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YARRA VALLEYANNUAL REPORTWATER

ANNUAL REPORT 2013/14

1

YARRA VALLEY WATERAnnual Report 2013/14

About us 2

Nature and scope of main activities 3

A message from the Chairman and the Managing Director 4

2013/14 Highlights 5

Year in Review 12

Financial Summary 12

Five year Financial Summary 13

Corporate Information 15

Risk Management Attestation 23

Annual Financial Report 25

Directors’ Report 26

Statement of Comprehensive Income 28

Balance Sheet 29

Statement of Changes in Equity 30

Cash Flow Statement 31

Notes to the Financial Statements 32

Statutory Certification 70

Auditor-General’s Audit Report 72

Additional Information 75

Performance Report 76

Auditor-General’s Audit Report 80

Water Consumption and Drought Response 82

Environmental and Social Sustainability Reporting 83

Annual Reporting of Major Non-Residential Water Users 87

Bulk Entitlements Report 89

Disclosure Index 92

CONTENTS

2

ABOUT US

Yarra Valley Water is the largest retail water corporation in Melbourne, providing essential water and sanitation services to more than 1.76 million people.

We manage more than $3.5 billion of infrastructure on the community’s behalf, across a service area of approximately 4,000 square kilometres in the northern and eastern suburbs – from as far north as Wallan to as far east as Warburton in the Yarra Valley.

On 1 July 2012, Yarra Valley Water became a statutory corporation under the Water Act 1989. Our activities are overseen by an independent Board of Directors, appointed by the State Government of Victoria. We are accountable to the Minister for Water, the Hon Peter Walsh MLA.

The Statement of Obligations issued by the Minister for Water, in accordance with Section 4I(2) of the Water Industry Act 1994, imposes obligations on Yarra Valley Water regarding performance of its functions and the exercise of its powers. Yarra Valley Water is required to monitor compliance with the obligations set out in the Statement, report on non-compliance and take remedial action in relation to non-compliance.

The Essential Services Commission is the economic regulator of the Victorian water sector. The Commission’s role includes the regulation of prices, service standards and market conduct across the water industry in Victoria. Yarra Valley Water is subject to regulation by the Commission.

We buy bulk water from Melbourne Water and are also responsible for taking away sewage for treatment. Most of the sewage is transferred to Melbourne Water’s Eastern or Western Treatment Plants. The balance is treated at our nine regional plants, several of which produce recycled water for use in new homes and for the irrigation of sports fields or open spaces.

– 1.76 million population served

– 52,696 business customers

– 535 full time equivalent (FTE) employees

– 138 water pressure reducing stations

– 9,345 kilometres of sewer mains

– 95 sewage pumping stations

– 9 sewage treatment plants

– 684,741 residential properties

– 10,700 new customers in 2013/14

– $3.9 billion of total assets

– 9,908 kilometres of water supply mains

– 79 water pumping stations

– 53 water supply tanks

3


NATURE AND SCOPE OF MAIN ACTIVITIES

The main business undertakings are:

Area Scope of activities

Water quality Provide water that meets all drinking water standards set by the Department of Health.

Manage compliance associated with recycled water.

Reticulated water reliability (bursts and leaks) Manage the number of planned and unplanned water supply interruptions.

Distribution water pipe reliability Minimise the possibility of a major burst in high risk areas.

Sewer blockages Manage the number of planned and unplanned sewer service interruptions.

Responsiveness to water pipe bursts and leaks Meet customers’ expectations in relation to response times for water supply interruptions.

Responsiveness to sewer spills and blockages Meet customers’ expectations in relation to response times for sewer spills and blockages.

Sewerage system capacity Ensure that the sewerage system meets the environmental standards defined by the Environment Protection Authority Victoria (EPAV).

Reducing the environmental and public health impacts of poorly performing septic tanks

Provide modern sewerage systems to replace poorly performing septic tanks.

Hardship scheme Offer effective assistance to customers facing financial difficulty.

Water efficiency Maintain water efficiency, through a variety of residential and commercial programs.

Customer Charter requirements Meet all Customer Charter requirements as approved by the Essential Services Commission.

Protecting the environment Meet all environmental standards imposed by the EPAV and State Environment Protection Policies.

Statement of Obligations Meet our obligations in the Statement of Obligations issued by the Minister for Water.

Trade waste Meet our trade waste obligations, as legislated in the Water Act 1989.

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A MESSAGE FROM THE CHAIRMAN AND THE MANAGING DIRECTOR

Yarra Valley Water’s 2013/14 Annual Report has been prepared against the backdrop of a rapidly changing environment, characterised by changes in the planning approach for future water and sanitation services and the way these are delivered, urban water policy reforms designed to improve community outcomes, and the need to reduce cost of living pressures for households.

During the financial year, the State Government of Victoria published Melbourne’s Water Future, which outlines a new approach to planning on a whole of water cycle basis, together with important reforms that will accelerate innovation and productivity.

Yarra Valley Water has been an advocate for many of the reforms outlined in Melbourne’s Water Future and we are pleased to see these come to fruition. In particular, we welcome the Government’s commitment to reforming bulk water arrangements as we believe it is in our customers’ best interests for us to have the accountability for managing the balance between our customers’ demand for water and the available supply.

From a planning perspective, the Water Future North Strategy is currently being developed as a key deliverable within Melbourne’s Water Future and this will be a very important first step in establishing a robust plan for whole of water cycle management in the rapidly growing northern corridor of Melbourne.

The Fairer Water Bills initiative, announced by the Minister for Water in January 2014, is an important undertaking by the Government to identify productivity savings across the water sector to take pressure off customer bills. Yarra Valley Water has identified significant savings in operating costs as part of our ongoing commitment to productivity. We believe that, by improving our own productivity, we can continue to support the standards of living enjoyed by current and future generations.

We delivered a better than expected financial result in 2013/14. In relation to revenue, this was mainly due to higher water use as a result of the warm and dry weather experienced during the year and additional revenue from higher volumes of development related products and services. From an expenditure perspective, we achieved savings in operating expenditure by continuing to implement a range of significant productivity improvements across the business, and finance charges were lower than we had budgeted due to lower borrowing levels (as a result of increased revenue), interest rate reductions in the market, proactive management of our debt portfolio, and the benefits achieved from our improved credit rating.

Following a comprehensive review of our strategic direction in 2012/13, we commenced implementation of our 2020 Strategy in 2013/14. The strategy is anchored in a statement that articulates why we exist:

‘Our purpose is to provide exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations.’

Based on what we have learned in the first year of implementing the strategy and changes in the external environment, we have made some minor adjustments to ensure alignment with Melbourne’s Water Future and the Fairer Water Bills initiative. At its highest level, the strategy helps to keep the organisation focused on what is important. It is a strategy that is resilient to changes in our business context and the external environment, as it reflects what matters most.

Broader coverage of our 2020 Strategy initiatives and our business activities over the past year can be found in the ‘2013/14 Highlights’ section of this Annual Report.

Both Caryle Demarte and Michael Tilley retired as Directors on 30 September 2013, after eight years and two years, respectively, of service on our Board. The Board thanks both

Caryle and Michael for their invaluable contribution. Two new Directors, Greg Camm and Therese Ryan, were appointed from 1 October 2013 for a four-year term.

Perhaps the biggest internal change, however, came with the retirement of our Managing Director, Tony Kelly, on 30 June 2014. Tony has made an outstanding contribution as our Managing Director since his appointment in January 2003 and to the Victorian water industry generally, in a career spanning more than forty years. The Board would like to sincerely congratulate him on his career, thank him for his contribution to Yarra Valley Water and to wish him success in his future endeavours.

The non-executive Directors would like to welcome Pat McCafferty to the Board, as Managing Director, from 1 July 2014. Pat has had a long career in the water industry and has previously held a number of executive roles within Yarra Valley Water. Pat was appointed following a rigorous search process and the Board is confident that he will continue to build on our past success to take Yarra Valley Water forward in pursuit of becoming an extraordinary water utility.

We extend a sincere thank you to the Board of Directors and to our staff for their continued support, efforts and achievements over the past year.

In accordance with the Financial Management Act 1994, we are pleased to present Yarra Valley Water’s Annual Report for the year ending 30 June 2014. It is compliant with all statutory reporting requirements.

Peter S Wilson AM Chairman

Patrick J McCafferty Managing Director

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2013/14 HIGHLIGHTS

2020 STRATEGYThe 2020 Strategy is anchored in a statement of purpose that articulates why we exist. We believe this is a powerful starting point, expressing what is of fundamental importance:

‘Our purpose is to provide exemplary water and sanitation services that contribute to the health and wellbeing of current and future generations.’

The strategy also comprises the following six strategic commitments that, when achieved collectively, we believe will represent an extraordinary result for our customers, our owner, our people and our stakeholders:

– We provide exemplary service;

– The way we work enables extraordinary performance;

– We make every cent count;

– We are safe;

– We work in harmony with the environment;

– We stand for an exceptional water industry.

Following are the 2013/14 highlights for each of the six strategic commitments.

‘PROVIDE EXEMPLARY SERVICE’

Our philosophy

Yarra Valley Water is a customer service organisation. We provide the most essential of essential services that are not only crucial to the health and wellbeing of the community, but also a fundamental part of everyday life. This responsibility drives us to put the customer at the heart of everything we do.

Customer insights

We have continued to undertake extensive research with customers and stakeholders to help us align our plans with our customers’ expectations. A constant theme in this is customers expecting us to continue to provide high quality drinking water and reliable water and sanitation services at a fair price.

Events of recent years, such as the cost of the desalination plant, have understandably caused concern in the community; however, overall customer satisfaction levels remain relatively strong. Cost of living, the economy, unemployment and job security have become the top concerns for Melburnians, and Australians more broadly.

We have engaged our customers in a range of discussions about what they value in relation to the services we provide. There is some variability in customer views in relation to what they value, ranging from the more obvious aspects such as drinking water, flushing the toilet and watering the garden, to higher order perspectives of what our services provide such as quality of life and wellbeing.

Year in Review highlights

– Overall, value ratings for our services see that almost 70% of customers rate the value they receive at 8 or more on a scale of 1 to 10.

– When it comes to customers who have had a service experience with us, approximately one-third rate the service as ‘outstanding’ and a further 50% rate the service as ‘good’. Customer satisfaction continues to rate higher for those who experience our service.

Customer satisfaction

Residential – Customer satisfaction 86%

Non-Residential – Customer satisfaction 74%

Residential – Satisfaction with service interactions

88%

Non-Residential – Satisfaction with service interactions

76%

– Affordability of water is a growing challenge and a recent survey identified that 39% of Melburnians have had trouble at one time or another paying their water bill. We are striving to increase all of our customers’ knowledge of the help available, particularly for those experiencing difficulty paying for essential water and sewerage services. Overall, 82% of our hardship customers rated their relationship and Yarra Valley Water’s service as better or much better than other utilities.

– We are also committed to improving the experience of customers who do not speak English as a first language and have increased our in-house Language Other Than English (LOTE) program over the past two years. We now have more than 10 bilingual Customer Contact Centre consultants taking over 4,000 calls including from Mandarin, Arabic, Greek and Cantonese speaking customers, helping them with their billing queries in their preferred language. Overall, 92% of the customers experiencing our LOTE program service rate our service as better than other utilities.

– We upheld our commitment to provide safe, high-quality drinking water. This year we achieved 92% customer satisfaction with the overall quality of drinking water provided.

– Two years after the development of our Customer Value Proposition, we continue to see strong positive customer feedback.

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2013/14 HIGHLIGHTS

Recent testing of key elements in the value proposition indicates that the needs of most customers, regarding quality and reliability, are being met:

Value proposition componentCustomers who agree

Yarra Valley Water provides a reliable water service

93%

Yarra Valley Water provides great drinking water

90%

Yarra Valley Water provides a reliable sewerage system

91%

– Volumes of pipe failures have reduced in recent years due to a combination of our investment in water mains pressure reduction, pipe renewals and favourable climatic conditions. Customer satisfaction with our response to infrastructure faults has been consistently high, with 95% of customers saying the service they received either met or exceeded their expectations. This service experience achieved a net promoter score of 58.9, exceeding best practice levels in the category. A key feature of our emergency fault repair service is our ‘customer call back’ process, where customers are contacted post-repair works to gauge if their issue has been resolved to their satisfaction.

– In regard to our telephone service, we removed our recorded greeting message and push-button options so that customers are put through directly to a consultant, resulting in a 70% improvement in the average time to connect. 92% of customers say our Customer Contact Centre service met or exceeded their expectations.

– In relation to the works we carry out on water and sewerage infrastructure, over the last 12 months, we were able to engage with customers affected by our works through both online and traditional channels. 86% of customers affected by our construction or field maintenance works agreed our communications met their needs and 84% confirmed that any inconvenience was acceptable or completely acceptable.

– In 2013/14 our ‘Choose Tap’ program continued to promote the benefits of tap water as a positive alternative to bottled water and other beverages. Over 85% of our customers think ‘Choose Tap’ is a good idea. ‘Choose Tap’ community activities to date include:

– over 750,000 litres of water consumed at refill stations, saving many single use plastic bottles, plus 1,000,000 people using portable units at community events;

– over 7,000 tap location ‘app’ downloads and a 4.5-star rating on iTunes, making drinking tap water more accessible and convenient;

– social media: 3,068 Facebook ‘likes’, 16,000 visitors per week, and the ‘Dupé’ clip has gone officially viral with over 280,000 on-line views on youtube; and

– over 35,000 students undertaking an education component and 6,423 fundraising bottles sold by 53 participating schools, providing a healthy alternative for fundraising.

– We maintained levels of reliability in water and sanitation services by replacing 60 kilometres of water pipes and 32 kilometres of sewerage pipes that had reached the end of their service life.

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‘ENABLE EXTRAORDINARY PERFORMANCE’

Our philosophy

Workplace culture is a critical determinant of business performance. Gallup (2013)1 has found that companies that invest in engaging staff and developing a positive culture have 22% higher profits, 21% higher productivity, 48% fewer safety incidents and 37% lower absenteeism.

Over the last decade, we have developed a strong foundation – a vibrant workplace culture, high levels of engagement and robust workplace practices. Over that period, we improved staff satisfaction, reduced staff turnover, improved stakeholder and customer satisfaction, improved our overall financial efficiency and delivered innovative new projects for more sustainable water and sewerage solutions.

To track our progress and develop targeted improvement strategies we use a number of internationally recognised benchmarking tools:

– the Human Synergistics Organisational Culture Inventory (OCI) incorporates a series of company-wide surveys to determine the organisation’s prevalent behavioural styles. These styles are grouped in three colour coded clusters: constructive (blue), aggressive defensive (red), and passive defensive (green). ‘Blue’ constructive styles emphasise achievement of realistic stretch targets, an open, honest and collaborative approach, and high levels of personal satisfaction;

– the Human Synergistics Management Impact (MI) and Leadership Impact (LI) are 360 degree feedback tools that measure our managers’ overall effectiveness and how their approach to their managerial responsibilities impact on the behaviours and performance of those around them. The tools assist us in aligning management and leadership practices with the vision, strategy and values of the organisation; and

– the Aon Hewitt Best Employer Opinion Survey measures staff engagement levels and perceived effectiveness of workplace practices. The survey provides key information to input into our human resource strategies and improvement plans.


– We were delighted to have been recognised for our culture building strategies, being named in Business Review Weekly’s (BRW’s) Most Innovative Companies 2013 list. This acknowledged our ongoing commitment to creating a highly engaged, high-performance workforce delivering exceptional results for our customers.

– In February 2014 we conducted our first Aon Hewitt Best Employer Opinion Survey achieving exceptional results in the four core areas of: employee engagement, effective leadership, aligned employer brand and high performance culture. We were very pleased to be advised that our results place us in the top 20 organisations in Australia and New Zealand.

The chart below indicates how we compared to the top quartile of all organisations involved in the process.

(1) Harter J. K., Schmidt F. L., Agrawal M. S., Plowman B. K., (2013). The Relationship Between Engagement at Work and Organizational Outcomes. 2012 Q12 Meta Analysis. GALLUP.

66%Employee Engagement

78%

62%Effective Leadership

64%

65%Aligned Employer Brand

81%

Yarra Valley Water overall Top quartile Australia and New Zealand

55%High Performance Culture

66%

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2013/14 HIGHLIGHTS

‘MAKE EVERY CENT COUNT’

Our philosophy

We provide a service where location rather than choice determines who our customers are, and we understand we have an important role to play in contributing to Victoria’s productivity. With these factors in mind, we have an important responsibility to ensure our services are delivered as efficiently as possible so as to keep pressure off household budgets and ensure that the input cost of water and sanitation does not reduce the competitiveness of the businesses we supply.

Typically, our investment decisions are long term. In this context, we have an obligation to make financial and investment decisions that achieve best community value and inter-generational equity. As with most business enterprises, there is a requirement that our organisation be financially well managed and generate a return to our owner, the State Government of Victoria. Our returns to Government are in the form of an annual dividend payment resulting from profits made on our operations, Environmental Contribution and tax equivalent payments. The Government uses these funds to deliver benefits to Victorians.

We strive to operate at optimal efficiency and contain our expenditure by improving our business processes and eliminating waste, while also managing and mitigating business risks. We continue to focus on delivering improved outcomes for similar cost or similar outcomes at a lower cost.


– To maintain our enviable standards of living, as a nation we need to improve our productivity and we recognise it is important that Yarra Valley Water plays its part. Our 2020 Strategy has seen a change of emphasis from ‘efficiency’ to ‘productivity’. To embed a commitment to productivity across the organisation, business areas have prepared annual productivity plans, documenting goals focused on prioritising efforts, improving productivity and reducing waste every year.

In addition, a benchmark productivity survey was conducted with staff to assess their opinion in relation to existing levels of productivity and their commitment towards entrenching productivity within our organisational psyche. The results of the survey were pleasing with three-quarters of staff saying the organisation is committed to improving its productivity and understanding their role in improving productivity.

– We engaged independent consultants with widespread utilities experience to undertake an opportunity assessment of aspects of our business to kick-start our productivity journey. This six-week process resulted in 252 project ideas, including a broad assessment of the dollar benefit, associated enabling costs, timing and risks. We have been working to develop a more detailed assessment of these opportunities, with the initial focus on implementing new revenue opportunities – delivering $700,000 in additional revenue in 2013/14. This work provided a strong foundation for our response to the Fairer Water Bills initiative announced by the State Government of Victoria in January 2014.

– Commenced the Craigieburn Household Water Use Project. The pilot project involves providing households with real-time data on

their water use. This data will assist customers in understanding their water use patterns and identifying leaks within their properties to help them minimise their bills and, at the same time, provide us with real intelligence on overall water use so that we can optimise our infrastructure investment to actual demand.

– In an Australian first and following a successful trial, we have adopted ‘ice-pigging’ water mains cleaning technology, which is providing far more effective water mains cleaning to reduce water quality complaints, at a much lower cost than the previous technology.

– Independent review of our credit rating, with the improved credit rating saving an estimated $37 million over the next 5 years in interest costs.

– Awarded a new contract for Supervisory Control and Data Acquisition (SCADA) support service, which now costs only 17% of the cost of these services in 2006.

– Implemented changes to our billing and associated systems to enable solicitors and conveyancers to request and receive the information needed to settle property sales online. In the six weeks following ‘go-live’, 75% of rates settlement statements and 100% of special meter read requests were being ordered online, with the potential to eliminate 60,000 phone calls per year.

– As part of an ongoing program we replace obsolete electrical switchboards and control systems at sewer pump stations. We identified efficiency savings that have decreased the average cost of construction and installation of sewage pumping station switchboards by 26% since 2010/11.

– Achieved a 20% saving in design costs through the development of a new delivery model with engineering consultants, Jacobs.

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‘WE ARE SAFE’

Our philosophy

In our 2020 Strategy, we defined the outcomes that would need to exist for us to truly have met our commitment, ‘We Are Safe’. The outcomes are:

– Safety exists as each person’s responsibility;

– We make our workplaces safe; and

– We carry out our work without harming ourselves or others.

