vision service success

Transcription

1 vision service success annual report

2 Contents 2 Corporate profile 4 Highlights 6 Chairman s review 8 CEO s report 10 Performance summary 11 Financial summary 14 Operational performance 20 Community and environment 24 Asset sustainability 30 Our customers 34 Our people 40 Business management 44 Organisational structure 45 SunWater executive 46 SunWater board 48 Corporate governance 54 Annual financial report 76 Statement of corporate intent summary 81 Key statistics 87 SunWater water supply schemes map 2009 IBC Glossary 1 This Annual Report is a summary of programs and activities undertaken in meeting key performance indicators as set out in SunWater s Statement of Corporate Intent and summarised on page of this report. The report outlines the vision, service and success of the organisation. It describes the initiatives and achievements of the past financial year, and details the organisation s future plans and prospects as a leader in water infrastructure development and management. Also contained in this report are those events, which have occurred after the reporting period, that have a significant impact on the organisation. SunWater is committed to open and accountable governance and, through this Annual Report, aims to meet the needs of all SunWater stakeholders in providing comprehensive and accurate information. SunWater welcomes your feedback on this report. The Annual Report can be accessed on SunWater s website: Hard copies are also available on request: SunWater Limited Level 10, 179 Turbot Street PO Box City East Brisbane QLD 4002 Phone (07) Fax (07) Customer Information Line SunWater Limited is a registered water service provider under the Water Act SunWater Limited annual report Operational Performance

3 vision service success Our vision To be leaders in water service delivery providing outstanding solutions for our customers and the community. Our mission To enhance the value of the corporation by providing cost-effective and commercial water services that add value for our customers. These services include: Bulk water storage and distribution Water treatment, reticulation and drainage Water infrastructure development Water facilities management, and Specialist consultancy and services. Our values Delivering results Providing outstanding service Working together Taking responsibility Respecting others, and Being open to change. SunWater Limited annual report Operational Performance 1

4 corporate profile. SunWater is Queensland s largest bulk water service provider, owning and managing around $7 billion in water infrastructure assets and supplying 40% of all water used commercially in Queensland. Heritage For more than 80 years, SunWater (in its present and previous forms) has built a regional network of water supply infrastructure throughout Queensland. It owns and manages this network of infrastructure, which underpins a diverse range of sectors including mining, power generation, industrial, urban communities and irrigated agriculture. Core capabilities SunWater s industry expertise and experience are unmatched in developing and managing water infrastructure by providing tailor-made solutions for industry, mining and government. The organisation focuses on meeting its clients needs, whether they are for new commercial water assets, efficient management of existing infrastructure, or the provision of expert advice in water management. SunWater works with its customers, business partners and suppliers in a fair, open and commercial manner to achieve mutually beneficial and cost-effective outcomes. SunWater s expertise is in developing and managing: Dams and weirs Major pumping stations Bulk water pipelines Irrigation channels and drainage systems, and Water treatment facilities. SunWater also provides a range of infrastructure management and consulting services including: Design and design review services Asset management, planning and review Flood hydrology, hydraulics and flood management Infrastructure operations and management Customer water account management and billing, and Water management and policy strategy advice. SunWater actively pursues developments that span this range of water solutions and remains flexible around delivery options to provide high-quality water supply and infrastructure outcomes for its customers and clients. Shareholders SunWater Limited is a Company Government Owned Corporation (GOC), and its shares are held by its shareholding Ministers on behalf of the State of Queensland. SunWater s shareholding Ministers were, at the time of preparing this report, the Honourable Andrew Fraser, Treasurer and Minister for Employment and Economic Development and the Honourable Stephen Robertson, Minister for Natural Resources, Mines and Energy and Minister for Trade. 2 SunWater Limited annual report Corporate Profile

5 Regions SunWater s business activities and interests are spread throughout Queensland from as far north as Bamaga, west to Mount Isa, and south to St George. SunWater maintains a network of offices and depots across Queensland, enabling it to provide services to a range of asset owners in regional areas. The majority of the business operations are in Queensland, but SunWater also operates and maintains water infrastructure in other states of Australia. SunWater s expertise in developing tailored water solutions is recognised throughout Australia. National policy agenda SunWater is actively involved in national and state water policy agendas through key advisory groups including the national Water Accounting Standards Board (WASB), the Australian Water Resource Information System (AWRIS) Steering Committee and the National Program for Sustainable Irrigation (NPSI) Program Management Committee. SunWater s expertise is valued, in that it brings a water service provider s and water industry practitioner s perspective to National Water Initiative related programs and projects. Customers SunWater s customer base has diversified as the business has grown. Queenslandbased irrigators have historically comprised the majority of SunWater s customers and still represent a significant portion of its customer base of almost 5,000. In the financial year, water infrastructure consulting and facilities services to industrial enterprises represented approximately 65.8% of total revenue. SunWater s commercial customers include mines, power generators, local governments, and other water infrastructure owners and developers to whom SunWater provides knowledge-based services. Water sources Approximately 40% of the water used commercially in Queensland is managed by SunWater via 23 water supply schemes and three subsidiary companies - North West Queensland Water Pipeline Pty Ltd, Eungella Water Pipeline Pty Ltd and Burnett Water Pty Ltd. SunWater s water storage and distribution infrastructure has a replacement value of $7 billion and includes: 19 major dams 63 weirs and barrages 80 major pumping stations 2,500 km of pipelines and open channels, and 730 km of drains. Under the Resource Operations Licences and interim Resource Operations Licences issued by the Department of Environment and Resource Management (DERM), SunWater manages a total water allocation of 2.82 million megalitres (ML). This includes 1.92 million ML of customer-owned allocations and a 0.54 million ML allowance for distribution losses within pipeline and open channel distribution systems. Pictured above: Colin Bendal inspecting Emerald s Fairbairn Dam, which provides water supply to one of Queensland s largest cotton growing regions. SunWater Limited annual report Corporate Profile 3

6 highlights. Consolidated financial performance Total revenue (excluding the Seqwater transaction and the proceeds from bank guarantees), exceeded by $8.8m. Expenses excluding impairment were $2.3m lower than Labour cost savings resulting from the Seqwater transaction of $6.0m, were offset by higher depreciation expense of $1.7m and higher legal fees of $1.7m, mostly associated with the Paradise Dam legal action. Return on assets (excluding the Seqwater transaction) was 4.5%, up from 2.3% in Income tax was $6.9m, down from $8.0m in This was due to prior year adjustments made following a ruling by the Australian Tax Office (ATO) in September 2008 which allowed SunWater, as an irrigation water provider, to write-off eligible capital expenditure incurred after 1 July 2004 over three years. It also reflects a favourable ruling by the ATO in August 2009 that treats the Seqwater transaction as tax neutral. Operational performance Water deliveries across all schemes totalled 1.05 million ML, a slight increase on the 1.02 million ML delivered in , despite being hampered by drought and then flood. Business cases and investigations for proposed water infrastructure development projects and upgrades to existing assets were progressed. These included the Connors River Dam and Pipelines project, the Nathan Dam and Pipelines project, the Glebe Weir Raising and Pipeline project, the Lower Fitzroy River Infrastructure project, Burdekin Falls Dam Raising project, and the Water for Bowen project. Approval for the construction of the $42.5m, 38 km Cloncurry Pipeline was obtained in the second quarter of the financial year, with work due to be completed in early The pipeline will provide a more reliable water supply to Cloncurry from SunWater s existing North West Queensland Water Pipeline. It will service future population and industrial growth in the township. Water supply for mining and energy operations around Queensland is an important business development area, with several major projects under discussion with mining companies. Community and environment SunWater provided individual sponsorship for 60 community events across regional Queensland. These sponsorships reflect SunWater s strong ties with the communities in which it operates and where its employees and their families live. Involvement in local shows, fundraisers, sporting events and other activities also provided the opportunity to promote SunWater s water safety campaign to recreational users of lakes and dams. The Environmental Impact Statement (EIS) for the Water for Bowen project is near completion and is planned for submission to the Co-ordinator General for review in late A draft Cultural Heritage Management Plan has also been negotiated with the traditional owners. EISs are being conducted on several other key projects including the Connors River Dam and Pipelines and the Nathan Dam and Pipelines. The Community Liaison Groups for those projects continued to meet to allow local views to be included as part of the environmental impact assessment process. The Bowen River Weir fishway is scheduled to be operational by March This follows completion of design work during the year, and the subsequent start of construction in July SunWater Limited annual report Highlights

7 Asset sustainability SunWater responded to flooding and asset damage during Queensland s natural disaster emergency in early 2009, with the emergency requiring diversion of resources from other projects. The majority of over 500 refurbishment and enhancement projects were completed during the year, at a cost of $11.0m. This annual program includes projects aimed at refurbishing aging assets, reducing service risk, and improving Workplace Health and Safety. A $2.5m design and relocation of a significant portion of SunWater s Collinsville Pipeline was completed during the year. The relocation makes way for an expansion of mining operations, and was funded by the mining company utilising the pipeline. In close consultation with customers, draft plans for modernisation of irrigation channel distribution systems to improve cost-effectiveness and water efficiency were developed during the year. The plans, which identify a number of potential initiatives for SunWater, were submitted to the Australian Government for consideration. Our customers 21 of SunWater s water schemes have service targets that define expected shutdown parameters, maximum numbers of interruptions to supply, and response times to customer complaints. SunWater achieved these customer satisfaction service targets in most regions during Diversifying the business by offering SunWater s consulting and facilities services to non-irrigation customers has opened up new opportunities and made a significant contribution to SunWater s annual revenue. Our people SunWater continued to develop flexible work arrangements to offer employees a healthy work/life balance and to retain valuable skills and expertise. SunWater continued its commitment to ongoing development of learning and development programs to maintain organisational capability. Workplace Health and Safety continued to be a critical focus with emphasis on a No-Harm goal. A revised Workplace Health and Safety policy was approved and a Safety Leadership training program was introduced for managers and supervisors. The Lost Time Injury Frequency Rate (LTIFR) for was 8.7, which is significantly lower than the previous year and marginally lower than medium-term averages. Following an injury to an employee in an electrical accident, SunWater undertook an internal electrical safety audit and introduced changes to address the issues identified. Business management SunWater progressed the integration of its two separate quality management systems into a whole-of-organisation quality management system. The Incident, Emergency Response, Crisis and Business Continuity Management documentation was revised in December 2008 and an internal audit of Business Continuity and Crisis Management processes was undertaken in March SunWater s Information and Communication Technology strategic plan includes the redesign of current water information management systems. During the year, a study was conducted to assess the cost-effectiveness of the existing system and its ability to meet evolving needs. Replacement plans will be considered under the auspices of the National Water Market System. Project management capabilities continue to be upgraded with SunWater s Asset Solutions group receiving accreditation as a Project Managed Organisation and professional accreditation of project directors and managers from the Australian Institute of Project Management. Standard project management tools and process will be introduced. A new Stop, Look, Assess, Manage (SLAM) process was introduced for all work tasks across the organisation and training workshops were conducted to educate staff in the new SLAM process. This initiative targets risk management from a safety perspective, and contributes to the achievement of No-Harm within SunWater. As part of its Brisbane office tenancy relocation during the year, SunWater has implemented a full disaster recovery capability for its production systems at a third party remote site. SunWater continued to meet regularly with Irrigator Advisory Committees (IAC) and introduced a dedicated web area for IAC information and meeting documentation. SunWater Limited annual report Highlights 5

8 chairman s review. The slowing of the economic boom that followed the Global Financial Crisis has reduced the urgency of demand for new water infrastructure and supply. This has resulted in changes to the timelines and priority for many of SunWater s regional water projects. In coal mining regions, a number of previously anticipated developments have been deferred and the increased demand for water is likely to be delayed for a few years beyond original projections. Mining activity is vital to the health of the Queensland economy and SunWater continues to work very closely with companies active in this sector to ensure their needs are met economically and at the optimum time. The widespread flooding, which resulted in large regions of Queensland being declared natural disaster areas, brought much-needed relief from the drought but also caused damage to SunWater infrastructure. Repairs became a high priority and added to SunWater s costs for the year. The year will be remembered for the Global Financial Crisis and, in many parts of Queensland, for the widespread floods that affected a number of regions for an extended time. Both of these factors had an impact on SunWater s operations during the year. I am pleased to report that SunWater s dedicated teams have enabled SunWater to meet the challenges of this fast-changing environment, whilst ensuring a continued focus on the needs of our customers and the community. Financial performance SunWater s adaptability also meant that in it achieved improvements in almost all its financial key performance indicators. These improvements were achieved in the areas of revenue, profit, liquidity and return on assets. Five-year results in these areas can be found in the financial performance section of this report on pages 11 to 13. Revenue for the year was increased by $8.8m. This result excludes the proceeds from the sale of certain assets to Seqwater of $48.9m and the proceeds from bank guarantees of $11.5m. The revenue increase was mainly attributable to the full year operation of the Burdekin-Moranbah Pipeline. Better utilisation of assets has contributed to SunWater s net profit before tax (excluding the Seqwater transaction) result of $44.0m in compared to $25.9m in Cashflows from operating activities for the year remained strong at $8.2m (after excluding proceeds from the bank guarantees). Corporate governance The financial year was SunWater s first year of operating as a Company Government Owned Corporation following the transition to this structure on 1 July This transition has been smooth with no impact on the performance of the business. Coupled with this transition, during SunWater reviewed its corporate planning framework and corporate risk processes to improve the focus of the business on creating shareholder value, as well as improving the identification, assessment and monitoring of strategic issues and corporate risks. The process of integration of quality, safety and environmental management systems within the organisation into a single system continued, and the integration of risk management into all business processes has strengthened the consistency and resilience of all operations. 6 SunWater Limited annual report Chairman s Review

9 New reporting and legal requirements were integrated into SunWater s operations. These included the changes associated with the Right to Information Act 2009, new reporting required from 1 July 2008 under the National Greenhouse and Energy Reporting Act 2007 and the second year of participation in the National Water Commission s National Performance Reporting for Rural Water Service Providers. SunWater was also one of the first water agencies in Australia to meet the new water data reporting requirements for the Bureau of Meteorology. Community and environmental responsibility Community consultation and support remained integral to SunWater s positive relationship with the people of Queensland. Community liaison groups continued to meet and provide valuable input as an integral part of the Environmental Impact Assessment processes for Nathan Dam and Pipelines and the Connors River Dam and Pipelines project investigations. A large proportion of SunWater s operations and employees are based in regional areas of Queensland and the company continued to take an active role in the communities in which it operates, through its support and sponsorship of local events and industry forums. Acknowledging an outstanding team On behalf of the Board, I would like to thank the SunWater executive team for their commitment to meeting a wide range of challenges to achieve the SunWater mission in I also thank all of our people for their individual contributions to the year s outcomes and for their responsiveness in adapting to the changing priorities of this unusual year. I thank my fellow Board members for their support and contribution during the year and welcome two new Board members - Kirstin Ferguson and Neil Turner - who bring valuable skills and experience to the Board. I would also like to extend my appreciation to former Directors Julie Boyd and Alan Millhouse, both of whom retired as Board members during the year, and thank them for their valuable contribution throughout their terms. The Board continues to encourage and support the organisation s investment in an ongoing program of employee development initiatives and succession planning. Employee knowledge and capability are the foundation of excellence in everything SunWater achieves. Safety SunWater has an uncompromising commitment to safety - for staff and the community. This is demonstrated through our continuing efforts to reduce safety risks, improve hazard awareness, and educate the community. As part of this commitment, SunWater continued to undertake a mass media-based water safety advertising campaign targeting those who use our dams and lakes for recreation. The campaign message encourages people to enjoy the facilities, but to do so in a safe manner. Looking forward The year ahead will be focused on more efficient operations - to achieve business productivity targets, to meet our customer commitments and to capture employee suggestions for business improvements. Many of the changes will be identified and implemented through the Smarter, Lighter, Faster initiative, which will scrutinise all operations to streamline processes and workflows. The Board and executive team will also continue to closely monitor the economic environment and work closely with customers in mining, agriculture and other pivotal industries throughout Queensland to ensure water infrastructure projects and water supply continue to meet current and emerging needs. Phil Hennessy Chair Board of SunWater Limited SunWater Limited annual report Chairman s Review 7

10 ceo s report. One of my priorities in , in the midst of the changing external circumstances has been to ensure SunWater s underlying focus on its service to customers and operational efficiency. SunWater s mission is to provide cost-effective and commercial water services that add value to our customers. This remains a fundamental touchstone against which all decisions are tested. Similarly our vision to be a leader in water service delivery and providing outstanding solutions for customers and the community continued to provide an inspirational position that guides the executive team and employees to continue to upgrade processes and to embrace positive initiatives. Ensuring Queensland s future water supply The availability of secure and reliable water supplies is critical to the future economic prosperity of Queensland. As Queensland s leading commercial water provider, supporting the Queensland Government s Statewide Water Policy remains one of SunWater s most important ongoing activities. The implementation of the Statewide Water Policy, which is designed to complement the South East Queensland water grid and to improve water supplies in regional Queensland, remained a key business focus during During the year, SunWater continued development of an integrated implementation plan known as Regional Water Solutions. While the global financial crisis changed the priority of some elements in this plan, major work continued with investigations and planning for Connors River Dam and Pipelines, Nathan Dam and Pipelines, Lower Fitzroy River Infrastructure projects and Water for Bowen projects. SunWater also commenced investigations on the Burdekin Falls Dam raising, Glebe Weir raising and the Bowen Basin Water Service Framework. Delivering new water infrastructure is a complex process governed by planning and environmental legislation at the local, state and federal levels, aside from other community, commercial and engineering considerations. As a responsible water provider, SunWater takes its obligations to the environment seriously, and as such will continue to work closely with the relevant authorities to ensure the impacts on the environment from these developments are identified and managed. For some projects, this may result in a delay, whilst mitigation plans are developed, tested and then implemented. Asset management for sustainable, cost-effective solutions The long-term sustainability and cost-effectiveness of water supplies in 23 water schemes, which serve around 5,000 customers, depends on comprehensive asset planning, incorporating new and emerging requirements for safety, environment, and water efficiency. SunWater has continued to improve its asset strategies to balance service requirements with an overall reduction in life-cycle costs. SunWater undertook ongoing works as part of its maintenance and refurbishment program during the year, thus ensuring effective operation of 19 major dams, 63 weirs and barrages, 80 pumping stations and 2,500 kilometres of pipelines and channels. The severe weather and flooding in many areas of Queensland damaged some key SunWater infrastructure and increased maintenance needs for the year to higher than normal levels. Importantly, this damage was able to be repaired with no impact on customer service levels. Improving customer service SunWater has a wide range of stakeholders and clients - those who rely on the performance of its water infrastructure, and a range of other businesses and authorities that use SunWater s consulting and specialist services for major projects and specific technical solutions. SunWater has continued to set its customer service sights high and introduced a number of initiatives to monitor and improve its operations and to give customers more responsive solutions. 8 SunWater Limited annual report CEO s Report

11 Customer service targets were set and measured for 21 water schemes. These targets cover factors such as notifications, planned and unplanned outages, and maximum levels of outages and response times. Targets were achieved in the majority of schemes with three areas narrowly missing their targets, and one area falling short by a significant margin due to infrastructure and resourcing limitations. Details of our performance against service targets are outlined in the Our Customers section of this report. A prime example of where SunWater has taken measures to introduce better systems for its customers can be seen in the Macintyre Brook Water Supply Scheme in Inglewood. In this area SunWater staff worked closely with customers and the State Government to introduce an improved water sharing and accounting system known as Continuous Sharing. The new system allows customers to individually manage their water account balance independent of other users in the system, thereby enabling better planning for future water needs. SunWater s participation for the second year in the National Water Commission s performance reporting initiative provided improved transparency of the overall performance of individual areas under a nationally consistent approach. Contributing to better water solutions During the year, SunWater continued to provide an important consulting role in contributing to cost-effective water solutions in Queensland. Major projects supported with SunWater knowledge and expertise during the year included: Involvement as a sub-alliance partner providing design services to the Western Corridor Recycled Water project Peer reviewer to the Hinze Dam Stage 3 raising, and Consultant to Anglo Coal on a 20-year dam safety review for Bundoora Dam. Safety remains paramount SunWater s goal for safety performance is No-Harm, and whilst the organisation continues to improve its performance, our result for was below our expectations. There were two regrettable incidents during the year, which SunWater has taken very seriously. A workplace injury at Biloela involving an electrical switchboard resulted in a fine for SunWater. To improve employee protection and to ensure that the risk of recurrence of this type of event is minimised, SunWater undertook an audit of all electrical switchboards and engaged an independent expert to review the findings and develop a program of improvements. The second incident involved the rapid uncontrolled deflation of one of the rubber bags at Bedford Weir. The investigation of this event is still continuing and SunWater is cooperating fully with Workplace Health and Safety Queensland. In the meantime, three other rubber dams were deflated under controlled conditions. An ongoing program of safety reviews and upgrades continues and substantial investments are planned for the year ahead to reduce safety risks and to progress further dam safety upgrades. Embracing tomorrow s challenges SunWater is a proactive participant in national water industry developments and also works closely with state and local governments on Queensland initiatives. In the year ahead and beyond, SunWater will continue to adapt to meet emerging requirements and to ensure best-practice in its operations. An important element of this will be metering upgrades for 11,000 water meters over the next 10 years as part of the National Framework for Non-Urban Water Metering. In , SunWater will also commence discussions with key stakeholders in industry and government about the review of rural water charges. New water legislation at the federal level, has introduced new requirements and challenges that will need to be carefully assessed well before the requirement to introduce new tariffs in July New productivity targets and a difficult economic environment will challenge SunWater to find further ways to streamline activities without compromising service to customers. SunWater s Smarter, Lighter, Faster initiative will be integral to achieving the increased efficiencies, and delivering on our commitments to customers. In the same way that SunWater has effectively met the planned and unplanned challenges of , it will embrace the demands of to continue to provide exceptional water solutions to the people and industries of Queensland. Peter Boettcher Chief Executive SunWater Limited SunWater Limited annual report CEO s Report 9

12 performance summary. KEY RESULT AREA Financial performance SunWater s achievements against these targeted areas of improvement are detailed on pages 11 to 13 of this report. Operational performance SunWater s achievements against these targeted areas of improvement are detailed on pages 14 to 19 of this report. OBJECTIVES/OUTCOMES To increase profitability of existing service commitments To realise the value of SunWater s water allocations To increase the value of the corporation through business growth PERFORMANCE MEASURES/OUTCOMES TARGETED DURING Achievement of water pricing targets Achievement of allocation sales targeted in the Marketing Strategy for Burnett Water P/L Number of water infrastructure developments under investigation by SunWater that are acknowledged by the Queensland Government as key components Community and environment SunWater s achievements against these targeted areas of improvement are detailed on pages 20 to 23 of this report. To achieve a high level of environmental performance in schemes and projects To contribute to the well-being of regional Queensland communities Extent of weed and pest animal management strategies implemented Implementation of dividend reinvestment projects Investment in community-based initiatives, e.g. Burdekin Water Festival which engages SunWater with local communities To minimise community risk from catastrophic events Emergency action plans reviewed and exercised to program Asset sustainability SunWater s achievements against these targeted areas of improvement are detailed on pages 24 to 29 of this report. Our customers SunWater s achievements against these targeted areas of improvement are detailed on pages 30 to 33 of this report. Our people SunWater s achievements against these targeted areas of improvement are detailed on pages 34 to 39 of this report. Business management SunWater s achievements against these targeted areas of improvement are detailed on pages 40 to 43 of this report. To ensure continuing asset serviceability To ensure asset integrity is safeguarded To upgrade the products and services offered To improve the level of customer satisfaction with SunWater services To build improved customer relationships To have a motivated, empowered and well-skilled workforce with a commercial culture To ensure compliance with legislative requirements To ensure risks are identified and managed To ensure that SunWater s ICT systems and architectures are efficient and provide appropriate business solutions Delivery of the asset refurbishment and enhancement program including water pricing team savings forecasts Number of five-year comprehensive inspections completed Continuous sharing (CS) arrangements implemented under new ROPs where customers support its introduction Achievement of scheme service targets for planned and unplanned shutdowns Customer representative support for key activities as demonstrated by committees operating in accordance with framework Collective Agreement initiatives implemented and performance monitored Positive acceptance and engagement in organisational change Compliance monitoring and action system in place and operating effectively Effective risk management systems incorporated into business processes Progress with implementation of ICT strategic plan Reliability of core IT business systems 10 SunWater Limited annual report Performance Summary

13 financial summary. SunWater consolidated results summary to ACTUAL $m $m $m $m $m ACTUAL ACTUAL ACTUAL ACTUAL Revenue Excess of fair value over cost upon acquisition of subsidiary 7.9 Gain on sale of assets to Seqwater 48.9 Proceeds from Bank Guarantees 11.5 Revenue (excluding excess of fair value, Seqwater transaction and Bank Guarantees) Net Profit (after tax) * Net Profit (after tax) (excluding excess of fair value) * Dividends declared EBIT (earnings before interest and tax) * Impairment EBITDA (EBIT before depreciation, amortisation and impairment) * Total assets Total liabilities Net assets Cash balance Borrowings Contributed Equity Cashflows from operating activities Refurbishment and backlog expenditure Total water deliveries (million megalitres) Full time equivalents * Figure excludes gain on sale of assets to Seqwater of $48.9m Revenue Net Profit (after tax and excluding excess of fair value) Water Deliveries by Sector Water Revenue by Sector $ million 143 $ million $ million 99 Industrial 15.2% Urban 3.7% Urban 4.2% Irrigation 81.1% Irrigation (including CSO) 29.8% Industrial 66.0% Revenue for exceeded by $8.8m and excludes the proceeds from the Seqwater transaction and bank guarantees. SunWater s net profit for less Seqwater ($48.9m) increased by $19.3m compared with results. Industrial water deliveries increased from 4.5% in to 15.2% in This includes one-off water deliveries in the Nogoa Mackenzie. Industrial water revenue increased from 61.4% in to 66.0% in Revenue Breakdown Irrigation Industrial water Urban bulk water External consultancies/contracts Water allocation sales Other revenues SunWater s revenue for exceeded results by $8.8m, excluding the proceeds from the Seqwater transaction and bank guarantees. SunWater Limited annual report Financial Summary 11

14 financial summary. Consolidated performance The net profit before tax for of $92.8m is $66.9m higher than the result of $25.9m. Proceeds from the Seqwater transaction contributed $48.9m to the net profit before tax. Revenue from ordinary activities was $9.7m higher in than in The main increases were industrial revenue of $15.4m, water allocations of $2.2m, irrigation revenue of $2.8m and interest revenue of $4.6m. This was offset by lower Community Service Obligations (CSOs) of $7.2m and lower consulting revenue of $6.1m and lower urban water charges of $1.7m. Industrial revenue increased because of increased capacity and increased usage charges attributable to new infrastructure mainly in the Bowen Basin. Irrigation revenue increased due to higher recognition of refurbishment annuity revenue as a result of higher refurbishment expenditure, increases to water charges under the price path and small increases in water deliveries in some schemes. CSO payments from the Queensland Government decreased by 69% to $3.2m as a result of changes in government funding arrangements in relation to dam safety upgrades. In 2008 spillway funding was made available by way of CSOs but in 2009 funding was provided by way of equity injection. Expenses (excluding finance costs) for were $150.0m, compared to $149.5m in There were savings in labour due to the Seqwater transaction ($6.0m) which were offset by higher depreciation of $1.7m, higher impairment of $2.7m and higher legal fees of $1.7m, the bulk of which are associated with legal expenses for the Paradise Dam legal action. Finance costs expensed were higher in due to lower capitalisation of interest expense. During , $3.6m was capitalised during the construction of the Burdekin-Moranbah Pipeline. Income Tax Income tax was $6.9m, down from $8.0m in This was due to prior year adjustments made following a ruling by the Australian Tax Office (ATO) in September 2008 which allowed SunWater, as an irrigation water provider, to write-off eligible capital expenditure incurred after 1 July 2004 over three years. It also reflects a favourable ruling by the ATO in August 2009 that treats the Seqwater transaction as tax neutral. Asset performance As part of the regulated water price, funds are set aside to meet future asset refurbishment requirements. SunWater spent $11.0m on asset refurbishments in compared to $9.7m in The majority of the refurbishment and enhancement program for the year was completed. It was necessary however to divert resources to flood repairs ($3.9m) during the year. This was the main contributor to delays experienced on a small number of projects. The projects that are ongoing are scheduled to be concluded early in SunWater continued with the dam safety upgrade program during the financial year, completing the Borumba Dam safety upgrade project after ownership of the dam was transferred to Seqwater on 1 July The detailed design and investigation stages were completed and construction commenced on the $21.1m Tinaroo Falls Dam safety upgrade. The total spend on this project to 30 June 2009 was $2.6m. Funds management SunWater s consolidated cash position at 30 June 2009 was $135.1m ( $40.0m). The $95.1m increase reflects proceeds of $77.7m from the sale of assets transferred to Seqwater, the $11.5m proceeds from bank guarantees, and the full-year operation of the Burdekin-Moranbah Pipeline. During the year SunWater repaid $16.4m of debt to the Queensland Treasury Corporation. Dividends In accordance with SunWater s established dividend process, dividends are based on profits but recognise the need to provide cash for the investigation and development of various water projects, asset refurbishment and other future commitments. A dividend of $7.6m, based upon the agreed methodology, was declared for the financial year. 12 SunWater Limited annual report Financial Summary

