annual...report on performance for the year ended 30 june 2015 we are pleased to submit the annual...

Annual Report

2014 – 15

About this reportThis is Sydney Water’s full Annual Report 2014–15 for 1 July 2014 to 30 June 2015. It covers financial, social and environmental performance, statutory information, financial statements and other regulatory information.

Much of the material reported is highly regulated and subjected to auditing by external parties such as the NSW Audit Office (financial statements) and auditors engaged by the Independent Pricing and Regulatory Tribunal (Operating Licence performance information).

The full report and a summary report is available on our website. If you have any comments about the Annual Report 2014–15, please email [email protected] or write to:

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

Letter to Shareholder MinistersThe Hon. Gladys Berejiklian MP Address: Treasurer 52 Martin Place Minister for Industrial Relations SYDNEY NSW 2001

The Hon. Dominic Perrottet MP Minister for Finance, Services and Property

Dear Treasurer and Minister for Finance, Services and Property

Report on performance for the year ended 30 June 2015

We are pleased to submit the Annual Report of Sydney Water Corporation (Sydney Water) for the year ended 30 June 2015 for presentation to Parliament. The full report includes financial statements, and we publish a 12-page summary on our website.

Our Annual Report 2014–15 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 2014–15, which form part of the Annual Report 2014–15, were certified by the Auditor-General of New South Wales.

Yours sincerely

Bruce Morgan | Chairman Kevin Young | Managing Director BComm, FCA, FAICD BEng (Hons), MBA, FIE Aust, CPENG, FAICD

1Sydney Water Annual Report 2014–15

http://www.sydneywater.com.au/web/groups/publicwebcontent/documents/document/zgrf/mdcx/~edisp/dd_071221.pdf

mailto:annualreport%40sydneywater.com.au?subject=

ContentsAbout this report 1

Letter to Shareholder Ministers 1

1. Overview 3

About Sydney Water 4

The year in review 13

Our performance 16

2. Corporate governance 27

Our Corporate Governance Framework 28

Sydney Water Board Directors 31

3. Customer at the heart 39

Our sustainability performance 40

Our service guarantee 46

Social programs 48

Multicultural Policies and Services Program 2014–15 50

Community investment 52

Privacy 53

4. World class performance 55


Risk management and performance 64

Legal events 65

Capital expenditure 67

Research and development 73

Heritage delegation actions 76

Environmental performance against special objectives 78

Threatened Species Conservation Act 1995 82

5. High performance culture 85


Workplace health and safety 88

Executive performance and remuneration 91

Workforce diversity 92

Staff and industrial relations 94

Consultant engagements 95

Overseas travel 96

6. Financials 97

Performance summary 98

Financial Statements 109

7. Appendixes 203

Appendix 1: Exemptions from reporting provisions 204

Appendix 2: NSW Government Information (Public Access) (GIPA) 205

Appendix 3: Public interest disclosures 2014–15 209

Appendix 4: External production costs 209

Glossary 210

Statutory information index 216

Index 219

2 Sydney Water Annual Report 2014–15

1. Overview

About Sydney WaterAt Sydney Water, we’re lucky enough to look after some of the best water in the world.

We’re Australia’s largest water and wastewater service provider and we’re owned by you. Every day, we proudly protect the health of our community by providing safe and refreshing drinking water, removing wastewater and preserving our rivers and beaches.

We’re proud to play a key role in Sydneysiders’ continuing health and enjoyment of this great city, reassuring them about the water they use to bathe their kids and giving them confidence to enjoy our city’s iconic outdoor way of life.

Our vision and mission

We are a statutory State Owned Corporation, wholly owned by the New South Wales Government. Our performance targets and service standards for operation and customer service are set out in our 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.

Our mission is to be world class, delivering essential water services that our customers love, in our great city. There are three strategic objectives that form our corporate strategy, designed to help us achieve our vision – to be the lifestream of Sydney for generations to come.

Our principal objectives are to:

• protect public health

• protect the environment

• be a successful business.

Our three strategic objectives are:

High performance culture

The foundations of Sydney Water’s culture are our values and our signature behaviours. Our culture and capabilities initiative focuses on implementing our ‘Safe and well together’ initiative, leadership development, the diversity and inclusion program, performance management process improvement, improvements to safety, a recruitment and retention strategy and a clear ethics framework.

Customer at the heart

We are focusing our whole organisation – people, systems, processes and capabilities – on delivering the best possible customer experience. Customers’ insights inform our decision-making, so we are consistent in how we communicate and interact with our customers.

World class performance

We introduced a number of initiatives to help us be world class. Our new product and servicing framework will shift the focus in our planning from an engineering perspective to that of the customer. We are benchmarking our performance against the private sector and other utilities to meet and exceed customer expectations.

4 Overview Sydney Water Annual Report 2014–15

Figure 1: Our corporate strategy 2015–20

Highperformanceculture

World classperformance


Drives Drives

Results Results

High performance culture

Our customers will see us:

• as role models for Sydney Water

• living our values

• taking ownership and following up


Our customers will:

• find us easy to deal with

• experience us as transparent

• continue to trust us, now and into the future

World class performance

Our customers will see us:

• as thought leaders

• providing great value for the quality they expect

• co-creating a sustainable future

Our vision is to be the lifestream of Sydney for generations to come

Our mission is to be world class, delivering essential water that our customers love, in our great city

5Sydney Water Annual Report 2014–15 Overview

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Our stakeholders

Effectively engaging with the communities we operate in is an important part of our corporate strategy. We engage with our customers, the government and industry.

We maintain strong stakeholder relationships to keep our customers happy, ensure good governance and perform successfully as a business.

Our principles for working 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.

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

These include:

• customers – business and residential

• staff and contractors

• developers

• state and local government

• regulators

• advocacy and special interest groups.


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 NSW Council of Social Services

OEH Office of Environment and Heritage

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

TEC Total Environment Centre

TfNSW Transport for NSW

UDIA Urban Development Institute of Australia

WSAA Water Services Association of Australia


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About our business

Table 1: Principal statistics 2014–15

Indicators 2014–15 Unit

Water

Estimated population serviced by drinking water1 4,832,770 people

Quantity of drinking water we produced 515,834 million litres

Amount of drinking water we sourced from desalination 0 million litres

Length of drinking water mains we own and operate 21,635 kilometres

Number of drinking water reservoirs in service 242 drinking water reservoirs

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

Properties with drinking water service available 1,876,084 properties

Wastewater

Estimated population serviced by wastewater services 4,721,970 people

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

562,476 million litres

Length of wastewater mains we own and operate 25,085 kilometres

Number of wastewater treatment plants2 16 wastewater treatment plants

Number of wastewater systems3 25 wastewater systems

Number of wastewater pumping stations in service 675 wastewater pumping stations

Properties with wastewater service available 1,827,402 properties

Recycled water

Estimated population serviced by recycled water4 80,920 people

Quantity of recycled water we supplied 43,075 million litres

Length of recycled water mains we own and operate 658 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 582,360 properties

Other

Area of operations (approximate) 12,700 square kilometres

1 Population serviced is a projection based on actual dwellings at June 2014 plus forecast growth.2 The number of wastewater treatment and water recycling plants is based on Sydney Water’s classification.3 24 licensed systems with the EPA plus one system (Wilton) serviced by WICA scheme (Bingara Gorge).4 Population serviced by recycled water refers to Rouse Hill only.


Our operations

Map 1: Area of operations

Manly

Windsor

Parramatta

Gosford

Mona Vale

Hornsby

Wisemans Ferry

Blacktown

Liverpool

Sutherland

Otford

Campbelltown

Wollongong

Bargo

Kiama

Oakdale

Katoomba

Penrith

Kurrajong HeightsLithgow

Area of operations – about 12,700 sq km

Water delivery system – about 3,200 sq km

Wastewater catchment system – about 2,000 sq km

Stormwater catchment system – about 300 sq km

0 5 01 51 02

SCALE IN KILOMETRES

BrokenBay

Port Jackson

BotanyBay

LakeIllawarra

Sydney


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Map 2: Water delivery systems

BrokenBay

Port Jackson

BotanyBay

LakeIllawarra

Orchard Hills

Prospect

North Richmond

Kurnell

Warragamba

Nepean

Woronora

Macarthur

Illawarra

Cascade

Desalination plant

Water filtration plant

Prospect South

Warragamba

Woronora

Ryde

Prospect North

Prospect East

Macarthur

North Richmond

Orchard Hills

Potts Hill

Nepean

Illawarra

Cascade

Water delivery systems

0 5 01 51 02

SCALE IN KILOMETRES


Map 3: Wastewater systems

Rouse Hill

Penrith

Castle Hill

Quakers Hill

Gerringong/Gerroa

Bombo

Wollongong

Picton

West Camden

Glenfield

St Marys

Winmalee

Shellharbour

Port Kembla

Bellambi

Fairfield

West Hornsby

Wallacia

Malabar

Bondi

Brooklyn

Cronulla

Riverstone

Richmond

North Richmond

HornsbyHeights

Warriewood

NorthHead

Liverpool

0 5 01 51 02

SCALE IN KILOMETRES

BrokenBay

Port Jackson

BotanyBay

LakeIllawarra

BondiBombo

Brooklyn

Castle HillCronullaGerringong/GerroaHornsby HeightsMalabarNorth HeadNorth RichmondPenrithPictonQuakers HillRichmondRiverstoneRouse HillShellharbourSt MarysWallaciaWarriewoodWest CamdenWest HornsbyWinmaleeWollongong

Wastewater treatment plant

Water recycling plant

Wastewater systems


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Map 4: Stormwater catchments

Port Jackson

BotanyBay

BrokenBay

Sydney

Manly

Sutherland

Blacktown

Parramatta

Liverpool

Hornsby

Mona Vale

Windsor

0 5

SCALE IN KILOMETRES

Sydney Harbour – Northern Foreshores

Sydney Harbour – Southern Foreshores

Tasman Sea – City Beaches

Sydney Harbour – South Eastern Foreshores

Middle Harbour

Lower Parramatta River

Duck River

Johnstons Bay

Lane Cove River

Lower Georges River

Hawkesbury River

Cooks River

Botany Bay

Upper Georges River

Upper Parramatta River

Tasman Sea – Northern Beaches

Stormwater catchments

10


The year in review

A message from our Chairman and our Managing Director

Going from good to great

It’s been a great year for Sydney Water and our customers. We’ve kept bills low compared to other household utility bills. We’ve also become more efficient, while maintaining high levels of customer service and business performance.

Importantly, we’ve changed our mindset. We’re thinking differently about our relationship with customers, taking an ‘outside-in’ approach to decision-making. To have customers at the heart of everything we do, we know we must understand what our customers value.

We are responding with new ways of approaching our communication, customer service and operations. We’re also enabling our staff to make the changes we need to be a more modern and agile business. And customers are noticing this new way of working – rating our performance, value for money and corporate reputation higher than ever.

Enhancing our relationship with customers

Staff from all parts of our business – from the frontline to those who plan for the future – are getting to know the customer better to help our decision-making.

We’ve changed how we respond to emergencies, focusing more on the customer impact. A great example was when we had to make emergency repairs to the outlet pipe from Macarthur Water Filtration Plant in October 2014. We planned the fix around our customers, and got the job done without any properties losing water supply.

As a result of customer feedback, we’ve also changed how we bill new multi-level buildings. Owners of new apartments will be able to make more informed choices about their water use. Under a new initiative, we will bill individual units for water use instead of the whole block.

We believe customers should benefit when we receive savings. In 2014, the Federal Government repealed the carbon tax, reimbursing Sydney Water for payments made since 1 July 2014. We passed these savings on to customers.

While our business undergoes positive change, we’re still delivering world class services to customers. Once again, our drinking water quality was rated as fully compliant by the Independent Pricing and Regulatory Tribunal (IPART) in its 2014 Operating Licence audit.

While we think we’ve had a good year, it’s nice to hear that customers think the same. Our customer sentiment monitoring shows customers rate our value for money at 7 out of 10, our overall quality of service at 7.7 out of 10, and our corporate reputation 6.4 out of 10 – all at record high levels.

Caring for the community and the environment

In most cases, our environmental performance for the year was good, but we were prosecuted by the Environment Protection Authority (EPA) for a wastewater leak at our Malabar Wastewater Treatment Plant in 2013–14. We’ve comprehensively reviewed this incident to ensure this type of leak doesn’t happen again at any of our wastewater treatment plants. We’re also investing over $100 million to improve the Malabar plant’s reliability.


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We’re working with the EPA to improve the regulatory framework for wet weather overflows so we achieve environmental and community outcomes more cost-effectively, helping to keep bills low. To inform our approach, we held workshops across our area of operations to learn more about community expectations on the issue.

To deliver better services to customers and the community, we’ve formed closer ties with the 44 local councils in our area of operations. We held over 35 face-to-face meetings with general managers of councils, and two workshops that attracted over 200 attendees. We’ve also appointed dedicated relationship managers for each council to offer personalised support on Sydney Water activities. This enhanced engagement helped our negotiations with councils to sign an agreement on road restoration. This means we can now make road restorations quicker, safer and more efficient.

Wet wipes cause havoc in our wastewater system and impact the environment. To educate people on what shouldn’t be flushed, we’ve worked with the Water Services Association of Australia (WSAA) and utility partners to raise awareness of the issue nationally. This year, our keep wipes out of the pipes campaign has reached over 400,000 people through social media and many thousands of others through Sydney Water’s existing community events and sponsorship program.

This year, we saw a 24% increase in applications for Section 73 Compliance Certificates, which is a requirement for a development. With growth set to continue between 2014 and 2019, we’ll spend about $856 million to service around 138,000 new homes. Almost 90% of this investment is for priority greenfield sites in the North West and South West Growth Centres, western Sydney and the Illawarra.

Investing in people and processes to be the best we can be

Staff are co-creating Sydney Water’s future. Our people have important insights through the work they do, and we’re tapping into this knowledge to work together more cohesively. Over 300 staff attended our Lifestream summits to contribute to our new corporate strategy. Staff developed our signature behaviours, turning our strategic direction into real, tangible ways of working.

Safety will always be a top priority at Sydney Water. We were disappointed with our safety performance during this year. We still have too many people injured in Sydney Water and this must improve. To increase our understanding of safety issues, we’ve paid particular attention to the data we collect to ensure that we have an accurate picture. We can now better allocate resources where they’re needed to keep our people safe. As part of our commitment to safety, we launched a web-application for staff to use on their smart phones, to report incidents and unsafe conditions or behaviour, instantly and easily wherever they are.

For our ‘Safe and well together’ strategy, we produced a number of video interviews with staff who have experienced life-changing accidents, raising awareness of safety within the workplace and at home. We also championed the Mates-in-Construction initiative throughout the business. This program on suicide prevention and mental health gives participants practical tools and training to improve their health and wellbeing at work.

We have successfully negotiated a new enterprise bargaining agreement. Sydney Water staff overwhelmingly voted in favour, with over 95% of respondents answering ‘yes’. The agreement was ratified through Fair Work Australia. This great result comes after a positive series of meetings between Sydney Water, the Australian Services Union and Professionals Australia.


Raising the bar in performance

In 2012, IPART set allowances for how much we spend on operating and capital costs up to 2016. We expect to save over $400 million compared to IPART’s allowance – which we hope will contribute to lower customer bills in the future.

Because of our excellent financial performance in 2013–14, we contributed $252 million to the NSW Government last year to support investment in crucial state services such as health and education, along with rebates on pensioners’ water bills and other social programs.

We saved $27.5 million in 2014–15 through our robust and collaborative procurement framework – focusing on getting the best value for money throughout the entire life cycle of our contracts with the private sector.

Over the past three years, the Civil Maintenance team has reduced costs by 18.3% through the ‘meet and beat the market’ efficiency program. This is while improving customer satisfaction from a high base of 8.3 out of 10 in 2012 to the current level of 8.9.

In late April, the Sydney region experienced some of its heaviest rainfall in 17 years. We closely supported the work of the emergency services and had extra staff on the ground through the night to ensure the reliability of water and wastewater services to customers during severe power outages without any safety incidents. Our wastewater system was resilient during this extreme weather event.

The year ahead

Next year, IPART will set new prices for our services, starting on 1 July 2016. We’ve proposed to IPART that we will lower customer bills each year to 2020. We want customers to benefit from our improved performance and the reduced costs from the current economic climate, such as lower interest rates. Before we made our proposal, we asked customers whether they preferred a fixed bill, or one that’s variable based on use. We used their feedback as the basis for pricing in our proposal.

To future-proof our business, we’re investing in a solution to rebuild all of our management software into one integrated system that will make it easier to deliver value to customers. We’ll also be preparing to replace our customer billing system with one that streamlines billing and payment functions, making transactions faster and easier for customers.

We’ll be strengthening our relationships with customers and the community in the year to come. We look forward to having open and honest conversations on how we deliver our services to customers and enhance liveability.

With our new strategy guiding the way, it’s exciting to think about where we’ll be in a year’s time. Thank you to our staff and Board for another great year. Let’s keep up the momentum.

Bruce Morgan Kevin Young Chairman Managing Director


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Our performance

This year’s highlights

Customer at the heart of everything we doWe’re making the most of technology to make things easier for customers. We recently launched the water service radar – a web-based application that delivers updates at 10 minute intervals. Customers can check our website to see if we’re working near their home or on a road they plan to travel on. This helps our customers plan around the disruption. We’ve also improved our website so it’s easier to use on mobile devices.

Our engagement with customers and other stakeholders through social media continues to grow. Over the last 12 months, we’ve reached over one million people.

We’re mindful of the impact our infrastructure has on the aesthetics of the urban and natural environment. Last year, we worked with a number of artists to give our pumping stations and other buildings a facelift, while reducing the impact of graffiti. Fifteen sites across our network are now sporting new murals painted by local talent. We continue to perform strongly against our Operating Licence requirements, demonstrating high to full compliance for all audited clauses for 2013–14. We also participated, along with customers and the community, in IPART’s consultation process in developing our new Operating Licence 2015–2020.

In 2014–15, we continued to educate community and youth through our education initiatives. We connected with over 24,000 people through our community engagement activities and workshops. We educated over 3,700 people at our sites.

Our education initiatives help the community understand who we are and what we do. All participants from our education activities reported an increased understanding of Sydney Water and rated their satisfaction level greater than 8 out of 10.

World class performanceWe have one of Australia’s largest dedicated water, wastewater and environmental sampling and testing facilities. In the past year, our National Association of Testing Authorities accredited lab performed more than 410,000 tests to ensure our quality control systems across our entire network are working as they should.

We sold 13 properties that we no longer need to run our business. These sales increased land supply in the housing market and allowed us to share the benefits of the sales with our customer base.

Our Civil Delivery and Networks staff worked together to introduce a new overflow containment system. The Watergate system reduces the need for sandbagging and other labour intensive methods of containing wastewater overflows in creeks and stormwater drains. The result is quicker deployment, reduced environmental impact, a safer workplace and significant cost savings.


We have mobilised a team of customer service and information technology specialists who’ll ensure we get the right solutions for our business needs. Over the next eight years, we’ll consolidate and simplify major applications and introduce a new billing system that will enhance customer interactions.

We’re working with Transport for NSW in coordinating major transport projects, such as WestConnex and the Sydney Light Rail. We signed an agreement in January 2015 to formalise the relationship with these stakeholders so projects are delivered efficiently and effectively.

Despite a considerable increase in development applications, we’ve improved our turnaround time to issue a Section 73 Compliance Certificate by 7.4% from the last financial year. In 2014–15, we issued over 4,500 Section 73 Compliance Certificates, which is 24% more than last year.

Based on our performance and increased transparency in the regulatory environment, Moody’s Investors Services upgraded our credit rating from Baa2 to Baa1. This is our first upgrade since our initial rating over 20 years ago.

High performance cultureAs part of our transformation, we’ve put our culture under the microscope. Staff from all areas have participated in workshops that have challenged beliefs and behaviours to help create cultural change.

The Civil Delivery team introduced a behavioural-based safety (BBS) system to encourage staff to proactively engage with safety, rather than have the traditional compliance mindset. The system is based on a peer-on-peer safety observation that encourages safety conversations on the job site. Almost 6,000 safety observations and conversations have been recorded since the program’s introduction.

Civil Delivery implemented a Management Operating System (MOS) within its Civil Maintenance team from August 2014 to February 2015. This was designed to improve communication between frontline staff and all levels of management. The program has successfully focused all staff to deliver work efficiently, providing a mechanism for staff to quickly raise and address issues and delays that could impact customers. The MOS has increased productivity by four per cent since its introduction.

We rolled out an e-learning program about our environmental responsibilities, raising staff awareness of the pivotal role we play in enhancing the liveability of our great city.

We’re refreshing our Work Health and Safety Management System (WHSMS), along with our 80 safety standards and procedures that will help improve safety at work.

We welcomed 21 new graduates to the business. Over 1,600 people applied for a position in the graduate program, which shows we are one of Australia’s best employers.

Over 350 staff came to our Annual Aqua Awards in November, which we held at our heritage-listed West Ryde Boiler House. These awards recognise staff who’ve gone above and beyond their normal responsibilities – we’re proud to showcase their achievements through this program.


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Our awards and recognition

International Water Association Awards (IWA) 2014

The Sewer Corrosion and Odour Research (SCORe) program won the Global Grand Award at the International Water Association’s 2014 Project Innovation Awards. The award was presented in Lisbon, Portugal in September 2014. The program also won the IWA’s Asia-Pacific Regional Project Innovation Award during the Singapore International Water Week.

This program is the largest worldwide research project focused on sewer corrosion and odour. It was delivered with five research partners and 11 industry partners. Implementing the research findings is expected to save the wastewater industry hundreds of millions of dollars globally.

Australian Water Association (AWA) Awards

Our staff were honoured at the 2015 NSW Australian Water Association Awards, winning four categories – the NSW Program Innovation Award, the NSW Research Innovation Award, the AWA Undergraduate of the Year Award and the Kamal Fernando Mentoring Award.

Four of our teams were also selected as award finalists.

2014 Treasury Managed Funds (TMF) Award

Our Injury Management team won the TMF Award for Excellence. This was for achieving a 65% decrease in work-related injuries over the past two years and a 50% decrease in non work-related injuries since June 2013.

2014 Sydney Engineering Excellence Award

In partnership with Oxyzone Pty Ltd, we won the prestigious 2014 Sydney Engineering Excellence Awards in the category of Products, Manufacturing Facilities and Processes. This was for the design and construction of our mobile ozone trailer, to improve the efficiency and effectiveness of new water main disinfection.

The three ozone trailers that we use in our operations provide significant environmental and safety benefits, plus annual savings of over $1.4 million.

2015 National Trust of Australia (NSW) Heritage Awards

We won the National Trust of Australia (NSW) Heritage Award for our work in saving and restoring a building adjacent to the Potts Hill Reservoir. This was in the category of Conservation Built Heritage for Government/Corporations. The building we restored used to house the CSIRO’s radio astronomy facility in the 1950s and was the first facility to observe the black hole of our galaxy.


Our financial highlights

Where our revenue comes from

Figure 2: Our total income $2,728 million

Services charges (50%)$1,367m

Usage charges (42%)$1,151m

Capital contributions (6%)$151m

Other income (2%)$59m

50%42%

6%

2%

Our total income for 2014–15 was $2.7 billion. We received higher income from IPART determined price rises for service and usage charges in 2014–15 and higher receipts of free assets from developers.

Figure 3: Our total operating expenditure $1,324 million

Staff costs (26%)$349m

Bulk water and filtration (39%)$513m

Sevice contractors (20%)$264m

Electricity (3%)$41m

Property and transport (2%) $24m

Other expenses (7%)$92m

Materials (3%)$40m

26%

39%

20%

3%3%2%7%

Our total operating expenditure for 2014–15 was $1.3 billion. This was $23 million higher than in 2013–14, with wages and other cost escalations partly offset by ongoing efficiencies.


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Figure 4: Our total asset investment $627 million

Business efficiency (5%)$31m

Renewals (47%)$293m

Reliability (12%)$78m

Mandatory standards (3%)$18m

Government programs (9%)$55m

Growth (24%)$153m

47%

5%

24%

12%

9%

3%

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 5: Our profit after tax

$ m

illio

n

600

500

0

100

200

300

2010–11 2011–12 2012–13 2013–14 2014–15

400

Our profit after tax for 2014–15 was $513 million, $49 million higher than in 2013–14.

This was due to the higher income we made from water sales and service charges and free assets from developers ($113 million higher than in 2013–14), but partly offset by the increased income tax expense ($41 million higher than in 2013–14).


Figure 6: Our capital expenditure

$ m

illio

n

700

600

500

0

100

200

300

2010–11 2011–12 2012–13 2013–14 2014–15

400

Our capital investment program in 2014–15 included continued major investments 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 providing for growth.

Figure 7: Our debt and gearing

$7,000

$8,000

$6,000

$0

$2,000

$1,000

$3,000

$4,000

Total debt ($m)

$5,000

Gearing %

$ m

illio

n

2010–11 2011–12 2012–13 2013–14 2014–1544%

46%

48%

50%

52%

56%

54%

Our debt and gearing (debt divided by debt plus equity) remained relatively stable in 2014–15. In 2011–12, we were able to repay debt with funds generated from the refinancing of the Sydney Desalination Plant. New capital investment in 2014–15 was mostly funded from internal resources.


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Table 2: Summary profit and loss*

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

2014–15 $m

Total income 2,307 2,671 2,521 2,615 2,728

Operating expenses 1,120 1,204 1,343 1,301 1,324

Earnings before interest, tax, depreciation and amortisation

1,187 1,467 1,178 1,314 1,404

Depreciation, amortisation and impairments

274 298 245 261 252

Interest expense 473 557 398 414 422

Profit before tax 440 612 536 640 730

Taxation expense 166 245 163 175 216

Profit after tax 274 367 372 464 513

Dividend payable 230 242 291 252 664

* 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 $1.4 billion, $90 million higher than in 2013–14. This was due to higher income from IPART determined price rises and also higher receipts of free assets from developers.

Depreciation, amortisation and impairments were $252 million, $9 million lower than in 2013–14. This was due to fewer losses on asset disposals.

Interest expense was $422 million, $8 million higher than in 2013–14, with the impact of lower interest rates more than offset by a reduction in interest costs transferred to capital.

Tax expense for the year was $216 million, $41 million higher than in 2013–14. This was in line with the higher profit result.

The dividend payable of $664 million aligns to the target in the 2014-–15 Statement of Corporate Intent (SCI) and includes retained surpluses from 2012–13 and 2013–14.

Table 3: Summary balance sheet*

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

2014–15 $m

Property, plant and equipment 14,488 13,450 13,949 14,635 15,471

Other assets 582 567 502 483 475

Total assets 15,070 14,017 14,451 15,118 15,946

Total debt 7,114 5,412 5,866 6,059 6,160

Other liabilities 2,043 2,673 2,620 2,665 3,319

Total liabilities 9,157 8,085 8,486 8,724 9,479

Net assets/equity 5,913 5,932 5,965 6,394 6,467

* All figures are rounded to whole dollars million. All figures prior to 2013–14 represent the Consolidated Group. All subsidiaries are now divested.


Total assets were valued at $15.9 billion, $828 million higher than in 2013–14. This was driven by capital expenditure on renewing existing assets and adding new assets.

Total liabilities were $9.5 billion, $755 million higher than in 2013–14. This was due to higher dividends payable and higher tax and superannuation liabilities.

Table 4: Summary cash flow*

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

2014–15 $m

Sources

Receipts from operations 2,152 2,231 2,405 2,477 2,520

Grants, interest, community service obligations and other operational receipts

151 182 155 172 165

Borrowings 720 610 440 174 89

Other receipts 62 2,223 26 92 102

Total sources 3,085 5,246 3,026 2,915 2,876

Uses

Operational expense payments 1,232 1,328 1,405 1,443 1,431

Capital expenditure payments 650 666 593 527 588

Dividends paid 232 230 368 291 252

Income tax paid 131 92 181 188 149

Interest paid 493 557 464 449 436

Borrowing reduction and other payments

343 2,413 17 17 18

Total uses 3,081 5,286 3,028 2,915 2,874

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

* All figures are rounded to whole dollars million. All figures prior to 2013–14 represent the Consolidated Group. All subsidiaries are now divested. Note: Interest paid includes the government guarantee fee and capital expenditure payments include payments for intangibles.

Cash receipts from operations in 2014–15 were $2.5 billion ($43 million higher than in 2013–14). This increased because of IPART determined price increases. Total cash inflows were $2.9 billion, $39 million less than in 2013–14.

Cash used for operational purposes in 2014–15 was $1.4 billion ($12 million lower than in 2013–14), in line with cost reductions.

A total of $588 million was used to fund the asset investment program.

Total interest paid includes both interest and the government guarantee fee on Sydney Water’s borrowings. Total interest paid was $436 million ($13 million lower than in 2013–14) due to a lower government guarantee fee.

We paid a dividend of $252 million to the NSW Government in 2014–15. This reflected the target in the 2014–15 Statement of Corporate Intent (SCI).


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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 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 at the heart – balanced sustainability scorecard

Customer at the heart – performance summary

Progress rating

2012

–13

2013

–14

2014

–15

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 experiencing financial hardship by providing flexible payment arrangements. 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 efficiency: Our water efficiency initiatives saved more than 43 billion litres of water in 2014–15. We are continuing to implement a range of cost-effective water efficiency, leak management and recycled water programs that meet individual customer needs.

Water drawn: Customers are still using water efficiently, maintaining a historically low level of total water use. Since drought restrictions were lifted, our customers have adopted water efficient practices as part of their everyday lives.

Water quality: We continue to supply drinking water to customers that has a high level of compliance with NSW Health requirements and Australian Drinking Water Guidelines 2011.


Table 6: World class performance – balanced sustainability scorecard

World class performance – performance summary

Progress rating

2012

–13

2013

–14

2014

–15

Profitability: Profitability was above target due to higher water usage income, receiving assets free of charge and lower operating costs. This was driven mostly by lower contractor costs, and lower borrowing costs due to lower interest rates.

Debt servicing: We managed our borrowing costs better. This was due to a combination of higher income, lower costs and lower interest charges.

Return on assets and equity: Our return on assets and equity was marginally higher than the target. This was due to a combination of higher water usage and developer 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.

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 biosolids met required standards.

Environmental compliance: We received one Tier 2 prosecution and one penalty notice from the EPA during the reporting period. Our contractors received no proceedings or penalty notices during 2014–15.

Environmental footprint: Our full supply chain carbon footprint and ecological footprint remained stable in 2013–14. Data for 2014–15 was not available in time for publication of this report.

–

Energy use and greenhouse gas emissions: We maintained our net emissions by surrendering NSW Greenhouse Gas Abatement Certificates. Our energy generation was equivalent to 17.5% of the electricity we used. That’s the highest energy generation to date.

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 13.06 hectares of native vegetation over the last five years.

By-products: We continued to meet our target of beneficially using 100% of biosolids.

Waste reduction: Our overall waste recycling rate remained at 88% despite a 67% increase in total waste generated through increased construction and demolition activity.


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Table 7: High performing culture – balanced sustainability scorecard

High performing culture – performance summary

Progress rating

2012

–13

2013

–14

2014

–15

Safety: The lost time injury frequency rate (LTIFR) for staff went from 6.16 to 4.71 in 2014–15. The LTIFR for contractors rose from 2.01 to 2.72.

Capability: We provide diverse training programs and professional development opportunities to help improve staff skills and knowledge. Our entry level programs continued to have high numbers of applications.

Staff engagement: The ‘People matter’ employee survey is done every two years. The next survey is scheduled to take place in 2016.

– –


2. Corporategovernance

The Sydney Water Board and Executive are committed to conducting the business of Sydney Water to high standards of corporate governance and in the best interests of our voting shareholders.

Our Corporate Governance FrameworkThe Board and Executive believe good corporate governance is essential for a high performing organisation with a sustainable future. Our governance framework helps us:

• 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.

At its meeting of 27 August 2014, the Sydney Water Board adopted the Australian Institute of Company Directors (AICD) Corporate Governance Framework which, outlines the practices of good corporate governance across four major quadrants of focus and engagement:

Board

Stakeholder

Individual

Organisational

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

The framework aligns with the ASX Corporate Governance Principles and Recommendations (3rd Edition) and the NSW Audit Office Governance Lighthouse Model.

28 Corporate governance Sydney Water Annual Report 2014–15

Executive Management Operating System (MOS)

The Sydney Water Executive are adapting and enhancing existing management and oversight practices through a formalised Management Operating System (MOS). This system guides effective operational oversight, governance and decision-making.

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 has a Chairperson and up to nine other directors appointed by the voting shareholders.

All members of the Board, except the Managing Director, are appointed by the voting shareholders; members’ instruments of appointment provide for a term of three years. Voting shareholders may renew appointments. The Minister advertises publicly for nominations for Board selections. The voting shareholders set each non-executive director’s remuneration, which is paid out of Sydney Water’s funds.

