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2020-21ANNUAL REPORT

EVERYDAYPEOPLE

2

Traditional Owners AcknowledgementCentral Highlands Water acknowledges the Traditional Owners/Peoples of the land on which we operate including Dja Dja Wurrung, Wadawurrung, Wurrundjeri Woi Wurrung, Tjap Wurrung, and Wotjobaluk, Jaadwa, Jadawadjali, Wergaia and Jupagulk Peoples.

We pay our respect to the Elders of these communities past, present and emerging, acknowledging that they have been custodians of land and water for many centuries and that their continuing culture and contribution is important to the life of the region.

Service area

0 9.5 19 Kilometres4.75

Dean

Avoca

Gordon

Ballan

Lexton

Waubra

Linton

Dereel

Clunes

Redbank

Navarre

Skipton

Enfield

Rokewood

Creswick

Bung Bong

Blackwood

Smythesdale

Landsborough

Amphitheatre

Snake Valley

Ballarat

Maryborough

Scarsdale Napoleons

BuninyongPittong

WallaceBungaree

Havelock

Bowenvale

Daisy Hill

Timor

Alma

Craigie

Talbot

Hepburn Springs

Broomfield

Miners Rest

Carngham Haddon

Learmonth

Burrumbeet

Newlyn

Kingston

Smeaton

Beaufort

Majorca

Corindhap

Daylesford

LakeBurrumbeet

TullaroopReservoir

LakeLearmonth

Lal LalReservoir

MooraboolReservoir Colbrook

Reservoir

DeanReservoir

CosgraveReservoir

White SwanReservoir

Gong Gong Reservoir

KirksReservoir

WilsonsReservoir

BullartoReservoir

WombatReservoir

Hepburn Reservoir

CentenaryReservoir

LeadDam

TalbotReservoir

EvansfordReservoir

LextonReservoir

SugarloafReservoir

LEGENDWater pipeline

Recycled water

Major road

Wastewater treatment plant

Water treatment plant

Lake and reservoir

Water district

Sewer district

Raglan

Central Highlands Water 2020-21 Annual Report 3

About this reportThis annual report details Central Highlands Water’s operational and financial performance during 2020-21. It has been prepared in accordance with the relevant Ministerial Reporting Directions, Financial Reporting Directions and Financial Reporting Directions FRD30D – Standard Requirements for the Publication of Annual Reports.

The CorporationCentral Highlands Region Water Corporation is a statutory body and is one of 19 state-owned water businesses in Victoria operating under the guidance of the Water Act 1989 (Vic). We operate in accordance with a Statement of Obligations issued by the Minister for Water, pursuant to the Water Industry Act 1994 (Vic). Central Highlands Water’s Board reports to the Minister for Water via the Department of Environment, Land, Water and Planning (DELWP). Our pricing and service standards are regulated by the Essential Services Commission (ESC), Victoria’s economic regulator of prescribed essential utility services.

The Minister responsible for Central Highlands Water for the period 1 July 2020 to 30 June 2021 was The Hon. Lisa Neville MP, Minister for Water, with The Hon. Richard Wynne MP as acting Minister for Water from 15 February 2021 to 30 June 2021.

Contents

Traditional Owners Acknowledgement 2

Service area map 2

About this report 3

The Corporation 3

Responsible Body Declaration 3

PART 1 THE YEAR IN REVIEW

About Us 4

Message from our Chair and Managing Director 5

At a Glance 6

Urban Water Systems Serviced by CHW 6

Summary of Financial Results 7

Strategic Framework 8

Key Initiatives and Projects 9

Key Priorities – Letter of Expectations 10

PART 2 CORPORATE REPORT 16

PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE 28

PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 31

PART 5 PERFORMANCE REPORT 41

Victorian Auditor-General’s Report (VAGO) 46

PART 6 FINANCIAL REPORT 46

Comprehensive Operating Statement 46

Balance Sheet 47

Cash Flow Statement 48

Statement of Changes in Equity 49

Notes to the Financial Statements 50

Declaration in the Financial Statements 89

Victorian Auditor-General’s Report (VAGO) 90

PART 7 DISCLOSURE INDEX 92

Additional copies This annual report is available for viewing or download from Central Highlands Water’s website, www.chw.net.au

To minimise our impact on the environment, we will not print hard copies of this report and encourage you to view this report online. If you require an electronic version of this report, please contact Central Highlands Water at:

Email: [email protected] Phone: 1800 061 514 Post: PO Box 152 Ballarat Vic 3353 In person: 7 Learmonth Rd Wendouree Vic 3355

ABN: 75 224 340 348

ISSN: 2203-9503 (Print) ISSN: 2203-9511 (Online)

© State of Victoria, Central Highlands Water 2021. This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968.

Cover image: Ronak Patel (Chemist), Andrew Harris (Field Services Team Leader), Alisha Bedggood (People, Safety & Wellbeing Acting Manager) and Peter Field (Catchments & Partnerships Senior Planner).

Responsible Body DeclarationIn accordance with the Financial Management Act 1994, I am pleased to present Central Highlands Water’s Annual Report for the year ending 30 June 2021.

Dr Jeremy Johnson AM Chair Central Highlands Region Water Corporation

29 September 2021

mailto:[email protected]

4 PART 1 THE YEAR IN REVIEW

Our VisionOur Water, Our Customers, Healthy Living

Our MissionTogether, we provide quality water and wastewater services, safely, efficiently and sustainably to communities in the Central Highlands region.

Our ValuesIntegrity Teamwork Leadership Care

Central Highlands Water (referred to as CHW or the Corporation in this report) is a regional water corporation providing drinking water, sewerage, trade waste and recycled water services to customers throughout the Central Highlands region of Victoria.

Our regionCHW services a large geographical region of 9,275 square kilometres and manages 15 distinct water supply systems and 13 wastewater systems in the local government areas of Ballarat, Central Goldfields, Golden Plains, Hepburn, Pyrenees, Northern Grampians, Moorabool and Corangamite.

Our servicesCHW provides water supply and sewerage services through 74,388 water supply connections and 64,217 wastewater service connections to 157,466 residents throughout the Central Highlands region.

Our core functions are:

Water supply

• collect, store, treat, transfer and distribute water

• manage and protect the water supply system

• identify current and future water needs

• develop and implement programs for the conservation and efficient use of water

• educate the public about the water supply.

Sewerage

• efficient collection, transfer, treatment and disposal of sewage

• identify current sewerage needs and plan for future needs

• develop and implement programs for the recycling and reuse of treated wastewater

• investigate, promote and conduct research into the provision of sewerage services.

Trade waste

• partner with industrial and commercial customers, and the community, to provide environmentally friendly operating systems for the delivery, treatment and disposal of trade waste.

Recycled water

Provide recycled water that supports us to:

• reduce demand on our water catchments

• help us save a significant amount of drinking water

• reduce the amount of wastewater discharged to regional waterways

• provide a safe, alternative water source for gardening, irrigation of public parks, golf courses, sporting ovals and recreational lakes.

CHW performs these functions in an environmentally sound way, recognising the need to preserve landscape, fauna and flora.

ABOUT US

PART 1

THE YEAR IN REVIEW

PART 1 THE YEAR IN REVIEW 5Central Highlands Water 2020-21 Annual Report

On behalf of the Central Highlands Water (CHW) Board and all staff, we are pleased to present our 2020-21 Annual Report.

Firstly, we acknowledge the Traditional Owners of the land on which we operate including Dja Dja Wurrung, Wadawurrung, Wurrundjeri Woi Wurrung, Tjap Wurrung, and Wotjobaluk, Jaadwa, Jadawadjali, Wergaia and Jupagulk Peoples.

We look forward to continuing the positive relationships we have developed with Traditional Owners and Aboriginal and Torres Strait Islander Peoples as we continue to implement our Reflect Reconciliation Action Plan and finalise and implement our Innovate Reconciliation Action Plan.

Despite the severe and continuing impact of the coronavirus (COVID-19) pandemic, CHW has continued to support our mission to provide quality water and wastewater services, safely, efficiently and sustainably to communities in the Central Highlands region over the last 12 months.

In addition, we have offered our customers support during this difficult time with a range of measures including a small business assistance program and the expansion of our ongoing customer support program for those in need or hardship. The pandemic also continued to challenge the way we work and deliver our services. This included multiple closures of our customer service counters in Ballarat and Maryborough, deferral of our training programs and the requirement for most of our workforce to work from home.

It is pleasing to note that the systems and processes put in place in the early stages of the pandemic have enabled the ongoing safety and reliability of essential water and sewer services to all of our 15 supply systems. We would like to recognise and thank our key stakeholders, especially the Department of Environment, Land, Water and Planning, for its support and guidance through this difficult time.

Despite the challenges, we have celebrated several major achievements in the past 12 months that have improved services for customers, reduced our environmental impact and provided economic benefit for our region and Victoria. These results are a testament to the professionalism and adaptability of our frontline teams, who continued to perform at very high levels.

As part of our ongoing service provision commitment during 2020-21, CHW invested $26.9 million across the region to build new, and replace ageing, water and sewer assets. Key projects including the commencement of the $25 million Ballarat Sewer Build legacy project, along with ongoing major upgrades of the Ballarat South Wastewater Treatment Plant. These projects will support Ballarat’s growth well into the future with the provision of reliable wastewater services.

Project planning for the Daylesford Goldfields Superpipe Interconnector is well advanced and approvals gained last year will mean this project can be tendered in late 2021. This project will play a key part in improving the Daylesford region’s reliable water supply, assisting the network to manage climate change and potential bushfire impacts.

In addition, in March this year, we moved our Maryborough office to a new High Street shop front location, focusing on our ongoing commitment to, and investment in, the Maryborough region. Maryborough represents our second largest water supply system with over 5,500 water connections.

As we move into a new financial year, we expect to face ongoing impacts from COVID-19. We will continue to monitor and respond to our emerging strategic challenges to ensure we remain relevant and sustainable. Firstly, we will respond to the changing needs and expectations of our customers and their desire to interact with us in a way that is convenient for them. This will include us continuing to adopt contemporary digital technologies, enabling us to deliver our customer promises faster and more efficiently and increase our self-serve capabilities.

We will also continue to grow our organisational culture to further embrace innovation and change, challenge thinking and explore opportunities to operate in a more efficient and effective manner. The global demand for skills in the areas of science, data and analytics, technology, engineering and mathematics is high. Similarly, adeptness in critical thinking, adaptable industry-specific knowledge and leadership are also highly sought after. Our workforce planning will continue to focus on attracting and retaining the expertise required to grow as an organisation and operate at a consistently high-level in an ever-changing environment.

As we close out the 2020-21 financial year, we are extremely proud of the resilience and adaptability displayed by our staff in the last 12 months and extend a sincere thanks to our fellow Board Directors for their support and guidance as we continue to focus on our customer and community needs for the year ahead.

MESSAGE FROM OUR CHAIR AND MANAGING DIRECTOR

Dr Jeremy Johnson AM Chair

Paul O’Donohue Managing Director


AT A GLANCE

Size, based on approximate number of water supply connections

Name of water supply system

Communities provided with water supply

Communities provided with sewerage service

Greater than 1,000 connections

Ballarat Ballan, Ballarat and immediate suburbs, Bungaree, Buninyong, Cardigan Village, Corindhap, Creswick, Dereel, Enfield, Gordon, Haddon, Linton, Miners Rest, Mount Egerton, Napoleons, Rokewood, Scarsdale, Skipton, Smythesdale, Snake Valley, Wallace

Ballan, Ballarat and immediate suburbs, Buninyong, Cardigan Village, Creswick, Enfield, Gordon, Miners Rest, Skipton, Smythesdale, Snake Valley

Maryborough Alma, Bet Bet, Carisbrook, Daisy Hill, Majorca, Maryborough, Talbot

Maryborough, Carisbrook

Daylesford Daylesford, Hepburn Daylesford, Hepburn

500 – 1,000 connections

Clunes Clunes Clunes

Beaufort Beaufort, Raglan* Beaufort

Avoca Avoca Avoca

Forest Hill Allendale, Broomfield, Newlyn, Kingston, Smeaton, Springmount

N/A

100 – 500 connections

Blackwood Barry’s Reef, Blackwood N/A

Lexton Lexton N/A

Landsborough Landsborough, Navarre N/A

Waubra Waubra Waubra

Learmonth Learmonth Learmonth

Less than 100 connections

Amphitheatre Amphitheatre* N/A

Redbank Redbank* N/A

Dean Dean N/A

Note:

* Regulated (non-drinking water) supply

URBAN WATER SYSTEMS SERVICED BY CHW

157,466total population

serviced

$124.3 Mcurrent operating

revenue

$1.563 Bvalue of infrastructure, property,

plant and equipment

190.6full-time equivalent

employees

30reservoirs

13diversion

weirs

34groundwater

bores

17bulk water

entitlements held

47service basins

and tanks

15,589 MLtotal water

supply volume

2,582 KMof water

mains

15water treatment

plants

41water pumping

stations

68,576residential water

connections

11,830 MLof wastewater

treated

1,514 KMof sewer

mains

13wastewater

treatment plants

103wastewater

pump stations

64,217wastewater connections

5,812non-residential

water connections

1,150 MLeffluent irrigated

to land

22major trade

waste customers


SUMMARY OF FINANCIAL RESULTS

Explanation for the summary of financial results CHW continued to perform strongly in 2020-21 delivering a profit after tax of $19.5 million, an increase of 23% on the prior year. Population growth and residential construction activity was the highest seen in many years leading to a significant increase in non-cash gifted assets.

Notwithstanding, this increase in connection numbers, service and usage charges increased only modesty due to a cooler summer period and service tariff reductions. Expenses declined 1% with lower costs across the networks, treatment plants and finance costs. After funding a significant capital investment program, total debt was reduced by $17 million. The five-yearly asset valuation undertaken by the Valuer General Victoria resulted in an increase to asset values of $367 million. This significantly impacted CHW’s financial position, increasing total equity to $1.3 billion.

Financial management compliance attestation statement I, Jeremy Johnson, on behalf of the Board, certify that the Central Highlands Region Water Corporation has no Material Compliance Deficiency with respect to the applicable Standing Directions of the Assistant Treasurer under the Financial Management Act 1994 and Instructions.


29 September 2021

2016-17$'000

2017-18$'000

2018-19$'000

2019-20$'000

2020-21$'000

Core business revenue 94,433 101,640 108,537 109,013 117,692

Government contributions 452 650 234 91 1,227

Other revenue 4,700 5,014 6,534 9,476 5,409

Total revenue 99,584 107,304 115,305 118,580 124,328

Operating expenditure 48,561 49,896 55,493 55,332 55,910

Depreciation expenditure 23,173 23,701 24,235 25,248 26,848

Finance costs 9,770 8,965 8,252 7,393 6,608

Other expenditure 6,221 6,901 8,019 7,957 7,055

Total expenditure 87,725 89,463 95,999 95,930 96,421

Net result before tax 11,859 17,841 19,306 22,650 27,907

Current assets 31,183 27,779 28,089 26,289 23,557

Non-current assets 1,174,411 1,185,628 1,203,056 1,221,928 1,608,259

Total assets 1,205,594 1,213,407 1,231,145 1,248,217 1,631,816

Current liabilities 31,777 36,165 39,082 36,291 42,722

Non-current liabilities 237,896 228,838 230,150 233,947 335,053

Total liabilities 269,673 265,003 269,232 270,238 377,775

Net cash flows from operations 28,702 32,750 30,039 36,090 37,478

Payments for property, plant and equipment (including infrastructure) 20,699 22,985 27,643 27,393 22,061


STRATEGIC FRAMEWORK

OUR VISION OUR WATER, OUR CUSTOMERS, HEALTHY LIVINGOUR MISSION Together, we provide quality water and wastewater services, safely, efficiently

and sustainably to communities in the Central Highlands region.

OUR VALUES Integrity Teamwork Leadership Care

OUR FOCUS 2021-23

INCREASING CUSTOMER VALUE AND SATISFACTIONWe will improve our ESC customer ratings by 20% and lift our relative ranking by 2023.

STRATEGIC PILLARS

SUSTAINABLE ENVIRONMENT AND WATER RESOURCESWe will ensure our community has sufficient water resources to live and invest with confidence while improving environmental outcomes.

CUSTOMER AND COMMUNITY We will engage and act on the voice of our customers to deliver exceptional experiences.

AGILE BUSINESS MODELWe will continually evolve our business model to provide the most efficient and effective 24/7 service.

SAFETY AND OUR PEOPLEWe will continue to develop a collaborative, safe and fair workplace team capable of meeting all future challenges.

KEY RESULT AREAS

• Environmental outcomes

• Climate change

• Water security

• Drinking water quality

• Infrastructure sustainability

• Customer

• Water efficiency

• Financial

• Governance

• Cyber and physical security

• Dynamic business model

• Safety

• Diversity and inclusion

• People strategy

• Leadership

SUPPORTINGTHE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS


KEY INITIATIVES AND PROJECTS

SUSTAINABLE ENVIRONMENT AND WATER RESOURCES(see Parts 1, 3, 4 and 5)

CUSTOMER AND COMMUNITY (see Parts 1, 2 and 5)

AGILE BUSINESS MODEL(see Part 6)

SAFETY AND OUR PEOPLE(see Parts 1 and 2)

• Ongoing delivery of safe water and wastewater services

• Updated the CHW Sustainability Framework

• Participant in the Large-Scale Renewable Energy Project (Zero Emissions Water)

• Initiated the Hepburn Shire Council (Daylesford & Hepburn Springs, Creswick and Clunes) Integrated Water Management Plan project

• Continued to maintain and provide public access to 12 accessible water storages and 3 reservoir parks

• Ongoing support of program to identify COVID-19 markers in sewage inflows

• Ongoing support of research projects in partnership with Federation University

• Ballarat’s Lal Lal Reservoir filled to capacity and spilled for the first time since 2016

• Partnership with Fifteen Trees saw over 1,000 trees planted

• Initiated CHW’s Carbon IDEAS program for staff-led carbon reduction initiatives

• Conducted Avoca community water quality forum

• Enhanced fishing access at Moorabool Reservoir

• Launched $25 million Ballarat Sewer Build project

• Annual Water Outlook report and video produced

• Maryborough’s Goldfields Reservoir water levels replenished

• Innovate Reconciliation Action Plan due for implementation

• Ongoing Customer Advisory Panel meetings

• Improved website functionality responding to customer demand for enhanced online services

• Ongoing support of vulnerable customers

• Delivered school education programs including the Schools Water Efficiency Program (SWEP)

• Delivered communication campaigns to assist and advise customers

• Continued to provide community support through the Customer Rebate Program and the Community Housing Retrofit Program

• Reviewed PR18 Customer Commitments to update 6 outputs and incorporate one new output

• Celebrated NAIDOC Week

• Moved Squirtle the Turtle to Maryborough playground

• Supported Federation Business School Awards for Excellence

• Continued community sponsorship program

• Undertook cultural burn and creation of scar tree with Wadawurrung Traditional Owners

• Reburial of Aboriginal artefacts at Gong Gong Reservoir Park

• New cultural heritage signs installed

• New CHW Maryborough office opened

• Kept all price rises to CPI or below in 2020-21

• Maintained proxy ‘A’ credit rating

• Organised TCV briefings within business

• Invested $26.9 million in capital improvements and programs

• Maintained the Incident Management Team to manage response to COVID-19 pandemic

• Developed a modernised hybrid working space with individual office pods

• Provided business continuity and ICT support services during the transition to hybrid working models

• Meeting room technology upgrades to support hybrid meetings

• Developed the 5-year 2021-22 Corporate Plan in accordance with DELWP guidelines

• Supported the Working for Victoria Environmental Taskforce with 10 positions

• Participated in 5 Intelligent Water Network (IWN) technology trials

• Updated procurement processes and thresholds

• Undertook review of strategic drivers with development of 3 organisation-wide priorities and 9 key initiatives

• Use of Rapid Impact System digital tool to assess storm damage across catchment areas

• Secondment from DELWP to assist with development of Urban Water Strategies

• Conducted Year 2 of the Learn Lead Grow leadership development program with a mix of online and in-person workshops

• Ongoing implementation of Diversity and Inclusion initiatives

• Safety culture maturity improved from ‘calculative’ to ‘proactive’ on the journey to ‘generative’

• Conducted 2 staff Pulse Surveys in response to the COVID-19 disruption

• Ongoing support and development of programs for staff including leave provisions, flexible working approaches, FAQs, counselling, one-on-one coaching and regular newsletters

• COVIDSafe plan on a page developed

• Emergency Management – bushfire and summer preparedness

• Exceptional teamwork response across CHW to asset damage and services during freak windstorm in June 2021

• Enterprise Bargaining process began

• Two staff participating in the Victorian Apprenticeship Recovery Program (VARP)

• Support of men’s and women’s proactive health initiatives during the year

• Supported Ballarat Careers Expo

• Attended Compassionate Ballarat events

CAPITAL EXPENDITURE Delivered $26.9 million of capital works in 2020-21. Some key projects delivered include:

• $5.2 million Ballarat South Wastewater Treatment plant augmentations and upgrades

• $3.5 million water and sewer main renewals

• $2.5 million Ballarat East Sewer duplication

• $1.8 million fleet, plant and equipment renewal

• $1.2 million land development

• $1.0 million Regional Roads Victoria prioritised renewal

• $0.9 million Maryborough Wastewater Reuse Scheme improvements

• $0.7 million ICT enhancements.