15 Profitability indicators Return on Equity (%) Return on Total Assets (%) Return on Total Assets replacement value (%) EBITDA & EBIT EBIT EBITDA $ SunWater s return on equity (excluding proceeds from the Seqwater transaction) was 7.4%, an increase of 3.5% largely attributable to higher earnings in Higher earnings in resulted in an increase in SunWater s return on assets from 2.3% in to 4.5% in Return on the replacement value of assets (excluding proceeds from the Seqwater transaction) in increased to 0.53%. The EBIT for (less Seqwater transaction of $48.9m) increased by almost 50% over , whilst EBITDA increased by approximately 30%. Financial leverage indicators Market Gearing (%) EBITDA Interest Cover (Times) Operating Cash Flow to Earnings (%) (EBITDA) Funds from Operations to Total Debt (%) Funds from Operations Interest Cover (Times) Market gearing improved during the year as no new borrowings were required Higher earnings in were largely contributed to improved debt cover Earnings and operating cashflow during the year remained strong Increased earnings in led to increased cashflows to debt Higher earnings, resulting in increased funds from operations, and lower interest costs in contributed to improved interest cover SunWater Limited annual report Financial Summary 13

16 operational performance 14 SunWater Limited annual report Operational Performance

17 At a glance Water deliveries across all schemes totalled 1.05 million ML, a slight increase on the 1.02 million ML delivered in , despite being hampered by drought and then flood. Approval for the construction of the $42.5m, 38 km Cloncurry Pipeline was obtained in the second quarter of the financial year, with work commencing in July Business cases and investigations for proposed water infrastructure development projects and upgrades to existing assets were progressed. Water supply for mining and energy operations around Queensland is an important business development area, with several major projects under discussion. Temporary transfer water sales were up 30% on the previous financial year. As a leading water supply solutions provider, SunWater is investigating and delivering short and long-term strategic water infrastructure developments that will enable future growth of its customers within the mining, industrial, commercial and agribusiness sector. Infrastructure management services SunWater continued to provide infrastructure management services during the financial year to ensure existing assets remain in good condition so that their service potential is available for our customers now and for future generations, in line with SunWater s service ethos. The Water Services group is responsible for this and, throughout the year in review, continued to assess and monitor the condition of assets, review maintenance strategies, develop long-term asset plans, undertake major infrastructure refurbishment projects and review the environmental performance of those assets. The organisation s expertise in infrastructure management is also utilised by other asset owners who outsource management of their water infrastructure assets to SunWater. The organisation provides the same high level of customer care irrespective of asset ownership thereby helping others achieve success. SunWater s vision means that it applies continuous improvement measures in managing these assets and aims for best-practice in operational efficiencies. SunWater s infrastructure management service contracts are tabled below: CONTRACT ORGANISATIONS BHP Mitsubishi Alliance (BMA) Department of Local Government, Sport & Recreation Department of Infrastructure and Planning National Capital Authority SERVICE Operate and maintain six major pipelines, pump stations and storage facilities for BMA s coal mines in the Bowen Basin. Operate and maintain the water supply for five communities located at the northern tip of Cape York. Reading and maintenance of 4,122 water meters in 11 groundwater areas and one industrial pipeline. Control and distribute water to irrigators in the Border Rivers area. Operate and maintain Scrivener Dam in Canberra, ACT. Border Rivers Commission Seqwater Operate and maintain works under the control of Border Rivers Commission including Glenlyon Dam and Boggabilla Weir. Provide maintenance and collate data from the Stream Gauging stations and dam surveillance instrumentation. Water availability Storage levels and announced allocations remained relatively stable throughout the reporting period, with the exception of two major storages - Paradise Dam that increased by 28% and Coolmunda Dam that decreased by 31%. The available water held in storage at SunWater dams and weirs, as at 30 June 2009, was 5.25 million ML #. This represents approximately 73% supply capacity. Across all schemes, SunWater delivered 1.05 million ML to customers, representing 48% of the available water. Due to climatic conditions, this is slightly higher than the previous reporting period ( : 1.02 million ML and 46% of available water). # Please note statistics in included storages that transitioned to Seqwater. Therefore no relationship can be derived between the and the statistics. Pictured: David Harrigan carrying out testing of the Burdekin Falls Dam outlet works model at our Rocklea Hydraulics Laboratory. SunWater Limited annual report Operational Performance 15

18 operational performance. Water allocation trading Water allocation trading (sales, leases, and temporary trading) for the financial year was lower than for This was primarily due to the deferral of allocation sales associated with the channel lining project in Emerald (which should be realised next financial year). Marketing activities continued in several regional areas in Queensland and interstate. Advertisements featuring the Water for Growth slogan appeared in strategic regional and national publications, from December through to February, to target potential customers in the agricultural, industrial and urban markets. Specific focus was on the water allocations available in the Bundaberg and Upper Burnett regions, with allocations available in other schemes also being promoted. SunWater s independent water trader, Psi Delta-Elders Ltd, continued to provide a water brokerage service for SunWater-owned water allocations, actively marketing and trading the water available for temporary transfer. The water year saw strong volumes of temporary transfer water sold throughout Queensland. In total 7,910 ML of temporary water were traded throughout the state, an increase of 30% on by the water trader. Legacy water contracts SunWater is required under its charter to review non-commercial local government and industrial water supply contracts with a view to moving these to commercial terms. This is an ongoing obligation and is actioned as each contract expires. The majority of existing non-commercial contracts were agreed to in an environment where there was no consideration of the true cost of providing water. During , one such contract was renegotiated to align with commercial arrangements. Negotiations continue on a further two expired legacy contracts with a view to finalisation in the first quarter of SunWater maintains another seven non-commercial supply agreements set to expire between July 2009 and 30 June 2019 and these will be renegotiated progressively. Water infrastructure developments In July 2007, SunWater received formal notification from the Department of Infrastructure and Planning (DIP) of its nomination as proponent for the development of business cases for seven major regional water supply projects. Progress on these projects is summarised on the following pages. SunWater will investigate prudent funding options that may include additional debt and equity to maintain an appropriate capital structure, in the event that any or all of the infrastructure development projects currently undergoing feasibility or business case development proceed to construction. Connors River Dam and Pipelines Proposed Location: Connors River The proposed dam is located on the Connors River near Mount Bridget in the Isaac Region, about 235 km north-west of Rockhampton and 100 km south of Mackay. A bulk water supply pipeline is proposed to run from the dam west to Moranbah in the northern Bowen Basin, servicing areas of highest demand. This will help meet the future water demands of industries and communities throughout the region. The project team continued to work on preparation of an EIS. The EIS is nearing completion and is scheduled to be submitted to the Coordinator-General for review in late The public release of the EIS will follow that submission. One voluntary property acquisition was completed by DERM for a large landholding directly affected by the proposed dam inundation during the financial year. Negotiations (in conjunction with DERM) are progressing on the acquisition of further properties affected by the proposed inundation. The project has been declared a significant project under the State Development and Public Works Organisation Act Nathan Dam and Pipelines Proposed Location: Dawson River The proposed dam would be located approximately 2 km upstream of the Nathan Gorge on the Dawson River, which is about 75 km downstream of Taroom and 315 km upstream from the Dawson River s junction with the Fitzroy River. Water from the proposed dam would be transported via a new pipeline to mines and power stations in the Surat Coal Basin. This could potentially extend as far as Dalby. Water would also be released downstream to mines in the Southern Bowen Coal Basin, to the Dawson Valley Water Supply Scheme, and as required to meet critical urban supply needs in the Lower Fitzroy region and other parts of central Queensland. Early studies undertaken as part of the environmental impact assessment process for the dam highlighted the potential to impact the critically endangered Boggomoss snail through the inundation of an isolated section of habitat located within the proposed dam footprint. In response to this issue SunWater commissioned extensive field surveys to determine the distribution and abundance of the snail throughout the region. These studies located a significant amount of additional habitat throughout the Dawson region, and increased the known population of the species from the previous estimate of 600 individuals to a revised estimate of 18,000. SunWater is currently discussing these findings and their implications for the project with the DEWHA. The project has been declared a significant project under the State Development and Public Works Organisation Act SunWater Limited annual report Operational Performance

19 Nullinga Dam Proposed Location: Walsh River, Mareeba All investigations are complete and a preliminary business case report was prepared and submitted to the Queensland Government in May The report recommended that no further work be carried out until there is a clarification on the required environmental flows for the system. Kinchant Dam raising Location: Pioneer Valley near Mackay The proposed raising of Kinchant Dam was identified as a possible source for creating additional water supplies to support existing and future demand in the area. Following the completion of geotechnical investigations, SunWater submitted a preliminary business case report to government in May The report recommended that no further work be carried out on the proposal due to the high costs associated with the project. Lower Fitzroy River Infrastructure Projects Location: Fitzroy River near Rockhampton SunWater is working with the Gladstone Area Water Board to investigate the feasibility of developing water supply infrastructure in the Fitzroy River in order to meet the short to medium-term water supply needs of the Rockhampton and Gladstone regions. The project is focused on assessing the feasibility of constructing a new weir located near Rookwood Crossing, and the raising of Eden Bann Weir, an existing SunWater asset located closer to Rockhampton. These assets would be developed progressively over time to meet new water demands as they transpire, with the exact timeframes for development to be explored through the project business case, which is scheduled for completion in June Water for Proserpine Location: Proserpine The proposed Water for Proserpine project aims to improve the reliability of urban water supplies in the Proserpine and Whitsunday region. Work on this project was placed on hold pending the outcome of the Water for Bowen project. Case study: Physical hydraulic modelling SunWater s hydraulics laboratory models key water infrastructure projects, allowing internal and external clients to test scale models before full scale construction. Situated at Rocklea, Brisbane, the laboratory forms an integral part of SunWater s project management service. SunWater s hydraulics laboratory is well equipped to meet a wide range of modelling requirements and allows testing of hydraulic structures under the close control of design personnel. Laboratory staff specialise in testing hydraulic structures such as spillways, energy dissipaters, tidal barrages and weirs, storm drainage structures, pump station intakes, irrigation control structures and conduits. The laboratory has, over the past year, played a key role in the design and testing of new and significant water resource infrastructure developments and dam safety upgrades for SunWater and external clients. David Pokarier and Amanda Butler collect velocity data during testing at our Rocklea Hydraulics Laboratory. Projects have included the Cedar Grove Weir, Burdekin Falls Dam Raising, Borumba Dam Safety Upgrade, Tinaroo Falls Dam Safety Upgrade, Bjelke- Petersen Dam Safety Upgrade, Hinze Dam Stage 3 and Wyaralong Dam. The Wyaralong Dam models are an example of the scale of the projects for which the laboratory can cater. Construction of the $348m Wyaralong Dam project is scheduled for completion by the end of The Wyaralong Dam has required two models, the larger of which demonstrates the dam s ability to safely pass flows up to the probable maximum flood at a scale of 1:80. The smaller model, at a scale of 1:30, provides crucial information related to the hydraulic conditions at the dam s outlet. Hydraulic modelling of projects has proven valuable for projects such as the Wyaralong Dam and has enabled considerable cost savings through design optimisation. Water for Bowen Location: Bowen The Water for Bowen project will supply water for industrial, urban and high-value agricultural use via a new channel and pipeline system extending 150 km from the Burdekin River south to Bowen and surrounding areas. The EIS is nearing completion and is scheduled to be submitted to the Coordinator- General for review in late Public release of the EIS will then follow. A draft Cultural Heritage Management Plan (CHMP) was negotiated with the traditional owners and the final CHMP should be executed in late SunWater Limited annual report Operational Performance 17

20 operational performance. Other development proposals that progressed during the year include: Cloncurry Pipeline Location: Cloncurry SunWater was requested by the Queensland Government in mid 2008 to prepare a business case for providing a water pipeline from SunWater s existing North West Queensland Water Pipeline to the township of Cloncurry. At the time the town and surrounding region was in severe drought with water supplies transported to the town by rail. The business case was completed and submitted to the Queensland Government in November In December 2008, SunWater was named proponent and the project received Queensland Government approval. Pipeline construction started in July 2009 and is scheduled for completion in December 2009, with first water planned for March (Refer also to case study on page 19.) Burdekin Falls Dam raising Location: Burdekin River, near Ravenswood A proposed two metre raising of the Burdekin Falls Dam has been identified by SunWater to provide water supply certainty for the Burdekin region. The raising would increase the storage capacity of the dam by 590,000 ML to a total of 2,446,000 ML. An additional 150,000 ML of yield will provide for water demand for future economic development. Stage One of the investigation was completed at the end of 2008 and included a pre-feasibility study and preliminary business case. Stage Two of the project includes preliminary design and environmental investigations. Stage Two of the project was placed on hold in June 2009 pending the commercial viability of the Water for Bowen project being established, or other significant demand emerging. An application for a Declaration of Significant Project was also lodged with Queensland s Department of Infrastructure and Planning in early Glebe Weir Raising and Pipeline Location: Dawson River, near Taroom During the reporting year, SunWater completed the EIS for the Glebe Weir raising and the pipeline for the Wandoan Coal project, for which the Glebe Weir raising is one water supply option under consideration. Due to recent economic conditions the Wandoan project has been delayed. Feasibility and engineering investigations are expected to recommence later in Consultancy services SunWater is continuing to provide consulting services to the market when it fits with the organisation s strategic direction. Some of the major consulting projects, including engineering studies, which were undertaken during the period, are outlined below: Western Corridor Recycled Water Project - Eastern Pipeline Alliance Since October 2006, SunWater has been a sub-alliance partner providing design services to the Eastern Pipeline Alliance. The alliance includes AJ Lucas, Transfield Services, GHD Pty Ltd, McCall s, and the Queensland Coordinator-General. Stages 1A and 1B of the Eastern Pipeline were completed. Water delivery commenced on 31 August 2007 and 31 March 2008 respectively, providing up to 66 ML of purified recycled water to Swanbank and Tarong power stations. Stage 2A was completed in October 2008, providing a further 116 ML a day of purified recycled water to the South East Queensland Water Grid. Stage 2B, which augments Stage 2A, will add a further 50 ML of purified water to the overall system. This stage involves the duplication of the Brisbane River crossing linking Luggage Point advanced wastewater treatment plant to Gibson Island, together with another two booster pump stations. Work is expected to conclude on this stage in the fourth quarter of Seqwater - Hinze Dam Stage 3 (HDS3) raising SunWater continues to act as the peer reviewer for Seqwater and the HDS3 Alliance team. The raising is to satisfy dam safety requirements, enhance the dam s flood mitigation benefits, and to provide more water security for the region by increasing the capacity of the Hinze Dam. The project is currently in the works delivery phase and SunWater is involved in reviewing detailed designs and providing technical advice to Seqwater. SunWater anticipates its role will continue throughout the design and construction phase of the project, which is expected to be completed by Queensland Water Infrastructure - Wyaralong Dam Queensland Water Infrastructure (QWI) has appointed a principal contractor to deliver Wyaralong Dam, with construction anticipated to be completed by the end of SunWater continued in its role as Owner s Engineer for QWI and provided technical support during the delivery of the project. This engagement has included building and testing physical models of the dam at SunWater s hydraulics laboratory. (Refer to case study on page 17.) 18 SunWater Limited annual report Operational Performance

21 Dam Safety Reviews - Bundoora Dam SunWater was engaged by Anglo Coal to undertake the 20-year dam safety review for Bundoora Dam and prepare the dam safety documentation. All remaining work on the dam safety review including the comprehensive inspection, stability analyses, design checks and the preparation of the final report were completed during the year. Business development outlook During the financial year, SunWater continued to progress other new business opportunities as listed below: Water supply for potential mines in the North West Mineral Province SunWater continued to undertake prefeasibility analysis of water transportation options for companies investigating the feasibility of developing new mines in the province, which centres on the Mount Isa/ Cloncurry region. Coal seam gas water SunWater signed a memorandum of understanding with one of the four major gas producers in the Surat Basin to provide them with potential market identification and water transportation services for treated water. SunWater is in similar discussions with the other three major gas producers. SunWater is also investigating the feasibility of developing a water grid to transport water aggregated from various producers to various market sectors. Water supply for proposed coal mines in the Bowen Basin SunWater is undertaking pre-feasibility studies for water supply and water transportation options for two proposed coal mines in the Bowen Basin. Water demand assessments for all proposed mines in the Bowen and Surat Basins have also been reviewed to incorporate the effects of the global financial crisis. While some projects have been deferred for two to three years pending economic recovery, others are progressing as planned. Case study: Cloncurry pipeline project reveals Mitakoodi history SunWater has, during project investigations, earned a solid reputation amongst the indigenous groups it has worked with, for its understanding of the importance of preserving and protecting our nation s cultural heritage. The Cloncurry Pipeline project is an example of mutually beneficial outcomes resulting from open and fair consultation with the region s traditional owners - the Mitakoodi people. Cultural heritage surveys for the Cloncurry Pipeline project were carried out for three months. In that time some of the region s indigenous youth had the opportunity to get a closer look at their indigenous history. Mitakoodi Elders and some of the clan s youngest members worked side by side surveying the 38 km water pipeline route, and together discovered numerous indigenous artefacts and sites of significance. Scar trees and numerous quarries containing quartz remnants used by earlier generations of Mitakoodi people were revealed and preserved for the future. Indigenous artefacts were either moved off the immediate pipeline route to a protected site nearby, given GPS coordinates to record their locations or the actual pipeline was realigned so as not to interfere with cultural sites of significance. A lot of positives came out of the cultural heritage survey, not just with the identification of artefacts, but also that the younger generation had the chance to walk the country with their elders to learn more about the land and their culture. Pearl Connelly and her granddaughter Lareese Ah-One discuss some of the quartz remnants left by their Mitakoodi ancestors. SunWater Limited annual report Operational Performance 19

22 community and environment 20 SunWater Limited annual report Operational Performance

23 At a glance Sponsorship of regional community events promoted SunWater and its water safety campaign. The sponsorships were supported through the involvement and commitment of local SunWater employees. The EIS for the Water for Bowen and Connors River Dam projects progressed well and will be submitted to the Coordinator-General in late This effort will ensure environmental and social impacts of the projects are managed in a sustainable way. Community Liaison Groups met for the Nathan Dam and Connors River Dam projects to allow local impacts to be considered as part of the EIS process. Design work for the Bowen River Weir fishway was completed. Construction commenced in July 2009 and is scheduled for completion by March SunWater is proud of its strong sense of community and its commitment to responsible environmental management - an overarching philosophy reinforced by staff participation in local events and projects and programs designed to benefit the community and environment. Sponsorships With more than half of SunWater s employees living, working and raising their families in regional Queensland, it is no surprise the organisation has a strong sense of community. SunWater and its employees aim to make a lasting contribution to the success of these communities of which they are a part, not only through financial support in the areas of youth, arts, environment, safety and education, but also through active community participation. SunWater s annual sponsorship program reveals the organisation s continued involvement with the Southern Cross Soloists Regional Music Schools and as a major sponsor of the SunWater Burdekin Water Festival. SunWater also regularly provides financial support for local shows, sports, fundraisers and industry forums. It is this kind of regionalised corporate philosophy and ongoing employee involvement that ensures small and large events right across regional Queensland are possible. (See also case study on page 23.) Public Safety Equally important to SunWater is community awareness of water safety hazards in and around its dams, weirs and water channels throughout regional Queensland. Each year SunWater delivers a mass media-based water safety advertising campaign targeting those who use our dams and lakes for recreation. The campaign message encourages people to enjoy the facilities, but to do so in a safe manner. This campaign is in addition to an annual program of regional community event visits by SunWater s water safety mascot which aims to educate primary school-aged children regarding water safety. Involvement SunWater is actively investigating strategic water infrastructure projects right across regional Queensland. As part of its commitment to positive community relations, SunWater has established Community Liaison Groups (CLG) for two of its major projects, Nathan Dam and Pipelines and Connors River Dam and Pipelines. Members have the opportunity to bring forward community input and opinion for discussion, at each CLG meeting and are provided with details of the project and potential local impacts. In addition to CLG meetings, SunWater also regularly holds locally-based public information sessions to give the broader community the opportunity to access available project information and discuss this with project team representatives. Pictured: Simon Dalip and John Beattie (left) inspect the pest fish exclusion screens installed on the Mareeba Dimbulah Water Supply Scheme channel system. SunWater Limited annual report Community and Environment 21

24 community and environment. Emergency Action Plans SunWater s Emergency Action Plans (EAPs) for each of its dams are reviewed on an annual basis to ensure that emergency contact details and procedures are up to date. SunWater completed a review of all EAPs associated with its major dams during the year. The review of the Boondooma, Burdekin Falls and Cania dams EAPs also served as a simulation exercise to train staff and to review the adequacy of the plans. The exercises identified some opportunities for improvement which are now being implemented. Weed and pest animal management strategies The reduction of the amount of chemicals used in weed control is important to SunWater. During the year, a successful trial of equipment fabricated to allow more accurate dosing of copper sulphate (used in irrigation channels to control filamentous algae) was conducted. Without the chemical treatments, the algae prohibit water delivery by forming nets which block and damage SunWater and customer infrastructure. By applying more accurate dosing, the amount of copper sulphate being used and entering the natural system is greatly reduced. SunWater s Bundaberg operations also undertook a major review of their aquatic weed treatment operations in water distribution channels to reduce the potential impact of herbicides on the receiving waters. Previously water treated with the herbicide Acrolein was able to be held for only 48 hours before being provided to irrigators. By purchasing additional equipment and redesigning treatment operations, the Bundaberg team were able to increase this withholding time to 72 hours, ensuring that any water which reaches a water course after this time is free of Acrolein. This was also achieved with minimal extension of the channel shutdown time in most systems. National Greenhouse and Energy Reporting (NGER) The National Greenhouse and Energy Reporting Act 2007 (the Act) was passed on 29 September 2007, establishing a mandatory reporting system for corporations that meet certain thresholds of greenhouse gas emissions and energy production and consumption. The first reporting period under the Act commenced on 1 July Key features of the Act are: Reporting of greenhouse gas emissions, energy consumption and production Public disclosure of corporate-level greenhouse gas emissions and energy information, and Consistent and comparable data available for decision making, in particular, the development of the Carbon Pollution Reduction Scheme. SunWater meets the greenhouse gas emissions and energy consumption thresholds and has registered for NGER reporting. The following table summarises the greenhouse gas emissions and energy information reported for the financial year. GREENHOUSE GAS EMISSIONS AND ENERGY CONSUMPTION ENERGY CONTENT (GJ) SCOPE 1 EMISSIONS (TCO2-E) Fuel Combustion/Energy (Transport) 39,932 2,785 SCOPE 2 EMISSIONS (TCO2-E) Other Fuel Consumption (Energy commodities) 510, ,889 Total 550,565 Scope 1 The release of greenhouse gas into the atmosphere as a direct result of an activity, or series of activities (including ancillary activities) that constitute a facility (i.e. petrol use in cars). Scope 2 The release of greenhouse gas as a result of one or more activities that generate electricity, heating, cooling or steam that is consumed by the facility but that do not form part of the facility (i.e. electricity used by a water pump). ENERGY PRODUCTION ENERGY CONTENT (GJ) Electricity (water generation) 25,864 Contaminated Land SunWater is progressively investigating all SunWater land historically used for fuel storage, abrasive blasting operations and landfills (during dam construction). In SunWater investigated a number of sites around the St George area used for these purposes. These sites were found to have only low level contamination (below contaminated land guidelines). 22 SunWater Limited annual report Community and Environment

25 Environmental collaboration/ fishways management SunWater has been collaborating with the QPIF to identify a suitable prioritisation matrix for fishway modification and construction in Queensland. QPIF developed a draft methodology for use on SunWater storages which takes into account a number of criteria including the location of the fish barrier such as a weir, barrage or dam, with respect to the ocean and/or other barriers. The process will provide a scientific basis for future fishway planning to be applied to highest priority barriers for maximum ecological benefit. Paradise Dam In March 2008, the DEWHA released its findings of an audit carried out at Paradise Dam in June Paradise Dam was one of a number of projects randomly selected to be audited under the federal Environment Protection and Biodiversity Conservation Act SunWater is continuing to work with the DEWHA to address the outcomes of the compliance audit. Dividend reinvestment projects Online climate tools for irrigators Development of a working version of online climate tools for irrigators ceased as the outcomes for this project are now considered likely to be more efficiently and effectively delivered as a part of the Australian Government s Australian Water Resource Information System (AWRIS). SunWater has been an active participant in and a contributor of technical expertise to the AWRIS program. Mareeba Channel fluming study This project is now complete, with the report documenting the design, installation rationale and operability also finalised. The flume is operating as intended with minimal ongoing issues to date. The outcomes of this research and development project demonstrate there is merit in the concept of the fluming, but practical implementation on an existing channel system with multiple structures to adapt is more expensive than traditional channel lining with further limitations on site selection. The concept has merit in certain brownfield site situations as a quick, cheap solution to convey a large volume of water. Case study: Making water work and making music play As part of its ongoing commitment to education and the arts throughout Queensland, SunWater once again sponsored a regional visit by the acclaimed Southern Cross Soloists musical ensemble. SunWater s annual sponsorship enables this Brisbane-based professional group of musicians to visit different regional towns to run intensive workshops for up and coming young high school musicians. SunWater research within regional schools found that music students were more than willing to learn new skills and train with skilled professionals but travelling to Brisbane to do so was often time and cost-prohibitive. SunWater s sponsorship of the music workshops enabled students to enjoy the benefits of one-on-one mentoring by some of Queensland s leading musicians and culminate in a free concert to showcase their burgeoning talents to the community. The Southern Cross Soloists visited Emerald in 2008 and since the program s inception more than five years ago, have worked with more than 300 students from across regional Queensland. Students from across Central Queensland gained valuable hands on experience during the Southern Cross Soloists Music Workshop in Emerald, which was sponsored by SunWater. Bowen River Weir Fishway Design of the new fishway was completed in the reporting year and construction commenced in July 2009 with a scheduled completion date of March The installation of this new advanced fishway will help to ensure that fish can migrate and breed, thereby maintaining an important balance to the river s eco-system. This infrastructure will allow fish species around 100 km of extra upstream river habitat for migration from as far downstream as the mouth of the Burdekin River. Kinchant Dam Wetland Reserve Planning This project has been deferred since the announced proposal to raise the dam. Plans for a wetland reserve will not be prepared until the future operational use of the area is determined. SunWater Limited annual report Community and Environment 23

26 asset sustainability 24 SunWater Limited annual report Operational Performance

27 At a glance Refurbishment and enhancement projects aimed at securing reliable infrastructure, minimising risk, and improving Workplace Health and Safety continued, with more than 500 individual projects on the schedule. SunWater teams responded quickly to flooding and asset damage during Queensland s natural disaster emergency. Completion of a $2.5m design and relocation of a significant part of SunWater s Collinsville Pipeline. Draft plans for modernisation of irrigation channel distribution systems were developed in close consultation with customers, and submitted to the Australian Government. Dam safety projects continued during the year with the commencement of the Tinaroo Dam safety upgrade project. To ensure the ongoing growth and development of Queensland s industrial, commercial and agribusiness sectors, SunWater s portfolio of water infrastructure assets undergoes the highest level of asset management and maintenance. SunWater has established a refurbishment and enhancement program focused on ensuring the integrity of its water infrastructure including 19 major dams, 63 weirs and barrages, 80 major pumping stations, over 2,500 km of pipelines and open channels and more than 730 km of drains. SunWater has continued to improve its asset management approach. This includes active participation in several research projects for the ewater Cooperative Research Centre (ewater CRC) and for the Centre of Integrated Engineering Asset Management (CIEAM). Some of these projects are yielding benefits and are being incorporated into SunWater s asset management approach. Improvements have been targeted at overall reduction in life-cycle costs without reducing service capability and reliability to customers. SunWater s approach includes comprehensive long-term asset plans for each of the water supply schemes which integrate customer service needs with compliance drivers, risk management and financial imperatives. These plans are formally reviewed and updated annually by regionally-based asset managers who also develop and implement detailed works programs covering maintenance and refurbishment of the asset base. Refurbishment and enhancement program The majority of SunWater s planned refurbishment and enhancement program was completed during with an expenditure of $11.0m. The refurbishment and enhancement program included more than 500 individual projects, most of which were targeted at securing the reliability of infrastructure so that SunWater can continue to provide a high standard of service to customers. Examples include the refurbishment of the Monduran pump station at Bundaberg at a cost of $0.3m and the upgrade of the Beardmore pump station at St George with the purchase of three new motors at a cost of $0.2m. During the year, SunWater completed the design and relocation of a significant proportion of the Collinsville Pipeline. The $2.5m relocation was necessary to make room for an extension to mining operations. The cost of the project was met by the mining company utilising the pipeline. The SunWater asset portfolio is aging and some assets require significant work to ensure customer supplies can be maintained. An example is the refurbishment of Whetstone Weir on the Macintyre Brook near Inglewood. During the year the structure was strengthened with steel sheet piling to replace the old timber sheeting and to install concrete facing. This project will be completed in the next year with further concrete work and the installation of new outlet works. In early 2009 some of SunWater s infrastructure was damaged during the rainfall and flooding that resulted in much of Queensland being declared a natural disaster area. The weather events required diversion of SunWater resources to repair flood damage, and were also the main contributor to delays in a small number of ongoing projects. (See case study on page 26.) These projects are now scheduled to be concluded in with no additional risks identified as a result of the delays. Pictured: Adam Chappell and Ian Grayson (right) installing solar powered technology at an automated channel gate in Emerald. SunWater Limited annual report Asset Sustainability 25