The Board’s 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 the achievement of those targets. The Board’s role is to govern Sydney Water rather than manage it. The directors must act in the best interests of Sydney Water and its voting shareholders at all times, 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 of Directors operates according to its charter, which complements the Constitution, the Director’s Manual and the Board’s revised Code of Conduct, which aligns with the values of our Corporate Strategy 2015–20.

Board committeesThe Board has established committees to provide strategic guidance to Sydney Water. The Board committees in 2014–15 were:

• Audit and Risk

• Corporate Governance

• Environment and Health (previously known as Customer, Health, Environment and Research)

• Finance and Asset Strategy

• Safety and Wellbeing

• People and Remuneration

• Nominations*.

* This committee was established in November 2014 to help the Board fulfil its corporate governance responsibilities for director appointments and re-appointments.

29Sydney Water Annual Report 2014–15 Corporate governance

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Figure 8: Sydney Water’s governance structure

Oversight through reporting

Corporate SecretaryLisa Coletta

Delegation

Management OperatingSystem (MOS)

Accountability

Accountability

Delegation

Delegation

Board

Executive

ManagingDirector

People &Remuneration

Chair:Mr Morgan

Members:Mr FisherDr BloomMr BourneMr Young

Audit & Risk

Chair:Ms McDonald

Members:Mr FisherDr KangaMr LeamingMr Young

Safety &Wellbeing

Chair:Mr Bourne

Members:Dr DayDr KangaMr Young

CorporateGovernance

Chair:Mr Fisher

Members:Ms McDonaldDr KangaMr LeamingMr Young

Nominations

Chair:Mr Morgan

Members:Mr FisherDr KangaMr LeamingMr YoungDr BloomMs McDonaldMr BourneDr Day

Environment & Health

Chair:Dr Bloom

Members:Dr DayMs McDonaldMr Young

Finance &Asset Strategy

Chair:Mr Leaming

Members:Dr BloomMr BourneDr DayMr Young


Sydney Water Board DirectorsBruce Morgan ChairmanBComm, FCA, FAICD

Appointment term:

Director: 1 January 2012 to 31 December 2014

Chairman: 1 October 2013 to 30 September 2016

Committees

• Chair – People and Remuneration, Nominations

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 of the PwC International Board.

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

Bruce is a director of Caltex Australia, Origin Energy, the University of NSW Foundation and the European Australian Business Council. He also chairs Redkite and the inaugural NSW Ministerial Advisory Committee on Social Housing Policy.

Bruce holds a Bachelor of Commerce (Accounting and Finance) from the University of NSW.


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

Appointment term:

1 August 2011 to a term of five years equivalent to his appointment as Managing Director of Sydney Water.

All committees

• 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.

Kevin 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 chairs the WSAA Asset Management Committee.


Appointment term:

1 January 2013 to 31 December 2015

Committees

• Chair – Environment and Health

• Member – Finance and Asset Strategy; People and Remuneration; Nominations

Dr Abby Bloom Non-executive DirectorBA (High Hons), MPH, PhD, FAICD

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 also founded three medical device companies, including a biomedical flow control technology company.

Abby is a director of Sydney Children’s Hospitals Network, 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.

Appointment term:

10 February 2014 to 9 February 2017

Committees

• Chair – Safety and Wellbeing

• Member – Finance and Asset Strategy; Nominations; People and Remuneration

Trevor Bourne Non-executive DirectorBSc.(Mech. Eng.), MBA, FAICD

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. Trevor is the Chairman of Senex Energy Ltd, an ASX 200 oil and gas company. As a current director of Caltex Australia, he chairs the OH&S committee and is 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, an MBA, and is a Fellow of the Australian Institute of Company Directors.

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Appointment term:

1 June 2015 to 31 May 2018

Committees

• Member – Environment and Health; Finance and Asset Strategy; Safety and Wellbeing; Nominations

Dr Diana Day Non-executive DirectorBA (Hons), DipEd, PhD, FAICD

As a water, earth and social scientist, Diana has led academic and public sector teams addressing water quality and security challenges in Australian rural, mining, riverine and metropolitan landscapes. This has included environmental water allocation, water protections for mining development, urban water policy challenges, and, Australian water and land futures.

Diana has 25 years of company director experience, including in research and development strategy for water and natural resources management and for agri-business commodity groups, including commercialisation companies. With multi-disciplinary and multi-sectoral skills, Diana has been appointed to boards of federal statutory authorities, private companies, tertiary institutions and not-for-profit organisations.

As inaugural board member of the Murray-Darling Basin Authority, Diana worked on the foundation of Australia’s Murray-Darling Basin Plan, and while in NSW Government delivered on urban catchment management trust implementation and in developing Australia’s National Water Quality Management Strategy. 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, MLA Donor Company, Earth Foundation Australia, the Sugar Research and Development Corporation, and the University of Newcastle.

Diana was formerly Associate Professor of Indigenous higher education at the University of Sydney where she mentored postgraduate researchers. Diana is a career and executive coach.


Appointment term:

1 January 2013 to 31 December 2014

Re-appointed from 1 July 2015 to 31 May 2018

Committees

• Chair – Corporate Governance

• Member – Audit and Risk; People and Remuneration; Nominations

Richard Fisher AM Non-executive DirectorMEc, LLB, MAICD

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 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.

Appointment term:

13 August 2013 to 12 August 2016

Committees

• Chair – Audit and Risk

• Member – Environment and Health; Corporate Governance; Nominations

Anne McDonald Non-executive DirectorB.Ec, FCA, FAICD

Anne is an experienced company director. She has over 30 years 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, regulatory and accounting requirements.

She is currently a director of The GPT Group, Spark Infrastructure and Specialty Fashion Group. 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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Appointment term:

10 February 2014 to 9 February 2017

Committees

• Member – Audit and Risk; Corporate Governance; Safety and Wellbeing; Nominations

Dr Marlene Kanga AM Non-executive DirectorB.Tech. (Chem), M.Sc., DIC, Ph.D, Hon. FIEAust, Hon. FIChemE FIPENZ, FAICD CPEng

Marlene is a director of iOmniscient, which has developed patented software technology for intelligent video analytics systems. Marlene is Acting Chair of Innovation Australia, which has oversight over the Department of Industry and Science research and development, venture capital, cooperative research centre and entrepreneurship programs to support innovation, as well as the Chair of the R&D Incentives Committee, the largest support program for innovation in industry in Australia. Marlene was National President of Engineers Australia in 2013.

Marlene represents Australia as a member of the Executive Council of the World Federation of Engineering Organisations (WFEO) and is Vice-President of the International Network for Women Engineers and Scientists (INWES).

Marlene is an Honorary Fellow of the Institution of Chemical Engineers, an Honorary Fellow of Engineers Australia, a Fellow of the Academy of Technology, Science and Engineering and a Fellow of the Australian Institute of Company Directors.

She was the FEIAP (Federation of Engineering Institutions in Asia and the Pacific) Professional Engineer of the Year in 2014 and listed among the Top 100 Engineers in Australia in 2013, 2014 and 2015 and the Top 100 Westpac Women of Influence in 2013.

Appointment term:

15 September 2014 to 14 September 2017

Committees

• Chair – Finance and Asset Strategy

• Member – Corporate Governance; Nominations; Audit and Risk

Paul Leaming Non-executive DirectorB.Bus, FCPA

Paul had an executive career spanning 30 years in financial services, having been Chief Financial Officer for AMP Limited and, before that, Chief Financial Officer and other senior finance roles at Macquarie Bank Limited. He retired in December 2011.

Paul is a director of the AMP Foundation Limited, Super IQ Pty Ltd, Chair of Money Brilliant Pty Ltd, Chair of Macrovue Pty Ltd and a director of the Newcastle Jockey Club.

He holds a Bachelor of Business from the Queensland University of Technology.

Board meetings

The Board meets monthly, except in January and June. 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 8: Attendance at Board and committee meetings 2014–15

Director Board of Directors Meeting

Attended (number

held)1

Audit and Risk

Committee

Attended (number

held)

Corporate Governance Committee

Attended (number

held)

Environment and Health Committee

Attended (number

held)

Finance and Asset

Strategy Committee

Attended (number

held)

People and Remuneration

Committee

Attended (number

held)

Safety and Wellbeing

Committee

Attended (number

held)

Nominations Committee

Attended (number

held)

B Morgan (C) 9 (10) (C) 2 (2)2 (C) 3 (3)3 (C) 4 (4) (C) 1 (1)

A Bloom 10 (10) (C) 5 (5) 5 (5) 4 (4) 1 (1)

T Bourne 10 (10) 5(5) 4 (4) (C) 4 (4) 1 (1)

D Day 9 (10) 5 (5) 5 (5) 3 (4) 0 (1)4

R Fisher5 6 (6) 4 (4) (C) 2 (2) 1 (1) 1 (1)

M Kanga 10 (10) 6 (6) 4 (4) 4 (4) 1 (1)

A McDonald 8 (10)6 (C) 6 (6) 3 (4) 4 (5) 0 (1)

P Leaming7 6 (7) 2 (2) 3 (3) (C) 3 (3)8 1 (1)

K Young 10 (10) 6 (6) 3 (4) 4 (5) 4 (5) 4 (4) 4 (4) 1 (1)

(C) stands for Chairperson for Board or Committee meeting.

1 The Board held two strategy sessions with the Executive on 28 November 2014 and 27 March 2015. These two sessions are not counted as directors’ meetings.

2 Mr Morgan acted as Chair for the Corporate Governance Committee for two meetings when Mr Fisher’s term expired on 31 December 2014.

3 Mr Leaming replaced Mr Morgan as Chair of the Finance and Asset Strategy Committee meeting on 18 March 2015. As a result, Mr Morgan is no longer a member of the Finance and Asset Strategy Committee.

4 Dr Day was not invited to this Nominations Committee meeting due to a conflict of interest (the purpose of the meeting was to discuss her re-appointment).

5 Mr Fisher’s term expired on 31 December 2014, and he was re-appointed for a further term of three years effective from 1 July 2015 to 31 May 2018.

6 Ms McDonald chaired a Board meeting in the absence of Mr Morgan, who was an apology.

7 Mr Leaming was elected as a director effective from 15 September 2014, however, Sydney Water did not receive confirmation of his appointment until 7 October 2015.

8 Refer to footnote 3.

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 which 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, and any conflicts (perceived or actual) are discussed at each Board meeting.

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.


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Figure 9: Sydney Water Executive

Service Delivery

General ManagerEric de RooyBE (Civil) (Hons), MBA

Business Strategyand Assurance –SIRIUS project

Civil Delivery

Network Operations

Product and AssetManagement

Projects and Services

Treatment

Finance andCorporate ServicesGeneral ManagerJames MitchellB Com, CPA, MAICD

ManagementAccounting

Financial Accounting

Procurement

Corporate Services

Business Governance

Transformation

General ManagerDaniel Hunter(until 19 June 2015)B Com, MAcct

Delivery ofOrganisation-wideStrategic Initiatives

OrganisationalTransformationProjects

Customer Services

General ManagerPaul FreemanB (Mech) (Hons)

Business CustomerServices

Customer Insightsand Solutions

Commercial Productsand Services

Customer Accountsand Billing

InformationTechnologyGeneral ManagerStephen WilsonBEc

IT Capability Partner

Architectureand Solutions

Technology Services

IT Commercial

Applications Portfolio

IT Business Strategyand Assurance

Program Delivery(T2020 and ERP)

Business Strategyand ResilienceGeneral ManagerSandra GambleBE (Hons), MBA, FAICD

Corporate Public Affairs

Competition andRegulation

Corporate Secretariat

Corporate Strategy

Internal Audit

Risk and Resilience

Liveable CitiesSolutionsGeneral ManagerPaul PlowmanBE (Civil), MBA

Engineering andEnvironmental Services

InfrastructureProgramsManagement Office

Delivery Program

Asset Data andInformation

Liveable City Program

Service and AssetStrategy

Urban Growth

Business Strategy and Support

People Leadershipand CultureGeneral ManagerAngela TsoukatosBSocWk, MM, GAICD

Human ResourcesOperations

Industrial relations

People andOrganisationalDevelopment

People Services

Recruitment andOnboarding

Safety

Board of DirectorsChairman

Bruce Morgan

Managing DirectorKevin Young

Non-Executive Directors

Corporate SecretaryLisa Coletta

Paul LeamingRichard FisherTrevor Bourne

Abby BloomAnne McDonaldDiana DayMarlene Kanga

These are the executive managers that hold these positions substantively. They may not have been performing these roles as at 30 June 2015.


at the3. Customer

heart

Our sustainability performance • In 2014–15, we scored 7.7 out of 10 in

customer satisfaction with our overall quality of service. We reached this peak score in 2013 and we’ve maintained it through determined efforts to be customer-focused and our commitment to maintaining quality services.

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

• The total number of complaints has dropped significantly over the past five years from 7,398 in 2010–11 to 5,945 in 2014–15. This decrease is mainly due to significantly fewer complaints about account-meter adjustments. We’ve also received fewer water quality complaints.

• We continued to meet our Operating Licence service quality and system performance targets in 2014–15.

• Water use in Sydney remains at historically low levels. Our customers have adopted water efficient practices as part of their everyday life. In 2014–15, our customers used about 295* litres per person per day (LPD), well under the Operating Licence target of 329 LPD.

• This year’s total water use of 515,834 million litres is similar to the total water use of 2012–13 despite a four per cent increase in population.

• We supplied customers with drinking water that performed well against NSW Health requirements and 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.

* Figure is weather corrected. For more information, see the Water Efficiency Report 2014–15 on our website.

40 Customer at the heart Sydney Water Annual Report 2014–15

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

Performance indicator key





Table 9: Customer at the heart sustainability performance indicators

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

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)

7.5 7.5 7.7 7.7 7.7

We surveyed over 1,000 customers to find out how they would rate the overall quality of service we deliver. Customers rated us on a scale of zero (extremely poor) to 10 (excellent). The results show customers continue to have a positive view of the overall quality of our service, with an average satisfaction rating of 7.7.

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

8.1 8.4 8.2 8.4 8.4

We asked customers to rate the overall quality of drinking water that comes out of their taps on a scale of zero (extremely poor) to 10 (excellent). In 2014–15, customer satisfaction with drinking water quality remains high at 8.4.

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

7,398 7,527 8,252 6,935 5,945

Under our Operating Licence 2010–15, 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 NSW (EWON) at ewon.com.au and ask them to independently review the complaint.

During 2014–15, we received 5,945 complaints (out of more than 755,000 calls) including 611 complaints EWON received about us.

Percentage of complaints resolved within 10 business days (%)

85.6 86.3 90.2 91.3 90.9

We aim to resolve customer enquiries and complaints quickly, efficiently and to customers’ satisfaction. In 2014–15, we resolved 90.9% of complaints within 10 business days. Complaints to EWON are not lodged with Sydney Water and are not included in this indicator.

41Sydney Water Annual Report 2014–15 Customer at the heart

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http://ewon.com.au

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

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 10.6

Sydney Water offers customers in financial difficulty the option of requesting a payment extension or entering into a payment arrangement. 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 our service guarantee in this 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 experience unplanned water interruptions

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

30,911 31,519 31,626 32,568 37,189

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

6,271 5,790 6,363 4,978 8,005

The numbers previously reported since 2010–11, when we transitioned to a new reporting system, excluded certain property types. The impact of the change is insignificant, with performance remaining within compliance limits.

Water main breaks can cause significant disruption for 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. There was a steep increase in breaks in 2014–15, which was mostly due to weather impacts on the system. Even with the increase, we met our Operating Licence targets for water main breaks 2014–15.


Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

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

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

91 92 93 92 92

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

91.4 93 93 91 92

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

94.1 92 91 94 91

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

832 572 1,280 661 133

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

9,158 7,708 6,908 8,869 10,118

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

30 43 39 66 80

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).

Water conservation

Total volume of drinking water saved each year by water efficiency programs (million litres)

121,106 44,435 48,199 45,478 43,768

Figure does not include water savings from PlumbAssist® or WaterFix® services. We’re unable to estimate the water savings from these programs at this time.

Figure does not include water savings from programs that are no longer running. For more information, see the full Water Efficiency Report 2014–15 on our website.

Water drawn

Total water use (million litres) (see figure 10)

496,695 481,930 516,442 532,575 515,834

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

Total water use in 2014–15 was 295 litres per person per day (weather corrected), well below our Operating Licence target of 329 LPD. For more information, see the full Water Efficiency Report 2014–15 on our website.


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Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Water quality

Number of zones where we achieved microbiological compliance (out of 13 supply systems (see figure 11)

13 13 13 13 13

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

99.99 99.97 99.98 99.99 100

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

99.37 99.23 99.54 99.62 99.5

Figure 10: Daily water use in greater Sydney was 295 litres per person a day in 2014–15

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Water usage level target 329 LPD

For more information, see the full Water Efficiency Report 2014–15 on our website.



Figure 11: Percentage of water tests that met the Australian Drinking Water Guidelines 2011 for E. coli in 2014–15

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


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Our service guarantee

Customer Contract

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 2014–15.

We continue to implement the 2010–2015 Payment Assistance Strategy, which we developed with Sydney Water’s Customer Council. This strategy ensures we apply industry best practice to meet the needs of customers experiencing hardship.

Our customer service policies and programs help customers in financial hardship maintain access to services. We also work with 358 community welfare agency partners to help us deliver these programs.

In 2014–15, our customer assistance programs included the following:

• 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.

• 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 external specialist services.

• Payment Assistance Scheme (PAS)

Through our Payment Assistance Scheme (PAS), we help customers having difficulty paying their water bill. After completing a hardship assessment, community welfare agencies or BillAssist® case coordinators can credit the customer’s Sydney Water account directly. This service is available to customers who own and occupy their home or private tenants responsible for paying for their water use. Customers must agree to a payment plan, if they have already received PAS credits in the last 12 months.

• Pensioner concessions

In 2014–15, we gave concessions to about 235,000 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.

• PlumbAssist®

We provide essential or emergency plumbing repairs to improve water efficiency, and reduce water costs, or where there’s a risk to health or public safety. Through our PlumbAssist® service, we repair leaking or broken taps, toilets and hot water services for customers who own and live in their home but cannot afford these plumbing repairs due to financial hardship.

• 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 programs, see the Help with your bill page on our website.


http://www.sydneywater.com.au/SW/accounts-billing/paying-your-bill/help-with-your-bill/index.htm

Outreach

We attend events and work with community welfare agencies to increase awareness of our payment assistance options and concession entitlements. In 2014–15, Sydney Water trained 13 new community welfare agencies on our PAS. We now have 358 agencies accredited to assess our customers in financial hardship. They also assess the payment assistance credits we apply to customer bills.

We have expanded on the information we communicate through our outreach program. Because some customers don’t initially feel comfortable discussing payment assistance options, we’re now covering topics customers ask about most, such as checking your property for leaks and monthly billing. Payment assistance is a secondary focus. We’ve seen an increase in the number of customer interactions because of this change in approach.

Improving access to information for customers

We continue to work with customers to improve access to our information and services. During 2014, we started to engage with the following customer segments:

• seniors

• culturally and linguistically diverse customers

• customers with mental health problems

• customers who have a disability

• families.

This engagement gave us a better understanding of these customers’ barriers to asking for help when they need it. Using their feedback, we’ve made it easier for all customers to understand and access our information and services.


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Social programsSydney 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 2014–15, Sydney Water incurred costs to the value of about $168 million.

Table 10: Social programs

2010–11 $m

2011–12 $m

2012–13 $m

2013–14 $m

2014–15 $m

Pensioner Concession Scheme 123.9 133.8 135.1 137.5 140.5

Exempt Properties Scheme 13.9 15.1 19.1 19.3 21.3

Hardship Support Scheme 0.8 1.0 1.1 0.9 0.9

Blue Mountains Septic Pump-out 0.6 0.3 0.2 0.2 0.3

Priority Sewerage Program 5.0 1.7 0 15.7 4.8

Total 144.2 151.9 155.5 173.6 167.8

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 2014–15, we gave about 236,000 pensioner households concessions on water, wastewater and drainage service charges. The typical concession was about $600 a pensioner, at a total cost of $140.5 million.

Exempt Properties Scheme

The Sydney Water Act 1994 states that certain types of properties are exempt from paying the service charges. We give exemptions following an application if they meet certain criteria. Land owned and used by not-for-profit community services organisations are generally exempt.

During 2014–15, we granted service charge exemptions to more than 10,000 properties. We spent over $21 million on the scheme.


Hardship Support Scheme

We provide various forms of help to customers experiencing financial hardship or with a low income.

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 about $1 million on this scheme in 2014–15.

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. The government contributes $6,000 a lot, for each property to be able to connect to the wastewater service. They reimbursed $4.8 million to Sydney Water in 2014-15, contributing to the connection of properties across the townships of Galston and Glenorie.

Blue Mountains Septic Pump-out Scheme

In 2014–15, we recommenced the administration of the Blue Mountains pump-out subsidy, at the request of the NSW Government. Seventy two properties with wastewater pump-out services benefit from the scheme, either through an upfront payment to assist with a new on-site system, or through assistance with ongoing pump-out costs. We spent about $350,000 in 2014–15 on this scheme.

Figure 12: Five year social program expenditure

Pensioner Concession Scheme

Exempt Properties Scheme

Hardship Support Scheme

Priority Sewerage Program

Blue Mountains Septic Pump-out

$ m

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Multicultural Policies and Services Program 2014–15We recognise that many of our customers are from culturally and linguistically diverse (CALD) communities. A number of initiatives helped us connect with these communities in 2014–15.

Table 11: CALD initiatives and achievements

Strategy Key initiatives and achievements

To develop and implement strategies targeting CALD customers, based on demographic information, needs analysis and market research

We know that specific customer groups can be unable or unwilling to access information about services, entitlements and support options due to barriers such as language difficulties, computer proficiency or cultural diversity.

We recognise that our customer base is changing, and that we need to respond to the changing demographics of our customers. In some local government areas, 70% of residents are culturally and linguistically diverse (CALD).

We want to make it easy for all customers to interact with us, which means making sure our information and services are easy to access and understand.

We have partnered with 22 different CALD welfare agencies and organisations to increase awareness of our payment assistance options among our CALD customers.

In 2013–14, we engaged NSW Health’s Multicultural Health Communication Service (MHCS) to help us better understand CALD customers’ needs. Our research focused on barriers and enablers to CALD customers seeking financial help.

We consulted MHCS and Ethnics Community Council (ECC) about the research findings to learn the best ways to inform CALD customers of our payment assistance options and other information.

Our Customer Council has representatives from the Ethnic Communities Council and the Community Relations Commission. They provide feedback on our planning and operations around our CALD customers’ interests.

This year, we engaged with our Customer Council specifically on ways to better communicate with and assist our more vulnerable customers, including those with limited English speaking skills.

We now better understand how to improve our engagement and communication with our CALD customers.

In 2015–16 we plan to better support CALD customers by:

• developing information about our programs and services in common CALD languages, in print and online

• reviewing communication channels preferred by CALD communities such as radio and newspapers.


Strategy Key initiatives and achievements

To provide equitable and accessible services

We have free phone interpreter services for customers who need translation services. We also provide multilingual brochures and information for customers experiencing financial hardship in Cantonese, Korean, Mandarin, Vietnamese, Arabic, Greek, Italian and English.

We partner with 22 community agencies that specialise in assisting people with CALD backgrounds to distribute this information. These agencies are also trained to assess the credits we give on water bills for customers experiencing hardship.

In 2015–16, we’ll translate some of our information both online and in print to give further access to information and services for CALD customers with limited or no English speaking skills.


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Community investmentThrough our Community Involvement Program, we strengthen our relationships with the community and key stakeholders. Our program covers community sponsorships, community education, industry conference sponsorships, business partnerships, donations and partnership servicing. Partnership servicing is money we spend to provide services like water trailer and mobile water refill units, education activities and community engagement at events.

The program helps us to engage and educate the community about:

• water quality

• the value of water and using it sustainably

• the benefits of drinking tap water

• our role in, and human impact on, the urban water cycle

• environmental protection

• public health.

Because our contracts for sponsorships contain commercial information of Sydney Water and the sponsored organisations, we follow standard business practice to keep them commercial-in-confidence.

In 2014–15, we continued our long-term partnerships with:

• Taronga Zoo

• Sculpture by the Sea

• Museum of Applied Arts and Sciences (Powerhouse Museum)

• Sutherland to Surf

• City to Surf

• Illawarra Surf Premiership

• Australian Museum (Streamwatch).

Due to changing business priorities we did not renew our sponsorship with Keep NSW Beautiful (formerly Keep Australia Beautiful) or with the Museum of Applied Arts and Sciences (MAAS) Ecologic Exhibition. We are pursuing discussions with MAAS on a new partnership focused on applied science in the coming year.

In 2014–15, we increased our partnership servicing spend as we focused on providing greater access to drinking water at community and council events through our portable water unit loan scheme. This enhanced our engagement at partnership events.

We connected with over 885,000 people through our sponsorship and community engagement activities and educated more than 3,700 people at our sites. Customer participation in our community involvement initiatives grew by 20% in 2014–15.

Social media posts about our programs reached 171,000 people with an average engagement score of five per cent. We also received positive print, online and television coverage of our activities.

Over the last year, we donated over $50,000 to community organisations. We supported staff-led giving by matching donations raised for OZ Harvest and Cancer Council. We also donated to the Peter Cullen Scholarship, WaterAid and Mates in Construction.

Table 12: Funds granted to organisations in 2014–15

Program 2014–15

Sponsorships and partnerships

$335,120

Streamwatch $215,000

Donations* $50,780

Partnership servicing $435,132

Total $1,036,032

* We spent less this year because the Financial Counsellors Program had ended and we needed less to match donations for disaster relief.


PrivacyWe’re committed to protecting the personal information of our customers, the general public, business partners and staff. Since 2002, we’ve voluntarily complied with the principles of the NSW Privacy and Personal Information Protection Act 1998 (PPIPA). We state this commitment publicly in point 13.3 of our Customer Contract. We’re 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

• don’t give personal information to other organisations for marketing. If we’re asked to give water usage details for a specific community or suburb, we only disclose the information if individual properties can’t be identified

• only use personal information for the purpose it was collected, or for related purposes

• make staff who deal with personal information aware of their obligations to protect privacy

• do not disclose a customer’s personal information when performing customer validation checks over the phone

• only disclose personal information to third parties if:

– we’re authorised or required to by law

– we’ve verbal or written authority from the person

– we can reasonably assume in the circumstances that the person would consent

– there’s a danger of injury or loss of life

– our contractors need the information for essential activities.

Table 13: Privacy activity in 2014–15

Requests for information Incidents Total

Internal 36 1 37

External 1 7 8

Total 37 8 45

Still open 0 0 0


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Over 2014–15 we:

• recommended changes to the Operating Licence, Customer Contract, the website and IT system contracts, as part of the comprehensive independent review of our privacy compliance framework

• initiated changes to the Privacy Policy, procedures, training and support material, and included privacy in our corporate risk assessment procedures

• changed several high risk systems and processes

• developed a tracking system for recommendations, which we will implement in future years to accommodate changing technology

• launched an online privacy awareness training module, mandatory for all new staff and with refresher courses periodically for staff involved in higher-risk processes

• retained Salinger Privacy for specialised privacy advice

• monitored changes to the legal environment and precedents, and to best practice

• participated in the NSW Privacy Practitioners Network, which provides access to relevant online and hardcopy privacy awareness services and literature

• submitted a best practice case study to the Privacy Commissioner on the improvements Sydney Water is making to our privacy governance framework.

Promotions

Providing services to over four million customers means we must produce a lot of communication materials. Some of these are reports and information on our policies and processes that we are required to communicate by law. Others give information, instruction or updates on our water, recycled water, wastewater and stormwater services and are published on our website.

We also produce fact sheets, newsletters, calling cards and other targeted material to advise customers on our activities in their community, construction and maintenance projects and our customer assistance programs. Our most widespread communication is through the customer newsletter Waterwrap and the Business update. We send these quarterly to all customers with their bills.

We also engage with our customers and stakeholders on Facebook, Twitter, YouTube and our interactive forum Sydney Water Talk. Over the last 12 months, we’ve reached over one million people through our social media channels. We’re using research to learn how our different customers like to receive information and interact with us, so we can better tailor our information to their needs. And we continue to explore new ways to reach our culturally and linguistically diverse (CALD) customer base.

If customers want more specific information than we have on our website, they can lodge a formal access application under the Government Information (Public Access) Act 2009. For more information, see appendix 2 in this report.



class4. Worldperformance

Our sustainability performance• 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 they comply with their trade waste agreements. In 2014–15, we achieved a high level of customer compliance, with 97.5% of industrial customers complying with their agreements, ensuring our biosolids meet required standards.

• 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 2013–14*. We’re working to reduce our carbon and ecological footprints and we expect to achieve this in time, through our energy efficiency and renewable energy projects.

• We generate renewable energy from our operations and by surrendering of carbon credits. In 2014–15, the energy we generated from renewable sources provided 17.5% of our energy needs, our highest renewable energy generation to date.

• In 2014–15, we maintained our net greenhouse gas emissions at 2011–12 levels by surrendering of NSW Greenhouse Gas Abatement Certificates (NGACs).

• Since 2010–11, we’ve cleared a total of 21.75 hectares of native vegetation and revegetated 34.81 hectares, to achieve a net increase of 13.06 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 our wastewater treatment plants. We’ve consistently achieved this target since 2005.

• We maintained our overall recycling rate at a five-year high of 88% in 2014–15 despite a 67% increase in total waste generated as a result of increased construction and demolition activity.

* Data for 2014–15 was not available in time for publication in this report.

56 World class performance Sydney Water Annual Report 2014–15






Table 14: World class performance sustainability performance indicators

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Profitability

Net profit after tax (NPAT) ($m) 274 367 372 464 513

Debt servicing

Funds flow from operations ($m) 435 436 518 603 708

Funds flow from operations interest cover ratio (times)

1.9 1.8 2.0 2.1 2.4

Funds flow from operations 2014–15 target was $574 million.

Funds flow from operations interest cover ratio (times) 2014–15 target was 2.0.

Return on assets and equity

Return on assets (%) 6.3 8.0 7.0 7.1 7.4

Return on equity (%) 4.8 6.2 6.9 7.5 8.0

Our return on assets in 2014–15 was 0.9% higher than the target of 6.5%. Our return on equity in 2014–15 was 2.2% higher than the target of 5.8%. This was due to a combination of higher water use income, developer income and operating cost efficiencies.

57Sydney Water Annual Report 2014–15 World class performance

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Infrastructure management

Delivery of capital investment program for renewals or rehabilitation

Water mains (% planned km achieved)

106 117 96 91 92

Water mains (% of planned expenditure completed)

99 96 96 78 88

Wastewater mains (% planned km achieved)

101 102 100 108 110

Wastewater mains (% of planned expenditure completed)

109 96 89 72 95

Information technology (% of planned expenditure completed)

104 82 49 68 54

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

Water mains 106 105 92 98 87

Wastewater mains 93 93 82 73 106

Stormwater programs

63 84 116 94 126

Property programs 115 101 100 76 83

We spent less than our budget on information technology renewal projects. This was due to a number of business cases being deferred until we developed a robust IT roadmap allowing us to move ahead with key IT projects.

We spent less than we budgeted for planned maintenance of water mains, as we completed less corrective maintenance work due to fewer leaks detected within our network than expected.

We completed our planned maintenance work for wastewater mains marginally above budget. This was largely because we brought some work forward in the dig and repair and root cutting areas.

In 2014–15, we spent more than budgeted for stormwater inspection and maintenance programs. This was due to unplanned but urgent maintenance work to de-silt various open stormwater channels needed to maintain hydraulic capacity. We transferred funds from the wastewater maintenance program to do this work.


Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Wastewater treatment system discharges

Percentage of wastewater volume treated that was compliant (%)

100 99.5 99.7 100 99.7

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 0.002

For more information, see the Sewage Treatment System Impact Monitoring Program Report on our website.

We monitor our wastewater treatment systems and must immediately notify the EPA and other authorities of any incident causing or threatening material harm to the environment. We report to the EPA on minor licence non-compliances not causing or threatening environmental harm, in line with the conditions of environment protection licences.

Trade waste agreements – –

Percentage of trade waste customers (industrial) complying with their wastewater discharge limits (%)

– – 92 95.2 97.5

This is a new indicator in the Operating Licence Reporting Manual June 2012, which we began reporting in 2012–13. In 2014–15, 97.5% of our 728 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 penalty notices issued under the Protection of the Environment Operations Act 1997

Sydney Water 2 0 1 4 2

Contractors 1 1 1 0 0

We received one Tier 2 prosecution and one penalty notice from the EPA during the reporting period. The Tier 2 prosecution related to an effluent pipeline leak at Malabar Wastewater Treatment Plant in September 2013. On 13 April and 21 April 2015, we were convicted of two offences of the Protection of the Environment Operations Act 1997 and ordered to pay an amount of $55,000 to Randwick City Council and $102,500 to the NSW Environment Trust.

