Sydney Water Annual Report 2014 - Parliament of …...4 Sydney Water Annual Report 2014 Independent verification statement Limitations The scope of work covered the Subject Matter

Annual Report 2014

Sydney Water Annual Report 2014 1

ContentsAbout this report 2

Letter to our Shareholder Ministers 2

Independent verification statement 3

1 Overview of the year 5About Sydney Water 6

Our stakeholders 7

Our operations 9

About our business 13

The year in review 14

Our performance 16

2 Customer focus 27Putting customers first in everything we do 28

3 Business excellence 33Making every decision and dollar count 34

4 Forward thinking 39Spearheading change 40

Our ecological footprint 44

5 Corporate governance 45Our framework 46

Board of directors 46

Role and responsibilities 46

Board committees 46

Directors of the Sydney Water Board 47

Retired members 51

Board meetings 52

Risk management and insurance 53

Legal events 54

6 Financials 55Performance summary 56

How we set our prices and budgets 60

Financial statements 64

7 Appendixes 161Special projects 162

Appendix 1: Capital expenditure 162

Appendix 2: Community investment 166

Appendix 3: Research and development 167

Guarantee of service 169

Appendix 4: Guarantee of service and social programs 169

Appendix 5: Multicultural Policies and Services Program 2013–14 174

Appendix 6: Promotions 175

Environmental performance 181

Appendix 7: Environmental performance against special objectives 181

Appendix 8: Heritage delegation actions 184

Appendix 9: Threatened Species Conservation Act 1995 186

Appendix 10: Waste reduction and purchasing policy (WRAPP) statement 188

Workforce 189

Appendix 11: Workplace health and safety (WHS) 189

Appendix 12: Executive performance and remuneration 192

Appendix 13: Workforce diversity 193

Appendix 14: Staff and industrial relations 196

Appendix 15: Consultant engagement 196

Appendix 16: Overseas travel 197

Information management 198

Appendix 17: Global Reporting Initiative 198

Appendix 18: Exemptions from reporting provisions 207

Appendix 19: NSW Privacy and Personal Information Protection Act 1998 207

Appendix 20: NSW Government Information (Public Access) Act 2009 208

Appendix 21: Public interest disclosures 213

Appendix 22: External production costs 213

Glossary 214

Statutory information index 220

Index 223

Contact us 226

2 Sydney Water Annual Report 2014

About this reportThis is Sydney Water’s full Annual Report 2013–14 for the period 1 July 2013 to 30 June 2014. It covers financial, social and environmental performance, statutory information, financial statements and other regulatory information. A 12-page summary report is available on our website.

If you have any comments or would like copies of the Annual Report, email [email protected] or write to:

Sydney Water Annual Report Project Manager Corporate Public Affairs PO Box 399 Parramatta NSW 2124

Letter to our Shareholder MinistersThe Hon Andrew Constance, MP Treasurer Minister for Industrial Relatioans

The Hon Dominic Perrottet, MP Minister for Finance and Services

Address: 52 Martin Place SYDNEY NSW 2000

Dear Treasurer and Minister for Finance and Services

Report on performance for the year ended 30 June 2014

We are pleased to submit the Annual Report of Sydney Water Corporation (Sydney Water) for the year ended 30 June 2014, for presentation to Parliament. The full report includes financial statements, and a 12-page summary will be published on our website.

Our Annual Report 2013–14 was prepared according to section 24A of the State-Owned Corporations Act 1989 and the Annual Reports (Statutory Bodies) Act 1984. The financial statements for 2013–14, which form part of the Annual Report 2013–14, were certified by the Auditor-General of New South Wales.

Yours sincerely

Bruce Morgan – ChairmanBComm, FCA, FAICD

Kevin Young – Managing DirectorBEng (Hons), MBA, FIE Aust, CPENG, FAICD

http://www.sydneywater.com.au/SW/about-us/our-publications/annual-report/index.htm

mailto:[email protected]


Independent verification statement

INDEPENDENT LIMITED ASSURANCE STATEMENT

To the Board of Directors and Executive of Sydney Water Sydney Water commissioned Net Balance Management Group Pty Ltd (Net Balance) to provide independent limited assurance in order to state whether anything has come to our attention to suggest the subject matter detailed below as presented in the 'Annual Report 2013-14' (the Report), has not been reported, in all material respects, in accordance with the criteria below.

Subject Matter The Subject Matter for our assurance engagement for the year ending 30 June 2014 is the extraction of 40 selected Principal Statistics, Sustainability Indicators, and Operating Licence Environmental Performance Indicators (indicators) and their inclusion in the Report. Refer to Appendix A for a list of the 40 metrics.

Criteria Sydney Water has set out the criteria for reporting against the subject matter in the form of a ‘Performance Indicator (PI) Sheet’ for each indicator part of the Sustainability Indicators. PI sheets outline the data collection and calculation process for each indicator. Sydney Water has utilised the National Performance Framework developed by the Water Services Association of Australia, the National Water Commission, the Bureau of Meteorology and NWI partners as the criteria for the ‘NWI indicators’ part of the Operating Licence Environmental Performance Indicators.

The Responsibility of Management The management of Sydney Water is responsible for the preparation and presentation of the Subject Matter in the Report in accordance with the above Criteria, and is also responsible for the selection of methods included in the Criteria. No conclusion is expressed as to whether the selected methods used are appropriate for the purpose described above. Further, Sydney Water’s management is responsible for establishing and maintaining internal controls relevant to the preparation and presentation of the Subject Matter that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate criteria; maintaining adequate records and making estimates that are reasonable in the circumstances.

Assurance Practitioner’s Responsibility Our responsibility is to express a limited assurance conclusion on the extraction of data presented in the Report based on our assurance engagement, in accordance with ASAE3000 ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ and in accordance with the terms of reference for this engagement as agreed with Sydney Water. The assurance engagement was undertaken in September 2014, and involved the following:

A review of the factual accuracy of the information presented in the Report by examining the data contributing to the 40 indicators (covering: the Principal Statistics; environmental compliance; wastewater treatment system and discharges; flora and fauna; environmental footprint; customer satisfaction; safety and; human resource indicators), and confirming that it has been extracted from Sydney Water’s internal systems

A review of the Report for any significant anomalies, particularly in relation to statements and trends in data

A review of Sydney Water’s key systems and processes used for managing, analysing and reporting sustainability performance information

A series of interviews with key personnel responsible for collating and writing sections of the Report to understand the reporting process.


Independent verification statement

Limitations The scope of work covered the Subject Matter referred to above as included in the Report. Net Balance did not provide assurance over the data. Specifically excluded from our scope was financial data, other than that relating to environmental, social or broader economic performance. The assurance engagement was conducted at Sydney Water's Head Office in Parramatta; no other site visits were undertaken.

Independence, Competence and Experience In conducting this assurance engagement, Net Balance has met the requirements of our Independence Policy. Net Balance confirms that we are not aware of any issues that could impair our objectivity in relation to this assurance engagement. Net Balance has not had any part in collecting and calculating data, or in preparing any part of the Report.

Limited Assurance Conclusion Based on our limited assurance procedures, nothing has come to our attention to indicate that the subject matter (as described above), as presented in the Annual Report 2013-14, is not prepared fairly, in all material respects, in accordance with the abovementioned criteria.

Recommendations Sydney Water has mature processes in place to effectively report its sustainability performance to stakeholders. Many of these indicators are highly regulated; systems for reporting are mature and are subject to auditing by other parties. We note that important improvements in Sydney Water’s sustainability data management practices, including the rolling out of Performance Indicator Sheets for defining data collection procedures, have been implemented and improvement is continuing. We note that the potential exists for a change in status of a safety incident to not be transferred between different OHS reporting systems. Net Balance recommends Sydney Water reviews the implementation of the safety incident reporting system with the aim of improving the accuracy of data capture of work health and safety incidents.

On behalf of the assurance team

3 October 2014 Melbourne, Australia

Terence Jeyaretnam, FIEAust Lead CSAP (AccountAbility UK)

1 Overview of the year

6 Overview of the year Sydney Water Annual Report 2014

About Sydney Water

Providing valued water solutions

Sydney Water gives our customers in Sydney, the Blue Mountains and the Illawarra access to essential water services. We provide drinking water, industrial and commercial wastewater services, water recycling and some stormwater services. We also work with the community to enhance the liveability of our cities by irrigating, protecting and restoring public areas like parks, rivers, playing grounds and wetlands.

Our vision and mission

We are a statutory state-owned corporation, being entirely owned by the New South Wales Government. Our performance targets and service standards for operation and customer service are set by an Operating Licence, which is governed by the Independent Pricing and Regulatory Tribunal. We operate under the Sydney Water Act 1994, which assigns our principal objectives.

We meet these objectives using these three key mindsets from our corporate strategy:

We exist for our customers, so we frame everything we do around customers’ priorities. We connect and collaborate with stakeholders at all levels across the community to ensure we stay in touch with our customers’ values.

Customer focus

To be a successful business, we must be commercially competitive and maximise the state’s investment, passing the savings we make onto customers. So we constantly strive to find efficiencies of time, money and process. To do this, we invest in staff training, research and development and innovation to improve our business practices.

Business excellence

Our sense of social responsibility is twofold: focused on looking after our customers and the community, and also protecting the environment, to ensure our cities’ water supply is sustainable into the future.

Forward thinking

Our objectives are to protect public health,

protect the environment and be a successful business.

Sydney Water Annual Report 2014 Overview of the year 7

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Valued water solutions

Sydney Water puts customers front of mind and contributes to liveable cities

Customer focus Business excellence Forward thinking

Performance culture

We have effective leadership at all levels

We have a capable, engaged and motivated workforce

We have effective working relationships and processes

Information, IT systems and processes

Systems deliver customer value

Managed information assets

Roadmaps supporting business needs

Figure 1: Our corporate strategy 2012–17

Our stakeholders Effectively engaging with the communities in which we operate is a core element of our corporate strategy. This includes working with our customers, the government and industry.

Maintaining strong stakeholder relationships is essential to keep our customers happy, ensure good governance and perform successfully as a business.

Our Stakeholder Engagement Framework states that our principles for dealing with stakeholders are:

• understanding our stakeholders’ needs

• identifying, mitigating and resolving issues

• sharing information

• consulting on projects, policies and processes

• cooperating, collaborating and partnering

• building trust through transparency and delivering on promises.

Sydney Water operates within a complex matrix of stakeholder groups. See Figure 2 over the page.

We value all of our stakeholder relationships, but we invest more time and resources on particular relationships, because of their influence, interest and impact on our operations.

These include:

• customers – business and residential

• staff and contractors

• portfolio/shareholder Ministers and Members of Parliament

• state and local government, including regulators

• advocacy and special interest groups

• media

• developers.


Figure 2: Our stakeholders

Action groups

Trade andnational outlets

EducationgroupsEWON

PENGOsBureau of

Meteorology

Portfolio Minister

ShareholderMinisters

Combinedcouncil groups

ROCs

LGNSW

Members of Parliament

Division Local Government

RMS

TfNSW

Infrastructure partners

Stormwaterindustry

IWA

Other key developers

Unions

Com

munity

Governm

ent

Staff

Industry

PIACNCC

NCOSS

Other utilitiesPlumbers

UniversitiesExperts

CustomerLiaison

Committees

Communityaffected by

operations & maintenance

AWA

WSAA

UDIABPB

Deliverypartners

Digital

MetroNational

RegionalSocial

Customer Council

Business Customer

Forum

NationalWater

Comm.All localcouncils

IPART

SCA

Portfolio Ministers for Environment, Health & Planning

Board

Contractors

EPAOEH

DPE

NSW Health

TreasuryOOW

DPI

DPC

INSW

Majorcontractors

Plantoperators

Urban Growth

PCA

Executive

Staff

Dep

art/Authorities

Parliament

StaffContractors

Deve

lope

rs

Wat

erLo

cal

Med

ia

Advocacy Federal

Local

Regulato

rs

Legend

AWA Australian Water Association

BPB Building Professionals Board

DPC Department of Premier and Cabinet

DPE Department of Planning and Environment

DPI Department of Primary Industries

EPA Environment Protection Authority

EWON Energy and Water Ombudsman NSW

IPART Independent Pricing and Regulatory Tribunal

IWA International Water Association

INSW Infrastructure NSW

LGNSW Local Government NSW

NCC Nature Conservation Council of NSW

NCOSS Council of Social Services NSW

OEH Office of Environment and Heritage

OOW Office of Water

PCA Property Council of Australia

PENGOs Peak Environment Non-government Organisatons

PIAC Public Interest Advocacy Centre

RMS Roads and Maritime Services

ROCs Regional Organisation of Councils

SCA Sydney Catchment Authority

TEC Total Environment Centre

TfNSW Transport for NSW

UDIA Urban Development Institute of Australia

WSAA Water Services Association of Australia


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Our operationsMap 1: Area of operations


Map 2: Water delivery systems


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Map 3: Wastewater systems


Map 4: Stormwater catchments


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About our business Below is a summary of the water, wastewater, recycled water and stormwater services we provided during the 2013–14 financial year.*

Table 1: Principal statistics 2013–14

Indicators 2013–14 Unit

Water

Estimated population serviced by drinking water 4,754,650 people

Quantity of drinking water produced 527,511 million litres

Amount of drinking water sourced from desalination 0 million litres

Length of drinking water mains we own and operate 21,477 kilometres

Number of drinking water reservoirs in service 243 drinking water reservoirs

Number of drinking water pumping stations in service 150 drinking water pumping stations

Properties with drinking water service available1 1,847,647 properties

Wastewater

Estimated population serviced by wastewater services 4,644,340 people

Wastewater collected (includes discharge, bypass, overflows and other)

469,579 million litres

Length of wastewater mains we own and operate 24,786 kilometres

Number of wastewater treatment plants2 16 wastewater treatment plants

Number of wastewater systems 24 wastewater systems

Number of wastewater pumping stations in service 679 wastewater pumping stations

Properties with wastewater service available 1,798,739 properties

Recycled water

Estimated population serviced by recycled water 77,853 people

Quantity of recycled water supplied 46,943 million litres

Length of recycled water mains we own and operate 628 kilometres

Number of water recycling plants2 14 water recycling plants

Number of recycled water reservoirs in service 9 recycled water reservoirs

Number of recycled water pumping stations in service 10 recycled water pumping stations

Stormwater

Length of stormwater channels we control 447 kilometres

Properties with stormwater drainage available 572,161 properties

Other

Area of operations (approximate) 12,700 square kilometres

1 A review of reports relating to service connections showed that unconnected properties around parks and reserves and new property developments were incorrectly included in previous years’ reports. As a result, the increase in connected properties seems proportionally lower this year.

2 The number of wastewater and recycled water plants is based on Sydney Water’s classification, which is different to NWI A4 and NWI A7.* Figures reflect the most recent data at time of reporting.


The year in review

From our Chairman of the Board and Managing Director

Sydney remains in the top 10 of the most liveable cities in the world, and we are proud of Sydney Water’s contribution to this achievement. In 2013–14, we continued to embrace our role in the community, not just as the provider of essential water services, but as an organisation that supports the liveability of our cities. We are protecting and regenerating land and nature, promoting water conservation and enriching the community through education, sponsorship and vibrant recreational spaces.

In April, we launched our Liveable Cities Strategy – the framework for how we impact on, contribute to and enhance our environment. The strategy helps us understand community values and priorities, and respond to issues. For example, in May we announced a partnership with the City of Sydney to build a 2.4 km stormwater drain to address the issue of flooding in Green Square, enabling the construction of a new town centre.

It was also a year of positive trends for all customer satisfaction indicators across the business. Satisfaction with the quality of our drinking water remains high, and we maintained our highest score for our customer service. Further to this, the number of complaints we received decreased significantly in 2013–14. These encouraging results testify to our ongoing efforts to prioritise our customers.

We faced some difficult challenges as well, which we overcame with unified resolve. The fires that struck the Blue Mountains in October were the worst in New South Wales since the 1960s. Our preparation and close relationships with water and fire agencies equipped us to react by monitoring network outages, supporting the firefighters and keeping our field crews safe. We waived excess water charges for affected residents and kept customers informed through our website and social media.

Our work to deliver essential wastewater services impacts the environment, and mitigating that impact is a key priority for us. In November, a valve failed when an intense downpour flooded the inlet pumping station at the Glenfield Wastewater Treatment Plant, releasing untreated wastewater into the Georges River. Our Incident Control team and contractor partners reacted swiftly to rectify the situation and keep the community informed and safe.

In April, the Independent Commission Against Corruption’s investigation of Australian Water Holdings began, with several Sydney Water staff assisting as witnesses. Despite the intense publicity around this investigation, our corporate reputation index score in April was the highest it has ever been.

Putting customers and the community first

We have made significant progress in managing the impact of leaks and breaks on our customers. We now give customers a single point of contact with dedicated staff who are trained and supported to give advice and authorise repair work. We have also cut back the time taken to resolve complaints. This approach has been accredited by the Customer Service Institute of Australia as a leading example for industry best practice.

We are delighted that over 9,000 people pledged to drink tap water for a year in our tapTM sustainability pledge. tapTM shows customers how drinking tap water has a positive impact on the environment. We sponsored Newtown Festival, the first ‘bottled water-free’ festival in Sydney, and our hydration stations were a highlight at events across Sydney, such as Sculpture by the Sea, the City2Surf, and the Royal Botanic Gardens on New Year’s Eve.


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Striving for business excellence

We are proud of our world-class drinking water quality. For the 18th year running, our drinking water achieved high to full compliance against the requirements of the Operating Licence in an independent audit.

Safety is one of our corporate priorities that will never change. To improve safety practices, we have undertaken a full review of our assets to ensure the operational safety of our staff, contractors and the public. Our current level of injuries is too high, and we need to do better in this area.

In December, our Cowan Wastewater Scheme was completed, on budget and six months ahead of schedule. At the launch, the former Minister for Finance and Services, Andrew Constance, congratulated us on our ‘excellent work delivering this wastewater scheme to the residents of Cowan so quickly’.

We collaborated with Oxyzone Pty Ltd to produce an innovative mobile ozone trailer that makes the water main disinfection process safer, faster and better for the environment. The efficiency of this innovative technology saves developers 8–12 weeks in processing time.

Thought leaders are forward thinking

Sydney’s population is forecast to grow by more than 1.4 million people by 2030, requiring more than 550,000 new homes. As part of our planning for this future, we spent $155 million on urban growth programs in 2013–14, which included building two wastewater pumping stations in the South West Growth Centre, and delivering wastewater services to the North West Growth Centre.

We have taken a number of measures to drive energy and cost efficiencies, reduce our carbon footprint and manage the pressures of population growth, including trialling glycerol co-digestion in our wastewater treatment process to generate energy and reduce the waste stream. We use solar power at our Potts Hill site and hydro-power and co-generation at a number of our wastewater treatment plants. Our innovative renewable energy projects are now generating more than 15% of our total energy needs, cutting our greenhouse gas emissions by 60,000 tonnes a year.

Board changes

There were a number of changes to the Board in 2013–14. After serving as a Director of the Board since January 2012, Bruce Morgan was appointed Chairman in September, taking over from Dr Tom Parry, who was Chairman from August 2007 to September 2013. We thank Tom for his contribution to Sydney Water and the broader water industry, during his time as Chairman.

We farewelled distinguished Board members John Brown, John Fletcher and Bob Pentecost, and we thank them for their significant contribution. We welcomed new members to the Board: Anne McDonald, Trevor Bourne and Dr Marlene Kanga, who are highly accomplished leaders in the finance, energy and processing industries respectively.

We would like to thank all staff, the Executive and the Board for their contributions and support over the year. We are excited about the future for Sydney and the role that Sydney Water will play in making our great city even better. Our focus is to be world class, delivering the essential water services our customers love, and always keeping customers at the heart of everything we do.

Bruce Morgan – Chairman

Kevin Young – Managing Director


Our performance

This year’s highlights

Customer focus

In 2013–14, we maintained our highest customer satisfaction score for our overall customer service, at 7.7 out of 10.

Our Corporate Reputation Index score for 2013–14 was the highest it has been since the study commenced in 2005, at 6.3 out of 10 – a healthy score for a utility.

Customer satisfaction with their service faults experience rose to 8.3 out of 10.

We partnered with the Water Services Association of Australia and the Smart Water Fund to produce a free online tool that helps business customers benchmark and improve their water use efficiency. The National Business Water Efficiency Benchmarking Project offers a range of resources to help business customers save money through improved water use. Industry water efficiency contributes to a sustainable future for our water supply, which benefits the whole community.

We also looked at how we can improve our services for builders and developers. We’ve cut down our processing time from 102 to 85 days for the Section 73 Compliance Certificate, which may be required for people planning to build or subdivide.

Our Tank Stream tours now consistently receive strong, positive media attention and excellent customer satisfaction ratings, and support community and stakeholder engagement.

To connect with our customers, we conducted research into what liveability means to them, and how they would like to see us contributing to it. It is the first time research like this has been carried out by an Australian water utility, and the results allow us to prioritise our initiatives in line with community values. The results showed that our customers are interested in projects like tapTM, renewable energy, recycling and waterway naturalisation.

We are always looking for ways to make life more convenient for our customers, such as providing a range of bill payment methods. We were one of the first NSW utilities to sign up for the Australia Post digital mail box, and we made our direct debit bill payment option available for customers to set up online. This increased customer use of direct debit by 53%.

Business excellence

In July 2013, Sydney Water outsourced mechanical-electrical maintenance to improve the organisation’s commercial performance. The new contract with Thiess will provide gross savings of $6.8 million each year.

Safety is one of our corporate priorities that will never change. To improve safety practices, we have implemented a new behavioural-based program in our Civil Delivery division which allows staff to report hazards on their smart phones.

We are supporting innovative servicing arrangements at Central Park, the 5 Green Star sustainable housing development in Sydney’s CBD, by providing access to back-up drinking water and sewer mining services for its recycled water system. We are also providing drinking water supply and wastewater collection services at the development boundary. The agreement with Flow Systems Pty Ltd to support Central Park will be the template for all future inter-utility service agreements.


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Business excellence

Our procurement reform saved $17.1 million against a target of $16 million, including bankable savings of $5.7 million and avoided costs of $11.3 million.

Our ongoing efforts to reduce costs for customers and operate more efficiently, while meeting our environmental and regulatory requirements, were noted when the State Budget was delivered in Parliament on 17 June.

A perception audit from March 2014, with local government and Customer Council representatives, showed our collaboration, communication and responsiveness have improved our external stakeholder relationships, with some respondents asking for stronger partnership with Sydney Water.

During Water Week in October, we unveiled the revamped Sustainability House at Taronga Zoo. This interactive exhibit teaches young people about protecting our waterways and conserving our drinking water supplies. Thanks to our Education team’s activities at Taronga Zoo last year, the total number of people who participated in our education events, workshops and tours has increased.

In April, we completed the first site of the Cooks River Naturalisation Project, part of our Land and Waterways Program. This $9.6 million project is naturalising three sites along the Cooks River, providing a healthy freshwater habitat for local wildlife. It also improves the appearance and amenities of the area for residents to enjoy, and we have received a lot of positive feedback from the community.

Forward thinking

We’ve worked hard to satisfy the Environment Protection Authority’s requirements to amend the June 2013 Overflow Abatement Strategic Framework and develop a more effective program for reducing impacts on the environment and the community. By December 2015, we will deliver an improved approach to the ongoing management of wet weather overflows in our wastewater network.

One of the flagship projects of our Liveable Cities Strategy is an innovative solution to the problem of removing graffiti from Sydney Water assets. With Marrickville Council, we enlisted artist Sid Tapia to create a modern art piece over 75 m2 on our heritage-listed drainage pumping station in Sydenham. This mural enhances the urban environment and discourages further vandalism.

Through our Liveable Cities Solutions Growth and Servicing Program, we have partnered with City of Sydney to plan a solution to flooding in the Green Square Town Centre. We are building a 2.4 km underground stormwater drain from Link Road, Zetland to the existing stormwater system at Alexandra Canal. This is part of our ongoing commitment to urban renewal.

We are doing things to foster bold and creative thought and action, within our organisation, the wider industry and the community overall. In September, we hosted City Talks with City of Sydney Council, featuring environmentalist and award-winning scientist Dr David Suzuki CC OBC. His inspiring presentation was followed by a panel discussion on how to enable sustainable cities.

In November, we launched our new Innovation Strategy based on the Hargraves Institute Innovation Model. The new strategy helps us to improve our current services and assets, and find breakthroughs in strategies, technologies, processes and practices. Continuing this work, in May we launched ACTIVATE, with a month-long innovation forum to enable collaboration between our divisions and with our external partners.

In July, we published an Information Technology Strategic Plan and began developing a 4+4 year roadmap for technology investment. This plan identified five key capabilities, which include information, identity and security, integration, cloud and mobility.


Our awards and recognition

Australasian Society of Trenchless Technology Awards (September 2013)

Our contractor Interflow Pty Ltd won Project of the Year – New Installation, for the work lining large sections of wastewater mains in Lidcombe, Auburn and Granville.

The Bennelong Stormwater Project was awarded Project of the Year - rehabilitation.

Australian Teleservices Association National Awards 2013

BillAssist, our unique program to help customers in financial hardship, was selected as a finalist in the innovation category.

International Water Associations Awards 2014

The Sewer Corrosion and Odour Research (SCORe) Program, which we delivered along with five research and 11 industry partners, won the International Water Associations Asia Pacific Regional Project Innovation Award at International Water Week in Singapore in June. This is the largest worldwide research project focused on sewer corrosion and odour, and is expected to save the water industry hundreds of millions of dollars.

National Trust of Australia (NSW) Heritage Awards 2014

Our educational tours of the Tank Stream were highly commended.

Customer Service Institute of Australia Awards 2013 and accreditation

In October 2013, we won the highly coveted Award for Customer Service Excellence in the State and Federal Government category. We were also highly commended in the Large Business category.

Our approach to managing customer complaints has also been accredited by Australia’s top customer service organisation, the Customer Service Institute of Australia (CSIA).

Our accreditation is a great achievement and acknowledgement of all the terrific work we have been doing across the organisation to improve complaint handling. Ideally, we work to minimise complaints, but when they do happen, it’s important to ensure they are managed quickly and effectively by the right people – it’s all part of being customer focused.

Angela Tsoukatos | General Manager of Customer Services


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Our financial highlights

Figure 3: Total income $2,615 million

$1,111m (42%)Use charges

$1,332m (51%)Service charges

$53m (2%)Other income

$119m (5%)Capital contributions

Our total income for 2013–14 was $2,615 million. We received a higher income from water sales and from IPART-determined price rises for service and use charges in 2013–14.

Figure 4: Operating expenditure $1,301 million

$337m (26%)Staff costs

$512m (39%)Bulk water and filtration

$41m (3%)Materials

$50m (4%)Electricity

$23m (2%)Property and transport

$78m (6%)Other expenses

$260m (20%)Service contractors

Our total operating expenditure for 2013–14 was $1,301 million, $42 million lower than in 2012–13 and driven by ongoing efficiency.

Figure 5: Total asset investment $548 million

$15m (3%)Business efficiency

$200m (37%)Renewals

$161m (29%)Growth

$17m (3%)Mandatory standards

$88m (16%)Government programs

$67m (12%)Reliability

We invested in:

• replacing or rehabilitating water and wastewater pipelines

• renewing water and wastewater treatment plants

• providing reticulated wastewater services to priority areas

• programs to provide for growth in existing areas and the north-west and south-west of Sydney.


Figure 6: Profit after tax 2013–14

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2009–10 2010–11 2011–12 2012–13 2013–14

Our profit after tax for 2013–14 was $464 million, $92 million higher than in 2012–13.

This was due to the higher income we made from water sales and service charges ($94 million higher than in 2012–13) and lower operating expenses ($42 million lower). It was partly offset by depreciation ($19 million higher than in 2012–13) and borrowing expenses ($16 million higher than in 2012–13).

Figure 7: Historical capital expenditure 2013–14

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2009–10 2010–11 2011–12 2012–13 2013–14

Our capital investment program in 2013–14 included continued major investment in core water and wastewater assets, for reliability and growth.

Total capital expenditure over the past four years has focused on core investment such as renewals and upgrades to provide for growth. In previous years, we focused on major projects such as the desalination plant and major wastewater recycling projects.

Figure 8: Debt and gearing 2013–14

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2009–10 2010–11 2011–12 2012–13 2013–14

Gearing % Total debt ($m)

Our debt and gearing (debt divided by debt plus equity) remained relatively flat in 2013–14. In 2011–12, we were able to repay debt with funds generated by refinancing the Sydney Desalination Plant. Our new capital investment in 2013–14 was mostly funded from internal resources.


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Table 2: Summary profit and loss 2013–14

Summary profit and loss* 2009–10 $m

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

Total income 2,187 2,307 2,671 2,521 2,615

Operating expenses 1,076 1,120 1,204 1,343 1,301

Earnings before interest, tax, depreciation and amortisation

1,111 1,187 1,467 1,178 1,314

Depreciation, amortisation and impairments

182 274 298 245 261

Interest expense 291 473 557 398 414

Profit before tax 638 440 612 536 640

Taxation expense 192 166 245 163 175

Profit after tax 446 274 367 372 464

Dividend payable 232 230 242 291 252

* All figures are rounded to whole dollars million. All figures before 2012–13 represent the Consolidated Group. All subsidiaries are now divested.

Earnings before interest, tax, depreciation and amortisation were $1,314 million, $136 million more than in 2012–13, because we had a higher income from greater volumes of water sold, IPART-determined price rises, and lower operating costs.

Depreciation, amortisation and impairments were $261 million, $16 million higher than in 2012–13, due a higher asset base.

Interest expense was $414 million, $16 million higher than in 2012–13, due to higher interest costs on the new debt, plus reduced interest costs transferred to capital.

Tax expense for the year was $175 million, $12 million higher than in 2012–13, in line with the higher profit result.

The dividend payable of $252 million on the 2013–14 profit after tax aligns to the target in our 2013–14 Statement of Corporate Intent (SCI).

Table 3: Summary balance sheet 2013–14

Summary balance sheet* 2009–10 $m

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

Property, plant and equipment 13,475 14,488 13,450 13,949 14,635

Other assets 481 582 567 502 483

Total assets 13,956 15,070 14,017 14,451 15,118

Total debt 6,505 7,114 5,412 5,866 6,059

Other liabilities 1,884 2,043 2,673 2,620 2,665

Total liabilities 8,389 9,157 8,085 8,486 8,724

Net assets/equity 5,567 5,913 5,932 5,965 6,394



Total assets were valued at $15,118 million, $667 million more than they were in 2012–13. This was driven by capital expenditure on renewing existing assets and adding new assets.

Total liabilities were $8,724 million, $238 million higher than in 2012–13, due to additional borrowings used to fund the capital expenditure.

Table 4: Summary cash flow 2013–14

Summary cash flow* 2009–10 $m

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

Sources

Receipts from operations 2,093 2,152 2,231 2,405 2,477

Grants, interest, Community Service Obligations and other operational receipts

155 151 182 155 172

Borrowings 957 720 610 440 174

Other receipts 63 62 2,223 26 92

Total sources 3,268 3,085 5,246 3,026 2,915

Uses

Operational expense payments 1,251 1,232 1,328 1,405 1,443

Capital expenditure payments 1,196 650 666 593 527

Dividends paid 205 232 230 368 291

Income tax paid 88 131 92 181 188

Interest paid 410 493 557 464 449

Borrowing reduction and other payments 79 343 2,413 17 17

Total uses 3,227 3,081 5,286 3,028 2,915

Increase or (decrease) in cash 41 4 (41) (2) 0


Note: Interest paid includes the Government Guarantee fee and capital expenditure payments, including payments for intangibles.

Cash receipts from operations in 2013–14 were $2,477 million, $72 million higher than in 2012–13. This increased because of a greater number of water sales and IPART-determined price increases. Total cash inflows were $2.9 billion, $113 million less than in 2012–13.

Cash used for operational purposes in 2013–14 was $1,443 million, $38 million higher than in 2012–13, in line with Consumer Price Index cost increases.

A total of $527 million was used to fund the asset investment program.

Total interest paid includes both interest and the payment of the Government Guarantee fee paid on Sydney Water’s borrowings. Total interest paid was $449 million, $15 million lower than in 2012–13, due to a lower Government Guarantee fee, partly offset by higher interest charges from increased debt.

We paid a dividend of $291 million to the NSW Government in 2013–14, which reflected 70% of the 2012–13 after-tax profit.


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How we measure our performance

Our principal objectives under the Sydney Water Act 1994 are to:

• be a successful business

• protect the environment

• protect public health.

We integrate the social, economic and environmental aspects of our business by aligning everything we do with our corporate strategic themes – customer focus, business excellence and forward thinking.

Customer focus

We work to understand our customers’ values and needs, maintain the health of our cities, and contribute to community wellbeing and

public health outcomes.

To know more, go to Chapter 2 of this report.

Business excellence

We harness the full productivity of our people

and infrastructure to improve safety, protect the

environment and keep water services affordable.


Forward thinking

By understanding risk and planning for the future, we contribute to the

sustainability of our cities.


Good governance

We manage our business openly and with accountability, and we require all staff to demonstrate our key behaviours.

To know more, go to Chapter 5: Corporate governance

Each year, we communicate our performance in these areas to stakeholders through the balanced sustainability scorecard in our Annual Report. The scorecard measures trends in key indicators that show how we have met, and continue to meet, their expectations over time – delivering cost-effective water services while protecting public health and the environment.

Our scorecard and Annual Report are aligned with the Global Reporting Initiative (GRI) guidelines, which represent the world’s best practice in sustainability reporting.

As a statutory state-owned corporation, we also report our financial performance, statutory performance indicators and other regulatory information in this report.

We prepare this report in line with section 24A of the State-Owned Corporations Act 1989 and the Annual Reports (Statutory Bodies) Act 1984.


Balanced sustainability scorecard

In the scorecard, we assess progress against our sustainability indicators each year, and reflect this in the summary statements and ratings for a range of performance areas. We include performance data and commentary on the sustainability indicators in Chapters 2, 3 and 4 of this report.

Sustainability indicator key

• Expectations met or exceeded Indicators show a positive long-term trend towards the goal.

• Areas to improve Mixed results, positive trends for some indicators and negative trends for others towards the goal.

• Action required Indicators show a negative long-term trend towards the goal.

– Not applicable Performance not reported.

Table 5: Customer focus balanced sustainability scorecard

Customer focus performance summary

Progress rating

2011

–12

2012

–13

2013

–14

Customer satisfaction: Customers have a positive view of the overall quality of service we deliver. We aim to resolve customer enquiries and complaints quickly, efficiently and to the customer’s satisfaction. • • •Social assistance: We continued to support customers in need by providing flexible payment arrangements and tailored assistance for customers experiencing financial hardship. This indicator was introduced in 2013–14.

– – •Service quality and system performance: We maintained high levels of water and wastewater system performance and met licence targets. • • •Water conservation: Our water conservation initiatives saved more than 45 billion litres of water in 2013–14. We are continuing a range of cost-effective water efficiency, leak management and recycled water programs that meet individual customers’ needs. • • •Water drawn: Customers are still using water efficiently, maintaining historically low levels of total water use following drought restrictions. This is despite an increase in water drawn in 2013–14 due to a warm and dry summer. • • •Water quality: We continue to supply our customers with drinking water that complies with NSW Health requirements and the Australian Drinking Water Guidelines 2011. • • •


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Table 6: Business excellence balanced sustainability scorecard

Business excellence performance summary

Progress rating

2011

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2012

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2013

–14

Profitability: Profitability was above target due to higher water and wastewater use income. Other contributions were higher developer capital contributions and lower core operating costs. • • •Debt servicing: We managed our borrowing costs better, due to a combination of higher income, lower costs and lower interest charges. • • •Return on assets and equity: Return on assets remained stable in 2013–14. Our return on equity increased from 2012-13. The result was higher than target due to a combination of higher water use income and operating cost efficiencies. • • •Infrastructure management: We continue to invest in programs to renew, rehabilitate and maintain our infrastructure to reliably deliver essential services. • • •Safety: The lost time from injury frequency rate (LTIFR) for staff went from 2.29 to 3.87 in 2013–14 and the LTIFR for contractors rose from 1.04 to 1.88. • • •Capability: We provide diverse training programs and professional development opportunities to improve staff skills and knowledge. Our entry level programs continued to receive high numbers of applications. • • •Staff engagement: In 2012, we participated in the People Matter Employee Survey, to measure how much Sydney Water staff feel proud, attached, motivated and inspired, and would recommend their organisation as a great place to work. In May 2014, when we conducted the survey again, our Engagement Index score increased from 60% to 67%.

• – •Wastewater treatment system discharges: We met licence requirements to help protect the local environment and public health. • • •Trade waste agreements: We managed trade waste agreements to meet wastewater discharge limits and ensure that biosolids meet required standards.1

– • •Environmental compliance: Four tier three penalty notices were issued to Sydney Water under the Protection of the Environment Operations Act 1997. There was minimal environmental harm from these incidents, and we have put controls in place to prevent recurrence. No proceedings or penalty notices were issued to Sydney Water contractors during 2013–14.

• • •1 Performance indicator changed for 2012–13. Historical data is not comparable.


Table 7: Forward thinking balanced sustainability scorecard

Forward thinking performance summary

Progress rating

2011

–12

2012

–13

2013

–14

Environmental footprint: Our full supply chain carbon footprint and ecological footprint remained stable in 2012–13.1 • • –

Energy use and greenhouse gas emissions: We maintained our net emissions by surrendering NSW Greenhouse Gas Abatement Certificates. • • •Environmental performance monitoring: Long-term monitoring results show that water quality and ecosystem health of inland and coastal waterways are being maintained. • • •Flora and fauna: We revegetated disturbed land, resulting in a net cumulative gain of 26.72 hectares of native vegetation over the last five years. Several major capital works projects commenced in 2013–14, resulting in a provisional annual net loss of native vegetation in riparian land we manage.

• • •By-products: We continued to meet our target of beneficially using 100% of biosolids. • • •Waste reduction: Our overall recycling rate rose to 88%, due to an increase in recycling of construction and demolition waste generated from contracted work. • • •

1 This indicator is reported for the previous year, as 2013–14 data is not available in time for publication in this report.

2 Customer focus

28 Customer focus Sydney Water Annual Report 2014

Putting customers first in everything we do

We exist to give our customers access to essential water services. We recognise that our customers are diverse. Sydney’s population is growing and its interests span personal, domestic, commercial, industrial and ecological issues. We are connecting with stakeholders across all these groups to ensure that we can deliver water solutions of value to everybody.

• In 2013–14, we scored 7.7 out of 10 in customer satisfaction with our overall quality of service. We reached this peak score last financial year, and we have maintained it through determined efforts to be customer focused.

• Water use in Sydney remains at historically low levels. In the past year, we used about the same total volume of water as in 2006–07, when Level 3 water restrictions were in place and the population was 10% smaller. Even though dam levels are high, customers still use water efficiently, largely due to our water efficiency initiatives and promotions, leak management, and recycled water services. In 2013–14, our customers used about 3071 litres per person a day (LPD), well under the Operating Licence target of 329 LPD.

• We continued to meet our Operating Licence service quality and system performance targets in 2013–14.

• We supplied customers with drinking water that performed well against the NSW Health requirements and the Australian Drinking Water Guidelines 2011. We treated raw water for increased turbidity, natural colour, organic matter, metals (iron, aluminium and manganese) and fluctuating pH levels.

• In 2013–14, the total number of complaints we received decreased to the lowest level in six years, with the biggest reduction in billing and account complaints. We also improved our response rate to complaints, with over 91% of complaints resolved within 10 days.

• Customers’ satisfaction rating for our drinking water quality remains high, at 8.4 out of 10.

• We overcame the delays in meter reading that occurred in 2012–13 through improved contractor performance.

1 Figure is weather corrected. For more information, see the Water Efficiency Report 2013–14 on our website.

http://www.sydneywater.com.au/SW/about-us/our-publications/reports-and-publications/index.htm

Sydney Water Annual Report 2014 Customer focus 29

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Performance indicator key




– Not applicable Performance area not reported.

Table 8: Customer focus sustainability performance indicators

Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Customer satisfaction • • • • •Average rating of the overall quality of service delivered, measured through customer surveys (on a scale of 0 – extremely poor, to 10 – excellent)

7.3 7.5 7.5 7.7 7.7

Average rating of customers satisfied with the overall quality of drinking water (on a scale of 0 – extremely poor, to 10 –excellent)

8.0 8.1 8.4 8.2 8.4

Total number of customer complaints (including to the Energy and Water Ombudsman of NSW)

8,986 7,398 7,527 8,252 6,935

Under our Operating Licence 2010–2015, we define a complaint as ‘an expression of dissatisfaction made to Sydney Water, related to its products or services, or the complaints-handling process itself, where a response or resolution is explicitly or implicitly expected’. If a customer is dissatisfied with our proposed solution or the action we take to resolve a complaint, they may contact the Energy and Water Ombudsman of NSW (EWON) – www.ewon.com.au – and ask them to independently review the complaint.

During 2013–14, we received 6,935 complaints (out of more than 759,000 calls), and EWON received 723 complaints about us. The number of complaints decreased in 2013–14 compared to 2012–13, mainly due to a reduction in billing and account complaints.

Percentage of complaints received that are resolved within 10 business days (%)

86.3 85.6 86.3 90.2 91.3

Complaints to EWON are not lodged with Sydney Water and are not included in this indicator.

http://www.ewon.com.au


Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Social assistance – – – – •Number of customers per 1,000 residential properties experiencing financial difficulty who are being assisted through our hardship program or payment plans

– – – – 12.2

Sydney Water offers customers in financial difficulty the option of requesting a payment extension or entering into a payment arrangement that best suits their needs. We can also register customers for Centrepay, which allows customers receiving Centrelink benefits to pay bills through regular deductions from their Centrelink payment. For more information, see Appendix 4: Guarantee of service and social programs in this Annual Report. The number of payment arrangements in place for extended periods is influenced by the promotion of regular planned payments for customers having payment difficulties.

This indicator was introduced in 2013–14. Data from previous years is not comparable.

Service quality and system performance – • • • •

Number of properties that experienced unplanned water interruptions

More than five hours (Operating Licence condition ≤40,000 properties)

– 26,205 28,386 30,806 30,687

More than one hour (Operating Licence condition ≤14,000 properties experience three or more unplanned interruptions)

– 5,305 4,171 4,918 4,535

Water main breaks can cause significant disruption to our customers. They often result from moisture changes in the soil causing movement in the pipes, accidental damage by third parties and loss of strength from long-term corrosion. We have programs to minimise unplanned water interruptions and to respond quickly when they do occur. We met our Operating Licence targets for water main breaks 2013–14.

Percentage of water main breaks attended to within priority response times (%)

Priority 6 (Operating Licence target 90% of jobs within three hours)

– 91 92 93 92

Priority 5 (Operating Licence target 90% of jobs within six hours)

– 91.4 93 93 91

Priority 4 (Operating Licence target 90% of jobs within five days)

– 94.1 92 91 94

We respond to water main breaks and leaks reported by customers based on priority (severity). The priority system ranges from 1 (least urgent) to 6 (most urgent).

Sydney Water Annual Report 2014 Customer focus 31

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Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Number of properties that experience low water pressure (Operating Licence target ≤6,000)

36 832 572 1,280 661

Properties affected by uncontrolled wastewater overflows (Operating Licence target ≤14,000)

9,905 9,158 7,708 6,908 8,869

Repeat (≥3) wastewater overflows (Operating Licence target ≤175)

– 30 43 39 66

Water conservation • • • • •Total volume of drinking water saved each year by water conservation programs (million litres)

116,703 121,106 44,435 48,199 45,478

This does not include water saved from activities by other organisations, regulatory measures or those programs no longer running. For more information see the full Water Efficiency Report 2013–14 on our website.

Before 2011–12, we reported on water savings from programs run by other agencies, recycled water schemes operated by private operators, and regulatory measures, such as the Building Sustainability Index and the Water Efficiency Labelling Scheme. From 2011–12, these savings have been reported by the NSW Metropolitan Water Directorate.

Figure does not include water savings from PlumbAssist or WaterFix services. It is not possible to estimate water savings from these programs at this time.

Water drawn • • • • •Total water use (million litres) (see Figure 9) 505,650 496,695 481,930 516,442 532,575

Total water use includes drinking water and unfiltered water provided for industrial use in the Illawarra. Recycled water is not included.

Water use in Sydney remains at low levels. Total water use in 2013–14 is about the same volume as used in 2006–07 when Level 3 water restrictions were in place. Sydney’s population has grown by 10% since 2006–07. For more information, see the full Water Efficiency Report 2013–14 on our website.

Water quality • • • • •Number of zones where microbiological compliance was achieved (out of 13 supply systems. See Figure 10)

13 13 13 13 13

Compliance with health guideline values as determined by NSW Health in each water delivery system (%)

99.97 99.99 99.97 99.98 99.99

Compliance with aesthetic guideline values as determined by NSW Health in each water delivery system (%)

99.34 99.37 99.23 99.54 99.62




Figure 9: Daily water use in greater Sydney was 307 litres per person a day in 2013–14 W

ater

su

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per

per

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son

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Year ending June

Weather corrected (365-day moving average)

1999

280

300

320

340

360

380

400

420

440

2000

2001

2002

2003

Pre-

rest

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Water usage level target 329 LPDVolu

ntar

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Wat

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ise

Rul

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2005

2004

2006

2007

2008

2009

2010

2011

2012

2013

2014

Note: For more information, see the full Water Efficiency Report 2013–14 on our website.

Figure 10: Percentage of water tests that met the Australian Drinking Water Guidelines 2011 for E. coli in 2013–14

Compliance target

Customer supply system

Perc

enta

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100%

99%

98%

97%

96%

95%

94%

93%

92%

91%

90%

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Mac

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Wor

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Note: For more information, see the Quarterly Drinking Water Quality Report on our website.


http://www.sydneywater.com.au/SW/water-the-environment/how-we-manage-sydney-s-water/waterquality/our-monitoring-program/index.htm

3 Business excellence

34 Business excellence Sydney Water Annual Report 2014

Making every decision and dollar count

To be a successful business, we know we must perform well for our stakeholders, passing the savings we make on to our customers. So we are examining our internal processes and organisational structure to see where we can do things better. We know that our greatest assets are our people, so we’ve been surveying staff across all of our sites and business divisions to get their perspective. We’re using this knowledge to build a better professional culture and work more efficiently as one team. We take the position that workplace safety is not negotiable and it is everyone’s responsibility to maintain a safe working environment.

• This year, we renewed and rehabilitated water and wastewater mains under budget.

• We’re building staff capability through training and development programs, and the Entry Level Program. Around 1,600 graduates applied to the Graduate Program in 2013–14, and we welcomed 12 new graduates in February 2014.

• We continue to treat Sydney’s wastewater to a high standard, in line with environment protection licences issued by the NSW Environment Protection Authority (EPA).

• We work closely with industrial customers to ensure that they comply with their trade waste agreements. In 2013–14, we achieved a high level of customer compliance, with 95.2% of industrial customers complying with their agreements, ensuring that their biosolids meet required standards.

• We are committed to achieving our safety goal of zero injuries to our staff, contractors and visitors. We’ve been working with key business stakeholders to develop a new initiative that helps us meet our corporate strategy objectives to provide a safe environment for our staff, contractors and the public. Our safety theme for 2014–2017 is ‘Safe and well together’.

• In 2012, we participated in the People Matter Employee Survey, organised by the NSW Public Service Commission (PSC), to measure our staff engagement, described by the PSC as ‘absorption in one’s job, commitment to one’s organisation, and willingness to put in extra effort to support colleagues and customers’. In May 2014, when we conducted the survey again, our Engagement Index score had increased from 60% to 67%. This score compares well to the NSW Public Sector result of 65%.

Sydney Water Annual Report 2014 Business excellence 35

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Table 9: Business excellence sustainability performance indicators

Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Profitability • • • • •Net profit after tax (NPAT) ($m) 446 274 367 415 464

Debt servicing • • • • •Funds flow from operations ($m) 747 435 436 518 603

Funds flow from operations interest cover ratio (times)

2.2 1.9 1.8 2.0 2.1

Funds flow from operations 2013–14 target was $498 million.

Funds flow from operations interest cover ratio (times) 2013–14 target was 1.9.

Return on assets and equity • • • • •Return on assets (%) 7.0 6.3 8.0 7.0 7.1

Return on equity (%) 8.1 4.8 6.2 6.9 7.5

Our return on assets in 2013–14 was 7.1%, which is higher than the target of 6.3%. Our return on equity in 2013–14 was 7.5%, which is higher than the target of 5.8%. This was due to a combination of higher water use income and operating cost efficiencies.


Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Infrastructure management • • • • •

Delivery of capital investment program for renewals or rehabilitation

Water mains (% planned km achieved)

100 106 117 96 91

Water mains (% of planned expenditure completed)

102 99 96 96 78

Wastewater mains (% planned km achieved)

101 101 102 100 108

Wastewater mains (% of planned expenditure completed)

98 109 96 89 72

Information technology (% of planned expenditure completed)

112 104 82 49 68

We spent less than our budget on information technology renewal projects due to a number of business cases being deferred until 2014–15.

Percentage of planned maintenance completed (% of planned expenditure completed)

Water mains 91 106 105 92 98

Wastewater mains 100 93 93 82 73

Stormwater programs

81 63 84 116 94

Property programs 99 115 101 100 76

We spent less than budgeted on planned maintenance for water mains, as we completed less corrective maintenance work than expected.

We completed our planned maintenance work for wastewater mains below budget. This was largely because we used less reactive closed circuit television (CCTV) than originally budgeted, and we obtained CCTV targets at a much cheaper unit rate than originally budgeted.

Safety • • • • •Lost time injury frequency rate

Sydney Water staff 4.86 6.14 6.28 2.29 3.87

Contractors 1.92 3.2 3.19 1.04 1.88

LTIFR is the number of lost time injuries for each million hours worked. An injury is a ‘lost time injury’ if the person was away from work for one day/shift or more.

Results reflect the most recent data at time of reporting. Historical data is updated to include any LTI notifications received since previous reporting periods.

Results are based on the number of contractor hours reported to Sydney Water

Sydney Water Annual Report 2014 Business excellence 37

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Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Capability • • • • •Training investment per staff member ($) 1,514 1,330 1,010 1,115 1,097

Number of staff in Entry Level Program (total at 30 June)

140 117 80 78 68

Numbers of staff on entry level programs change throughout the year as we recruit new participants and others move into permanent positions.

Percentage of full-time equivalent entry level staff (%)

4.6 3.9 2.8 2.9 2.7

Staff-initiated turnover for staff with five years of service or less (%)

7.7 6.2 8.9 8.7 8.6

This indicator enables us to track our performance in retaining staff skills and knowledge. Sydney Water internal targets for staff-initiated turnover for staff with five years of service or less are:

• 15% for less than one year of service

• 10% for one to less than three years of service

• 7% for three to five years of service.

Staff engagement – – • – •The Engagement Index incorporates five statements that measure the extent to which staff feel proud, attached, motivated and inspired, and would be willing to recommend their organisation as a great place to work (%)

– – 60 – 67

Job satisfaction – the measure of staff who strongly agree, or agree that they are satisfied with their job

– – 66 – 77

Wastewater treatment system discharges • • • • •Percentage of wastewater volume treated that was compliant (%)

97 100 99.5 99.7 100

We monitor our wastewater treatment systems and are required to notify the EPA and other authorities of any incident causing or threatening material harm to the environment immediately. We report minor licence non-compliances not causing or threatening environmental harm to the EPA, in line with the conditions of environment protection licences. For more information, see the Sewage Treatment System Impact Monitoring Program Report 2013–14 on our website.

Total volume of controlled wastewater overflows in dry weather, expressed as a percentage of total treated wastewater discharged to the environment (%)

<0.001 <0.001 <0.001 0.001 0.001

http://www.sydneywater.com.au/SW/water-the-environment/how-we-manage-sydney-s-water/waterquality/stsimp-reports/index.htm


Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Trade waste agreements – – – • •Percentage of trade waste customers (industrial) complying with their wastewater discharge limits (%)

– – – 92 95.2

This is a new indicator in the Operating Licence Reporting Manual June 2012 for which reporting commenced in 2012–13. In 2013–14, 95.2% of our 709 industrial trade waste customers complied with the wastewater discharge limits in their trade waste agreement. For more information, see the Operating Licence Environment Report on our website.

Environmental compliance • • • • •Total number of prosecutions and notices (including penalty notices) issued under the Protection of the Environment Operations Act 1997

Sydney Water 0 2 0 1 4

Contractors 1 1 1 1 0

We received four penalty notices from the EPA during the reporting period. The penalty notices related to odours from the Malabar Wastewater Treatment Plant (2) and drinking water discharges at the North Strathfield Rail Underpass Project and at Duck River. We have implemented a number of actions identified in our incident review to prevent future incidents. Notices of penalties are published on the EPA Public Register at epa.nsw.gov.au.



http://www.epa.nsw.gov.au

4 Forward thinking

40 Forward thinking Sydney Water Annual Report 2014

Spearheading change

The only thing we can be certain about the future is that there will be change. For our business to not only survive, but thrive, we must also grow and change. Our responsibilities go beyond delivering water to taps and managing wastewater systems. We manage our impact on the environment and are taking steps to enhance and sustain the liveability of Sydney, the Illawarra and the Blue Mountains. To do this, we maintain relationships with the industry, our customers and all of our stakeholders. We’ve been sharing our expertise and building relationships to benefit from the skills and experience of others. Through these collaborations, we are managing risk, fostering innovation and embracing change for the better.

• Energy-intensive water recycling, tighter quality treatment standards and a growing population put continuous pressure on our outputs. Despite this, through our energy efficiency and waste reduction programs and policies, we maintained stable carbon and ecological footprints in 2012–13.1 We are working to reduce our carbon and ecological footprints, and we expect to achieve this, in time, through our energy efficiency and renewable energy projects.

• In 2013–14, our total gross greenhouse gas emissions increased four per cent compared to 2012–13, but were still below previous years. We also maintained our net emissions by surrendering NSW Greenhouse Gas Abatement Certificates (NGACs).

• Since 2009–10, we have cleared a total of 19.16 hectares of native vegetation and revegetated 45.88 hectares, to achieve a net increase of 26.72 hectares. Much of the clearing is temporary, with the disturbed land revegetated through bush regeneration.

• We again met our target of beneficially using 100% of biosolids produced at wastewater treatment plants. We have consistently achieved this target since 2005.

• We increased our overall recycling rate from 57% in 2012–13 to a five year high of 88% in 2013–14. The overall increase was caused by a rise in recycling rates for construction and demolition waste generated from contracted work.

1 Data for 2013–14 was not available in time for publication in this report.

Sydney Water Annual Report 2014 Forward thinking 41

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Table 10: Forward thinking sustainability performance indicators

Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Environmental footprint • • • • •Full supply chain carbon footprint for operations and capital works (million tonnes of carbon dioxide equivalent emissions)

(see Figure 11)

1.07 0.92 0.91 0.92 Not available

We report our footprint as a gross number (before accounting for carbon offsets) because this reflects our carbon risk exposure.

In 2012–13, about six per cent of our carbon footprint came from direct emissions, 33% from electricity use, 47% from our operations supply chain, and 14% from carbon embedded in capital works projects. In 2012–13, we surrendered carbon credits to reduce our footprint by 25%.

Data for 2013–14 was not available in time for publication in this report.

Ecological footprint of business activities (hectares) (see Map 5)

130,000 110,000 110,000 110,000 Not available

Our ecological footprint represents the land area taken up by our infrastructure and our disposed waste, land disturbed to produce the materials we use, and land forecast to be disturbed as a result of greenhouse gas emissions from our carbon footprint.

Data for 2013–14 was not available in time for publication in this report.

Energy use and greenhouse gas emissions • • • • •Total electricity used or generated by Sydney Water (million kWh)

Used 390.3 400.8 414.4 404.1 407.9

Self-generated 40.2 58.7 69.0 65.6 65.1

Percentage of electricity generated by Sydney Water (%)

10.3 14.6 16.6 16.2 16


Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

Gross greenhouse gas emissions (per 1,000 properties) (see Figure 12) tonnes CO2

245 251 206 189 196

Gross emissions are total emissions from electricity, fuel and gas use before accounting for offsets from renewable energy. Results use emission factors published by the Commonwealth Department of Climate Change and Energy Efficiency in the National Greenhouse Accounts (NGA) Factors. Sydney Water uses the full fuel cycle emissions factor.

Net greenhouse gas emissions (per 1,000 properties) tonnes CO2

144 115 87 85 85

Net emissions are the total gross emissions less renewable energy certificates, NGACs and/or carbon offsets surrendered. For more information, see the Operating Licence Environment Report on our website.

Environmental performance monitoring • • • • •Ecosystem health downstream of inland wastewater treatment plant discharges

Health maintained downstream of nine of the 12 inland plants

Health maintained downstream of 10 of the 12 inland plants

Health maintained downstream of eight of the 12 inland plants



Ecosystem impacts of deep water ocean discharges

No impact No impact No impact No impact Results not yet available

We regularly assess the impact of discharges from Malabar, Bondi and North Head wastewater treatment plants on the offshore marine environment through the Ocean Sediment Program. It is a three-year cyclical program that assesses benthic macro invertebrate health and ocean sediment quality. We also test toxicity of treated wastewater from ocean plants.

2013–14 results were not available at time of publication. For more information, see the Sewage Treatment System Impact Monitoring Program Report 2013–14 on our website.

Flora and fauna • • • • •Total area of native vegetation cleared (hectares)

5.4 1.8 4.0 0.02 7.94

We report on native vegetation if the area of a project is more than 0.01 hectares or 100 square metres. There are no targets for these native vegetation indicators. For more information, see the Operating Licence Environment Report on our website.

Total area of native vegetation rehabilitated (hectares)

30.1 2.2 2.3 3.9 7.38

Total area of native vegetation net gain or loss (hectares)

24.7 0.4 -1.7 3.9 –0.56

Data reflects either the net gain or loss of native vegetation annually. We have revegetated a net cumulative gain of 27.4 hectares of native vegetation over the last five years.

Area of riparian land managed by Sydney Water under a plan of management (hectares)

413.1 415.8 418.5 421.8 422.1

By-products • • • • •Percentage of biosolids beneficially used (%) 100 100 100 100 100






Sydney Water Annual Report 2014 Forward thinking 43

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Indicator 2009–10 2010–11 2011–12 2012–13 2013–14

We produced 37,118 dry tonnes of biosolids in 2013–14. For more information, see the Operating Licence Environment Report on our website.

Waste reduction • • • • •Percentage of solid waste recycled or used (%)

74 72 72 57 88

The overall waste recycling rate is a combination of the recycling rates of construction and demolition waste from Sydney Water and contractor projects, office waste, and process waste. For more information, see the Operating Licence Environment Report on our website.

Figure 11: Sydney Water’s carbon footprint trends 2012–13*

2008–09 2009–10 2010–11 2011–12 2012–13

1,600,000

1,200,000

800,000

400,000

0

To

nn

es c

arb

on

dio

xid

e eq

uiv

alen

t (t

CO

2-e)

Direct emissions (Scope 1)

Electricity emissions (Scope 2)

Operations indirect emissions (Scope 3)

Capital works indirect emissions (Scope 3)

* Data for 2013–14 was not available in time for publication of this report.

Figure 12: Sydney Water’s total gross greenhouse gas emissions per 1,000 properties

2009–10 2010–11 2011–12

Year ended 30 June

2012–13 2013–14

Gro

ss t

on

nes

car

bo

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ioxi

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ent

(t C

O2-

e)

per

1,0

00 p

rop

erti

es

300

250

200

150

100

50

0






Our ecological footprintOur ecological footprint represents:

• the area of land taken up by our infrastructure and our disposed waste

• land disturbed to produce the materials we use

• land forecast to be disturbed as a result of greenhouse gas emissions from our carbon footprint.

Map 5: Sydney Water’s ecological footprint 2012–13*

* Data for 2013–14 was not available in time for publication of this report.

5 Corporate governance

46 Corporate governance Sydney Water Annual Report 2014

Our frameworkSydney Water’s Board and Executive believe good governance is essential to be a high performing organisation with a sustainable future. Our governance helps ensure that we:

• deliver the outcomes our shareholders expect

• support our people and business operations

• set the framework for sound ethical, financial and risk management practices and effective compliance and auditing programs.

Sydney Water has adopted the Company Directors Corporate Governance Framework developed by the Australian Institute of Company Directors (AICD). The framework outlines good corporate governance practice across four major quadrants of focus and engagement:

1. Individual

2. Board

3. Organisational

4. Stakeholder

The framework serves as a basis to measure and compare the activities of the Board and management to the best practices of corporate governance. It is used as part of the Board performance assessment process, outlined in the Board Charter.

Board of directors

In line with the Sydney Water Act 1994 (NSW), the State-Owned Corporations Act 1989 (NSW) and the Constitution of Sydney Water, the Board consists of a Chairperson and up to nine other directors appointed by the voting shareholders. The Managing Director may be appointed as a director.

The Board members have expertise in business management, environment protection, public health, regulatory function, law, auditing, finance and engineering.

All members of the Board, except the Managing Director, are appointed by the voting shareholders for terms of up to five years. Voting shareholders

may renew appointments. The Minister advertises publicly for nominations for Board selection. Each non-executive director’s remuneration is set by the voting shareholders and paid out of Sydney Water’s funds.

Role and responsibilities

The Board is responsible for the corporate governance of Sydney Water. This includes setting the strategic direction, establishing performance targets as set out in the Statement of Corporate Intent, and monitoring achievement against those targets. The Board’s role is to govern Sydney Water rather than manage it. The directors must always act in the best interests of Sydney Water and its voting shareholders, according to governing legislation.

The Board serves the interests of the voting shareholders, staff, suppliers, customers and the broader community honestly, fairly and diligently. It delegates responsibility to the Managing Director for implementing the strategic direction and managing Sydney Water’s day-to-day operations. The Board operates according to its charter which complements the Constitution, the Director’s Manual and the Board’s Code of Conduct.

Board committees

The Board has established committees to provide strategic guidance to Sydney Water. The Board committees in 2013–14 were:

• Audit and Risk

• Corporate Governance

• Customer, Health, Environment and Research

• Finance and Asset Strategy

• Safety and Wellbeing

• People and Remuneration

• Special*

* This committee was established in December 2013 to help the Board discharge its responsibilities relating to the ICAC investigation into Australian Water Holdings Pty Limited (AWH) and contractual arrangements between the Sydney Water Corporation and AWH.

Sydney Water Annual Report 2014 Corporate governance 47

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Directors of the Sydney Water Board

Bruce Morgan – Chairman BComm, FCA, FAICD

Term of appointment: Director – 1 January 2012 to 31 December 2014 Chairman – 1 October 2013 to 30 September 2016

Committees • Chair – People and Remuneration,

Corporate Governance • Member – Audit and Risk; Finance and

Asset Strategy; Safety and Wellbeing; Special Committee

Bruce’s career was in professional services, having been a partner with the leading global firm PricewaterhouseCoopers (PwC) for over 25 years. Bruce served as Chairman of the Australian PwC Board and as a member on the PwC International Board.

He previously held roles as managing partner of PwC’s Sydney and Brisbane offices. Bruce practised as an audit partner focused on the financial services, energy and mining sectors. He retired as a partner of PwC in October 2012.

Bruce is a director of Caltex Australia Ltd, Origin Energy Ltd, the University of NSW Foundation, the European Australian Business Council and Redkite. Bruce holds a Bachelor of Commerce (Accounting and Finance) from the University of NSW.

Kevin Young – Managing Director BEng (Hons), MBA, FIE Aust, CPENG, FAICD

Term of appointment: 1 August 2011 to a term equivalent to his appointment as Managing Director of Sydney Water

All committees • Ex-officio member

Kevin is the Managing Director of Sydney Water. He was previously the Managing Director of Hunter Water.

Kevin has a Civil Engineering degree with honours from the University of Newcastle and a Master of Business Administration. He is a Fellow of the Institute of Engineers Australia and a Fellow of the Australian Institute of Company Directors. He has over 30 years of experience working for the private sector and government authorities within Australia and overseas.

Kevin was previously Chairman of the Water Services Association of Australia (WSAA). WSAA’s members serve over 17 million Australians every day with water and wastewater services. He is now the Chair of the WSAA Asset Management Committee.


Dr Abby Bloom – Non-executive Director BA (High Hons), MPH, PhD, FAICD

Term of appointment: 1 January 2013 to 31 December 2015

Committees • Chair – Customer, Health, Environment

and Research • Member – Finance and Asset Strategy

Abby is an experienced company director and former senior executive and corporate advisor in healthcare and health financing, water and sanitation, and ageing.

During her 10 years in the US Department of State, Abby was the Senior Health, Water and Sanitation Policy Advisor responsible for US foreign aid water and health policy globally.

She has worked in over 20 emerging economies as a consultant and project manager in health reform and infrastructure. She is also the founder of three medical device companies, including a biomedical flow control technology company.

Abby is a director of Western Sydney Local Health District, a member of the NSW Ministerial Advisory Committee on Ageing, and a member of the Griffith University Enterprise Advisory Board, and the Risk and Audit Committee of the NSW Department of Family and Community Services. Her previous directorships include a national occupational health company and a large sporting organisation.

A graduate of Yale and Sydney universities, Abby is Adjunct Professor, Sydney Medical School, Menzies Centre for Health Policy.

Trevor Bourne – Non-executive Director BSc (Mech Eng), MBA, FAICD

Term of appointment: 10 February 2014 to 9 February 2017

Committees • Chair – Safety and Wellbeing

Trevor is a highly experienced non-executive director, having served on public and private company boards in Australia and Asia for more than 15 years. As the current director of Caltex Australia, he is Chairman of its OH&S committee and a member of the Audit and Remuneration committee.

Trevor recently retired from the board of Origin Energy after 12 years, having served through the substantial growth period following the split from Boral. At Origin, he chaired the Remuneration committee and was a member of the Audit and Safety committees.

Trevor’s executive career included 15 years at BHP, eight years with the Orica subsidiary Incitec, and 15 years with Brambles, which included six years as Managing Director of Australasia.

Trevor has an extensive background in manufacturing, logistics, engineering and large scale project management. He holds a Mechanical Engineering degree from the University of NSW and an MBA, and is a Fellow of the Australian Institute of Company Directors.


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Dr Diana Day – Non-executive Director BA (Hons), DipEd, PhD, FAICD

Term of appointment: 1 June 2012 to 31 May 2015

Committees • Member – Customer, Health, Environment

and Research; Finance and Asset Strategy; Safety and Wellbeing; Special

Diana has 20 years of experience as a company director of statutory authorities, private companies, universities and not-for-profit organisations. She is Senior Visiting Fellow at the Institute of Environmental Studies, University of NSW.

Diana was formerly an Associate Professor in indigenous higher education at the University of Sydney. She has expertise in research and development strategy to drive sustainability of business, environmental and agricultural systems. She has led academic and public sector teams addressing water quality and security challenges in rural, mining, riverine and metropolitan landscapes.

As a water, earth and social scientist, Diana has worked with multiple governments, industries, and community stakeholders to enhance ecological resilience in land, freshwater and marine environments. An inaugural board member of the Murray-Darling Basin Authority, Diana’s non-executive directorships have included the Commonwealth Research Centre for Irrigation Futures, Meat and Livestock Australia Ltd, the Fisheries Research and Development Corporation, the Sugar Research and Development Corporation, the University of Newcastle, and the Rural Industries Research and Development Corporation.

Richard Fisher AM – Non-executive Director MEc, LLB, MAICD

Term of appointment: 1 January 2012 to 31 December 2014

Committees • Chair – Corporate Governance; Special • Member – Audit and Risk; People

and Remuneration

Richard is General Counsel of the University of Sydney and an Adjunct Professor in its Faculty of Law. Richard was Chairman of Partners at Blake Dawson (now Ashurst). He specialised in corporate law during his 25 years as partner at that firm.

He has been a director of InvoCare Ltd since 24 October 2003 and was appointed its Chairman in 2013. He is a former part-time Commissioner of the Australian Law Reform Commission and was an International Consultant for the Asian Development Bank.

Richard was a member of the Library Council of NSW from 2004 to 2013. Richard holds a Master of Economics from the University of New England and a Bachelor of Laws from the University of Sydney.


Dr Marlene Kanga AM – Non-executive Director BTech (Chem), MSc, DIC, PhD, FIEAust, CPEng, FIPENZ, FAICD

Term of appointment: 10 February 2014 to 9 February 2017

Committees • Member – Audit and Risk; Corporate

Governance; Safety and Wellbeing

Marlene is an experienced business leader and company director in the process industry. She has over 30 years of experience in safety and risk engineering in Australia and New Zealand.

Marlene is a member of the Board of Innovation Australia and Chair of the Board’s Research and Development Incentives Committee, the largest government support program for industry research and development in Australia.

She has been a member of the Board of the Institution of Engineers Australia since November 2007 and was Chair in 2013, as part of her role as National President of the Institution. She is a member of the Executive Council of the World Federation of Engineering Organisations. She founded a company providing risk engineering services and co-founded a software company specialising in intelligent video analytics.

Marlene has extensive experience advising public and private corporations in the areas of safety, risk management and corporate governance. Marlene holds degrees in chemical engineering from the Indian Institute of Technology Bombay and Imperial College, University of London and a doctorate in Finance from Macquarie University.

She is a Fellow of the Institution of Engineers and Australia, the Institution of Engineers New Zealand and a Fellow of the Australian Institute of Company Directors.

Anne McDonald – Non-executive Director BEc, FCA, GAICD

Term of appointment: 13 August 2013 to 12 August 2016

Committees • Chair – Audit and Risk Committee • Member – Customer, Health, Environment and

Research; Corporate Governance

Anne is an experienced company director. She has over 30 years of broad-based business and financial experience from working with a wide cross section of international and local companies, assisting them with audit, transaction due diligence and regulatory and accounting requirements.

She is currently a director of the GPT Group, Spark Infrastructure, Specialty Fashion Group Ltd and Westpac Bank’s Life and General Insurance businesses. Anne also acts as an advisor to the Norton Rose Fullbright Australian Partnership Council.

Before pursuing a full time career as a non-executive director, Anne was a Partner of Ernst & Young for 15 years until 2005, and during that time served as a Board Member of Ernst & Young Australia for seven years.

Anne holds a Bachelor of Economics from the University of Sydney, is a Fellow of the Institute of Chartered Accountants and a graduate of the Australian Institute of Company Directors.


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Retired members

Dr Thomas G Parry AM – (Chairman) BEc (Hons), MEc, PhD

Term of appointment: 1 June 2010 to 30 September 2013

Committees • Chair – People and Remuneration • Member – Finance and Asset Strategy

Tom was a consultant to Macquarie Capital Funds Group until August 2009. He was Foundation Executive Chairman of the Independent Pricing and Regulatory Tribunal of NSW (IPART) and its predecessor, the Government Pricing Tribunal of NSW, from 1992 to 2004. He was an ex-officio Commissioner of the Australian Competition and Consumer Commission, a member of the NSW Council on the Cost and Quality of Government, and the Foundation NSW Natural Resources Commissioner. He was also a member of the Board of NSW Health’s Clinical Excellence Commission and South East Area Health.

Tom is currently Chairman of the Australian Energy Market Operator, Chairman of First State Super, Chairman of Health Super Financial Services, a director of the Australian Securities Exchange’s Market Compliance Company, a director of Powerco NZ and a director of Brisbane Airport Corporation Holdings. He is a member of the Advisory Council of the SMART Infrastructure Facility at the University of Wollongong.

John Brown – (Non-executive Director) BCom, FCA, MAICD

Term of appointment: 7 September 2010 to 30 September 2013

Committees • Chair – Audit and Risk • Member – People and Remuneration

John was previously a partner with KPMG for over 26 years and since then has been appointed to a number of NSW and Federal Government bodies’ audit committees. He is currently a member of the Audit and Risk Committee of the Australian Taxation Office.

He is also a director of the Charities Aid Foundation and Gift of Life Foundation Ltd and a member of the National Health and Medical Research Council.

John Fletcher – (Non-executive Director) BSc, MBA, FAICD

Term of appointment: 7 April 2011 to 31 March 2014

Committees • Chair – Finance and Asset Strategy • Member – Audit and Risk

John is a director of APA Group. He was previously a director with Integral Energy Australia, Foodlands Australia Ltd, Alinta Energy Group (formerly Babcock & Brown Power Group) and Natural Gas Corporation Holdings Ltd (New Zealand). John has held a number of executive roles at the Australian Gas Light Company including Chief Financial Officer and Group Manager Investments.

Bob Pentecost AM – (Non-executive Director) BE (Civil), GDA, MAICD

Term of appointment: 8 October 2010 to 30 September 2013

Committees • Chair – Safety and Wellbeing • Member – Customer, Health, Environment and

Research; Finance and Asset Strategy; People and Remuneration

Bob has worked in the private sector as a director on several boards and also in government, giving advice at ministerial and cabinet level.

Recently, Bob was the Chief Executive Officer of Rail Infrastructure Corporation. He has filled similar roles at Network Design and Construction (telecoms), Merlin International Properties and the Darling Harbour Authority. He was formerly a non-executive director of Allconnex Water and Hamilton Island Pty Ltd.

Bob was awarded membership to the Order of Australia for services to the building and construction industry in 1991. He is a member of the Industry Advisory Network at the University of Technology, Sydney.


Board meetings

The Board meets at least monthly, except in January. Meetings are held in line with Sydney Water’s Constitution, following an annual schedule of set meeting dates, plus additional meetings when called by directors.

Table 11: Board and committee meeting attendance 2013–14

Director Board of Directors Meeting

Attended (number

held)1

Audit and Risk

Committee

Attended (number

held)

Corporate Governance Committee

Attended (number

held)

Customer, Health,

Environment and Research

Committee

Attended (number

held)

Finance and Asset

Strategy Committee

Attended (number

held)

People and Remuneration

Committee

Attended (number

held)

Safety and Wellbeing

Committee2

Attended (number

held)

Special Committee3

Attended (number

held)

B Morgan4 (C) 14 (15)

5 (6) (C) 1 (1) 4 (4) 2 (2) 5 (5)

A Bloom 13 (15) (C) 5 (5) 4 (4)

T Bourne5 6 (6) (C) 1 (1)

J Brown6 4 (4) (C) 2 (2) 1 (1)

D Day 15 (15) 5 (5) 4 (4) 3 (3) 5 (5)

R Fisher 12 (15) 5 (6) (C) 2 (2) 1 (1) (C) 5 (5)

J Fletcher7 10 (10) 5 (5) (C) 3 (4)

M Kanga5 4 (6) 1(1) 1 (1) 1 (1)

A McDonald8 9 (10) (C) 4 (4) 1 (1) 1 (1)

T Parry6 (C9) 3 (4) 0 (1) (C) 1 (1)

B Pentecost6 5 (5) 2 (2) 1 (1) 1 (1) (C) 2 (2)

K Young 14 (15) 6 (6) 2 (2) 5 (5) 4 (4) 1 (1) 3 (3)

Notes: (C) Chairman of the Board and/or committee.1 A Board strategy day was held on 18 July 2013; however, this date is not counted as a Directors meeting.2 The Safety Committee was renamed the Safety and Wellbeing Committee on 23 April 2014.3 The Special Board Committee commenced in December 2013. Its purpose was to help the Board discharge its responsibilities

relating to the ICAC investigation into Australian Water Holdings Pty Limited (AWH) and contractual arrangements between Sydney Water and AWH.

4 Mr Morgan was appointed as Chair of the Board from 1 October 2013.5 Mr Bourne and Dr Kanga’s terms commenced on 10 February 2014.6 Dr Parry, Mr Brown and Mr Pentecost’s terms expired on 30 September 2013.7 Mr Fletcher’s term expired on 31 March 2014.8 Ms McDonald’s term commenced on 13 August 2013. However, her appointment was not effective until Sydney Water

received the written instrument of appointment from NSW Treasury on 27 September 2013.9 Dr Parry was Chairman of the Board for three meetings until his term expired on 30 September 2013.


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Managing conflicts of interest

To ensure their independent status, all directors are subject to the statutory duties and responsibilities regarding conflicts of interest. We rely on the integrity of the Board members to identify and disclose issues that may give rise to any conflict of interest. The Corporate Secretary maintains the Register of Disclosures, which is reviewed annually to ensure that our information is up to date.

Indemnity and insurance

In line with the State-Owned Corporations Act 1989 and Sydney Water’s Constitution, all directors have been granted an indemnity with the approval of our Shareholder Ministers.

Sydney Water has a policy of insurance for Directors’ and Officers’ liability, which underpins and augments the Deed of Indemnity. Insurance does not extend to deliberate acts of fraud or dishonesty.

Risk management and insuranceSydney Water takes a proactive approach to risk management. Our risk management framework ensures that we manage our commercial, social, environmental and customer risks consistently. The framework is approved by the Board and is in line with the Risk Management Standard AS/NZS ISO 31000.

The corporate risk management framework guides all of our decision-making processes. Managers use the framework to identify, manage and control risks that could affect our ability to fulfil our strategic, divisional and operational objectives.

Our corporate strategy defines 12 risk themes in our business, each with related issues and emerging threats. We map our risks against these themes, so we can be transparent in reporting risks and mitigation strategies to the Board.

Below are some examples of our risk themes.

Table 12: Risk themes 2013–14

Safety Risks related to protecting the safety of our staff, contractors and the public

Servicing solutionsRisks related to the strategies, plans and partnership arrangements we use to deliver services

Stakeholder relationsRisks related to maintaining strong relationships with regulators, stakeholders and shareholders, including staff and customers

Commercial operationsRisks related to commercial transactions including procurement, commercial arrangements, investment and budgeting

Product and service standards

Risks related to complying with our Operating Licence including protecting the environment, public health and service continuity

ResilienceRisks related to our ability to respond to threats and opportunities, to adapt to change and to be innovative


Insurance

Sydney Water has a comprehensive insurance program as part of our risk management strategy. We review our insurance annually and consult with our appointed insurance broker to protect against various insurable risks. These risks could affect:

• our operations

• our legal liabilities

• existing assets and those under construction.

We transfer insurable risks by contributing to the New South Wales Treasury Managed Fund. We also buy insurance with reputable insurers in the commercial market.

Legal events

ICAC public hearing (Operation Credo)

In March and April 2014, we had a number of current and former directors and staff assist the Independent Commission Against Corruption (Commission) by giving evidence as witnesses in the Commission’s public hearing (Operation Credo). Operation Credo involved, among other matters, investigations into allegations of corrupt conduct involving persons having an interest in Australian Water Holdings (and its predecessors and subsidiaries), including whether those persons obtained a financial benefit as a result of adversely affecting our official functions. The Commission is expected to issue its final report in relation to Operation Credo in January 2015.

NSW Supreme Court actions

Recovery of money under a contract signed without authority

We began legal action in the Supreme Court of NSW in March 2011, to recover money related to a contract allegedly signed by a staff member who did not have the authority to sign it.

On 13 December 2011, the Supreme Court determined in favour of Sydney Water. In June 2013, the Supreme Court upheld the judgment.

In December 2013, the Supreme Court granted Sydney Water the right to have the judgment enforced.

HIH liquidation – priority access to reinsurance funds

In October 2012, we began legal action in the Supreme Court of NSW against the liquidator of HIH. We did this to gain priority access to reinsurance funds, relevant to our insurance arrangements, dating back to 1998.

On 12 June 2013, the Supreme Court decided in favour of the liquidator. We appealed this decision on 12 March 2014, but on 23 June 2014, the Court of Appeal of NSW dismissed our appeal.

Protection of the Environment Operations Act 1997

In September 2013, the Protection of the Environment Operations Act 1997 was amended by the Protection of the Environment Operations Amendment (Illegal Waste Disposal) Act 2013 to make it illegal for corporations to knowingly supply false and misleading information in the course of dealing with waste. The new offence attracts a possible fine of $500,000 from 1 October 2013.

6 Financials

56 Financials Sydney Water Annual Report 2014

Performance summaryWe must balance our objectives to protect public health and the environment, while providing affordable services and a return to shareholders. The challenge is to do this while continuing to achieve business efficiency.

As a state-owned corporation, we are required to operate as efficiently as any comparable business and maximise the net worth of the NSW Government’s investment.

During 2013–14, our profit after tax was $464 million, $104 million above the Statement of Corporate Intent target of $360 million. This was due to higher water use income, receiving assets free of charge and lower operating costs, which were driven mostly by lower contractor costs and labour efficiencies.

Indicator: Net profit after tax (versus Statement of Corporate Intent)

Sydney Water’s Board agrees on a Statement of Corporate Intent (SCI) each year with the shareholders. The SCI includes key business objectives, commercial performance and income targets, operational expenditure and capital investment. It forms the basis of our yearly budget.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the year were $1,314 million, $115 million above the SCI target of $1,199 million. Profit after tax for 2013–14 was $464 million, $104 million above the SCI target of $360 million.

Our profit improved from higher water and wastewater use income, receiving assets free of charge from developers and lower core operating costs.

Table 13: Profit and loss statement 2013–14

Financial performance target 2010–11 result

2011–12 result

2012–13 result

2013–14 result

2013–14 SCI

budget

2013–14 variance

to SCI budget

Total income ($m) 2,307 2,671 2,521 2,615 2,525 90*

Operating expenses ($m) 1,120 1,204 1,343 1,301 1,326 25*

Earnings before interest, tax, depreciation and amortisation (EBITDA) ($m)

1,187 1,467 1,178 1,314 1,199 115*

Depreciation, amortisation, impairments and loss on asset sales ($m)

274 298 245 261 248 13#

Borrowing expenses ($m) 473 557 398 414 410 4#

Total expenses ($m) 1,867 2,059 1,986 1,976 1,984 8*

Net profit before tax (NPBT) ($m) 440 612 536 640 541 99*

Income tax expense ($m) 166 245 163 175 181 6*

Net profit after tax (NPAT) ($m) 274 367 372 464 360 104*

Dividend payable ($m) 230 242 291 252 252 0

Sydney Water Annual Report 2014 Financials 57

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Financial performance target 2010–11 result

2011–12 result

2012–13 result

2013–14 result

2013–14 SCI

budget

2013–14 variance

to SCI budget

Return on assets (%) 6.3 8.0 7.0 7.1 6.3 0.8*

Funds flow interest cover (ratio) 1.9 1.8 2.0 2.1 1.9 0.2*

Capital investment program ($m) 636 659 610 548 658 110*

Gearing ratio (%) 55 48 49 49 49 0

* Favourable variance to SCI.# Unfavourable variance to SCI.

Income

Total income for the year was $2,615 million, $90 million above the SCI target of $2,525 million.

Our regulated income was $2,439 million, $57 million above the SCI target of $2,383 million. This was due to increased income from higher water use during the warm and dry summer.

Our non-regulated income was $176 million, $33 million above the SCI target of $142 million. This was mostly due to higher developer capital contributions (mostly assets free of charge) driven by higher commercial and industrial demand.

Property sales

During 2013–14, we sold four properties we don’t need, at a total gross sale price of $20 million, net of GST. We put the proceeds from the sales into general revenue. We made all sales in line with accepted NSW Government disposal standards and guidelines. Access to documents relating to property disposal is available through the Government Information (Public Access) Act 2009.

Expenditure

Our operating expenses for the year were $1,301 million, $25 million below the SCI target of $1,326 million. This was mostly due to savings in labour and contractor costs from reforms and delayed projects.

Total asset charges (depreciation, amortisation, impairments and sales for assets) for the year were $261 million, $13 million above the SCI target of $248 million. This was mostly due to higher depreciating asset values and also increased depreciation on impaired assets, both as a result of changes to the accounting standard affecting fair value.

Total borrowing expenses (interest expense and government guarantee fees) for the year were $414 million, $4 million higher than budget. This was mostly due to faster capitalisation of assets from works-in-progress, resulting in lower interest capitalisation.

Income tax

Income tax expense for the year was $175 million, $6 million below the SCI target of $181 million. This was favourably impacted by a previous year adjustment to depreciation.

Dividends

For 2013–14, we recognised a dividend payable of $252 million, which is the SCI target.

Time for payment of accounts

We did not make any penalty interest payments during 2013–14 for late payments to creditors.


Indicator: Funds flow from operations

Cash (funds flow) from our operations in 2013–14 was $603 million. This is $105 million higher than our target, due to higher water sales and lower operating costs and interest payments.

Indicator: Funds flow from operations interest cover

The funds flow from operations interest cover ratio was 2:1. This was above the target of 1:9, due to a combination of higher sales income and lower costs.

Table 14: Funds flow from operations interest cover 2009–10 to 2013–14

Funds flow 2009–10 2010–11 2011–12 2012–13 2013–14 2013–14 target

Funds flow from operations ($m) 747 435 436 518 603 498

Funds flow from operations interest cover ratio

2.2 1.9 1.8 2.0 2.1 1.9

Investment management

We benchmark our investment portfolio’s performance against the NSW Treasury Corporation’s hour glass cash facility. This meets NSW Treasury guidelines and increases our investment returns while maintaining risk controls.

In 2013–14, our investment performance was 2.5% compared to the benchmark of 2.8%, with an average investment balance of $800,000. This reflected the short-term nature of our investments, with the return closely in line with the Reserve Bank of Australia cash rate.

At 30 June 2014, we had $3.9 million cash in the bank.

Cash and investments 2013–14

Sydney Water Benchmark

Market valuation 30 June 2014 $3.9m N/A

Yearly return 2.5% 2.8%

Debt management

At 30 June 2014, our total debt was $6.059 billion. Our debt portfolio was sourced almost entirely through NSW Treasury Corporation and we manage it to limit the cost of funds.

We continued to use Treasury Corporation’s short-term borrowing facility to help meet cash requirements and reduce our fixed borrowings.

At 30 June 2014, 66% of our total debt was fixed-rate debt with a maturity of over one year, while 23% was inflation-indexed debt maturing out to 2035. The remaining 11% was fixed-rate debt, due for refinancing in 2014–15.


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We are rated by Moody’s Investors Service. Our baseline credit assessment (BCA or stand-alone rating) for 2014 is Baa2 (BBB).

Debt management 2013–14

Sydney Water Benchmark

Market valuation 30 June 2014* $6.74 billion N/A

Generalised cost of funds 7.1% 7.0%

* Market value of debt represents the value if all debt had to be retired and is different to the capital value, which is the value in the financial statements.

Cash flow

In 2013–14, we received $2.5 billion in cash from our operations, which is $72 million higher than the year before.

We used $1.4 billion in cash for operations.

We used $527 million to fund our asset investment program, which was $66 million lower than 2012–13. Our capital program is relatively stable from year-to-year, reflecting continued renewal of assets and servicing growth areas.

We paid $449 million in interest, which was $15 million lower than the year before. This was due to a lower government guarantee fee, partly offset by higher interest charges from increased debt.

Indicator: Return on assets and equity

We measure return on assets by dividing our earnings before interest and tax by the average value of our total assets. We measure return on equity by dividing the profit after tax by the average value of total shareholder funds (total equity).

Our return on assets for 2013–14 was 7.1%, which is 0.8% higher than the target of 6.3%. The return on equity was 7.5%, which is 1.7% higher than the target of 5.8%. This was due to a combination of higher water use income and operating cost efficiencies.

The historic results are low for a regulated utility with our level of commercial risk.

Table 15: Return on assets and equity 2009–10 to 2013–14

Measure 2009–10 2010–11 2011–12 2012–13 2013–14 2013–14 target

Return on assets (%) 7.0 6.3 8.0 7.0 7.1 6.3

Return on equity (%) 8.1 4.8 6.2 6.9 7.5 5.8


How we set our prices and budgets

The Independent Pricing and Regulatory Tribunal (IPART) set the prices for Sydney Water’s services in June 2012, for the period from July 2012 to June 2016.

Table 16: Our 2014–15 budget

Measure Budget 2014–15 – $m

Total income 2,639

Total operating expenses 1,379

Depreciation, amortisation, impairments and loss on asset sales 262

Borrowing costs 447

Total expenses 2,088

Profit before tax 551

Income tax expense 184

Profit after tax 367

Pricing

Our services are declared monopoly services under Section 4 of the Independent Pricing and Regulatory Tribunal (IPART) Act. The tribunal sets and regulates our prices to ensure they are fair for customers, while allowing us to cover costs and generate an adequate return on our assets.

We must set prices according to the IPART-determined methodology or maximum price. We cannot charge less than this price, without the NSW Treasurer’s approval.


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Table 17: IPART Pricing table 2013–14

2013–14

IPART determined price(in 2012–13 value)

Adjustment for desalination by

IPART determined

method(in 2013–14 value)

Inflated IPART maximum price (at rate of 1.8%)

(in 2013–14 value)

Sydney Water price setJul–Sepa

Sydney Water price setOct–Jun

Service charges ($)

Residential properties

Water

Individually metered $122.07 $1.07 $125.33 $31.34 $31.33

Multi-premises with a common meter

$79.55 $1.07 $82.05 $20.52 $20.51

Unmetered $505.47 $1.07 $515.63 $128.93 $128.90

Wastewater $560.61 $570.70 $142.69 $142.67

Stormwater (drainage)

Stand-alone premises $67.06 $68.26 $17.08 $17.06

Multi-premises $40.24 $40.96 $10.24 $10.24

Non-residential properties

Water

Meter size (mm):b

Single 20 mm $122.07 $1.07 $125.33 $31.34 $31.33

Common or multi 20 mm $134.20 $1.18 $137.79 $34.47 $34.44

25 $209.69 $1.84 $215.30 $53.84 $53.82

32 $343.56 $3.01 $352.75 $88.21 $88.18

40 $536.81 $4.71 $551.18 $137.81 $137.79

50 $838.77 $7.36 $861.22 $215.32 $215.30

80 $2,147.24 $18.84 $2,204.73 $551.19 $551.18

100 $3,355.08 $29.44 $3,444.91 $861.25 $861.22

150 $7,548.92 $66.24 $7,751.04 $1,937.76 $1,937.76

200 $13,420.30 $117.76 $13,779.62 $3,444.92 $3,444.90

250 $20,969.00 $184.00 $21,530.44 $5,382.61 $5,382.61

300 $30,195.36 $264.96 $31,003.83 $7,750.98 $7,750.95

500 $83,876.00 $736.00 $86,121.76 $21,530.44 $21,530.44

600 $120,781.44 $1,059.84 $124,015.34 $31,003.85 $31,003.83

Unmetered $505.47 $1.07 $515.63 $128.93 $128.90


2013–14



IPART determined



(in 2013–14 value)



Wastewaterc

Meter size (mm):d

Single 20 mm $560.61 $570.70 $142.69 $142.67

Common or multi 20 mm $731.57 $744.73 $186.19 $186.18

25 $1,143.08 $1,163.65 $290.92 $290.91

32 $1,872.82 $1,906.53 $476.64 $476.63

40 $2,926.28 $2,978.95 $744.76 $744.73

50 $4,572.33 $4,654.63 $1,163.68 $1,163.65

80 $11,705.15 $11,915.84 $2,978.96 $2,978.96

100 $18,289.30 $18,618.50 $4,654.64 $4,654.62

150 $41,150.93 $41,891.64 $10,472.91 $10,472.91

200 $73,157.20 $74,474.02 $18,618.52 $18,618.50

250 $114,308.00 $116,365.54 $29,091.40 $29,091.38

300 $164,603.52 $167,566.38 $41,891.61 $41,891.59

500 $457,232.00 $465,462.17 $116,365.55 $116,365.54

600 $658,414.08 $670,265.53 $167,566.39 $167,566.38

Unmetered $560.61 $570.70 $142.69 $142.67

Stormwater (drainage)

Stand-alone premises

Small (200 m2 or less) $40.24 $40.96 $10.24 $10.24

Medium (201–1,000 m2) or low impact

$107.30 $109.23 $27.33 $27.30

Large (1,001–10,000 m2) $196.71 $200.25 $50.07 $50.06

Very large (10,001–45,000 m2)

$894.14 $910.23 $227.58 $227.55

Largest (45,001 m2 or greater)

$1,788.28 $1,820.46 $455.13 $455.11

Multi-premises $40.24 $40.96 $10.24 $10.24


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2013–14



IPART determined



(in 2013–14 value)



Usage charges ($/kL)

Residential properties

Water $2.13 $2.168 $2.168 $2.168

Non-residential properties

Water $2.13 $2.168 $2.168 $2.168

Wastewater (>400 kL wastewater discharge a year)e,f

$1.30 $1.30 $1.30 $1.30

a Sydney Water’s charges applied from 1 July 2013.

b We use the formula: (meter size) 2 x 25 mm charge/625 to calculate IPART’s maximum determined water service charge, for meter sizes not specified in its determination.

c The prices assume the application of a discharge factor (df%) of 100%. The relevant df% may vary from case to case, as determined by Sydney Water. We make a pro rata adjustment where the df% is less than 100%.

d We use the formula (meter size) 2 x 25 mm charge/625 x df% to calculate IPART’s maximum determined wastewater charge, for meter sizes not specified in its determination.

e For non-residential properties, the wastewater usage charge applies when a property’s discharge into the wastewater system exceeds 1.096 kL/day (or 100 kL/quarter average).

f All IPART’s maximum determined prices are subject to CPI adjustment, except the wastewater usage charge.

Note: Other charging arrangements including: Rouse Hill stormwater drainage, boarding houses, metered standpipes, trade waste and ancillary charges set according to IPART’s determined maximum price.

In 2012 determination, IPART determined that the maximum Rouse Hill land charge for new properties was $969.21 a year for five years. However, it was reduced to $237 a year. This reduction was approved by the NSW Treasurer in 2013.


Sydney Water Corporation

Financial Statementsfor the year ended

30 June 2014

Sydney Water Corporation - 30 June 2014 Page 1


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Contents

Statement of profit or loss and other comprehensive income 66

Statement of financial position 67

Statement of changes in equity 68

Statement of cash flows 69

Notes to the financial statements: 70

Corporate information 70

1. Summary of significant accounting policies 70

2. Income and expenses 97

3. Income tax expense 103

4. Cash and cash equivalents 105

5. Trade and other receivables 106

6. Inventories 108

7. Other current assets 108

8. Current tax asset and liability 109

9. Property, plant and equipment 110

10. Intangible assets 118

11. Deferred tax assets and liabilities 123

12. Trade and other payables 124

13. Borrowings and other financial liabilities 124

14. Dividends payable 127

15. Provisions 128

16. Share capital 138

17. Reserves 139

18. Retained earnings 140

19. Total equity reconciliation 140

20. Notes to the statement of cash flows 141

21. Commitments 142

22. Consultants 144

23. Auditors’ remuneration 144

24. Related party disclosures 145

25. Financial risk management disclosures 146

26. Contingencies 156

Directors’ Declaration 158

Independent Auditor’s Report 159


Start of audited financial statements

Note 2014 2013$'000 $'000

Revenue 2(a) 2,611,090 2,518,908

Other income 2(b) 3,916 2,544

Finance costs 2(c) (413,905) (397,710)

Other expenses 2(c) (1,561,455) (1,587,798)

Profit before income tax 639,646 535,944

Income tax expense 3(a) (175,153) (163,460)

Profit for the period 464,493 372,484

Other comprehensive income

Items that will not be reclassified subsequently to profit or loss:

Revaluation of property, plant and equipment 17(b) 250,591 (43,072)Income tax effect 3(c) (75,177) 12,922

175,414 (30,150)

Cash flow hedges:Gains (losses) taken to equity 17(b) (422) 11Transferred to the initial carrying amount of hedged items 17(b) 422 (11)

- - Income tax effect 3(c) - -

- -

Remeasurement of defined benefit superannuation net liability 2(c) 2,075 305,109Income tax effect 3(c) (623) (91,533)

1,452 213,576

Total items that will not be reclassified subsequently to profit or loss, net of income tax 176,866 183,426

Other comprehensive income for the period net of income tax 176,866 183,426

Total comprehensive income for the period 641,359 555,910

This statement should be read in conjunction with the accompanying notes.