28 asset sustainability. The refurbishment and enhancement program for the year also saw a number of Workplace Health and Safety improvements, including the installation of barriers and hand rails, delivered in response to SunWater s risk assessment program. Comprehensive inspections The five-yearly comprehensive inspection program for SunWater s dams is on track with five inspections (Peter Faust, Leslie, Boondooma, Bjelke-Petersen and Tinaroo Falls) completed during the reporting year. All inspections have concluded that the dams are in a safe and satisfactory condition. Borumba Dam safety upgrade Following the transfer of this asset to Seqwater on 1 July 2008, a commercial arrangement was made to ensure SunWater continued with the upgrade uninterrupted. The upgrade was completed in early 2009 and the site was handed back to Seqwater in March Tinaroo Falls Dam safety upgrade Construction of the fourth spillway in SunWater s dam safety upgrade program started in March 2009 and is due for completion by October Refer to case study on page 27 for details. Additionally, Note 31 to the financial statements (Dam safety upgrade program) on page 73 includes a table that summarises SunWater s prioritisation and estimate of upgrade costs in the Dam Safety Program. These preliminary estimates are subject to further investigation in conjunction with the approval of the Queensland Government with respect to prioritisation and timing of necessary works and funding support. Case study: Flood damage puts team to the test Northern Queensland experienced extensive flooding for more than two months during The deluge provided a challenge for service delivery crews to maintain normal water delivery to customers, especially in the Burdekin Water Supply Scheme where rainfall was heaviest. A large-scale landslide beside one of the water supply scheme s major water pump stations and a massive build up of silt in the Burdekin River rendered most of the scheme inoperable immediately following the floods. Hundreds of tonnes of debris was dumped into pump inlet works and massive river flows deposited large quantities of sediment and vegetation into other pumps further upstream. A specially-designed excavator with a 60 foot arm was called in to remove silt at the foot of the Millaroo A Pump Station. First priority was ensuring the safety of our operations and maintenance staff while they attempted to reinstate the pump stations to deliver water to customers. Pressure to restore water supply before crops started to fail was also crucial. Tasks included removing more than two Olympic pools of sand at one end of the river and filling in a landslide hole at the other end that could accommodate three semi-trailers. Crews worked around the clock with a fleet of excavators and machinery to bring water back on line within three days. Strategies are now in place to mitigate these types of flood impacts should they occur again. 26 SunWater Limited annual report Asset Sustainability

29 Case study: Tinaroo Falls Dam safety upgrade SunWater is investing $21m to improve the safety of Tinaroo Falls Dam as part of its ongoing dam safety upgrade program. Commissioned in 1959, Tinaroo Falls Dam is located on the Barron River about 100 km upstream from where the river discharges into the Coral Sea near Cairns. Tinaroo Falls Dam supplies water via 390 km of pipelines and channels to the various sections of the Mareeba-Dimbulah Water Supply Scheme. SunWater s dam safety upgrade program is part of an on-going dam safety program, and will ensure that SunWater s dams continue to be safe in light of evolving standards, new climate data and in the event of much larger extreme rainfall events. Whilst the probability of such an event occurring is very low, SunWater, as a responsible dam owner, is taking proactive measures to ensure its assets are capable of withstanding an extreme rainfall event. The Tinaroo Falls Dam safety upgrade commenced in March 2009 and involves work on both the main dam wall and the nearby saddle dam. The project involves the insertion of steel cable anchors into the main dam wall and strengthening the dam by further securing the wall to the foundation bedrock. In addition to work on the main dam wall, the height of the saddle dam will be increased by 30cm. Filter zones, designed to minimise damage caused by seepage during a flood event, will be placed on the downstream face. Once the spillway capacity upgrade is complete, Tinaroo Falls Dam will be better able to manage the flows of an extreme rainfall event by ensuring that any excess water can pass downstream safely. The Tinaroo Falls Dam safety upgrade is expected to be completed by October Phil Webber (right) and Errol Wright discuss progress on the Tinaroo Falls Dam safety upgrade on the Atherton Tablelands. Healthy Headwaters program The Australian Government undertook a due diligence review of the business plan for a $44.0m project to modernise SunWater infrastructure in the Murray Darling Basin as part of a state priority project in the Healthy Headwaters program. The project, if approved, would involve Australian Government investment in the automation and upgrading of SunWater s water management and distribution infrastructure in exchange for water entitlements being granted to the Commonwealth Water Holder. Irrigation Distribution Modernisation Planning project During the reporting year, SunWater continued to investigate ways to modernise its irrigation channel distribution systems, making them more cost-effective and waterefficient. The 14-month investigation, managed at scheme level in close consultation with the irrigation advisory committees and customers, is nearing completion. Draft modernisation plans for each of the eight irrigation distribution schemes were submitted to the Australian Government for review and subsequently provided to stakeholder groups for final feedback. The draft plans are strategic in nature and map out a number of potential initiatives to be considered by SunWater. These plans will be finalised in the next financial year pending feedback on the drafts. SunWater Limited annual report Asset Sustainability 27

30 asset sustainability. Irrigation scheme annuities The level of expenditure required to maintain the serviceability and integrity of the asset portfolio can vary significantly from year to year. To even out expenditure peaks and troughs, SunWater utilises an annuity funding approach for all schemes. This ensures that existing and future customers contribute fairly, taking into account the long-term asset refurbishments and augmentation requirements. The following graphs show the actual refurbishment and augmentation spend over the past five years for each scheme. They also show the annuity collected as a component of water charges and the annuity balance available for future work. $ 000 $ 000 SUNWATER 15,000 12,000 9,000 6,000 3, BARKER BARAMBAH BURDEKIN HAUGHTON CALLIDE VALLEY BOWEN BROKEN RIVERS CHINCHILLA WEIR Annuity collected Renewals spend Annuity balance $ BOYNE RIVER AND TARONG CUNNAMULLA $ BUNDABERG DAWSON VALLEY $ SunWater Limited annual report Asset Sustainability

31 ETON MAREEBA DIMBULAH ST GEORGE $ 000 $ JULIUS DAM MARY RIVER* THREE MOON CREEK LOWER FITZROY NOGOA MACKENZIE UPPER BURNETT $ MACINTYRE BROOK PIONEER RIVER UPPER CONDAMINE $ $ 000 MARANOA RIVER PROSERPINE RIVER * amounts exclude the Upper Mary Scheme component. The Upper Mary Scheme was transferred to Seqwater at 1 July SunWater Limited annual report Asset Sustainability 29

32 our customers 30 SunWater Limited annual report Operational Performance

33 At a glance Scheme service targets were achieved for most regions, with more appropriate future targets introduced for Bundaberg. The Macintyre Brook CS system is making usage monitoring and future planning easier for customers. New web-based information was introduced for Irrigator Advisory Committees. Diversifying the business through growth of facilities management services to commercial customers made a significant contribution to SunWater s annual revenue. SunWater understands its customers need for cost-effective and reliable water services and tailors its water supply solutions to ensure sustainable growth can be successfully achieved for mutual benefit. Irrigator Advisory Committees (IACs) SunWater continued to meet regularly with members of its 18 IACs to discuss operational matters. An IAC page is now available on SunWater s website, publishing information and meeting outcomes to all interested customers. Committee members and other irrigators are able to view current and previous minutes, storage reports, committee member details, and news and events for each scheme. Effort continues to be directed towards conducting one-on-one meetings with SunWater s commercial and industry-based customers to ensure issues are identified and appropriately addressed and to maintain existing strong relationships. Achievement of scheme service targets SunWater set scheme service targets for 21 of its water schemes. The targets specific to each scheme cover: Timing and duration of planned and unplanned shutdowns Length of notice given to customers for planned and unplanned shutdowns Time to repair meters causing restrictions to supply Number of interruptions to supply, and Response time to customer complaints. Across all SunWater schemes, 153 exceptions to the achievement of service targets were reported during the year. SunWater achieved its customer service targets for all regions except: Mareeba, with three exceptions reported regarding complaints that were not actioned within the agreed timeframes Burdekin, with three exceptions on the number of customers exceeding greater than six interruptions Mary River, with one exception on the number of customers exceeding greater than six interruptions, and Bundaberg, where 146 exceptions were reported, largely as a result of unplanned shutdowns which caused customers to exceed greater than six interruptions. These exceptions related to: - 1 notification exception on planned event - 2 duration exceptions on planned event - 20 duration exceptions on unplanned shutdowns exceptions on the number of customers exceeding greater than six interruptions, and - 2 complaints not responded to within the agreed 21-day period. The performance monitoring of the Bundaberg scheme was based on a cumulative annual target of six exceptions before a notification exception is triggered. Following consultation with the Bundaberg Irrigator Advisory Committee, more appropriate service targets were set. Changes include increasing the maximum number of interruptions (planned/unplanned events) to 10 per customer per water year, and increasing the unplanned shutdown duration to 72 hours. Similar infrastructure maintenance regimes are in place elsewhere in Queensland (Ayr and Mareeba) and are based on a trigger of 10 exceptions. These new service targets take effect from 1 July (See also case study on page 32.) Pictured: Mark Goos from Mulgowie Farming in the Burdekin is one of many irrigators utilising the benefits of SunWater s online technology to make more informed business decisions. SunWater Limited annual report Our Customers 31

34 our customers. National Performance Reporting SunWater participated in the National Water Commission s National Performance Reporting for Rural Water Service Providers for the second consecutive year. The report provides the NWI with information about the performance of SunWater s irrigation water supply schemes compared to similar services provided in other areas. Information about the physical and financial performance of irrigation services at the bulk water and distribution system level is included. The report is available to the public and can be accessed on the National Water Commission s website Continuous Sharing The Continuous Sharing (CS) system provides customers with a more efficient way to manage their water accounts. Under this system, individual customers can monitor and manage their water account balance. It eliminates the need for water accounts to be reset at the start of each water year, and customers are able to plan further ahead with greater confidence. Throughout the reporting period, further progress was made on the development of new modelling techniques to assess CS proposals against Water Resource Plan objectives. SunWater used new hydrologic modelling techniques in the Macintyre Brook system to assess and develop a proposal to allow carryover of cap under CS. With the support of scheme customers, a submission has been made to the DERM to amend the Border Rivers ROP. SunWater and the DERM are now working through issues arising from the submission. Since the start of the new CS water accounting system in Macintyre Brook in July 2008, customers have been able to access a detailed daily inventory of their water account balances and better plan their future water needs. Case study: SunWater provides secure and reliable service With a portfolio of around 5,000 customers from the commercial, industrial, mining and agricultural sectors, SunWater needs to be focused on providing the most effective and efficient water supply solutions available. Customers like Stanwell Corporation rely on SunWater staff to deliver essential water supplies which are required for the power company s steam turbine operation to meet Queensland s ongoing demand for electricity. Stanwell engaged SunWater in 1992 and since then SunWater has continued to provide a secure and reliable service through SunWater s 28 km water pipeline and pumping network. SunWater achieved its agreed infrastructure outage targets for the Stanwell power station for the year, further cementing their professional relationship. SunWater ensured all planned or unplanned outages on the pumps and pipeline needed to transport the power company s 24,000 ML allocation, did not impact Stanwell s ability to deliver on its own customer commitments. Scott Funch and Stanwell Corporation s Scott McGraw (right) discuss pump maintenance at the Stanwell Pump Station in Rockhampton. Part A tariff rebate scheme The Queensland Government s Irrigators Fixed Water Charges Rebate Scheme continued this year, giving irrigators the ability to claim up to $10,000 per annum towards their fixed water charges in recognition of the continuing tough environmental conditions. At the start of , irrigators in four SunWater supply schemes were eligible for some relief from Part A charges as a result of the government s rebate scheme. As a result of solid inflows to a number of schemes during the second and third quarters of the year, the number of schemes eligible for the rebate reduced to one by the end of the financial year. The Queensland Government will not be extending the rebate scheme beyond the eligibility deadline of 30 June SunWater Limited annual report Our Customers

35 Case study: Water futures SunWater is continuing to play a key role in the long-term strategic management of water through its involvement in a number of key water advisory and research groups. In the Burdekin, SunWater is one of the founding members of the Lower Burdekin Water Futures Group (LBWF). The group, which was set up in 2006, brings together a cross-section of organisations that have a direct interest in the management of water, such as irrigators, researchers, water boards, councils and varied government agencies. The formation of the group ensures greater coordination and better alignment of stakeholder efforts and enables members to have a holistic focus on water management. The group s primary aim is to encourage long-term strategic thinking about water management and to deliver economic, social and environmental outcomes that ensure the region s sustainability. The group addresses a number of key water issues such as drainage and run-off and water and land manager coordination but also looks at the integration of interests between science, policy, management and the community. Looking to the future - (from left) Lower Burdekin Water Futures farmer Michael Hoey, Burdekin Shire Mayor Lyn McLaughlin, CSIRO s Dr Keith Bristow and SunWater Resource Compliance Officer Fiona Christie. Collaborative investment SunWater continued in its partnership with research and development corporations, governments, commodities groups and water providers to invest in research that provides useful information to a wide range of agricultural stakeholders. This collaborative investment enables SunWater and its customers to benefit from a greater investment than what could be achieved individually and includes organisations such as: National Program for Sustainable Irrigation (NPSI), which seeks improved skills, knowledge and decision making of end users to enable practice change and more efficient and sustainable use and management of water. Irrigation Futures, which delivers irrigation research, education and training to growers, industry, governments and the communities to enable the investment into better irrigation methods and practice. The Cotton CRC, an industry program that supports the production of competitive cotton farming systems, high quality consumer-preferred cotton and increases the skills and knowledge of people in the cotton industry. The Burdekin Water Futures Group. Refer to case study above. SunWater Limited annual report Our Customers 33

36 our people 34 SunWater Limited annual report Operational Performance

37 At a glance Collective Agreement initiatives were implemented and performance monitored. Flexible work arrangements offer part-time roles, purchase of additional leave, banked time arrangements and time off in lieu. SunWater encourages its people to maintain memberships of work-related professional associations through an annual membership fee refund scheme. 360 degree assessment to identify senior management development opportunities has been introduced. Workplace Health and Safety continued to be a critical focus, with an internal safety review and upgrades to infrastructure and procedures following an injury to an employee in an electrical accident. Ongoing skills development through staff training in management and operations is the cornerstone of providing the best possible services to our customers and will ensure SunWater is the leader in water infrastructure management. SunWater had 562 employees as at 30 June 2009, many of whom work and live in the regional communities in which the organisation operates. These highly skilled professionals are the backbone of the organisation and their expertise, professionalism and focus on customer service allows SunWater to continue to lead the way in water solutions in Queensland. During the financial year, SunWater reinforced its commitment to its employees through a range of initiatives. These were aimed at improving the way it communicates with its people by effectively managing the skills and expertise within the Company and ensuring it continues to offer work/life balance and an environment that supports professional growth. Collective Agreement implementation Under the SunWater Collective Agreement , a number of initiatives were developed or progressed throughout the financial year, including: Increased salary rates by 4% for all employees from 1 July 2008 Confirmed localised agreements during the year for the Tinaroo Falls Dam upgrade project, Cloncurry Pipeline project, and the Bowen River Weir Fishway project. A number of localised agreements terminated during the year following successful conclusion of construction projects. Staff Development Steering Committee The SDSC was established to provide SunWater with a company-wide oversight for developing and advancing employee development opportunities. During the financial year, the Committee continued to monitor a number of initiatives, including: An entry-level recruitment program including the graduate engineers and technical cadetship programs. Four graduates and three technical cadets were inducted into these programs. The introduction of vacation employment and participation in project placements for student engineers. Four undergraduates were placed during the vacation periods. The extension of the successful Frontline Leader Program to regional centres resulted in two new programs at Mackay and Bundaberg. Access to continuous learning events that were promoted through the training calendar. A review of compliance training requirements and their impact on time availability. Pictured: Work on the $21m safety upgrade project at Tinaroo Falls Dam on the Atherton Tablelands is on track for completion in late SunWater Limited annual report Our People 35

38 our people. Staffing strategy SunWater has developed a high-level Staffing Strategy which is designed to help the organisation attract, develop and retain staff to achieve business outcomes and maximise competitive advantage over the next five years. During the year, a formal program that includes SunWater s Succession Management and Development initiatives was introduced. The succession planning work seeks to identify critical and key roles in SunWater and potential successors within the organisation. Development plans will continue to be actioned during for all employees of SunWater and at the senior management level will include a 360 degree assessment to target development activities. This process is under way and will be completed for the Senior Management group by the end of September SunWater s Human Resources team is partnering with individual business groups to deliver the Staffing Strategy, with the Staff Development Steering Committee (SDSC) holding responsibility for overseeing, monitoring and reporting on progress. Training and graduate programs SunWater s people management practices are designed to facilitate performance improvement and a sustainable competitive advantage. New employees are trained through its apprentice, cadet, and graduate programs, which are part of an ongoing commitment to ensure the availability of core capabilities to meet SunWater s future staffing needs. Supervisor induction program A Supervisor Induction program was developed and will commence in July Running over two days, it is designed to address the specific needs of employees who are promoted to a supervisory role for the first time. Elements of the program include: Recruitment and selection Employee and industrial relations Performance management Finance Workplace Health and Safety Information Communication Technology Managing risk and fraud Code of Conduct Environment, and The Collective Agreement. Frontline Leader Program SunWater s Frontline Leader program is firmly established and has been well received. A 12-month voluntary Frontline Leader Extension program will be launched in September 2009 to provide an action learning component and to ensure the teachings are translated to the workplace. One of the key elements of the program is that participants undertake organisational improvement projects that have been approved by the CEO. Successful completion of this program may lead to nomination for the Leadership Development program. Workplace Harassment Referral Officers During , twelve employees representing all regions were trained to assist employees and supervisors to manage any issues of harassment through the Workplace Harassment Referral Officers network. 36 SunWater Limited annual report Our People

39 Water Industry Training (WIT) Forty-eight SunWater employees graduated from the WIT program and received their Certificate III in Water Operations. Of the remaining 24 who were enrolled, 16 have either resigned or withdrawn from the program while eight are continuing with their studies. The next intake will begin as soon as the WIT program review has been completed by the provider, Wide Bay TAFE and SunWater. (See case study on page 39.) The following table provides a snapshot of the results from the key programs: Employee demographics The following graphs illustrate the breakdown of employees by gender, age and employment status. PROGRAM NO. OF PARTICIPANTS GRADUATIONS Graduate program (1) 20 2 Apprentice and Technical Cadets program (2) 23 3 Water Industry Training program (3) Frontline Leader program (4) Students Vacation Employment (5) 4 (1) The Graduate program is a three-year program. In , two people graduated. Of the remaining 20 participants, six are currently into their third year. (2) The Cadet program is a four-year program. The first intake commenced in early The first cadets are therefore expected to graduate by the end of The Apprentice program is a three to four-year program. In , three apprentices graduated. (3) The Water Industry Training program is a three-year program that can be accelerated. The inaugural group started in 2005, with progressive groups enrolling up until participants have now commenced the program, 16 have resigned or withdrawn and 40 have graduated in the period, with 16 continuing their studies EMPLOYEE BY GENDER MALE FEMALE TOTAL EMPLOYEE AVERAGE AGE (4) Over the period four groups (46 people) were enrolled in the Frontline Leader Program. Two groups graduated in 2008 (13 from the Bundaberg Program and seven from the Ayr program) and the remaining two groups (14 in the Brisbane program and 12 in the Mackay program) are due to graduate before the end of (5) Student vacation employment was extended to two Geology, one Human Resources, and one Hydrology undergraduates OCCUPATIONAL GROUP BY EMPLOYMENT STATUS AND GENDER MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MANAGEMENT PROFESSIONAL TECHNICAL ADMIN OPERATIONS 40 CASUAL PART TIME PERMANENT TEMPORARY TOTAL MALE AV. AGE FEMALE AV. AGE TOTAL AV. AGE SunWater Limited annual report Our People 37

40 our people. Workplace Health and Safety SunWater s safety goal is No-Harm in all of its operations. The year saw a further increase in organisational commitment to the achievement of this goal. A Workplace Health and Safety Management System, which is third-party certified under the AS/ NZS Standard 4801:2001 Occupational Health and Safety Management Systems, is well established. Regular inspections, internal audits and external surveillance audits are undertaken to ensure that the system is effectively maintained across the business and that SunWater is meeting its obligations. The highlights in this area for the financial year include the: Approval of a Workplace Health and Safety policy, which applies to SunWater and its subsidiary companies and is relevant to management, employees, consultants, contractors and suppliers. Completion of the rollout of the Safety Leadership training program to managers and supervisors to implement SunWater s target of No-Harm. Introduction of the Stop, Look, Assess, Manage (SLAM) process, to ensure that risks are identified and controlled for all work tasks. Introduction of a fatigue management policy and procedure, and Completion of crisis management plans by all business units in relation to the threat posed by the pandemic influenza virus (H1N1). The Lost Time Injury Frequency Rate (LTIFR) and number of Lost Time Injuries (LTIs) for were significantly lower than and were marginally lower than the three-year and four-year averages. In contrast however, the Lost Time Injury Duration Rate (LTIDR) and number of LTI days for were significantly higher than the figures and the three-year and four-year averages. This indicates an increase in the severity of LTIs. The high LTIDR and number of LTI days for were due primarily to one serious incident that occurred during the financial year which resulted in significant lost time during the financial year. PREVIOUS YEARS 3 YEAR AVERAGE CURRENT YEAR 4 YEAR AVERAGE LTIFR LTIDR ^ No. of LTIs No. of Days Lost ^ ^ Excludes lost time due to incidents occurring during LTIFR = Lost Time Injury Frequency Rate LTIDR = Lost Time Injury Duration Rate NUMBER OF LOST TIME INJURIES PER MILLION HOURS AVERAGE LOST TIME PER INJURY (DAYS) ^ LOST TIME INJURY FREQUENCY RATE LTIFR LOST TIME INJURY DURATION RATE LTIDR LTIDR^ Excludes lost time injury days resulting from incidents occurring during previous financial years SunWater Limited annual report Our People

41 Safety The risks present in the workplace and the vigilance that must be maintained at all times to ensure safety in the workplace for SunWater employees and the public, have been highlighted by two incidents during the year. Electrical switchboards have been the focus of an internal safety audit in following a workplace injury in Biloela that involved a SunWater electrician working on a switchboard. SunWater has taken the employee s injury very seriously. The incident prompted short and long-term upgrades to electrical infrastructure and improvements to the organisation s asset management program. To minimise the risk of recurrence of this type of event, SunWater undertook an audit of all electrical switchboards and engaged an independent expert to review the findings and help develop a program to eliminate significant safety risks in the workplace. In November 2008 an incident occurred when an inflatable rubber bag on Bedford Weir deflated unexpectedly thereby releasing a large volume of water downstream of the weir. Tragically a fatality occurred. As the cause of the incident is unknown, three other inflatable rubber bags at SunWater weirs were safely deflated under controlled conditions as a precautionary measure. SunWater immediately provided its support to the Queensland Government s Workplace Health and Safety investigation, which is ongoing. Chemical management During the year SunWater undertook a review of chemicals used and stored for SunWater operations. The database ChemAlert II was purchased to enable the central storage of a complete inventory of all chemicals stored at all sites (offices, workshops, depots, chemical storage sheds) across SunWater. The database provides for timely access to Material Safety Data Sheets for each chemical, and information on which items can or cannot be stored together for safety reasons. Case study: Water industry training SunWater recognises that its water officers are at the forefront of the everchanging quest for more efficient and effective water resource management. Increased regulation in water resource management, particularly in relation to the environment, has increased the need for skill development programs to ensure staff are able to perform the best job possible. The challenge for SunWater was to source an effective training solution that was accessible to all water officers, given the organisation s geographically dispersed workforce across regional Queensland and the nature of its operations. With these limitations in mind, SunWater developed a partnership with the Wide Bay Institute of TAFE to deliver staff training via an e-learning platform. The program enables staff to gain invaluable skills through self-paced training out in the field and at the desk and does not require long-distance travel to training institutes. Since SunWater s e-learning program was established, 48 staff have now successfully completed the Water Industry Training Package (NWP01) to Certificate III. (From left) Theodore water officers Peter Tweed, Adam Goebel and Tim Stevens were one of 48 staff who successfully completed water industry training. SunWater Limited annual report Our People 39

42 business management 40 SunWater Limited annual report Operational Performance

43 At a glance The certification of Quality, Environment and Workplace Health and Safety Management Systems continued. Risk management systems were integral to business processes. All employees were trained in the new SLAM process which highlights workplace risk assessment and management. Compliance monitoring and action systems continued to operate effectively. Efficient outcomes are highly regarded at SunWater and inherent within our operating philosophy. SunWater s systems, strategic risk assessment programs, and controls enable the provision of effective customer services and contribute to business success. Quality Management System The integration of SunWater s two separate Quality Management Systems used for operations and maintenance and for engineering and project development was well progressed, with completion scheduled for June The ultimate long-term goal is the incorporation of all critical business processes under the quality management umbrella. SAI Global conducted surveillance audits of the Water Services Quality Management System and the Asset Solutions Quality Management System in September 2008 and February No non-conformances were raised and both certifications to AS/NZS ISO9001:2008 were renewed. Environmental Management System SunWater undertook continued maintenance and improvement of the SunWater Environmental Management System, which has certification under AS/NZS ISO14001:2004. The review and development of processes and schedules, as well as increased communication through meetings, forums and workshops, provided practical support to enable regional centres to meet operational requirements. Workplace Health and Safety Management System Risk Management - Stop, Look, Assess, Manage (SLAM) process The SLAM risk management process was developed to ensure that risks are considered and managed for all work, whether or not more formal risk documentation already exists. The process involves the completion of a SLAM record and a list of controls in a pocket-sized booklet. Training workshops were conducted for all employees in Brisbane and the regions over the period from late February to June The need to identify hazards and near-misses as a preventive measure was also introduced to enhance the SLAM training process. SAI Global Surveillance Audit An external surveillance audit of the Workplace Health and Safety Management System was conducted at Ayr and Bundaberg in November 2008 and at Borumba Dam upgrade project in December No major issues were raised during these audits and SunWater s certification was accordingly renewed. Driver safety The Fatigue Management procedure was revised and reissued during November It addresses the legislative requirements for heavy vehicle fatigue management and includes a Working Hours Policy. Pandemic flu kits In response to the H1N1 influenza threat, new policies and documentation were prepared. In April 2009 an information kit on pandemic flu was made available to employees, and supplemented by a managers kit published in May Draft policies relating to pandemic flu (including hygiene, PPE&C, leave, social distancing etc.) were also developed. Pictured: Karen Quagliata (left) and Debra Gottardi reviewing SunWater s systems for effective customer service. SunWater Limited annual report Business Management 41