Measuring our safety performance

We measure our safety culture using the Global Safety Index (GSI) Safety Culture benchmarking tool, which measures our culture against a number of Australian companies.

We measure our safety performance through the Significant Injury Frequency Rate (SIFR). SIFR is the number of significant injuries (Lost Time Injuries + Medical Treatment Injuries) per million hours worked. We also use a variety of tools to measure our safety culture.


– The Global Safety Index (GSI) Safety Culture benchmarking tool showed an improvement across all nine of the dimensions surveyed. Three of the dimensions are now assessed by GSI as being ‘High Performing’.

– The strong focus on our safety culture in 2013/14 delivered an outstanding result in the safety element of the Aon Hewitt Best Employer Opinion Survey. In spite of this, our safety performance, as measured by SIFR, has plateaued and a number of incidents in the middle part of the year caused us to miss our ambitious SIFR target.

– Developed the ‘We Are Safe Behaviours’ document. This defines our beliefs and identifies the behaviours that both contribute to and detract from our safety culture.

– Restructured our consultative committee framework. This has brought a stronger focus to our consultative structure and increased participation.

– Implemented new online hazard and incident reporting forms, which are linked more strongly to the corporate risk framework and also include workflows to address issues raised and to escalate important issues early to senior management.

– Launched Safety Action Squads, an initiative where local teams identify their most important safety issues and showcase their ideas and responses to the whole organisation.

– Achieved a score of 93% in the Aon Hewitt Best Employer Opinion Survey in relation to safety engagement.

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‘WORK IN HARMONY WITH THE ENVIRONMENT’

Our philosophy

We believe that the long-term wellbeing of our community and the strength of the economy is dependent on the environment. We know nature has the capacity to process some level of waste within natural cycles and that zero impact on the environment is neither achievable nor necessary. Therefore, we aim to provide our services within the carrying capacity of nature. In doing so, we aim to work across the whole of the water cycle, with others, to provide fully integrated and resilient water systems.

The work we have carried out over the past ten years shows that our major environmental impacts are caused by our greenhouse gas emissions, nutrients that we discharge into creeks and rivers and from extracting water from rivers for consumption by customers. For each of these areas, we have initiatives to improve our performance.

At the same time, we recognise that, while we manage our own operations for positive environmental outcomes, we can magnify our effectiveness by actively encouraging our customers, stakeholders, partner organisations and others to do the same in providing their services to us.


– In 2013/14, we met our targets for controlling our greenhouse gas and nutrient emissions to the environment and the quantity of water we take from the environment. We continue to have no net greenhouse gas emissions associated with our operations and, despite the easing of water restrictions, per capita water consumption remains well below pre-drought levels.

– Our objective to run our operations in a way that protects and enhances waterways has been achieved by keeping the quantity of nitrogen that we discharge to less than 87 tonnes per year (representing our contribution to sustainable levels in Port Phillip Bay).

– We took a leading role by delivering innovative projects that demonstrate new ways to provide sustainable water and sewerage infrastructure. Several projects that demonstrate new possibilities for the water industry are complete or well advanced and others are in the planning stage. Our leading-edge Merrifield Stormwater Harvesting and Reuse Plant at Kalkallo (partially funded by the Living Victoria Fund) is substantially finished. Additional integrated water management projects to support the delivery of Melbourne’s Water Future are also in progress.

– Our focus also remains on providing a modern sewerage service to properties by eliminating poorly performing septic tanks that cause pollution in local waterways. In 2013/14, we provided these services to 650 properties.

– Through our non-revenue water investigation programs we have saved over four gigalitres of water by finding hidden leaks in our water supply system.

2013/14 HIGHLIGHTS

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‘STAND FOR AN EXCEPTIONAL WATER INDUSTRY’

Our philosophy

Our Strategic Commitment to Stand for an Exceptional Water Industry recognises that we play a role within a broader context in providing water and sanitation services that contribute to Melbourne’s liveability. A water sector that is constantly improving its services, environmental performance and productivity is vital in maintaining the community’s standard of living.

We recognise that our contribution can be magnified by working closely with others in the water sector, both in terms of providing leadership and in learning from others. We believe that the comparative competition model in Melbourne provides a spur for performance improvement by enabling comparison across service and cost outcomes, helping to identify leading practices and performance improvement opportunities. When best practices or innovations are identified, these can then be more broadly adopted to lift the overall performance of the sector.

We also understand that we are part of a natural cycle that does not start or stop with the borders of our service area. Close collaboration with other water utilities, the Office of Living Victoria, local government, developers and local communities is critical in achieving improved outcomes from whole of water cycle management.


– Contributed to the Government’s Fairer Water Bills initiative and provided a productivity plan reflecting breakthroughs in cost performance. In preparing this plan, we set ambitious targets for cost reductions and revenue generation.

– Escalated and bolstered our work with local councils, Melbourne Water and the Metropolitan Planning Authority in contributing to the development of the Water Future North Strategy as part of Melbourne’s Water Future.

– Set new or improved industry benchmarks in:

– the support of customers experiencing financial hardship (with the most extensive hardship grant scheme as identified by the Essential Services Commission);

– shortest connection times for customer phone calls;

– lowest operating expenditure per property in Melbourne; and

– service responsiveness to plumbers, builders, developers and solicitors via the ‘easyACCESS’ system.

– Led a cross-sector collaboration involving key participants from the welfare sector and water utilities to examine ways of easing the burden of high water bills on customers experiencing financial hardship.

– Commenced a water use trial to assess the benefits of providing customers with real time water usage information and the early detection of household leaks.

– Redesigned the format of our ‘smart account’ to provide householders with neighbourhood water use comparisons.

– Expanded the ‘Choose Tap’ program advocating the benefits of tap water, with a growing number of other Victorian water utilities now part of the ‘Choose Tap’ coalition. There are now eight water utilities committed to ‘Choose Tap’ and a number of major organisations as key supporters including the Country Fire Authority, the RSPCA, Diabetes Australia, the Australian Dental Association, YMCA, Bowel Cancer Australia, Kidney Health Australia, Latrobe University, Swinburne University, Deakin University, Healesville Sanctuary and Queensland Health and Waterways. The coalition and supporter network continues to grow. The cost savings to all parties and the overall impact from adopting a common platform for communicating the benefits of tap water are significant. The ‘Choose Tap’ program has been recently recognised by winning the International Water Association’s (IWA) Marketing & Communications Category in the 2014 IWA Asia Pacific Regional Project Innovation Awards.

– Developed the ‘WaterCare’ hub, an online facility comprising a one-stop shop containing all the necessary information and processes to enable the welfare sector to service its clients in relation to water utility assistance. This has the potential to be a more generic ‘care’ hub used by other organisations, such as energy utilities and banks, who have shown interest.

– Entered into a mentoring agreement with the National Water Supply and Drainage Board of Sri Lanka, assisting with their climate adaption strategy.

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YEAR IN REVIEW

FINANCIAL SUMMARYYarra Valley Water recorded a net profit after tax of $45.6 million in 2013/14. The result is comparable with the 2012/13 result and was $33 million higher than the budgeted profit after tax. The additional profit was generated primarily as a result of increased water consumption. This was driven largely by the hot and dry weather experienced during the year. Other key factors contributing to the higher than expected profit were:

– Strong focus on controllable operating costs by continuing to eliminate or defer non-essential work and implement productivity improvements which delivered savings of 10%.

– Growth in New Customer Contributions and other revenue streams associated with the development industry.

– Effective management of the debt portfolio, including improvement in the stand-alone credit rating, to minimise finance costs in the short and long term.

Capital expenditure of $197 million was incurred during the year to renew, augment and upgrade water and sewerage infrastructure. Yarra Valley Water actively reduces its capital expenditure whilst achieving planned outcomes through the effective management of costs and innovative management of its program of works.

A final dividend of $17.7 million for the 2012/13 financial year was paid during the financial year. The amount of the dividend for the year ended 30 June 2014 will be determined in line with established Government dividend policy.

During 2013/14, total assets increased by $311 million as a result of our investment in infrastructure, property, plant and equipment and the infrastructure asset revaluation.

Total liabilities increased by $179 million in 2013/14, largely as a result of the growth in borrowings to fund capital expenditure and an increase in net deferred tax liability. Total borrowings increased by $121 million in 2013/14 to fund investments in water and sewerage infrastructure growth and to replace old infrastructure.

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FIVE YEAR FINANCIAL SUMMARY

2014 $’000

2013 $’000

2012 $’000

2011 $’000

2010 $’000

Statement of Comprehensive IncomeService revenue 916,868 700,836 697,588 586,923 497,585 Other revenue 71,991 61,955 77,590 72,207 57,606

Total revenue 988,859 762,791 775,178 659,130 555,191

Operating and other expenses 716,520 512,181 507,367 406,159 369,518 Depreciation and amortisation 86,009 75,632 75,980 72,429 46,113 Finance costs 120,368 108,349 104,783 94,226 79,634

Total expenses 922,897 696,162 688,130 572,814 495,265

Profit before income tax 65,962 66,629 87,048 86,316 59,926 Income tax (20,363) (20,248) (26,284) (26,012) (18,229)

Net profit after tax 45,599 46,381 60,764 60,304 41,697

Balance SheetCurrent assets 181,733 138,015 141,243 107,928 76,858 Non-current assets 4,141,830 3,873,914 3,605,832 3,566,300 3,193,382

Total assets 4,323,563 4,011,929 3,747,075 3,674,228 3,270,240

Current liabilities 392,565 307,624 510,475 393,517 313,168 Non-current liabilities 2,395,242 2,301,388 1,901,698 1,842,916 1,710,620

Total liabilities 2,787,807 2,609,012 2,412,173 2,236,433 2,023,788

Net assets 1,535,756 1,402,917 1,334,902 1,437,795 1,246,452

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YEAR IN REVIEW

Return on equity (%) Return on average assets (%) Gearing ratio (%) interest bearing debt to assets

Net profit after tax ($M) Interest cover (times) Capital expenditure ($M)

Return on equity has reduced compared with the prior year due to an increase in the infrastructure asset valuation (equity).

Return on average assets remained in line with the previous year.

Gearing ratio has decreased slightly as the borrowing levels have not increased in line with the assets due to our improved internal financing position.

13/14

6.0

4.8

3.9

4.5 5.

0 5.2

5.2

4.5

4.5

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

13/14

2.8

2.1

1.8

1.5

2.5

2.2

2.2

2.2

1.9

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

6.0

3.6

1.4

3.0

4.4 4.5

4.4

3.4

3.1

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

The profit performance has remained in line with the previous year.

Interest cover has reduced compared with the prior year due to the increase in finance charges associated with increased borrowings and higher Financial Accommodation Levy.

We continue to focus on the delivery of efficient outcomes through innovative design in planning our capital expenditure program.

13/14

43.3 46

.1 48.3 50.8

40.3

39.9 44

.4

45.5

45.0

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

13/14

149.8

162.7

153.3 18

0.3

278.6

228.0

239.1

228.2

197.0

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/1313/14

36.1

22.1

9.1

19.8

41.7

60.3

60.8

46.4

45.6

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

15


A high standard of corporate governance

The Yarra Valley Water Board has overall responsibility for corporate governance which includes:

– setting the strategic direction;

– establishing goals for management and monitoring the achievement of these goals;

– monitoring the performance of the business.

We are committed to ensuring that a robust corporate governance framework is in place and we review the framework regularly to ensure it aligns with best practice. Whilst being a statutory water corporation, incorporated under the Water Act 1989 we have, nevertheless, assessed our practices against the 3rd Edition of the Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations, issued in March 2014. Our review has found that our Corporate Governance Framework is substantially compliant with the relevant ASX Principles and Recommendations in the context of Yarra Valley Water’s statutory corporation status.

This Statement sets out the main corporate governance practices in place during the 2013/14 financial year.

Board

The Board comprises seven independent non-executive Directors and one executive Director, who is the Managing Director. The non-executive Chairman and non-executive Directors are appointed by the Minister for Water and the Managing Director is appointed by the Board.

The Directors come from a wide range of backgrounds and bring to the Board an appropriate mix of skills and experience.

Peter Wilson AM, BCom (Hons), MA, FCPA, FAICD, FAHRI

Peter Wilson became a Director of Yarra Valley Water Limited on 1 January 2007 and was appointed Chair on 1 July 2008. His appointment transferred to Yarra Valley Water Corporation with effect from 1 July 2012.

He has a background in economics, commerce and strategy development and has held senior executive positions in a number of organisations. He was Executive Director General Manager at AMCOR, Chief Executive Officer of the Energy 21 Group and Managing Director, Asia Pacific Division at the ANZ Banking Group.

Peter is the National President of the Australian Human Resources Institute,

a Director of the World Federation of People Management Associations based in Geneva, a Director of the Vincent Fairfax Ethics in Leadership Foundation, was Chairman of Vision Super Pty Ltd until the end of his rotational term on 30 June 2014 and continues as a Director of Vision Super Pty Ltd.

Committee Membership:

– Risk Management and Audit Committee

– Human Resources, Remuneration and Safety Committee (Chairman of Committee for remuneration issues)

– Sustainability, Planning, Infrastructure and Environment Committee.

David Middleton BE (Civil), ME (Env), MBA (Tech Mgt)

David Middleton was appointed as a Director of Yarra Valley Water Limited on 1 October 2011. His appointment was transferred to Yarra Valley Water Corporation with effect from 1 July 2012 and David was appointed Deputy Chairman of the Board from 23 October 2013.

He is Executive Director, Water Markets for CH2M Hill Australia Pty Ltd, a design, construction and operations firm.

CORPORATE INFORMATION

Board of Directors

Managing DirectorPatrick McCafferty

Sustainability, Planning,Infrastructure &

Environment Committee

Human Resources,Remuneration &

Safety Committee

Risk Management &Audit Committee

Strategy &Communications

Vacant

SustainableDevelopmentSam Austin

InfrastructureServices

David Snadden

Finance &Corporate Services

Kevin Jones

People & CultureAnne Farquhar

BusinessTechnology Services

Leigh Berrell

Billing & ContactServices

Steve Lennox

Organisational structure

16


He has previously held senior roles with Thames Water Asia Pacific Pty Ltd and operational roles with Melbourne Water Corporation, Western Region Water Corporation and Goulburn Valley Region Water Corporation.

David is a Director of CH2M Hill Australia Pty Ltd and Halcrow Pacific Pty Ltd and a member of Hutt Valley Water Services (NZ).


– Human Resources, Remuneration and Safety Committee (Chairman)


Pat McCafferty BBus (Acc), Exec.MBA, GAICD, Managing Director

Pat McCafferty was appointed Managing Director of Yarra Valley Water on 1 July 2014. He has extensive experience across the water sector and has held General Manager roles at Yarra Valley Water since 2001, covering a wide range of operational and strategic leadership positions including strategic planning, economic regulation, finance, marketing and customer service.


– Human Resources, Remuneration and Safety Committee.

Gregory Camm MBA, BBus, CPA, SFFin, MAICD

Greg Camm became a Director of Yarra Valley Water Corporation on 1 October 2013. He retired from his role as Chief Executive Officer of Superpartners Ltd in 2012.

Greg was previously the Managing Director and Chief Executive Officer of AMP Financial Services New Zealand (2005 – 2007) and held a number of senior executive positions with the Australia and New Zealand Banking Group (1989 – 2005) including Managing Director, Australian Retail Banking (2004 – 2005).

He is Deputy Chair of iSelect Ltd (2012 – current) and a Director of mecu Ltd (2011 – current) and Bottlecyclers Pty Ltd (2010 – current), a member of the Financial Sustainability Committee of the Walter and Eliza Institute, a Trustee for the Australian Cancer Research Foundation and is on the Business Advisory Council of Greenfleet Australia.




Dean Comrie BSc (Hons), Grad Cert (Env Eng), MBA, MAICD

Dean Comrie became a Director of Yarra Valley Water Limited on 1 October 2011. His appointment was transferred to Yarra Valley Water Corporation with effect from 1 July 2012.

Dean is currently a Project Director with SP AusNet where he is responsible for the maintenance and capital delivery contracts for SP AusNet’s gas and electricity distribution networks.

Dean has extensive experience in the utilities sector and has held a variety of executive and non-executive positions, including as Managing Director of Ecowise Environmental, a specialist consulting and technical service provider to the water sector.



– Sustainability, Planning, Infrastructure and Environment Committee (Chairman).

Susan Friend BCom, LLB, CA (NZ), MAICD

Sue Friend became a Director of Yarra Valley Water Limited on 1 January 2010. Her appointment was transferred to Yarra Valley Water Corporation with effect from 1 July 2012. Sue has a background in audit, internal audit and forensic accounting gained from 15 years working with PricewaterhouseCoopers.

She is a Director of Not For Sale Australia Pty Ltd and is currently a consultant with Sapere Research Group, a global expert services firm.


– Risk Management and Audit Committee (Chairman)


Steve McArthur MAICD

Steve McArthur became a Director of Yarra Valley Water Corporation on 1 October 2012. He is the Managing Director of Samanco Pty Ltd and Business Advisor to Glencoe Group Pty Ltd.

He is the Chairman of the Melbourne Marketing Authority and has served as a committee member, President and Chairman of a number of local community and sporting groups.

Steve was Shadow Minister for Water Resources (1999 – 2002) and Shadow Minister for Agriculture (2000 – 2002).




17


Therese Ryan LLB, GAICD

Therese Ryan became a Director of Yarra Valley Water Corporation on 1 October 2013. She was formerly Vice President, General Counsel for General Motors International Operations, Shanghai.

She previously held general counsel roles with GM Holden Ltd (2001 – 2006) and Qenos Pty Ltd. Therese is currently a Director of Burson Group Ltd, Victorian Managed Insurance Authority, VicForests, Metropolitan Fire Brigade, a Director/Trustee of WA Local Super, an independent member of the audit committee of the City of Melbourne, and Chair of the Advisory Committee of the Office of Correctional Services Review.


– Human Resources, Remuneration and Safety Committee


Retirement of Directors on 30 September 2013

Caryle Demarte PSM, BBus, FAICD

Caryle Demarte was originally appointed a Director on 1 September 2005. She made an invaluable contribution to Yarra Valley Water as a Director, including her roles as Deputy Chairman of the Board, Chairman of the Sustainability, Planning, Infrastructure and Environment Committee and the Risk Management and Audit Committee and a member of the Human Resources, Remuneration and Safety Committee.

Caryle has extensive experience in the energy industry and has held executive and non-executive positions in the public and private sectors. She was General Manager at TXU Australia and at Kinetik Energy. Caryle is Chair of the Independent Infrastructure Assistance Fund Powerline Bushfire Safety Program and is a Director of Aurora Energy.

Michael Tilley BA (Acc), FCA, FCPA, FAICD

Michael Tilley was originally appointed a Director on 1 October 2011. He made an invaluable contribution to the business as a Director, including his role as a member of the Risk Management and Audit Committee and the Sustainability, Planning, Infrastructure and Environment Committee.

Michael is Chairman of Terrain Capital Ltd and was previously the Managing Director responsible for providing corporate advisory and investment banking services for public and private companies within Australia and overseas.

He has worked in the accounting and finance industries for more than 40 years and has a broad range of senior advisory and project management experience in all facets of corporate finance.

Michael is the former Chairman of the Lower Murray Urban and Rural Water Corporation and a Director of Oliver Hume Australia Ltd. He is also a registered tax agent and a registered company auditor.

Retirement of Managing Director on 30 June 2014

Tony Kelly CPEng, SFCDA, MAICD

Tony Kelly was originally appointed as the Managing Director of Yarra Valley Water in January 2003.

His resignation as Managing Director became effective from 30 June 2014.

Tony has extensive experience in the water industry and held four General Manager roles at Yarra Valley Water since its inception in 1995. He was also the Chairman of Savewater! Alliance Incorporated and was a member of the Human Resources, Remuneration and Safety Committee.