Sydney Water Corporation – 30 June 2014 Page 3


Statement of profit or loss and other comprehensive income

for the year ended 30 June 2014



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Note 2014 2013 1 July 2012$'000 $'000 $'000

Current assets

Cash and cash equivalents 4 3,922 3,831 6,337Trade and other receivables 5 311,827 322,272 352,900Inventories 6 904 888 521Other current assets 7 3,722 8,822 16,829Current tax asset 8 1,531 687 -

321,906 336,500 376,587Non-current assets classified as held for sale 9(c) 6,605 763 -

Total current assets 328,511 337,263 376,587

Non-current assets

Trade and other receivables - - 7,658Property, plant and equipment 9 14,635,439 13,948,528 13,449,725Intangible assets 10 154,456 164,869 182,675

Total non-current assets 14,789,895 14,113,397 13,640,058

Total assets 15,118,406 14,450,660 14,016,645

Current liabilities

Trade and other payables 12 548,614 532,895 544,237Borrowings and other financial liabilities 13 11,650 11,240 10,782Current tax liability 8 19,530 71,298 111,374Dividends payable 14 252,000 290,625 242,000Provisions 15 178,461 211,760 206,461

Total current liabilities 1,010,255 1,117,818 1,114,854

Non-current liabilities

Borrowings and other financial liabilities 13 6,232,684 6,045,321 5,596,959Deferred tax liabilities 11 599,441 472,446 369,530Provisions 15 881,627 850,035 1,109,747

Total non-current liabilities 7,713,752 7,367,802 7,076,236

Total liabilities 8,724,007 8,485,620 8,191,090

Net assets 6,394,399 5,965,040 5,825,555

Equity

Share capital 16 3,148,354 3,108,354 3,108,354Reserves 17 1,307,795 1,149,760 1,183,107Retained earnings 18 1,938,250 1,706,926 1,534,094

Total equity 19 6,394,399 5,965,040 5,825,555




Statement of financial position

as at 30 June 2014



AssetShare revaluation Hedging Retained Total

Note capital reserve reserve earnings equity$'000 $'000 $'000 $'000 $'000

Balances as at 1 July 2013 previously reported 3,108,354 1,149,760 - 1,784,973 6,043,087

Changes in accounting policy due to revised AASB 119 1(w) - - - (78,047) (78,047)

Restated balances as at 1 July 2013 3,108,354 1,149,760 - 1,706,926 5,965,040

Comprehensive income for the period:

Profit for the period 18 - - - 464,493 464,493

Other comprehensive income 17(b), 18 - 175,414 - 1,452 176,866

Total comprehensive income for the period - 175,414 - 465,945 641,359

Transfers between equity items 17(b), 18 - (17,379) - 17,379 -

Total transfers between equity items - (17,379) - 17,379 -

Transactions with owners in their capacity as owners:

Share capital issued 16 40,000 - - - 40,000

Dividends recognised as a liability 14 - - - (252,000) (252,000)

Total transactions with owners in their capacity as owners 40,000 - - (252,000) (212,000)

Balances as at 30 June 2014 3,148,354 1,307,795 - 1,938,250 6,394,399

Balances as at 1 July 2012 previously reported 3,108,354 1,183,107 - 1,639,962 5,931,423

Changes in accounting policy due to revised AASB 119 1(w) - - - (105,868) (105,868)

Restated balances as at 1 July 2012 3,108,354 1,183,107 - 1,534,094 5,825,555

Comprehensive income for the period:

Profit for the period 18 - - - 372,484 372,484

Other comprehensive income 17(b), 18 - (30,150) - 213,576 183,426

Total comprehensive income for the period - (30,150) - 586,060 555,910

Transfers between equity items 17(b), 18 - (3,197) - 3,197 -

Total transfers between equity items - (3,197) - 3,197 -

Transactions with owners in their capacity as owners:

Share capital issued 16 - - - - -

Dividends recognised as a liability 15 - - - (416,425) (416,425)

Total transactions with owners in their capacity as owners - - - (416,425) (416,425)

Balances as at 30 June 2013 3,108,354 1,149,760 - 1,706,926 5,965,040

This statement should be read in conjunction with the accompanying notes.Sydney Water Corporation – 30 June 2014 Page 5


Statement of changes in equity




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Note 2014 2013$'000 $'000

Cash flows from operating activities

Cash receipts in the course of operations (inclusive of Goods and Services Tax) 2,477,487 2,405,043Cash payments in the course of operations (inclusive of Goods and Services Tax) (1,442,649) (1,405,296)Cash generated from operations 1,034,838 999,747

Revenue grants received from Commonwealth Government 23 19Cash receipts for social programs 159,510 154,170Interest received 312 134Income tax received 11,677 905Interest paid (344,117) (329,212)Government guarantee fee paid (104,914) (135,130)Income tax paid (188,247) (180,823)

Net cash from operating activities 20(a) 569,082 509,810

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 19,692 5,934Capital contributions received for social programs 15,672 -Other capital contributions received 8,392 15,081Security and other deposits received 7,790 4,575Payments for property, plant and equipment (492,881) (561,026)Payments for intangible assets (33,998) (31,896)Security and other deposits released (5,826) (6,514)

Net cash from investing activities (481,159) (573,846)

Cash flows from financing activities

Proceeds from issue of share capital 16 40,000 -Proceeds from borrowings 174,034 440,112Repayment of borrowings (6,236) (6,178)Other finance payments (5,005) (4,604)Dividends paid 14 (290,625) (367,800)

Net cash from financing activities (87,832) 61,530

Net increase (decrease) in cash and cash equivalents 91 (2,506)

Cash and cash equivalents at beginning of period 3,831 6,337

Cash and cash equivalents at end of period 4 3,922 3,831




Statement of cash flows





Notes to the financial statements for the year ended 30 June 2014

Corporate information

Sydney Water Corporation (‘the Corporation’) is a NSW statutory state owned corporation established on 1 January 1999 following the enactment of the Water Legislation Amendment (Drinking Water and Corporate Structure) Act 1998 and legislative amendments to the Sydney Water Act 1994. The address of the Corporation’s head office is 1 Smith Street, Parramatta, NSW 2150.

The Corporation’s ultimate parent is the NSW Government. Accordingly, the results, financial position and cash flows of the Corporation are included in the NSW Total State Sector Accounts.

The Corporation provides water and water-related services under its Operating Licence to customers in its area of operations in NSW. The Corporation operates under the commercial disciplines of the NSW Government’s Commercial Policy Framework and accordingly the directors have determined that the Corporation is a for-profit entity for financial reporting purposes.

The Corporation’s financial statements for the year ended 30 June 2014 were authorised for issue in accordance with a resolution of the directors on 27 August 2014.

The significant accounting policies that have been adopted in the preparation of the financial statements are detailed below.

1. Summary of significant accounting policies

(a) Basis of preparation

The financial statements are general purpose financial statements, which have been prepared in accordance with applicable Australian Accounting Standards (including Australian Interpretations) issued by the Australian Accounting Standards Board (AASB), mandates issued by NSW Treasury and other mandatory and statutory reporting requirements, including NSW Treasury Circulars adopted in the Corporation’s Statement of Corporate Intent, Part 3 of the Public Finance and Audit Act 1983 and the associated requirements of the Public Finance and Audit Regulation 2010. In preparing these financial statements, the accounting policies described below are based on the requirements applicable to for-profit entities in these mandatory and statutory requirements.

The financial statements cover the financial performance and cash flows of the Corporation for the reporting period 1 July 2013 to 30 June 2014, and its financial position as at 30 June 2014.

The financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position:

• certain classes of property, plant and equipment are stated at the lower of fair value and recoverable amount;• non-current assets classified as held for sale, if any, are stated at the lower of carrying amount and fair value less costs to

sell; • derivative financial instruments, if any, are stated at fair value;• borrowings are measured at amortised cost;• defined benefit superannuation liabilities are stated at the present value of accrued defined benefit obligations less the fair

value of fund assets; and• other non-current provisions are stated at the present value of the future estimated obligations for the relevant liabilities

concerned.

The financial statements are presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000).

The accounting policies set out below have been consistently applied by the Corporation to all periods presented in the financial statements. Judgements, key assumptions and estimations that management has made in the preparation of the financial statements are disclosed in the relevant notes to the financial statements.

Where relevant, comparative amounts are restated to conform to the current reporting period’s presentation. This could arise as a result of the requirements of new or revised Australian Accounting Standards or Australian Interpretations, a voluntary change in accounting policy or a reclassification of items presented.

(b) Statement of compliance

The financial statements comply with all applicable Australian Accounting Standards and Australian Interpretations. The financial statements also comply with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).



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(c) Foreign currency

Transactions in foreign currencies are translated to Australian Dollars at the foreign exchange rate ruling at the date of thetransaction.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Australian Dollars at the foreign exchange rate ruling on that date. Foreign exchange differences arising on translation are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian Dollars at foreign exchange rates ruling at the dates the fair value was determined.

Net foreign exchange gains are classified as other income (refer note 1(e)) and net foreign exchange losses are classified as expenses.

(d) Revenue

Revenue is income that arises in the course of ordinary activities. Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Corporation and the revenue can be reliably measured. In respect of the significant categories of revenue earned, the following recognition criteria must also be met before revenue is recognised:

• Rendering of services

The Corporation provides water, wastewater and stormwater services under its Operating Licence to customers in its area of operations on a daily basis. Revenue from the rendering of these services comprises service availability charges, usage charges and various ancillary service charges.

Service availability charges constitute a fixed charge to customers covering the cost of making the Corporation's water, wastewater and stormwater services available.

Usage charges reflect revenue derived from the consumption and use made of the Corporation's water, wastewater and trade waste services.

Ancillary services are those provided to customers for water, wastewater and stormwater related services including building approvals and the provision of information such as plans and diagrams.

Revenue is recognised in respect of these services on an accrual basis as the services are provided.

In regard to usage charges covering water usage, sewer usage, trade waste and recycled water charges, the Corporation recognises an estimate for the accrued revenue earned from the unbilled consumption of these services where meters have not been read as at the reporting date. (Refer note 5).

• Interest revenue

Interest revenue is recognised as the interest accrues using the effective interest method. The effective interest method calculates the amortised cost of a financial asset and allocates interest revenue over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to its net carrying amount.

• Government grants

Grants that compensate the Corporation for expenses incurred or revenue foregone are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred or the revenue is foregone.

Government grants that are provided on the basis that conditions need to be met are recognised in the statement of financial position initially as deferred income when there is reasonable assurance that they will be received and that the Corporation will comply with the conditions attaching to them. They are then transferred to profit or loss as revenue as the conditions are fulfilledunless they are of a material amount that compensates the Corporation for the cost of a specific identifiable asset, in whichcase they are recognised in profit or loss as revenue on a systematic basis over the useful life of that asset.

Government grants received by the Corporation mainly comprise social program reimbursements from the NSW Government.

Social program reimbursements

The Corporation provides a number of non-commercial social programs at the direction of the NSW Government. These include pensioner rebates, properties exempt from service and usage charges and expenditures for priority sewerage areas.

The Corporation seeks full cost reimbursement for all social programs provided at the request of the NSW Government that result in costs and/or revenues foregone for the Corporation. Where the portfolio Minister, with the approval of the NSW Treasurer, directs the Corporation to undertake activities of a non-commercial or social nature in the public interest



under Sections 20N or 20P of the State Owned Corporations Act 1989, the Corporation may seek reimbursement of costs incurred in complying with such a direction.

Revenue from social program reimbursements is recognised on an accrual basis as the Corporation’s right to receive these amounts emerges. This is considered to be at the same time as the related social program items are recognised in profit or loss.

As these reimbursements are usually compensating the Corporation for costs already incurred or revenue already foregone, they are recognised as revenue. Where such reimbursements are received in advance, they are recognised initially as deferred income in the statement of financial position and are recognised subsequently as revenue when the costs incurred or revenues foregone for which they are intended to compensate are recognised in profit or loss.

Revenue from social program reimbursements is separately disclosed in note 2(a).

• Rent revenue from operating leases

Rent revenue from operating leases is recognised on a straight-line basis over the lease term.

• Developer contributions

Developer contributions may take a variety of forms, including both monetary and non-monetary resources, and include cash advances received free of repayment obligation towards the construction of assets, and assets that are acquired at no cost.

Developer contributions are recognised as revenue in profit or loss at their fair value.

Developer contributions in the form of cash are now mainly applicable to recycling works. Their fair value is the amount of cash received from the developer and they are recognised as revenue when received.

Developer contributions in the form of assets are recognised upon certification by the Corporation that the assets are in accordance with the Corporation’s standards and when control of the assets is transferred to the Corporation. Their fair value at initial recognition is an estimate of the sub-contractor’s cost, which in effect represents replacement cost as at the date of acceptance.

(e) Other income

Other income comprises gains arising from either the disposal of recognised assets and liabilities or the re-measurement of some items to fair value at the reporting date that are required to be taken to profit or loss under the relevant applicable Australian Accounting Standards.

Examples are gains from the disposal of assets, foreign exchange gains on transactions, and gains from re-measurement to fair value of financial assets that are classified as held for trading and for derivative financial instruments used as fair value hedges.

• Disposal of investments or other financial assets

The net gain or loss on disposal of investments or other financial assets is calculated as the difference between the carrying amount at the time of disposal and the net proceeds on disposal and is recognised in profit or loss in the period of disposal. Net gains on disposal are recognised as other income. Net losses on disposal are reclassified as expenses.

• Disposal of property, plant and equipment, assets held for sale and intangible assets

The net gain or loss on disposal of these assets is calculated as the difference between the carrying amount of the assets at the time of disposal and the net proceeds on disposal and is recognised in profit or loss in the period of disposal.

Gains or losses arising from the sale of property holdings are recognised at the date that the risks and rewards of ownershiphave been transferred to the purchaser and the Corporation has no continuing involvement with the relevant property. This is normally considered to be when legal title passes to the purchaser at the date of settlement.

Net gains on disposal are recognised as other income. Net losses on disposal are reclassified as expenses.

• Sale of other current assets

The net gain or loss on sale of other current assets such as inventory or greenhouse trading certificates is calculated as thedifference between the carrying amount of the assets at the time of sale and the net proceeds on sale and is recognised in profit or loss in the period of sale. Net gains on sale are recognised as other income. Net losses on sale are reclassified as expenses.

• Foreign exchange gains

Refer accounting policy for foreign exchange in note 1(c).



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• Fair value gains through profit or loss

Refer accounting policies for investments (note 1(i)), derivative financial instruments (note 1(k)) and greenhouse trading certificates (note 1(m)). Net losses are reclassified as expenses.

(f) Expenses

Expenses are recognised in profit or loss when incurred. Expenses include items that are incurred in the course of ordinary activities as well as various losses that arise from either the disposal of recognised assets or the re-measurement of some items at the reporting date that are required to be taken to profit or loss under the relevant applicable Australian Accounting Standards.

Examples of losses are those arising from the disposal of property, plant and equipment, foreign exchange losses on transactions, some asset impairment losses, losses from re-measurement to fair value of financial assets that are classified as held for trading and for derivative financial instruments used as fair value hedges. Expenses are disclosed in these financial statements by nature. (Refer note 2(c)).

• Water filtration plant agreements

The Corporation has contractual arrangements with the owner/operators of water filtration plants at Prospect, Woronora, Illawarra and Macarthur for the filtration of bulk water supplied to the Corporation. The contractual arrangements and the accounting policies adopted in respect of each agreement are described below:

Prospect, Woronora and Illawarra

The agreements in respect of services provided by these water filtration plants are for 25 years and require the Corporation to pay the owners a tariff for the filtration services provided. At the end of the agreements, the Corporation has the option toextend the agreements or to acquire the water filtration plants at an independently determined market value at that time. The water filtration plants do not automatically transfer to the Corporation at that time.

The tariff incurred by the Corporation under these agreements comprises two components: an availability charge and a usage charge. The accounting treatment adopted by the Corporation in respect of these agreements is to record the entire tariff as an expense when incurred in profit or loss.

The Corporation considers these agreements to be service agreements for the filtration of water, similar to other executory supply agreements that are dependent on both parties fulfilling obligations equally during the terms of the agreements.

Macarthur

The water filtration agreement that previously existed in respect of this plant was renegotiated with the plant owners during the 2010-11 reporting period, with the new agreement taking effect from 1 March 2011. Up until that date, the previous agreement was similar to the service agreements for Prospect, Illawarra and Woronora water filtration plants detailed above. It was originally for a period of 25 years and was originally due to expire in 2020. It also contained a similar tariff structure and similar optional conditions relating to the possible acquisition of the plant at the end of the agreement at an independently determined market value.

The new existing agreement, however, now extends to 8 September 2030 and has within it a number of different conditions and tariff components. In particular, the components within the availability charge have been amended to two fixed daily charges (see below) and there is now a bargain purchase option at the end of the agreement where the Corporation can acquire the plant for a terminal nominal value of $1 if it chooses to do so.

As mentioned above, the availability charge now comprises two separate fixed daily charges: a service element to cover fixed operational costs incurred in operating the plant (which is adjusted over time with escalation factors), and a fixed charge that is related to the capital cost of the plant itself and which does not vary over the term of the agreement. This fixed charge is not dependent on output or performance and it essentially creates an arrangement that is similar to a take-or-pay agreement. Other operational service elements within the agreement are covered by the usage charge component of the tariff.

The new agreement became effective from 1 March 2011 after a number of conditions precedent were satisfied in the 2010-11reporting period. Up until that date, the Corporation recognised the entire tariff incurred under the previous agreement as an expense within profit or loss. From 1 March 2011 onwards, the Corporation has only recognised the usage charge and the service element component of the availability charge within expenses in profit or loss.

The fixed charge component of the availability charge that is related to the capital cost of the plant itself meets the criteria within Australian Interpretation 4 ‘Determining whether an Arrangement contains a Lease’ and, in substance, this represents a lease arrangement within the overall water filtration plant agreement. Further, this lease is considered to be a finance lease in accordance with Australian Accounting Standard AASB 117 ‘Leases’ and therefore it results in a finance lease asset and a finance lease liability being recognised in the statement of financial position. (Refer notes 1(n), 9(a) and 13). This accounting treatment has been confirmed by a leading international accounting firm and also by NSW Treasury.

The amount recognised as an expense in profit or loss in relation to all of the above water filtration agreements is disclosed in note 2(c). Disclosure of the Corporation’s finance lease commitments in respect of the Macarthur water filtration plant agreement is shown in note 21(c). Disclosure of commitments in respect of the agreements covering the Prospect, Woronora and Illawarra water filtration plants is shown in note 21(d).



• Depreciation and amortisation

Items of property, plant and equipment (excluding freehold land) that are either owned or under a finance lease, and intangible assets with finite lives (such as computer application software and licences for rights of access to certain properties) are depreciated/amortised on a straight-line basis over their estimated useful lives, making allowance where appropriate for residual values. The lives are reviewed annually, taking into account assessments of asset condition, commercial and technicalobsolescence and expected normal wear and tear. Land is not depreciated.

Work in progress is not depreciated until the assets are brought into service and are available for use.

The estimated useful life of a finance lease asset is determined by whether there is reasonable certainty that the Corporation will acquire the asset at the end of the lease term. If there is no reasonable certainty, the finance lease asset is amortised over the term of the lease. If there is reasonable certainty, the asset is amortised over the life of the physical asset that is the subject of the finance lease.

The normal life expectancies of major asset categories are as follows:

Depreciable asset classes and categories Number of Years

• Property, plant and equipment

System asset network categories:Dams (non-catchment) 200Stormwater wetlands infrastructure 200Canals and tunnels 100Major pipelines (above ground) 140Weirs 100Submarine outfalls 100Water mains 55 to 140Wastewater mains

- Gravity mains – pipe conduit only * 55 to 130- Pressure mains 55 to 130

Stormwater drains and basins 80 to 150System buildings 20 to 50Water, sewage and stormwater pumping stations:

- Civil component 50 to 100- Electrical component 25 to 30- Mechanical component 25 to 40- Electronic component 10 to 15

Water and sewage treatment plants and water filtration plants under a finance lease: **- Civil component 50 to 100- Electrical component 10 to 30- Mechanical component 10 to 40- Electronic component 7 to 15

Reservoirs:- Civil component 20 to 150- Electrical component 25 to 30- Mechanical component 25 to 40- Electronic component 10 to 15

Integrated control systems 3 to 10Water meters 8 to 20

Market buildings 20 to 50Leasehold property 99Plant and equipment 3 to 12Computer equipment 3 to 12

• Intangible assets

Computer application software 3 to 9Licences for right of access to properties 40

* For wastewater gravity mains greater than 100mm in diameter, the hole/cavity component is considered to be non-depreciable as these mains are capable of being repeatedly relined in the future (rather than being entirely replaced through excavation) and hence only the pipe conduit component for these mains is considered to be depreciable.

** The reference to water filtration plants under a finance lease refers to the finance lease contained within contractual arrangements currently in place with the owners of the Macarthur water filtration plant referred to in the previous section.



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• Operating lease expenses

Payments made under operating leases are representative of the pattern of benefits derived from the leased assets and accordingly they are recognised as an expense in profit or loss in the periods in which they are incurred. In most cases, recognition as an expense occurs on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense in profit or loss.

• Borrowing costs

Interest and other borrowing costs, such as government guarantee fees payable in respect of the Corporation’s borrowings, are expensed as incurred within finance costs in profit or loss unless they relate to qualifying assets, in which case they are capitalised as part of the cost of those assets. Qualifying assets are assets that take a substantial period of time to get ready for their intended use or sale. The Corporation considers this to be 12 months or more.

Capitalisation of borrowing costs is undertaken where a direct relationship can be established between the borrowings and the relevant projects giving rise to qualifying assets. Typically, these are projects whose annual budgeted expenditure is approximately $5 million or greater.

Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is net of any interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average. (Refer note 2(c)).

(g) Taxation

• Income tax

The Corporation is subject to notional taxation in accordance with the State Owned Corporations Act 1989. An ‘equivalent’ or ‘notional’ income tax is payable to the NSW Government through the Office of State Revenue. Taxation liability is assessed according to the National Tax Equivalent Regime (NTER) that replaced the former State Tax Equivalent Regime of the NSW Treasury from 1 July 2001. The NTER closely mirrors the Commonwealth Income Tax Assessment Acts of 1936 and 1997 (as amended) and is administered by the Australian Taxation Office (ATO).

The Corporation applies the ‘balance sheet method’ of tax-effect accounting to determine income tax expense and current and deferred tax assets and liabilities.

Income tax expense on the operating result for the reporting period comprises both current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case the income tax is itself recognised directly in equity as part of other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income for the reporting period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.

Deferred tax represents future assessable or deductible amounts that arise due to temporary differences existing at the reporting date between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes (their tax bases). Deferred tax balances are not recognised for temporary differences that arise from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affect neither accounting profit nor taxable profit.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities provided are based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities to which they relate. They are measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the tax laws enacted or substantively enacted at the reporting date.

Current and deferred tax assets are offset with current and deferred tax liabilities respectively where they relate to income taxes levied by the same taxation authority and the Corporation intends to settle current tax assets and liabilities with that taxation authority on a net basis. (Refer note 11).

• Goods and services tax

Revenue, expenses and assets are recognised excluding any amount of Goods and Services Tax (GST), except where the amount of GST incurred by the Corporation as a purchaser is not recoverable from the ATO. In such cases, the GST incurred is recognised as part of the cost of acquisition of an asset or as part of an item of expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from the ATO is included as a current asset or liability in the statement of financial position. Cash flows of GST are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities that are recoverable from, or payable to, the ATO are classified as cash flows from operating activities.

Commitments are disclosed inclusive of GST where applicable. (Refer note 21).



(h) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise positive cash balances and short-term investments with a maturity period of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the statement of cash flows, cash and cash equivalents consists of the above definition for the statement of financial position, net of bank overdraft balances. Bank overdraft balances, if any, are included within borrowings under current liabilities in the statement of financial position. (Refer note 13).

(i) Investments

• Financial assets

Investments in marketable securities with a maturity period of three months or less are classified as cash and cash equivalents (see note 1(h) above) and those with a maturity period longer than three months are classified as Investments. Those with a maturity period greater than 12 months are classified under non-current assets. All others are classified under current assets. Valuations for all investments are carried out annually as at the reporting date.

Investments in marketable securities are initially recognised at cost, being the fair value of the consideration given and including any acquisition charges associated with the investment. After initial recognition, investments are classified as either held-to-maturity, at fair value through profit or loss (held for trading) or available-for-sale, and are measured as follows:

• Held-to-maturity

Where the Corporation has the positive intent of holding investments to maturity, they are classified as held-to-maturity and are measured at amortised cost less any impairment losses. Amortised cost is calculated using the effective interest method, taking into account any discount or premium on acquisition, over the period to maturity. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

• At fair value through profit or loss (held for trading)

Where the Corporation holds investments with the intention of trading them in the short term to generate a profit from fluctuations in price, they are classified as held for trading within the category of ‘At fair value through profit or loss’ and are measured at the reporting date at fair value. Any gains or losses arising from their measurement to fair value are recognised in profit or loss.

• Available-for-sale

Where the Corporation holds investments that are not classified as either held-to-maturity or at fair value through profit or loss (held for trading), they are classified as available-for-sale and are measured at the reporting date at fair value. Any gains or losses arising from their measurement to fair value are recognised in other comprehensive income and taken directly to an investment revaluation reserve (a separate component of equity) until the investment is disposed of, or until the investment is determined to be impaired, at which time the cumulative amount previously taken to this reserve is transferred to profit or loss.

For investments classified as ‘At fair value through profit or loss (held for trading)’ or ‘Available-for-sale’, fair value is their market value determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

Purchases and sales of investments in marketable securities that require delivery within the time frame generally established by regulation or convention in the market place are recognised on the trade date, which is the date on which the Corporation commits to purchase or sell the securities.

(j) Trade and other receivables

Trade and other receivables represent amounts that are receivable by the Corporation for providing services to customers prior to the end of the reporting period and that are yet to be collected. (Refer note 5).

Trade and other receivables due within 12 months of the reporting date, which generally have settlement terms between 14 and 60days, are recognised initially and subsequently carried at original invoice amount, which is their fair value, less any impairment losses recognised by way of an allowance for impairment that represents specific amounts considered to be either doubtful or uncollectible.

Recognition at original invoice amount for these receivables is adopted as this is not materially different to amortised cost, given the short-term nature of these receivables. Trade and other receivables due greater than 12 months, however, are discounted to amortised cost using the Government bond rate which closely matches the term of the receivable as the discount rate.

The recoverability of trade receivables is regularly reviewed throughout the reporting period. The allowance for impairment is recognised when collection of the full amount invoiced is considered to be no longer probable after due consideration of factors such as the length of time in excess of the due date, financial difficulties of the debtor, past recoverability experience and prevailing economic conditions. All of these factors are considered to be objective evidence of impairment.

Known bad debts are written off against the allowance as and when identified. Sydney Water Corporation – 30 June 2014 Page 13


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(k) Other financial assets

Other financial assets comprise any derivative financial instruments that are favourable at the reporting date. (Derivative financial instruments that are unfavourable at the reporting date are classified as other financial liabilities – refer note 1(s)).

• Derivative financial instruments

The Corporation enters into a small number of derivative financial instruments from time to time to manage its exposure to foreign exchange rate and interest rate risks arising from operational, financing and investment activities. The instruments used are forward foreign exchange contracts and interest rate swaps respectively.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are re-measured and stated at fair value in the statement of financial position.

Fair values are determined on the basis of valuation rates and valuations supplied by independent market sources.

The gain or loss on re-measurement to fair value is recognised in profit or loss, unless the derivative financial instruments qualify for hedge accounting. Under hedge accounting, the recognition of any resultant gain or loss depends on the nature of the item being hedged and the classification of the derivative financial instrument, as follows:

Hedge accounting

Under hedge accounting, derivative financial instruments that are used as hedging instruments and meet strict hedgeeffectiveness criteria are classified as either fair value hedges or cash flow hedges (see below).

Hedge effectiveness is assessed at the inception of the hedge, and at each subsequent reporting date, by assessing the extent to which changes in fair values or cash flows of the hedging instrument offset those of the associated hedged asset or liability or forecast transaction. If the actual result is within a range of 80-125 per cent, the hedge is considered to be highly effective.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument previously recognised in other comprehensive income and presented within equity remains there until the forecast transaction occurs.

If a hedged transaction is no longer expected to occur, the net cumulative gain or loss presented within equity is transferredto profit or loss.

Fair value hedges and cash flow hedges under hedge accounting are defined and recognised as follows:

• Fair value hedges

Hedges are fair value hedges where they hedge the exposure to changes in the fair value of a recognised asset or liability or unrecognised firm commitment, or identified portions thereof, and which could affect profit or loss.

Any gain or loss from re-measuring the hedging instrument to fair value at the reporting date is recognised immediately in profit or loss. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss also being recognised in profit or loss.

• Cash flow hedges

Hedges are cash flow hedges where they hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit or loss.

For cash flow hedges that are hedging firm commitments, the portion of the gain or loss on re-measurement to fair value that is determined to be an effective hedge is recognised in other comprehensive income and taken directly to a hedging reserve (a separate component of equity). Any ineffective portion is recognised in profit or loss.

When the hedged firm commitment results in the recognition of an asset or liability, then, at the time the asset or liability is recognised, the associated cumulative gains or losses that had previously been recognised in the hedging reserve are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability.

For all other cash flow hedges, the gains or losses that are recognised in the hedging reserve are transferred to profit or loss in the same reporting period in which the hedged firm commitment affects profit or loss.



(l) Inventories

Inventories include a variety of items on hand including stock, stores and materials of a critical nature for operational and maintenance purposes. (Refer note 6).

These items have been arrived at by actual count, weight or measurement and are valued at the lower of cost and net realisable value using the ‘first-in first-out’ basis of valuation for the purposes of determining cost. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs necessary to make the sale.

(m) Other current assets

Other current assets comprises greenhouse trading certificates acquired and held by the Corporation at the reporting date. (Refer note 7).

• Greenhouse trading certificates

Greenhouse trading certificates held at the reporting date by the Corporation include Large-scale Generation Certificates (LGCs – formerly referred to as Renewable Energy Certificates (RECs)) and Energy Saving Certificates (ESCs).

Greenhouse trading certificates are items that can be traded in energy markets and are required by energy retailers to meet greenhouse gas emissions or renewable energy targets imposed on them by NSW or Commonwealth legislation, as applicable. As such, they have a fair value that can be attributed to them at the reporting date based on observable market prices if they are held for trading purposes.

Greenhouse trading certificates can either be held for trading purposes, or utilised/surrendered to the regulators that administer the registration of these certificates in order to demonstrate the achievement of carbon neutral initiatives during any relevant period.

The Corporation is entitled to generate or acquire these certificates as a result of various energy saving initiatives undertaken,such as installing water saving devices in customers’ properties or constructing co-generation facilities to produce renewable energy at a number of its treatment plants.

Greenhouse trading certificates that are generated by the Corporation for a nominal registration fee and which are held for potential trading purposes are initially recognised at fair value based on the market price at the time of acquisition. Theircarrying amount is subsequently restated at each reporting date to the fair value based on the prevailing market price at that time, with any gains or losses recognised in profit or loss as part of other income.

Greenhouse trading certificates that are generated by the Corporation for a nominal registration fee and which are not held fortrading purposes are recognised at the cost of registration.

When greenhouse trading certificates are surrendered, their carrying value is recognised as an expense in profit or loss at that time.

(n) Property, plant and equipment

• Acquisitions and capitalisation

All items of property, plant and equipment acquired by the Corporation are recognised initially at the cost of acquisition. Subsequent to initial recognition, particular classes of assets are revalued in accordance with the Corporation’s revaluation policies (see Asset valuations below).

Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire the asset, including costs that are directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended.

Items costing $5,000 or more individually and having a minimum expected working life of three years are capitalised. In the case of system asset categories that work together to form an entire network (collectively referred to hereafter as ‘system assets’), all expenditures are capitalised regardless of cost. This also applies to water meters.

In respect of system assets constructed by the Corporation for its own use, cost includes:

• materials used in construction • direct labour• contractors’ services• major inspection costs• an estimate, where relevant, of the costs of dismantling, decommissioning and removing the asset and restoring the

site on which it is located • an appropriate proportion of overheads.

Borrowing costs are also capitalised to the cost of constructed system assets where applicable. (Refer note 1(f)).

Construction costs for system assets are capitalised initially as work in progress within property, plant and equipment. Subsequently, the costs within work in progress are reclassified as completed assets when construction has ended and each facility, or operating unit in each facility, becomes operational and available for use in the manner intended.



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In respect of major inspections undertaken for system assets, the cost of the inspection is capitalised as part of the cost of the asset if it is probable that future economic benefits will flow to the Corporation and the cost can be measured reliably. Theinspection cost capitalised is then depreciated over the period of time until the next inspection. When each major inspection cost is capitalised, any remaining cost or estimated cost of the previous inspection is derecognised.

The cost of dismantling, decommissioning and removing an asset and restoring the site on which it is located is capitalised when a decision to decommission the asset has been made. This also gives rise to the recognition of a corresponding liabilityas a provision. (Refer also note 1(u)).

Where asset components that connect to the Corporation’s system asset network are handed over by developers free of charge, they are initially recognised at fair value. Fair value for these asset components at initial recognition is determined using the cost approach under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ (see below). In applying the cost approach, the Corporation uses an estimate of the sub-contractor’s cost for these asset components, which in effect representstheir replacement cost as at the date of acceptance. (Refer also note 1(d)).

• Asset valuations

Following initial recognition, each class of property, plant and equipment is stated in the statement of financial position at fair value less any subsequent accumulated depreciation and accumulated impairment losses. Adopting the fair value model for property, plant and equipment assets, rather than the cost model, is a requirement of NSW Treasury’s mandates in respect of options to be adopted by NSW public sector entities under Australian Accounting Standards.

Fair value is defined as ‘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’. This is sometimes referred to as an ‘exit price’.

In determining the most appropriate measure of fair value for its assets, the Corporation considers a number of factors such as the principal (or most advantageous) market in which an orderly transaction would take place for the asset, the highest and best use of the asset and whether the asset is used in combination with other assets or on a stand-alone basis, and the assumptions that a market participant would use when pricing the asset.

When transactions are not directly observable in a market, which is the case with the Corporation’s property, plant and equipment assets, fair value is determined for each asset class using one of three valuation techniques permitted under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’: the market approach, the income approach and the cost approach.

• Under the market approach, fair value is determined using prices and other relevant information generated by market transactions involving identical or comparable assets or groups of assets.

• Under the income approach, fair value is determined by converting future cash flows to a single current (ie discounted) amount.

• Under the cost approach, fair value is determined by calculating the current replacement cost of an asset, which represents the amount that would be required currently to replace the service capacity of an asset.

The relevant valuation technique adopted by the Corporation as the most appropriate for each class of asset is described below.

For some classes of assets, re-measurement to fair value is undertaken by way of an asset revaluation. Valuations are performed with sufficient regularity to ensure that the carrying amount prior to any impairment adjustments does not differ materially from the asset’s fair value at the reporting date.

Where an asset’s carrying amount is greater than its estimated recoverable amount, it is written down immediately to thatestimated recoverable amount.

• System assets

System assets are those infrastructure assets owned by the Corporation that deliver water, wastewater and stormwater services to its customers through an integrated network of various asset categories. (Refer note 1(f) for depreciable asset categories within this asset class). From 1 July 2013, this class of assets now also includes system land and water meters. (Refer note 1(w)).

Due to the specialised nature of this class of assets where there is generally no active market, the fair value is determined using the income approach described above by discounting the future cash flows expected to be generated from the use of these assets under the price-regulated environment in which the Corporation operates as a for-profit entity. The future cash flows generated from the use of the assets under this price-regulated environment are considered to be the primary factor that a market participant would consider when pricing these assets. This is considered to be more relevant to a market participant than the estimated depreciated current replacement cost of the assets, which was the basis of determining fair value for this asset class in the previous reporting period before Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ became operative.

In determining estimated depreciated current replacement cost for these assets both in the previous reporting period and also generally for other internal asset management purposes, the Corporation uses estimates of modern engineering equivalent replacement asset (MEERA) values on a whole of facility basis and takes into account condition-based assessments of the assets and their asset lives to determine their remaining service potential.



Valuations for system assets to fair value are carried out annually, effective from 1 July each financial reporting period. Comprehensive engineering valuations of different categories of system assets to determine their estimated depreciated replacement costs are carried out on a progressive cycle not exceeding five years. Valuations carried out during the intervening years of the progressive cycle are carried out using an output index that is applicable to the general construction industry.

When categories of system assets are revalued to fair value based on the income approach, any accumulated depreciation or amortisation is netted against the gross carrying amount and the resulting balance is then increased or decreased by the revaluation increments or decrements.

• Land and buildings

System land is land upon which the Corporation’s system assets are located and which has no other alternative use at the reporting date. The fair value of system land is determined as part of the income approach applied to system assets referred to above to determine the future cash flows to be generated by these assets collectively under the current price-regulated environment. This is because a market participant would take into account the restrictions imposed on the system land by being used exclusively for the operation and location of the various system asset categories. Accordingly, the fair value of system land is no longer considered to be the market valuation provided by the Valuer-General that is normally used for rating purposes, less estimated costs to sell, which was the case in the previous reporting period. The fair value is now a reduced proportion of those valuations, whereby the proportion is determined when attributing the discounted future cash flows under the income approach to both system land and other system asset categories. Hence from 1 July 2013, system land is now considered to be part of the asset class ‘system assets’. (Refer note 1(w)).

Market land and buildings, which are commercial properties held by the Corporation, are valued by independent registered valuers on a three-yearly cycle, unless market conditions necessitate an earlier valuation to be undertaken, using the market approach to determine fair value under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’. Market land is stated in the statement of financial position at market value along with impairment deductions due to estimated costs to sell and costs to remediate environmental contamination (where these have been reliably estimated). Market buildings are stated at market value less accumulated depreciation and costs to sell.

Leasehold properties are stated at market value less accumulated amortisation along with impairment deductions for costs to sell.

When these assets are revalued, any accumulated depreciation or amortisation is netted against the gross carrying amount and the resulting balance is then increased or decreased by the revaluation increments or decrements.

• Other asset classes forming property, plant and equipment

Other asset classes are recognised initially at the cost of acquisition. These assets are not revalued as it is considered that their depreciated historical cost is an acceptable surrogate for their fair value if a market approach was applied under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’.

For each class of property, plant and equipment subject to valuation, revaluation increments are recognised in other comprehensive income and credited to an asset revaluation reserve within equity in the statement of financial position.

Where a revaluation decrement or an impairment loss reverses a revaluation increment previously credited to, and which is still in the balance of, the asset revaluation reserve, the revaluation decrement or impairment loss is debited to that reserve. In other cases, the decrement or impairment loss is recognised as an expense in profit or loss.

Revaluation increments and decrements are offset against one another on an ‘individual asset’ basis for revaluation purposes as follows:

• In respect of the class of system assets (including system land and water meters), the Corporation considers the unit of measure for an ‘individual asset’ in its single cash-generating unit to be the entire system asset network. (Refer note 9(b)).

• In respect of the Corporation’s market land and buildings, the ‘individual asset’ is considered to be each individual land parcel together with any building improvements on the land parcel.

Upon disposal of assets or asset components that have been revalued, any asset revaluation reserve balance relating to the particular asset or asset component being disposed is transferred to retained earnings.

• Leased assets

• Finance Leases

Leases of property, plant and equipment where the Corporation, as lessee, assumes substantially all the risks and rewards of ownership are classified as finance leases. This includes contractual arrangements in which a finance lease can be inferred in accordance with Australian Interpretation 4 ‘Determining whether an Arrangement contains a Lease’ and Australian Accounting Standard AASB 117 ‘Leases’. (Refer note 1(f) in relation to the renegotiated Macarthur water filtration plant agreement).

Finance leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs incurred or amounts received as a condition precedent to entering an arrangement that creates a finance lease relationship for the underlying asset are taken into account in establishing the amount recognised as a finance lease asset.



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A finance lease liability is also established at inception at the present value of the future minimum lease payments. (Refer also note 1(s)). Each lease payment thereafter is allocated between the liability in the statement of financial position and finance costs in profit or loss.

Capitalised finance lease assets are depreciated on a straight-line basis over either the term of the lease or the expected useful life of the leased asset, depending on whether or not there is reasonable certainty that the leased asset will be acquired at the end of the lease term.

If there is reasonable certainty that the leased asset will be acquired at the end of the lease term, the finance lease asset is depreciated over the economic life of the leased asset consistent with the depreciation policies applied to other similar assets owned by the Corporation.

If there is no reasonable certainty that the leased asset will be acquired at the end of the lease term, the finance lease asset Is depreciated over the shorter of the lease term and the useful life of the leased asset.

• Operating Leases

Leases of property, plant and equipment where the Corporation as a lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Initial direct costs incurred by the Corporation acting as a lessor in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on a straight-line basis in line with lease rental revenue.

Payments made under operating leases by the Corporation acting as a lessee are recognised in accordance with the accounting policy in note 1(f).

• Assets held for sale

Non-current assets that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale in the statement of financial position. Assets classified as held for sale are shown under current assets. Classification as held for sale occurs only when:

• the Corporation is committed to a plan to sell the asset • an active program to locate a buyer and complete the plan has been initiated • the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value • the sale is expected to occur within one year from the date of classification.

Immediately before classification as held for sale, the measurement of the relevant asset is brought up to date in accordance with applicable Australian Accounting Standards and the Corporation’s accounting policies. Then, on initial classification as held for sale, the asset is measured at the lower of its carrying amount and its fair value less costs to sell.

Subsequent to classification as held for sale, any impairment losses related to the value of the asset are recognised in profit or loss. Any reversals of impairment are also recognised in profit or loss except that any such reversal cannot exceed the amount of impairment losses previously recognised as an impairment expense to profit or loss before the asset was classified as heldfor sale.

Once a depreciable asset is classified as held for sale, depreciation ceases for that asset.

(o) Intangible assets

Intangible assets are identifiable non-monetary assets without physical substance. Intangible assets are capitalised initially at cost. Costs incurred on incomplete intangible assets that are being progressively acquired, such as easements or software, are recognised as acquisitions in progress at the reporting date. These assets are reclassified as completed intangible assets whenthe assets are fully acquired and are operational or available for use.

Following initial recognition in relation to computer software, the cost approach is applied as it is considered that there is no active market that can be referenced for performing revaluations to a market-based fair value. In relation to easements, the income approach is applied along with system assets. (Refer note 1(n)).

The useful lives of intangible assets are assessed to be either finite or indefinite.

Where intangible assets are determined to have finite lives, they are amortised on a straight-line basis and the expense is recognised as part of the depreciation and amortisation line item in profit or loss. (Refer also note 1(f)). These assets are recognised in the statement of financial position at cost less accumulated amortisation and accumulated impairment losses, where applicable.

Where intangible assets are determined to have indefinite lives, they are not amortised. However, they are tested for impairment as part of the cash-generating unit test applied by the Corporation in conjunction with other assets. Any resulting impairment losses are recognised as an expense in profit or loss. Any reversals of impairment losses are also recognised in profit or loss. These assets are recognised in the statement of financial position at cost less accumulated impairment losses, where applicable. (Refer note 10).



• Research and development

Expenditure on research activities, undertaken with the prospect of obtaining new technical knowledge or understanding, is recognised as an expense in profit or loss when incurred.

Expenditure on development activities, whereby research findings are applied to the development of substantially new or improved products or processes, is capitalised if the product or process is significant, is technically or commercially feasible, will provide future economic benefits and there are sufficient resources to complete development.

The development activities expenditure capitalised, if any, comprises direct labour, materials, other costs directly attributable to the development activity and an appropriate proportion of overheads. Such expenditure is tested for impairment at each reporting date, whether or not the intangible asset arising from the expenditure is available for use or in progress.

Other development expenditure is recognised in profit or loss when incurred.

(p) Reassessment of fair value and impairment of assets

At each reporting date, the carrying amounts of assets (other than inventories, greenhouse trading certificates held for trading and deferred tax assets) are reviewed to ensure that they represent fair value. If the carrying amount requires a valuation adjustment in order to represent fair value, this is carried out at the reporting date. In addition, the carrying amounts are reviewed to determinewhether there is an indication of impairment. If any indication of impairment exists, a formal estimate of their recoverable amount is made. (Refer below - Calculation of recoverable amount). Where the carrying amount of an asset is greater than its recoverable amount, the asset is considered impaired.

An impairment loss is recognised whenever the carrying amount of an asset within a cash-generating unit, or the cash-generating unit taken as a whole, exceeds its recoverable amount. Impairment losses are recognised as an expense in profit or loss, unless an asset has previously been revalued through the asset revaluation reserve, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.

Impairment losses recognised in respect of a cash-generating unit taken as a whole are allocated to reduce the carrying amount of each asset in the cash-generating unit on a pro rata basis, except for those assets that have a separately determinable recoverable amount. In that allocation process, those assets that have a separately determinable recoverable amount are stated at that recoverable amount within the cash-generating unit and all the other assets receive the remaining pro rata impairment loss allocation necessary to ensure the cash-generating unit is stated at its total recoverable amount.

For the Corporation, the cash-generating unit is considered to be at the whole of entity level as all of the system asset categories that it owns work together as an integrated system asset network, rather than as individual assets, to generate cash flows under current pricing methodologies.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity through other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been previouslyrecognised directly in equity is transferred to profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised through profit or loss.

• Calculation of recoverable amount

Financial assets

The recoverable amount of investments classified as held-to-maturity and any receivables stated at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate determined at initial recognition of these financial assets. Receivables with a short duration are not discounted. Impairment in respect of these receivables is determined in accordance with the accounting policy in note 1(j).

Other assets

The recoverable amount of various classes of property, plant and equipment and intangible assets is determined as the greater of fair value less costs to sell and value in use as applicable to each class of asset. In this regard, fair value is determined using the principles and valuation approaches in Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ described above in note 1(n). As mentioned above, fair value (and recoverable amount) is determined at the total cash-generating unit level using an income approach. Where an asset class has its own separately determinable recoverable amount (for example, market land and buildings), this separately determined amount is allocated to that asset class. The remaining asset classes with no separately determinable recoverable amount are allocated the remaining value under the income approach for the cash-generating unit on a pro rata basis.

• Reversals of impairment

Financial assets

An impairment loss in respect of investments classified as held-to-maturity or any receivables stated at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment was recognised.



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Other assets

Impairment losses in respect of other assets such as system assets, including system land, water meters and easements,are reversed if there has been a change in the estimates used to determine the recoverable amount or if an event or significant changes have occurred during the reporting period that have led, or will lead, to a benefit to the Corporation because of the manner in which the relevant asset is expected to be used.

Impairment losses are reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(q) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Corporation prior to the end of the reporting period and that are unpaid.

Trade and other payables are recognised in the statement of financial position at cost, which is considered to approximate amortisedcost due to their short-term nature. They are not discounted, as the effect of discounting would not be material for these liabilities.

Recognition of trade and other payables occurs when the goods or services purchased by the Corporation have been received and an obligation to make future payments arises. (Refer note 12).

• Financial guarantees

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for aloss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantees provided by the Corporation to other parties, if any, are recognised as financial liabilities when, at thereporting date, it is probable that the Corporation will be required to make a payment to the holder of the guarantee as a result of a default and the amount can be measured reliably.

Financial guarantee liabilities, if any, are recognised in the statement of financial position at fair value. Fair value is calculated by assessing a number of factors, such as the ability of the defaulting party to obtain funding in its own right, the range ofprobabilities that a default would occur and the range of probable outcomes for payment as a result of a default.

(r) Borrowings

Interest-bearing borrowings obtained by the Corporation from the NSW Treasury Corporation are recognised initially at the fair value of the consideration received, which incorporates any transaction costs associated with the borrowing. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. This includes capital indexed bonds whose carrying amount is restated at each reporting date by way of an indexation adjustment based on the Consumer Price Index (CPI) in Australia. (Refer note 13).

Amortised cost is calculated by taking into account any differences between the initial fair value and the final redemption value of the borrowings, such as discounts or premiums. These differences are amortised to profit or loss as part of finance costs over the period of the borrowings on an effective interest basis. Indexation adjustments on CPI indexed bonds are also recognised as part of finance costs in profit or loss.

Gains or losses are recognised in profit or loss when liabilities are derecognised, such as through a debt restructuring or early repayment of debt, as well as through the amortisation process.

Interest-bearing borrowings are classified as current liabilities only if the borrowing is due to be settled within 12 months after the reporting date and there is no discretion on the part of the Corporation to extend or refinance the obligation on a long-term basis with the respective lender. All other interest-bearing borrowings are classified as non-current liabilities, including those in which the Corporation has the discretion to refinance or roll over the borrowings for at least 12 months after the reporting date even if they are due to mature within a shorter period.

(s) Other financial liabilities

Other financial liabilities (refer also note 13) comprise any derivative financial instruments that are unfavourable at the reporting date (refer note 1(k)), any finance lease liabilities (refer notes 1(f) and 1(n) in relation to the Macarthur water filtration plant agreement) and liabilities for the Corporation’s obligations under the Blue Mountains Sewage Transfer Scheme agreement described below.

• Blue Mountains Sewage Transfer Scheme agreement

The Corporation has a service agreement with the legal owner of a sewage tunnel in the Blue Mountains for the transfer of sewage through that tunnel to a sewage treatment plant owned by the Corporation. Under that agreement, which was entered into in June 1993, the legal owner financed the construction of the tunnel under a build-own-operate-transfer arrangement.

The term of the agreement is for 35 years, with the Corporation having an option to extend to 50 years. A tariff is payable to the legal owner of the tunnel over the term of the agreement. Payments are made quarterly and are indexed with movements in Average Weekly Ordinary Time Earnings (AWOTE).



At the end of the agreement, the legal title of the tunnel constructed under this scheme will ultimately transfer to the Corporation at a nominal consideration of $1. Notwithstanding this, however, the Corporation considers that, in substance, it presently controls the tunnel and that the future payments to be made to the legal owner are, in substance, for the acquisition of the tunnel over the term of the agreement.

Accordingly, the Corporation has capitalised the cost of the tunnel asset as an item of property, plant and equipment and hasrecognised a liability in the statement of financial position for the obligation to make future tariff payments to the legal owner.