44 business management. Corrective Action Tracking System The Corrective Action Tracking System (CATS) was introduced in SunWater in June It is a web-based application utilising the Lawlex system and is designed to centralise the reporting and management of corrective actions no matter where they originate. The system sends out warnings to owners so that corrective actions can be followed up. Regular CATS Continual Improvement meetings were held from early 2009 to the end of the financial year to address any issues with the system. An internal audit of the corrective action process and CATS was completed during May This included a major review of CATS involving a crosssection of users. The final report identified several business improvement opportunities that will be actioned in Incident, Emergency Response, Crisis and Business Continuity Management Manual To reflect organisational and roster changes, the Incident, Emergency Response, Crisis and Business Continuity Management documentation was revised and re-issued in December An internal audit of the Business Continuity and Crisis Management processes undertaken in March and April 2009, identified a number of areas for potential improvement and provided recommendations. Compliance System SunWater has implemented a compliance program aimed at achieving better compliance management, monitoring and reporting. The program includes an annual compliance plan, a compliance action system to alert employees to new legal obligations, regular compliance reporting to the Board s Audit and Corporate Governance Committee, strategic monitoring of complaints handling, and monitoring the effectiveness of management systems in achieving compliance objectives. The program is reviewed twice a year, with any changes being approved by the Audit and Corporate Governance Committee. The Board approved the establishment of an Accountability Referrals Committee during the reporting period. The Committee s function is to respond to the governance gap created by the removal of the application of the Crime and Misconduct Act 1991 and the Whistleblowers Protection Act This work was undertaken in preparation for SunWater s conversion to public company status. The new Committee will advise the CEO on any official misconduct matters where an existing policy is not pertinent. The Committee will also assist the CEO in appointing appropriate experts or independent parties to investigate and action any misconduct matters. Right to Information SunWater produced its publication scheme in accordance with the Queensland Government s Government Owned Corporations (GOCs) Release of Information Guidelines and is continuing to develop and implement changes associated with its obligations under the Right to Information Act A new website page is being prepared which will specifically address SunWater s governance obligations under the GOC Act, the OGOC Governance Guidelines, the Corporations Act 2001 and the relevant Australian Stock Exchange Guidelines on Governance and the AS 4360 Risk Management. Information Communication Technology (ICT) Business Systems A critical element of the ICT Strategic Plan is the planned redesign of SunWater s current water information management systems. During the year, a study was conducted into the cost-effectiveness of the existing system and its ability to meet SunWater s evolving needs. This study highlighted a number of areas for potential improvement. The utilisation of the corporate Enterprise Resource Planning System, SAP, continues to increase, with greater online procurement functionality now available with an improvement in the speed and consistency of purchasing. Increased reporting requirements to the Bureau of Meteorology required the development of a new water reporting system during the course of the year. SunWater sought and obtained federal funding for the majority of this project and delivered the water information required within the specified timeframes. SunWater was recognised by the Bureau as being among the first water agencies in Australia to meet this requirement. With the increased pace of operations within SunWater and greater dependency on ICT systems, improvements in SunWater s ICT Disaster Recovery capability were identified as desirable and were addressed during the year. These changes culminated in a full ICT Disaster Recovery test in March 2009 with resulting data loss and data recovery times well within SunWater s requirements. (See case study on page 43.) Project Managed Organisation SunWater s Asset Solutions group received its Project Managed Organisation certificate during the year. This followed the successful completion of a project management audit by the Australian Institute of Project Management. Throughout the year, SunWater employees were also professionally accredited as certified practising project directors and project managers. This means that SunWater will introduce and use a standard process and tools across the organisation in the areas of: Project management documentation Scope, estimation and cost management tools Planning and scheduling Risk and issues management Contractor management Accreditation and training for project managers, and Project reporting (earned value methodology). 42 SunWater Limited annual report Business Management

45 Internal Audit Internal Audit is a key component of SunWater s corporate governance. It operates under a Charter approved by the Audit and Corporate Governance Committee of SunWater s Board. The internal audit capability is governed by a three-year strategic audit plan, which is approved by the Audit and Corporate Governance Committee. The function is performed independently using an objective, systematic, disciplined and proactive approach and in conformance with the International Standards of Professional Practice in Auditing. The audit programs have a strong focus on areas of high risks, critical controls, compliance and governance processes with consideration of industry trends and other external factors affecting the business. Monitoring activities and evaluating performance The Audit and Corporate Governance Committee regularly monitors the status of internal audit projects and management actions on previous audit recommendations. The Quality Improvement and Assurance Program for internal auditing was established in 2006 and includes a periodic external assessment by a qualified assessor and continuous internal quality reviews. A feedback mechanism provides the CEO with the auditees evaluation of every engagement and these outcomes are discussed with the Manager Internal Audit. Resourcing During the financial year, Internal Audit set up an internal co-sourcing arrangement for rotational site visits across its operations in Queensland and outsourced technical projects to an external third party. Completed audits in perspective SunWater is particularly aware that it has to demonstrate to industry and the public that good governance processes are in place and that they operate within a transparent and robust framework. Internal Audit therefore dedicates more attention to corporate governance, business management and risk management. This year, SunWater has expanded its technical capability in reviewing commercial risks associated with dealing with external counterparties and with its ability to address risks pertaining to crisis management, business continuity planning and disaster recovery planning. Case study: ICT Disaster Recovery SunWater s business critical systems are more secure than ever following completion of a comprehensive disaster recovery (DR) project by SunWater s ICT team. In July 2008 ICT commenced the task of implementing an improved DR strategy designed to meet the recovery objectives of identified critical business systems and infrastructure applications in the event of a complete loss of SunWater s Brisbane data centre. The DR project involved establishment of an alternative data centre, the utilisation of server virtualisation technology to convert Brisbane s existing physical servers to virtual machines, synchronisation of data Matt Davis and Danny Leong (right) from our Brisbane office discussing our information disaster recovery capabilities. Business Activity SunWater Deloitte Total % Corporate Governance and Business Management No. of Projects No. of Projects No. of Projects Mandays Mandays Mandays Financial Reporting Information and Technology Risk Management * Tabulated figures are exclusive of: - internal and external reviews undertaken by SunWater under Business Performance Systems to maintain certification of WHS, EMS and QMS, and - significant ad hoc projects undertaken by SunWater Internal Audit such as audit planning and monitoring. Internal customer survey outcomes During the reporting period, an internal survey of the internal audit performance was undertaken to rate the internal audit function over six categories with a scale of 1-4 (1-poor, 2-fair, 3-good, 4-excellent). The categories were: 1. Relationship with management 2. Audit staff 3. Scope of work 4. Audit process and report 5. Management of the internal audit activity, and 6. Value added. Internal audit achieved a Good rating across all categories. between head office and the DR facility and implementation of network technology to support connectivity with the DR facility. Using virtualisation technologies has reduced costs in DR strategy implementation and has simplified DR processes by removing server hardware dependencies; providing greater flexibility and agility in server deployment and management; and ensuring better use of physical server resources through server consolidation. Implementation of the updated DR strategy now means that during a disaster event SunWater will experience reduced downtime and costs. SunWater Limited annual report Business Management 43

46 organisational structure. Shareholding Ministers Board Executive Assistant CEO Chief Executive Manager Internal Audit General Manager Water Services General Manager Asset Solutions General Manager Corporate Manager Corporate Strategy Manager Public Affairs The water industry continues to change nationally and regionally, with substantial new infrastructure developments necessary to meet the needs of the community and industry. These developments are being progressed within a competitive environment, with a number of local, national and international water companies actively participating in the market. SunWater has aligned its business structure to maximise identification and uptake of market opportunities, gain internal efficiencies and improve customer service. The Board of SunWater sets strategic direction, and is answerable to the shareholding Ministers for the performance of the business. The Chief Executive (CEO) is responsible for overall management and performance of SunWater and directly manages the internal audit, public affairs and media functions. Water Services (WS) manages SunWater s water infrastructure assets and provides facility management services to other asset owners. This group is focused on service delivery, and provides services ranging from asset management to water delivery, customer water accounting and billing, as well as ensuring compliance with relevant legislation. The Water Services team provides the same high levels of service to customers irrespective of asset or water entitlement ownership. Asset Solutions (AS) investigates and delivers new commercial business for SunWater, including acquisition of existing assets, development of new assets and negotiation of new facility management contracts. AS also includes the Business Development unit whose primary role is to seek out new business opportunities with new and existing customers. Corporate supports the organisation in the areas of finance, legal, human resources, information and communication technology, and a range of other administrative and support functions. Corporate Strategy (CS) is responsible for all policy and reform matters in relation to water resource management and planning, water products and allocations, water pricing and economic regulation, water legislation, national water policy initiatives and compliance with operating licences. 44 SunWater Limited annual report Organisational Structure

47 SunWater Executive. Peter Boettcher BE(Agric), MBA Chief Executive As CEO, Peter is charged with providing leadership and overall business management to SunWater. Peter is recognised as a leading authority on water infrastructure management in Queensland. Throughout his career, he has gained extensive experience in senior management roles at a strategic and operational level. Peter believes that the industry is now moving to a more competitive and commercial model where water and water infrastructure services are recognised as being critical enablers to economic growth. This emerging environment provides exciting opportunities for SunWater in the areas of business growth, improvements to water infrastructure management, improved service levels that enable customers to reach their business goals, and the provision of key infrastructure for the benefit of future generations. As a respected industry professional, Peter is experienced in all aspects of commercial water business management. He is focused on ensuring that SunWater delivers dependable and reliable infrastructure services to all its customers, whether they are local governments, commercial industries, or irrigation water users. Peter commenced his role as CEO SunWater in April 2008, having held previous positions in the organisation including COO and General Manager of the Water Supply Services Division. Mark Browne BBus(BusMgt), DipEng(Elec), MBA, Dip PM, MAICD General Manager Asset Solutions Mark Browne commenced in the role as General Manager Asset Solutions in September 2007 and is responsible for the delivery of SunWater s project portfolio and business development activities. He has more than 20 years experience in project management, business development and business management in the infrastructure construction and defence industries. Prior to joining SunWater, Mark held senior positions in large infrastructure construction companies and delivered multimillion-dollar projects throughout Queensland under a variety of contracting arrangements including alliances and traditional delivery mechanisms. His strategy and business development experience includes his role as Chief Strategist and Manager of Business Development for Boeing Australia s systems group and Business Development Manager for ABB Engineering Construction. Mark will use his broad industry experience to focus on ensuring that SunWater continues to deliver project services to its entire customer bases, existing and newly developed. Geoff White BCom, FCA General Manager Corporate and Company Secretary Geoff White s primary focus at SunWater is to refine systems and processes, and ensure that best-practice corporate support is provided to the operational business units to assist them in achieving effective customer service. Geoff has substantial commercial experience in all aspects of business and financial management, as well as audit and corporate governance. He was a partner in a leading accounting firm for 14 years. In addition, he has significant practical experience in the management of client relationships, human resources, information technology and financial administration. Geoff, who joined SunWater in 2001, has previously been involved with a wide range of organisations including public and private companies, joint ventures and not-for-profit organisations. SunWater Limited annual report SunWater Board 45

48 SunWater Board. The Board of SunWater comprises seven directors selected for their individual and combined expertise to overview and direct the corporation. Phil Hennessy BBus (Accountancy), FCA Chair Phil is Queensland Chairman of KPMG and practises in the area of corporate reconstruction. He has experience across a wide range of market sectors and has undertaken numerous insolvency-related assignments and viability reviews for lenders, creditors and other stakeholders. Phil is responsible for the operations of the Queensland practice of KPMG. His role focuses on the firm s people, clients and its connection with the community. He is also National Leader for the Korean Business Practice, Australia which includes responsibility for the relationship with the KPMG practice in the Republic of Korea and for facilitating client opportunities between Australia and the Republic of Korea. Phil is Queensland President of the Starlight Children s Foundation, Chair of the Mater Hospital Foundation, Chair of the Premier of Queensland s Export Awards Committee and Member of the Infrastructure Australia Advisory Council. Jane Bertelsen BSc, MSBA Deputy Chair Jane is an experienced public sector manager. For over a decade she was Manager of Intergovernmental Relations in the Brisbane City Council and Secretary of the South East Queensland Regional Organisation of Councils, which focused on the strategic goals of the region. She holds a Bachelor of Science and a Master of Science in Business Administration from Boston University and is a graduate of the National Institute of Dramatic Art. Jane gained extensive experience in project analysis, policy development and economic research while working in Rome for the United Nations Food and Agriculture Organization (FAO) and World Food Council (WFC). She has participated in international United Nations missions and conferences in Africa, Asia and Europe. Jane is a member of the Board of Trustees of Queensland Performing Arts Council and is Chair of the State Library of Queensland. Tom Connor AO BE(Civil), MEngSc, PhD, Hon Fellow IEAust, MASCE, FTSE, CPEng(Civil), RPEQ Director Tom is the Director of Engineering Technology and Sustainability of the Government and Infrastructure Division of the Asia Pacific operations of Kellogg Brown and Root Pty Ltd, a global engineering and construction firm. He has over 30 years experience in engineering and project management in the water sector in Australia and internationally. Tom is Chair of the Queensland Sustainable Energy Advisory Council and has undertaken that role since its inception. The Council advises the Queensland Government on innovation fund applications in energy and water. He is a past National President of the Institution of Engineers Australia (now Engineers Australia) and past Chair of the Australian Council of Building Design Professions. 46 SunWater Limited annual report SunWater Board Pictured above: Seated left to right - Jane Bertelsen, Phil Hennessy. Standing left to right - Neil Turner, Tom Connor, Kirstin Ferguson, John Gibson, Greg Moynihan.

49 Kirstin Ferguson BA (Hon), LLB (Hon), FAIM, MAICD John Gibson BCom, MBA(Melb), FCPA, FAIM, FAICD Greg Moynihan BCom, GradDipSIA, ASA, Fellow FINSIA, MAICD Neil Turner Director Kirstin is the Chief Executive Officer of Sentis, a global safety consultancy providing the Zero Incident Process (ZIP) cognitive-based safety training to the utilities, mining and resources industries. Kirstin was previously the COO & Director of Corporate Services at the national law firm, Deacons, and has also worked as an Administration Manager in London with the law firm Ashurst Morris Crisp. Kirstin s initial career was as an officer in the Royal Australian Air Force and she graduated with the Air Force Prize from the Australian Defence Force Academy. Kirstin has previously been named Brisbane Young Manager of the Year by the Australian Institute of Management and she was awarded a Churchill Fellowship in Kirstin is admitted as a solicitor in Queensland and NSW. Director John is an experienced company director who has been involved in a wide range of Australian agribusiness. In horticulture, he has been Chairman, Queensland Market Corporation, Deputy Chairman, Australian Horticultural Corporation; Chairman, Queensland Horticulture Institute; and Member, Queensland Horticulture Industry Development Council. Other previous positions include Managing Director, Australian Dairy Corporation; Managing Director, Austdairy Ltd; Member, Biosecurity Council of Queensland, Director, Thai Dairy Industry Co Ltd; and Deputy Secretary, Commonwealth Department of Primary Industries. For a number of years he has also been Chairman of community care services organisation Newlife Care Inc. Director While spending most of his career within the broad finance sector, Greg has enjoyed general management roles in a wide range of disciplines. These include responsibilities for financial and capital management, investment management, corporate strategy and marketing, as well as having primary accountability for business operations covering general insurance, business banking, retail banking and wealth management. Greg is a former Chief Executive Officer of Metway Bank Limited and has held senior executive positions in Citibank Australia, Metway Bank and Suncorp Metway Limited. Since 2003 he has pursued a number of business interests in the investment management and private equity sectors, as well as undertaking professional company director responsibilities. Greg has held directorships with Cashcard Australia Ltd, LJ Hooker Ltd, RACQ Insurance Ltd, Hedge Funds of Australia Ltd (Chair), Suncorp Metway Ltd (various subsidiaries), and First Base Pooled Development Fund. He is currently a Director of Ausenco Limited, Calbridge Ltd, UAP Holdings Pty. Ltd., GRG Residential Pty Ltd and a number of private investment companies. Director Neil is a former Speaker of the Legislative Assembly (Queensland) and the former Minister for Transport and Primary Industries. Prior to his Parliamentary roles Neil was a primary producer, Shire Councillor and member of UGA. Neil is a Justice of the Peace and a holder of the Centenary of Federation Medal. Chief Executive Peter Boettcher BE(Agric), MBA See page 48 for profile. Company Secretaries Geoff White BCom, FCA See page 48 for profile. Renee Butterfield LLB, BA Corporate Counsel Renee Butterfield joined SunWater in December 2008 as the Corporate Counsel and was appointed Alternate Company Secretary in May Renee is responsible for legal compliance and the provision of legal services for all areas of the business by SunWater s in-house legal team. Prior to joining SunWater, Renee worked both as a private practitioner and in corporate roles for ASX listed companies. SunWater Limited annual report SunWater Executive 47

50 corporate governance. SunWater was established as a statutory Government Owned Corporation (GOC) on 1 October 2000 under the Government Owned Corporations Act On 1 July 2008, SunWater transitioned to a Company GOC under the Corporations Act 2001 and is registered as SunWater Limited ACN SunWater is wholly owned by the Queensland Government. SunWater s corporate governance practices and frameworks have been established in compliance with the governance requirements in legislation, including the Government Owned Corporations Act 1993 and the Financial Accountability Act 2009, and have regard to the Queensland Government s Corporate Governance Guidelines for GOCs. SunWater has implemented significant processes to ensure its internal policies, guidelines and practices remain aligned with the wider legislative and GOC policy framework relevant to the Company and its subsidiaries. Through regular monitoring, reporting and disclosure, SunWater is able to demonstrate that its corporate governance practices are adequate and appropriate. Principle 1 Foundations of management and oversight To ensure that the Board is able to effectively fulfil the requirements of section 88 of the GOC Act and relevant provisions of the Corporations Act: The Board Handbook defines the roles and responsibilities of the Board and individual directors and matters which are delegated to management. The Audit and Corporate Governance Committee, Regulatory and Environment Committee and Remuneration Committee have specific committee charters. A register of committees and their functions is maintained by SunWater. The Board Handbook is available to facilitate board operations and induction and self-evaluation processes. Management s responsibilities are defined and documented in formal position descriptions and performance plans. A performance evaluation for the CEO and Senior Executives took place as part of SunWater s annual achievement development system. The evaluation process and results are overseen by the Remuneration Committee. Principle 2 Structure the Board to add value There is a range of procedures and controls in place to ensure that the interests of shareholding Ministers and the public are properly protected: The Board is appointed by the Governor-in-Council in accordance with the Government Owned Corporations Act The Board comprises seven non-executive Directors, all of whom are considered to be independent and have no business or other relationships that could compromise their ability to exercise unfettered and independent judgement. The skills, experience and expertise of each Director are set out on pages 46 to 47 of this report. Work undertaken for SunWater by any business in which a Director has an interest is recorded and assessed against materiality thresholds to ensure ongoing director independence. Depending on the nature and amount of work undertaken, SunWater has defined the materiality threshold for a supplier of SunWater at 40% or more of the total in the relevant expenditure category or categories in any rolling 12-month period. Amounts paid by SunWater to professional advisory firms of which Directors are principals are reported to the Board on a quarterly basis as they occur. Directors declare their business interests and any business or other relationships annually and must notify the Board of changes to business interests and appointments. The Board generally reviews all Director independence information on a monthly basis. The Board and Committees regularly review their information needs to ensure the information received is appropriate for the effective discharge of their charters. While the Chair continuously monitors the performance of individual Directors, the Board and Committees, a formal self-evaluation process is undertaken every 18 months. The last self-evaluation process was completed in 2008 and communicated to the Shareholding Ministers. The next review is scheduled in the first quarter of 2010 and will involve individual and collective performance assessments overseen by the Chair. Evaluations will include assessment of whether the objectives of the Board (and Committees) were met in a costeffective manner and an assessment of SunWater s overall compliance with the Queensland Government s broader GOC policy framework. The results of these assessments will be communicated to shareholding Ministers in writing. The Board has established and administers an ongoing performance evaluation and reporting process. As part of the process, training and development requirements are identified to ensure that Directors have appropriate skills and knowledge of water industry and corporate governance issues. Directors may seek independent professional advice at the Company s expense. Principle 3 Promote ethical and responsible decision making SunWater holds all Directors and employees to the highest standards of ethical behaviour. SunWater is committed to corporate practices which recognise the interests of employees, clients and the community as a whole and obligations of corporate social responsibility: SunWater has implemented a Code of Conduct outlining practices necessary to maintain confidence in SunWater s integrity which applies to all employees and Directors. SunWater has established a trading in securities policy which applies to regulate any situation where Directors, officers or employees may in the course of their duties have access to inside information about any securities or where dealings in securities may create a conflict of interest. 48 SunWater Limited annual report Corporate Governance

51 SunWater has established an Accountability Referrals Committee (ARC) to respond to any allegations of misconduct against SunWater officers. The ARC advises the CEO on how to deal with misconduct matters and also assists the CEO in appointing appropriate experts or independent parties to investigate misconduct matters. Any allegations of misconduct against the CEO or a Director are referred by the ARC directly to the Chair. Principle 4 Safeguard integrity in financial reporting SunWater has appropriate structures and rigorous procedures and controls in place to ensure complete and accurate reporting of its financial position: SunWater has established an Audit and Corporate Governance Committee to oversee preparation of financial statements and to confirm that accounting methods applied are consistent and comply with applicable accounting standards and concepts. The Committee also advises the Board on the efficacy of the internal and external audit functions, the adequacy of accounting procedures and system controls (including delegations), and budget and financial forecasts. The Audit and Corporate Governance Committee comprises four independent non-executive Director members who have appropriate financial experience. The Audit and Corporate Governance Committee ensures that strategic and operational risks of significance are subject to review by independent management and makes recommendations to the Board about policy, risk management and compliance improvements. The CEO, General Manager Corporate and Manager Finance have confirmed in writing that the financial statements present a true and fair view and are in accordance with accounting standards. Principle 5 Make timely and balanced disclosures As a GOC, SunWater is accountable to its shareholding Ministers who are in turn accountable to Parliament. SunWater is committed to maintaining a level of disclosure that provides shareholding Ministers with timely and complete access to information: SunWater submits detailed quarterly reports to its shareholding Ministers on its performance against the annual SCI. SunWater adopts a broad approach to disclosure by regularly providing submissions and briefing notes to shareholding Ministers on specific matters. To ensure that SunWater meets its disclosure requirements, SunWater regularly assesses the key information needs of stakeholders. Principle 6 Respect the rights of shareholders SunWater is committed to providing balanced and comprehensive information to shareholding Ministers to ensure that the requirements of open and accountable government are met: Shareholding Ministers are advised in a timely manner of all issues that have a significant financial, operational, employee, community or environmental impact. SunWater engages with stakeholders through a range of communication strategies to ensure effective and active consultation. SunWater seeks to actively engage with shareholding Ministers to meet legislative and regulatory requirements and promote integrity and confidence. Principle 7 Recognise and manage risk SunWater has in place a comprehensive framework and procedures for the identification, monitoring and management of key risks associated with its business activities: The Board and its Committees monitor management s performance in identifying areas of risk and implementing effective strategies to manage and mitigate identified risks. A risk management methodology and process based on AS/NZS ISO 4360:2004 is being used across SunWater. The Corporation maintains a number of specific project and operational risk management registers which use (as much as practicable) common processes, categories and assessment criteria. Management of SunWater s business risks includes the use of a hierarchy of registers which elevate risks of higher importance to management team, committee and Board consideration as required. SunWater has implemented and maintains systems, policies and procedures which ensure: - Integration and alignment of risk management systems with corporate and operational objectives - Clear communication throughout SunWater of the Board and Senior Management s position on risk - Common risk management terminology across the Company - Risk management forms part of normal business practice and is not undertaken as a separate task at set times, and - Information systems for reporting on risk are integrated to enable aggregation and reporting at a corporate level. SunWater has implemented policies and procedures which include: - Staff responsibilities in relation to fraud prevention and identification - Responsibility for fraud investigation once a fraud has been identified - Processes for reporting on fraud-related matters to management - Reporting and recording processes to be followed to manage and finalise allegations of fraud - Requirements for staff training to be conducted on fraud prevention and identification - A reference to the Code of Conduct for ethical behaviour, and - A fraud control plan for ongoing monitoring and coordination of fraud control activities which sets out responsibilities and accountabilities for fraud control at all levels of the Company. SunWater Limited annual report Corporate Governance 49

52 corporate governance. The CEO, General Manager Corporate, and Manager Finance confirm to the Board that the statement given under recommendations applying to Principle 4 is founded on a sound system of risk management and internal compliance and control which implements Board policies, and that the risk management and control system is operating efficiently and effectively in all material respects. At the highest level of risk consideration, SunWater has established a strategic issues log and corporate risk register which are regularly reported to the Board (monthly) and Committees (every two months). Risks are assigned by the Board to the Committees based on their impact on the business and their external consequences. The Audit and Corporate Governance Committee oversees general risk management issues and the Regulatory and Environment Committee oversees risks in the water, regulatory and environmental management areas. Higher risks are aligned with established business priorities and assessed against a comprehensive risk intelligence framework developed by an external advisor. Identified risks are typically categorised under the areas of governance, strategy and planning, operations and infrastructure, compliance and reporting. Internally, SunWater has dedicated internal audit, legal and governance resources to oversee management of risk identification, planning, mitigation and review processes and, additionally, sources external advice as required. Principle 8 Remunerate fairly and responsibly SunWater has established a Remuneration Committee which meets at least four times each year and assists the Board in discharging its duties in regard to executive appointments, executive performance, staff remuneration and industrial relations matters. It considers and recommends to the Board the remuneration and terms of employment for the CEO and senior executives and is directly involved in the associated performance planning and review processes. It also oversees the Collective Agreement renewal process. The members of the Remuneration Committee and their attendance is detailed on page 51 of this report. The appropriateness of SunWater s remuneration strategy is assessed utilising community and industry standards and other external information. The Board of SunWater The Board of SunWater Limited is responsible for providing effective governance, leadership and management oversight. The Board s functions include: Ensuring that SunWater acts in accordance with its SCI Approving major projects, policies, plans, budgets and performance targets Ensuring that appropriate policies, procedures and systems are implemented to manage risk, improve business performance and ensure compliance with applicable legal and statutory obligations Evaluating new business opportunities, and Assessing performance of the management and operations of SunWater. During , the Board of SunWater comprised: Phil Hennessy (Chair) Jane Bertelsen (Deputy Chair) Julie Boyd AM Tom Connor AO John Gibson Alan Millhouse Greg Moynihan Kirstin Ferguson, and Neil Turner Schedule of current director terms NAME POSITION INITIAL APPOINTMENT CURRENT TERM Philip Arthur Hennessy (Margaret) Jane Bertelsen Director and Chair (Appointed Chair 15 December 2005) Director and Deputy Chair (Appointed Deputy Chair 15 December 2005) 1 October July 2008 to 30 September 2011* 1 October July 2008 to 30 September 2011 Thomas Blair Connor Director 1 August July 2007 to 30 September 2010 John Lewis Gibson Director 1 August July 2007 to 30 September 2010 Gregory John Moynihan Director 9 August August 2007 to 30 September 2010 Kirstin Ferguson Director 1 October October 2008 to 30 September 2011 Neil John Turner Director 1 October October 2008 to 30 September 2011 * On 25 September 2009, the Queensland Government announced new board appointments that saw Phil Hennessy complete his term at SunWater on 30 September 2009 to take up the chair at another State Government enterprise. Scott Spencer was appointed Chair of SunWater effective 1 October SunWater Limited annual report Corporate Governance

53 Board Committees To increase its effectiveness, the Board has three committees. Charters approved by the Board set out the roles and terms of reference for these committees. SunWater s Board and committee charters are available at Audit and Corporate Governance Committee Committee members have been chosen for their financial and water industry expertise. The Committee meets at least four times a year and assists the Board in overseeing SunWater s financial management and external reporting. The Committee ensures that financial reports are prepared in accordance with Australian Accounting Standards (including Australian equivalents to International Financial Reporting Standards) and other prescribed statutory requirements. The Committee also advises the Board on the efficacy of the internal and external audit functions, the adequacy of accounting procedures and system controls including delegations, and budget and financial forecasts. In addition, through scheduled and regular reporting, the Committee ensures that strategic and operational risks of significance impacting these areas are subject to oversight independent of management, and where necessary, makes recommendations to the Board about policy, risk management and compliance improvements. Members during : John Gibson (Chair), Jane Bertelsen, Phil Hennessy, Greg Moynihan and Kirstin Ferguson. Regulatory and Environment Committee The Committee meets at least four times a year and assists the Board in carrying out its duties in accordance with the Water Act 2000 (Qld), the Environmental Protection and Biodiversity Conservation Act 1991 (Cth) and related legal compliance requirements. The Committee serves as an independent and objective party to review regulatory information presented by management to shareholders, regulators, other key stakeholders and the community. In addition, through scheduled and regular reporting, the Committee ensures that strategic and operational risks of significance impacting these areas are subject to oversight independent of management, and where necessary, makes recommendations to the Board about policy, risk management and compliance improvements. Members during : Tom Connor (Chair), Jane Bertelsen, Greg Moynihan and Neil Turner. Remuneration Committee The Committee meets at least four times a year and assists the Board in discharging its duties in regard to executive appointments, staff remuneration and industrial relations matters. It considers and recommends to the Board the remuneration of the CEO and senior executives and is directly involved in the associated performance planning and review processes. The appropriateness of SunWater s remuneration strategy is assessed utilising community and industry standards and other external information. Members during : Jane Bertelsen, John Gibson, Greg Moynihan (Chair) and Kirstin Ferguson. Meetings attended by directors COMMITTEES BOARD OF SUNWATER AUDIT AND CORPORATE GOVERNANCE REGULATORY AND ENVIRONMENT REMUNERATION Total Meetings Phil Hennessy 13 6 Jane Bertelsen* 14 3/3** 3/3 2/2** Tom Connor 14 5 John Gibson Greg Moynihan* 14 4/4 2/2** 6/6 Kirstin Ferguson* 9/10 4/4 5/6 Neil Turner* 9/10 3/3 Julie Boyd# 3/4 1/2 * After the appointments of Ms Ferguson and Mr Turner on 1 October 2008, the Board reviewed and reallocated committee responsibilities. ** Retired from Committees during the year. # Ms Boyd retired at the completion of her term on 30 September SunWater Limited annual report Corporate Governance 51