Tony has made an outstanding contribution to Yarra Valley Water and to the water industry in general.

Corporate Secretary

Kevin Jones FCCA, GAICD, BA (Hons), ALCM

Kevin Jones has been Corporate Secretary of Yarra Valley Water Corporation since 1 July 2012. He is responsible for ensuring compliance with statutory and regulatory requirements, for governance functions and for ensuring that the decisions of the Board of Directors and its Committees are implemented.

18


Board Charter

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

The Board Charter is reviewed at least every three years and the Board may, by resolution, amend the Charter if required at any time.

Code of Conduct

The Board has adopted a Directors’ Code of Conduct based on the Code of Conduct issued by the Public Sector Standards Commissioner.

Declaration of Private Interests

All Directors have completed a declaration of private interests.

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

Independent professional advice

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

Board performance review

In accordance with the Board Policy, an interim Performance Review of the Board was conducted in early 2014 by an independent external person. As part of the Review, a survey was completed by all Directors and members of the Executive Team and interviews were conducted. The results were excellent and an improvement on the very high standard already set in previous years. Based on the survey data and interviews, no issues facing the Board were found and no substantive opportunities for improvement were identified.

A full Performance Review of the Board will be conducted in early 2015.

Induction and training

The Board has adopted a training and development policy for Directors. This policy facilitates appropriate training and development opportunities for Directors to enable them to fulfil their role, broaden their knowledge and share this knowledge with the rest of the Board.

All newly appointed Directors are required to undertake an induction program to help them understand their role and support the fulfilment of their Board responsibilities. The induction program includes an overview of the Yarra Valley Water business, the water industry and links with Government.

Directors also attend seminars and other events to broaden their exposure to water industry issues and initiatives. New Directors Therese Ryan and Greg Camm have undertaken the induction program.

19


Board Committees

The Board has established the following Committees of Directors to assist it in carrying out its responsibilities and to allow detailed consideration of complex issues. Each Board Committee has its own terms of reference, which set out the Committee’s objectives, duties and responsibilities, composition, meetings, authority and reporting responsibilities.

At Board meetings, where the minutes of Committee meetings are presented, the Chairman of the Committee highlights the key issues considered by the Committee.

Committee Scope of activities

Risk Management and Audit Committee The Risk Management and Audit Committee assists the Board in fulfilling its duties and responsibilities relating to risk management, the effectiveness of internal controls and the accounting and reporting practices of the business.

The majority of Committee members have financial expertise.

Human Resources, Remuneration and Safety Committee The Human Resources, Remuneration and Safety Committee assists the Board in reviewing strategies and policies to ensure that critical actions and plans are in place to implement and develop the business’ people and culture and in fulfilling its duties and responsibilities associated with policy, compliance, risk and audits for Occupational Health and Safety.

Sustainability, Planning, Infrastructure and Environment Committee

The Sustainability, Planning, Infrastructure and Environment Committee assists the Board in reviewing objectives, strategies, policies, compliance, actions, risks and audits in relation to minimising the business’ impacts on the environment and the effectiveness and efficiency of the business’ asset management practices in relation to water and sewerage infrastructure and in reviewing and recommending the adoption of the business’ Water Plan.

Directors’ attendance at Board and Committee meetings

Board of Directors Meetings

Risk Management and Audit

Committee Meetings

Human Resources, Remuneration

and Safety Committee Meetings

Sustainability, Planning, Infrastructure

and Environment Committee Meetings

P S Wilson 12 of 12 4 of 4 5 of 5 2 of 2G J Camm(1) 9 of 10 3 of 3 - 1 of 2D M Comrie(2) 12 of 12 1 of 1 3 of 3 2 of 2C P Demarte(3) 2 of 2 1 of 1 2 of 2 -S E Friend 12 of 12 4 of 4 - 2 of 2V A Kelly(7) 12 of 12 - 5 of 5 - S J McArthur(4) 11 of 12 3 of 3 2 of 2 2 of 2D A Middleton 10 of 12 - 5 of 5 1 of 2T A Ryan(5) 9 of 10 - 0 of 3 2 of 2M D Tilley(6) 0 of 2 0 of 1 - -

(1) Greg Camm was appointed as a Director from 1 October 2013 and a member of the Risk Management and Audit Committee and the Sustainability, Planning, Infrastructure and Environment Committee on 23 October 2013.

(2) Dean Comrie ceased being a member of the Risk Management and Audit Committee and was appointed as a member of the Human Resources, Remuneration and Safety Committee on 23 October 2013.

(3) Caryle Demarte retired as a Director on 30 September 2013.

(4) Steve McArthur ceased being a member of the Human Resources, Remuneration and Safety Committee and was appointed as a member of the Risk Management and Audit Committee on 23 October 2013.

(5) Therese Ryan was appointed as a Director from 1 October 2013 and a member of the Human Resources, Remuneration and Safety Committee and the Sustainability, Planning, Infrastructure and Environment Committee on 23 October 2013.

(6) Michael Tilley retired as a Director on 30 September 2013.

(7) Tony Kelly resigned as Managing Director on 30 June 2014.

20


Our Executive Team

Pat McCafferty BBus (Acc), Exec.MBA, GAICD

Managing Director

As Managing Director, Pat is also a member of the Board.

Refer to details under ‘Board’.

Sam Austin BE (Civil)

General Manager, Sustainable Development

Sam is responsible for the provision of water and sewerage services to new customers. He manages the planning and procurement of new infrastructure and the connection of new customers to the network. Sam works closely with the development industry and has the challenge of developing new and innovative sustainable servicing strategies to meet commercial and environmental objectives.

Leigh Berrell BAppSc (CompSci) (Hons), GradCert BT, MBA, GAICD

Chief Information Officer

Leigh is responsible for the strategic direction of information technology to achieve the business objectives of Yarra Valley Water. This includes the development and delivery of the IT Strategic Plan, Enterprise Architecture and IT projects. Leigh is also responsible for the operation, maintenance and support of IT systems, sourcing and procurement of IT products and services and the management of IT vendors.

Anne Farquhar Cert Bus Mgt

General Manager, People and Culture

Anne is responsible for developing and implementing the human resources strategy for the business, including workplace planning, organisational culture and learning and development. Anne is also responsible for developing and maintaining systems for recruitment, succession planning, performance management and internal communications.

Kevin Jones FCCA, GAICD, BA (Hons), ALCM

Chief Financial Officer and Corporate Secretary

Kevin is responsible for overall business management reporting, statutory accounting, financial planning, treasury and taxation. His role also includes statutory compliance, occupational health and safety, corporate governance, insurance, risk management, auditing, property management, legal services and records management.

Steve Lennox BBus (Acc), CPA, ACIS, AGIA

General Manager, Billing and Contact Services

Steve is responsible for customer billing and responding to customers’ enquiries. He is primarily responsible for meter reading, billing management as well as debt collection, Customer Contact Centre operations and the development and implementation of support programs for customers in financial difficulty.

David Snadden BE (Civil), Exec.MBA

General Manager, Infrastructure Services

David is responsible for managing the water and sewerage infrastructure to ensure that it achieves our desired customer service levels and environmental performance. He is primarily responsible for strategy development, planning, operation, maintenance and renewal of the water and sewerage infrastructure.

General Manager, Strategy and Communications (Vacant)

The General Manager, Strategy and Communications is responsible for strategy, regulation, planning, marketing and communications. This incorporates long-term strategic planning, pricing and regulatory affairs, innovation and growth, community and stakeholder engagement, representing the business in water industry policy and reform activities, and development and implementation of marketing programs.

21


‘We Are Safe’

Yarra Valley Water is committed to the Safety and Wellbeing of our staff, partner organisations and members of the public. Our safety commitment ‘We Are Safe’ is embedded in everything we do.

Our 2020 Strategy Safety outcomes are:

– Safety exists as each person’s responsibility;

– We make our workplaces safe;

– We carry out our work without harming ourselves or others.

These safety outcomes are supported by our ‘We Are Safe Behaviours’ Statement, compliance with occupational health and safety legislation and using our accredited Safety Management System.

Our people

We believe that a great culture delivers great outcomes. It provides the foundation for a high-performing workplace where we collaborate with partners and stakeholders to deliver exceptional outcomes for our customers and the environment. Creating this constructive workplace culture requires a holistic approach, encompassing all aspects of the employment life cycle, such as recruitment, communication, role clarity, recognition, development, equity and leadership. Our focus on culture ensures that we employ the right staff, provide them with clear direction and challenging work, enable performance through strong leadership and honest feedback, and provide ongoing development through targeted learning opportunities.

Fair treatment at work – discrimination

At Yarra Valley Water, it is our strategic intent to create a vibrant workplace achieving exceptional business outcomes, successful partnerships and personal satisfaction. We are committed to providing fair and equitable treatment for all employees in the workplace including partners, contractors, work experience students, suppliers and agents, both on and off site, when on Corporation business. We endeavour to eliminate discrimination through proactive, reasonable and proportionate measures. All employees are required to comply with relevant Federal and State legislation that establishes grounds on which discrimination is illegal including but not limited to the Acts relating to Occupational Health and Safety, Equal Employment Opportunity, Discrimination and Human Rights.

Recruitment

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

Employment data

Full time

Part time Casual Total

Full Time Equivalent

(FTE) 2013/14

Full Time Equivalent

(FTE) 2012/13

Female 173 70 23 266 231 243Male 291 4 16 311 304 305

Total 464 74 39 577 535 548

Legislative compliance

Victorian Information Privacy Act 2000

Yarra Valley Water complies with the information privacy principles set out in the Victorian Information Privacy Act 2000.

As the holder of our customers’ confidential and personal information, Yarra Valley Water is conscious of the need to ensure that this information is protected and to prevent any unauthorised access to, and improper use of, that information.

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

Protected Disclosure Act 2012

Yarra Valley Water has procedures in place to help employees and contractors understand the requirements and obligations under the Protected Disclosure Act 2012 and to facilitate the making and handling of disclosures and the notification of such disclosures to the Independent Broad-based Anti-corruption Commission. These procedures are available to the public at Yarra Valley Water’s Mitcham office.

There have been no disclosures received by Yarra Valley Water in 2013/14 for notification to the Independent Broad-based Anti-corruption Commission in relation to the operation, activities or officers of Yarra Valley Water.

22

Freedom of Information Act 1982

Yarra Valley Water is committed to ensuring information is accessible to customers in compliance with the Freedom of Information Act 1982.

During 2013/14, 12 requests were received for access to documents under the Freedom of Information Act 1982.

Requests were fulfilled as follows:

Full access to all documents 8Full access to some documents – others in part 4

12

Requests for access to Yarra Valley Water documents under the Freedom of Information Act 1982 are to be made in writing and addressed to:

Peter Thatcher Assistant Corporate Secretary Yarra Valley Water Private Bag 1 Mitcham, Victoria, 3132

Each application must be accompanied by a $26.50 application fee and clearly identify the documents sought. General enquiries relating to Freedom of Information can be made by telephoning (03) 9872 1238 between 8.30am and 4.30pm, Monday to Friday.

Building Act 1993

Yarra Valley Water maintains its head office complex in accordance with the Building Act 1993.

Victorian Industry Participation Policy Disclosures

Yarra Valley Water implements the Victorian Industry Participation Policy (VIPP) in accordance with section 9 of the Victorian Industry Participation Policy Act 2003. During 2013/14, the Corporation commenced two contracts with an estimated 96% local content to which a VIPP plan was not required as the procurement activity was local by nature.

National Competition Policy

Competitive neutrality seeks to enable fair competition between government and private sector businesses. Any advantages or disadvantages that a government business may experience simply as a result of government ownership should be neutralised.

Yarra Valley Water complies with the requirements of the National Competition Policy.

Other information

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

– a statement that declarations of pecuniary interests have been duly completed by all relevant officers;

– details of shares held by any senior officer as nominee or held beneficially in a statutory authority or authority;

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

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

– details of any major external reviews carried out on the entity;

– details of major research and development activities undertaken by the entity;

– details of overseas visits undertaken including a summary of the objectives and outcomes of each visit;

– details of major promotional, public relations and marketing activities undertaken by the entity to develop community awareness of the entity and its services;

– details of assessments and measures undertaken to improve the occupational health and safety of employees;

– a general statement on industrial relations within the entity and details of time lost through industrial accidents and disputes;

– a list of major committees sponsored by the entity, the purposes of each committee and the extent to which the purposes have been achieved;

– details of all consultancies and contractors including:

– consultants/contractors engaged

– services provided

– expenditure committed to for each engagement.


23


The Directors of the Corporation certify that Yarra Valley Water has risk management processes in place consistent with the National Risk Management Standard AS/NZS ISO 31000:2009 and an internal control system in place that enables our executive to understand, manage and satisfactorily control our risk exposures.

The Directors of the Corporation verify that Yarra Valley Water’s Strategic and Operational Risk Profiles have been critically reviewed within the last 12 months.

This attestation has been made in accordance with the resolution of the Directors of the Corporation on the 26th day of August 2014.



RISK MANAGEMENT ATTESTATION

25


ANNUAL FINANCIAL REPORT 2013/14 Yarra Valley Water Corporation ABN 93 066 902 501

26

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2014

The Directors of Yarra Valley Water Corporation present their report for the financial year ended 30 June 2014.

Directors

The names of the Corporation’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period, unless otherwise stated.

Peter Snowden Wilson

Chairman

Vincent Anthony (Tony) Kelly

Retired as Managing Director on 30 June 2014

Patrick John McCafferty

Appointed as Managing Director on 1 July 2014

David Anthony Middleton

Deputy Chairman

Gregory Joseph Camm

Appointed as a Director on 1 October 2013

Dean Matthew Comrie

Caryle Patricia Demarte

Retired as a Director on 30 September 2013

Susan Elizabeth Friend

Stephen James McArthur

Therese Anne Ryan

Appointed as a Director on 1 October 2013

Michael Douglas Tilley

Retired as a Director on 30 September 2013

Particulars of the Directors’ and Corporate Secretary’s qualifications, experience and special responsibilities (if any) are set out in the Corporate Information Section of this Annual Report.

Directors’ attendance at meetings

The number of Directors’ meetings and Board Committee meetings held, and the number of meetings attended by each of the Directors of the Corporation during the financial year, are set out in the Corporate Information Section of this Annual Report.

Principal activities

The principal activities of the Corporation during the course of the financial year were the provision, within its district, of retail water supply and sewerage services and the collection of trade waste.

There were no significant changes in the nature of these activities during the year.

Dividends

A final dividend of $17.7 million for the year ended 30 June 2013 was paid on 15 November 2013.

The amount of the dividend for the year ended 30 June 2014 will be determined in line with established Government dividend policy.

Review of operations

A review of the operations of the Corporation during the year ended 30 June 2014 and the results of those operations are contained in this Annual Report.

State of affairs

In January 2014, the metropolitan water businesses received correspondence from the Minister for Water seeking advice on the potential for efficiency improvements in the water sector, to place downward pressure on water prices. The purpose of the initiative was to promote an urban water sector that delivered cost efficient and effective services to households and industry while maintaining financially sustainable, innovative and accountable water corporations, and safeguarding the highest standards for safety, liveability and security of supply. Subsequently, the Minister for Water issued a press release outlining the efficiency review, titled ‘Fairer Water Bills’.

On 11 May 2014, the Premier and the Minister for Water announced the outcomes of the first stage of the Fairer Water Bills initiative. As a result of the process, residential customers with water usage would receive an annual bill reduction of $100 for the next four years, starting from 2014/15.

Prices in 2014/15 were due to increase by CPI under the Essential Services Commission’s five-year price path, issued in its June 2013 determination. However, as a result of the requirement to pass through savings associated with the Victorian Desalination Plant and the benefits of our Revenue Cap to our customers, the average residential customer’s bill will now decrease by an average of 0.2%. This bill decrease is in addition to the $100 bill reduction from Fairer Water Bills.

Except as provided above, there were no significant changes in the state of affairs of the Corporation during the year ended 30 June 2014 not otherwise disclosed in the Annual Report.

27


Events subsequent to balance sheet date

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

Environmental regulation

Yarra Valley Water is subject to environmental regulation in respect of its operations. The Corporation holds a corporate licence issued by the Environment Protection Authority Victoria (EPAV) under the Environment Protection Act 1970. The licence imposes conditions about discharges, reporting obligations and other matters concerning the operation of seven sewage treatment plants.

During the financial year, the Corporation complied with all conditions of the EPAV corporate licence with the exception of one incident, which related to a reported odour complaint at the Lilydale Sewage Treatment Plant.

The Corporation maintains an Environmental Management System certified to ISO 14001.

Further particulars of specific environmental performance measures are set out in the Additional Information section of this Annual Report.

Directors’ Deed

Yarra Valley Water entered into a deed with each Director under which it is required to provide access to the books of the Corporation and to maintain insurance coverage for at least seven years after the Director ceases to be a Director.

Insurance of officers

During the financial year, the Corporation paid premiums in respect of contracts to insure Directors, former Directors and Officers of the Corporation against certain liabilities.

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

Rounding of amounts to nearest thousand dollars

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

This Report is made in accordance with a resolution of the Directors of the Corporation on the 26th day of August 2014.



28

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014

Note2014

$’0002013

$’000

Revenue 1, 4 988,859 762,791Expenses 1, 5 (802,529) (587,813)Finance costs (120,368) (108,349)

Profit before income tax 65,962 66,629Income tax expense 1, 6(a) (20,363) (20,248)

Net profit 45,599 46,381

Other comprehensive incomeItems that will not be reclassified to net resultIncrease from revaluation of infrastructure assets 12(b) 145,579 104,340Increase from revaluation of crown land 12(b) - 408Defined benefit superannuation plan actuarial gain 1, 20 4,434 7,340Deferred income tax on items of other comprehensive income 1, 6(b) (45,073) (33,646)

Other comprehensive income, net of tax 104,940 78,442

Total comprehensive income 150,539 124,823

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

29


BALANCE SHEET AS AT 30 JUNE 2014

Note2014

$’0002013

$’000

ASSETSCurrent assetsCash 8 345 136Receivables 3(c), 9 176,780 130,065Other 10 4,608 7,814

Total current assets 181,733 138,015

Non-current assetsInfrastructure, property, plant and equipment 12(a) 3,935,163 3,677,544Intangible assets 11(a) 202,563 196,254Defined benefit superannuation asset 1, 13(c) 4,104 116

Total non-current assets 4,141,830 3,873,914

TOTAL ASSETS 4,323,563 4,011,929

LIABILITIESCurrent liabilitiesUnearned income 16 436 3,440Current tax payable 6(d) 10,200 3,948Provisions 15 17,444 17,636Payables 3(c), 14 120,485 108,050Borrowings 3(b) 244,000 174,550

Total current liabilities 392,565 307,624

Non-current liabilitiesProvisions 17 1,548 1,363Refundable advances 3(c) 2,389 1,518Unearned income 16 7,543 7,543Net deferred tax 1, 6(e) 682,262 641,264Borrowings 3(b) 1,701,500 1,649,700

Total non-current liabilities 2,395,242 2,301,388

TOTAL LIABILITIES 2,787,807 2,609,012

NET ASSETS 1,535,756 1,402,917

EQUITYContributed equity 18 477,297 477,297Retained earnings 1, 20 179,448 148,514Asset revaluation reserve 19 879,011 777,106

TOTAL EQUITY 1,535,756 1,402,917

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

30

2014 Note

Issued capital

$’000

Contributed equity $’000

Retained earnings

$’000

Asset revaluation

reserve $’000

Capital reserve

$’000Total $’000

Balance at 1 July 2013 - 477,297 148,514 777,106 - 1,402,917Net profit - - 45,599 - 45,599Other comprehensive income 19, 20 - - 3,035 101,905 - 104,940

Total comprehensive income

Transactions with owners in their capacity as owners

-

-

48,634

101,905

-

150,539

Dividends paid 7 - - (17,700) - - (17,700)

Balance at 30 June 2014 - 477,297 179,448 879,011 - 1,535,756

2013 Note

Issued capital $’000

Contributed equity $’000

Retained earnings

$’000

Asset revaluation

reserve $’000

Capital reserve $’000

Total $’000

Balance at 1 July 2012, as previously reported

84,940

-

153,946

703,660

392,357

1,334,903

Impact of changes in accounting policy

1

-

-

691

-

-

691

Balance at 1 July 2012 restated

84,940

-

154,637

703,660

392,357

1,335,594

Net profit - - 46,381 - - 46,381

Transfer upon transition to statutory authority

(84,940)

477,297

-

-

(392,357)

-

Other comprehensive income 19, 20 - - 4,996 73,446 - 78,442

Total comprehensive income (restated)

(84,940) 477,297 51,377 73,446 (392,357) 124,823

Transactions with owners in their capacity as owners

Dividends paid 7 - - (57,500) - - (57,500)

Restated balance at 30 June 2013

-

477,297

148,514

777,106

-

1,402,917

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

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014

31


Note2014

$’0002013

$’000

Cash flows from operating activitiesReceipts from customers 929,696 748,271Payments to suppliers and employees (728,480) (539,149)Goods and services tax refunded (net) 23,730 27,628Income tax paid (19,225) (16,348)Interest and other costs of finance paid (115,445) (106,254)Interest received 11 21

Net cash inflow from operating activities 29(a) 90,287 114,169

Cash flows from investing activitiesProceeds from sale of intangibles, infrastructure, property, plant and equipment 819 1,151Payments for acquisition of infrastructure, property, plant and equipment (169,828) (174,223)Payments for acquisition of intangible assets (25,362) (43,759)

Net cash outflow from investing activities (194,371) (216,831)

Cash flows from financing activitiesProceeds from borrowings 219,450 287,973Repayment of borrowings (98,200) (128,200)Proceeds / (repayments) of developer security deposits 743 (3)Dividends paid 7 (17,700) (57,500)

Net cash inflow from financing activities 104,293 102,270

Net decrease in cash held 209 (392)Cash at beginning of year 136 528

Cash at end of year 8, 29(b) 345 136

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

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2014

32

1. Summary of significant accounting policies

(a) Basis of accounting

This financial report is a general purpose financial report that has been prepared in accordance with applicable Australian equivalents to International Financial Reporting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, the requirements of the Financial Management Act 1994 and applicable Ministerial Directions.