After construction of the tunnel was completed in April 1996, the asset and the liability that were initially recognised in thestatement of financial position were for equal amounts representing the final construction cost of the tunnel. Subsequent to this initial recognition, the tunnel asset has been, and continues to be, revalued along with all other system assets each reportingperiod and it is being depreciated over its estimated useful life. The liability is now stated at amortised cost, using the effective interest method.

Payments are separated between principal repayments that reduce the liability and interest expense, which is recognised in profit or loss as part of finance costs.

(t) Dividends payable

A liability for dividends payable is recognised in the reporting period in which the dividend is declared. Dividends are regarded as declared when they are appropriately authorised as no longer at the discretion of the Corporation. This occurs through a formal process whereby the Corporation’s Board recommends the dividend to its voting Shareholder Ministers and the final agreed dividend is accepted and approved by the Shareholder Ministers prior to the end of the reporting period. (Refer note 14).

(u) Provisions

Provisions are liabilities of uncertain timing or amount. A provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the obligation is to be settled greater than 12 months after the reporting date and the effect is material, a provision is determined bydiscounting the expected future cash flows required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. This is usually the risk free rate on Government bonds that most closely match the expected future payments, except where noted below. If the obligation is due to be settled less than 12 months after the reporting date, the provision is stated at the best estimate available and is not discounted.

When some or all of a provision is expected to be reimbursed from a third party, the reimbursement receivable is recognised as an asset only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement.

A provision is classified as a current liability if the Corporation does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Provisions recognised in the statement of financial position comprise some employee benefits and other provisions. These are described below.

• Employee benefits

All liabilities for employee benefits are recognised in the statement of financial position. Employee benefits comprise short-term benefits, other long-term benefits, termination benefits and post-employment benefits.

• Short-term employee benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service. They include wages and salaries and sick leave.

All short-term employee benefits that are payable at the reporting date are measured on an undiscounted basis at the nominal amount expected to be paid.

Expenses for wages and salaries are recognised on an accrual basis as services are rendered by employees. Expenses for sick leave, which is non-vesting, are recognised when the absences occur.

Liabilities for wages and salaries are included within trade and other payables while liabilities for any non-vesting sick leave, where applicable, are included within provisions in the statement of financial position.



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• Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either:

(a) an entity’s decision to terminate an employee’s employment before the normal retirement date; or(b) an employee’s decision to accept an offer of benefits in exchange for the termination of employment.

In the case of the Corporation, this refers specifically to redundancy benefits payable to employees as a result of organisational restructures.

A liability and expense for such termination benefits are recognised at the earlier of when the Corporation can no longer withdraw an offer of termination benefits and when, if applicable, the Corporation recognises costs for a restructuring that involves the payment of termination benefits.

For termination benefits payable as a result of (a) above, the time when the Corporation can no longer withdraw the offer of those benefits is when it has communicated a plan of termination to the affected employees and unions. This is considered to be when:

o actions required to complete the plan indicate that it is unlikely that there will be any significant change to the plano the plan identifies the number of employees affected, their job classifications or functions and their locations and

the expected completion date, and o the plan outlines sufficient details for the employees to determine the amount and type of termination benefits to be

received.

A provision is recognised under these circumstances even when the plan does not identify each individual employee affected by the plan.

For termination benefits payable as a result of (b) above, the time when the Corporation can no longer withdraw the offer of termination benefits is the earlier of when the employee accepts the offer and, if applicable, when a restriction takes effect on the Corporation’s ability to withdraw the offer. If such a restriction exists at the time of the offer, this would be when the offer was made.

The liability for termination benefits for specific employees that have accepted an offer of termination benefits is measured at the calculated entitlement that will be paid to those employees. This liability is usually settled in the following reporting period and thus is not discounted.

When specific employees are not known, an estimate for a provision is calculated on the basis of the number of employees expected to accept an offer of termination benefits in accordance with the termination plan. The liability is only discounted, using market yields on Government bonds, if the termination benefits are not expected to be settled wholly before 12months after the annual reporting date.

• Post-employment benefits

Post-employment benefits are employee benefits (other than termination benefits and short-term employee benefits) that are payable after the completion of employment. In the case of the Corporation, this refers specifically to benefits providedto employees and former employees through superannuation schemes. Superannuation schemes are classified as either defined contribution or defined benefit.

• Defined contribution superannuation schemes

The Corporation contributes to the First State Superannuation Scheme, a defined contribution scheme in the NSW public sector, as well as other private schemes to a lesser extent. Contributions to these schemes are recognised as an expense in profit or loss as incurred. The liability recognised at the reporting date represents the contributions to be paid to these schemes in the following month.

• Defined benefit superannuation schemes

The Corporation contributes to three defined benefit superannuation schemes in the NSW public sector Pooled Fund. These are: State Superannuation Scheme (SSS), State Authorities Superannuation Scheme (SASS) and State Authorities Non-contributory Superannuation Scheme (SANCS).

The Corporation’s net obligation in respect of these schemes is calculated separately for each scheme by estimating the amount of future benefit that employees have earned in return for their service in the current and prior reporting periods. That benefit is discounted to determine its present value, and the fair value of any scheme assets is deducted.

The discount rate is the yield at the reporting date on Government bonds that have maturity dates approximating to the terms of the Corporation’s obligations. Calculations are performed by the Pooled Fund’s actuary using the projected unit credit method and they are advised to individual agencies for recognition and disclosure purposes in their financial statements.

Where the present value of the defined benefit obligation in respect of a scheme exceeds the fair value of the scheme’s assets, a liability for the difference is recognised in the statement of financial position. Where the fair value of a scheme’s assets exceeds the present value of the scheme’s defined benefit obligation, an asset is recognised in the statement of financial position.



Any superannuation asset recognised is limited to the total of any unrecognised past service cost and the present value of any economic benefits that may be available in the form of refunds from the schemes or reductions in future contributions to the schemes, as advised by the Pooled Fund’s actuary.

Australian Accounting Standard AASB 119 ‘Employee Benefits’ does not specify whether an entity shall distinguish current and non-current portions of assets and liabilities arising from post-employment benefits because at times the distinctions may be arbitrary. Based on this, the Corporation discloses defined benefit superannuation liabilities or assets as non-current as this best reflects when the Corporation expects to settle (realise) the liabilities (assets).

Remeasurements of the net defined benefit liability or asset are recognised in other comprehensive income (directly through retained earnings) in the reporting period in which they occur. Such remeasurements include actuarial gains or losses, the return on plan assets (excluding amounts included in net interest on the defined benefit liability or asset) and any change in effect of the asset ceiling (excluding amounts included in net interest on the defined benefit liability or asset).

• Other long-term employee benefits

Other long-term employee benefits are all employee benefits other than short-term employee benefits, post-employment benefits and termination benefits. In the case of the Corporation, this refers specifically to employee benefits for long service leave and annual leave.

The liabilities for long service leave and annual leave at the reporting date represent the present value of the future benefitsthat employees have earned in return for their service in the current and prior reporting periods, less the fair value of anyrelated assets (where applicable) at that date.

The present value of the future benefit related to long service leave is actuarially calculated using an actuarial valuation method called the projected unit credit method. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Consideration is given to expected wages and salary levels, experience of employee departures and periods of service. The discount rate used is the yield at the reporting date on Government bonds that have maturity dates approximating to the terms of the long service leave obligations.

The liability for annual leave benefits is also actuarially calculated to determine the present value of the future benefit that employees have earned in return for their service up to the reporting date. The discount rate used is the yield at the reporting date on Government bonds that have maturity dates approximating to the terms of the annual leave obligations.

The liabilities and expenses for these employee benefits are recognised when employees render service that increases their entitlement to future benefits. The expense in each case is recognised as one net amount that encompasses a number of components, such as current service cost and the interest cost from discounting.

Unconditional entitlements to long service leave benefits are classified as current liabilities in the statement of financialposition, while conditional and pre-conditional entitlements are classified as non-current liabilities as they do not fall due for settlement at the reporting date.

Liabilities for annual leave are classified as current liabilities in the statement of financial position regardless of when they are expected to be settled as these liabilities have fallen due for settlement at the reporting date.

• Other provisions

Employee benefit on-costs

Costs that are a consequence of employing employees but which are not employee benefits themselves, such as payroll tax, are recognised as liabilities and expenses when the employment to which they relate has occurred.

Payroll tax payable at the reporting date in relation to wages and salaries paid during the previous month is recognised as part of trade and other payables in the statement of financial position, consistent with the classification of any recognised liability for wages and salaries. Payroll tax payable in respect of annual leave, long service leave or redundancy payments to be made in the future is recognised as part of provisions, consistent with the classification of liabilities for these employee benefits.

Provisions for payroll tax on unpaid annual leave, long service leave and termination benefits are measured at the reporting date based on payroll tax laws that have been enacted or substantively enacted at the reporting date.

Workers’ compensation self-insurance

Prior to 1 March 2007, the Corporation held a group self-insurer’s licence with the WorkCover Authority for workers’ compensation that applied to the Corporation and its then wholly-owned subsidiaries based in NSW. For injuries that occur from 1 March 2007, the Corporation has now insured with the Treasury Managed Fund (TMF) in NSW. Accordingly, the liability for self-insurance workers’ compensation that remains with the Corporation now only relates to injuries that occurred prior to 1 March 2007.

The liability for workers’ compensation self-insurance recognised as a provision in the statement of financial position is actuarially calculated on a discounted cash flow basis, using a range of information including case cost estimates that are assessed having regard to a number of factors such as potential recoveries and industry wide experience. The liability also includes an estimate for incurred but not reported claims based on past experience.



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The discount rate used by the actuary is the yield on Government bonds, which is a pre-tax rate that the actuary considers to be representative of current market assessments of the time value of money and the risks specific to the liability.

The actuary provides a range of calculations of the central estimate liability that take into account different levels of likelihood of adequacy and different risk margins. The Corporation adopts as the liability the central estimate calculation based on a 50 per cent likelihood of adequacy, which contains no risk margin. This is considered to be the best and most objective assessment of the liability.

General insurance

The Corporation recognises a general insurance provision for outstanding uninsured claims and claims within the deductible levels of its various insurance policies. Outstanding claims are recognised when an incident occurs that may give rise to a claim against the Corporation.

The liability that is recognised is actuarially assessed on the basis of individual estimates of actual claims existing as at the reporting date, and includes an estimate for incurred but not reported claims based on past experience and other industry wide experience. Claim estimates include an estimate for probable loss and take into account legal and loss adjusting expertise to establish the quantum on an individual claim basis. This is considered to be the best estimate of the amount required to settle the present obligation for each claim at the reporting date.

For claims after 31 July 2008, the Corporation’s general insurance is now covered by the TMF scheme (which has a $300 franchise) in NSW. This cover includes claims that have occurred but have not been reported between 30 June 1989 and 31 July 2008. For claims where the date of loss is between 31 May 2006 and 31 July 2008, the Corporation’s previous commercial insurance arrangements apply (for which the Corporation has an excess of $1 million). The Corporation continues to manage all liability claims.

Road restoration

Road restoration costs are those incurred for the purpose of restoring roads back to their original state after a period of construction or maintenance activity. Road restoration costs are capitalised as part of the cost of an asset that is constructed. Where no asset is created and road restoration costs are incurred, the costs are expensed in profit or loss.

Provisions for road restoration costs are recognised as the relevant activity is being undertaken. The liability recognised inthe statement of financial position is an estimate of costs that would be invoiced by local government councils on an individual project basis. This is considered to be the best estimate of the amount required to settle the present obligation at the reporting date.

Restoration of leased premises

Restoration costs in respect of leased premises are those costs that the Corporation must incur under the terms of the lease to restore the relevant leased premises back to their original state at the end of the lease term.

Provisions for restoration of leased premises are calculated based on discounted future cash flows using the yield on Government bonds, which is a pre-tax rate that the Corporation considers to be representative of current market assessments of the time value of money and the risks specific to the liability.

Provisions are recognised at the inception of a lease when such restoration is a condition of the lease. Unwinding of the discount is recognised as a finance cost in profit or loss.

The restoration costs are separately capitalised against assets that have been acquired as part of leasing the premises, such as fitouts. Where the Corporation has not incurred expenditure to acquire assets as part of leasing the premises, the restoration costs are expensed in profit or loss.

Restoration costs for decommissioning system asset network components

Restoration costs in respect of the decommissioning of system asset network components include costs for the purpose of dismantling, decommissioning, removing the particular system asset component and restoring the site on which it was located. Whilst it is the Corporation’s intention to locate its system asset network components indefinitely at their currentlocation, obligations to incur restoration costs can arise at the time of constructing these components for a temporary period or when a management decision is made to alter the system asset network by decommissioning one of its components.

When it is known during construction that a system asset network component is to be decommissioned at a particular time in the future, the estimated cost of the restoration is capitalised as part of the cost of that component and a correspondingliability is recognised within provisions in the statement of financial position.

When a management decision has been subsequently made to decommission an existing system asset network component, the estimated cost of restoration is added to the cost of that component and is depreciated over its remaining useful life. A corresponding liability is recognised at the same time within provisions in the statement of financial position.

The estimated cost to be initially recognised in both cases is determined by discounting the present value of the future cashflows using the yield on Government bonds, which is a pre-tax rate that the Corporation considers to be representative of current market assessments of the time value of money and the risks specific to the liability.



Subsequent to initial recognition, any changes to the liability that result from changes in the estimated timing or amount of the outflow of economic benefits required to settle the obligation, or a change in the discount rate, are recognised as follows:

• An increase in the liability is debited to the asset revaluation reserve to the extent of any existing credit balance for the system asset network, otherwise it is expensed in profit or loss

• A decrease in the liability is credited to the asset revaluation reserve after any previous revaluation decrease that was originally charged to profit or loss has firstly been reversed.

Any change to the liability from the unwinding of the discount due to the passage of time is recognised as a finance cost in profit or loss.



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(v) Accounting standards and interpretations issued but not yet operative

At the reporting date, a number of Australian Accounting Standards and Australian Interpretations have been issued by the AASB that are not yet operative and which have not been early adopted by the Corporation. The following is a list of these standards and interpretations with a description of their possible impact on the financial statements in the period of their initial application:

• AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]’ (issued December 2009)

This standard makes consequential amendments to various standards and interpretations as a result of the issuance of Australian accounting Standard AASB 9 ‘Financial Instruments’ in December 2009, which focused only on financial assets and has since been replaced by AASB 9 issued in December 2010 (see below). AASB 9 issued in December 2010 sets out new requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements. This standard can be early adopted by entities that early adopt AASB 9 issued in December 2009. However, the standard is effectively replaced by Australian Accounting Standard AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)’ issued in December 2010 (see below) if an entity also adopts AASB 9 issued in December 2010. The initial application of this standard will have no impact on the financial results of the Corporation. The initial application date of this standard was originally annual reporting periods beginning on or after 1 January 2013 (ie 2013-14). However, amendments introduced by Part C of Australian Accounting Standard AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ issued in December 2013 (see below) have deferred the application date of AASB 9 and consequently AASB 2010-7 and this standard to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18).

• AASB 9 ‘Financial Instruments’ (issued December 2010)

This standard includes new requirements for the classification and measurement of financial instruments, as well as recognitionand derecognition requirements for financial instruments, resulting from the completion of Phase 1 of the IASB’s project to replace International Accounting Standard IAS 39 ‘Financial Instruments: Recognition and Measurement’ (and consequently Australian Accounting Standard AASB 139 ‘Financial Instruments: Recognition and Measurement’). It replaces Australian Accounting Standard AASB 9 issued in December 2009 that focused only on requirements for financial assets. The new requirements improve and simplify the approach for financial instruments compared with the requirements of the existing AASB 139. The main changes from AASB 139 are as follows:

(a) Financial assets are classified on the basis of both the objective of an entity’s business model for managing its financial assets, and the characteristics of the contractual cash flows. This reduces the numerous categories of financial assets in AASB 139, each of which had its own classification criteria.

(b) The standard requires a financial asset to be measured at amortised cost if the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and if the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Otherwise, financial assets are to be measured at fair value.

(c) The standard allows an irrevocable election on initial recognition to present gains or losses on investments in equity instruments that are not held for trading in other comprehensive income. There is no subsequent recycling on disposal of the instrument through profit or loss. Any dividends from these investments are to be recognised in profit or loss.

(d) Hybrid contracts with financial asset hosts are classified and measured in their entirety based on the classification criteria in (a) above.

(e) Investments in unquoted equity instruments must be measured at fair value. Cost may be an appropriate estimate of fair value in limited circumstances.

(f) Investments in contractually linked instruments that create concentrations of credit risk (tranches) are classified and measured by looking through to the underlying assets generating cash flows and assessing them against the classification criteria in (a) above to determine whether the investment is to be measured at fair value or amortised cost.

(g) Financial assets are reclassified only in rare circumstances when there is a relevant change in the entity’s business model.

(h) The portion of a change in fair value relating to an entity’s own credit risk for financial liabilities measured at fair value utilising the fair value option is presented in other comprehensive income, except when that would create an accounting mismatch in which case all changes in fair value are to be recognised in profit or loss.

While these are significant changes to the classification and measurement requirements for financial instruments for many entities, these amendments and the initial application of this standard will have no impact on the financial results of the Corporation. The initial application date of this standard was originally annual reporting periods beginning on or after 1 January 2013 (ie 2013-14). However, amendments introduced by Part C of Australian Accounting Standard AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ issued in December 2013 (see below) deferred the application date of this standard to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18). Subsequent to this, Part E of Australian Accounting Standard AASB 2014-1 ‘Amendments to Australian Accounting Standards’ issued in June 2014 has now further extended the mandatory application date of AASB 9 to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19).



• AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127]’ (issued December 2010)

This standard makes amendments to a range of Australian Accounting Standards (including Australian Interpretations) as a consequence of the issuance of Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2010 (see above). When operative, the standard supersedes Australian accounting Standard AASB 2009-11 (see earlier). The initial application of this standard will have no impact on the financial results of the Corporation. The initial application date of this standard was originally annual reporting periods beginning on or after 1 January 2013 (ie 2013-14). However, amendments introduced by Part C of AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ issued in December 2013 (see below) have deferred the application date of AASB 9 and consequently AASB 2011-9 and this standard to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18).

• AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities [AASB 132]’ (issued June 2012)

This standard adds application guidance to Australian Accounting Standard AASB 132 ‘Financial Instruments: Presentation’ to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of ‘currently has a legally enforceable right of set-off’ and that some gross settlement systems may be considered equivalent to net settlement. The initial application of this standard will have no impact on the financial results of the Corporation. This standard is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).

• AASB 1055 ‘Budgetary Reporting’ (issued March 2013)

This standard sets out budgetary reporting requirements for the whole of Government, General Government Sector (GGS) and not-for-profit entities within the GGS of the Australian Government and State and Territory Governments, and as such is not applicable to the Corporation. This standard, together with Australian Accounting Standard AASB 2013-1 ‘Amendments to AASB 1049 – Relocation of Budgetary Reporting Requirements’ (see below), relocates the corresponding budgetary reporting requirements for the whole of Government and GGS of the Australian Government and State and Territory Governments from Australian Accounting Standard AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’. The initial application of this standard will have no impact on the financial results of the Corporation. This standard is applicable to annual reporting periods beginning on or after 1 July 2014 (ie 2014-15).

• AASB 2013-1 ‘Amendments to AASB 1049 – Relocation of Budgetary Reporting Requirements’ (issued March 2013)

This standard makes amendments to Australian Accounting Standard AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’, and as such is not applicable to the Corporation. The standard removes the requirements relating to the disclosure of budgetary information from AASB 1049 (without substantive amendments). All budgetary reporting requirements applicable to whole of Governments and General Government Sectors are now located in a single, topic-based, Australian Accounting Standard AASB 1055 ‘Budgetary Reporting’ (see above). The initial application of this standard will have no impact on the financial results of the Corporation. This standard is applicable to annual reportingperiods beginning on or after 1 July 2014 (ie 2014-15).

• AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets’ (issued June 2013)

This standard makes amendments to the disclosure requirements in Australian Accounting Standard AASB 136 ‘Impairment of Assets’. The amendments include the requirement to disclose additional information about fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. In addition, a further requirement has been included to disclose the discount rates that have been used in the current and previous measurements if the recoverable amount of impaired assets based on fair value less costs of disposal was measured using a present value technique. The initial application of this standard will have no impact on the financial results of the Corporation as it relates to disclosure. This standard is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).

• AASB Interpretation 21 ‘Levies’ (issued June 2013)

This interpretation clarifies the circumstances under which a liability to pay a levy imposed by a government should be recognised and whether that liability should be recognised at a specific date or progressively over a period of time. In this regard, such a liability is required to be recognised in line with the obligating event or activity that triggers the payment of the levy, as identified in the relevant legislation. The initial application of this interpretation will have no impact on the financial results of the Corporation. This interpretation is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).



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• AASB 2013-4 ‘Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting [AASB 139]’ (issued July 2013)

This standard makes amendments to Australian accounting Standard AASB 139 ‘Financial Instruments: Recognition and Measurement’ to permit the continuation of hedge accounting in circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. The initial application of this standard will have no impact on the financial results of the Corporation. This standard is applicableto annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).

• AASB 2013-5 ‘Amendments to Australian Accounting Standards – Investment Entities [AASB 1, AASB 3, AASB 7, AASB 10, AASB 12, AASB 107, AASB 112, AASB 124, AASB 127, AASB 132, AASB 134 & AASB 139]’ (issued August 2013)

This standard makes amendments to various Australian Accounting Standards by defining an ‘investment entity’ and requiring that, with limited exceptions, an investment entity not consolidate its subsidiaries or apply Australian Accounting Standard AASB 3 ‘Business Combinations’ when it obtains control of another entity. Instead, these amendments require an investment entity to measure unconsolidated subsidiaries at fair value through profit or loss in accordance with Australian Accounting Standard AASB 9 ‘Financial Instruments’ in its consolidated and separate financial reports. The amendments also introduce new disclosure requirements for investment entities. An investment entity is defined as an entity that:

(a) obtains funds from one or more investors for the purpose of providing those investors with management services; (b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and (c) measures and evaluates the performance of substantially all of its investments on a fair value basis.

The initial application of this standard will have no impact on the financial results of the Corporation, as the Corporation does not meet the definition of an investment entity. This standard is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).

• AASB 2013-6 ‘Amendments to AASB 136 arising from Reduced Disclosure Requirements’ (issued September 2013)

This standard makes amendments to Australian Accounting Standard AASB 136 ‘Impairment of Assets’ to incorporate reduced disclosure requirements into the standard for entities who choose to comply with Tier 2 reduced disclosure requirements under the differential financial reporting framework established by Australian Accounting Standard AASB 1053 ‘Application of Tiers of Australian Accounting Standards’ in June 2010. Tier 2 reduced disclosure requirements can be applied as an optional choice to for-profit private sector entities that do not have public accountability, all not-for-profit private sector entities and public sector entities other than Australian, State, Territory and Local Governments. Whether this becomes an optional choice for the Corporation in the future to present reduced disclosure requirements under this and other standards will depend on the NSW public sector-wide policy decisions of the NSW Treasury. The initial application of this standard will have no impact on the financial results of the Corporation as it is concerned with disclosure only. This standard is applicable to annual reportingperiods beginning on or after 1 January 2014 (ie 2014-15).

• AASB 2013-7 ‘Amendments to AASB 1038 arising from AASB 10 in relation to Consolidation and Interests of Policyholders [AASB 1038]’ (issued October 2013)

This standard makes amendments to Australian Accounting Standard AASB 1038 ‘Life Insurance Contracts’ to remove the specific consolidation requirements from the standard, and thereby leave Australian Accounting Standard AASB 10 ‘Consolidated Financial Statements’ as the sole source for consolidation requirements applicable to life insurer entities. The initial application of this standard will have no impact on the financial results of the Corporation as it applies only to life insurer entities. This standard is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).

• AASB 2013-8 ‘Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities’ [AASB 10, AASB 12 & AASB 1049]’ (issued October 2013)

This standard makes amendments to Australian Accounting Standards AASB 10 ‘Consolidated Financial Statements’, AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’ by providing implementation guidance to assist not-for-profit entities in applying AASB 10 and AASB 12, and to clarify that General Government Sector financial statements are not required to comply with the disclosure requirements of AASB 12. These amendments to AASB 10 and AASB 12 do not apply to for-profit entities, and the amendments to AASB 1049 apply to General Government Sector financial statements. Therefore, neither of these are applicable to the Corporation and thus the initial application of this standard will have no impact on the financial results of the Corporation. This standard is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).



• AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ (issued December 2013)

This standard makes amendments to a number of Australian Accounting Standards (including Australian Interpretations). The amendments that are operative in future annual reporting periods are detailed in Parts B and C of the standard. Part B makes amendments to particular Australian Accounting Standards and Australian Interpretations to delete references to Australian Accounting Standard AASB 1031 ‘Materiality’, as well as making a number of editorial amendments. Part C makes amendments to Australian Accounting Standard AASB 9 ‘Financial Instruments’ (see earlier) to add Chapter 6 ‘Hedge accounting’ and makes consequential amendments to AASB 9 and numerous other standards. It also amends the mandatory effective date of AASB 9 (and consequently Australian Accounting Standards AASB 2009-11 and AASB 2010-7 – see earlier) toannual reporting periods beginning on or after 1 January 2017 instead of 1 January 2015. The changes in this standard have now subsequently been included within amendments in Australian Accounting Standard AASB 2014-1 ‘Amendments to Australian Accounting Standards’ issued in June 2014 (see below) and which result in a further deferral of AASB 9 to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19). The initial application of this standard will have no impact on the financial results of the Corporation. Part B applies to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15), while Part C applies to annual reporting periods beginning on or after 1 January 2015 (ie 2015-16).

• AASB 1031 ‘Materiality’ (issued December 2013)

Australian Accounting Standard AASB 1031 ‘Materiality’ issued in July 2004 is being withdrawn by the AASB. This requires a number of consequential amendments to all Australian Accounting Standards and Australian Interpretations to remove references to AASB 1031. Until such references are removed, this revised standard has been issued as an interim standard that cross-references to other standards and to the Framework for the Preparation and Presentation of Financial Statements that contain guidance on materiality. Once all the references to AASB 1031 have been removed from standards, this revised standard will be withdrawn. The initial application of this standard will have no impact on the financial results of the Corporation. This revised standard is applicable to annual reporting periods beginning on or after 1 January 2014 (ie 2014-15).

• AASB 1056 ‘Superannuation Entities’ (issued June 2014)

This standard replaces Australian Accounting Standard AAS 25 “Financial Reporting by Superannuation Plans’ and updates financial reporting requirements applicable to large superannuation entities regulated by the Australian Prudential RegulationAuthority and to public sector superannuation entities. Accordingly, it is not applicable to the Corporation and thus its initial application will have no impact on the financial results of the Corporation. This standard is applicable to annual reporting periods beginning on or after 1 July 2016 (ie 2016-17).

• AASB 14 ‘Regulatory Deferral Accounts’ (issued June 2014)

This standard is an interim standard pending completion by the IASB of a comprehensive project on rate-regulated activities. The standard applies to first-time adopters of Australian Accounting Standards who conduct rate-regulated activities and permits them to continue to account for amounts related to rate-regulation in accordance with their previous financial reporting framework’s generally accepted accounting principles (previous GAAP). It permits such entities to continue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances that they may have. This exemption is not available to entities who already apply Australian Accounting Standards. Accordingly, this standard is not applicable to the Corporation and thus its initial application will have no impact on the financial results of the Corporation. This standard is applicable to annual reporting periods beginning on or after 1 January 2016 (ie 2016-17).

• AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (issued June 2014)

This standard is an omnibus standard consisting of five distinct Parts, each of which has a different application date. The Parts are as follows:

Part A: Annual Improvements 2010-2012 and 2011-2013 Cycles

This Part makes amendments to various Australian Accounting Standards arising from the issuance by the IASB of improvements to standards in the above periodic improvement cycles. The amendments are editorial in nature and the initial application of this Part will have no impact on the financial results of the Corporation. This Part is applicable to annual reporting periods beginning on or after 1 July 2014 (ie 2014-15) except that the amendments to Australian Accounting Standard AASB 9 ‘Financial Instruments’ (see earlier) apply only when that standard is applied or operative (ie 2017-18).

Part B: Defined Benefit Plans: Employee Contributions (Amendments to AASB 119)

This Part makes amendments to Australian Accounting Standard AASB 119 ‘Employee Benefits’ to incorporate changes to the requirements for contributions from employees or third parties that are linked to periods of service. The amendments clarify that if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise suchcontributions as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service. In contrast, if the amount of the contributions is dependent on the number of years of service, an entity is required to attribute those contributions to periods of service using the same attribution method required by AASB 119 for the gross benefit. This is the current actuarial method used in the case of the Corporation’s defined benefit plans, and accordingly the initial application of this Part will have no impact on the financial results of the Corporation. This Part is applicable to annual reporting periods beginning on or after 1 July 2014 (ie 2014-15).



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Part C: Materiality

This Part makes amendments to particular Australian Accounting Standards to delete their references to Australian Accounting Standard AASB 1031 ‘Materiality’, which is currently in the process of being withdrawn through a staged approach (see earlier). The AASB is making these amendments as and when each standard is also being amended for another purpose. These amendments are in addition to deletions already made by Australian Accounting Standards AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ (see earlier). The initialapplication of this Part will have no impact on the financial results of the Corporation. This Part is applicable to annual reporting periods beginning on or after 1 July 2014 (ie 2014-15).

Part D: Consequential Amendments arising from AASB 14

This Part makes consequential amendments arising from the issuance of Australian Accounting Standard AASB 14 ‘Regulatory Deferral Accounts’ (see earlier), which is not applicable to the Corporation. Accordingly, the initial application of this Part will have no impact on the financial results of the Corporation. This Part is applicable to annual reporting periods beginning on or after 1 January 2016 (ie 2016-17).

Part E:

This Part makes amendments to Australian Accounting Standards to reflect the AASB’s decision to defer the mandatory application date of Australian Accounting Standard AASB 9 ‘Financial Instruments’ to annual reporting periods beginning on orafter 1 January 2018 (ie 2018-19). This Part also makes amendments to numerous Australian Accounting Standards as a consequence of the introduction of Chapter 6 ‘Hedge Accounting’ into AASB 9 and to amend reduced disclosure requirements for Australian Accounting Standard AASB 7 ‘Financial instruments: Disclosures’ and Australian Accounting Standard AASB 101 ‘Presentation of Financial Statements’. These consequential amendments include amendments that had been previously made by Part C of Australian Accounting Standard AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ (see earlier), but which needed to be remade in order to be effective, in view of procedural issues with repealed Accounting Standards. The initial application of this Part will have no impact on the financial results of the Corporation. This Part is applicable to annual reporting periods beginning on or after 1 January 2015 (ie 2015-16).

• AASB 2014-2 ‘Amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2 Disclosure Requirements [AASB 1053]’ (issued June 2014)

This standard makes a number of amendments relating to reduced disclosure requirements in Australian Accounting Standard AASB 1053 ‘Application of Tiers of Australian Accounting Standards’. AASB 1053 established a differential financial reporting framework consisting of two Tiers of disclosure reporting requirements for preparing general purpose financial statements. This standard clarifies requirements relating to entities making a transition between Tier 1 and Tier 2 under this framework. The Corporation is currently an entity that is required to comply with disclosure requirements, where applicable, in all Australian Accounting Standards and is thus a Tier 1 entity. Whether reduced Tier 2 disclosure requirements would ever apply to the Corporation is dependent on NSW public sector-wide policy decisions of the NSW Treasury. Accordingly, the initial application of this standard will have no impact on the financial results of the Corporation. This standard is applicable to annual reporting periods beginning on or after 1 July 2014 (ie 2014-15).

• AASB 2014-3 ‘Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations [AASB 1 & AASB 11]’ (issued August 2014)

This standard amends Australian Accounting Standard AASB 11 ‘Joint Arrangements’ to provide guidance for acquisitions of interests in joint operations in which the activity constitutes a business, as defined in Australian Accounting Standard AASB 3‘Business Combinations’. The amendments require such an acquirer to apply all of the principles on business combinations in AASB 3 and other Australian Accounting Standards except for those principles that conflict with the guidance in AASB 11. The amendments also require the acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for business combinations. The standard also makes an editorial correction in AASB 11. The initial application of this standard will have no impact on the financial results of the Corporation. The standard is applicable to annual reporting periods beginning on or after 1 January 2016 (ie 2016-17).

• AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation [AASB 116 & AASB 138]’ (issued August 2014)

This standard amends Australian Accounting Standards AASB 116 ‘Property, Plant and Equipment’ and AASB 138 ‘Intangible Assets’ to:

(a) establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset; (b) clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset; and (c) clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.

The initial application of this standard will have no impact on the financial results of the Corporation. The standard is applicable to annual reporting periods beginning on or after 1 January 2016 (ie 2016-17).



(w) Changes in accounting policies arising from changes in Accounting Standards

During the reporting period, Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ and revised Australian Accounting Standard AASB 119 ‘Employee Benefits’, both issued in September 2011, became operative. These standards resulted in changes in accounting policies and accounting estimates. Their financial impacts are outlined below:

• AASB 13 ‘Fair Value Measurement’

This standard establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other Australian Accounting Standards. It establishes a new definition offair value as ‘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.’ This definition means that fair value is now based on an ‘exit price’ for assets and liabilities, rather than an ‘entry price’, and requires an assessment of conditions (including any restrictions) that would betaken into account by a market participant when pricing the relevant asset or liability in an actual or theoretical market. In this regard, the standard establishes three approaches to determining fair value as appropriate to the circumstances: the market approach, the income approach and the cost approach. These were outlined previously in note 1(n) – Asset Valuations.

The impact of this new definition of fair value for the Corporation is that system assets, system land and water meters are now combined as one class, and their combined fair value is now determined by the income approach rather than by estimating the depreciated current replacement cost for system assets, adopting depreciated historical cost for water meters, and adopting separately the Valuer-General valuations for system land. These separate approaches were used in the previous reporting period before the adoption of AASB 13. As the income approach for these assets results in an identical outcome when applying the cash-generating unit test to determine their recoverable amount, there is no impact on the total carrying value of property, plant and equipment in the statement of financial position. However, the proportion of these asset categories within property, plant and equipment has now altered. This impacts depreciation expense, although the impact is not considered material.

Since AASB 13 is required to be adopted prospectively from the beginning of the current reporting period, no adjustments are required to the comparative amounts relating to the disclosures of fair value in note 9. Accordingly, the amounts shown as comparatives for fair value in note 9 are disclosed according to the fair value definitions that apply or applied in each relevant reporting period. Also, no comparative information has been provided for any new disclosures required by AASB 13.

When categories of system assets are revalued to fair value based on the income approach, any accumulated depreciation or amortisation is now netted against the gross carrying amount and the resulting balance is then increased or decreased by the revaluation increments or decrements. This is in contrast to the method under the cost approach in the previous reporting period whereby any accumulated depreciation was restated proportionately with the change in the gross carrying amount of the asset so that the net carrying amount of the system asset category after revaluation equalled its revalued amount. This change is required by NSW Treasury Policy Paper TPP 14-01 ‘Accounting Policy: Valuation of Physical Non-current Assets at Fair Value’. Accordingly, disclosures in note 9 between reporting periods also reflect the differences in these two approaches.

• Revised AASB 119 ‘Employee Benefits’

As a result of this revised standard, the Corporation has changed its accounting policy in how it determines the income or expense related to its post-employment defined benefit superannuation plans.

Under the revised standard, the net interest expense (income) on the net defined benefit liability (asset) is now calculated by applying the discount rate used to measure the gross defined benefit liability at the beginning of the reporting period to the then net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the reporting period as a result of contributions and benefit payments. Previously, the net interest expense (income) was calculated as the difference between the interest cost on the gross defined benefit liability and the expected return on plan assets (now omitted).

This change has the effect of increasing the net interest expense on the net defined benefit liability recognised in profit or loss, as the discount rate is generally lower than the long-term expected rate of return on plan assets. However, it also has the corresponding effect of increasing the gain on remeasurement of the net defined benefit liability in other comprehensive income.

In addition, the defined benefit obligation under the revised standard is now calculated to incorporate a contribution tax provision. The contribution tax provision is calculated based on grossing up the net defined benefit liability deficit less the allowance for past service expenses and insurable death and disability liabilities at a contribution tax rate of 15%. Previously, a contribution tax provision of zero % was assumed through the availability of investment credits. The revised standard does not allow the netting off of investment credits in the gross liability calculation. This change has also increased the defined benefit obligation, as well as increasing current service cost, net interest expense and remeasurement gains.

As this revised standard is required to be adopted retrospectively, the comparatives in the statement of profit or loss and other comprehensive income and the statement of financial position have been restated. The adjustments to restate the various line items and subtotals in these statements are shown in the following tables:



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Impact of revised AASB 119 on Statement of Profit or Loss and Other Comprehensive Income

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Year ended 30 June 2013 30 June 2013 Revised 30 June 2013previously AASB 119 restated

reported adjustments$’000 $’000 $’000

______________________________________________________________________________________________________

Other expenses (1,526,805) (60,993) (1,587,798)

Profit before income tax 596,937 (60,993) 535,944

Income tax expense (181,758) 18,298 (163,460)

Profit for the period 415,179 (42,695) 372,484

Remeasurement of defined benefit superannuation net liability(before income tax) 204,372 100,737 305,109

Income tax effect (on remeasurement of defined benefit superannuationnet liability) (61,312) (30,221) (91,533)

Remeasurement of defined benefit superannuation net liability(after income tax) 143,060 70,516 213,576

Total items that will not be reclassified subsequently to profit or loss,net of income tax 112,910 70,516 183,426

Other comprehensive income for the period net of income tax 112,910 70,516 183,426

Total comprehensive income for the period 528,089 27,821 555,910

______________________________________________________________________________________________________

Year ended 30 June 2014 Revised AASB 119

adjustments$’000

______________________________________________________________________________________________________

Other expenses (51,558)

Profit before income tax (51,558)

Income tax expense 15,467

Profit for the period (36,091)

Remeasurement of defined benefit superannuation net liability(before income tax) 46,788

Income tax effect (on remeasurement of defined benefit superannuationnet liability) (14,036)

Remeasurement of defined benefit superannuation net liability(after income tax) 32,752

Total items that will not be reclassified subsequently to profit or loss,net of income tax 32,752

Other comprehensive income for the period net of income tax 32,752

Total comprehensive income for the period (3,339)



Impact of revised AASB 119 on Statement of Financial Position

______________________________________________________________________________________________________

As at 1 July 2012 Balance as at Revised Balance as at1 July 2012 AASB 119 1 July 2012previously adjustments restated

reported$’000 $’000 $’000

______________________________________________________________________________________________________

Deferred tax liabilities 414,902 (45,372) 369,530

Provisions (non-current) 958,507 151,240 1,109,747

Total non-current liabilities 6,970,368 105,868 7,076,236

Total liabilities 8,085,222 105,868 8,191,090

Net assets 5,931,423 (105,868) 5,825,555

Retained earnings 1,639,962 (105,868) 1,534,094

Total equity 5,931,423 (105,868) 5,825,555

______________________________________________________________________________________________________

As at 30 June 2013 Balance as at Revised Balance as at30 June 2013 AASB 119 30 June 2013

previously adjustments restatedreported

$’000 $’000 $’000______________________________________________________________________________________________________

Deferred tax liabilities 505,895 (33,449) 472,446

Provisions (non-current) 738,539 111,496 850,035

Total non-current liabilities 7,289,755 78,047 7,367,802

Total liabilities 8,407,573 78,047 8,485,620

Net assets 6,043,087 (78,047) 5,965,040

Retained earnings 1,784,973 (78,047) 1,706,926

Total equity 6,043,087 (78,047) 5,965,040

______________________________________________________________________________________________________



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

2. Income and expenses

Profit before income tax expense has been arrived at after including the following income and expense items:

(a) Revenue

Revenue items are shown below.

Revenue from rendering of services:Service availability charges 1,158,255 1,113,123Usage charges 1,111,477 1,071,527

___________________________

Service availability and usage charges 2,269,732 2,184,650Ancillary services 15,784 24,882Sundry revenue 18,928 13,655

___________________________

2,304,444 2,223,187

Interest revenue from:Financial assets not at fair value through profit or lossusing the effective interest method:

Investments in marketable securities 20 14Bank balances 103 112Overdue accounts 2,081 2,297

___________________________

2,204 2,423Other transactions 607 498

___________________________

Total interest revenue 2,811 2,921

Revenue from government grants:NSW Government contributions for social programs # 173,547 162,155Grants from Commonwealth Government 23 19

___________________________

173,570 162,174Other revenue from:

Rent revenue from operating leases 11,603 11,093Contributions by developers for capital works 118,662 119,533

___________________________

130,265 130,626

___________________________

Total revenue recognised in profit or loss 2,611,090 2,518,908___________________________

# This amount comprised contributions of $157.875 million (2013: $155.467 million) in respect of pensioner and other rebates and other contributions of $15.672 million (2013: $6.688 million).



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Dissection of total revenue into regulated and non-regulated categories

RegulatedService availability charges 1,163,015 1,117,643Usage charges 1,098,265 1,059,667Ancillary services 13,560 22,778Sundry revenue 849 831NSW Government contributions for social programs 157,875 155,467Rent revenue from operating leases 5,688 5,438Contributions by (repayments to) developers for capital works 227 58

___________________________

2,439,479 2,361,882___________________________

Non-regulatedService availability charges (customer redress rebates) (4,760) (4,520)Usage charges 13,212 11,860Ancillary services 2,224 2,104Sundry revenue 18,079 12,824Interest revenue 2,811 2,921NSW Government contributions for social programs 15,672 6,688Grants from Commonwealth Government 23 19Rent revenue from operating leases 5,915 5,655Contributions by developers for capital works 118,435 119,475

___________________________

171,611 157,026___________________________

Total revenue recognised in profit or loss 2,611,090 2,518,908___________________________

(b) Other income

Other income items are shown below. Other income is non-regulated.

Net gain on disposal of property, plant and equipment:Assets classified as held for sale 2,526 1,129

Net gain on disposal of intangible assets:Software 20(a) - 204

Net gain on disposal of greenhouse trading certificates 594 563

Net fair value gain on greenhouse trading certificates 796 648___________________________

Total other income recognised in profit or loss 3,916 2,544___________________________



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

(c) Expenses

Finance costs expense

Finance costs expense items are shown below.

Financial liabilities not at fair value through profit and lossusing the effective interest method:

Interest expense 340,167 335,453Amortisation of deferred discounts (premiums) on loans 20(a) 2,668 5,091

___________________________

Total interest expense using effective interest method 342,835 340,544

Government guarantee fee expense 98,548 104,914Indexation of CPI bonds 20(a) 22,311 14,399Other 8 6

___________________________

463,702 459,863Less amount capitalised 20(a) (49,797) (62,153)

___________________________

Total finance costs expense recognised in profit or loss 413,905 397,710___________________________



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

(c) Expenses (continued)

Other expenses

Other expenses comprises expenses that are considered core operations expenses, and also expenses that arise from asset adjustments and various losses recognised in profit or loss that are considered non-core.

Below is an analysis of core operations expenses from continuing operations. Additional expenses from continuing operations that are considered non-core are provided on the following page in addition to these core operations expenses to arrive at total other expenses recognised in the statement of profit or loss and other comprehensive income.

Core operations expenses:

Employee-related expenses:Total employee-related expenses 399,096 433,274Less amount capitalised (61,596) (58,241)

___________________________

Employee-related expenses * 337,500 375,033

Non employee-related expenses:Purchases of bulk water from Sydney Catchment Authority 203,676 197,002Purchases from Sydney Desalination Plant Pty Limited 192,718 195,068Tariff expenses from water filtration plant service agreements 115,252 114,411Maintenance services expenses ** 141,951 123,978Operational services expenses ** 101,346 94,924Materials, plant and equipment expenses 40,697 49,515Operating lease expenses *** 51,661 51,860Electricity and other energy expenses 49,846 48,732Transport expenses (excluding leases) 2,402 10,306Property expenses (excluding leases) 20,709 21,370Data management expenses (excluding leases) 16,877 16,985Other expenses from ordinary activities 42,483 60,709

___________________________

979,618 984,860Less amount capitalised (16,288) (16,764)

___________________________

Non employee-related expenses 963,330 968,096

___________________________

Total core operations expenses 1,300,830 1,343,129___________________________

* Employee-related expenses within other expenses in profit or loss exclude remeasurements of the defined benefit superannuation net liability (asset). Remeasurements of the defined benefit superannuation net liability (asset) comprises actuarial gains and losses,the return on plan assets (excluding amounts included in net interest on the net defined benefit liability (asset)) and any change in the effect of a potential asset ceiling (excluding amounts included in net interest on the net defined benefit liability (asset)) in relation to the plans. These remeasurements are recognised in other comprehensive income. (See also details on Superannuation expense below and note 15(c)).

** Maintenance services include various services provided to the Corporation for repairs and maintenance activities carried out on the Corporation’s system asset network. Operational services include a number of other professional services provided to the Corporation, such as customer billing, revenue collection and meter reading services, scientific services and services for operating assets.

*** Operating lease expenses represent minimum lease payments only.



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Other expenses (continued)

Total core operations expenses 1,300,830 1,343,129(continued from previous page)

Depreciation and amortisation expenses 9(a), 10(a), 20(a) 230,253 210,900___________________________

Total other expenses in the course of ordinary activities 1,531,083 1,554,029

Net losses from disposal of:Property, plant and equipment 18,360 17,661Intangible assets 20(a) 1 -Investment in former subsidiary - 27

___________________________

18,361 17,688

Impairment losses expensed (reversed) through profit or loss:Financial assets:

Receivables 5 731 (15)Property, plant and equipment 9(a), 20(a) 11,036 14,230Intangible assets 10(a), 20(a) 244 1,866

___________________________

12,011 16,081

___________________________

Total other expenses recognised in profit or loss 1,561,455 1,587,798___________________________



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Superannuation expense (gain) recognised in profit or loss

• Defined benefit schemes

Total expense advised by Pillar Administration * 15(c) 46,888 54,014Other movements (3,159) (3,650)

___________________________

43,729 50,364Less amount capitalised (3,298) (1,185)

___________________________

40,431 49,179___________________________

• Defined contribution schemes

Total expense 10,843 10,935Less amount capitalised (967) (2,847)

___________________________

15(c) 9,876 8,088___________________________

Total superannuation expense (gain) recognised in profit or loss 50,307 57,267

___________________________

* Excludes remeasurements of the defined benefit superannuation net liability amounting to a gain of $2.075 million (2013: a gain of $305.109 million) included in other comprehensive income. (Refer notes 15(c) and 18).

Maintenance expenses

Maintenance-related employee expenses (included inemployee-related expenses) 63,903 85,647

Maintenance expenses (excluding maintenance-relatedemployee expenses) 141,951 123,978

___________________________

Total maintenance expenses 205,854 209,625___________________________

Research and development expenses

Research and development costs recognised as an expense 4,161 4,749___________________________



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

3. Income tax expense

Major components of income tax expense recognised in profit or loss for the reporting period are as follows:

(a) Recognised in profit or loss

Current tax expense

Current year 141,098 140,172Adjustments for prior years (17,140) (1,017)

___________________________

123,958 139,155

Deferred tax expense

Origination and reversal of temporary differences 51,195 24,305___________________________

11(b) 51,195 24,305

___________________________

Total income tax expense in profit or loss 175,153 163,460___________________________



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

(b) Reconciliation between income tax expense and profit before income tax

Profit before income tax 639,646 535,944___________________________

Income tax expense calculated using the domestic corporation tax rate of 30% (2013: 30%) 191,894 160,783

Increase in tax expense due to:Non-deductible expenses 2,246 2,302Adjustment of temporary differences - 2,079

Decrease in tax expense due to:Research and development concession (982) (687)Adjustment of temporary differences (865) -

___________________________

192,293 164,477Under (Over)-provided in prior years (17,140) (1,017)

___________________________

Income tax expense 175,153 163,460___________________________

(c) Income tax on other comprehensive income

Deferred tax relating to:

Revaluation of property, plant and equipment 17(b) 75,177 (12,922)Remeasurements of defined benefit superannuation net liability 18 623 91,533

___________________________

11(b) 75,800 78,611___________________________



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

4. Cash and cash equivalents

Cash 3,922 3,831___________________________

Cash and cash equivalents in statement of financial position and statement of cash flows 3,922 3,831

___________________________

Significant terms and conditions

Details in respect of cash and cash equivalents categories are as follows:

• Cash book balance

During the reporting period, the cash book balance can fluctuate from a positive balance to a negative (overdraft) balance. When the cash book balance is negative at the reporting date, it is shown as a bank overdraft under borrowings in the statement of financial position. (Refer note 13).

Cash balances earn interest at bank rates.

