $’000 Current liabilities - payables Contractual payables
Corporate information
Security deposits Statutory payables Fringe benefits tax payable Total current liabilities - payables Payables and accruals
Performance Report
Trade payables and accruals are recognised for future amounts to be paid in respect of goods and services received. The amounts are unsecured and are usually paid 30 days after invoice date. Payables consist of:
Annual Financial Report
•• Contractual payables represent liabilities for goods and services provided to the Corporation prior to the end of the financial year that are unpaid, and arise when the Corporation becomes obligated to make future payments in respect of the purchase of those goods and services. Contractual payables are classified as financial instruments and categorised as financial liabilities at amortised cost. •• Statutory payables relate to goods and services tax and fringe benefits tax payables. Statutory payables are recognised and measured similarly to contractual payables, but are not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from a contract. 5.3.1. Ageing analysis of contractual payables 1 to 3 months $’000
3 to 12 months $’000
Over 12 months $’000
Total $’000
Additional Information
Not aged
Less than 1 month $’000
2018 Trade payables
28,350
472
85
-
28,907
-
-
-
-
99,261
Other payables
6,145
-
-
-
-
6,145
Total payables
105,406
28,350
472
85
-
134,313
-
242 -
17 -
-
25,027
-
77,579
Index
99,261
Accruals
2017 Trade payables
77,579
24,768 -
Other payables
5,062
-
-
-
-
5,062
Total payables
82,641
24,768
242
17
-
107,668
Accruals
YARRA VALLEY WATER ANNUAL REPORT 2017-18
70
Introduction
5.4. Unearned income Grant income - current Customers paid in advance Other Total current liabilities - unearned income
Total current and non-current liabilities - unearned income
2017 $’000
787
808
16,188
21,877
3,318
1,870
20,293
24,555
8,184
7,617
28,477
32,172
Corporate information
Developer contributions - non-current
2018 $’000
2017-18 Highlights
Unearned income
Government grants
Performance Report
Government grants are recognised once reasonable assurance has been reached that the Corporation will comply with the conditions attaching to them and that the grants will be received. Government grants of a revenue nature are recognised as income over the periods necessary to match them with the related costs. Government grants related to assets are recognised in the Balance Sheet by deducting the grant in arriving at the carrying amount of the asset, thereby incurring a reduced depreciation charge. Customers paid in advance Customers paid in advance represents payments received from customers in advance of the provision of goods or services or any legal or constructive obligation required to be performed by Yarra Valley Water to settle the terms of receipt of income. Developer contributions
Annual Financial Report
Unearned developer contributions’ income represents amounts received from developers for the reimbursement of costs that will be incurred by the Corporation for the construction of assets to service new urban growth.
5.5. Other provisions 2018 $’000
2017 $’000
Carrying amount at beginning
2,289
1,080
Additional provision
3,076
1,384
Amounts utilised during year
(628)
(175)
Carrying amount at year end
4,737
2,289
Additional Information
Current liabilities - other provisions
Provisions are recognised when the Corporation has 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.
Index
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using a discount rate that reflects the time value of money and the risks specific to the provision. When some or all 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.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
71
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
6. FINANCING OUR OPERATIONS
2017-18 Highlights
Introduction The section provides information on the sources of finance utilised by the Corporation during its operations, along with interest expenses (the cost of borrowings and other information related to financing activities of the Corporation). This section includes disclosures of balances that are financial instruments (such as borrowings and cash balances). Structure 6.1 Borrowings and finance costs 6.1.1 Maturities of financial liabilities
6.1.2 Finance costs
Corporate information
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 Interest-bearing financial liabilities
Net fair value
2017 $’000
2018 $’000
2017 $’000
289,565
266,317
293,895
271,756
Borrowings - non current liabilities
2,124,600
1,996,900
2,291,589
2,177,118
Total
2,414,165
2,263,217
2,585,484
2,448,874
Annual Financial Report
2018 $’000
Borrowings - current liabilities
Performance Report
6.1. Borrowings and finance costs
Borrowings 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’. This classification is determined at initial recognition.
Additional Information
Interest 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.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
72
Introduction
6.1.1. Maturities of financial liabilities
Weighted average effective interest rate %
Less than 12 months $’000
1 to 3 years $’000
Borrowings - fixed interest rate
4.29
132,300
231,400
338,200
1,415,000
2,116,900
Borrowings - floating interest rate
2.01
157,265
90,000
50,000
-
297,265
289,565
321,400
388,200
1,415,000
2,414,165
3 to 5 years Over 5 years $’000 $’000
2017-18 Highlights
The following table allocates the Corporation’s 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.
Total $’000
Total
Corporate information
2018
2017 4.61
153,200
235,500
202,300
1,399,100
1,990,100
Borrowings - floating interest rate
2.15
113,117
60,000
100,000
-
273,117
266,317
295,500
302,300
1,399,100
2,263,217
Total
Performance Report
Borrowings - fixed interest rate
6.1.2. Finance costs 2017 $’000
Interest on borrowings
96,211
98,176
Financial accommodation levy
33,255
29,156
661
108
130,127
127,440
Other interest expense Total finance costs
Annual Financial Report
2018 $’000
Additional Information
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 by the Corporation into the Consolidated Fund in accordance with section 40N of the Financial Management Act 1994 in respect of financial accommodation provided to the Corporation by the State Government of Victoria.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
73
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
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.
Cash at bank
985
1,110
Cash on hand
1
1
986
1,111
2018 $’000
2017 $’000
88,502
61,564
4.1-4.3
107,843
96,872
Bad and doubtful debts
3.1
3,066
2,828
Write off / disposal of assets
3.1
2,944
2,071
Defined benefit superannuation plan expense
3.1
688
887
Net loss on disposal of non-current physical assets
4.4
(218)
(144)
Impairment writeback
4.2
(2,720)
-
Impairment write-down
3.1
1,104
3,181
Value of works taken over from developers
2.1
(23,272)
(20,507)
Increase in net deferred tax liabilities
2,056
26,976
(Increase) / decrease in other current assets
(269)
286
463
524
Increase / (decrease) in provisions and unearned income
(1,986)
4,333
Increase / (decrease) in payables
15,678
(22,483)
Increase in trade receivables
(5,717)
(3,538)
(Increase) / decrease in GST receivable
(7,660)
6,621
180,502
159,471
Total current assets - cash
Corporate information
2017 $’000
2017-18 Highlights
2018 $’000
6.2.1. Reconciliation of net result for the period to cash flow from operating activities
Note Net profit after tax Adjustments for non-cash items
Performance Report
Depreciation / amortisation
Annual Financial Report
Changes in operating assets and liabilities
Net cash inflow from operating activities
Additional Information
Increase in accrued interest
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
74
Introduction
7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENT
2017-18 Highlights
Introduction The Corporation is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of 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 for the Corporation related mainly to fair value determination. Structure
Corporate information
7.1 Financial instruments 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 non-financial physical assets
7.4.2 Fair value – Reconciliation of changes in level three items
7.4.3 Fair value – Valuation techniques and significant unobservable inputs in level 3 items
Performance Report
7.1. Financial instruments specific disclosures Introduction
Annual Financial Report
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. Due to the nature of the Corporation’s activities, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes, fines and penalties). Such assets and liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation. Categories of financial instruments Loans, receivables and cash are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets and liabilities are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables (net of impairment) are measured at amortised cost using the effective interest method. The Corporation recognised the following assets in this category:
Additional Information
•• Cash and deposits – refer to note 6.2 •• Receivables (excluding statutory receivables) – refer to note 5.1
Index
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. The Corporation recognised the following liabilities in this category: •• Payables (excluding statutory payables) – refer to note 5.3 •• Borrowings – refer to note 6.1
YARRA VALLEY WATER ANNUAL REPORT 2017-18
75
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
7.2. Financial risk management objectives and policies Capital risk management
2017-18 Highlights
The Corporation controls its capital structure in order to maintain a satisfactory debt to equity ratio to provide the State Government of Victoria with adequate returns and to ensure that it can fund its operations as a going concern. The capital structure of the Corporation consists of net debt (borrowings as detailed in the table below and offset by cash and bank balances - see Note 6.2) and equity of the Corporation (comprising contributed equity, asset revaluation surplus and retained earnings detailed in Notes 9.1 to 9.3). The only externally imposed capital requirements of the Corporation are that the:
Corporate information
•• financial accommodation does not exceed the approval limits set by the Treasurer of Victoria pursuant to the Borrowing and Investment Powers Act 1987; and •• the Corporation, with the exception of an operating account with overdraft facilities, is required to borrow exclusively with the Treasury Corporation of Victoria (TCV). These external capital requirements are incorporated into the management of capital through the Board approved Corporate Plan.
