corporate plan 2019-20 - southern rural water › ... › 2019 › 05 ›...

Corporate Plan2019-20

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Foreword

I am pleased to submit Southern Rural Water’s 2019-20 Corporate Plan – the second under the 2018-2023 Pricing Determination.

In 2018-19 we reviewed and updated our corporate strategy to deliver on our vision of:

Excellence in rural water management, driving growth and customer productivity in southern Victoria.

The revised strategy has strengthened our focus on driving growth and productivity while ensuring effective resource stewardship and commitment to leadership and culture. This will ensure that we continue to support our agricultural sector and other regional customers, while demonstrating strong leadership in climate change, environmental improvement, a culture of excellence, and a diverse and inclusive workplace.

As we prepare this plan, we once again find ourselves in dry conditions. Our unregulated surface and groundwater systems continue to have extensive restrictions, with some systems on total ban.

Our regulated irrigation systems in the Macalister, Werribee and Bacchus Marsh Districts have had lower than average inflows resulting in lower water share allocations. Temperatures have been higher than average, and steady demand from our customers means that we will enter the 2019-20 season with much lower levels in our storages.

Changes in supply availability and demand will continue to drive significant variations in vegetable prices, although value in the export market continues to climb and domestic demand remains strong. Recent storms in northern Australia have resulted in large increases in market prices.

Continued increases in feed prices and tough seasonal conditions make for challenging times for our dairy customers. The longer term outlook for dairy remains positive, albeit with less production bringing higher farm-gate prices.

We expect that the volume of water carried-over in the Werribee and Bacchus Marsh Irrigation Districts will be low, with many farmers relying on inflows over winter and spring. The seasonal outlook is predicting lower than average rainfall over winter. For this reason we are positioning to be able to use emergency Thomson water to

augment recycled water for Werribee in the 2019-20 summer.

For the Macalister Irrigation District, we continue to rely on winter and spring inflows but will be starting from a low base this year, due to the low rainfall over the 2018-19 season. This will be likely to impact opening allocation.

The outlook for power generation and urban water customers is mixed. There are low levels in the storages that supply Western Water, while storage shares remain good in the Latrobe system for Gippsland Water and the power generators.

Under this plan we will focus attention on ensuring we effectively manage dry conditions to ensure our customers have as many options as possible, including additional and alternative supply, to meet their needs.

We will continue with our strategy of modernising assets and systems to improve service to customers, while seeking additional funding sources and productivity savings to keep prices affordable for customers and ensure our own financial sustainability. In this way, we can position the business to help make our customers successful, in turn promoting strong regional economies and employment opportunities.

We were pleased to receive a commitment in February from the Federal Government for $31m investment towards MID2030 Phase 2. This helps us progress to the final stages in a significant program of transformation and upgrades we have committed to with our customers, the Victorian Government and the Australian Government over several years.

Under this plan, we will also continue to reduce our carbon emissions in line with our Zero 2025 strategy, and we will continue to deliver on our Health, Safety and Wellbeing Strategy, as well as our Diversity and Inclusion plan.

We will continue to monitor the external environment to identify, understand and respond to new and emerging issues.

I look forward to working in partnership with our customers, stakeholders, and government to bring this plan to fruition.

Diane James AM Chairman

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Contents COVER PAGE 1

Corporate Overview 4

Statement of corporate intent 5 Business plan 11 Government priorities 24 Capital expenditure 29 Changes from 2018-19 plan 31 Risk 32

Macalister Irrigation District 37

Overview 38 Service measures 39 Pricing 40 Capital works program 42 Financial outcomes 44

Werribee Irrigation District 46


Bacchus Marsh Irrigation District 55


Groundwater and Rivers 64


Latrobe Bulk Entitlements 73

Overview 74 Service measures 74 Charges 75 Capital works program 75

Werribee and Maribyrnong Bulk Entitlements 76

Overview 77 Service measures 77 Charges 78 Capital works program 78

Financial Statements 80

Preface 81 Operating statement 86 Balance sheet 87 Statement of cash flow 88 Financial performance indicators 88 Quarterly financial statements 89

Appendices 92

Corporate Overview

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Statement of corporate intent Over the past 12 months we have refreshed our corporate strategy. Our vision and focus areas are outlined below. Our trademark behaviours set the tone for a culture that drives excellence.

Our vision

Excellence in rural water management, driving growth and customer productivity in southern Victoria.

Our focus

For customers

adaptive, efficient and sustainable irrigation districts

affordable prices communication,

convenience, and customer control

growth and increased productivity

For us

safe, healthy, and caring workplace

culture of excellence, high performance and individual accountability

diverse and inclusive leadership at all levels agile and future-ready

people financially sustainable

For all

climate resilience sustainable water

resources environmentally

responsible strong and respectful

relationships safe dams

Our trademark behaviours

United – we enrol others in a clear and compelling vision – we own it, we take responsibility for it and we stand together

Customer First – our customers are at the centre of what we do

Ambitious – we all want to create extraordinary outcomes, and we support each other to achieve them

Results Driven – we do what we say, we tackle the tough stuff, and see our commitments through

Innovative – we challenge the way we do things and try new things to improve. Whether it works or not, we value this and learn from it

Respectful – we show respect by listening to understand, responding to requests, caring about each other and valuing our differences

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Our strategy

Our long-term strategy is summarised by our strategy map below. It forms the basis upon which this Corporate Plan has been developed.

This strategy supports our vision of driving growth and productivity across southern Victoria by:

making more water available

giving water users more flexibility and control in the way that they access water

providing sustainable access to water in ways that are more efficient and convenient for our customers.

Further detail on our strategy, including 2019-20 targets for each objective, is included in Section 1.2 – Business Plan (page 11).

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Our services

Irrigation

We manage the release and delivery of water to the Werribee, Bacchus Marsh, and Macalister Irrigation Districts.

This includes operating and maintaining regulated channel and pipeline networks, and maintaining drainage systems.

Managing dams

We operate and maintain seven dams to harvest water on behalf of irrigators and other Bulk Entitlement holders, including power generators and urban water utilities.

We also work with Catchment Management Authorities, Melbourne Water and the Victorian Environmental Water Holder to manage the release of environmental flows.

The following table lists the storages we manage and the customers they service.

Storage River Customers

Blue Rock Latrobe Gippsland Water, power generators, licensed diverters, Victorian Environmental Water Holder, Department of Treasury and Finance

Lake Narracan Latrobe Power generators, Department of Treasury and Finance

Lake Glenmaggie Macalister / Thomson

Macalister irrigators, licensed diverters, Victorian Environmental Water Holder

Rosslynne Reservoir Maribyrnong Western Water, Melbourne Water, licensed diverters

Melton Reservoir Werribee Werribee irrigators, Bacchus Marsh irrigators, licensed diverters

Merrimu Reservoir Werribee

Western Water, Werribee irrigators, Bacchus Marsh irrigators, Department of Environment, Land, Water and Planning (DELWP) (unallocated share), licensed diverters, Victorian Environmental Water Holder

Pykes Creek Reservoir Werribee Werribee irrigators, Bacchus Marsh irrigators, Western Water, licensed diverters

Groundwater and rivers

We have been delegated under the Water Act 1989 to manage licensed water use from southern Victoria’s unregulated rivers and groundwater aquifers. Our role includes:

assessing applications to take and use water assessing applications to construct new farm dams and bores metering water use and ensuring compliance with legal requirements monitoring rivers and aquifers, and applying rosters and restrictions where necessary to

protect environmental outcomes.

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Other functions

We also undertake a range of ancillary functions, including:

managing recreational facilities at our major water storages (Glenmaggie, Cowwarr, Blue Rock, Melton, Merrimu and Pykes Creek)

operating (by appointment) as Resource Manager for some surface water catchments (mostly in Gippsland)

operating and maintaining groundwater pumps in and around the Macalister Irrigation District to manage salinity

providing administrative support to the Victorian Drillers’ Licensing Board.

Our structure

Our customer-facing activities are consolidated as a single Customer Services division, comprising four operating businesses.

Water Supply East Water Supply West Groundwater and Rivers Business Services

Operating the Macalister Irrigation District, and major dams in the Latrobe and Macalister basins.

Operating the Werribee and Bacchus Marsh Irrigation Districts, and major dams in the Werribee and Maribyrnong basins.

Licensing diversions from surface and groundwater, and the construction of bores and dams.

Providing customer service and administrative support.

These operating businesses are supported by a range of corporate and technical functions, structured into six groups:

Technical and Environmental

Providing technical support to our operating businesses in engineering, environmental management, and water resource management, as well as developing and delivering irrigation modernisation projects.

People and Culture Providing employee services, performance management, and employee health and safety.

Strategy and Performance

Coordinating strategic planning, and providing performance monitoring and strategy reporting.

Communications and Engagement

Delivering communications and engagement activities for customers, stakeholders and communities.

Information and Communications Technology

Supporting our IT systems and networks, and investment in technology to support our strategic objectives.

Finance and Governance

Supporting and delivering financial management, risk management, corporate governance, and regulatory compliance.

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Performance measures and targets

Our service measures have been developed in consultation with our customers, to focus on measuring the elements of service that are important to them.

Measures and targets relevant to each customer group are detailed in subsequent sections of this plan.

Targets for financial indicators, as required under Appendix 2A of the Victorian Water Industry Performance Reporting Framework, are included in section 8.5 of this plan.

The measures below are specified under Appendices 2C, 2D and 2E of the Victorian Water Industry Performance Reporting Framework.

Measure Target (2019-20)

Orders delivered at time agreed [C1.4] 95%

Applications (water share transfers) completed within agreed timeframes [C1.5] 99%

Groundwater supply (number of transfers processed within target period) [WSR3] 90%

Billing complaints (per 1000 customers) [CRR2] <1

Net tonnes CO2 emissions (E2) 1,300 tonnes

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Governance

Southern Rural Water (SRW) is governed by a board of directors; comprising up to eight non-executive directors (including the chairman) appointed by the Minister for Water, and a Managing Director appointed by the board.

The board will continue to seek improvement in its governance planning and practices.

It will do this by:

conducting an annual review of the board’s performance, and subsequently developing and implementing an improvement plan.

establishing and supporting board committees to meet governance requirements and to support the board’s effectiveness. The committees are:

o Audit, Risk and Governance o Remuneration o Asset Governance o People and Culture.

working closely with our customer consultative committees. These committees comprise a

diverse range of customers and provide critical guidance and insight into customer thinking. They are:

o Macalister Customer Consultative Committee o Southern Groundwater and Rivers Forum o Werribee Bacchus Marsh Customer Consultative Committee.

locating board meetings throughout our region to engage with customers and stakeholder groups through field tours, stakeholder receptions, and face-to-face meetings.

reporting on board meetings via our website to our wider customer and community base.

supporting completion of the Company Directors Course (Australian Institute of Company Directors) by all directors, encouraging director attendance at relevant industry forums, and encouraging directors’ continuing professional development.

resourcing the board’s secretariat with appropriately qualified personnel and providing access to relevant professional guidance and assistance.

monitoring government policy and ensuring corporation alignment to policy.

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Business plan

Corporate strategy – overview

Our vision is:

Excellence in rural water management, driving growth and customer productivity in southern Victoria

This vision recognises the important role we have in supporting Victoria’s economy, which relies on secure and reliable water supplies. We have an opportunity to drive growth and productivity, particularly in regional areas, by:

making more water available

giving water users more flexibility and control in the way that they access water

providing sustainable access to water in ways that are more efficient and convenient for our customers.

This requires investment in infrastructure and information systems. A strategic challenge is achieving the right balance between service improvement, customer prices, and our own financial sustainability. We also need to ensure that water for economic growth and customer productivity does not come at the expense of sustainability for the water resources we manage – particularly in the face of climate change.

The following tables set goals for 2023 and targets for 2019-20 for each of our strategic focus areas.

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Customer, shareholder and stakeholder outcomes

Growth and customer productivity

Context Strategic intent

We can add value to the Victorian community by ensuring that water is utilised sustainably, and is made available to our customers in the most efficient and effective way to facilitate their productivity and production.

Our strategy includes undertaking activities that boost economic activity such as making more water available for irrigated agriculture, and enhancing levels of service in water delivery to promote adoption of more productive on-farm irrigation practices.

We enable customers to improve their productivity and/or production to strengthen local economies. We provide opportunities for business to enter our region by providing access to secure and reliable water supplies.

Goals (by June 2023 or as specified below) 2019-20 Targets

• To significantly increase in value the output from our rural water customers over the next 25 years.

• Complete study of take-up of improved irrigation practices, develop a baseline for area under irrigation.

• $240k economic value of additional water made available for customers in the MID (based on estimated economic value of $850/ML, as per the modernisation business case).

Affordable prices


Affordability of our services is a critical driver.

Our strategy so far has allowed us to fund a large portion of our modernisation projects with minimal price impacts. Our 2018 Price Submission proposed stable prices for most customers through to 2023. We still need to ensure prices remain affordable as we complete the final stages of modernisation.

By keeping prices affordable:

• input costs are lower for producers

• southern Victoria’s agricultural production can be competitive in national and international markets

• customers have more money to invest on farm to boost their own productivity.


• Keep real price rises (relative to 2013-14) over 20 years to less than:

− Macalister Irrigation District 10%

− Werribee Irrigation District 10%

− Bacchus Marsh Irrigation District 10%

− Groundwater and Rivers 10%

• Real price changes (relative to 2013-14):

− Macalister Irrigation district 0.7% reduction

− Werribee Irrigation District 5.1% increase

− Bacchus Marsh Irrigation District 3.5% reduction

− Groundwater and Rivers 9.6% reduction

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Financial sustainability


In simple terms, we define financial sustainability as generating enough revenue to meet our financial commitments – now and into the future. Any assessment of our ability to meet future financial commitments will be based on assumptions about our future expenditure and the prices we will charge. We need to consider whether these assumptions reflect a sustainable set of circumstances. For example:

• If forecasting to meet our financial commitments into the future requires assumptions about price increases that would be unaffordable to our customers, then we cannot genuinely consider this to represent financial sustainability.