• Short-term investments maturing three months or less

Short-term investments maturing three months or less are considered cash equivalents. These usually consist of interest-bearing deposits held by the Corporation. There were no interest-bearing deposits or other cash equivalents at the current or previous reporting dates.

Interest-bearing deposits are non-negotiable investments with banks and government authorities. Interest-bearing deposits are issued at face value paying a fixed interest rate over their life at maturity. Interest-bearing deposits can be issued for any duration although the Corporation typically holds only short dated deposits maturing within three months. Their carrying amount approximates fair value due to their short term to maturity.

Refer also note 25(c) for a maturity analysis of all financial assets and financial liabilities.



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

5. Trade and other receivables

Current

Trade receivables

Outstanding service availability and usage charges billed 88,338 96,024Allowance for impairment (1,232) (671)

___________________________

87,106 95,353Accrued unbilled usage charges on unread meters:

Water usage 131,201 146,422Sewer usage 13,088 14,070Trade waste 3,147 2,672Recycled water 1,701 1,507

___________________________

149,137 164,671

___________________________

236,243 260,024

Other trade debtors billed 6,164 7,596Allowance for impairment (79) -

___________________________

6,085 7,596

___________________________

Total trade receivables 242,328 267,620

Other receivables

Other debtors and accrued revenue 40,368 45,681Prepayments 29,131 8,971

___________________________

Total other receivables 69,499 54,652

___________________________

Total current trade and other receivables 311,827 322,272___________________________


Trade debtors for service availability and usage charges receivable are required to be settled within 21 days. Other current trade debtors receivable are generally required to be settled between 14 and 60 days.

Accrued investment income is receivable within a maximum period of six months. All other current receivables are expected to be realised within 12 months of the reporting date. Non-current receivables relates to the amortised cost of amounts that are due to be received due to a deferred settlement period of longer than 12 months after the reporting date.

Accrued unbilled usage charges on unread meters comprises estimates for accrued revenue for water usage, sewer usage, trade waste and recycled water charges where meters have not been read as at the reporting date. These charges are billed to customers with actual consumption after the next meter reading cycles in the next reporting period. However, in order to recognise an accrual for these unbilled charges at the reporting date for financial reporting purposes, the Corporation uses different estimation techniques based on consumption data and other parameters that are relevant to the billing cycles for each of these charges.

Refer note 25(c) for a maturity analysis of all financial assets and financial liabilities.



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Ageing analysis of trade receivables billed to customers

At the reporting date, the ageing analysis of outstanding trade receivables billed to customers is as follows:

Outstanding service availability and usage charges billed

• Gross amounts Not past due 7,534 8,980Past due 22 - 30 days 10,757 10,920Past due 31 - 60 days 15,243 15,812Past due 61 - 90 days 8,542 9,855Past due 91 - 180 days 31,637 35,694Past due 181 - 365 days 8,377 8,768Past due > 365 days 6,248 5,995

___________________________

Outstanding service availability and usage charges billed 88,338 96,024___________________________

• Allowance for impairment

Past due > 365 days (1,232) (671)___________________________

Allowance for impairment (1,232) (671)___________________________

Other trade debtors billed

• Gross amounts Not past due 5,746 6,844Past due 15 - 30 days 47 105Past due 31 - 60 days 60 126Past due 61 - 90 days 165 183Past due 91 - 180 days 46 320Past due 181 - 365 days 92 15Past due > 365 days 8 3

___________________________

Other trade debtors billed 6,164 7,596___________________________

• Allowance for impairment

Past due 15 - 30 days (19) -Past due 91 - 180 days (19) -Past due 181 - 365 days (41) -

___________________________

Allowance for impairment (79) -___________________________

All other balances within trade and other receivables are not past due and are expected to be realised at the amounts carried in the statement of financial position when due.



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Movement in allowance for impairment

The movement during the reporting period for the allowance for impairment is as follows:

Carrying amount at beginning of period:Outstanding service availability and usage charges (671) (673)Other trade debtors - (38)

___________________________

(671) (711)Charge for impairment reversal (loss) made during the period:

Outstanding service availability and usage charges (651) (15)Other trade debtors (80) 30

___________________________

2(c) (731) 15

Amounts written off:Outstanding service availability and usage charges 90 17Other trade debtors 1 8

___________________________

91 25

Carrying amount at end of period:Outstanding service availability and usage charges (1,232) (671)Other trade debtors (79) -

___________________________

(1,311) (671)___________________________

6. Inventories

Current

Stock, stores and materials - at cost 904 888___________________________

Total inventories 904 888___________________________

7. Other current assets

Greenhouse trading certificates- at market value 3,722 8,822

___________________________

Total other current assets 3,722 8,822___________________________



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

8. Current tax asset and liability

Where the Corporation’s pay-as-you-go income tax instalment payments made during the reporting period are less than the income tax payable in respect of the operating result for that period, the balance is recognised in the statement of financial position as a current tax liability. Where the pay-as-you-go payments made during the reporting period have exceeded the income tax payable for that period, the balance is recognised as a current tax asset.

At the reporting date, the Corporation had both a current tax asset of $1.531 million (2013: $0.687 million) receivable in respect of the previous reporting period, and a current tax liability balance of $19.530 million (2013: $71.298 million) outstanding in respect of the current reporting period. These balances represent the remaining balance of income taxes payable (or, if a current tax asset, receivable) at the reporting date in respect of current and prior periods, after allowing for payments already made during the reporting periods on a pay-as-you-go basis.

The income tax payable in respect of the operating result for the reporting period was $141.098 million (2013: $140.172 million).



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56,5

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3519

6,14

687

,027

147,

128

62,1

2679

2,52

458

,767

,594

Acc

umul

ated

dep

reci

atio

n or

am

ortis

atio

n (3

87)

(614

)-

-(1

5,62

3,76

1)(5

1,45

3)(4

0,08

9)(7

1,29

7)(4

9,02

1)-

(15,

836,

622)

Acc

umul

ated

impa

irmen

t(1

1,11

9)(1

04)

(18,

855)

-(2

8,85

0,31

5)(1

02,0

51)

--

--

(28,

982,

444)

(11,

506)

(718

)(1

8,85

5)-

(44,

474,

076)

(153

,504

)(4

0,08

9)(7

1,29

7)(4

9,02

1)-

(44,

819,

066)

Net

car

ryin

g am

ount

289,

274

10,6

8462

2,47

1-

12,0

55,0

5942

,642

46,9

3875

,831

13,1

0579

2,52

413

,948

,528

At 3

0 Ju

ne 2

014

Fair

valu

e–

Leve

l 3 (a

nd v

alua

tion

tech

niqu

e):

Cos

t -

--

--

--

157,

883

63,0

6665

1,88

187

2,83

0M

arke

t val

uatio

n -2

014

234,

107

12,1

00-

--

--

--

-24

6,20

7Fa

ir va

lue

–in

com

e ap

proa

ch-

--

194,

815

13,4

32,0

5743

,430

--

--

13,6

70,3

02

234,

107

12,1

00-

194,

815

13,4

32,0

5743

,430

-15

7,88

363

,066

651,

881

14,7

89,3

39

Acc

umul

ated

dep

reci

atio

n or

am

ortis

atio

n (7

1)(8

0)-

--

--

(83,

403)

(45,

430)

-(1

28,9

84)

Acc

umul

ated

impa

irmen

t(2

4,79

5)(1

21)

--

--

--

--

(24,

916)

(24,

866)

(201

)-

--

--

(83,

403)

(45,

430)

-(1

53,9

00)

Net

car

ryin

g am

ount

209,

241

11,8

99-

194,

815

13,4

32,0

5743

,430

-74

,480

17,6

3665

1,88

114

,635

,439

Rev

alue

d as

sets

bas

ed o

n co

st m

odel

:

Cos

t56

,909

19,3

87-

233,

251

16,4

13,5

5010

4,62

3

Acc

umul

ated

dep

reci

atio

n or

am

ortis

atio

n (6

,329

)(4

,051

)-

-(3

,794

,591

)(1

1,50

1)A

ccum

ulat

ed im

pairm

ent

(10,

198)

(4,4

92)

-(1

00,3

41)

--

(16,

527)

(8,5

43)

-(1

00,3

41)

(3,7

94,5

91)

(11,

501)

Net

car

ryin

g am

ount

30

June

201

440

,382

10,8

44-

132,

910

12,6

18,9

5993

,122

Sydn

ey W

ater

Cor

pora

tion

–30

Jun

e 20

14 P

age

48


Year

end

ed 3

0 Ju

ne 2

013

Mar

ket l

and

and

build

ings

Leas

ehol

d pr

oper

tyS

yste

m

la

ndS

yste

m

as

sets

-lan

d

Sys

tem

as

sets

-Inf

rast

ruct

ure

(ow

ned)

Sys

tem

as

sets

- Inf

rast

ruct

ure

(und

er fi

nanc

e le

ase)

Wat

er

met

ers

Pla

nt a

nd

equi

pmen

tC

ompu

ter

equi

pmen

tW

ork

in

prog

ress

Tota

l

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0

At 1

Jul

y 20

12 –

net c

arry

ing

amou

nt31

5,32

09,

953

616,

409

-11

,420

,829

50,3

4146

,357

80,2

8613

,204

897,

026

13,4

49,7

25

Add

ition

s to

wor

k in

pro

gres

s-

--

--

--

--

639,

234

639,

234

Add

ition

s fro

m w

ork

in p

rogr

ess

6,46

891

211

,255

-69

1,46

6-

7,20

010

,257

7,48

2(7

35,0

40)

-A

dditi

ons

-oth

er-

--

-10

3,90

1-

--

--

103,

901

Dis

posa

ls(6

)-

(7)

-(1

6,14

6)-

(1,1

71)

(351

)(6

)-

(17,

687)

Rec

lass

ified

as

asse

ts h

eld

for s

ale

(5,5

42)

--

--

--

--

-(5

,542

)

Oth

er re

clas

sific

atio

ns17

7-

(42)

-(2

55)

--

116

-84

083

6

Rev

alua

tion

incr

ease

s (+

) and

dec

reas

es

(-), u

nrel

ated

to im

pairm

ents

, rec

ogni

sed

in th

e as

set r

eval

uatio

n re

serv

e (2

1,33

8)-

(1,2

30)

--

--

--

-(2

2,56

8)

Impa

irmen

t los

ses

(-) re

cogn

ised

in th

e as

set r

eval

uatio

n re

serv

e(4

,897

)-

--

(9,2

03)

(6,4

04)

--

--

(20,

504)

Impa

irmen

t los

ses

reve

rsed

(+) a

nd

reco

gnis

ed in

the

asse

t rev

alua

tion

rese

rve

--

--

--

--

--

-

Impa

irmen

t los

ses

or re

valu

atio

n de

crem

ents

(-) r

ecog

nise

d in

pro

fit o

r los

s in

the

line

item

‘Oth

er e

xpen

ses’

(780

)-

(3,9

14)

--

--

--

(9,5

36)

(14,

230)

Impa

irmen

t los

ses

reve

rsed

or

reva

luat

ion

incr

emen

ts (+

) rec

ogni

sed

in

prof

it or

loss

in th

e lin

e ite

m ‘O

ther

ex

pens

es’

--

--

--

--

--

-

Dep

reci

atio

n ch

arge

(128

)(1

81)

--

(135

,533

)(1

,295

)(5

,448

)(1

4,47

7)(7

,575

)-

(164

,637

)

At 3

0 Ju

ne 2

013

–ne

t car

ryin

g am

ount

289,

274

10,6

8462

2,47

1-

12,0

55,0

5942

,642

46,9

3875

,831

13,1

0579

2,52

413

,948

,528

Sydn

ey W

ater

Cor

pora

tion

–30

Jun

e 20

14 P

age

49


Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

ceFin

ancials

Ap

pen

dixes

Bu

siness excellen

ce

Mar

ket l

and

and

build

ings

Leas

ehol

d pr

oper

tyS

yste

m

la

ndS

yste

mas

sets

-lan

d

Sys

tem

as

sets

-inf

rast

ruct

ure

(ow

ned)

Sys

tem

as

sets

-inf

rast

ruct

ure

(und

er fi

nanc

e le

ase)

Wat

er

met

ers

Pla

nt a

nd

equi

pmen

tC

ompu

ter

equi

pmen

tW

ork

in

prog

ress

Tota

l

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0At

1 J

uly

2012

Fair

valu

e:C

ost

--

--

--

83,5

5514

0,62

356

,935

897,

026

1,17

8,13

9In

depe

nden

t mar

ket v

alue

201

132

0,08

110

,410

634,

877

--

--

--

-96

5,36

8In

depe

nden

t mar

ket v

alue

201

21,

855

--

--

--

--

-1,

855

Rep

lace

men

t val

ue 2

011

--

--

48,0

68,9

6119

4,08

2-

--

-48

,263

,043

321,

936

10,4

1063

4,87

7-

48,0

68,9

6119

4,08

283

,555

140,

623

56,9

3589

7,02

650

,408

,405

Acc

umul

ated

dep

reci

atio

n or

am

ortis

atio

n (2

60)

(353

)-

-(1

4,55

3,37

3)(4

6,35

2)(3

7,19

8)(6

0,33

7)(4

3,73

1)-

(14,

741,

604)

Acc

umul

ated

impa

irmen

t(6

,356

)(1

04)

(18,

468)

-(2

2,09

4,75

9)(9

7,38

9)-

--

-(2

2,21

7,07

6)(6

,616

)(4

57)

(18,

468)

-(3

6,64

8,13

2)(1

43,7

41)

(37,

198)

(60,

337)

(43,

731)

-(3

6,95

8,68

0)

Net

car

ryin

g am

ount

315,

320

9,95

361

6,40

9-

11,4

20,8

2950

,341

46,3

5780

,286

13,2

0489

7,02

613

,449

,725

At 3

0 Ju

ne 2

013

Fair

valu

e:C

ost

--

--

--

87,0

2714

7,12

862

,126

792,

524

1,08

8,80

5In

depe

nden

t mar

ket v

alue

201

129

8,92

511

,402

--

--

--

--

310,

327

Inde

pend

ent m

arke

t val

ue 2

012

Rep

lace

men

t val

ue 2

012

1,85

5 -- -

641,

326 -

- --

56,5

29,1

35-

196,

146

- -- -

- -- -

643,

181

56,7

25,2

81

300,

780

11,4

0264

1,32

6-

56,5

29,1

3519

6,14

687

,027

147,

128

62,1

2679

2,52

458

,767

,594

Acc

umul

ated

dep

reci

atio

n or

am

ortis

atio

n (3

87)

(614

)-

-(1

5,62

3,76

1)(5

1,45

3)(4

0,08

9)(7

1,29

7)(4

9,02

1)-

(15,

836,

622)

Acc

umul

ated

impa

irmen

t(1

1,11

9)(1

04)

(18,

855)

-(2

8,85

0,31

5)(1

02,0

51)

--

--

(28,

982,

444)

(11,

506)

(718

)(1

8,85

5)-

(44,

474,

076)

(153

,504

)(4

0,08

9)(7

1,29

7)(4

9,02

1)-

(44,

819,

066)

Net

car

ryin

g am

ount

289,

274

10,6

8462

2,47

1-

12,0

55,0

5942

,642

46,9

3875

,831

13,1

0579

2,52

413

,948

,528

Rev

alue

d as

sets

bas

ed o

n co

st m

odel

:

Cos

t61

,428

19,3

8723

1,10

7-

15,5

13,8

6210

4,62

3

Acc

umul

ated

dep

reci

atio

n or

am

ortis

atio

n (5

,797

)(3

,818

)-

-(3

,577

,091

)(8

,263

)A

ccum

ulat

ed im

pairm

ent

(3,5

79)

(5,8

87)

(100

,991

)-

--

(9,3

76)

(9,7

05)

(100

,991

)-

(3,5

77,0

91)

(8,2

63)

Net

car

ryin

g am

ount

30

June

201

352

,052

9,68

213

0,11

6-

11,9

36,7

7196

,360

Sydn

ey W

ater

Cor

pora

tion

–30

Jun

e 20

14 P

age

50


(b) Measurement of fair value

When measuring the fair value of assets, the Corporation uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques applied to theCorporation’s classes of assets. The levels of the fair value hierarchy are:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3: inputs for the asset or liability are not based (or are unable to be based) on observable market data (unobservable inputs).

Due to the nature of the Corporation’s assets, the inputs used to determine fair value are unobservable inputs and as a consequence, the fair value determined for these assets are at Level 3 within this fair value hierarchy. Further details are provided below:

• Market land and buildings, and Leasehold property

Market land and buildings are commercial properties held by the Corporation that have potential for alternative use. Fair value is measured by reference to valuations obtained from independent valuers that have been engaged to determine property values based on the open market value of the properties concerned.

As mentioned above, the fair value measurement of market land and buildings and leasehold property has been categorised as Level 3 based on the unobservable inputs involved in valuations. Inputs to the valuations are sale prices of similar properties in the same or comparable localities (as the property being valued) and where applicable, rental income and the relevant lease term. Estimates of the costs to sell, which are determined internally, are recognised as an impairment to (and deducted from) the independent market valuations when determining their recoverable amount. In addition, where land holdings have been found to be environmentally contaminated and reliable estimates of the cost to remediate the land have been determined, the estimated remediation cost is also recognised as an impairment to (and deducted from) the independent market valuation when determining recoverable amount.

The Corporation’s policy is to obtain independent market valuations for market land and buildings every three years, unless market conditions necessitate an earlier valuation to be undertaken. (Refer note 1(n)). Market land and buildings acquired during the intervening years of the revaluation cycle are normally stated at directors’ valuation for the reporting period in which the property was acquired and qualify for independent valuation at the next independent valuation cycle, unless there is a specific business need to obtain an independent valuation earlier. At each reporting date, a review of the property market is undertaken to determine whether there is evidence to suggest that there has been a material change in the fair values of market land and buildings since the revaluation date. Where there has been a material change, the carrying amounts in the statement of financial position are adjusted accordingly.

• System assets (including system land and water meters)

Revaluations undertaken during each reporting period are effective from 1 July so as to ensure asset categories subject to revaluation are depreciated for the full reporting period on the same basis. Although the effective date for these revaluations is 1 July, the Corporation reassesses the revaluation again at the reporting date to see whether there has been any material movement in the fair value of the asset categories since the revaluation at 1 July. The combined effect of all revaluationadjustments recognised in the asset revaluation reserve during the reporting period in respect of system assets (now including system land and water meters from 1 July 2013) was a net increase of $293.890 million (2013: a net decrease of $15.607 million).

Prior to 1 July 2013, the valuation of system assets (using a ‘cost approach’) was carried out in two stages at the beginning of the reporting period.

o The first stage involved increasing system asset values by $28.923 billion to an estimated written down current replacement cost of $40.394 billion, effective from 1 July 2012. This was carried out using recent market prices, condition-based assessments of system asset categories and their lives, and an output index that is applicable to the general construction industry.

o The second stage involved the valuation decrease of system asset and easement values by $28.940 billion to their recoverable amount upon application of a cash-generating unit test, also effective from 1 July in that reporting period. After taking into consideration additions and other subsequent movements during the reporting period, a further comparison was made at the reporting date to ensure that the carrying amount of all property, plant and equipment assets and intangible assets in the Corporation’s statement of financial position did not exceed their recoverable amount of $14.114 billion.

Due to the interdependent nature of the various categories of water industry infrastructure assets (such as pipes, pumping stations and treatment plants), their fair value is now determined by using the ‘income approach’ under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ (as described earlier in note 1(n) – Asset Valuations).



Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

ceFin

ancials

Ap

pen

dixes

Bu

siness excellen

ce

The change to the income approach better reflects how a market participant would consider the fair value of the Corporation’s system assets. The income approach determines fair value by assessing the stream of future net cash flows that can be derived from the use of the asset categories working together as an integrated network within the relevant cash-generating unit, rather than the realisable value (or replacement cost value) of the asset categories themselves. Fair value is calculated using relevant estimated future net cash flows discounted to their present value for the assets within the Corporation’s single cash-generating unit.

In this regard, the Corporation considers it has a single cash-generating unit, which is considered to be at the whole of entity level. This is because all of the system asset categories that it owns work together as an integrated system asset network, rather than as individual assets, to generate cash flows under current pricing methodologies.

The discount rate used to determine fair value under this approach is the weighted average cost of capital for the cash-generating unit, as this is the rate that best represents the time value of money and the risks specific to the assets within the cash-generating unit under the current regulatory pricing environment.

The fair value measurement of system assets has been categorised as Level 3 in the fair value hierarchy based on the unobservable inputs to the measurement calculation. Determining fair value is highly dependent on the inputs or assumptions used to estimate the future net cash flows that are able to be derived from the relevant assets. As the cash flows that are generated by the Corporation’s system assets are a direct function of the current regulatory pricing methodology undertaken by the Corporation’s regulator, the Independent Pricing and Regulatory Tribunal (IPART), the Corporation aligns the estimation of its future cash flows for the purposes of calculating fair value with the IPART regulatory pricing methodology. In this regard, the Corporation uses a model developed internally that complies with the same regulatory principles used by IPART.

These principles involve determining a regulatory asset base (RAB) for the purpose of calculating an ‘annual revenue requirement’. The ‘annual revenue requirement’ is composed of the revenue streams, and therefore the future cash flows, attributable to the existing regulated assets at the reporting date. The ‘annual revenue requirement’ derived for each year of the model decreases over the long term as the RAB decays through regulatory depreciation.

The model used by the Corporation is a 100-year model, as this captures the future revenue streams and cash flows for most long-lived infrastructure assets. Any cash flows for assets that have useful lives that are longer than 100 years are considered to be not material in present value terms. This model is based on a ‘real’ framework rather than a ‘nominal’ framework.

The IPART methodology used to determine prices for the Corporation’s water, wastewater and stormwater services is often referred to as a ‘building blocks’ approach. As mentioned above, its purpose is to derive an ‘annual revenue requirement’, which is needed by the Corporation to pay for the investment in its assets (‘return of’ capital), obtain an investment return (‘return on’ capital) and pay for its operating expenses. In addition, IPART now includes a theoretical income tax amount as one of the building blocks and now also uses a post-tax weighted average cost of capital for the Corporation as the discount rate in deriving the ‘annual revenue requirement’.

The Corporation’s weighted average cost of capital determined by IPART is an inherent part of the calculation at each PricingDetermination. Pricing Determinations generally occur every four years. Although IPART has now adopted a post-tax regulatory pricing model, the Corporation’s fair value calculation converts this approach to a pre-tax approach. Using a pre-tax rate enables the calculation model to additionally serve as a cash-generating unit test model for the purpose of calculating the recoverable amount of the Corporation’s total asset base in compliance with Australian Accounting Standard AASB 136 ‘Impairment of Assets’.

In addition to deriving future net cash flows for regulated categories of system assets from the above regulatory estimation approach, an allowance for estimated cash flows to be derived from or attributable to non-regulated categories of system assets is also included in the cash-generating unit test to derive the total recoverable amount of the Corporation’s assets.

Cash outflows used in the cash-generating unit test include all estimated operating expenses that are considered to be efficient and hence passed through from a pricing perspective, as well as any future capital expenditure required to complete asset categories that are under construction and still in progress at the reporting date.

Using IPART’s methodology encapsulates all of the Corporation’s asset classes, including market land and buildings, leasehold property, system assets, plant and equipment and computer equipment, as well as intangible assets (refer note 10). As the fair value of these other classes of assets is determined using other valuation techniques (eg market values for the asset class market land and buildings), these other assets classes are deducted from the total value calculated using IPART’s methodology, in order to determine the fair value for system assets separately.

The major inputs (assumptions) underlying the calculations of fair value as at both the current reporting date and at the beginning of the reporting period are detailed in the table below. The calculation of fair value as at the beginning of the reporting period (1 July 2013) applied the same inputs as the calculation of recoverable amount as at the previous reporting date (30 June 2013).



Input item /relationship to fair value measurement

30 June 2014 - Calculation of fair value

1 July 2013 - Calculation of fair value

30 June 2013- Calculation of recoverable amount

Discount rateChanges to the discount rate would impact on the ‘return of capital’ over future periods but would have a minor impact on the ‘return on capital’ (as the same rate is used to project future earnings on capital invested).

Pre-tax weighted average cost of capital of 8.5% pa ‘nominal’ (equivalent to a ‘real’ pre-tax rate of 5.9% pa).

Pre-tax weighted average cost of capital of 8.5% pa ‘nominal’ (equivalent to a ‘real’ pre-tax rate of 5.9% pa).

CPI rateThe asset value would increase if the CPI rate was higher.

The regulated asset base (RAB) was escalated (from the previous balance date) by the CPI rate of 2.9% prior to determining the annual revenue requirement. Other than this, modelling was undertaken in a ‘real’ framework.

The regulated asset base (RAB) was escalated by the CPI rate, adjusted down for the carbon price impact, of 1.8% prior to determining the annual revenue requirement. Other than this, modelling was undertaken in a ‘real’ framework.

Period of discountingThe asset value would decrease if the discounting period was reduced (and asset service lives were unchanged) because the full asset value would not be recovered over the discounting period. However, if the period of discounting was reduced because asset lives were shorter, then the asset value would not change because the asset value would still be recovered.

Maximum of 100 years or the economic lives of the assets as determined by IPART, whichever is the shorter.

Maximum of 100 years or the economic lives of the assets as determined by IPART, whichever is the shorter.

Cash inflows:

• Service and usage revenue /

The asset value would be higher if RAB (rolled forward) was higher.

The asset value would be higher if capital expenditure required to complete projects in progress was higher.

• Proceeds from sale of landand plant/Then asset value would be higher if sale proceeds were lower.

• Rental income /The asset value would be higher if rental income was higher.

• Other non-regulated revenue /The asset value would be higher if non-regulated revenue (including developer charges on unregulated recycled water assets) was higher.

The ‘annual revenue requirement’ calculated using the post-tax IPART regulatory methodology for the full period of discounting, based on:

- the regulatory asset base value (RAB) determined by IPART from the June 2012 Pricing Determination and rolled forward to 30 June 2014, and,

- capital spending in future years limited to only the amount of capital expenditure required to complete capital projects in progress at 30 June 2014.

Proceeds from sale of land and plant have been deducted from the RAB as part of determining its value rolled forward as at 30 June 2014 since the June 2012 Pricing Determination.

50% of expected rental income is used to reduce the ‘annual revenue requirement’. The other 50% is included as non-regulated revenue.

Cash flows from non-regulated recycled water assets are added to future regulated income streams determined from the rolled forward RAB.

Investment/interest income is excluded.

The ‘annual revenue requirement’ calculated using the post-tax IPART regulatory methodology for the full period of discounting, based on:

- the regulatory asset base value (RAB) determined by IPART from the June 2012 Pricing Determination and rolled forward to 30 June 2013, and,

- capital spending in future years limited to only the amount of capital expenditure required to complete capital projects in progress at 30 June 2013.

Proceeds from sale of land and plant have been deducted from the RAB as part of determining its value rolled forward as at 30 June 2013 since the June 2012 Pricing Determination.

50% of expected rental income is used to reduce the ‘annual revenue requirement’. The other 50% is included as non-regulated revenue.

Cash flows from non-regulated recycled water assets are added to future regulated income streams determined from the rolled forward RAB.

Investment/interest income is excluded.



Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

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ancials

Ap

pen

dixes

Bu

siness excellen

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Input item /relationship to fair value measurement(continued)

30 June 2014 - Calculation of fair value

1 July 2013 - Calculation of fair value

30 June 2013- Calculation of recoverable amount

Cash outflows:

• Operating expenditureNo effect on asset values as it has been assumed that future operating expenditure will be fully funded (‘passed through’) in future IPART PricingDeterminations.

• Capital expenditureAsset value would be higher if capital expenditure required to complete projects in progress was higher.

Operating expenditure from budgets in the Corporation’s Statement of Corporate Intent, excluding non-cash items such as depreciation and impairment expenses.

Capital expenditure required to complete capital projects in progress at 30 June 2014.

Operating expenditure from budgets in the Corporation’s Statement of Corporate Intent, excluding non-cash items such as depreciation and impairment expenses.

Capital expenditure required to completecapital projects in progress at 30 June 2013.

Sensitivity analysis

The sensitivity of changes in the discount rate and the CPI on the total fair value of property, plant and equipment is shown below:

(i) Discount rate Rate If higher If lowerApplied % +0.25% -0.25%

______________________________________________________________________________________________________

‘Real’ pre-tax rate 5.90 6.15 5.65Calculated fair value of property, plant and equipment ($000) 14,635,439 14,127,639 15,178,439Resulting change ($’000) ($507,800) 543,000______________________________________________________________________________________________________

(ii) CPI (used to escalate the Regulatory Asset Base) Rate If higher If lowerApplied % +0.25% -0.25%

______________________________________________________________________________________________________

CPI rate 2.90 3.15 2.65Calculated fair value of property, plant and equipment ($000) 14,635,439 14,670,839 14,600,039Resulting change ($’000) 35,400 (35,400)______________________________________________________________________________________________________

• Plant and equipment, Computer equipment and Work in Progress

Fair value of plant and equipment, computer equipment and work in progress has been based on depreciated historical cost. Thefair value measurement of these asset classes has been categorised as Level 3 based on the unobservable inputs to the measurement calculation. Inputs to the asset values are the historical costs applicable to the various component items held in these classes together with estimates of their useful service lives.

(c) Non-current assets classified as held for sale

At the reporting date, there were four properties (2013: one property) classified as assets held for sale under current assets in the statement of financial position. (Refer note 1(n)). Two of the properties were previously used for sewage treatment and the remainder were used for maintenance and administration purposes. These properties are now considered to be surplus to the needs of the Corporation.

(d) Changes of estimated useful lives

During the current reporting period, the estimated useful lives of water meters, held in the asset class of system assets, were reviewed and amended by the Corporation. The useful lives of water meters with a size of 20mm to 40mm were changed from 15 to 20 years. The useful lives of water meters with a size of 50mm (light duty) changed from 15 to 13 years. The useful lives of other water meters with a size of 50mm or greater changed from 15 years to 8 years. The financial impact of these changes on depreciation expense in the current reporting period was a small increase that is not considered to be material. It is not practicable to determine the financial effect on future reporting periods as this is a prospective adjustment commencing with the current reporting period for the remainder of the water meters’ estimated useful lives. However, based on the small impact on the current reporting period, this would also not result in a material impact on future reporting periods.



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Overview

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Overview

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(b) Measurement of fair value

As mentioned earlier, fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques applied to the Corporation’s classes of assets. The levels of the fair value hierarchy are:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3: inputs for the asset or liability are not based (or are unable to be based) on observable market data (unobservable inputs).

The inputs used to determine the fair value of intangible assets are unobservable inputs and as a consequence, the fair valuedetermined for these assets are at Level 3 within this fair value hierarchy. Further details are provided below:

• Computer application software

Computer application software that is not an integral part of any related hardware is classified as an intangible asset. Software that is an integral part of related hardware is incorporated within the relevant class of physical assets, such as computer equipment or system assets, under property, plant and equipment.

Computer application software is dissected between software that has been internally developed and software that has been acquired from external sources.

Computer application software is assessed as having a finite life. Accordingly it is amortised over the expected useful life for the particular software. (Refer note 1(f)).

Fair value of computer software has been based on depreciated historical cost. The fair value measurement of this asset class has been categorised as Level 3 based on the unobservable inputs to the measurement calculation. Inputs to the asset values are the historical costs applicable to the various component items held in this class together with estimates of their useful service lives.

• Easements and other rights of access

Easements are legal rights acquired by the Corporation to be able to gain access to its system assets where they are situated on, or under the surface of, land owned by parties external to the Corporation. Where easements are not legally able to be created over certain properties (such as Commonwealth land), other rights of access by the Corporation are usually by way of a licensing agreement with the property owner concerned for a defined period.

Easements are determined to have indefinite lives, as there is no finite period over which their use is fully consumed. They convey a right to the Corporation to enable it to gain access to its system assets over an indefinite period of time. Unlike the system assets themselves, which are consumed over a finite period and undergo replacement to enable continuity of service, aneasement can exist continuously throughout this period and beyond, and thus may never need to be released. Easements are only derecognised when a management decision has been made to relocate the relevant system asset component and the need for the easement no longer exists.

Since easements are viewed as having an indefinite life, they are not amortised. Other rights of access that have a defined licensing period are amortised over that period on a straight-line basis.

The fair value measurement of easements has been categorised as Level 3 based on the unobservable inputs to the measurement calculation. Because easements are directly related to system assets, the calculation of their fair value has beencarried out with system assets using an income approach. The income approach determines fair value by assessing the stream of future net cash flows that can be derived from the use of the asset categories working together as an integrated network within the relevant cash-generating unit, rather than the cost or realisable value of the asset categories themselves. A full description of the method used to calculate fair value, the inputs to the calculation and their relationship to the measurement of fair value has been included in note 9(b) (in relation to System assets).

Any proportional valuation adjustment that is applied to system assets, in the Corporation’s single cash-generating unit, is also applied to easements and other rights of access.



Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

ceFin

ancials

Ap

pen

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Bu

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___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

12. Trade and other payables

Current

Trade payables 99,829 59,633Non-trade payables and accrued expenses 448,785 473,262

___________________________

Total trade and other payables 548,614 532,895___________________________


Trade accounts payable and accrued expenses (other than for interest on loans) are normally settled within 30 days. Accrued interest on loans and advances is generally payable within a maximum period of six months. Other non-trade payables are payable at various times throughout the reporting period. Trade and other payables are not secured against the assets of the Corporation.

Refer also note 25(c) for a maturity analysis of all financial assets and financial liabilities.

Financial guarantees

At the current reporting date, the Corporation had no financial guarantees in place with external parties.

13. Borrowings and other financial liabilities

Current

Current portion of long-term borrowings 6,207 6,234

Other financial liabilities:Current portion of obligation under Blue Mountains Sewage Transfer scheme 2,034 1,912Current portion of finance lease liabilities 3,409 3,094

___________________________

Total current borrowings and other financial liabilities 11,650 11,240___________________________

Non-current

Long-term borrowings 6,052,414 5,859,608

Other financial liabilities:Long-term obligation under Blue Mountains Sewage Transfer Scheme 56,010 58,044Long-term obligation under finance lease liabilities 124,260 127,669

___________________________

Total non-current borrowings and other financial liabilities 6,232,684 6,045,321___________________________



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(a) Borrowings

Financial accommodation

The Corporation obtains financial accommodation from the following facilities:

• a bank overdraft facility with its corporate banker• a purchase credit card facility with its corporate banker• a bank guarantee facility with its corporate banker and with NSW Treasury Corporation• a ‘Come and Go’ short-term borrowing facility with NSW Treasury Corporation• long-term borrowing facilities with NSW Treasury Corporation.

These financing facilities are approved by the NSW Treasurer under the Public Authorities (Financial Arrangements) Act 1987. The NSW Treasurer’s approval of the facilities relating to the Corporation is in place until amended or revoked.

Details in relation to each of these facilities at the reporting date are provided below.

• Bank overdraft facility

At the reporting date, the Corporation has a bank overdraft facility of $10 million (2013: $10 million) with its corporate banker. The bank overdraft facility is used as and when required as part of the Corporation’s daily cash management functions. It provides coverage of $10 million (2013: $10 million) during the day and $2 million (2013: $2 million) overnight. Overdraft interest is charged on the basis of the corporate banker’s debit rate that is calculated daily and applied to overdrawn balances. This facility was not utilised at the reporting date (2013: $Nil) by the Corporation.

• Purchase credit card facility

At the reporting date, the Corporation has the NSW Treasurer’s approval for a purchase credit card facility limit of $5 million (2013:$5 million). The purchase credit card facility is used by the Corporation only as an efficient means for staff to purchase low value monetary items for the Corporation. At the reporting date, the purchase credit card facility in place with the Corporation’s corporate banker amounted to $2.5 million (2013: $2.5 million) and the amount payable from the use of purchase credit cards amounted to $0.120 million (2013: $0.064 million). This amount is included within trade and other payables in the statement of financial position.

• Bank guarantee facility

At the reporting date, the Corporation has the NSW Treasurer’s approval for obtaining a total bank guarantee facility of up to $55million (2013: $55 million) from either the Corporation’s corporate banker, NSW Treasury Corporation or a combination of both. This facility is predominantly used by the Corporation to provide a bank guarantee to the WorkCover Authority in respect of the Corporation’s remaining self-insurance workers’ compensation liability. However, the facility is also used from time to time by the Corporation whenever a bank guarantee is required, in lieu of security deposits, under contractual arrangements with external parties. (Refer also note 26(a)). At the reporting date, $27.835 million of this total facility had been utilised (2013: $43.082 million) by the Corporation.

• ‘Come and Go’ short-term borrowing facility

At the reporting date, the Corporation has a ‘Come and Go’ short term borrowing facility of $100 million (2013: $100 million) in place with the NSW Treasury Corporation. The ‘Come and Go’ facility was used extensively as part of the Corporation’s daily cash management function during the reporting period. This facility totalled $Nil at the reporting date (2013: $Nil).

• Long- term borrowing facilities

At the reporting date, the Corporation has approval to obtain long-term borrowing facilities from the central borrowing authority, the NSW Treasury Corporation. The Corporation cannot borrow new loans in its own name from the market without approval from the Treasurer of NSW. Accordingly, both new loans and the refinancing of maturing existing loans are arranged via the NSW Treasury Corporation, which raises borrowings on the Corporation’s behalf.

At the reporting date, the Treasurer of NSW had approved a global borrowing limit up to $6.696 billion (2013: $6.696 billion) for the Corporation including the Come and Go facility. The global limit in place for the current reporting period effectively resulted in the Corporation having approval to obtain additional loan funding during the current reporting period of $0.844 billion (2013: $1.284 billion) in excess of the debt balance at the previous reporting date.

Of the Corporation’s total new longer term borrowing facilities of $0.844 billion (2013: $1.284 billion) in place with the NSW Treasury Corporation in the current reporting period, loan proceeds of $174.034 million (2013: $440.112 million) were drawn down by the Corporation by the reporting date and loans totalling $6.236 million (2013: $6.178 million) were repaid.

Long-term borrowings shown in this note consist of the following categories:

• Board’s loans• Commonwealth Government loans• Other advances• NSW Treasury Corporation loans.

None of these categories are secured against the assets of the Corporation. Details in respect of each category are shown below.For details in respect of the maturity analysis of these long-term borrowings, refer to note 25(c).



• Board’s loans

Board’s loans comprised loans raised prior to 1983 when the then Metropolitan Water Sewerage and Drainage Board (a predecessor entity of the Corporation) borrowed in its own name. These were ‘bullet’ loans, on which interest was paid on a half yearly basis and the full principal was repaid on maturity. The final loans in this category matured during the current reporting period and were repaid upon maturity. Accordingly, there were no Board’s loans outstanding at the current reporting date (2013: $0.720 million outstanding) for the Corporation.

• Commonwealth Government loans

Commonwealth Government loans were issued via the NSW Government over several years in the 1970s to the then Metropolitan Water Sewerage and Drainage Board to fund sewerage backlog works. These loans involve the half-yearly payment of principal and interest and will mature within a maximum period of two years. Principal repayments are not refinanced. Commonwealth Government loans outstanding at the reporting date totalled $6.960 million (2013: $12.416million) for the Corporation.

• Other advances

Other advances comprise loan obligations assumed from the Blue Mountains and Penrith City Councils when predecessor entities of the Corporation assumed control over the water and/or wastewater systems of those councils. The majority of the outstanding loans involve the half-yearly repayment of principal and interest over the life of the loans. Some ‘bullet’ loans remain, on which interest is paid on a half yearly basis and the full principal is repaid on maturity. These loans are very long term in nature with many extending between one year and five years. Other advances outstanding at the reporting date totalled $0.679 million (2013: $0.737 million) for the Corporation.

• NSW Treasury Corporation loans

The largest category of loans outstanding is NSW Treasury Corporation loans. These are loans raised on behalf of the Corporation by the central borrowing authority, the NSW Treasury Corporation.

Loans are negotiated with either a floating interest rate, in which case the rate is reset periodically in accordance with the requirements of the Corporation, or at a fixed rate where interest is paid half-yearly in arrears or on maturity. Additionally, the NSW Treasury Corporation provides CPI indexed bonds to the Corporation. These loans are either restated by an indexation adjustment based on the Australian CPI on a quarterly basis, or they pay the CPI indexation semi-annually along with the interest payment. The Corporation’s loans are usually refinanced at maturity.

Short-term debt facilities have a term to maturity of between one and six months, while fixed rate loans currently have maturities up to 27 years (2013: 28 years) for the Corporation. CPI indexed bonds have a maximum term to maturity of 21years to 2035 (2013: 22 years to 2035).

NSW Treasury Corporation loans outstanding at the reporting date, inclusive of any deferred discounts or premiums on the loans, totalled $6.051 billion (2013: $5.852 billion) for the Corporation.

(b) Other financial liabilities

Details in respect of other financial liabilities, which are not secured against the assets of the Corporation, are as follows:

• Obligation under Blue Mountains Sewage Transfer Scheme:

Availability payments to the private sector under this contract include repayment of principal (per above) and interest calculated at a real yield of 6.25%. Payments are made quarterly and are indexed with movements in Average Weekly Ordinary Time Earnings (AWOTE). The contract commenced in the 1995-96 reporting period and is for 35 years, with the Corporation having an option to extend for a further 15 years. If the Corporation chooses to exercise the option after 35 years, the annual payment to be made until the end of the agreement will be fixed at 80% of the final payment in the 35th year with no further indexation. At the end of the agreement, the legal title of the tunnel constructed under this scheme will ultimately transfer to the Corporation at a nominal consideration of $1.

• Finance lease liabilities:

As mentioned in note 1(f), the Corporation has identified a finance lease within the renegotiated water filtration agreement with the owners of the Macarthur Water Filtration Plant. The new agreement took effect from 1 March 2011 and extends for nearly 20 years to 8 September 2030.

The new agreement has within it an obligation for the Corporation to make a fixed daily payment to the owners of the Plant as part of the availability charge component of the tariff. This daily charge does not vary over the term of the agreement and is not dependent on output or performance, and the ongoing payment stream ultimately leads to a bargain purchase option of $1 at the end of theagreement. In the Corporation’s view, this payment stream in substance represents a series of lease payments that together with the bargain purchase option create a finance lease arrangement with the owners of the Plant.



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The net present value of the future payment stream of these lease payments at the reporting date has been recognised as a finance lease liability in the statement of financial position. The interest rate used for discounting this payment stream is the Corporation’s then ‘real’ pre-tax weighted average cost of capital of 7.5% per annum, which is equivalent to a nominal rate of 10.19% per annum. Lease payments are allocated between repayment of principal (per above) and interest, which is recognised within finance costs in profit or loss.

For details in respect of the maturity analysis for all of the above financial liabilities, refer to note 25(c).

___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

14. Dividends payable

Current

Dividends recognised during the period:

Dividend on ordinary shares held by the Corporation’s shareholders and recognised as a liability at 19, 20 252,000 416,4258.00 cents per share (2013: 13.40 cents per share) * ___________________________

Under the NTER, the Corporation is not required to maintain a dividend franking account.

* The total amount of dividends recognised during the previous reporting period as a liability amounted to $416.425 million. This comprised of $290.625 million in respect of the previous reporting period’s profit after tax and an amount of $125.800 million in relation to the after-tax gain on the sale of the Corporation’s former subsidiary Sydney Desalination Plant Pty Limited on 1 June 2012. The latter amount was subsequently paid during the previous reporting period (see below), leaving a balance outstanding at the previous reporting date of $290.625 million in the statement of financial position. This was then subsequently paid in the current reporting period.

Dividends paid during the period:

Dividend on ordinary shares paid to the Corporation’sshareholders at 9.35 cents per share (2013: 11.83 cents per share) ** 290,625 367,800

___________________________

** The dividend paid in the previous reporting period included an amount of $125.800 million in relation to the after-tax gain on the sale of the Corporation’s former subsidiary Sydney Desalination Plant Pty Limited on 1 June 2012. The remaining portion of $242.000 million was in respect of the dividend recognised as a liability at the previous reporting date.



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

15. Provisions

(a) Carrying amounts

Current

Short-term provisions:Employee benefits for annual leave # 30,923 33,424Termination benefits 8,421 30,734Employee benefits on-costs 1,871 2,272Road restoration 7,763 8,849

___________________________

48,978 75,279

Current portion of long-term provisions:Employee benefits for long service leave # 102,783 111,376Employee benefits on-costs 5,602 6,070Post-employment benefits from superannuation 44 -Workers’ compensation self-insurance 2,047 2,727General insurance 1,866 1,314Restoration of leased premises 229 359Restoration costs from decommissioning system asset

network components 16,912 14,635___________________________

129,483 136,481

___________________________

Total current provisions 178,461 211,760___________________________

# As mentioned in note 1(u), provisions are classified as current liabilities if the Corporation does not have an unconditional right to defer settlement of the liabilities for at least 12 months after the reporting date. Accordingly, employee benefits provisions which are due to be settled wholly within 12 months after the reporting date, such as annual leave entitlements and the unconditional component of long service leave entitlements, must be classified as current liabilities regardless of when they are expected to be settled.

In relation to employee benefits for annual leave recognised above as a current liability, the Corporation expects to make payments totalling $19.371 million (2013: $20.572 million) in the next reporting period.

In relation to employee benefits for long service leave (the unconditional component) recognised above as a current liability, the Corporation expects to make payments totalling $16.484 million (2013: $22.826 million) in the next reporting period.

All other provisions under current liabilities are expected to be paid in the next reporting period for the amount so recognised.

Non-current

Long-term provisions:Employee benefits for long service leave 7,805 7,142Employee benefits on-costs 426 389Post-employment benefits from superannuation 811,954 781,696Workers’ compensation self-insurance 22,021 25,838General insurance 3,529 3,948Restoration of leased premises 7,375 6,993Restoration costs from decommissioning system asset

network components 28,517 24,029___________________________

Total non-current provisions 881,627 850,035___________________________



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Note 2014$’000

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(b) Reconciliations of movements in carrying amounts

Reconciliations of the carrying amounts of each class of provision, other than for employee benefits which is excluded from thescope of Australian Accounting Standard AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, are set out below:

• Road restoration

Carrying amount at beginning of period 8,849Provisions made during the period 8,490Provisions used during the period (9,576)

_____________

Carrying amount at end of period 7,763_____________

This provision is used to recognise the Corporation’s obligations for payment of road restoration costs to local government councils. Such obligations arise during a period of construction or maintenance activity by the Corporation, where roads need to be restored to their original condition at the completion of the activity. There is uncertainty in relation to the amount estimated on a project basis. However, there is also some uncertainty as to the timing of payment as it is dependent on actual invoicing by local government councils and any associated delays. The Corporation’s estimates are based on past experience of works undertaken.

• Workers’ compensation self-insurance

Carrying amounts at beginning of period:Current 2,727Non-current 25,838

_____________

28,565

Provisions made (reversed) during the period (3,132)Provisions used during the period (2,063)Unwinding of discount 698

_____________

24,068_____________

Carrying amounts at end of period:Current 2,047Non-current 22,021

_____________

24,068_____________

This provision is used to recognise the Corporation’s remaining self-insurance liability for workers’ compensation injury claims prior to 1 March 2007. The provision is actuarially calculated on a discounted cash flow basis, using a range of information including case cost estimates that are assessed having regard to a number of factors such as the type of injuries and claims, potential recoveries and industry wide experience. The liability recognised also includes an estimate for incurred but not reported claims based on past experience, and is based on a likelihood of adequacy of 50%. Associated with the liability, the actuary has estimated expected recoveries totalling $0.183 million (2013: $0.730 million). These recoveries have not been recognised as an asset as they are not considered to be virtually certain.

Due to the long-term nature of the liability, there is uncertainty in a number of factors such as the costs that will ultimately be incurred, the discount rate that is used by the independent actuary, the time period for settlement of the claims, the level of likelihood of adequacy adopted by the Corporation and the possibility that claims incurred and not yet reported may be underestimated or overestimated.



___________________________________________________________________________________________________________

Note 2014$’000

___________________________________________________________________________________________________________

• General insurance


_____________

5,262

Provisions made during the period 10,303Provisions used during the period (10,297)Unwinding of discount 127

_____________

5,395_____________


_____________

5,395_____________

This provision is used to recognise the Corporation’s proportion of insured and uninsured claims under circumstances where theCorporation is liable to pay for damage, costs, loss or injury (other than workers’ compensation). The provision is actuarially calculated on a discounted cash flow basis, using a range of information including estimates of the probable cost of each claim, the type of injuries and claims, potential recoveries and industry wide experience. The liability recognised also includes an estimate for incurred but not reported claims based on past experience and the nature of the claims.