2017 $’000
289,565
266,317
Borrowings - non-current
2,124,600
1,996,900
Total borrowings
2,414,165
2,263,217
Total assets
4,966,332
4,730,501
49%
48%
Borrowings - current
Gearing ratio
Annual Financial Report
2018 $’000
Performance Report
The Corporation effectively manages its capital by assessing its financial risks and adjusting its 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 by the Corporation to control its capital during the year. The gearing ratios for the years ended 30 June 2018 and 30 June 2017 were as follows:
Financial risks
Additional Information
The main risks the Corporation is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. The Board reviews and approves policies for managing these risks. i. Interest rate risk Interest rate risk is the risk to earnings or capital arising from movements in interest rates. The Corporation is exposed to interest rate risk through its borrowing activities and changes in the market in comparison to the assumptions in the Essential Services Commission regulatory pricing determination in relation to the underlying cost of debt.
Index
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. The Corporation effectively manages 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 TCV, with borrowing decisions based on future borrowing requirements, treasury management policy compliance and TCV’s market interest rate outlook.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
76
Introduction
Refer section 6.1.1 for maturity analysis of contractual financial liabilities. 2017 $’000
+ 50 basis points
(1,015)
(1,140)
- 50 basis points
1,015
1,140
2017-18 Highlights
2018 $’000
Interest rates sensitivity analysis
ii. Liquidity risk
Corporate information
Liquidity risk is the risk of not being able to meet the specific financial commitments including short term working capital needs and the financing of new and maturing loans as they are required. The Corporation manages liquidity risk by actively maintaining efficient banking practices, regularly monitoring forecast and actual cash flows and ensuring adequate borrowing facilities are maintained. Annual approval is received from the Treasurer of Victoria for new borrowings, borrowings to refinance maturing and non-maturing loans and temporary purpose borrowing facilities. Financing arrangements
Performance Report
The Corporation had access to a total of $153.6 million (2017: $137.6 million) of unused borrowings approved by the Treasurer of Victoria as at 30 June 2018. The Corporation has a formal bank overdraft facility with Westpac Banking Corporation. iii. Credit risk Credit risk is the risk that a counterparty or customer will fail to meet contractual obligations. For the Corporation credit risk arises mainly from customer outstanding receivables as it is legally obliged to service all customers in its district without regard to their credit quality. The Corporation has in place extensive debt collection strategies to minimise customer credit risk and recover outstanding receivables.
2018 $’000
2017 $’000 934,947
3,066
2,828
Default rate
0.31%
0.30%
Additional Information
991,424
Bad debts
Revenue (excl. DCA and NCC)
Annual Financial Report
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates. Receivables that are neither past due nor impaired had an average rate of default to revenue in the three years 2015-16 to 2017-18 of 0.3 per cent.
The credit risk attributable to the Corporation’s deposits with the TCV and other financial institutions is considered to be very low due to the minor amounts involved and the contractual arrangements in place for its counter parties. The maximum exposure to credit risk at the reporting date is the carrying amount of the items in the Balance Sheet. For receivables, the maximum exposure is the gross amount of receivables before allowing for doubtful debts.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
77
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
7.3. Contingent assets and contingent liabilities
2017-18 Highlights
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. In financial year 2018, the rate cards used in estimating developer contributed assets were reviewed against industry benchmarks and bill of quantities and tender schedules provided by developers. Effective 1 July 2018, the rates have been revised resulting in a significant increase in contingent assets and liabilities. a. Contingent assets
2017 $’000
Water supply assets under construction
39,322
13,500
Water supply assets committed to
13,799
8,100
Sewerage supply assets under construction
38,230
15,500
Sewerage supply assets committed to
14,592
5,400
Performance Report
2018 $’000
Corporate information
The Corporation enters into agreements with land developers whereby assets are transferred to the Corporation at no cost. These assets are brought to account as revenue (see note 2) and capitalised.
The Corporation is unaware of any other material contingent assets. b. Contingent liabilities
2018 $’000 Water supply assets Sewerage supply assets
Annual Financial Report
Contingent on the completion of the contingent assets transferred from developers, Yarra Valley Water has a liability to reimburse developers for additional works constructed at Yarra Valley Water’s request. 2017 $’000
8,998
6,200
19,487
4,300
Additional Information
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 Yarra Valley Water and the developer. The Corporation is unaware of any other material contingent liability. Claims to which the Corporation is aware and which may result in a liability being incurred have been provided for as other provisions. Refer Note 5.5.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
78
Introduction
7.4.Fair value
2017-18 Highlights
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 the results and financial position of the Corporation. 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:
Corporate information
•• 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; and •• 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 non-financial physical assets
Performance Report
The Corporation’s 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, the Corporation’s 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 3 (iii) $’000
Fair value as at 30 June $’000
Infrastructure
-
-
3,817,200
3,817,200
Land (specialised)
-
-
240,935
240,935
Land (non-specialised)
-
167,766
-
167,766
Buildings (market approach)
-
2,189
-
2,189
Buildings (depreciated replacement cost)
-
-
30,384
30,384
Plant and equipment
-
-
19,730
19,730
Crown land (specialised)
-
-
267
267
169,955
4,108,516
4,278,471
Total 30 June 2018 -
-
3,771,700
3,771,700
Land (specialised)
-
-
197,622
197,622
Land (non-specialised)
-
150,234
-
150,234
Buildings (market approach)
-
2,340
-
2,340
Buildings (depreciated replacement cost)
-
-
31,511
31,511
Plant and equipment
-
-
20,932
20,932
Crown land (specialised)
-
-
218
218
152,574
4,021,983
4,174,557
Total 30 June 2017
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
Infrastructure
Additional Information
Level 2 (ii) $’000
Annual Financial Report
Level 1 (i) $’000
79
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
Infrastructure
2017-18 Highlights
The 30 June 2018 valuation of infrastructure assets has been independently provided by KPMG, using a discounted cash flow methodology to determine the fair value of infrastructure. This involved discounting the forecast stream of cash flows of the entire business to both debt and equity investors at a weighted average cost of capital (WACC), which represents an estimate of a hypothetical market participant’s discount rate. The valuation model: •• Calculates forecast cash flows to debt and equity investors over a 10-year forecast period. Cash flows to debt and equity investors are those cash flows available after all operating expenses (including taxes) have been paid and necessary investments in working and fixed capital have been made;
Corporate information
•• Calculates a terminal value at the end of the forecast period adopting the Gordon Growth methodology by applying the mid-point of the WACC, terminal growth rate and terminal cash flows. A single terminal value has been adopted due to the sensitive nature of the terminal value in the model; •• Arrives at an enterprise valuation by discounting the cash flows to the valuation date using the selected high ($4 billion) and low ($3.7 billion) WACC estimates and adopts a mid-point of ($3.8 billion); •• Deducts non-infrastructure related assets and liabilities to derive the implied water infrastructure asset valuation;
Performance Report
•• Includes a tax amortisation benefit (TAB) on the water infrastructure assets, being an estimate of the present value of future tax amortisation benefits that may be received. In including a TAB a delay of five years is overlayed to reflect the likely timing of secondary infrastructure assets sales, the impact being to reduce the calculated TAB by approximately 25 percent. The calculated TAB is added to the implied water infrastructure assets valuation to arrive at the total value of water infrastructure assets 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
Annual Financial Report
The most recent valuation of freehold land was independently determined by the Victorian Valuer-General’s Office using fair value as at 30 June 2016. In undertaking the valuation of land, the Victorian Valuer-General’s Office adopted the market based direct comparison approach, whereby the properties were valued by analysing land sales in comparable proximity to the subject sites and allowing for shape, size, topography, location and other relevant factors specific to the land being valued. Where applicable specialised land is adjusted for the community service obligation (CSO) to reflect the specialised nature of the land being valued. As adjustments to CSO are considered as significant unobservable inputs, specialised land would be classified as level 3 assets. To the extent that non-specialised land does not contain significant, unobservable adjustments, the assets are classified as level 2 under the market approach.