• Similarly, if our expenditure forecasts do not include adequate provision for maintaining and renewing assets, then we may be able to meet our financial commitments, but those commitments will not be sufficient to sustain our operations into the future.

We manage financial performance, debt and our $1.3b of assets to ensure we are financially sustainable and support Victoria’s strong financial position.


• Total debt less than $61m • Total debt $61m

• Credit rating at least BBB+ • Credit rating A-

• Interest cover above 1.5 times • Interest cover 2.5 times (end of year)

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Sustainable water resources


The infrastructure that we manage and operate, and the extractions that we licence, inevitably have environmental impacts. Releases of water for irrigation purposes can reverse the natural flow of water in rivers, extractions in unregulated rivers reduce downstream flows, and extractions from groundwater can impact groundwater dependent ecosystems or cause other environmental damage from aquifer drawdown.

From the dams that we manage through to our irrigation supply systems, we are committed to ensuring that we manage our water resources sustainably to optimise water availability and reduce any negative impacts to the environment.

When managing licence use, or considering a new licence, we employ the precautionary principle to ensure we have sufficient data and technical understanding of the impact our decisions may have on the resource.

We manage the water resources under our stewardship to ensure that they are sustainable in the long term.

We recognise the potential environmental impacts of conducting our business and seek to reduce and/or offset these impacts, and to go beyond just complying with our obligations in order to achieve real environmental improvements.


• Reduce water losses so that we can regularly operate our irrigation systems at better than 90% efficiency.

• District system efficiency:

− Macalister Irrigation District 82%

− Werribee Irrigation District 75%

− Bacchus Marsh Irrigation District 75%

• Zero net carbon emissions by 2025 • Reduce net carbon emissions to 1,300 tonnes CO2-e (or less)

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Customer value

Modern assets


The Macalister Irrigation District Channel Automation Program commenced in 2004 with funds from the Victorian Water Trust. In 2007 we finalised the MID2030 strategy – an infrastructure improvement strategy to transform the efficiency, service levels and environmental footprint of the Macalister Irrigation District. We commenced this strategy with a customer-funded leading works program in 2011, and with subsequent $32m Phase 1A works jointly funded by customers and state and federal governments. The current $60m Phase 1B will be completed in 2021. We are working closely with state and federal governments to agree funding arrangements for the final stage of works and recently welcomed the announcement by the federal government of a $31m commitment to Phase 2 of MID modernisation.

In 2011 we finalised the Western Irrigation Futures Strategy, which provides a number of actions to improve the water security, quality and viability of the Werribee and Bacchus Marsh Irrigation Districts. During 2015-16, we developed business cases to pipe the Werribee Irrigation District and reconfigure the Bacchus Marsh Irrigation district. Since 2015 we have replaced over 18km of channels in Werribee with new pipelines and in Bacchus Marsh, the reconfiguration plan has seen a new river pump station, storage tank and 4km of new pipeline constructed.

For our unregulated systems we are introducing new technology to read our meters. The system comprises a low-cost, low-power transmitting device that is attached to existing water meters and allows hourly data to be sent digitally via radio technology to high-sensitivity receivers. We completed a pilot project using the technology in 2016, and have we since automated around 35% of the meter fleet.

Our assets provide efficient delivery and a reliable service that enables our customers to be productive.


• Complete modernisation in each irrigation district’s assets by 2023

• MID

− Completion of Stage 4 construction

− Procurement of Stage 3 materials

• WID

− Completion of Stage 3

• BMID

− Completion of Stage 4

• Establish automated meter reading and real-time customer usage information on more than 90% of our unregulated surface water and groundwater meters by 2022.

• Automated meter reading devices installed to a further 15% of unregulated surface water and groundwater meters, bringing the total to 50%.

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Enhanced customer experience


There is a significant opportunity to enhance online services that our customers increasingly expect. Irrigation district customers can manage their water orders online, and we have provided a platform to facilitate water trading by bringing buyers and sellers together, as well as a platform for conducting online water auctions. Opportunities exist to expand online services to view and pay bills online without visiting a third-party provider such as BPAY, and updating their details.

We are currently developing a portal to give customers a secure online interface to view information on their entitlements and water usage. We are also working with DELWP on a proof of concept for exchanging data in real time with the Victorian Water Register. This will provide a basis for streamlining assessment processes and making transactions available online.

Our customers have access to systems, processes and information that enable them to be more productive.


• Customers are able to access their information and undertake transactions that they highly value online.

• Launch of customer portal, allowing customer access to:

− automated meter reading information

− online payment gateway

− electronic billing with email and SMS functionality.

• Customers highly rate their experience in dealing with SRW.

• Overall customer satisfaction >90%.

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Increased production


In most years, less than half of the water that is licensed, allocated and available is put to productive use. There are many different reasons for this, including water being lost from delivery systems, entitlements held by inactive licence holders, and poor commodity markets.

We believe that there is enough water available to support much greater agricultural production without compromising environmental health.

Audited water savings from the modernisation of our irrigation districts have enabled water allocation and shares being made available for our customers to buy, and also as allocations for environmental water. There are also a number of unregulated groundwater and surface water areas that have water available for licensing under permissible consumptive volumes set by the state government.

In addition, we can assist customers to become more productive through improving water markets and encouraging water to be traded to those who value it most. There is potential to partner with other agencies to attract new industries and customers to southern Victoria to better utilise available water.

Finally, we will consider how to optimise the benefits of fully modernised irrigation systems to better service customers.

Provide the means to increase production through the efficient and effective use of water.


• Customers have additional water entitlements for increased production or security as per modernisation business cases:

− Macalister Irrigation District 37GL

− Werribee Irrigation District 3GL

− Bacchus Marsh irrigation district 0.6GL.

• Macalister Irrigation District:

− additional entitlements from volumes as validated from Phase 1A savings:

270ML High Reliability Water Share

135ML Low Reliability Water Share

100ML allocation

− commence data validation of Phase 1B water savings.

• Werribee Irrigation District:

− 600ML additional entitlement subject to validation of 4/1 project water savings.

• We realise the full benefits of our modernised assets. • Assess productivity gains through more efficient delivery of water.

• 50% MID customers with access to Demand Management System.

• Additional entitlements created in unregulated systems within resource limits.

• Unregulated water sales:

− Tarwin River 2,500ML

− Tambo River 1,500ML

− Mitchell River up to 6,000ML.

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• New irrigated land in southern Victoria. • Undertake a study to establish accurate information on land under irrigation, as baseline for setting future targets.

• 25% reduction in sleeper licences (licences that are not being used over long periods of time).

• 5% reduction in sleeper licences.

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Business resilience

Business growth and new revenue


In 2015 we developed a strategy to increase revenues.

To March 2019 we had delivered around $8m of one-off revenue, mostly through sales of water savings, and some land sales. Land sales have proven to be more protracted than we anticipated.

We secured around 5% of new annual revenue, mostly through new recycled water contracts and the annual charges associated with additional water entitlements.

Generation of additional one-off and recurrent unregulated revenue.


• To deliver $19m of new revenue over the period of the pricing submission.

• $2.5m of new revenue for the financial year.

Improved asset management


We are responsible for managing an asset portfolio valued at over $1.3b.

In 2018 we undertook an asset management maturity assessment using a framework adopted from the International Infrastructure Management Manual, which also yielded maturity against ISO 5001 and the Department of Treasury and Finances ‘Asset Management Accountability Framework’. Based on this assessment, a two-year improvement program was developed, beginning with the development of a Strategic Asset Management Plan which was finalised in 2018. In 2019 we commenced the update of our capital investment prioritisation tool and the development of new Asset Management Plans across SRW.

Alongside our 2019 Price Submission, we developed a 25-year capital plan and finalised a Strategic Asset Management Plan.

We manage our assets to meet obligations, provide agreed customer service levels, support strategy, to keep our long-term asset costs as low as possible and keep our prices affordable.


• Achieve a maturity of Level 3 as per the Department of Treasury and Finance (DTF) Asset Management Accountability Framework (AMAF).

• Complete audit on SRW Asset Management against the AMAF by June 2020.

• Complete all actions as per Strategic Asset Management Plan Implementation Plan.

• Implement a fit-for-purpose Asset Management Information System

• Develop an internal requirements review for an Asset Management Information System.

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Resource stewardship

Climate resilience


We have committed to a Zero 2025 strategy to reduce our carbon emissions by 100% from a baseline 1,559 tCO2e by the year 2025. Our Zero 2025 strategy is based on an aspiration to exceed the Victorian Government’s targets and to be the first water corporation to be carbon neutral by 2025.

As we operate mainly gravity-fed systems with few pumps and no treatment facilities, we are a low energy user. However, we do operate a relatively large vehicle fleet due to our geographical spread.

We actively promote the use of renewable energies, and we have more than 900 solar cells in the Macalister Irrigation District, as well as contracts with third parties to generate hydro-power at our storages.

Reduce carbon emissions and adapt to climate change.


• Reduce gross CO2 to 1,041tpa by 2025:

− reduce consumption of electricity by 550 MWh

− increase renewable energy percentage to 100% by 2025.

• Establish and implement the strategy and framework for managing the Intelligent Water Networks (IWN) Large-scale Renewable project to achieve 100% renewable energy.

• Complete installation of rooftop solar projects.

• Develop and implement carbon offset strategy.

• Incorporate adaption to climate change in business decisions.

• Finalise climate adaptation plan.

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Environmental improvement


Our Environmental Strategy reflects our commitment to, where possible, drive environmental improvement and our need to comply with statutory requirements, as well as our Statement of Obligations, Letter of Expectations, Emissions Reduction Pledge and various government policies (including Water for Victoria).

Our waste generation is estimated to be 36 tonnes per annum, which is relatively low by industry standards. We are also a relatively low user of potable water, at an estimated 1,955kl per annum.

We manage water in a number of ways which can have an impact on waterway health, including:

• harvesting and releasing water under a range of Bulk Entitlement obligations

• regulating river flows through various dams and weirs

• licensing groundwater and surface water extractions

• licensing farm dams

• operating drainage networks in the Macalister and Werribee Irrigation Districts.

We also have extensive land holdings around our storages and within our irrigation districts. As a Regional Catchment Strategy Leader for the Port Phillip and Westernport CMA region, we have implemented a number of revegetation projects on previously cleared land. We have also established native vegetation offsets sites that protect high-quality vegetation in to the future.

We will reduce adverse impact on the environment from our operations and will deliver improved environmental outcomes.


• Reduce waste to landfill to 29tpa by 2025. • Reduce waste to landfill to under 33tpa.

• Provide 2,033ML for an environmental entitlement in the Werribee system.

• No target for 2019-20.

• Reduce nutrient discharges from the MID by 7.5 tonnes per annum, to 50 tonnes per annum by 2030.

• Provide data on nutrient loads and trends to the Lake Wellington Sustainable Irrigation Group in order to inform nutrient reduction activities within the MID and broader catchment.

• Establish 65 ha of native vegetation offset sites by 2025.

• Develop revegetation plan for Pykes Creek Reservoir land following pine tree removal.

• Increase native vegetation on SRW land by 50 ha by 2025.

• Develop business case for establishment of 50 ha of native vegetation.

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Leadership and culture

A culture of excellence


We have established Trademark Behaviours to describe how our people can contribute to the success of SRW.

Creating a culture of excellence requires a vision of what is possible, a plan to set it in motion, and the practices to generate it on an ongoing basis. We have used the People Matter Survey and the Insync Alignment and Engagement Survey to track our progress.

We create an environment where people:

• are committed to delivering SRW’s vision, goals and objectives

• show pride in their work and demonstrate accountability

• consistently meet or exceed expectations

• are encouraged to innovate and become leaders in our industry

• are supported in their development

• live our trademark behaviours.


• Achieve our desired culture as measured in the Culture Survey.

• Achieve participation rate of 90% in the 2019 Engagement and Alignment Pulse Survey.

• Achieve a 10% improvement in our ‘favourable’ response to the engagement score, from 50%

• Achieve a 10% improvement in our ‘favourable’ response to the alignment score, from 40%.

• Successful transition of workforce to modernised environment/structure.

• Develop a five-year People and Culture Plan which incorporates:

− workforce plan

− learning and development plan.

• Improved results from the People Matter survey over four years:

− 20% increase in engagement, from 63%

− 20% increase in leadership, from 47%

− 20% increase in accountability, from 46%.

• Achieve participation rate in the 2020 People Matter Survey of 90%.

• Improved results from People Matter survey:

− 10% increase in engagement, from 63%

− 10% increase in leadership, from 47%

− 10% increase in accountability, from 46%.

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Safe, healthy, diverse and caring workplace


We have developed a Health, Safety and Wellbeing Strategy to ensure our workplaces promote good mental health and wellbeing, and are free from preventable injuries – safe for staff, contractors and visitors.

We conduct OHS Management System Reviews every two years and we have recently completed a Critical Risk Review. Recommendations from both reviews are underway.

We have developed a Diversity and Inclusion Strategy and action plan to ensure all our people feel respected, valued and included and have access to equal opportunity, which encourages them to contribute at their full potential. We want to attract people to our workplace with new and different perspectives and experiences, which will enhance innovation and performance at SRW.

The strategy takes us beyond compliance, recognising diversity and inclusion as a business enabler and a business imperative. Our strategy provides a roadmap to foster diversity and inclusion in our workforce, helping us make positive contributions to social inclusion and workforce participation.

A workplace where:

• everyone is responsible and accountable for health, safety and wellbeing

• our people feel valued, included, respected and connected to reach their full potential

• diversity is celebrated.


• 2020 diversity and inclusion goals:

− >32% women at SRW

− 50% women in executive positions

− >35% women in leadership positions

− >40% women in degree-required positions (other than STEM)

− >40% women holding degree-required STEM positions

− >15% women in field positions

− >8% employees under 25

− >3% employees identify as Aboriginal or Torres Strait Islander.

• Diversity and inclusion targets:

− >32% women at SRW

− 50% women in executive positions

− >35% women in leadership positions

− >40% women in degree-required positions (other than STEM)

− >40% women holding degree-required STEM positions

− >15% women in field positions

− >6% employees under 25

− >3% employees identify as Aboriginal or Torres Strait Islander.