The financial report of Yarra Valley Water Corporation (the Corporation) for the year ended 30 June 2014 was authorised for issue in accordance with a resolution of the Directors on 26 August 2014.

(b) Basis of accounting preparation and measurement

The financial report has been prepared on an accruals and going concern basis and is based on a historical cost basis, except for infrastructure, property, plant and equipment, and the defined superannuation asset which have been measured at fair value. All amounts are presented in Australian dollars unless otherwise stated and have been rounded to the nearest thousand dollars, or in other cases to the nearest dollar.

The following is a summary of the material accounting policies adopted by the Corporation in the preparation of the financial report. Accounting policies are applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The accounting policies have been consistently applied, unless otherwise stated.

(c) Changes in accounting policies

Subsequent to the 2012/13 reporting period, the following new and revised standards have been adopted in the current period.

AASB 13 Fair Value Measurements

AASB 13 establishes a single source of guidance for assets and liabilities measured at fair value. AASB 13 does not change when the Corporation is required to use fair value, but rather provides guidance on how to measure fair value under Australian Accounting Standards when fair value is required or permitted.

AASB 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal, or most advantageous market at the measurement date under current market conditions. Fair value under AASB 13 is an exit price regardless of whether the price is directly observable or estimated using another valuation technique. Furthermore, AASB 13 explicitly requires consideration of the highest and best use to determine fair value. The highest and best use of a non-financial asset takes into account the use of the asset that is physically possible, legally permissible and financially feasible. Generally an entity’s current use of a non-financial asset is presumed to be its highest and best use unless market or other factors suggest otherwise.

The Corporation has considered the specific requirements relating to highest and best use, valuation premise, and principal market. The methods, assumptions, processes and procedures for determining fair value were revisited and adjusted where applicable. In light of AASB 13, the Corporation has reviewed the fair value principles as well as its current valuation methodologies in assessing the fair value, and the assessment has not materially changed the fair values recognised.

Application of AASB 13 has predominantly impacted the disclosures of the Corporation. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replaced existing disclosure requirements in other standards. The disclosure requirements of AASB 13 apply prospectively and need not be applied in comparative information before first application. Consequently, the 2012/13 comparatives of these disclosures have not been provided.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

33


AASB 119 Employee Benefits

In 2013/14, the Corporation has applied amended AASB 119 Employee Benefits and related consequential amendments for the first time.

The revised AASB 119 changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligation and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan asset when they occur and hence eliminate the ‘corridor approach’ permitted under the previous version of AASB 119 and accelerate the recognition of past service costs.

All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net defined asset or liability recognised in the Balance Sheet to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of AASB 119 are replaced with a ‘net interest cost’ under AASB 119 (as revised in 2011), which is calculated by applying the discount rate to the net defined benefit asset or liability. These changes have had an impact on the amounts recognised in the profit or loss and other comprehensive income in prior years.

The revised standard also changes the definition of short-term employee benefits. Short-term employee benefits are now defined as benefits expected to be settled wholly within twelve months after the end of the reporting period in which the employees render the related service. As a result, accrued annual leave balances which are not expected to be wholly settled within 12 months which were previously classified by the Corporation as short-term employee benefits no longer meet the definition and are now classified as long-term employee benefits. The change of measurement for the annual leave provision has resulted in the provision being brought to account on a discounted basis rather than undiscounted as in prior periods.

AASB 119 has been applied retrospectively in accordance with its transitional provisions. Consequently, the Corporation has restated its reported results in the comparative period presented and reported the cumulative effect as at 1 July 2012 as an adjustment to opening equity. The impact is as follows:

Impact of AASB 119 Employee Benefits on Statement of Comprehensive Income and Balance Sheet.

Statement of Comprehensive Income at 1 July 2012

As at 1 July 2012 as

previously reported

$’000

Impact of change in

accounting policy $’000

As at 1 July 2012

(restated) $’000

Expense – Annual leave (583,347) (71) (583,418)

Profit before income tax 87,048 (71) 86,977Income tax expense (26,284) 21 (26,263)

Net profit 60,764 (50) 60,714

Other comprehensive incomeDefined benefit superannuation plan actuarial gain / (loss) (8,279) 1,058 (7,221)Deferred income tax on item of other comprehensive income 45,896 (317) 45,579

Other comprehensive income, net of tax (107,557) 741 (106,816)

Total comprehensive income (46,793) 691 (46,102)

34

Balance Sheet at 1 July 2012

As at 1 July 2012 as

previously reported

$’000

Impact of change in


As at 1 July 2012

(restated) $’000

Balance Sheet Liabilities

Defined benefit superannuation liability (7,991) 1,058 (6,933)Provisions – Employee benefits (14,972) (71) (15,043)Net deferred tax (605,174) (296) (605,470)

Total liabilities (2,412,173) 691 (2,411,482)

EquityRetained earnings (153,946) (691) (154,637)

Total equity (1,334,903) (691) (1,335,594)

Statement of Comprehensive Income at 30 June 2013

As at 30 June 2013 as

previously reported

$’000

Impact of change in


As at 30 June

2013 (restated)

$’000

Revenue – Superannuation defined benefit 763,077 (286) 762,791Expense – Superannuation defined benefit & annual leave (586,565) (1,248) (587,813)

Profit before income tax 68,163 (1,534) 66,629Income tax expense (20,708) 460 (20,248)

Net profit 47,455 (1,074) 46,381

Other comprehensive incomeDefined benefit superannuation plan actuarial gain / (loss) 5,978 1,362 7,340Deferred income tax on item of other comprehensive income (33,237) (409) (33,646)

Other comprehensive income, net of tax 77,489 953 78,442

Total comprehensive income 124,944 (121) 124,823


35


Balance Sheet at 30 June 2013

As at 30 June 2013 as

previously reported

$’000

Impact of change in


As at 30 June

2013 (restated)

$’000

Assets

Defined benefit superannuation asset - 116 116

Total assets 4,011,813 116 4,011,929

Liabilities

Provisions – Employee benefits (14,170) (74) (14,244)Defined benefit superannuation liability (773) 773 -Net deferred tax (641,020) (244) (641,264)

Total liabilities (2,609,467) 455 (2,609,012)

EquityRetained earnings (147,943) (571) (148,514)

Total equity (1,402,346) (571) (1,402,917)

The Corporation has not prepared a third Balance Sheet in regard to the above restatement, as the impacts are not considered material in accordance with AASB 101 Presentation of Financial Statements.

(d) Critical accounting judgement and estimates

The Corporation evaluates estimates and judgements which are incorporated in the financial report based on historical knowledge and the best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data obtained both externally and within the Corporation. Actual results may differ from these estimates.

The most significant accounting estimates undertaken in the preparation of this financial report relate to:

– residual values and useful lives

– asset impairment

– unearned revenue

– accrued revenue

– provisions

– deferred tax

– fair value of infrastructure, property, plant and equipment

– contingent assets and liabilities

– defined benefit superannuation fund.

36

(e) Fair value measurement

The Corporation measures some of its assets and liabilities at fair value either on a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the following assumptions:

– that the transaction to sell the asset or transfer the liability takes place either in the principal market (or the most advantageous market, in the absence of the principal market), either of which must be accessible to the entity at the measurement date; and

– that the entity uses the same valuation assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

Judgments about highest and best use must take into account the characteristics of the assets concerned, including restrictions on the use and disposal of any assets arising from their physical nature and any applicable legislative/contractual arrangements.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, and based on the lowest level inputs that are significant to the fair value measurement as a whole:

– Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

– Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

– Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

(f) Income tax

The Corporation is subject to the National Tax Equivalent Regime (NTER), which is administered by the Australian Taxation Office.

The current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the Balance Sheet date.

Deferred tax is accounted for using the Balance Sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in net profit in the Statement of Comprehensive Income, except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Corporation will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the Law.


37


(g) Revenue recognition

Water and sewerage

Revenue is brought to account when services have been provided or when a usage or service charge has been made. The payment in advance by customers of accounts which at reporting date were unbilled is classified as trade payables.

Water usage charges and sewage disposal charges are recognised as revenue when the service has been provided. As meter reading is cyclical, an estimate is made at the end of the accounting period for water usage and sewage disposal by customers. The estimate is made by multiplying the number of days since the last reading by daily average water consumption for that period.

Developer contributed assets

Developers are required to provide water supply and sewerage facilities to new subdivisions which are subsequently gifted to, and maintained by, the Corporation. These assets are recognised as revenue at fair value upon the gaining of control of the asset and are recorded as ‘developer contributed assets’.

New customer contributions

New customer contributions represent fees paid by developers so that they can connect new developments to the Corporation’s existing water supply and sewerage systems. Generally, these are recognised as revenue when the contribution has been received; however, in respect of assets to service new urban growth, amounts are received in advance and recognised as a liability initially, then recognised as revenue when the development lots are released for sale.

Other revenue

Other revenue includes fees for information statements, new meter installation services, water trading, billing and collection administration fees from both Melbourne Water and the Department of Environment and Primary Industries and charges for the relocation of assets requested by third parties. Property sales are recognised on the signing of an unconditional contract of sale with a deposit of at least 10%. Income from operating leases is recognised in net profit in the Statement of Comprehensive Income on a straight line basis over the lease term.

(h) Leases

Payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. The Corporation does not have any finance leases.

(i) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown in current liabilities in the Balance Sheet.

(j) Receivables and provision for impairment of receivables

All debtors are recognised at the amounts receivable less any provision for impairment of receivables. Credit is generally allowed for a period of 16 days. The collectability of debt is assessed each accounting period for usage and other charges. A provision for impairment of receivables is raised where doubt as to its collection exists. Bad debts are written off when the individual debt is determined to be uncollectible.

38

(k) Infrastructure, property, plant and equipment

Financial Reporting Direction 103E Non-Current Physical Assets requires non-current physical assets to be measured at fair value. Accordingly, the Corporation uses the revaluation model in accordance with AASB 116 Property, Plant and Equipment.

Infrastructure, land and building assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment losses, where applicable. Plant and equipment assets are measured at fair value less depreciation and impairment losses where applicable.

Due to the specialised nature of the Corporation’s infrastructure assets, fair value is estimated using the income approach (based on discounted cash flows). Refer Note 12.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost of the item can be measured reliably. Repairs and maintenance are charged to net profit in the Statement of Comprehensive Income during the financial year in which they are incurred.

The cost of fixed assets constructed within the Corporation includes the cost of materials, direct labour and an appropriate proportion of fixed and variable overheads.

Revaluations

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

Any revaluation increase is recognised in other comprehensive income, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in net profit in the Statement of Comprehensive Income, in which case the increase is credited to profit to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation is recognised in net profit in the Statement of Comprehensive Income to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that asset.

In measuring the fair values of non-financial assets, independent valuers are engaged for scheduled valuations in a five-year cycle. Infrastructure assets are measured to fair market value in the intervening years by the Corporation.

Depreciation

The depreciable amount of all fixed assets, but excluding freehold land and crown land, is depreciated on a straight line basis over their useful lives, commencing from the time the asset is held ready for use. The useful lives, which are consistent with the prior period, used for each class of depreciable assets are:

Class of Fixed Asset Useful life

Buildings 10 to 100 yearsInfrastructure 3 to 100 yearsPlant and equipment 3 to 25 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

At 30 June 2014 the following infrastructure asset categories lives were prospectively changed:

– hydraulic modelling water 10 years (2013: 5 years);

– recycled water main 100 years (2013: 70 years); and

– recycled water reticulation 100 years (2013: 95 years).

The cumulative impact on depreciation in 2013/14 is a decrease of $71,205 and for 2014/15 the expected impact is a decrease of $708,961.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in net profit in the Statement of Comprehensive Income. When revalued assets are sold, amounts included in the asset revaluation reserve relating to that asset are transferred to retained earnings.


39


(l) Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives are carried at cost less impairment losses, where applicable. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the Corporation.

Research and development costs

Expenditure on intangible assets’ research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from a development project is recognised only if all the following are demonstrated:

– the technical feasibility of completing the intangible asset so that it will be available for use or sale

– the intention to complete the intangible asset and use or sell it

– the ability to use or sell the intangible asset

– how the intangible asset will generate probable future economic benefits

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

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

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

Amortisation

Intangible assets with finite useful lives are amortised on a straight line basis over the asset’s useful life. Amortisation begins when the asset is available for use; that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period. The useful life used for the software asset class is between three and ten years. Water entitlements are classified as an intangible asset with indefinite useful life. Intangible assets with indefinite useful lives are not amortised. There has been no change to useful lives during 2013/14 or 2012/13.

(m) Impairment of non-financial assets

Infrastructure, property, plant and equipment and intangible assets with finite useful lives are assessed annually for indications of impairment. Whenever there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount.

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

Where an asset’s carrying value exceeds its recoverable amount, an impairment loss is recognised in net profit in the Statement of Comprehensive Income for the excess amount, except to the extent that the write-down can be debited to an asset revaluation reserve amount applicable to that asset. The recoverable amount of assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell. The recoverable amount of assets that are not primarily held to generate net cash flows is measured at the higher of depreciated replacement cost and fair value less costs to sell.

No material indicators of impairment were present at the time the financial statements were authorised for issue.

(n) Creditors and accruals

Creditors and accruals are recognised for future amounts to be paid in respect of goods and services received. The amounts are unsecured and are usually paid 30 days after invoice date.

40

(o) Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Short-term and long-term employee benefits

Liabilities recognised in respect of short-term (wholly settled within twelve months) employee benefits are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Corporation in respect of services provided by employees up to the reporting date.

Superannuation

Accumulation plans – Contributions to the accumulation plans are expensed as the contributions are paid or become payable.

Defined benefit superannuation plan – A liability or asset in respect of the defined benefit superannuation plan is recognised in the Balance Sheet and is measured as the present value of the defined benefit obligation at the reporting date plus unrecognised actuarial gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date. The present value of the defined benefit obligation is based on expected future payments to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service.

Actuarial gains and losses are recognised immediately in retained earnings in the Balance Sheet in the year in which they occur.

(p) Unearned developer contributions

Unearned developer contributions represent amounts advanced to the Corporation by developers for capital and recurrent works not completed. The amounts are non-interest bearing.

(q) Provisions

Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of past events for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(r) Borrowings and finance costs

Loans are repaid or refinanced on maturity and are carried at their principal amounts. Where the Corporation has both the intention and discretion to refinance loans maturing within 12 months from balance date under a Government approved financing facility, such loans are classified as non-current. Interest is payable semi-annually and is accrued over the period it becomes due. Accrued interest is recorded as part of accruals.

Finance costs are directly attributable to the acquisition, construction or production of qualifying assets measured at fair value and are therefore recognised as expenses in the Statement of Comprehensive Income in the period in which they are incurred.

(s) Commitments

Commitments for future expenditure arising from contracts are disclosed at their nominal value and inclusive of goods and services tax.

(t) Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the Balance Sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and contingent liabilities are presented inclusive of goods and services tax receivable or payable respectively. Refer Note 24.

(u) Dividend

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


41


(v) Smart Water Fund

The Smart Water Fund was established by Melbourne’s four water businesses and the State Government of Victoria for the purpose of providing grant funding to support the development of sustainable water use projects.

Contributions made to the Smart Water Fund are initially recognised as assets in the water businesses’ Balance Sheets. Expenses are subsequently recognised by the water businesses when incurred by the Fund.

Yarra Valley Water’s share of the Fund disbursements for the year is $555,236 (2013: $653,733) and is included in the Statement of Comprehensive Income. As at 30 June 2014, Yarra Valley Water’s Balance Sheet reflects its share of cash in the Fund totalling $174,139 (2013: $729,376). Refer Note 10.

(w) Environmental contributions

The Water Industry (Environmental Contributions) Act 2004 amended the Water Industry Act 1994 to make provision for environmental contributions to be paid by water authorities. The Act establishes an obligation for authorities to pay into the consolidated fund annually in accordance with a pre-established schedule of payments which sets out the amounts payable by each water business.

The purpose of the environmental contribution is set out in the Act and the funding may be used for the purpose of financing initiatives that seek to promote the sustainable management of water or address water-related initiatives. The environmental contributions are recognised as an expense as incurred.

(x) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Balance Sheet are shown inclusive of GST. The net amount of GST receivable from or payable to the ATO is included in the Balance Sheet as part of receivables or payables.

Cash flows are presented in the Cash Flow Statement on a gross basis except for the GST component of investing and financing activities which are disclosed as operating cash flows.

(y) Financial instruments

Financial instruments are initially measured at cost on transaction date which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition, these instruments are measured as set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method, less any impairment.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost comprising original debt less principal repayments and amortisation.

(z) Government grants

Government grants are recognised once reasonable assurance has been reached that the Corporation will comply with the conditions attaching to them and that the grants will be received. Government grants of a revenue nature are recognised as income over the periods necessary to match them with the related costs. Government grants related to assets are recognised in the Balance Sheet by deducting the grant in arriving at the carrying amount of the asset, thereby incurring a reduced depreciation charge.

42

2. New accounting standards and interpretations not yet adopted

Standard / Interpretation Summary

Applicable for annual reporting periods beginning on or after

Impact on Yarra Valley Water financial report

AASB 9 Financial Instruments This standard simplifies requirements for the classification and measurement of financial assets result from Phase 1 of the International Accounting Standards Board (IASB) project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments Recognition and Measurement)

1 January 2017 The preliminary assessment has not identified any material impact arising from AASB 9.

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

In addition to the new standards above, the Australian Accounting Standards Board (AASB) has issued a list of amending standards that are not effective for the 2013/14 year. In general, these amending standards include editorial and references changes that are expected to have insignificant impacts on the Corporation’s financial report.