Additional Information
As at 30 June 2018 the fair value of land was checked against indices provided by the Victorian Valuer-General’s Office to determine any material or exceptionally material movements. As a result, land was revalued upwards by $60.4 million. If land was measured at historical cost, the carrying amount would be $56.5 million (2017: $55.2 million). Buildings – specialised / non-specialised
Index
The most recent valuation was performed on 30 June 2016 and valuation was independently determined by the Victorian ValuerGeneral’s Office using market value or depreciated replacement cost method. The depreciated replacement cost method is based on the replacement of buildings to a ‘modern equivalent’ standard after applying an appropriate depreciation rate, useful life and adjusting for condition. As depreciation adjustments are considered as significant, unobservable inputs in nature, buildings are classified as level 3 fair value. To the extent that non-specialised buildings do not contain significant, unobservable adjustments, these asset are classified as level 2 under the market approach. As at 30 June 2018, buildings were checked against indices provided by the Victorian Valuer-General’s Office to determine any material or exceptionally material movements. No material movements have occurred. If buildings were measured at historical cost, the carrying amount would be $38.7 million (2017: $38.6 million).
YARRA VALLEY WATER ANNUAL REPORT 2017-18
80
Introduction
Plant and equipment
2017-18 Highlights
Plant and equipment is 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 2018 no material movements have occurred other than as disclosed in note 4.2. Crown land
Corporate information
The most recent valuation Crown land was independently determined by the Victorian Valuer-General’s Office using fair market value as at 30 June 2016. In undertaking the valuation of Crown land, the Victorian Valuer-General’s Office adopted the market based direct comparison method whereby the properties were valued by analysing land sales in comparable proximity to the subject sites and allowing for shape, size, topography, location and other relevant factors specific to the land being valued. From the sales analysed an appropriate rate per square metre was applied. Where applicable, crown land is adjusted for the community service obligation to reflect the specialised nature of the land being valued. As adjustments to community service obligation are considered as significant unobservable inputs, specialised Crown land would be classified as level 3 assets. As at 30 June 2018, Crown land was checked against indices provided by the Victorian Valuer-General’s Office to determine any material movements. As a result, Crown land was revalued upwards by $0.049 million.
Performance Report
7.4.2. Fair Value – reconciliation of changes in level 3 items The following table presents a reconciliation of changes in Level 3 items for the period ending 30 June 2018:
Opening Balance 1 July 2017 Acquisitions
Land Crown land (specialised) $’000 $’000
Buildings Infrastructure $’000 $’000
Total $’000
20,932
218
197,622
31,511
3,771,700
4,021,983
160,382
166,185
425
113
(2,326)
-
-
-
(618)
(2,944)
Depreciation
(4,141)
-
-
(1,240)
(81,519)
(86,900)
-
49
42,888
-
(32,745)
10,192
Closing balance 30 June 2018
19,730
267
240,935
30,384
3,817,200
4,108,516
Opening Balance 1 July 2016
23,385
218
195,975
32,503
3,515,800
3,767,881
Acquisitions
3,475
-
1,647
48
291,107
296,277
Disposals / write off
(845)
-
-
-
(1,151)
(1,996)
(5,083)
-
-
(1,040)
(70,390)
(76,513)
-
-
-
-
36,334
36,334
20,932
218
197,622
31,511
3,771,700
4,021,983
Revaluation gains / (loss) recognised in other comprehensive income
Depreciation Revaluation gains / (loss) recognised in other comprehensive income Closing balance 30 June 2017
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
-
Additional Information
5,265
Disposals / write off
Annual Financial Report
Plant and equipment $’000
81
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
7.4.3. Fair value – valuation techniques and significant unobservable inputs in level 3 items
Land (specialised and Crown)
Market approach
Significant unobservable inputs
Range (average)
Sensitivity of the input to fair value
Community service obligation (CSO) adjustment
1% to 92% (21%)
A significant increase or decrease in the community service obligations adjustment would result in a higher or lower land valuation.
Infrastructure
Terminal value growth rate (inclusive of inflation)
3.5%
If the terminal growth rate had changed by +/- 0.25% from the year end valuation, the impact to the valuation would have been a decrease of $616 million and increase by $814.6 million.
Terminal value capex
$217 million
If the terminal value capex changed by +/- 10% the impact would be $637 million.
Original useful life
2 to 25 years (4.6)
A significant increase or decrease in useful life impacts the fair value of plant and equipment.
Cost per unit
$100 to $1,409,766 ($9,235)
A significant increase or decrease in cost per unit impacts the fair value of plant and equipment.
Cost per square metre
$100 to $4,200 $2,165
A significant increase or decrease in cost per square metre impacts the fair value of buildings.
Useful life (remaining)
1 to 60 years (23)
A significant increase or decrease in useful life impacts the fair value of buildings.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
If the WACC had changed by +/0.25% from the year end valuation, the impact to the valuation would have been a decrease of $845.7 million and increase by $747.4 million.
Additional Information
Depreciated replacement cost approach
5.0% to 5.6%
Annual Financial Report
Buildings
Depreciated cost (deemed fair value)
Weighted average cost of capital (WACC)
Performance Report
Plant and equipment
Income approach using a discounted cash flow model
Corporate information
$1000 to $17,568,000 ($254,495)
2017-18 Highlights
Valuation technique
82
Introduction
8. STATUTORY OBLIGATIONS
2017-18 Highlights
Introduction This section includes disclosures in relation to the Corporation’s statutory obligations. Structure 8.1 Income tax 8.2 Environmental contributions 8.3 Goods and Services Tax
Corporate information
8.1. Income tax The Corporation is subject to the National Tax Equivalent Regime (NTER), which is administered by the Australian Taxation Office. The income tax expense for the period is the expected tax payable on the current period’s taxable income based on the national corporate income tax rate of 30%, 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.
2018 $’000
2017 $’000
Current income tax expense (paid or payable)
32,461
26,346
Adjustments for prior years
(1,372)
381
5,163
475
36,252
27,202
173
(12,677)
124,754
88,766
Tax at the Australian tax rate of 30% (2017: 30%)
37,426
26,630
Adjustments for income tax of previous years
Income tax
Performance Report
The income tax expense for the financial year differs from the amount calculated on the net result. The differences are reconciled as follows:
Income statement Annual Financial Report
Deferred income tax expense Temporary differences Income tax expense reported in the income statement Statement of changes in equity Income tax reported in equity
Additional Information
Tax reconciliation Net result before income tax expense
381
64
13
Non-deductible depreciation
13
13
Assessable income Income tax on profit before tax
121
165
36,252
27,202
11,239
7,362
Index
(1,372)
Non-deductible expenses
Income tax payable Current tax payable
YARRA VALLEY WATER ANNUAL REPORT 2017-18
83
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
2017 $’000
Provisions
8,024
6,884
Buildings future deductible amounts
2,100
2,361
-
232
10,124
9,477
9,477
8,734
647
743
10,124
9,477
(374,228)
(368,596)
(258,405)
(268,229)
(54,709)
(45,516)
Corporate information
2018 $’000
2017-18 Highlights
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 Amounts recognised in comprehensive operating statement
Unearned income Total deferred tax assets
Performance Report
Movements Opening balance at 1 July Credited/(debited) to the comprehensive operating statements Closing balance at 30 June
Annual Financial Report
Deferred tax liabilities Amounts recognised in comprehensive operating statement Accelerated depreciation for tax purposes Amounts recognised directly in equity Revaluation of infrastructure to fair value Revaluation of land to fair value
(588) (2,038)
(690,426)
(684,967)
(684,967)
(670,958)
(5,632)
(1,332)
173
(12,677)
Closing balance at 30 June
(690,426)
(684,967)
Net deferred tax liabilities
(680,302)
(675,490)
Defined benefit superannuation asset Total deferred tax liabilities
Additional Information
(588) (2,496)
Revaluation of buildings to fair value
Movements Opening balance at 1 July
Credited/(debited) to other comprehensive income
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
Debited to the comprehensive operating statements
84
Introduction
8.2. Environmental contributions
2017-18 Highlights
The Water Industry (Environmental Contributions) Act 2004 (the Act) amended the Water Industry Act 1994 to make provision for environmental contributions to be paid by water authorities. The Act establishes an obligation for authorities to pay into a consolidated fund annual contributions for the first period, from 1 October 2004 to 30 June 2008 in accordance with the pre-established schedule of payments, which sets out the amounts payable by each corporation. The contribution period has been extended until 30 June 2020. The purpose of the environmental contribution is set out in the Act, and the funding may be used for financing initiatives that seek to promote the sustainable management of water or address water-related initiatives.