The penalty notice related to a dry weather wastewater overflow at Yennora in June 2014.

Within the reporting period, the EPA accepted a proposal for an ‘enforceable undertaking’ for a pumping station overflow at Glenfield Water Recycling Plant in November 2013.

Notices of penalties and prosecutions are published on the EPA Public Register at epa.nsw.gov.au


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


http://epa.nsw.gov.au

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Environmental footprint

Full supply chain carbon footprint for operations and capital works (million tonnes of carbon dioxide equivalent emissions) (see figure 13)

0.9 0.9 0.9 0.9 Not available

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

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

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

Data for 2014–15 was not available in time for publication in this report.

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.

Energy use and greenhouse gas emissions

Total electricity used or generated by Sydney Water (million kWh)

Used 400.8 414.4 404.1 407.9 414.3

Self-generated 58.7 69.0 65.6 65.1 72.6

Percentage of electricity generated by Sydney Water (%)

14.6 16.6 16.2 16.0 17.5

In 2014–15, our energy generation from renewable sources is equivalent to 17.5% of electricity used, our highest energy generation to date.

Gross greenhouse gas emissions (per 1,000 properties) (see figure 14) tonnes CO2

251 206 189 195 197

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

115 87 85 85 84

Environmental performance monitoring

Ecosystem health downstream of inland wastewater treatment plant discharges

Health maintained

downstream of 10 of the

12 inland plants

Health maintained

downstream of 8 of the 12 inland

plants

Health maintained


plants

Health maintained


plants

Health maintained

downstream of 10 of the

12 inland plants

Ecosystem impacts of deep water ocean discharges

No impact

No impact

No impact

No impact

Results not yet

available

For more information, see the Sewage Treatment System Impact Monitoring Program Report on our website.

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’s 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.



Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Flora and fauna

Total area of native vegetation cleared (hectares)

1.8 4.0 0.02 7.94 7.99

Total area of native vegetation rehabilitated (hectares)

2.2 2.3 3.9 7.38 19.03

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

0.4 -1.7 3.88 -0.56 11.04

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.

Data reflects either the net gain or the net loss of native vegetation each year. We have revegetated a net cumulative gain of 13.06 hectares of native vegetation over the last five years.

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

415.8 418.5 421.8 422.1 423.3

By-products

Percentage of biosolids beneficially used (%)

100 100 100 100 100

We produced 40,627 dry tonnes of biosolids in 2014–15. For more information, see the Operating Licence Environment Report on our website.

Waste reduction

Percentage of solid waste recycled or used (%)

72 72 57 88 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.


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Figure 13: Sydney Water’s carbon footprint trends 2006–07 to 2013–14*

Direct emissions (Scope 1) Electricity emissions (Scope 2)

Operations indirect emissions (Scope 3) Capital works indirect emissions (Scope 3)

Ton

nes

car

bo

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(t C

O2-

e)

400,000

0

800,000

1,200,000

1,600,000

2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14

* Data for 2014–15 was not available in time for publication of this report.

Figure 14: Sydney Water’s total gross greenhouse gas emissions per 1,000 properties 2010–11 to 2014–15

Gro

ss t

on

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CO

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O2-

e)p

er 1

,000

pro

per

ties

250

300

200

–

50

100

2010–11 2011–12 2012–13

Year ended 30 June

2013–14 2014–15

150


Our ecological footprint

Our 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 2010–11 to 2013–14

0 5 01 51 02

SCALE IN KILOMETRES

2010–11 – 110,000 ha

2011–12 – 110,000 ha

2012–13 – 110,000 ha

2013–14 – 110,000 ha

Manly

Windsor

Parramatta

Gosford

Mona Vale

Hornsby

Wisemans Ferry

Blacktown

Liverpool

Sutherland

Otford

Sydney

Campbelltown

Wollongong

Bargo

Kiama

Oakdale

Katoomba

Penrith

Kurrajong HeightsLithgow

BrokenBay

Port Jackson

BotanyBay

LakeIllawarra

* Data for 2014–15 was not available in time for publication of this report.


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Risk management and performanceSydney Water has adopted an organisation-wide Risk Management Framework that encourages a risk-aware culture, where staff and contractors proactively identify, communicate and manage risks. The framework is approved by the Board and is consistent with the Risk Management Standard AS/NZS ISO 31000.

We manage our customer, commercial, social and environmental risks to create better value for our customers and shareholders and fulfil the performance requirements of our statutory and regulatory obligations.

Our Board is supported by seven sub-committees, which oversee risks related to their respective core functions, such as public health and environment, safety and financial matters. The Board’s Audit

and Risk Committee monitors the overall effectiveness of the Risk Management Framework and the robustness of the control environment. Our Executive team monitors risks relating to our day-to-day operations and delivering corporate objectives.

Our Risk Management Framework includes a risk management policy and procedures that set out a structured and systematic process for identifying, assessing, managing, reporting and escalating risks.

All divisions are implementing the Risk Management Framework by embedding processes in all relevant business planning, decision-making and performance monitoring processes. We identify risks, record them and allocate responsibilities to an owner to respond.

Below are the key risks we manage.

Risk theme Theme details

Business operations

Risks related to day-to-day running of the business including systems, assurance, process efficiency, legal requirements and asset management.

Commercial operations

Risks related to commercial transactions including procurement, commercial arrangements, investment and budgeting activities.

Customer processes

Risks related to the effectiveness of our customer interactions.

Product and service standards

Risks related to protecting the environment and public health.

Product offerings

Risks related to the products Sydney Water offers and their alignment to customer values and perceptions.

Regulatory price determination

Risk related to Sydney Water’s income, including regulatory determinations of revenue and prices.

Resilience Risks related to Sydney Water’s preparedness to respond to threats and opportunities, adapt to changing conditions and leverage innovation.

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


Risk theme Theme details

Servicing solutions

Risks related to the strategies, plans and partnering arrangements we use to deliver services into the future.

Stakeholder relations

Risks related to maintaining strong relationships with regulators, stakeholders and shareholders to influence decision-making that impacts Sydney Water and our customers.

Technological support

Risks related to IT systems and information management.

Workforce and culture

Risks related to people, leadership, conduct, management systems and processes.

Insurance

Sydney Water’s insurance program focuses on transferring and mitigating risks as a key element of the Risk Management Framework.

We regularly review our insurance program to prepare for current and emerging risks. If appropriate, we transfer insurable risks

to either the commercial insurance market or the New South Wales Treasury Managed Fund. We review the insurance program each year to ensure it’s line with our risk themes and is relevant, effective, and has good breadth of coverage across transferable and insurable risks.

Legal events

Significant judicial decisions

High Court of Australia

ICAC v Cunneen decision – Impact on Operation Credo

In April 2015, the High Court of Australia dismissed an appeal by the Independent Commission Against Corruption (ICAC) in respect of the NSW Supreme Court’s decision to stop ICAC’s investigation into Deputy Senior Crown Prosecutor, Ms Margaret Cunneen. As a result of this decision, ICAC withheld the release of its report on Operation Credo.

Operation Credo involved, amongst other matters, investigations into allegations of corrupt conduct involving persons having an interest in Australian Water Holdings (AWH) (and its predecessors and subsidiaries), including whether those persons obtained a financial benefit as a result of adversely

affecting our official functions. In 2014, we had a number of current and former directors and staff assist ICAC by giving evidence as witnesses in ICAC’s public hearing for Operation Credo.

The report by a panel of independent experts appointed by the NSW Government to review ICAC’s jurisdiction following the High Court’s decision (the Gleeson Review) was released in July 2015. As a result of the Gleeson Review, in September 2015 the Premier introduced the ICAC Amendment Bill 2015 into Parliament, which amends the definition of ‘corrupt conduct’ under the Independent Commission Against Corruption Act 1988. Subject to the ICAC Amendment Bill 2015 becoming law, we anticipate that ICAC will soon release its report on Operation Credo.


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Federal Court of Australia

Sydney Water v AWH and others

As a result of evidence presented during ICAC’s public hearing for Operation Credo, in June 2014, we commenced proceedings in the Federal Court of Australia to recover amounts we were inappropriately invoiced by Australian Water Holdings Pty Ltd.

In April 2015, we settled the proceedings on confidential terms. The settlement reached avoided a potentially long, expensive and highly complex hearing and delivered a positive financial outcome for our customers.

NSW Land and Environment Court

Prosecution by the NSW Environment Protection Authority (EPA) for effluent leak at Malabar Wastewater Treatment Plant

In September 2013, effluent leaked from a reclaimed effluent pipeline at our Malabar Wastewater Treatment Plant. This resulted in about 0.5 ML of treated wastewater entering the ocean from the submerged cliff face bypass discharge point at Malabar Headland, rather than the ocean outfall discharge point.

In September 2014, the EPA commenced proceedings against us for contravening a condition of our environment protection licence (that all plant and equipment must be maintained in a proper and efficient condition) and for polluting waters under the Protection of the Environment Operations Act 1997 (NSW). We pleaded guilty to both offences.

In April 2015, we were convicted of both offences and received a total penalty of $157,500.

Significant changes to legislation affecting Sydney Water

Protection of the Environment Operations Act 1997

In January 2015, the Protection of the Environment Operations Act 1997 (NSW) was amended by the Protection of the Environment Legislation Amendment Act 2014 (NSW) to impose a requirement to immediately notify the EPA and other regulatory authorities of material harm pollution incidents that involve odour alone.

Carbon tax repeal

In July 2014, the Clean Energy Legislation (Carbon Tax Repeal) Act 2014 (Cth) repealed the carbon tax. The treasurer approved our request to pass the savings from this change on to customers. After consulting the pricing regulator, the Independent Pricing and Regulatory Tribunal, we gave our customers a $10 carbon tax rebate in January 2015. This rebate reflected that from 1 July 2014 a component of our prices included a carbon tax component. We will be giving customers another rebate in January 2016.


Capital expenditure

The capital works program aims to:

• renew and upgrade existing assets

• improve business efficiencies

• deliver government programs

• support urban growth.

In 2014–15, Sydney Water spent about $627 million on capital works, which was 12% below the $701 million budget, partly due to efficiencies and scope reductions of $39 million.

We intentionally deferred capital works of $29 million to future years after reassessing asset conditions and integrating asset planning initiatives.

Table 15: Major capital works projects completed 2014–15

Project Project benefits

Wastewater main renewals (outputs achieved in 2014–15)

We renewed 17.1 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 30.4 km of reticulation wastewater mains to reduce dry weather and repeat overflows affecting customers.

Water main renewals (outputs achieved in 2014–15)

We renewed 46.5 km and decommissioned 1 km of water reticulation mains to maintain water supply and reduce interruptions.

We renewed 6.3 km and decommissioned 1.1 km of water trunk mains to maintain water supply and reduce interruptions.

North West Growth Centre Servicing Package 2 – Riverstone, Box Hill and Schofields

We provided water and wastewater services to the second release precincts of the North West Growth Centre to service growth. The project was completed within a reduced budget and six months later than planned due to increased scope.

North West Growth Centre Package 3A (First Ponds Creek)

We provided wastewater services to the First Ponds Creek component of the North West Growth Centre. This was part of the Accelerated Housing Program to provide for growth. We completed the project within budget and on time.

Cronulla Wastewater Treatment Plant odour abatement

We reduced the odour impact of Cronulla Wastewater Treatment Plant on nearby residential/commercial development to meet environmental licence requirements. We completed the project within budget and revised timeframe to accommodate increased scope.

Winmalee Tunnel improvement protects the tunnel from structural damage

We improved the reliability of the Winmalee Tunnel to ensure the wastewater system continues to operate safely during heavy wet weather. We completed the project within budget, but later than planned due to delays encountered during excavation.


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Project Project benefits

Cooks River stormwater naturalisation

We naturalised a concrete stormwater channel that was approaching structural failure, improving both river health and aesthetic appeal. We completed the project six months later than planned, as the site was contaminated and required unexpected remediation work. We came in under budget mainly due to efficiency gains in contract management and delivery.

Bargo Sewerage Scheme

We constructed a wastewater system to service about 830 properties in Bargo, protecting the environment and reducing risks to public health. We completed the project on time and under budget, mainly due to planning and delivery efficiency gains. The scheme was available for customer connections from 30 June 2014.

Buxton Sewerage Scheme

We constructed a wastewater system to service about 700 properties in Buxton, protecting the environment and reducing risks to public health. We completed the project on time and under budget, mainly due to planning and delivery efficiency gains. The scheme was available for customer connections from 30 June 2014.

Douglas Park Sewerage Scheme

We constructed a wastewater system to service about 154 properties, protecting the environment and reducing risks to public health. We completed the project within budget and on time. The scheme was available for customer connections from 30 June 2014.

Wilton Sewerage Scheme

We constructed a wastewater system to service about 256 properties, protecting the environment and reducing risks to public health. We completed the project within budget, on time and under budget, mainly due to planning and delivery efficiency gains. The scheme was available for customer connections from 30 June 2014.

Table 16: Major capital works in progress as at 30 June 2015

Project Forecast completion

date

Budget $m

Cost to date

$m

Malabar Wastewater Treatment Plant Improvement Program – upgrade to improve reliability, capability and performance of the plant. We should complete this project within budget, although it may take longer than planned to allow for cleaning the digesters.

June 2017 106 50

Information technology projects – continuing minor projects to reduce operating expenditure, renew IT systems and equipment, and deliver new systems and capabilities. Major projects include a new billing system and a new Enterprise Resource Planning business management system.

Ongoing 86/year* Ongoing

Wastewater treatment plant renewals – continuing to replace equipment near the end of its service life.


* Denotes five-year average.



date

Budget $m

Cost to date

$m

Wastewater reticulation and wastewater trunk main renewals – continuing program 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.


Water reticulation and wastewater trunk main renewals – continuing to replace water mains near the end of their service life to reduce the impact of failures on the community and the environment.


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.


Green Square Trunk Stormwater Drainage – will increase stormwater drainage capacity in Green Square Town Centre to reduce risk of flooding and facilitate development. We’re on track to complete the project on time and within budget.

December 2017

53 11

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. We’re on track to complete the project on time and within budget.

Note: The scheme was available for customer connections from June 2015.

December 2016

48 37

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. We’re on track to complete the project on time and under budget.

June 2016 46 25

North Head Wastewater Treatment Plant Odour Scrubber – replacing an odour scrubber to reduce corrosion and odour emissions. We’re on track to complete the project on time and under budget.

June 2016 44 27

Astrolabe Park, Stormwater Renewal – replacing existing stormwater culverts. We’re on track to complete the project on time and within budget.

December 2017

30 2

Picton Sewerage Scheme Amplification (Stage 2) – amplifying and upgrading the Picton wastewater recycling plant to provide for growth. We’re on track to complete the project within budget, but four months later than planned due to additional stakeholder engagement activities.

September 2017

30 2



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date

Budget $m

Cost to date

$m

Metropolitan IICATS Water Remote Terminal Unit Renewal – replacing remote terminal units used to control and monitor assets at 324 sites to meet current and future operational needs. We’re on track to complete the project within budget, but four months later than planned due to additional scope.

October 2015

29 23

North West Growth Centre Package 3A, Cattai Creek – providing wastewater services to the Cattai Creek area of the North West Growth Centre. We’re on track to complete the project on time and within budget.

July 2015 25 21

Reservoir Renewal and Reliability Program – continuing to ensure reservoirs and associated equipment operate at lowest costs while complying with regulatory requirements.


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. We’re on track to complete the project under budget, but three months later than planned due to scope change.

September 2015

24 9

West Dapto (Package 1) – constructing water and wastewater infrastructure to service growth in the West Dapto Urban Release Area. We’re on track to complete the project on time and within budget.

September 2015

24 12

Menangle Park Wastewater (Stage 1) – constructing a new wastewater pumping station and wastewater mains to service growth within the Menangle Park Release Area. We’re on track to complete the project on time and under budget.

December 2015

24 6

Wastewater Treatment Plant Accommodation Program Stage 2 – to modify and redesign wastewater treatment plant offices at North Richmond Water Filtration Plant and at Malabar, St Marys and Penrith wastewater treatment plants. We’re on track to complete the project within budget, but five months later than planned due to delays caused by safety issues on some sites.

July 2016 23 10

South West Growth Centre, First Release Precincts, Turner Road – providing water infrastructure to service growth in the South West Growth Centre. We’re on track to complete the project on time and within budget.

November 2016

21 1

Riverstone wastewater lead-ins mains – providing wastewater services in the North West Growth Centre to service growth. This is part of the Accelerated Housing Program. We’re on track to complete the project on time and within budget.

October 2016

19 1




date

Budget $m

Cost to date

$m

SWGC – Austral Precinct – providing wastewater infrastructure in the Austral precinct of the South West Growth Centre to service growth. We’re on track to complete the project on time and within budget.

June 2016 19 2

Northern Suburbs Ocean Outfall Sewer (NSOOS) chemical dosing units – to reduce corrosion in the NSOOS and extend the life of associated wastewater assets. We’re on track to complete the project on time and within budget.

December 2015

18 6

Wastewater pumping station renewals – continuing to replace equipment near the end of its service life.


New SPS 1146 Balmain (to replace SPS 008) –constructing a new wastewater pumping station to provide reliable wastewater services to the Balmain area. We’re on track to complete the project under budget, but nine months later than planned due to contractor safety issues.

August 2015

15 9

Water pumping stations – continuing to improve reliability and safety, and minimise life cycle costs of water pumping stations.


Picton Sewerage Scheme Amplification (Stage 1) –amplifying and upgrading the Picton wastewater recycling plant to provide for growth. We’re on track to complete the project within budget, but eight months later than planned to accommodate season-dependent pump installation work.

February 2016

12 9

Meter replacement program – targeted to improve measuring and monitoring of water volume and service reliability.


South West Growth Centre, wastewater pumping station SP0484 upgrade – providing a second rising main from SP0484 to satisfy wet weather licence requirements, while servicing growth in the Camden area. We’re on track to complete the project on time and within budget.

November 2015

11 3



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Drivers of planned capital expenditure for the next financial year

Our capital works budget for 2015–16 is $705 million (nominal – not including capital borrowing cost). Drivers of planned capital expenditure are (2015–16 forecast in brackets):

• asset renewal and rehabilitation of assets to meet system performance regulations and customer service levels ($423 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 sectors ($193 million)

• NSW Government programs mainly to finish priority sewerage programs that started under our Operating Licence 2010–15 requirements ($13 million)

• new regulatory standards, such as wastewater system performance under environment protection licences ($18 million)

• business efficiency measures, such as information technology or energy saving projects that reduce operating expenditure ($59 million).

Over the next five years from 2015–16 to 2019–20, we will deliver a capital works program of about $3.65 billion in nominal (escalated) dollars.


Research and development

We invested $5.91 million for 34 research and development projects in 2014–15.

Of this, we invested around $455,000 in key national and international research alliances through Water Services Association of Australia (WSAA) and around $171,000 through Low Carbon Living –Cooperative Research Centre (LCLCRC). We also committed about $61,000 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

• drive new analytic approaches to inform better investment

• prepare for the onset of new and disruptive technologies.

Table 17: Major alliance and collaborative research investment

Research partner Area of focus Sydney Water investment

2014–15

WSAA

• Water 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 by improving water quality and environmental performance.

• Water recycling and desalination through research and technical meetings.

$454,986

LCLCRC • Opportunities for lower-carbon manufacturing.

• A more efficient and productive built environment sector as a whole.

• Engaged communities participating in low carbon living.

• An evidence base for good planning and policy.

• Large-scale national capability development.

• Tools, technologies and techniques to ensure the sector remains globally competitive.

$171,279


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Research partner Area of focus Sydney Water investment

2014–15

Water filtration plants: BOO research and development

• Water quality and public health, treatment technologies, wastewater treatment

$60,663

(Excludes funding from BOO partners)

Total alliance and collaborative subscriptions

$686,928

Table 18: Completed projects (>$100,000) 2014–15

Project title Sydney Water investment to 30 June 2014

Sydney Water investment to 30 June 2015

Estimated total project investment

(all partners)

Smart Grid Smart City Project with Ausgrid

$332,158 $338,671 $100,897,600

BASIX multi-dwelling monitoring study

$259,422 $264,335 $700,000

Treatment requirement for Australian source waters

$25,380 $27,557 $470,000

Monitoring membrane integrity for virus removal

$23,846 $23,846 $193,000

Regional climate modelling $150,782 $150,915 $2,500,000

NSW Environmental Trust environmental risk assessment of selected human pharmaceuticals

$9,648 $9,648 $400,000


Table 19: Ongoing projects (>$100,000) 2014–15

Project title Sydney Water investment to 30 June 2014*

Sydney Water investment to 30 June 2015*

Estimated total project investment

(all partners)

Optimal management of corrosion and odour in sewers: Australian Research Council (ARC) linkage project

$1,699,466 $1,728,357 $21,000,000

Advanced condition assessment and pipe failure prediction

$4,023,324 $4,759,473 $13,400,000

Innovative failure data analysis to target critical mains for condition assessment

$195,477 $198,734 $225,000

A new management tool for effective wastewater source control: ARC linkage project

$1,159,399 $1,225,704 $3,665,000

Biosolids research and development

$1,746,381 $1,966,955 $4,796,857

Hawkesbury-Nepean water quality modelling

$4,573,572 $4,801,138 $6,000,000

National Demonstration Education and Engagement Program to investigate and address the barriers to the public accepting adding recycled water to drinking water supplies

$81,242 $96,547 $10,138,000

Environmental E. coli $44,464 $48,847 $1,060,000

Energy Research and Development Program

$699,072 $747,616 $762,500

Climate change risk management framework tool – AdaptWater™

$569,945 $575,965 $1,025,000

Assessment of decentralised water management systems

$207,098 $214,511 $300,000

Climate Change Adaptation Program

$338,102 $348,512 $350,000

Nutrient removal and fouling in membrane bio reactor technology (ARC Project)

$159,087 $167,084 $1,143,000

Waterways modelling (Sydney Harbour and Botany Bay modelling)

$1,384,255 $2,379,455 $4,500,000

* Cumulative totals.


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Heritage delegation actions

We have the regulatory power to approve and endorse certain work on Sydney Water assets listed on the State Heritage Register (SHR).

We also have the regulatory power to grant excavation permits and/or exempt work that could impact archaeological sites in our area of operations.

We can also endorse conservation management plans and strategies for assets listed on the SHR.

Table 20: Decisions made under the Heritage Council of NSW delegation 2014–15

Site Work completed Decision

Wastewater (Sewerage) Pumping Station No. 1, Ultimo

Removing lean-to, reinstating original roof and conservation work

Approved under S60

Pressure tunnel shafts 6 and 12

Replacing valves, which required structural changes

Approved under S57(2) – Standard Exemption 7

Ryde Pumping Station and site (WP0005)

Removing old electrical cabling and wiring


Pipehead water supply canal and associated works, Guildford

Removing low significant structures partially within heritage curtilage


The Obelisk Sewer Vent Installing temporary artwork Approved under S57(2) – Standard Exemption 11


Replacing electrical substation equipment


Mount Dorothy Reservoir Remediating soil, minor excavation


Chatswood reservoirs and site

Removing portable building housing chemical dosing equipment


Kiama reservoirs Installing new prefabricated dosing unit, turning bay and delivery bund


Botany Water Reserve Installing new stormwater pipes

Approved under S57(2) – Standard Exemption 4 & 7

Potts Hill reservoirs site Replacing hydraulic cabinets and control units for penstocks



Installing solar panels on roof Approved under S57(2) – Standard Exemption 7


Site Work completed Decision

Western Main Outfall Sewer Installing two new connections and a new maintenance hole


Chatswood reservoirs Installing solar panels to roof of reservoir


Upper Canal System Installing two new sampling platforms


Millers Point and Dawes Point Village Heritage Precinct

Excavating for water main adjustments (minor)


Marrickville Wastewater (Sewerage) Pumping Station (SP0271)

Replacing penstocks and one new pump


Oran Park House, Catherine Fields (Part) Precinct

Trenching Approved under S139(4) – Schedule 1(b)

Cricketers Arms Hotel, Prospect

Trenching Approved under S139(4) – Schedule 1(c)

Green Square Trenching and horizontal boring

Approved under S139(4) – Schedule 1(c)

Corunna Road, Eastwood Trenching Approved under S139(4) – Schedule 1(b)

Prince Alfred Park, Surry Hills

Excavating to assess condition of 1888 water main

Approved under S139(4) – Schedule 1(c)


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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 table 21 to publicly available reports and information that demonstrate our performance against these clauses.

We publish key performance reports on our website:

• Annual Report 2014–15.

• Sydney Water Operating Licence Environment Report (Environment Plan 2014–19 Annual Report and Environmental Indicators Report 2014–15) – details our corporate performance information on our environmental objectives, targets and indicators.

• Water Efficiency Report 2014–15 – 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 – a summary of wastewater discharge quality, quantity and loads data for key pollutants relating to regulatory limits. This report also contains wastewater overflows and recycled water data.


Table 21: Environmental performance against special objectives 2014–15

Special objectives clauses Sydney Water performance report section

Additional public reports

Reduce the impact of Sydney Water’s discharges into or onto the air, water or land of substances which are likely to cause harm to the environment

Operating Licence Environment Report – Environment Plan 2014–19 Annual Report

Operating Licence Environment Report – Environmental Indicators Report 2014–15:

• Wastewater treatment and system discharges

• Biosolids

• Waste

• Electricity

• Greenhouse gas emissions

Annual Report 2014–15 Customer at the heart

Annual Report 2014–15 World class performance

Water Efficiency Report 2014–15

Sewage Treatment System Impact Monitoring Program (STSIMP) Report

Input to National Greenhouse and Energy Reporting (NGER) scheme cleanenergyregulator.gov.au/NGER/Pages/default.aspx (Note: The Clean Energy Regulator is required to publish an extract of the NGER register and data for the previous reporting period by 28 February)

National Pollutant Inventory (NPI) returns npi.gov.au (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 epa.nsw.gov.au/prpoeoapp

Input to Bureau of Meteorology (BOM) National Water Account bom.gov.au/water/nwa/

Input to Office of Environment and Heritage (OEH) State of the Beaches Report environment.nsw.gov.au/beach

Promote pollution prevention through reduction, reuse and recovery of energy, water and other materials and substances, used or discharged by Sydney Water, by the use of appropriate technology practices



• Trade waste

• Biosolids

• Waste

• Electricity indicators



Annual Report 2014–15 World class performance


• Input to NGER scheme cleanenergyregulator.gov.au/NGER/Pages/default.aspx

• Input to Bureau of Meteorology (BOM) National Water Account bom.gov.au/water/nwa/

• Input to OEH State of the Environment Report epa.nsw.gov.au/soe/


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www.cleanenergyregulator.gov.au/NGER/Pages/default.aspx



http://npi.gov.au

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

http://bom.gov.au/water/nwa/

http://environment.nsw.gov.au/beach











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



Reduce significantly the combined environmental impact of the per capita amount of energy and water used by the Corporation and of other materials and substances discharged by the Corporation



• Wastewater treatment and system discharges

• Biosolids

• Waste

• Electricity


Annual Report 2014–15 World class performance:

• Environmental footprint

• Environmental performance monitoring


STSIMP Report

• Environment Protection Licence Annual Returns, POEO Public Register epa.nsw.gov.au/licensing/lbl/annualreturn.htm

• Input to OEH State of the Beaches Report environment.nsw.gov.au/beach

• Input to OEH State of the Environment Report epa.nsw.gov.au/soe/

Minimise Sydney Water’s creation of waste by the use of appropriate technology, practices and procedures



• Biosolids

• Waste

Regulate the transport, collection, treatment, storage and disposal of waste



• Trade waste

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 2014–15 Environmental performance

• Government Gazette and online contaminated land management public record, NSW EPA website epa.nsw.gov.au/clm/aboutclmrecord.htm










http://epa.nsw.gov.au/licensing/lbl/annualreturn.htm

http://epa.nsw.gov.au/licensing/lbl/annualreturn.htm



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



















http://epa.nsw.gov.au/clm/aboutclmrecord.htm




Conduct public information and awareness programs about environmental programs, and involve the community in making decisions on environmental matters




• Input to BOM National Water Account bom.gov.au/water/nwa/

• Input to NGER scheme cleanenergyregulator.gov.au/NGER/Pages/default.aspx

• Input to 2010 Metropolitan Water Plan, NSW Government led by Department of Primary Industries, Office of Water metrowater.nsw.gov.au/planning-sydney

• Input into the OEH State of the Beaches Report environment.nsw.gov.au/beach/

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 npi.gov.au

• Government Gazette and online contaminated land management public record, NSW EPA website epa.nsw.gov.au/clm/aboutclmrecord.htm


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http://metrowater.nsw.gov.au/planning-sydney

http://metrowater.nsw.gov.au/planning-sydney

http://environment.nsw.gov.au/beach/

http://environment.nsw.gov.au/beach/







http://npi.gov.au



Threatened Species Conservation Act 1995Section 70 of the Threatened Species Conservation Act 1995 requires public authorities to report on how they implement recovery plans.

(1) A public authority (including the Director-General but not including a council) identified in a recovery plan as responsible for implementing measures in the plan must report on action taken by it to implement those measures in its annual report to Parliament.

a)Is Sydney Water identified as responsible for implementing measures included in a threatened species recovery plan? (Yes/No)

Yes:

• 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’ve completed 140 Property Environmental Management Plans for the most environmentally sensitive sites we own. The sites include all of those with known threatened species, communities and populations.

We’ve included relevant requirements from recovery plans in each site-specific Property Environmental Management Plan.

We’ve reviewed the implementation of the Property Environmental Management Plans to improve results and ensure better environmental outcomes for threatened species, communities and populations.

Eastern Suburbs Banksia scrub

We have a management plan 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 golf clubs must implement environmental management plans to ensure their operations protect the ESBS. Sydney Water also directly protects and maintains patches of ESBS not on golf course land. Protective measures include physical protection, bush regeneration and weed management. In 2014–15, Sydney Water completed a range of additional works in and around ESBS patches as part of a $245,000 grant administered by the Greater Sydney Local Land Services and Golf NSW.

We also prepared Property Environmental Management Plans 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, which contains Coastal Saltmarsh. 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, we planted Coastal Saltmarsh at two sites in March 2015. This initiative created over 850 m2 of new saltmarsh and a much larger area of new saltmarsh habitat on the naturalised banks, where it will grow naturally.

We also mapped vegetation around all of Sydney Water’s tidal stormwater assets and added this into Sydney Water’s Geographic Information System (GIS).

Endangered population of bandicoots (Perameles nasuta) at North Head WWTP

We have a Property Environmental Management Plan for North Head WWTP, which sets out how we help protect an endangered population of bandicoots (Perameles nasuta). We contribute to feral animal control and other measures at North Head.

Acacia pubescens

We have Property Environmental Management Plans 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 new growth of the species. A VCA contract manages the environmental values as required, including monitoring and reporting on Acacia pubescens.

We prepared a Property Environmental Management Plan for Prospect Reservoir.

We’re implementing the Plan of Management for Chullora Wetlands, which includes weed management and potential habitat protection.

Green and Golden Bell Frog (Litoria aurea)

We prepared Property Environmental Management Plans for Cronulla WWTP, St Marys Water Recycling Plant and Prospect Reservoir.

Botany, Eve St and Chullora Wetlands are potential habitat for this species of frog. Plans of Management for these wetlands aim to protect and enhance this habitat.

We recently completed work on the Cooks River naturalisation, restoring potential Green and Golden Bell Frog habitat at three locations along the river.

Grevillea caleyi

We prepared a Property Environmental Management Plan for Site 2 south (Mona Vale Road), Tumbledown Hill, and Terrey Hills.


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Cumberland Plain Woodland

The recovery plan for Cumberland Plain Woodland identifies properties that contain Cumberland Plain Woodland. We have Property Environmental Management Plans for the most significant of these sites.

We’ve mapped vegetation for our trunk drainage land in the Rouse Hill development area, including several areas of Cumberland Plain Woodland. We’re protecting and enhancing these remnants through bush regeneration and weed management, in line with the plan of management for Sydney Water Trunk Drainage Land in the Rouse Hill Development Area.

Tadgell’s Bluebell (Wahlenbergia multicaulis Benth)

A draft recovery plan for Tadgell’s Bluebell (Wahlenbergia multicaulis Benth) identified plants on one of our properties. We’re not taking action, as the plants are on an isolated pocket of land that’s rarely accessed.


5. High performanceculture

Our sustainability performance • We’re 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. This is to provide a safe environment for our staff, contractors and the public. Our safety theme for 2014–2017 is ‘Safe and well together’.

• 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 2014–15, and we welcomed 21 new graduates in February 2015 – an increase of 75% on the previous year.

• Sydney Water was voted number 16 in the Top 20 Ideal Employers Survey for engineering students in the Universum Top 100 Ideal Employers*.