43


3. Financial instruments

(a) Financial risk management

The Corporation’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, short-term and long-term borrowings with the Treasury Corporation of Victoria (TCV) and leases.

The main purpose of non-derivative financial instruments is to raise funds for Yarra Valley Water. The Corporation does not have any derivative financial instruments.

The Corporation meets quarterly with representatives of TCV to discuss financial markets, interest rate exposure and treasury management strategies in the context of the most recent economic conditions and forecasts. The Board provides principles for overall financial risk management as well as written policies covering specific areas.

The Corporation’s overall financial risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Corporation. Financial risks are identified, evaluated and managed in accordance with the Corporation’s operational requirements.

(b) Capital risk management

The Corporation controls its capital in order to maintain a satisfactory debt to equity ratio to provide the State Government of Victoria with adequate returns and to ensure that it can fund its operations as a going concern.

The capital structure of the Corporation consists of net debt (borrowings as detailed in section d. to this Note and offset by cash and bank balances – see Note 8) and equity of the Corporation (comprising contributed equity, asset revaluation reserve and retained earnings detailed in Notes 18 to 20).

The only externally imposed capital requirements of the Corporation are that:

– financial accommodation does not exceed the approval limits set by the Treasurer of Victoria pursuant to the Borrowing and Investment Powers Act 1987; and

– the Corporation, with the exception of a trading account with overdraft facilities, is required to borrow exclusively with the Treasury Corporation of Victoria.

These external capital requirements are incorporated into the management of capital through the Board and approval of the Corporate Plan by the State Government of Victoria.

The Corporation effectively manages its capital by assessing its financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses include the management of debt levels and distributions to the State Government of Victoria. There have been no changes to the strategy adopted by the Corporation to control its capital during the year. The gearing ratios for the years ended 30 June 2014 and 30 June 2013 were as follows:

Note2014

$’0002013

$’000

Borrowings – Current 244,000 174,550Borrowings – Non-current 1,701,500 1,649,700Less: cash 8 (345) (136)

Net debt 1,945,155 1,824,114Total equity 1,535,756 1,402,917

Total capital 3,480,911 3,227,031

Gearing ratio 56% 57%

44

(c) Financial risks

The main risks the Corporation is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. The Corporation uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk, ageing analysis for credit risk and maturities analysis for liquidity risk.

i Interest rate risk

The Corporation’s main interest rate risk arises from long-term borrowings. The risk is that the Corporation is unable to refinance existing debt at the Essential Services Commission’s (ESC) benchmark cost of debt which would expose the Corporation to higher finance costs. Arranging debt to mature at or close to the dates the ESC will use to calculate the efficient rate of debt is a prudent treasury practice. Borrowings issued at variable rates expose the Corporation to cash flow interest rate risk. Borrowings issued at fixed rates expose the Corporation to fair value interest rate risk. The adopted debt portfolio strategy is to shorten the duration and increase the level of floating rate debt.

Interest rates details and maturities analysis on borrowings are provided in the table below.

Interest rates sensitivity analysis

As at 30 June 2014, if interest rates had changed by +/- 50 basis points from the year end rates with all other variables held constant, the post tax profit impact for the year would have been $1.6 million (2013: $1.25 million) higher / lower as a result of higher / lower interest expense from variable interest rate borrowings.

ii Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and ensuring the availability of funding through an adequate amount of committed credit facilities. The Corporation manages liquidity risk by monitoring forecast and actual cash flows and ensuring that adequate borrowing facilities are maintained.

Financing arrangements

The Corporation had access to a total of $87.0 million (2013: $56.2 million) of unused approved borrowings by the Treasurer of Victoria as at 30 June 2014. The Corporation has a formal bank overdraft facility with the Australia and New Zealand Banking Group Limited.


45


Maturities of financial liabilities

The following table allocates the Corporation’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.

Interest rate details and maturities analysis on financial instruments: liabilities

Weighted average

effective interest rate

%

Less than 12 months

$’000

1 to 3 years $’000

3 to 5 years $’000

Over 5 years

$’000Total $’000

2014Refundable advances – non-interest bearing

-

-

2,389

-

-

2,389

Payables – non-interest bearing - 120,485 - - - 120,485Borrowings – fixed interest rate 5.56 148,200 256,400 285,500 929,600 1,619,700Borrowings – floating interest rate 2.79 95,800 30,000 60,000 140,000 325,800

Total 364,485 288,789 345,500 1,069,600 2,068,374

2013Refundable advances – non-interest bearing

-

-

1,518

-

-

1,518

Payables – non-interest bearing - 108,050 - - - 108,050Borrowings – fixed interest rate 5.66 98,200 291,400 276,400 851,900 1,517,900Borrowings – floating interest rate 2.97 76,350 - 70,000 160,000 306,350

Total 282,600 292,918 346,400 1,011,900 1,933,818

46

iii Credit risk

Credit risk arises mainly from credit exposure to customers including outstanding receivables. A further exposure to credit risk arises from deposits with the Treasury Corporation of Victoria (TCV) and other financial institutions. In relation to credit exposure to customers, the Corporation is legally obliged to service all customers in its district without regard to their credit quality and has extensive programs in place to minimise customer credit risk.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates. Receivables that are neither past due nor impaired had an average rate of default to revenue in the three years 2011/12 to 2013/14 of 0.822 per cent. For the 2013/14 financial year, the Corporation had $9.5 million (2013: $5.5 million) of bad debts and revenue of $956.6 million (2013: $727.6 million), being a default rate of 0.99 per cent.

The credit risk attributable to the Corporation’s deposits with the TCV and other financial institutions is considered very low due to the minor amounts involved and the high credit ratings of its counter parties. Currently, the Corporation does not hold any collateral as security nor credit enhancements relating to any of its financial assets.

The maximum exposure to credit risk at the reporting date is the carrying amount of the items in the Balance Sheet. For receivables, the maximum exposure is the gross amount of receivables before allowing for doubtful debts.

The Corporation uses ageing analysis to measure receivables credit risk as follows:

Ageing analysis and impairment detail of receivables

Not aged

1 to 16 days

$’000

17 to 60 days

$’000

61 to 90 days

$’000

91 to 180 days

$’000

Over 180 days

$’000Total $’000

2014 Trade debtorsNot past due and not impaired - 35,686 - - - - 35,686 Past due but not impaired - - 35,475 4,208 6,178 10,350 56,211 Impaired - (42) (187) (53) (250) (1,466) (1,998)

Net trade debtors - 35,644 35,288 4,155 5,928 8,884 89,899

Accrued revenue 77,994 - - - - - 77,994 Other receivables 8,887 - - - - - 8,887

Total receivables 86,881 35,644 35,288 4,155 5,928 8,884 176,780

2013Trade debtorsNot past due and not impaired - 22,086 - - - - 22,086 Past due but not impaired - - 20,507 2,738 4,268 12,013 39,526 Impaired - (78) (472) (136) (245) (917) (1,848)

Net trade debtors - 22,008 20,035 2,602 4,023 11,096 59,764

Accrued revenue 59,496 - - - - - 59,496 Other receivables 10,805 - - - - - 10,805

Total receivables 70,301 22,008 20,035 2,602 4,023 11,096 130,065

The Corporation’s policy on the provision for impairment of trade receivables is described in Note 1(j).


47


(d) Fair value

All financial assets and liabilities with the exception of leases are recognised in the Balance Sheet. Cash, cash equivalents and non-interest-bearing financial assets and financial liabilities are carried at a cost which approximates the fair value. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of the interest-bearing financial liabilities is determined by discounting the expected future cash flows at current interest rates.

The carrying amounts and fair values of interest-bearing financial liabilities at balance date are as follows:

2014 Carrying amount

$’000

2014 Net fair

value $’000

2013 Carrying amount

$’000

2013 Net fair

value $’000

Interest-bearing financial liabilitiesBorrowings 1,945,500 2,112,578 1,824,250 1,949,474

Total 1,945,500 2,112,578 1,824,250 1,949,474

2014 $’000

2013 $’000

4. Revenue

Rendering of servicesFixed service charges 347,664 292,140Water usage charges 368,602 255,543Sewage disposal charges 177,894 167,504Trade waste charges 22,708 21,195Desalination plant return - (35,546)

Total rendering of services 916,868 700,836Interest income 11 21Other revenueNew customer contributions by developers 20,786 15,781Other products and services 14,325 6,673Developer contributed assets 11,490 19,154Rent 1,373 1,110Other 24,006 19,216

Total other revenue 71,980 61,934

Total revenue 988,859 762,791

48

Note2014

$’0002013

$’0005. Expenses

Bulk water and sewerage charges 21(b) 538,667 359,643Depreciation 12(b) 67,051 61,462Contract payments 49,894 47,994Salary and employee benefits expense 1 42,920 37,446Environmental contribution 29,880 17,503Amortisation 11(b) 18,958 14,170Billing and revenue collection costs 10,344 9,167Bad and doubtful debts 9,483 5,519Information technology costs 4,969 7,336Write off of assets 4,730 2,713Consulting services 3,919 3,072Electricity 3,840 3,382Government taxes, fees and contributions 3,392 3,268Rental expenses relating to operating leases 426 873Smart Water Fund contributions 555 654Transport costs 669 616Superannuation defined benefit expense 1, 13(c) 905 1,245Other expenses 11,927 11,750

Total expenses 802,529 587,813

Net (gain) / loss on disposal of infrastructure, property, plant and equipment (23) 91

6. Income tax

(a) The components of income tax expense comprise:Current income tax – current income tax charge 23,490 17,870Deferred income tax – reversal of temporary difference (3,873) 2,378Adjustments for current tax of prior periods 746 -

Income tax expense reported in net profit 20,363 20,248

(b) Deferred income tax recognised in other comprehensive income

Defined benefit superannuation plan actuarial gain 1,399 2,344Gain on revaluation of infrastructure assets 43,674 31,302

Total deferred income tax recognised in other comprehensive income 45,073 33,646


49


2014 $’000

2013 $’000

(c) Reconciliation of income tax expense to prima facie tax payable

Accounting profit before income tax expense 65,962 66,629

At the statutory income tax rate of 30% (2013: 30%) 19,789 19,989Adjustments for current tax of prior periods 746 -Non-deductible expenses (186) 247Non-deductible depreciation 14 12

Income tax expense reported in net profit 20,363 20,248

(d) Income tax payable

Current tax payable 10,200 3,948

(e) Deferred tax items

Non-current liabilities – deferred taxAccelerated depreciation for tax purposes 356,987 361,012Revaluation of infrastructure to fair value 295,783 252,109Revaluation of land to fair value 36,684 36,574Revaluation of buildings to fair value 61 61

Total non-current liabilities – deferred tax 689,515 649,756

Recognised directly in equity 332,525 288,851Recognised in net profit 356,990 360,905

Total non-current liabilities – deferred tax 689,515 649,756

Deferred tax assetsDefined benefit superannuation asset 1,231 35Provisions (6,356) (6,338)Buildings future deductible amounts (1,041) (1,155)Unearned Government grant income (1,087) (1,034)

Total deferred tax assets (7,253) (8,492)

Net deferred tax liabilities 682,262 641,264

50

2014 $’000

2013 $’000

7. Dividends paid

Dividends paid by the Corporation to the State Government of Victoria were:Unfranked interim dividend paid - 4,500Unfranked final dividend paid for prior year 17,700 53,000

Total dividends paid 17,700 57,500

The Corporation, under the National Tax Equivalent Regime, is not required to maintain a franking account.

8. Current assets – cash

Cash at bank 344 135Cash on hand 1 1

Total current assets – cash 345 136

9. Current assets – receivables

Trade receivables – debtors 91,897 61,612Trade receivables – accrued revenue 77,994 59,496Other receivables 8,887 10,805Less: Provision for impairment of receivables (1,998) (1,848)

Total current assets – receivables 176,780 130,065

Refer Note 3 Financial instruments for ageing analysis and assessment of risks associated with receivables.

Movements in the provision for impairment of receivablesBalance at the beginning of the year (1,848) (1,908)Reversal of provision and write-offs recognised as an expense 9,483 5,519Increase in provision (9,633) (5,459)

Total provision for impairment of receivables (1,998) (1,848)

10. Current assets – other

Water Efficiency Program for Schools – advance 910 1,519Other Water Efficiency Programs – advance 160 3,323Prepayments 3,538 2,972

Total current assets – other 4,608 7,814

The Water Efficiency Program for Schools – advance represents amounts advanced from the Department of Environment and Primary Industries and from the Department of Education and Early Childhood Development for the audit and delivery of the works required to improve the water efficiency of schools. The amount is recognised as both an asset and a liability in the Balance Sheet.

The Other Water Efficiency Programs – advance includes amounts advanced from the Department of Environment and Primary Industries with the objective to find a more sustainable way to service remote unsewered communities such as backlog areas.

Prepayments include $174,139 (2013: $729,376) which relate to amounts paid to the Smart Water Fund but not yet distributed.


51


2014 $’000

2013 $’000

11. (a) Non-current assets – intangible assets

SoftwareCost 131,261 120,142Less accumulated amortisation (56,569) (37,844)Works in progress 30,954 16,995

Total software 105,646 99,293

Water entitlements and other intangible assets 96,917 96,961

Total intangible assets 202,563 196,254

11. (b) Movements in carrying amounts

Water entitlements

& other intangible

assets $’000

Software $’000

Intangible works in progress

$’000Total $’000

2014Balance at 1 July 2013 96,961 82,298 16,995 196,254Additions - - 25,362 25,362Transfers - 11,403 (11,403) -Disposals (33) (62) - (95)Amortisation expense (11) (18,947) - (18,958)

Carrying amount at 30 June 2014 96,917 74,692 30,954 202,563

2013Balance at 1 July 2012 90,000 59,900 29,894 179,794Additions - - 33,714 33,714Transfers 10,045 36,568 (46,613) -Transfer of water entitlements (3,084) - - (3,084)Amortisation expense - (14,170) - (14,170)

Carrying amount at 30 June 2013 96,961 82,298 16,995 196,254

The amortisation expense has been included in the line item ‘Amortisation’. Refer to Note 5.

Yarra Valley Water made a contribution of $100 million toward the cost of the Goulburn-Murray Water Connections Project (Connections project), formerly known as the Northern Victorian Irrigation Renewal Project. In exchange for this contribution, Yarra Valley Water is entitled to a share of the water savings generated by the Connections project on an ongoing basis. The entitlements are pooled between the three Melbourne metropolitan retailers.

In exchange for access to the three Melbourne metropolitan retailers’ pooled water entitlements, four regional urban water businesses (Barwon Water, South Gippsland Water, Western Water and Westernport Water) are required to make contributions of $9.3 million to the retailers, with Yarra Valley Water’s share being $3.1 million. The investment has therefore been recognised at its net value ($100 million less $3.1 million).

Water entitlements and other intangible assets are recognised at cost less accumulated amortisation.

52

2014 $’000

2013 $’000

12. (a) Non-current assets – infrastructure, property, plant and equipment

InfrastructureAt fair value 3,464,273 3,197,802

Total infrastructure 3,464,273 3,197,802

Freehold landAt fair value 277,128 265,103

Total freehold land 277,128 265,103

Crown landAt fair value 408 408

Total crown land 408 408

BuildingsAt fair value 35,039 19,016Less accumulated depreciation (1,575) (939)

Total buildings 33,464 18,077

Capital works in progress 123,744 171,762

Plant and equipmentAt fair value 56,741 47,438Less accumulated depreciation (20,595) (23,046)

Total plant and equipment 36,146 24,392

Total infrastructure, property, plant and equipment 3,935,163 3,677,544


53


12. (b) Non-current assets – infrastructure, property, plant and equipment – movements in carrying amounts

Capital works in progress

$’000Land $’000

Crown land

$’000Buildings

$’000

Plant and equipment

$’000

Infra- structure

$’000Total $’000

2014Balance at 1 July 2013 171,762 265,103 408 18,077 24,392 3,197,802 3,677,544Additions 183,726 - - - - - 183,726Transfers (229,705) 12,066 - 16,136 20,317 181,186 -Disposal / write off (2,039) (41) - (110) (1,724) (721) (4,635)Depreciation expense - - - (639) (6,839) (59,573) (67,051)Revaluation increase recognised in equity

-

-

-

-

-

145,579

145,579

Carrying amount at 30 June 2014 123,744 277,128 408 33,464 36,146 3,464,273 3,935,163

2013Balance at 1 July 2012 150,817 258,853 - 18,499 22,966 2,974,903 3,426,038Additions 210,933 - - - - - 210,933Transfers (189,988) 6,250 - 1,840 10,287 171,611 -Disposal / write off - - - (1,631) (1,075) (7) (2,713)Depreciation expense - - - (631) (7,786) (53,045) (61,462)Revaluation increase recognised in equity

-

-

408

-

-

104,340

104,748

Carrying amount at 30 June 2013 171,762 265,103 408 18,077 24,392 3,197,802 3,677,544

Infrastructure

The 30 June 2014 valuation of infrastructure assets, using the income approach, was estimated by discounting the Corporation’s future cash flows to their present value and arriving at an enterprise value. Net debt is deducted from the enterprise value to obtain the equity value. The value of infrastructure assets is derived from the equity value after deducting all other assets and liabilities. The discount rate selected represents the rate that market participants would reasonably expect to use in determining the fair market value of the Corporation. Future estimated cash flows were based on the Essential Services Commission’s pricing determination and updated management forecasts. In order to assess the reasonableness of our valuation, the enterprise value is reviewed by comparison to other related industries using earnings before interest, tax and depreciation/amortisation (EBITDA) and regulatory asset base (RAB) multiples.

Advice on relevant assumptions and discount factors have been independently provided by Deloitte Touche Tohmatsu.

If infrastructure assets were measured at historical cost, the carrying amount would be $2.54 billion (2013: $2.41 billion).

Land – specialised / non-specialised

The 30 June 2011 valuation of freehold land was independently determined by the Victorian Valuer-General’s Office using fair market value as at 30 June 2011 for land. In undertaking the valuation of land, the Victorian Valuer-General’s Office adopted the market based direct comparison approach, whereby the properties were valued by analysing land sales in comparable proximity to the subject sites and allow for shape, size, topography, location and other relevant factors specific to the land being valued. Where applicable, specialised land is adjusted for the community service obligation (CSO) to reflect the specialised nature of the land being valued. Land was checked against indices provided by the Victorian Valuer-General’s Office to determine any material or exceptionally material movements.

If land were measured at historical cost, the carrying amount would be $53.6 million (2013: $41.6 million).

54

Buildings (non-specialised)

The 30 June 2011 valuation of buildings was independently determined by the Victorian Valuer-General’s Office using fair market value based on highest and best use at 30 June 2011 for buildings. Buildings were checked against indices provided by the Victorian Valuer-General’s Office to determine any material or exceptionally material movements.

If buildings were measured at historical cost, the carrying amount would be $42.7 million (2013: $27.3 million).

Plant and equipment

Plant and equipment is held at carrying value (depreciated cost) which approximates fair value. Unless there is market evidence that current replacement costs are significantly different from the original acquisition cost, it is considered unlikely that depreciated replacement cost will be materially different from the existing carrying value.

Crown land

The 30 June 2013 valuation of crown land was independently determined by the Victorian Valuer-General’s Office using fair market value as at 30 June 2013. In undertaking the valuation of crown land the Victorian Valuer-General’s Office adopted the market-based direct comparison method whereby the properties were valued by analysing land sales in comparable proximity to the subject sites and allowing for shape, size, topography, location and other relevant factors specific to the land being valued. From the sales analysed an appropriate rate per square metre was applied. Where applicable, crown land is adjusted for the community service obligation to reflect the specialised nature of the land being valued.

12. (c) Fair Value Measurement – infrastructure, property, plant and equipment

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

In accordance with AASB 13 Fair Value Measurement the Corporation’s non-financial assets have been categorised into the three levels of the fair value hierarchy depending on the degree to which inputs into the fair value measurement are observable, and the significance of the inputs to the fair value measurement.