FUTURE PLANNING 2021-22 projected outcomes

• CPI (inflation rate): 1.1%

• Customer-driven tariff reform will continue during 2021-22 to deliver overall customer pricing outcomes at our below CPI since the current regulatory pricing period began in 2018

• Capital expenditure proposed $26.5 million.


This section reports on the Victorian Government’s key priorities for the water sector per MRD07 Letter of Expectations:

1. Climate change

2. Customer and community outcomes

3. Water for Aboriginal cultural, spiritual and economic values

4. Resilient and liveable cities and towns

5. Recognising recreational values

6. Leadership and culture

7. Financial sustainability

1. Climate Change CHW recognise climate change as an ongoing strategic risk. Accordingly, CHW has continued to prioritise its response through a combination of mitigation initiatives to limit the threat and adaptation measures designed to build resilience.

E2: Emission reduction

CHW committed to an Emission Reductions Pledge in March 2017 in support of Victoria’s target of zero net emissions by 2050. This pledge commits to a minimum 20% reduction in carbon emissions (relative to CHW’s 2011-12 to 2015-16 emissions baseline) by 2024-25. In line with this commitment, CHW is now generating up to 3,500 MWh of renewable energy from behind the meter solar. The solar panels located across 4 of CHW’s major sites, will reduce greenhouse gas emissions by 3,745 tonnes per year. In addition, CHW has entered into a Power Purchase Agreement (PPA) with Zero Emissions Water as a means of purchasing renewable energy and further reducing emissions.

E3: Climate adaptation

To ensure CHW’s resilience to future climate impacts and to take advantage of related opportunities, CHW has developed a Climate Change Adaptation Plan (CCAP). The CCAP aims to manage climate change risks to CHW and enhance CHW’s ability to carry out its statutory functions and meet the needs of its customers and shareholders now and into the future. The CCAP is aligned with the Water Services Association of Australia’s Climate Change Adaption Guidelines and supports CHW’s objectives, including:

• support the implementation of the State Government policy, including Water for Victoria and the Pilot Water Sector Climate Change Adaptation Plan

• reduce CHW’s vulnerability to the direct and indirect consequences of climate change

• build resilience to climate change impacts and extreme weather events

• innovate to take advantage of new and emerging opportunities presented by changes in our climate

• continuously grow CHW’s capacity and capability for adaptation.

CHW has also proudly contributed to the development of the Grampians Region Climate Adaptation Strategy 2021-25 as a member of the Grampians Region Climate Adaptation Group.

2. Customer and community outcomes

C1: Customer satisfaction

CR1 and CR4 are reported on in Part 5, Performance Report (see page 42).

C2: Customer and community engagement

In line with a commitment to meaningful engagement with customers, community and stakeholders, CHW continued to use the IAP2 framework in consultation programs with local communities, undertaking the following activities and initiatives during 2020-21.

Engagement programs

• Customer Advisory Panel

The Customer Advisory Panel continued with 3 meetings in 2020-21. This panel includes representatives from local government, local welfare support agencies, major customers, education sector, regional development, Traditional Owner groups and individual community members. The Customer Advisory Panel's purpose is directly aligned to the CHW strategic pillar ‘Customer and Community’. Leading, influencing, educating and engaging key stakeholders and the community is crucial to achieving long-term water security. Working to actively strengthen relationships to positively influence decision making at all levels remains vital.

• Stakeholder Engagement Plan

CHW communicates with a wide range of internal and external stakeholders in every aspect of its operations. To continually derive meaningful stakeholder engagement, strengthen relationships and reputation, as well as deliver on core programs and services, a strategic and consistent approach to stakeholder engagement is essential.

• Small-Town Water Quality Program

As part of the PR18 commitments for the 2018-23 period, a community engagement program was conducted with the Avoca community to collaboratively investigate potential water quality improvements. One-on-one conversations and survey feedback took place with community members and a public Water Quality Forum was also held on 26 April 2021. The forum provided information relating to water quality, water supply, long-term planning, water reuse and customer service. Attendees also took part in a ‘blind water taste test’ where they compared tastes and preferences on samples from Avoca and other communities in CHW’s service area. It was a good opportunity for CHW staff to meet a number of community members from family households, as well as community group representatives, who provided information regarding various areas of CHW services and expressed their thoughts and preferences regarding water quality and future planning.

Major community partnerships

CHW continued its partnership with the 2021 Ballarat Begonia Festival as the Major Community Partner. In 2021, the festival was diversified due to the COVID-19 pandemic. CHW attended the Gardeners’ Market, in partnership with Corangamite Catchment Management Authority (CCMA). Funds raised from the sale of reusable stainless-steel bottles were donated to WRISC Family Violence Support who provide support services for women and children experiencing family violence. CHW also ran an online competition for school and community groups to create a ‘Veggie Patch Pal’ as well as participated in the Floral Frame Trail, with a frame placed at Kirks Reservoir Park for the duration of the festival.

Online engagement

Website enhancements such as online forms, LiveChat and the applications and forms landing page were added to CHW’s new website, providing customers with online two-way communication tools.

KEY PRIORITIES – LETTER OF EXPECTATIONS


Innovate Reconciliation Action Plan (RAP)

CHW’s second RAP, Innovate, is due for release in October/November 2021. This RAP focusses on enhancing relationships, understanding and opportunities with the 5 Traditional Owner groups in the Central Highlands service region.

Ongoing engagement programs and initiatives

• Choose Tap Program

CHW continued the promotion of the Choose Tap program throughout the region, installing more drinking water fountains at public spaces and schools. An ongoing agreement has seen the installation of new fountains in the City of Ballarat, Central Goldfields and Moorabool Shire regions.

• School education program

In 2020-21, CHW engaged with kindergartens, primary schools and secondary schools across the region by:

– developing and distributing electronic educational materials via a quarterly newsletter (153 subscribers to 103 campuses)

– providing drinking water fountains

– developing water efficiency stickers and posters

– running themed tours and incursions for kindergartens, schools and community groups (164 students)

– running Begonia Festival competition across 10 early learning centres, primary schools and community groups

– hosting National Water Week poster competition entries and awards presentation (153 students)

– taking part in the National Water Week online learning festival in partnership with DELWP, AWA and 16 other water corporations.

• 2020 Ballarat Business Awards

CHW continued to support Commerce Ballarat, and their annual awards program, through sponsorship of the Connect Evolve Recover 2020 program.

• Working for Victoria

In partnership with CCMA, CHW employed 10 Working for Victoria taskforce members for 6 months in 2020. These people had lost their jobs due to the COVID-19 pandemic. The crews worked on a number of projects and featured in videos: Moorabool Reservoir enhanced fishing access and Willow control at Lal Lal Creek.

• Scar Tree creation

Wadawurrung Traditional Owners joined CHW staff to create a Scar Tree at Kirks Reservoir Park with a video produced to tell the story of the occasion. Interpretive signage will be added to explain the significance of the scar tree to the public.

• Ballarat Sewer Build

CHW commenced a major legacy project, duplicating the existing sewer line. As part of this $25 million infrastructure project, CHW has engaged with local traders, and the community, both during the planning stages of the project as well as throughout the critical central business district portion of construction. Stakeholders are regularly updated via a dedicated weekly e-newsletter, face-to-face communication, social media, news articles and a dedicated web page.

• Uniting – bathrooms and showers

Uniting Breezeway meals program upgraded its facilities in 2020-21, with community support. CHW provided funds for the upstairs wet area, including showers and toilets.

• Victorian Apprenticeship Recovery Program

CHW is proud to be one of the Government agencies involved in the Working for Victoria – Victorian Apprenticeship Recovery Program (VARP). CHW has worked closely with Ballarat Group Training in 2020-21 to recruit 2 trainees under the VARP Program. Mickitja Rotumah-Onus and Amber Cosmas commenced their 2-year traineeships in March 2021.

3. Water for Aboriginal cultural, spiritual and economic values

AC1 to AC3: Reconciliation Action Plan (reflecting engagement of Aboriginal communities and Traditional Owners)

CHW has progressed the development of its second Reconciliation Action Plan (RAP) through 2020-21. The proposed Innovate RAP is currently in the final phase of review and approval through Reconciliation Australia. It builds on the work of the Reflect RAP, seeking to build stronger linkages with Aboriginal and Torres Strait Islander Peoples, foster opportunities, celebrate culture and enhance care for Country and water.

While CHW’s Reflect RAP expired in February 2020, the organisation has continued to deliver initiatives outlined in, or aligned with, the plan through 2020-21. Key initiatives completed to support recognition and achievement of Aboriginal cultural values include:

• identification of, and care for, areas of significant cultural heritage on CHW managed sites

• creation of a contemporary scar tree in the Kirks Reservoir Park

• undertaking a cultural burn at Lal Lal in conjunction with Wadawurrung Traditional Owners

• completion of a cultural burn on in the Lal Lal reservoir catchment

• implementation of a social procurement strategy, including a focus on procurement from Aboriginal and Torres Strait Islander businesses. Actions undertaken to support the social procurement strategy include:

– procurement of ongoing land maintenance services in the Daylesford region with a Dja Dja Wurrung business enterprise

– procurement of Traditional Owner artwork

• sponsoring Aboriginal events and groups, including the sponsorship of cultural education initiatives in schools

• cultural training for staff and events to provide opportunities for growth and reflection as follows:

– Sorry Day, National Reconciliation Week and NAIDOC week events, including Aboriginal guest speakers and cultural training

– aboriginal cultural heritage and land use activity

• management of CHW’s first Heritage Strategy, which seeks to identify, protect and enhance local heritage values, Aboriginal and non-Aboriginal (over 900 known heritage sites on land under CHW management), and implementation of the supporting action plan to ensure the ongoing protection of heritage sites

• engagement of an Aboriginal and Torres Strait Islander trainee as part of a program to enable education and employment opportunities

• ongoing respectful and inclusive relationships with Traditional Owners and First Nations’ communities.


4. Resilient and liveable cities and towns

L1: Integrated Water Management (urban)

The Central Highlands Region Integrated Water Management (IWM) Forum is a collaborative approach involving all key organisations and agencies that play a role in water management within the region. The forum’s vision is “working together to leverage opportunities across the water cycle to deliver a healthy, resilient and prosperous future for the region and its communities”.

During 2020-21, CHW supported the forum and the delivery of key actions within the Central Highlands Strategic Direction Statement through:

• utilising internal resources and support to coordinate practitioner activities and Chair the forum

• completing investigative groundwater drilling to inform the longer-term strategic direction for potential Managed Aquifer Recharge projects in the Ballarat West and Ballarat North areas

• commencing the delivery of the Beaufort Closed Loop Recycled Water Scheme project, in partnership with Pyrenees Shire Council

• launching the Hepburn Shire (including Daylesford & Hepburn Springs) Integrated Water Management Plan and commencing stakeholder consultation

• working in partnership with City of Ballarat to further develop plans for Expanding Ballarat’s Alternative Water Network and Greening Wendouree Recreation Reserve

• working in partnership with the North Central Catchment Management Authority to deliver the Tullaroop Catchment Investment Framework for Environmental Resources report

• continuing to foster relationships, explore ideas, collaborate and seek joint funding with stakeholders across the region, and the broader industry, to improve and enhance integrated water management planning and deliver projects.

L2: Water Efficiency

Key achievements 2020-21:

• continued participation in the State Government Schools’ Water Efficiency Program (SWEP) across 34 schools

• continued collaboration with Smart Water Advice website, incorporating initiatives on CHW website and ongoing promotion through quarterly education newsletter

• maintained website links to ‘Target Your Water Use’ information

• continued to promote Permanent Water Savings Rules throughout the Central Highlands region

• continued to prepare for the introduction of digital water metering

• CHW community sponsorship program supports events where water efficiency messaging can be delivered.

L2 b measures

• Number of customers assisted by the Community Rebate Program: 99

• Number of customers assisted by the Community Housing Retrofit Program: 25

L3: Water bills (urban)

Victorian water bills are amongst the lowest in Australia

2019-20 Total residential bill

Central Highlands

Water ($)

National median for

relevant utility sized

grouping ($)*

Comment

L3 a) Average consumption

1,231 1,358 CHW 9% below national median

L3 b) 200 kL consumption

1,335 1,382 CHW 3% below national median

Note:

* Data from National performance report 2019-20: urban water utilities, part A (Bureau of Meteorology, February 2021) for utilities with 50,000-100,000 connected properties (n=12)

L4: Payment management and hardship

a. The total number of payment arrangements:

2019-20 2020-21

3,547 2,168

b. Number of customers awarded hardship grants: 11 See Part 4 – Environmental and Social Sustainability for more information about the hardship grants (Utility Relief Grant Scheme) on page 40.

5. Recognising recreational values

(Rec1: Recreational values – explicit inclusion of recreational values in planning and reporting activities)

In 2020-21, CHW delivered a Working for Victoria project, in partnership with the CCMA, designed to improve and enhance the communities' recreational use and access. This environmental taskforce upgraded recreational facilities and amenities at CHW parks, gardens and reservoirs open to public access. This aligned with the CHW Recreational Parks Masterplan which directly benefits individuals and community user groups in the Ballarat and Central Highlands region. The project accelerated key actions identified in the CHW Recreation Masterplan. Maintenance programs were brought forward and this had a direct benefit in a reduction of operational costs to CHW customers.

The project provided a unique opportunity to enhance the corporation’s recreational assets. The refurbishment and replacement of park facilities and experiences has a direct benefit to the public visitation experience for the Central Highlands communities. The development of enhanced access, for people with limited mobility, to the Moorabool Reservoir was completed in partnership with the Ballarat and District Anglers and improves recreational fishing, while protecting a potable water supply.

In 2020-21, CHW collaborated with the Moorabool Shire on the improvement of Lal Lal Falls Reserve through the removal of willow trees along the waterway above the waterfall, one of the most spectacular waterfalls in the Moorabool area. The scenic views make this reserve attractive to visitors, weed control above and below the falls ensures the geological features remain visible to the community.


CHW continues to work with local communities to provide access to these reservoir parks and other reservoirs, resulting in many positive beneficial recreational outcomes for the community. CHW supports community bookings of the wedding spaces within Kirks Reservoir Park. Our Communication and Engagement and Environmental Services teams provide information to park visitors and user groups on park facilities, opening times and event management.

Recreational values

CHW continues to provide public access to 15 of its reservoirs and reserves. Public access is subject to ongoing reviews of risks associated with safety, health and drinking water quality.

Open reservoirs and reservoir parks:

• Kirks Reservoir Park Brown Hill (Gong Gong)

• Gong Gong Reservoir Park Brown Hill (Gong Gong)

• Moorabool Reservoir Park, Springbank

Reservoirs open for recreational fishing:

• Bullarto Reservoir, Bullarto (Daylesford)

• Colbrook Reservoir, Creswick

• Cosgrove Reservoir, Blakeville

• Dean Reservoir, Cosgrave

• Hepburn Reservoir, Hepburn

• Moorabool Reservoir, Springbank

• Russells Reservoir (Russells Dam), Wattle Flat

• Talbot Reservoir, Evansford

• Wombat Reservoir, Daylesford

• Landsborough Reservoir, Landsborough

• Redbank Reservoir, Redbank

• Sugarloaf Reservoir, Avoca

Facilities and features of reservoir parks

• All: full visitor facilities (toilets, walking trails, picnic tables and BBQs)

• Kirks Reservoir Park: Living Water Trail, a school’s education centre, weddings and Shakespeare in the Park performances

• Gong Gong Reservoir Park: a native bush setting, with walking and cycling trails, wetlands and supporting a diverse native animal population

• Moorabool Reservoir Park is managed in conjunction with the Friends of Moorabool Reservoir community group

Recreation highlights 2020-21

• Upgrade to 1,400 metres of parkland bushwalking trails in the Gong Gong Reservoir Park

• 18 hectares of weed management and control reserve coverage in public access areas

• 24 hectares of vegetation management and brush cutting coverage in public access areas

• 13,000 tree guards either removed or installed

• 5km of roads and tracks maintained or upgraded throughout the project

• 300 information signs either assessed or installed as part of the project

• 3 km of fencing installed, removed or maintained

• upgrades to fencing, paths and signage

• 34 bird nest boxes constructed.

6. Leadership and culture

During 2020-2021, CHW finalised its commitments under the Diversity and Inclusion Strategy 2019-20 and a new Diversity and Inclusion Plan 2021-2025 was developed.

The Diversity and Inclusion Plan continues to support CHW’s commitment to inclusion, equity and having a workforce that represents the diverse communities we serve. A holistic approach is adopted to achieving an inclusive workplace environment through:

• Attraction and recruitment

• Safety and respect

• Employee experience

• Leadership capability

• Community and visibility

• Measurement and accountability.

To promote these outcomes CHW continues to support initiatives and strategies that raise awareness of difference and improve team members’ cultural capability. To assist with this, CHW empower its People Matters Committee, Diversity Working Group and Reconciliation Working Group and deliver an organisation-wide leadership development program.

CHW also use a ‘Safe, Healthy and Inclusive Workforce’ events calendar to promote inclusion and have continued to do so virtually throughout 2020-2021, recognising and celebrating:

• Chinese New Year

• International Women’s Day

• International Day Against Homophobia, Biphobia and Transphobia

• Sorry Day, NAIDOC Week and Reconciliation Week

• Harmony Day

• Blood Donation Week

• Donate Life Week

• Mental Health Week

• Suicide Prevention Awareness

• White Ribbon Day

• International Day for People with a Disability.

The aim of these events is to raise awareness of difference, share stories and increase understanding across our business.


Diversity and inclusion metrics

Initiative Target/Measure 2019-20 2020-21

Inclusive workplace 100% of roles have access to at least 1 flexible working option

>35% caring responsibilities

7% LGBTQI community

47% staff work flexibly

45% caring responsibilities

7.6% LGBTI community

100% staff work flexibly

45% caring responsibilities

7.6% LGBTI community

Gender participation Gender representation 45% female and 45% male

10% other

45% minimum female representation in senior leadership roles

39% senior leadership representation

39% female

61% male

Gender representation 40% female

60% male

Female representation in senior leadership roles 39% female

People living with a disability

Water industry target is 10%

CHW set target of 6.2% to reflect the communities served

3% 3%

Aboriginal and/or Torres Strait Islander representation

Water industry target is 3%

CHW target 1.2% to reflect the communities served

2% 2%

Intergenerational workforce

Demographics align with communities served

54% staff are 45 years of age and over

46% staff are under 45 years of age

49% staff are 45 years of age and over

51% staff are under 45 years of age

20% of our workforce speak a language other than English at home.