Corporate information
The Corporation has a statutory obligation to pay an environmental contribution to the Department of Environment, Land, Water and Planning. This contribution is recognised as an expense during the reporting period as incurred. Other commitments are represented mainly by environmental commitments. The Corporation has a commitment to pay an environmental contribution to the Department of Environment, Land, Water and Planning of $42.86 million each year until 30 June 2020. 2018 $’000
2017 $’000
Not later than one year
42,855
29,880
Later than one year but not later than five years
42,855
85,710
Total (GST inclusive)
85,710
115,590
Performance Report
Environmental contribution commitments at balance date not provided for in the financial statements: Payable
Annual Financial Report
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 Australian Taxation Office (ATO). In these circumstances, the 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 see note 5.1.
Additional Information
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.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
85
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
9. OTHER DISCLOSURES
2017-18 Highlights
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
Corporate information
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 government-related entities
9.6.2 Key management personnel
9.6.3 Transactions with key management personnel and other related parties
Performance Report
9.7 Ex-gratia expenses 9.8 Economic dependency
Annual Financial Report
9.9 Events subsequent to balance sheet date 9.10 Australian accounting standards issues that are not yet effective
9.1. Contributed equity Additions to net assets which have been designated as contributions by owners are recognised as contributed equity. Other transfers that are in the nature of contributions or distributions (capital repatriation) have been recognised in contributed equity. 2017 $’000
Contributed equity
468,697
468,697
Less capital repatriation
(23,865)
-
Total contributed equity
444,832
468,697
Additional Information
2018 $’000
Contributed equity
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
86
Introduction
9.2. Retained earnings 2017 $’000
Opening balance
276,722
233,811
Net profit after tax
88,502
61,564
Defined benefit superannuation plan actuarial gain*
2,213
5,924
Net deferred tax assets recognised through retained earnings*
(1,777)
(41,600)
(22,800)
Closing balance
325,174
276,722
Corporate information
(663)
Dividend paid
2017-18 Highlights
2018 $’000
*Defined benefit superannuation plan actuarial gain net of tax effect $1,550,000 (2017: $4,147,000 gain).
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.
Performance Report
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. 2017 $’000
Asset revaluation surplus
904,301
878,741
Total asset revaluation surplus
904,301
878,741
Infrastructure $’000
Crown land $’000
Land $’000
Buildings $’000
Total $’000
Balance at 1 July 2017
625,862
218
251,100
1,561
878,741
Revaluation, net of tax effect
(22,922)
49
48,433
-
25,560
Balance at 30 June 2018
602,940
267
299,533
1,561
904,301
600,428
218
251,100
1,561
853,307
25,434
-
-
-
25,434
625,862
218
251,100
1,561
878,741
Movements in asset revaluation surplus
Annual Financial Report
2018 $’000
Asset revaluation surplus
Additional Information
2018
Balance at 1 July 2016 Revaluation, net of tax effect Balance at 30 June 2017
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
2017
87
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
9.4. Responsible persons
2017-18 Highlights
The relevant Minister and Directors of Yarra Valley Water 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 2018 were: Minister for Water
Sue Therese O’Connor
Chair of the Board
Robert Clive Skinner
Deputy Chair of the Board
Patrick John McCafferty
Managing Director
Victor John Perton
Director
Anita Michele Roper
Director
Eric Sjerp
Director
Helen Lynette Thornton
Director
Karen Milward
Director
Appointed 1 October 2017
Victoria Fay Marles
Director
Appointed 1 October 2017
Gregory Joseph Camm
Director
Retired 30 September 2017
Susan Elizabeth Friend
Director
Retired 30 September 2017
Corporate information
Hon Lisa Neville MP
Performance Report Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
88
Introduction
9.4.1. Remuneration of responsible persons
2017-18 Highlights
The Minister’s remuneration and allowances are set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the Department of Parliamentary Service’s 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 whose remuneration from the Corporation was within the specified bands were as follows:
$10,000 - $19,999
2
-
$30,000 - $39,999
2
-
$40,000 - $49,999
-
5
$50,000 - $59,999
5
2
$90,000 - $99,999
1
1
$410,000 - $419,999
-
1
$430,000 - $439,999
1
-
11
9
908
865
Total numbers Total amount ($’000)
Performance Report
2017 No.
Corporate information
2018 No.
Annual Financial Report
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 report 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.
Additional Information
•• 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 a severance packages.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
89
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED
2,150
2,175
170
203
52
53
2,372
2,431
Total numbers
9
13
Total annualised employee equivalent (AEE)
8
8
Short-term employee benefits Post‑employment benefits Other long-term employment benefits Total amount ($'000)
2017-18 Highlights
2017 $’000
Introduction
2018 $’000
Corporate information
(a) Annual employee equivalent is based on the time fraction worked over the reporting period.
9.6. Related party Related parties of the Corporation include:
Performance Report
•• All key management personnel and their close family members and personal business interest (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; and •• Controlled business interests.
Annual Financial Report
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 The Corporation, under a normal commercial agency arrangement, bills and collects rates on behalf of the Minister for Water relating to Parks Victoria services. The Corporation charges the Department of Environment, Land, Water and Planning for the services it provides in billing and collecting rates and on charges costs incurred regarding supplementary council valuations. The Corporation is required to pay an environmental contribution to the department. 2017 $’000
3,472
2,824
468
550
-
1,140
29,880
29,880
64,803
61,270
1,605
2,240
Additional Information
2018 $’000 Amounts recognised as revenue in the Statement of Comprehensive Income Administration fees for billing and collecting rates and reimbursement of costs of supplementary council valuations Water efficiency program funding Transfer of water entitlement
Environmental contribution
Index
Amounts recognised as an expense in the Statement of Comprehensive Income
Cash amounts paid during the year Parks Victoria levy billed to customers Amounts payable at 30 June
YARRA VALLEY WATER ANNUAL REPORT 2017-18
90
Introduction
ii. Melbourne Water Corporation
2017-18 Highlights
The Corporation transacts solely with the Melbourne Water Corporation for the purchase of potable water and disposal of sewage. The Corporation, under a normal commercial agency arrangement, bills and collects drainage rates and charges on behalf of the Melbourne Water Corporation. The Corporation charges the Melbourne Water Corporation for the services it provides in billing and collecting drainage fees on behalf of the Melbourne Water Corporation and on charges costs incurred regarding supplementary council valuations. 2018 2017 $’000 $’000 Amounts recognised as revenue in Statement of Comprehensive Income 5,378
5,257
503,305
493,414
Drainage billed to customers
85,758
82,380
Amounts payable at 30 June
11,098
12,796
Corporate information
Administration fees for billing and collecting drainage rates and reimbursement of the 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
Performance Report
iii. Treasury Corporation of Victoria The Corporation borrows from and invests with the Treasury Corporation of Victoria, see 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: 2017 $’000
2,414,165
2,263,217
Interest expense
96,211
98,176
Amounts payable at 30 June
27,677
28,346
Aggregate amount of borrowings
Annual Financial Report
2018 $’000
Additional Information
iv. Department of Treasury and Finance The Corporation pays amounts to the State Government of Victoria, via the Department of Treasury and Finance. Amounts incurred were as follows: 2018 2017 $’000 $’000 Cash payments 41,600
22,800
Capital repatriation
23,865
-
Financial accommodation levy
33,255
29,156
Income tax equivalent
36,252
27,202
Amounts payable at 30 June
19,774
11,818
Index
Dividend paid
Amounts recognised as an expense in the Statement of Comprehensive Income
YARRA VALLEY WATER ANNUAL REPORT 2017-18
91
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
v. Department of Health and Human Services
Concession amounts billed during the year Amounts payable at 30 June
2018 $’000
2017 $’000
49,581
49,131
4,111
4,904
2017-18 Highlights
Customers of the Corporation who hold either a Pension Concession Card, a Gold Repatriation Health Care Card for All Conditions or a Health Care Card are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the Department of Health and Human Services.
Corporate information
vi. Other State Government of Victoria related parties During the year Yarra Valley Water supported Thriving Communities Partnership (TCP), a cross-sector collaboration with the goal that everybody has fair access to the modern essential services they need to thrive in contemporary Australia. Pat McCafferty acts as a director and Yarra Valley Water has supported TCP with their setup and administration. At 30 June 2018, Yarra Valley Water has a liability to TCP amounting to $0.358 million.