Level 1(i) $’000

Level 2(ii) $’000

Level 3(iii) $’000

Fair Value as at 30

June 2014 $’000

Infrastructure - - 3,464,273 3,464,273 Land (specialised) - - 109,793 109,793 Land (non-specialised) - 167,335 - 167,335 Buildings - 33,464 - 33,464 Plant and equipment - - 36,146 36,146 Crown land - - 408 408

Total - 200,799 3,610,620 3,811,419

(i) Quote prices (unadjusted) in active markets for identical assets or liabilities.

(ii) Inputs based on observable market data (either directly using prices or indirectly derived from prices).

(iii) Input not based on observable market data.


55


The following table presents a reconciliation of changes in Level 3 items for period ending 30 June 2014.

Plant and equipment

$’000Crown land

$’000

Land (specialised)

$’000Infrastructure

$’000Total $’000

Opening balance 1 July 2013 24,392 408 109,793 3,197,802 3,332,395Acquisitions 20,317 - - 181,186 201,503Disposals (1,724) - - (721) (2,445)Depreciation (6,839) - - (59,573) (66,412)Revaluation gains recognised in other comprehensive income

-

-

-

145,579

145,579

Closing balance 30 June 2014 36,146 408 109,793 3,464,273 3,610,620

The following table summarises the valuation techniques used and significant unobservable inputs of recurring Level 3 fair value measurements. There have been no changes in valuation technique.

Valuation technique

Significant unobservable inputs

Range (weighted average)

Sensitivity of the input to fair value

Land (Specialised and Crown)

Market approach Community service obligation (CSO) adjustment

20% to 90%

A significant increase or decrease in the CSO adjustment would result in a higher or lower land valuation.

Infrastructure Income approach using a discounted cash flow model

Weighted average cost of capital (WACC)

6.25% to 6.5%

The higher the WACC the lower the valuation.

Useful life 3 to 100 years (56 years)

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

Inflation 2.5% A significant increase or decrease in inflation rates would result in a higher or lower valuation.

Plant and equipment

Depreciated cost (deemed fair value)

Useful life 3 to 25 years (3 years)

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

Cost per unit $100 to $1,409,766 ($12,000)

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

56

13. Defined benefit superannuation asset

(a) Superannuation plan information

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

Defined benefit members receive lump sum retirement benefits on retirement, death, disablement and withdrawal. The defined benefit plan is closed to new members. All new members of the fund receive accumulation only benefits.

The Superannuation Industry (Supervision) Act 1993 (SIS) governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions.

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

– administration of the plan and payment to the beneficiaries from plan assets when required in accordance with the plan rules;

– management and investment of the plan assets; and

– compliance with superannuation law and other applicable regulations.

The prudential regulator, the Australian Prudential Regulation Authority (APRA), licenses and supervises regulated superannuation plans.

There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year.

(b) Description of risks

There are a number of risks to which the plan exposes the Corporation. The more significant risks related to the defined benefits are:

– Investment risk: The risk that investment returns will be lower than assumed and the Corporation will need to increase contributions to offset this shortfall.

– Salary growth risk: The risk that wages or salaries (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.

– Legislative risk: The risk that legislative changes could be made which increase the cost of providing the defined benefits.

The plan assets are invested by the Trustee in a pool of assets with plans providing defined benefits for other employers. The assets have a benchmark weighting to equities of 50% and therefore the plan has significant concentration of equity market risk. However, within the equity investments, the allocation both globally and across sectors is diversified.


57


2014 $’000

2013 $’000

(c) Reconciliation of the net defined benefit asset

Net defined benefit asset / (liability) at start of year 116 (6,933)Net interest (917) (1,083)Past service cost 12 (162)Actual return on plan assets less interest income 3,283 3,872Actuarial gains arising from changes in demographic assumptions 79 -Actuarial gains arising from changes in financial assumptions 799 889Actuarial gains arising from liability experience 273 2,579Employer contributions 459 954

Net defined benefit asset at year end 4,104 116

Superannuation defined benefit expense (Note 5) is represented by the sum of net interest ($917,000) and past service cost $12,000.

(d) Reconciliation of the fair value of plan assets

Fair value of plan assets at beginning of the year 31,584 29,321Interest income 1,046 862Actual return on plan assets less interest income 3,283 3,872Employer contributions 459 954Contributions by plan participants 255 280Benefits paid (4,906) (3,393)Taxes & premiums paid (250) (312)

Fair value of plan assets at year end 31,471 31,584

(e) Reconciliation of the defined benefit obligation

Present value of defined benefit obligations at beginning of the year 31,468 36,254Current service cost 917 1,083Interest cost 1,034 1,024Contributions by plan participants 255 280Actuarial gains arising from changes in demographic assumptions (79) -Actuarial gains arising from changes in financial assumptions (799) (889)Actuarial gains arising from liability experience (273) (2,579)Benefits paid (4,906) (3,393)Taxes & premiums paid (250) (312)

Superannuation liability 27,367 31,468

58

(f) Fair value plan assets as at 30 June 2014

Total $’000

Quoted prices in active

markets for identical assets – Level 1

$’000

Significant observable

inputs – Level 2

$’000

Unobservable inputs –-

Level 3 $’000

Asset categoryInvestment funds 31,471 - 31,471 -

Total 31,471 - 31,471 -

2014 %

2013 %

(g) Plan assets

Australian equity 30 30International equity 24 29Fixed income 11 10Defensive alternatives 10 7Property 9 9Growth alternatives 8 8Cash 8 7

Total 100 100

(h) Fair value of Corporation’s own financial instruments

The fair value of plan assets includes no amounts relating to:

– any of the Corporation’s own financial instruments

– any property occupied by, or other assets used by, the Corporation.

2014 %

2013 %

(i) Actuarial assumptions to determine defined benefit cost

Discount rate 3.40 3.00Expected salary increase rate 4.60 4.60

(j) Actuarial assumption to determine defined benefit obligation

Discount rate 3.70 3.40Expected salary increase rate 4.60 4.60


59


(k) Sensitivity analysis

The defined benefit obligation as at 30 June 2014 under several scenarios is presented below.

Scenario A: 0.5% pa lower discount rate assumption

Scenario B: 0.5% pa higher discount rate assumption

Scenario C: 0.5% pa lower salary increase rate assumption

Scenario D: 0.5% pa higher salary increase rate assumption

Base Case Scenario A Scenario B Scenario C Scenario D

Discount rate 3.7% pa 3.2% pa 4.2% pa 3.7% pa 3.7% paSalary increase rate 4.6% pa 4.6% pa 4.6% pa 4.1% pa 5.1% paDefined benefit obligation ($’000) 27,367 28,717 26,100 26,093 28,712

The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions.

(l) Funding arrangements

The Equipsuper Contribution and Funding Policy provides for a review of the financial position of the plan each six months, as at 30 June and 31 December, with the Corporation contribution rate comprising a long-term contribution rate and an adjustment to meet the financing objective of a Funding Ratio of 105%.

The Funding Ratio is the ratio of assets to accrued liabilities, being the greater of vested benefits and the present value of past membership benefits. Where the Funding Ratio is greater than 100% the financing objective is to achieve a Funding Ratio of 105% over five years. Where the Funding Ratio is less than 100% the primary financing objective is to achieve 100% over three years and 105% over five years.

In the most recent review of the financial position as at 31 December 2013 the actuary recommended a Corporation contribution rate of nil. The Corporation continues to contribute salary sacrifice contributions and at the required rates for accumulation members. The next review of the financial position and Corporation contribution rate is as at 30 June 2014.

(m) Expected contributions

Expected employer contributions for the financial year ending 30 June 2015 are expected to be nil.

(n) Maturity profile of defined benefit obligation

The weighted average duration of the defined benefit obligation as at 30 June 2014 is eight years.

$’00030 June 2015 1,824 30 June 2016 1,938 30 June 2017 2,250 30 June 2018 2,476 30 June 2019 2,379 Following 5 years 13,751

2014 $’000

2013 $’000

14. Current liabilities – payables

Trade payables 37,826 35,319Accruals 79,185 70,000Security deposits 3,474 2,731

Total current liabilities – payables 120,485 108,050

Refer Note 3 Financial instruments for ageing analysis and assessment of risks associated with receivables.

60


2014 $’000

2013 $’000

15. Current liabilities – provisions

Employee benefits 15,387 14,244Other provisions 2,057 3,392

Total current liabilities – provisions 17,444 17,636

Employee benefits include amounts relating to accrued annual leave and long service leave. Employee benefits expected to be wholly settled within 12 months: $2,083,238 (2013:$1,627,394).

Employee benefits relating to 2013 were restated in accordance with transitional provisions in AASB 119 Employee benefits. Refer to Note 1 Changes in accounting policies.

16. Current and non-current liabilities – unearned income

Grant income – current 436 3,440

Total current liabilities – unearned income 436 3,440

Developer contributions – non-current 7,543 7,543

Total current and non-current liabilities – unearned income 7,979 10,983

Unearned developer contributions income are amounts received or receivable from developers for the reimbursement of costs that will be incurred by the Corporation for the construction of assets to service new urban growth. The amounts paid to the Corporation will be offset in future years by new customer contributions that will be payable when the development lots are released for sale.

17. Non-current liabilities – provisions

Employee benefits 1,548 1,363

Total non-current liabilities – provisions 1,548 1,363

Movements in provisions (current and non-current)Employee benefits Carrying amount at beginning 15,607 16,356Additional provision 5,741 3,998Amounts utilised during year (4,413) (4,747)

Carrying amount at year end 16,935 15,607

Other provisionsCarrying amount at beginning 3,392 2,022Additional provision 814 36,530Amounts utilised during year (2,149) (35,160)

Carrying amount at year end 2,057 3,392

61


2014 $’000

2013 $’000

18. Contributed equity

Contributed equity 477,297 477,297

Total contributed equity 477,297 477,297

Additions to net assets which have been designated as contributions by owners are recognised as contributed equity. Other transfers that are in the nature of contributions or distributions have also been designated as contributions by owners.

19. Asset revaluation reserve

Asset revaluation reserve 879,011 777,106

Total asset revaluation reserve 879,011 777,106

Movements in asset revaluation reserve

Infrastructure $’000

Crown land

$’000Land $’000

Buildings $’000

Total $’000

2014Balance at 1 July 2013 588,254 408 188,256 188 777,106Revaluation, net of tax effect 101,905 - - - 101,905

Balance at 30 June 2014 690,159 408 188,256 188 879,011

2013Balance at 1 July 2012 515,216 - 188,256 188 703,660Revaluation, net of tax effect 73,038 408 - - 73,446

Balance at 30 June 2013 588,254 408 188,256 188 777,106

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

2014 $’000

2013 $’000

20. Retained earnings

Opening balance 148,514 154,637Net profit 45,599 46,381Defined benefit superannuation plan actuarial gain 4,434 7,340Net deferred tax assets recognised through retained earnings (1,399) (2,344)Dividend paid (17,700) (57,500)

Closing balance 179,448 148,514

62

21. Related party disclosures

(a) Parent entity

The Corporation is owned by the State Government of Victoria.

(b) Relationship with State Government of Victoria related parties

i. Minister for Environment and Climate Change

The Corporation, under a normal commercial agency arrangement, bills and collects rates on behalf of the Minister for Environment and Climate Change relating to Parks Victoria services. The Corporation charges the Department of Environment and Primary Industries for the services it provides in billing and collecting rates and on charges costs incurred regarding supplementary council valuations.

2014 $’000

2013 $’000

Amounts recognised as revenue in the Statement of Comprehensive Income Administration fees for billing and collecting rates and reimbursement of costs of supplementary council valuations 2,703 2,462

Cash amounts paid during the year Parks Victoria services billed to customers 58,734 49,467

ii. Melbourne Water Corporation

The Corporation transacts solely with the Melbourne Water Corporation for the purchase of potable water and disposal of sewage. The Corporation, under a normal commercial agency arrangement, bills and collects drainage rates and charges on behalf of the Melbourne Water Corporation. The Corporation charges the Melbourne Water Corporation for the services it provides in billing and collecting drainage fees on behalf of the Melbourne Water Corporation and on charges costs incurred regarding supplementary council valuations.

Amounts recognised as an expense in the Statement of Comprehensive Income Bulk water and sewer wholesaler charges expense 538,667 359,643

Amounts recognised as revenue in the Statement of Comprehensive Income Administration fees for billing and collecting drainage rates and reimbursement of the costs of supplementary council valuations 4,576 3,574

Amounts recognised in the Balance Sheet Goulburn-Murray Water Connections Project (previously named Northern Victoria Irrigation Renewal Project) - 10,000

Cash amounts paid during the year Drainage billed to customers 76,270 70,390


63


iii. Department of Environment and Primary Industries

The Corporation is required to make various payments to the Department of Environment and Primary Industries.

2014 $’000

2013 $’000

Amounts recognised as an expense in the Statement of Comprehensive Income Environmental contribution 29,880 17,503

iv. Treasury Corporation of Victoria

The Corporation borrows from and invests with the Treasury Corporation of Victoria. The aggregate amount of borrowings payable at reporting date and the amounts of interest expense included in the determination of profit before income tax is:

Aggregate amount of borrowings Interest expense

1,945,500 99,269

1,824,250 92,069

v. Department of Treasury and Finance

The Corporation pays amounts to the State Government of Victoria, via the Department of Treasury and Finance. Amounts were paid as follows:

Dividend paid Financial accommodation levy

17,700 20,908

57,500 16,110

vi. Department of Human Services

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

Concession amounts billed during the year 45,703 44,735

vii. State Revenue Office

In addition to Payroll Tax and Land Tax, which are payable on normal commercial terms and conditions, customers of the Corporation who are not for profit entities are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the State Revenue Office.

Concession amounts billed during the year 1,224 1,176

viii. Other State Government of Victoria related parties

Water and sewerage services were provided to wholly owned State Government of Victoria entities for properties within Yarra Valley Water’s district under normal commercial terms and conditions.

All other transactions with State Government of Victoria related party entities were made on normal commercial terms and conditions.

64

22. Responsible Persons, Executive Officers and other personnel

(a) Responsible Persons

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

The relevant Minister of Yarra Valley Water during the reporting period, from 1 July 2013 to 30 June 2014, was the Hon Peter Walsh MLA, Minister for Water.

The Directors of Yarra Valley Water at any time during the financial year ended 30 June 2014 were:

Peter Snowden Wilson

Chairman

Vincent Anthony (Tony) Kelly

Retired as Managing Director 30 June 2014

David Anthony Middleton

Deputy Chairman

Greg Joseph Camm

Appointed as a Director 1 October 2013

Dean Matthew Comrie

Caryle Patricia Demarte

Retired as a Director 30 September 2013

Susan Elizabeth Friend

Stephen James McArthur

Therese Anne Ryan

Appointed as a Director 1 October 2013

Michael Douglas Tilley

Retired as a Director 30 September 2013


65


Remuneration of Responsible Persons

The remuneration paid to the Minister for Water is reported in the Annual Report of the Department of Premier and Cabinet. Other relevant interests are declared in the Register of Members’ Interest which each member of the Parliament completes.

The number of responsible persons whose remuneration from the Corporation was within the specified bands were as follows:

2014 No.

2013 No.

$10,000 – $19,999 2 1$30,000 – $39,999 2 1$40,000 – $49,999 3 5$50,000 – $59,999 1 -$90,000 – $99,999 1 1$400,000 – $409,999 - 1$410,000 – $419,999 1 -

Total numbers 10 9

Total amount

$’000 807

$’000 800

(b) Transactions with director related entities

Water and sewerage services were provided to Directors or director related entities for properties within Yarra Valley Water’s district under normal commercial terms and conditions.

Mr Kelly was Chairman of Savewater! Alliance Incorporated. The Corporation paid membership fees and purchased goods and services in the amount of $329,560 (2013: $716,971). No amounts remained payable to Savewater! Alliance Incorporated at 30 June 2014 (2013: Nil).

Mr Kelly was a Director of Smart Water Fund. Smart Water Fund has provided services to the Corporation for which an amount of $6,981 (2013: $1,000,000) in fees was paid or payable on normal commercial terms and conditions. No amounts remained payable at 30 June 2014 (2013: Nil). Prepayments of $174,139 (2013: $729,376) which relates to amounts paid but not yet distributed.

Mr Middleton is the Regional Business Group Manager, Water for CH2M Hill Australia Pty Ltd. No services were provided to the Corporation by CH2M Hill Australia Pty Ltd (2013: $43,093) during the year.

Mr Wilson was the Chairman of Vision Super Pty Ltd until the end of his rotational term on 30 June 2014 and continues as a Director of Vision Super Pty Ltd. Vision Super Pty Ltd provides superannuation services to the Corporation’s employees for which an amount of $346,036 (2013: $290,064) in employee superannuation contributions was paid or payable on normal commercial terms and conditions. No amounts remained payable at 30 June 2014 (2013: Nil).

Mr Comrie is a Project Director with SP AusNet. SP AusNet has provided services to the Corporation for which an amount of $124,784 (2013: $137,569) in fees was paid or payable on normal commercial terms and conditions. No amounts remained payable at 30 June 2014 (2013: Nil). Select Solutions, a division of SP AusNet, has provided services to the Corporation for which an amount of $15,852,954 (2013: $11,760,242) in fees was paid or payable on normal commercial terms and conditions. No amounts remained payable at 30 June 2014 (2013: Nil).

There were no other transactions with director related entities.

66


(c) Remuneration of Executive Officers

The number of Executive Officers, excluding the Responsible Persons, whose total annualised remuneration from the Corporation was within the specified bands were as follows:

Total Remuneration Base Remuneration

2014 No.

2013 No.

2014 No.

2013 No.

$90,000 – $99,999 - - - 1*$210,000 – $219,999 - - - 1$220,000 – $229,999 - - 1 4$230,000 – $239,999 - 1 2 -$240,000 – $249,999 - - 2 1$250,000 – $259,999 1 1 - 1$260,000 – $269,999 2 3 2 -$270,000 – $279,999 2 - - -$280,000 – $289,999 - 1 - -$290,000 – $299,999 - 1 - -$300,000 – $309,999 2 - - -$570,000 – $579,999* - 1* - -

Total numbers 7 8 7 8

Total annualised employee equivalent (AEE) 7 8 7 8

Total amount $’000 1,950 2,435 1,705 1,716

Total remuneration is inclusive of base remuneration, bonus payments, redundancy payments, retirement benefits and payments of annual leave and long service leave upon termination.

Annualised employee equivalent (AEE) is based on working 38 hours per week over the reporting period.

The definition of Executive Officers was revised in the current year in accordance with FRD 21B Disclosure of Responsible Persons, Executive Officers and Other Personnel in the Financial Report.

*The disclosure relates to the retirement of a long-serving executive officer in November 2012. Upon termination, long service leave and annual leave payments were made and have been disclosed in total remuneration.

(d) Key management personnel compensation

$’000 $’000

Key management personnel compensation

Short-term employee benefits 2,508 2,549

Post-employment benefits 249 686

Other employment benefits* 49 50

Total (GST inclusive) 2,806 3,285

Total numbers 17 17

Key management personnel includes Responsible Persons and Executive Officers. Where applicable, the table above includes performance bonuses paid during the year, based on performance in the previous year.

*Other employment benefits represents long service leave.

(e) Other personnel (contractors with significant management responsibilities)

During the year, Yarra Valley Water had no other personnel, by way of contractors, charged with significant management responsibilities.

67


2014 $’000

2013 $’000

23. Remuneration of auditor

Amount received, or due and receivable, by the Victorian Auditor-General’s Office for auditing the financial statements of the Corporation 129 131

24. Contingent liabilities and contingent assets

(a) Contingent liabilities

The Corporation is unaware of any material contingent liability. Claims to which the Corporation is aware and which may result in a liability being incurred have been provided for as other provisions. Refer Notes 14 and 15.