54 corporate governance. Subsidiary Companies Each subsidiary company has a Board of Directors drawn from the SunWater Board, and meets on average three times per year to overview the management, operations, performance and financial reporting activities of that company. Remuneration of Directors Remuneration of Directors is determined by the Governor-in-Council. Total remuneration levels for individual Directors are reported on page 71. Dividend Policy SunWater s dividend policy, as stated in the SCI, takes into account the return its shareholders expect on their investment. SunWater s Board recommended a dividend amount of $7.6m based on a dividend payout ratio of 60% of the corporation s adjusted consolidated operating profit after tax for the financial year. Senior executive and staff remuneration The Remuneration Committee of the Board oversees all employee remuneration. SunWater remuneration policies for all staff, excluding senior managers, are determined by a Union Collective Agreement in accordance with the Queensland Government approved negotiating framework. SunWater does not have a performance payment scheme for employees covered by the Union Collective Agreement. Senior executive remuneration is set by the Board in accordance with Queensland Government policy for the Governance Arrangements for Chief and Senior Executives. Their remuneration is based on external independent advice on position evaluation and having regard for Queensland Government policy. Remuneration levels are set on the basis of Total Fixed Remuneration (TFR), which are inclusive of all payments and benefits. Senior executive remuneration and conditions for new appointments are based on Queensland Government s preferred outer limit employment agreements. Existing senior positions are based on a mix of outer limit and tenured employee arrangements. A Performance Pay Scheme for chief and senior executives based on agreed targets set by the Board and CEO was in place during The scheme was reviewed in accordance with Queensland Government guidelines. Compliance in key areas Dam safety SunWater has in place a comprehensive dam safety program that meets or exceeds dam safety guidelines set by the dam safety regulator (DERM), and monitors dam safety as required by the Water Supply (Safety and Reliability) Act 2008 and in accordance with the Australian National Committee on Large Dams (ANCOLD) guidelines. Annual updates are provided to SunWater s insurance broker to comply with insurance policy disclosure requirements. In recognition of revised maximum probable flood estimates and relevant ANCOLD and Queensland Government regulatory Guidelines on Acceptable Flood Capacity for Dams, SunWater has established and is implementing a program of dam safety upgrades. Quality management The Quality Management Systems for operations and maintenance and project development are certified under ISO9001:2008 and ensure that best-practice quality management and compliance is achieved across the business. Environmental management The SunWater Environmental Management System is certified under AS/NZS ISO14001:2004 and ensures that best-practice environmental management and compliance is achieved across the business. Workplace Health and Safety Management The SunWater Workplace Health and Safety Management System is certified under AS/NZS 4801:2001 and ensures that best-practice WH&S management and compliance are achieved across the business. Financial management SunWater complied with the requirements of the Financial Accountability Act Local industry policy SunWater complies with the Queensland Government s Local Industry Policy and supports competitive local industry access to tender for work on relevant infrastructure and resource based projects and major procurements in Queensland. SunWater s commitment includes, but is not limited to, ensuring work packages are presented so as to offer maximum opportunities for capable local suppliers and ensuring that information about opportunities for suppliers is communicated through local and regional newspapers prior to the commencement of the development and construction stages of projects. SunWater reports on local industry involvement in these projects as required by submitting local industry participation plans and outcome reports to the Department of Employment, Economic Development and Innovation in line with the Queensland Government s policy and guidelines. Statement of Affairs In compliance with the Freedom of Information Act 1992, SunWater publishes on its website and annually updates a Statement of Affairs, which includes a description of the corporation s structure and functions, the impacts of these functions on the community, the kinds of documents held, and literature available for general distribution. Sunwater Compliance Program SunWater has implemented a compliance program aimed at achieving best-practice compliance management, monitoring and reporting. The program includes a compliance action system to alert staff to new legal obligations and monitors the effectiveness of management systems in achieving compliance objectives. 52 SunWater Limited annual report Corporate Governance

55 Internal audit review SunWater s internal audit capability is governed by a three-year strategic audit plan, which is approved by the Audit and Corporate Governance Committee. The function is performed independently using an objective, systematic, disciplined and proactive approach and in conformance with legislative standards and the International Standards for the Professional Practice of Internal Auditing. The audit programs have a strong focus on corporate risk management frameworks, compliance, control and governance processes, and use internal and external expertise. Corporate planning and reporting SunWater produces a corporate plan with a five-year outlook, and an SCI that is the annual performance agreement between the Board and shareholding Ministers. Quarterly reports provide shareholding Ministers with details of SunWater s progress towards key undertakings and financial performance against targets and budgets documented in the SCI. Consolidated business and group performance reports are provided to the Board on a monthly basis. Directions and notifications from Shareholding Ministers SunWater received no directions or notifications from shareholders during the financial year. Subsidiary reporting SunWater s subsidiaries - North West Queensland Water Pipeline Pty Ltd, Eungella Water Pipeline Pty Ltd and Burnett Water Pty Ltd - prepare separate special purpose financial accounts; however, for public reporting purposes, the subsidiaries are consolidated into SunWater s financial report. Going concern declaration In the Directors opinion, at the date of this declaration, there are reasonable grounds to believe that SunWater will be able to pay its debts as and when they become due and payable. Further information regarding SunWater s Corporate Governance can be found at Subsidiary businesses North West Queensland Water Pipeline Pty Ltd North West Queensland Water Pipeline Pty Ltd (NWQWP) is a wholly owned subsidiary of SunWater. Its primary assets include low-lift and high-lift pump stations, 113 km of pipeline and control systems. It was designed as a multi-user pipeline deriving raw water from Lake Julius and transporting it to the Ernest Henry Mine Reservoir and a number of minor rural users along the route. The existing stage 1 is designed to deliver 7000 ML per annum sufficient to supply additional users in the future. The pipeline design allows for a future upgrade depending on user demand. In December, the Queensland Government approved the design and construction of a 38 km extension pipeline from the NWQWP to the township of Cloncurry for domestic and industrial supply. This was in response to the township s primary storage at Chinaman Creek Dam running dry throughout the year and forcing the Cloncurry Shire Council to rail water from Mt Isa to Cloncurry as an emergency measure. The pipeline extension is currently being constructed and will provide water security for the region. This is a Queensland Government funded project that is planned to be completed by March Eungella Water Pipeline Pty Ltd Eungella Water Pipeline Pty Ltd (EWP) is a wholly owned subsidiary of SunWater. The company s original assets comprise 123 km of pipeline and associated pumping equipment with the capacity to deliver up to 15,000 ML per annum of water from Eungella Dam to the Goonyella Balancing Storage and 10,000 ML per annum to the Moranbah Terminal Storage. The 116 km of Eastern and Southern Spur pipelines that take water from the Eungella Water Pipeline and the new Burdekin-Moranbah Pipeline to coal mines and related users in the northern Bowen Basin were finalised and commenced delivering water in the first quarter of Burnett Water Pty Ltd Burnett Water Pty Ltd (BW) is a wholly owned subsidiary of SunWater. The company s assets comprise Paradise Dam and Kirar Weir on the Burnett River and the unsold portion of the 184,000 ML of water allocations made available for sale/lease as a result of these new storages. These allocations can be utilised in the Bundaberg and Upper Burnett Water Supply Schemes. The mini hydro power station at Paradise Weir has been commissioned but low release levels restrict periods when power can be generated. Transitional issues for management and operation of the new infrastructure have been addressed and the company has been fully integrated with SunWater. In addition, SunWater has developed a comprehensive marketing strategy to realise the commercial value of the company s water allocations in the marketplace. Uptake of the new allocations has been slow partly due to low storage levels and subsequent low Announced Allocations, although the ability to source high priority water has been well received. On 7 October 2008 the Wide Bay Burnett Conservation Council commenced action in the Federal Court against BW seeking orders in relation to the fishways at Paradise Dam. BW and SunWater are committed to building and operating their dams in an environmentally sustainable manner. It is anticipated that this matter will be resolved in SunWater Limited annual report Corporate Governance 53

56 financial report 54 SunWater Limited annual report Financial Report

57 Contents 56 Directors report 57 Auditor s independence declaration 58 Income statements 58 Balance sheets 59 Statements of changes in equity 59 Statements of cash flows 60 Notes to the financial statements 60 Note 1 Summary of significant accounting policies 63 Note 2 Financial risk management 65 Note 3 Critical accounting estimates and judgements 65 Note 4 Revenue 65 Note 5 Expenses excluding finance costs 66 Note 6 Finance costs 66 Note 7 Income tax and income tax equivalents 66 Note 8 Cash and cash equivalents 66 Note 9 Receivables 66 Note 10 Inventories 67 Note 11 Other current assets 67 Note 12 Non-current assets classified as held for sale 67 Note 13 Other financial assets 67 Note 14 Property, plant and equipment 69 Note 15 Intangible assets 69 Note 16 Deferred tax assets 69 Note 17 Payables 69 Note 18 Provisions 70 Note 19 Borrowings 70 Note 20 Other liabilities 70 Note 21 Deferred tax liabilities 70 Note 22 Employee benefits 70 Note 23 Contributed equity 70 Note 24 Retained profits 71 Note 25 Dividends 71 Note 26 Reconciliation of profit after income tax equivalents to net cash inflow from operating activities 71 Note 27 Commitments for expenditure 71 Note 28 Related parties disclosures 73 Note 29 Contingencies 73 Note 30 Segment information 73 Note 31 Dam safety upgrade program 73 Note 32 Subsequent events General information This financial report covers both SunWater Limited as the parent entity and the consolidated entity consisting of SunWater Limited and its subsidiaries. On 1 July 2008, SunWater transitioned to a Company Government Owned Corporation (GOC). SunWater s head office and principal place of business is: Level 10, 179 Turbot Street BRISBANE QLD 4000 SunWater owns and operates bulk water supply and distribution infrastructure located throughout regional Queensland and provides water-related engineering and facilities management services. Water is supplied to mining companies, industrial companies, power stations, manufacturing companies, irrigators, water boards and local governments. 74 Directors declaration 75 Independent auditor s report Pictured: Phil Kemp and Jasmina Moktan reviewing dam safety upgrade plans for Tinaroo Falls Dam on the Atherton Tablelands. SunWater Limited annual report Financial Report 55

58 directors report Your directors present their report together with the financial report of SunWater Limited and its controlled entities ( SunWater ) for the financial year ended 30 June 2009 and the auditor s report thereon. Directors The following persons were directors of SunWater Limited during the whole of the financial year and up to the date of this report: Mr P Hennessy Ms J Bertelsen Mr T Connor Mr J Gibson Mr G Moynihan Ms J Boyd was a director from the beginning of the financial year until her resignation on 30 September Ms K Ferguson was appointed a director on 1 October Mr N Turner was appointed a director on 1 October Further information about the qualifications, experience, term of appointment and attendance at meetings are detailed in the SunWater Board and Corporate Governance sections of the Annual Report (Information about the qualifications and experience of the company secretaries of SunWater Limited is detailed in the SunWater Executive Managers section of the Annual Report.) Principal activity SunWater s principal activity is the provision of water supply services to customers throughout Queensland including irrigators, mines, power generators and local governments. Financial performance The consolidated after tax profit for the financial year amounted to $ million (2008: $ million profit). Further details of SunWater s financial performance are provided in the Financial Summary section of the Annual Report. Dividends In respect of the financial year ending 30 June 2009, a dividend of $7.625 million was declared to the holders of fully paid ordinary shares (2008: $5.897 million declared for the full reporting period ending 30 June 2008 and paid in December 2008). Review of operations Information on the operations of SunWater and the results of such operations are detailed in the Operational Performance section of the Annual Report. Significant changes in the state of affairs On 1 July 2008, SunWater Limited was registered with the Australian Securities and Investments Commission as a public company. SunWater Limited is also a government owned corporation in accordance with section 24(b) of the Government Owned Corporations Act Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2009 that has significantly affected, or may significantly affect: (a) SunWater s operations in future financial years, (b) the results of those operations in future financial years, or (c) SunWater s state of affairs in future financial years; except as set out elsewhere in this report and the financial statements. Likely developments An outline of the likely developments in SunWater s operations is included in the Operational Performance section of the Annual Report. Environmental regulation SunWater s operations are subject to significant environmental regulation under both Commonwealth and State legislation. SunWater aims to achieve a high standard of care for the natural environment in all its activities. In order to achieve this goal, SunWater has implemented an Environmental Management System, consistent with the requirements of AS/NZS ISO14001:2004 and which is third party certified, across all levels and functions of the organisation. The SunWater Environmental Management System covers the following: Development and ongoing management of SunWater s existing and future water supply schemes, Provision of strategic and routine operations and maintenance services to both internal SunWater clients and external water infrastructure owners, Planning and design of water distribution and supply infrastructure this includes project planning, feasibility studies, geotechnical investigations, site surveys, facility design, development of project specifications and performance criteria, and project management, Refurbishment and construction of water distribution and supply infrastructure. Further information about environmental issues is disclosed in the Community and Environment section and in note 29 to the financial statements. Safety SunWater s water infrastructure assets are located throughout Queensland. The increasing age profile of the assets continues to focus attention on the safety of SunWater s employees, customers and the public. During the year, SunWater s ongoing safety program included the commencement of construction of the Tinaroo Falls Dam upgrade, the development of a wide-ranging upgrade program for the safe operation of the assets and the continuation of a media campaign to encourage positive safety behaviours on and around SunWater s infrastructure by members of the public. Insurance of officers During the financial year, SunWater paid a premium of $72,265 (exclusive of GST) to insure the directors and secretaries of SunWater Limited and its wholly owned subsidiary companies, and the executive officers of SunWater. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the directors and officers in their capacity as officers of entities in SunWater, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to SunWater. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Auditor s independence declaration A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out following this Directors Report. Rounding of amounts The Corporation is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the directors report. Amounts in the directors report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditor The Auditor-General of Queensland continues in office in accordance with section 327 of the Corporations Act This report is made in accordance with a resolution of directors. PA Hennessy Chairman Brisbane, Qld 26 August 2009 JL Gibson Director 56 SunWater Limited annual report Financial Report

59 auditor s independence declaration To the Directors of SunWater Limited This audit independence declaration has been provided pursuant to s.307c of the Corporations Act Independence Declaration As lead auditor for the audit of SunWater Limited for the year ended 30 June 2009, I declare that, to the best of my knowledge and belief, there have been a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. Megan Maybury CA As Delegate of the Auditor-General of Queensland 25 August 2009 Queensland Audit Office Brisbane SunWater Limited annual report Financial Report 57

60 income statements For the year ended 30 June 2009 balance sheets As at 30 June 2009 Consolidated Parent notes $ 000 $ 000 $ 000 $ 000 ASSETS Current assets Cash 8 135,101 40, ,316 24,575 Receivables 9 8,646 11,294 9,439 11,524 Inventories 10 2,639 2,444 2,639 2,444 Other current assets 11 19,252 17,805 19,104 11, ,638 71, ,498 50,534 Non-current assets classified as held for sale 12 1,916 29,877 1,916 29,877 Total current assets 167, , ,414 80,411 Non-current assets Receivables , Other financial assets ,668 72,668 Property, plant and equipment , , , ,554 Intangible assets 15 56,772 56,229 7,085 5,680 Deferred tax assets 16 17,920 22,194 15,419 19,217 Total non-current assets 696, , , ,333 Total assets 863, , , ,744 LIABILITIES Current liabilities Payables 17 22,390 18,545 19,813 18,485 Provisions 18 12,513 11,517 12,513 11,517 Borrowings 19 3,557 1,420 11,003 8,087 Other 20 9,523 10,309 9,523 10,302 Total current liabilities 47,983 41,791 52,852 48,391 Non-current liabilities Provisions 18 1,161 1,154 1,161 1,154 Borrowings , , , ,562 Deferred tax liabilities 21 31,209 28,619 15,186 12,238 Total non-current liabilities 277, , , ,954 Total liabilities 325, , , ,345 Net assets 538, , , ,399 EQUITY Contributed equity , , , ,711 Retained profits , , , ,688 Total equity 538, , , ,399 The above balance sheets should be read in conjunction with the accompanying notes. Consolidated Parent notes $ 000 $ 000 $ 000 $ 000 Revenue 4 259, , , ,147 Expenses excluding finance costs 5 (149,969) (149,517) (147,754) (143,351) Finance costs 6 (16,911) (15,169) (15,114) (13,611) Profit/(Loss) before income tax equivalents expense 92,844 25,889 96,473 26,185 Income tax equivalents expense/(income) 7 6,865 8,041 3,715 4,830 Profit/(loss) for the year 85,979 17,848 92,758 21,355 The above income statements should be read in conjunction with the accompanying notes. 58 SunWater Limited annual report Financial Report

61 statements of changes in equity As at 30 June 2009 Consolidated Parent notes $ 000 $ 000 $ 000 $ 000 Total equity at the beginning of the financial year 459, , , ,771 Profit/(loss) for the year 85,979 17,848 92,758 21,355 Contributions of equity 23-6,170-6,170 Dividends 25 (7,625) (5,897) (7,625) (5,897) Total equity at the end of the financial year 538, , , ,399 The above statements of changes in equity should be read in conjunction with the accompanying notes. statements of cash flows For the year ended 30 June 2009 Consolidated Parent notes $ 000 $ 000 $ 000 $ 000 Cash flows from operating activities Inflows: Receipts from customers (inclusive of GST and refunded GST) 208, , , ,270 Community service obligations 2,476 10,288 2,476 10,288 Interest received Intercompany taxes received - - 2, Outflows: Payments to suppliers and employees (inclusive of GST) (117,240) (117,973) (114,414) (120,060) Net cash inflow (outflow) from operating activities 26 94,250 86,568 77,787 68,302 Cash flows from investing activities Inflows: Proceeds from sale of property, plant and equipment 12 78, , Proceeds from term debtors Interest received 6,695 2,150 5,798 1,133 Dividends received ,100 11,000 Outflows: Payments for property, plant and equipment (45,584) (46,874) (44,138) (41,918) Net cash inflow (outflow) from investing activities 39,288 (44,467) 53,937 (29,528) Cash flows from financing activities Inflows: Proceeds from borrowing - 15,000-15,000 Government grant Dividend re-investment - 6,170-6,170 Outflows: Interest paid (16,833) (18,284) (15,086) (16,213) Repayment of borrowings (16,436) (21,406) (15,000) (20,221) Dividends paid (5,897) (6,170) (5,897) (6,170) Net cash inflow (outflow) from financing activities (38,486) (24,372) (35,983) (21,434) Net increase (decrease) in cash held 95,052 17,729 95,741 17,340 Cash at the beginning of the financial year 40,049 22,320 24,575 7,235 Cash at the end of the financial year 135,101 40, ,316 24,575 The above statements of cash flows should be read in conjunction with the accompanying notes. SunWater Limited annual report Financial Report 59

62 notes to the financial statements 30 June 2009 Note 1 Summary of significant accounting policies The significant accounting policies that have been adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented unless otherwise stated. The financial report includes separate statements for SunWater (the parent entity) and the consolidated entity consisting of SunWater and its subsidiaries. (a) Basis of preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act The financial statements have been prepared on an accruals basis and are presented in Australian currency. Compliance with IFRS Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated and parent entity financial statements and notes of the consolidated entity and parent entity comply with International Financial Reporting Standards (IFRS). Historic cost convention The historic cost convention has been applied except where otherwise stated. Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting assumptions. It also requires management to exercise its judgement in the process of applying SunWater s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in notes 3 and 14. (b) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the parent entity as at 30 June 2009 and the financial results of all subsidiaries at that date. The parent entity and its subsidiaries together are referred to in this financial report as the consolidated entity. Subsidiaries are those entities over which the parent entity has the power to govern the financial and operating policies. SunWater wholly owns all its subsidiaries (refer note 13). The balances and effects of all transactions between entities in the consolidated entity are eliminated in full. Where a subsidiary began or ceased to be controlled during the reporting period the results are included only from the date control commenced or up to the date control ceased. Accounting policies of all subsidiaries are consistent with the accounting policies of the parent entity. Investments in subsidiaries are accounted for at cost in the financial statements of the parent entity. The consolidated entity has no investments in associates or joint ventures. (c) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, rebates, trade allowances and amounts collected on behalf of third parties. Water revenue is recognised when water has been delivered to customers or, in cases where no water has been delivered, is accrued in accordance with contractual provisions. Recognition of all other service revenue is based on work completed at the reporting date. Electricity generation revenue is recognised on the amount of electricity generated at the reporting date. Water allocations sales revenue is recognised at the point of sale. Interest income is recognised as it accrues. Realised gains on repayment of borrowings where market value is less than book value are recognised in revenue. (d) Government grants The parent entity received community service obligation (CSO) payments from the Queensland Government. The payments fund the Rural Water CSO in recognition of the current rural water pricing policies set by the government as well as certain other activities for which there are not any other revenue sources. These amounts are recorded as revenue from ordinary activities. New rural water infrastructure assets or extensions to existing assets that are built by clear direction from government for other than commercial return may also incorporate a CSO component. These amounts are initially recorded as pre-paid revenue. Revenue is recognised on a systematic basis over the accounting periods in which the related assets costs are recognised. Water allocations are saleable rights that may be granted by the Crown, free of charge, in a Resource Operations Plan under the Water Act Interim water allocations (replacing water licences granted under previous legislation) and water allocations are recognised at nominal cost or deemed cost. All other water allocations granted free of charge are recognised, when granted, at fair value which is deemed to be cost. (e) Income tax SunWater is exempt from income tax under section 24AM of the Income Tax Assessment Act but, in accordance with part 2 of the Manual for the National Tax Equivalents Regime, is required to comply with the National Tax Equivalents Regime in relation to income tax. Income tax equivalents expense (or income) for the period is the tax payable on the current period s taxable income adjusted by deferred tax expenses (or income) representing changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. SunWater and its wholly owned Australian-controlled subsidiaries have implemented the tax consolidation legislation as of 1 July Under that legislation, the head entity, SunWater, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the taxconsolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, SunWater also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax-consolidated group. Assets or liabilities arising under tax funding agreements with the tax-consolidated entities are recognised as amounts receivable from or payable to other entities in the group. Tax consolidation legislation On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which limits the joint and several liability of the wholly-owned subsidiaries in the case of a default by the head entity, SunWater. New subsidiaries will enter into a similar agreement as soon as practicable after acquisition. SunWater and its subsidiaries have also entered into tax funding agreements under which the subsidiaries fully compensate SunWater for any current tax payable assumed and are compensated by SunWater for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to SunWater under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the subsidiaries financial statements. 60 SunWater Limited annual report Financial Report

63 notes to the financial statements 30 June 2009 Note 1 Summary of significant accounting policies (continued) The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from SunWater, which is issued as soon as practicable after the end of each financial year. SunWater may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables (refer note 9). (f) Leases Leases of property, plant and equipment where SunWater or a subsidiary, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Neither SunWater nor any of its subsidiaries has entered into any finance leases. Leases in which a significant portion of the risks and rewards are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Lease income from operating leases is recognised in revenue on a straight-line basis over the lease term. (g) Business combinations The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the excess of fair value over cost is recognised directly in the consolidated income statement, but only after a reassessment of the identification and measurement of the net assets acquired. (h) Impairment of assets Goodwill, and intangible assets that have an indefinite useful life such as water allocations, are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are assessed on an annual basis for indicators of impairment. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value-in-use. In the case of SunWater s water infrastructure assets, which are not traded in an active market, value-in-use is used as recoverable amount. For the purposes of assessing impairment, assets are grouped in cash generating units (CGU) which are the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets. Each of SunWater s water supply schemes is regarded as a cash-generating unit. Each hydro-electricity generating station is regarded as a cash-generating unit. Non-financial assets (other than goodwill) that were impaired in a prior period are reviewed for possible reversal of the impairment at each reporting date. (i) Cash and cash equivalents For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (j) Receivables (i) Current receivables All trade receivables are recognised at the amounts receivable as they are due for settlement no more than 30 days from the invoice date. The collectibility of receivables is assessed at balance date with adequate provision made for doubtful debts. All known bad debts are written off. A provision for impairment of trade receivables is established when there is objective evidence that all amounts due according to the original terms of the receivables will not be able to be collected. The amount of the impairment loss is recognised in the income statement. When a receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the provision account. Subsequent recoveries of amounts previously written off are recognised in the income statement. (ii) Term trade debtors Term trade debtors represent the term sale of water allocations. Settlement on these debtors ranges from one to three years. (k) Inventories Materials and stores are valued at the lower of cost and net realisable value. Costs have been assigned to individual items of stock primarily on the basis of weighted average cost. (l) Property, plant and equipment Items of property, plant and equipment are carried at cost or deemed cost less accumulated depreciation and impairment losses. SunWater elected to exercise the option allowed under AASB 101 First-time Adoption of Australian Equivalents to International Financial Reporting Standards to adopt the fair value of an item of property, plant and equipment as its deemed cost. This means that all items of property, plant and equipment that had been revalued to fair value on or prior to 1 July 2005, the date of transition to AIFRS, were measured on the basis of deemed cost at that date. Subsequent acquisitions are carried at cost less accumulated depreciation and impairment losses. The cost of self-constructed items includes the direct cost of construction plus costs incidental to the construction, including all other costs incurred in preparing the assets ready for use, such as engineering design fees, an appropriate proportion of overheads and borrowing costs (refer note 1(q)). The cost also includes the initial estimate of the costs of decommissioning the items and restoring the site on which they are located where such estimate is relevant and reliable in the context of the very long life of most of these assets. Costs attributable to pre-feasibility activities and alternative approach assessments are expensed as incurred. All items of property, plant and equipment acquired at a cost, or other value, in excess of $1,000 are capitalised in the year of acquisition. Assets under construction are recorded at cost and are not depreciated until they are completed and held ready for use. No threshold is applied to items within the infrastructure class of assets as these types of assets form a network. Adjustments or additions to existing infrastructure assets that are not in the nature of enhancements or replacements do not satisfy asset recognition criteria and are expensed on completion. The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually. (m) Depreciation and amortisation Depreciation and amortisation is calculated on a straight-line basis so as to write off the cost or deemed cost of each depreciable asset, less its estimated residual value, progressively over its estimated useful life to the entity. Useful life to the entity is determined after considering a number of factors such as manufacturer s specifications, engineering life, climatic and geographic conditions and contractual life. SunWater Limited annual report Financial Report 61

64 notes to the financial statements 30 June 2009 Note 1 Summary of significant accounting policies (continued) For each class of depreciable asset the following depreciation rates were used: Asset class Land Depreciation rates Land is not depreciated Buildings and land improvements 1.25% to 20% Plant and equipment 8% to 40% Infrastructure 0.5% to 10% (n) Non-current intangible assets (i) Water allocations Water allocations not held for sale are intangible assets that are valued at cost or deemed cost. SunWater elected to exercise the option allowed under AASB 101 First-time Adoption of Australian Equivalents to International Financial Reporting Standards to adopt the fair value of an intangible asset as its deemed cost. This means that all water allocations that had been revalued to fair value on or prior to 1 July 2005, the date of transition to AIFRS, were measured on the basis of deemed cost at that date. Subsequent acquisitions are initially recognised at cost or at fair value where granted free of charge (note 1(d)). After initial recognition, water allocations may be revalued at their fair value being market value as evidenced by comparable sales, or independent valuation, or, where no reliable market value exists, the present value of net cash flows. Water allocations held for sale are recognised at the lower of cost and net realisable value. Water allocations have an indefinite life and are not amortised but are reviewed annually for indications of impairment. No recognition threshold is applied. (ii) Software Software has a finite life and is carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method. Amortisation rates for software vary from 20% to 33%. (iii) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of SunWater s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to that entity. Where goodwill is less than $50,000 it is expensed in the same period in which it arises. (o) Payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial period that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (p) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Fees paid on the establishment of loan facilities, which are not incremental costs relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. (q) Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed. SunWater s borrowings are discrete to each project. Therefore the amount of interest capitalised is the actual interest cost incurred on each loan account. (r) Provisions Provisions are recognised when SunWater: has a present legal or constructive obligation as a result of past events; and it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. (s) Refurbishment annuity A refurbishment annuity forms part of the approved irrigation price path for each water supply scheme, and is billed to irrigation customers as part of the normal water billing process. Under the irrigation price path, SunWater is obliged to set apart the annuity for the sole purpose of applying the funds to refurbishment activities on each particular water supply scheme. To give effect to this requirement, SunWater accounts for the annuity as unearned revenue until the funds have been applied to refurbishment activities at which point revenue is recognised. Expenditures applied to refurbishment activities are immediately matched by recognising available annuity (unearned revenue) as income for each water supply scheme. Any unspent annuity at year end (unearned revenue) is carried as a current liability on the balance sheet. (t) Employee benefits (i) Wages and salaries and annual leave Liabilities for wages, salaries and annual leave due but unpaid at the reporting date are recognised in payables at the remuneration rates expected to apply at the time of settlement and include related on-costs such as payroll tax, workers compensation premiums, long service leave levies and employer superannuation contributions. (ii) Long service leave SunWater is levied under the Queensland Government s long service leave scheme at rates determined by actuarial assessment. Levies are expensed in the period in which they are paid or payable. Amounts paid to employees for long service leave are claimed from the scheme as and when leave is taken. No provision for long service leave entitlements is taken up in the financial statements as the liability is held on a whole-of-government basis. (iii) Superannuation Employer superannuation contributions are paid to Queensland Government superannuation schemes at rates determined by the State Actuary. Contributions are expensed in the period in which they are paid or payable. SunWater s obligation is limited to its contribution to the superannuation schemes. Therefore, no liability is recognised for superannuation benefits in these financial statements as the liability is held on a whole-of-government basis. (u) Dividends Provision is made for the amount of any dividend declared by the directors on or before the end of the financial year but not distributed at balance date. (v) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of GST, unless GST is not recoverable from the Australian Taxation Office (ATO) in which case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flow. (w) Rounding of amounts Amounts in the financial report and these accompanying notes have been rounded to the nearest thousand dollars or in certain cases to the nearest dollar. 62 SunWater Limited annual report Financial Report