Table 22: High performace culture sustainability performance indicators

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Safety

Lost time injury frequency rate

Sydney Water staff 6.14 6.28 2.29 6.16 4.71

Contractors 3.2 3.19 1.04 2.01 2.72

Lost time injury frequency rate 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. We update historical data to include any lost time injury notifications received since previous reporting periods.

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

* HC online hcamag.com/hr-news/revealed-australias-most-attractive-employers-to-grads-201484.aspx

86 High performance culture Sydney Water Annual Report 2014–15

http://hcamag.com/hr-news/revealed-australias-most-attractive-employers-to-grads-201484.aspx

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

Capability

Training investment per staff member ($) 1,330 1,010 1,115 1,097 1,187

In 2014–15, we invested $1,187 on average to train each staff member. Staff also participated in additional activities to build capability that didn’t result in a cost measured by this benchmark.

Number of staff in entry level program (total at 30 June).

117 80 78 68 84

Numbers of staff on entry level programs change throughout the year as we recruit new participants and others move into permanent positions. Entry level staff represent the following proportions of full-time equivalent staff:

• 3.3% in 2014–15

• 2.6% in 2013–14

• 2.9% in 2012–13

• 2.8% in 2011–12

• 3.9% in 2010–11.

Results are based on a 12 month rolling average.

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

8.9 8.7 8.0 8.6 8.0

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, 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’re satisfied with their job.

– 66 – 77 –

The People Matter Employee Survey, organised by the NSW Public Service Commission, is done every two years. The next survey is scheduled for 2016.

87Sydney Water Annual Report 2014–15 High performance culture

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Workplace health and safety

Our focus on safety continued in 2014–15 with the implementation of our ‘Safe and well together’ initiative.

We believe our safety performance is not up to standard. Our serious injury frequency rate (SIFR) failed to achieve our target of 11.2 with a year-end figure of 17.4.

We’re committed to achieving our 15/16 year-end target of 4.33, a 10% reduction in our lost time injury frequency rate (LTIFR). We’ve introduced total recordable injury frequency rate (TRIFR), a lagging performance indicator with a stretch target of <10.

Under this framework, we’re refreshing our Work Health and Safety Management System (WHSMS), along with over 80 safety standards and procedures that will help improve safety at work.

To achieve these results constructively, we developed six Executive commitment statements:

• There is no task so urgent and no service so important that we cannot take time to do it safely.

• We look out for ourselves and one another.

• Our leaders are role models and actively create a safe environment.

• It is great to speak up and challenge anyone about health, safety and wellbeing.

• We learn from incidents to stop them from happening again.

• We support our people to be proactive and visible in all aspects of health, safety and wellbeing.

The Civil Delivery team introduced a Behavioural Based Safety (BBS) system to encourage staff to engage with safety in a proactive way. Staff use their smart phones to submit photos and notes about safety on the job, enabling managers to give their front-line staff real-time feedback and positive reinforcement for safe behaviour. Staff have recorded almost 7,000 safety observations and conversations since the program started, demonstrating our workforce’s ongoing commitment to safety.

We produced a series of video interviews with staff who experienced life-changing accidents both on the job and outside of work. We shared these business-wide to stimulate conversations around risk and unsafe behaviour.

We invited the non-profit organisation Mates-in-Construction (MIC) to show our people that their mental health is just as important as physical health. This program focuses on suicide prevention and mental health, giving participants practical tools and training to improve their health and wellbeing at work. The MIC talks were delivered at 27 Sydney Water sites, with over 700 staff participating.


Table 23: Lost time injury frequency rate for Sydney Water staff and contractors

Indicator 2010–11 2011–12 2012–13 2013–14 2014–15

LTIFR Sydney Water 6.14 6.28 2.29 6.16 4.71

LTIFR Contractors 3.2 3.19 1.04 2.01 2.72

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

Figure 15: Lost time injury frequency rate for Sydney Water staff

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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 = (number of LTIs/number of hours worked) x 1,000,000

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Note: Results reflect the most recent data at time of reporting. We update historical data to include any LTI notifications received since previous reporting periods.

Figure 16: Lost time injury frequency rate and lost time injuries for Sydney Water staff

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Figure 17: Lost time injury frequency rate and lost time injuries for contractors

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Notes:1. Results reflect the most recent data at time of reporting. We update historical data to include any LTI notifications received since

previous reporting periods.2. Results are based on the number of contractor hours reported to Sydney Water.

Figure 18: Significant injury frequency rate for Sydney Water staff

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Figure 19: Significant injury frequency rate for contractors

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Notes: 1. Results reflect the most recent data at time of reporting. We update historical data to include any LTI/MTI notifications received

since previous reporting periods.2. Results are based on the number of contractor hours reported to Sydney Water.

Executive performance and remuneration At 30 June 2015, about 12.5% of Sydney Water’s staff-related expenditure was for senior executives*.

Table 24: Senior executive remuneration

2015 2014 Average remuneration

SES band equivalent* Female Male Female Male 2015 2014

Above band 4 equivalent 0 1 0 1 $715,938 $688,402

Band 4 equivalent 0 0 0 0 - -

Band 3 equivalent 3 5 2 6 $371,840 $358,786

Band 2 equivalent 7 28 7 23 $264,683 $257,565

Band 1 equivalent 62 189 49 197 $194,778 $190,175

Totals 72 223 58 227

Grand total 295 285

Note: Sydney Water doesn’t use NSW SES salary bands. There is no direct alignment.

* The figure in 2014 was reported erroneously. The figure previously represented all staff partially or not covered by the Enterprise Agreement. We now report staff related expenditure only for Sydney Water’s definition of senior executives.


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Workforce diversity

Statistical information on EEO target groups

Table 25: Trends in the representation of EEO groups1

Target/benchmark

2010–11 2011–12 2012–13 2013–14 2014–15

No. % No. % No. % No. % No. %

Women 50% 813 26.6% 780 27.1% 749 27.5% 750 29.5% 776 29.9%

Aboriginal people and Torres Strait Islanders

2.6%2 20 0.7% 21 0.7% 24 0.9% 29 1.1% 27 1.0%

People whose first language is not English

19.0% 559 18.3% 553 19.2% 490 18.0% 453 17.8% 445 17.2%

People with a disability

N/A3 93 3.0% 79 2.7% 76 2.8% 62 2.4% 59 2.3%

People with a disability requiring a work-related adjustment

1.5%4 25 0.8% 19 0.7% 20 0.7% 14 0.6% 14 0.5%

Total staff 3,053 2,874 2,722 2,543 2,593

Notes:1. Staff numbers are as at 30 June 2015.2. Minimum target by 2015.3. Per cent employment levels are reported, but a benchmark has not been set.4. Minimum annual incremental targets: 1.1% (2011), 1.3% (2012), 1.5% (2013).

Table 26: Trends in the distribution of EEO groups5

Distribution Index6

EEO group Target/benchmark

2011 2012 2013 2014 2015

Women 100 99 98 99 99 98

Aboriginal people and Torres Strait Islanders

100 81 79 72 70 76

People whose first language is not English

100 99 99 98 104 106

People with a disability 100 89 90 89 91 91

People with a disability requiring a work-related adjustment

100 88 95 91 N/A N/A

Notes: 5. Information included in table 25 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.


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’s both a staff and a manager edition of the training to reflect different accountabilities. A total of 1,722 people (over 65%) completed the program by 30 June 2015.

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 two Aboriginal and Torres Strait Islander trainees in 2014–15. The total number of identified Indigenous staff is 27, which is one per cent of our workforce.

Our entry level program has offered one Indigenous specific industry experience placement in 2014–15.

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 2015–16

We continue to refine our Indigenous Employment Strategy. We work with Indigenous communities and job networks to increase our Aboriginal and Torres Strait Islander staff numbers through traineeships and mainstream employment.

We will continue our relationship with the University of Western Sydney’s Office of Aboriginal and Torres Strait Islander Employment and Engagement. We will look into working with other universities to provide opportunities for Aboriginal and Torres Strait Islander candidates for our Industry Experience and the Graduate Program.


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Table 27: Workforce numbers

Human resources 2010–11 2011–12 2012–13 2013–14 2014–15

FTE – Permanent 2,749 2,604 2,459 2,288 2,376

FTE – Temporary 124 111 108 115 72

FTE – Part-time 132 118 112 106 110

Total 3,005 2,833 2,679 2,509 2,558

Other

Agency staff 171 108 100 123 167

Redundancies 60 160 149 77 46

Appointments 141 121 140 205 230

Average turnover 3.3% 3.5% 4.6% 4.9% 4.0%

Unplanned absences 4.0% 4.3% 3.1% 3.4% 3.5%

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).

Staff and industrial relations

This year, we’ve continued improving our industrial relationships.

Importantly, we settled a new Enterprise Agreement. This was agreed with staff and unions and approved by Fair Work Australia before the previous agreement expired, providing certainty for staff and the business. The agreement also provides a commitment to further collaborative discussion and change to address key business challenges.

The bargaining process helped identify key business issues and committed us to addressing them in a cooperative fashion.

No formal disputes have been lodged with the Fair Work Commission during this year.


Consultant engagementsTable 28: Payments to consultants for engagements over $50,000.00 from 1 July 2014 to 30 June 2015

Vendor name Contract number

Contract description Amount

The Trustee for The Brewster Murray

26973 Site condition assessment $121,300.00

The Trustee for Enterprise Improvement

A review of processes for the Mobile Plant and Equipment asset class

$109,650.00

KPMG 27065 Accounting advisory services in relation to the Wyuna and Prospect Water Filtration Plants

$85,500.00

Brooke Institute Pty Ltd

27276 Design of a procurement capability framework and training program.

$71,285.60

The Trustee for The Brewster Murray

Design consultancy for technical reviews of Malabar, Penrith, St Marys and North Richmond

$71,050.00

BMT WBM PTY LTD Consultancy advice for on-site wastewater management upgrade assistance for the Blue Mountains septic pump-out customers

$50,400.00

Total payments to consultants over $50,000

$509,185.60

There were 28 consultants engaged for $50,000 or less totalling

Total payments to consultants in 2014–15

$427,871.30

$937,056.90


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Overseas travelTable 29: Overseas travel 2014–15

Date of travel Name Destination Purpose

7–14 September 2014

Victoria Whiffin

Toronto, Canada

Represented Standards Australia at the International Standards Organisation (ISO) Technical Committee 275 to discuss sludge recovery, recycling, treatment and disposal. Travel costs were funded by Standards Australia.

24–25 September 2014

Paul Freeman

Lisbon, Portugal

Attended the IWA World Water Congress 2014 to receive the award from the International Water Association for the SCORe (Sewer Corrosion and Odour Research) Project.

4–27 November 2014

Sam Dransfield

Rotorua, New Zealand

Attended the Sydney Water Fellowship Programs funded by Veolia, to help our Servicing and Asset Strategy team create Sydney Water’s Biosolids vision.

18 November – 5 December 2014

Michael Blackmore

Paris, France and Bruges, Belgium

Attended the Sydney Water Fellowship Programs funded by Veolia, to help our Servicing and Asset Strategy team create Sydney Water’s Biosolids vision.

2–14 March 2015

Ben Blayney

Paris, France Attended as a speaker to present on ‘Innovation to boost performance’ at the Suez Technical World Congress in Paris to disseminate emerging technology and outcomes from leading research.

7–28 March 2015

Darren Cash

China, France, Denmark, Switzerland and the Netherlands

Attended a six-week fellowship funded by Veolia, to learn about data driven intelligent networks to improve Sydney Water’s asset management and customer engagement strategies.

7–30 March 2015

John Murray

China, France, Denmark, Switzerland and the Netherlands

Attended a six-week fellowship funded by Veolia, to learn about data driven intelligent networks to improve Sydney Water’s asset management and customer engagement strategies.

16–26 May 2015

James Milton

Tennessee, United States of America

Attended as a speaker at the American Backflow Prevention Association (ABPA) International Education Conference and Trade Show.

We improved our understanding of the manufacturing and testing involved in producing backflow prevention devices, and enhanced Sydney Water’s reputation overseas.


6. Financials

Performance summaryAs a state owned corporation, we must operate as efficiently as any comparable business and maximise the net worth of the NSW Government’s investment.

During 2014–15, our profit after tax was $513 million, $147 million above the Statement of Corporate Intent (SCI) target of $367 million. This was due to higher water use income, receiving assets free of charge and lower operating costs. Lower operating costs were driven mostly by lower contractor costs and lower borrowing costs due to lower interest rates.

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. The SCI forms the basis of our yearly budget.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the year were $1,404 million, $144 million above the SCI target of $1,260 million. Profit after tax for 2014–15 was $513 million, $147 million above the SCI target of $367 million. Our profit improved from higher water and wastewater use income and service charge income, receiving assets free of charge from developers and lower operating costs.

Table 30: Profit and loss statement 2011–12 to 2014–15

Financial performance target

2014–15variance

to SCI budget

2014–15 SCI

budget

2014–15 result

2013–14 result

2012–13 result

2011–12result

Total income ($M) 89* 2,639 2,728 2,615 2,521 2,671

Operating expenses ($M)

56* 1,380 1,324 1,301 1,343 1,204

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

144* 1,260 1,404 1,314 1,178 1,467

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

10* 262 252 261 245 298

Borrowing expenses ($M)

24* 447 422 414 398 557

Total expenses ($M) 90* 2,089 1,999 1,976 1,986 2,059

Net profit before tax (NPBT) ($M)

179* 551 730 640 536 612

98 Financials Sydney Water Annual Report 2014–15

Financial performance target

2014–15variance

to SCI budget

2014–15 SCI

budget

2014–15 result

2013–14 result

2012–13 result

2011–12result

Income tax expense ($M)

32# 184 216 175 163 245

Net profit after tax (NPAT) ($M)

147* 367 513 464 372 367

Dividend payable ($M)

0 664 664 252 291 242

Return on assets (%) 0.9* 6.5 7.4 7.1 7.0 8.0

Funds flow interest cover (times)

0.4* 2.0 2.4 2.1 2.0 1.8

Capital investment program ($M)

73* 701 627 548 610 659

Gearing ratio (%) 2* 51 49 49 49 48* Favourable variance to SCI.# Unfavourable variance to SCI.

Income

Total income for the year was $2,728 million, $89 million above the SCI target of $2,639 million.

Regulated income was $2,527 million, $40 million above the SCI target of $2,487 million. This was due to higher water use income from higher water supply during the warm and dry summer.

Non-regulated income was $201 million, $49 million above the SCI target of $152 million. This was mostly due to higher developer capital contributions (mostly assets free of charge) driven by higher developer demand.

Property sales

During 2014–15, we sold 13 properties surplus to our needs at a total gross sale price of $60 million, net of GST. We placed proceeds from the sales in general revenue. We made all sales in line with accepted NSW Government disposal standards and guidelines. You can access documents relating to property disposal under the Government Information (Public Access) Act 2009.

Expenditure

Operating expenses for the year were $1,324 million, $56 million below the SCI target of $1,380 million. This was mostly due to savings in contractor costs from reforms and deferred projects.

Total asset charges (depreciation, amortisation, impairments and sales for assets) for the year were $252 million, $10 million below the SCI target of $262 million. This was mostly due to fewer losses on the disposals of system assets.

Total borrowing expenses (interest expense and government guarantee fees) for the year were $422 million, $24 million lower than budget. This was mostly due to lower interest rates.

Income tax

Income tax expense for the year was $216 million, $32 million above the SCI target of $184 million. This was due to the higher profit result.

99Sydney Water Annual Report 2014–15 Financials

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Dividends

For 2014–15, we recognised a dividend payable of $664 million, which is in line with the SCI target.

Time for payment of accounts

We did not make any penalty interest payments during 2014–15 for late payments to creditors.

Indicator: Funds flow from operations

Cash (funds flow) from our operations in 2014–15 was $708 million. This is $134 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 2.4. This was above the target of 2.0 due to a combination of higher sales income, lower costs and lowerinterest charges.

Table 31: Funds flow from operations interest cover 2010–11 to 2014–15

Funds flow

2014–15target

2014–15 2013–14 2012–13 2011–12 2010–11

Funds flow from operations ($M)

574 708 603 518 436 435

Funds flow from operations interest cover

2.0 2.4 2.1 2.0 1.8 1.9

Investment management

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

In 2014–15, our investment performance was 2.35% compared to the benchmark of 2.53%, with an average investment balance of $300,000. 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 2015, we had cash in the bank of $5.7 million.

Table 32: Cash and investments 2014–15

Sydney Water Benchmark

Market valuation ($M) 574 708

30 June 2015 5.7 N/A

Yearly return (%) 2.35 2.53


Debt management

At 30 June 2015, our total debt was $6.160 billion. Our debt portfolio was sourced almost entirely through NSW Treasury Corporation and we manage it actively 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 2015, 56% of our total debt was fixed-rate debt with a maturity of more than one year, while 27% was inflation-indexed debt maturing out to 2035. The remaining 17% was fixed-rate debt due for refinancing in 2015–16.

Table 33: Debt management 2014–15

Sydney Water Benchmark

Market valuation ($M) 30 June 2015*

6,905 6,974

Generalised cost of funds (%) 5.75 5.60

Weighted average yield (%) 30 June 2015

5.04 5.14

* 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

Cash receipts from operations in 2014–15 were $2,520 million, $42 million higher than in 2013–14. This increased because of IPART-determined price increases. Total cash inflows were $2.9 billion, $39 million less than in 2013–14.

Cash used for operational purposes in 2014–15 was $1,431 million, $11 million lower than in 2013–14 due to ongoing cost reductions.

A total of $588 million was used to fund the asset investment program.

Total interest paid includes both interest and the government guarantee fee on Sydney Water’s borrowings. Total interest paid was $436 million, $13 million lower than in 2013–14. This was due to a lower government guarantee fee and lower interest rates.

Indicator: Return on assets and equity

We measure return on assets by dividing our earnings before interest and tax (EBIT) 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 2014–15 was 7.4%, 0.9% higher than the target of 6.5%. The return on equity was 8.0%, 2.2% higher than the target of 5.8%. This was due to a combination of higher water use and developer income and operating cost efficiencies.

The historic results are low for a regulated utility with Sydney Water’s level of commercial risk.


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Table 34: Return on assets and equity 2010–11 to 2014–15

Funds flow

2014–15target

2014–15 2013–14 2012–13 2011–12 2010–11

Return on assets (%) 6.5 7.4 7.1 7.0 8.0 6.3

Return on equity (%) 5.8 8.0 7.5 6.9 6.2 4.8

Table 35: 2015–16 budget

MeasureBudget 2015–16

$M

Total income 2,766

Total operating expenses 1,338

Depreciation, amortisation, impairments and loss on asset sales 295

Borrowing costs 468

Total expenses 2,101

Profit before tax 654

Income tax expense 202

Profit after tax 462

Pricing

How we set our prices and budgets

Our services are declared monopoly services under Section 4 of the Independent Pricing and Regulatory Tribunal (IPART) Act 1992. 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.

In 2014–15, we set our prices in line with IPART’s pricing determinations, apart from some recycled water developer charges.

Recycled water developer charges

Sydney Water has registered a Development Servicing Plan (DSP) for the Rouse Hill Recycled Water Scheme according to IPART’s Determination No. 8 2006. This determination sets the methodology for fixing the maximum prices that a water agency may charge for recycled water developer charges.

In the current and previous reporting years, we levied recycled water capital contributions for three other recycled water schemes without using the methodology stipulated in Determination No. 8 2006. These contributions were very likely less than the maximum price set by that determination.

The non-compliance happened as a result of Sydney Water collecting capital contributions for recycled water schemes without a registered DSP in place, and without seeking Treasurer approval to charge a price that was very likely less than the maximum price under the methodology. At the time, we didn’t believe we required a DSP for those schemes and raised capital contributions accordingly.


The non-compliance relates to:

• a non-compliance in 2009 and 2010 for both the Oran Park/Turner Road and Colebee schemes, where we levied charges without a DSP in place. We are no longer collecting charges for these schemes

• an ongoing non-compliance since 2007 for the Hoxton Park recycled water scheme that we are addressing by preparing a DSP.

Table 36: Recycled water schemes, developer charges to be levied

IPART Determination No. 8 2006 and Determination No. 1 2012 – Pricing arrangements for recycled water

Recycled Water Scheme

Status of DSP Developer charge to be levied

Compliance status against the determination

Rouse Hill Registered $3,941/ET Compliant

Hoxton Park Under preparation To be determined Non-compliant. DSP under preparation

Oran Park/ Turner Road

Not required N/A Historical non-compliance. No further charge to be levied

Colebee Not required N/A Historical non-compliance. No further charge to be levied

Ropes Crossing Under preparation To be determined Compliant

Sydney Water is now working to rectify the non-compliance. We’re preparing a DSP for the Hoxton Park scheme in line with IPART’s determination and we’ll seek approval from the Treasurer if needed. We’ll place the DSP on public display and any interested parties will be able to comment on the plan.


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IPART pricing table

Table 37: IPART pricing table

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 set Jul–Sepa

Sydney Water

price set Oct–Jun

Service charges ($)

Residential properties

Water

Individually metered $109.21 -$0.47 $113.95 $28.51 $28.49

Multi-premises with a common meter

$87.97 -$0.47 $91.72 $22.93 $22.93

Unmetered $492.61 -$0.47 $515.78 $128.96 $128.94

Wastewater $565.19 $592.31 $148.10 $148.07

Stormwater (drainage)

Stand-alone premises $76.00 $79.64 $19.91 $19.91

Multi-premises $35.77 $37.48 $9.37 $9.37

Non-residential properties

Water

Meter size (mm):b

Single 20 mm $109.21 -$0.47 $113.98 $28.51 $28.49

Common or multi 20 mm

$128.04 -$0.54 $133.64 $33.41 $33.41

25 $200.06 -$.85 $208.81 $52.21 $52.20

32 $327.78 -$1.39 $342.12 $85.53 $85.53

40 $512.16 -$2.17 $534.57 $133.65 $133.64

50 $800.24 -$3.38 $835.27 $208.84 $208.81

80 $2,048.62 -$8.65 $2,138.30 $534.59 $534.57

100 $3,200.97 -$13.51 $3,341.10 $835.29 $835.27

150 $7,202.18 -$30.38 $7,517.50 $1,879.38 $1,879.37

200 $12,803.88 -$54.01 $13,364.45 $3,341.12 $3,341.11

250 $20,006.00 -$84.39 $20,881.89 $5,220.48 $5,220.47

300 $28,808.64 -$121.52 $30,069.93 $7,517.49 $7,517.48

500 $80,024.00 -$337.54 $83,527.61 $20,881.91 $20,881.90

600 $115,234.56 -$486.06 $120,279.75 $30,069.96 $30,069.93

Unmetered $492.61 -$0.47 $515.78 $128.96 $128.94


IPART determined

price (in 2012–13

value)

Adjustment for



2013–14 value)

Inflated IPART

maximum price (at

rate of 1.8%)

(in 2013–14 value)

Sydney Water


Sydney Water

price set Oct–Jun

Wastewaterc

Meter size (mm):d

Single 20 mm $565.19 $592.30 $148.10 $148.07

Common or multi 20 mm

$845.57 $886.15 $221.56 $221.53

25 $1,321.20 $1,384.61 $346.16 $346.15

32 $2,164.65 $2,268.55 $567.16 $567.13

40 $3,382.26 $3,544.60 $886.15 $886.15

50 $5,284.78 $5,538.44 $1,384.61 $1,384.61

80 $13,529.05 $14,178.44 $3,544.61 $3,544.61

100 $21,139.14 $22,153.81 $5,538.46 $5,538.45

150 $47,563.06 $49,846.08 $12,461.52 $12,461.52

200 $84,556.56 $88,615.27 $22,153.84 $22,153.81

250 $132,120.00 $138,461.76 $34,615.44 $34,615.44

300 $190,252.80 $199,384.93 $49,846.24 $49,846.23

500 $528,480.00 $553,847.04 $138,461.76 $138,461.76

600 $761,011.20 $797,539.73 $199,384.94 $199,384.93

Unmetered $565.19 $592.31 $148.10 $148.07

Stormwater (drainage)

Stand-alone premises

Small (200 m2 or less) $35.77 $37.48 $9.37 $9.37

Medium (201–1,000 m2) or low impact

$89.41 $93.70 $23.44 $23.42

Large (1,001–10,000 m2)

$268.24 $281.11 $70.30 $70.27

Very large (10,001–45,000 m2)

$1.341.21 $1,405.58 $351.41 $351.39

Largest (45,001 m2 or greater)

$3,129.50 $3,279.71 $819.95 $819.92

Multi-premises $35.77 $37.48 $9.37 $9.37


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IPART determined

price (in 2012–13

value)

Adjustment for



2013–14 value)

Inflated IPART

maximum price (at

rate of 1.8%)

(in 2013–14 value)

Sydney Water


Sydney Water

price set Oct–Jun

Usage charges ($/kL)

Residential properties

Water $2.13 $2,232 $2,232 $2,232

Non-residential properties

Water $2.13 $2,232 $2,232 $2,232

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

$1.20 $1.20 $1.20 $1.20

a Sydney Water’s charges applied from 1 July 2014.

b IPART’s maximum determined water service charge for meter sizes not specified in its Determination is calculated using the following formula: (meter size)2 x 25 mm charge/625.

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 the Sydney Water Corporation. A pro rata adjustment shall be made where the df% is less than 100%.

d IPART’s maximum determined sewerage charge for meter sizes not specified in its Determination is calculated using the following formula: (meter size)2 x 25 mm charge/625 x df%.

e For non-residential properties, the sewer usage charge will apply when a property’s discharge into the sewerage system exceeds 0.959kL/day.

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

Note:

• All Sydney Water prices are in nominal dollars ($ of the year).• Other charging arrangements including Rouse Hill stormwater drainage, boarding houses, metered standpipes, trade waste and

ancillary charges were set in accordance with IPART’s determined maximum price.• In 2012 determination, IPART determined maximum Rouse Hill land charge for new properties was $969.21 per year for five

years. However, it was reduced to $237 per year. This reduction was approved by the NSW Treasurer in 2013.


Auditor-General’s statutory audit report

At the completion of the audit of Sydney Water’s financial statements for the year ended 30 June 2015, the Auditor-General provided Sydney Water with a Statutory Audit Report as required under the Public Finance and Audit Act 1983.

The Statutory Audit Report made comment on two matters, to which Sydney Water is required to respond in its Annual Report under section 7(1)(iia) of the Annual Reports (Statutary Bodies) Act 1984. The two matters, along with Sydney Water’s response, are provided below:

Auditor-General’s comment

Financial position

At 30 June 2015, the Corporation’s current liabilities of $1.5 billion exceeded current assets of $315 million. However, the Corporation’s ability to pay its debts as and when they become due and payable is supported by:

• the $7.2 billion ($6.7 billion at 30 June 2014) borrowing facility from Treasury Corporation approved by the Treasurer under the Public Authorities (Financing Arrangements) Act 1987 on 21 July 2015

• the $100 million short-term ‘Come and go’ facility extended by the Treasury Corporation.

Sydney Water’s response

Sydney Water is able to pay its debts as and when they become due and payable because it has sufficient financing facilities in place approved by the Treasurer of NSW, as detailed in the Auditor-General’s comment, as well as positive cash flow factors comprising a consistent regulated revenue stream from water service and usage charges, and other income.

Given these positive liquidity factors, Sydney Water has structured its balance sheet in order to minimise the volume of surplus funds and investments held to meet current liabilities as they fall due. This strategy of minimising financial investments held has been a prudent cash flow strategy aimed at minimising the volume of additional borrowings required to fund the operations of Sydney Water and has been successfully pursued for at least the past five years.

Sydney Water also maintains extensive cash flow models and forecasts in order to ensure that financing facilities are sufficient to meet obligations, and funds are available to meet cash flow commitments as they fall due.


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Auditor-General’s comment

Recognition of Water Filtration Plants

The Corporation regards the arrangements on three water filtration plants as service agreements and recognises expenses as and when they occur, but does not recognise any assets or liabilities relating to the arrangements.

In my opinion, the Corporation’s treatment of these three contractual arrangements is not consistent with the principles in Australian Accounting Standard AASB 117 ‘Leases’. The Corporation should have recognised liabilities for the related present obligations and corresponding assets in the statement of financial position.

The value of these obligations and assets at 30 June 2015 is approximately $286 million ($295 million at 30 June 2014).

I have included this as an uncorrected misstatement. As the misstatements have been assessed as not material to the financial statements as a whole, the Independent Auditor’s Report for the year ended 30 June 2015 is unqualified.

I understand the Corporation is in process of renegotiating these arrangements. We will assess the accounting treatment once the new arrangements have been executed.

Sydney Water’s response

This has been a long-standing difference in professional opinion between Sydney Water and the Audit Office in relation to the accounting treatment of the availability charges under the water filtration agreements relating to the Prospect, Illawarra and Woronora Water Filtration Plants.

Sydney Water’s accounting treatment has been to expense all payments under these agreements, on the basis that these agreements are considered to be service agreements rather than leases. This accounting treatment has been in place since the mid-1990s and has been supported by professional accounting advice and also by NSW Treasury on numerous occasions. We still maintain that this accounting treatment is appropriate for the existing agreements, and sufficient disclosure has been included in Sydney Water’s financial statements to ensure readers are able to be fully informed.

While this difference in professional opinion previously resulted in an audit qualification on the financial statements up to 30 June 2012, the qualification no longer exists as it is no longer considered to be a material issue in Sydney Water’s financial statements.

The existing agreements are currently being renegotiated.