(b) Contingent assets

The Corporation enters into agreements with land developers whereby assets are transferred to the Corporation at no cost. These assets are brought to account as revenue and capitalised. At the reporting date, land developers had commenced construction of assets that are transferred to the Corporation after the maintenance period contingent upon the release of Statements of Compliance by the Corporation. Due to the nature of the industry and the assets involved, a contingent asset amount cannot be reliably measured.

25. Commitments

(a) Capital commitments

Total capital expenditure contracted for at balance date but not provided for in the financial statements Payable:Not later than one year 75,350 65,730Later than one year but not later than five years 41,513 9,913Greater than five years 64 123


The Corporation’s capital commitments include growth works and mains renewals for both water and sewer.

(b) Lease commitments

Non-cancellable operating leases contracted for at balance date but not provided for in the financial statements Payable:Not later than one year 197 381Later than one year but not later than five years 106 256Later than five years 63 5

Total (GST inclusive) 366 642

Non-cancellable operating lease receivable:Not later than one year 776 839Later than one year but not later than five years 1,088 1,340Later than five years 1,871 2,141


There are no commitments in relation to finance leases as the Corporation does not have any finance leases.

68


2014 $’000

2013 $’000

(c) Other commitments

Other expenditure commitments at balance date not provided for in the financial statements Payable:Not later than one year 29,880 29,880Later than one year but not later than five years 29,880 59,760


Other commitments are represented by environmental commitments. The Corporation has a commitment to pay an environmental contribution to the Department of Environment and Primary Industries of $29.9 million per annum until 30 June 2016.

26. Ex-gratia expenses

Hardship write offs for customers in the Arrange and Save Program 1,704 1,425Write offs for disconnected customer accounts greater than 180 days 2,142 4,644Bankruptcies and liquidations 209 223Minimum account write offs 94 84


All ex-gratia expenses above form part of bad and doubtful debts at Note 5.

27. Economic dependency

The normal trading activities of the Corporation depend on the provision of bulk water and sewerage services from the Melbourne Water Corporation. The normal trading activities of the Corporation also depend to a significant extent on the provision of finance from the Treasury Corporation of Victoria.

28. Events subsequent to balance sheet date

In January 2014, the metropolitan water businesses received correspondence from the Minister for Water seeking advice on the potential for efficiency improvements in the water sector, to place downward pressure on water prices. The purpose of the initiative was to promote an urban water sector that delivered cost efficient and effective services to households and industry while maintaining financially sustainable, innovative and accountable water corporations, and safeguarding the highest standards for safety, liveability and security of supply. Subsequently, the Minister for Water issued a press release outlining the efficiency review, titled ‘Fairer Water Bills’.

On 11 May 2014, the Premier and the Minister for Water announced the outcomes of the first stage of the Fairer Water Bills initiative. As a result of the process, residential customers with water usage would receive an annual bill reduction of $100 for the next four years, starting from 2014/15.

Based on the conditions of the Victorian Government’s Fairer Water Bills $100 bill reduction initiative, Yarra Valley Water has not met the provision recognition criteria of AASB 137 Provisions, Contingent Liabilities and Contingent Asset, and therefore has not recognised a provision as at 30 June 2014. The cost of this initiative to be recognised in the first quarter of 2014/15 is estimated to be $65.8 million.

Consistent with the Victorian Government’s Fairer Water Bills initiative, Melbourne Water has identified efficiency savings that will be provided to Yarra Valley Water in the form of a rebate in respect of each discrete financial year to which the efficiencies relate.

Based on the conditions of entitlement of the Melbourne Water Fairer Water Bills rebate for the first quarter 2014/15, Yarra Valley Water has not met the recognition criteria of AASB 120 Accounting for Government Grants and Disclosure of Government Assistance and is therefore not entitled to recognise a receivable as at 30 June 2014. The value of the rebate that will be recognised in the first quarter of 2014/15 is estimated to be $48.8 million.

69


29. Cash flow information

For the purpose of the Cash Flow Statement, cash includes deposits at call which are readily convertible to cash on hand and which are used in the cash management function on a daily basis.

2014 $’000

2013 $’000

(a) Reconciliation of net profit to net cash from operating activities

Net profit 45,599 46,381

Adjustments for non-cash itemsDepreciation / amortisation 86,009 75,632Bad and doubtful debts 9,483 5,519Write off of assets 4,730 2,713Defined benefit superannuation plan expense 905 1,245Net (gain) / loss on disposal of non-current assets (23) 91Value of works taken over from developers (11,490) (19,154)

Changes in operating assets and liabilitiesIncrease in net deferred tax liabilities 20,363 20,251Decrease in other current assets 5,427 106Increase in interest creditors 3,894 1,926Increase / (decrease) in provisions and unearned income 198 (2,952)Decrease in payables (15,940) (14,347)Increase in trade receivables (58,574) (2,921)Decrease in GST receivable 165 6,905Decrease in unfunded defined benefit superannuation plan liability (459) (7,226)

Net cash inflow from operating activities 90,287 114,169

(b) Reconciliation of cash

Cash and cash equivalents 345 136

Closing cash balance 345 136

(c) Financing arrangements

The Corporation’s borrowings are made exclusively with the Treasury Corporation of Victoria in accordance with approvals from the Treasurer of Victoria.

70

STATUTORY CERTIFICATION

We certify that the attached Financial Statements of Yarra Valley Water Corporation have been prepared in accordance with Standing Directions 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements.

In our opinion, the information set out in the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and accompanying notes presents fairly the financial transactions during the year ended 30 June 2014 and financial position of the Corporation at 30 June 2014.

At the time of signing, we are not aware of any circumstance which would render any particulars included in the Financial Statements to be misleading or inaccurate.

We authorise the attached Financial Statements for issue dated at Melbourne on this 26th day of August 2014.



Kevin W Jones Chief Financial Officer

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THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY

72

AUDITOR-GENERAL’S AUDIT REPORT

73



75


ADDITIONAL INFORMATION 2013/14

76

PERFORMANCE REPORT

FINANCIAL PERFORMANCE INDICATORS

Performance Indicator 2012/13 Result

2013/14 Result

2013/14 Target

Variance to Prior Year %

Notes Variance to Target

%

Notes

F1 Cash Interest Cover

Cash flow from operations before net interest and tax payments / net interest payments 2.2 times 1.9 times 1.7 times (13.6) 1 11.8 2

F2 Gearing Ratio

Total debt (including finance leases) / total assets *100 45.5% 45.0% 47.7% 1.1 5.7

F3 Internal Financing Ratio

(Net operating cash flow – dividends) / Capital expenditure * 100 26.1% 37.3% 24.9% 42.9 3 49.8 4

F4 Current Ratio

(Current assets / current liabilities) excluding long-term employee provisions and revenue in advance 46.4% 47.9% 44.8% 3.2 6.9

F5 Return on Assets

Earnings before net interest and tax / Average total assets *100 4.5% 4.5% 3.4% 0.0 32.4 5

F6 Return on Equity

Net profit after tax / average total equity *100 3.4% 3.1% 0.9% (8.8) 244.4 6

F7 Earnings Before Interest, Tax, Depreciation and Amortisation

Earnings before interest, tax, depreciation and amortisation / total revenue *100 32.9% 27.5% 24.9% (16.4) 7 10.4 8

Notes

1 Unfavourable due to lower net operating cash flows and higher interest payment from growth in 2013/14 borrowings and increase in Financial Accommodation Levy on new debt from 1 July 2013. In 2014/15 we will continue to enhance our cash collection strategies, deliver productivity initiatives and effectively manage our debt portfolio to reduce interest costs.

2 Favourable due to higher net operating cash flows associated with additional revenue.

3 Favourable due to lower operating cash flows offset by reduced dividend payment and lower capital spend.

4 Favourable due to additional receipts from additional revenue, lower finance charges from reduced borrowings, improved credit rating and the active management of the debt portfolio.

5 Favourable due to higher earnings before interest payments and tax from additional revenue and savings in operating expenditure.

6 Favourable due to higher profit after tax from additional revenue, savings in operating expenditure and lower finance charges.

7 Unfavourable due to higher earnings before interest payments and tax from additional revenue and savings in operating expenditure, offset by increased depreciation resulting from the 2012/13 infrastructure valuation and write off of assets. In 2014/15 we are planning on delivering productivity initiatives to increase revenue and reduce operating expenditure.

8 Favourable due to higher earnings before interest payments and tax due to additional revenue and savings in operating expenditure.

77


WATER AND SEWERAGE SERVICES PERFORMANCE INDICATORS


2013/14 Result

2013/14 Target



%

Notes

WS1 Unplanned water supply interruptions

Number of customers receiving 5 unplanned interruptions in the year / total number of water (domestic and non-domestic) customers * 100 2.8 2.0 4.5 28.6 1 55.6 2

WS2 Interruption time

Average duration of unplanned water supply interruptions

108.2 minutes

99.4 minutes

104.4 minutes 8.1 3 4.8

WS3 Restoration of unplanned water supply interruptions

Unplanned water supply interruptions restored within 5 hours / total unplanned water supply interruptions * 100 96.2% 97.0% 96.3% 0.8 0.7

SS1 Containment of sewer spills

Sewer spills from reticulation and branch sewers (priority 1 and 2) contained within 5 hours / total sewer spills from reticulation and branch sewers 99.8% 99.95% 97.7% 0.2 2.3

SS2 Sewer spills interruptions

Number of residential sewage customers affected by sewerage interruptions restored within 4 hours 99.5% 99.5% 96.8% 0.0 2.8

Notes

1 & 2 Favourable due to continued improvement in asset delivery practices and data availability to reduce the size of shut off blocks through the valve insertion program. This proactive approach has been effective in managing customers who are experiencing multiple interruptions.

3 Favourable due to changes to the emergency response process implemented to reduce the duration of unplanned interruptions following the drought period experienced, including increased use of reducing water pressure rather than turning off water supply prior to the crew completing the repairs.

78

PERFORMANCE REPORT

CUSTOMER RESPONSIVENESS PERFORMANCE INDICATORS


2013/14 Result

2013/14 Target



%

Notes

CR1 Water quality complaints

Number of complaints per 100 customers 0.418 0.0004 0.43 99.0 4 99.9 5

CR2 Sewerage service quality complaints


CR3 Sewerage odour complaints


CR4 Billing complaints

Number of complaints per 100 customers 0.59 0.14 0.12 76.3 10 (16.7) 11

Notes

4 & 5 Favourable due to our 2013/14 results reflecting water quality complaints in accordance with Essential Services Commission definition, whilst previously we reported both enquiries and complaints.

6 & 7 Favourable due to improvements to processes and management of complaints, with the number of complaints reducing in 2013/14 when compared to 2012/13 and remaining below the target, which is based on the five-year average.

8 & 9 Favourable due to program of works undertaken to address odour hotspot areas.

10 Favourable due to experiencing significantly higher billing complaint volumes in 2012/13 in comparison to 2013/14 as a result of desalination plant over-recovery, recovery of previously unbilled sewerage charges and the elimination of direct debit payment method on credit cards.

11 Unfavourable due to debt collection trial undertaken during May and June 2014 to improve recovery rates. This has resulted in an increase in credit related complaints. To reduce the number of complaints we have implemented improvements to the internal escalation process including direct channels into the Customer Relations Team which are advertised on the website and in customer’s bills to quickly manage and address any customer’s issues.

ENVIRONMENTAL PERFORMANCE INDICATORS


2013/14 Result

2013/14 Target



%

Notes

E1 Effluent reuse volume (end use) 25.7% 28.5% 28.8% 10.9 12 (1.0)

E2 Total net CO2 emissions

Net tonnes CO2 equivalent 0.00 0.00 0.00 - -

Notes

12 Favourable due to increased customer demand for the supply of recycled water due to a dry and extended irrigation season experienced in 2013/14.

79


PERFORMANCE REPORT

CERTIFICATION OF PERFORMANCE REPORT FOR 2013/14We certify that the accompanying Performance Report of Yarra Valley Water Corporation in respect of the 2013/14 financial year is presented fairly in accordance with the Financial Management Act 1994.

The Performance Report outlines the relevant performance indicators for the financial year as determined by the Minister for Water and as set out in the 2013/14 Corporate Plan, the actual and comparative results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets and/or between the actual results in the current year and the previous year.

As at the 26th day of August 2014, we are not aware of any circumstances which would render any particulars in the Performance Report to be misleading or inaccurate.



80


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83


ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING

SUSTAINABLE WATER USE

Water recycling

In 2013/14 we produced 10,988ML of recycled water at our sewage treatment plants, of which 3,135ML, or 28.5%, of the total was reused. This was slightly below our target of 28.8%. We connected 2,334 properties to Class A recycled water and constructed 240.3 km of recycled water mains.

Water recycling continues to be a key component of our integrated water cycle management servicing strategy for the Northern Growth Corridor. This strategy is providing recycled water to all homes and provides significant efficiency and environmental benefits for the community. Class A recycled water is provided to new homes via a third pipe system for toilet flushing, garden watering and laundry use.

We continued to expand our recycled water supply system by completing the construction of the Merrifield Stormwater Harvesting and Reuse Plant at Kalkallo. We also constructed and commissioned several new distribution mains to further support the supply of recycled water to service new development in Craigieburn.

Water efficiency

We continued to encourage our customers to maintain their Water Wise habits, to help protect the long-term security of our water supplies and reduce the cost of supply augmentations including the following:

– since 2011, processed 5,011 rebates under the Living Victoria Water Rebate Program;

– assisted businesses with voluntary water management plans and small business grants;

– distributed water efficient showerheads under our Showerhead Exchange Program. A total of 189,503 have been issued since the beginning of the program;

– assisted 6,341 customers, since October 2009, in upgrading their toilets to the most efficient dual flush models under the Toilet Replacement Program; and

– engaged over 120 schools within our service area, which have integrated material from ‘Water – Learn It! Live It!’ initiatives into water efficiency curriculum units. Since its inception, 1,080 classroom presentations have been completed to more than 21,000 primary school children within our district.

Residential – Average Litres of Water per Capita per Day

245

97/98

233

98/99

241

99/00

245

00/01

218

01/02

232

02/03

212

03/04

202

04/05

209

05/06

189

06/07

164

07/08

158

08/09

150

09/10

146

10/11

152

11/12

167

12/13 13/14

164

84


OTHER STATUTORY OBLIGATIONS

Victorian Waterway Management Strategy

Yarra Valley Water strives to deliver our services within the carrying capacity of nature and reducing our environmental footprint is a priority.

To improve waterway health we:

– exceeded our Sewer Backlog Program target, with 745 properties this year deciding to switch from poor performing septic tanks to modern reticulated sewerage infrastructure. This reduces local pollution and improves the quality of water in the Yarra River and its tributaries;

– continued to manage our nitrogen discharges to Port Phillip Bay in accordance with our self-imposed nitrogen cap: 46 tonnes of nitrogen was discharged in 2013/14 compared with our cap of 87 tonnes.

To comply with river and aquifer health requirements as per our Statement of Obligations, Yarra Valley Water undertakes regular (weekly, fortnightly, monthly) sampling at each of our sewage treatment plants to ensure that our treatment complies with our Environment Protection Authority Victoria (EPAV) Corporate Licence Requirements.

A summary of our sewage treatment plants’ performance is reported to the EPAV on an annual basis. Additionally, water quality and flow data relating to waterways is reported to the Essential Services Commission, the National Pollutant Inventory and the Bureau of Meteorology.

State Environment Protection Policy (Waters of Victoria)

During 2013/14, we upgraded the capacity of four emergency relief structures in Preston so that they would not discharge wastewater to the environment during a greater than 1 in 5 year average rainfall event. Following the completion of the Preston project, there are 21 emergency relief structures remaining which are non-compliant with this policy. The rectification of these remaining emergency relief structures will be delivered via 15 projects programmed over four years commencing 1 July 2018. A number of approaches will be used to rectify and manage the remaining non-compliant emergency relief structures including a combination of river health assessments, non-revenue sewage intervention and capacity upgrades.

85


GREENHOUSE GAS EMISSIONS AND NET ENERGY CONSUMPTIONThe Greenhouse Gas (GHG) reductions brought about by our Showerhead Exchange Program continued to offset our own GHG emissions, ensuring that we had no net GHG emissions for the sixth year in a row. Our business partners are also assisting and continue to reduce their emissions each year.

GHG (Tonnes of CO2 emissions)

2013/14 2012/13 2011/12 2010/11

Water treatment and pumping 7,399 8,420 8,492 8,023

Wastewater treatment 17,709 17,204 16,153 15,584

Office use 2,158 2,823 2,940 3,155

Vehicle fleet 1,051 1,065 1,042 1,376

Total GHG emissions 28,317 29,512 28,627 28,138

Offsets purchased 0 274 272 283

Other offsets* 28,317 29,238 28,355 27,855

* We offset our greenhouse gas emissions as a result of the Showerhead Exchange Program as water efficient showerheads reduce the amount of energy required to heat water.

GHG (Megajoules)

2013/14 2012/13 2011/12 2010/11

Water treatment and pumping 22,765,147 25,907,692 26,129,231 24,686,154

Wastewater treatment 54,489,548 52,935,385 49,701,538 47,950,769

Wastewater pumping 13,534,502 9,449,756 9,243,755 7,573,738

Office use 6,641,394 8,686,154 9,046,154 9,707,692

Vehicle fleet 3,232,975 3,276,923 3,206,154 4,233,846

Total 100,663,566 100,255,910 97,326,832 94,152,199

Conversion factor of 1 kWh = 3.6 Megajoules (MJ) used

Energy Use (MJ Per ML)

2013/14 2012/13 2011/12 2010/11

Water treatment and pumping

Bulk water volume* (ML) 131,916 132,997 120,489 113,905

Energy Use (MJ/ML) 172.6 194.8 216.9 216.7

Wastewater Treatment Wastewater volume treated at YVW STP (ML)

10,323 10,073 10,560 10,698

Energy Use (MJ/ML) 5,278.5 5,255.2 4,706.6 4,482.2

Wastewater Pumping Waste Water Volume Transferred to MW (ML)

117,281 118,078 123,493 113,696

Energy Use (MJ/ML) 106.1 73.7 69.0 60.9

Energy figures only include Yarra Valley Water usage (exclude Melbourne Water treatment and transfer usage)

* Metered water supplied to Yarra Valley Water customers.

86


COMMUNITY SERVICE OBLIGATIONS

Value of Community Service Obligations provided 2013/14 $’000

2012/13 $’000

Provision of concessions to pensioners 45,707 44,719

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

1,243 1,178

Utility Relief Grants Scheme payments 827 486

Water concessions for life support machines – Haemodialysis 23 18

Total 47,800 46,401

Provision of concessions to pensioners

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

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

Customers who are not-for-profit entities are entitled to pay a concessionary amount instead of the full balance outstanding on their accounts. When a customer pays this lesser amount, the difference is billed to and paid by the State Revenue Office.

Utility Relief Grants Scheme

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

Water concessions for life support machines – Haemodialysis

The State Government of Victoria provides a rebate for customers required to use a dialysis/life support machine at home, to compensate these customers for water usage and sewage disposal charges relating to the use of such a machine.

The rebate amount is determined by the DHS based on the estimated annual water usage of a dialysis machine (168 kL). This rebate is in addition to any other pension or concession entitlements.

87


ANNUAL REPORTING OF MAJOR NON-RESIDENTIAL WATER USERS

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

Table 1: Customer by volume range

Volumetric Range – ML per year Number of Customers

Equal to or greater than 200 ML and less than 300 ML 2




Equal to or greater than 750 ML and less than 1,000 ML 0

Greater than 1,000 ML 2

Total number of customers 7

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

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

Customer name Developed and commenced a water management plan

Continental Poultry Pty Ltd ✓

CSL Behring Pty Ltd ✓

La Trobe University ✓

Monash University ✓

SCA Hygiene Australasia Pty Ltd ✓

Visy Pulp & Paper Pty Ltd (Coolaroo) ✓

Visy Pulp & Paper Pty Ltd (Reservoir) ✓

Requirement 3: Information on Water Management Action Plan (WaterMAP) program including customer participation and estimated efficiencies

There were 17 active participants in the WaterMAP program in 2013/14. Efficiencies are difficult to estimate given that most actions are ongoing and revolve around behaviour, although the average water efficiency improvement was in the order of 10%.