In assessing this provision, there is uncertainty in a number of factors such as the costs that will ultimately be incurred, the discount rate that is used by the independent actuary, the time period for settlement of the claims, the level of likelihood of adequacy adopted by the Corporation and the possibility that claims incurred and not yet reported may be under- or over-estimated. In respect of a claim or series of claims arising out of an incident where there is insurance coverage, the amountrecognised is not greater than the deductible stated on the relevant policy.

• Restoration of leased premises

Carrying amounts at beginning of period:Current 359Non-current 6,993

_____________

7,352

Provisions (reversed) made during the period (4)Provisions used during the period (11)Unwinding of discount 267

_____________

7,604_____________

Carrying amounts at end of period:Current 229Non-current 7,375

_____________

7,604_____________

This provision is used to recognise the Corporation’s obligation in respect of payment of restoration costs for leased premises, whereby the Corporation must restore the relevant leased premises back to their original state at the end of the lease term. Estimates of restoration costs are calculated based on details of the individual property concerned and the terms and conditions of the relevant lease. These estimates are then discounted using the yield on government bonds. The main uncertainty is in relation to the actual restoration costs that will ultimately be incurred. Estimates will also change if there is a change in the discount rate.



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Note 2014$’000

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• Restoration costs from decommissioning system asset network components


_____________

38,664

Provisions made (reversed) during the period 12,342Provisions used during the period (6,206)Unwinding of discount 629

_____________

45,429_____________


_____________

45,429_____________

This provision is used to recognise the Corporation’s obligation for restoration costs in respect of the decommissioning of system asset network components. Such costs include costs for the purpose of dismantling, decommissioning, removing a system asset network component and restoring the site on which it was located. It also includes constructive obligations for rectification works where safety issues have been identified, such as electrical cabling repairs and asbestos removal. Obligations arise when it is known that an asset is being constructed for a temporary period or when a management decision is made to alter the system asset network by decommissioning a system asset network component, or when investigations reveal that safety issues require rectification on the relevant sites.

The liability is calculated on a discounted cash flow basis, using the yield on government bonds as the discount rate. Estimates of costs are made on a case by case basis at the reporting date, depending on the specific system asset network component and its location, the constructive obligation being assessed, and using past experience. Estimates are also made in relation to the period over which the system asset network component will be decommissioned, or the constructive obligation is expected to be settled.In calculating these estimates, some uncertainty exists in relation to the actual costs that will ultimately be incurred for the restoration, and in relation to the period of time until actual decommissioning occurs or the rectification works will be completed.Estimates will also change if there is a change in the discount rate.

(c) Post-employment benefits from superannuation schemes

• Defined contribution superannuation schemes

The Corporation contributes to the First State Superannuation Scheme, a defined contribution scheme, as well as other private schemes to a lesser extent. The amount recognised as an expense in profit or loss, as part of employee-related expenses, is $9.876 million (2013: $8.088 million). (Refer also note 2(c)).

• Defined benefit superannuation schemes

The Corporation contributes to three closed defined benefit superannuation schemes in the NSW public sector Pooled Fund. The Pooled Fund holds in trust the investments of these schemes. The schemes are:

State Superannuation Scheme (SSS);State Authorities Superannuation Scheme (SASS); and State Authorities Non-contributory Superannuation Scheme (SANCS).

The following disclosures in relation to these schemes have been provided by Pillar Administration.

Nature of benefits provided by the Fund

As these schemes are defined benefit schemes, at least a component of the final benefit is derived from a multiple of member salary and years of membership. Members receive lump sum or pension benefits on retirement, death, disablement and withdrawal. These schemes are closed to new members.



The regulatory framework

The above schemes in the Pooled Fund are established and governed by the following NSW legislation: Superannuation Act 1916, State Authorities Superannuation Act 1987, State Authorities Non-Contributory Superannuation Scheme Act 1987, and their associated regulations.

The schemes in the Pooled Fund are exempt public sector superannuation schemes under the Commonwealth Superannuation Industry (Supervision) Act 1993 (SIS). The SIS Legislation treats exempt public sector superannuation funds as complying funds for concessional taxation and superannuation guarantee purposes.

Under a Heads of Government agreement, the NSW Government undertakes to ensure that the Pooled Fund will conform with the principles of the Commonwealth’s retirement incomes policy relating to preservation, vesting and reporting to members and that members’ benefits are adequately protected.

The NSW Government prudentially monitors and audits the pooled Fund and the Trustee Board activities in a manner consistent with the prudential controls of the SIS legislation. These provisions are in addition to other legislative obligations on the Trustee Board and internal processes that monitor the Trustee Board’s adherence to the principles of the Commonwealth’s retirement incomes policy.

An actuarial investigation of the pooled Fund is performed every three years. The last actuarial investigation was performed as at 30 June 2012.

Other entities’ responsibilities for the governance of the Pooled Fund

The Pooled Fund’s Trustee is responsible for the governance of the Fund. The Trustee has a legal obligation to act solely in the best interests of fund beneficiaries. The Trustee has the following roles:

o Administration of the Fund and payment to the beneficiaries from Fund assets when required in accordance with the Fund rules;

o Management and investment of the Fund assets; ando Compliance with other applicable regulations.

Risks

There are a number of risks to which the Pooled Fund exposes the Corporation. The more significant risks relating to the defined benefits are:

o Investment risk – The risk that investment returns will be lower than assumed and the Corporation will need to increase contributions to offset this shortfall.

o Longevity risk – The risk that pensioners live longer than assumed, increasing future pensions.o Pension indexation risk – The risk that pensions will increase at a rate greater than assumed, increasing future pensions.o Salary growth risk – The risk that wages or salaries (on which future benefit amounts for active members will be based) will

rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.o Legislative risk – The risk that legislative changes could be made which increase the cost of providing the defined benefits.

The defined benefit Fund assets are invested with independent fund managers and have a diversified asset mix. The Fund has nosignificant concentration of investment risk or liquidity risk.

Significant events

There were no Fund amendments, curtailments or settlements during the reporting period.



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SASS SANCS SSS2014 2013 2014 2013 2014 2013

$’000 $'000 $’000 $'000 $'000 $’000___________________________________________________________________________________________________________

Reconciliation of the net defined benefit liability (asset)

Net defined benefit liability (asset) at beginning of period 87,206 117,312 28,463 38,546 666,027 894,276

Current service cost 6,779 7,731 2,334 2,868 8,347 11,547Net interest on the net defined benefit liability (asset) 3,202 3,480 1,046 1,145 25,180 27,243Past service cost - - - - - -(Gains)/losses arising from settlements - - - - - -Actual return on Fund assets less interest income (2,080) (23,266) (1,730) (3,314) (66,316) (95,494)Actuarial (gains) losses arising from changes in demographic assumptions - 5,112 - (41) - 55,522Actuarial (gains) losses arising from changes in financial assumptions 11,718 (19,834) 3,747 (5,105) 57,968 (186,169)Actuarial (gains) losses arising from liability experience 3,330 3,805 1,380 (3,392) (10,092) (32,933)Adjustment for effect of asset ceiling - - - - - -Employer contributions (5,884) (7,134) (1,854) (2,244) (6,817) (7,965)

_____________________________________________________________________________Net defined benefit liability (asset)at end of period 104,271 87,206 33,386 28,463 674,297 666,027

_____________________________________________________________________________

Reconciliation of the fair value of fund assets

Fair value of fund assetsat beginning of period 191,893 176,389 26,636 26,089 805,538 723,662

Interest income 6,923 5,102 967 730 29,719 21,480Actual return on Fund assets less interest income 2,080 23,266 1,730 3,314 66,316 95,494Employer contributions 5,884 7,135 1,854 2,244 6,817 7,965Contributions by participants 3,485 3,606 - - 4,653 5,397Benefits paid (45,627) (25,175) (11,561) (6,351) (55,904) (54,795)Taxes, premiums and expenses paid 2,237 1,570 153 610 2,746 6,335Transfers in - - - - - -Contributions to accumulation section - - - - - -Settlements - - - - - -Exchange rate changes - - - - - -

_____________________________________________________________________________Fair value of fund assetsat end of period 166,875 191,893 19,779 26,636 859,885 805,538

_____________________________________________________________________________

Reconciliation of the defined benefit obligation

Present value of defined benefitobligations at beginning of period 279,099 293,702 55,099 64,635 1,471,565 1,617,938

Current service cost 6,779 7,731 2,334 2,868 8,347 11,547Interest cost 10,125 8,582 2,013 1,875 54,899 48,723Contributions by fund participants 3,485 3,606 - - 4,653 5,397Actuarial (gains) losses arising from changes in demographic assumptions - 5,112 - (41) - 55,522Actuarial (gains) losses arising from changes in financial assumptions 11,718 (19,834) 3,747 (5,105) 57,968 (186,169)Actuarial (gains) losses arising from liability experience 3,330 3,805 1,380 (3,392) (10,092) (32,933)Benefits paid (45,627) (25,175) (11,561) (6,351) (55,904) (54,795)Taxes, premiums and expenses paid 2,237 1,570 153 610 2,746 6,335Transfers in - - - - - -Contributions to accumulation section - - - - - -Past service cost - - - - - -Settlements - - - - - -Exchange rate changes - - - - - -

_____________________________________________________________________________Present value of defined benefitobligations at end of period 271,146 279,099 53,165 55,099 1,534,182 1,471,565

_____________________________________________________________________________



___________________________________________________________________________________________________________

SASS SANCS SSS2014 2013 2014 2013 2014 2013

$’000 $'000 $’000 $'000 $'000 $’000___________________________________________________________________________________________________________

Reconciliation of the effect of the Asset Ceiling

Adjustment for effect of asset ceiling ceiling at beginning of period - - - - - -

Change in the effect of the asset ceiling - - - - - -_____________________________________________________________________________

Adjustment for effect of asset ceiling at end of period - - - - - -

_____________________________________________________________________________

Fair value of Fund assets

All Pooled fund assets are invested by Superannuation Trustee Corporation (STC) at arm’s length through independent fund managers, assets are not separately invested for each entity and it is not possible or appropriate to disaggregate and attribute fund assets to individual entities. As such, the disclosures below relate to total assets of the Pooled Fund:

___________________________________________________________________________________________________________

Quoted prices in Significantactive markets for observable Unobservable

identical assets inputs inputsAsset category Total Level 1 Level 2 Level 3

$’000 $'000 $’000 $’000___________________________________________________________________________________________________________

As at 30 June 2014:

Short term securities 2,452,755 1,572,615 880,140 -Australian fixed interest 2,365,014 10,928 2,354,086 -International fixed interest 880,529 - 880,529 -Australian equities 11,738,636 11,494,549 241,423 2,664International equities 10,953,329 8,172,677 2,780,531 121Property 3,272,986 894,113 692,296 1,686,577Alternatives 6,329,410 565,401 4,897,152 866,857

___________________________________________________________

Total 37,992,659 22,710,283 12,726,157 2,556,219___________________________________________________________

Information as at 30 June 2013 is not available from Pillar Administration.

The percentage invested in each asset class at the reporting date is as follows:___________________________

2014 2013% %

___________________________

Short term securities (2013: Cash) 6.5 13.1Australian fixed interest 6.2 6.9International (2013: Overseas) fixed interest 2.3 2.2Australian equities 30.9 30.4International (2013: Overseas) equities 28.8 26.1Property 8.6 8.3Alternatives (2013: Other) 16.7 13.0

___________________________

100.0 100.0 ___________________________

Level 1 – quoted prices in active markets for identical assets or liabilities. The assets in this level are listed shares and listed unit trusts.

Level 2 – inputs other than quoted prices observable for the asset or liability either directly or indirectly. The assets in this level are cash; notes; government, semi-government and corporate bonds; unlisted trusts containing assets or liabilities where quoted prices are available in active markets for identical assets or liabilities.



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Level 3 – inputs for the asset or liability that are not based on observable market data. The assets in this level are unlisted property, unlisted shares, unlisted infrastructure, distressed debt and hedge funds.

Derivatives, including futures and options, can be used by investment managers. However, each manager’s investment mandate clearly states that derivatives may only be used to facilitate efficient cash flow management or to hedge the portfolio against market movements and cannot be used for speculative purposes or gearing of the investment portfolio. As such, managers make limited use of derivatives.

Fair value of the Fund’s financial instruments

The fair value of the Pooled Fund’s total assets include, as at the reporting date, $173.9 million in NSW Government bonds.

Significant actuarial assumptions at the reporting date___________________________________________________________________________________________________________

2014 2013

___________________________________________________________________________________________________________

Discount rate 3.57% pa 3.80% pa

Salary increase rate (excluding promotional increases):2013-14 2.27% pa 2.25% pa2014-15 2.27% pa 2.25% pa2015-16 to 2017-18 2.5% pa 2.0% pa2018-19 to 2019-20 3.0% pa 2.0% pa2020-21 to 2022-23 3.0% pa 2.5% pa2023-24 onwards 3.5% pa 2.5% pa

Rate of CPI increase 2.5% pa 2.5% pa

Pensioner mortality As per the 2012 Actuarial investigation of the

Pooled Fund___________________________



Sensitivity Analysis

The Corporation’s total defined benefit obligation as at the current reporting date under several scenarios is presented below.

Scenarios A to F relate to sensitivity of the total defined benefit obligation of the Pooled Fund to economic assumptions, and scenario G and H relate to sensitivity to demographic assumptions.

Base case Scenario A Scenario B-1.0 % +1.0%

discount rate discount rate___________________________________________________________________________________________________________

Discount rate 3.57% 2.57% 4.57%Rate of CPI increase as above as above as aboveSalary inflation rate as above as above as aboveDefined benefit obligation ($’000) 1,858,493 2,145,072 1,627,017

___________________________________________________________________________________________________________

Base case Scenario C Scenario D+0.5% rate of -0.5% rate ofCPI increase CPI increase

___________________________________________________________________________________________________________

Discount rate as above as above as aboveRate of CPI increase 2.50% 3.00% 2.00%Salary inflation rate as above as above as aboveDefined benefit obligation ($’000) 1,858,493 1,978,665 1,749,162

___________________________________________________________________________________________________________

Base case Scenario E Scenario F+0.5% salary -0.5% salaryincrease rate increase rate

___________________________________________________________________________________________________________

Discount rate as above as above as aboveRate of CPI increase as above as above as above

above rates above ratesSalary inflation rate as above plus 0.5% pa less 0.5% paDefined benefit obligation ($’000) 1,858,493 1,874,236 1,843,432

___________________________________________________________________________________________________________

Base case Scenario G Scenario H+5% pensioner -5% pensionermortality rates mortality rates

___________________________________________________________________________________________________________

Defined benefit obligation ($’000) 1,858,493 1,839,334 1,878,795___________________________________________________________________________________________________________

The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions.

Asset – Liability matching strategies

The Trustee monitors its asset-liability risk continuously in setting its investment strategy. It also monitors cash flows to manage liquidity requirements.



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Funding arrangements

Funding arrangements are reviewed at least every three years following the release of the triennial actuarial review and was last reviewed following completion of the triennial review as at 30 June 2012. Contribution rates are set after discussions between the employer, STC and NSW Treasury.

Funding positions are reviewed annually and funding arrangements may be adjusted as required after each annual review.

(i) Surplus/deficit

The following is a summary of the 30 June 2014 and 30 June 2013 financial position of the Fund calculated in accordance with Australian Accounting Standard AAS 25 ‘Financial Reporting by Superannuation Plans’.

___________________________________________________________________________________________________________

SASS SANCS SSS2014 2013 2014 2013 2014 2013

$’000 $'000 $’000 $'000 $'000 $’000___________________________________________________________________________________________________________

Accrued benefits * 208,171 226,655 38,249 42,798 846,574 828,015Net market value of fund assets (166,875) (191,893) (19,779) (26,636) (859,885) (805,538)

_____________________________________________________________________________

Net (surplus) deficit 41,296 34,762 18,470 16,162 (13,311) 22,477_____________________________________________________________________________

* There is no allowance for a contribution tax provision within the Accrued benefits figure for AAS 25. Allowance for contribution tax is made when setting the contribution rates.

(ii) Contribution recommendations

Recommended contribution rates for the Corporation are:

Multiple of member contributions 1.90 1.90 - - 1.60 1.60Percentage of member salary - - 2.50 2.50 - -

_____________________________________________________________________________

(iii) Economic assumptions

The economic assumptions adopted for the 30 June 2012 actuarial investigation of the Pooled Fund were:

___________________________________________________________________________________________________________

Weighted Average Assumptions:% pa

___________________________________________________________________________________________________________

Expected rate of return on Fund assets backing current pension liabilities 8.3

Expected rate of return on Fund assets backing other liabilities 7.3

Expected salary increase rate 2.7 to 30 June 2018,(excluding promotional salary increases) then 4.0 thereafter

Expected rate of CPI increase 2.5___________________________________________________________________________________________________________

Expected contributions ___________________________________________________________________________________________________________

SASS SANCS SSS2014 2013 2014 2013 2014 2013

$’000 $'000 $’000 $'000 $'000 $’000___________________________________________________________________________________________________________

Expected employer contributions tobe paid in the next reporting period 6,621 6,851 2,205 2,388 7,444 8,635

_____________________________________________________________________________

Maturity profile of defined benefit obligation

The weighted average duration of the defined benefit obligation is 13.7 years (2013: 13.5 years).Sydney Water Corporation – 30 June 2014 Page 74


___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

16. Share capital

Issued and fully paid up share capital

(a) Carrying amount

Share capital 3,148,354 3,108,354___________________________

(b) Movements during the reporting period

Balance at beginning of period:3,108,354,000 (2013: 3,108,354,000) ordinary shares 3,108,354 3,108,354

Shares issued and fully paid up during the period:40,000,000 (2013: Nil) ordinary shares 40,000 -

___________________________Balance at end of period:3,148,354,000 (2013: 3,108,354,000) ordinary shares 3,148,354 3,108,354

___________________________


The Corporation’s two shareholders are:

• the Treasurer, Minister for Industrial Relations• Minister for Finance and Services.

Each shareholder holds 1,574,177,000 (2013: 1,554,177,000) ordinary shares non-beneficially on behalf of the NSW Government. The shares entitle the NSW Government to a dividend from the Corporation, the amount of which is determined as part of the annual process of negotiating and agreeing the Corporation’s Statement of Corporate Intent with the shareholders.

Any changes to the Corporation’s share capital can only be undertaken in accordance with the Corporation’s constitution and with the agreement of its shareholders.

During the reporting period, the Corporation received an equity cash contribution of $40.000 million (2013: Nil) from its shareholders, and in return issued to them fully paid up ordinary shares of an equivalent amount. The purpose of this share capital contribution wasto provide the Corporation with funding for works being undertaken under the NSW Government’s Housing Acceleration Fund scheme.



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

17. Reserves

(a) Carrying amounts

Asset revaluation reserve 1,307,795 1,149,760Hedging reserve - -

___________________________

Total reserves 1,307,795 1,149,760___________________________

(b) Movements during the reporting period

• Asset revaluation reserve

Balance at beginning of period 1,149,760 1,183,107Net gain (loss) before tax on revaluation ofsystem and property assets 250,591 (43,072)Transfer from (to) retained earnings 18 (17,379) (3,197)Tax effect of asset revaluation 3(c) (75,177) 12,922

___________________________

Balance at end of period 1,307,795 1,149,760___________________________

The asset revaluation reserve relates to system and property assets within property, plant and equipment and non-current assets classified as held for sale (prior to their reclassification to current assets), and comprises after-tax revaluation increments and decrements arising from the revaluation of these assets and any applicable impairment write-downs to recoverable amount on an individual asset basis. (Refer note 1(n)).

In respect of assets that have been reclassified as held for sale, the reserve also includes the cumulative after-tax revaluation increments that existed up until the date of reclassification.

When assets or asset components are derecognised, the amounts in the reserve relating to those assets or asset components aretransferred to retained earnings.

• Hedging reserve

Balance at beginning of period - -Net gain (loss) before tax on adjustmentsto fair value of cash flow hedges (422) 11Transferred to the initial carrying amount of hedged items 422 (11)Tax effect of fair value adjustments 3(c) - -

___________________________

Balance at end of period - -___________________________

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments.



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

18. Retained earnings

Balance at beginning of period 1,706,926 1,534,094Profit for the period 464,493 372,484Remeasurement of defined benefitsuperannuation net liability 2(c), 15(c) 2,075 305,109Income tax (expense) revenue on remeasurement ofdefined benefit superannuation net liability 3(c) (623) (91,533)Transfer from (to) asset revaluation reserve 17(b) 17,379 3,197Transactions with owners as owners:

Dividends recognised as a liability 14 (252,000) (416,425)___________________________


19. Total equity reconciliation

Balance at beginning of period 5,965,040 5,825,555Total comprehensive income for the period 641,359 555,910Transactions with owners as owners:

Share capital issued 16 40,000 -Dividends recognised as a liability 14 (252,000) (416,425)

___________________________




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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

20. Notes to the statement of cash flows

(a) Reconciliation of profit to net cash from operating activities

Profit for the period 464,493 372,484

Adjustments for:

Profit or loss items classified as either investing or financing:Net loss (gain) on sale of subsidiary excluding transaction costs 2(c), 24(c) - 27Net loss (gain) on disposal of property, plant and equipment (including assets held for sale) 15,834 16,532Net loss (gain) on disposal of intangible assets 2(c) 1 (204)Current year contributions for capital works (134,334) (126,221)Depreciation and amortisation 2(c) 230,253 210,900Interest expense capitalised to work in progress 2(c) (49,797) (62,153)Interest expense on developer agreements 923 300Amortisation of deferred discounts (premiums) on loans 2(c) 2,668 5,091Indexation of CPI bonds 2(c) 22,311 14,399Impairment loss recognised (reversed) for property, plant and equipment 2(c) 11,036 14,230Impairment loss recognised for intangible assets 2(c), 10(a) 244 1,866

Net movement in statement of financial position items applicable to operating activities:

Inventories (11) (233)Greenhouse trading certificates 5,101 8,007Trade and other receivables 2,418 38,260Trade and other payables (6,831) (23,330)Provisions 6,612 56,302Income tax assets and liabilities (1,417) (16,458)Derivatives (422) 11

___________________________

Net cash from operating activities 569,082 509,810___________________________

(b) Non-cash financing and investing activities

Assets that are acquired by the Corporation under finance leases or other similar financing arrangements, and assets handed over at no cost by developers are not included in the statement of cash flows as these are regarded as non-cash. The amount capitalised during the current reporting period in respect of assets handed over at no cost by developers to the Corporation was $110.270 million (2013: $104.451 million).

There were no new finance leases during the current or previous reporting periods.

(c) Standby credit arrangements

Details of financial accommodation facilities for the Corporation are disclosed in note 13.

(d) Cash balance not recognised

Under the terms of an agreement between Parramatta City Council and the Corporation, the Corporation is contributing to the overall development of the Civic Place public domain at Parramatta. At the reporting date, an amount of $3.560 million (2013: $3.478million) is currently placed in an interest-bearing bank account administered by the Corporation in accordance with the agreement. The balance of cash in this bank account has not been recognised by the Corporation as an asset as the account is jointly controlled by both the Corporation and Parramatta City Council.

The cash is not able to be used for any other purpose by the Corporation. Funds can only be released from the bank account when Parramatta City Council provides to the Corporation certification of public domain works procured by the Council in relation to the Civic Place development. At that time, the Corporation must hand over to the Council 14.3 per cent of the certified value of the public domain work completed. Any funds remaining unexpended in the bank account as at 31 December 2018 will return to the Corporation’s normal cash management activities and restrictions over the use of this cash will cease.



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

21. Commitments

(a) Capital expenditure commitments

The total amount of contractual commitments for capital expenditure (covering both property, plant and equipment and intangible assets) at the reporting date (inclusive of GST) is $608.450 million for the Corporation (2013: $674.187 million). The amount of GST included in this amount that is recoverable from the ATO is $55.314 million (2013: $61.290 million).

(b) Operating lease commitments

Payable as lessee

Future operating lease rentals not provided forin the financial statements and payable:

not later than one year 43,274 38,652later than one year and not later than five years 163,001 139,993later than five years 362,455 381,083

___________________________

568,730 559,728___________________________

Representing:Cancellable operating leases 20,159 14,687Non-cancellable operating leases 548,571 545,041

___________________________

568,730 559,728___________________________

Non-cancellable operating lease rentalsare payable as follows:


___________________________

548,571 545,041___________________________

The Corporation leases property and motor vehicles under operating leases. It also has an agreement to obtain recycled water from a plant that is owned and operated by an external party in the Rosehill/Camellia area. This recycled water plant was constructed under a privately financed project (PFP) that is in substance an operating lease for the Corporation in relation to the payments madeto obtain the recycled water, which is subsequently sold to a small number of foundation customers for industrial and irrigation purposes.

Leases for property generally have terms of one to 10 years’ duration with option periods following, ranging up to 15 years. The only exception is a 99-year ground lease at Homebush that does not expire until 2086.

Where no option periods exist under these leases, it is necessary to negotiate a new lease with the owner, who has the right to require vacant possession. Where there are option periods, the option to continue occupation rests with the Corporation alone.

The leasing of the Head Office building at 1 Smith Street, Parramatta is by way of an operating lease of 15 years (ending in May 2024) with two 5-year option periods.

Leases for motor vehicles are predominantly for terms between two and five years and provide the Corporation with an option to replace at the end of the lease term.

The lease agreement involving the recycled water plant at Rosehill/Camellia is for a term of 20 years, extending to 2031-32.

Amounts disclosed for these commitments include total GST of $19.674 million (2013: $17.153 million) for the Corporation that is recoverable from the ATO.



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Receivable as lessor

Future operating lease rentals not recognised in the financial statements and receivable:

not later than one year 11,809 8,808later than one year and not longer than five years 9,845 12,281later than five years 13,664 14,497

___________________________

35,318 35,586___________________________

Operating leases are non-cancellable and are mainly in respect of residential, commercial and industrial properties, open space and space for telecommunication towers. Operating leases are for terms ranging from less than one year to 50 years, with the longest remaining term expiring in 2039 with a 50-year option. Lease rentals are generally reviewed annually.

Amounts disclosed for these commitments include total GST of $3.211 million (2013: $3.235 million) that is payable to the ATO.

(c) Finance lease commitments

Payable as lessee

Future minimum lease payments payable:


___________________________

254,302 269,997Less future finance costs 126,633 139,234

___________________________

Finance lease liabilities – present value 127,669 130,763___________________________

Current 3,409 3,094Non-current 124,260 127,669

___________________________

Finance lease liabilities in statement of financial position 13 127,669 130,763___________________________

These finance lease commitments represent the future payments of a fixed charge per day within the availability charge component of the tariff payable under the renegotiated Macarthur Water Filtration Plant agreement. (Refer also note 1(f)).

The new agreement extends to 8 September 2030, at which time there is a bargain purchase option for the Corporation to acquire the Plant for a terminal value of $1. The discount rate used to derive the net present value of the future lease payments is a ‘real’ pre-tax rate of 7.50% per annum. This is equivalent to a ‘nominal’ pre-tax rate of 10.19% per annum.

Amounts disclosed for these commitments do not include GST as they are comprised of principal and interest payments. The additional GST that would be applicable when making these payments and which would be recoverable from the ATO by the Corporation is $25.430 million (2013: $27.000 million).



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

(d) Commitments for availability charges in other water filtration plant agreements

Future commitments for availability charges not recognised in the financial statements and payable:


___________________________

500,252 582,860___________________________

The above commitments relate to availability charges only in water filtration plant agreements covering the Prospect, Woronora and Illawarra plants. The Prospect agreement expires in 2021, while the agreement for the Woronora and Illawarra plants expires in 2022. The present value of these commitments at the reporting date is $294.739 million (2013: $324.085 million). The amount of GST included in the above commitments that is recoverable from the ATO is $45.477 million (2013: $52.987 million).

22. Consultants

The total amount paid or payable to consultants engaged by the Corporation during the reporting period was $0.703 million (2013:$0.385 million).

23. Auditors' remuneration

Remuneration for audit of the financial statements by Audit Office of NSW 435 410___________________________

435 410___________________________



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

24. Related party disclosures

The Corporation has related party relationships with key management personnel (refer (a) below) and their related entities (refer (b) below).

(a) Key management personnel compensation

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 all directors, whether executive or non-executive, and senior executives who lead the various divisions of the Corporation.

Key management personnel compensation is as follows:

Short-term employee benefits 3,470 4,256Post-employment benefits 499 625Other long-term benefits 91 955Termination benefits 251 352

___________________________

4,311 6,188___________________________

This comprises compensation relating to:

DirectorsExecutive 688 662Non-executive 583 588

___________________________

1,271 1,250Senior executives 3,040 4,938

___________________________

4,311 6,188___________________________

The above disclosures for senior executives are based on actual payments made for employee benefits during the reporting period.

(b) Other transactions with key management personnel and related entities

From time to time, key management personnel may purchase goods or services from the Corporation. These purchases are on the same terms and conditions as those entered into by other customers and are trivial or domestic in nature.

Any transactions undertaken with entities related to key management personnel are conducted on an arm's length basis in the normal course of business and on commercial terms and conditions.

During the current reporting period, the following related party transactions with entities related to key management personnel occurred:

A director of the Corporation from 1 January 2012, Mr B. Morgan, is also a director of Origin Energy Limited from 16 November 2012. During the current reporting period, the Corporation made payments totalling $50.871 million (2013: $31.427 million from 16 November 2012 to 30 June 2013) to Origin Energy for electricity supply and services. Payments for these services were made on an arm’s length basis and on commercial terms and conditions in the ordinary course of business. The Corporation also received payments on an arm’s length basis from Origin Energy totalling $1.810 million (2013: $0.987 million) comprising payments for the sale of greenhouse trading certificates totalling $1.568 million (2013: $0.780 million), payments for service and usage charges on properties totalling $0.004 million (2013: $0.003 million) and payments of $0.238 million (2013: $0.204 million) to recoup the Corporation for unused electricity due to the Corporation generating its own electricity at treatment plant co-generation facilities.

During the previous reporting period, the following related party transactions with entities related to former key managementpersonnel occurred:

A close family member of the Corporation’s former General Manager, Corporate Services up to 13 July 2012, Ms D. Dawson, was the Transportation Business Stream Leader in the Sydney Office of GHD Pty Ltd during the previous reporting period. The Corporation engaged GHD Pty Ltd for the provision of various engineering services to the Corporation. Costs incurred by the Corporation with GHD Pty Ltd during the previous reporting period amounted to $4.480 million. Payments under these contracts were made on an arm’s length basis and on commercial terms and conditions in the ordinary course of business.

There were no other material transactions during either the current or previous reporting periods with entities related to key management personnel.



25. Financial risk management disclosures

Financial instruments and financial risk factors

The Corporation undertakes transactions in a range of financial instruments including:

• cash (refer note 4)• investments in marketable securities that are cash equivalents (refer note 4)• receivables (refer note 5)• payables and financial guarantees (if any) (refer note 12)• borrowings (refer note 13)• liabilities under the Blue Mountains Sewage Transfer Scheme agreement and the finance lease within the renegotiated

Macarthur Water Filtration Plant agreement (refer note 13)• derivatives.

These financial instruments expose the Corporation to a range of financial risks in its normal course of business operations. These risks include market risk (both foreign currency risk and interest rate risk), credit risk, liquidity risk and regulatory risk.

Financial risk management policies, objectives and reporting

The risks outlined above are managed centrally by the Corporation’s Treasury Management Unit in its Finance and Corporate ServicesDivision, in accordance with treasury management policies approved by the Board. These policies provide a framework of strict controls within the Corporation to manage the impact of these exposures on the financial results of the Corporation. The policies have also been set to operate in a manner that sits within the overall framework of the Public Authorities (Financial Arrangements) Act 1987 in NSW. The policies cover a number of aspects such as:

• approved delegation levels and segregation of duties for dealing, authorising and settling treasury management transactions• approved credit limits for dealing with counterparties • the types of treasury transactions, including derivatives, that the Corporation can enter into• approved limits for hedging foreign exchange exposures• the structure of debt and investment portfolios • approved benchmarks for managing performance.

Reporting of treasury and financial risk management performance to a designated sub-committee of the Board occurs on a quarterly basis. Treasury management strategies and performance are also reported on and reviewed on a monthly basis by a Treasury Committee of senior finance managers within the Finance and Corporate Services Division of the Corporation.

In addition, the NSW Treasury conducts regular reviews of the Corporation’s treasury management activities as to its compliance with the Public Authorities (Financial Arrangements) Act 1987.

Use of derivative financial instruments and hedge accounting

The Corporation enters into a small number of derivative financial instruments to manage exposure to foreign currency risk and interest rate risk. These instruments can include interest rate swaps, forward interest rate contracts, forward foreign exchange contracts, bond options and interest rate futures. Typically, the most common that are used are forward foreign exchange contracts and, to a lesser extent, interest rate swaps.

The Corporation uses derivative financial instruments for hedging purposes only and does not enter into or trade them for speculative purposes. Strict internal guidelines and treasury management policies approved by the Board exist to control the use of derivative financial instruments.

As mentioned in note 1, hedge accounting involves classification of hedging instruments into categories of fair value hedges and cash flow hedges. A third category known as hedges of net investments in foreign operations is also possible. However, this is not applicable to the Corporation. There were no derivative financial instruments in place at either the current or previous reporting date for the Corporation. Any derivative financial instruments would normally be used as cash flow hedges.

Details of any derivative financial instruments that have been entered into and still exist at the reporting date would be shown below in note 25(a) and their maturity analysis would be shown in note 25(c). They are usually recognised in the statement of financial position under Other financial assets or Other financial liabilities, depending on whether at the reporting date their fair value is measured such that a cash inflow or cash outflow respectively will occur.

Any cash flow hedges are recognised at fair value, with fair value movements recognised in other comprehensive income and reflected in a hedging reserve in the statement of financial position. Hedges are assessed for effectiveness at each reporting date. They are considered to be effective if their cash flows would offset the cash flows of the purchase commitments that they are hedging by a ratio of between 80 to 125%. Any ineffectiveness is recognised in profit or loss.

When cash flow hedges mature, any gain or loss that is ultimately realised is transferred from the hedging reserve in equity to the cost of the carrying amount of the asset acquired under the purchase commitments being hedged.



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Financial risk exposures

(a) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of financial risk for the Corporation: foreign currency risk and interest rate risk.

• Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The objective in managing foreign currency risk is to minimise the impact that changes in foreign exchange rates will have on the Corporation’s financial outcomes.

Exposure to foreign currency risk for the Corporation arises from contractual arrangements for the purchase or supply of goods and services where payment is either required to be made in foreign currency or is pegged to foreign currency rates.

The policies for management of foreign currency risks arising from contractual arrangements for the purchase or supply of goods and services are contained in the Corporation’s Treasury Management Policy manual. These policies include hedging of all foreign currency exposures in excess of Australian Dollars (AUD) 1,000,000 and foreign currency exposures above AUD 500,000 that exceed 90 days.

The Corporation generally manages foreign exchange exposures by entering into forward foreign exchange contracts to hedge the relevant purchase and sale commitments. It is the Corporation’s policy not to enter forward foreign exchange contracts until a firm commitment is in place and to negotiate the terms of these cash flow hedging derivatives to match the terms of the hedged item in order to maximise hedge effectiveness.

Under forward foreign exchange contracts, the Corporation agrees to exchange specified amounts of various currencies at an agreed future date at a specified exchange rate. Forward foreign exchange contracts can vary in duration from less than one month to several years and they are settled in net terms.

During the current reporting period, the Corporation’s exposure to foreign exchange risk remained low with one capital project requiring hedging for the acquisition of specialised equipment from overseas under the Corporation’s policy. The relevant forward foreign exchange contract was closed out before the reporting date and there were no other forward foreign exchange contracts outstanding for the Corporation at the reporting date.

• Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The objective in managing interest rate risk is to manage the impact that changes in interest rates will have on the Corporation’s financial outcomes, and thus support the delivery of financial targets contained in the Corporation’s Statement of Corporate Intent.

The Corporation is exposed to changes in market interest rates. Although there is a small exposure arising from cash and investment portfolios, the main exposure arises primarily from the Corporation’s portfolio of interest-bearing short and long-term borrowings.

The Corporation manages this exposure by implementing various treasury management policies and controls approved by the Boardthat are designed to ensure debt maturities are spread across the yield curve. These controls include approved parameters specifying the minimum and maximum percentages of debt issuance in maturity bands, approved parameters limiting the maximum exposure tofloating interest rate debt products, portfolio duration and weighted average life management targets and approved trading bands.

In addition, a small number of derivative financial instruments are entered into from time to time, when appropriate, to assist in managing interest rate risk. These mainly comprise interest rate swaps, but can also include forward interest rate contracts, bondoptions and interest rate futures where appropriate. The use of these derivatives is subject to various treasury management policies and controls approved by the Board, including limits on their use and levels of delegation.

The Corporation regularly analyses its interest rate exposure due to the regular use of borrowing facilities with the NSW Treasury Corporation to fund its extensive capital works programs. Within this analysis, consideration is given to potential renewals of existing positions, possible hedging strategies and the appropriate mix of fixed rate, floating variable rate and CPI indexed debt undertaken inlight of current and expected conditions in the economy that may affect interest rates. Debt portfolios are constantly repositioned and compared with approved benchmark positions in order to manage the impact of interest rates on finance costs over the long term and to measure portfolio performance.

The Corporation’s exposure to interest rate risk at the reporting date increased compared to the previous reporting date due to higherdebt levels. However, sustained low official cash rates and longer term bond rates have led to stable debt financing costs.

The Corporation’s interest rate exposures are being managed strategically by placing new and maturing debt for fixed maturity periods in fixed and floating rate debt instruments in line with parameters approved by the Board under current treasury management policies.Long-term fixed rate and CPI indexed bonds with maturities to 2041 have been issued in order to maintain a high modified duration of the debt portfolio over time.

All interim and long-term treasury management strategies in regard to borrowings have been approved by the Board. This includes further debt management strategies to manage the financial impact of regulatory risks that can occur in the current regulatory pricing environment . (See below under (d) Regulatory risk).

At the current and previous reporting date, there were no derivative financial instruments outstanding for managing interest rate risk.



The following table details the carrying amounts of financial assets and financial liabilities, including their weighted average interest rates, that are exposed to interest rate risk at the reporting date and that are not designated in cash flow hedges:

___________________________________________________________________________________________________________

Weighted average interest Carrying amount

rate2014 2013 2014 2013

Note % % $’000 $’000___________________________________________________________________________________________________________


At amortised cost:

Cash 4 2.30 2.55 3,922 3,831___________________________

3,922 3,831___________________________

• Financial liabilities

At amortised cost:

Borrowings:NSW Treasury Corporation loans 13 5.86 5.57 6,050,982 5,851,969Board’s loans 13 - 6.59 - 720Commonwealth Government loans 13 9.76 9.73 6,960 12,416Other advances 13 8.80 8.67 679 737

Obligation under Blue Mountains Sewage Transfer Scheme 13 6.25 6.25 58,044 59,956Finance lease liabilities 13 10.19 10.19 127,669 130,763

___________________________

6,244,334 6,056,561___________________________

Sensitivity analysis

The following table shows the effect on profit and equity after tax at the reporting date if nominal interest rates had been 100 basis points (that is, one percentage point) higher or lower than current levels, with all other variables being held constant and taking into account all underlying exposures and related hedges if any. A sensitivity of 100 basis points has been used, as this is considered reasonable based on the current level of both short-term and long-term NSW Treasury Corporation and Australian interest rates.

Based on the value of the Australian short-term interest rates (one month Bank Bill Swap Rate – BBSW) at the reporting date of 2.67%(2013: 2.82%), a 100 basis points increase would increase the rate to 3.67% (2013: 3.82%) and a 100 basis points decrease would reduce the rate to 1.67% (2013: 1.82%). This is broadly representative of recent interest rate increases and decreases within a certain range, which is reasonably possible given historical movements in official interest rates by the Reserve Bank of Australia (RBA). Historically, the RBA official cash rate has fluctuated between 4.75% and 2.50% over the past five years.

___________________________________________________________________________________________________________

Finance costs* Post tax profit* Equity* Higher (lower) Higher (lower) Higher (lower)

Judgement of reasonably 2014 2013 2014 2013 2014 2013possible events $’000 $’000 $’000 $'000 $’000 $'000

___________________________________________________________________________________________________________

Interest rates 100 basis points higher 2,166 42 (1,516) (29) (1,516) (29)Interest rates 100 basis points lower (2,166) (42) 1,516 29 1,516 29

* The impact shown is before capitalisation to qualifying assets and any consequential adjustments to recoverable amount. After capitalisation and consequential adjustments to recoverable amount, there would be no impact on finance costs or post tax profit. However, equity would be lower by $1.516 million (2013: $0.029 million lower) for a 100 basis point increase, and vice versa.



Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

ceFin

ancials

Ap

pen

dixes

Bu

siness excellen

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(b) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. In this context, it refers to the risk that indebted counterparties will default on their contractual obligations, resulting in financial loss to the Corporation. Exposures to credit risk for the Corporation exist in respect of all financial assets recognised in the statement of financial position, such as trade and other receivables, cash and cash equivalents, investments in marketable securities and derivative financial instruments (if any).

In respect of trade and other receivables, the Corporation monitors balances outstanding on an ongoing basis and has policies in place for the recovery or write-off of amounts outstanding.

In respect of cash and cash equivalents, investments in marketable securities and derivative financial instruments (if any), the Corporation only deals with creditworthy counterparties and recognised financial intermediaries as a means of mitigating against the risk of financial losses from defaults. Policies are in place to monitor the credit ratings of counterparties and to limit the amount of funds placed with those counterparties, depending on their credit rating. In addition, only highly liquid marketable securities are used for investment purposes.

There was no change to the level of credit risk exposure for the Corporation during the current reporting period. At the reporting date, there were no significant concentrations of credit risk in which the Corporation is significantly exposed to any single counterparty or group of counterparties having similar characteristics or similar geographical locations.

At the reporting date, the maximum exposure to credit risk for the Corporation is represented by the carrying amount of each financial asset in the statement of financial position. (Refer notes 4 and 5).

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is managed by the Corporation through the maintenance of extensive short-term and long-term cash flow forecasting models, and through the availability of financial accommodation facilities approved by the Treasurer of NSW under the Public Authorities (Financial Arrangements) Act 1987. These facilities include a long-term fixed borrowing facility with the NSW Treasury Corporation, a ‘Come and Go’ short-term borrowing facility with the NSW Treasury Corporation, and a bank account overdraft facility with the Corporation’s corporate banker. Details of all financial accommodation facilities are shown in note 13.

The objective of managing liquidity risk using the above facilities is to maintain a balance of funding and flexibility in ensuring cash is available each day to meet the Corporation’s financial obligations, whilst maintaining a daily bank balance with minimum surplus funds (with a target of between $Nil and $4 million on at least 80% of calendar days). In addition, the Corporation’s treasury management policies limit debt with terms to maturity of less than three months to 30% of total borrowings within the Corporation’s debt portfolio.

During the current reporting period, the Corporation’s liquidity risk increased due to the additional funding required to meet commitments under its extensive capital works programs, given the Corporation’s revenue levels under its current IPART Pricing Determination. The exposure to this increased liquidity risk was managed by obtaining the approval of the NSW Treasurer to secure the appropriate levels of both long-term and short-term borrowing facilities with NSW Treasury Corporation, and using the facilities in accordance with approved policies for cash flow management, so that all commitments could be met as and when they fell due.

While current liabilities are greater than current assets as at the current and previous reporting dates, the Corporation continues totrade as a going concern. The Corporation derives the majority of its revenue from the operation of its infrastructure assets. (Refer note 9). The NSW Treasury Corporation’s Come and Go Facility had $100 million unused (2013: $100 million) by the Corporation andsimilarly the bank overdraft limit was $10 million unused (2013: $10 million unused) as at the current and previous reporting dates. (Refer note 13).

During the current and previous reporting periods, there were no defaults or breaches on any loans payable. No assets have been pledged as collateral. The Corporation’s exposure to liquidity risk is deemed insignificant based on previous reporting periods’ data and current reassessment of risk.

(d) Regulatory risk

Regulatory risk is the risk that the Corporation’s actual cost of debt will not be fully compensated through the methodology employed by IPART in determining the Corporation’s prices to be charged to customers. The main components of regulatory risk are real interest rate risk, debt margin risk and inflation risk.

Regulatory risk is managed by the Corporation through policies and strategies to hedge the components of regulatory risk. These include strategies that align the debt portfolio to IPART’s cost of debt determination methodology.

The objective of managing regulatory risk is to ensure that the Corporation’s actual cost of debt does not exceed the cost of debt included in the regulatory Pricing Determination, and that this does not impact negatively on financial ratios and the Corporation’s corporate credit rating.



Mat

urity

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____

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____

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Sydn

ey W

ater

Cor

pora

tion

–30

Jun

e 20

14 P

age

87


Overview

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inkin

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overnan

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ancials

Ap

pen

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____

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____

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____

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____

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____

____

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____

Sydn

ey W

ater

Cor

pora

tion

–30

Jun

e 20

14 P

age

88


Con

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____

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2013

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____

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1,28

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____

____

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____

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__

Sydn

ey W

ater

Cor

pora

tion

–30

Jun

e 20

14 P

age

89


Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

ceFin

ancials

Ap

pen

dixes

Bu

siness excellen

ce

Fair values of financial assets and financial liabilities

Fair values of financial assets and financial liabilities are determined on the following bases:

• Cash

The carrying amount is considered to be a reasonable approximation of the fair value.

• Cash equivalents

Fair values are determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

• Investments in marketable securities


• Trade and other receivables


• Derivative financial instruments

If any, fair values are determined on the basis of valuation rates and valuations supplied by independent market sources.

• Trade and other payables


• Borrowings

• Bank overdraft balances

If any, the carrying amount is considered to be a reasonable approximation of the fair value.

• NSW Treasury Corporation loans


• All other categories of loans

Fair values are determined on the basis of discounted cash flows using the equivalent interest rate swap rates supplied by independent market sources. It is considered that this method closely approximates the settlement values of these loans should they be actively traded.

• Other financial liabilities

• Obligation under Blue Mountains Sewage Transfer Scheme

The fair value is determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

• Finance lease liabilities

The fair value is determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

The following table details the carrying amounts and fair values at the reporting date for all financial instruments:



___________________________________________________________________________________________________________

Carrying amount Fair valueNote 2014 2013 2014 2013

$’000 $’000 $’000 $’000___________________________________________________________________________________________________________


At amortised cost:Cash 4 3,922 3,831 3,922 3,831Trade and other receivables 5 311,827 322,272 311,827 322,272

____________________________________________________

315,749 326,103 315,749 326,103____________________________________________________

• Financial liabilities

At amortised cost:Trade and other payables 12 548,614 532,895 548,614 532,895Borrowings:

NSW Treasury Corporation loans 13 6,050,982 5,851,969 6,731,635 6,415,253Board’s loans 13 - 720 - 746Commonwealth Government loans 13 6,960 12,416 7,434 13,666Other advances 13 679 737 752 845

Obligation under Blue Mountains Sewage Transfer Scheme 13 58,044 59,956 181,101 184,305Finance lease liabilities 13 127,669 130,763 127,669 130,763

____________________________________________________

6,792,948 6,589,456 7,597,205 7,278,473____________________________________________________

Fair value hierarchy

There were no financial instruments at either the current or previous reporting dates that were carried in the statement of financial position at fair value determined by any of the three valuation methods defined below:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.,

as prices) or indirectly (i.e., derived from prices)• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).



Overview

Cu

stom

er focu

sFo

rward th

inkin

gC

orp

orate g

overnan

ceFin

ancials

Ap

pen

dixes

Bu

siness excellen

ce

___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

Management of capital

The Corporation’s objective when managing capital is to safeguard the Corporation’s ability to continue as a going concern, so that it can continue to provide appropriate returns for its shareholders and benefits for the community within its area of operations. This is achieved by maintaining an optimal capital structure that aims to minimise or reduce the cost of capital, whilst at the same time ensuring the Corporation’s operations and capital works objectives are achieved.

The capital structure of the Corporation is monitored on the basis of key performance indicators, which includes:

• the level of gearing for the Corporation (see below), and • its debt to equity ratio.

In determining appropriate prices for the Corporation to charge its customers, IPART, the Corporation’s pricing regulator, has adopted a standard gearing assumption of 60 per cent for the purposes of determining the Corporation’s weighted average cost of capital (WACC). The WACC is a key input in IPART’s regulatory pricing methodology in which a regulated asset base is used to determine the Corporation’s ‘annual revenue requirement’ (and ultimately prices to be charged to customers) based on the efficient use of resources and an appropriate rate of return on capital invested.

The table below shows the level of capital employed at the reporting date for the Corporation, as well as financial ratios used in the management of capital based on the definitions within the NSW Treasury’s Commercial Policy Framework.