Water industry target is 12.5%

CHW target greater than 5% to reflect the communities served

7% 7%

CHW utilises a range of survey tools including the Victorian Public Sector People Matters Survey and targeted internal surveys (diversity and Team Member Pulse Survey) to measure and track diversity and inclusion performance to targets.

G1.4: Participation of Traditional Owners on Board committees and internal committees

• In all requests for expressions of interest for internal committees, CHW includes a specific request for non-traditional participants and will approach team members to request participation.

• A representative from Wadawurrung Aboriginal Corporation is a member of the Customer Advisory Panel.

• CHW engaged the professional services of a Wadawurrung Traditional Owner to support development and implementation of CHW’s Reconciliation Action Plan which involved their attendance at reconciliation working group meetings.

G1.5: People Matters Survey

People Matters Survey participation rate:

2017 2019 2020 2021

55% 81% N/A 85%

People Matters Survey Engagement index:

2017 2019 2020 2021

75 68 N/A 71

Throughout 2020 -2021, CHW continued to obtain regular, systematic feedback from all team members to measure employee sentiment, health, safety and wellbeing feedback and the impact of COVID-19 on its workforce. This allowed the organisation to make changes where necessary to support the health, safety, wellbeing and work performance of team members while ensuring business continuity during COVID-19.

CHW participated in the 2021 People Matters Survey with 85% of team members responding. Results will be received in August 2021 and will be used to plan strategies for engagement and inclusion.

G3: Health and safety

See Part 2 – Corporate Report for more information (page 22).


7. Financial sustainability

F1 to F7: Financial indicators

2019-20Result

2020-21Result

2020-21Target

Variance toprior year

Variance totarget

F1: Interest Cover (Cash) 5.18 5.58% 2.50% 7.7% 123.2%

F2: Gearing Ratio 10.26% 6.81% 11.00% (33.6)% (38.1)%

F3: Internal Financing Ratio 131.75% 169.88% 43.00% 28.9% 295.1%

F4: Current Ratio 0.72 0.55 1.49 (23.6)% (63.1)%

F5: Return on Assets 2.41% 2.40% 1.40% (0.4)% 71.4%

F6: Return on Equity 1.61% 1.75% 0.70% 8.7% 150.0%

F7: EBITDA Margin 46.63% 49.36% 41.00% 5.9% 20.4%

For more information, refer to Part 5 – Performance Report.

16 PART 2 CORPORATE REPORT

PART 2

CORPORATEREPORT

ORGANISATIONAL STRUCTURE

Board of Directors

Chair Dr Jeremy Johnson AM

Managing DirectorPaul O’Donohue

Executive and Board operations

Commercial and business development

Strategic planning

Communications and engagement

Infrastructure Planning and

Operations

General Manager Jeff Haydon

Environmental services

Sustainability

Water and wastewater treatment

Water resources

Laboratory

Strategic asset management and planning

Growth and development

(30 November 2020 – 30 June 2021)

Commercial and business development

(30 November 2020 – 30 June 2021)

People, Culture and Safety

General Manager Renée Fearn

Health, Safety & Wellbeing

People services

Diversity and inclusion

Learning and development

Change management

People strategy

Customer service (30 November

– 30 June 2021)

Capital Delivery and Networks

General Manager Stephen Answerth

Infrastructure delivery

Capital expenditure program

Network field services

Maintenance

Business Services

General Manager Anthony O’Brien

Finance

Governance and risk

Business intelligence

Information communication and technology

Customer experience (30 November

– 30 June 2021)

Customer and Community

General Manager Jacqueline O'Neill

(1 July 2020 – 19 September 2020)

General Manager Vacant

(19 September 2020 – 30 July 2021)

Acting General Manager

Communications and engagement Lise Eagan Bales

People, Culture and

Safety Committee

Sustainability

Committee

Customer and Community

Partnerships Committee

Audit and Risk

Committee

Central Highlands Water 2020-21 Annual Report PART 2 CORPORATE REPORT 17

BOARD OF DIRECTORSDr Jeremy Johnson AM ChairAppointed 1 July 2010

Jeremy was Chief Executive Officer at Sovereign Hill 2002-2018. He is Past President of the Australian Chamber of Commerce & Industry, a Director/ Trustee of Care Super Pty Ltd and an Executive Council Member and Past President of the Victorian Chamber of

Commerce & Industry. In 2011, he was awarded an Honorary Doctorate by Federation University for his services to the business community. A Justice of the Peace, Jeremy is a qualified Company Secretary, a Fellow of the Governance Institute of Australia and a Member of the Australian Institute of Company Directors. Qualification: Dip Bus Studies (RMIT). Jeremy received an Order of Australia in the Queen’s Birthday Honours 2019 ‘for significant service to tourism and to the community of Ballarat’.

Angeleen Jenkins Deputy ChairAppointed 1 October 2017

Angeleen is an experienced professional company director. In her executive career, Angeleen was previously employed as a director and company executive of a major multinational engineering, building and construction group

that participated in water and wastewater infrastructure. A proud resident of Ballarat, Angeleen is passionate about the local community, safe production, the environment, workplace diversity, risk management, sound governance and sustainable business performance. Angeleen is currently a Director of Mayflower Enterprises (Hyne Group and XLam), Tiaki Plantations Company, Taumata Plantations Limited, ASX-listed RPM Global and VicForests. Angeleen is also a former long-term Director of McConnell Dowell Corporation Limited, a major multi-national construction group. Angeleen has a Bachelor of Arts in Psychology, and is a Fellow of the Australian Institute of Company Directors.

Jim Hallam DirectorAppointed 1 October 2017

Jim is currently Chief Financial Officer of the ASX listed MMJ Group Holdings Limited. He has 25 years of experience in the Australian investment management industry with alternative asset fund managers in Australia, and overseas, including

Hastings Funds Management and Annuity Australia. Jim has been a non-executive director of several businesses in the essential infrastructure, funds management, timberland, agriculture and manufacturing sectors within Australia and the United Kingdom. Jim has a Bachelor Economics, is a member of the Chartered Accountants Australia & New Zealand, a fellow of the Governance Institute of Australia and a member of the Australian Institute of Company Directors.

Jodi Heath DirectorAppointed 1 October 2017

Jodi is currently General Manager, Geelong and Ballarat Regions, Parks Victoria, she has a wealth of experience in the banking and telecommunication sectors with top-10 ASX listed companies over the past 21 years. As a non-executive

director Jodi has worked across many sectors including water, education, health, employment services, disability services, aged care and community organisations over the past 14 years and chaired various committees. She is currently a Director of Gen U (Karingal St Laurence) and Professionals with Alzheimer’s (PALZ) which is near and dear to her. Jodi is a Graduate of the Australian Institute of Company Directors, a Member of the Deakin Alumni Community and an Australian Rural Leaders Fellow. Jodi holds a Master of Business Administration specialising in Corporate Governance and Ethics from Deakin University.


Peter Le Lievre Director Appointed 1 October 2015

Peter has been a resident of Ballarat all of his adult life and is a very active member of the community in sporting circles. Peter is a Life Member of two cricket clubs and a director of the Ballarat Cricket Association. Peter’s professional

experience includes one year as a graduate accountant with the Ballarat Water Commission and Sewerage Authority in the late 1970s, 15 years as a partner in an accounting practice specialising in KPIs, 11 years as CEO in the agricultural sector and other senior management and advisory roles in a wide variety of business sectors including Australia’s first plant protein manufacturer. Peter has extensive experience in strategic planning and is currently contracted as an advisor to Ballarat Regional Industries and a range of other local private enterprises. Peter holds Fellow designation of CPA Australia and is a Graduate of the Australian Institute of Company Directors.

Mark McKenzie DirectorAppointed 1 October 2019

Mark is a wine and olive grower in the Grampians region and a consultant in strategic communications. His experience includes business management, corporate affairs, marketing and communications. He held senior wine industry roles as

CEO of the Victorian Wine Industry Association, Executive Director of Wine Grape Growers Australia, and CEO of Murray Valley Winegrowers. Mark was CEO of NSW Irrigators Council, before returning to farming. He was a Director of National Irrigators Council and a Member of the National Farmers Federation Water Taskforce. He is a past director of the NSW TAFE Commission. Mark holds tertiary qualifications in agricultural science.

Rachel Thomson DirectorAppointed 1 October 2015

Rachel has over 20 years' experience internationally and in Australia in senior roles in risk management and insurance. Rachel’s previous executive role involved analysis of business strategy, financial performance, corporate governance

processes and assessment of risk management of Australian and U.S. corporations. Rachel is a former member of the risk management board in the insurance sector and is currently a non-executive director on V/Line Corporation and an independent member of DELWP’s Risk and Audit Committee. Rachel has a Bachelor of Science in Mathematics from the University of Melbourne and is a Graduate of the Australian Institute of Company Directors.

Paul O’Donohue Managing DirectorAppointed July 2012

Paul is the Managing Director of Central Highlands Water. Since joining the organisation in 2003, he has overseen many key business areas including major project delivery, strategy, long-term planning, communications and account

management. Prior to joining Central Highlands Water, Paul held senior management positions in the recreation and hospitality sectors. Qualifications: BA (Mgt), Dip (Ldrshp), GradDip (BusMgt), GAICD, FIWA.


Board of DirectorsThe Board sets the strategic directions, policies and goals for the business and management. It comprises 8 directors, including a Chair and Managing Director. The Chair and Directors are appointed by the Minister for Water. The Managing Director is appointed by the Board.

Membership and meeting attendance

Number of meetings attended 1 July 2020 to 30 June 2021.

Board member Meetings attended

(total of 6)

Dr Jeremy Johnson AM (Chair) 6 of 6

Angeleen Jenkins (Deputy Chair) 6 of 6

Jim Hallam 6 of 6

Jodi Heath 4 of 6

Peter Le Lievre 5 of 6

Mark McKenzie 6 of 6

Rachel Thomson 6 of 6

Paul O'Donohue (Managing Director) 6 of 6

Audit and Risk Committee

Purpose

The Audit and Risk Committee assists the Board in the organisation's governance and exercising of due care, diligence and skill.

The Committee’s key responsibilities are to:

• Oversee and appraise the scope and quality of the audits conducted by internal and external auditors

• Maintain, by holding quarterly meetings, open lines of communication among the Board, internal auditors and the external auditors to exchange views and information, and confirm their respective authorities and responsibilities

• Serve as an independent and objective party to review the reliability and integrity of financial information

• Determine the adequacy of CHW’s administrative, operating and accounting controls

• Oversee the organisation's Risk Management Framework including the integration of risk management principles into CHW's strategic objectives, policies and reporting

• Ensure compliance with laws, regulations, financial code of conduct and ethical standards.

The Committee’s authority and role is set out in the Audit and Risk Committee Charter, a regulatory requirement that covers governance responsibilities including but not limited to those outlined in the Standing Directions of the Assistant Treasurer under the Financial Management Act 1994.

Membership and meeting attendance

Number of meetings attended 1 July 2020 to 30 June 2021.

Committee member Independent Meetings attended

Eligiblemeetings

Peter Le Lievre (Chair) Yes 4 4

Jim Hallam (Director) Member until September 2020 Yes 1 1

Dr Jeremy Johnson AM (Board Chair) Member from October 2020 Yes 3 3

Stewart Howe (Independent) Yes 4 4

Rachel Thomson (Director) Yes 4 4

Membership of the Committee is reviewed annually and members are eligible for reappointment. The Committee comprises at least 3 independent non-executive Directors, with the option to include one independent external member. The members, collectively, will have diverse backgrounds with a broad and complementary range of skills and experience relevant to CHW’s operations. Meetings are held quarterly. Special meetings of the Committee can be called in accordance with CHW’s Board Charter 2018.

Supporting policy

• Board Charter (2018)

• Audit and Risk Committee Charter

• Water Act 1989

• Standing Directions of the Minister for Finance under the Financial Management Act 1994

Other major Board committees

Sustainability Committee

Board members:Jodi Heath (Chair)Jim HallamMark McKenzieDr Jeremy Johnson AM (ex-officio)

Purpose: to ensure the Board maintains a focus on sustainability throughout its policies, operations, service delivery and innovation.

Customer and Community Participation Committee

Board members:Mark McKenzie (Chair)Angeleen JenkinsJim HallamDr Jeremy Johnson AM (ex-officio)

Purpose: to ensure the Board remains informed on issues that impact customers and customer perceptions of CHW.

People, Culture and Safety Committee

Board members:Angeleen Jenkins (Chair)Rachel ThomsonPeter Le LievreDr Jeremy Johnson AM (ex-officio)

Purpose: to assist the Board to fulfil its governance responsibilities in relation to organisational development and employee related activities including leadership, safety, wellbeing and diversity and inclusion.

Information about CHW’s major committees, including the extent to which the committee has achieved its purpose is available on request.

Performance appraisalsPerformance appraisals for all committees are conducted annually.

CORPORATE GOVERNANCE


Public sector values and employment principlesThe Public Administration Act 2004 established the Victorian Public Sector Commission (VPSC). The VPSC’s role is to strengthen public sector efficiency, effectiveness and capability, and advocate for public sector professionalism and integrity.

CHW has policies and practices that are consistent with the VPSC’s employment standards and provide for fair treatment, career opportunities and the early resolution of workplace issues. CHW provides regular training to staff in how to avoid conflicts of interest and how to respond to offers of gifts. Mangers and team members receive targeted training on managing conflict, responding to and misconduct, harassment and bullying.

All recruitment undertaken by CHW follows a consistent process to ensure selection is based on merit. All applicants are assessed and evaluated without discrimination on the basis of the key selection criteria and key capabilities.

Recruitment of managers and supervisors includes a focus on leadership and management capability. All people leaders undertake psychometric testing that assesses IQ, engagement, commitment to OHS, risk of demonstrating discriminatory behaviour and emotional intelligence testing.

CHW’s Code of Conduct policy is supported by procedures, team members development and awards programs to encourage behaviour that supports CHW’s and VPSC’s values and behaviours. A requirement that employees demonstrate and further develop these values and behaviours is incorporated into all performance reviews. Employees have been correctly classified in workforce data collections.

Training and developmentIn line with CHW’s commitment to employee development, training and development opportunities were provided across the business in 2020-21 in the areas of individual development, leadership and management, safety, governance and compliance, corporate/executive and water quality.

CHW remains committed to the development of employees and provides opportunities for all people at CHW to develop, grow and positively contribute. CHW continued the Learn Lead Grow Program in 2020- 2021. This program is organisation-wide and is aligned to Great Leadership that Leads with Values and with developing CHW’s long-term leadership and organisational culture.

The Learn Lead Grow Program includes:

• Development opportunities for employees at all levels of the organisation

• Development of role specific authority, influence and accountability

• Contemporary leadership concepts, innovative thinking and strategies for CHW

Comparative workforce data

Employees by division

The full-time employee equivalent (FTE) of all CHW team members employed in the last full pay periods in June 2020 and June 2021:

Division 2019-20 2020-21

Office of Managing Director 4.00 4.00

Business Services 33.66 34.64

Infrastructure Planning and Operations 56.23 59.15

Capital Delivery and Network Field Services 41.06 42.68

People and Culture 8.11 8.19

Customer and Community 43.06 41.94

Total FTE 186.10 190.60

Employees by classification

Workforce type 2019-20 2020-21

Administration Officer 116.4 118.05

Executive Officer 6.00 6.00

Field Employees 47.8 46

Senior Management 15.9 20.55

Total FTE 186.10 190.60

Employees by age

Age group

2019-20 headcount

FTE 2020-21 headcount

FTE

15-24 5 5.00 5 5.00

25-34 33 31.15 31 29.14

35-44 53 48.11 61 56.82

45-54 67 65.07 57 55.22

55-64 33 31.98 42 39.99

65+ 5 4.8 5 4.43

Total 196 186.1 201 190.60

Gender participation in the workforce

Total number (headcount)

2019-20 2020-21

Percentage Number Percentage Number

Women 39% 77 39% 78

Men 61% 119 61% 123

Self-described * * 0% 0

Total 196 201

Note:

* Not a reportable field in 2019-20 annual report.

PEOPLE AND CULTURE


OHS performance and benchmarking The 2020-21 year has been one of strong safety performance with the following key achievements completed.

Key achievements

CHW has maintained its focus and intensity on improving its safety culture and performance during 2020-21, through a period of significant change and uncertainty for staff, customers, community and contractors with the impacts of COVID-19.

Notwithstanding these challenges, 2020-21 has been a year of strong safety performance with the following key achievements completed:

• overall SIFR results have continued a downwards trajectory

• CHW successfully continued certification to the new International Standard for OHS Management Systems (ISO 45001)

• strong response to the COVID-19 situation with OHS hazards identified and controlled as low as reasonably practicable within the scope of CHW’s control

• successfully transitioning from a Calculative Safety Culture to a Proactive Safety Culture

• conducting a fatal risk gap analysis in line with the commencement of Workplace Manslaughter legislation

• successful implementation of preventative and early intervention health and wellbeing support that has resulted in zero WorkCover claims associated with the reporting period

• occupational hygiene project to assess occupational exposures to bioaerosols and contaminants.

Internal and external inputs, monitoring of performance and CHW’s listening strategy over the past 18 months has informed the creation of the new Health, Safety and Wellbeing strategic pathways incorporating:

• Workplace Safety

• Healthy Me

• Mentally Healthy Workplace

• Social Wellbeing.

Further work in 2021 will see the finalisation and launch of the new strategy.

OHS Performance data

The CHW Significant Injury Frequency Rate (SIFR) for 2020-21 of six (6) was slightly higher than the score of 3 for 2019-20 (see table below). The CHW contractors SIFR rate for 2020-21 of 15.6 was slightly lower than the score of 17.8 for 2019-20 reporting period, however the overall score is continuing in a downward trend. For context there were 2 lost time injuries in 2020-21 compared to one medical treatment injury in 2019-20. Contractor management continues to remain an ongoing area of focus for CHW.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

200

8-0

9

200

9-1

0

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

46.8

30.0

32.4

19.6

25.8 28.2

6.7

13.5 9.612.5

6.0

3.0

6.5

CHW SIFR

Contractors SIFR

Linear (CHW SIFR)


Health and Safety Reporting – Leading the Way Measures

Measurement of implementation

2018-19 2019-20 2020-21

Near misses reported 60 61 40

Hazards reported 156 83 42

Injuries (first aid) 23 10 12

Lost time injuries (LTIs) 3 0 2

Medical treatment injuries

1 1 0

Process (lead) – Measures of implementation

Rates of absenteeism 6.9% 6.3% 3.9%

OHS Induction Training completion

100% 100% 100%

Yearly employee People Matters Survey (PMS) results

81% Participation

68% Engagement

Postponed due to

COVID-19

Completed, but no report

at time of reporting

Mental health and wellbeing employee training

Not reported 98% 100%

Consultation –OHS committees Not reported 100% 92%

Consultation – Senior management commitment

Not reported 100% 100%

OHSMS implementation, review and improvement

100% 100% 100%

Outcome (lag) – Measures of effectiveness

No. of standard Workcover claims 1 2 0

Average cost per claim $358,211* $17,979 $0

Fatalities 0 0 0

Claims 2 2 1**

13 weeks as percent of total claims

0 0 0

26 week as percent of total claims

50% 0 0

Average lost days/ shifts 546 0 0

Prosecutions 0 0 0

Notes:

* This WorkCover claim involved a meter reader who was attacked by a dog. This figure has been adjusted from 2018-19 Annual Report due to the full claim costs being processed post 30 June 2019.