65 notes to the financial statements 30 June 2009 Note 1 Summary of significant accounting policies (continued) (x) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. SunWater s assessment of the impact of these new standards and interpretations is set out below. (i) AASB 8 Operating Segments and AASB Amendments to Australian Accounting Standards arising from AASB 8 (effective from 1 January 2009) SunWater is not the type of entity to which this standard applies because its debt or equity instruments are not traded in a public market. Consequently, this standard will not impact SunWater s financial report. (ii) Revised AASB 123 Borrowing Costs and AASB Amendments to Australian Accounting Standards arising from AASB 123 (effective from 1 January 2009) The revised AASB 123 has removed the option to expense all borrowing costs and, when adopted, will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial report of SunWater, as SunWater already capitalises borrowing costs relating to qualifying assets. (iii) Revised AASB 101 Presentation of Financial Statements and AASB Amendments to Australian Accounting Standards arising from AASB 101 (effective from 1 January 2009) The September 2007 revised AASB 101 requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. Under this standard, an impact may arise if SunWater, or one of its subsidiaries, makes a prior period adjustment or reclassifies items in the financial statements. If that occurs, the standard requires additional disclosures. SunWater will apply the revised standard from 1 July (iv) AASB Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations (effective from 1 January 2009) This standard does not impact SunWater because, as a government owned corporation, it is unable to make share-based payments to employees. (v) Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASB Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 (effective 1 July 2009) The revised AASB 3 continues to apply the acquisition method to business combinations, but with some significant changes. The standard requires all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisitionby-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. All acquisition-related costs must be expensed. This is different to SunWater s current policy which is set out in note 1(g) above. The revised AASB 127 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control. SunWater does not currently have any transactions with non-controlling interests. SunWater will apply the revised standards prospectively to all business combinations and transactions with non-controlling interests from 1 July 2009 in the event that such transactions occur. (vi) AASB Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective 1 July 2009) The amendments to AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian Equivalents to International Financial Reporting Standards require that all of a subsidiary s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. SunWater will apply the amendments prospectively from 1 July (vii) AASB Amendments to Australian Accounting Standards Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009) These amendments require that all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre-acquisition profits. SunWater currently treats normal dividends from subsidiaries as revenue. Consequently, no impact is expected from the adoption of the amendments. The amendments will be adopted from 1 July (viii) AASB Interpretation 15 Agreements for the Construction of Real Estate (effective 1 January 2009) SunWater s scope of operations does not include the construction of real estate. Consequently, this interpretation does not impact SunWater. (ix) AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008) SunWater does not have any investments in foreign operations. Consequently, this interpretation does not impact SunWater. (x) AASB Amendment to IAS 39 Financial Instruments: Recognition and Measurement (effective 1 July 2009) These amendments prohibit designating inflation as a hedgeable component of a fixed rate debt and also prohibit including time value in the one-sided hedged risk when designating options as hedges. SunWater does not have any of these financial instruments. Consequently, these amendments will not impact SunWater. (xi) AASB Interpretation 17 Distribution of Non-cash Assets to Owners and AASB Amendments to Australian Accounting Standards arising from AASB Interpretation 17 (effective 1 July 2009) AASB-I 17 applies to situations where an entity pays dividends by distributing non-cash assets to its shareholders. SunWater does not pay dividends in this way currently and it is not envisaged in the foreseeable future. Consequently, there is not expected to be any impact when the interpretation applies from 1 July Note 2 Financial risk management SunWater s activities may, at certain times, expose it to a variety of financial risks being market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. SunWater s overall risk management program focuses mainly on counterparty risks and the unpredictability of the financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The objective of SunWater s financial risk management policies is to minimise potential adverse effects on SunWater s financial performance. SunWater 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 and aging analysis and counterparty risk analysis for credit risk. The Board has endorsed written principles for overall risk management, as well as policies covering specific areas, such as mitigating interest rate and credit risk, use of derivative financial instruments and investment of excess liquidity. (a) Market risk (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity s functional currency. Although SunWater does not operate internationally, on infrequent occasions, SunWater may source plant and equipment or components of water infrastructure assets internationally and become exposed to foreign exchange risk. The SunWater Board has approved policies to manage foreign exchange risk. When required, SunWater hedges foreign exchange risk on exposures arising from future commercial transactions and recognised assets and liabilities using approved derivative risk instruments on advice from, and transacted by, Queensland Treasury Corporation. During , SunWater had no significant exposure to foreign exchange risk and did not enter into any derivative contracts to hedge its foreign exchange risk exposure. SunWater Limited annual report Financial Report 63

66 notes to the financial statements 30 June 2009 Note 2 Financial risk management (continued) (ii) Price risk Commodity price risk arises when future commercial supply agreements are subject to fluctuations in price movements. During , SunWater had no significant exposure to price risk. (iii) Cash flow and fair value interest rate risk SunWater s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose SunWater to cash flow interest rate risk, whereas borrowings issued at fixed rates expose SunWater to fair value interest rate risk. SunWater manages its interest rate risk in consultation with Queensland Treasury Corporation in accordance with policies approved by the SunWater Board. Interest rate risk is measured monthly through the monitoring of changes in yields over the debt duration profile. The following interest rate sensitivity analysis assumes that the rate would be held constant over the financial year, with the change occurring at the beginning of the financial year. SunWater has assumed a movement of +/- 100 basis points in interest rates applicable to its borrowings as a reasonable expectation based on historical patterns for the type of debt facility held interest rate risk Carrying -1% +1% Financial Instruments amount Profit Equity Profit Equity $ 000 $ 000 $ 000 $ 000 $ 000 Consolidated Cash 135,101 (1,286) (1,286) 1,286 1,286 Queensland Treasury Corporation borrowings 248,868 2,458 2,458 (2,458) (2,458) Overall effect on profit and equity 1,172 1,172 (1,172) (1,172) 2008 interest rate risk Carrying -1% +1% Financial Instruments amount Profit Equity Profit Equity $ 000 $ 000 $ 000 $ 000 $ 000 Consolidated Cash 40,049 (283) (283) Queensland Treasury Corporation borrowings 265,593 2,315 2,315 (2,315) (2,315) Overall effect on profit and equity 2,032 2,032 (2,032) (2,032) (b) Credit risk Credit risk largely arises from the potential failure of counterparties to meet their obligations under the respective contracts. Credit evaluations are performed on all customers requiring credit over a certain amount and on all counterparties to significant contracts. Exposure to credit risk is monitored on an ongoing basis. Cash is invested only with Queensland Treasury Corporation, a highly rated financial institution. During , SunWater had no transactions involving derivative financial instruments. At the balance sheet date there were no other significant concentrations of credit risk in respect to recognised financial instruments. The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the carrying amount of those assets as represented in the following table: Maximum exposure to credit risk Category note $ 000 $ 000 Consolidated Cash and cash equivalents 8 135,101 40,049 Receivables current 9 8,646 11,294 Receivables non-current Advance to Burnett Dam Alliance 11 1,000 1, ,857 52,557 Parent Cash and cash equivalents 8 120,316 24,575 Receivables current 9 9,439 11,524 Receivables non-current 9 2, ,421 36,313 Collateral in the form of insurance bonds is held as security for the advance to Burnett Dam Alliance. No financial assets and financial liabilities have been offset and presented net in the Balance Sheets. The method for calculating any impairment for credit risk is based on past experience, current and expected changes in economic conditions and changes in client credit ratings. (c) Liquidity risk Liquidity risk management within SunWater ensures sufficient cash is available to meet short-term and long-term financial commitments. SunWater has policies in place to manage liquidity risk. SunWater manages liquidity risk by monitoring forecast cash flows to ensure that sufficient cash and short-term borrowing facilities are maintained, so that adequate funds are available at all times to meet SunWater s commitments as they arise. The following table sets out the liquidity risk of financial liabilities held by SunWater. It represents the contractual maturity of financial liabilities, calculated based on undiscounted cash flows. total CasH FloWS 2009 Carrying Less than 1-5 Over 5 (contraamount 1 year years years ctual) $ 000 $ 000 $ 000 $ 000 $ 000 Consolidated Payables 22,390 22, ,390 Borrowings Queensland Treasury Corporation 248,868 18,058 72, ,978* 338,209 Deposits payable Other ,641 40,473 72, , ,982 Parent Payables 19,813 19, ,813 Borrowings Queensland Treasury Corporation 216,397 14,501 57, ,013* 289,458 Intercompany loan 24,879 11,003 13,876-24,879 Deposits payable Other ,472 45,342 71, , ,533 total CasH FloWS 2008 Carrying Less than 1-5 Over 5 (contraamount 1 year years years ctual) $ 000 $ 000 $ 000 $ 000 $ 000 Consolidated Payables 18,545 18, ,545 Borrowings Queensland Treasury Corporation 265,593 19,407 77, ,238* 364,260 Deposits payable Other ,518 38,042 77, , ,185 Parent Payables 18,485 18, ,485 Borrowings Queensland Treasury Corporation 231,686 15,706 62, ,687* 310,273 Intercompany loan 21,963 8,087 13,876-21,963 Deposits payable Other ,507 42,361 76, , ,094 * Cash flows over 5 years are based on estimated market value. 64 SunWater Limited annual report Financial Report

67 notes to the financial statements 30 June 2009 Note 3 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. SunWater makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Estimated impairment of assets Key assumptions and estimates concerning the future are made when assessing the value-in-use of water infrastructure assets using the net present value of future cash flows derived from each cash-generating unit. Value-in-use is taken to be the recoverable amount in respect to cash-generating units comprising water infrastructure assets. Significant factors influencing the assessment of value-in-use include the following: SunWater applied its pre-tax weighted average cost of capital (WACC) as the discount rate. WACC includes a market-determined rate that reflects the risks associated with operating the business. The risk-free component of WACC takes into account the forward-looking long-term average expected gross domestic product growth, and the forward-looking long-term average expected inflation. As a natural monopoly, there is not an open market for the water infrastructure owned by SunWater. Water charges applied to irrigators are regulated by the Queensland Government which subsidises water prices by way of community service obligation payments for the regulated pricing shortfall incurred against forecast efficient costs of storage and distribution of water for irrigation purposes. As the regulated price does not provide for a commercial return on capital, the reduced cash flows substantially impact on the values assigned to the water infrastructure assets. The cash flow projections employ prices for irrigation in the medium to longer term based on the currently approved pricing arrangements and likely future pricing trends. The cash flow projections assume water availability equals expected customer usage over the long term. The cash flow projections anticipate that business efficiencies will be achieved over time to meet benchmarked costs and that future price paths will recover efficient costs. (ii) Useful life of property, plant and equipment Many of SunWater s water infrastructure assets have extremely long lives. Factors considered in estimating the useful life of assets are set out in note 1(m). (iii) Non-current intangible assets Under AASB 138 Intangible Assets, water allocations are assessed as having an indefinite life. In determining this position, SunWater has assumed that the current Resource Operations Licence conditions will continue in perpetuity. Note 4 Revenue Consolidated Parent $ 000 $ 000 $ 000 $ 000 Revenue from ordinary activities Industrial water charges 99,162 83,728 75,506 63,536 Irrigation water charges 42,782 39,880 41,963 39,157 Urban water charges 6,250 7,938 6,250 7,938 Drainage charges 1,251 1,202 1,251 1,202 Water allocations revenue 11,401 9,210 8,967 6,205 Consulting and facilities services revenue 24,402 30,516 37,784 37,125 Electricity generation Community service obligation 3,174 10,370 3,174 10,370 Other fees and charges Grants Interest 6,976 2,372 6,079 1,354 Dividends received ,100 11,000 Rent received 966 1, ,069 Other , , , ,482 Other income Gain on disposal of non-current assets (refer note 12) 49, , Gain on settlement of loan Proceeds from bank guarantees (refer note 12) 11,500-11,500 - Proceeds from insurance settlement (1) ,156 1,665 61,156 1,665 Total revenue 259, , , ,147 (1) Whilst insurance claims are yet to be finalised, the amount accrued in these financial statements represents the best information available at the date of this report. The final insurance settlement may differ from these amounts. Note 5 Expenses excluding finance costs Consolidated Parent $ 000 $ 000 $ 000 $ 000 Depreciation and amortisation Land improvements and buildings Plant and equipment 2,196 1,670 2,196 1,670 Water infrastructure 20,416 18,517 14,093 12,165 Software 1,017 1,965 1,017 1,965 Total depreciation and amortisation 24,433 22,695 18,110 16,343 Labour and on-costs 39,251 45,238 40,843 45,473 Contracted services 19,399 21,894 20,245 23,119 Electricity 14,549 14,976 13,837 14,370 Materials 5,249 4,685 9,932 4,870 Plant hire 4,946 5,323 4,971 5,341 Motor vehicle operating lease charges 2,484 2,352 2,484 2,352 IT charges 1, , Bad and doubtful debts (1) 2 (608) 2 (608) Loss on disposal of non-current assets Travel 1,992 2,278 2,089 2,293 Accommodation 2,930 2,686 2,931 2,701 Insurance 4,979 4,117 4,627 3,819 Legal fees 2, ,574 1,001 Rates and land taxes 1,189 1,260 1,076 1,184 Telephone, facsimile and data lines 2,012 2,022 2,007 1,984 Remuneration of auditors (2) Write off of inventories Cost of water allocations sold 862 1, Impairment (refer notes 12, 14 & 15) 19,003 16,255 19,003 16,255 Other 2,183 1,149 2,102 1,649 Total expenses excluding finance costs 149, , , ,351 (1) Provision for doubtful debts no longer required was written back in (2) Amounts received or due and receivable by the auditor of the consolidated entity related to the audit of the financial report of the parent entity and its subsidiaries. No other services were provided. SunWater Limited annual report Financial Report 65

68 notes to the financial statements 30 June 2009 Note 6 Finance costs Consolidated Parent $ 000 $ 000 $ 000 $ 000 Interest and finance charges paid/payable 17,277 18,754 15,480 16,629 Amount capitalised (366) (3,585) (366) (3,018) Finance costs expensed 16,911 15,169 15,114 13,611 Note 7 Income tax and income tax equivalents Consolidated Parent $ 000 $ 000 $ 000 $ 000 (a) Income tax equivalents expense/(income) Current tax equivalents expense/(income) 10,625 7,068 7,593 7,206 Deferred tax equivalents (income) 2, ,229 (2,376) Over-provided in prior years* (6,107) - (6,107) - 6,865 8,041 3,715 4,830 Income tax equivalents expense/(income) is attributable to: Profit from continuing operations 6,865 8,041 3,715 4,830 Deferred tax equivalents expense/(income) included in income tax equivalents expense comprises: Decrease/(increase) in deferred tax assets (note 16) (243) 5,162 (718) 893 (Decrease)/increase in deferred tax liabilities (note 21) 2,590 (4,189) 2,947 (3,269) 2, ,229 (2,376) (b) Numerical reconciliation of income tax equivalents expense to prima facie tax equivalents payable Profit from continuing operations before income tax equivalents expense 92,844 25,889 96,473 26,185 Tax at 30% 27,854 7,766 28,942 7,855 Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Entertainment expenses Disposal of assets to SEQWater (14,664) - (14,664) - Dividends from subsidiaries - - (4,230) (3,300) Sundry items (203) 250 (211) 250 Prior year over provision (6,107) - (6,107) - Investment allowance (37) - (37) - Income tax equivalents expense 6,865 8,041 3,715 4,830 * On 15 September 2008, SunWater Limited received a positive ruling from the Australian Taxation Office. The ruling allows SunWater Limited as the head company of the SunWater group to be treated as an Irrigation Water Provider, and access the write-off under Subdivision 40-F, for capital expenditure on water facilities incurred primarily and principally for the supply of water to primary producers. The write-off allows eligible expenditure incurred after 1 July 2004 to be written-off pro-rata over three years. The additional deduction available to SunWater Limited for the financial years is $16.2m. Note 8 Cash and cash equivalents Consolidated Parent $ 000 $ 000 $ 000 $ 000 Cash on hand Cash at bank 2,477 7, ,504 Deposits on call 116,732 32, ,761 19,054 Term deposits 15,874-15, ,101 40, ,316 24,575 (a) Reconciliation to cash at the end of the year The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows: Balances as per statement of cash flows 135,101 40, ,316 24,575 (b) Risk exposure SunWater s risk exposure is discussed in note 2. Note 9 Receivables Consolidated Parent $ 000 $ 000 $ 000 $ 000 Current Trade debtors 9,697 12,367 6,405 9,795 Term trade debtors Intercompany receivables Intercompany taxation receivables - - 3,284 2,802 9,746 12,394 10,539 12,624 Less: Provision for impairment of receivables 1,100 1,100 1,100 1,100 8,646 11,294 9,439 11,524 Non-current Term trade debtors Intercompany receivables - - 2, , (a) Impaired receivables The ageing of trade receivables is as follows: impair- impairgross ment Gross ment Consolidated $ 000 $ 000 $ 000 $ 000 Not past due 6, ,780 - Past due 0 30 days Past due days 1, More than 60 days , ,856 1,100 12,608 1,100 (b) Foreign exchange and interest rate risk Information about SunWater s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is discussed in note 2. (c) Fair value and credit risk Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. For more information on SunWater s risk management policies, refer to note 2. Note 10 Inventories Consolidated Parent $ 000 $ 000 $ 000 $ 000 Materials and stores 2,639 2,444 2,639 2,444 Inventory expense Inventories recognised as expense during the year ended 30 June 2009 amounted to $1.542 million (2008 $1.415 million). There were no write-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2009 ( nil). There were no reversals of previous write-downs (2008: $0.006 million). 66 SunWater Limited annual report Financial Report

69 notes to the financial statements 30 June 2009 Note 11 Other current assets Consolidated Parent $ 000 $ 000 $ 000 $ 000 GST receivable 1,562 1,079 1, Prepayments 1, , Advance to Burnett Dam Alliance 1,000 1, Other debtors Accrued revenue (1) 15,473 14,841 16,486 10,137 (1) Includes water delivered to 30 June but not invoiced. 19,252 17,805 19,104 11,991 Note 12 Non-current assets classified as held for sale Consolidated Parent $ 000 $ 000 $ 000 $ 000 Buildings and land improvements (2) - 1,238-1,238 Plant and equipment (2) Water infrastructure (see below) (1) (2) 1,916 24,699 1,916 24,699 Assets under construction (2) - 1,700-1,700 Water allocations (2) - 1,958-1,958 1,916 29,877 1,916 29,877 (1) Sale of water infrastructure asset SunWater constructed the Goondicum pipeline to provide water to a mining customer. During , and prior to commissioning of the pipeline, the customer went into voluntary administration. SunWater signed a Pipeline Transfer Agreement on 1 May 2009 with another party who agreed to pay $2.5 million to SunWater on the later of 1 May 2013 and the date that the pipeline is legally transferred to them. Legal transfer of the pipeline, which is dependent upon the transfer and assignment of a number of titles, leases and easements, is anticipated in (also see note 14). At the time of signing the transfer agreement, SunWater collected $ million in bank guarantees provided by the mining customer and recognised an impairment of the pipeline asset in the amount of $ million. (2) Transfer of assets Under the South East Queensland Water (Restructuring) Act 2007, SunWater was directed by the Treasurer of Queensland to transfer certain water infrastructure, plant and equipment, buildings, land improvement assets and unsold water allocations to the Queensland Bulk Water Supply Authority on 1 July The proceeds of the transfer amounted to $ million and a final accounting gain of $ million was recognised. No tax applied as under the National Tax Equivalents Regime government imposed transfers are tax neutral. Note 13 Other financial assets Consolidated Parent $ 000 $ 000 $ 000 $ 000 Shares in controlled entities at cost ,668 72,668 Information relating to the controlled entities is set out below. Country of Class of Name of entity incorporation shares Equity holding % % North West Queensland Water Pipeline Pty Ltd Australia Ordinary Eungella Water Pipeline Pty Ltd Australia Ordinary Burnett Water Pty Ltd Australia Ordinary Note 14 Property, plant and equipment Consolidated Parent $ 000 $ 000 $ 000 $ 000 Land (1) 8,454 8,296 8,454 8,296 Buildings and land improvements (1) 14,274 13,290 14,274 13,290 Less: accumulated depreciation 2,702 2,231 2,702 2,231 Total buildings and land improvements 11,572 11,059 11,572 11,059 Plant and equipment (1) 17,607 12,126 17,605 12,124 Less: accumulated depreciation 7,909 7,611 7,909 7,611 Less: accumulated impairment Total plant and equipment 9,333 4,515 9,331 4,513 Water infrastructure (1) 694, , , ,212 Less accumulated depreciation 66,318 45,957 37,367 23,330 Less: accumulated impairment 82,181 83,229 77,332 78,379 Total water infrastructure 545, , , ,503 Assets under construction (1), (2) 46,278 33,480 37,846 33,183 Total property, plant and equipment 621, , , ,554 (1) At cost or deemed cost. (2) Includes the costs of investigating feasibilities associated with the development of business cases for proposed water infrastructure projects that, at commencement, were deemed more likely to proceed to construction. If circumstances arise in the future whereby any of the business cases are unsuccessful, an impairment loss will be recognised at that time. No such circumstances were known at 30 June 2009, and no impairment losses were recognised. Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of are set out below. land Buildings Plant & Water Assets total & land equip- infra- under improve- ment struc- constrments ture uction $ 000 $ 000 $ 000 $ 000 $ 000 Consolidated Carrying amount at 1 July ,296 11,059 4, ,037 33, ,387 Additions 241 1,538 7,472 31,030 53,295 93,576 Disposals (83) (221) (93) (1,980) - (2,377) Transfer between classes (40,497) (40,497) Transfer to noncurrent assets held for sale (note 12) (1,916) - (1,916) Depreciation expense (note 5) - (804) (2,196) (20,416) - (23,416) Impairment loss (accumulated impairment) (note 5) - - (365) (22,055) - (22,420) Impairment loss (non-current asset held for sale) (notes 5, 12) (20,025) - (20,025) Impairment losses reversed (note 5) ,106-23,106 Carrying amount at 30 June ,454 11,572 9, ,781 46, ,418 SunWater Limited annual report Financial Report 67

70 notes to the financial statements 30 June 2009 Note 14 Property, plant and equipment (continued) land Buildings Plant & Water Assets total & land equip- infra- under improve- ment struc- constrments ture uction $ 000 $ 000 $ 000 $ 000 $ 000 Parent Carrying amount at 1 July ,296 11,059 4, ,503 33, ,554 Additions 241 1,538 7,472 31,009 45,139 85,399 Disposals (83) (221) (93) (1,980) - (2,377) Transfer between classes (40,476) (40,476) Transfer to noncurrent assets held for sale (note 12) (1,916) - (1,916) Depreciation expense (note 5) - (804) (2,196) (14,093) - (17,093) Impairment loss (accumulated impairment) (note 5) - - (365) (22,055) - (22,420) Impairment loss (non-current asset held for sale) (notes 5, 12) (20,025) - (20,025) Impairment losses reversed (note 5) ,106-23,106 Carrying amount at 30 June ,454 11,572 9, ,549 37, ,752 Impairment Cash generating units in which material impairment losses were recognised or (reversed) during the financial year are: Consolidated Parent loss (Reversed) Loss (Reversed) $ 000 $ 000 $ 000 $ 000 Goondicum pipeline 20,025-20,025 - This CGU was a stand-alone pipeline operation (note 12). The impairment loss represents the difference between carrying amount and recoverable amount being fair value less costs to sell as determined by negotiated agreement. Bundaberg Water Supply Scheme - (5,729) - (5,729) This CGU comprises all of the water infrastructure assets in the Bundaberg Water Supply Scheme. The reversal of previously recognised impairment losses arises mainly because revised future cash inflows are now expected to recover certain previously recognised future cash outflows. Recoverable amount is determined as value in use. The discount rate used was 10.8% (2008: 10.8%). Burdekin Haughton Water Supply Scheme 6,975-6,975 - This CGU comprises all of the water infrastructure assets in the Burdekin Haughton Water Supply Scheme. The impairment loss mainly arises because additional future cash outflows related to safety improvement and refurbishment costs are expected to absorb currently forecast net cash inflows. Recoverable amount is determined as value in use. The discount rate used was 10.8% (2008: 10.8%). Dawson Valley Water Supply Scheme - (8,584) - (8,584) This CGU comprises all of the water infrastructure assets in the Dawson Valley Water Supply Scheme. The reversal of previously recognised impairment losses largely arises because future cash inflows are forecast to increase following additional water entitlement sales and renegotiation of water supply contracts. Recoverable amount is determined as value in use. The discount rate used was 10.8% (2008: 10.8%). Nogoa MacKenzie Water Supply Scheme 7,513-7,513 - This CGU comprises all of the water infrastructure assets in the Nogoa MacKenzie Water Supply Scheme. The impairment loss mainly arises because additional future cash outflows related to refurbishment costs have arisen that are expected to absorb currently forecast net cash inflows. Recoverable amount is determined as value in use. The discount rate used was 10.8% (2008: 10.8%). 68 SunWater Limited annual report Financial Report

71 notes to the financial statements 30 June 2009 Note 15 Intangible assets Consolidated Parent $ 000 $ 000 $ 000 $ 000 Software (1) 13,704 11,625 13,704 11,625 Less accumulated amortisation 10,781 9,811 10,781 9,811 Less accumulated impairment ,564 1,119 2,564 1,119 Trade names Water allocations (1) 54,200 55,102 4,513 4,553 (1) At cost or deemed cost. 56,772 56,229 7,085 5,680 Reconciliations Reconciliations of the carrying amounts of intangible assets at the beginning and end of are set out below. soft- Trade Water Ware names allocations $ 000 $ 000 $ 000 Consolidated Carrying amount at 1 July , ,102 Sales (note 5) - - (862) Additions at cost 2, Disposals/retirements (26) - (40) Amortisation expense (note 5) (1,017) - - Impairment losses reversed (note 5) Carrying amount at 30 June 2009 (1) 2, ,200 soft- Trade Water Ware names allocations $ 000 $ 000 $ 000 Parent Carrying amount at 1 July , ,553 Additions at cost 2, Disposals/retirements (26) - (40) Amortisation expense (note 5) (1,017) - - Impairment losses reversed (note 5) Carrying amount at 30 June 2009 (1) 2, ,513 (1) Net of retirements (fully written down) Note 16 Deferred tax assets Consolidated Parent $ 000 $ 000 $ 000 $ 000 The balance comprises temporary differences attributable to: Provision for doubtful debts Property, plant and equipment 2,485 2, Accrued payables Accrued employee benefits 1,466 1,494 1,466 1,494 Revenue received in advance 1,006-1,006 - Provision for lease make good Provision for Rocklea land commitment Unearned renewal annuity 2,741 2,978 2,741 2,978 Tax losses included in deferred tax assets 9,289 10,866 9,289 10,866 Balance before current year tax losses 17,920 19,254 15,419 16,277 Tax losses transferred in current year - 2,940-2,940 Balance at 30 June 17,920 22,194 15,419 19,217 Note 16 Deferred tax assets (continued) Consolidated Parent $ 000 $ 000 $ 000 $ 000 Movements: Opening balance at 1 July 22,194 34,425 19,217 27,178 Credited/(charged) to the income statement 6,337 (5,162) 6,813 (893) Losses utilised to offset current tax payable (10,611) (7,069) (10,611) (7,068) Closing balance at 30 June 17,920 22,194 15,419 19,217 Deferred tax assets to be recovered after more than 12 months 15,869 20,107 13,384 17,322 Deferred tax assets to be recovered within 12 months 2,051 2,087 2,035 1,895 Closing balance at 30 June 17,920 22,194 15,419 19,217 Note 17 Payables Consolidated Parent $ 000 $ 000 $ 000 $ 000 Trade creditors 7,365 4,495 7,143 4,188 Intercompany taxation payables ,940 Other creditors and accruals 15,025 14,050 12,418 11,357 22,390 18,545 19,813 18,485 Note 18 Provisions Consolidated Parent $ 000 $ 000 $ 000 $ 000 Current Employee benefits (note 22) 4,888 4,980 4,888 4,980 Tenancy obligations Dividends 7,625 5,897 7,625 5,897 12,513 11,517 12,513 11,517 Non-current Land commitment (1) 1,161 1,154 1,161 1,154 1,161 1,154 1,161 1,154 (1) By way of an agreement between the former State Water Projects and the Department of Natural Resources and Water, SunWater is required to settle with the department, the disposition of certain surplus land. Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below. tenancy land obligations commitment $ 000 $ 000 Consolidated Carrying amount at 1 July ,154 Provisions added/(written back) (216) 7 Payments made during the year (424) - Carrying amount at 30 June ,161 Parent Carrying amount at 1 July ,154 Provisions added/(written back) (216) 7 Payments made during the year (424) - Carrying amount at 30 June ,161 SunWater Limited annual report Financial Report 69