Interest-bearing debt 13 6,058,621 5,865,842Other interest-bearing liabilities 13 185,713 190,719

___________________________

Total interest-bearing liabilities 6,244,334 6,056,561Total equity 19 6,394,399 5,965,040

___________________________

Total capital employed 12,638,733 12,021,601___________________________

% %

Gearing ratio 48.65 49.58(Interest-bearing debt / Interest-bearing debt + Total equity)

Debt to equity ratio 97.65 101.53(Total interest-bearing liabilities / Total equity)



___________________________________________________________________________________________________________

Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

26. Contingencies

(a) Contingent liabilities

Details of contingent liabilities by class are set out below. These are matters in which provisions are not required as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

Litigation

Claims made against the Corporation in which thereis a risk of financial exposure (other than matters coveredby workers’ compensation self-insurance and generalinsurance provisions – refer note 15) and which have been referred to lawyers amounted to: - 82

___________________________

In the directors’ opinion, disclosure of any further information about the relevant claims would be prejudicial to the interests of the Corporation.

There are other claims that are in existence at the reportingdate but they cannot be reliably measured at this time.

Site contamination and licence compliance

The Corporation has risk exposures from normal operations.These take the form of contaminated land/infrastructureand environmental incidents. These risks are managed in conjunction with the Office of Environment and Heritage. There is an ongoing program for management of contamination and its remediation. It is not possible to estimate contingent liabilities reliably, as the need for and the type of remediation are dependent on future events that cannot be determined at this time.

Matters identified in which there is a risk of financial exposure due to matters relating to contamination and environmentalincidents amounted to: 6,800 10,038

___________________________

Operational activities

Risk exposures occur as a result of operational activities. Theseexposures comprise various matters that have or possibly could lead to disputes over past or existing contracts or other operational activities. It is not possible to estimate contingent liabilities reliably asmost exposures require clarification of the extent of loss.

Matters identified in which there is a risk of financial exposurefrom operational activities amounted to: 1,500 150

___________________________

Guarantees provided

• Workers’ compensation self-insurance

Under the Workers’ Compensation Act 1987, as the Corporation was a self-insurer until 1 March 2007 and as a state owned corporation was deemed to not have governmentemployer status, the Corporation is required to provide a bank guarantee to the WorkCover Authority that secures theCorporation’s remaining self-insurance workers’ compensationliability. The value of the bank guarantee at the reporting date was: 27,835 43,082

___________________________

There are other indemnities that are in existence at the reporting date. However, they are considered remote or not able to bereliably measured at this time.



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Note 2014 2013$’000 $'000

___________________________________________________________________________________________________________

(b) Contingent assets

Details of contingent assets are set out below.

Contractual claims

The Corporation is seeking to recover costs incurred under contractual arrangements through litigation.

In the directors’ opinion, disclosure of any furtherinformation about the relevant claims would be prejudicialto the interests of the Corporation and cannot be reliablymeasured at this time. - -

___________________________

Insurance claims

The Corporation is seeking to settle a number of outstanding insurance claims and recover costs or losses from insurers.

In the directors’ opinion, disclosure of any further information about the relevant claims would be prejudicial to the interests of the Corporation and cannot be reliably measured at this time. - -

___________________________

End of audited financial statements





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7 Appendixes

162 Appendixes Sydney Water Annual Report 2014

Special projects

Appendix 1: Capital expenditure

Through our capital works program, we renew and upgrade existing assets, improve business efficiency, deliver government programs and support urban growth.

In 2013–14, we spent about $548 million on capital works, which was 17% under the budget of $658 million. We estimate we made efficiencies and scope reductions of $38 million with a further $53 million of intentional deferrals to future years. This was after reassessing asset condition and integrating asset planning initiatives. Excluding efficiencies, scope reductions and intentional deferrals, the variance is $19 million, or 2.9% below the Statement of Corporate Intent. This is within the target variance of five per cent.

Table 18: Major capital works projects completed 2013–14

Project Project benefits

Wastewater main renewals (outputs achieved in 2013–14)

We renewed 15.6 km of key wastewater mains that were near the end of their service life to reduce the impact of failures on the community and the environment.

We rehabilitated 21 km of reticulation wastewater mains to reduce dry weather and repeat overflows affecting customers.

Water main renewals (outputs achieved in 2013–14)

We renewed 31.4 km of water reticulation mains to maintain water supply and reduce interruptions.

We renewed 7.4 km of water trunk mains to maintain water supply and reduce interruptions.

Camden Wastewater Treatment Plant Biosolids Amplification Project

We increased the biosolids treatment capacity of the plant from 10.5 ML/d to 23 ML/d in response to growth in the catchment.

Upgrade of Wastewater Pumping Station SPS614 Narellan

This upgrade allows us to service future growth in the Turner Road precinct of the South West Growth Centre.

Sydney Water Annual Report 2014 Appendixes 163

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Table 19: Major capital works in progress as at 30 June 2014

Project Forecast completion

date

Budget $m

Cost to date $m

Malabar Wastewater Treatment Plant Improvement Program – to improve reliability, capability and performance of the plant.

June 2017 106 8

North West Growth Centre Package 2 and 3A – to provide water services to the second release precincts of the North West Growth Centre.

December 2014

104 77

Wastewater pumping station and wastewater treatment plant renewals – continuing to replace equipment near the end of its service life

Ongoing 87 a year Ongoing

Water reticulation main and water trunk main renewals – continuing to replace water mains near the end of their service life to reduce interruptions to supply.


Wastewater reticulation and wastewater trunk main renewals – continuing to replace and rehabilitate wastewater mains near the end of their service life to reduce the impact of failures on the community and the environment.


Bargo Sewerage Scheme – constructing wastewater pipes to connect around 830 properties. The scheme will protect the environment and reduce risks to public health.

June 2015 54 39

Galston and Glenorie Sewerage Scheme – constructing wastewater pipes to connect about 687 properties. The scheme will protect the environment and reduce risks to public health.

June 2016 48 5

South West Growth Centre Second Release Precincts (Wastewater) – constructing wastewater infrastructure to service growth in the precincts of East Leppington, Leppington North, Leppington and Emerald Hills.

June 2016 46 4

North Head Wastewater Treatment Plant Odour Scrubber – replacing an odour scrubber to reduce corrosion and odour emissions.

June 2016 44 7

Information technology projects – continuing minor projects to reduce operating expenditure, renew IT systems and equipment, and deliver new systems and capabilities.


Buxton Sewerage Scheme – constructing wastewater pipes to connect about 701 properties. The scheme will also protect the environment and reduce risks to public health.

June 2015 48 27

Astrolabe Park Stormwater Renewal – replacing existing stormwater culverts.

July 2017 30 1



date

Budget $m

Cost to date $m

Cronulla Odour Management – reducing the impact of odours from plant on nearby residential and commercial developments to meet licence requirements. The original budget of $19.3 million was increased as tendered cost estimates were over the approved funding. Project delayed six months by additional concrete repairs.

October 2014 30 26

Metropolitan IICATS Water Remote Terminal Unit Renewal – will replace remote terminal units, used to control and monitor assets at 324 sites to meet current and future operational needs.

June 2015 29 17

St Marys Wastewater Growth – constructing a new wastewater pumping station and wastewater mains to service growth and maintain wet weather performance in the St Marys area.

June 2015 24 1

West Dapto (Package 1) – constructing water and wastewater infrastructure to service growth in the West Dapto Urban Release Area.

January 2016 24 7

Menangle Park Wastewater (Stage 1) – constructing a new wastewater pumping station and wastewater mains to service growth within the Menangle Park Release Area.

November 2015

24 2

Wastewater Treatment Plant Accommodation Program Stage 2 – to modify and redesign wastewater treatment plant offices at North Richmond Water Filtration Plant, Malabar, St Marys and Penrith wastewater treatment plants.

July 2016 23 1

Cowan Sewerage Scheme – constructing wastewater pipes to connect around 248 properties. The scheme will also protect the environment and reduce risks to public health.

June 2015 20 16

Reservoir Renewal and Reliability Program – continuing to ensure reservoirs and associated equipment operate at lowest costs complying with regulatory requirements.


Douglas Park Sewerage Scheme – constructing wastewater pipes to connect around 154 properties. The scheme will protect the environment and reduce risks to public health.

June 2015 15 10

New SPS 1146 Balmain (to replace SPS 008) – constructing a new wastewater pumping station to provide reliable wastewater services to the Balmain area.

November 2014

15 6

Wilton Sewerage Scheme – constructing wastewater pipes to connect around 256 properties. The scheme will protect the environment and reduce risks to public health.

June 2015 14 9

Winmalee Tunnel Improvement – will ensure the wastewater system continues to operate safely during heavy wet weather events and protects the tunnel from structural damage.

January 2015 13 10


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date

Budget $m

Cost to date $m

Picton Sewerage Amplification Stage 1 – constructing a wastewater main to service West Picton and upgrading Picton Wastewater Treatment Plant facilities.

June 2015 12 2

Water pumping stations – continuing to improve reliability and safety and minimise life cycle costs of water pumping stations.


West Hoxton Sewerage Scheme – constructing wastewater pipes to connect around 91 properties. The scheme will protect the environment and reduce risks to public health.

June 2015 9 7

Green Square Trunk Stormwater Drainage – will increase stormwater drainage capacity in Green Square Town Centre to reduce risk of flooding and facilitate development.

December 2017

Commercial-in-confidence due to current

tender process

1

Drivers of planned capital expenditure for the next financial year

Our capital works budget for 2014–15 is $701 million (nominal – not including capital borrowing cost). Drivers of planned capital expenditure are (2014–15 forecast in brackets):

• asset renewal and rehabilitation to meet system performance regulations and customer service levels ($416 million)

• development of new water, wastewater, recycled water and stormwater infrastructure to meet the needs of urban growth in both infill (existing) and greenfield (new) areas including North West and South West growth centres ($192 million)

• NSW Government programs, mainly priority sewerage programs, to meet Operating Licence requirements. This includes substantial investment in the Bargo, Buxton, Cowan, Douglas Park, Galston and Glenorie, West Hoxton and Wilton sewerage schemes ($48 million)

• new regulatory standards, such as wastewater system performance under environmental protection licences ($17 million)

• business efficiency measures, such as information technology or energy saving projects that reduce operating expenditure ($28 million)

• planning to replace our customer billing software.

Over the next five years, from 2014–15 to 2018–19, we will deliver a capital works program of about $3.6 billion in nominal (escalated) dollars.


Appendix 2: Community investment

Our Strategic Partnerships Program covers community sponsorships, industry conferences, business partnerships, donations and partnership servicing. Partnership servicing is money we spend to attend and provide services like water trailer and mobile water refill units, education activities and community engagement at events. We use the Strategic Partnerships Program to strengthen our relationships with the community and key stakeholders.

The program helps us to engage and educate the community about:

• water quality

• the value of water and using it sustainably

• our role in the urban water cycle

• how people affect the urban water cycle

• environmental protection

• public health

• the benefits of drinking tap water

Because our contracts for donations and sponsorship commitments contain commercial information of Sydney Water and the sponsored organisations, we follow standard business practice to keep them commercial-in-confidence.

In 2013–14, we continued our long-term partnerships with:

• Taronga Zoo

• Sculpture by the Sea

• the Powerhouse Museum

• Keep NSW Beautiful (formerly Keep Australia Beautiful)

• Sutherland to Surf

• City to Surf

• the Illawarra Surf Premiership

In January 2013, we transferred our Streamwatch Program to the Australian Museum. We are providing four years’ funding to run the program and support community groups.

We have two new agreements with the Urban Development Institute of Australia (UDIA) and the Total Environment Centre. These partnerships help us enhance our cities’ liveability and allow us to collaborate with some key stakeholder groups.

In 2013–14, Sydney Water donated more than $180,000 to charity. Our investment focuses on general hardship and mental health. It also includes the Peter Cullen Scholarship, WaterAid and dollar-matching for staff fundraising towards disaster charity appeals.


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Table 20: Funds granted to non-government organisations in 2013–14

Program 2013–14

Sponsorships and partnerships $580,945

Streamwatch $215,000

Donations1 $181,974

Partnership servicing $292,246

Total $1,270,165

1 Includes funds raised by our graduates for a nominated charity and dollar matching by Sydney Water. This program began in 2011–12 and was not previously reported.

Appendix 3: Research and development

We invested $6.11 million over 31 research and development projects in 2013–14. Of this, we invested $474,718 in key national and international research alliances. We also committed $55,904 through arrangements with our Build-Own-Operate (BOO) water filtration plant partners.

The key drivers of the research program are to:

• maintain safe, high quality drinking water

• improve our understanding of our assets and our ability to predict their long-term performance

• better understand and respond to climate variability and long-term climate change

• improve energy efficiency

• improve environmental performance

• better understand water supply and demand balance issues

• successfully implement water recycling schemes.

Table 21: Major alliance and collaborative research investment 2013–14

Research partner Area of focus Sydney Water investment 2013–14

Water Services Association of Australia (WSAA)

• Water Research Foundation (formerly the American Water Works Association Research Foundation)

• Water Environment Research Foundation

• Water Reuse Association

• Drinking water quality and public health, asset management practices, sustainable water supplies and climate change

• Water quality research and innovative technologies for improving the water environment

• Promote water recycling and desalination through research and technical meetings

$474,718

Water filtration plants: BOO research and development

Water quality and public health, treatment technologies, wastewater treatment

$55,904 (Excludes funding from

BOO partners)

Total alliance and collaborative subscriptions

$530,622


Table 22: Completed research projects (>$100,000) 2013–14

Project title Sydney Water investment to 30 June 2013

Sydney Water investment to 30 June 2014

Estimated total project investment

(all partners)

Investigation of endocrine disruption in the Australian aquatic environment

$92,252 $115,707 $1,000,000

St Marys Water Recycling Initiative Aquatic Environmental Assessment Program

$151,004 $210,577 $2,166,436

A novel approach to quantify indirect ingestion of recycled water: improving the evidence base for water guidelines

$20,000 $20,000 $232,310

Table 23: Ongoing research projects (>$100,000) 2013–14

Project title Sydney Water investment to 30 June 2013*

Sydney Water investment to 30 June 2014*


(all partners)

Optimal management of corrosion and odour in sewers: Australian Research Council (ARC) linkage project

$1,628,479 $1,699,466 $21,000,000

Advanced condition assessment and pipe failure prediction

$3,092,003 $4,023,324 $13,400,000

Innovative failure data analysis to target critical mains for condition assessment

$176,985 $195,477 $225,000

A new management tool for effective wastewater source control: Australian Research Council linkage project

$948,722 $1,159,399 $3,665,000

Smart Grid Smart City Project with Ausgrid

$261,401 $332,158 $100,897,600

Biosolids research and development $1,100,830 $1,746,381 $2,250,000

Hawkesbury-Nepean water quality modelling

$3,729,254 $4,573,572 $6,000,000

NSW Environmental Trust environmental risk assessment of selected human pharmaceuticals

$9,648 $9,648 $400,000

Treatment requirement for Australian source waters

$20,555 $25,380 $470,000

Monitoring membrane integrity for virus removal

$22,893 $23,846 $193,000


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Project title Sydney Water investment to 30 June 2013*

Sydney Water investment to 30 June 2014*


(all partners)

National Demonstration Education and Engagement Program to investigate and address the barriers to public acceptance of adding recycled water to drinking water supplies

$66,933 $81,242 $10,138,000

Environmental E. coli $33,973 $44,464 $1,060,000

Energy Research and Development Program

$632,873 $699,072 $762,500

BASIX multi-dwelling monitoring study $205,168 $259,422 $700,000

Regional climate modelling $120,814 $150,782 $2,500,000

Climate change risk management framework tool – AdaptWater™

$452,896 $569,945 $1,025,000

Assessment of decentralised systems $186,155 $207,098 $300,000

Climate Change Adaptation Program $317,891 $338,102 $350,000

Low Carbon Living Cooperative Research Centre (CRC)

$187,938 $384,261 $1,000,000

Nutrient removal and fouling in MBR technology (ARC Project)

$140,177 $159,087 $1,143,000

Waterways modelling (Sydney Harbour and Botany Bay modelling)

$168,580 $1,384,255 $4,500,000

* Cumulative totals.

Guarantee of service

Appendix 4: Guarantee of service and social programs

Our Customer Contract sets out how we manage customers’ access to water supply, including:

• customers experiencing hardship

• delivery of customer assistance

• restriction, disconnection and restoration procedures.

No changes were made to these Customer Contract provisions during 2013–14.

We continue to implement the 2010–2015 Payment Assistance Strategy, which we developed in consultation with Sydney Water’s Customer Council. This ensures our program applies industry best practice and meets the needs of customers experiencing hardship, now and in the future.


Our customer service policies and programs help maintain services for customers in financial hardship. Over 240 community welfare agency partners help us deliver these programs.

In 2013–14, our customer assistance programs included:

• Pensioner Concession Scheme – Each year, we give concessions to about 230,000 pensioners on their water bills. Pensioners are eligible for concessions if they hold a Pensioner Concession Card, a Department of Veterans’ Affairs Gold Card or if they receive a Department of Veterans’ Affairs intermediate rate pension.

• BillAssist – Our team of qualified professional case coordinators work with residential customers experiencing financial hardship. We provide personalised support, advice and payment assistance, and refer customers to other specialist services.

• Payment Assistance Scheme (PAS) – This scheme helps customers who are having difficulty paying their water bill. After completing a hardship assessment, community welfare agencies or BillAssist case coordinators can approve credit directly to the customer’s Sydney Water account. This service is available to customers who own and occupy their own home or private tenants responsible for paying for their water use. Customers must agree to an instalment plan (see below), if they have already received PAS credits in the last 12 months.

• PlumbAssist – We provide essential or emergency plumbing repairs to improve water efficiency and reduce water costs or where there is a risk to health or public safety. Eligible customers must own and live in their home, be experiencing financial hardship and be unable to afford plumbing repairs. We normally repair leaking or broken taps, toilets and hot water services through PlumbAssist.

• Payment arrangements – We help customers facing financial difficulty with flexible payment plans. We can defer customer payments for a short time, or arrange smaller, regular payments using the customer’s preferred payment method.

• Centrepay referral – Customers can choose to pay bills by having a regular amount deducted from their Centrelink payments. We can register customers for Centrepay by phone. Centrepay is a free direct bill-paying service for customers who receive Centrelink payments.

For more information on our financial assistance programs visit our website.

Outreach

In 2013–14, Sydney Water briefed 20 community welfare agencies on our Payment Assistance Scheme.

We continue to work with both agencies and customers to improve access to our information and services for specific customer segments. In 2013–14, we focused on:

• seniors

• culturally and linguistically diverse customers

• customers with mental health problems

• customers who have a disability

• families.

We have been working with key stakeholders representing these segments to understand and remove the barriers that make it difficult for these customers to access information or help and improve the way we work with new/existing partners.

http://www.sydneywater.com.au/SW/accounts-billing/paying-your-bill/financial-assistance/


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We regularly seek outreach opportunities to promote our Payment Assistance Scheme and available services. In 2013–14, we attended the 2014 Premier’s Gala Concert as part of Seniors Week, Local Community Services Association (LCSA) annual conference, Communities Shaping the Future and the Energy + Water Consumers’ Advocacy Program (EWCAP) Conference.

Social programs

Sydney Water runs several social programs under the direction of the NSW Government. The main goal of the programs is to give all our customers adequate access to water, wastewater and stormwater services. We provide concessions to eligible recipients and the NSW Government reimburses us.

During 2013–14, we spent nearly $174 million on social programs.

Table 24: Social programs invested in 2013–14

Social program 2013–14 $m

Pensioner water concessions 137.5

Exempt property forgone revenue 19.3

Payment Assistance Scheme 0.9

Priority Sewerage Program 15.7

Blue Mountains septic pump-out 0.2

Total 173.6

In 2013–14, there was an increase of $17.9 million (or 12%) in total expenditure from the previous year. This was mainly due to the timing of the Priority Sewerage Program.

Pensioner Concession Scheme

We provide rebates to pensioners for water, wastewater and stormwater service charges. The rebates cover:

• 100% of the water service charge

• 50% of the drainage service charge

• 83% of the wastewater service charge.

All valid pensioner concession card holders are eligible for this scheme.

In 2013–14, we gave about 234,000 pensioner households concessions on water, wastewater and drainage service charges. The typical concession was about $600 a pensioner, at a total cost of just over $137 million.


Exempt Properties Scheme

The Sydney Water Act 1994 states that certain types of properties are exempt from paying service charges. We give exemptions following an application and on-site inspection. Land owned and used by not-for-profit community services organisations are generally exempt.

During 2013–14, we granted service charge exemptions to more than 10,000 properties. We spent over $19 million on the scheme.

Payment Assistance Scheme

We provide various forms of help to customers experiencing financial hardship or with a low income. Our Payment Assistance Scheme applies credit to eligible customers’ water bills. This service is available to customers assessed as experiencing financial hardship, who own and occupy their own home or private tenants responsible for paying for their water use.

The number of customers seeking help through this scheme has increased in recent years. Our aim is to enable customers having financial difficulties to manage payments, reduce debts and use mainstream payment channels. Under this program, we give customers experiencing financial hardship credit to ensure they can maintain their connection to essential water and wastewater services.

We spent over $900,000 on this scheme in 2013–14.

Priority Sewerage Program

Under the Priority Sewerage Program, we extend reticulated wastewater services to areas with no wastewater pipes. The NSW Government determines and prioritises these areas. It contributes $6,000 a lot, for each property to be able to connect to the wastewater service. The government reimbursed just under $16 million to Sydney Water in 2013–14, contributing to the potential connection of over 2,600 properties across six townships.

Blue Mountains Septic Pump-out Scheme

In 2013–14, we provided a subsidy for 72 customers in the Blue Mountains with wastewater pump-out services. This subsidy ended on 30 June 2014. Sydney Water has liaised with impacted customers in relation to alternative servicing solutions.


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Sydney Water’s five-year history of social program expenditure

Figure 13: Social programs expenditure 2009–10 to 2013–14S

oci

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s

Pensioner Rebate Scheme

Blue Mountains Septic Pump-out

Exempt Properties Scheme

Priority Sewerage Program

Hardship Support Scheme

0

50

100

150

200

2009–10 2010–11 2011–12 2012–13 2013–14

Table 25: Social programs expenditure 2009–10 to 2013–14

Social programs 2009–10 $m

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

Pensioner Rebate Scheme 114.6 123.9 133.8 135.1 137.5

Exempt Properties Scheme 12.3 13.9 15.1 19.1 19.3

Payment Assistance Scheme 0.7 0.8 1.0 1.1 0.9

Blue Mountains Septic Pump-out Scheme

0.7 0.6 0.3 0.2 0.2

Priority Sewerage Program 1.9 5.0 1.7 0 15.7

Total 130.2 144.2 151.9 155.5 173.6


Appendix 5: Multicultural Policies and Services Program 2013–14

We recognise that many of our customers are from culturally and linguistically diverse (CALD) communities. Below is a summary of our initiatives to connect with these communities in 2013–14.

Strategy Key initiatives and achievements

To develop and implement strategies targeting CALD customers, based on demographic information, needs analysis and market research

The Payment Assistance Program delivers assistance to lower income customers from diverse backgrounds. We provide financial and water saving assistance and ongoing access to services.

In 2013–14, we engaged NSW Health’s Multicultural Health Communication Service (MHCS) to help us better understand CALD customers’ needs. We want to determine their channel and communication preferences and the barriers these customers face when trying to access support or information from us.

The initial phase of this work focused on improving access to our financial assistance information and services. MHCS helped us to better support CALD customers by:

• reviewing our current communication channels

• reviewing how and where we deliver information about payment assistance

• reviewing technological accessibility issues

• developing additional culturally appropriate communication material

• developing and implementing cultural competency training for staff.

We continue to seek partnering opportunities with community agencies representing the CALD community. We partnered with 20 agencies this year.

We will continue to expand our outreach into the CALD community in 2014–15.

To provide equitable and accessible services

Sydney Water runs a Customer Council, which includes a representative from the Ethnic Communities Council.

We provide free phone interpreter services for customers requiring translation services. We also provide multilingual brochures and information for customers experiencing financial hardship in Cantonese, Korean, Mandarin, Vietnamese, Arabic, Greek, Italian and English.

Community agencies like St Vincent de Paul Society and various diversity and migrant resource centres help distribute this information to CALD communities.

We have formed partnerships with community agencies that have specialised access to CALD groups. This includes 20 agencies that deliver emergency relief.


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Appendix 6: Promotions

Providing services to over four million customers means we need to produce a lot of communications materials. Most of these provide information, instruction or updates on our water, recycled water, wastewater and stormwater services and are published on our website. In 2013–14, we published many newsletters, reports, fact sheets, guides and videos, which are summarised below.

Table 26: External communications materials produced in 2013–14

Month Name of publication Type

July North West Growth Centre Pumping Station Fact sheet

July Stormwater service drainage charges Fact sheet

July Review of environmental factors – Malabar Wastewater Treatment Plant Process & Reliability Renewals & Improvements Project

REF

July Winmalee Wastewater System Improvement Project – Lugano Avenue, Springwood community update July 2013

Fact sheet

July Winmalee Wastewater System Improvement Project community update July 2013

Fact sheet

July Website rebuild Q&A

July Douglas Park Wastewater Scheme July 2013 Booklet

July Sewer Mining – How to set up a sewer mining scheme Booklet

July Stormwater harvesting – How to collect and re-use stormwater from Sydney Water’s stormwater system

Booklet

July Waterwrap Aug – Oct 2013 Newsletter

July Business update Aug – Oct 2013 Newsletter

July Your water Aug – Oct 2013 Newsletter

July Wet weather overflows strategic framework Submission

July SewerFix™ Program – improving the wastewater and stormwater systems Fact sheet

July Learn about filtration (web-ready) Interactive

July St Marys Advanced Water Recycling Plant (web-ready) Interactive

July How wastewater is treated and recycled (web-ready) Interactive

July Urban water cycle (web-ready) Interactive

July Wilton Wastewater Scheme connection Guide

July Orchard Hills Water Filtration Plant Fact sheet

July Vacuum wastewater systems Fact sheet

July St Marys Water Recycling Plant Fact sheet

July St Marys Advanced Water Recycling Plant Fact sheet

July Cronulla Wastewater Treatment Plant Fact sheet

July Graduate interviews Video

August West Hoxton Wastewater Scheme update Newsletter

August Malabar Wastewater Treatment Plant Fact sheet



August Bargo Wastewater Scheme project update Newsletter

August Buxton Wastewater Scheme project update Newsletter

August North West Growth Centre maintenance hole Fact sheet

August North West Growth Centre wastewater ventilation system Fact sheet

August Maintaining your stormwater system (fencing) Calling card

August PlumbAssist pipejetting Form pad

August Malabar Wastewater Treatment Plant Improvement Project Newsletter, handout and poster

August Excursion booking Form

August School excursions: Safety conditions and excursion checklist Fact sheet

August Water Recycling Education Centre: Stage 5 Geography Fact sheet

August SewerFix™ Program – South Western Suburbs Ocean Outfall System Project Fact sheet

August SewerFix™ Program – Narrabeen Submain Project Fact sheet

August Water efficiency report 2013 Report

August Video series Q&A on leaks and breaks Video

September Liveability for IWA conference Video

September Commercial pipejetting Calling cards, brochure, fact sheet

September Environment Plan 2013–2018 Report

September South West Growth Centre – Planning for new wastewater services for the second release precincts

Newsletter

September Algal capability Flyer

September North Head Wastewater Treatment Plan Fact sheet

September Cowan Wastewater Scheme update September 2013 Fact sheet

September Video on AdaptWater for Tapped In newsletter Video

September Liveability video for next generation infrastructure Video

September Rouse Hill Water Recycling Plant Fact sheet

September Penrith Water Recycling Plant Fact sheet

September North Richmond Water Filtration Plant Fact sheet

September Reducing odour and corrosion in the wastewater network Fact sheet

September Douglas Park Wastewater Scheme September 2013 Newsletter

September Orchard Hills Water Filtration Plant, Water Recycling Education Centre: HSC Chemistry

Fact sheet

September Water Recycling Education Centre – HSC Earth & Environmental Science Fact sheet

September Liveable cities Video

September WHS newsletter September email

October Waterwrap Nov 2013 – Jan 2014 eNewsletter


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October Business update Nov 2013 – Jan 2014 Newsletter

October Your water Nov 2013 – Jan 2014 Newsletter

October Sewer notification reply slips Flyer

October Meter reading – self read Calling card

October Balmain Wastewater Pumping Station project community update – October 2013

Fact sheet

October Caddies Creek and Strangers Creek Landscape Master Plan October 2013 Newsletter

October Decisions report – Malabar Wastewater Treatment Plant Process and Reliability/Renewal Improvement Project

Report

October Review of environmental factors submission – North Head Wastewater Treatment Plant

Submission

October Tree roots in private sewer Fact sheet

October Powells Creek Bank Naturalisation Project Newsletter

October Water services repair Calling card

October North Head Wastewater Treatment Plant upgrade October 2013 Newsletter

October 2012–13 Annual electricity report Report

October State of the Assets 2013 Report

October Annual Report 2013 Report

October Bargo Wastewater Scheme project update November 2013 Newsletter

October Buxton Wastewater Scheme project update November 2013 Newsletter

October Quakers Hill Water Recycling Plant Fact sheet

October Wollongong Water Recycling Plant Fact sheet

October Using science to solve real-world problems Advertisement

October Reducing corrosion and odour in the wastewater network Newsletter

October Review of environmental factors posters – North Head Scrubber Display

October Financial reports 2012–13 Report

October Water Week 2013 Video

October Emergency Control Centre staffing during October 2013 bushfires Video

October Temporary water service and neighbour notice Calling card

November Multilevel metering ads for Australian Plumbing and Plumbing Connections Advertisement

November Annual Report 2013 – MD’s message Video

November OSA Process – Winmalee WWTP (Biosolids technology assessment) Fact sheet

November Dewatering (Biosolids technology assessment) Fact sheet

November Knowledge Management System (Biosolids technology assessment) Fact sheet

November Recuperative thickening (Biosolids technology assessment) Fact sheet

November Home owner’s manual – pressure sewerage system Manual

November Tank Stream Video and brochure



November Critical maintenance on your recycled water system Calling card

November North Head Wastewater Treatment Plant improvements Fact sheet

November Footage of great white shark at NSOOS Video

November Douglas Park Wastewater Scheme connection guide Guide

November Barometric loop Fact sheet

November Transfer pipeline Fact sheet

November Water recycling – What to consider before setting up a recycled water scheme

Fact sheet

November Galston and Glenorie Wastewater Scheme – fact sheet series (5 topics) Fact sheet

November Georges River health warning Fact sheet

November Pull-up banner – Safety hazard reporter app Display

November Safety hazard reporter app Flyer

November WHS Newsletter November 2013 eNewsletter

December Cronulla OMP community newsletter December 2013 Newsletter

December Wet weather overflows video series (7 chapters) Video

December Climate Change Adaptation Program: outcomes Brochure and booklet

December Wet Weather Overflows Strategic framework – Addendum Environmental risk management methodology – Technical report 3 December 2013

Report

December WHS newsletter December 2013 eNewsletter

January Waterwrap Feb – April 2014 Newsletter

January Business update Feb – April 2014 Newsletter

January Your water Feb – April 2014 Newsletter

January Science education flyer Flyer

January Galston and Glenorie Wastewater Scheme connection guide Fact sheet

January 10 ways to save water Fact sheet

January WaterAid snakes and ladders game Poster

January Green Square Sign

January Temporary bus stop relocation Sign

January Water services repair card Calling card

January Water demand infographics Graphic

January Cattai Creek Carrier Fact sheet

January Douglas Park Wastewater Scheme community update February 2014 Newsletter

January Galston and Glenorie Wastewater Scheme commercial connection guide Fact sheet

February Wollongong meter reading self read Calling card

February New requirements for multi-level building Fact sheet

February Prescribed trade waste pre-treatment listing request Form


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February South West Growth Centre community update February 2014 Newsletter

February Key facts about us Fact sheet

February Managing new developer process Fact sheet

February Asset adjustment manual Booklet

February 2015 Graduate Program Brochure

February WHS newsletter February 2014 eNewsletter

February Environment Policy Policy

March Terms and conditions and information on PlumbAssist Brochure

March Decisions report – North Head WWTP NSOOS Scrubber Replacement Project

Report

March Cowan Wastewater Scheme March 2014 community update Newsletter

March West Hoxton Wastewater Scheme community update March 2014 Newsletter

March Wilton Wastewater Scheme community update March 2014 Newsletter

March Sydney Water logo policy – web version Policy

March Climate Change Adaptation Program Fact sheet

March Cooks River Naturalisation Project timelapse animation Video

March Enhancing liveable cities approach Booklet

March Access to your property Calling card

March Reducing use, increasing renewable energy resources Fact sheet

March Enhancing the liveability of our cities Fact sheet

March WHS Newsletter March 2014 eNewsletter

March Sydney Water Map guidelines Booklet

April Wastewater pumping station Cowpasture Rd, Leppington Newsletter

April Green Square – review of environmental factors Booklet

April Wastewater pumping station 4th Ave, Austral Newsletter

April North Head Wastewater Treatment Plant community news April 2014 Newsletter

April Waterwrap May – July 2014 Newsletter

April Business update May – July 2014 Newsletter

April Your water May – July 2014 Newsletter

April Properties with Sydney Water maintenance holes Fact sheet

April SewerFix™ wastewater ventilation system Fact sheet

April Green Square – review of environmental factors Newsletter

April Buxton/Bargo PSP park closure Poster

May Multi-level metering requirements Advertisement

May Green Square Stormwater drain Fact sheet

May Critical work on your water supply Calling card



May Critical maintenance on your recycled water system Calling card

May SewerFix™ Wastewater ventilation system Fact sheet

May SewerFix™ work in Bexley Fact sheet

May Bacteriology Fact sheet

May Customer assistance Card

May WHS Newsletter May 2014 eNewsletter

May Community and stakeholder engagement policy Policy

May Safety passport Booklet

May General safety induction for contractors Brochure

May Contractor induction pass Pass

June Payment assistance scheme Form

June Customer Contract in brief 2014 Brochure

June Wilton Wastewater Scheme community update June 2014 Fact sheet

June Ozone trailer award submission Booklet

June South West Growth Centre community update June 2014 Newsletter

June On-site stormwater detention Guide

June Monthly meter reading Form

June Water meter test Form

June Developer satisfaction survey Fact sheet

June Section 73 response times Fact sheet

June Prices fact sheets (Your business, Your home, Other services) Fact sheet

June Rouse Hill area charges Fact sheet

June Testing your water pressure Fact sheet

June Reducing odour in corrosion – Seven Hills dosing unit update Fact sheet

June Bargo, Buxton, Wilton and Douglas Park – plumbers update Newsletter

June Connecting to the sewer – plumbers’ connection checklist Fact sheet

June Bargo, Buxton, Wilton and Douglas Park – plumbers’ information pack Cover sheet

June Review of environmental factors – Distribution Place NSOOS Chemical Dosing Unit Project June 2014

REF

June Connection checklist for eligible properties (Bargo PSP) Fact sheet

June Reasons to connect (Bargo PSP) Fact sheet

June Pesticide use plan Plan

June Malabar improvement project community update July 2014 Newsletter

June Allowances and rebates on your bill Policy

June Detaining stormwater on your property Policy

June WHS newsletter June eNewsletter

June Understanding the costs (Bargo PSP) Fact sheet


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Environmental performance

Appendix 7: Environmental performance against special objectives

As set out in the Sydney Water Act 1994, our principal objectives are to protect public health, to protect the environment, and to be a successful business.

In implementing these principal objectives, Sydney Water has the following special objectives:

• to reduce risks to human health

• to prevent the degradation of the environment.

When applying these special objectives, we review our performance against a number of clauses in the Sydney Water Act 1994 and the Protection of the Environment Administration Act 1991.

We provide links in the table below to publicly available reports and information that demonstrates our performance against these clauses.

We publish key performance reports on our website:

• Annual Report 2013–14

• Sydney Water Operating Licence Environment Report (Environment Plan 2013–18 Annual Report and Environmental Indicators Report 2013–14). This details our corporate performance information on our environmental objectives, targets and indicators

• Water Efficiency Report 2013–14. This outlines how we are meeting our water conservation requirements and contributing to water efficiency, leak management, and water recycling initiatives

• Sewage Treatment System Impact Monitoring Program (STSIMP) Report 2013–14. This summarises wastewater discharge quality, quantity and loads data for key pollutants against regulatory limits. It also contains wastewater overflows and recycled water data.


Table 27: Environmental performance against special objectives 2013–14

Special objectives clauses

Sydney Water performance report section

Additional public reports

Reduce the impact of Sydney Water’s discharges of substances which are likely to cause harm to the environment into the air or water, or onto land

Operating Licence Environment Report – Environment Plan 2013–18 Annual Report

Operating Licence Environment Report – Environmental Indicators Report 2013–14:

• Wastewater treatment and system discharges

• Biosolids

• Waste

• Electricity

• Greenhouse gas emissions

Annual Report 2014 – Chapter 4 – Forward thinking

Annual Report 2014 – Appendix 10: Waste Reduction and Purchasing Policy (WRAPP) annual statement

Water Efficiency Report 2013–14

Sewage Treatment System Impact Monitoring Program (STSIMP) Report 2013–14

• Input to National Greenhouse and Energy Reporting (NGER) scheme www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting (Note: the Clean Energy Regulator must publish an extract of the NGER register and data for the previous reporting period by 28 February)

• National Pollutant Inventory (NPI) returns www.npi.gov.au/npi-data/search-npi-data(Note: the Australian Government publicly releases NPI facility data for the preceding year on 31 March)

• Environment Protection Licence Annual Returns, Protection of the Environment Operations (POEO) Public Register www.epa.nsw.gov.au/prpoeoapp

• Input to Bureau of Meteorology (BOM) National Water Account www.bom.gov.au/water/nwa/

• Input to Office of Environment and Heritage (OEH) State of the Beaches Report www.environment.nsw.gov.au/beach/ar1314

• Waste Reduction and Purchasing Policy (WRAPP) Report

Promote pollution prevention by reducing, re-using and recovering energy, water and other materials and substances used or discharged by Sydney Water, through appropriate technology practices



• Trade waste

• Biosolids

• Waste

• Electricity indicators


Annual Report 2014 – Chapter 4 – Forward thinking


• Input to NGER scheme www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/


• WRAPP Report












http://www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting



http://www.npi.gov.au/npi-data/search-npi-data

http://www.epa.nsw.gov.au/prpoeoapp

www.bom.gov.au/water/nwa/

http://www.environment.nsw.gov.au/beach/ar1314









http://www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Pages/default.aspx

http://www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/Pages/default.aspx

http://www.bom.gov.au/water/nwa/


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Reduce significantly the combined environmental impact of the per capita amount of energy and water used and of other materials and substances discharged by Sydney Water



• Wastewater treatment and system discharges

• Biosolids

• Waste

• Electricity


Annual Report 2014 – Chapter 4 – Forward thinking:

• Environmental footprint

• Environmental performance monitoring

Annual Report 2014 – Appendix 10: WRAPP annual statement


STSIMP Report 2013–14


• Input to NGER scheme www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/

• WRAPP Report

• Environment Protection Licence Annual Returns, POEO Public Register www.epa.nsw.gov.au/licensing/lbl/annualreturn.htm

• Input to OEH State of the Beaches Report www.environment.nsw.gov.au/beach/ar1314

Minimise Sydney Water’s creation of waste by using appropriate technology, practices and procedures



• Biosolids

• Waste


• WRAPP Report

Regulate the transport, collection, treatment, storage and disposal of waste



• Trade waste










http://www.bom.gov.au/water/nwa/

http://www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/

http://www.cleanenergyregulator.gov.au/National-Greenhouse-and-Energy-Reporting/

http://www.epa.nsw.gov.au/licensing/lbl/annualreturn.htm

http://www.epa.nsw.gov.au/licensing/lbl/annualreturn.htm


















Adopt minimum environmental standards prescribed by complementary Commonwealth and State legislation and advise government to prescribe more stringent standards where appropriate



• Environmental compliance

Annual Report 2014 – Appendixes 7–10 – Environmental performance

• Government Gazette and online contaminated land management public record, NSW EPA website www.epa.nsw.gov.au/prclmapp/searchregister.aspx

Conduct public information and awareness programs about environmental programs, and involve the community in making decisions on environmental matters


Annual Report 2014 – Chapter 2 – Customer focus


• Input to 2010 Metropolitan Water Plan, NSW Government led by Department of Primary Industries, Office of Water www.metrowater.nsw.gov.au/planning-sydney

• Input into the OEH State of the Beaches Report www.environment.nsw.gov.au/beach/ar1314

Ensure the community has relevant information about hazardous substances arising from, or stored by any industry or public authority



• Trade waste

• Biosolids

• Waste


• NPI returns www.npi.gov.au/home

• Government Gazette and online contaminated land management public record, NSW EPA website www.epa.nsw.gov.au/prclmapp/searchregister.aspx

• WRAPP Report

Appendix 8: Heritage delegation actions

We have the regulatory power to approve and endorse certain work on Sydney Water’s assets listed on the State Heritage Register (SHR).

This includes granting excavation permits or exemptions for work that potentially impacts archaeological sites in our area of operations. We can also endorse conservation management plans and strategies prepared for assets listed on the SHR.







http://www.epa.nsw.gov.au/prclmapp/searchregister.aspx







http://www.metrowater.nsw.gov.au/planning-sydney

http://www.metrowater.nsw.gov.au/planning-sydney








http://www.npi.gov.au/home




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Table 28: Decisions made under the Heritage Council of NSW delegation 2013–14

Site Description Decision

Sydenham Pit and Drainage Pumping Station No. 1

New perimeter fence and gates around the site Approved under S57(2) – Standard Exemption 7

Prospect Reservoir Hydraulically decommission two water pumping stations

Approved under S57(2) – Standard Exemption 7

Potts Hill Reservoirs site Using Reservoir 1 as a film set, temporary works Approved under S57(2) – Standard Exemption 7

Wastewater Pumping Station 67 (SPS 67)

New chemical dosing unit building Approved under S57(2) – Standard Exemption 7

Potts Hill Reservoirs site Replace penstocks and hydraulic control units Approved under S57(2) – Standard Exemption 7

Wastewater Pumping Station 38, Dousing Hall, Mascot

New chemical dosing unit and chemical storage tanks


Ashfield Reservoir New access stairs Approved under S57(2) – Standard Exemption 7

Pipehead, Water Supply Canal and associated works

Hydraulically decommission two pumping stations Approved under S57(2) – Standard Exemption 7

Whites Creek Aqueduct Demolish depot buildings and remove palm trees Approved under S57(2) – Standard Exemption 7

Centennial Park flow-meter house

Restore building and reinstate slate roof Approved under S57(2) – Standard Exemption 5

Pipehead, Water Supply Canal and associated works

Mechanical upgrade to Water Pumping Station WP0022


Alexandra Canal Concrete pile retaining wall Approved under S57(2) – Standard Exemption 7

Centennial Park Reservoir No. 1

Bicycle track and temporary works depot Approved under S57(2) – Standard Exemption 7

Galston and Glenorie geotechnical investigations

Boreholes Approved under S139(4) – Schedule 1(b)

Burlington Park, Northmead Trenching and horizontal boring Approved under S139(4) – Schedule 1(b)

Galston and Glenorie Excavation Approved under S139(4) – Schedule 1(b)

Marsden and Lennox Streets, Parramatta

Excavation Approved under S139(4) – Schedule 1(c)

Alexandra Canal Concrete pile retaining wall Approved under S139(4) – Schedule 1(b)


Appendix 9: Threatened Species Conservation Act 1995

Section 70 of the Threatened Species Conservation Act 1995 requires public authorities to report on their implementation of recovery plans.

1. A public authority (including the Director-General but not including a council) identified in a recovery plan as responsible for the implementation of measures included in the plan must report on action taken by it to implement those measures in its annual report to Parliament.

Threatened species conservation activities

(a) Is Sydney Water identified as responsible for implementing measures included in a threatened species recovery plan? (Yes/No)

Yes – they include:

• Eastern Suburbs Banksia scrub

• Coastal Saltmarsh

• Endangered population of bandicoots (Perameles nasuta) at North Head

• Downy Wattle (Acacia pubescens)

• Green and Golden Bell Frog (Litoria aurea)

• Grevillea caleyi

• Recovery plan for Cumberland Plain Woodland.

(b) If yes, provide a description of the actions taken to implement those measures.

We have completed 140 property environmental management plans (PEMPs) for the most environmentally sensitive sites that we own. The sites include all of those with known threatened species, communities and populations.

We have included relevant requirements from recovery plans in each Sydney Water site-specific PEMP.

We have reviewed the implementation of the PEMPs to improve results and ensure better environmental outcomes for threatened species, communities and populations.

Eastern Suburbs Banksia Scrub

We have a plan of management for Botany Wetlands. This plan covers the wetlands themselves and Bonnie Doon, Eastlakes and The Lakes golf courses, which contain remnants of Eastern Suburbs Banksia Scrub (ESBS). Under the plan, the clubs who are responsible for the golf courses must implement environmental management plans to ensure their operations protect the ESBS. Protective measures include physical protection, bush regeneration and weed management.

We also prepared PEMPs for North Head Wastewater Treatment Plant (WWTP) and Maroubra Reservoir. We manually remove fuels over several years to reduce bushfire hazards at North Head WWTP and protect the ESBS.

Coastal Saltmarsh

We have a plan of management for Eve Street Wetland, Arncliffe. Our protective measures include:

• physical protection

• bush regeneration

• weed management

• maintenance of the wetland’s tidal regime.

As part of the Cooks River Naturalisation Project, construction on the first Coastal Saltmarsh site began last financial year. We expect this work to be completed in September 2014. This initiative will create significant new areas of saltmarsh in two sites.

We also mapped vegetation around all of Sydney Water’s tidal stormwater assets.


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(b) If yes, provide a description of the actions taken to implement those measures.

Endangered population of bandicoots (Perameles nasuta) at North Head

Our PEMP for North Head WWTP sets out how we help protect an endangered population of bandicoots (Perameles nasuta). We attend population recovery team meetings and contribute to feral animal control and other measures at North Head.

Acacia pubescens

We have PEMPs for Potts Hill Reservoir and the Pipehead to Potts Hill pipeline. Some of the stands of Acacia pubescens at Potts Hill are included in areas covered by a voluntary conservation agreement (VCA). We have fenced off and signposted the VCA area to protect the new growth of the species. A VCA contract is now in place to manage the environmental values as required, including monitoring and reporting on the Acacia pubescens.

We have prepared a PEMP for Prospect Reservoir.

We are implementing the plan of management for Chullora Wetlands, which includes weed management and potential habitat protection.

Green and Golden Bell Frog (Litoria aurea)

We have prepared PEMPs for Cronulla WWTP, St Marys Water Recycling Plant and Prospect Reservoir.

Botany, Eve St and Chullora Wetlands contain potential habitat for the Green and Golden Bell Frog. Plans of Management for these wetlands aim to protect and enhance this habitat.

Our work on the Cooks River naturalisation aims to restore potential Green and Golden Bell Frog habitat at three locations along the river.

Grevillea caleyi

We have prepared a PEMP for Site 2 south (Mona Vale Road), Tumbledown Hill and Terrey Hills.

Cumberland Plain Woodland

The Recovery Plan for Cumberland Plain Woodland identifies properties we own that contain Cumberland Plain Woodland. We have PEMPs for the most significant of these sites.

We have mapped vegetation for our trunk drainage land in the Rouse Hill Development Area. This includes several areas of Cumberland Plain Woodland. We are protecting and enhancing these remnants through bush regeneration and weed management in line with the plan of management, Sydney Water Trunk Drainage Land in the Rouse Hill Development Area.

Tadgell’s Bluebell (Wahlenbergia multicaulis Benth)

Our plants have been identified in a draft recovery plan for Tadgell’s Bluebell (Wahlenbergia multicaulis Benth). We are taking no action, as the only known plants on our property are in an isolated pocket of land that is rarely accessed.


Appendix 10: Waste reduction and purchasing policy (WRAPP) statement

This statement outlines how we implemented the NSW Government’s Waste reduction and purchasing policy (WRAPP), in line with Annual Reports (Statutory Bodies) Regulation 2010. This statement includes information on measures taken and progress on:

• reducing the generation of waste

• recovering resources

• using recycled material.

Reducing waste generation (waste avoidance and minimisation)

Reducing construction waste

We continue reducing the amount of waste we generate by using innovative measures to avoid excavation.

Work on the North West Growth corridor used vegetation waste, generated from mulching operations on-site, to provide ground cover for disturbed sites. The sewer relining program used pipe relining methods that require minimal digging and, by keeping the old pipes in place, avoided excavating over 9,000 tonnes of material.

Minimising office waste

Our office printers are set up with double-sided printing as the default setting. Every page on our intranet and website has a printer-friendly option to reduce paper use when information is printed.