** This WorkCover claim is an industrial deafness claim for a past employee, not incident occurred in the reporting period.

There is a strong reporting culture at CHW which is reflected in the near miss and hazard reporting. These reports are proactively managed and rapidly addressed.

The training of employees on incident investigation methods has increased ownership and accountability over incident investigations and hazard controls throughout operational teams at CHW.

• CHW has a target of zero harm. If a team member is injured, immediate action is taken to diagnose, actively manage and give employees the right support to rehabilitate.

• CHW has focused on preventative controls directed at mental health related hazards, specific to the risks associated with isolation as a result of COVID-19 lockdowns, additional resourcing to support increased work demands, improved ICT equipment and software for hybrid work arrangements. This has proactively supported staff through a difficult time.

• CHW takes a partnering approach to supporting employees to return to appropriate meaningful work as soon as possible (with the support of medical practitioners, their team leaders, managers and the People, Culture & Safety team). This has improved the timeliness of return to work and people’s connection with the workplace.

• Early identification and management of injuries and preventative health initiatives have resulted in health issues being resolved before they require medical treatment or lead to lost time injuries. This has resulted in a significant decrease in the number of WorkCover claims over time.

Safety cultureIn 2021, CHW engaged a professional consulting firm to conduct a Safety Culture Pulse analysis. The intent of analysis was to measure CHW’s safety culture maturity using Professor Patrick Hudson’s model of Safety Maturity. Patrick Hudson is a leading academic and researcher in the field of Safety Culture. The 2021 Pulse Review Safety Culture assessment was a follow up to evaluate the effectiveness of the improvement strategy founded on the recommendations from the 2018 Current State Analysis (CSA). Overall, the consulting firm assessed CHW as having a Proactive OHS culture. This is a positive shift forward from the 2018 assessment that found CHW to be at the Calculative culture maturity stage.

The 2021 Pulse Review Safety Culture assessment focused on specific aspects of CHW’s safety culture:

• Safety Leadership Capability

• Learning Culture

• Contractor Management

• Health and Wellbeing

• Psychological Safety

The review found CHW to have a well-developed and mature culture of care for people – employees, contractors and the community which it serves. The leadership team succeeded in leveraging this strength through comprehensive engagement and commitment to continue to improve skills and practices across the organisation. Success was achieved during a period of high disruption caused by the COVID-19 pandemic and the regional growth and expansion demand across its operational footprint.


Consultancy Expenditure

Details of consultancies (valued at $10,000 or greater)

In 2020-21, there were 33 consultancies where the total fees payable to the consultants were $10,000 or greater. The total expenditure incurred during 2020-21 in relation to these consultancies was $1,652,138.85 (excl. GST). Details of individual consultancies are outlined at www.chw.net.au/about-us/annual-report

Details of consultancies (valued at less than $10,000)

In 2020-21, there were 19 consultancies engaged during the year, where the total fees payable to the consultants was less than $10,000. The total expenditure incurred during 2020-21 in relation to these consultancies was $45,102.70 (excl. GST).

Information and Communication Technology (ICT) expenditureFor the 2020-21 reporting period, CHW had a total ICT expenditure of $8,590,072, with the details shown below.

All operational ICT expenditure ICT expenditure relating to projects to create or enhance ICT capabilities

Business as usual (BAU) ICT expenditure

(total)

Non-business as usual (non-BAU) ICT expenditure

(total = operational expenditure and capital expenditure)

Operational expenditure (OPEX)

Capital expenditure (CAPEX)

$4,946,222 $3,643,850 $504,445 $3,139,405

SUMMARY OF EXPENDITURE

• ICT expenditure refers to Central Highlands Water's costs in providing business enabling ICT services within the current reporting period. It comprises Business As Usual (BAU) ICT expenditure and Non-Business As Usual (Non BAU) ICT expenditure.

• Non-BAU ICT expenditure relates to extending or enhancing Central Highlands Water's current ICT capabilities.

• BAU ICT expenditure is all remaining ICT expenditure which primarily relates to ongoing activities to operate and maintain the current ICT capabilities.

Government advertising expenditureCHW’s expenditure during 2020-21 did not exceed $100,000.


Freedom of Information (FOI)The Freedom of Information Act 1982 (the Act) allows the public a right of access to documents held by CHW. The purpose of the Act is to extend as far as possible the right of the community to access information held by government departments, local councils, Ministers, and other bodies subject to the Act.

An applicant has a right to apply for access to documents held by CHW. This comprises documents both created by CHW or supplied to CHW by an external organisation or individual. This may also include maps, photographs and audio-visual material. Information about the type of material produced by CHW is available on its website, under Freedom of Information part II – Information Statement, within the Freedom of Information page.

The Act allows CHW to refuse access, either fully or partially, to certain documents or information. Examples include:

• Cabinet documents,

• some internal working documents,

• law enforcement documents,

• documents covered by legal professional privilege such as legal advice, personal information about other people and information provided to CHW in-confidence.

Under the Act, CHW is required to process valid requests within 30 days of receiving the request. In some cases, this time may need to be extended. If an applicant is not satisfied by a decision made by CHW, under section 49A of the Act, they have the right to seek a review by the Office of the Victorian Information Commissioner (OVIC) within 28 days of receiving a decision letter.

Making a request

Access to documents may be obtained through a FOI request to CHW. An application fee of $30.10 applies. Access charges may also be payable if the document pool is large, and the search for material time consuming. When making an FOl request, applicants should ensure requests are in writing, and clearly identify what types of material/documents are being sought.

People wanting access to CHW documents under the Freedom of Information Act can use the online FOI application at www.chw.net.au

CHW also accept applications made in writing to:

Freedom of Information Officer Central Highlands Water PO Box 152 Ballarat Vic 3353

General enquiries about FOI may be made by contacting CHW on 1800 061 514 or via email to [email protected]

FOl responsiveness 2020-21

CHW received 2 requests for access to documents under the Act, 1 from a member of the public and 1 from a legal firm. Full access was granted in one case and partial access was granted in the other case, in accordance with the Act.

All decisions, once request validated, were responded to within the statutory 30 days.

Additional information available on request

In compliance with the requirements of Standing Directions of the Assistant Treasurer, details in respect of the items listed below have been retained by CHW) and are available (in full) on request from CHW’s FOI Officer (contact details listed above), subject to the provisions of the Freedom of Information Act 1982.

a) A statement that declarations of pecuniary interests have been duly completed by all relevant officers of CHW.

b) Details of publications produced by CHW about itself, and how these can be obtained.

c) Details of major promotional, public relations and marketing activities undertaken by CHW to develop community awareness of the corporation and its services.

d) Details of changes in prices, fees, charges, rates and levies charged by CHW.

e) Details of any major external reviews carried out on CHW.

f) Details of major research and development activities undertaken by CHW.

g) Details of overseas visits undertaken, including a summary of the objectives and outcomes of each visit.

h) A list of CHW’s major committees, the purpose of each committee and the extent to which the purpose has been achieved.

i) A general statement on industrial relations within CHW and details of time lost through industrial accidents and disputes.

j) Details of assessments and measures undertaken to improve the occupational health and safety of employees.

Available on request and included in this Annual Report

k) Details of all consultancies and contractors, including consultants/contractors engaged, services provided and expenditure committed for each engagement (on page 23 – see also www.chw.net.au).

Information not applicable to CHW

The following is not applicable for the reason set out below:

i) Details of shares held by a senior officer as nominee, or held beneficially in a statutory authority or subsidiary (no shares have ever been issued in the name of CHW).

Further information

Further information regarding the operation and scope of FOl can be obtained from the Act, regulations made under the Act, and at ovic.vic.gov.au

Privacy and Data Protection Act 2014 (Vic)CHW has, to the best of its knowledge, met its obligations under the Privacy and Data Protection Act 2014 (Vic).

DISCLOSURES

http://www.chw.net.au


Public Interest Disclosures Act 2012The Public Interest Disclosures Act 2012 (PID Act) enables people to make disclosures about improper conduct by public officers and public bodies. The PID Act aims to ensure openness and accountability by encouraging people to make disclosures, and protecting them when they do.

• A public interest disclosure is a complaint of corrupt or improper conduct by a public officer or a public body. CHW is a public body for the purposes of the PID Act

• Improper or corrupt conduct involves substantial mismanagement of public resources, risk to public health or safety or the environment, or corruption. The conduct must be criminal in nature or a matter for which an officer could be dismissed

• You can make a public interest disclosure about CHW, or its Board members, officers or employees by contacting the Independent Broad-Based Anti-Corruption Commission (contact details provided below)

• CHW is not able to receive public interest disclosures

• CHW has an established procedure for the protection of persons from detrimental action in reprisal for making a public interest disclosure about CHW or its employees. You can access CHW’s procedure at www.chw.net.au

Contacts

Independent Broad-Based Anti-Corruption Commission (IBAC) Victoria

Address: Level 1, North Tower, 459 Collins Street, Melbourne Vic 3000 Mail: IBAC, GPO Box 24234 Melbourne Vic 3001 Website: www.ibac.vic.gov.au Phone: 1300 735 135 Email: See the website above for the secure email disclosure process, which also provides for anonymous disclosures.

Building Act 1993CHW does not own or control any government buildings and therefore is exempt from notifying its compliance with the building and maintenance provisions of the Building Act 1993. CHW conducts a regular program to ensure compliance with all relevant provisions of the Building Act 1993 in building and maintenance activities. Any areas of concern are logged and addressed.

Competitive Neutrality PolicyCHW continues to comply with the requirements of the Competitive Neutrality Policy. This policy requires government businesses to ensure that, where services compete, or potentially compete with the private sector, any advantage arising solely from their government ownership be removed if it is not in the public interest. Government businesses are required to cost and price these services as if they were privately owned. This policy supports fair competition between public and private businesses and provides government businesses with a tool to enhance decisions on resource allocation. It does not override other policy objectives of government and focuses on efficiency in the provision of service.

DataVic Access Policy (2012)To comply with the Victorian Government’s DataVic Access Policy, the information included in this Annual Report, including the Performance Report and Financial Report, will be made available online at http://www.data.vic.gov.au/ in a readable format.

Local Jobs First Act 2003

Reporting on all Local Jobs First projects except those related to grants

5.3: The following information relates to projects commenced and/or completed to which Local Jobs First applied during the 2020-21 reporting period.

a) The number of projects that the Major Projects Skills Guarantee has been applied, the total number of hours completed, or to be completed, by apprentices, trainees or cadets on these projects, and the total number of opportunities created for apprentices, trainees and cadets on these projects: 0

b) The number of projects and percentage of ‘local content’ committed under projects commenced and/or completed to which LIDP was required:

• Total: 4• Ballarat East Outfall Sewer Project: 97%• Provision of Catchment Services for CHW: 90%• Provision of Parks Facilities & Asset Maintenance

Services for CHW: 98%• Maryborough Road SPS No. 1 Rising Main Replacement

Project: 88%

c) For projects commenced, a statement of total LIDP commitments (local content, employment and engagement of apprentices, trainees and cadets) committed as a result of these projects:

• Ballarat East Outfall Sewer Project: 7• Provision of Catchment Services for CHW: 5• Provision of Parks Facilities & Asset Maintenance

Services for CHW: 0• Maryborough Road SPS No. 1 Rising Main

Replacement Project: 10• Total: 22

d) For projects completed, a statement of total VIPP Plan or LIDP outcomes (local content, employment and engagement of apprentices/trainees) achieved as a result of these contracts: 0

e) The total number, across all projects commenced or completed of small and medium-sized businesses engaged as either the principle contractor or as part of the supply chain:

• Ballarat East Outfall Sewer Project: 5• Provision of Catchment Services for CHW: 23• Provision of Parks Facilities & Asset Maintenance

Services for CHW: 5• Maryborough Road SPS No. 1 Rising Main

Replacement Project: 24• Total: 57

Reporting on grants provided

a) The total number of conversations with the Industry Capability Network that correspond with the registration and issue of an Interaction Reference Number: 0

Major contractsCHW did not enter into any major contracts (valued at $10 million or more) during 2020-21.


Whole of life asset management

Leadership and accountability

Asset planning Asset acquisition Asset operation Asset disposal

Overview and key requirements

Asset management strategy

Overview Monitoring and preventative action

Disposal process

Resourcing and skills Risk management and contingency planning

Acquisition process Maintenance of assets

Governance Information management

Allocating asset management responsibility

Record keeping responsibility

Attestation requirements Asset valuation

Monitoring asset performance

Asset management system performance

Reporting to government

Evaluation of asset performance

Other requirements

Comply

Non-comply

Not applicable

Unassessed

0

1

2

3

41 2 3

45

6

7

8

9

10

11

12a

12b

13

14

15

16a

16b

17

18a18b

192021a21b22

2324

25

26

27

28

29

30

31

32a

32b

33

34

35

36

37a

37b

3839

40 41

LEGEND

Status Scale

Not applicable N/AInnocence 0Awareness 1Developing 2Competence 3Optimising 4Unassessed U/A

CHW Target

Assessment

Asset Management Accountability FrameworkIn 2021-22 CHW conducted a self-assessment of its level of asset management maturity. The assessment highlighted a target maturity rating of 'competence' was achieved across all areas, meaning systems and processes are fully in place, consistently applied and systematically meeting the accountability framework requirements.


AMAF clause Index Compliance Maturity System status

Maturity Effectiveness of application

Overall assessment (black)

Target maturity (red)

3.1 Overview and key requirements (leadership and accountability)

1 Comply Competence Competence 3 3

3.1.1 Resourcing and skills


3 Not applicable Not applicable Not applicable N/A 3

3.1.2 Governance



3.1.2 Allocating asset management responsibility






3.1.3 Attestation requirements


3.1.4 Monitoring asset performance

12a Comply Competence Competence 3 3

12b Comply Competence Competence 3 3



3.1.4 Asset management system performance




3.1.4 Reporting to government


3.1.4 Evaluation of asset performance



3.1.5 Other requirements


3.2 Planning

3.2.2 Asset management strategy




Risk management and contingency planning



3.3 Acquisition

3.3.1 Overview


3.3.2 Acquisition process


3.4 Operation

3.4.2 Monitoring and preventive action






3.4.3 Maintenance of assets




3.4.3 Information management








3.4.3 Record keeping


3.4.4 Asset valuation


3.5 Disposal


28 PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE

Major customers – use by volume range

Volumetric range – ML per year Number of customers

Equal to or greater than 100ML and less than 200ML 2


Equal to or greater than 300ML and less than 400ML -

Equal to or greater than 400ML and less than 500ML -

Equal to or greater than 500ML and less than 750ML


Greater than 1000ML -

Total number of customers equal to or greater than 100ML

4

Major customers – participation in water efficiency programs

Customer Comment

McCain Foods (Aust) Pty Ltd

Ongoing collaborative focus to reduce water consumption, per quantity of product, through more efficient processes.

City of Ballarat In collaboration with CHW, and other stakeholders, the Ballarat Integrated Water Management Plan has been developed and endorsed.

Imerys Minerals Australia Pty Ltd

Maintaining long-term commitment to optimising water use through recycling process water and good management practices.

Ballarat Health Services

Maintaining long-term commitment to optimising water use through substitution and good management practices.

CORPORATE WATER CONSUMPTION

MAJOR NON-RESIDENTIAL WATER USERS

PART 3

WATER CONSUMPTION AND DROUGHT RESPONSE

PART 3

WATER CONSUMPTION AND DROUGHT RESPONSE

The amounts reported in the table below represent water consumption at our Wendouree and Maryborough sites. The figures include maintenance, office and workshop areas These amounts do not include any treatment plants or other work sites.

Consumption Value Units

Consumption 803 kL

Number of employees 190.6 FTE

Annual use 4.2 kL per person

Daily use 11.5 L per person

Per m2 office space 149 L

Central Highlands Water 2020-21 Annual Report PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE 29

WATER CONSUMPTIONW

ater

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Non-Potable consumption (ML)

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Recycled stormwater volume (ML)

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Total potable consumption (ML)

Total non-potable consumption (ML)

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Total consumption (ML)

Average annual consumption (ML) 1

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30 PART 3 WATER CONSUMPTION AND DROUGHT RESPONSE

The Central Highlands region’s storage volumes remained high throughout 2020-21 and ended the year in an extremely healthy position. Despite high storage levels across the region, precautionary operational measures were implemented in a number of systems to safeguard against short-term low rainfall risks, by maximising supply diversity. Only minor drought response actions were implemented due to a dry start to the summer, however work continues to reduce exposure to future drought conditions.

Measures employed to maximise water supply resilience to drought conditions include:

• connecting the new groundwater bore at Avoca into the system

• working with Central Goldfields Shire Council to deliver excess water to Goldfields Reservoir, as part of an Integrated Water Management solution

• maximising the use of groundwater as a supplementary supply to Daylesford, allowing surface water levels to remain high throughout the year

• supplying a blend of surface water and groundwater in Amphitheatre, to help preserve surface water storage volumes.

The water restriction status remained at Permanent Water Saving Rules across all supply systems.

System Date Drought response action

Comment

Amphitheatre All year PWSR Amphitheatre Reservoir volumes began to decline through the year with groundwater used to supplement supply during the summer period of 2020-21. Strong rainfall in the autumn months returned the system to surface only.

Avoca All year PWSR Overall groundwater levels remained steady throughout 2020-21. Works to connect the new groundwater bore were completed towards the end of 2020-21.

Ballarat All year PWSR The Ballarat system remained in a healthy state with the system finishing the year above 80% full.

Beaufort All year PWSR Storage volumes remained relatively high throughout 2020-21 with streamflows maintained all year.

Blackwood All year PWSR The Blackwood system was solely supplied from surface water throughout 2020-21.

Clunes All year PWSR Groundwater levels remained steady throughout 2020-21

Daylesford All year PWSR Early rainfall resulted in the system filling before the end of June. Surface water levels were maximised throughout summer with groundwater supplementing and diversifying supply.

Dean All year PWSR The groundwater system continued to supply sufficient volumes of water throughout the year.

Forest Hill All year PWSR Groundwater levels remained steady throughout 2020-21. With cooler conditions and lower demand, the system was maintained throughout summer without experiencing the usually high drawdown in the aquifer.

Landsborough All year PWSR A reliable groundwater supply system that performed well throughout the year.

Learmonth All year PWSR A reliable groundwater supply system that performed well throughout the year.

Lexton All year PWSR A reliable groundwater supply system that performed well throughout the year.

Maryborough All year PWSR The system was supplied from surface water throughout 2020-21, finishing the year at 58% of capacity and with storages beginning to fill.

Redbank All year PWSR The system remained on groundwater during 2020-21 due to the water quality preferences and low surface water volumes.

Waubra All year PWSR A reliable groundwater supply system that performed well throughout the year.

DROUGHT RESPONSE

Central Highlands Water 2020-21 Annual Report PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 31

PART 4

ENVIRONMENTAL AND SOCIAL SUSTAINABILITY

CHW is dedicated to environmental sustainability through the protection and enhancement of the natural environmental, and climate change adaptation, to create a sustainable future.

CHW is guided by the following United Nations Sustainable Development Goals (SDGs):

• Supporting sustainable agriculture practices (SDG2) (page 8)

• Providing clean water and wastewater services (SDG6)

• Delivering renewable energy and being energy efficient (SDG7)

• Enhancing Aboriginal inclusion in natural resources management (SDG10)

• Helping to create sustainable cities and communities and protecting our heritage (SDG11)

• Reducing waste generation through prevention, reduction, recycling and reuse (SDG12)

• Strengthening resilience to climate change (SDG13)

• Continuing sustainable land management practices (SDG15)

To support the achievement of these sustainability principles, CHW implements an accredited ISO14001:2015 Environmental Management System (EMS), and has been recertified for a further 3 years.