72 notes to the financial statements 30 June 2009 Note 19 Borrowings Consolidated Parent $ 000 $ 000 $ 000 $ 000 Note 22 Employee benefits Consolidated Parent $ 000 $ 000 $ 000 $ 000 Unsecured (1) Queensland Treasury Corporation loan 248, , , ,686 Intercompany loan ,879 21, , , , ,649 Represented by: Current 3,557 1,420 11,003 8,087 Non-current 245, , , , , , , ,649 (1) Borrowings by subsidiary company are secured by parent entity guarantee. (a) Financing arrangements The loans from Queensland Treasury Corporation (QTC) are interest bearing. The borrowing arrangements are subject to annual review. Subject to the annual approval of the Queensland Treasurer, borrowings are sourced from the SunWater Client Specific Pool, except in the case of borrowings by SunWater s subsidiary companies which borrow from QTC s generic debt pool. SunWater may draw up to the amount of the approved borrowing program (in 2009: nil). SunWater has a credit standby arrangement with QTC totalling $15 million. This facility was unused at 30 June 2009 (2008: unused). (b) Fair value Carrying Fair Carrying Fair amount value amount value $ 000 $ 000 $ 000 $ 000 The carrying amounts and fair values of interest bearing liabilities at balance date are: Borrowings 248, , , ,326 Note 20 Other liabilities Consolidated Parent $ 000 $ 000 $ 000 $ 000 Deposits payable Unearned annuity 9,140 9,929 9,140 9,929 Other ,523 10,309 9,523 10,302 Note 21 Deferred tax liabilities Consolidated Parent $ 000 $ 000 $ 000 $ 000 The balance comprises temporary differences attributable to: Accrued interest receivable Inventories Accrued revenue 3,808 4,090 2,416 2,379 Water allocations 7,290 7,992 1,354 1,953 Property, plant and equipment 19,426 16,311 10,731 7,707 Closing balance at 30 June 31,209 28,619 15,186 12,238 Movements Opening balance at 1 July 28,619 32,808 12,238 15,507 Charged/(credited) to the income statement 2,590 (4,189) 2,948 (3,269) Closing balance at 30 June 31,209 28,619 15,186 12,238 Deferred tax liabilities to be settled after more than 12 months 26,716 24,303 12,085 9,660 Deferred tax liabilities to be settled within 12 months 4,493 4,316 3,101 2,578 Closing balance at 30 June 31,209 28,619 15,186 12,238 Employee benefits liability Provision for employee benefits (note 18 ) 4,888 4,980 4,888 4,980 Accrued salaries and wages (note 17) 16 1, ,105 Aggregate employee benefits liability 4,904 6,085 4,904 6,085 Employee numbers Full time equivalents excluding casuals Number of employees as at 30 June Note 23 Contributed equity Consolidated Parent $ 000 $ 000 $ 000 $ 000 (a) Share capital Issued and paid up capital: 2 ordinary shares of $ million each (1) 288, , , ,711 (1) Shares have no par value. number Contribution Total of shares per share $ 000 $ 000 (b) Movements in ordinary share capital Opening balance 1 July , ,711 Equity injection - - Closing balance 30 June , ,711 (c) Capital risk management SunWater s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. SunWater monitors capital on the basis of the market gearing ratio. This ratio is calculated as total borrowings divided by total capital. Total capital is calculated as total equity plus total borrowings. During 2009, SunWater s strategy, which was unchanged from 2008, was to maintain a gearing ratio within a 40% upper limit. The market gearing ratios at 30 June 2009 and 30 June 2008 were as follows: Consolidated Parent $ 000 $ 000 $ 000 $ 000 Total borrowings 248, , , ,649 Total equity 538, , , ,399 Total capital 786, , , ,048 Market gearing ratio 32% 37% 34% 39% Note 24 Retained profits Consolidated Parent $ 000 $ 000 $ 000 $ 000 Movements: Balance 1 July 171, , ,688 85,230 Net profit/(loss) attributable to members of SunWater 85,979 17,848 92,758 21,355 Dividends declared (7,625) (5,897) (7,625) (5,897) Balance 30 June 249, , , , SunWater Limited annual report Financial Report

73 notes to the financial statements 30 June 2009 Note 25 Dividends Parent $ 000 $ 000 Ordinary shares 2008 first and final dividend of $ million per share declared (1) - 5, first and final dividend of $ million per share declared (1) 7,625-7,625 5,897 (1) Franking does not apply to SunWater as an NTER entity because the shareholders represent the Queensland Government. Note 26 Reconciliation of profit after income tax equivalents to net cash inflow from operating activities Consolidated Parent $ 000 $ 000 $ 000 $ 000 Profit for the year 85,979 17,848 92,758 21,355 Depreciation and amortisation 24,433 22,695 18,110 16,343 Impairment 19,003 16,255 19,003 16,255 Bad and doubtful debts 2 (608) 2 (608) Net (gain)/loss on sale or disposal of non-current assets (48,529) 172 (48,529) 172 Interest income (7,179) (2,150) (5,798) (1,133) Interest paid 17,317 18,284 15,086 16,213 Gain on loan settlement (289) (903) (289) (903) Dividends received - - (14,100) (11,000) Change in assets and liabilities: (Increase)/decrease in inventories and intangibles 586 1,101 (276) (79) (Increase)/decrease in deferred tax assets 4,274 12,231 3,798 7,961 (Increase)/decrease in receivables (1,479) (6,789) (532) (1,451) (Increase)/decrease in other assets (7,103) 3,468 (7,431) 591 (Decrease)/increase in creditors 3,420 7,326 1,838 6,695 (Decrease)/increase in deferred revenue 1,225 1,827 1,199 1,160 (Decrease)/increase in income taxes payable (Decrease)/increase in deferred tax liabilities 2,590 (4,189) 2,948 (3,269) Net cash inflow from operating activities 94,250 86,568 77,787 68,302 Note 27 Commitments for expenditure Consolidated Parent $ 000 $ 000 $ 000 $ 000 (a) Capital expenditure commitments Capital expenditure commitments (including GST) contracted for but not brought to account are as follows: ICT projects Water infrastructure projects 17,238 8,299 13,576 8,299 17,399 8,477 13,737 8,477 Payable: Not later than one year 17,399 8,477 13,737 8,477 (b) Non-cancellable operating lease expense commitments Future operating lease commitments (including GST) not brought to account and payable: Within one year 2,995 2,560 2,995 2,560 Later than one year but not later than five years 12,632 12,283 12,632 12,283 Later than five years 16,295 18,845 16,295 18,845 31,922 33,688 31,922 33,688 Note 27 Commitments for expenditure (continued) SunWater leases property under non-cancellable operating leases expiring from one to ten years. Leases generally provide SunWater with a right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based either on movements in the consumer price index or operating criteria. Future projects and acquisitions SunWater has been appointed by the State Government as proponent for the development of business cases for a range of water infrastructure projects. In addition, SunWater has made in-principle commitments to investigate certain major capital projects and acquisitions. However, these projects and acquisitions are at varying stages of completion and final costs cannot be accurately quantified at this time. Details of SunWater s dam safety upgrade program are disclosed in note 31. Note 28 Related parties disclosures Key management personnel compensation Director remuneration is approved by the Governor in Council in accordance with the requirements of the Government Owned Corporations Act The Board Remuneration Committee reviews the compensation and other terms of employment of senior executives having regard to government policy, relevant market comparatives and performance against goals set at the start of the year. Key management personnel compensation disclosures by category Category $ 000 $ 000 Consolidated Short-term employee benefits 1,234 1,381 Post-employment benefits Total 1,380 1,539 Parent Short-term employee benefits 1,186 1,350 Post-employment benefits Total 1,327 1,505 Compensation directors short-term Post- Total employee employment Benefits benefits $ 000 $ 000 $ 000 Consolidated 2009 Name of director Phil Hennessy, Chair Jane Bertelsen, Deputy Chair Julie Boyd (retired 30 September 2008) Tom Connor John Gibson Alan Millhouse (retired 30 June 2008) 2-2 Greg Moynihan Kirstin Ferguson (commenced 1 October 2008) Neil Turner (commenced 1 October 2008) Consolidated 2008 Name of director Phil Hennessy, Chair Jane Bertelsen, Deputy Chair Julie Boyd Tom Connor John Gibson Alan Millhouse Greg Moynihan SunWater Limited annual report Financial Report 71

74 notes to the financial statements 30 June 2009 short-term Post- Total employee employment Benefits benefits $ 000 $ 000 $ 000 Parent 2009 Name of director Phil Hennessy, Chair Jane Bertelsen, Deputy Chair Julie Boyd (retired 30 September 2008) Tom Connor John Gibson Alan Millhouse (retired 30 June 2008) 2-2 Greg Moynihan Kirstin Ferguson (commenced 1 October 2008) Neil Turner (commenced 1 October 2008) Parent 2008 Name of director Phil Hennessy, Chair Jane Bertelsen, Deputy Chair Julie Boyd Tom Connor John Gibson Alan Millhouse Greg Moynihan Directors remuneration excludes insurance premiums (exclusive of GST) of $72,265 (2008 $65,970) paid by the parent entity in respect of directors and officers liability insurance contracts as the contracts do not specify premiums paid in respect of individual directors and officers. Compensation executives short-term Post- Total employee employment Benefits benefits $ 000 $ 000 $ 000 Parent 2009 Title of executive Chief Executive Officer General Manager, Corporate General Manager, Water Services completed service 27/03/ Acting General Manager, Water Services General Manager, Asset Solutions Parent 2008 Title of executive Chief Executive Officer Chief Operating Officer General Manager, Corporate General Manager, Water Services completed service 4/07/ General Manager, Water Services appointed 21/05/ Executives may also earn performance based at-risk incentives payments which are not included in this table. Performance payments to employees Financial year aggregate Total fixed Employees at-risk salaries receiving Performance and wages performance remuneration payments Payments $ 000 $ 000 $ Note 28 Related parties disclosures (continued) Transactions with director-related entities (i) SunWater engaged the consulting services of KPMG, a firm of which Mr Phil Hennessy is a partner. Total value of the consulting services (inclusive of GST) was $278,461 (2008 $168,377). The services were procured on a commercial basis in accordance with board-approved processes and the State Purchasing Policy. (ii) SunWater provided consulting services and supplied office accommodation to Western Corridor Recycled Water Pty Ltd, a State of Queensland controlled company of which Mr Phil Hennessy was a director from May 2007 until 1 August SunWater entered commercial arrangements with Western Corridor Recycled Water Pty Ltd prior to the appointment of Mr Hennessy. Total value of goods and services provided by SunWater (inclusive of GST) was $6,572,093 (2008 $10,344,069). Transactions with subsidiaries The parent entity within the group is SunWater. Interests in subsidiaries are set out in note 13. All transactions with subsidiaries are carried out under normal commercial terms and conditions or at cost. No transactions occurred between subsidiaries. The following transactions occurred between the parent entity and its subsidiaries: $ 000 $ 000 Sales of water to subsidiaries 4,067 3,853 Sales of services to subsidiaries 13,388 6,611 Interest paid to subsidiaries Current tax payable assumed from tax consolidated subsidiaries 3,284 2,802 Current tax losses assumed from tax consolidated subsidiaries 252 2,940 Dividends received from subsidiaries 14,100 11,000 Loan received from subsidiary 2,916 21,963 The following balances are outstanding at the reporting date in relation to transactions with subsidiaries: $ 000 $ 000 Receivables (note 9) 4,085 2,802 Payables (note 17) 252 2,940 Transactions with entities subject to common control All State of Queensland controlled entities are related parties for the purposes of AASB 124 Related Party Disclosures. In its normal commercial business activities, SunWater transacts with Queensland Government departments, statutory bodies, other GOCs and local government bodies. All material transactions are negotiated on terms equivalent to those that prevail in arm s length transactions or in accordance with government policy The value of these related party transactions and balances, as reported in the financial statements, on an accruals basis, is: Financial statement item Nature of transaction $ 000 $ 000 Cash (note 8) Deposits on call 132,606 32,381 Receivables (note 9) Water sales 167 1,394 Receivables (note 9) Consultancies 1,338 5,522 Receivables (note 9) Sale of goods, rent Borrowings (note 19) QTC borrowings 248, ,593 Payables (note 17) Electricity, regulatory charges 1,126 1,015 Contributed equity (note 23) Equity contributions from shareholders - 6,170 Dividends (note 25) Dividends declared 7,625 5,897 Revenue interest (note 4) Interest received from QTC 6,574 1,891 Revenue all other (note 4) Water sales, CSO, grants 6,246 18,697 Revenue consulting fees (note 4) Consultancies 20,344 31,161 Revenue other revenue (note 4) Sale of goods, rent Expense interest (note 6) Interest paid to QTC 16,788 18,360 Expense all other (note 5) Electricity, regulatory charges 33,526 34, SunWater Limited annual report Financial Report

75 notes to the financial statements 30 June 2009 Note 29 Contingencies (a) In September 2008, the Wide Bay Burnett Conservation Council (WBBCC) commenced legal proceedings against Burnett Water Pty Ltd (BWPL), a wholly owned subsidiary of SunWater, in connection with the original design and subsequent operation of the upstream fish lift and the downstream fishway at Paradise Dam. In its Statement of Claim, the WBBCC alleges that the design and operation of the fish transfer devices are not in accordance with the Federal permit. In denying the claims, BWPL is confident of its position and will defend the action. However, in so doing, BWPL s legal fees, experts fees and other associated costs are estimated to be in the order of $3.0 million to $3.5 million in total, of which approximately $1.8 million is expected to be incurred in the financial year. The trial has been set for September 2009 and, should BWPL be unsuccessful in defending the claims, it may be ordered to modify or enhance either or both of the fish transfer devices. Costs associated with any such order cannot be reliably estimated at this time, however a significant enhancement of the existing infrastructure could cost in the range of $10 million to $20 million depending on the order. In addition, costs may be awarded against the Company, which also cannot be reliably estimated at this time. BWPL is in discussions with the Department of Employment, Economic Development and Innovation (DEEDI) which was the owner of BWPL at the time SunWater acquired it in December 2005 and, as such, was the owner at the time from which the claims relating to the design of the fishway transfer devices originate. DEEDI has been made aware of the WBBCC claim and, whilst it is monitoring the progress of the legal proceedings, it has not acknowledged any responsibility to date. BWPL s position is that it will seek support and funding from DEEDI for all appropriate costs incurred, including costs in defending the action, and if ultimately ordered by the court to do so, the costs of any infrastructure works required to comply with that order. In acting to protect its position, the Company will investigate all commercial and legal options open to it. At this time, no provision has been made in the financial statements for any costs associated with the legal proceedings as described above, nor has any allowance been made for any cost recoveries from other parties. (b) During the 2008 year, an audit of Paradise Dam under the Environment Protection and Biodiversity Conservation Act 1999 was carried out by the Department of the Environment, Water, Heritage and the Arts (DEWHA). The findings of the DEWHA report concluded that Paradise Dam was not fully compliant due to drought conditions which precluded the downstream fishway from becoming operational. SunWater is working with DEWHA to resolve the partial compliance finding. In the event that this finding is not resolved satisfactorily, DEWHA may take further legal action under the Act. No provision has been made in the financial statements for any costs associated with resolving the finding of partial compliance, or dealing with any subsequent DEWHA action. (c) In November 2008, one of two fabridams mounted on top of Bedford Weir failed. In the ensuing unexpected release of a large volume of water downstream, a fatality occurred. The incident is the subject of a Workplace Health and Safety Queensland investigation and may be subject to a later enquiry by the Coroner. At the date of this report, both enquiries are ongoing and no provision has been made in the financial statements for any costs resulting from the fabridam failure. (d) SunWater was directed by the Treasurer of Queensland under section 68 of the South East Queensland Water (Restructuring) Act 2007 to indemnify the Queensland Bulk Water Supply Authority in relation to assets transferred on 1 July This indemnity may give rise to claims on SunWater if any of the conditions are triggered. At the date of this report, there are no known claims or circumstances which would give rise to a claim under the indemnity. (e) At 30 June 2009, SunWater was engaged in commercial disputes under various contracts. None of those disputes has resulted in legal action at the date of this report, however it is not possible to reliably estimate the eventual outcome of these disputes or the financial consequences of thereof. Note 31 Dam safety upgrade program SunWater has in place a comprehensive Dam Safety Program to ensure the continuing integrity of its referable dams. This program incorporates an ongoing series of inspections, engineering assessments, and comprehensive risk assessments for all referable dams, taking into account all relevant factors including changes in design standards, hydrologic data and methods, industry best practice and regulator requirements. The dam safety program has previously identified the need to upgrade a number of dam spillways in response to spillway adequacy reviews. Spillway upgrades have been completed for Fred Haigh Dam (2006), Bjelke-Petersen Dam (2008), and Borumba Dam (1) (2009). Whilst the initial program of safety upgrades was prioritised based on spillway adequacy, SunWater is progressively completing Comprehensive Risk Assessments (CRA) for all of its referable dams. The CRA considers a much broader range of risk factors, and therefore provides a more complete view of upgrade requirements for each dam. As each CRA is completed, the priority of upgrades within the portfolio is assessed, and if necessary revised. The table below provides a summary of the current prioritisation and estimate of cost for each upgrade currently scheduled. safety upgrade Commencement of Works Estimated Costs Tinaroo Falls Dam July, 2008 $ million Burdekin Falls Dam August, 2009 $ million Teemburra Dam March, 2010 $4.150 million Kinchant Dam February, 2011 $ million Coolmunda Dam February, 2012 $ million At this time, it is not possible to quantify the complete scope of works or the likely cost of the remainder of the safety upgrade program, and discussions with Government over funding support are continuing. (1) Borumba Dam was transferred to Seqwater on 1 July 2008, with upgrade works completed by SunWater as a commercial contract to Seqwater. Note 32 Subsequent events To date, no events have occurred subsequent to balance date that materially impact these financial statements. Note 30 Segment information SunWater and its subsidiaries form a single business segment, providing a range of water-related services that are subject to similar risks and returns. SunWater operates predominantly in one geographic segment, being Queensland. Operations outside Queensland are not material. SunWater Limited annual report Financial Report 73

76 directors declaration In the directors opinion: (a) the financial statements and notes set out on pages 58 to 73 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the company s and consolidated entity s financial position as at 30 June 2009 and of their performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. PA Hennessy Chairman Brisbane, Qld 26 August 2009 JL Gibson Director 74 SunWater Limited annual report Financial Report

77 independent auditor s report To the Members of SunWater Limited Matters relating to the Electronic Presentation of the Audited Financial Report The auditor s report relates to the financial report of SunWater Limited for the financial year ended 30 June 2009 included on SunWater Limited s website. The directors are responsible for the integrity of the SunWater Limited s website. I have not been engaged to report on the integrity of the SunWater Limited s website. The auditor s report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report, available from SunWater Limited, to confirm the information included in the audited financial report presented on this website. These matters also relate to the presentation of the audited financial report in other electronic media including CD Rom. Report on the Financial Report I have audited the accompanying financial report of SunWater Limited, which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor s Responsibility My responsibility to express an opinion on the financial report based on the audit is prescribed in the Auditor-General Act This Act, including transitional provisions, came into operation on 1 July 2009 and replaces the previous requirements contained in the Financial Administration and Audit Act The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of risks of material misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. Independence The Auditor-General Act 2009 promotes the independence of the Auditor-General and QAO authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can only be removed by Parliament. The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor- General s opinion are significant. In conducting the audit, the independence requirements of the Corporations Act 2001 have been complied with. I confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of SunWater Limited on 25 August 2009, would be in the same terms if provided to the directors, as at the date of this auditor s report. Auditor s Opinion In my opinion (a) the financial report of SunWater Limited is in accordance with the Corporations Act 2001, including (i) giving a true and fair view of the company s and consolidated entity s financial position as at 30 June 2009 and of their performance for the year ended on that date;and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Megan Maybury CA As Delegate of the Auditor-General of Queensland 28 August 2009 Queensland Audit Office Brisbane SunWater Limited annual report Financial Report 75

78 statement of corporate intent summary. The Statement of Corporate Intent (SCI) is the organisation s annual performance agreement with shareholding Ministers. The agreement outlines a comprehensive range of corporate performance outcomes that SunWater intends to deliver in year one of its rolling five-year corporate plan. This Annual Report provides a summary of SunWater s SCI corporate performance outcomes (refer to page 10). It also provides details about SunWater s performance in relation to these outcomes under the following key result areas: Financial performance Community and environment Asset sustainability Our customers Our people Business management The organisation s financial performance is further detailed in the financial report on pages of this document. Other key components of the SCI are summarised as follows: Non-financial performance indicators Environment UNIT ACTUAL TARGET YTD ACTUAL AS AT 30 JUNE 09 Compliance with environmental obligations % No non-compliances No non-compliances 1 Compliance breaches No. 0 0 No non-compliances 1 Safety LTIFR 2 No LTIDR 3 No (10.6) Industry Distribution system efficiency % N/A NWI 5-5 Customer service levels Exceptions Compliance with ROL and ROP reporting requirements Timely compliance with statutory reporting timeframes Size/value No. of show cause notices % Employees FTEs Water allocations 6 m ML Allocations assigned to non-price-path customers 7 m ML % of total Water deliveries 8 m ML Water delivered/available % Temporary water trades m ML The current measure of the number of legal non-conformances is undergoing a review for appropriateness. Dependent on the outcome of this review a new performance indicator may be put forward from 1 July This same review will also reconsider the most appropriate indicators associated with safety performance. 2 Lost time injury frequency rate = number of lost time injuries x 1,000,000)/employee exposure hours. 3 Lost time injury duration rate = number of work days lost/number of lost time injuries. 4 LTIDR actual reflects a carry over effect of incidents from A truer year to date measurement is an LTIDR of Implementation of National Water Initiative (NWI) methodology for assessing irrigation system hotspots. Metrics currently being established. 6 Water allocations and interim water allocations held by customers, SunWater and subsidiaries (excluding loss allowances). 7 Total excludes allocation authority leases, allocation authority sales, allocation authority reserves, allocation authority options, water supply agreements, Burnett Water leases and allocation authority trades. 8 Water deliveries include Customer and SunWater transactions (excluding the SunWater Loss Account, the St George Compensation Account and the Macintyre Brook Environmental Account). 9 The significant increase in the number of exceptions in compared to previous years has been investigated. As a result of the findings SunWater increased its local operational focus on ensuring established procedures are being consistently applied SunWater Limited annual report Statement of Corporate Intent Summary

79 LTIFR and LTIDR - SunWater targets No-Harm safety outcomes from all of its operations. After adjustment for carry-over from , year end outcomes for LTIFR and LTIDR in of 8.7 and 10.6 respectively show improvement from 14.9 (LTIFR) and 16.3 (LTIDR) in Customer Service Levels - The number of customer service level exceptions from planned and unplanned shutdowns continues to exceed targets. The majority of the exceptions recorded relate to the Bundaberg scheme. A review of this scheme s targets resulted in more realistic targets being set for and out-years. The significant increase in the number of exceptions in compared to previous years has been investigated. As a result of the findings SunWater increased its local operational focus on ensuring established procedures are being consistently applied. Water deliveries and water delivered/ available - SunWater water deliveries over increased by 3% year on year to a figure of 1.05 million ML. That this increase fell short of target may be attributed in part to higher than forecast rainfall in the north of Queensland through the latter part of 2008, and persistent dry conditions being experienced in a number of central and southern Queensland water supply schemes. These circumstances were also in part responsible for the modest rise of 1.4% in the water delivered to water available ratio, also significantly below target for the year. Community Service Obligations (CSOs) Contracts for CSOs provided by SunWater are negotiated with DERM consistent with the principles in Queensland Treasury s Community service obligations: A policy framework (1999). CSO funding as stated in the SCI for the period ending 30 June 2012 follows: CSO CATEGORY $ 000 FUNDING YEAR $ $ $ 000 Rural water subsidy (all schemes) 3,524 2,689 2,189 TBA ROP development 1, TBA Dam safety upgrades 1 1,960 1,880 TBA TBA Total 6,617 5,186 TBA TBA 1 Amounts shown are based on prices (no CPI included). Employment and industrial relations plan SunWater s employment and industrial relations strategy focuses on ensuring it has a satisfied and appropriately skilled workforce in place to provide ongoing services to its customers and the community. It is also focused on ensuring the organisation s endeavours are achieved in a harmonious industrial climate. SunWater is committed to the continuation of initiatives provided by the SunWater Collective Agreement (SunWater s third union-agreed certified agreement and the first under the federal WorkChoices legislation), which covers the period 1 July 2006 to 30 June The agreement supports SunWater s commitment to: A preference for the Australian Industrial Relations Commission s jurisdiction for dispute resolution and the making of collective agreements with unions rather than individual contracts New individual contracts being limited to staff in higher supervisory/ managerial positions Adherence to the government policy Agreement Making in Government Owned Corporations - Guidance for Chief Executive Officers by not entering into Queensland workplace agreements, Australian workplace agreements or non-union agreements, and No forced redundancies. Additionally, SunWater is committed to delivering its stated services and functions utilising internal staff wherever possible. Contractors are expected to be used only for peak workloads and activities outside core competencies. SunWater also ensures the principles of equity and merit are upheld in its processes associated with recruitment, selection and promotion of staff. Further details of the Collective Agreement initiatives progressed during the year are provided on page 35 of this report. SunWater Limited annual report Statement of Corporate Intent Summary 77

80 statement of corporate intent summary. Government policies As specified in Attachment 4 of the SCI SunWater agreed to adhere to the following government policies: Agreement Making in Government Owned Corporations - Guidance for Chief Executive Officers (December 2004) Audit and reporting requirements for GOC controlled entities and investments (December 2001) Code of practice for the building and construction industry (August 2000) Code of practice for GOCs financial arrangements (October 2004) Community service obligations - A policy framework (March 1999) GOCs - Cost of capital principles (February 2006) GOCs overseas travel policy (November 2006) GOC subsidiaries - Key shareholder requirements for constitutions (2006) Guidelines for the development of employment and industrial relations plans in GOCs (November 2002) Guidelines for export of services by GOCs (December 2001) Guidelines for frequent flyer schemes (June 1999) Guidelines for the preparation of statements of corporate intent and corporate plans for GOCs (February 2006) Investment guidelines for GOCs (April 2003) Local industry policy: A fair go for local industry (1999) Remuneration guidelines for directors and senior executives in GOCs (September 2000) State purchasing policy (September 2001) Corporate Governance Guidelines for GOCs (2005) Additionally, new or updated government policies as advised and implemented during the year include: Government Owned Corporations Air Travel Policy (May 2008) Local Industry Policy (November 2007) State Procurement Policy (2008) Purchasing Carbon Offsets for Queensland Government Air Travel (October 2008) QFleet ClimateSmart Policy (April 2008) Government Owned Corporations Corporate Entertainment and Hospitality Guidelines (September 2008) Government Owned Corporations Governance Arrangements for Chief and Senior Executives (May 2008) Government Owned Corporations Release of Information Arrangements (2009) Government Sport and Recreation Sponsorship Policy (January 2009) Government Recycling Policy for Buildings and Civil Infrastructure Guidelines for the Development of Employment and Industrial Relations Plans in GOCs (December 2008) Corporate Governance Guidelines for GOCs (February 2009) Minimum Remuneration Disclosure Requirements (June 2009) Corporate sponsorships and advertising SunWater continued to contribute to the well-being of regional Queensland communities through investment in, and support for, community-based initiatives such as the SunWater Burdekin Water Festival. Further detail of SunWater s efforts in enhancing Queensland communities is provided on pages of this report. The table below summarises SunWater s expenditure on all marketing activities during Corporate sponsorships and advertising ACTIVITIES/EVENTS OVER $5000 LISTED BUDGET EXPENDITURE TO 30 JUNE 2009 Sponsorship Southern Cross Soloists (Previously reported) 2008 ANCOLD Conference (Previously reported) Other Total sponsorship Corporate entertainment Staff awards ceremony (held in July 2008) Brisbane Office Christmas Party Other Total corporate entertainment Advertising Water safety advertising campaign (potential) Other Total advertising 10,000-60,000 70,000 10,000 15,000 25,000 50, ,000 20, ,000 10,000 9,500 55,915 75,415 12,000 16,900 23,120 52, ,000 17, ,600 Donations Hannah s Foundation - 6,500 Other related activities Total other related activities budget (Children s promotional products that support the public safety campaign) 30,000 30,000 Total all activities 320, ,535 Additional details of expenditure on sponsorship, advertising, corporate entertainment, donations and other related activities are provided on pages of this report. During the year SunWater amended its SCI, in line with a request by shareholders, to include budgeted expenditure for hospitality events less than $5,000 per event. Actual expenditure against these events is also shown on pages of this report. 78 SunWater Limited annual report Statement of Corporate Intent Summary