Performance Report
Water and sewerage services were provided to wholly owned State Government of Victoria entities for properties within Yarra Valley Water’s district under normal commercial terms and conditions. All other transactions with State Government of Victoria related party entities were made on normal commercial terms and conditions and have not been considered material for disclosure. 9.6.2. Key management personnel
Annual Financial Report
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Corporation, directly or indirectly, this comprises 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 the activities of the Corporation directly or indirectly, during the financial year. The compensation detailed below excludes the salaries and benefits the Portfolio Minister receives. The Minister’s remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the Department of Parliamentary Services’ financial report. 2017 $’000
821
783
Post‑employment benefits
77
73
Other long-term employment benefits
10
9
908
865
Short-term employee benefits
Total amount
Additional Information
2018 $’000
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
92
Introduction
9.6.3. Transactions with key management personnel and other related parties
2017-18 Highlights
All key management personnel 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 the Corporation’s Balance Sheet and Statement of Comprehensive Income may have been affected by the existence of related parties, and by transactions and outstanding balances, including commitment, with such parties.
9.7. Ex-gratia expenses 2018 $’000
2017 $’000
1,615
930
Write offs for disconnected customer accounts greater than 180 days
2,598
2,130
Bankruptcies and liquidations
36
78
Minimum account write offs
102
139
4,351
3,277
Total (GST inclusive)
Corporate information
Hardship write offs for customers in the Arrange and Save Program
Performance Report
All ex-gratia expenses above form part of bad and doubtful debts expense at note 3.1.
9.8. Economic dependency The normal trading activities of the Corporation are significantly dependent on the provision of finance from the Treasury Corporation of Victoria.
Annual Financial Report
9.9. Events subsequent to balance sheet date Since 30 June 2018 to the date of this report, no matter or circumstance has arisen that, in the opinion of the Directors, has significantly affected or may significantly affect the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation in future financial years.
Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
93
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CONTINUED Introduction
9.10. Australian accounting standards issued that are not yet effective
AASB 15 Revenue from Contracts with Customers
1 January 2018
The changes in revenue recognition requirements in AASB 15 will result in changes to the timing and amount of revenue recorded in the financial statements. There will be no change to the treatment of the Service and Usage Revenue Streams as a result of the new standard.
Corporate information
The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.
Applicable for annual reporting periods beginning on or after Impact on Yarra Valley Water financial report
2017-18 Highlights
Standard / Interpretation Summary
However; our non-core revenue and other revenue streams will be impacted including; new customer contributions, meter installation and inspection fees. The timing of recognition of these streams will need to be recognised on issuance of Statement of Compliance to the developer/ owner, as such recognition of revenue is delayed.
Performance Report
Management are working on quantifying the impact of these changes. AASB 9 Financial Instruments
1 January 2019
If Yarra Valley Water were to apply the revised impairment loss model on the 2017-18 debtors balance, it would increase the Corporation’s provision by less than $200,000. While there will be no significant impact to the measurement arising from AASB 9 there will be a change to the way financial instruments are disclosed.
The assessment has indicated that most operating leases, except for short term and low value leases will come on to the balance sheet and will be recognised as right of use assets with a corresponding lease liability.
Additional Information
AASB 16 Leases The key changes introduced by AASB 16 include the recognition of most operating leases (which are currently not recognised) on balance sheet.
The assessment has identified that the amendments are to result in earlier recognition of impairment losses for debtors and at more regular intervals.
Annual Financial Report
The key changes include 1 January 2018 the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model which recognises impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.
In the operating statement, the operating lease expense will be replaced by depreciation expense of the asset and an interest charge.
Index
There will be no change for lessors as the classification of operating and finance leases remains unchanged. The impact will be immaterial. Please refer to note 3.3 for leases committed as at 30 June 2018. In addition to the new standards above, the Australian Accounting Standards Board has issued a list of amending standards that are not yet effective for the 2017-18 year. In general, these amending standards include editorial and references changes that are expected to have insignificant impacts on the Corporation’s financial report. There are no other standards that are not yet effective that are expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions. YARRA VALLEY WATER ANNUAL REPORT 2017-18
94
STATUTORY CERTIFICATION Introduction 2017-18 Highlights
We certify that the attached Financial Statements of Yarra Valley Water Corporation have been prepared in accordance with Standing Directions 5.2 of the Minister for Finance’s Standing Directions issued pursuant to the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements.
Corporate information
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 2018 and financial position of the Corporation at 30 June 2018. 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.
Performance Report
We authorise the attached Financial Statements for issue dated at Melbourne on this 24th day of August 2018.
Annual Financial Report
Sue T O’Connor Chair
Patrick J McCafferty Managing Director
Additional Information
Natalie Foeng Chief Financial Officer
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
95
AUDITOR-GENERAL’S AUDIT REPORT Introduction 2017-18 Highlights
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 2018 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.
Corporate information
• • • • • •
Basis for Opinion
Performance Report
In my opinion, the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2018 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. I have conducted my audit in accordance with the Audit Act 1994 which includes 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.
In connection with my audit of the financial report, my responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a materially misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. 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.
Index
Board’s responsibilities for the financial report
The Board is responsible for the "other information" included in the corporation's annual report for the year ended 30 June 2018. The other information comprises the information in the annual report but excludes 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 and accordingly I do not express any form of assurance conclusion thereon.
Additional Information
Information other than the Financial Report, Performance report and Auditor's Reports
Annual Financial Report
My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Victoria. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
In preparing the financial report, the Board is responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
96
Introduction
As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
2017-18 Highlights
Auditor’s responsibilities for the audit of the financial report
Corporate information
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: •
• •
Annual Financial Report
•
Performance Report
•
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 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 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.
Additional Information
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.
Index
MELBOURNE 28 August 2018
Paul Martin as delegate for the Auditor-General of Victoria
2
YARRA VALLEY WATER ANNUAL REPORT 2017-18
97
YARRA VALLEY WATER ANNUAL REPORT 2017-18
98
ADDITIONAL INFORMATION 2017-18
YARRA VALLEY WATER ANNUAL REPORT 2017-18
99
WATER CONSUMPTION AND DROUGHT RESPONSE Introduction
WATER CONSUMPTION REPORT 2017-18 Number of customers (as at 30 June 2018)
Non-residential customers Total
2017-18 Highlights
Residential customers
746,925 55,205 802,130
Drinking Water volume (ML)1
Non-residential customers (1) Total
Corporate information
Residential customers
112,487 30,668 143,155
Recycled wastewater volume (ML) Residential customers
27 1,425
(2) Total
1,452
(1)+(2) Total consumption (ML)2
144,607
Average annual consumption3
138,898
Performance Report
Non-residential customers
Leakage
8,867
Bursts
4,748
Other
3,700
(3) Total (1)+(2)+(3) Total water all sources (ML)
Annual Financial Report
Non-revenue water (ML)
17,315 161,922
Additional Information
1. Includes a small amount of unchlorinated water supplied directly from aqueducts. 2. Total consumption does not include water sourced from rainwater tanks or from grey water reuse. 3. Average customer usage calculated over five years from 2013-14 to 2017-18.
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
100
Introduction
14/15
161
161
13/14
160
164
12/13
168
166
153
147
151
157
150
Corporate information
164
186
207
200
210
230
217
246
244
200
2017-18 Highlights
237
250
250
RESIDENTIAL DEMAND – AVERAGE LITRES OF WATER PER CAPITA PER DAY
100
50
97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11
11/12
SUSTAINABLE WATER USE
The metropolitan water retailers have prepared common Drought Preparedness Plans (incorporating a Drought Response Plan) based around an adaptive framework to manage water shortages and potential use of four levels of water restrictions to control the use of potable water outdoors.
Water recycling
CORPORATE WATER CONSUMPTION
Total water consumption for 2017-18 Number of FTE staff on site Average water use per employee (kL per employee) Total office space
4,586.40 kL 595.2 7.71kL 10,000m
2
Average water use per m
2
0.459 kL
We connected 2,680 properties to Class A recycled water and constructed 73km of recycled water mains. Water recycling continues to be a key component of our integrated water cycle management servicing strategy for the Northern Growth Corridor. Provision of 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.
SUSTAINABLE AND RESILIENT WATER SERVICES SYSTEMS
Index
The amounts in the table below represent consumption at Yarra Valley Water’s Lucknow Street, Mitcham office and not at any treatment plants or other work sites.
In 2017-18, we produced 12,088 ML of recycled water at our sewage treatment plants of which 4,018 ML or 33.2% was reused. This reused volume was an increase of 13.2% in comparison to 2016-17.
Additional Information
During 2017-18, water storage levels were high and as such there was no requirement for drought preparedness measures. Consequently, Permanent Water Use Rules continued to apply for the whole of 2017-18.