Sydney Water Corporation

Financial Statements for the year ended

30 June 2015


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ContentsStatement of profit or loss and other comprehensive income

Statement of financial position Page 112

Statement of changes in equity Page 113

Statement of cash flows Page 114

Notes to the financial statements: Page 115

Corporate information Page 115

1. Summary of significant accounting policies Page 1152. Income and expenses Page 1393. Income tax expense Page 1454. Cash and cash equivalents Page 1475. Trade and other receivables Page 1486. Inventories Page 1507. Other current assets Page 1508. Current tax asset and liability Page 1519. Property, plant and equipment Page 15210. Intangible assets Page 16011. Deferred tax assets and liabilities Page 16512. Trade and other payables Page 16613. Borrowings and other financial liabilities Page 16614. Dividends payable Page 16915. Provisions Page 17016. Other liabilities Page 18017. Share capital Page 18018. Reserves Page 18119. Retained earnings Page 18220. Total equity reconciliation Page 18221. Notes to the statement of cash flows Page 18322. Commitments Page 18423. Consultants Page 18624. Auditors’ remuneration Page 18625. Related party disclosures Page 18726. Financial risk management disclosures Page 18827. Contingencies Page 198

Directors’ Declaration Page 200

Independent Auditor’s Report Page 201


Start of audited financial statements

Note 2015 2014

$'000 $'000

Revenue 2(a) 2,715,999 2,611,090

Other income 2(b) 12,335 3,916

Finance costs 2(c) (422,189) (413,905)

Other expenses 2(c) (1,576,542) (1,561,455)

Profit before income tax 729,603 639,646

Income tax expense 3(a) (216,105) (175,153)

Profit for the period 513,498 464,493

Other comprehensive income

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

Gain on revaluation of property, plant and equipment 18(b) 371,928 250,591

Income tax effect 3(c) (111,578) (75,177)

260,350 175,414

Cash flow hedges:

Gains (losses) taken to equity 18(b) - (422)

Transferred to the initial carrying amount of hedged items 18(b) - 422

- -

Income tax effect 3(c) - -

- -

Remeasurement of defined benefit superannuation net liability 2(c) (53,851) 2,075

Income tax effect 3(c) 16,155 (623)

(37,696) 1,452

Total items that will not be reclassified subsequently to profit or loss, net of income tax 222,654 176,866

Other comprehensive income for the period net of income tax 222,654 176,866

Total comprehensive income for the period 736,152 641,359

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


Statement of profit or loss and other comprehensive income

for the year ended 30 June 2015



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Note 2015 2014

$'000 $'000

Current assets

Cash and cash equivalents 4 5,752 3,922

Trade and other receivables 5 291,306 311,827

Inventories 6 1,065 904

Other current assets 7 2,695 3,722

Current tax asset 8 1,239 1,531

302,057 321,906

Non-current assets classified as held for sale 9(c) 12,694 6,605

Total current assets 314,751 328,511

Non-current assets

Property, plant and equipment 9 15,471,384 14,635,439

Intangible assets 10 159,632 154,456

Total non-current assets 15,631,016 14,789,895

Total assets 15,945,767 15,118,406

Current liabilities

Trade and other payables 12 534,614 548,614

Borrowings and other financial liabilities 13 7,140 11,650

Current tax liability 8 74,510 19,530

Dividends payable 14 664,024 252,000

Provisions 15 196,020 178,461

Total current liabilities 1,476,308 1,010,255

Non-current liabilities

Borrowings and other financial liabilities 13 6,332,838 6,232,684

Deferred tax liabilities 11 708,466 599,441

Provisions 15 951,628 881,627

Other liabilities 16 10,000 -

Total non-current liabilities 8,002,932 7,713,752

Total liabilities 9,479,240 8,724,007

Net assets 6,466,527 6,394,399

Equity

Share capital 17 3,148,354 3,148,354

Reserves 18 1,561,746 1,307,795

Retained earnings 19 1,756,427 1,938,250

Total equity 20 6,466,527 6,394,399



Statement of financial position

as at 30 June 2015



Asset

Share revaluation Hedging Retained Total

Note capital reserve reserve earnings equity

$'000 $'000 $'000 $'000 $'000

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

Comprehensive income for the period:

Profit for the period 19 - - - 513,498 513,498

Other comprehensive income 18(b), 19 - 260,350 - (37,696) 222,654

Total comprehensive income for the period - 260,350 - 475,802 736,152

Transfers between equity items on disposal of assets 18(b), 19 - (6,399) - 6,399 -

Total transfers between equity items - (6,399) - 6,399 -

Transactions with owners in their capacity as owners:

Share capital issued 17 - - - - -

Dividends recognised as a liability 14 - - - (664,024) (664,024)

Total transactions with owners in their capacity as owners - - - (664,024) (664,024)

Balances at 30 June 2015 3,148,354 1,561,746 - 1,756,427 6,466,527

Balances 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 19 - - - 464,493 464,493

Other comprehensive income 18(b), 19 - 175,414 - 1,452 176,866

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

Transfers between equity items on disposal of assets 18(b), 19 - (17,379) - 17,379 -

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

Transactions with owners in their capacity as owners:

Share capital issued 17 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 at 30 June 2014 3,148,354 1,307,795 - 1,938,250 6,394,399



Statement of changes in equity




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Note 2015 2014

$'000 $'000

Cash flows from operating activities

Cash receipts in the course of operations (inclusive of Goods and Services Tax) 2,519,796 2,477,487

Cash payments in the course of operations (inclusive of Goods and Services Tax) (1,431,232) (1,442,649)

Cash generated from operations 1,088,564 1,034,838

Revenue grants received from Commonwealth Government 70 23

Cash receipts for social programs 163,173 159,510

Interest received 234 312

Income tax refunds received 1,640 11,677

Interest paid (337,524) (344,117)

Government guarantee fee paid (98,548) (104,914)

Income tax paid (148,872) (188,247)

Net cash from operating activities 21(a) 668,737 569,082

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 59,924 19,692

Capital contributions received for social programs 4,830 15,672

Capital grants received from NSW Government 16 10,000 -

Other capital contributions received 14,908 8,392

Security and other deposits received 12,039 7,790

Payments for property, plant and equipment (534,531) (492,881)

Payments for intangible assets (53,290) (33,998)

Security and other deposits released (5,883) (5,826)

Net cash from investing activities (492,003) (481,159)

Cash flows from financing activities

Proceeds from issue of share capital 17 - 40,000

Proceeds from borrowings 88,746 174,034

Repayment of borrowings (6,207) (6,236)

Other finance payments (5,443) (5,005)

Dividends paid 14 (252,000) (290,625)

Net cash from financing activities (174,904) (87,832)

Net increase (decrease) in cash and cash equivalents 1,830 91

Cash and cash equivalents at beginning of period 3,922 3,831

Cash and cash equivalents at end of period 4 5,752 3,922



Statement of cash flows




Sydney Water Corporation – 30 June 2015 Page 7


Notes to the financial statements for the year ended 30 June 2015

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 2015 were authorised for issue in accordance with a resolution of the board of directors on 26 August 2015. 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 2014 to 30 June 2015, and its financial position as at 30 June 2015.

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.

(b) Comparative information

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 and Australian Interpretations, a voluntary change in accounting policy or a reclassification of items presented.

(c) Foreign currency

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


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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 fulfilled unless they are of a material amount that compensates the Corporation for the cost of a specific identifiable asset or assets, in which case they are recognised in profit or loss as revenue on a systematic basis over the useful life of the asset or assets. (Refer note 16).

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.



Notes to the financial statements for the year ended 30 June 2015

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 2015 were authorised for issue in accordance with a resolution of the board of directors on 26 August 2015. 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 2014 to 30 June 2015, and its financial position as at 30 June 2015.

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.

(b) Comparative information

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 and Australian Interpretations, a voluntary change in accounting policy or a reclassification of items presented.

(c) Foreign currency

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



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 and Australian Interpretations. 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 ownership have 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 the difference 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).

• 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


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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 and Australian Interpretations. 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 ownership have 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 the difference 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).

• 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 and Australian Interpretations. 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 to extend 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 2010-11 reporting 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 22(c). Disclosure of commitments in respect of the agreements covering the Prospect, Woronora and Illawarra water filtration plants is shown in note 22(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 technical obsolescence 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) 200 Stormwater wetlands infrastructure 200 Canals and tunnels 100 Major pipelines (above ground) 140 Weirs 100 Submarine outfalls 100 Water mains 55 to 140 Wastewater mains - Gravity mains – pipe conduit only * 55 to 130 - Pressure mains 55 to 130 Stormwater drains and basins 80 to 150 System buildings 20 to 50 Water, 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 10 Water meters 8 to 20

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

• Intangible assets

Computer application software 3 to 9 Licences 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 total budgeted expenditure is approximately $3 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 profit or loss 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 22).



(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 60 days, 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.


• 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 total budgeted expenditure is approximately $3 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 profit or loss 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 22).


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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 hedge effectiveness 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 transferred to 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.

Water that resides in the Corporation’s infrastructure assets at the reporting date is not recognised as inventory as any value that

would be attributed to that water is not considered to be material. (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. Their carrying 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 for trading 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)).


(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 hedge effectiveness 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 transferred to 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.


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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. 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. The inspection 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 liability as 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 represents their 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 and Australian Interpretations. 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 vast majority of 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 that estimated 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). This class of assets also includes system land and water meters. 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. 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. As system land forms part of the system assets class, 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. 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

Property, plant and equipment asset classes other than system assets, market land and buildings and leasehold properties, such as plant and equipment and computer equipment, 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 water filtration plant agreements). 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. 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.


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. 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. The inspection 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 liability as 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 represents their 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 and Australian Interpretations. 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 vast majority of 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 that estimated 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). This class of assets also includes system land and water meters. 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. 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.


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• 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 held for 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 when the 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 fair value (income approach) methodology 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 is still 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 determine whether 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 previously recognised 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.

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.


• 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 held for 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 when the 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 fair value (income approach) methodology 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 is still in progress. Other development expenditure is recognised in profit or loss when incurred.


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(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 amortised cost 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 a loss 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 the reporting 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 of probabilities 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 water filtration plant agreements) 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 has recognised 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 the statement 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 reporting period 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 by discounting 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.

• 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.


(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 amortised cost 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 a loss 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 the reporting 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 of probabilities 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 water filtration plant agreements) 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 has recognised a liability in the statement of financial position for the obligation to make future tariff payments to the legal owner.


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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 plan o 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 12 months 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 provided to 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 benefits that employees have earned in return for their service in the current and prior reporting periods, less the fair value of any related 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 financial position, 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. 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.


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 plan o 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 12 months 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 provided to 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).


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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 in the 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 current location, 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 corresponding liability 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 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. 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.



(v) Accounting standards and interpretations issued but not yet effective

At the reporting date, a number of Australian Accounting Standards and Australian Interpretations have been issued by the AASB that are not yet effective 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 and more recently AASB 9 issued in December 2014 (see below). AASB 9 issued in December 2010 set out new requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements. AASB 9 issued in December 2014 is the complete standard incorporating all previous versions and now also covers impairment and hedge accounting. AASB 2009-11 can still 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 or subsequently adopts the complete version of AASB 9 issued in December 2014. 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 2010-7 and this standard to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18).

• 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 before the more recent release of AASB 9 in December 2014 (see below). 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’ (see below) have deferred the application date of this standard to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18).

• 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 Part C of the standard. Part C makes amendments to Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2010 (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 issued in both December 2009 and December 2010 (and consequently Australian Accounting Standards AASB 2009-11 and AASB 2010-7 – see earlier) to annual 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 both versions 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 C applies to annual reporting periods beginning on or after 1 January 2015 (ie 2015-16).

• 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 Regulation Authority 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).


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 in the 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 current location, 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 corresponding liability 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 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. 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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• 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 that are operative in future reporting periods 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 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 the separate transitional versions of Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2009 and December 2010 to annual reporting periods beginning on or after 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 issued in December 2010 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 2014-3 ‘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).



• AASB 15 ‘Revenue from Contracts with Customers’ (issued December 2014)

This standard introduces a new revenue recognition and measurement model to be applied to all contracts with customers except those that are within the scope of other standards (such as leases and financial instruments). The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is to be applied on an individual contract basis, but can also be used on a portfolio basis if the impact on the financial statements is not considered to be materially different to the individual contract basis. The steps to be applied in the new model are: 1. Identify the contract with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognise revenue when (or as) the entity satisfies each performance obligation. When operative, this standard will replace a number of existing standards and interpretations. The initial application of this standard is not expected to have a material impact on the financial results of the Corporation. However, this will be dependent on individual contracts with customers that will be entered into in future reporting periods. The standard is applicable to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18).

• AASB 9 ‘Financial Instruments’ (issued December 2014)

After a staged release of this standard in both December 2009 and then subsequently in December 2010, this standard is now the complete standard on accounting for financial instruments that will replace Australian Accounting Standard AASB 139 ‘Financial Instruments: Recognition and Measurement’, as well as the versions issued in December 2009 and 2010, when it becomes operative. AASB 9 issued in December 2009 focused only on requirements for financial assets, and AASB 9 issued in December 2010 focused on adding requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The complete standard now incorporates requirements for hedge accounting as well as a new impairment model for financial assets. The complete standard seeks to 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.

(i) The requirements for impairment of financial assets are now based on a three-stage ‘expected loss’ approach (j) The standard contains limited amendments to the classification and measurement of financial assets in order to add a third

measurement category for debt instruments. The new category of fair value through other comprehensive income is added to the existing categories for debt instruments, ie amortised cost and fair value through profit or loss; and

(k) The standard results in amendments to Australian Accounting Standard AASB 7 ‘Financial Instruments: Disclosures’ that

significantly expand the disclosures required in relation to credit risk.

While these are significant changes for many entities, the initial application of this standard is not expected to have a material impact on the financial results of the Corporation. The standard (including the earlier versions issued in December 2009 and December 2010 for those entities who wish to adopt them early) is applicable to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19).


• 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 that are operative in future reporting periods 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 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 the separate transitional versions of Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2009 and December 2010 to annual reporting periods beginning on or after 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 issued in December 2010 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 2014-3 ‘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).


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• AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’ (issued December 2014)

This standard makes consequential amendments to various existing standards and interpretations arising from the issuance of AASB 15 ‘Revenue from Contracts with Customers’ (see above). The amendments are mainly of an editorial nature to refer to AASB 15 and its underlying principles. The initial application of this standard is not expected to have a material impact on the financial results of the Corporation. The standard is applicable to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18), except that the amendments to Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2014 (see above) apply to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19).

• AASB 2014-6 ‘Amendments to Australian Accounting Standards – Agriculture: Bearer Plants [AASB 101, AASB 116, AASB 117, AASB 123, AASB 136, AASB 140 & AASB 141]’ (issued December 2014)

This standard makes amendments to a number of standards to define and require bearer plants to be accounted for as property, plant and equipment and included within the scope of Australian Accounting Standard AASB 116 ‘Property, Plant and Equipment’, instead of Australian Accounting Standard AASB 141 ‘Agriculture’. It also makes various editorial corrections to standards. 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 2014-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2014)’ (issued December 2014)

This standard makes consequential amendments and various editorial corrections to a number of standards and an interpretation arising from the issuance of Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2014 (see above). The initial application of this standard is not expected to have a material impact on the financial results of the Corporation. The standard is applicable to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19).

• AASB 2014-8 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) – Application of AASB 9 (December 2009) and AASB 9 (December 2010) [AASB 9 (December 2009] & AASB 9 (December 2010]’ (issued December 2014)

This standard makes amendments to the two early versions of Australian Accounting Standard AASB 9 ‘Financial Instruments’ (issued in December 2009 and December 2010) which have now been replaced by the complete version issued in December 2014 (see earlier). The two earlier versions can still be chosen for early adoption by entities before the complete version becomes operative. The amendments are such that for annual reporting periods beginning on or after 1 January 2015, an entity may apply either of these two earlier versions, if and only if, that entity’s date of initial application (as described in the applicable version of the standard) is before 1 February 2015. 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 2015 (ie 2015-16).

• AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements [AASB 1, AASB 127 & AASB 128]’ (issued December 2014)

This standard amends Australian Accounting Standard AASB 127 ‘Separate Financial Statements’, and consequentially amends Australian Accounting Standard AASB 1 ‘First-time Adoption of Australian Accounting Standards’ and Australian Accounting Standard AASB 128 ‘Investments in Associates and Joint Ventures’ to allow entities the choice of using the equity method of accounting for investments in subsidiaries, joint ventures and associates in their separate financial statements (rather than account for them at cost). The standard also makes editorial corrections to AASB 127. 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 2014-10 ‘Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture [AASB 10 & AASB 128]’ (issued December 2014)

This standard amends Australian Accounting Standard AASB 10 ‘Consolidated Financial Statements’ and Australian Accounting Standard AASB 128 ‘Investments in Associates and Joint Ventures’ to address an inconsistency between the requirements in AASB 10 and those in AASB 128 (issued in August 2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require: (a) a full gain or loss to be recognised when a transaction involves a business (whether it is housed in a subsidiary or not); and (b) a partial gain or loss to be recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The standard also makes an editorial correction to AASB 10. 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 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle [AASB 1, AASB 2, AASB 3, AASB 5, AASB 7, AASB 11, AASB 110, AASB 119, AASB 121, AASB 133, AASB 134, AASB 137 & AASB 140]’ (issued January 2015)

This standard amends various standards arising from the IASB’s Annual Improvement process, including editorial corrections. The amendments mainly relate to changes in methods of disposal of assets held for sale, information relating to interim financial statements and discount rates to be used for employee benefits in areas where there is no deep market for high quality corporate bonds. 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 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 [AASB 7, AASB 101, AASB 134 & AASB 1049]’ (issued January 2015)

This standard makes amendments to a number of standards arising from the IASB’s Disclosure Initiative. The standard amends Australian Accounting Standard AASB 101 ‘Presentation of Financial Statements’ to provide clarification regarding the disclosure requirements in AASB 101. Specifically, it proposes narrow-focus amendments to address some of the concerns expressed about existing presentation and disclosure requirements and to ensure entities are able to use judgement when applying a standard in determining what information to disclose in their financial statements. The standard also makes editorial corrections to AASB 101 and consequential amendments to other standards. 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 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 ‘Materiality’ (issued January 2015)

This standard completes the AASB’s project to remove Australian guidance on materiality from Australian Accounting Standards. This includes the withdrawal of references to Australian Accounting Standard AASB 1031 ‘Materiality’ in all standards and interpretations, which commenced via the now operative Part C of Australian Accounting Standard AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, materiality and Financial Instruments’ (see earlier), and which is now completed by this standard to allow AASB 1031 to effectively be withdrawn by the AASB. 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 2015 (ie 2015-16).

• AASB 2015-4 ‘Amendments to Australian Accounting Standards – Financial Reporting Requirements of Australian Groups with a Foreign Parent [AASB 127 & AASB 128]’ (issued January 2015)

This standard makes amendments to Australian Accounting Standard AASB 128 ‘Investments in Associates and Joint Ventures’ and consequential amendments to Australian Accounting Standard AASB 127 ‘Separate Financial Statements’ to align the relief available in Australian Accounting Standard AASB 10 ‘Consolidated Financial Statements’ and AASB 128 in respect of the financial reporting requirements for Australian groups with a foreign parent. In this regard, while certain entities exempted from preparing consolidated financial statements are exempt from applying the equity method of accounting in accounting for interests in associates and joint ventures, this standard requires the ultimate Australian entity to apply the equity method if either the entity or the group is a separate reporting entity or both are reporting entities. 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 2015 (ie 2015-16).

• AASB 2015-5 ‘Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception [AASB 10, AASB 12 & AASB 128]’ (issued January 2015)

This standard amends Australian Accounting Standard AASB 10 ‘Consolidated Financial Statements’, Australian Accounting Standard AASB 12 ‘Disclosure of Interests in Other Entities’ and Australian Accounting Standard AASB 128 ‘Investments in Associates and Joint Ventures’: (a) to confirm that the exemption from preparing consolidated financial statements for certain entities in AASB 10 is available to a parent entity that is a subsidiary of an investment entity; (b) to clarify the applicability of AASB 12 to the financial statements of an investment entity; and (c) to introduce relief in AASB 128 to permit a non-investment entity investor in an associate or joint ventures that is an investment to retain the fair value through profit or loss measurement applied by the associate or joint venture to its subsidiaries. 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 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’ (issued December 2014)

This standard makes consequential amendments to various existing standards and interpretations arising from the issuance of AASB 15 ‘Revenue from Contracts with Customers’ (see above). The amendments are mainly of an editorial nature to refer to AASB 15 and its underlying principles. The initial application of this standard is not expected to have a material impact on the financial results of the Corporation. The standard is applicable to annual reporting periods beginning on or after 1 January 2017 (ie 2017-18), except that the amendments to Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2014 (see above) apply to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19).

• AASB 2014-6 ‘Amendments to Australian Accounting Standards – Agriculture: Bearer Plants [AASB 101, AASB 116, AASB 117, AASB 123, AASB 136, AASB 140 & AASB 141]’ (issued December 2014)

This standard makes amendments to a number of standards to define and require bearer plants to be accounted for as property, plant and equipment and included within the scope of Australian Accounting Standard AASB 116 ‘Property, Plant and Equipment’, instead of Australian Accounting Standard AASB 141 ‘Agriculture’. It also makes various editorial corrections to standards. 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 2014-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2014)’ (issued December 2014)

This standard makes consequential amendments and various editorial corrections to a number of standards and an interpretation arising from the issuance of Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2014 (see above). The initial application of this standard is not expected to have a material impact on the financial results of the Corporation. The standard is applicable to annual reporting periods beginning on or after 1 January 2018 (ie 2018-19).

• AASB 2014-8 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) – Application of AASB 9 (December 2009) and AASB 9 (December 2010) [AASB 9 (December 2009] & AASB 9 (December 2010]’ (issued December 2014)

This standard makes amendments to the two early versions of Australian Accounting Standard AASB 9 ‘Financial Instruments’ (issued in December 2009 and December 2010) which have now been replaced by the complete version issued in December 2014 (see earlier). The two earlier versions can still be chosen for early adoption by entities before the complete version becomes operative. The amendments are such that for annual reporting periods beginning on or after 1 January 2015, an entity may apply either of these two earlier versions, if and only if, that entity’s date of initial application (as described in the applicable version of the standard) is before 1 February 2015. 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 2015 (ie 2015-16).

• AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements [AASB 1, AASB 127 & AASB 128]’ (issued December 2014)

This standard amends Australian Accounting Standard AASB 127 ‘Separate Financial Statements’, and consequentially amends Australian Accounting Standard AASB 1 ‘First-time Adoption of Australian Accounting Standards’ and Australian Accounting Standard AASB 128 ‘Investments in Associates and Joint Ventures’ to allow entities the choice of using the equity method of accounting for investments in subsidiaries, joint ventures and associates in their separate financial statements (rather than account for them at cost). The standard also makes editorial corrections to AASB 127. 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 2014-10 ‘Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture [AASB 10 & AASB 128]’ (issued December 2014)

This standard amends Australian Accounting Standard AASB 10 ‘Consolidated Financial Statements’ and Australian Accounting Standard AASB 128 ‘Investments in Associates and Joint Ventures’ to address an inconsistency between the requirements in AASB 10 and those in AASB 128 (issued in August 2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require: (a) a full gain or loss to be recognised when a transaction involves a business (whether it is housed in a subsidiary or not); and (b) a partial gain or loss to be recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The standard also makes an editorial correction to AASB 10. 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).


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• AASB 2015-6 ‘Amendments to Australian Accounting Standards – Extending Related Party Disclosures to Not-for-Profit Public Sector Entities [AASB 10, AASB 124 & AASB 1049]’ (issued March 2015)

This standard makes amendments to extend the scope of Australian Accounting Standard AASB 124 ‘Related Party Disclosures’ to include application by, and implementation guidance for, not-for-profit public sector entities. Currently, AASB 124 does not apply to such entities. The standard also makes amendments to Australian Accounting Standard AASB 10 ‘Consolidated Financial Statements’ and Australian Accounting Standard AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’, as well as an editorial correction to AASB 124. 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 July 2016 (ie 2016-17).

• AASB 2015-7 ‘Amendments to Australian Accounting Standards – Fair Value Disclosures of Not-for-Profit Public Sector Entities [AASB 10, AASB 124 & AASB 1049]’ (issued March 2015)

This standard makes amendments to Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ to provide temporary exemption to not-for-profit public sector entities from making certain specified disclosures about the fair value measurement of assets within the scope of Australian Accounting Standard AASB 116 ‘Property, Plant and Equipment’ which are primarily held for their current service potential rather than to generate future net cash inflows. 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 July 2016 (ie 2016-17).



___________________________________________________________________________________________________________ Note 2015 2014 $’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 1,199,381 1,158,255 Usage charges 1,151,047 1,111,477 ___________________________ Service availability and usage charges 2,350,428 2,269,732 Ancillary services 18,269 15,784 Sundry revenue 14,545 18,928 ___________________________ 2,383,242 2,304,444 Interest revenue from: Financial assets not at fair value through profit or loss using the effective interest method: Investments in marketable securities 7 20 Bank balances 90 103 Overdue accounts 1,961 2,081 ___________________________ 2,058 2,204 Other transactions 541 607 ___________________________ Total interest revenue 2,599 2,811 Revenue from government grants: NSW Government grants for social programs # 167,921 173,547 Grants from Commonwealth Government 70 23 ___________________________ 167,991 173,570 Other revenue from: Rent revenue from operating leases 11,241 11,603 Contributions by developers for capital works 150,926 118,662 ___________________________ 162,167 130,265 ___________________________ Total revenue recognised in profit or loss 2,715,999 2,611,090 ___________________________ # This amount comprised grants of $163.091 million (2014: $157.875 million) in respect of pensioner and other rebates and other

grants of $4.830 million (2014: $15.672 million).


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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

Dissection of total revenue into regulated and non-regulated categories Regulated Service availability charges 1,204,451 1,163,015 Usage charges 1,138,289 1,098,265 Ancillary services 15,468 13,560 Sundry revenue 930 849 NSW Government contributions for social programs 163,091 157,875 Rent revenue from operating leases 5,513 5,688 Contributions by (repayments to) developers for capital works (422) 227 ___________________________ 2,527,320 2,439,479 ___________________________ Non-regulated Service availability charges (customer redress rebates) (5,070) (4,760) Usage charges 12,758 13,212 Ancillary services 2,801 2,224 Sundry revenue 13,615 18,079 Interest revenue 2,599 2,811 NSW Government contributions for social programs 4,830 15,672 Grants from Commonwealth Government 70 23 Rent revenue from operating leases 5,728 5,915 Contributions by developers for capital works 151,348 118,435 ___________________________ 188,679 171,611 ___________________________ Total revenue recognised in profit or loss 2,715,999 2,611,090 ___________________________ (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 8,123 2,526 Net gain on disposal of greenhouse trading certificates - 594 Net fair value unrealised gain on greenhouse trading certificates 4,212 796 ___________________________ Total other income recognised in profit or loss 12,335 3,916 ___________________________



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(c) Expenses Finance costs

Finance costs expense items are shown below. Financial liabilities not at fair value through profit and loss using the effective interest method: Interest expense 331,873 340,167 Amortisation of deferred discounts (premiums) on loans 21(a) (676) 2,668 ___________________________ Total interest expense using effective interest method 331,197 342,835 Government guarantee fee expense 97,813 98,548 Indexation of CPI bonds 21(a) 19,224 22,311 Other 9 8 ___________________________

448,243 463,702 Less amount capitalised 21(a) (26,054) (49,797) ___________________________ Total finance costs expense recognised in profit or loss 422,189 413,905 ___________________________


___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

Dissection of total revenue into regulated and non-regulated categories Regulated Service availability charges 1,204,451 1,163,015 Usage charges 1,138,289 1,098,265 Ancillary services 15,468 13,560 Sundry revenue 930 849 NSW Government contributions for social programs 163,091 157,875 Rent revenue from operating leases 5,513 5,688 Contributions by (repayments to) developers for capital works (422) 227 ___________________________ 2,527,320 2,439,479 ___________________________ Non-regulated Service availability charges (customer redress rebates) (5,070) (4,760) Usage charges 12,758 13,212 Ancillary services 2,801 2,224 Sundry revenue 13,615 18,079 Interest revenue 2,599 2,811 NSW Government contributions for social programs 4,830 15,672 Grants from Commonwealth Government 70 23 Rent revenue from operating leases 5,728 5,915 Contributions by developers for capital works 151,348 118,435 ___________________________ 188,679 171,611 ___________________________ Total revenue recognised in profit or loss 2,715,999 2,611,090 ___________________________ (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 8,123 2,526 Net gain on disposal of greenhouse trading certificates - 594 Net fair value unrealised gain on greenhouse trading certificates 4,212 796 ___________________________ Total other income recognised in profit or loss 12,335 3,916 ___________________________


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___________________________________________________________________________________________________________ Note 2015 2014 $’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 411,598 399,096 Less amount capitalised (62,350) (61,596) ___________________________ Employee-related expenses * 349,248 337,500 Non employee-related expenses: Availability charges and purchases of bulk water from Water NSW (Sydney Catchment Authority from 1 July 2014 to 31 December 2014) 207,231 203,676 Availability charges from Sydney Desalination Plant Pty Limited 195,980 192,718 Tariff expenses from water filtration plant service agreements 110,011 115,252 Maintenance services expenses ** 164,271 141,951 Operational services expenses ** 99,909 101,346 Materials, plant and equipment expenses 40,118 40,697 Operating lease expenses *** 51,724 51,661 Electricity and other energy expenses 41,451 49,846 Transport expenses (excluding leases) 2,438 2,402 Property expenses (excluding leases) 21,125 20,709 Data management expenses (excluding leases) 18,340 16,877 Other expenses from ordinary activities 38,927 42,483 ___________________________ 991,525 979,618 Less amount capitalised (16,846) (16,288) ___________________________ Non employee-related expenses 974,679 963,330 ___________________________ Total core operations expenses 1,323,927 1,300,830 ___________________________

* 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 assets 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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Other expenses (continued) Total core operations expenses 1,323,927 1,300,830 (continued from previous page) Depreciation and amortisation expenses 9(a), 10(a), 21(a) 239,924 230,253 ___________________________ Total other expenses in the course of ordinary activities 1,563,851 1,531,083 Net losses from disposal of: Property, plant and equipment 9,073 18,360 Intangible assets 21(a) 179 1 Greenhouse trading certificates 154 - ___________________________ 9,406 18,361 Impairment losses expensed (reversed) through profit or loss: Financial assets: Receivables 5 (39) 731 Property, plant and equipment 9(a), 21(a) 3,824 11,036 Intangible assets 10(a), 21(a) (500) 244 ___________________________ 3,285 12,011 ___________________________ Total other expenses recognised in profit or loss 1,576,542 1,561,455 ___________________________


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(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 411,598 399,096 Less amount capitalised (62,350) (61,596) ___________________________ Employee-related expenses * 349,248 337,500 Non employee-related expenses: Availability charges and purchases of bulk water from Water NSW (Sydney Catchment Authority from 1 July 2014 to 31 December 2014) 207,231 203,676 Availability charges from Sydney Desalination Plant Pty Limited 195,980 192,718 Tariff expenses from water filtration plant service agreements 110,011 115,252 Maintenance services expenses ** 164,271 141,951 Operational services expenses ** 99,909 101,346 Materials, plant and equipment expenses 40,118 40,697 Operating lease expenses *** 51,724 51,661 Electricity and other energy expenses 41,451 49,846 Transport expenses (excluding leases) 2,438 2,402 Property expenses (excluding leases) 21,125 20,709 Data management expenses (excluding leases) 18,340 16,877 Other expenses from ordinary activities 38,927 42,483 ___________________________ 991,525 979,618 Less amount capitalised (16,846) (16,288) ___________________________ Non employee-related expenses 974,679 963,330 ___________________________ Total core operations expenses 1,323,927 1,300,830 ___________________________

* 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 assets 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 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

Superannuation expense (gain) recognised in profit or loss

• Defined benefit schemes Total expense advised by Pillar Administration * 15(c) 45,099 46,888 Other movements (3,116) (3,159) ___________________________

41,983 43,729 Less amount capitalised (3,568) (3,298) ___________________________ 38,415 40,431 ___________________________

• Defined contribution schemes Total expense 11,636 10,843 Less amount capitalised (989) (967) ___________________________ 15(c) 10,647 9,876 ___________________________ Total superannuation expense (gain) recognised in profit or loss 49,062 50,307 ___________________________

* Excludes remeasurements of the defined benefit superannuation net liability amounting to a loss of $53.851 million (2014: a gain of $2.075 million) included in other comprehensive income. (Refer notes 15(c) and 19).

Maintenance expenses Maintenance-related employee expenses (included in employee-related expenses) 64,343 63,903 Maintenance expenses (excluding maintenance-related employee expenses) 164,271 141,951 ___________________________ Total maintenance expenses 228,614 205,854 ___________________________ Research and development expenses Research and development costs recognised as an expense 4,572 4,161 ___________________________



___________________________________________________________________________________________________________ Note 2015 2014 $’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 202,984 141,098 Adjustments for prior years (481) (17,140) ___________________________ 202,503 123,958 Deferred tax expense Origination and reversal of temporary differences 13,602 51,195 ___________________________ 11(b) 13,602 51,195 ___________________________ Total income tax expense in profit or loss 216,105 175,153 ___________________________


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Superannuation expense (gain) recognised in profit or loss

• Defined benefit schemes Total expense advised by Pillar Administration * 15(c) 45,099 46,888 Other movements (3,116) (3,159) ___________________________

41,983 43,729 Less amount capitalised (3,568) (3,298) ___________________________ 38,415 40,431 ___________________________

• Defined contribution schemes Total expense 11,636 10,843 Less amount capitalised (989) (967) ___________________________ 15(c) 10,647 9,876 ___________________________ Total superannuation expense (gain) recognised in profit or loss 49,062 50,307 ___________________________

* Excludes remeasurements of the defined benefit superannuation net liability amounting to a loss of $53.851 million (2014: a gain of $2.075 million) included in other comprehensive income. (Refer notes 15(c) and 19).

Maintenance expenses Maintenance-related employee expenses (included in employee-related expenses) 64,343 63,903 Maintenance expenses (excluding maintenance-related employee expenses) 164,271 141,951 ___________________________ Total maintenance expenses 228,614 205,854 ___________________________ Research and development expenses Research and development costs recognised as an expense 4,572 4,161 ___________________________


Overview

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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

(b) Reconciliation between income tax expense and profit before income tax Profit before income tax 729,603 639,646 ___________________________ Income tax expense calculated using the domestic corporation tax rate of 30% (2014: 30%) 218,881 191,894 Increase in tax expense due to: Non-deductible expenses 379 2,246 Decrease in tax expense due to: Research and development concession (1,239) (982) Non-assessable items (778) - Adjustment of temporary differences (657) (865) ___________________________ 216,586 192,293 Under (Over)-provided in prior years (481) (17,140) ___________________________ Income tax expense 216,105 175,153 ___________________________ (c) Income tax on other comprehensive income Deferred tax relating to: Revaluation of property, plant and equipment 18(b) 111,578 75,177 Remeasurements of defined benefit superannuation net liability 19 (16,155) 623 ___________________________ 11(b) 95,423 75,800 ___________________________


Sydney Water Corporation Notes – 30 June 2015 Page 39

___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

4. Cash and cash equivalents

Cash 5,752 3,922 ___________________________ Cash and cash equivalents in statement of financial position and statement of cash flows 5,752 3,922 ___________________________ 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 26(e) for a maturity analysis of all financial assets and financial liabilities.