Requirement 4: Information on industry-specific programs including customer participation and estimated efficiencies Industry specific programs include:

Program Title Number of Participants Estimated Efficiencies

Small Business Grants 28 20.5 ML

Small Business Rebates 191 N/A

Busiwi$e Audit Program 1 N/A

National Benchmarking Project N/A N/A

88

Requirement 5: Information on continuing work with businesses to build knowledge of water cycle patterns and options to encourage large water users to adopt local water solutions

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

Requirement 6: Information to report to Parliament acknowledging leading and innovative business efforts to reduce use, harvest local water, and manage discharge

No information was reported to Parliament for 2013/14.

Requirement 7: Information on assistance to businesses to capture water consumption savings through business analysis systems as a means of facilitating, identifying and implementing local water savings

We provide individual business’ consumption data reports, audit programs to identify opportunities for water efficiency improvements and access to a national benchmarking website to compare water consumption with others in similar industries.

Requirement 8: Description of work and methodology for developing guidelines and goals for increased water efficiency by smaller businesses with high water use

The following two programs exist to support increased water efficiency by smaller businesses with high water use:

– Voluntary WaterMAP Program: A water management action plan is a voluntary process that enables non-residential customers to assess their water usage, identify inefficiencies and opportunities for water savings, prepare an action plan to implement water efficiency activities and generate an annual report of progress with water use, efficiency and implementation of actions; and

– Busiwi$e Audit Program: Comprises two audit programs, depending on the size and complexity of the business.

ANNUAL REPORTING OF MAJOR NON-RESIDENTIAL WATER USERS

89

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annu

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of

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n’s

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ntitl

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15.1

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N/A

N/A

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14.1

(a)

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Cla

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N/A

N/A

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ass

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perm

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use

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use

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use

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(d)

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Cla

use

13.1

(d)

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Cla

use

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(d)

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Cla

use

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(a)

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N/A

N/A

N/A

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am

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use

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use

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(e)

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Cla

use

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(e)

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Cla

use

14.1

(d)

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Cla

use

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Cla

use

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use

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N/A

Cla

use

15.1

(f)

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Cla

use

13.1

(f)

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Cla

use

15.1

(f)

Nil

Cla

use

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(e)

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Cla

use

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Nil

Nil

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use

15.1

(g)

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Cla

use

13.1

(g)

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Cla

use

15.1

(g)

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Cla

use

14.1

(g)

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Cla

use

11.1

(f)

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Cla

use

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pro

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N/A

Cla

use

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Cla

use

13.1

(h)

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Cla

use

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Cla

use

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(h)

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Cla

use

11.1

(g)

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Cla

use

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(h)

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Cla

use

11.1

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91

BULK

ENT

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MEN

TS R

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T

No

tes

for

com

plia

nce

wit

h b

ulk

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is a

sses

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ear

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The

supp

ly o

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to

Prim

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Entit

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is o

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ated

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er t

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Des

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t Bu

lk E

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ia w

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so

urce

d fr

om t

he M

elbo

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‘poo

l’ of

all

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bour

ne’s

Bul

k En

title

men

t so

urce

s. B

arw

on W

ater

was

sup

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d 11

1 M

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201

3/14

for

co

mm

issi

onin

g of

the

Mel

bour

ne t

o G

eelo

ng P

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ine.

Yar

ra R

iver

3.

The

Reta

il C

orpo

ratio

ns h

old

the

follo

win

g Bu

lk E

ntitl

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ts o

n th

e Ya

rra

Rive

r

–Bu

lk E

ntitl

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t (Y

arra

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Mel

bour

ne W

ater

for

City

Wes

t W

ater

) Con

vers

ion

Ord

er 2

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– BE

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364

–Bu

lk E

ntitl

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t (Y

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Mel

bour

ne W

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for

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th E

ast

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200

6 –

BEE0

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3

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lk E

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t (Y

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for

Yar

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) Con

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Ord

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362

4.

Com

plia

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with

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long

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m a

vera

ge d

iver

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lim

it of

400

,000

ML

is a

sses

sed

usin

g a

15-y

ear

rolli

ng a

vera

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nnua

l div

ersi

on.

Silv

er a

nd

Wal

lab

y C

reek

s (G

ou

lbu

rn B

asin

)

5.

The

Reta

il C

orpo

ratio

ns h

old

the

follo

win

g Bu

lk E

ntitl

emen

ts o

n th

e Si

lver

and

Wal

laby

Cre

eks

–Bu

lk E

ntitl

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t (S

ilver

& W

alla

by C

reek

s –

Mel

bour

ne W

ater

for

City

Wes

t W

ater

) Con

vers

ion

Ord

er 2

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– BE

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475

–Bu

lk E

ntitl

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t (S

ilver

& W

alla

by C

reek

s –

Mel

bour

ne W

ater

for

Sou

th E

ast

Wat

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onve

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n O

rder

200

6 –

BEE0

4947

4

–Bu

lk E

ntitl

emen

t (S

ilver

& W

alla

by C

reek

s –

Mel

bour

ne W

ater

for

Yar

ra V

alle

y W

ater

) Con

vers

ion

Ord

er 2

006

– BE

E049

473

6.

Com

plia

nce

with

the

3-y

ear

tota

l div

ersi

on li

mit

of 6

6,00

0 M

L is

ass

esse

d us

ing

a 3-

year

rol

ling

tota

l div

ersi

on.

Tho

mso

n R

iver

7.

The

Reta

il C

orpo

ratio

ns h

old

the

follo

win

g Bu

lk E

ntitl

emen

ts o

n th

e Th

omso

n Ri

ver

– Tr

ansf

er o

f Bu

lk E

ntitl

emen

t (T

hom

son

Rive

r –

Mel

bour

ne W

ater

Cor

pora

tion)

Con

vers

ion

Ord

er 2

001

to C

ity W

est

Wat

er 2

006

– BE

E049

361

– Tr

ansf

er o

f Bu

lk E

ntitl

emen

t (T

hom

son

Rive

r –

Mel

bour

ne W

ater

Cor

pora

tion)

Con

vers

ion

Ord

er 2

001

to S

outh

Eas

t W

ater

200

6 –

BEE0

4936

0

– Tr

ansf

er o

f Bu

lk E

ntitl

emen

t (T

hom

son

Rive

r –

Mel

bour

ne W

ater

Cor

pora

tion)

Con

vers

ion

Ord

er 2

001

to Y

arra

Val

ley

Wat

er 2

006

– BE

E049

359

8.

Com

plia

nce

with

the

long

-ter

m a

vera

ge d

iver

sion

lim

it of

171

,800

ML

is a

sses

sed

usin

g a

15-y

ear

rolli

ng a

vera

ge a

nnua

l div

ersi

on.

Tara

go

an

d B

un

yip

Riv

ers

9.

The

Reta

il C

orpo

ratio

ns h

old

the

follo

win

g Bu

lk E

ntitl

emen

ts o

n th

e Ta

rago

and

Bun

yip

Rive

rs

–Bu

lk E

ntitl

emen

t (T

arag

o an

d Bu

nyip

Riv

ers

– M

elbo

urne

Wat

er f

or C

ity W

est

Wat

er) C

onve

rsio

n O

rder

200

9 –

BEE0

4935

8

–Bu

lk E

ntitl

emen

t (T

arag

o an

d Bu

nyip

Riv

ers

– M

elbo

urne

Wat

er f

or S

outh

Eas

t W

ater

) Con

vers

ion

Ord

er 2

009

– BE

E049

357

–Bu

lk E

ntitl

emen

t (T

arag

o an

d Bu

nyip

Riv

ers

– M

elbo

urne

Wat

er f

or Y

arra

Val

ley

Wat

er) C

onve

rsio

n O

rder

200

9 –

BEE0

4935

6

10.

Com

plia

nce

with

the

Tar

ago

Rive

r lo

ng-t

erm

ave

rage

div

ersi

on li

mit

of 2

4,95

0 M

L is

ass

esse

d us

ing

a 5-

year

rol

ling

aver

age

annu

al d

iver

sion

.

11.

Com

plia

nce

with

the

Bun

yip

Rive

r lo

ng-t

erm

ave

rage

div

ersi

on li

mit

of 5

,560

ML

is a

sses

sed

usin

g a

5-ye

ar r

ollin

g av

erag

e an

nual

div

ersi

on.

Vic

tori

an D

esal

inat

ion

Pro

ject

12. T

he R

etai

l Cor

pora

tions

hol

d th

e fo

llow

ing

Bulk

Ent

itlem

ents

to

the

Vic

toria

n D

esal

inat

ion

Proj

ect

–Bu

lk E

ntitl

emen

t (D

esal

inat

ed W

ater

– C

ity W

est

Wat

er) O

rder

201

0 –

BEE0

5081

4

–Bu

lk E

ntitl

emen

t (D

esal

inat

ed W

ater

– S

outh

Eas

t W

ater

) Ord

er 2

010

– BE

E050

815

–Bu

lk E

ntitl

emen

t (D

esal

inat

ed W

ater

– Y

arra

Val

ley

Wat

er) O

rder

201

0 –

BEE0

5081

6

13. O

n 1

Apr

il 20

13, t

he M

inis

ter

for

Wat

er m

ade

a ze

ro d

esal

inat

ed w

ater

ord

er f

or t

he 2

013/

14 y

ear.

14. C

ompl

ianc

e w

ith t

he d

esal

inat

ed w

ater

long

-ter

m a

vera

ge d

iver

sion

lim

it of

150

,000

ML

is a

sses

sed

usin

g a

5-ye

ar r

ollin

g av

erag

e di

vers

ion.

15. A

s th

e Pr

imar

y En

title

men

t ho

lder

s ar

e su

pplie

d fr

om t

he M

elbo

urne

‘poo

l’, t

his

is r

epor

ted

unde

r no

te 2

of

the

com

bine

d Ya

rra

Rive

r, Si

lver

and

Wal

laby

Cre

eks

and

Thom

son

Rive

r.

Go

ulb

urn

Sys

tem

16.

The

Reta

il C

orpo

ratio

ns h

old

the

follo

win

g Bu

lk E

ntitl

emen

ts t

o th

e G

oulb

urn

Syst

em

–Bu

lk E

ntitl

emen

t (G

oulb

urn

Syst

em –

City

Wes

t W

ater

) Ord

er 2

012

– BE

E049

478

–Bu

lk E

ntitl

emen

t (G

oulb

urn

Syst

em –

Sou

th E

ast

Wat

er) O

rder

201

2 –

BEE0

4947

7

–Bu

lk E

ntitl

emen

t (G

oulb

urn

Syst

em –

Yar

ra V

alle

y W

ater

) Ord

er 2

012

– BE

E049

476

17.

The

Reta

il C

orpo

ratio

ns’ B

ulk

Entit

lem

ents

in t

he G

oulb

urn

Syst

em p

rovi

de f

or t

he p

rogr

essi

ve a

nnua

l ass

ignm

ent

of e

ntitl

emen

t vo

lum

es a

s w

ater

sav

ing

wor

ks a

nd m

easu

res

from

Gou

lbur

n-M

urra

y W

ater

’s C

onne

ctio

ns P

roje

ct a

re c

ompl

eted

. The

201

3/14

en

title

men

t vo

lum

e w

as 2

8,58

7.3

ML.

18.

6.6

ML

of w

as u

sed

to m

aint

ain

the

oper

atio

nal c

apac

ity o

f th

e N

orth

-Sou

th P

ipel

ine

and

keep

the

pip

elin

e ch

arge

d fo

r fir

e-fig

htin

g pu

rpos

es, a

s al

low

ed u

nder

cla

use

9.1

(c) o

f th

e Re

tail

Cor

pora

tion’

s St

atem

ents

of

Obl

igat

ions

(Sys

tem

Man

agem

ent)

.

19.

Com

plia

nce

with

the

ann

ual d

iver

sion

lim

it of

75,

000

ML

is a

sses

sed

usin

g th

e ac

tual

mea

sure

d an

nual

div

ersi

on.

20.

The

Reta

il C

orpo

ratio

ns h

ad 1

,355

ML

dedu

cted

fro

m t

heir

30 J

une

2013

vol

umes

as

a re

sult

of c

arry

ove

r ru

les

for

wat

er c

arrie

d ov

er in

to 2

013/

14.

21.

The

Reta

il C

orpo

ratio

ns h

ave

in p

lace

wat

er m

anag

emen

t st

rate

gies

to

man

age

wat

er a

lloca

tion

hold

ings

in t

he R

iver

Mur

ray

and

Gou

lbur

n Sy

stem

to

max

imis

e th

e va

lue

of t

he r

esou

rces

hel

d to

the

ir cu

stom

ers

and

min

imis

e ris

k of

spi

lling

wat

er a

lloca

tion.

The

se

stra

tegi

es in

clud

e th

e tr

ansf

er o

f al

loca

tions

bet

wee

n Bu

lk E

ntitl

emen

t A

lloca

tion

Acc

ount

s an

d tr

adin

g w

ater

allo

catio

ns.

Riv

er M

urr

ay

22.

The

Reta

il C

orpo

ratio

ns h

old

the

follo

win

g Bu

lk E

ntitl

emen

ts t

o th

e Ri

ver

Mur

ray

–Bu

lk E

ntitl

emen

t (R

iver

Mur

ray

– C

ity W

est

Wat

er) O

rder

201

2 –

BEE0

4948

1

–Bu

lk E

ntitl

emen

t (R

iver

Mur

ray

– So

uth

East

Wat

er) O

rder

201

2 –

BEE0

4948

0

–Bu

lk E

ntitl

emen

t (R

iver

Mur

ray

– Ya

rra

Valle

y W

ater

) Ord

er 2

012

- BE

E 04

9479

23.

The

Reta

il C

orpo

ratio

ns’ B

ulk

Entit

lem

ents

in t

he R

iver

Mur

ray

prov

ide

for

the

prog

ress

ive

annu

al a

ssig

nmen

t of

ent

itlem

ent

volu

mes

as

wat

er s

avin

g w

orks

and

mea

sure

s fr

om G

oulb

urn-

Mur

ray

Wat

er’s

Con

nect

ions

Pro

ject

are

com

plet

ed. T

he 2

013/

14

entit

lem

ent

volu

me

was

16,

814.

7 M

L.

24.

The

Reta

il C

orpo

ratio

ns h

ad 6

66 M

L de

duct

ed f

rom

the

ir 30

Jun

e 20

13 v

olum

es a

s a

resu

lt of

the

car

ry o

ver

rule

s fo

r w

ater

car

ried

over

into

201

3/14

.

25.

The

Reta

il C

orpo

ratio

ns h

ave

in p

lace

wat

er m

anag

emen

t st

rate

gies

to

man

age

wat

er a

lloca

tions

hol

ding

s in

the

Riv

er M

urra

y an

d G

oulb

urn

Syst

em t

o m

axim

ise

the

valu

e of

the

res

ourc

es h

eld

to t

heir

cust

omer

s an

d m

inim

ise

risk

of s

pilli

ng w

ater

allo

catio

n. T

hese

st

rate

gies

incl

ude

the

tran

sfer

of

allo

catio

ns b

etw

een

Bulk

Ent

itlem

ent

Allo

catio

n A

ccou

nts

and

trad

ing

wat

er a

lloca

tions

.

92

Yarra Valley Water’s 2013/14 Annual Report is prepared in accordance with all relevant Victorian legislation and pronouncements. This index has been prepared to facilitate identification of Yarra Valley Water’s compliance with statutory disclosure requirements.

INDEX

Legislation Disclosure requirement Page

Report of operations

Charter and purpose

FRD 22E Manner of establishment and the relevant Minister 2FRD 22E Objectives, functions, powers and duties 2-12FRD 22E Nature and range of services provided 3

Management and structure

FRD 22E Organisational structure 15FRD 22E Directors of the Board 15

Financial and other information

FRD 10 Disclosure Index 92FRD 22E Summary of financial results for the year 12-14FRD 22E Operational and budgetary objectives, and performance against objectives 3-12FRD 22E Significant changes or factors affecting performance 4-12FRD 22E Employment and conduct principles 18FRD 22E Subsequent events 68FRD 22E Application and operation of the Freedom of Information Act 1982 22FRD 22E Application and operation of the Protected Disclosure Act 2012 21FRD 22E Statement of National Competition Policy 22FRD 22E Statement of availability of other information 22FRD 22E Environmental performance 10, 82-86FRD 22E Building and maintenance provisions of the Building Act 1993 22FRD 25B Victorian Industry Participation Policy disclosures 22FRD 27C Presentation and Reporting of Performance Information 76-81FRD 30A Standard Requirements for the design and print of annual reports AllSD 4.5.5 Risk management compliance attestation 23SD 4.2(g) General information requirements 2-22SD 4.2(j) Sign-off requirements 4

Ministerial reporting directions

MRD 01 Performance Reporting 76-81MRD 02 Reporting on water consumption and drought response 82MRD 03 Environmental and social sustainability reporting 83-86MRD 04 Disclosure of information on bulk entitlements, transfers of water entitlements,

allocations and licences, irrigation water usage and licence requirements

89-91MRD 05 Annual reporting of major non-residential water users 87-88

DISCLOSURE INDEX


Financial Report

Financial Statements required under Part 7 of the Financial Management Act 1994

SD 4.2(b) Statement of Comprehensive Income 28SD 4.2(b) Balance Sheet 29SD 4.2(b) Statement of Changes in Equity 30SD 4.2(b) Cash Flow Statement 31SD 4.2(b) Notes to the Financial Statements 32-69

Other requirements under Standing Directions 4.2

SD 4.2(c) Compliance with applicable Australian Accounting Standards and other authoritative pronouncements

70

SD 4.2(c) Compliance with Ministerial Directions 70SD 4.2(c) Accountable Officer’s declaration 70SD 4.2(d) Rounding of amounts 32

Other disclosures as required by FRDs in Notes to the Financial Statements

FRD 03A Accounting for dividends 40, 50FRD 07A Early adoption of authoritative accounting pronouncements 42FRD 17B Long Service Leave wage inflation and discount rates 40, 60FRD 21B Disclosures of Responsible Persons, Executive Officers and other Personnel in the

Financial Report

64-66FRD 103E Non-current physical assets 38, 52-55FRD 105A Borrowing costs 40, 43-46FRD 106 Impairment of assets 37-39FRD 109 Intangible assets 39FRD 110 Cash flow statements 31, 69FRD 119A Transfers through contributed capital 61FRD 120H Accounting and reporting pronouncements applicable to the 2013/14

reporting period

42

Legislation

Freedom of Information Act 1982

Building Act 1993

Protected Disclosure Act 2012

Victorian Industry Participation Policy Act 2003

Financial Management Act 1994

Yarra Valley Water ABN 93 066 902 501

Lucknow Street Mitcham Victoria 3132 DX 13204

Telephone: 03 9872 1699 Fax: 03 9872 1353

www.yvw.com.au

© Copyright August 2014 Yarra Valley Water Corporation

ISSN: 2202-6304 (Print) ISSN: 2202-6312 (Online)

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Telephone: 03 9872 1699 Fax: 03 9872 1353

www.yvw.com.au

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YARRA VALLEY WATER ANNU

AL REPORT 2013/14



Telephone: 03 9872 1699 Fax: 03 9872 1353

www.yvw.com.au

Printed on Revive Laser.

Revive Laser paper is made in Australia from 100% recycled fibre (text page stock) and 70% recycled fibre (cover stock). They are FSC® Recycled (text page stock) and FSC® Mix (cover page stock) certified, ISO 14001 accredited and certified Carbon Neutral. Revive Laser supports Landcare Australia and is the ideal choice for those wanting to make a positive contribution to the Australian environment.



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