The key requirements of the EMS are to:

• establish an environmental policy for the organisation

• identify, understand and minimise risk to the environment

• identify relevant legal and other compliance requirements

• transition practices to meet the requirements of the new Environmental Protection Act (EPA)

• establish environmental objectives, targets and programs

• monitor and measure progress in achieving objectives

• review the EMS and CHW environmental performance

• ensure the continuous environmental performance improvement of the business.

Sustainable water use CHW undertook the following initiatives and activities during 2020-21:

Water recycling

CHW continued to provide recycled water from across the 13 wastewater systems for a range of uses during 2020-21, including:

• delivery of recreational and environmental water to Lake Wendouree

• provision of recycled water for sporting facilities and open public spaces across the region

• agricultural irrigation across the region, for the production of fodder.

• industrial process water at the Ballarat South and Ballarat North Wastewater Treatment Plants.

Water efficiency and conservation

• Continued participation in 34 schools in the Schools Water Efficiency Program (SWEP)

• Continued collaboration with Smart Water Advice website incorporating initiatives on CHW website and ongoing promotion through quarterly education newsletter

• Maintained website links to ‘Target Your Water Use’ information

• Continued to promote Permanent Water Savings Rules through the region

• Continued to prepare for the introduction of digital water metering

• CHW community sponsorship program supports events where water efficiency messaging can be delivered.

Sustainable and Resilient Water Services Systems

• Supporting the technical and collaborative work to shape the consultation draft for the Central and Gippsland Sustainable Water Strategy

• Commencing planning work to update CHW’s Urban Water Strategy and undertaking a technical review of the strategy guidelines and the climate change guidelines

• Publishing the Annual Water Outlook

• Commencing stakeholder consultation for the Hepburn Shire Integrated Water Management Plan

• Building partnerships and progressing integrated water management projects through the Central Highlands Region Integrated Water Management Forum

• Delivering major capital projects and asset renewal programs

• Participating and supporting state-wide and regional working groups such as the Victorian Hydrological Modelling Group, Water Grid Partnership Technical Group and the Grampians Region Climate Adaptation Strategy Working Group

• Maintaining active partnerships with DELWP, Sustainability Victoria, Regional Sustainability Alliance Ballarat, City of Ballarat, Committee for Ballarat, Federation University and other local organisations.

ENVIRONMENTAL SUSTAINABILITY

32 PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY

Central Region Sustainable Water Strategy

CHW supported the shaping of the Central and Gippsland Region Sustainable Water Strategy consultation draft through:

• active membership within the consultative committee who helped develop the work

• ongoing participation within collaborative working groups for alternative water, urban water, recreation values and water resource technical assessments

• workshopping ideas and opportunities with regional stakeholders and partners

• sharing data, information and knowledge as key inputs to the planning process

• offering feedback and reviewing working documents

• technical input to the Long-term Water Resource Assessment (Southern Victoria) project.

Other statutory obligationsCHW undertook the following initiatives and activities during 2020-21.

Catchment Management Authority (CMA) Regional Catchment Strategy

CHW continued to support the Victorian Government’s Our Catchments, Our Communities strategy through Catchment Partnership Agreements with the Corangamite and North Central Catchment Management Authorities (CMAs). Furthermore, in 2020-21 CHW completed a Memorandum of Understanding (MoU) with these CMAs.

The MoU strengthens the collaborative relationship between the CMAs and CHW, promoting cooperation and joint action to maintain and improve catchment health. It focuses on the following strategic areas of common interest:

1. Integrated catchment management

2. Integrated water management planning

3. Building climate resilience

4. Environmental water entitlements

5. Improving water quality

6. Communications and engagement with the community and other regional stakeholders

7. Natural resource management data sharing actions that CHW has undertaken that specifically support the CMAs Regional Catchment Strategy include:

• contributing to the development of annual work plans for 2020-21

• collaborating on data sharing with partner agencies, including the establishment of live data feeds to DELWP for environmental projects associated with the Working for Victoria program

• assisting the Corangamite and North Central CMAs in the renewal of the Regional Catchment Strategy, through participation in a comprehensive program of community and stakeholder engagement. Delivered at the regional level, the program identified the outcomes and priority directions for the management of the region’s water, biodiversity, land, coast and marine, as well as community assets

• continuing work on a new environmental asset database for use in a Geographic Information System supporting mobile field staff and long-term planning for operational and capital investment

• continuing to implement actions to reduce risks to water quality in our declared water supply catchments.

Victorian Waterway Management Strategy and River Health Projects

CHW is committed to the delivery of the Victorian Waterway Management Strategy through partnerships with catchment managers. CHW has developed projects under the Corangamite and North Central CMA Regional Waterway Strategies:

• In 2020-21, the North Central CMA (NCCMA) and CHW commissioned the development of an Integrated Catchment Management Plan (ICMP) for the Tullaroop catchment to protect its environmental, social, economic and cultural values as well as continuing to supply safe drinking water for Maryborough and surrounding townships. The catchment, including Tullaroop Reservoir and its feeder waterways, is also of major cultural significance to the Traditional Owners, the Jaara people, represented by Dja Dja Wurrung Clans Aboriginal Corporation (DDWCAC).

• The first component of the ICMP summarises the catchment values, threats, investment analysis, current initiatives and knowledge gaps. The second component of the project estimates the benefits and costs of options for feasibly managing the Tullaroop catchment to achieve the shared goals, and provides a recommendation on the preferred option which will become the basis of developing the final ICMP.

• CHW developed a draft CHW Healthy Waterway Strategy to manage to identify and manage business impacts on regional waterways. The purpose of this is to:

– provide strategic context and drivers for waterway management

– provide an overview of waterway assets at CHW

– understand the values and threats of waterways

– establish goals and targets

• Riparian weed control across the catchment to protect and enhancement streamside vegetation.

• Revegetation along the Moorabool River West Branch at Mollongghip and Lal Lal reserves

• Providing support to the Waterwatch program in the Corangamite CMA region.

Biodiversity 2037 Strategy

Actions completed in 2020-21 that support delivery of the Victorian Government’s Biodiversity 2037 Strategy include:

• planting 8,590 native trees, shrubs and grasses, achieving 10.74 hectares of native revegetation along waterways and decommissioned forestry coupes

• native seed collection program for revegetation projects

• implementing the CHW Biodiversity Strategy and associated Action Plan. Actions achieved include:

– native revegetation

– management of the threatened plant species

– weed control program

– pest animal control program

– flora and fauna surveys in the Bullarto catchment

– collaboration with Traditional Owners to undertake revegetation and conduct a cultural burn

• implementation of 6 Biodiversity Offset Management Plans

• removal of 13,000 tree guards by a Working for Victoria crew

• collaboration with DELWP on Biodiversity Response Planning.


State Environment Protection Policy (SEPP) (Waters of Victoria)

CHW assesses planning permit applications for dwellings in potable water supply catchments for compliance against the Code of Practice for Onsite Wastewater Management 891.4 and in Clause 28 of the State Environment Protection Policy – Water of Victoria (SEPP WoV 2018).

CHW uses its powers as a referral authority to set conditions related to the installation and maintenance of septic tanks and effluent disposal systems and works with municipalities in the ongoing implementation of Domestic Water Management Plans, working with the City of Ballarat, Moorabool, Pyrenees and Hepburn Shires to monitor the implementation of municipal Domestic Wastewater Management Plans. This has resulted in the processing of 88 planning applications within potable water supply catchments.

Water supply systems Bore name Groundwater license number

RWA license authority**

Annual licence volume (ML)

Volume extracted in 2020-21

Amphitheatre Amphitheatre Bore BEE059427 GWM Water 20 1.9

Avoca Bung Bong Bore BEE069412 G-MW 250 163

Ballarat Ballarat West BEE031536 SRW 1697* 480

Bungaree Bore BEE027683 SRW 69 0

Beaufort Raglan BEE030997 SRW 200 0.4

Blackwood Barrys Reef Bore BEE027580 SRW 50 0.2

Clunes Clunes (UW usage) BEE069135 G-MW 350 193

Daylesford Coomoora Bore BEE069510 G-MW 268* 43

Dean Dean Bore BEE025842 SRW 30 10

Forest Hill Forest Hill Bores BEE004957 G-MW 350 157

Landsborough/Navarre Navarre Bore BEE062916 GWM Water 150 37

Learmonth Bankin Hill BEE005382 G-MW 98 30

Lexton Gordon Hill BEE071487 G-MW 30 22

Maryborough Moolart Bores BEE018090 G-MW 1070.8* 80

Stoney Creek BEE069615 G-MW 5 0

Redbank Redbank Bores BEE056519 G-MW 50 3.7

Waubra Waubra Bore BEE014898 G-MW 65 25

Note:

* Includes temporary transfer to/from CHW licence in 2020-21.

GROUNDWATER LICENCES


2020-21 GeneralCHW holds 17 Bulk Entitlement Conversion Orders which define its legal rights to extract water to supply its water supply systems. These orders are summarised below.

CHW also maintains a Bulk Entitlement Metering Plan to ensure repairs, replacements, operational processes and data control is conducted in accordance with Bulk Entitlement requirements.

Bulk Entitlement Order

Annual amount taken from specified point(s) under Order (*)

Volume remaining in reservoirs at 30 June 2021 (*)

Transfers of BE to supply system, amendments, new entitlements or credits (*)

Failures or difficulties with complying with requirements of BE (*)

Comment (*)

Bulk Entitlement (Upper West Moorabool System) Conversion Order 1995

5767 ML(14.1 (e))

Beales 172 MLWilsons 179 MLMoorabool 3519 ML(14.1 (d))

None(14.1 (g)), (14.1 (h)),(14.1 (i)), (14.1 ( j))

None(14.1 (k)), (14.1 (l))

Nil.

Bulk Entitlement (Lal Lal – CHW) Conversion Order 1995

4597 ML(CHW)2418 ML(VEWH) 2709 ML(Barwon Water)(18.1 (g))

CHW share of Lal Lal Reservoir 32005 ML (18.1 (e))

None(18.1 (l)), (18.1 (m)),(18.1 (n)), (18.1 (o))

None(18.1 (p)), (18.1 (q))

Total net gain to CHW's share of the reservoir was 4353 ML (18.1 (f)), (18.1 ( j)). No water was taken from any point other than the specified point (18.1 (i)).

Bulk Entitlement (Ballan) Conversion Order 1998

0 ML(12.1 (c))

Colbrook 164 ML None(12.1 (e)), (12.1 (f)), (12.1 (g)), (12.1 (h))

None(12.1 (i)), (12.1 ( j))

Reservoir remained out of service during 2020-21. Ballan supplied from the Ballarat System.

Bulk Entitlement (Blackwood and Barry’s Reef) Conversion Order 1998

54 ML(11.1 (e))

Not applicable None (11.1 (g)), (11.1 (h)), (11.1 (i)), (11.1 ( j))

None(11.1 (k)), (11.1 (l))

Nil.

Bulk Entitlement (Yarrowee – White Swan System) Conversion Order 2002

8272 ML(14.1 (e))

White Swan12203 ML Gong 929 ML Kirks 364 ML Pincotts 203 ML(14.1 (d))

None(14.1 (g)), (14.1 (h)), (14.1 (i)), (14.1 ( j))

None(14.1 (k)), (14.1 (l))

Nil.

Bulk Entitlement (Landsborough/ Navarre) Conversion Order 2003

0 ML(12.1 (d))

70 ML(12.1 (c))

None(12.1 (f)), (12.1 (g)), (12.1 (h)), (12.1 (i))

None(12.1 ( j)), (12.1 (k))

No surface water used during 2020-21. System now relies on groundwater supply.

Bulk Entitlement (Lexton) Conversion Order 2004

0 ML(12.1 (c))

121ML(12.1 (b))

None(12.1 (e)), (12.1 (f)), (12.1 (g)), (12.1 (h))

None (12.1 (i)), (12.1 ( j))

Reservoir remained out of service during 2020-21.

Bulk Entitlement (Redbank) Conversion Order 2003

0 ML(12.1 (d))

3 ML(12.1 (c))

None(12.1 (f)), (12.1 (g)), (12.1 (h)), (12.1 (i))

None(12.1 ( j)), (12.1 (k))

System reliant on groundwater supply for 2020-21.

Bulk Entitlement (Avoca) Conversion Order 2003

19 ML(12.1 (d))

Sugarloaf 151 ML(12.1 (c))

None(12.1 (f)), (12.1 (g)), (12.1 (h)), (12.1 (i))

None (12.1 ( j)), (12.1 (k))

System reliant on groundwater supply for 2020-21. Surface water use consumed by raw water customers.

Bulk Entitlement (Daylesford – Hepburn Springs) Conversion Order 2004

599 ML(12.1 (c))

Wombat 548 ML Bullarto 221 MLHepburn 28 ML(12.1 (b))

None(12.1 (e)), (12.1 (g)), (12.1 (h))Yes (12.1 (f))

None (12.1(i)), (12.1 ( j))

System supplemented with 43ML of groundwater during 2020-21.

BULK ENTITLEMENT COMPLIANCE REPORT


Bulk Entitlement Order

Annual amount taken from specified point(s) under Order (*)

Volume remaining in reservoirs at 30 June 2021 (*)

Transfers of BE to supply system, amendments, new entitlements or credits (*)

Failures or difficulties with complying with requirements of BE (*)

Comment (*)

Bulk Entitlement (Creswick) Conversion Order 2004

479 ML(12.1 (c))

Cosgrave 678 ML Russells 25 ML Dean 113 ML(12.1 (b))

None(12.1 (e)), (12.1 (f)), (12.1 (g)), (12.1 (h))

None(12.1 (i)), (12.1 ( j))

Transferred into the White Swan Reservoir during 2020-21.

Bulk Entitlement (Beaufort) Conversion Order 2005

155 ML(12.1 (d))

Musical Gully 255 ML Troys 7 ML(12.1 (b))

None(12.1 (f)), (12.1 (g)),(12.1 (h)), (12.1 (i))

None (12.1 ( j)), (12.1 (k))

All water sourced from Musical Gully Reservoir.

Bulk Entitlement (Amphitheatre) Conversion Order 2003

9 ML(12.1 (c))

34 ML(12.1 (b))

None (12.1 (e)), (12.1 (f)), (12.1 (g)), (12.1 (h))

None (12.1 (i)), (12.1 ( j))

Nil.

Bulk Entitlement (Skipton) Conversion Order 2004

0 ML(12.1 (c))

Not applicable None (12.1 (e)), (12.1 (f)), (12.1 (g)), (12.1 (h))

None (12.1 (i)), (12.1 ( j))

Reservoir remained out of service during 2020-21.

Bulk Entitlement (Loddon System – Part Maryborough – CHW) Conversion Order 2005

414 ML(14.1 (b))

Not applicable None(14.1 (c)), (14.1 (e)) (14.1 (g)), (14.1 (h))

None(14.1 (i)), (14.1 ( j))

There were no periods of restrictions during 2020-21 (14.1(f)).

Bulk Entitlement (Evansford – Talbot System – Part Maryborough – CHW) Conversion Order 2006

1405 ML(17.1 (b))

Evansford 1067 ML 341.69 mAHDTalbot 430 ML 334.16 mAHDCentenary 167 ML(17.1 (c))281.51 mAHD

None(17.1 (d)), (17.1 (g)), (17.1 (i)), (17.1 ( j))

None(17.1 (k)), (17.1 (l))

Reflects the total volume of water taken for Maryborough (i.e. volume leaving Centenary Reservoir less any groundwater into Centenary Reservoir). There were no periods of restrictions during 2020-21 (17.1 (h)).

Bulk Entitlement (Bullarook System – CHW) Conversion Order 2009

183 ML(12.1 (b))

Not applicable None(12.1 (f)), (12.1 (g))

Not applicable(12.1 (h)), (12.1 (i))

CHW pumped 183 ML from Newlyn Reservoir into Cosgrave Reservoir during 2020-21. There were no periods of restrictions during 2020-21 (12.1(e)).

Notes:

* The numbers in brackets refer to the relevant clause of the Bulk Entitlement Order.

CHW did not make any applications for changes under any of the “Making Allowances” clauses in its Bulk Entitlements in 2020/21.

CHW undertakes an extensive river health program in order to fulfil its environmental obligations.

Metering programs were in place for all bulk entitlements and no changes were made to the programs.


GREENHOUSE GAS AND ENERGY REPORTING

Emissions Reduction Hierarchy

CHW produces greenhouse gas emissions from a range of activities such as the consumption of electricity, methane and nitrous oxide emissions from wastewater treatment and the combustion of fossil fuel in vehicles. CHW’s Emissions Reduction Pledge commits to reducing emissions by a minimum of 20% by 2025, compared with the baseline figure of 18,336 tCO2-e. CHW’s emissions reduction performance for 2020-21 is outlined in Table 1 below.

Table 1: Scope 1 and 2 greenhouse gas emissions by operational area

Performance indicators

Greenhouse gas emissions (tCO2-e) Variance Commentary

2020-21Emissionreductiontarget **

2020-21 result

Scope 1emissions

Scope 2emissions

2020-21result

Water treatmentand supply

- 0 2545 2545 NA A 19% decrease in emissions compared with last year, contributed to through improved energy efficiency at the Avoca Water Treatment Plant and reduced use of the Goldfields Superpipe.

Seweragecollection,treatment andrecycling

- 4880 4785 9,665 NA An 8% reduction in fugitive emissions compared with last year.

Other - 154 646 800 NA A 15% reduction in office electricity, with the biggest reduction (41%) at the Maryborough Depot.

Transport - 547 0 547 NA CHW has continued to maintain an energy efficient fleet, which includes hybrid and electric vehicles.

TOTAL EMISSIONS(a)

- 5581 7969 13,557 NA

OFFSETS RETIRED– Self generated *(b)

- 0 0 0 NA No self-generated offsets.

NET EMISSIONS *(a-b)

15,633 5581 7976 13,557 -13.3% In 2020-21, CHW reduced its carbon emissions by 4,779 tCO2-e, when compared to the baseline figure of 18,336 tCO2-e.

CHW reduced emissions by an additional 2,076 tCO2-e (-13.3%) when compared to the 2020-21 Emission Reduction Pledge Target of 15,633 tCO2-e.

Notes:

* CHW’s greenhouse gas emissions have been calculated in accordance with the National Greenhouse and Energy Reporting (Measurement) Determination 2008, as amended in 2021, and National Greenhouse Accounts (NGA) Factors, October 2020.

** CHW does not have an Emission Reduction Target for each Performance Indicator category, as this was not a requirement of the Emissions Reduction Pledge.Figure 1: Progress towards greenhouse gas emissions target for 1 July 2025.

Have a Strategy for Zero Net Emission by 2050

Avoid Emissions (& Lock-in)

Energy Productivity

Utilise Waste

Low Carbon Electricity

Electrification &Fuel Switching

Sequester

Offset

Resear

ch, D

evelo

pment,

Demonst

ratio

n and D

eploym

ent

Impro

ved R

eportin

g

Central Highlands Water 2020-21 Annual Report

Figure 1: Progress towards greenhouse gas emissions target for 1 July 2025

Energy consumption and generationCHW has adopted a renewable energy led strategy to help reduce its greenhouse gas emissions. Current and future initiatives supporting CHW’s emissions reduction efforts include:

• a reduction in the consumption of 3165MWh of grid electricity was achieved in 2020-21 due to the first full year of running the “behind-the-meter” solar generation systems at:

– White Swan Water Treatment Plant and Pump Station

– Lal Lal Water Treatment Plant

– Ballarat South Waste Water Treatment Plant

– Ballarat North Water Reclamation Plant

• ongoing pursuit of energy efficiency and optimisation

• participation in the Zero Emissions Water Ltd. Power Purchase Agreement (PPA).

CHW’s current electrical consumption is outlined in Table 2 below.