___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

(b) Reconciliation between income tax expense and profit before income tax Profit before income tax 729,603 639,646 ___________________________ Income tax expense calculated using the domestic corporation tax rate of 30% (2014: 30%) 218,881 191,894 Increase in tax expense due to: Non-deductible expenses 379 2,246 Decrease in tax expense due to: Research and development concession (1,239) (982) Non-assessable items (778) - Adjustment of temporary differences (657) (865) ___________________________ 216,586 192,293 Under (Over)-provided in prior years (481) (17,140) ___________________________ Income tax expense 216,105 175,153 ___________________________ (c) Income tax on other comprehensive income Deferred tax relating to: Revaluation of property, plant and equipment 18(b) 111,578 75,177 Remeasurements of defined benefit superannuation net liability 19 (16,155) 623 ___________________________ 11(b) 95,423 75,800 ___________________________


Overview

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Cu

stom

er at th

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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

5. Trade and other receivables

Current Trade receivables Outstanding service availability and usage charges billed 93,279 88,338 Allowance for impairment (1,246) (1,232) ___________________________ 92,033 87,106 Accrued unbilled usage charges on unread meters: Water usage 135,050 131,201 Sewer usage 12,345 13,088 Other usage 5,516 4,848 ___________________________ 152,911 149,137 ___________________________ 244,944 236,243 Other trade debtors billed 5,633 6,164 Allowance for impairment (2) (79) ___________________________ 5,631 6,085 ___________________________ Total trade receivables 250,575 242,328 Other receivables Other debtors and accrued revenue 33,999 40,368 Prepayments 6,732 29,131 ___________________________ Total other receivables 40,731 69,499 ___________________________ Total current trade and other receivables 291,306 311,827 ___________________________

Significant terms and conditions 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. 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. Details in relation to credit risk, liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these receivables and all other financial assets and financial liabilities.



___________________________________________________________________________________________________________ Note 2015 2014 $’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 7,390 7,534 Past due 22 - 30 days 13,231 10,757 Past due 31 - 60 days 14,767 15,243 Past due 61 - 90 days 9,597 8,542 Past due 91 - 180 days 34,076 31,637 Past due 181 - 365 days 7,800 8,377 Past due > 365 days 6,418 6,248 ___________________________ Outstanding service availability and usage charges billed 93,279 88,338 ___________________________

• Allowance for impairment Past due > 365 days (1,246) (1,232) ___________________________ Allowance for impairment (1,246) (1,232) ___________________________ Other trade debtors billed

• Gross amounts Not past due 4,812 5,746 Past due 15 - 30 days 46 47 Past due 31 - 60 days 469 60 Past due 61 - 90 days 103 165 Past due 91 - 180 days 77 46 Past due 181 - 365 days 64 92 Past due > 365 days 62 8 ___________________________ Other trade debtors billed 5,633 6,164 ___________________________

• Allowance for impairment Past due 15 - 30 days - (19) Past due 91 - 180 days - (19) Past due 181 - 365 days (1) (41) Past due > 365 days (1) - ___________________________ Allowance for impairment (2) (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 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

5. Trade and other receivables

Current Trade receivables Outstanding service availability and usage charges billed 93,279 88,338 Allowance for impairment (1,246) (1,232) ___________________________ 92,033 87,106 Accrued unbilled usage charges on unread meters: Water usage 135,050 131,201 Sewer usage 12,345 13,088 Other usage 5,516 4,848 ___________________________ 152,911 149,137 ___________________________ 244,944 236,243 Other trade debtors billed 5,633 6,164 Allowance for impairment (2) (79) ___________________________ 5,631 6,085 ___________________________ Total trade receivables 250,575 242,328 Other receivables Other debtors and accrued revenue 33,999 40,368 Prepayments 6,732 29,131 ___________________________ Total other receivables 40,731 69,499 ___________________________ Total current trade and other receivables 291,306 311,827 ___________________________

Significant terms and conditions 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. 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. Details in relation to credit risk, liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these receivables and all other financial assets and financial liabilities.


Overview

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___________________________________________________________________________________________________________ Note 2015 2014 $’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 (1,232) (671) Other trade debtors (79) - ___________________________ (1,311) (671) Charge for impairment reversal (expense) made during the period: Outstanding service availability and usage charges (33) (651) Other trade debtors 72 (80) ___________________________ 2(c) 39 (731) Amounts written off: Outstanding service availability and usage charges 19 90 Other trade debtors 5 1 ___________________________ 24 91 Carrying amount at end of period: Outstanding service availability and usage charges (1,246) (1,232) Other trade debtors (2) (79) ___________________________ (1,248) (1,311) ___________________________

6. Inventories

Current Stock, stores and materials - at cost 1,065 904 ___________________________ Total inventories 1,065 904 ___________________________

7. Other current assets

Greenhouse trading certificates - at market value 2,695 3,722 ___________________________ Total other current assets 2,695 3,722 ___________________________



___________________________________________________________________________________________________________ Note 2015 2014 $’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 $1.239 million (2014: $1.531 million) receivable in respect of

the previous reporting period, and a current tax liability balance of $74.510 million (2014: $19.530 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 $202.984 million (2014: $141.098 million).


___________________________________________________________________________________________________________ Note 2015 2014 $’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 (1,232) (671) Other trade debtors (79) - ___________________________ (1,311) (671) Charge for impairment reversal (expense) made during the period: Outstanding service availability and usage charges (33) (651) Other trade debtors 72 (80) ___________________________ 2(c) 39 (731) Amounts written off: Outstanding service availability and usage charges 19 90 Other trade debtors 5 1 ___________________________ 24 91 Carrying amount at end of period: Outstanding service availability and usage charges (1,246) (1,232) Other trade debtors (2) (79) ___________________________ (1,248) (1,311) ___________________________

6. Inventories

Current Stock, stores and materials - at cost 1,065 904 ___________________________ Total inventories 1,065 904 ___________________________

7. Other current assets

Greenhouse trading certificates - at market value 2,695 3,722 ___________________________ Total other current assets 2,695 3,722 ___________________________


Overview

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Overview

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ula

ted d

epre

cia

tion o

r am

ort

isation

(387)

(61

4)

- -

(15,6

23,7

61)

(51,4

53)

(40,0

89)

(71,2

97)

(49,0

21)

- (1

5,8

36,6

22)

Accum

ula

ted im

pairm

ent

(11,1

19)

(10

4)

(18,8

55)

- (2

8,8

50,3

15)

(10

2,0

51)

- -

- -

(28,9

82,4

44)

(1

1,5

06)

(71

8)

(18,8

55)

- (4

4,4

74,0

76)

(15

3,5

04)

(40,0

89)

(71,2

97)

(49,0

21)

- (4

4,8

19,0

66)

Net

carr

yin

g a

mou

nt

28

9,2

74

10,6

84

62

2,4

71

-

12,0

55,0

59

42,6

42

46,9

38

75,8

31

13,1

05

79

2,5

24

13,9

48,5

28

At

30 J

un

e 2

01

4

F

air v

alu

e –

Level 3 (

an

d v

alu

ation

tech

niq

ue):

Cost

-

- -

- -

- -

15

7,8

83

63,0

66

65

1,8

81

872,8

30

Mark

et

valu

ation -

2014

23

4,1

07

12,1

00

-

- -

- -

- -

- 246,2

07

Fair v

alu

e –

incom

e a

ppro

ach

-

- -

194,8

15

13,4

32,0

57

43,4

30

- -

- -

13,6

70,3

02

23

4,1

07

12,1

00

-

194,8

15

13,4

32,0

57

43,4

30

- 15

7,8

83

63,0

66

65

1,8

81

14,7

89,3

39

Accum

ula

ted d

epre

cia

tion o

r am

ort

isation

(71)

(80)

- -

- -

- (8

3,4

03)

(45,4

30)

- (1

28,9

84)

Accum

ula

ted im

pairm

ent

(24,7

95)

(12

1)

- -

- -

- -

- -

(24,9

16)

(2

4,8

66)

(20

1)

- -

- -

- (8

3,4

03)

(45,4

30)

- (1

53,9

00)

Net

carr

yin

g a

mou

nt

20

9,2

41

11,8

99

-

194,8

15

13,4

32,0

57

43,4

30

- 74,4

80

17,6

36

65

1,8

81

14,6

35,4

39

Rev

alu

ed

ass

ets

ba

se

d o

n c

os

t m

od

el:

Cost

56,9

09

19,3

87

-

233,2

51

16,4

13,5

50

104,6

23

A

ccum

ula

ted d

epre

cia

tion o

r am

ort

isation

(6,3

29)

(4,0

51)

- -

(3,7

94,5

91)

(11,5

01)

A

ccum

ula

ted im

pairm

ent

(10,1

98)

(4,4

92)

- (1

00,3

41)

- -

(1

6,5

27)

(8,5

43)

- (1

00,3

41)

(3,7

94,5

91)

(11,5

01)

Net

carr

yin

g a

mou

nt

30 J

un

e 2

014

40,3

82

10,8

44

-

132,9

10

12,6

18,9

59

93,1

22

Syd

ney W

ate

r C

orp

ora

tion –

30

Ju

ne 2

015 P

ag

e 4

6

Y

ear

en

de

d 3

0 J

un

e 2

014

M

ark

et

land

an

d

build

ing

s

Leaseh

old

pro

pert

y

Syste

m

Land *

S

yste

m

assets

-

land *

Syste

m

assets

-

Infr

astr

uctu

re

(ow

ned)

*

Syste

m

assets

-

Infr

astr

uctu

re

(un

der

fin

ance

lease)

Wate

r m

ete

rs *

P

lant

an

d

eq

uip

ment

Com

pute

r eq

uip

ment

Work

in

pro

gre

ss

Tota

l (F

air v

alu

e

hie

rarc

hy

– L

evel 3)

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

At

1 J

uly

20

13 –

net

carr

yin

g a

mou

nt

28

9,2

74

10,6

84

62

2,4

71

-

12,0

55,0

59

42,6

42

46,9

38

75,8

31

13,1

05

79

2,5

24

13,9

48,5

28

A

dd

itio

ns t

o w

ork

in p

rogre

ss

- -

- -

- -

- -

- 56

4,3

59

56

4,3

59

A

dd

itio

ns t

ransfe

rred f

rom

work

in p

rogre

ss

- -

- 12

7

68

0,5

41

-

- 13,6

95

11,9

33

(7

06,2

96)

- A

dd

itio

ns –

oth

er

an

d a

dju

stm

ents

-

- -

- 10

9,8

44

-

- -

- -

10

9,8

44

D

isp

osals

-

- -

- (1

7,7

54)

- -

(62

6)

(9)

- (1

8,3

89)

Recla

ssifie

d a

s a

ssets

held

for

sale

(2

2,9

79)

- -

- -

- -

- -

- (2

2,9

79)

Oth

er

recla

ssific

ation

s

(6,2

53)

- (6

22,4

71)

62

1,5

96

46,8

42

-

(46,9

38)

(13

0)

- 7,2

52

(1

02)

Revalu

ation incre

ases (

+)

or

decre

ases

(-)

recogn

ised in t

he a

sset

revalu

ati

on

reserv

e

(2

3,6

10)

-

-

5,9

09

-

-

-

-

-

-

(1

7,7

01)

Impair

ment

losses (

-) r

ecogn

ised in t

he

asset

revalu

ation r

eserv

e

(1

9,6

90)

- -

(4

33,7

32)

- -

- -

- -

(4

53,4

22)

Impair

ment

losses r

evers

ed (

+)

and

recog

nis

ed in t

he a

sset

revalu

ation r

eserv

e

-

-

-

-

71

9,5

29

2,1

85

-

-

-

-

72

1,7

14

Im

pair

ment

losses o

r re

valu

ati

on

decre

ments

(-)

recog

nis

ed in p

rofit

or

loss

in t

he lin

e ite

m ‘O

ther

exp

en

ses’

(7

,38

7)

- -

- -

- -

- -

(5

,95

8)

(1

3,3

45)

Impair

ment

losses r

evers

ed o

r re

valu

ation

incre

ments

(+)

recognis

ed in p

rofit

or

loss

in t

he lin

e ite

m ‘O

ther

exp

en

ses’

-

1,3

94

-

91

5

-

-

-

-

-

-

2,3

09

D

epre

cia

tion c

harg

e

(11

4)

(17

9)

- -

(16

2,0

04)

(1,3

97)

- (1

4,2

90)

(7,3

93)

- (1

85,3

77)

At

30 J

une 2

01

4 –

net

carr

yin

g a

mount

20

9,2

41

11,8

99

-

19

4,8

15

13,4

32,0

57

43,4

30

-

74,4

80

17,6

36

65

1,8

81

14,6

35,4

39

* D

ue t

o t

he intr

oduction o

f A

ustr

alia

n A

ccou

nting S

tan

dard

AA

SB

13

‘F

air V

alu

e M

easure

ment’ f

rom

1 J

uly

201

3,

the a

ssets

within

the s

ep

ara

te c

lasses o

f S

yste

m L

an

d a

nd W

ate

r M

ete

rs w

ere

re

cla

ssifie

d t

o t

he a

sset

cla

ss S

yste

m A

ssets

in t

he p

revio

us r

ep

ort

ing p

eri

od.

This

movem

ent

an

d s

ep

ara

te c

lasses e

xis

ting a

t th

e t

ime a

re s

how

n in t

he a

bove a

nd b

elo

w t

able

s f

or

com

para

tive

purp

oses o

nly

. M

ovem

ents

and d

isclo

sure

s f

or

the c

urr

ent

rep

ort

ing p

eri

od,

how

ever,

sh

ow

th

e a

sset

cla

ss o

f S

yste

m A

ssets

(in

frastr

uctu

re inclu

din

g s

yste

m lan

d)

(Ow

ned)

as o

ne c

om

bin

ed a

mou

nt

as

this

will

be t

he c

lass t

hat

will

be d

isclo

sed f

or

futu

re r

ep

ort

ing p

urp

ose

s.


Syd

ney W

ate

r C

orp

ora

tion –

30

Ju

ne 2

015 P

ag

e 4

7

Mark

et

land

an

d

build

ings

Leaseh

old

pro

pert

y

Syste

m

la

nd *

S

yste

m

assets

-

land *

Syste

m

assets

-

infr

astr

uctu

re

(ow

ned)

*

Syste

m

assets

-

infr

astr

uctu

re

(un

der

fin

ance

lease)

Wate

r m

ete

rs

Pla

nt

an

d

eq

uip

ment

Com

pute

r eq

uip

ment

Work

in

pro

gre

ss

Tota

l

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

At

1 J

uly

2013

F

air v

alu

e:

C

ost

-

- -

- -

- 87,0

27

14

7,1

28

62,1

26

79

2,5

24

1,0

88,8

05

Ind

ep

en

dent m

ark

et

valu

e 2

01

1

29

8,9

25

11,4

02

-

- -

- -

- -

- 310,3

27

Ind

ep

en

dent m

ark

et

valu

e 2

01

2

1,8

55

-

64

1,3

26

-

- -

- -

- -

643,1

81

Repla

cem

ent

valu

e 2

01

2

- -

- -

56,5

29,1

35

196,1

46

- -

- -

56,7

25,2

81

30

0,7

80

11,4

02

64

1,3

26

-

56,5

29,1

35

196,1

46

87,0

27

14

7,1

28

62,1

26

79

2,5

24

58,7

67,5

94

Accum

ula

ted d

epre

cia

tion o

r am

ort

isation

(387)

(61

4)

- -

(15,6

23,7

61)

(51,4

53)

(40,0

89)

(71,2

97)

(49,0

21)

- (1

5,8

36,6

22)

Accum

ula

ted im

pairm

ent

(11,1

19)

(10

4)

(18,8

55)

- (2

8,8

50,3

15)

(10

2,0

51)

- -

- -

(28,9

82,4

44)

(1

1,5

06)

(71

8)

(18,8

55)

- (4

4,4

74,0

76)

(15

3,5

04)

(40,0

89)

(71,2

97)

(49,0

21)

- (4

4,8

19,0

66)

Net

carr

yin

g a

mou

nt

28

9,2

74

10,6

84

62

2,4

71

-

12,0

55,0

59

42,6

42

46,9

38

75,8

31

13,1

05

79

2,5

24

13,9

48,5

28

At

30 J

un

e 2

01

4

F

air v

alu

e –

Level 3 (

an

d v

alu

ation

tech

niq

ue):

Cost

-

- -

- -

- -

15

7,8

83

63,0

66

65

1,8

81

872,8

30

Mark

et

valu

ation -

2014

23

4,1

07

12,1

00

-

- -

- -

- -

- 246,2

07

Fair v

alu

e –

incom

e a

ppro

ach

-

- -

194,8

15

13,4

32,0

57

43,4

30

- -

- -

13,6

70,3

02

23

4,1

07

12,1

00

-

194,8

15

13,4

32,0

57

43,4

30

- 15

7,8

83

63,0

66

65

1,8

81

14,7

89,3

39

Accum

ula

ted d

epre

cia

tion o

r am

ort

isation

(71)

(80)

- -

- -

- (8

3,4

03)

(45,4

30)

- (1

28,9

84)

Accum

ula

ted im

pairm

ent

(24,7

95)

(12

1)

- -

- -

- -

- -

(24,9

16)

(2

4,8

66)

(20

1)

- -

- -

- (8

3,4

03)

(45,4

30)

- (1

53,9

00)

Net

carr

yin

g a

mou

nt

20

9,2

41

11,8

99

-

194,8

15

13,4

32,0

57

43,4

30

- 74,4

80

17,6

36

65

1,8

81

14,6

35,4

39

Rev

alu

ed

ass

ets

ba

se

d o

n c

os

t m

od

el:

Cost

56,9

09

19,3

87

-

233,2

51

16,4

13,5

50

104,6

23

A

ccum

ula

ted d

epre

cia

tion o

r am

ort

isation

(6,3

29)

(4,0

51)

- -

(3,7

94,5

91)

(11,5

01)

A

ccum

ula

ted im

pairm

ent

(10,1

98)

(4,4

92)

- (1

00,3

41)

- -

(1

6,5

27)

(8,5

43)

- (1

00,3

41)

(3,7

94,5

91)

(11,5

01)

Net

carr

yin

g a

mou

nt

30 J

un

e 2

014

40,3

82

10,8

44

-

132,9

10

12,6

18,9

59

93,1

22


Overview

Co

rpo

rate govern

ance

Cu

stom

er at th

e heart

Wo

rld class

perfo

rman

ceH

igh

perfo

rman

ce cu

lture

Finan

cialsA

pp

end

ixes


(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 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). 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 of system assets are undertaken at the end of each reporting period to ensure these assets are stated at fair value. Due to the interdependent nature of the various categories of system assets that are used in the water industry (such as pipes, pumping stations and treatment plants), their fair value is determined by using the ‘income approach’ under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ (as described earlier in note 1(n) – Asset Valuations). The income approach 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 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. It also includes a theoretical income tax amount as one of the building blocks and 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 Pricing Determination. Pricing Determinations generally occur every four years. Although IPART uses 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 be consistent with the impairment testing requirements of 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 fair value calculation model for the Corporation’s assets. Cash outflows used in the fair value model 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 under the income approach determines the total fair value of 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). The fair value applicable to the system asset class is derived by deducting the fair value of other classes of assets which have been separately determined using other valuation techniques (eg market values for the asset class market land and buildings) from the total fair value of all assets. The major inputs (assumptions) underlying the calculations of fair value as at the current and previous reporting date are detailed in the table below.



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 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). 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 of system assets are undertaken at the end of each reporting period to ensure these assets are stated at fair value. Due to the interdependent nature of the various categories of system assets that are used in the water industry (such as pipes, pumping stations and treatment plants), their fair value is determined by using the ‘income approach’ under Australian Accounting Standard AASB 13 ‘Fair Value Measurement’ (as described earlier in note 1(n) – Asset Valuations). The income approach 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 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.


Overview

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Input item / relationship to fair value measurement

30 June 2015 - Calculation of fair value


Discount rate Changes 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 7.5% pa ‘nominal’ (equivalent to a ‘real’ pre-tax rate of 4.9% pa).


CPI rate The asset value would increase if the CPI rate was higher.

The regulated asset base (RAB) was escalated by the CPI rate of 2.4% prior to determining the annual revenue requirement. Other than this, modelling was undertaken in a ‘real’ framework.

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.

Period of discounting The 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.


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 land and 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 2015, and,

- capital spending in future years limited to only the amount of capital expenditure required to complete capital projects in progress at 30 June 2015.

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 2015 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.







Input item / relationship to fair value measurement (continued)



Cash outflows:

• Operating expenditure No effect on asset values as it has been assumed that future operating expenditure will be fully funded (‘passed through’) in future IPART Pricing Determinations.

• Capital expenditure Asset 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 2015.

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.

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 lower Applied % +0.25% -0.25% ______________________________________________________________________________________________________

‘Real’ pre-tax rate 4.90 5.15 4.65 Calculated fair value of property, plant and equipment ($000) 15,643,710 15,028,190 16,308,070 Resulting change ($’000) (615,520) 664,360 ______________________________________________________________________________________________________ (ii) CPI (used to escalate the Regulatory Asset Base) Rate If higher If lower Applied % +0.25% -0.25% ______________________________________________________________________________________________________

CPI rate 2.40 2.65 2.15 Calculated fair value of property, plant and equipment ($000) 15,643,710 15,681,360 15,606,050 Resulting change ($’000) 37,650 (37,660) ______________________________________________________________________________________________________

• 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. The fair 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 seven properties (2014: four properties) classified as assets held for sale under current assets in the statement of financial position. (Refer note 1(n)). One of the properties was previously used as a maintenance depot and the remainder were used for locating infrastructure (system assets). These properties are now considered to be surplus to the needs of the Corporation.


Input item / relationship to fair value measurement



Discount rate Changes 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).



CPI rate The asset value would increase if the CPI rate was higher.

The regulated asset base (RAB) was escalated by the CPI rate of 2.4% prior to determining the annual revenue requirement. Other than this, modelling was undertaken in a ‘real’ framework.

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.

Period of discounting The 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.



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 land and 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.










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92)

Accum

ula

ted im

pairm

ent

-

- -

(18,4

42)

- (1

8,4

42)

(52,8

29)

(20

8,4

63)

(26

1,2

92)

(18,4

42)

- (2

79,7

34)

Net

carr

yin

g a

mou

nt

37,2

66

99,1

23

13

6,3

89

7,8

29

20,6

51

164,8

69

At

30 J

un

e 2

01

4

F

air v

alu

e –

Level 3 (

an

d v

alu

ation t

echn

iqu

e):

Cost

97,2

73

34

5,9

63

44

3,2

36

-

6,6

03

449,8

39

Fair v

alu

e –

incom

e a

ppro

ach

-

- -

8,4

75

-

8,4

75

97,2

73

34

5,9

63

44

3,2

36

8,4

75

6,6

03

458,3

14

Accum

ula

ted a

mort

isation

(6

4,8

38)

(23

9,0

20)

(30

3,8

58)

- -

(30

3,8

58)

Accum

ula

ted im

pairm

ent

-

- -

- -

-

(64,8

38)

(23

9,0

20)

(30

3,8

58)

- -

(30

3,8

58)

Net

carr

yin

g a

mou

nt

32,4

35

10

6,9

43

13

9,3

78

8,4

75

6,6

03

154,4

56

Rev

alu

ed

ass

ets

ba

se

d o

n c

os

t m

od

el:

Cost

26,8

25

Accum

ula

ted a

mort

isation

-

A

ccum

ula

ted im

pairm

ent

(18,3

50)

-

Net

carr

yin

g a

mou

nt

8,4

75


Overview

Co

rpo

rate govern

ance

Cu

stom

er at th

e heart

Wo

rld class

perfo

rman

ceH

igh

perfo

rman

ce cu

lture

Finan

cialsA

pp

end

ixes

Syd

ney W

ate

r C

orp

ora

tion N

ote

s –

30

Ju

ne 2

015 P

age 5

7

11

. D

efe

rre

d t

ax

ass

ets

an

d l

iab

ilit

ies

(a

) R

ec

og

nis

ed

an

d u

nre

co

gn

ised

defe

rre

d t

ax a

ssets

an

d lia

bilit

ies

Defe

rred t

ax

assets

an

d lia

bili

ties r

ecogn

ised in t

he s

tate

ment

of

fin

ancia

l p

ositio

n a

re a

ttributa

ble

to t

he f

ollow

ing:

Ass

ets

Lia

bilit

ies

Net

20

15

20

14

20

15

20

14

20

15

20

14

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

Pro

pert

y,

pla

nt

an

d e

qu

ipm

ent

-

- 1,0

73,7

74

92

8,0

77

1,0

73,7

74

92

8,0

77

A

ccru

ed inte

rest

reven

ue

- -

39

9

27

8

39

9

27

8

Con

sum

ab

le s

tore

s

-

- 32

0

27

1

32

0

27

1

Em

plo

yee b

en

efits

(31

8,1

61)

(29

0,9

49)

- -

(31

8,1

61)

(29

0,9

49)

Pro

vis

ions n

ot

curr

ently d

ed

uctible

(19,8

81)

(20,2

51)

- -

(19,8

81)

(20,2

51)

Anticip

ate

d r

eceip

ts a

nd a

ccru

ed e

xp

en

ses

(5

,14

4)

(70)

- -

(5,1

44)

(70)

Cap

ital gra

nts

fro

m N

SW

Govern

ment

(3

,00

0)

- -

- (3

,00

0)

- O

ther

fin

ancia

l in

str

um

ents

(19,0

32)

(19,0

32)

- -

(19,0

32)

(19,0

32)

Gre

enh

ou

se t

rad

ing c

ert

ific

ate

s

(8

09)

- -

1,1

17

(8

09)

1,1

17

Tax

(assets

) lia

bili

ties

(3

66,0

27)

(33

0,3

02)

1,0

74,4

93

92

9,7

43

70

8,4

66

59

9,4

41

S

et-

off o

f ta

x

36

6,0

27

33

0,3

02

(3

66,0

27)

(330,3

02)

- -

Net

tax

(assets

) /

liabili

ties

-

- 70

8,4

66

59

9,4

41

70

8,4

66

59

9,4

41

Th

ere

were

no u

nre

cogn

ised d

efe

rred t

ax

assets

an

d lia

bili

ties f

or

the C

orp

ora

tion a

t th

e r

ep

ort

ing d

ate

.

(b)

Mo

vem

en

ts in

tem

po

rary

dif

fere

nc

es

Bala

nce

1 J

uly

20

14

Recog

nis

ed

in p

rofit

or

loss

Recog

nis

ed in

oth

er

com

pre

hensiv

e

incom

e

Bala

nce

30 J

une 2

015

B

ala

nce

1 J

uly

2013

Recog

nis

ed

in p

rofit

or

loss

Recog

nis

ed in

oth

er

com

pre

hensiv

e

incom

e

Bala

nce

30 J

un

e 2

01

4

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

Pro

pert

y,

pla

nt

an

d e

qu

ipm

ent

92

8,0

77

34,1

19

11

1,5

78

1,0

73,7

74

80

1,6

92

51,2

08

75,1

77

928,0

77

A

ccru

ed inte

rest

reven

ue

27

8

12

1

- 399

15

3

125

-

27

8

Con

sum

ab

le s

tore

s

27

1

49

-

320

26

6

5

- 27

1

Em

plo

yee b

en

efits

(29

0,9

49)

(11,0

57)

(16,1

55)

(31

8,1

61)

(29

1,9

31)

359

62

3

(29

0,9

49)

Pro

vis

ions n

ot

curr

ently d

ed

uctible

(20,2

51)

37

0

- (1

9,8

81)

(18,2

39)

(2,0

12)

- (2

0,2

51)

Anticip

ate

d r

eceip

ts a

nd a

ccru

ed e

xp

en

ses

(7

0)

(5,0

74)

- (5

,14

4)

(15

6)

86

-

(70)

Cap

ital gra

nts

fro

m N

SW

Govern

ment

-

(3,0

00)

- (3

,00

0)

- -

- -

Oth

er

fin

ancia

l in

str

um

ents

(19,0

32)

- -

(19,0

32)

(21,9

86)

2,9

54

-

(19,0

32)

Gre

enh

ou

se t

rad

ing c

ert

ific

ate

s

1,1

17

(1

,92

6)

- (8

09)

2,6

47

(1

,53

0)

- 1,1

17

Net

tax

(assets

) /

liabili

ties

59

9,4

41

13,6

02

95,4

23

70

8,4

66

47

2,4

46

51,1

95

75,8

00

599,4

41



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 value determined 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)).

The fair value of computer software has been based on depreciated historical cost, which closely approximates depreciated current replacement cost for this class of assets. Accordingly, this fair value measurement 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, an easement 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 been carried 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.


Syd

ney W

ate

r C

orp

ora

tion N

ote

s –

30

Ju

ne 2

015 P

age 5

7

11

. D

efe

rre

d t

ax

ass

ets

an

d l

iab

ilit

ies

(a

) R

ec

og

nis

ed

an

d u

nre

co

gn

ised

defe

rre

d t

ax a

ssets

an

d lia

bilit

ies

Defe

rred t

ax

assets

an

d lia

bili

ties r

ecogn

ised in t

he s

tate

ment

of

fin

ancia

l p

ositio

n a

re a

ttributa

ble

to t

he f

ollow

ing:

Ass

ets

Lia

bilit

ies

Net

20

15

20

14

20

15

20

14

20

15

20

14

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

Pro

pert

y,

pla

nt

an

d e

qu

ipm

ent

-

- 1,0

73,7

74

92

8,0

77

1,0

73,7

74

92

8,0

77

A

ccru

ed inte

rest

reven

ue

- -

39

9

27

8

39

9

27

8

Con

sum

ab

le s

tore

s

-

- 32

0

27

1

32

0

27

1

Em

plo

yee b

en

efits

(31

8,1

61)

(29

0,9

49)

- -

(31

8,1

61)

(29

0,9

49)

Pro

vis

ions n

ot

curr

ently d

ed

uctible

(19,8

81)

(20,2

51)

- -

(19,8

81)

(20,2

51)

Anticip

ate

d r

eceip

ts a

nd a

ccru

ed e

xp

en

ses

(5

,14

4)

(70)

- -

(5,1

44)

(70)

Cap

ital gra

nts

fro

m N

SW

Govern

ment

(3

,00

0)

- -

- (3

,00

0)

- O

ther

fin

ancia

l in

str

um

ents

(19,0

32)

(19,0

32)

- -

(19,0

32)

(19,0

32)

Gre

enh

ou

se t

rad

ing c

ert

ific

ate

s

(8

09)

- -

1,1

17

(8

09)

1,1

17

Tax

(assets

) lia

bili

ties

(3

66,0

27)

(33

0,3

02)

1,0

74,4

93

92

9,7

43

70

8,4

66

59

9,4

41

S

et-

off o

f ta

x

36

6,0

27

33

0,3

02

(3

66,0

27)

(330,3

02)

- -

Net

tax

(assets

) /

liabili

ties

-

- 70

8,4

66

59

9,4

41

70

8,4

66

59

9,4

41

Th

ere

were

no u

nre

cogn

ised d

efe

rred t

ax

assets

an

d lia

bili

ties f

or

the C

orp

ora

tion a

t th

e r

ep

ort

ing d

ate

.

(b)

Mo

vem

en

ts in

tem

po

rary

dif

fere

nc

es

Bala

nce

1 J

uly

20

14

Recog

nis

ed

in p

rofit

or

loss

Recog

nis

ed in

oth

er

com

pre

hensiv

e

incom

e

Bala

nce

30 J

une 2

015

B

ala

nce

1 J

uly

2013

Recog

nis

ed

in p

rofit

or

loss

Recog

nis

ed in

oth

er

com

pre

hensiv

e

incom

e

Bala

nce

30 J

un

e 2

01

4

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

$’0

00

Pro

pert

y,

pla

nt

an

d e

qu

ipm

ent

92

8,0

77

34,1

19

11

1,5

78

1,0

73,7

74

80

1,6

92

51,2

08

75,1

77

928,0

77

A

ccru

ed inte

rest

reven

ue

27

8

12

1

- 399

15

3

125

-

27

8

Con

sum

ab

le s

tore

s

27

1

49

-

320

26

6

5

- 27

1

Em

plo

yee b

en

efits

(29

0,9

49)

(11,0

57)

(16,1

55)

(31

8,1

61)

(29

1,9

31)

359

62

3

(29

0,9

49)

Pro

vis

ions n

ot

curr

ently d

ed

uctible

(20,2

51)

37

0

- (1

9,8

81)

(18,2

39)

(2,0

12)

- (2

0,2

51)

Anticip

ate

d r

eceip

ts a

nd a

ccru

ed e

xp

en

ses

(7

0)

(5,0

74)

- (5

,14

4)

(15

6)

86

-

(70)

Cap

ital gra

nts

fro

m N

SW

Govern

ment

-

(3,0

00)

- (3

,00

0)

- -

- -

Oth

er

fin

ancia

l in

str

um

ents

(19,0

32)

- -

(19,0

32)

(21,9

86)

2,9

54

-

(19,0

32)

Gre

enh

ou

se t

rad

ing c

ert

ific

ate

s

1,1

17

(1

,92

6)

- (8

09)

2,6

47

(1

,53

0)

- 1,1

17

Net

tax

(assets

) /

liabili

ties

59

9,4

41

13,6

02

95,4

23

70

8,4

66

47

2,4

46

51,1

95

75,8

00

599,4

41



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 value determined 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)).