16/17 17/18
Annual Financial Report
DROUGHT RESPONSE REPORT
15/16
Performance Report
0
During 2017-18, we worked on a range of sustainable and resilient services for our customers, including: •• Collaborating with the Victorian State Government, other water corporations and local government through Integrated Water Management forums for the Maribyrnong, Yarra and Dandenong Creek catchments. Yarra Valley Water YARRA VALLEY WATER ANNUAL REPORT 2017-18
101
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING
•• Initiating and delivering 95 ML of Class B recycled water to Melbourne Polytechnic’s training farm at Whittlesea to improve agricultural production, lower overall farm costs and demonstrate recycled water use to local farmers and students.
•• Collaborating with Victorian Planning Authority, two councils, South East Water and Melbourne Water to identify integrated water solutions for the Latrobe National Employment Cluster and Monash National Employment Cluster growth areas.
Water quality
A combination of factors including improved management of operational changes, and targeted cleaning of over 170km of water mains using a combination of cleaning methods have all contributed to our performance.
Water conservation We continued to encourage our customers to maintain responsible water use practices, to help protect the long-term security of our water supplies and reduce the cost of supply augmentations including the following: •• The WaterCare water efficiency program, which is a Yarra Valley Water initiative aimed to assist vulnerable customers to reduce their water usage and costs by providing a free
Victorian Biodiversity Strategy Yarra Valley Water follows the directive of ‘Victoria’s Native Vegetation Management: A Framework for Action’, which was developed as an offset measure to support the Victorian Biodiversity Strategy. We work with multidisciplinary companies and involve ecologists early in the preliminary design phase of projects to complete them in a more sustainable manner. This includes conducting complete risk assessments, life-cycle analyses, net-gain assessments and offset management plans, and preliminary flora and fauna options assessments. We liaise with stakeholders such as the Department of Environment, Land, Water and Planning DELWP, local councils and other water utilities on a project-by-project basis to determine how best to conserve Victoria’s biodiversity. We liaise directly with DELWP on ongoing growth and development of all native offset areas established as part of these projects.
Index
We achieved 88% customer satisfaction with the overall quality of drinking water provided.
OTHER STATUTORY OBLIGATIONS
Additional Information
During 2017-18, we maintained our commitment to provide safe, high-quality drinking water. This year we received 3.23 complaints for every 1,000 customers, maintaining performance from previous years.
•• The continuation of our primary school incursions program, which since inception has now delivered over 1,442 classroom presentations to more than 38,500 primary school children within our district.
Annual Financial Report
•• Collaborating with other metropolitan water corporations to develop a new Melbourne Metropolitan Sewerage Strategy, which takes a 50-year strategic view for the development of Melbourne’s bulk sewerage system, to protect public health and enhance the liveability, productivity, prosperity and environment of the metropolitan region.
•• Provision of the Schools Water Efficiency (SWEP) program to more than 250 schools, the program includes free data loggers to participating schools, giving teachers and students alike access to timely information about water consumption using an interactive website. Complementing this information is a tailored curriculum resource which aligns with math and science concepts for students. As a result of the program, schools have been able to identify efficiencies and save over $3.4 million since the program commenced.
Performance Report
•• Collaborating with Melbourne Water and DELWP on customer research to inform stormwater solutions in the Northern Growth Corridor.
•• Distributed water efficient showerheads under our showerhead exchange program. A total of 190,799 showerheads have been issued since the beginning of the program.
Corporate information
•• Continuing the roll out of recycled water infrastructure in the Northern Growth Corridor and Chirnside Park area to ultimately service about 165,000 properties.
water audit. This may include minor plumbing repairs or replacement of inefficient water fittings. The program is run in conjunction with the Victorian Government’s Community Rebate program and supports customers who are experiencing financial hardship as a result of high water bills. During 2017-18, more than 520 customers benefited from the program, through leak repairs and replacement of inefficient shower heads.
2017-18 Highlights
•• Undertaking extensive community engagement on options to deliver recycled water to around 5,500 properties in Doncaster.
Introduction
is involved in a number of place-based projects that include IWM servicing schemes for various geographic areas and stormwater harvesting schemes to water open space and playing fields, in line with our commitments under action 5.1 of Water for Victoria.
Victorian Waterway Management Strategy Yarra Valley Water strives to deliver our services within the carrying capacity of nature and reducing our environmental footprint is a priority.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
102
During the year, we provided input as a key stakeholder for Melbourne Water’s review of the Healthy Waterways Strategy.
During 2017-18, the following projects underwent construction to prevent wastewater discharges to the environment during rainfall events with less than a one-in-five year average recurrence interval: •• Mernda South to Darebin link main
We completed detailed design on the following uncontrolled spills projects: •• Scotchmans Creek diversion sewer •• Doreen flow control facility and rising main augmentation We progressed functional designs for the following projects:
•• Brunswick catchment upgrade and inflow reduction •• Blackburn hydraulic upgrade and ERS installation •• Roycroft Avenue ERS installation. We progressed hydraulic options assessment for the following projects:
•• Masons Road branch sewer. Yarra Valley Water’s internal inflow and infiltration working group, which was formed following inflow/infiltration rectifications in Croydon/Ringwood South last year, has been progressing with development of a defined methodology for identifying and rectifying inflow and infiltration into our network. Works will commence for implementing this methodology in 2018-19.
•• Completion and approval of Pricing Submission 4 document which proposed the implementation of the alternative Waterway Investment Prioritisation (WIP) approach •• Participating in and influencing the SEPP review process •• Worked closely with Melbourne Water in their project review of their Enhancing Our Dandenong Creek project in order to obtain any relevant lessons learnt •• Participated in and influenced the Sewerage Management Guidelines working group •• Progressing our proposed implementation methodology based on the draft Sewerage Management Guidelines. Yarra Valley Water has also continued to construct new sewerage infrastructure for previously unsewered areas as part of the Community Sewerage Program. The Community Sewerage Program provides wastewater services to areas referred to Yarra Valley Water by local councils that are deemed to be a high risk of environmental impact to waterways and public health. The areas contain a large number of failing septic systems and properties unable to contain wastewater within property boundaries.
Index
•• Dry Creek branch sewer
•• Participation in stakeholder engagement through Melbourne Water’s Healthy Waterway Strategy development
Additional Information
•• Burwood East sewer duplication and ERS installation
•• Detailed drain and waterway litter surveys to identify key risk and threats to waterway outcomes, beneficial uses and values
Annual Financial Report
•• Epping 4B branch sewer.
•• Drainage monitoring to identify sewage cross connections identified in Phase 1
Performance Report
State Environment Protection Policy (Waters of Victoria)
Corporate information
A summary of our sewage treatment plants’ performance is reported to the EPAV on an annual basis. Additionally, water quality and flow data relating to waterways is reported to the Essential Services Commission, the National Pollutant Inventory and the Bureau of Meteorology.
The second phase of the Merri Creek Waterway Investment Prioritisation study has been ongoing throughout 2017-18. The first phase determined that the key threats to the waterway outcomes sought were from stormwater pollutants. The risk and impacts of wastewater overflows into the Merri Creek and downstream waterways was negligible. Phase 2 is focused on detailed waterway monitoring, development of a framework for assessing risk, threats and opportunities for improvement, stakeholder consultation, and implementation of prioritised projects. These include:
2017-18 Highlights
To comply with river and aquifer health requirements as per our Statement of Obligations, Yarra Valley Water undertakes regular (weekly, monthly) sampling at each of our sewage treatment plants to ensure they comply with our Environment Protection Authority Victoria (EPAV) Corporate Licence Requirements.
Introduction
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 tons. In 2017-18, our discharge was 52.4 tons.
During 2017-18, we provided reticulated sewer services to parts of Donvale and customers continued to connect to newly constructed systems in Warrandyte and North Warrandyte. We are also continuing to plan for new sewerage services in the Dandenong Ranges, with the Program to be delivered to areas including, Monbulk, Kallista, the Patch, Sherbrooke and Yarra Junction.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
103
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING CONTINUED Introduction
GREENHOUSE GAS EMISSIONS AND NET ENERGY CONSUMPTION
2017-18 Highlights
We have offset our GHG emissions to achieve net zero emissions for a ninth year in a row. To achieve net zero emissions we voluntarily surrendered Certified Emission Reduction (CER) credits that were generated by the Stung Tatay Hydroelectric Project in Cambodia. This year we plan on making an application to be certified as Carbon Neutral under the National Carbon Offset Standard. We are also working with our business partners and suppliers to encourage them to reduce their emissions each year.