81 Table 1 Sponsorship, advertising, corporate entertainment, donations and other related activities. Details of individual activities over $5,000 ACTIVITY Sponsorship Southern Cross Soloists - SunWater and Stanwell Winter Music School DATE July 08 PURPOSE/BENEFITS ACCRUING TO THE CORPORATION Provides opportunities for regional children to develop and enhance their music ability and is in line with SunWater s sponsorship objectives of supporting our local communities ANCOLD Conference Nov 08 Water industry conference to remain informed about new developments and best practice. YTD BUDGET($) YTD ACTUAL ($) 10,000 10,000-9,500 1 TOTAL (1) 10,000 19,500 Advertising Water Safety Advertising Campaign (Easter and Christmas) Dec 08 April 09 Promotes safe public behaviour on and around SunWater assets, especially dams. 150, ,000 TOTAL (2) 150, ,000 Corporate entertainment Brisbane Office Christmas Party Dec 08 Opportunities for the CEO and executive managers to convey their thanks to all staff and to reflect on achievements Staff Awards Ceremony July 08 Recognises and rewards staff who go over and above their duties. 15,000 16, ,000 12,000 2 TOTAL (3) 25,000 28,900 Donations Hannah s Foundation SunWater donation associated with the funeral of Nelani Koefer. - 6,500 3 TOTAL (4) - 6,500 Other related activities Activity (>5,000) Nil Nil TOTAL (5) Nil Nil TOTAL (1)+(2)+(3)+(4)+(5) 185, ,900 4 Note: all expenditure exclusive of GST 1. The January to March 2009 quarterly report introduced the sponsorship of the ANCOLD conference. While budgeted, this item had not been itemised as a single sponsorship above $5, The cost of the functions had increased from previous years and exceeded the advised budget figures. Both functions remained well within the established thresholds for per head expenditure limits. 3. SunWater made a donation to Hannah s Foundation to cover the cost of the funeral of Nelani Koefer, whose life was tragically lost in the Bedford Weir incident. 4. Overall expenditure partially offset by underspend as detailed in the notes to Table 2 following. SunWater Limited annual report Statement of Corporate Intent Summary 79

82 statement of corporate intent summary. Table 2 Details of total expenditure for sponsorship, advertising, corporate entertainment, donations and other related details of individual activities below $5,000. ACTIVITY BUDGETED EXPENDITURE (SCI) ($) YTD ACTUAL EXPENDITURE ($) Sponsorship 60,000 55,915 1 Advertising 20,000 17,600 Corporate Entertainment Staff Functions Number of functions Actual Expenditure TOTAL (1) 15,000 15,190 Business Development Number of functions 6 4 TOTAL (2) 2,500 1,500 Stakeholder and Community Engagement Number of functions 6 5 TOTAL (3) 7,500 6,430 TOTAL (1)+(2)+(3) 25,000 23,120 Donations Nil Nil Other Related Activity 30,000 30,000 2 Note: all expenditure exclusive of GST 1. Budget for sponsorships below $5,000 (per event) originally included the cost of the ANCOLD sponsorship ($9,500). This expenditure was highlighted in the January to March 2009 quarterly report as a single event exceeding $5,000 - there was no budget entry, consistent with the approved SCI. The underspend of $4,085 should be read in conjunction with the $9,500 overspend in Table 1 (previous page). Overall, sponsorship expenditure of $75,415 exceeded a budgeted amount of $70, Amount for children s promotional products that support the public safety campaign. Table 3 Significant changes in the financial year in sponsorship, advertising, corporate entertainment, donations and other related activities from that specified in the SCI. ACTIVITY DATE BUDGETED EXPENDITURE (SCI) ($) REVISED EXPENDITURE ($) REASON FOR CHANGE Sponsorship Nil beyond notes in Tables 1 and 2 above Advertising Nil beyond notes in Tables 1 and 2 above Corporate Entertainment Nil beyond notes in Tables 1 and 2 above Donations Nil beyond notes in Tables 1 and 2 above Other Related Activities Annually 30,000 30,000 Nil beyond notes in Tables 1 and 2 above 80 SunWater Limited annual report Statement of Corporate Intent Summary

83 key statistics. Scheme summary - customer water allocation and use Scheme Customer Segment No of Customers Customers Water Allocations (1) Available Deliveries (3) Temporary Water (2) Transfers (4) ML ML ML Number Volume ML Awoonga Callide Pipeline Water is transported from Gladstone Area Water Board s Awoonga Dam to Callide Dam for use by the Callide power stations. Barker Barambah Water is released from Bjelke-Petersen Dam to customers who draw water from weirs and supplemented sections of Barker and Barambah creeks. Bowen Broken Rivers Water from Eungella Dam is distributed to mining customers via the BMA and Eungella pipelines and is released to the Bowen River Weir to supply the Collinsville and Newlands pipelines and downstream irrigators. Boyne River and Tarong Water from Boondooma Dam is piped via the Tarong Pipeline to the Tarong Power Station and is released to supplement irrigation supplies along the Boyne River. Bundaberg Storages on the Kolan and Burnett rivers (the major storage being Fred Haigh Dam) supply water to the scheme via a series of pump stations, balancing storages, channels and pipelines. The allocation and delivery figures include those from Paradise Dam. Burdekin Haughton Water is released from Burdekin Falls Dam to Clare Weir, which forms a pumping pool and regulating structure. From here it is distributed through several pump stations, pipelines, balancing storages and channels to the irrigation area, and along the Burdekin River to the north and south Burdekin water boards and river customers. Callide Valley Water is released from Callide and Kroombit dams to downstream controlling structures and percolates into the underlying aquifers. Irrigators draw their supplies from the aquifers and directly from Kroombit and Callide creeks during releases. Water is pumped from Callide Dam to the Callide power stations and Banana Shire Council. Chinchilla Weir (5) Water from Chinchilla Weir supplements streamflows 35 km upstream to 53 km downstream of the weir for use by irrigators. Cunnamulla The Allan Tannock Weir supplies water to landholders adjoining the ponded area of the weir for irrigation, stock and domestic supplies and for the town of Cunnamulla. Industrial 18,884 18,884 Other Total 29 18,917 18,917 Irrigation 31,421 11,831 6, Urban 2,200 2, Trade Total ,231 14,055 7, Industrial 30,270 30,290 15, Irrigation 5,736 5, Urban 1,785 1, Other Total 56 38,092 38,204 16, Industrial 29,374 29,374 11,087 Irrigation 10,666 10,666 4,024 Urban 3,640 3, Other Total ,074 44,073 15, Industrial Irrigation 198, ,051 61, ,126 Urban 9,111 8,981 3, Trade 4,865 Other Total , ,667 65, ,200 Industrial 12,129 13,051 4, Irrigation 609, , , ,342 Urban 10,538 10, Other Trade 142, ,124 Total , , , ,680 Industrial 3,772 3,542 2,529 Irrigation 18,252 12,754 4, Urban 2,187 1, Total ,211 18,177 7, Industrial Irrigation 2,872 3,267 2, Urban 1,160 1, Total 34 4,044 4,439 2, Industrial Irrigation 2,492 2,492 1, Total 26 2,612 2,612 1, SunWater Limited annual report Key Statistics 81

84 key statistics. Scheme Customer Segment No of Customers Customers Water Allocations (1) Available Deliveries (3) Temporary Water (2) Transfers (4) ML ML ML Number Volume ML Dawson Valley (5) Weirs on the Dawson River provide supplies to river customers and to the channel distribution systems near Theodore. The scheme also includes an offstream storage. Eton (5) During high river flows, water is harvested from the Pioneer River into Kinchant Dam, from where it is distributed through a network of pump stations, channels, pipes and balancing storages. Julius Dam Julius Dam provides water to the North West Queensland Water Pipeline Pty Ltd (a SunWater subsidiary) which supplies the Ernest Henry Mine. The dam also serves as a backup supply to the Mount Isa Water Board. Lower Fitzroy Water is released from Eden Bann Weir down the Fitzroy River, from which it is pumped via the Stanwell Pipeline to the Stanwell Power Station. Irrigation customers draw supplies from the Fitzroy River. Macintyre Brook Water is released from Coolmunda Dam to weirs along the lower reaches of Macintyre Brook from which it is drawn for irrigation and the Inglewood town water supply. Maranoa River (5) Neil Turner Weir supplies water to landholders bordering the ponded area of the weir for irrigation, stock and domestic supplies. This scheme does not operate under Announced Allocation sharing rules. Mareeba Dimbulah Releases from the Tinaroo Falls Dam gravitate through 176 km of main channel, as well as subsidiary channels, pipelines and supplemented streams, to the various sections of the scheme. Deliveries exclude those for hydro. Mary River Water for this scheme is taken from the Mary River and Tinana Creek barrages for irrigation, urban and industrial use. Industrial 2,887 2,887 1,709 Irrigation 52,917 60,957 35, ,701 Urban 1,959 1,786 1,098 Other Trade Total ,932 65,766 38, ,711 Irrigation 51,799 40,853 10, Urban Other 1, Total ,174 41,843 11, Industrial 23,850 15,000 4,481 Other 5,000 21,750 11,572 Trade 10,850 10,850 Urban 7,900 Total 3 47,600 47,600 16,053 Industrial 24,006 24,008 19,898 Irrigation 3,101 3,101 Other Total 24 27,218 27,227 19, Industrial Irrigation 17,526 16,230 9, ,688 Urban Other 6,403 15,090 6, ,649 Trade Total 96 25,179 31,653 16, ,337 Irrigation Total Industrial 910 1,625 1, Irrigation 151, ,569 80, ,400 Urban 6,654 6,657 3, ,145 Other Total , ,492 85, ,351 Industrial Irrigation 22,038 22,014 4, Urban 1,120 1, Trade 3,000 3,000 Total ,208 26,169 5, SunWater Limited annual report Key Statistics

85 Scheme Customer Segment No of Customers Customers Water Allocations (1) Available Deliveries (3) Temporary Water (2) Transfers (4) ML ML ML Number Volume ML Nogoa Mackenzie The scheme is supplied by Fairbairn Dam via the Selma and Weemah channel systems and supplemented sections of the Nogoa-Mackenzie River. The scheme also includes three weirs along the Mackenzie River and the Blackwater Pipeline that supplies coalmines around Blackwater. Pioneer River The scheme is based on Teemburra Dam, the Mirani, Marian and Dumbleton weirs and a supplemented section of the Pioneer River. Proserpine River The scheme comprises Peter Faust Dam and supplemented sections of the Proserpine River and supplies water to the Six Mile Creek and Kelsey Creek water boards. St George Customers are supplied from Beardmore Dam via the St George and Buckinbah channel systems and supplemented sections of the Thuraggi watercourse and Balonne River. The scheme is also serviced by three weirs. Three Moon Creek Cania Dam supplies riparian users along Three Moon Creek and the town of Monto. Groundwater supplies are recharged and instream storages are replenished through releases from the dam. Upper Burnett Wuruma Dam supplements sections and supplies weirs along the Burnett and Nogo rivers. The supplemented section of the Burnett River also collects runoff from the Auburn and Boyne rivers and unused water released from Boondooma Dam s Boyne River outlet. The allocation and delivery figures include those from Kirar Weir. Upper Condamine Water is released from Leslie Dam on Sandy Creek to supplement a series of weirs on the Condamine River between Warwick and Cecil Plains. The scheme also includes a pump station and a short pipeline. Industrial 28,719 95,617 79, ,329 Irrigation 164, , , ,398 Urban 8,450 7,295 4,580 Other ,805 Trade Total , , , ,532 Industrial 1,920 1, Irrigation 46,526 46,534 9, Urban 16,520 16,962 12, Other Trade 10,500 10,500 Total 22 76,330 76,346 22, Industrial Irrigation 39,275 48,270 16, Urban 13,713 11,733 4, Trade 6,532 6,532 Total 91 60,070 67,085 21, Industrial Irrigation 71,703 86,603 63, ,054 Urban 2,000 2,449 1,171 Other 3 0 Trade 1, Total ,763 89,346 65, ,054 Irrigation 14,124 7,609 3, Urban Total 92 14,734 8,209 3, Irrigation 28,786 20,228 12, ,166 Urban 1,895 1, Trade 1,644 Total ,681 23,617 13, ,166 Irrigation 30,363 14,949 14,949 Urban 3,332 3,332 1,362 Other Total ,699 18,285 16,312 TOTAL ALL SCHEMES 4,985 2,020,325 2,164,918 1,047,634 1, ,820 (1) Water allocations and interim water allocations held by customers, including those leased to customers by SunWater (2) Includes announced allocations, carryovers, temporary transfers (from SunWater and customers), bedsands water, risk A water, credit water, streamflow period, channel harvesting, spot sales, water transportation and water use (other authority) (3) Includes allocation water, bedsands water, credit water, streamflow period, risk A and township water, channel harvesting, spot sales, water transportation and water use (other authority) (4) Includes transfer of customer and SunWater allocations (5) Water year does not align with financial year SunWater Limited annual report Key Statistics 83

86 key statistics. Rural water CSOs paid by government WATER SUPPLY SCHEME $ Barker Barambah 25,383 Bowen Broken Rivers 411 Boyne River and Tarong 29,310 Bundaberg 249,534 Callide Valley 514,118 Chinchilla Weir 1,969 Cunnamulla 48,205 Dawson Valley 9,979 Eton 158,060 Lower Fitzroy 10,444 Maranoa River 75,082 Mareeba Dimbulah 262,979 Pioneer River 25,607 St George 8,937 Three Moon Creek 293,611 Upper Burnett 252,728 Upper Condamine 9,371 Other 50,958 Total 2,026,686 Summary of storage situation Storage Name Water Supply Scheme Total Capacity Dead Storage Storage at July 2008 Storage at June 2009 Minimum storage July 2008 to June 2009 Maximum Storage July 2008 to JunE 2009 ML ML ML %Full ML %Full ML %Full ML %Full Allan Tannock Weir Cunnamulla 4, , , , , Bedford Weir Nogoa Mackenzie 22,900 3,290 22, , , , Ben Anderson Barrage Bundaberg 30,300 6,650 20, , , , Ben Dor Weir Macintyre Brook Bingegang Weir Nogoa Mackenzie 8, , , , , Bjelke-Petersen Dam Baker Barambah 134,900 1,000 17, , , , Boondooma Dam Bowen River Weir Boyne River & Tarong Bowen Broken Rivers 204,200 8,360 97, , , , Bucca Weir Bundaberg 11, , , , , Buckinbah Weir St George 5, , , , , Burdekin Falls Dam Burdekin Haughton 1,860,000 7,860 1,778, ,860, ,630, ,860, Callide Dam Callide Valley 136,370 2,880 10, , , ,626 9 Cania Dam Three Moon Creek 88, , , , ,258 6 Chinchilla Weir Chinchilla 9, , , , , Clare Weir Burdekin Haughton 8, , , , , SunWater Limited annual report Key Statistics

87 Storage Name Claude Wharton Weir Water Supply Scheme Total Capacity Dead Storage Storage at July 2008 Storage at June 2009 Minimum storage July 2008 to June 2009 Maximum Storage July 2008 to JunE 2009 ML ML ML %Full ML %Full ML %Full ML %Full Upper Burnett 12, , , , , Coolmunda Dam Macintyre Brook 69, , , , , Dumbleton Weir Pioneer River 8, , , , , E. J. Beardmore Dam St George 81,700 3,120 34, , , , Eden Bann Weir Lower Fitzroy 35,900 9,650 35, , , , Eungalla Dam Bowen Broken Rivers 112,400 1, , , , , Fairbairn Dam Nogoa Mackenzie 1,301,000 12,300 1,202, ,133, ,013, ,237, Fred Haigh Dam Bundaberg 562,000 4,390 2, , , ,524 0 Gattonvale Offstream Storage Bowen Broken Rivers 5, , , , , Glebe Weir Dawson Valley 17, , , , , Gyranda Weir Dawson Valley 16,500 2,120 13, , , Jack Taylor Weir St George 10,100 1,670 10, , , , Joe Sippel Weir Baker Barambah John Goleby Weir Upper Burnett 1, , , , Jones Weir Upper Burnett 3, , , , Julius Dam Julius Dam 107,500 8,190 88, , , , Kinchant Dam Eton 65, , , , , Kirar Weir Upper Burnett 9, , , , , Kolan Barrage Bundaberg 4,020 1,630 3, , , , Kroombit Dam Callide Valley 14, ,306 9 Leslie Dam Upper Condamine 106,200 2,130 16, , , , Marian Weir Pioneer River 3, , , , , Mary River Barrage Mary River 12,000 5,050 12, , , , Mirani Weir Pioneer River 4, , , , , Moolabah Weir St George 2, , , , Moura Offstream Storage Dawson Valley 2, , , , Moura Weir Dawson Valley 7, , , , , Ned Churchward Weir Bundaberg 29,500 2,600 25, , , , Neville Hewitt Weir Dawson Valley 11,300 2,120 7, , , , Orange Creek Weir Dawson Valley 6,140 2,320 5, , , , Paradise Dam Bundaberg 300,000 13, , , , , Peter Faust Dam Proserpine River 491, , , , , Silverleaf Weir Baker Barambah Tartrus Weir Nogoa Mackenzie 12,000 2,530 10, , , , Teemburra Dam Pioneer River 147,500 8, , , , , Theodore Weir Dawson Valley 4, , , , , Tinana Barrage Mary River 4,750 2,015 4, , , , Tinaroo Falls Dam Mareeba Dimbulah 438,920 1, , , , , Whetstone Weir Macintyre Brook Wuruma Dam Upper Burnett 165,400 2,430 3, , , ,850 2 SunWater Limited annual report Key Statistics 85

88 key statistics. SunWater dams - summary statistics DAM NAME STREAM NAME NEAREST TOWN STRUCTURE DESCRIPTION E J Beardmore Balonne River St George Earthfill and mass concrete (vertical lift gates) STORAGE LEVEL ABOVE ORIGINAL BED (METRES) STORAGE CAPACITY (ML) SURFACE AREA AT FULL SUPPLY LEVEL (HA) YEAR COMPLETED ,700 2, Bjelke-Petersen Barker Creek Murgon Earth and rockfill ,900 2, Boondooma Boyne River Proston Concrete faced rockfill ,200 1, Burdekin Falls Burdekin River Ravenswood Mass concrete ,860,000 22, Callide Callide Creek Biloela Earthfill (radial gates) ,300 1, /98 Cania Three Moon Creek Monto Earth and rockfill , Coolmunda Macintyre Brook Inglewood Earthfill (radial gates) ,000 1, Eungella Broken River Eungella Earth and rockfill , Fairbairn Nogoa River Emerald Earthfill ,301,000 15, Fred Haigh Kolan River Gin Gin Earth and rockfill ,000 5, Julius Leichhardt River Mount Isa Multiple arch concrete buttress Kinchant Sandy Creek (North Branch) - water harvested from Pioneer River Kroombit Kroombit Creek Biloela Earth and rockfill, RCC spillway Leslie Sandy Creek Warwick Mass concrete (radial gates) Paradise* Burnett River Biggenden Roller compacted concrete ,500 1, North Eton Earth and rockfill , / , ,200 1, / ,560 2, Peter Faust Proserpine River Proserpine Earth and rockfill ,400 4, Teemburra Teemburra Creek Finch Hatton Concrete faced rockfill ,500 1, Tinaroo Falls Barron River Atherton Mass concrete ,900 3, Wuruma Nogo River Eidswold Mass concrete ,400 1, * Owned by Burnett Water Pty Ltd - a subsidiary of SunWater 86 SunWater Limited annual report Key Statistics

89 Glossary of terms and acronyms AASB Australian Accounting Standards Board GOC Government Owned Corporation ACN Australian Company Number GPS Global Positioning System AIFRS AM ANCOLD AO ARC ATO AWRIS BMA BW CATS CEO CGU CHMP CIEAM CLG COO CPI CRA CRC CS CSO DEEDI DERM DEWHA DIP DR EAP EBIT EBITDA EIS EMS EWP FTE Australian equivalents to International Financial Reporting Standards Member of the Order of Australia Australian National Committee on Large Dams Officer of the Order of Australia Accountability Referrals Committee Australian Tax Office Australian Water Resource Information System BHP Billiton Mitsubishi Alliance Burnett Water Pty Ltd Corrective Action Tracking System Chief Executive Officer Cash Generating Units Cultural Heritage Management Plans Centre of Integrated Engineering Asset Management Community Liaison Group Chief Operating Officer Consumer Price Index Comprehensive Risk Assessment Cooperative Research Centre Continuous Sharing Community Service Obligation Department of Employment, Economic Development and Innovation Department of Environment and Resource Management Department of Environment Water Heritage and the Arts Department of Infrastructure and Planning Disaster Recovery Emergency Action Plan Earning Before Interest and Tax Earning Before Interest and Tax Depreciation and Amortisation Environmental Impact Statement Environmental Management System Eungella Water Pipeline Full Time Equivalent GST IAC ICT IFRS IT km LBWF LTI LTIDR LTIFR m ML NGER NPSI NTER NWI NWQWP OGOC PPE&C QAO QMS QPIF QTC QWI ROP SCI SDSC SLAM TFR WACC WASB WBBCC WH&S WIT Goods and Services Tax Irrigation Advisory Committees Information and Communications Technology International Financial Reporting Standards Information Technology Kilometre Lower Burdekin Water Futures Lost Time Injury Lost Time injury Duration Rate Lost Time Injury Frequency Rate million Megalitre (1,000,000 litres) National Greenhouse Energy Reporting National Program for Sustainable Irrigation National Tax Equivalent Regime National Water Initiative North West Queensland Water Pipeline Office of Government Owned Corporations Personal Protective Equipment and Clothing Queensland Audit Office Quality Management System Queensland Primary Industries and Fisheries Queensland Treasury Corporation Queensland Water Infrastructure Pty Ltd Resource Operations Plan Statement of Corporate Intent Staff Development Steering Committee Stop Look Assess Manage Total Fixed Remuneration Weighted Average Cost of Capital Water Accounting Standards Board Wide Bay Burnett Conservation Council Workplace Health and Safety Water Industry Training

90 COOKTOWN SunWater water supply schemes 2009 Normanby River iver Palme r R CHILLAGOE Granite Creek Weir Bruce Weir Leafgold Weir Solanum Weir Collins Weir MOSSMAN MAREEBA DIMBULAH WSS CAIRNS Mareeba Dulbil Weir ATHERTON Tinaroo Falls Dam INNISFAIL TULLY INGHAM SOUTH PACIFIC OCEAN LEGEND Ck Sandy St George River iver Mit chell R Hodgkinson River Walsh Riv er T ate River BRISBANE Ayr Ro cky Tate River Lynd River EMERALD Clare SunWater Weirs SunWater Dams Major Rivers SunWater Owned/Operated Pipelines SunWater Pipelines Under Construction SunWater Regulated Stream SunWater Channel Systems SunWater Brisbane Office SunWater Regional Offices SunWater Service Centres Rudd Ck SunWater Depots SCALE 1:4,000,000 (before reduction A3) Einasleigh River km HUGHENDEN FOR DETAILS OF JULIUS DAM WSS SEE INSET 'A' Val Bird Weir CHARTERS TOWERS TOWNSVILLE Giru Weir Clare Clare Weir Blue Valley Weir Burdekin Falls Dam Gorge Weir Ayr BURDEKIN MORANBAH PIPELINE BURDEKIN HAUGHTON WSS Peter Faust Dam COLLINSVILLE PIPELINE BOWEN Collinsville Bowen River Weir & Gattonvale Offstream Storage NEWLANDS PIPELINE PROSERPINE RIVER WSS BOWEN BROKEN RIVERS WSS PROSERPINE Mirani Weir Eungella Dam Teemburra Dam EUNGELLA WATER PIPELINE Kinchant Dam Marian Weir ETON WSS NEBO PIONEER RIVER WSS Dumbleton Weir MACKAY Eton SARINA EUNGELLA WATER PIPELINE EASTERN EXTENSION INSET 'A' B urdeki n River Scale 1:2,750,000 rke River Gi Cla lbert River Dug ald River ich h ardt River Gre gory River L e Stawell Riv er Julius Dam CLONCURRY WATER PIPELINE NORTH WEST QLD PIPELINE Paro o Ck Bo gie River JULIUS DAM WSS MT ISA CLONCURRY ERNEST HENRY MINE Warrigal Ck F ive r Cape R lin ders River Amelia Ck Cloncurry River Suttor Ck i ver tor R Sut Belyando River MORANBAH

91 Ward River MUTTABURRA LONGREACH ILFRACOMBE ISISFORD ADAVALE QUILPIE THARGOMINDAH HUNGERFORD ARAMAC BARCALDINE JERICHO ALPHA BLACKALL TAMBO CHARLEVILLE WYANDRA CUNNAMULLA WSS CUNNAMULLA EUNGELLA WATER PIPELINE SOUTHERN EXTENSION ST LAWRENCE Isaac River MARANOA RIVER WSS CLERMONT NOGOA MACKENZIE WSS SPRINGSURE ST GEORGE WSS HEBEL CAPELLA MITCHELL Tartrus Weir Bingegang Weir Eden Bann Weir Bedford Weir NEW SOUTH WALES ROLLESTON ROMA MUNGINDI BLACKWATER DUARINGA DAWSON VALLEY WSS SURAT YULEBA Gyranda Weir MARLBOROUGH TAROOM LOWER FITZROY WSS Roper Ck CALLIDE VALLEY WSS Callide Dam Biloela Kroombit Dam Cania Dam Theodore Mulgildie Weir Wuruma Dam MILES UPPER BURNETT WSS BOYNE RIVER & TARONG WSS Chinchilla Weir GOONDIWINDI Macke n zie River Allan Tannock Weir Selma Weir Fairbairn Dam Neil Turner Weir EMERALD E J Beardmore Dam Jack Taylor Weir BLACKWATER PIPELINE Moolabah Weir Buckinbah Weir Neville Hewitt Weir Moura Weir Theodore Weir Orange Creek Weir Glebe Weir STANWELL PIPELINE Callide Weir Moura Offstream Storage CHINCHILLA WEIR WSS TARA YEPPOON Stag Ck Weir CHINCHILLA MACINTYRE BROOK WSS THREE MOON CREEK WSS MONTO Bazley Weir Avis Weir GIN GIN UPPER CONDAMINE WSS CALLIOPE Lemon Tree Weir MILLMERRAN INGLEWOOD Whetstone Weir STAG CREEK PIPELINE GLADSTONE AWOONGA- CALLIDE PIPELINE EIDSVOLD DALBY MUNDUBBERA Wando Weir MIRIAM VALE GAYNDAH BARKER BARAMBAH WSS KINGAROY Paradise Dam Boondooma Dam Silverleaf Weir MURGON Bjelke-Petersen Dam Joe Sippel Weir TARONG PIPELINE Leslie Dam Greenup Weir Coolmunda Dam STANTHORPE AGNES WATERS Nogoa Rive r Youlambie Weir Monto Weir Jones Weir Cecil Plains Weir Ben Dor Weir John Goleby Weir Claude Wharton Weir Nangwee Weir Bucca Weir Fred Haigh Dam Melrose Weir Yarramalong Weir Ned Churchward Weir BIGGENDEN NANANGO Talgai Weir Bundaberg Ben Anderson Barrage ESK Toowoomba WARWICK Kolan Barrage C lem atis Ck Comet River GATTON BUNDABERG WSS CHILDERS Mary River Barrage TIARO KILCOY MARY RIVER WSS GYMPIE BOONAH HERVEY BAY Me rivale River W a rrego River Kirar Weir Sandy Ck Maryborough Tinana Barrage Dawso n Rive r Maranoa River NAMBOUR CALOUNDRA CABOOLTURE IPSWICH NOOSA Mary R iver C oo yarck Emu Ck Cond a mine River Balonne River Brisbane R Cogoon River Oak e y Ck iver BRISBANE Moonie River ST GEORGE ROCKHAMPTON BEAUDESERT Weir River Briarie Ck Culgoa River iver Alice R Nive River Bedurie Ck La nglo River Paroo River Darr River Thomson Riv er River Ba rcoo iver Bulloo R

92 SUNWATER Brisbane Office Level 10, 179 Turbot Street PO Box City East BRISBANE Q 4002 Phone (07) Fax (07) Customer Information Line