PART 4 ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 37

Table 2: Total electricity consumption report

Total electricity use 2019-2020result

(MWh)total

electricity*

2020-21result

(MWh)total

electricity*

Commentary

Water treatment and supply 12,287 12,112 Similar usage to 2019-20.

Sewage collection, treatment and recycling

8,452 9,573 Electricity consumption has increased by 9% from last year, due to population growth and climatic factors. However, the grid electricity consumption has reduced by 15% due to the rest being sourced from CHW's behind the meter solar plants.

Other (office, workshops, depot, etc)

843 781 A 7% decrease in electricity use, attributed to the impact of the COVID-19 pandemic.

TOTAL (a) 21,582 22,466

Note:

* Total electricity is inclusive of all CHW’s sites and services and includes the consumption of grid electricity, purchase of green power and renewable electricity used behind the meter.

Table 3: Total renewable energy used

Performance Indicator 2019-20renewable

electricity used(MWh)

2020-21renewable

electricity used(MWh)

Commentary

1. Grid sourced: Mandatory (LRET)

3,926 3,574

2. Solar 583 3,380 A big increase in the solar energy generated as, for the first year, it ran for 12 months at Maryborough WTP, Ballarat North WWTP, Lal Lal WTP, White Swan WTP, White Swan Pump Station and Ballarat South WWTP.

3. Hydroelectric 285 232

4. Wind 0 0

5. Biogas 0 0

6. Green power 0 0

7. Other 0 0

Total (b) 4,794 7,186

Percentage renewableelectricity = (b)/(a) * 100

22.2% 32.0% An increase in the use of renewable energy as a result of the full use of the solar installations for the year.

Note:

* Total electricity.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2011-16

Baseline

2016

-17

2017-18

2018

-19

2019-20

2020

-21

2021-22

2022-23

2023-24

2024-25

Target

tCO

2-e

Net greenhouse gas emissions (tonnes of CO2 equivalent)

Actual net greenhouse gas emissions (tCO2-e)

Projected net greenhouse gas emissions (tCO2-e)


ProcurementCHW’s major procurement activities include requirements for supplier compliance with ISO14000.

CHW is participating in the water industry Large Scale Renewables Project which will help achieve the Government’s emission reduction and renewable energy targets.

CHW’s Social Procurement Strategy supports the opportunity to use buying power within the region to deliver positive social impacts to the community being:

• opportunities for Victorian Aboriginal people, Victorians with a disability and disadvantaged Victorians

• women’s equality and safety

• supporting safe and fair workplaces

• sustainable Victorian social enterprise and Aboriginal business sectors

• sustainable Victoria regions

• environmentally sustainable outputs and business practices

• implementation of the Climate Change Policy objectives.

CHW has engaged ‘social procurement’ suppliers to complete works and services under the following categories:

• car washing

• waste management

• labour hire/recruitment

• traineeships

• catering

• supply of native plants

• landscaping services

• supply of artwork for recognition awards

• conservation programs.

CHW has also incorporated the following socially responsible initiatives through our purchasing processes:

• including social clauses in contracts, requesting that suppliers deliver social impacts such as supporting diversity and purchasing locally as part of a contract

• purchasing environmentally friendly toilet paper and paper towels, ‘Thank-you’ products to assist in reducing world poverty and 100% recycled copy paper

• supporting the 5-star ANCAP safety rating and selecting energy efficient alternatives to reduce CO2 emissions of our passenger vehicles and utilities in line with our Fleet Management Framework

• installing solar panels, LED lighting and mini-hydro systems at CHW sites

• improving access to safe water, improved hygiene and sanitation in the world's poorest communities through partnership with Water Aid.

Working with other water corporations and VicWater, CHW has developed their first Modern Slavery Statement to support the screening of supply chains for ethical and modern slavery considerations.

CHW complies with the Victorian Government’s Local Jobs First Policy which ensures that small and medium size enterprises are given a full and fair opportunity to compete for CHW’s works helping to create job opportunities, including for apprentices, trainees and cadets (see page 25).

Office-based environmental dataThe majority of office-based activities take place at CHW’s main office in Learmonth Road, Wendouree. CHW also operates a small office in Maryborough.

Energy use

CHW consumes grid electricity and gas in both the Learmonth Road office and Maryborough office. CHW generates approximately 117 MWh of electricity annually from a solar array at the Learmonth Road office, avoiding the generation of approximately 119 tCO2-e annually.

Waste and recycling

Waste generated from office-based activities includes general municipal waste, disposed via a licenced landfill, and segregated recyclables. CHW implements a Resource Recovery and Waste Reduction Plan aimed to achieve zero waste to landfill from operations by 2050. CHW will conduct a waste audit in 2021-22 to help improve resource recovery performance.

Paper

CHW utilises office paper that is carbon-neutral in its origin and is certified by the Australian Forestry Standard; endorsed by PEFC, (sustainable forest certification scheme) and meets ISO 14001 standard requirements. The use of modern printers incorporating time out functionality and individual user identification for print release ensures that unaccounted for printing is avoided. CHW’s document management system also plays a key role in sharing business information electronically, reducing the need for hard copies.

Water consumption

CHW consumed approximately 803 kL of potable water to operate its office based activities at the Learmonth Road and Maryborough office locations. This was down 47% from the previous year because of reduced staff occupying the office due to COVID-19.

Transport

CHW continues to optimise the size and characteristics of its vehicle fleet to ensure that it remains fit-for-purpose and efficient. Through the introduction of GPS vehicle tracking and the implementation of the ‘euro 6’ engine emissions standard, the environmental impact associated with office based transport continues to be minimised. CHW’s Smart Fleet vehicle management system also contributes to reduced vehicle travel through increased facilitation of carpooling. Technologies such as video conferencing and cloud-based information sharing tools are increasingly helping CHW’s staff avoid physical travel.


Office based environmental data for 2020-21

Indicator 2020-21 2019-20 2018-19

Energy Use

E1. Total energy usage segmented by primary source (MJ) 5,034,536 4,510,884 4,648,168

Electricity (MJ) – excluding green power 2,145,280 2,360,484 2,371,079

Natural gas (MJ) 2,983,000 2,150,400 2,277,088

Green power (MJ) 0 0 0

LPG (MJ) 0 0 0

E2. Total greenhouse gas emissions from energy consumption (tonnes CO2-e) 737 780 822

Electricity (tonnes CO2-e) – excluding green power 584 669 705

Natural gas (tonnes CO2-e) 153 111 117

LPG (tonne CO2-e) 0 0 0

E3. Percentage of electricity purchased as green power (%) 0 0 0

E4. Units of office energy used per FTE (MJ/FTE) 26,414 31,958 24,076

E5. Units of office energy used per office area for Maryborough and head office (MJ/m2) 951 837 862

Waste and recycling

Ws1. Total units of waste disposed of by destination (kg/yr) 37,070 33,910 84,136

Landfill 31,660 29,420 76,297

Comingled recycling (kg) 4,580 4,490 7,839

Paper and card (kg) 410 - -

Secure documents (kg) 420 - -

Organics (kg) - - -

Ws2. Total units of waste disposed of per FTE by destination (kg/FTE)

Landfill 157.5 208 395

Comingled recycling (kg) 22.7 32 41

Paper and card (kg) 2 NA NA

Ws3. Recycling rate (%) 17% 13.24% 9.32%

Ws4. Greenhouse gas emissions associated with waste (tonnes CO2-e) 61 41 76

Paper use

P1. Total units of A4 equivalent copy paper used (reams) 413 1116 1,424

P2. Units of A4 equivalent copy paper used per FTE (reams/FTE) 2.16 8 7

P3. Percentage of recycled content in copy paper purchased (%) 100% 0% 100% (2)

Water consumption

W1. Total water consumption (kilolitres 803 1,522 1,452

W2. Units of office water used per FTE (kilolitres/FTE) 4.2 11 8

W3. Units of office water used per office area (kilolitres/m2) 0.149 0.28 0

Travel and transport

T.1 Total energy consumption by fleet vehicles (MJ) 307,699 1,059,975 -

Diesel 83,723 405,285 -

LPG 0 0 -

Unleaded 223,976 654,691 -

T2. Total distance travelled by fleet vehicles (km) 91,851 300,053 422,632

Diesel 20,727 93,916 41,332

LPG 0 0 0

Unleaded 71,124 206,137 381,300

T3. Total greenhouse gas emissions from fleet vehicles (tonnes CO2-e) 21 72 577 (1)

Diesel 6 28 467 (1)

LPG 0 0 NA

Unleaded 15 44 109 (1)

T3. Total greenhouse gas emissions from fleet vehicles per 1000km (tonnes CO2-e) 0.23 0.24 1.36(1)

Diesel 0.29 0.30 11.30 (1)

LPG 0.00 0.00 0.00

Unleaded 0.21 0.21 0.29 (1)

T4. Total distance travelled by air 1282 31,520 54,686

T5. Percentage using sustainable transport to get to and from work by locality NA NA NA

Notes:

(-) Data not available.(1) The 2018-19 figures reported greenhouse gas emissions from CHW’s entire corporate fleet. The 2019-20 and 2020/21 figures include fleet greenhouse gas

emissions only associated with office-based activities.(2) The 2018-2019 figure was reported as renewable content.


Value of community service obligations provided

No. Applied For 2020-21

Amount Granted 2020-21

$

Amount Granted 2019-20

$

Rebates and Concessions

Pensioner & Health Care Card Concessions 21,805 5,480,315.97 5,316,016.17

Life Support Rebates 2 331.23 -

Rebate paid to Not-for-Profit Organisations 1,323 313,838.46 315,516.66

Vulnerable Customer Relief

Utility Relief Grant Scheme* 404 175,592.58 169,016.39

CHW Hardship Relief 11 2,207.30 7,923.43

Water Saving

Community Housing Retrofit Program (CHRP) 24 42,440.50 151,479.00

Community Rebate Program (CRP) 102 27,626.28 61,887.00

Water Saving Products Rebates

Guaranteed Service Levels

Customer Charter Rebates 210 24,250.00 40,200.00

Note:

* Customers receive payment for the Utility Relief Grant Scheme directly from the Department of Families, Fairness and Housing.

Management of social and economic impactsDuring 2020-21, CHW continued its focus on delivering positive customer outcomes via its 3 core programs, Customer Assistance and Vulnerability, Community Rebates, as well as the promotion of Permanent Water Saving Rules throughout the region. These core programs are supported by CHW’s dedicated Customer Care team and facilitate the following for customers:

• access to State Government concessions

• access to the DHHS Utility Relief Grant Scheme

• access to the Community Rebate Program provided in partnership with DELWP, supporting our vulnerable customers

• access to the Community Housing Retrofit Program provided in partnership with DELWP, supporting not-for-profit housing providers

• referrals to no-cost financial counselling services and other local agencies

• home visits to assist customers with paperwork, grant applications and provide water efficiency advice

• a range of payment options including Centrepay and flexible payment arrangements

• access to CHW’s Business Assistance Package – a customised program targeting small business customers in financial hardship

• access to community information sessions providing information on payment options, how to read a water meter, how to identify leaks, concessions and other assistance available

• an annual Care Flow Forum aimed to strengthen partnerships with local agencies, providing assistance to vulnerable customers across the region.

SOCIAL SUSTAINABILITY

Central Highlands Water 2020-21 Annual Report PART 5 PERFORMANCE REPORT 41

PART 5

PERFORMANCEREPORT

Financial performance indicators

KPI Number

Key Performance Indicator 2019-20 Result

2020-21 Result

2020-21 Target

Variance to prior

year

Notes Variance to target

Notes

F1 Cash Interest CoverNet operating cash flows before net interest and tax/net interest payments 5.18 5.58 2.50 7.7% 123.2% 1

F2 Gearing RatioTotal debt (including finance leases)/total assets *100 10.26% 6.81% 11.00% (33.6)% 2 (38.1)% 3

F3 Internal Financing RatioNet operating cash flow less dividends/net capital expenditure *100 131.75% 169.88% 43.00% 28.9% 4 295.1% 5

F4 Current RatioCurrent assets/current liabilities (excluding long-term employee provisions and revenue in advance) 0.72 0.55 1.49 (23.6)% 6 (63.1)% 7

F5 Return on AssetsEarnings before net interest and tax/average assets *100 2.41% 2.40% 1.40% (0.4)% 71.4% 8

F6 Return on EquityNet profit after tax/average total equity *100 1.61% 1.75% 0.70% 8.7% 150.0% 9

F7 EBITDA MarginEarnings Before Interest, Tax, Depreciation and Amortisation/total revenue *100 46.63% 49.36% 41.00% 5.9% 20.4% 10

Notes:

1 & 3 & 5 & 7 & 8 & 9 & 10 Significant variances to target due to the uncertainty around COVID-19 when planning for 2020-21. CHW's Corporate Plan included a number of assumptions (including reduced revenue of $2m and delayed billing receipts of $13m) which failed to materialise.

2 Favourable variance to prior year due to a combination of debt reduction and increased asset base following Valuer General Victoria revaluation process.

4 Favourable variance to prior year due to reduced operating expenses and higher than normal capital expenditure accrual.

6 Unfavourable variance to prior year mostly due to an increase in accrued expenses in 2020-21.

STATEMENT OF PERFORMANCE FOR THE 2020-21 FINANCIAL YEAR

42 PART 5 PERFORMANCE REPORT

Customer responsiveness performance indicators

KPI Number


2020-21 Result

2020-21 Target

Variance to prior

year


Notes

CR1 Water Quality ComplaintsNo. of complaints per 1000 customers 1.15 0.94 1.99 (18.3)% 1 (52.8)% 2

CR4 Billing ComplaintsNo. of complaints per 1000 customers 0.16 0.30 0.36 87.5% 3 (16.7)% 4

Notes:

1 & 2 Enhanced focus on preventative programs, better operational response procedures, targeted mains cleaning and better disinfection management have contributed to the decrease of water quality complaints for 2020-21 compared to the previous year and in relation to the target.

3 & 4 CHW has seen an upward trend in billing complaints during 2020-21 (relating to issues including billing delays and fixed service charges). CHW continues to develop its reporting procedures to capture complaints more accurately to better align with ESC guidance relating to complaints.

Environmental performance indicators

KPI Number


2020-21 Result

2020-21 Target

Variance to prior

year


Notes

E1 Effluent re-use volume (and use)Percentage recycled for each category 13.5% 16.5% 15.0% 22.2% 1 10.0% 2

E2 Total net CO2 emissionsNet CO2 equivalent 14,976 13,557 15,633 (9.5)% 3 (13.3)% 4

Notes:

1 & 2 The variance between 2019-20 and 2020-21 was due to marginally lower total inflows, which resulted in a marginal reduction in effluent production; and increased reuse at the following Wastewater Treatment Plants: Skipton, Ballan, Ballarat South and Ballarat North.

3 & 4 Reduction in CO2 emssions has been driven by reduced fugitive emissions from wastewater collection, treatment and recycling; improved energy efficiency at the Avoca Water Treatment Plant; and reduced use of the Goldfields Superpipe.

Notes:

1 & 2 The average interruption time was reduced by a single short duration event that impacted a large number of customers.

Water and sewerage service performance indicators

KPI Number


2020-21 Result

2020-21 Target

Variance to prior

year


Notes

WS1 Unplanned Water Supply InterruptionsNumber of customers receiving 5 unplanned water supply interruptions in the year 0% 0% 0% 0.0% 0.0%

WS2 Interruption timeAverage duration of unplanned water supply interruptions 121 114 120 (5.8)% 1 (5.0)% 2

WS3 Restoration of Unplanned Water Supply InterruptionsPercentage of unplanned water supply interruptions restored within 5 hours 94.8% 93.8% 96.0% (1.1)% (2.3)%

SS1 Containment of Sewer SpillsPercentage of sewer spills from reticulation and branch sewers contained within 5 hours 97.2% 96.6% 100% (0.6)% (3.5)%

SS2 Sewer Spills InterruptionsPercentage of residential sewerage customers affected by sewerage interruptions restored within 5 hours 95.8% 97.5% 95% 1.8% 2.6%


STATUTORY CERTIFICATIONWe certify that the accompanying Performance Report of Central Highlands Region Water Corporation in respect of the 2020-21 financial year is presented fairly in accordance with the Financial Management Act 1994.

The Performance Report outlines the relevant performance indicators for the financial year as determined by the responsible Minister and as set out in the 2020-21 Corporate Plan, the actual and comparative results achieved for the financial year against predetermined performance targets and these indicators, and an explanation of any significant variance between the actual results and performance targets and/or between the actual results in the current year and the previous year.

As at the date of signing, we are not aware of any circumstances which would render any particulars in the Performance Report to be misleading or inaccurate.


Paul O’Donohue Managing Director Central Highlands Region Water Corporation

Anthony O’Brien General Manager Business Services Central Highlands Region Water Corporation

Dated this 29th day of September 2021

44 PART 5 PERFORMANCE REPORT

VICTORIAN AUDITOR-GENERAL’S REPORT

Independent Auditor’s Report To the Board of the Central Highlands Region Water Corporation

Opinion I have audited the accompanying performance report of the Central Highlands Region Water Corporation (the corporation) for the year ended 30 June 2021, which comprises the:

• financial performance indicators • water and sewerage service performance indicators • customer responsiveness performance indicators • environmental performance indicators • statutory certification.

In my opinion, the performance report of the Central Highlands Region Water Corporation for the year ended 30 June 2021 presents fairly, in all material respects, in accordance with the performance reporting requirements of Part 7 of the Financial Management Act 1994.

Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Standards on Assurance Engagements. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the performance report section of my report.

My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the performance report in Victoria and have also fulfilled our other ethical responsibilities in accordance with the Code.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Board's responsibilities for the performance report

The Board is responsible for the preparation and fair presentation of the performance report in accordance with the performance reporting requirements of the Financial Management Act 1994, and for such internal control as the Board determines is necessary to enable the preparation and fair presentation of the performance report that is free from material misstatement, whether due to fraud or error.


2

Auditor’s responsibilities for the audit of the performance report

As required by the Audit Act 1994, my responsibility is to express an opinion on the performance report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the performance report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Standards on Assurance Engagements will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of this performance report.

As part of an audit in accordance with the Australian Standards on Assurance Engagements, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

• identify and assess the risks of material misstatement of the performance report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the corporation’s internal control

• evaluate the overall presentation, structure and content of the performance report, including the disclosures, and whether the performance report represents the underlying events and results in a manner that achieves fair presentation.

I communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

MELBOURNE 1 October 2021

Paul Martin as delegate for the Auditor-General of Victoria

46 PART 6 FINANCIAL REPORT

PART 6

FINANCIALREPORT

COMPREHENSIVE OPERATING STATEMENTFOR THE YEAR ENDED 30 JUNE 2021

Central Highlands Water Corporation is pleased to present its audited general-purpose financial statements for the financial year ended 30 June 2021.

Notes 2021$'000

2020$'000

Revenue and income from transactionsService charges 2.1.1 62,151 61,615Usage charges 2.1.1 30,165 29,803Government grants 2.2 1,227 91Developer contributions 2.1.2 25,374 17,584Net gain/(loss) on disposal of non-current assets 4.1.5 (172) (711)Other income 2.3 5,583 10,198Total revenue and income from transactions 124,328 118,580

Expenses from transactionsDepreciation 4.1.1 (26,192) (24,613)Amortisation 4.2 (656) (635)Employee benefits 3.1.1 (22,587) (22,980)Service concession arrangement tolls 6.3 (9,624) (10,687)Direct operating expenses 3.2 (9,790) (10,787)Repairs & maintenance 3.3 (5,664) (5,896)Environmental contributions 8.2 (4,472) (3,967)Interest expenses 6.1.2 (6,608) (7,393)Operating expenses 3.4 (9,674) (9,088)Total expenses from transactions (95,267) (96,046)

Net result from transactions (net operating balance) 29,061 22,534

Other economic flows included in net resultOther gains/(losses) from economic flows 9.2 (1,154) 116Total other economic flow included in net result (1,154) 116

Net result before income tax 27,907 22,650

Income tax expense 8.1.1 (8,380) (6,797)

Net result 19,527 15,853

Other economic flow - other comprehensive incomeItems that will not be reclassified to net resultChanges in physical asset revaluation surplus 9.1 366,781 -Deferred Income tax relating to these items 8.1 (110,034) -Comprehensive result 276,274 15,853

The accompanying notes form part of these financial statements.