2016-17
2015-16
2014-15
2013-14
2012-13
8,682
7,930
7,950
7,660
7,399
5,296
Wastewater treatment
18,063
17,937
18,499
18,206
17,709
17,204
Wastewater pumping
4,655
5,446
4,316
4,469
*4,399
3,124
Office use
1,699
1,735
1,959
1,927
2,158
2,823
Vehicle fleet
1,072
1,035
1,038
993
1,051
1,065
Total GHG emissions
34,171
34,083
33,762
33,255
*32,716
29,512
Offsets purchased
34,171
-
-
-
-
274
-
34,083
33,762
33,255
*32,716
29,238
Water treatment and pumping
†
Other offsets
††
Performance Report
2017-18
Corporate information
GHG (Tons of CO2e)
* Sewage pumping was omitted from 2013-14 figures. We offset our Total GHG emissions for the period 2017-18 with Certified Emission Reduction (CER) credits generated by the Stung Tatay Hydroelectric Project in Cambodia under the Kyoto Protocol’s Clean Development Mechanism (Project 8761).
††
We offset our greenhouse gas emissions as a result of the Showerhead Exchange Program, since water efficient showerheads reduce the amount of energy required to heat water.
Annual Financial Report
†
GHG (MJ)
2016-17
2015-16
2014-15
2013-14
2012-13
Water treatment and pumping
28,940,000
26,190,803
25,327,324
23,368,277
22,765,147
16,022,023
Wastewater treatment
53,807,000
46,890,108
45,320,422
44,817,195
41,757,855
40,758,843
Wastewater pumping
15,517,000
17,986,957
13,747,786
13,633,553
13,534,502
9,449,755
Office use
11,382,000
14,508,774
10,970,789
14,261,166
10,252,076
10,049,487
Vehicle fleet
15,504,000
14,989,000
15,022,000
14,501,000
15,270,000
15,678,000
110,581,191 103,579,580
91,958,108
Total
125,150,000 120,565,642 110,388,321
Index
2017-18
Additional Information
In 2017-18 our waste-to-energy facility generated 4,656,691kWh of renewable energy, which equated to 16.4% of our total electricity requirement. The waste-to-energy facility and our Aurora treatment plant directly consumed 2,175,448kWh of this renewable energy, with the rest exported to the grid for use at other sites. This direct ‘behind the meter’ consumption of renewable energy resulted in a reduction of 2,349 tons of CO2 emissions compared to sourcing that electricity from the grid.
Conversion factor of 1 kWh = 3.6 Megajoules (MJ) used.
YARRA VALLEY WATER ANNUAL REPORT 2017-18
104
Introduction
Water treatment and pumping
2015-16
2014-15
2013-14
2012-13
142,728
137,336
140,689
132,384
131,916
132,997
202.8
190.7
180.0
176.5
172.6
120.5
Wastewater volume treated at Yarra Valley Water Sewage Treatment Plant (ML)
11,153
11,847
10,914
10,263
10,323
10,073
Energy use (MJ/ML)
4824.4
3,958.0
4,152.5
4,366.9
4,045.1
4,046.3
121,296
127,828
120,550
119,995
117,281
118,078
127.9
128.8
104.6
104.7
106.1
73.7
Bulk water volume* (ML) Energy use (MJ/ML)
Wastewater volume transferred to Melbourne Water (ML) Energy use (MJ/ML)
Performance Report
Wastewater pumping
2016-17
Corporate information
Wastewater treatment
2017-18
2017-18 Highlights
Energy Use (MJ Per ML)
Energy figures only include Yarra Valley Water usage (exclude Melbourne Water treatment and transfer usage). Annual Financial Report
* Metered water supplied to Yarra Valley Water customers.
COMMUNITY SERVICE OBLIGATIONS 2016-17 $’000
49,563
49,111
Rebates paid to not-for-profit organisations under the Water and Sewerage Rebate Scheme
1,295
1,249
Utility Relief Grant payments
1,128
1,073
18
20
52,004
51,453
Provision of concessions to pensioners
Water concessions for life support machines – Haemodialysis Total
Additional Information
2017-18 $’000
Community service obligations
Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
105
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING CONTINUED
The Utility Relief Grants 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.
REBATES PAID TO NOT-FOR-PROFIT ORGANISATIONS UNDER THE WATER AND SEWERAGE REBATE SCHEME
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 these customers for water usage and sewage disposal charges relating to the use of such a machine.
Performance Report
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.
Corporate information
Customers who hold either a Pension Concession Card, a Gold Repatriation Health Care Card for All Conditions or a Health Care Card are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the Department of Human and Health Services (DHHS).
2017-18 Highlights
UTILITY RELIEF GRANTS SCHEME
Introduction
PROVISION OF CONCESSIONS TO PENSIONERS
The rebate amount is determined by the DHHS based on the estimated annual water usage of a dialysis machine (168 kL). This rebate is in addition to any other pension or concession entitlements.
Annual Financial Report Additional Information Index
YARRA VALLEY WATER ANNUAL REPORT 2017-18
106
ANNUAL REPORTING OF MAJOR NON-RESIDENTIAL WATER USES Introduction
REQUIREMENT 1: NUMBER OF CUSTOMERS WHO FALL WITHIN EACH RANGE
2017-18 Highlights
(Section 122ZJ of the Water Act 1989)
TABLE 1: CUSTOMER BY VOLUME RANGE Volumetric Range – MLs per year
Number of customers 8
Equal to or greater than 200 ML and less than 300 ML
2
Equal to or greater than 300 ML and less than 400 ML
2
Equal to or greater than 400 ML and less than 500 ML
2
Equal to or greater than 500 ML and less than 750 ML
-
Equal to or greater than 750 ML and less than 1000 ML
-
Greater than 1000 ML
2
Total number of customers
Corporate information
Equal to or greater than 100 ML and less than 200 ML
16 Performance Report
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
Yes
Austin Hospital
Yes
Bega Cheese
Yes
Bertocchi Smallgoods
Yes
Chadstone Shopping Centre
Yes
Chiquita Mushrooms Pty Ltd
Yes
Continental Poultry Pty Ltd
Yes
CSL Behring
Yes
Huhtamaki
Yes
Latrobe University
Yes
Monash University
Yes
Northern Hospital
Yes
Peters Ice Cream
Yes
Visy Packaging Properties Pty Ltd
Yes
Visy Paper Coolaroo
Yes
Westfield Doncaster
Yes
Index
Asaleo Care Pty Ltd
Additional Information
Information as to customers’ participation in water efficiency program
Annual Financial Report
Name of customer
To build business knowledge and support large water users to adopt local water solutions, we coordinate and facilitate seminars, undertake site visits to 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. YARRA VALLEY WATER ANNUAL REPORT 2017-18
107
BULK ENTITLEMENTS REPORT Introduction
Yarra Valley Water holds Bulk Entitlements to the water resources of the Greater Yarra River — Thomson Basin and to the Victorian Desalination Project. In addition, Yarra Valley Water holds Bulk Entitlements in the River Murray and Goulburn System of up to 25,000 ML annually of water savings, as a result of its investment in the Goulburn-Murray Water’s Connections Project.
Clause 13.1 (a) 0 ML4
Clause 14.1 (b) 7.0 ML8,9
0 ML
Annual water allocation made available to the Authority
Clause 16.1 (b) 130,538 ML
Clause 13.1 (a) 5,695 ML4
Clause 14.1 (c) 5,480 ML
Clause 11.1 (a) 4,707 ML
Share of storage volume at 30 June 2018 for carryover
Clause 16.1 (b) 180,757 ML
Clause 13.1 (a) 5,695 ML
6,976 ML10
3,460 ML14
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
Clause 16.1 (d) Nil
Clause 13.1 (b) Nil
Clause 14.1 (d)11 Net 5,480 ML Clause 14.1 (e) Nil
Clause 11.1 (b) Net 4,707 ML15,16 Clause 11.1 (c) Nil
Approval, amendment and implementation of approved metering program
Clause 16.1 (e) Continued implementation2
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) Nil
Clause 11.1 (d) Nil
Any new bulk entitlement granted to Yarra Valley Water
Clause 16.1 (g) Nil
Clause 13.1 (d) Nil
Nil
Nil
Compliance with the bulk entitlement
N/A
Clause 13.1 (e) Continued compliance 5
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
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
Clause 16.1 (a) 160,470 ML
Additional Information
The volume of water taken by Yarra Valley Water in 2017-2018
Annual Financial Report
River Murray 12,13
Performance Report
Goulburn System6,7
Corporate information
Victorian Desalination Project3
2017-18 Highlights
Reporting obligation
Greater Yarra System – Thomson River Pool1
108
Introduction
NOTES FOR COMPLIANCE WITH BULK ENTITLEMENTS 1.