• By 2030, to have the lowest reportable injury frequency rate in the Victorian water industry and to consistently exceed our leading indicator targets.

• Establish safety culture index as a baseline for future reporting.

• Complete OHS Audit Action Plan.

• 365 LTI Free Days.

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Government priorities SRW is proud to be leading implementation of the below priorities that are specified in the government’s Water for Victoria policy. Below we describe how we will address and deliver on the seven priority areas identified in the Minister’s Letter of Expectations. Implementation of these priorities strongly aligns with our vision of ‘excellence in rural water management, driving growth and customer productivity in southern Victoria’.

Climate change

We have committed to a Zero 2025 strategy to be carbon neutral.

For 2019-20, our target is to reduce carbon emissions to 1,300 tCO2e (or less). This will be achieved through:

establishing and implementing the strategy and framework for managing the Large-scale Renewable project (a collaboration across the Victorian water sector) to achieve 100% renewable energy

completing installation of rooftop solar projects developing and implementing a carbon offset approach.

We will also finalise our climate adaptation plan to incorporate consideration for climate change in business decisions.

For further context on our climate change targets and initiatives, refer to the following objectives within our corporate strategy:

Sustainable water resources (page 14) Climate resilience (page 20)

Customer and community outcomes

We pride ourselves on our strong relationships with customers, recognising the products and services we supply are critical inputs for their business.

We maintain customer interfaces through:

offices in each of our main districts field staff a multi-site customer services call centre team regular meetings and interaction with our customer committees digital engagement, including website and social media platforms.

Our ongoing engagement with customers and communities includes:

Customer Consultative Committees (CCCs) in the irrigation districts and a Southern Groundwater and Rivers Customer Forum

strong connection between our field staff and customers a dedicated ‘Customer First’ internal team, reviewing the ways we provide service and

conducting regular site visits to a range of customers regular board engagement with stakeholders and customers, including tours to their

businesses to hear about their priorities and challenges

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focused communications and engagement plans for all major projects detailed customer surveys every two years short, transactional customer surveys and feedback for specific issues media releases, case studies, videos and interviews to keep the wider community aware

of the work we are doing with, and for, our customers sponsorship of community groups’ initiatives and activities education tours regular newsletters, website content and social media updates.

Our communications and engagement initiatives for 2019-20 include support for all our major projects, decision processes, plus stakeholder, customer and community engagement. This includes assisting with community and stakeholder engagement in the development of land and recreation management plans for storages which also have significant recreational use. We will expand our use of modern communication techniques; e.g. texting, social media, customer portal; to keep customers informed of matters relevant to their business operations.

Our 2019-20 targets for performance measures C1.4 and C1.5 under Appendix 3A to the corporate planning and reporting guidelines are included in section 1.1 (page 9). Further measures and targets relevant to each customer group are detailed in subsequent sections of this Plan, as are bill impacts for individual customer groups.

During 2019-20 we will work with DELWP on developing a common survey of customer satisfaction for rural water businesses.

Water for Aboriginal cultural, spiritual and economic values

Covering 37% of southern Victoria, our region intersects with many Traditional Owner groups.

Our Aboriginal engagement strategy is to seek opportunities to develop meaningful working relationships with Traditional Owners and Aboriginal communities in the regions we cover, helping them to meet their objectives, including employment and capacity-building, economic development, cultural respect and acknowledgement.

We have a multi-agency partnership agreement with the Gunaikurnai Land and Waters Aboriginal Corporation (GLaWAC), the Registered Aboriginal Party (RAP) for the Gunaikurnai people, which holds native title over most of Gippsland. The agreement was developed jointly with 13 other water corporations and natural resource management organisations in Gippsland and is now being implemented.

We are exploring if this can be used as a model for similar multi-partner agreements across the state, which respects that Traditional Owner groups may prefer a joint approach, giving them a strong voice at the table.

The GLaWAC-GEA (joint) Working Group will continue to meet throughout 2019-20 to share knowledge and deliver against key actions in the agreement regarding: cultural respect and education, employment and economic development, joint management of the 10 parks and reserves, and community education.

During 2019-20 SRW will:

support the DELWP Aboriginal Procurement Framework, which has a target of 1% of all contracts and purchase orders to be sourced from Victorian Aboriginal businesses

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work with Kinaway Chamber of Commerce, Supply Nation and Aboriginal Victoria to explore opportunities for Aboriginal enterprises to provide goods and services

explore opportunities for Aboriginal enterprises to manage native vegetation and/or carbon offset sites that we develop

continue the next phase of the SRW HomeGrown traineeship program, which is placing trainees from diverse backgrounds including Aboriginal and Torres Strait Islander people

target all of our staff having undertaken cultural awareness training, including introducing a module into the induction program

refer all significant surface and groundwater applications to Traditional Owner groups for consultation

continue to invite Traditional Owner groups as important members of any stakeholder engagement activities on Country

advise Traditional Owner groups of opportunities to access water savings, including through auctions of surface and groundwater

explore opportunities with the relevant Registered Aboriginal Parties to build capacity on water-management matters, including shadowing and mentoring

work with Traditional Owners to develop our understanding of their cultural values and ecological knowledge of water on Country.

Resilient and liveable cities and towns

While SRW does not provide drinking water for cities or towns, we manage the harvesting and release of raw water under bulk entitlements on behalf of urban water businesses, and we also manage licences held by urban water businesses to extract raw water from surface and groundwater for town supplies.

We partner with Melbourne Water to provide irrigators in Werribee with recycled water sourced from Western Treatment Plant. Further, we are investigating opportunities for use of alternative water in Bacchus Marsh.

We are involved with the 11 Integrated Water Management groups that operate across our region. We also sit on several of the project control groups, and support working groups with relevant surface and groundwater information strategies and projects where they intersect with our areas of responsibility. This can include groundwater supply or diversions from dams or unregulated rivers.

Our irrigation modernisation projects deliver investment and benefits to the local communities; both in the construction period and, more significantly, through improved service and water savings by increasing production, regional economic activity, and environmental benefits.

Recognising recreational values

SRW manages dams on behalf of customers who own the water entitlements in these dams. The storages and weirs that we manage also provide recreational value for the local communities and tourism, ranging from passive recreation such as picnicking, through to boating, kayaking, fishing, swimming, and water skiing on several of our storages. Lake Glenmaggie is a popular holiday boating and fishing spot. Blue Rock Lake has become a focus for competitive bass fishing and community recreational use. Pykes Creek Reservoir is particularly popular for recreational water use at weekends because of its proximity to Melbourne.

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We provide information on our website about recreational opportunities at each of our sites, and we have an active social media presence for our more significant storages. We regularly partner with local communities, user groups, and Landcare groups to explore and implement opportunities to support them to meet their objectives.

To better understand our community and visitor expectations for recreational use, we lead or participate in consultation with local communities; for example the Pykes Creek Advisory Committee (led by SRW) and the Melton Reservoir Development Advisory Group (led by Melton City Council).

Land and recreation management plans

SRW is preparing land and recreation management plans for all major water storages, consistent with the requirements of Water for Victoria. We already have plans for Blue Rock Lake, Merrimu Reservoir and Pykes Creek Reservoir, and during 2019-20 we will develop a plan for Lake Glenmaggie.

We prepare these plans in consultation with the local communities and other stakeholders including urban water corporations, catchment management authorities, DELWP, Landcare groups and recreational user groups (e.g. boating and fishing clubs). The plans focus on recreational usage and the protection of environmental values. They consider short-, medium- and long-term needs and define agreed actions, responsibilities, and funding arrangements. In doing so, the plans will assist SRW to maintain infrastructure and facilities to support recreational objectives at our water storages under existing arrangements.

Recreational Users Information Needs Assessment (RUINA)

We have worked with the team from DELWP in developing the Recreational Users Information Needs Assessment (RUINA), which has identified some gaps in how we manage our storages for recreational use. During 2019-20, we will continue working with the RUINA team to identify projects to close these gaps.

Other opportunities

In recent years, we have made several submissions for funding to improve the recreational value of water at our storages including:

playground and picnic facilities upgrades jetty installations disabled access to swimming and boating facilities.

We were successful in a submission with the Boating Safety and Facilities Program managed by Transport for Victoria to install a boat ramp jetty at Blue Rock Lake, which will be completed and commissioned in 2019.

The Blue Rock Lake all-abilities playground project will progress this year. The project is funded by DELWP’s Boosting Recreational Water Use Initiative in 2019-20, which was announced in 2018. We plan to seek alternative funding and support to augment this project with upgrades to the parking facilities and information guides as appropriate.

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Leadership and culture

SRW has developed a Diversity and Inclusion Strategy and Action Plan for 2018-2020, as well as a Health Safety and Wellbeing Strategy. The board has established a People and Culture Committee which provides the board oversight and the opportunity to shape the organisational culture of SRW to ensure:

• a commitment to a culture of excellence • adherence to the agreed trademark behaviours • the creation of a diverse and inclusive workplace • the safety and well-being of all employees • compliance with the Victorian Public Sector Code of Conduct.

Further context and targets are included against our corporate strategy under the objective of safe, healthy, diverse and caring workplace (page 23).

We will continue to conduct annual reviews of the board’s performance, and to develop and implement appropriate improvement plans.

Financial sustainability

Financial indicators as required under the Corporate Planning and Reporting Guidelines are provided in section 8 of this plan.

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Capital expenditure

Overview

Our capital expenditure program is summarised below, and assumes:

existing ANCOLD dam design standards existing safety design and construction safety standards no natural disasters or other major unplanned incidents.

The program now includes major modernisation projects in the Macalister, Werribee and Bacchus Marsh Irrigation Districts. The MID 2030 Phase 1B project is fully funded with one-third each from SRW (on behalf of irrigators), the Victorian Government, and the Australian Government.

The capital forecast includes an increase to the MID2030 Phase 1B project, as detailed in Section 1.5 (page 31).

The federal government has announced $31m (half) funding for the MID2030 Phase 2 modernisation works. As a project funding agreement is not yet finalised, this project is not costed in this Corporate Plan. It is expected that funding agreements will be finalised with SRW, the state government and the federal government during 2019. No major expenses on Phase 2 are expected in 2019-20. Final funding arrangements will be included in the SRW’s 2020-21 Corporate Plan. A sensitivity analysis indicating potential impacts of this expenditure in future years on our interest cost, debt levels and interest cover is provided on page 84 of this Corporate Plan.

At the time of writing, we have two thirds of our Werribee and Bacchus Marsh projects funded by SRW (on behalf of irrigators) and the Victorian Government and have made another submission to the National Water Infrastructure Development Fund (NWIDF) to secure funding for the remaining third. The final third is not costed in this corporate plan.

The program includes our forecast at 30 April 2019 of capital expenditure for 2018-19. Project detail can be found in following sections of this Plan.

Project 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Total Forecast Budget Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000 $'000

Macalister Irrigation 39,540 15,295 4,965 1,578 580 5,162 27,580

Werribee Irrigation 5,333 4,947 33 24 31 59 5,094

Bacchus Marsh Irrigation 3,301 2,795 103 137 186 113 3,334

Groundwater & Rivers 442 984 740 416 502 209 2,851 Maribyrnong & Werribee Bulk Entitlement 1,499 2,077 793 1,343 850 2,051 7,114

Latrobe Bulk Entitlements 1,383 826 1,368 998 830 1,342 5,364

Corporate and shared 4,520 2,636 2,543 2,566 2,664 2,279 12,688

56,018 29,560 10,545 7,062 5,643 11,215 64,025

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Corporate and shared projects

Our corporate and shared capital budgets include IT systems and equipment, vehicles and plant, facilities and other shared costs, and leased land and buildings, as detailed below.

Project 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Total Forecast Budget Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000 $'000 Asset management system upgrade 0 200 207 211 216 221 1,055

IT systems and equipment 796 623 573 586 617 398 2,797

Vehicles & plant 1,500 1,500 1,500 1,500 1,500 1,500 7,500

Werribee office redevelopment 2,118 3 0 0 0 0 3

Facilities & other shared costs 99 263 214 219 269 115 1,080

Leased land and buildings 7 47 49 50 62 45 253

4,520 2,636 2,543 2,566 2,664 2,279 12,688

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Changes from 2018-19 plan

Strategic goals

In 2018-19 we reviewed and updated our corporate strategy. The revised strategy includes some new objectives, and some revised goals. Our long term goals and the 2019-20 targets to deliver our revised strategy are included in section 1.2 (page 11).

Financial position

Current irrigation modernisation projects for the Macalister, Werribee and Bacchus Marsh Irrigation Districts introduced $104m of capital expenditure into the business. These modernisation plans are unchanged from the 2018-19 Corporate Plan and continue to account for the significant increase in debt described by the forecast Balance Sheet.

In respect of the MID2030 1B works underway in the Macalister Irrigation District, recent procurement of works planned for winter 2019 has led to an increase to construction costs. Costs have been driven by higher than expected contractor prices that emerged subsequent to a competitive tender process. The costs include increased costs for the purchase of pipes and construction materials. Significant investment in infrastructure is occurring across southern Victoria, which is placing pressure on the ability of contractors to meet demand. While we are continuing to review the project and will endeavour to find ways to offset this cost increase, this Corporate Plan includes an additional $6m of MID2030 1B project costs not recorded in the 2018-19 Corporate Plan.

Our end of year debt levels across the five years to June 2023 are higher than projected by the 2018-19 Corporate Plan ($5m more by June 2023). This change reflects the increase in MID2030 1B costs, offset by lower capital expenditure elsewhere in the business.

While a deterioration since the 2018-19 Corporate Plan, our forecast cash interest cover remains at a financially sound projection throughout the Corporate Plan period (lowest ratio of 2.5 in 2020-21, compared to 2.7 in the 2018-19 Corporate Plan).

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Risk

Our risk management approach

Our work on risk management continues to be consistent with the International Standard ISO 31000:2018 and requirements under the Statement of Obligations.

Appropriate controls and treatments have been established to manage each risk. We review these on an ongoing basis.