PART 6 FINANCIAL REPORT 47Central Highlands Water 2020-21 Annual Report

BALANCE SHEET AS AT 30 JUNE 2021

Notes 2021$'000

2020$'000

ASSETS

Current assets

Cash and cash equivalents 6.4 1,245 3,963

Receivables 5.1 6,064 3,679

Contract assets 5.2 14,500 16,556

Inventories 5.5 597 571

Other financial assets 5.7 1,151 1,520

Total current assets 23,557 26,289

Non-current assets

Receivables 5.1 173 174

Infrastructure, property, plant & equipment 4.1.1 1,563,094 1,176,531

Intangible assets 4.2 39,407 38,277

Biological assets 5.8 5,555 6,946

Other financial assets 5.6 30 -

Total non-current assets 1,608,259 1,221,928

Total assets 1,631,816 1,248,217

LIABILITIES

Current liabilities

Payables 5.3 16,258 10,470

Contract liabilities 5.4 1,252 1,400

Interest bearing liabilities 6.1.1 19,197 18,894

Employee benefits provision 3.1.2 6,015 5,528

Total current liabilities 42,722 36,291

Non-current liabilities

Interest bearing liabilities 6.1.1 91,947 109,144

Net deferred tax liabilities 8.1.2 242,775 124,363

Employee benefits provision 3.1.2 331 652

Total non-current liabilities 335,053 234,159

Total liabilities 377,775 270,450

Net assets 1,254,041 977,767

EQUITY

Contributed capital 358,241 358,241

Asset revaluation surplus 9.1 510,672 253,925

Accumulated surplus 385,128 365,601

Total equity 1,254,041 977,767



CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2021

Notes 2021$'000

2020$'000

Cash flows from operating activities

Receipts

Service and usage charges 92,159 93,341

Receipts from Government grants – other 1,082 1,487

Interest received 2 11

Developer contribution fees 3,487 3,044

Goods and Services Tax received from the Australian Taxation Office 13 (219)

Other receipts 5,353 11,661

Total receipts 102,096 109,325

Payments

Payments to suppliers and employees (52,127) (61,949)

Interest and other costs of finance paid (8,187) (8,641)

Environmental contribution levy paid (4,304) (2,645)

Total payments (64,618) (73,235)

Net cash inflow from operating activities 6.4.1 37,478 36,090

Cash flows from investing activities

Payments for infrastructure, property, plant & equipment (22,061) (27,393)

Proceeds from sale of infrastructure, property, plant & equipment 575 202

Payments for intangible assets (1,786) (2,796)

Net cash outflow from investing activities (23,272) (29,987)

Cash flows from financing activities

Repayments of borrowings (14,000) (3,000)

Proceeds from loans to ZEW Ltd (30) -

Principal element of service concession liability (2,894) (2,614)

Net cash outflow from financing activities (16,924) (5,614)

Net (decrease)/increase in cash and cash equivalents (2,718) 489

Cash and cash equivalents at the beginning of the financial year 3,963 3,474

Cash and cash equivalents at the end of the financial year 6.4 1,245 3,963



STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2021

Notes Contributedcapital

$'000

Assetrevaluation

surplus$'000

Accumulated surplus

$'000

Totalequity

$'000

Opening balance at 1 July 2019 358,241 253,925 349,748 961,914

Total comprehensive income for the year - - 15,853 15,853

Balance at 30 June 2020 9.1 358,241 253,925 365,601 977,767

Net results for the year - - 19,527 19,527

Other comprehensive income - 256,747 - 256,747

Balance at 30 June 2021 9.1 358,241 510,672 385,128 1,254,041

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


NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020NOTE:

1 Basis of preparation

2 Funding delivery of services

3 The cost of delivering our services

4 Key assets available to support output delivery

5 Other assets and liabilities

6 How we financed our operations

7 Risks, contingencies and valuation judgements

8 Statutory obligations

9 Other disclosures

1. BASIS OF PREPARATIONIntroduction

CHW manages 15 distinct water supply systems and 13 wastewater systems in a service area of 9,275 km2, which is equivalent to just over 6% of Victoria’s total area. Services are provided to 157,466 residents and businesses in more than 60 towns. These communities range in population from less than 100 people to more than 100,000 in the Ballarat and District water supply system. These services are provided in a fully integrated 'catchment-to-tap' approach which involves:

• collection and storage of water via surface water and groundwater sources

• filtration and disinfection via 15 water treatment plants

• water delivery through 2,551 km of water mains

• the collection and treatment of wastewater via 1,478 km of sewer mains

• the beneficial reuse of reclaimed water and biosolids.

Significant Events

There were no significant events during the 2020-21 year.

1.1 Basis of preparationA description of the nature of CHW's operations and principal activities are included in the Report of Operations, which does not form part of these financial statements.

The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, income and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Accounting policies are selected and applied in a manner which ensures the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring the substance of the underlying transactions or other events is reported.

Unless otherwise stated, all accounting policies applied are consistent with those of the prior year.

Functional and presentation currency

Items included in this financial report are measured using the currency of the primary economic environment in which the Corporation operates (‘the functional currency’). The financial statements are presented in Australian dollars, which is the Corporation’s functional and presentation currency.

Classification between current and non-current

In the determination of whether an asset or liability is current or non-current, consideration is given to the time when each asset or liability is expected to be realised or paid. The asset or liability is classified as current if it is expected to be turned over within the next 12 months, being the Corporation’s operational cycle.

Rounding

Unless otherwise stated, amounts in the report have been rounded to the nearest thousand dollars.


Historical cost convention

These financial statements have been prepared under the historical cost convention, except for the revaluation of financial assets, all classes of infrastructure, property, plant and equipment and investment property.

Comparative information

In these financial statements, CHW has changed the classification or presentation of certain disclosures (and relevant comparative information) to improve readability by the user. This change in the presentation has not arisen as a result of the identification of errors or changes in accounting policies by CHW. Where adjustments have been made to comparative information as a result of the correction of errors and changes in accounting policies, the nature of error and its magnitude has been disclosed in line with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.

Accounting estimates

Judgements and estimates require assumptions to be made about highly uncertain external factors such as discount rates, probability factors, the effects of inflation, changing technology, political and social trends and climate change. There are many uncertainties in the estimation process and assumptions valid at the time of estimation may change significantly when new information becomes available.

Judgements, estimates and assumptions are required to be made about financial information being presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Revisions to accounting estimates are made in the period in which the estimate is revised and also in future periods that are affected by the revision. Judgements and assumptions made by management in applying Australian Accounting Standards (AAS) that have significant effects on the financial statements and estimates relate to:

Significant judgement and estimation area Note number

Accrued water usage charges 5.2

The fair value of land, buildings, infrastructure, plant and equipment 7.3

Estimation of useful life 4.1.4

Impairment of assets 4 and 5.1.1

Employee benefit provisions 3.1.2

Actuarial assumptions for employee benefit provisions based on likely tenure of existing staff, patterns of leave claims, future salary movements and future discount rates 3

Determining whether the performance obligations are sufficiently specific so as to determine whether the arrangement is within the scope of AASB 15 Revenue from Contracts with Customers (AASB 15) or AASB 1058 Income of not-for-profit entities (AASB 1058) 2.1

The timing of satisfaction of performance obligations 2

Determining transaction price and amounts allocated to performance obligations 2

For leases, determining whether the arrangement is in substance short-term arrangement 6.2

Controlled entities

These financial statements cover the Corporation as an individual reporting entity and include all the activities of the Corporation. CHW has no controlled entities.

COVID-19

The Novel Coronavirus (COVID-19) outbreak first reported in late 2019 is currently having an unprecedented health and economic impact both internationally and domestically. To reduce the spread of the virus, a series of public health measures were imposed across the world, including in Australia, including travel restrictions, a nation-wide call to work from home and significantly reduced levels of activity in both the economy and community. In response to the global health pandemic, the Federal and State governments have been providing a number of economic stimulus packages and policies in support of Victorian families and businesses.

The consequential impacts on CHW have included, but are not limited to:

• ensuring a strong response and putting provisions in place to continue to provide essential water and wastewater services for CHW customers

• support for employees transitioning to working from home

• uplifting IT network capability to support remote working

• supporting customers experiencing financial difficulties through arrangements including a hardship program, more time to pay arrangements and payment plans

• providing socially responsible waivers to trade waste customers and commercial tenants experiencing financial hardship.

The most significant impact on the business has been the ability of our customers to pay bills given the broader economic impacts across the economy. Hardship programs have increased, as we support our customers through this period.

As a result, at this stage the only account balance that is affected by COVID-19, due to Management's judgements, is Receivables and expected credit loss provision where an increased provision amount has been included as per Note 5.1.

The following items have been considered by Management but CHW remains satisfied that COVID-19 has not required a change to the judgement and/or assumptions in the disclosure of any balances.

• Fair value of non-financial assets

• Impairment of non-financial assets

• Superannuation defined benefit assets and liabilities

• Going concern

For the year ended 30 June 2021, the Corporation recognised a net profit of $19.5m. The Corporation's net current liabilities as at 30 June 2021 were $19.2m. The Corporation has $1.2m of resources comprising cash and cash equivalents, other highly liquid assets and unused credit lines available at the date of authorisation of these financial statements.

Management continuously review budgets and forecasts while monitoring cash flow requirements and customer payment trends during this period of uncertainty and conclude that the going concern assumption still remains appropriate.

These financial statements have been prepared on a going concern basis and do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate.


2. FUNDING DELIVERY OF SERVICESRevenue and income that fund delivery of the Corporation’s services are accounted for consistently with the requirements of the relevant accounting standards disclosed in the following notes.

2.1 Revenue from contracts with customers

Notes 2021$'000

2020$'000

Revenue from service, usage and trade waste charges 2.1.1 92,316 91,418

Developer contributions 2.1.2 25,374 17,584

Total revenue from contracts with customers 117,690 109,002

2.1.1 Revenue from service, usage and trade waste charges

2021$'000

2020$'000

Service charges

Water service charges 14,140 14,394

Wastewater service charges 47,604 46,706

Trade waste service charges 407 515

Total service charges 62,151 61,615

Usage charges

Water volume 27,792 26,869

Wastewater volume 655 1,123

Trade waste volume 1,515 1,761

Recycled water volume 203 50

Total usage charges 30,165 29,803

Total service and usage charges 92,316 91,418

Revenue from service, usage and trade waste charges is determined to be in accordance with AASB 15 Revenue from Contracts with Customers (AASB 15).

Type of service Nature and timing of satisfaction of performance obligations, including significant payment terms

Revenue recognition policies

Service charges (trade waste, water and wastewater)

Service charges are recognised as revenue when the services have been provided or service charge has been made. Service charges are billed in advance and recognised evenly throughout the financial year to reflect continuous service being provided to customers. Service charges are based on fixed fee for access to water, recycled water and wastewater disposal. The charges are payable within 28 days.

Revenue is recognised over time as service is provided.

Usage charges, disposal charges – sewerage

Water usage and sewer disposal charges are recognised as revenue when water is consumed by customers, and sewage waste is disposed by customers. Meter reading is undertaken progressively during the year and are billed quarterly in arrears. An estimation of usage and disposal charges is made at the end of each accounting period for connection where meters were not read at balance date. This is calculated by determining the level of billable service provided multiplied by the cost of each service. The charges are payable within 28 days.


Trade waste disposal charges

Revenue related to trade waste disposal is based on the volume of waste disposed by customers.

Revenue is recognised at a point in time.

Recycled water charges

Recycled water charges are all recognised as revenue over time as the performance obligation is satisfied. The Corporation measures these charges based on the regulated prices and the volume of water consumed by customers, and sewage and trade waste disposed by customers. The charges are payable within 30 days.


Contract assets and liabilities have been disclosed in Notes 5.2 and 5.4.

Compliance information

These general-purpose financial statements have been prepared in accordance with the Financial Management Act 1994 (FMA) and applicable Australian Accounting Standards (AASs), which include Interpretations, issued by the Australian Accounting

Standards Board (AASB). In particular, they are presented in a manner consistent with the requirements of AASB 1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049). Where appropriate, those AASs paragraphs applicable to not-for-profit entities have been applied.


2.1.2 Developer contributions

2021$'000

2020$'000

New customer contributions 3,487 3,044

Developer contributed assets 21,887 14,540

Total contributions 25,374 17,584



New customer contributions New customer contributions represent non-refundable upfront charges applicable when customers request to build or develop a property and connect to the Corporation’s water supply and sewerage infrastructure network. The charges contribute towards the cost of augmenting the Corporation's water supply distribution systems and sewerage disposal systems.

Depending on the type of new customer contribution application, this can result in the performance obligation being satisfied at a point in time when the Corporation satisfies its performance obligation. This will vary depending on the type of application submitted by the customer. As a result, a performance obligation can be satisfied when:• the Statement of Compliance is issued to the customer; or• the customer is connected to the Corporation’s infrastructure network

for the provision of water and sewerage services when no Statement of Compliance is required to be issued; or

• the customer receives consent from the Corporation to proceed with their application.

The rates applied to calculate the new customer contributions are regulated by the Essential Services Commission.


Developer contributed assets Developer contributed assets arise when developers pay for the cost of construction of new infrastructure assets and subsequently gift these assets to the Corporation to maintain in perpetuity.

Depending on the type of developer application, this can result in the performance obligation being satisfied: • when the Statement of Compliance is issued to the customer, or • when the customer is connected to the Corporation’s infrastructure

network for the provision of water and wastewater services when no Statement of Compliance is required to be issued.

Revenue is recognised at the fair value of the gifted assets by assessing the value of the works using schedule of rates.


2.1.3 Timing of recognition of revenue from customers

The corporation derives revenue from the transfer of goods and services over time and at a point in time for the following charges.

Service charges

Usage charges

Service charges

Disposal charges

Recycled water

Developer contributions

New customer

contributions

Total revenue with

customers

Water Water Wastewater Wastewater Charges

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

2020

At a point in time

-

-

-

-

-

14,540

3,044

17,584

Over time 14,394 26,869 47,221 2,884 50 - - 91,418

Total 14,394 26,869 47,221 2,884 50 14,540 3,044 109,002

2021

At a point in time

-

-

-

-

-

21,887

3,487

25,374

Over time 14,140 27,792 48,011 2,170 203 - - 92,316

Total 14,140 27,792 48,011 2,170 203 21,887 3,487 117,690


2.2 Government grants

2021$'000

2020$'000

Income recognised as income of not-for-profit entities

General purpose grants 1,227 91

Total government grants 1,227 91

The Corporation has determined that all grant income is recognised as income of not-for-profit entities in accordance with AASB 1058, except for grants that are enforceable and with sufficiently specific performance obligations and accounted for as revenue from contracts with customers in accordance with AASB 15.

Income from grants that are enforceable and with sufficiently specific performance obligations are accounted for as revenue from contracts with customers. This is recognised based on the consideration specified in the funding agreement and to the extent that it is highly probable a significant reversal of the revenue will not occur. The funding payments are normally received in advance or shortly after the relevant obligation is satisfied.

Income from grants without any sufficiently specific performance obligations, or that are not enforceable, is recognised when the Corporation has an unconditional right to receive cash which usually coincides with receipt of cash. On initial recognition of the asset, the Corporation recognises any related contributions by owners, increases in liabilities, decreases in assets, and revenue (‘related amounts’)

in accordance with other Australian Accounting Standards. Related amounts may take the form of:

• contributions by owners, in accordance with AASB 1004 Contributions (AASB 1004)

• revenue or a contract liability arising from a contract with a customer, in accordance with AASB 15

• a lease liability in accordance with AASB 16 Leases (AASB 16)

• a financial instrument, in accordance with AASB 9 Financial Instruments (AASB 9)

• a provision, in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets (AASB 137).

A government grant is not recognised until there is reasonable assurance that the Corporation will comply with the conditions attaching to it, and that the grant will be received.

Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.

2.3 Other income

2021$'000

2020$'000

Forestry timber sales 1,566 1,274

Temporary water sales 1,037 5,713

ZEW Ltd settlement income 106 258

Other 2,874 2,953

Total other income 5,583 10,198



Forestry timber sales Revenue related to the sale of nature forest timber based on the weight of timber sold.


Temporary water sales Revenue is recognised at the fair value of the temporary water sale. Revenue is recognised at a point in time.

ZEW Ltd settlement income Relates to the Corporation’s investment in Zero Emissions Water Limited (ZEW Ltd). The Corporation recognised compensation settlements received during the reporting period due to delays in reaching the commercial operational date. Refer Note 5.6 for further details on the arrangement between the Corporation and ZEW Ltd.


Other Revenue related to water allocation sales, development-related revenue streams and other revenue incurred in normal operations. Revenue from other services rendered is recognised when or as performance obligations are satisfied.



3. THE COST OF DELIVERING OUR SERVICESIntroduction

This section provides an account of the expenses incurred by CHW in delivering services and outputs.

3.1 Expenses incurred in delivery of services

2021$'000

2020$'000

Employee benefit expenses 22,587 22,980

Direct operating expenses 9,790 10,787

Repairs and maintenance 5,664 5,896

Operating expenses 9,674 9,088

Total expenses incurred in delivery of services 47,715 48,751

3.1.1 Employee benefits in the comprehensive operating statement

2021$'000

2020$'000

Salaries and wages 19,871 18,841

Annual leave 1,303 1,231

Long service leave 98 834

Employer superannuation contributions 1,928 1,913

Termination benefits 147 317

Other (760) (156)

Total employee benefit costs 22,587 22,980

Employee expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, termination payments and WorkCover premiums.

Directly attributable costs for bringing an asset to the location and condition necessary for operation, such as costs of employee benefits arising directly from the construction or acquisition of the item of infrastructure, property, plant and equipment, are capitalised.

The amount recognised in the comprehensive operating statement in relation to superannuation is employer contributions for members of both defined benefit and defined contribution superannuation plans that are paid or payable during the reporting period (see Note 3.1.3).

Termination benefits are payable when employment is terminated before normal retirement date, or when an employee accepts an offer of benefits in exchange for the termination of employment. Termination benefits are recognised when the Corporation is demonstrably committed to terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.

3.1.2 Employee benefits provision in the balance sheet

Provision is made for benefits accruing to employees in respect of annual leave and long service leave for services rendered to the reporting date and recorded as an expense during the period the services are delivered.

2021$'000

2020$'000

Current provisions:

Rostered days off

Unconditional and expected to settle within 12 months

138

116

Annual leave


1,217 1,139

Unconditional and expected to settle after 12 months

464 346

Long service leave


398 412


2,909 2,829

Provisions for on-costs


321 279


568 407

Total current provisions for employee benefits 6,015 5,528

Non-current provisions:

Long service leave – conditional 282 577

On-costs 49 75

Total non-current provisions for employee benefits 331 652

Total provisions for employee benefits 6,346 6,180

Reconciliation of movement in on-cost provisions

2021$'000

2020$'000

Opening balance 761 613

Additional provisions recognised 436 385

Amounts utilised recognised (244)

(259)

Effects of changes in the discount rate

(15)

22

Closing balance 938 761

Current 889 686

Non-current 49 75


Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, (including non-monetary benefits, annual leave and accumulating sick leave) expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period. These are then measured at the amounts expected to be paid when the liabilities are settled.