Yarra Valley Water holds the following Bulk Entitlement to the Greater Yarra System – Thomson River Pool. •• Bulk Entitlement (Greater Yarra System – Thomson River Pool – Yarra Valley Water) Order 2014 – WSE000081 (previously BEE072377). 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 3.
•• Bulk Entitlement (Desalinated Water – Yarra Valley Water) Order 2014 – WSE000054 (previously BEE050816). 4.
Compliance with our Desalinated Water long term average diversion limit of 56,951 ML is assessed using a 5-year rolling average diversion.
Goulburn System Yarra Valley Water holds the following Bulk Entitlement to the Goulburn System. •• Bulk Entitlement (Goulburn System – Yarra Valley Water) Order 2012 – WSE000010 (previously BEE072239). 7.
8.
7.0 ML 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 Yarra Valley Water’s Statement of Obligations (System Management).
9.
Compliance with the combined annual diversion limit of 75,000 ML for the holders of Bulk Entitlement (Goulburn System – City West Water) Order 2012, Bulk Entitlement
12. Yarra Valley Water holds the following Bulk Entitlements to the River Murray. •• Bulk Entitlement (River Murray – Yarra Valley Water) Order 2012 – WSE000145 (previously BEE072242). 13. 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 G-MW’s Connections Project are completed. The 2017-18 entitlement volume was 8,331.9 ML (3,919.0 ML in Zone 6 (Vic Murray – Dartmouth to Barmah) and 4,412.9 ML in Zone 7 (Vic Murray – Barmah to SA Border)).
14. Yarra Valley Water’s commencement volume on 1 July 2017 was 3,459.9 ML (1,593.6 ML in Zone 6 and 1,866.3 ML in Zone 7). At 30 June 2018, Yarra Valley Water held 3,459.9 ML (1,593.6 ML in Zone 6 and 1,866.3 ML in Zone 7). 15. Yarra Valley Water has in place water management strategies to manage water allocations holdings in the River Murray and Goulburn System to maximise the value of the resources held to their customers and minimise risk of spilling water allocation. These strategies include the transfer of allocations between Bulk Entitlement Allocation Accounts and trading water allocations.
Index
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 G-MW’s Connections Project are completed. The 2017-18 entitlement volume was 10,897.1 ML.
River Murray
Additional Information
6.
11. Yarra Valley Water has in place water management strategies to manage water allocation holdings in in the River Murray and Goulburn System to maximise the value of the resources held to their customers and minimise risk of spilling water allocation. These strategies include the transfer of allocations between Bulk Entitlement Allocation Accounts and trading water allocations. Net total trade out was 5,480.1 ML as 50 ML of total trade out of 5,530.1 ML traded was to correct a mistake by a water broker.
Annual Financial Report
5.
The Hon Lisa Neville MP, Minister for Water, announced a 15GL desalinated water order for the 2017-18 year, of which Yarra Valley Water’s share is 5,695 ML. We received 5,695 ML of this order in July and August 2017 which was delivered into the Melbourne water supply system. The Minister for Water has also announced a further water order of 15GL to be delivered during 2018-19.
10. Yarra Valley Water’s commencement volume on 1 July 2017 was 6,983.1 ML. At 30 June 2018, Yarra Valley Water held 6,976.1 ML.
Performance Report
Yarra Valley Water holds the following Bulk Entitlement to the Victorian Desalination Project.
(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).
Corporate information
2.
2017-18 Highlights
Greater Yarra System – Thomson River Pool
16. Total trade out for River Murray system was 4,706.7 ML (2,245.3 ML in Zone 6 and 2,461.4 ML in Zone 7).
YARRA VALLEY WATER ANNUAL REPORT 2017-18
109
INDEX Introduction
DISCLOSURE INDEX Yarra Valley Water’s 2017-18 Annual Report is prepared in accordance with all relevant Victorian legislations and pronouncements. This index has been prepared to facilitate identification of Yarra Valley Water’s compliance with statutory disclosure requirements. DISCLOSURE REQUIREMENT
2017-18 Highlights
LEGISLATION
PAGE
Charter and purpose Manner of establishment and the relevant Ministers
FRD 22H
Purpose, functions, powers and duties
FRD 22H
Key initiatives and projects
FRD 22H
Nature and range of services provided
2 cover & 2-29 2-22
Corporate information
FRD 22H
cover, 2 & 6-9
Management and structure FRD 22H
Organisational structure
23
Financial and other information FRD 10A
Disclosure index
FRD 15E
Executive officer disclosures
31
FRD 22H
Employment and conduct principles
30
FRD 22H
Occupational health and safety policy
18-19
FRD 22H
Summary of the financial results for the year
20-22
FRD 22H
Significant changes in financial position during the year
FRD 22H
Major changes or factors affecting performance
FRD 22H
Subsequent events
FRD 22H
Application and operation of Freedom of Information Act 1982
FRD 22H
Compliance with building and maintenance provisions of Building Act 1993
33
FRD 22H
Statement on Competitive Neutrality Policy
34
FRD 22H
Application and operation of the Protected Disclosure Act 2012
32
FRD 22H
Details of consultancies over $10,000
32
FRD 22H
Details of consultancies under $10,000
32
FRD 22H
Disclosure of government advertising expenditure
32
FRD 22H
Disclosure of ICT expenditure
32
110-111
Performance Report
46 2-22 46
Statement of availability of other information
34
Victorian Industry Participation Policy disclosures
34
FRD 27C
Presentation and reporting of performance information
FRD 29C
Workforce data disclosures
MRD 01
Performance Reporting
MRD 02
Water Consumption and Drought Response
100-101
MRD 03
Environmental and Social Sustainability Reporting
102-106
MRD 04
Disclosure of Information on Bulk Entitlement
108-109
MRD 05
Annual Reporting of Major Non-Residential Water Users
MRD 06
Greenhouse Gas and Energy Reporting
MRD 07
Disclosure of Information
Additional Information
FRD 22H FRD 25C
Annual Financial Report
32-33
37-41 31
Index
37-41
107 10 & 104-105 4-18, 38-41 & 102-107
YARRA VALLEY WATER ANNUAL REPORT 2017-18
110
Introduction
DISCLOSURE REQUIREMENT
2017-18 Highlights
LEGISLATION
PAGE
Compliance attestation and declaration SD 5.1.4
Attestation for compliance with Ministerial Standing Direction
SD 5.2.3
Declaration in report of operations
4-5
Declaration in financial statements
95
35
Corporate information
Financial statements Declaration SD 5.2.2
Other requirements under Standing Directions 5.2 Compliance with Australian accounting standards and other authoritative pronouncements
95
SD 5.2.1(a)
Compliance with Ministerial Directions
95
SD 5.2.1(b)
Compliance with Model Financial Report
95
Performance Report
SD 5.2.1(a)
Other disclosures as required by FRDs in notes to the financial statements (a) FRD 11A
Disclosure of Ex gratia Expenses
FRD 21C
Disclosures of Responsible Persons, Executive Officers and other Personnel (Contractors with Significant Management Responsibilities) in the Financial Report
88-90
FRD 103G
Non Financial Physical Assets
62-66
FRD 110A
Cash Flow Statements
FRD 112D
Defined Benefit Superannuation Obligations
93
Annual Financial Report
51 & 74 58-61
Legislation 32-33
Freedom of Information Act 1982
33
Protected Disclosure Act 2012
32
Victorian Industry Participation Policy Act 2003
34
Financial Management Act 1994
35
Additional Information
Building Act 1993
UN GLOBAL COMPACT INDEX
YARRA VALLEY WATER ANNUAL REPORT 2017-18
Index
Please refer to our report, Planet, People, Prosperity, for information on how our policies, programs and actions align with the 10 principles of the UN Global Compact and the Sustainable Development Goals (SDGs).
111
Yarra Valley Water ABN 93 066 902 501 Lucknow Street Mitcham Victoria 3132 DX 13204 Telephone: 03 9872 1699 Fax: 03 9872 1353 www.yvw.com.au
1800 796 518 1800 796 518 1800 796 518 1800 796 518
© Copyright November 2018 Yarra Valley Water Corporation ISSN 2202-6304 (Print) ISSN 2202-6312 (Online)
1800 796 518 1800 796 518 1800 796 518 1800 796 518