Consequence assessment continues to centre around seven themes: Reputation, third party losses, customers, environment, prices, people and losses.

Risks are regularly reviewed at risk owner level. Potential new risks and occurrences are considered at both the Executive Risk Committee and within each business unit; any changes are subject to Executive Risk Committee, Audit, Risk and Governance Committee, and board approval. Risks are recorded in a comprehensive risk register. An annual risk review is conducted by management and presented to the board in June of each year. Corporate risks are individually reviewed at board committee level throughout the year, allowing for a comprehensive presentation by risk owners, and a thorough examination of the topic by the board committee.

In 2018-19 a critical risk review was initiated by the board. The review proposed an action plan to improve safety outcomes. The board through its Audit, Risk and Governance committee continues to oversee implementation of the outcomes of the review. An attestation by the Managing Director to each board meeting and to the Audit, Risk and Governance Committee, includes risk occurrence for the month, changes to individual risk ratings, changes to risk mitigation strategies, and any emerging risks which may have been identified.

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Corporate risks and controls

The following table identifies our corporate risks and controls. These controls are regularly assessed for their adequacy and their performance.

Risk Primary Controls

Align and meet shareholder expectations

Engagement with Ministers and departmental staff

Engagement in policy development processes

Adherence to Southern Rural Water policies and corporate instructions, including licensing practices, purchasing and tendering procedures.

Regular assessment of compliance with Statement of Obligations (and other instruments) via our compliance register

Impact of climate change

Ongoing monitoring of groundwater systems to detect over-use or salinity intrusion

Modernising irrigation districts to reduce water losses

Irrigation districts being resilient by having multiple water sources

Environmental damage due to over extraction from an aquifer

Monitoring of aquifer levels (and quality if required) by technical staff and hydrogeologists

Use of groundwater model in high-risk aquifers

Occupational Health & Safety

Compliance with policies OHS policies, procedures and work instructions, including:

o Contractor Management Procedure 230

o Bushfire Safety & Fire Ratings Procedure 215

o Corporate Instruction 25 – Motor vehicles

o Application and administration of Asbestos Management & Control Procedure 202

o Confined Space Procedure No 211

o Meters, Repairing & Replacing - SWP No. 248

o Meter Reading, Groundwater & Surfacewater Pumps - SWP No.142

o Hazard Management Procedure 224

o Magnacide H Herbicide Procedure

o Working Near Overhead & Underground Services SWP No. 222

o Managing Aggressive Customer Behaviour Procedure 250

o Fall from Heights Procedure 200

o Working in Excavations SWP 214

Regular workplace inspections and safety audits

Periodic third-party structural and mechanical inspections of assets

Failure to manage outrage

Regular engagement with key stakeholders, opinion leaders and customers

Public consultation process for significant or controversial applications

Financial mismanagement

Setting and reviewing financial parameters via Water Plan and Corporate Plan, including maintenance of 25 year financial model

Board oversight of budget assumptions and process

Reconciliation processes

Internal audit program, including annual verification of debt management practices

Headworks supply failure

Undertaking operation, maintenance, safety and security inspections using Visual Inspection Regimes

Undertaking annual emergency and security training exercises

Five-yearly external comprehensive inspections

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Loss of scale

Ensuring strong government/stakeholder relations through ongoing engagement

Ensuring alternative water supplies for irrigation districts

Delivering our Business Growth and New Revenue Strategy

Imposing exit fees on termination of delivery shares to offset future revenue losses

Public safety

Undertaking visual inspections

Enforcement of Marine Act 2010 & Marine Regulations 2012

Delivering our Public Health and Safety Strategy

Undertaking and acting on Public Health & Safety Risk Assessments

Terrorism

Monitoring national terrorist alert system or other government advice

On-site surveillance and ensuring restricted site access

By design, dams are highly resilient

Unrealised economic output / long-term customer viability

Delivering on Irrigation Modernisation to improve service and provide more water for production

Applying water savings from modernisation to provide additional resources to expand production

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Operational risks and controls

The following table identifies our operational risks and controls:

Risk Primary Controls

Allocation system failure

Maintaining stream monitoring network

Use of water allocation models and procedure

Regular review of restriction rules and trigger points

Failure to manage water quality issues

Regular water quality monitoring

Maintaining BGA Incident Response Plan

Maintaining Storage Sustainability (Safe Drinking Water Risk Management) Plans

Chemical control training and procedures

Managing grazing on SRW land, and ensuring stock exclusion zones within storage margins

Fraud

Regularly reviewing and enforcing delegations (including embedded controls within finance system)

Ensuring IT security

Compliance with Financial Management Act, and with financial procedures and controls

Internal and external audit programs

Industrial action

Operating in accordance with Enterprise Agreement, policies and procedures

Effective engagement with staff

Maintaining safety system and resolution procedures

Irrigation supply failure

Rolling asset inspection programs, including critical asset inspections

Ensuring our Disaster Recovery Plan is effective

Delivering our Dam Safety Program

Maintaining supply contingency plans

Maintaining backup communications links

Legal process failure

Maintaining and enforcing our instrument of delegation

Adherence to documented processes and procedures, including:

o Compliance Guidelines and Procedure Manual

o Release and compliance strategies for each storage

o Code of Conduct

o Privacy Policy

Regular engagement with DELWP staff, government e-alerts, industry forums and professional governance bodies

Regularly assessing compliance via our Compliance Register

Loss of critical IT systems

Maintaining uninterruptable power supply

Utilising offsite backup and disaster recovery contract

Using Amazon Cloud Services as a buffer to our systems

Ensuring support contracts for critical systems

Loss of major office Maintaining Business Continuity Plans

Ensuring physical security controls

Third party property Carrying out Asset Inspection Program

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damage Using water level alarms on automated regulators

Dam safety surveillance and flood routing training for reservoir operators

Observing bio-security procedures

Regular review of calibration for flow monitoring devices

Macalister Irrigation District

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Overview

The Macalister Irrigation District (MID) is the largest irrigation district in southern Victoria. The district is situated around Maffra in central Gippsland and sources water from the Macalister River via Lake Glenmaggie, and from the Thomson River via Cowwarr Weir.

The district has secure water supplies, supplemented by good rainfall. The average annual inflow to the district over the last 10 years has been around 180,000ML.

The region has productive soils, a strong dairy sector, and developing vegetable and cropping industries. Approximately 33,500 hectares are currently used for irrigation, and of this, 90% is under pasture. Estimates put annual economic contribution in excess of $500m per annum.

The irrigation season runs from 15 August to 15 May. On average, we process up to 20,000 irrigation orders each irrigation season in the MID.

Total area of the district 54,753ha

Total length of channels 592km

Total length of pipes 39km

Total length of drains 411km

No. of delivery outlets 2,159

No. of customers (irrigation and stock and domestic) 1,140

Total high reliability water shares 155,628ML

Total low reliability water shares 74,514ML

Total delivery shares 1,423ML/day

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Service measures

The table below details our service measures for the Macalister Irrigation District. It includes the achievement of water savings that are issued as water shares for SRW to allocate and are validated by DELWP. Savings will support our customers to enhance productivity in the district.

Measure 2019-20

Performance Target

Channel performance (pool height consistency) 79%

Delivery reliability 99%

Delivery efficiency 82%

Customers with access to Demand Management System 50%

Release of water savings 800ML

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Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within the constraints of our total revenue requirement.

Our prices for 2019-20 are consistent with the indicative price paths from our 2018 Price Submission, and will increase by CPI only.

Specific prices

The table below lists the major prices for the Macalister Irrigation District. Our full tariff schedule is detailed in the Appendices.

Tariff 2018-19 2019-20 High reliability water share (per ML) $12.90 $13.10

Low reliability water share (per ML) $6.45 $6.55

Delivery share (per ML/day) $5,255.00 $5,335.00

Standard usage (per ML) $9.95 $9.95

Service point – metered outlet (each) $208.50 $212.00

Service point – metered pump (each) $109.50 $111.00

Salinity mitigation $0.55 $0.55

We also collect application fees on behalf of the Victorian Water Register for transactions relating to water shares and allocations.

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Bill impacts

The table below provides indicative bill impacts for small, medium and large customers in the district.

2018-19 2019-20 Bill

change qty charge charge % Small customer High reliability water share (ML) 5.0 $64.50 $65.50 Low reliability water share (ML) 2.5 $16.13 $16.38 Delivery share (ML/day) 0.0575 $302.16 $306.76 Service point - metered outlet (each) 1 $208.50 $212.00 Usage (ML) 5.0 $49.75 $49.75 Salinity mitigation (ML) 5.0 $2.75 $2.75 $643.79 $653.14 1.5% Medium customer High reliability water share (ML) 50.0 $645.00 $655.00 Low reliability water share (ML) 25.0 $161.25 $163.75 Delivery share (ML/day) 0.575 $3,021.63 $3,067.63 Service point - metered outlet (each) 1 $208.50 $212.00 Usage (ML) 50.0 $497.50 $497.50 Salinity mitigation (ML) 50.0 $27.50 $27.50 $4,561.38 $4,623.38 1.4% Large customer High reliability water share (ML) 250.0 $3,225.00 $3,275.00 Low reliability water share (ML) 125.0 $806.25 $818.75 Delivery share (ML/day) 2.875 $15,108.13 $15,338.13 Service point - metered outlet (each) 3 $625.50 $636.00 Usage (ML) 250.0 $2,487.50 $2,487.50 Salinity mitigation (ML) 250.0 $137.50 $137.50 $22,389.88 $22,692.88 1.4% Medium river water customer High reliability water share (ML) 50.0 $645.00 $655.00 Low reliability water share (ML) 25.0 $161.25 $163.75 Service point - metered pump (each) 1 $109.50 $111.00 Usage (ML) 50.0 $497.50 $497.50 Salinity mitigation (ML) 50.0 $27.50 $27.50 $1,440.75 $1,454.75 1.0%

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Capital works program

Overview

Our budgeted capital expenditure for the MID totals $27.6m across the five years of this Corporate Plan.


MID2030 Phase 1B 35,744 9,473 2,447 13 0 0 11,933

Cowwarr Weir operating gear 66 235 295 463 0 0 993

Maffra Weir operating gear 290 1,565 688 0 0 0 2,253

MID siphons 150 1,670 0 0 0 0 1,670

Other district works 1,832 1,614 503 516 251 4,131 7,015

Other storage works 1,458 738 1,032 586 329 1,031 3,716

39,540 15,295 4,965 1,578 580 5,162 27,580

Significant projects

MID2030 Phase 1B

The MID2030 Phase 1B modernisation project is progressing as scheduled. The MID2030 modernisation project is jointly funded by SRW customers and state and federal governments. This project covers the Southern Tinamba supply zone, which includes some of the oldest and most inefficient channels that have the highest water losses in the district.

SRW is modernising approximately 80km of channels in the Tinamba, Mewburn Park and Riverslea areas with a combination of piping and channel automation.

This project commenced in 2016 and is planned to be completed in 2021. The project will increase the system efficiency and the level of service to customers in the area. The estimated water savings from the project are approximately 9,700ML per year. The first stage of pipeline works was completed in 2017 and the second stage of pipeline works commenced later than anticipated in June 2018. The works continued until the start of the irrigation season in August 2018, with a reduced scope of works for the construction period. With the cooperation of customers, the pipeline works were recommenced in December 2018; all pipeline works are planned to be complete by August 2019. The last construction program of works for the Phase 1B project is to automate the lower part of the Southern Tinamba supply zone; we plan to complete this work in winter 2020.

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Cowwarr Weir operating gear

We reviewed the issue of uncertain design capacity and condition of the ageing gate-lifting gear and deck. The review identified the need to upgrade the operating gear to meet modern design standards. In 2019-20, works will be carried out on the upgrade of the lifting gear and the later years of the Corporate Plan will see works completed on the mechanical and electrical upgrades of the operating gear and an upgrade of the operating deck.

Maffra Weir operating gear

A review of the operating gear for the spillway gates at Maffra Weir was undertaken in 2017. The review identified the need to upgrade the operating gear to meet modern design standards.

The board approved a business case to replace the operating gear and associated operating deck. The project cost is estimated to be $2.5m.

This work commenced in 2018-19 and will be completed in 2019-20.

MID siphons

The MID siphons are typically between 50 and 100 years old. Siphon failures cause significant disruption to supply and can take several weeks to return supply to customers. A full renewal program for siphons in the MID will be developed in 2019-20.

Siphon No 1 has previously had preventative maintenance work carried out but a recent detected leak has required this siphon to be replaced during the 2019 winter period. The expected cost to replace Siphon No 1 is $1.65m.

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Financial outcomes

Operating result

The operating cost base for the Macalister Irrigation District increases across the five-year period to June 2024. This reflects the progressive completion of irrigation modernisation works and represents the customer contribution towards these projects. As revenue is limited to CPI over the period, the increasing cost base results in a loss in 2020-21 and a break-even result for 2021-22. The district operating result is expected to return to surplus by 2022-23.

Surplus results across the planning period accumulate into the modernisation fund – providing a contribution towards future modernisation projects, such as MID2030 Phase 2.

Revenue from usage charges is calculated on our 10-year average usage of 147GL per annum.

2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Forecast Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000

Revenue Fixed annual charges 10,937 11,180 11,471 11,769 12,073 12,385

Usage charges 1,721 1,467 1,467 1,467 1,467 1,467

Other revenue 148 84 86 88 90 92

12,806 12,731 13,024 13,324 13,630 13,944 Expenses Operating costs - District 7,549 7,790 7,969 7,995 8,022 8,127

- Storage 1,146 1,212 1,240 1,243 1,246 1,262

Capital costs - District 1,230 1,932 2,517 2,364 2,275 2,293

- Storage 1,397 1,545 1,914 2,046 2,088 2,102

11,322 12,479 13,640 13,648 13,631 13,784 Operating result 1,482 252 (616) (324) (1) 160

Resilience fund

In our 2013-18 Water Plan we proposed to strengthen price certainty and stability for customers by introducing a business resilience fund. This fund is built by pricing for a small annual surplus during the 2013-18 regulatory period. The fund enables us to absorb unforeseen cost or revenue changes without amending our indicative price path. Our Corporate Plan forecasts that we will maintain the MID resilience fund at $800k by the end of the five-year period to 2023-24.