The fair value of computer software has been based on depreciated historical cost, which closely approximates depreciated current replacement cost for this class of assets. Accordingly, this fair value measurement 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, an easement 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 been carried 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

Co

rpo

rate govern

ance

Cu

stom

er at th

e heart

Wo

rld class

perfo

rman

ceH

igh

perfo

rman

ce cu

lture

Finan

cialsA

pp

end

ixes

- 58 -


___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

12. Trade and other payables

Current Trade payables 53,844 99,829 Non-trade payables and accrued expenses 480,770 448,785 ___________________________ Total trade and other payables 534,614 548,614 ___________________________ Significant terms and conditions

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.

Details in relation to liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these payables and all other 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 1,210 6,207 Other financial liabilities: Current portion of obligation under Blue Mountains Sewage Transfer scheme 2,164 2,034 Current portion of finance lease liabilities 3,766 3,409 ___________________________ Total current borrowings and other financial liabilities 7,140 11,650 ___________________________ Non-current Long-term borrowings 6,158,498 6,052,414 Other financial liabilities: Long-term obligation under Blue Mountains Sewage Transfer Scheme 53,846 56,010 Long-term obligation under finance lease liabilities 120,494 124,260 ___________________________ Total non-current borrowings and other financial liabilities 6,332,838 6,232,684 ___________________________



Significant terms and conditions

(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 (2014: $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 (2014: $10 million) during the day and $2 million (2014: $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 (2014: $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 (2014:

$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 (2014: $2.5 million) and the amount payable from the use of purchase credit cards amounted to $0.074 million (2014: $0.120 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 $55

million (2014: $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 27(a)). At the reporting date, $23.886 million of this total facility had been utilised (2014: $27.835 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 (2014: $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. At the reporting date, $Nil (2014: $Nil) of this facility had been utilised by the Corporation.

• 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 (2014: $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 $0.637 billion (2014: $0.824 billion) in excess of the debt balance at the previous reporting date.

Of the Corporation’s total new longer term borrowing facilities of $0.637 billion (2014: $0.824 billion) in place with the NSW Treasury

Corporation in the current reporting period, loan proceeds of $88.746 million (2014: $174.034 million) were drawn down by the Corporation by the reporting date and loans totalling $6.207 million (2014: $6.236 million) were repaid.

Long-term borrowings shown in this note consist of the following categories:

• 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. Details in relation to liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these long-term borrowings and all other financial assets and financial liabilities.

- 58 -


___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

12. Trade and other payables

Current Trade payables 53,844 99,829 Non-trade payables and accrued expenses 480,770 448,785 ___________________________ Total trade and other payables 534,614 548,614 ___________________________ Significant terms and conditions

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.

Details in relation to liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these payables and all other 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 1,210 6,207 Other financial liabilities: Current portion of obligation under Blue Mountains Sewage Transfer scheme 2,164 2,034 Current portion of finance lease liabilities 3,766 3,409 ___________________________ Total current borrowings and other financial liabilities 7,140 11,650 ___________________________ Non-current Long-term borrowings 6,158,498 6,052,414 Other financial liabilities: Long-term obligation under Blue Mountains Sewage Transfer Scheme 53,846 56,010 Long-term obligation under finance lease liabilities 120,494 124,260 ___________________________ Total non-current borrowings and other financial liabilities 6,332,838 6,232,684 ___________________________


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• 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, a predecessor entity of the Corporation, to fund sewerage backlog works. These loans involve the half-yearly payment of principal and interest and will mature within a maximum period of one year. Principal repayments are not refinanced. Commonwealth Government loans outstanding at the reporting date totalled $0.961 million (2014: $6.960 million) 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 mature between one year and four years. Other advances outstanding at the reporting date totalled $0.470 million (2014: $0.679 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 and resettable loans to the Corporation. CPI indexed bonds 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. Resettable loans are loans where the interest rate resets in line with the regulatory Pricing Determination period. These 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 26 years (2014: 27 years) for the Corporation. CPI indexed bonds have a maximum term to maturity of 20 years to 2035 (2014: 21 years to 2035). NSW Treasury Corporation loans outstanding at the reporting date, inclusive of any deferred discounts or premiums on the loans, totalled $6.158 billion (2014: $6.051 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 the agreement. 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. 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 the payment stream of lease payments is a ‘real’ pre-tax discount rate of 7.5% per annum, which is equivalent to a nominal rate of 10.19% per annum. This is the rate implicit in the renegotiated agreement. Lease payments are allocated between repayment of principal (per above) and interest, which is recognised within finance costs in profit or loss. Details in relation to liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these specific financial liabilities, and all other financial assets and financial liabilities.



___________________________________________________________________________________________________________ Note 2015 2014 $’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, 20 664,024 252,000 21.09 cents per share (2014: 8.00 cents per share) ___________________________

Under the NTER, the Corporation is not required to maintain a dividend franking account.

Dividends paid during the period: Dividend on ordinary shares paid to the Corporation’s shareholders at 8.00 cents per share (2014: 9.35 cents per share) 252,000 290,625 ___________________________


• 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, a predecessor entity of the Corporation, to fund sewerage backlog works. These loans involve the half-yearly payment of principal and interest and will mature within a maximum period of one year. Principal repayments are not refinanced. Commonwealth Government loans outstanding at the reporting date totalled $0.961 million (2014: $6.960 million) 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 mature between one year and four years. Other advances outstanding at the reporting date totalled $0.470 million (2014: $0.679 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 and resettable loans to the Corporation. CPI indexed bonds 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. Resettable loans are loans where the interest rate resets in line with the regulatory Pricing Determination period. These 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 26 years (2014: 27 years) for the Corporation. CPI indexed bonds have a maximum term to maturity of 20 years to 2035 (2014: 21 years to 2035). NSW Treasury Corporation loans outstanding at the reporting date, inclusive of any deferred discounts or premiums on the loans, totalled $6.158 billion (2014: $6.051 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 the agreement. 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. 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 the payment stream of lease payments is a ‘real’ pre-tax discount rate of 7.5% per annum, which is equivalent to a nominal rate of 10.19% per annum. This is the rate implicit in the renegotiated agreement. Lease payments are allocated between repayment of principal (per above) and interest, which is recognised within finance costs in profit or loss. Details in relation to liquidity risk and market risk generally are disclosed in note 26. Also, refer note 26(e) for a maturity analysis of these specific financial liabilities, and all other financial assets and financial liabilities.


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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

15. Provisions (a) Carrying amounts Current Short-term provisions: Employee benefits for annual leave # 32,490 30,923 Termination benefits 6,349 8,421 Employee benefits on-costs 1,912 1,871 Road restoration 7,218 7,763 ___________________________ 47,969 48,978 Current portion of long-term provisions: Employee benefits for long service leave # 107,101 102,783 Employee benefits on-costs 5,837 5,602 Post-employment benefits from superannuation 92 44 Workers’ compensation self-insurance 1,843 2,047 General insurance 838 1,866 Restoration of leased premises - 229 Restoration costs from decommissioning system asset network components 32,340 16,912 ___________________________ 148,051 129,483 ___________________________ Total current provisions 196,020 178,461 ___________________________

# 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 $20.861 million (2014: $19.371 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 $18.074 million (2014: $16.484 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 9,159 7,805 Employee benefits on-costs 499 426 Post-employment benefits from superannuation 897,098 811,954 Workers’ compensation self-insurance 20,245 22,021 General insurance 3,482 3,529 Restoration of leased premises 7,993 7,375 Restoration costs from decommissioning system asset network components 13,152 28,517 ___________________________ Total non-current provisions 951,628 881,627 ___________________________



___________________________________________________________________________________________________________ Note 2015 $’000 ___________________________________________________________________________________________________________

(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 the scope of Australian Accounting Standard AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, are set out below:

• Road restoration

Carrying amount at beginning of period 7,763 Provisions made during the period 9,816 Provisions used during the period (10,361)

_____________

Carrying amount at end of period 7,218 _____________

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 2,047 Non-current 22,021

_____________

24,068 Provisions made (reversed) during the period (295) Provisions used during the period (2,247) Unwinding of discount 562

_____________

22,088 _____________

Carrying amounts at end of period: Current 1,843 Non-current 20,245

_____________

22,088 _____________

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 $0.205 million (2014: $0.183 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 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

15. Provisions (a) Carrying amounts Current Short-term provisions: Employee benefits for annual leave # 32,490 30,923 Termination benefits 6,349 8,421 Employee benefits on-costs 1,912 1,871 Road restoration 7,218 7,763 ___________________________ 47,969 48,978 Current portion of long-term provisions: Employee benefits for long service leave # 107,101 102,783 Employee benefits on-costs 5,837 5,602 Post-employment benefits from superannuation 92 44 Workers’ compensation self-insurance 1,843 2,047 General insurance 838 1,866 Restoration of leased premises - 229 Restoration costs from decommissioning system asset network components 32,340 16,912 ___________________________ 148,051 129,483 ___________________________ Total current provisions 196,020 178,461 ___________________________

# 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 $20.861 million (2014: $19.371 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 $18.074 million (2014: $16.484 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 9,159 7,805 Employee benefits on-costs 499 426 Post-employment benefits from superannuation 897,098 811,954 Workers’ compensation self-insurance 20,245 22,021 General insurance 3,482 3,529 Restoration of leased premises 7,993 7,375 Restoration costs from decommissioning system asset network components 13,152 28,517 ___________________________ Total non-current provisions 951,628 881,627 ___________________________


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___________________________________________________________________________________________________________ Note 2015 $’000 ___________________________________________________________________________________________________________

• General insurance


_____________

5,395 Provisions made during the period 6,658 Provisions used during the period (7,857) Unwinding of discount 124

_____________

4,320 _____________

Carrying amounts at end of period: Current 838 Non-current 3,482

_____________

4,320 _____________

This provision is used to recognise the Corporation’s proportion of insured and uninsured claims under circumstances where the Corporation 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 amount recognised is not greater than the deductible stated on the relevant policy.

• Restoration of leased premises

Carrying amounts at beginning of period: Current 229 Non-current 7,375

_____________

7,604 Provisions (reversed) made during the period 134 Provisions used during the period - Unwinding of discount 255

_____________

7,993 _____________

Carrying amounts at end of period: Current - Non-current 7,993

_____________

7,993 _____________

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.



___________________________________________________________________________________________________________ Note 2015 $’000 ___________________________________________________________________________________________________________

• Restoration costs from decommissioning system asset network components


_____________

45,429 Provisions made (reversed) during the period 5,622 Provisions used during the period (6,184) Unwinding of discount 625

_____________

45,492 _____________

Carrying amounts at end of period: Current 32,340 Non-current 13,152

_____________

45,492 _____________

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 $10.647 million (2014: $9.876 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.


___________________________________________________________________________________________________________ Note 2015 $’000 ___________________________________________________________________________________________________________

• General insurance


_____________

5,395 Provisions made during the period 6,658 Provisions used during the period (7,857) Unwinding of discount 124

_____________

4,320 _____________

Carrying amounts at end of period: Current 838 Non-current 3,482

_____________

4,320 _____________

This provision is used to recognise the Corporation’s proportion of insured and uninsured claims under circumstances where the Corporation 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 amount recognised is not greater than the deductible stated on the relevant policy.

• Restoration of leased premises

Carrying amounts at beginning of period: Current 229 Non-current 7,375

_____________

7,604 Provisions (reversed) made during the period 134 Provisions used during the period - Unwinding of discount 255

_____________

7,993 _____________

Carrying amounts at end of period: Current - Non-current 7,993

_____________

7,993 _____________

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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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. The next actuarial investigation is due as at 30 June 2015 and the report is expected to be released by the end of 2015. 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; and o 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 no significant concentration of investment risk or liquidity risk. Significant events There were no Fund amendments, curtailments or settlements during the reporting period.



___________________________________________________________________________________________________________ SASS SANCS SSS Total 2015 2014 2015 2014 2015 2014 2015 2014 $’000 $'000 $’000 $'000 $'000 $’000 $'000 $’000 ___________________________________________________________________________________________________________ Reconciliation of the net defined benefit liability (asset)

Net defined benefit liability (asset) at beginning of period 104,271 87,206 33,386 28,463 674,297 666,027 811,954 781,696

Current service cost 6,273 6,779 2,229 2,334 7,857 8,347 16,359 17,460 Net interest on the net defined benefit liability (asset) 3,616 3,202 1,161 1,046 23,963 25,180 28,740 29,428 Past service cost - - - - - - - - (Gains)/losses arising from settlements - - - - - - - - Actual return on Fund assets less interest income (13,264) (2,080) (1,336) (1,730) (67,942) (66,316) (82,542) (70,126) Actuarial (gains) losses arising from changes in demographic assumptions 2,340 - 322 - (7,342) - (4,680) - Actuarial (gains) losses arising from changes in financial assumptions 10,428 11,718 1,863 3,747 133,578 57,968 145,869 73,433 Actuarial (gains) losses arising from liability experience (1,406) 3,330 (1,163) 1,380 (2,227) (10,092) (4,796) (5,382) Adjustment for effect of asset ceiling - - - - - - - - Employer contributions (5,949) (5,884) (1,763) (1,854) (6,094) (6,817) (13,806) (14,555) _____________________________________________________________________________ Net defined benefit liability (asset) at end of period 106,309 104,271 34,699 33,386 756,090 674,297 897,098 811,954 _____________________________________________________________________________ Reconciliation of the fair value of fund assets

Fair value of fund assets at beginning of period 166,875 191,893 19,779 26,636 859,885 805,538 1,046,539 1,024,067

Interest income 5,646 6,923 670 967 29,775 29,719 36,091 37,609 Actual return on Fund assets less interest income 13,264 2,080 1,336 1,730 67,942 66,316 82,542 70,126 Employer contributions 5,949 5,884 1,763 1,854 6,094 6,817 13,806 14,555 Contributions by participants 2,859 3,485 - - 4,001 4,653 6,860 8,138 Benefits paid (13,323) (45,627) (4,010) (11,561) (64,175) (55,904) (81,508) (113,092) Taxes, premiums and expenses paid 3,979 2,237 (34) 153 4,903 2,746 8,848 5,136 Transfers in - - - - - - - - Contributions to accumulation section - - - - - - - - Settlements - - - - - - - - Exchange rate changes - - - - - - - - _____________________________________________________________________________ Fair value of fund assets at end of period 185,249 166,875 19,504 19,779 908,425 859,885 1,113,178 1,046,539 _____________________________________________________________________________ Reconciliation of the defined benefit obligation

Present value of defined benefit obligations at beginning of period 271,146 279,099 53,165 55,099 1,534,182 1,471,565 1,858,493 1,805,763

Current service cost 6,273 6,779 2,229 2,334 7,857 8,347 16,359 17,460 Interest cost 9,262 10,125 1,831 2,013 53,738 54,899 64,831 67,037 Contributions by fund participants 2,859 3,485 - - 4,001 4,653 6,860 8,138 Actuarial (gains) losses arising from changes in demographic assumptions 2,340 - 322 - (7,342) - (4,680) - Actuarial (gains) losses arising from changes in financial assumptions 10,428 11,718 1,863 3,747 133,578 57,968 145,869 73,433 Actuarial (gains) losses arising from liability experience (1,406) 3,330 (1,163) 1,380 (2,227) (10,092) (4,796) (5,382) Benefits paid (13,323) (45,627) (4,010) (11,561) (64,175) (55,904) (81,508) (113,092) Taxes, premiums and expenses paid 3,979 2,237 (34) 153 4,903 2,746 8,848 5,136 Transfers in - - - - - - - - Contributions to accumulation section - - - - - - - - Past service cost - - - - - - - - Settlements - - - - - - - - Exchange rate changes - - - - - - - - _____________________________________________________________________________ Present value of defined benefit obligations at end of period 291,558 271,146 54,203 53,165 1,664,515 1,534,182 2,010,276 1,858,493 _____________________________________________________________________________


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. The next actuarial investigation is due as at 30 June 2015 and the report is expected to be released by the end of 2015. 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; and o 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 no significant 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 SSS Total 2015 2014 2015 2014 2015 2014 2015 2014 $’000 $'000 $’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 - - - - - - - - _____________________________________________________________________________

The adjustment for the effect of any asset ceiling is determined based on the maximum economic benefit available to the Corporation in the form of reductions in future employer contributions.

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 Significant active markets for observable Unobservable identical assets inputs inputs Asset category Total Level 1 Level 2 Level 3 $’000 $'000 $’000 $’000 ___________________________________________________________________________________________________________

As at 30 June 2015:

Short term securities 2,641,516 95,603 2,545,913 - Australian fixed interest 2,656,598 958 2,638,759 16,881 International fixed interest 1,003,849 (110) 1,003,959 - Australian equities 10,406,940 9,898,541 503,999 4,400 International equities 13,111,481 9,963,287 2,585,150 563,044 Property 3,452,609 948,421 718,406 1,785,782 Alternatives 7,170,187 622,102 3,020,225 3,527,860 ___________________________________________________________ Total # 40,443,180 21,528,802 13,016,411 5,897,967 ___________________________________________________________

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 2,664 International equities 10,953,329 8,172,677 2,780,531 121 Property 3,272,986 894,113 692,296 1,686,577 Alternatives 6,329,410 565,401 4,897,152 866,857 ___________________________________________________________ Total 37,992,659 22,710,283 12,726,157 2,556,219 ___________________________________________________________

The percentage invested in each asset class at the reporting date is as follows: ___________________________ 2015 2014 % % ___________________________

Short term securities 6.5 6.5 Australian fixed interest 6.6 6.2 International fixed interest 2.5 2.3 Australian equities 25.7 30.9 International equities 32.4 28.8 Property 8.6 8.6 Alternatives 17.7 16.7

___________________________

100.0 100.0 ___________________________



# Additional to the assets disclosed above, at the reporting date the Pooled Fund has provisions for receivables (payables) estimated to be around $1.74 billion. This gives total estimated assets of $42.2 billion. Level 1 – quoted prices in active markets for identical assets or liabilit ies. 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 where quoted prices are available in active markets for identical assets or liabilities. 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 as at the reporting date include $209.2 million (2014: $173.9 million) in NSW Government bonds. Of the direct properties owned by the Pooled Fund:

- GPNSW occupies part of a property owned by the Pooled Fund with a fair value of $159 million (2014: $153 million). - NSW Ambulance occupies part of a property 50% owned by the Pooled Fund with a fair value of $204 million (2014: $205 million).

Significant actuarial assumptions at the reporting date ___________________________________________________________________________________________________________ 2015 2014 ___________________________________________________________________________________________________________ Discount rate 3.03% pa 3.57% pa Salary increase rate (excluding promotional increases): 2013-14 to 2014-15 N/A 2.27% pa 2015-16 to 2017-18 2.50% pa 2.50% pa 2018-19 2.50% pa 3.00% pa 2019-20 to 2020-21 3.50% pa 3.00% pa 2021-22 to 2022-23 3.00% pa 3.00% pa 2023-24 to 2024-25 3.00% pa 3.50% pa Thereafter 3.50% pa 3.50% pa Rate of CPI increase 2015-16 2.50% pa 2.50% pa 2016-17 to 2017-18 2.75% pa 2.50% pa Thereafter 2.50% pa 2.50% pa Pensioner mortality The pensioner mortality

assumptions are as per the 2012 Actuarial investigation of the Pooled Fund. These assumptions are disclosed in the actuarial investigation report available from the Trustee’s website. The report shows the pension mortality rates for each age.___________________________


___________________________________________________________________________________________________________ SASS SANCS SSS Total 2015 2014 2015 2014 2015 2014 2015 2014 $’000 $'000 $’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 - - - - - - - - _____________________________________________________________________________

The adjustment for the effect of any asset ceiling is determined based on the maximum economic benefit available to the Corporation in the form of reductions in future employer contributions.

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 Significant active markets for observable Unobservable identical assets inputs inputs Asset category Total Level 1 Level 2 Level 3 $’000 $'000 $’000 $’000 ___________________________________________________________________________________________________________

As at 30 June 2015:

Short term securities 2,641,516 95,603 2,545,913 - Australian fixed interest 2,656,598 958 2,638,759 16,881 International fixed interest 1,003,849 (110) 1,003,959 - Australian equities 10,406,940 9,898,541 503,999 4,400 International equities 13,111,481 9,963,287 2,585,150 563,044 Property 3,452,609 948,421 718,406 1,785,782 Alternatives 7,170,187 622,102 3,020,225 3,527,860 ___________________________________________________________ Total # 40,443,180 21,528,802 13,016,411 5,897,967 ___________________________________________________________

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 2,664 International equities 10,953,329 8,172,677 2,780,531 121 Property 3,272,986 894,113 692,296 1,686,577 Alternatives 6,329,410 565,401 4,897,152 866,857 ___________________________________________________________ Total 37,992,659 22,710,283 12,726,157 2,556,219 ___________________________________________________________

The percentage invested in each asset class at the reporting date is as follows: ___________________________ 2015 2014 % % ___________________________

Short term securities 6.5 6.5 Australian fixed interest 6.6 6.2 International fixed interest 2.5 2.3 Australian equities 25.7 30.9 International equities 32.4 28.8 Property 8.6 8.6 Alternatives 17.7 16.7

___________________________

100.0 100.0 ___________________________


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Sensitivity Analysis

The Corporation’s total defined benefit obligation as at the current reporting date under several scenarios is presented below. The total defined benefit obligation disclosed is inclusive of the contribution tax provision which is calculated based on the asset level at the current reporting date.

Scenarios A to F relate to sensitivity of the total defined benefit obligation of the Pooled Fund to economic assumptions, and scenarios 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 3.03% 2.03% 4.03% Rate of CPI increase as above as above as above Salary inflation rate as above as above as above Defined benefit obligation ($’000) 2,010,276 2,317,676 1,761,972 ___________________________________________________________________________________________________________

Base case Scenario C Scenario D +0.5% rate of -0.5% rate of CPI increase CPI increase ___________________________________________________________________________________________________________

Discount rate as above as above as above above rates above rates Rate of CPI increase as above plus 0.5% pa less 0.5% pa Salary inflation rate as above as above as above Defined benefit obligation ($’000) 2,010,276 2,142,336 1,890,242 ___________________________________________________________________________________________________________ Base case Scenario E Scenario F +0.5% salary -0.5% salary increase rate increase rate ___________________________________________________________________________________________________________

Discount rate as above as above as above Rate of CPI increase as above as above as above above rates above rates Salary inflation rate as above plus 0.5% pa less 0.5% pa Defined benefit obligation ($’000) 2,010,276 2,023,714 1,997,393 ___________________________________________________________________________________________________________ Base case Scenario G Scenario H +5% pensioner -5% pensioner mortality rates mortality rates ___________________________________________________________________________________________________________

Defined benefit obligation ($’000) 2,010,276 1,987,769 2,034,164 ___________________________________________________________________________________________________________ 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. No explicit asset-liability matching strategy is used by the Trustee.



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. The next triennial review is due as at 30 June 2015 and the report is expected to be released by the end of 2015. 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 2015 and 30 June 2014 financial position of the Fund calculated in accordance with Australian Accounting Standard AAS 25 ‘Financial Reporting by Superannuation Plans’.

___________________________________________________________________________________________________________ SASS SANCS SSS Total 2015 2014 2015 2014 2015 2014 2015 2014 $’000 $'000 $’000 $'000 $'000 $’000 $'000 $’000 ___________________________________________________________________________________________________________ Accrued benefits * 217,447 208,171 37,883 38,249 862,286 846,574 1,117,616 1,092,994 Net market value of fund assets (185,249) (166,875) (19,504) (19,779) (908,425) (859,885) (1,113,178) (1,046,539) _____________________________________________________________________________ Net (surplus) deficit 32,198 41,296 18,379 18,470 (46,139) (13,311) 4,438 46,455 _____________________________________________________________________________

* 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 1.9 1.9 - - 1.6 1.6 Percentage 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 SSS Total 2015 2014 2015 2014 2015 2014 2015 2014 $’000 $'000 $’000 $'000 $'000 $’000 $'000 $’000 ___________________________________________________________________________________________________________ Expected employer contributions to be paid in the next reporting period 5,433 6,621 1,872 2,205 6,403 7,444 13,708 16,270 _____________________________________________________________________________ Maturity profile of defined benefit obligation

The weighted average duration of the defined benefit obligation is 13.5 years (2014: 13.7 years).


Sensitivity Analysis

The Corporation’s total defined benefit obligation as at the current reporting date under several scenarios is presented below. The total defined benefit obligation disclosed is inclusive of the contribution tax provision which is calculated based on the asset level at the current reporting date.

Scenarios A to F relate to sensitivity of the total defined benefit obligation of the Pooled Fund to economic assumptions, and scenarios 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 3.03% 2.03% 4.03% Rate of CPI increase as above as above as above Salary inflation rate as above as above as above Defined benefit obligation ($’000) 2,010,276 2,317,676 1,761,972 ___________________________________________________________________________________________________________

Base case Scenario C Scenario D +0.5% rate of -0.5% rate of CPI increase CPI increase ___________________________________________________________________________________________________________

Discount rate as above as above as above above rates above rates Rate of CPI increase as above plus 0.5% pa less 0.5% pa Salary inflation rate as above as above as above Defined benefit obligation ($’000) 2,010,276 2,142,336 1,890,242 ___________________________________________________________________________________________________________ Base case Scenario E Scenario F +0.5% salary -0.5% salary increase rate increase rate ___________________________________________________________________________________________________________

Discount rate as above as above as above Rate of CPI increase as above as above as above above rates above rates Salary inflation rate as above plus 0.5% pa less 0.5% pa Defined benefit obligation ($’000) 2,010,276 2,023,714 1,997,393 ___________________________________________________________________________________________________________ Base case Scenario G Scenario H +5% pensioner -5% pensioner mortality rates mortality rates ___________________________________________________________________________________________________________

Defined benefit obligation ($’000) 2,010,276 1,987,769 2,034,164 ___________________________________________________________________________________________________________ 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. No explicit asset-liability matching strategy is used by the Trustee.


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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

16. Other liabilities

NSW Government capital grant for Housing Acceleration Fund 10,000 - ___________________________

During the current reporting period, the Corporation received a capital grant from the NSW Government towards capital works on stormwater assets in the Green Square development under the Housing Acceleration Fund scheme (Stage 2). This grant has been recognised initially as deferred income in accordance with Australian Accounting Standard AASB 120 ‘Accounting for Government Grants and Disclosure of Government Assistance’ and NSW Treasury policy. The grant will be subsequently transferred progressively to profit or loss on a systematic and rational basis over the useful lives of the related assets when they are ultimately constructed and begin to depreciate. (Refer also note 1(d) for Government grants).

17. Share capital Issued and fully paid up share capital (a) Carrying amount Share capital 3,148,354 3,148,354 ___________________________ (b) Movements during the reporting period Balance at beginning of period: 3,148,354,000 (2014: 3,108,354,000) ordinary shares 3,148,354 3,108,354 Shares issued and fully paid up during the period: Nil (2014: 40,000,000) ordinary shares - 40,000 ___________________________ Balance at end of period: 3,148,354,000 (2014: 3,148,354,000) ordinary shares 3,148,354 3,148,354 ___________________________ Significant terms and conditions

The Corporation’s two shareholders are: • the Treasurer and Minister for Industrial Relations

• the Minister for Finance, Services and Property. Each shareholder holds 1,574,177,000 (2014: 1,574,177,000) 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 previous reporting period, the Corporation received an equity cash contribution of $40.000 million 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 was to provide the Corporation with funding for works being undertaken under the NSW Government’s Housing Acceleration Fund scheme. There were no equity contributions received or issues of shares in the current reporting period.



___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

18. Reserves (a) Carrying amounts Asset revaluation reserve 1,561,746 1,307,795 Hedging reserve - - ___________________________ Total reserves 1,561,746 1,307,795 ___________________________

(b) Movements during the reporting period

• Asset revaluation reserve Balance at beginning of period 1,307,795 1,149,760 Net gain (loss) before tax on revaluation of system and property assets 371,928 250,591 Transfer from (to) retained earnings 19 (6,399) (17,379) Tax effect of asset revaluation 3(c) (111,578) (75,177) ___________________________ Balance at end of period 1,561,746 1,307,795 ___________________________

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 are transferred to retained earnings.

• Hedging reserve Balance at beginning of period - - Net gain (loss) before tax on adjustments to fair value of cash flow hedges - (422) Transferred to the initial carrying amount of hedged items - 422 Tax effect of fair value adjustments - - ___________________________ 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 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

16. Other liabilities

NSW Government capital grant for Housing Acceleration Fund 10,000 - ___________________________

During the current reporting period, the Corporation received a capital grant from the NSW Government towards capital works on stormwater assets in the Green Square development under the Housing Acceleration Fund scheme (Stage 2). This grant has been recognised initially as deferred income in accordance with Australian Accounting Standard AASB 120 ‘Accounting for Government Grants and Disclosure of Government Assistance’ and NSW Treasury policy. The grant will be subsequently transferred progressively to profit or loss on a systematic and rational basis over the useful lives of the related assets when they are ultimately constructed and begin to depreciate. (Refer also note 1(d) for Government grants).

17. Share capital Issued and fully paid up share capital (a) Carrying amount Share capital 3,148,354 3,148,354 ___________________________ (b) Movements during the reporting period Balance at beginning of period: 3,148,354,000 (2014: 3,108,354,000) ordinary shares 3,148,354 3,108,354 Shares issued and fully paid up during the period: Nil (2014: 40,000,000) ordinary shares - 40,000 ___________________________ Balance at end of period: 3,148,354,000 (2014: 3,148,354,000) ordinary shares 3,148,354 3,148,354 ___________________________ Significant terms and conditions

The Corporation’s two shareholders are: • the Treasurer and Minister for Industrial Relations

• the Minister for Finance, Services and Property. Each shareholder holds 1,574,177,000 (2014: 1,574,177,000) 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 previous reporting period, the Corporation received an equity cash contribution of $40.000 million 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 was to provide the Corporation with funding for works being undertaken under the NSW Government’s Housing Acceleration Fund scheme. There were no equity contributions received or issues of shares in the current reporting period.


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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

19. Retained earnings Balance at beginning of period 1,938,250 1,706,926 Profit for the period 513,498 464,493 Remeasurement of defined benefit superannuation net liability 2(c), 15(c) (53,851) 2,075 Income tax (expense) revenue on remeasurement of defined benefit superannuation net liability 3(c) 16,155 (623) Transfer from (to) asset revaluation reserve 18(b) 6,399 17,379 Transactions with owners as owners: Dividends recognised as a liability 14 (664,024) (252,000) ___________________________ Balance at end of period 1,756,427 1,938,250 ___________________________

20. Total equity reconciliation Balance at beginning of period 6,394,399 5,965,040 Total comprehensive income for the period 736,152 641,359 Transactions with owners as owners: Share capital issued 17 - 40,000 Dividends recognised as a liability 14 (664,024) (252,000) ___________________________ Balance at end of period 6,466,527 6,394,399 ___________________________



___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

21. Notes to the statement of cash flows

(a) Reconciliation of profit to net cash from operating activities Profit for the period 513,498 464,493 Adjustments for: Profit or loss items classified as either investing or financing: Net loss (gain) on disposal of property, plant and equipment (including assets held for sale) 951 15,834 Net loss (gain) on disposal of intangible assets 2(c) 179 1 Current year contributions for capital works (155,756) (134,334) Depreciation and amortisation 2(c) 239,924 230,253 Interest expense capitalised to work in progress 2(c) (26,054) (49,797) Interest expense on developer agreements (235) 923 Amortisation of deferred discounts (premiums) on loans 2(c) (676) 2,668 Indexation of CPI bonds 2(c) 19,224 22,311 Impairment loss recognised (reversed) for property, plant and equipment 2(c) 3,824 11,036 Impairment loss recognised (reversed) for intangible assets 2(c), 10(a) (500) 244 Net movement in statement of financial position items applicable to operating activities: Inventories (108) (11) Greenhouse trading certificates 1,026 5,101 Trade and other receivables 20,521 2,418 Trade and other payables (51,875) (6,831) Provisions 35,920 6,612 Income tax assets and liabilities 68,874 (1,417) Derivatives - (422) ___________________________ Net cash from operating activities 668,737 569,082 ___________________________ (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 $136.018 million (2014: $110.270 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 $3.638 million (2014: $3.560 million) is currently placed in an interest-bearing bank account administered by the Corporation in accordance with the agreement.