Resource recovery (waste re-use and recycling)

Construction and maintenance projects

Sydney Water continued to recycle and re-use materials from construction and maintenance projects in 2013–14. We were able to divert from landfill over 97% of construction and demolition material generated by our Civil Delivery work.

Recycling office waste

We recycled over 1,200 tonnes of office waste during the period. This included office paper, computer equipment and co-mingled containers.

The use of recycled material (buying of recycled-content materials)

Procurement

We require suppliers of materials to complete an environmental assessment, if our contract with them is worth over $500,000. This encourages suppliers involved in the tender process to deliver products containing recycled content.


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Workforce

Appendix 11: Workplace health and safety (WHS)

Safety will always be a top priority for Sydney Water. To be a successful business we must build and maintain a safe, capable and committed workforce. We are focusing on improving our leadership, systems and risk management, to provide our staff with the appropriate training, tools, processes and support to avoid or minimise risk to health and safety.

In 2013–14, a new safety cognitive behaviours program was rolled out in the Service Delivery division and was very well received.

To achieve our goal of zero injuries to our staff, contractors and visitors, we are:

• simplifying procedures for staff and contractors

• improving Board reporting to enable the executives and directors to exercise due diligence

• supporting our Board Safety and Wellbeing Committee to ensure a committed approach to safety at Sydney Water.

In 2013–14, we did not incur any prosecutions under the Work Health and Safety Act 2011.

We have introduced the Incident Cause Analysis Method (ICAM) process for our medium-high risk rated incidents. These ICAMs allow us to analyse incidents and implement improvements and preventative measures to our safety systems.

Over 2013–14, we completed two phases of an independent audit on our assets’ risk profile, from a safety perspective. This greater understanding of our asset risk profile enables us to prioritise our safety systems and communications to staff.

We have been working with key business stakeholders to develop an initiative to help us meet our corporate strategy objectives to provide a safe environment for our staff, contractors and the public. Our safety theme for 2014–2017 is ‘Safe and well together’.

Indicator: Lost time injury frequency rate for Sydney Water staff and contractors

The LTIFR is the number of lost time injuries for each million hours worked. An injury is a ‘lost time injury’ if the person was away from work for one day/shift or more.


Figure 14: Lost time injury frequency rate for Sydney Water staff

0

5

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15

20

25

30

35

95/96 96/97 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 12/13 13/14LTIFR 28.46 25.45 21.40 21.78 18.19 11.86 12.34 10.28 9.70 14.83 8.20 6.65 5.25 3.68 4.86 6.14 6.43 2.29 3.87

Day

s/lo

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The frequency rate is the number of lost time injuries for each one million hours worked. The formula used for calculating frequency rates is: Frequency rate = rate = (number of LTIs / number of hours worked) x 1,000,000

Note: Results reflect the most recent data at time of reporting. Historical data is updated to include any LTI notifications received since previous reporting periods.

Figure 15: Lost time injury frequency rate and lost time injuries per month for Sydney Water staff

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Sydney Water LTIs per month Sydney Water LTIFR


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Figure 16: Contractor lost time injury frequency rate and lost time injuries per month

Contractor LTIs per month Contractor LTIFR

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Note: Results reflect the most recent data at time of reporting. Historical data is updated to include any LTI notifications received since previous reporting periods. Results are based on the number of contractor hours reported to Sydney Water.

Figure 17: Significant injury frequency rate for Sydney Water staff

Sydney Water MTIs Sydney Water SIFRSydney Water LTIs

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Appendix 12: Executive performance and remuneration

At 30 June 2014, 21.77% of Sydney Water’s staff-related expenditure was for senior executives.

Table 29: Executive performance and remuneration 2013–14

2013–14 $ range

Female Male Average remuneration $

488,100 and above – 1 688,402.00

422,501 – 488,100 – – –

299,751 – 422,500 2 6 358,786.63

238,301 – 299,750 7 23 257,565.17

167,100 – 238,300 50 203 190,685.10

Totals 59 233

Grand total 292

Figure 18: Organisation chart

Board of Directors

Managing Director

Business Strategy and Resilience

Customer ServicesFinance and

Corporate ServicesInformation Technology

Liveable City Solutions

People, Leadership and Culture

Service Delivery Transformation


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Appendix 13: Workforce diversity

Initiatives to remove discrimination in employment and promote workforce diversity

Appropriate workplace behaviour training

We continued to enforce appropriate workplace behaviour by having staff complete an e-learning package. There is a staff and a manager edition of the training to reflect different accountabilities. A total of 1,611 people (over 60%) completed the program by 30 June 2014.

Work/life balance

We continued to promote the availability of work/life balance tools such as elderly care and child care information kits.

Aboriginal and Torres Strait Islander EEO group

We celebrated National Aboriginal Indigenous Day Observation Committee (NAIDOC) Week at our Parramatta and Potts Hill offices.

We employed an additional seven Aboriginal and Torres Strait Islander trainees in 2013–14, taking the total number of identified Indigenous staff to 29, which is 1.2% of our workforce.

First language other than English EEO group

We continued to use the Community Language Allowance Scheme (CLAS) to support staff who use their expertise in another language to improve customer service.

Disability EEO group

We continued to support staff with temporary or permanent disabilities by providing flexible work arrangements.

Key workforce diversity strategies for 2013–14

We continued to refine the Indigenous Employment Strategy. We work with Indigenous communities and job networks to increase Aboriginal and Torres Strait Islander staff numbers through traineeships and mainstream employment.


Table 30: Workforce numbers

Human resources 2009–10 2010–11 2011–12 2012–13 2013–14

FTE – Permanent 2,794 2,749 2,604 2,459 2,288

FTE – Temporary 140 124 111 108 115

FTE – Part-time 120 132 118 112 106

Total 3,054 3,005 2,833 2,679 2,509

Other

Agency staff 182 171 108 100 123

Redundancies 80 60 160 149 77

Appointments 128 141 121 140 205

Average turnover 3.5% 3.3% 3.5% 4.6% 4.9%

Unplanned absences 3.8% 4.0% 4.3% 3.1% 3.4%

Calculations:

Staff numbers: We calculate staff numbers by apportioning the full-time equivalent (FTE) hours worked to the actual headcount numbers.

Average turnover: Staff initiated terminations rolling 12 months/average staff headcount (same time period).

Unplanned absences: Total unplanned absence hours/total paid hours rolling 12 months (same time period).

Statistical information on equal employment opportunity target groups

Table 31: Trends in the representation of EEO groups1

Target/benchmark

2009–10 2010–11 2011–12 2012–13 2013–14

No. % No. % No. % No. % No. %

Women 50% 817 26.3% 813 26.6% 780 27.1% 749 27.5% 750 29.5%

Aboriginal people and Torres Strait Islanders

2.6%2 20 0.6% 20 0.7% 21 0.7% 24 0.9% 29 1.1%

People whose first language is not English

19.0% 562 18.1% 559 18.3% 553 19.2% 490 18.0% 453 17.8%

People with a disability

N/A3 102 3.3% 93 3.0% 79 2.7% 76 2.8% 62 2.4%


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Target/benchmark

2009–10 2010–11 2011–12 2012–13 2013–14

No. % No. % No. % No. % No. %

People with a disability requiring a work-related adjustment

1.5%4 28 0.9% 25 0.8% 19 0.7% 20 0.7% 14 0.6%

Total staff 3,106 3,053 2,874 2,722 2,543

Notes:

1. Staff numbers are as at 30 June.

2. Minimum target by 2015.

3. Per cent employment levels are reported, but a benchmark level has not been set.

4. Minimum annual incremental targets: 1.1% (2011), 1.3% (2012), 1.5% (2013).

Table 32: Trends in the distribution of EEO groups5

EEO group Distribution Index6

Benchmark/target

2010 2011 2012 2013 2014

Women 100 100 99 98 99 99

Aboriginal people and Torres Strait Islanders

100 83 81 79 72 70

People whose first language is not English

100 100 99 99 98 104

People with a disability 100 89 89 90 89 91

People with a disability requiring a work-related adjustment

100 87 88 95 91 N/A

Notes:

5. Information included in Table 32 is provided by the NSW Public Service Commission.

6. A Distribution Index of 100 indicates that the centre of the distribution of the EEO group across salary levels is equivalent to that of other staff. Values less than 100 mean that the EEO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this tendency is, the lower the index will be. In some cases the index may be more than 100, indicating that the EEO group is less concentrated at lower salary levels. The Distribution Index is not calculated where EEO group or non-EEO group numbers are less than 20. Calculations exclude casual staff.


Appendix 14: Staff and industrial relations

This year has been successful for our industrial relations. We improved our performance in a cooperative and effective manner, working together with unions to secure the best outcomes for both Sydney Water and staff.

An important positive result was that unions did not lodge any disputes against us with the Fair Work Commission.

We have started initial preparations for negotiating the next Enterprise Agreement, and we hope to continue our constructive relationship with unions through this process.

Appendix 15: Consultant engagement

Table 33: Payments to consultants of engagements over $50,000 in 2013–14

Vendor name Contract number

Contract description Amount $

Ernst & Young 26946 Methodology accrual of unread meters 269,824.28

Marchment Hill Consulting 26968 Network Facility Renewals Program 170,500.00

Trustee Brewster Murray 26973 Condition Assessment Treatment Plants 97,950.00

538,274.28

There were 17 consultants engaged for $50,000 or less totalling

242,570.33

Total payments to consultants in 2013–14 780,844.61


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Appendix 16: Overseas travel

Table 34: Overseas travel 2013–14

Name Date of travel Destination Comments

David Gough 11 – 20 September 2013 Denver, USA Attended the WateReuse Association Board meeting, WateReuse Symposium Denver and discussions with Denver Water’s planning/strategy staff.

Jim Mitchell 16 – 20 September 2013 Singapore Presented at the Water Utilities Leaders Forum and visited sites related to Singapore International Water Week 2013.

Andrew Kirkwood

11 – 17 November 2013 Cook Islands Attended the Pacific Water & Wastes Association Conference to discuss and confirm details of the capacity development arrangements between Sydney Water and Eda Ranu.

Sandra Gamble 9 – 18 December 2013 Paris, France Presented at the first meeting of the Club of the World’s Premium Water Services, by invitation of The Syndicat des Eaux d’lle-de-France. Also met with representatives from SUEZ Environment and Thames Water.

Paul Freeman 11 – 12 February 2014 Auckland, New Zealand

Chaired the Water Services Association of Australia asset management committee meeting on behalf of the Managing Director.

David Gough 25 – 31 March 2014 Virginia, USA Chaired WateReuse Australia at the WateReuse Association Board meeting and strategic planning workshop.

Philip Woods 15 March – 21 April 2014 France & Germany A five week BOO Fellowship in France & Germany with Veolia Water to research international liveability projects that we could potentially apply in our work in Sydney, the Blue Mountains and the Illawarra.

Jim Mitchell 1 – 6 June 2014 Singapore Presented at the Singapore International Water Week 2014.

Jeyatharsini Rajalingam

26 April – 6 June 2014 UK Fellowship funded by TRILITY, Sydney Water’s Macarthur Water Filtration Plant build own operate (BOO) partner, to gain experience and input from the UK water industry for the $16 million Advanced Condition Assessment and Pipe Failure Prediction Project.


Information management

Appendix 17: Global Reporting Initiative

We follow international best practice by mapping our annual report against the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines 3.1 – an initiative of the United Nations Environment Program.

In our reporting, we have adopted the GRI principles of transparency, inclusiveness, completeness, relevance, sustainability context, accuracy, neutrality, comparability, clarity, reliability and timeliness. In line with these principles, Net Balance Management Group Pty Ltd independently verified selected environmental indicators and sustainability indicators from our Operating Licence, for the Annual Report 2013–14. The verification statement is on page 3 of this report.

Table 35: Global Reporting Initiative

Standard disclosures: Profile

Ref Indicator description Reported* Location

1. Strategy and analysis

1.1 Statement from the most senior decision maker of the organisation

Fully Pages 14–15

1.2 Description of key impacts, risks and opportunities Fully Pages 14–15, 34–38, 40–44, 53, 56

2. Organisational profile

2.1 Name of the reporting organisation Fully Page 2

2.2 Primary brands, products and/or services Fully Page 6

2.3 Organisational structure of the organisation, including main divisions, operating companies, subsidiaries and joint ventures

Fully Page 192

2.4 Location of organisation’s headquarters Fully Page 226

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report

Fully Pages 6, 9

2.6 Nature of ownership and legal form Fully Page 6

2.7 Markets served Fully Page 6

2.8 Scale of the reporting organisation Fully Pages 9–13

2.9 Significant changes during the reporting period regarding size, structure or ownership

Not applicable Not applicable

2.10 Awards received in reporting period Fully Page 18

3. Report parameters

3.1 Reporting period Fully Page 2

* Not applicable – indicator does not relate to Sydney Water’s operations. Not reported – Sydney Water does not gather data and report information included in this indicator


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3.2 Date of most recent previous report Fully 2012–13 report available at www.sydneywater.com.au

3.3 Reporting cycle Fully Page 2

3.4 Contact point for questions regarding the report Fully Page 2

3.5 Process for defining report content Fully Pages 2, 25, 198, 220–222

3.6 Boundary of the report Partially Pages 2, 25

3.7 State any specific limitations on the scope or boundary of the report

Not reported Not reported

3.8 Basis for reporting on joint ventures, partially owned subsidiaries, leased facilities, outsourced operations and other situations that affect comparability from last report


3.9 Data measurement techniques and the bases of calculations, including assumptions

Fully Throughout report

3.10 Explanations of the nature and effect of any re-statements of information provided in earlier reports

Not applicable Not applicable

3.11 Significant changes from previous reporting periods in the scope, boundary or measurement methods applied in the report

Fully Pages 29–31, 35–38, 41–43

3.12 GRI Content Index – table identifying the location of standard disclosures in the report

Fully Pages 198–206

3.13 Policy and current practice with regard to seeking external assurance for the report

Partially Page 198

4. Governance, commitments and engagement

4.1 Governance structure of the organisation Fully Pages 46–52

4.2 Indicate if the chair of the highest governance body is also an executive officer

Fully Pages 47, 52

4.3 For organisations that have a unitary board structure, state the numbers of members of the highest governance body that are independent and/or non-executive members

Fully Pages 47–51

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body

Partially Page 46

4.5 Linkage between compensation and the organisation’s performance for members of the highest governance body

Partially Page 46

4.6 Process of the highest governance body to ensure conflicts of interest are avoided

Fully Page 53






4.7 Process for determining required qualifications and expertise of the members of the highest governance body

Fully Page 46

4.8 Internally developed mission, codes of conduct and value statements

Fully Pages 6, 46

4.9 Process of the highest governing body for overseeing the organisation’s identification and management of economic, environmental and social performance

Fully Page 46

4.10 Process for evaluating the performance of the highest governance body

Fully Page 46

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation


4.12 Externally developed, economic, environmental and social charter, principles or initiatives to which the organisation subscribes and/or endorses

Fully Pages 6, 32, 34, 172, 174

4.13 Significant memberships in associations Partially Pages 47, 167

4.14 List of stakeholder groups engaged by the organisation

Fully Pages 7–8

4.15 Basis for identification and selection of stakeholders to engage

Fully Page 7

4.16 Approaches to stakeholder engagement, including frequency of engagement

Fully Pages 7, 28, 34, 37, 40, 166, 170–171, 174–180

4.17 Key issues and concerns that have been raised through stakeholder engagement and how the organisation has responded to these

Fully Pages 16–17, 28–29, 171–172, 174

Standard disclosures: Performance indicators


Environmental

Materials

EN 1 Materials used by weight or volume Fully Pages 13, 31

EN 2 Percentage of materials used that are recycled input materials


Energy

EN 3 Direct energy consumption by primary energy source

Fully Page 41. See also Operating Licence Environment Report 2013–14

EN 4 Indirect energy consumption by primary source Not reported Not reported





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EN 5 Energy saved due to conservation and efficiency improvements

Fully Page 41. See also Operating Licence Environment Report 2013–14

EN 6 Initiatives to provide energy efficient or renewable energy-based products and services, and reductions in energy requirements as a result of these initiatives

Partially Page 40. See also Operating Licence Environment Report 2013–14

EN 7 Initiatives to reduce indirect energy consumption and reductions achieved


Water

EN 8 Total water withdrawal by source Fully Page 31

EN 9 Water sources significantly affected by withdrawal of water


EN 10 Percentage and total volume of water recycled and re-used

Fully Pages 13, 31. See also the Water Efficiency Report 2013–14

Biodiversity

EN 11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas


EN 12 Description of significant impacts of activities, products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

Fully Pages 37, 42, 186–187

EN 13 Habitats protected or restored Fully Pages 42, 186–187

EN 14 Strategies, current actions and future plans for managing impacts on biodiversity

Fully Pages 186–187. See also Operating Licence Environment Report 2013–14

EN 15 Number of International Union for Conservation of Nature (IUCN) Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk


Emissions, effluents and waste

EN 16 Total direct and indirect greenhouse gas emissions by weight

Fully See Operating Licence Environment Report 2013–14

EN 17 Other relevant indirect greenhouse gas emissions by weight

Fully See Operating Licence Environment Report 2013–14





















EN 18 Initiatives to reduce greenhouse gas emissions and reductions achieved


EN 19 Emissions of ozone-depleting substances by weight Not reported Not reported

EN 20 Nitrogen oxides and sulphur oxides, and other significant air emissions by type and weight


EN 21 Total water discharge by quality and destination Fully Pages 37, 42. See also the Sewage Treatment System Impact Monitoring Program Report 2013–14

EN 22 Total weight of waste by type and disposal method Fully See Operating Licence Environment Report 2013–14

EN 23 Total number and volume of significant spills Fully Page 38. See also Operating Licence Environment Report 2013–14

EN 24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally


EN 25 Identity, size, protected status and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and run-off

Partially Pages 42, 186–187. See also Sewage Treatment System Impact Monitoring Program Report 2013–14

Products and services

EN 26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation

Fully Pages 40, 186–187. See also Water Efficiency Report 2013–14 and the Operating Licence Environment Report 2013–14

EN 27 Percentage of products sold and their packaging materials that are reclaimed, by category

Not reported Not applicable

Compliance

EN 28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Fully Pages 38. See also Operating Licence Environment Report 2013–14



























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Transport

EN 29 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce


Overall

EN 30 Total environmental protection expenditures and investments by type


Human rights

Investment and procurement practices

HR 1 Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening


HR 2 Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken


HR 3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained


Non-discrimination

HR 4 Total number of incidents of discrimination and actions taken


Freedom of association and collective bargaining

HR 5 Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be at significant risk and actions taken to support these rights


Child labour

HR 6 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour


Forced and compulsory labour

HR 7 Operations identified as having significant risk for incidents of forced or compulsory labour and measures to contribute to the elimination of forced or compulsory labour





Security practices

HR 8 Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations


Indigenous rights

HR 9 Total number of incidents of violations involving rights of indigenous people and actions taken


Assessment

HR 10 Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments


Remediation

HR 11 Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms


Society

Local community

SO 1 Percentage of operations with implemented local community engagement, impact assessments and development programs


SO 9 Operations with significant potential or actual negative impacts on local communities


SO 10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities


Corruption

SO 2 Percentage and total number of business units analysed for risks related to corruption


SO 3 Percentage of employees trained in organisation’s anti-corruption policies and procedures

Partially Page 213

SO 4 Actions taken in response to incidents of corruption Fully Page 213

Public policy

SO 5 Public policy positions and participation in public policy development and lobbying


SO 6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country



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Anti-competitive behaviour

SO 7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes

Fully Page 54

Compliance

SO 8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

Fully Pages 38, 54. See also Operating Licence Environment Report 2013–14

Product responsibility

Customer health and safety

PR 1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures


PR 2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes


Products and service labelling

PR 3 Type of product and service information required by procedures and percentage of significant products and services subject to such information requirements


PR 4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes


PR 5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

Fully Pages 16, 28–29

Marketing communications

PR 6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion and sponsorship


PR 7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion and sponsorship, by type of outcomes














Customer privacy

PR 8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

Fully Pages 207–208

Compliance

PR 9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services


Economic

Economic performance

EC 1 Economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments

Fully Pages 19–22, 56–59, 166–167

EC 2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change

Partially Pages 15, 40, 167

EC 3 Coverage of the organisation’s defined benefit plan obligations

Fully Pages 66,70, 85–86

EC 4 Significant financial assistance received from government

Fully Pages 75, 97–98

Market presence

EC 5 Range of ratios of standard entry-level wage compared to local minimum wage at significant locations of operation


EC 6 Policy, practices and proportion of spending on locally-based suppliers at significant locations of operation


EC 7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation


Indirect economic impacts

EC 8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind or pro bono engagement

Fully Page 162, 165, 172

EC 9 Understanding and describing significant indirect economic impacts, including the extent of impacts


* Not applicable – indicator does not relate to Sydney Water’s operations. Not reported – Sydney Water does not gather data and report information included in this indicator


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Appendix 18: Exemptions from reporting provisions

Table 36: Exemptions from reporting provisions 2013–14

Statutory requirements Statutory references Comments

Format of financial statements S 41B(c) Public Finance and Audit Act 1983

Exemption from preparing manufacturing, trading and profit and loss statements. Required to prepare an Operating Statement.

Paying accounts

• performance in paying accounts, including action to improve payment performance

Schedule 1

Annual Reports (Statutory Bodies) Regulation 2010

Statutory state-owned corporations are not subject to the payment of accounts provisions in Section 13 of the Public Finance and Audit Regulation 2010

Time for paying

• reasons for late payment

• interest paid due to late payments

Schedule 1


As above

Appendix 19: NSW Privacy and Personal Information Protection Act 1998

We are committed to protecting the personal information of the public, our customers, business partners and staff. Since 2002, we have voluntarily complied with the principles of the NSW Privacy and Personal Information Protection Act 1998 (PPIPA). This commitment is publicly stated in the Sydney Water Customer Contract 2010–2015 (Point 13.3). We are also subject to the NSW Health Records Information Protection Act 2002 (HRIPA).

We ensure that we:

• only collect relevant personal information for lawful purposes directly related to our activities

• protect personal information from misuse and unauthorised access

• take reasonable steps to check the accuracy of personal information before we use it

• do not give personal information to other organisations for marketing. If we are asked to give water usage details for a specific community or suburb, we only disclose the information if individual properties cannot be identified

• only use personal information for the purpose it was collected, or for related purposes

• ensure that staff who deal with personal information are aware of their obligations to protect privacy

• never disclose information we expect customers or their representatives to know

• disclose personal information to third parties if:– we are authorised or required to by law– we have verbal or written authority from the person– we can reasonably assume in the circumstances that the person would consent – there is a danger of injury or loss of life– our contractors need the information for essential activities.


Table 37: Privacy activity in 2013–14

Requests for information

Issues (Complaints) Total

Internal 51 0 51

External 2 3 5

Total 53 3 56

Still open 1 1 2

Actions we took to enforce our privacy practice for 2013–14 include:

• engaging Salinger Privacy to conduct a comprehensive review of our Privacy Compliance Framework

• conducting internal reviews in response to external complaints

• ensuring new staff did online privacy awareness training, and refresher courses were completed periodically by staff involved in higher-risk processes

• retaining Salinger Privacy for specialised privacy advice

• monitoring changes to the legal environment and precedents

• participating in the NSW Privacy Practitioners Network

• ensuring staff have access to relevant online and hardcopy privacy awareness services and literature.

Appendix 20: NSW Government Information (Public Access) Act 2009

We received 51 valid Government Information (Public Access) (GIPA) applications and one invalid application during the 2013–14 financial year. Of the 51 valid applications, the processing period allowed under the GIPA Act for seven applications extends into the 2014–15 financial year. One additional application received in 2012–13 was decided in 2013–14 as agreed with the applicant.

In 2013–14, 45 applications were decided as follows:

• 34 applications were granted in full

• 1 application was partly granted, because there were overriding public interest concerns against disclosing some information (as listed in table, section 14 of the GIPA Act)

• 8 applications were refused in full, due to the following:– 2 applications required excessive use of resources– 1 application contained business information about third parties– 1 application contained information about judicial processes and natural justice– 4 applications requested information we do not hold

• 1 application – information was already publicly available

• 1 application was withdrawn after consultation with the applicant.


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Sydney Water proactively makes information publicly available on its website, as required by the GIPA Act. This process is reviewed each year and includes identifying:

• categories of information often asked for

• initiatives, developments or projects that we want the public to know about

• information we produced since the last review

• information we hold that is not released proactively, but would be in the public interest for us to disclose

• and the type of information proactively released by other organisations.

To find out more about how we provide information visit our website.

Table 38: Number of applications by type of applicant and outcome*

Applicant

Acc

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Info

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Media 2 0 0 0 0 0 0 0

Members of parliament 0 0 0 0 0 0 0 0

Private sector business 4 0 0 0 0 0 0 0

Not for profit organisations or community groups

1 0 0 0 0 0 0 0

Members of the public (application by legal representative)

17 1 2 3 0 1 0 1

Members of the public (other) 10 0 0 1 1 1 0 0

* More than one decision can be made about a particular access application. If so, a record must be made of each decision. This also applies to Table 39.

http://www.sydneywater.com.au/SW/about-us/our-organisation/Howweprovideinformation/


Table 39: Number of applications by type of application and outcome

Type

Acc

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ted

in fu

ll

Acc

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gran

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in p

art

Acc

ess

refu

sed

in fu

ll

Info

rmat

ion

not h

eld

Info

rmat

ion

alre

ady

avai

lab

le

Ref

use

to d

eal w

ith

app

licat

ion

Ref

use

to c

onfir

m/

den

y w

heth

er

info

rmat

ion

is h

eld

Ap

plic

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ithdr

awn

Personal information applications*

3 0 0 0 0 0 0 0

Access applications (other than personal information applications)

31 1 2 4 1 2 0 1

Access applications that are partly personal information applications and partly other

0 0 0 0 0 0 0 0

* A personal information application is an access application for personal information (as defined in clause 4 of Schedule 4 to the Act) about the applicant (the applicant being an individual).

Table 40: Invalid applications

Reason for invalidity Number of applications

Application does not comply with formal requirements (section 41 of the Act) 3

Application is for excluded information of the agency (section 43 of the Act) 0

Application contravenes restraint order (section 110 of the Act) 0

Total number of invalid applications received 3

Invalid applications that subsequently became valid applications 2


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Table 41: Conclusive presumption of overriding public interest against disclosure: matters listed in Schedule 1 to Act

Overriding public interest considered Number of considerations used*

Overriding secrecy laws 0

Cabinet information 0

Executive Council information 0

Contempt 0

Legal professional privilege 1

Excluded information 0

Documents affecting law enforcement and public safety 0

Transport safety 0

Adoption 0

Care and protection of children 0

Ministerial code of conduct 0

Aboriginal and environmental heritage 0

* More than one public interest consideration may apply to a particular access application. Each consideration is to be recorded once per application. This also applies in relation to Table 42.

Table 42: Other public interest considerations against disclosure: matters listed in table to section 14 of Act

Public interest consideration Number of unsuccessful application

Responsible and effective government 0

Law enforcement and security 0

Individual rights, judicial processes and natural justice 1

Business interests of agencies and other persons 1

Environment, culture, economy and general matters 0

Secrecy provisions 0

Exempt documents under interstate Freedom of Information legislation 0

Table 43: Time taken to make decision

Applications Number

Decided within the statutory timeframe (20 days plus any extensions) 44

Decided after 35 days (by agreement with applicant) 1

Not decided within time (deemed refusal) 0

Total 45


Table 44: Number of applications reviewed under Part 5 of the Act (by type of review and outcome)

Type of review Decision varied Decision upheld

Total

Internal review 0 0 0

Review by Information Commissioner* 0 0 0

Internal review following recommendation under section 93 of Act 0 0 0

Review by ADT 0 0 0

Total 0 0 0

* The Information Commissioner does not have the authority to vary decisions, but can make recommendations to the original decision-maker. The data in this case indicates that a recommendation to vary or uphold the original decision has been made.

Table 45: Applications for review under Part 5 of the Act (by type of applicant)

Applications Number of applications for review

By access applicants 0

By persons who the information in the access application relates to (see section 54 of the Act) 0


Overview

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Appendix 21: Public interest disclosures

Table 46: Public interest disclosures 2013–14

Public interest disclosures Number of applications for review

Number of public officials who made public interest disclosures to Sydney Water 3

Number of public interest disclosures received by Sydney Water 3

Of the public interest disclosures received, how many were primarily about:

• corrupt conduct

• maladministration

• serious and substantial waste

• government information contravention

• local government pecuniary interest contravention

1

2

0

0

0

Of the public interest disclosures received they were:

• made by public officials performing their day to day functions

• made under a statutory or other legal obligation

• all other public interest disclosures

3

0

0

Number of public interest disclosures that have been finalised in this reporting period 2

We have an established internal reporting policy to the Managing Director and Executive. Staff awareness is raised through the eLearning program delivered annually, a quarterly integrity update on current issues, awareness articles in enews, and face-to-face training for teams.

Staff; contractors and members of the public can call our independent corruption hotline on 1800 500 965 to report concerns of potential corruption or fraud or serious waste of resources. The hotline is managed by KPMG and all calls are confidential.

Appendix 22: External production costs

Due to limitations of our in-house facilities and resources, and the length of the document, some elements of the production of the Annual Report were outsourced in 2013–14. The total estimated* expenditure on external production for the Annual Report 2013–14 is $16,060. This is a 20% reduction on last year’s Annual Report production costs.

* Figure correct at the time of publication.

214 Glossary Sydney Water Annual Report 2014

Glossary

A

Acacia pubescensA vulnerable species of shrub, with bright yellow flowers, also known as Downy Wattle.

AdaptWater™

An online climate change analysis tool developed by Sydney Water, the Water Services Association of Australia and Climate Risk Pty Ltd.

Australian Drinking Water Guidelines (ADWG)The criteria for acceptable drinking water quality set by the National Health and Medical Research Council (NHMRC) and the Natural Resource Management Ministerial Council (NRMMC).

Australian Water Association (AWA)Australia’s membership association for water professionals and organisations.

AverageThe sum of scores divided by the total number of results.

B

Balanced Sustainability ScorecardAn overview of our sustainability performance based on our goals, which integrate the social, economic and environmental aspects of our performance.

Beneficial use Use of materials to deliver a net environmental benefit.

Benthic macro invertebrates Small animals without a backbone that live on the ocean floor.

BillAssistSydney Water’s Customer Assistance Program to help customers with payment difficulties and/or growing debt.

Biosolids Nutrient-rich, organic waste products that can be used in agriculture, composting and land rehabilitation.

BypassPartially treated wastewater discharged from a wastewater treatment plant.

C

Carbon footprintSydney Water’s carbon footprint is the greenhouse gas emissions produced by our operations and in the supply of the materials, energy and services that we need to operate.

Carbon offsets Absorbs and stores carbon to reduce the amount of greenhouse gases in the atmosphere.

CatchmentAn area of land surrounding a dam or water storage or the area served by a wastewater treatment plant. Rain falling over a water catchment drains to a dam and may contain nutrients, minerals and contaminants collected from the land surfaces. Waste is collected from homes and businesses in wastewater pipes (sewers) within a wastewater catchment and drains by gravity or is pumped to a specific wastewater plant.

CentrepayA regular payment arrangement that allows customers receiving income support from Centrelink to pay bills through regular deductions from their Centrelink payment.

Conservation Resource use, management and protection to prevent degrading, depleting or wasting resources to ensure resources are sustainable for present and future generations.

Sydney Water Annual Report 2014 Glossary 215

Critical water mainsLarge mains that have significant impacts when they fail. These mains operate under pressure and are generally underground. To determine whether a main is ‘critical’ we consider costs of repairs, water loss, restoration, property damage and customer rebates, plus the social impacts to the community including water discontinuity and community disruption.

Culturally and linguistically diverse (CALD)Customers with English as a second language.

D

Dam(s)Artificial walls built to store water – mainly for domestic use or irrigation.

Desalination Process that removes salt from sea water to make it suitable for treating to drinking water standards.

Drinking water Water treated to Australian and New Zealand Environment and Conservation Council (ANZECC) standards, to make it safe and healthy for drinking and domestic use.

E

E. coliA type of bacteria, nearly always present in the gut of humans and other warm-blooded animals. E. coli indicates faecal contamination, so is an important indicator for public health.

Ecological footprintOur ecological footprint represents the area of land taken up by our infrastructure and disposed waste, and the land disturbed to produce the materials we use. It also reflects the area of land forecast to be disturbed by greenhouse gas emissions from our carbon footprint.

Energy & Water Ombudsman NSW (EWON)The NSW Government-approved dispute resolution scheme for New South Wales electricity, gas and water customers.

Environment Protection Authority (EPA)An independent body that regulates and responds to activities that can affect the health of the NSW environment and its people.

Environment Protection Licences (EPL)Licences issued by the Environment Protection Authority under the Protection of the Environment Operations Act 1997. Licence conditions prevent and monitor pollution and promote cleaner production by recycling and re-using resources and adhering to best practice.

F

Filtration (water)A process for removing particles from water by passing it through a porous barrier, such as a screen, membrane, sand or gravel.

G

Greenhouse gas emissions Gases, such as carbon dioxide, methane and nitrous oxide that contribute to the greenhouse effect.

Grevillea caleyiAn endangered species of shrub.

Grit Hard and heavier solid matter removed from water and wastewater during treatment, generally inorganic.

H

Hydro-powerThe generation of electricity by converting energy from running water.

http://www.ewon.com.au/index.cfm/suppliers/suppliers-in-nsw/electricity-suppliers/

http://www.ewon.com.au/index.cfm/suppliers/suppliers-in-nsw/gas-suppliers/

http://www.ewon.com.au/index.cfm/suppliers/suppliers-in-nsw/water-suppliers/


I

Independent Commission Against Corruption (ICAC)A NSW Government body that investigates and exposes corrupt conduct in the NSW public sector as determined in the Independent Commission Against Corruption Act 1988. ICAC prevents corruption by advising, assisting and educating the community and public sector about corruption and its effects.

Independent Pricing and Regulatory Tribunal (IPART)An independent body that oversees state pricing and regulation in the water, gas, electricity and public transport industries.

Irrigation Controlled application of water through manmade systems to supply agricultural needs.

K

Kilolitre (KL)One thousand litres of water or one tonne of water.

Kilowatt hours (kWh)A unit of energy equivalent to that transferred or expended in one hour by one kilowatt of power.

L

Litre (L) A measure of liquid volume.

Lost time injury (LTI)A work-related injury or illness that results in an individual being unable to work on a subsequent scheduled workday or shift.

Lost time injury frequency rate (LTIFR)The main measure of safety performance in many companies in Australia. It is the number of lost time injuries multiplied by one million, divided by the number of man-hours worked in the reporting period.

M

Megalitre (ML)One million litres of water or one thousand tonnes of water.

MicroorganismsOrganisms which are invisible or only barely visible to the eye.

MinimumThe lowest recorded reading.

MitigationThe act of lessening or moderating the severity of anything distressing, eg carbon mitigation.

MonitoringAn ongoing testing program to assess potential changes in circumstances.

Medical Treatment Injury (MTI)An injury that requires treatment beyond first aid capabilities, provided by intervention, or under the specific order of a medical professional. This does not include first aid administered by a medical professional.


N

NaturaliseAdding natural features, such as trees and rocks, to improve environmental and social values.

NutrientsCompounds needed for growth by plants and other organisms. Major plant nutrients are phosphorus and nitrogen.

O

Office of Environment and Heritage (OEH)Regulates industry, protects and conserves the NSW environment, manages over 850 national parks and reserves and protects the natural, cultural and built heritage in NSW.

Operating LicenceA licence issued under the Sydney Water Act 1994 that sets many of our performance standards.

P

PlumbAssistA service which helps customers in financial hardship make emergency or essential plumbing repairs.

R

Recycled water Highly treated wastewater used in industrial processes, irrigation in agriculture, urban parks and landscapes and in households for flushing toilets, car washing and watering gardens. It is not for drinking or personal use.

Recycling Collecting and processing a resource so that it can be treated and re-used.

RegulatorsOrganisations that set regulations and standards. Sydney Water’s regulators include the Office of Environment and Heritage and NSW Health.

RehabilitateTo restore to good condition.

RenewTo make new, to restore or to make effective for an additional period.

ReservoirA man-made water storage area. Water is transferred from dams and treatment plants by gravity or pumping stations to reservoirs, which are usually on high land. The water then flows through a system of mains and smaller pipes to our customers.

RevegetateTo grow again as plants/to provide with vegetation again.

Riparian land Land that is next to or surrounds a body of water, and includes natural wetlands and areas around stormwater assets.

Risk assessmentProcess of gathering data and making assessments to estimate short and long-term harmful effects of a particular product or activity.


S

Significant injury frequency rate (SIFR)The number of lost time injuries plus medical treatment injuries multiplied by one million and then divided by the number of man-hours worked in the reporting period.

SewageSee Wastewater.

Sludge Solid matter removed during wastewater or water treatment, which can be processed into a material that can be beneficially used (biosolids).

Staff engagementThe extent to which staff commit to someone or something in their organisation, and how hard they work, and how long they stay as a result of that commitment.

Stormwater Rainwater that runs off the land, frequently carrying various forms of pollution such as litter and debris, animal droppings and dissolved chemicals. This untreated water is carried in stormwater channels and discharged directly into creeks, rivers, the harbour and the ocean.

Stormwater systemThe system of pipes, canals and other channels used to carry stormwater to bodies of water, such as rivers or oceans. The system does not usually involve treatment.

Streamwatch A water quality monitoring program formerly run by Sydney Water and the Sydney Catchment Authority and now transferred to the Australian Museum.

Suspended solidsParticles in water that can be removed by sedimentation or filtration.

T

Tadgell’s Bluebell (Wahlenbergia multicaulis Benth) An endangered species of herb.

tap™

A program that promotes drinking tap water as the sustainable choice.

Trade waste Industrial or commercial wastewater with significant potential contaminants with limits usually set by agreements.

Trade waste agreementsAgreements between Sydney Water and industrial and commercial customers to restrict the amount of toxic and other potentially harmful substances discharged to the wastewater system.

Treatment (water)The filtration and disinfection process.

ToxicityHow poisonous or harmful something is.

V

VolumeThe size, measure, or amount of anything in three dimensions.

W

Waste Discarded, rejected, unwanted, surplus or abandoned substances. Does not include gas, water, wastewater, beneficially used biosolids and re-use water.

WastewaterThe dirty water that goes down the drains of homes and businesses and into the wastewater system.


Wastewater overflowA wastewater overflow occurs when wastewater escapes from the wastewater system due to insufficient capacity or blockage in the pipe.

Wastewater systemThe system of pipes and pumping stations for collecting and transporting wastewater from each property to the wastewater treatment plant.

Wastewater treatment plantThe place where we put wastewater through filtration and other treatment processes. Once the waste is treated we then either discharge it to the environment or recycle it.

Water demandTotal amount of water needed for drinking, agriculture, industry, recreation and gardening. This is seasonal and highly influenced by the weather.

Water filtration plantA treatment plant that improves water quality by removing impurities through filtration.

Water pumping stationsStations house mechanical pumping equipment used to transport water from lower ground to higher ground through pipes.

Water qualityPhysical, chemical and biological measures of water.

Water re-useThe use of water more than once, after wastewater has been treated to an appropriate standard and delivered to the point of use.

Water Services Association of Australia (WSAA)The peak industry body that brings together and supports the Australian urban water industry. Members provide water and wastewater services to over 16 million Australians and to many of the country’s largest industries and commercial enterprises.

WaterwaysAll streams, creeks, rivers, estuaries, inlets and harbours.

Wetland A low-lying area often covered by shallow water, such as marshes, mangroves, swamps, bogs or billabongs. Rich in biodiversity, they store and filter water and replenish underground water supplies.


Statutory information index

Annual Reports (Statutory Bodies) Act 1984

s9(1) Nature of report of operations:

(a) charter(b) aims and objectives(c) access(d) management and structure(e) summary review of operations(f) legal change

Please refer to individual items listed under Schedule 1 within this Statutory index

s9A Letter of submission Page 2


Regulation 5 Identification of audited financial statements Pages 64-160

Regulation 7 Detailed budget Pages 57-60

Regulation 10 Production costs (2)(a)

Page 213

Regulation 10 Internet address (2)(b)

Page 226

Regulation 10 Details on non-printed formats (2)(c)

Page 226

Regulation 12 Comparison of investment performance Page 58

Regulation 13 Comparison of liability management Page 58-59

Regulation 14 Number of executive officers Page 192

Regulation 16(2) Content index Pages 223-224

Regulation 16(2) Table of contents Page 1

Regulation 18(2)(a) Annual Report on internet Page 226

Regulation 19(4) Exemptions from reporting Page 207

Schedule 1 Access Page 226

Schedule 1 Aims and objectives Pages 6, 181

Schedule 1 Charter Page 6

Schedule 1 Consultants Page 196

Schedule 1 Consumer response Pages 28-30

Schedule 1 Controlled entities Not applicable

Schedule 1 Economic or other factors Pages 14-15

Schedule 1 Workforce diversity Pages 193-195

Schedule 1 Multicultural policies and services program Page 174

Schedule 1 Funds granted to non-government community organisations Pages 166-167

Schedule 1 Human resources Pages 194-196


Schedule 1 Land disposal Page 57

Schedule 1 Legal change Page 54

Schedule 1 Management and activities Pages 6-7, 9-15, 24-26, 28-31, 34-38, 40-43, 162-165

Schedule 1 Management and structure – organisation chart Pages 46-52, 192

Schedule 1 Occupational health and safety Pages 25, 34, 36, 189-191

Schedule 1 Payment of accounts Pages 57, 207

Schedule 1 Promotion – overseas travel Page 197

Schedule 1 Research and development Pages 167-169

Schedule 1 Risk management and insurance activities Pages 53-54

Schedule 1 Social programs Pages 169-173

Schedule 1 Summary review of operations Pages 6-15, 19-22

Schedule 1 Time for payment of accounts Page 57

Schedule 1 Agreements with the Community Relations Commission Not applicable

Schedule 1 Waste Pages 25-26, 34, 38, 43, 188

Community Relations Commission and Principles of Multiculturalism Act 2000

Directive of the CRC – agreements with the Community Relations Commission Not applicable

Government Information (Public Access) Act 2009

s125 Reports to Parliament Pages 208-212

Heritage Act 1977

s169 Heritage delegations Pages 184-185

Independent Pricing and Regulatory Tribunal Act 1992

s18 Pricing Page 60

s18 Pricing table Pages 61-63

Public Interest Disclosures Act 1994

s31 Reports to Parliament Page 213

State Owned Corporations Act 1989

s24A (3)(a) Performance against Statement of Corporate Intent Pages 21, 56-58

s24A (3)(b) Departures from performance targets Pages 56-58

Sydney Water Act 1994

s22(6) Special objective table Pages 182-184

Schedule 5(2) Budgetary information Pages 56-60

Schedule 5(3)(a) Specific particulars – research and development Pages 167-169

Schedule 5(3)(b) Specific particulars – human resources Pages 194-196

Schedule 5(3)(c) Specific particulars - consultants Page 196

Schedule 5(3)(d) Specific particulars – equal employment opportunity Pages 193-195

Schedule 5(3)(e)(i) Specific particulars – promotion Pages 175-180


Schedule 5(3)(e)(ii) Specific particulars – overseas travel Pages 103-104

Schedule 5(3)(f) Specific particulars – consumer response Pages 28-30

Schedule 5(3)(g) Specific particulars – guarantee of service Page 169

Schedule 5(3)(h) Specific particulars – time for payment of accounts Page 58

Schedule 5(4) Comparison of investment performance Pages 58-60

Schedule 5(5) Comparison of liability management performance Page 59

Threatened Species Conservation Act 1995

s70 Threatened species – recovery plans Pages 186-187

Waste Avoidance and Resource Recovery Act 2001

WRAPP Reporting GuidelinesWaste Reduction and Purchasing Policy

Page 188


Index

Index of figures, maps and tables

FiguresFigure 1: Our corporate strategy 2012–17 7

Figure 2: Our stakeholders 8

Figure 3: Total income 19

Figure 4: Operating expenditure 19

Figure 5: Total asset investment 19

Figure 6: Profit after tax 2013–14 20

Figure 7: Historical capital expenditure 2013–14 20

Figure 8: Debt and gearing 2013–14 20

Figure 9: Daily water use in greater Sydney was 307 litres per person a day in 2013–14 32

Figure 10: Percentage of water tests that met the Australian Drinking Water Guidelines 2011 for E. coli in 2013–14 32

Figure 11: Sydney Water’s carbon footprint trends 2012–13 43

Figure 12: Sydney Water’s total gross greenhouse gas emissions per 1,000 properties 43

Figure 13: Social program expenditure 2009–10 to 2013–14 173

Figure 14: Lost time injury frequency rate for Sydney Water staff 190

Figure 15: Lost time injury frequency rate and lost time injuries per month for Sydney Water staff 190

Figure 16: Contractor lost time injury frequency rate and lost time injuries per month 191

Figure 17: Significant injury frequency rate for Sydney Water staff 191

Figure 18: Organisation chart 192

MapsMap 1: Area of operations 9

Map 2: Water delivery systems 10

Map 3: Wastewater systems 11

Map 4: Stormwater catchments 12

Map 5: Sydney Water’s ecological footprint 2012–13 44

TablesTable 1: Principal statistics 2013–14 13

Table 2: Summary profit and loss 2013–14 21

Table 3: Summary balance sheet 2013–14 21

Table 4: Summary cash flow 2013–14 22

Table 5: Customer focus balanced sustainability scorecard 24

Table 6: Business excellence balanced sustainability scorecard 25

Table 7: Forward thinking balanced sustainability scorecard 26

Table 8: Customer focus sustainability performance indicators 29

Table 9: Business excellence sustainability performance indicators 35


Table 10: Forward thinking sustainability performance indicators 41

Table 11: Board and Committee meeting attendance 2013–14 52

Table 12: Risk themes 2013–14 53

Table 13: Profit and loss statement 2013–14 56

Table 14: Funds flow from operations interest cover 2009–10 to 2013–14 58

Table 15: Return on assets and equity 2009–10 to 2013–14 59

Table 16: Our 2014–15 budget 60

Table 17: IPART Pricing table 2013–14 61

Table 18: Major capital works projects completed 2013–14 162

Table 19: Major capital works in progress as at 30 June 2014 163

Table 20: Funds granted to non-government organisations in 2013–14 167

Table 21: Major alliance and collaborative research investment 2013–14 167

Table 22: Completed research projects (>$100,000) 2013–14 168

Table 23: Ongoing research projects (>$100,000) 2013–14 168

Table 24: Social programs invested in 2013–14 171

Table 25: Social programs expenditure 2009–10 to 2013–14 173

Table 26: External communications materials produced in 2013–14 175

Table 27: Environmental performance against special objectives 2013–14 182

Table 28: Decisions made under the Heritage Council of NSW delegation 2013–14 185

Table 29: Executive performance and remuneration 2013–14 192

Table 30: Workforce numbers 194

Table 31: Trends in the representation of EEO groups 194

Table 32: Trends in the distribution of EEO groups 195

Table 33: Payments to consultants of engagements over $50,000 in 2013–14 196

Table 34: Overseas travel 2013–14 197

Table 35: Global Reporting Initiative 198

Table 36: Exemptions from reporting provisions 2013–14 207

Table 37: Privacy activity in 2013–14 208

Table 38: Number of GIPA applications by type of applicant and outcome 209

Table 39: Number of GIPA applications by type of application and outcome 210

Table 40: Invalid GIPA applications 210

Table 41: GIPA applications with an overriding public interest against disclosure 211

Table 42: GIPA applications with other public interest considerations against disclosure 211

Table 43: Time taken to make decision on GIPA application 211

Table 44: Number of GIPA applications reviewed under Part 5 212

Table 45: GIPA applications for review under Part 5 (by type of applicant) 212

Table 46: Public interest disclosures 2013–14 213


Contact us

By telephone

Customer enquiries: 13 20 92 (Monday – Friday, 8.30 am – 5.30 pm) Help with leaks and faults: 13 20 90 (24 hours every day) Corruption hotline: Freecall 1800 500 965 (24 hours every day) Interpreter service: 13 14 50

We offer a free teletypewriter (TTY) service for customers with hearing and speech difficulties. Call the National Relay Service on 13 36 77 and enter the phone number 13 20 90 (24 hours every day).

By post

Sydney Water PO Box 399 Parramatta NSW 2124

On the web

sydneywater.com.au facebook.com/SydneyWater twitter.com/sydneywaternews

By email

For Annual Report enquiries: [email protected]

For general enquiries use the online form at http://sydneywater.custhelp.com/app/ask

Annual Report online

The Annual Report 2013-14 is available at: sydneywater.com.au/SW/about-us/our-publications/annual-report/index.htm

SW92 10/14

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