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Modernisation fund

In 2015 we established a modernisation fund to accumulate surplus funds generated from operating results, water entitlement and other asset sales. These funds are used to offset price increases from modernisation projects.


Opening balance 6,830 2,258 674 1,149 24 157

Water sales 913 500 500 500 500 500

Transfer from operating surplus 1,512 261 0 0 14 185

Share of asset sales and surplus funds 139 364 1,136 813 0 0

Funds applied to modernisation projects (7,327) (2,758) (1,174) (2,449) (384) (708)

Interest 191 49 18 11 3 9

Closing balance 2,258 674 1,149 24 157 143

Werribee Irrigation District

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Overview

The Werribee Irrigation District (WID) is one of Victoria’s prime horticulture regions, located on Melbourne’s doorstep at Werribee South.

Water supply to the WID consists of river water, groundwater and Class A recycled water sourced from Melbourne Water’s Western Treatment Plant. We also have the ability to supply additional water which was purchased in 2016 from the Thomson drought reserve.

River water for the WID is harvested in dams on tributaries to the Werribee River and on the Werribee River itself. These dams also hold entitlements for the Bacchus Marsh Irrigation District and for Western Water.

The WID specialises in the production of green leafy vegetables - most notably broccoli, lettuce and cauliflowers - with a farm gate value in excess of $187m per year. The WID employs approximately 660 people.

The costs of managing the dams are shared in accordance with Bulk Entitlements, and for the WID the shares are:

70.4% of Pykes Creek 71.3% of Melton 14.3% of Merrimu 7.13% of Lerderderg diversion.

More information on our storage operation function for the Werribee and Maribyrnong systems is included in Section 7 of this Plan.




Total length of drains 63km

No of delivery outlets 267

No of customers 244


Total delivery shares 156ML/day

Total recycled water customer contracted volume 7,864ML

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Service measures

The table below details our service measures and targets for the Werribee Irrigation District. It includes the achievement of water savings that are issued as water shares for SRW to allocate and are validated by DELWP. Savings will support our customers to enhance productivity in the district.

Measure 2019-20

Performance Target

Delivery volume accuracy 98%



Recycled water salinity <1800EC

Release of water savings 1,300ML

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Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within our total revenue requirement.

Our prices for 2019-20 are consistent with the indicative price paths in our 2018 Price Submission, and will increase by CPI only.

Specific prices

The table below lists the major prices for the Werribee Irrigation District. Our full tariff schedule is detailed in the Appendices.






Recycled water contracted volume (ML) $349.00 $354.00


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Bill impacts

The table below provides indicative bill impacts for small, medium and large customers in the Werribee Irrigation District, as well as a large recycled water customer.

2018-19 2019-20 Bill change

qty charge charge % Small customer High reliability water share (ML) 5.0 $635.00 $645.00 Low reliability water share (ML) 2.5 $158.75 $161.25 Delivery share (ML/day) 0.0775 $1,176.45 $1,194.28 Service point - metered outlet (each) 1 $234.00 $237.00 $2,204.20 $2,237.53 1.5%

Medium customer High reliability water share (ML) 50.0 $6,350.00 $6,450.00 Low reliability water share (ML) 25.0 $1,587.50 $1,612.50 Delivery share (ML/day) 0.775 $11,764.50 $11,942.75 Service point - metered outlet (each) 1 $234.00 $237.00 $19,936.00 $20,242.25 1.5%

Large customer High reliability water share (ML) 100.0 $12,700.00 $12,900.00 Low reliability water share (ML) 50.0 $3,175.00 $3,225.00 Delivery share (ML/day) 1.55 $23,529.00 $23,885.50 Service point - metered outlet (each) 2 $468.00 $474.00 $39,872.00 $40,484.50 1.5%

Large recycled water customer High reliability water share (ML) 100.0 $12,700.00 $12,900.00 Low reliability water share (ML) 50.0 $3,175.00 $3,225.00 Delivery share (ML/day) 1.55 $23,529.00 $23,885.50 Service point - metered outlet (each) 2 $468.00 $474.00 Recycled water 100.0 $34,900.00 $35,400.00 $74,772.00 $75,884.50 1.5%

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Overview

Our budgeted capital expenditure for the WID totals $5.1m across the next five years.

Project 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Total Forecast Budget Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000 $'000 WID modernisation 5,157 4,519 0 0 0 0 4,519 Recycled water valve 118 260 0 0 0 0 260 Other district works 58 168 33 24 31 59 315 5,333 4,947 33 24 31 59 5,094


Werribee Irrigation District modernisation

We have replaced over 18km of pipelines in the Werribee Irrigation District since 2015, including the first two stages of our Werribee Irrigation Modernisation project. Co-funding from the state government and customers will allow us to complete two-thirds of the project which will conclude with Stage 3 in 2019. We are actively seeking funding for the last third.

The project will save 5,000ML, with two-thirds going back to customers to use for production and to improve the resilience of the district to dry times. The remaining third of the water savings will go to improve the health of the Werribee River.

Water savings through modernisation works has made an additional 4GL of water available to customers since the beginning of the works. Given some customers are low on water allocation following recent dry seasons, this demonstrates the importance of improving water security through modernisation works, underpinning the resilience and productivity of the district.

Recycled Water Valve

Melbourne Water supplies recycled water to SRW from a main pipeline along the Maltby bypass from its water treatment plant.

SRW requires a valve to be installed so water supply can be regulated, reducing the risk of oversupply, which can also impact other customers being supplied on the same pipeline. This project will be completed during 2019-20 and is estimated at a cost of $377k.

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Financial outcomes

Operating result

The operating cost base for the Werribee Irrigation District increases in 2019-20 recognising the transfer from capital-focused resources to operating-focused resources to enable successful operation of modernised assets. Costs also increase from the progressive completion of irrigation modernisation works.

Implementation of irrigation modernisation works enables further operating cost reductions across the period. In addition, the anticipated sale of water entitlements resulting from modernisation works is applied against the capital cost base, further reducing costs from 2020-21. Together, these lower costs return the district operating result to surplus by 2022-23.

Other revenue represents an interest return on termination fee proceeds received in 2014-15. These proceeds are contributed towards modernisation works in 2018-19 and 2019-20, and thereafter no further revenue is received by the district.

Any surplus results across the period accumulate into our modernisation fund – providing a potential contribution to complete the final stage of WID modernisation.

2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Forecast Budget Budget Budget Budget Budget

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


Other revenue 51 8 0 0 0 0

4,092 4,110 4,196 4,292 4,391 4,492 Expenses Operating costs - District 2,071 2,318 2,332 2,301 2,268 2,298

- Storage 599 632 647 648 650 658

Capital costs - District 239 258 354 286 265 259

- Storage 1,016 1,090 1,169 1,095 1,139 1,143

3,925 4,298 4,502 4,330 4,322 4,358 Operating result 167 (188) (306) (38) 69 134

Recycled water supply

Contracted volume to the Werribee recycled water scheme is approximately 7.5GL per annum. Our pricing model assumes usage of 65% for a break-even result.

Prices increase by CPI annually and include an ongoing contribution to repay the long-term recycled water debt. This debt arose on the establishment of the scheme and on current rates of repayment will be fully paid by 2032.

54


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

Revenue Fixed entitlement charges (50%) 1,369 1,323 1,354 1,385 1,416 1,449

Usage charges 411 397 406 415 425 435

Other revenue 63 64 65 67 68 70

1,843 1,784 1,825 1,867 1,909 1,954 Expenses Operating costs - District 228 221 226 226 227 230

- Melbourne Water 1,362 1,385 1,417 1,450 1,483 1,517


Long term district debt repayment 129 129 129 133 133 136

1,719 1,766 1,819 1,853 1,886 1,925 Operating result 124 18 6 14 23 29

Resilience fund

In our 2013-18 Water Plan we proposed to strengthen price certainty and stability for customers by introducing a business resilience fund. This fund is built by pricing for a small annual surplus during the 2013-18 regulatory period. The fund enables us to absorb unforeseen cost or revenue changes without amending our indicative price path. Our Corporate Plan forecasts expect that the losses incurred in the district during 2019-20 to 2021-22 will exhaust the resilience fund. As the district returns to surplus from 2022-23, the resilience fund of $300k can be restored without any price increase for customers.

Modernisation fund

In 2015 we established a modernisation fund to accumulate surplus funds generated from operating results and other asset sales. We use these funds to offset the price increases from modernisation projects.


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

Opening balance (25) 198 231 6 0 0 Water sales 0 390 195 195 170 0 Transfer from operating surplus 134 0 0 0 0 0 Share of asset sales and surplus funds 61 0 0 0 0 0 Funds applied to modernisation project costs 24 (366) (426) (201) (170) 0 Interest 3 9 6 0 0 0 Closing balance 198 231 6 0 0 0

Bacchus Marsh Irrigation District

56

Overview

The Bacchus Marsh Irrigation District (BMID) is located north-west of Melbourne, on a fertile flood plain of the Werribee and Lerderderg Rivers.

The district is dominated by several large-scale enterprises that produce a significant proportion of the total output. Vegetable growing and orchards are the primary businesses.

We also provide water for sand-washing to several major quarries supplying the construction industry.

Current estimates indicate that around $50m of economic activity is generated per year. The BMID supports approximately 430 full time jobs.

There is a small volume of licensed groundwater, and river water is supplied from Pykes Creek Reservoir. An important priority is to secure a viable alternative water supply.

The first stage of modernisation works has changed the way water is supplied to customers. Approximately two-thirds of the district is now supplied via a pump station on the Werribee River at the Maddingley Weir. This has improved the responsiveness of the supply system to changes in customer demand, raising overall service levels.

Storage operator costs

In addition to the operating and capital costs of running the irrigation district, BMID prices must also contribute to costs of operating storages to harvest and release water.

The costs are shared in accordance with bulk entitlements, and for the BMID the shares are:

28.3% of Pykes Creek 28.7% of Melton 5.7% of Merrimu 2.9% of Lerderderg diversion.

More information on our storage operation function for the Werribee and Maribyrnong systems is included in Section 7 of this Plan.




No of delivery outlets 165

No of customers 130


Total delivery shares 71ML/day

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Service measures

The table below details our service measures and targets for the Bacchus Marsh Irrigation District. It includes the achievement of water savings that are issued as water shares for SRW to allocate and are validated by DELWP. Savings will support our customers to enhance productivity in the district.

Measure 2018-19

Performance Target

Delivery volume accuracy 98%



Release of water savings 200ML

Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within our total revenue requirement.

Our prices for 2019-20 are consistent with the indicative price paths from our 2018 Price Submission. As Bacchus Marsh customers received an equivalent price decrease in the 2013-18 period, this price path returns prices for the 10-year period to CPI only.

Our water share prices will increase by CPI only (1.5%), while the infrastructure fee for delivery shares will increase by 4.4% (including CPI). This increase provides a customer contribution to modernisation of the irrigation district, and follows price reductions during our previous Price Submission.

Specific prices

The table below lists the major prices for the Bacchus Marsh Irrigation District. Our full tariff schedule is detailed in the Appendices.






58


59

Bill impacts

The table below provides indicative bill impacts for small, medium and large customers in the Bacchus Marsh Irrigation District:

2018-19 2019-20 Bill change

qty charge charge % Small customer High reliability water share (ML) 5.0 $635.00 $645.00 Low reliability water share (ML) 2.5 $158.75 $161.25 Delivery share (ML/day) 0.0925 $1,005.48 $1,049.88 Service point - metered outlet (each) 1 $204.00 $213.00 $2,003.23 $2,069.13 3.3%

Medium customer High reliability water share (ML) 25.0 $3,175.00 $3,225.00 Low reliability water share (ML) 12.5 $793.75 $806.25 Delivery share (ML/day) 0.4625 $5,027.38 $5,249.38 Service point - metered outlet (each) 1 $204.00 $213.00 $9,200.13 $9,493.63 3.2%

Large customer High reliability water share (ML) 100.0 $12,700.00 $12,900.00 Low reliability water share (ML) 50.0 $3,175.00 $3,225.00 Delivery share (ML/day) 1.85 $20,109.50 $20,997.50 Service point - metered outlet (each) 2 $408.00 $426.00 $36,392.50 $37,548.50 3.2%

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Overview

Our capital expenditure for the BMID totals $3.3m across the next five years.

Project 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Total Forecast Budget Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000 $'000 BMID modernisation 3,145 2,554 0 0 0 0 2,554

District works 156 241 103 137 186 113 780

3,301 2,795 103 137 186 113 3,334


BMID Modernisation

The first two stages of our modernisation project in Bacchus Marsh are complete, including a new pump station, tank and new pipelines. The final two stages of pipeline and reconfiguration will be completed in 2019. It has already been demonstrated that modernisation of the WID and BMID can deliver much needed reliability of supply to irrigators, particularly during dry conditions.

Water savings through modernisation works has made an additional 1GL of water available to customers since the beginning of the works. Given some customers are low on water allocation following recent dry seasons, this demonstrates the importance of improving water security through modernisation works, underpinning the resilience and productivity of the district.

We are actively seeing funding to complete the final stage of the modernisation plan which involves the decommissioning of the Main Channel.

When complete, the project will save a further 1GL per annum, with two-thirds going back to customers to use for production and to improve the resilience of the district. The other third of the water savings will go to improve the health of the Werribee River.

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Financial outcomes

Operating result

Revenue from Bacchus Marsh customers increases at CPI plus 1.7% for the 2018-23 period. This indicative price path was included in our Price Submission, and represents the customer contribution towards irrigation modernisation.

The progressive implementation of irrigation modernisation works at Bacchus Marsh enables operating cost reductions across the period. These lower costs offset the increase in capital charges that results from the customer contribution towards irrigation modernisation.

Surplus results across the period accumulate into our modernisation fund – providing a potential contribution to complete BMID modernisation.