Although the account is in the name of the Corporation, the balance of cash in this bank account has not been recognised by the

Corporation as an asset because officers of Parramatta City Council are also signatories to the account and restrict its use so that 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 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

19. Retained earnings Balance at beginning of period 1,938,250 1,706,926 Profit for the period 513,498 464,493 Remeasurement of defined benefit superannuation net liability 2(c), 15(c) (53,851) 2,075 Income tax (expense) revenue on remeasurement of defined benefit superannuation net liability 3(c) 16,155 (623) Transfer from (to) asset revaluation reserve 18(b) 6,399 17,379 Transactions with owners as owners: Dividends recognised as a liability 14 (664,024) (252,000) ___________________________ Balance at end of period 1,756,427 1,938,250 ___________________________

20. Total equity reconciliation Balance at beginning of period 6,394,399 5,965,040 Total comprehensive income for the period 736,152 641,359 Transactions with owners as owners: Share capital issued 17 - 40,000 Dividends recognised as a liability 14 (664,024) (252,000) ___________________________ Balance at end of period 6,466,527 6,394,399 ___________________________


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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

22. 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 $901.050 million for the Corporation (2014: $608.450 million). The amount of GST included in this amount that is recoverable from the ATO is $81.914 million (2014: $55.314 million).

(b) Operating lease commitments Payable as lessee Future operating lease rentals not provided for in the financial statements and payable: not later than one year 43,857 43,274 later than one year and not later than five years 160,229 163,001 later than five years 350,303 362,455 ___________________________ 554,389 568,730 ___________________________ Representing: Cancellable operating leases 18,956 20,159 Non-cancellable operating leases 535,433 548,571 ___________________________ 554,389 568,730 ___________________________ Non-cancellable operating lease rentals are payable as follows: not later than one year 36,867 35,477 later than one year and not later than five years 148,298 150,641 later than five years 350,268 362,453 ___________________________ 535,433 548,571 ___________________________

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 made to 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 $16.324 million (2014: $19.674 million) for the Corporation that is recoverable from the ATO.



___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

Receivable as lessor Future operating lease rentals not recognised in the financial statements and receivable: not later than one year 12,783 11,809 later than one year and not longer than five years 7,841 9,845 later than five years 12,422 13,664 ___________________________ 33,046 35,318 ___________________________

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. Lease rentals are generally reviewed annually.

Amounts disclosed for these commitments include total GST of $3.004 million (2014: $3.211 million) that is payable to the ATO.

(c) Finance lease commitments Payable as lessee Future minimum lease payments payable: not later than one year 15,738 15,695 later than one year and not later than five years 62,823 62,823 later than five years 160,046 175,784 ___________________________ 238,607 254,302 Less future finance costs 114,347 126,633 ___________________________ Finance lease liabilities – present value 124,260 127,669 ___________________________ Current 3,766 3,409 Non-current 120,494 124,260 ___________________________ Finance lease liabilities in statement of financial position 13 124,260 127,669 ___________________________

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 $23.861 million (2014: $25.430 million).


___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

22. 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 $901.050 million for the Corporation (2014: $608.450 million). The amount of GST included in this amount that is recoverable from the ATO is $81.914 million (2014: $55.314 million).

(b) Operating lease commitments Payable as lessee Future operating lease rentals not provided for in the financial statements and payable: not later than one year 43,857 43,274 later than one year and not later than five years 160,229 163,001 later than five years 350,303 362,455 ___________________________ 554,389 568,730 ___________________________ Representing: Cancellable operating leases 18,956 20,159 Non-cancellable operating leases 535,433 548,571 ___________________________ 554,389 568,730 ___________________________ Non-cancellable operating lease rentals are payable as follows: not later than one year 36,867 35,477 later than one year and not later than five years 148,298 150,641 later than five years 350,268 362,453 ___________________________ 535,433 548,571 ___________________________

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 made to 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 $16.324 million (2014: $19.674 million) for the Corporation that is recoverable from the ATO.


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___________________________________________________________________________________________________________ Note 2015 2014 $’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: not later than one year 64,669 67,375 later than one year and not later than five years 263,584 281,944 later than five years 96,174 150,933 ___________________________ 424,427 500,252 ___________________________

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 $285.827 million (2014: $294.739 million). The amount of GST included in the above commitments that is recoverable from the ATO is $38.584 million (2014: $45.477 million).

23. Consultants The total amount paid or payable to consultants engaged by the Corporation during the reporting period was $0.951 million (2014:

$0.703 million).

24. Auditors' remuneration

Remuneration for audit of the financial statements by Audit Office of NSW 446 457 ___________________________ 446 457 ___________________________



___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

25. Related party disclosures

The Corporation has related party relationships with key management personnel (refer (a) and (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 3,769 3,470 Post-employment benefits 545 499 Other long-term benefits 30 91 Termination benefits - 251 ___________________________ 4,344 4,311 ___________________________ This comprises compensation relating to:

Directors Executive 716 688 Non-executive 607 583

___________________________

1,323 1,271 Senior executives 3,021 3,040

___________________________ 4,344 4,311 ___________________________

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. There were no related party transactions during either the current or previous reporting periods with other entities related to the Corporation’s key management personnel.


___________________________________________________________________________________________________________ Note 2015 2014 $’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: not later than one year 64,669 67,375 later than one year and not later than five years 263,584 281,944 later than five years 96,174 150,933 ___________________________ 424,427 500,252 ___________________________

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 $285.827 million (2014: $294.739 million). The amount of GST included in the above commitments that is recoverable from the ATO is $38.584 million (2014: $45.477 million).

23. Consultants The total amount paid or payable to consultants engaged by the Corporation during the reporting period was $0.951 million (2014:

$0.703 million).

24. Auditors' remuneration

Remuneration for audit of the financial statements by Audit Office of NSW 446 457 ___________________________ 446 457 ___________________________


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26. 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 Services Division, 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 26(a) and their maturity analysis would be shown in note 26(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.



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 and there were no 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 Board that 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 to floating interest rate debt products, portfolio duration and weighted average life management targets and approved trading bands. In addition, the Corporation is able to enter into derivative financial instruments, as required, to assist in managing interest rate risk. These mainly comprise interest rate swaps, but can also include forward interest rate contracts, bond options 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 in light 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 higher debt 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:


26. 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 Services Division, 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 26(a) and their maturity analysis would be shown in note 26(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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___________________________________________________________________________________________________________ Weighted average interest Carrying amount rate 2015 2014 2015 2014 Note % % $’000 $’000 ___________________________________________________________________________________________________________

∗ Financial assets At amortised cost: Cash 4 1.80 2.30 5,752 3,922 ___________________________ 5,752 3,922 ___________________________

∗ Financial liabilities At amortised cost: Borrowings: NSW Treasury Corporation loans 13 5.04 5.86 6,158,277 6,050,982 Commonwealth Government loans 13 10.20 9.76 961 6,960 Other advances 13 9.77 8.80 470 679 Obligation under Blue Mountains Sewage Transfer Scheme 13 6.25 6.25 56,010 58,044 Finance lease liabilities 13 10.19 10.19 124,260 127,669 ___________________________ 6,339,978 6,244,334 ___________________________ 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 2.04% (2014: 2.67%), a 100 basis points increase would increase the rate to 3.04% (2014: 3.67%) and a 100 basis points decrease would reduce the rate to 1.04% (2014: 1.67%). 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 2.0% over the past five years. ___________________________________________________________________________________________________________ Finance costs* Post tax profit* Equity* Higher (lower) Higher (lower) Higher (lower) Judgement of reasonably 2015 2014 2015 2014 2015 2014 possible events $’000 $’000 $’000 $'000 $’000 $'000 ___________________________________________________________________________________________________________ Interest rates 100 basis points higher 4,064 2,166 (2,845) (1,516) (2,845) (1,516) Interest rates 100 basis points lower (4,064) (2,166) 2,845 1,516 2,845 1,516

* The impact shown is before capitalisation to qualifying assets and any consequential adjustments to fair value. After capitalisation and consequential adjustments to fair value, there would be no impact on finance costs or post tax profit. However, equity would be lower by $2.845 million (2014: $1.516 million lower) for a 100 basis point increase, and vice versa.



(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 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 program, 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 to operate 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 (2014: $100 million) by the Corporation and similarly the bank overdraft limit was $10 million unused (2014: $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 structure 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 vary significantly from the cost of debt included by IPART in the regulatory Pricing Determination, and so that this does not impact negatively on financial ratios and the Corporation’s corporate credit rating.


___________________________________________________________________________________________________________ Weighted average interest Carrying amount rate 2015 2014 2015 2014 Note % % $’000 $’000 ___________________________________________________________________________________________________________

∗ Financial assets At amortised cost: Cash 4 1.80 2.30 5,752 3,922 ___________________________ 5,752 3,922 ___________________________

∗ Financial liabilities At amortised cost: Borrowings: NSW Treasury Corporation loans 13 5.04 5.86 6,158,277 6,050,982 Commonwealth Government loans 13 10.20 9.76 961 6,960 Other advances 13 9.77 8.80 470 679 Obligation under Blue Mountains Sewage Transfer Scheme 13 6.25 6.25 56,010 58,044 Finance lease liabilities 13 10.19 10.19 124,260 127,669 ___________________________ 6,339,978 6,244,334 ___________________________ 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 2.04% (2014: 2.67%), a 100 basis points increase would increase the rate to 3.04% (2014: 3.67%) and a 100 basis points decrease would reduce the rate to 1.04% (2014: 1.67%). 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 2.0% over the past five years. ___________________________________________________________________________________________________________ Finance costs* Post tax profit* Equity* Higher (lower) Higher (lower) Higher (lower) Judgement of reasonably 2015 2014 2015 2014 2015 2014 possible events $’000 $’000 $’000 $'000 $’000 $'000 ___________________________________________________________________________________________________________ Interest rates 100 basis points higher 4,064 2,166 (2,845) (1,516) (2,845) (1,516) Interest rates 100 basis points lower (4,064) (2,166) 2,845 1,516 2,845 1,516

* The impact shown is before capitalisation to qualifying assets and any consequential adjustments to fair value. After capitalisation and consequential adjustments to fair value, there would be no impact on finance costs or post tax profit. However, equity would be lower by $2.845 million (2014: $1.516 million lower) for a 100 basis point increase, and vice versa.


Overview

Co

rpo

rate govern

ance

Cu

stom

er at th

e heart

Wo

rld class

perfo

rman

ceH

igh

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rman

ce cu

lture

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cialsA

pp

end

ixes

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4 -

Syd

ney W

ate

r C

orp

ora

tion N

ote

s –

30

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ne 2

015 P

age 8

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Rep

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015 P

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Overview

Co

rpo

rate govern

ance

Cu

stom

er at th

e heart

Wo

rld class

perfo

rman

ceH

igh

perfo

rman

ce cu

lture

Finan

cialsA

pp

end

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6 -

Syd

ney W

ate

r C

orp

ora

tion –

30

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ne 2

015 P

ag

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(f)

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2014

A

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om

monw

ealth G

overn

ment

loan

s

6,5

36

1,0

35

-

- -

- 7,5

71

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ther

advances

26

3

28

3

19

7

27

13

-

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3

N

SW

Tre

asury

Corp

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tion loan

s

95

8,1

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72

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16

Fin

ance lease lia

bili

ties

15,6

95

15,7

38

15,6

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15,6

95

15,6

95

17

5,7

84

254,3

02

__

__

____

__

__

__

__

__

__

__

____

___

__

____

__

__

_____

__

__

__

__

__

___

__

__

__

__

__

____

__

__

__

__

__

___

__

__

__

1,5

22,1

27

93

6,4

50

1,3

29,5

46

49

3,2

00

81

3,5

99

4,3

42,5

68

9,4

37,4

90

__

__

____

__

__

__

__

__

__

__

____

___

__

____

__

__

_____

__

__

__

__

__

___

__

__

__

__

__

____

__

__

__

__

__

___

__

__

__

∗

Th

ese b

ala

nces d

iffe

r fr

om

the s

tate

ment

of

fin

ancia

l p

ositio

n a

s t

hey e

xclu

de incom

e in a

dvance a

nd s

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taxes p

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Th

ese ite

ms a

re o

ut

of

scop

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hese d

isclo

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(g) 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 Fair values are determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

∗ Trade and other receivables The carrying amount is considered to be a reasonable approximation of the fair value.

∗ 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 The carrying amount is considered to be a reasonable approximation of the fair value.

∗ Borrowings

• Bank overdraft balances If any, the carrying amount is considered to be a reasonable approximation of the fair value.

• NSW Treasury Corporation loans Fair values are determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

• 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 the equivalent interest rate swap rates supplied by independent market sources.

• Finance lease liabilities

The fair value is determined on the basis of discounted cash flows using the independently determined yield at the inception of the lease.

The following table details the carrying amounts and fair values at the reporting date for all financial instruments:


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___________________________________________________________________________________________________________ Carrying amount Fair value Note 2015 2014 2015 2014 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

∗ Financial assets

Cash 4 5,752 3,922 5,752 3,922 Trade and other receivables * 253,855 246,234 253,855 246,234 ____________________________________________________ 259,607 250,156 259,607 250,156 ____________________________________________________

∗ Financial liabilities

Trade and other payables * 508,235 528,974 508,235 528,974 Borrowings: ** NSW Treasury Corporation loans 13 6,158,277 6,050,982 6,903,174 6,731,635

Commonwealth Government loans 13 961 6,960 1,020 7,434 Other advances 13 470 679 509 752 Obligation under Blue Mountains Sewage Transfer Scheme 13 56,010 58,044 184,637 181,101 Finance lease liabilities 13 124,260 127,669 124,260 127,669 ____________________________________________________ 6,848,213 6,773,308 7,721,835 7,577,565 ____________________________________________________

∗ These balances differ from the statement of financial position as they exclude prepayments and statutory taxes receivable in the case of trade and other receivables, and income in advance and statutory taxes payable in the case of trade and other payables. These items are out of scope in relation to these disclosures.

** The face value of NSW Treasury Corporation loans at the reporting date is $6,168.542 million (2014: $6,066.442 million). The carrying amount shown above for both Commonwealth Government loans and Other advances is equal to their face value.

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).


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___________________________________________________________________________________________________________ Note 2015 2014 $’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 6,159,708 6,058,621 Other interest-bearing liabilities 13 180,270 185,713 ___________________________ Total interest-bearing liabilities 6,339,978 6,244,334 Total equity 20 6,466,527 6,394,399 ___________________________ Total capital employed 12,806,505 12,638,733 ___________________________

% %

Gearing ratio 48.78 48.65 (Interest-bearing debt / Interest-bearing debt + Total equity) Debt to equity ratio 98.04 97.65 (Total interest-bearing liabilities / Total equity)

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___________________________________________________________________________________________________________ Carrying amount Fair value Note 2015 2014 2015 2014 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

∗ Financial assets

Cash 4 5,752 3,922 5,752 3,922 Trade and other receivables * 253,855 246,234 253,855 246,234 ____________________________________________________ 259,607 250,156 259,607 250,156 ____________________________________________________

∗ Financial liabilities

Trade and other payables * 508,235 528,974 508,235 528,974 Borrowings: ** NSW Treasury Corporation loans 13 6,158,277 6,050,982 6,903,174 6,731,635

Commonwealth Government loans 13 961 6,960 1,020 7,434 Other advances 13 470 679 509 752 Obligation under Blue Mountains Sewage Transfer Scheme 13 56,010 58,044 184,637 181,101 Finance lease liabilities 13 124,260 127,669 124,260 127,669 ____________________________________________________ 6,848,213 6,773,308 7,721,835 7,577,565 ____________________________________________________

∗ These balances differ from the statement of financial position as they exclude prepayments and statutory taxes receivable in the case of trade and other receivables, and income in advance and statutory taxes payable in the case of trade and other payables. These items are out of scope in relation to these disclosures.

** The face value of NSW Treasury Corporation loans at the reporting date is $6,168.542 million (2014: $6,066.442 million). The carrying amount shown above for both Commonwealth Government loans and Other advances is equal to their face value.

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).


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___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

27. 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 there is a risk of financial exposure (other than matters covered by workers’ compensation self-insurance and general insurance provisions – refer note 15) and which have been referred to lawyers amounted to: - -

___________________________

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 reporting date 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/infrastructure and 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 environmental incidents amounted to: 6,800 6,800

___________________________

Operational activities

Risk exposures occur as a result of operational activities. These exposures 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 as

most exposures require clarification of the extent of loss. Matters identified in which there is a risk of financial exposure from operational activities amounted to: 1,039 1,500

___________________________

Guarantees provided


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 government employer status, the Corporation is required to provide a bank guarantee to the WorkCover Authority that secures the Corporation’s remaining self-insurance workers’ compensation liability. The value of the bank guarantee at the reporting date was: 23,886 27,835 ___________________________

There are other indemnities that are in existence at the reporting date. However, they are considered remote or not able to be reliably measured at this time.


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___________________________________________________________________________________________________________ Note 2015 2014 $’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 further information about the relevant claims would be prejudicial to the interests of the Corporation and cannot be reliably measured 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

- 90 -


___________________________________________________________________________________________________________ Note 2015 2014 $’000 $'000 ___________________________________________________________________________________________________________

27. 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 there is a risk of financial exposure (other than matters covered by workers’ compensation self-insurance and general insurance provisions – refer note 15) and which have been referred to lawyers amounted to: - -

___________________________

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 reporting date 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/infrastructure and 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 environmental incidents amounted to: 6,800 6,800

___________________________

Operational activities

Risk exposures occur as a result of operational activities. These exposures 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 as

most exposures require clarification of the extent of loss. Matters identified in which there is a risk of financial exposure from operational activities amounted to: 1,039 1,500

___________________________

Guarantees provided


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 government employer status, the Corporation is required to provide a bank guarantee to the WorkCover Authority that secures the Corporation’s remaining self-insurance workers’ compensation liability. The value of the bank guarantee at the reporting date was: 23,886 27,835 ___________________________

There are other indemnities that are in existence at the reporting date. However, they are considered remote or not able to be reliably measured at this time.


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7. Appendixes

Appendixes

Appendix 1: Exemptions from reporting provisions

List of annual reporting exemptions

Statutory requirements Statutory references# Comments

Format of financial statements S 41B(c) PF&AA 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 ARSBR Statutory State Owned Corporations are not subject to the payment of accounts provisions in section 13 of the Public Finance and Audit Regulation 2015

Time for paying

• reasons for late payment

• interest paid due to late payments

Schedule 1 ARSBR As above

# Reference:PF&AA = Public Finance and Audit Act 1983.ARSBR = Annual Reports (Statutory Bodies) Regulation 2015.

204 Appendixes Sydney Water Annual Report 2014–15

Appendix 2: NSW Government Information (Public Access) (GIPA)

We received 63 valid applications under the Government Information (Public Access) Act 2009 (GIPA) during the 2014–15 financial year. Seven applications from 2013-14 were decided this financial year. These were according to the processing period allowed under the Act.

Out of 63 valid applications received, the processing period allowed under this Act for three applications extends into the 2015–16 financial year.

In 2014–15, 67 applications were decided with:

• 46 applications being granted in full

• seven applications partly granted because there were overriding public interest concerns against disclosing some information (as listed in table, section 14 of this Act)

• three applications were refused in full due to the following:

– two applications contained business information about third parties

– one application contained information about judicial processes and natural justice

• three applications were refused because applicants failed to provide advance deposit for the processing charge

• one application was for information already publicly available

• six applications were for information not held by Sydney Water

• one application was withdrawn by the applicant.

Sydney Water proactively makes information publicly available on its website, in line with the Act. We review this process each year, 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 it

• the type of information proactively released by other government organisations.

This information is available on the How we provide information page of our website.

205Sydney Water Annual Report 2014–15 Appendixes

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http://www.sydneywater.com.au/SW/about-us/our-organisation/Howweprovideinformation/index.htm

http://www.sydneywater.com.au/SW/about-us/our-organisation/Howweprovideinformation/index.htm

Table A: Number of applications by type of applicant and outcome*

Applicant Acc

ess

gra

nte

d in

fu

ll

Acc

ess

gra

nte

d in

par

t

Acc

ess

refu

sed

in f

ull

Info

rmat

ion

no

t h

eld

Info

rmat

ion

alr

ead

y av

aila

ble

Ref

use

to

dea

l wit

h a

pp

licat

ion

Ref

use

to

co

nfi

rm/d

eny

w

het

her

info

rmat

ion

is h

eld

Ap

plic

atio

n w

ith

dra

wn

Media 1 0 0 0 0 0 0 0

Members of Parliament 0 0 0 0 0 0 0 0

Private sector business 9 2 1 0 0 2 0 1

Not for profit organisations or community groups

0 0 0 0 0 0 0 0

Members of the public (application by legal representative)

25 4 0 4 1 1 0 0

Members of the public (other) 11 1 2 2 0 0 0 0

* More than one decision can be made in respect of a particular access application. If so, a recording must be made in relation to each such decision. This also applies to Table B.

Table B: Number of applications by type of applicant and outcome*

Applicant Acc

ess

gra

nte

d in

fu

ll

Acc

ess

gra

nte

d in

par

t

Acc

ess

refu

sed

in f

ull

Info

rmat

ion

no

t h

eld

Info

rmat

ion

alr

ead

y av

aila

ble

Ref

use

to

dea

l wit

h a

pp

licat

ion

Ref

use

to

co

nfi

rm/d

eny

w

het

her

info

rmat

ion

is h

eld

Ap

plic

atio

n w

ith

dra

wn

Personal information applications* 2 0 1 1 0 0 0 0

Access applications (other than personal information applications)

43 7 2 4 1 3 0 1

Access applications that are partly personal information applications and partly other

1 0 0 1 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 C: Invalid applications

Reason for invalidity Number of applications

Application does not comply with formal requirements (section 41 of the Act)

0

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 0

Invalid applications that subsequently became valid applications 2

Table D: Conclusive presumption of overriding public interest against disclosure: matters listed in Schedule 1 to Act

Number of times consideration used*

Overriding secrecy laws 0

Cabinet information 0

Executive Council information 0

Contempt 0

Legal professional privilege 0

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 in relation to a particular access application and, if so, each such consideration is to be recorded (but only once per application). This also applies in relation to Table E.

Table E: Other public interest considerations against disclosure: matters listed in table to section 14 of Act

Number of occasions when application

not successful

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 3

Environment, culture, economy and general matters 0

Secrecy provisions 0

Exempt documents under interstate Freedom of Information legislation

0


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Table F: Timeliness

Number of applications

Decided within the statutory timeframe (20 days plus any extensions)

65

Decided after 35 days (by agreement with applicant) 2

Not decided within time (deemed refusal) 0

Total 67

Table G: Number of applications reviewed under Part 5 of the Act (by type of review and outcome)

Decision varied

Decision upheld Total

Internal review 1 2 3

Review by Information Commissioner* 1 0 1

Internal review following recommendation under section 93 of the Act

0 0 0

Review by NCAT 0 0 0

Total 2 2 4

* 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 H: Applications for review under Part 5 of the Act (by type of applicant)

Number of applications for review

Applications by access applicants 3

Applications by persons to whom information the subject of access application relates (see section 54 of the Act)

1


Appendix 3: Public interest disclosures 2014–15

Public interest disclosures

Number of applications for review

Number of public officials who made public interest disclosures to Sydney Water

2

Number of public interest disclosures received by Sydney Water 2

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

1

0

0

0

Number of public interest disclosures that have been finalised in this reporting period

1

We have an established internal reporting policy to the Managing Director and Executive. We raise staff awareness through:

• the e-learning program delivered annually

• a quarterly integrity update on current issues

• awareness articles in our weekly staff newsletter

• face to face training for teams.

Appendix 4: External production costs

Due to limitations of our in-house facilities and resources, and the length of thedocument, some aspects of the production of the Annual Report were outsourced in 2014–15. The total expenditure on the external production of the Annual Report 2014-15 was $18,876 (including GST)*.

* Figure correct at time of publication.


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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.

ASXThis is the Australian Stock Exchange.

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.

BASIXThis is the Building Sustainability Index and it’s a state-wide planning policy. BASIX ensures new residential dwellings are designed to use less drinking water and produce fewer greenhouse gas emissions by setting energy and water reduction targets. It also applies to extensions and alterations of existing residential properties.

BillAssist®

Sydney 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.

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.

210 Glossary Sydney Water Annual Report 2014–15

CSIROThis is the Commonwealth Scientific and Industrial Research Organisation.

Culturally and linguistically diverse (CALD)Customers with English as a second language.

DDesalination 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 footprintMeasures the amount of productive land required for Sydney Water uses.

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)The Environment Protection Authority issues EPLs under the Protection of the Environment Operations Act 1997. Licence conditions prevent and monitor pollution and promote cleaner production through 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.

I

IICATSThis is our Integrated, Instrumentation Control Automation and Telemetry System. It forecasts customer demand across the day and seasonally. We use this system remotely to move drinking water and wastewater in a controlled way.

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 through advice and assistance, and educates 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.

211Sydney Water Annual Report 2014–15 Glossary

K

KilolitreOne 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

MassA measure of weight.

MegalitreOne million litres of water or one thousand tonnes of water.

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.

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 Licence A licence issued under the Sydney Water Act 1994 that sets many of our performance standards.

P

PathogensDisease-causing organisms, such as bacteria, viruses and single-celled parasitic organisms.

PlumbAssist®

A 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 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 on human health or the environment from exposure to hazards from a particular product or activity.

S

Serious 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.

Sewage overflowSee Wastewater overflow.

Sludge Solid matter removed during wastewater or water treatment, which can be processed into a material that can be beneficially used (biosolids).

SPSThis is a sewage pumping station (also known as a wastewater pumping station). They lift wastewater up hills on the journey to a wastewater treatment plant.

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.

SWGCThis is the South West Growth Centre. The NSW Government have identified it as a greenfield land release site. It’s located within Liverpool, Camden and Campbelltown Local Government Areas.

213Sydney Water Annual Report 2014–15 Glossary

T

Tadgell’s Bluebell (Wahlenbergia multicaulis Benth) An endangered species of herb.

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 Industry Competition Act 2006 (WICA)The Act aims to foster competition in the urban water sector.

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 provide services 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.

WICAThis is the Water Industry Competition Act. See the Act for the definition.


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 1

Annual Reports (Statutory Bodies) Regulation 2015

Regulation 5 Identification of audited financial statements Pages 107-202

Regulation 7 Detailed budget Pages 98-99

Regulation 8 (1) Significant matters Not applicable

Regulation 8 (2)(a) External production costs Page 209

Regulation 8 (2)(b) Internet address Back cover

Regulation 8 3 Privacy and Personal Information Protection Act 1998

Pages 53-54

Regulation 10 Comparison of investment performance Page 100

Regulation 11 Comparison of liability management Page 101

Regulation 12 Number and remuneration of senior executive Page 91

Regulation 14 (2) Content index Pages 219-220

Regulation 14 (2) Table of contents Page 2

Regulation 16 (2)(a) Annual Report on internet Back cover

Regulation 17 (4) Exemptions from reporting Page 204

Schedule 1 Charter Page 4

Schedule 1 Aims and objectives Pages 4-5, 8-12

Schedule 1 Access Back cover

Schedule 1 Management and structure – organisation chart Pages 31-37

Schedule 1 Summary review of operations Pages 8-12, 19-26

Schedule 1 Funds granted to non-government community organisations

Page 52

Schedule 1 Social programs Pages 48-49

Schedule 1 Legal change Pages 65-66

Schedule 1 Economic or other factors Pages 13-15

Schedule 1 Management and activities Pages 8-15, 19-26, 41-44, 57-61, 65-72, 86-87


Schedule 1 Research and development Pages 73-75

Schedule 1 Human resources Page 94

Schedule 1 Consultants Page 95

Schedule 1 Workforce diversity Pages 92-93

Schedule 1 Land disposal Pages 99

Schedule 1 Promotion – overseas travel Page 96

Schedule 1 Consumer response Pages 40-41

Schedule 1 Payment of accounts Page 100

Schedule 1 Time for payment of accounts Appendix 1

Schedule 1 Risk management and insurance activities Pages 64-65

Schedule 1 Controlled entities Not applicable

Schedule 1 Multicultural policies and services program Pages 50-51

Schedule 1 Agreements with Multicultural NSW Not applicable

Schedule 1 Work health and safety Pages 14, 17, 86, 88-91

Government Information (Public Access) Act 2009

s125 Reports to Parliament Pages 205-208

Heritage Act 1977

s169 Heritage delegations Pages 76-77

Independent Pricing and Regulatory Tribunal Act 1992

s18 Pricing implementation Pages 102-103

s18 Pricing table Pages 104-106

Public Interest Disclosures Act 1994

s31 Reports to Parliament Page 209

State Owned Corporations Act 1989

s24A (3)(a) Performance against Statement of Corporate Intent Pages 22-23, 98-99

s24A (3)(b) Departures from performance targets Pages 98-100


Sydney Water Act 1994

s22(6) Special objective table Pages 78-81

Schedule 5(2) Budgetary information Pages 98-99

Schedule 5(3)(a) Specific particulars – research and development

Pages 73-75

Schedule 5(3)(b) Specific particulars – human resources Page 94

Schedule 5(3)(c) Specific particulars - consultants Page 95

Schedule 5(3)(d) Specific particulars – equal employment opportunity

Pages 92-93

Schedule 5(3)(e)(i) Specific particulars – promotion Page 54

Schedule 5(3)(e)(ii) Specific particulars – overseas travel Page 96

Schedule 5(3)(f) Specific particulars – consumer response Pages 40-41

Schedule 5(3)(g) Specific particulars – guarantee of service Page 46

Schedule 5(3)(h) Specific particulars – time for payment of accounts

Appendix 1

Schedule 5(4) Comparison of investment performance Page 100

Schedule 5(5) Comparison of liability management performance

Page 101

Threatened Species Conservation Act 1995

s70 Threatened species – recovery plans Pages 82-84


Index

Index of figures, maps and tables

Figures

Figure 1: Our corporate strategy 2015–20 5Figure 2: Our total income $2,728 million 19Figure 3: Our total operating expenditure $1,324 million 19Figure 4: Our total asset investment $627 million 20Figure 5: Our profit after tax 20Figure 6: Our capital expenditure 21Figure 7: Our debt and gearing 21Figure 8: Sydney Water’s governance structure 30Figure 10: Daily water use in greater Sydney was 295 litres per person a day in 2014–15 44Figure 11: Percentage of water tests that met the Australian Drinking Water Guidelines

2011 for E. coli in 2014–15 45Figure 12: Five year social program expenditure 49Figure 13: Sydney Water’s carbon footprint trends 2006–07 to 2013–14 62Figure 14: Sydney Water’s total gross greenhouse gas emissions per 1,000 properties

2010–11 to 2014–15 62Figure 15: Lost time injury frequency rate for Sydney Water staff 89Figure 16: Lost time injury frequency rate and lost time injuries for

Sydney Water staff 89Figure 17: Lost time injury frequency rate and lost time injuries for contractors 90Figure 18: Significant injury frequency rate for Sydney Water staff 90Figure 19: Significant injury frequency rate for contractors 91

Maps

Map 1: Area of operations 9Map 2: Water delivery systems 10Map 3: Wastewater systems 11Map 4: Stormwater catchments 12Map 5: Sydney Water’s ecological footprint 2010–11 to 2013–14 63

Tables

Table 1: Principal statistics 2014–15 8Table 2: Summary profit and loss 22Table 3: Summary balance sheet 22Table 4: Summary cash flow 23Table 5: Customer at the heart – balanced sustainability scorecard 24


Table 6: World class performance – balanced sustainability scorecard 25Table 7: High performing culture – balanced sustainability scorecard 26Table 8: Attendance at Board and committee meetings 2014–15 36Table 9: Customer at the heart sustainability performance indicators 41Table 10: Social programs 48Table 11: CALD initiatives and achievements 50Table 12: Funds granted to organisations in 2014–15 52Table 13: Privacy activity in 2014–15 53Table 14: World class performance sustainability performance indicators 57Table 15: Major capital works projects completed 2014–15 67Table 16: Major capital works in progress as at 30 June 2015 68Table 17: Major alliance and collaborative research investment 73Table 18: Completed projects (>$100,000) 2014–15 74Table 19: Ongoing projects (>$100,000) 2014–15 75Table 20: Decisions made under the Heritage Council of NSW delegation 2014–15 76Table 21: Environmental performance against special objectives 2014–15 79Table 22: High performace culture sustainability performance indicators 86Table 23: Lost time injury frequency rate for Sydney Water staff and contractors 89Table 24: Senior executive remuneration 91Table 25: Trends in the representation of EEO groups 92Table 26: Trends in the distribution of EEO groups 92Table 27: Workforce numbers 94Table 28: Payments to consultants for engagements over $50,000.00 from

1 July 2014 to 30 June 2015 95Table 29: Overseas travel 2014–15 96Table 30: Profit and loss statement 2011–12 to 2014–15 98Table 31: Funds flow from operations interest cover 2010–11 to 2014–15 100Table 32: Cash and investments 2014–15 100Table 33: Debt management 2014–15 101Table 34: Return on assets and equity 2010–11 to 2014–15 102Table 35: 2015–16 budget 102Table 36: Recycled water schemes, developer charges to be levied 103Table 37: IPART pricing table 104


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: [email protected]

Annual Report online

The Annual Report 2014–15 and previous reports are on the Annual Report page of our website.

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http://sydneywater.com.au

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