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


Expenses Operating costs - District 816 729 739 735 730 739

- Storage 242 255 260 261 262 265


- Storage 399 437 466 435 455 461

1,565 1,626 1,666 1,601 1,661 1,669 Operating result (35) (62) (39) 92 98 131

Resilience fund

In our 2013-18 Water Plan we proposed to strengthen price certainty and stability for customers by introducing a business resilience fund. This fund is built by pricing for a small annual surplus during the 2013-18 regulatory period. The fund enables us to absorb unforeseen cost or revenue changes without amending our indicative price path. Our Corporate Plan forecasts that we will maintain the BMID resilience fund at $200k throughout the five-year period.

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Modernisation fund

In 2015 we established a modernisation fund to accumulate surplus funds generated from the operating result and other asset sales. We use these funds to offset the price increases from modernisation projects.


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

Opening balance 810 28 372 70 61 114 Water sales 0 360 60 60 40 0 Transfer from operating surplus (29) 0 0 0 68 0 Share of asset sales and surplus funds 23 67 0 0 0 0 Funds applied to modernisation projects (811) (72) (374) (71) (64) (111) Interest 35 7 11 3 3 3 Closing balance 28 372 70 61 108 0

Groundwater and Rivers

65

Overview

Our Groundwater and Rivers business licenses and monitors the use of water from unregulated rivers and groundwater aquifers in southern Victoria. It is also responsible for licensing the construction of bores and farm dams. Each year around 1,600 bore construction licences are issued, mostly for stock and domestic use – with higher numbers of applications in dry years.

Groundwater and Rivers staff engage with customers on a regular basis to assist with accessing groundwater and surface water via trades, or new entitlement. Field staff undertake site inspections, meter maintenance and installation and compliance activities.

Groundwater and Rivers staff also monitor river flow conditions and manage irrigation rosters and restrictions during dry periods.

Licence holders on the Latrobe and Maribyrnong systems contribute to costs of operating storages to harvest and release water – Blue Rock Lake on the Latrobe River, and Rosslynne Reservoir on the Maribyrnong River.

The costs are shared in accordance with bulk entitlements, and in the case of Blue Rock Lake, also includes a pro-rata apportionment of the drought reserve.

The shares are:

2.59% of Blue Rock for the Latrobe system 4.5% of Rosslynne for the Maribyrnong system.

More information on our storage operation functions for the Latrobe system is included in Section 6, and in Section 7 for the Maribyrnong system.

Number of surface water take and use licences 4,191

Volume of surface water take and use entitlements 163,226ML

Number of groundwater take and use licences 4,296

Volume of groundwater take and use entitlements 393,979ML

Number of surfacewater registration (dam) licences 3,141

Volume of surfacewater registration (dam) licences 82,034ML

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Service measures

The table below details our service measures and targets for processing applications and for promoting trade in unregulated systems:

Measure 2019-20

Performance Target

Applications processed within target timeframes 90%

Customer contacts to promote water trade 1,000

The following targets are applied to the various application types:

Application type Target (days)

Allocation trade 3

Bore construction licence 3

Divide a water share 3

Information statement 7

Licence transfer 7

Water share transfer 7

Subdivision 10

Farm dam licence 30

Take and use licence 30

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Pricing

Overview

We set prices annually to reflect our operating and capital budgets, within the constraints of our total revenue requirement.

Our prices for 2019-20 are consistent with the indicative price paths from our 2018 Price Submission, and reflect a small reduction after CPI.

In March 2017, Hazelwood Power Station ceased operating. The owner, Engie, holds a groundwater licence for dewatering the mine. We have assumed the continuation of dewatering and payment of associated licence fees over the period of this Corporate Plan.

Specific prices

The table below lists the major prices for our Groundwater and Rivers customers. Our full tariff schedule is detailed in the Appendices.

Tariff 2018-19 2019-20 Licence charge (per licence) $368.00 $365.00

Licensed volume charge – surface water (per ML) $11.80 $11.70

Licensed volume charge – groundwater (per ML) $4.05 $4.00

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Bill impacts

The table below provides indicative bill impacts for small, medium and large licence holders.

Surface water

2018-19 2019-20 Bill change

qty charge charge % Small customer Licence charge (each) 1.0 $368.00 $365.00 Volumetric charge (ML) 5.0 $59.00 $58.50 $427.00 $423.50 -0.8%

Medium customer Licence charge (each) 1.0 $368.00 $365.00 Volumetric charge (ML) 50.0 $590.00 $585.00 $958.00 $950.00 -0.8%

Large customer Licence charge (each) 1.0 $368.00 $365.00 Volumetric charge (ML) 200.0 $2,360.00 $2,340.00 $2,728.00 $2,705.00 -0.8%

Groundwater

2018-19 2019-20 Bill change

qty charge charge % Small customer Licence charge (each) 1.0 $368.00 $365.00 Volumetric charge (ML) 5.0 $20.25 $20.00 $388.25 $385.00 -0.8%

Medium customer Licence charge (each) 1.0 $368.00 $365.00 Volumetric charge (ML) 150.0 $607.50 $600.00 $975.50 $965.00 -1.1%

Large customer Licence charge (each) 1.0 $368.00 $365.00 Volumetric charge (ML) 300.0 $1,215.00 $1,200.00 $1,583.00 $1,565.00 -1.1%

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Application fees

We charge application fees for a range of different transactions in relation to water licences and works licences (bores and dams).

Overall, our application fees will not increase more than CPI.

The table below lists the most common fees that we receive. Our full tariff schedule is detailed in the Appendices.

Tariff 2018-19 2019-20 Construct, alter or decommission class A or B bore $440.00 $448.00

Transfer of licence (repeat temporary transfer or sale of property) $122.00 $124.00

Information statement $112.00 $113.50

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Overview

Our capital expenditure for Groundwater and Rivers totals $2.9m across the next five years.

Project 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Total Forecast Budget Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000 $'000 Automated meter reading 205 705 558 230 235 0 1,728

Meter replacement 237 279 182 186 267 209 1,123

442 984 740 416 502 209 2,851


Automated meter reading

We are implementing new technology to read meters. The system comprises a low cost, low power transmitting device that is attached to existing water meters and allows hourly data to be sent digitally via radio technology to high-sensitivity receivers. This removes the need for field staff to physically read meters, which will reduce operating costs and safety risks, and will improve productivity. The data will also be available online.

During 2019-20 we will install automated meter reading on 15% of unregulated surface water and groundwater meters, bringing the total automated to 50%.

Meter replacements

We continue to undertake meter replacements and upgrades to ensure we meet our obligations under the National Framework for Non-Urban Meters and associated State Implementation Plan, as far as reasonably practicable.

We have a fleet of over 5,000 meters. We assume that there will be no external funding or requirement from government to upgrade to more expensive metering technology and so we have provided only for replacement of existing meters as they reach end of life.

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Financial outcomes

Operating result

Our corporate strategies to reduce operating and capital expenditure delivered operating surpluses across the 2013-18 Water Plan period.

This improved financial performance has enabled a price freeze for customers across the full 2018-23 regulatory period. As shown by the operating result table below, irrespective of price increases less than CPI, a cumulative surplus is expected across the Corporate Plan period.

Applications for new groundwater and surfacewater licences are subject to ongoing volatility (influenced by factors such as seasonal conditions and government policy). For 2019-20 we have projected to maintain the same core workload as 2018-19.

Groundwater and Rivers – Service Delivery


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


Expenses Operating costs - District 6,001 5,913 6,049 6,067 6,086 6,166

- Storage 65 61 62 62 63 63


- Storage 18 21 26 26 25 24

6,540 6,455 6,659 6,691 6,717 6,823 Operating result 73 107 (3) 47 95 145

Groundwater and Rivers Applications


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

Revenue Fees 1,181 1,191 1,208 1,225 1,242 1,270

Expenses Operating costs 1,177 1,212 1,243 1,247 1,251 1,271

Operating result 4 (21) (35) (22) (9) (1)

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Resilience fund

In our 2013-18 Water Plan we proposed to strengthen price certainty and stability for customers by introducing a business resilience fund. This fund is built by pricing for a small annual surplus during the 2013-18 regulatory period. The fund enables us to absorb unforeseen cost or revenue changes without amending our indicative price path. Our Corporate Plan forecasts that we will maintain the Groundwater and Rivers resilience fund at $500k by the end of the five-year planning period.

Modernisation fund

In 2015 we established a modernisation fund to accumulate surplus funds generated from the operating result and other asset sales. We use these funds to offset price increases from modernisation projects.


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

Opening balance 2,345 2,301 1,810 1,431 1,387 1,364 Transfer from operating surplus 108 130 63 91 119 147 Share of asset sales and surplus funds 0 0 35 25 26 76 Funds applied to modernisation projects (205) (705) (558) (230) (235) 0 Interest 53 84 81 70 67 72 Closing balance 2,301 1,810 1,431 1,387 1,364 1,659

Latrobe Bulk Entitlements

74

Overview

SRW is the appointed storage manager for the Latrobe River basin. Our role is to harvest, store and release water on behalf of entitlement holders. This involves managing large and complex infrastructure including dam walls, embankments, spillways, and associated mechanical and electrical equipment.

We manage Blue Rock Lake, Lake Narracan and Yallourn Weir on behalf of Gippsland Water and the Latrobe Valley power companies. A small share of entitlement from Blue Rock Lake is held by SRW for downstream licence holders, and the Department of Treasury and Finance (DTF) is custodian for water entitlements issued to the former State Electricity Commission of Victoria (SECV). Blue Rock Lake also holds an environmental entitlement and a drought reserve.

The table below shows the entitlement shares on the Latrobe system:

Entitlements Blue Rock Narracan and Yallourn

Gippsland Water 16.27%

AGL, Loy Yang A power station 16.40% 32.80%

Energy Australia, Yallourn power station 14.97% 29.94%

Alinta, Loy Yang B power station 8.20% 16.4%

Licence holders 2.00%

DTF (Former SECV) 10.43% 20.86%

Environmental entitlement 9.00%

Drought reserve 22.73%

Service measures

Maximising the accuracy of water release helps us to minimise water losses. We measure performance as the percentage of time that the released flow is within defined limits of the ordered flow. Our target is 95% of ordered releases are within 10% of the ordered flow.

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Charges

The table below details our charges for the Latrobe storage operation. These charges are based on the pricing principle of cost recovery, and act to fully reimburse our cash outgoings to manage these systems.

2018-19 2019-20 $'000 $'000

Gippsland Water 648 680

Energy Australia 427 417

AGL 468 457

GDF Suez 234 228

Victorian Government (SECV) 264 256

Victorian Environmental Water Holder 138 142


Overview

Our capital expenditure on Latrobe system storages totals $5.4m across the next five years.


Storage works 1,383 826 1,368 998 830 1,342 5,364

1,383 826 1,368 998 830 1,342 5,364


Storage works projects include upgrades to pump stations, condition investigations for spillway gates and painting of spillway gates to maintain integrity.

Werribee and Maribyrnong Bulk Entitlements

77

Overview

SRW is the appointed storage manager for dams on the Werribee and Maribyrnong river systems. Our role is to harvest, store and release water on behalf of entitlement holders. This involves managing large and sophisticated infrastructure including dam walls, embankments, spillways, and associated mechanical and electrical equipment.

We manage the Pykes Creek, Melton and Merrimu reservoirs on the Werribee system, which also includes diversion weirs and tunnels to divert water from the Werribee River into Pykes Creek Reservoir and from the Lerderderg River into Merrimu Reservoir via Goodmans Creek. This system provides water for Western Water and for our Werribee and Bacchus Marsh Irrigation Districts. There is also an environmental entitlement to the flows into Merrimu Reservoir, and a portion of the storage capacity and inflows are unallocated.

On the Maribyrnong River, we manage Rosslynne Reservoir, which holds entitlements for Western Water, Melbourne Water and for SRW on behalf of downstream licence holders.

The table below shows the entitlement shares on the Werribee and Maribyrnong systems:

Entitlements Pykes Creek Melton

Merrimu Rosslynne

Capacity Inflows Western Water 1.24% 60% 70% 86%

Melbourne Water 9.5%

SRW 98.76% 100% 20% 10% 4.5%

Environmental entitlement 10%

Unallocated 20% 10%

Service measures

To maximise seasonal allocations for customers, it is important that water harvest is maximised in our off-stream storages at Pykes Creek and Merrimu Reservoirs (other major storages are on-stream so harvest performance does not apply). Our target is that water is harvested at the maximum possible rate >95% of time available (when dam capacity is available).

For all storages, maximising the accuracy of water release helps us to minimise water losses. We measure performance as the percentage of time that the released flow is within defined limits of the ordered flow. Our targets are:

Werribee system: 95% of time within 10% or 5ML Maribyrnong system: 95% of time within 10% or 1ML.

The different levels of precision in the definition for each system reflect the different equipment for measuring and making releases at the different storages, as well as the differing customers and volumes.

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Charges

The table below details our charges for the Werribee and Maribyrnong storage operations. These charges are based on the pricing principle of cost recovery, and act to fully reimburse our cash outgoings to manage these systems.

2018-19 2019-20 $'000 $'000 Western Water 1,785 1,877

Melbourne Water 53 59

DELWP (Unallocated share) 274 286


Overview

Our capital expenditure on storages in the Werribee and Maribyrnong river systems totals $7.1m across the next five years.

Project 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Total Forecast Budget Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000 $'000 Lerderderg SCADA 48 427 0 0 0 0 427 Merrimu tower retrieval system 45 432 24 0 0 0 456 Rosslynne tower retrieval system 61 439 0 0 0 0 439 Other storage works 1,345 779 769 1,343 850 2,051 5,792

1,499 2,077 793 1,343 850 2,051 7,114


Lerderderg SCADA

Lerderderg Weir is in a remote location. The only means of access is via a steeply sloping, heavily forested track, and at present there is no remote operation or camera surveillance of the site and mobile phone reception. SCADA will provide remote monitoring and control, reducing the need for staff to attend site and allowing them to be better prepared when they do.

Merrimu outlet tower personnel retrieval

The project will improve the access systems in the outlet tower at Merrimu Reservoir to ensure that we can safely evacuate an injured or unwell person from the lower levels of the tower.

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SRW owns large areas of land around Merrimu Reservoir that are subject to erosion. We run a program of ongoing improvements to the catchment each year.

Rosslynne outlet tower personnel retrieval

The project will improve the access systems in the outlet tower at Rosslynne Reservoir to ensure that we can safely evacuate an injured or unwell person from the lower levels of the tower.

Financial Statements

81

Preface

Overview

Our forecast financial statements comprise:

Operating Statement Balance Sheet Statement of Cash Flow Financial Performance Indicators Quarterly Operating Statement Quarterly Balance Sheet Quarterly Financial Performance Indicators.

Our Operating Statement shows significant losses after interest and depreciation charges – between $6m and $8m per annum across the planning period. This must be interpreted within the context of our designation as a ‘not for profit’ entity subject to state government sanctioned price regulation, and the implications of this for our asset values and depreciation charges.

We have infrastructure assets valued at over $1.3b which are not included in our regulatory asset base for pricing. This generates around $15m-17m per annum of depreciation charges, of which $11m-$12m is not recoverable through our regulated pricing framework.

Financial assumptions

Quantities

The quantities on which our revenue is forecast are generally stable across the planning period, with only moderate adjustments to reflect our proposed sale of properties and water entitlements.

This stability reflects the entitlement-based nature of our services, including:

Eastern Irrigation – delivery volumes consistent with our Water Plan of 147GL per annum, being approximately the same as the last 10-year average.

Groundwater and Rivers Application Fees – applications for new groundwater and surfacewater licences are subject to ongoing volatility (influenced by factors such as seasonal conditions and government policy). For 2019-20 we have projected a similar workload as 2018-19.

Werribee Irrigation – given the dry seasonal outlook, we anticipate delivering the Thomson drought reserve to Werribee customers.

Bacchus Marsh Irrigation – delivery of river water entitlements consistent with business as usual. It is anticipated that there will be sufficient carryover to meet customer needs in 2019-20. No delivery of metro water or other emergency supply water is planned for 2019-20.

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Staffing

Our staffing levels are expected to remain consistent with 2018-19.

Inflation

Our financial plans have been prepared in nominal dollars of the day, which are calculated with 2019-20 inflation at 1.5% and 2.3% inflation applied thereafter.

Cost of debt

Our Balance Sheet records an ongoing debt position for the corporation. As has been our approach in the past, we plan our interest costs as the weighted average of existing fixed interest obligations and the spot interest rate applicable at the time of completing the Corporate Plan. Accordingly, we have assumed an interest charge of 4.3% for 2019-20 – increasing to 5.3% across the balance of the planning period. The increase to 5.3% takes a prudent view that interest rates may increase in future periods.

Rate of return

A 4.13% real rate of return has been incorporated within our calculation of revenue requirement. This rate is consistent with that used by the Essential Services Commission for the draft 2018-23 Price Determination.

Construction costs

Our future capital budgets assume that infrastructure construction costs will increase at CPI.

Labour rates

We have assumed an increase in labour rates above CPI as a result of the enterprise agreement concluded in 2018.

Electricity costs

As most of our water supply is gravity-fed, our electricity costs are mostly for office use and accordingly represent a minor expense for the corporation. We expect to manage electricity price movements within our general basket of external costs.

Fuel prices

While we have an extensive fleet of 130 vehicles, we have not adjusted budgets for any real change to fuel prices. As with other speculative price changes, we expect to manage any cost change within our general basket of external costs.

83

Sensitivity analysis

Overview

This section summarises the financial impacts of alternative water supply and demand scenarios.

At the outset we note that, as a rural water corporation, we do not operate in a conventional utility regime – where the utility supplies water to meet the demand of its customers. Rather, our customers own their entitlements and our role is to deliver the water available to them under those entitlements when they order it, or in the case of Groundwater and Rivers customers, to ensure that the entitlements are exercised in accordance with conditions imposed to protect the environment and other users.

Consequently, most of our revenue is derived from charges for water entitlements, and is not dependent on how much water is available to, or used by, the holders of those entitlements.

Macalister Irrigation District

In the MID, water usage is charged at $9.95 per megalitre, and accounts for approximately 12% of our revenue. This Plan assumes ‘average’ water allocations and water deliveries based on recent years, that is, 147,500ML of water deliveries. A repeat of 2006-07, the worst year on record, would see usage limited to 50% of high reliability water entitlement – around 72,000ML.

This would decrease our revenue by $720k, which we would need to recover through future tariff increases.

Werribee Irrigation District

Our pricing for the Werribee Irrigation District does not include a variable usage charge for river water supplied against water shares. This recognises the highly variable nature of the Werribee catchment.

Long-term recycled water contracts have been established for Werribee customers and these contracts include a 50% ‘take or pay’ obligation. However, on average, we expect to deliver to customers 65% of contracted volume, and water pricing has been established on this basis. Should conditions be wetter than average, it is likely that our revenue will be limited to the 50% take or pay obligation, and pricing will fail to recover our costs by approximately $200k. In a dry year, we will recoup this deficit as deliveries will exceed 65%.

This Plan is based on 65% recycled water usage, which generates a break-even result.

Bacchus Marsh Irrigation District

As with Werribee, our pricing for the Bacchus Marsh Irrigation District does not include a variable usage charge for river water supplied against water shares.

This recognises the highly variable nature of the Werribee catchment. As with Werribee, we recently consulted with the customer committee on the possibility of reintroducing a usage charge, and this option was rejected.

84

Groundwater and Rivers: Applications

Applications for new groundwater and surfacewater licences are subject to ongoing volatility (influenced by factors such as seasonal conditions). We believe the level of revenue at risk from the budgeted $1.2m is $250k.

Groundwater and Rivers: Field Compliance

Our annual tariffs for groundwater and surfacewater licences comprise a fixed charge per licence and an entitlement component (per ML). This does not expose us to any revenue risk from seasonal conditions.

Latrobe, Werribee and Maribyrnong Bulk Entitlements

Our Headworks business operates storages on behalf of bulk entitlement holders. Our charges are based on the actual costs of operating and maintaining those storages – and so do not expose us to any revenue risk from seasonal conditions.

Specific issues

Modernisation works

Our financial projections are based on significant modernisation works occurring in the Macalister, Werribee and Bacchus Marsh irrigation districts. A total program of just over $100m has been supported by the Victorian Government, the Australian Government and our irrigation customers. Macalister works are fully funded to the end of Phase 1B, and two-thirds of Werribee and Bacchus Marsh funding has been secured.

As the final third contribution towards Werribee and Bacchus Marsh ($15m) has not been secured, we have not included this part of the modernisation works within the Corporate Plan.

The federal government has announced $31m (half) funding for the MID2030 Phase 2 modernisation works. As a project funding agreement is not yet finalised, this project is not costed in this Corporate Plan. It is expected that funding agreements will be finalised with SRW, the state government and the federal government during 2019. No major expenses on Phase 2 are expected in 2019-20. Final funding arrangements will be included in the SRW’s 2020-21 Corporate Plan.

Sensitivity analysis Consistent with the business plan proposed by SRW, should a funding agreement be concluded whereby MID customers contribute $21m towards the MID2030 Phase 2 project, the projected SRW financial position at the conclusion of the project will include additional debt funding and associated interest costs. If works conclude by June 2023, SRW’s cash interest cover at June 2023 is projected to be 2.65 as a result of annual interest costs increasing to $4.4m and debt to $81.5m ($1.0m and $23.5m respectively more than the 2019-20 Corporate Plan).

85

Asset valuations

Our Operating Statement and Balance Sheet are prepared in accordance with accounting standards and financial reporting directions, under which our infrastructure assets are carried at their depreciated replacement value.

In accordance with state government requirements, our infrastructure and land assets are subject to revaluation every five years, and were last restated at 30 June 2016.

Our prices have been determined in accordance with the pricing principles established in the Water Industry Regulatory Order 2003 (WIRO), and revenue has been subject to determination by the Essential Services Commission. This determination has reflected the White Paper position with regard to past investments, and established our regulatory asset value to be zero as at 1 July 2004. Under the WIRO pricing principles we are therefore unable to generate any return on assets constructed or acquired prior to 1 July 2004.

Repaying deficits and building resilience

In order to avoid cross-subsidisation between our customer groups, we maintain an ongoing record of annual results, which is represented by the various fund balances held for each customer group.

In the past, our irrigation businesses tended to operate in deficit as a result of revenue volatility in times of drought.

We also incurred significant upfront costs in establishing the recycled water scheme, and we have set recycled water prices to recover these costs over 20 years.

The introduction of unbundling, and the decision to cease usage charges in Werribee and Bacchus Marsh has reduced our revenue risk. Coupled with favourable seasonal results, and the implementation of our operating cost reduction strategy, all irrigation deficits have now been repaid. Our approved prices are now building some resilience in our businesses to absorb unforeseen cost and revenue changes, as well as generate operating surpluses to contribute towards the cost of modernisation.

86

Operating statement


Revenue

Fixed annual charges 28,927 29,264 30,117 30,729 31,387 32,074 Usage charges 2,133 1,864 1,873 1,882 1,892 1,902

Application fees 1,215 1,306 1,325 1,345 1,364 1,396 Recoverable works charges 389 322 904 647 778 837

Other revenue 846 460 470 480 490 499 Sale of assets 2,372 6,980 2,105 1,505 1,460 1,250

35,882 40,196 36,794 36,588 37,371 37,958

Expenses

Employee related expenditure 15,184 15,914 16,234 16,229 16,222 16,430 Other operating costs 9,939 8,710 8,086 8,106 8,127 8,228

Other project costs 1,171 208 243 242 241 237 Recycled water supply 1,362 1,385 1,417 1,450 1,483 1,517

Environmental contribution 561 590 604 618 632 646 Recoverable works 389 322 904 647 778 837 WDV of assets sold 750 2,294 1,050 750 750 750

29,356 29,423 28,538 28,042 28,233 28,645

Earnings before interest, taxes and depreciation 6,526 10,773 8,256 8,546 9,138 9,313

Depreciation on regulated asset

value 3,914 4,485 4,721 4,529 4,629 4,679 Financing charges 1,552 2,555 3,555 3,489 3,349 3,321

Profit before taxes and statutory depreciation 1,060 3,733 (20) 528 1,160 1,313

Additional statutory

depreciation 11,035 11,081 11,093 12,534 12,534 12,534 Income tax credit (3,050) (2,204) (3,334) (3,602) (3,412) (3,366)

Net loss (6,925) (5,144) (7,779) (8,404) (7,962) (7,855)

87

Balance sheet

Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 Forecast Budget Budget Budget Budget Budget $'000 $'000 $'000 $'000 $'000 $'000

Assets

Current assets Cash assets 6,649 1,318 1,191 950 1,072 948 Receivables 5,748 5,149 5,052 5,004 5,064 5,138

Other 447 447 447 447 447 447

Total current assets 12,844 6,914 6,690 6,401 6,583 6,533

Non-current assets

Property, plant & equipment 1,290,861 1,300,300 1,407,135 1,394,553 1,380,323 1,371,640

Total non-current assets 1,290,861 1,300,300 1,407,135 1,394,553 1,380,323 1,371,640

Total assets 1,303,705 1,307,214 1,413,825 1,400,954 1,386,906 1,378,173

Liabilities

Current liabilities Debt payable within one year 3,900 4,400 4,200 4,300 4,400 4,400

Payables 6,628 3,009 1,512 2,155 2,474 2,940 Provision for employee

benefits 4,880 5,283 5,741 6,213 6,700 7,201

Total current liabilities 15,408 12,692 11,453 12,668 13,574 14,541

Non-current liabilities Long term debt 46,700 56,600 59,300 57,200 53,600 55,100

Provision for employee benefits 203 220 239 259 279 300

Deferred tax liabilities 212,805 210,601 241,840 238,238 234,826 231,460

Total non-current liabilities 259,708 267,421 301,379 295,697 288,705 286,860

Total liabilities 275,116 280,113 312,832 308,365 302,279 301,401

Net assets 1,028,589 1,027,101 1,100,993 1,092,589 1,084,627 1,076,772

Equity Contributed capital 459,123 462,779 463,779 463,779 463,779 463,779

Asset revaluation reserve 557,300 557,300 637,971 637,971 637,971 637,971 Retained profits 12,166 7,022 (757) (9,161) (17,123) (24,978)

Total equity 1,028,589 1,027,101 1,100,993 1,092,589 1,084,627 1,076,772

88

Statement of cash flow


Cash flow from operating activities Receipts from customers 34,982 35,244 35,540 35,886 36,561 37,134

Payments to suppliers & employees (26,206) (27,016) (26,687) (24,695) (24,910) (25,961) Interest & bill discount received / (paid) (1,504) (2,555) (3,555) (3,489) (3,349) (3,321)

Net cash provided by operating activities 7,272 5,673 5,298 7,702 8,302 7,852

Cash flows from investing activities Payments for property, plant & equipment (56,300) (30,610) (10,275) (6,693) (5,430) (10,226)

Proceeds from sale of property, plant & equipment 750 5,550 1,350 750 750 750

Net cash used in investing activities (55,550) (25,060) (8,925) (5,943) (4,680) (9,476)

Cash flow from financing activities Proceeds from contributed capital 26,266 3,656 1,000 - - -

Repayment of debt (1,530) (3,900) (4,400) (4,200) (4,300) (4,400) New debt facilities 23,660 14,300 6,900 2,200 800 5,900

Net cash provided by financing activities 48,396 14,056 3,500 (2,000) (3,500) 1,500

Net increase/ decrease cash held 118 (5,331) (127) (241) 122 (124)

Cash at beginning of the year 6,531 6,649 1,318 1,191 950 1,072

Cash held at the end of the year 6,649 1,318 1,191 950 1,072 948

Financial performance indicators


Internal financing ratio 12.9% 18.5% 51.6% 115.1% 152.9% 76.8% Gearing ratio 3.9% 4.7% 4.5% 4.4% 4.2% 4.3%

Interest cover - cash 5.8 3.2 2.5 3.2 3.5 3.4 Current ratio 83.4% 54.5% 58.4% 50.5% 48.5% 44.9%

Return on assets (0.3%) 0.0% (0.2%) (0.3%) (0.2%) (0.2%) Return on equity (0.7%) (0.5%) (0.7%) (0.8%) (0.7%) (0.7%) EBITDA margin 18.2% 26.8% 22.4% 23.4% 24.5% 24.5%

89

Quarterly financial statements

Quarterly operating statement

Sep-19 Dec-19 Mar-20 Jun-20 $'000 $'000 $'000 $'000

Revenue

Fixed annual charges 7,378 7,371 7,229 7,286 Usage charges 124 496 786 458

Application fees 327 326 326 327 Recoverable works charges 19 25 168 110

Other revenue 115 114 114 117 Sale of assets 1,386 1,388 2,818 1,388

9,349 9,720 11,441 9,686

Expenses

Employee related expenditure 3,676 4,281 3,676 4,281 Other operating costs 2,160 2,187 2,203 2,160

Other project costs 52 52 53 51 Recycled water supply 62 441 441 441

Environmental contribution - 295 - 295 Recoverable works 19 25 168 110 WDV of assets sold 572 574 574 574

6,541 7,855 7,115 7,912

0

Earnings before interest, taxes and depreciation 2,808 1,865 4,326 1,774

Depreciation on regulated asset

value 1,099 1,110 1,121 1,155 Financing charges 616 718 612 609

0

Profit before taxes and statutory depreciation 1,093 37 2,593 10

Additional statutory depreciation 3,056 3,103 3,155 1,767 Income tax credit (551) (551) (551) (551)

Net loss (1,412) (2,515) (11) (1,206

90

Quarterly balance sheet

Sep-19 Dec-19 Mar-20 Jun-20 $'000 $'000 $'000 $'000

Assets

Current assets Cash assets 1,255 1,272 1,283 1,318 Receivables 10,922 8,160 2,348 5,149

Other 447 447 447 447

Total current assets 12,624 9,879 4,078 6,914

Non-current assets

Property, plant & equipment 1,300,531 1,300,006 1,297,815 1,300,300

Total non-current assets 1,300,531 1,300,006 1,297,815 1,300,300

Total assets 1,313,155 1,309,885 1,301,893 1,307,214

Liabilities

Current liabilities Overdraft 17,300 17,800 8,300 4,400 Payables 3,018 2,204 2,042 3,009

Provision for employee benefits 4,975 5,080 5,176 5,283

Total current liabilities 25,293 25,084 15,518 12,692

Non-current liabilities Long term debt 46,700 46,700 46,700 56,600

Provision for employee benefits 207 212 216 220 Deferred tax liabilities 212,254 211,703 211,152 210,601

Total non-current liabilities 259,161 258,615 258,068 267,421

Total liabilities 284,454 283,699 273,586 280,113

Net assets 1,028,701 1,026,186 1,028,307 1,027,101

Equity Contributed capital 460,647 460,647 462,779 462,779

Asset revaluation reserve 557,300 557,300 557,300 557,300 Retained profits 10,754 8,239 8,228 7,022

Total equity 1,028,701 1,026,186 1,028,307 1,027,101

91

Quarterly statement of cash flow

Sep-19 Dec-19 Mar-20 Jun-20 $'000 $'000 $'000 $'000

Cash flow from operating activities

Receipts from customers 2,788 11,096 15,866 5,494 Payments to suppliers & employees (6,492) (6,836) (6,462) (7,256)

Interest & bill discount received / (paid) (617) (718) (612) (608) Net cash provided by operating activities (4,291) 3,542 8,792 (2,370)

Cash flows from investing activities

Payments for property, plant & equipment (17,414) (5,413) (2,800) (4,983) Proceeds from sale of property, plant &

equipment 1,387 1,388 1,387 1,388

Net cash used in investing activities (16,027) (4,025) (1,413) (3,595)

Cash flow from financing activities

Proceeds from contributed capital 1,524 - 2,132 - Repayment of debt - (450) - (3,450) New debt facilities 13,400 950 (9,500) 9,450

Net cash provided by financing activities 14,924 500 (7,368) 6,000

Net increase/ decrease cash held (5,394) 17 11 (148)

Cash at beginning of the period 6,649 1,255 1,272 1,283

Cash held at the end of the period 1,255 1,272 1,283 1,318

Quarterly financial performance indicators

Sep-19 Dec-19 Mar-20 Jun-20 Budget Budget Budget Budget

Internal financing ratio -24.6% 65.4% 314.0% -47.6% Gearing ratio 4.9% 4.9% 4.2% 4.7%

Interest cover - cash (6.0) 5.9 15.4 (2.9) Current ratio 49.9% 39.4% 26.3% 54.5%

Return on assets (0.0%) (0.1%) 0.1% 0.0% Return on equity (0.1%) (0.2%) (0.0%) (0.1%) EBITDA margin 30.0% 19.2% 37.8% 18.3%

Appendices

93

Detailed tariff schedule

18-19 19-20 20-21 21-22 22-23 23-24

ANNUAL CHARGESIrrigation / Regulated Systems

Macalister Irrigation / Macalister and Thomson Regulated SystemsMacalister/Thomson Water Share - High Reliability 12.90 13.10 13.40 13.70 14.00 14.40 Macalister/Thomson Water Share - Low Reliability 6.45 6.55 6.70 6.85 7.00 7.20 MID Delivery Share 5,255.00 5,335.00 5,455.00 5,585.00 5,710.00 5,845.00 MID Service Point - Metered Outlet 1 208.50 212.00 216.50 221.50 226.50 232.00 Macalister/Thomson/MID Service Point - Metered Pump 1 109.50 111.00 113.50 116.00 119.00 121.50 Macalister/Thomson/MID Service Point - Unmetered 1 48.75 49.50 50.75 51.75 53.00 54.25 Macalister/Thomson/MID Usage 9.95 9.95 9.95 9.95 9.95 9.95 MID Casual Use 53.90 54.70 55.90 57.20 58.50 59.90 MID Drainage Diversion Entitlement & Sales 2 19.35 19.65 20.10 20.55 21.00 21.50 Salinity mitigation 3 0.55 0.55 0.55 0.55 0.60 0.60

Werribee and Bacchus Marsh Irrigation / Werribee Regulated SystemWerribee System Water Share - High Reliability 127.00 129.00 132.00 135.00 138.00 141.50 Werribee System Water Share - Low Reliability 63.50 64.50 66.00 67.50 69.00 70.75 WID Delivery Share 15,180.00 15,410.00 15,760.00 16,120.00 16,490.00 16,870.00 BMID Delivery Share 10,870.00 11,350.00 11,950.00 12,580.00 13,240.00 13,940.00 WID Service Point - Metered Outlet 1 234.00 237.00 243.00 248.00 254.00 260.00 Werribee System/WID Service Point - Metered Pump 1 117.00 118.75 121.50 124.25 127.25 130.25 Werribee System/WID Service Point - Unmetered 1 58.50 59.25 60.75 62.00 63.50 65.00 BMID Service Point - Metered Outlet 1 204.00 213.00 224.00 236.00 249.00 262.00 BMID Service Point - Metered Pump 1 102.00 106.75 112.25 118.25 124.50 131.00 BMID Service Point - Unmetered 1 52.25 54.75 57.50 60.50 63.75 67.00 WID Casual Use 239.00 243.00 248.00 254.00 260.00 266.00 BMID Casual Use 256.00 268.00 282.00 297.00 312.00 329.00 WID Drainage Diversion Entitlement & Sales 2 112.00 113.50 116.00 119.00 121.50 124.50 WID recycled water contracted volume 349.00 354.00 362.00 371.00 379.00 388.00 WID recycled water sales 2 279.00 283.00 289.00 296.00 303.00 310.00 WID recycled water uncontracted use 645.00 655.00 670.00 685.00 700.00 715.00

Unregulated surface and groundwaterLicence Charges

Take and Use Licence 368.00 365.00 365.00 364.50 364.50 364.50 Operating Licence - Decontamination Bore & Hazardous Dam 238.50 236.50 236.50 236.50 236.50 236.00

Licensed Volume ChargesSurface Water Licensed Volume & Sales - Standard 2 11.80 11.70 11.70 11.70 11.70 11.70 Surface Water Licensed Volume - Offstream Winterfill 8.26 8.19 8.19 8.19 8.19 8.19 Aquaculture Diversion Rate 78.25 77.50 77.50 77.50 77.50 77.50 Groundwater Licensed Volume 4.05 4.00 4.00 4.00 4.00 4.00

System Management ChargesSurface Water - Thorpdale 4, 5 9.50 9.40 9.40 9.40 9.40 9.40 Surface Water - Latrobe System 4, 6 11.40 11.35 11.30 11.30 11.30 11.30 Surface Water - Maribyrnong 4,7 51.00 50.50 50.50 50.50 50.50 50.50 Groundwater - Deutgam 4 27.10 26.90 26.90 26.90 26.90 26.80 Salinity mitigation 4, 8 0.55 0.55 0.55 0.55 0.60 0.60 Groundwater control pump usage 25.25 25.75 26.25 27.00 27.50 28.25

NotesTariff and Price Component Indicative price ($)*Price ($)

94

18-19 19-20 20-21 21-22 22-23 22-23

APPLICATION FEESIrrigation District

Application to amend district boundary 1,175.00 1,190.00 1,220.00 1,250.00 1,275.00 1,305.00 Applications relating to Delivery Shares, Water Use Licences and Registrations, and Drainage Diversion Agreements

237.50 242.50 247.50 252.50 260.00 265.00

Issue of Take and Use or Underground Disposal LicenceFixed component - Domestic & Stock 752.50 765.00 782.50 800.00 817.50 837.50 Fixed component - volume up to 20ML 1,645.00 1,670.00 1,705.00 1,745.00 1,785.00 1,825.00 Fixed component - medium impact 2,070.00 2,100.00 2,150.00 2,200.00 2,250.00 2,305.00 Fixed component - high impact 3,335.00 3,385.00 3,465.00 3,540.00 3,625.00 3,705.00 Volumetric component 20.30 20.60 21.10 21.60 22.10 22.60 Water availability assessment 112.00 113.75 116.25 119.00 121.75 124.50

Amendment/Amalgamation of LicenceLicence amendment - significant 555.00 562.50 575.00 587.50 602.50 615.00 Licence amendment - minor 122.00 124.00 126.50 129.50 132.50 135.50

Transfer of LicenceSimple transfer (repeat temporary transfer or sale of property) 122.00 124.00 126.50 129.50 132.50 135.50 Low impact transfer (up to 20ML or amalgamation) 375.00 382.50 390.00 400.00 407.50 417.50 Medium impact transfer 805.00 815.00 835.00 855.00 870.00 890.00 High impact transfer 2,065.00 2,095.00 2,145.00 2,195.00 2,245.00 2,295.00

Construction Licences - NewContruct Farm Dam - not potentially hazardous and no engineering 965.00 980.00 1,005.00 1,025.00 1,050.00 1,075.00 Construct Farm Dam - potentially hazardous and no peer review 2,630.00 2,670.00 2,735.00 2,795.00 2,860.00 2,925.00 Construct Farm Dam - potentially hazardous, peer review or on-stream dam requiring a s.51 licence

5,445.00 5,525.00 5,655.00 5,785.00 5,915.00 6,050.00

Construct, alter or decommission class A or B bore 448.00 455.00 465.50 476.00 487.00 498.00 Construct, alter or decommission class C bore 1,280.00 1,300.00 1,330.00 1,360.00 1,395.00 1,425.00 Construct, alter or decommission class D bore 1,690.00 1,715.00 1,755.00 1,795.00 1,835.00 1,880.00 Construct additional investigation bore 101.50 103.00 105.50 108.00 110.50 113.00

Construction Licences - ExistingHazardous dam - Operating licence 1,320.00 1,340.00 1,375.00 1,405.00 1,435.00 1,470.00 Farm Dam - alter or decommission 745.00 760.00 775.00 795.00 810.00 830.00 Amend, renew or transfer works licence 122.00 124.00 126.50 129.50 132.50 135.50 Bore construction licence renewal 122.00 124.00 126.50 129.50 132.50 135.50

Private WorksPrivate works - domestic & stock pipe permit 320.00 325.00 332.50 340.00 347.50 355.00 Private works - other 620.00 630.00 645.00 660.00 675.00 690.00 Transfer licence to use works 237.50 242.50 247.50 252.50 260.00 265.00

GeneralApplications - additional assessment 132.00 134.00 137.50 140.50 143.50 147.00 Information Statement 112.00 113.50 116.00 119.00 121.50 124.50 Information report - mail out or standard 395.00 402.50 412.50 420.00 430.00 440.00 Information report - short 112.00 113.50 116.00 119.00 121.50 124.50 Information report - complex 1,230.00 1,250.00 1,280.00 1,305.00 1,335.00 1,370.00 Special meter reading 112.00 113.50 116.00 119.00 121.50 124.50 Diversion works on Crown lands 330.00 335.00 342.50 350.00 357.50 367.50

Notes to the above table are detailed on the next page.

Tariff and Price Component Notes Price ($) Indicative prices ($)

95

Notes to tariff schedule

NOTES

* These charges are subject to a revenue cap. The proposed annual price path is only indicative and actual annual price changes will be subject to constraints specified in the annual price adjustment formula.

** A number of application fees have been restructured, and so more than one fee may have previously been applicable for these transactions.

1 Shared service points charged at 80% of the full rate.

2 "Sales" charges apply to usage in excess of annual entitlement volume.

3 Salinity mitigation charged on usage recorded for the prior season.

4 Charge per ML of entitlement, in addition to standard or winterfill licenced volume charge.

5 Applies to licences on the Narracan, Ten Mile and Wilderness Creeks and their tributaries.

6 Applies to licences downstream of Blue Rock Lake.

7 Applies to licences downstream of Rosslynne Reservoir.

8 Applies to extraction from rivers, streams and deep bores in the following parishes: Bundalaguah, Coongulla, Dension, Glenmaggie, Maffra, Nuntin, Sale, Tinamba, Wa De Lock, Toongabbie North, Toongabbie South, Winnindoo, Wooundellah, Wurruk Wurruk.

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