Liabilities for wages and salaries (including non-monetary benefits, annual leave, accumulating sick leave and on-costs) are recognised as part of the employee benefit provision as current liabilities, because the Corporation does not have an unconditional right to defer settlements of these liabilities.

No provision has been made for sick leave as all sick leave is non-vesting and it is not considered probable that the average sick leave taken in the future will be greater than the benefits accrued in the future. As sick leave is non-vesting, an expense is recognised in the Statement of Comprehensive Income as it is taken.

On-costs

On-costs, such as payroll tax and workers’ compensation insurance, are not employee benefits. They are disclosed separately as a component of the provision for employee benefits when the employment to which they relate has occurred.

Long service leave

Long Service Leave (LSL) is recognised in the provision for employee benefits.

Unconditional LSL (representing 7 or more years of continuous service) is disclosed as a current liability even where the Corporation does not expect to settle the liability within 12 months. The Corporation does not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months.

The components of this current LSL liability are measured at:

• Undiscounted value – the component the Corporation expects to wholly settle within 12 months; or

• Present value – the component the Corporation does not expect to wholly settle within 12 months.

Conditional long service leave is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current long service liability is measured at present value.

Any gain or loss following revaluation of the present value of non-current LSL liability is recognised as a transaction, except to the extent that a gain or loss arises due to changes in bond interest rates for which it is then recognised in the operating statement.

3.1.3 Superannuation

Superannuation contributions

CHW makes the majority of its employer superannuation contributions in respect of its employees to the Local Authorities Superannuation Fund (Vision Super). The Fund has two categories of membership, accumulation and defined benefit, each of which is funded differently. Obligations for contributions to the Fund are recognised as an expense in the Comprehensive operating statement when they are made or become due.

Contributions by CHW (excluding any unfunded liability payments) to the superannuation plans for the financial year ended 30 June 2021 and 30 June 2020 are detailed below:

Scheme Type of Scheme Rate 2021 $’000

2020 $’000

Vision Super Defined benefits 9.50% 203 202

Vision Super Accumulation 9.50% 743 726

Superannuation funds – other Accumulation 9.50% 982 985

Contributions to all funds 1,928 1,913

2021$'000

2020$'000

Unfunded liability payments to Vision Super 2 3

Contributions outstanding to Vision Super 157 151

Expected contributions to be paid to Vision Super 103 79

Accumulation

The Fund’s accumulation category, Vision MySuper/Vision Super saver, receives both employer and employee contributions on a progressive basis. Employer contributions are normally based on a fixed percentage of employee earnings (for the year ended 30 June 2021, this was 9.5% as required under Superannuation Guarantee (SG) legislation.


Defined benefit fund

The Corporation does not use defined benefit accounting for its Defined Benefit obligations under the Fund’s Defined Benefit category. This is because the Fund’s Defined Benefit category is a pooled multi-employer sponsored plan.

There is no proportional split of the defined benefit liabilities, assets or costs between the participating employers as the defined benefit obligation is a floating obligation between the participating employers and the only time that the aggregate obligation is allocated to specific employers is when a call is made. As a result, the level of participation of the group in the new fund cannot be measured as a percentage compared with other participating employers. Therefore, the fund actuary is unable to allocate benefit liabilities, assets and costs between employers for the purposes of AASB 119 Employee Benefits (AASB 119).

Funding arrangements

The Corporation makes employer contributions to the Defined Benefit category of the Fund at rates determined by the Trustee on the advice of the Fund Actuary. In addition, the Corporation reimburses the Fund to cover the excess of the benefits paid as a consequence of retrenchment above the funded resignation or retirement benefit.

A triennial actuarial review for the Defined Benefit category as at 30 June 2020 was conducted and completed by the due date of 31 December 2020.

The vested benefit index (VBI) of the Defined Benefit category of which CHW is a contributing employer was 104.6%. The financial assumptions used to calculate the VBI were:

Net investment returns 5.6% pa

Salary information 2.8% pa

Price inflation 2.0% pa

The 2021 interim actuarial investigation

An interim actuarial investigation is being conducted for the Fund’s position as at 30 June 2021 as the Fund provides lifetime in the Defined Benefit category. It is anticipated that this actuarial investigation will be completed by October 2021.

Vision Super has advised that the VBI at 30 June 2021 was 109.7%. The financial assumptions used to calculate this VBI were:

Net investment returns 4.8% pa

Salary information 2.8% pa

Price inflation 2.3% pa

The VBI is used as the primary funding indicator. Because the VBI was above 100%, the 30 June 2020 actuarial investigation determined the Defined Benefit category was in a satisfactory financial position and that no change was necessary to the Defined Benefit category’s funding arrangements from prior years.

Employer contributions

Regular contributions

On the basis of the results of the 2020 triennial actuarial investigation conducted by the Fund Actuary, CHW makes employer contributions to the Fund’s Defined Benefit category at rates determined by the Fund’s Trustee. For the year ended 20 June 2021, this rate was 9.5% of members salaries (9.5% in 2019/2020). This rate is expected to increase in line with any increases in the SG contribution rate and was reviewed as part of the 30 June 2020 triennial valuation.

In addition, CHW reimburses the Fund to cover the excess of the benefits paid as a consequence of retrenchment above the funded resignation or retirement benefit.

Funding calls

If the Defined Benefit category is in an unsatisfactory financial position at an actuarial investigation or the Defined Benefit category‘s VBI is below its shortfall limit at any time other than the date of the actuarial investigation, the Defined Benefit category has a shortfall for the purposes of Prudential Standard SPS 160 Defined Benefit Matters (SPS160) and the Fund is required to put a plan in place so that the shortfall is fully funded within three years of the shortfall occurring. The Fund monitors its VBI on a quarterly basis and the Fund has set its shortfall limit at 97%.

In the event that the Fund Actuary determines that there is a shortfall based on the above requirement, the Fund’s participating employers (including CHW) are required to make an employer contribution to cover the shortfall.

Using the agreed methodology, the shortfall amount is apportioned between the participating employers based on the pre-1 July 1993 and post-30 June 1993 service liabilities of the Fund’s Defined Benefit category, together with the employer’s payroll at 30 June 1993 and at the date the shortfall has been calculated.

Due to the nature of the contractual obligations between the participating employers and the Fund, and that the Fund includes lifetime pensioners and their reversionary beneficiaries, it is unlikely that the Fund will be wound up.

If there is a surplus in the Fund, the surplus cannot be returned to the participating employers. In the event that a participating employer is wound-up, the defined benefit obligations of that employer will be transferred to that employer’s successor.

The 2020 triennial actuarial investigation surplus amounts

An actuarial investigation is conducted annually for the Defined Benefit category of which CHW is a contributing employer. Generally, a full actuarial investigation is conducted every three years and interim actuarial investigations are conducted for each intervening year. A full investigation was conducted as at 30 June 2020.

The Fund’s actuarial investigation identified the following for the Defined Benefit category of which CHW is a contributing employer as at 30 June 2020 identified the following:

2020$'000

2019$'000

VBI surplus 100 151

Total service liability surplus 200 233

Discounted accrued benefits surplus 218 257

The VBI surplus means that the market value of the fund’s assets supporting the defined benefit obligations exceed the vested benefits that the defined benefit members would have been entitled to if they had all exited-on 30 June 2020.

The total service liability surplus means that the current value of the assets in the Fund’s Defined Benefit category plus expected future contributions exceeds the value of expected future benefits and expenses as at 30 June 2020.

The discounted accrued benefit surplus means that the current value of the assets in the Fund’s Defined Benefit category exceeds the value of benefits payable in the future but accrued in respect of service to 30 June 2020.


Defined benefit fund

Defined benefit fund members receive a lump sum benefit on retirement, death, disablement or withdrawal from the fund. Benefits are calculated on a multiple of an employee’s final salary. The multiple is dependent on an employee’s length of service and their contribution rate. The fund ceased including new members from September 1994. A liability or asset in respect of defined benefits superannuation is recognised and measured as the difference between the present value of employees’ accrued benefits at reporting date and the net market value of the superannuation plan’s assets at that date.

CHW is not the trustee of the defined benefit fund.

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

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

• management and investment of the plan assets; and

• compliance with superannuation law and other applicable regulations.

There are a number of risks to which the plan exposes the Corporation. The more significant risks relating to the defined benefits are investment risk, salary growth risk, legislative risk and pension risk.

CHW’s plan assets are invested by the trustee in a pool of assets with assets from other employers’ plans. The assets have a benchmark weighting to equities of 50 per cent and therefore the plan has a significant concentration of equity market risk. However, within the equity investments the allocation both globally and across sectors is diversified.

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

3.2 Direct operating expenses

2021$'000

2020$'000

Fleet 607 705

Power 1,621 2,391

Water and wastewater network 3,744 4,175

Bulk and temporary water charges 761 752

Forestry (biological assets) 1,084 967

Catchments and grounds 707 485

Monitoring and testing 753 827

Other direct operational expense 513 485

Total direct operating expenses 9,790 10,787

Expense Description Recognition policy

Fleet Expenses related to the management of fleet Accruals basis. Recognised in the Comprehensive operating statement.

Power Energy and electricity charges Accruals basis. Recognised in the Comprehensive operating statement.

Water and wastewater network Expenses related to the management of water and wastewater assets

Accruals basis. Recognised in the Comprehensive operating statement.

Bulk and temporary water charges Expenses related to bulk and temporary water charges Accruals basis. Recognised in the Comprehensive operating statement.

Forestry (biological assets) Expenses related to the management of forestry assets Accruals basis. Recognised in the Comprehensive operating statement.

Catchment and grounds Expenses relating to catchment and ground assets Accruals basis. Recognised in the Comprehensive operating statement.

Monitoring and testing Monitoring and testing expenses Accruals basis. Recognised in the Comprehensive operating statement.

Other direct operational expense Generally, represent the day to day running costs incurred in normal operations.

Accruals basis. Recognised in the Comprehensive operating statement.


3.3 Repairs and maintenance

2021$'000

2020$'000

Catchments and grounds 1,147 1,050

Water and sewer network 4,136 4,578

Facilities maintenance 211 155

Other repairs and maintenance 170 113

Total repairs and maintenance 5,664 5,896


Planned maintenance, repair costs and minor renewal costs.

Where the repair relates to the replacement of a component of an asset.

Routine maintenance that does not enhance the performance of the asset is expensed as incurred.

3.4 Operating expenses

2021$'000

2020$'000

Audit fees 223 187

Bad and doubtful debts 1,198 492

Bank and merchant fees 322 408

Community engagement 260 453

Insurance 432 415

Other operating 1,257 1,549

Printing and postage 420 503

Professional and technical services 3,388 3,207

Telephone and communication links 728 612

Information technology expenditure 1,445 1,262

Total operating expenses 9,674 9,088


Audit fees Audit fees paid to VAGO, and to internal auditors As incurred. Recognised in the Comprehensive operating statement.

Bad and doubtful debts Represents provision for bad and doubtful debts Accruals basis. Recognised in the Comprehensive operating statement.

Bank and merchant fees Bank charges and fees As incurred. Recognised in the Comprehensive operating statement.

Community engagement Expenses relating to community engagement As incurred. Recognised in the Comprehensive operating statement.

Insurance Insurance charges Accruals basis. Recognised in the Comprehensive operating statement.

Other operating Generally, represent the day to day running costs incurred in normal operations

As incurred. Recognised in the Comprehensive operating statement.

Printing and postage Printing and postage expenses As incurred. Recognised in the Comprehensive operating statement.

Professional and technical services Expenses related to professional and technical services As incurred. Recognised in the Comprehensive operating statement.

Telephone and communication links Telephone and communication expenses As incurred. Recognised in the Comprehensive operating statement.

Information technology expenditure All operating expenses, maintenance contracts, license fees and other costs associated with operating the information technology environment of the Corporation

As incurred. Recognised in the Comprehensive operating statement.


4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERYIntroduction

The Corporation controls infrastructure and other investments that are utilised in fulfilling its objectives and conducting its activities. They represent the key resources that have been entrusted to the Corporation to be utilised for delivery of those outputs.

4.1 Infrastructure, property, plant and equipment

4.1.1 Reconciliation of movements in carrying values of infrastructure, property, plant and equipment

Land

$'000

Buildings

$'000

Plant & equipment

$'000

Infra-structure

– water

$'000

Infra-structure – waste -water$'000

Service concession

assets at fair value

$'000

Capital works In progress

$'000

Total

$'000

Year ended 30 June 2020

Opening net book amount 50,278 19,756 8,705 678,260 327,073 41,693 35,197 1,160,962

Additions - - - - - - 30,262 30,262

Gifted asset - - - 4,708 11,112 - (1,280) 14,540

Disposal - - (164) (411) (94) - (1,181) (1,850)

Transfer between asset classes 1,631 1,260 2,687 19,246 8,693 - (33,496) 21

Transfer to intangibles - - - - - - (2,791) (2,791)

Depreciation - (606) (1,795) (11,382) (9,373) (1,457) - (24,613)

Closing net book amount 51,909 20,410 9,433 690,421 337,411 40,236 26,711 1,176,531

At 30 June 2020 .

Cost or fair value 51,909 26,056 20,369 785,470 383,765 43,145 26,711 1,337,425

Accumulated depreciation - (5,646) (10,936) (95,049) (46,354) (2,909) - (160,894)

Net book amount 51,909 20,410 9,433 690,421 337,411 40,236 26,711 1,176,531


Opening net book amount 51,909 20,410 9,433 690,421 337,411 40,236 26,711 1,176,531

Additions - - - - - - 26,851 26,851

Gifted assets - - - - - - 21,887 21,887

Disposal (11) - (119) (590) (203) - - (923)

Transfer between asset classes 610 272 7,616 6,149 21,274 5,797 (41,773) (55)

Transfer to intangibles - - - - - - (1,786) (1,786)

Revaluation 18,314 14,478 (631) 331,893 (8,794) 11,521 - 366,781

Depreciation - (580) (2,069) (6,360) (9,936) (7,247) - (26,192)

Closing net book amount 70,822 34,580 14,230 1,021,513 339,752 50,307 31,890 1,563,094

At 30 June 2021

Cost or fair value 70,822 34,588 25,546 1,022,125 340,668 53,444 31,890 1,579,083

Accumulated depreciation - (8) (11,316) (612) (916) (3,137) - (15,989)

Net book amount 70,822 34,580 14,230 1,021,513 339,752 50,307 31,890 1,563,094


4.1.2 Initial recognition and subsequent measurement

Infrastructure, property, plant and equipment

Items of infrastructure, property, plant and equipment, are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment. Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition. Assets transferred as part of a machinery of government change are transferred at their carrying amount.

The cost of constructed non-financial physical assets includes the cost of all materials used in construction, direct labour on the project and an appropriate proportion of variable and fixed overheads.

Items with a cost or value in excess of $1,000 and a useful life of more than one year are recognised as an asset. All other assets acquired are expensed.

Service Concession Arrangement

A Service Concession Arrangement (SCA) under AASB 1059 Service Concession Arrangement: Grantors (AASB 1059) is an asset other than goodwill, to which a private operator has right of access to provide public services on behalf of the Corporation in a service concession arrangement that:

• the operator constructs, develops, upgrades or replaces major components, or acquires from a third party or is an existing asset of the operator, or

• is an existing asset of the Corporation, including a previously unrecognised identifiable intangible asset and land under roads, or an upgrade to or replacement of a major component of an existing asset of the grantor.

The Corporation recognises a service concession arrangement constructed, developed or acquired from a third party by the operator, including an upgrade to an existing asset of the Corporation, when the Corporation controls the asset. The Corporation controls or regulates the services the operator must provide with the asset, price, and any significant residual interest in the asset at the end of the term of the arrangement.

The Corporation initially measures Service concession arrangements at current replacement cost in accordance with the cost approach to fair value in AASB 13 Fair Value Measurement (AASB 13). Subsequent to the initial recognition, or reclassification of the asset, the Corporation measures the service concession asset in accordance with AASB 116 or AASB 138 Intangible Assets (AASB 138) as appropriate as relevant.

Where an existing asset of the Corporation is reclassified as a service concession asset, the Corporation measures the asset at current replacement cost as at the date of reclassification. Any difference between the fair value of the asset using current replacement cost and the carrying value of the asset being accounted for as if it were a revaluation is taken to the asset revaluation reserve.

After initial recognition, the Corporation depreciates the service concession arrangement over its useful life using the principles in AASB 116 Property, Plant and Equipment (AASB 116). SCAs are subject to revaluation as required by Financial Reporting Direction 103I Non-Financial Physical Assets (FRD 103I). Refer to Note 7.3 Fair value determination for a summary of revaluation details by asset category with further details provided on accounting for revaluation in Note 4.1 Revaluations of Infrastructure, Property, Plant and Equipment.

Motor Vehicles

Vehicles are valued using the current replacement cost method. The Corporation acquires new vehicles and at times disposes of them before the end of their economic life. The

process of acquisition, use and disposal in the market is managed by experienced fleet managers in the Corporation who set relevant depreciation rates during use to reflect the utilisation of the vehicles.

Revaluation of infrastructure, property, plant and equipment

Non-financial physical assets are revalued at fair value every five years in accordance with the Government purpose classifications defined in Financial Reporting Direction 103I Non-Financial Physical Assets (FRD 103I). The Valuer-General Victoria (VGV) is the Government’s independent valuation agency and is used by the Corporation to conduct these scheduled revaluations. Certain infrastructure assets are revalued using specialised advisors under the direction of the VGV.

Revaluations may occur more frequently if fair value assessments indicate material changes in values. In such instances, interim managerial revaluations are undertaken in accordance with the requirements of FRD 103I.

The Corporation in conjunction with VGV, monitors changes in the fair value of each asset class through relevant data sources, in order to determine whether a revaluation is required.

The Corporation assets relating to land, buildings, infrastructure and service concession assets were independently valued by the VGV as at 30 June 2021. The market that the assets are valued in is being impacted by the uncertainty that the coronavirus (COVID-19) outbreak has caused. The valuer has advised that the current market environment, impacted by coronavirus (COVID-19), creates significant valuation uncertainty. The value assessed at the valuation date may therefore change over a relatively short time period.

Refer to Note 7.3 Fair value determination for further information on the revaluation methods used for the asset classes.

4.1.3 Accounting for revaluation movements

Infrastructure, property, plant and equipment

Fair value is determined with regard to the asset’s highest and best use (considering legal or physical restrictions imposed on the asset, public announcements or commitments made in relation to the intended use of the asset).

Revaluation increases or decreases arise from differences between an asset’s carrying value and its fair value.

Revaluation increases and decreases relating to individual assets in a class of PPE, are offset against other assets in that class but are not offset against assets in different classes. An asset revaluation surplus is not transferred to accumulated funds on the de-recognition of the related asset.

Revaluation increments are credited directly to the asset revaluation reserve, except to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense, in which case the increment is recognised immediately as revenue.

Revaluation decrements are recognised immediately as an expense, except to the extent that a credit balance exists in the asset revaluation reserve applicable to the same class of assets, in which case the decrement is debited directly to the asset revaluation reserve.

Biological assets

An increase or decrease in the fair value of these biological assets is recognised in the consolidated comprehensive operating statement as an ‘other economic flow’. The accounting treatment for biological assets is disclosed in section 5.8.


4.1.4 Depreciation and impairment

All infrastructure assets, buildings, plant and equipment and other non-financial physical assets that have finite useful lives, are depreciated. Where assets have separate identifiable components that have distinct useful lives and/or residual values, a separate depreciation rate is determined for each component.

Depreciation is generally calculated on a straight-line basis, at rates that allocate the asset’s value, less any estimated residual value, over its estimated useful life, commencing from the time the asset is held ready for use.

Typical estimated useful lives for the different asset classes for current and prior years are included in the table below:

Periods

Buildings

Buildings 5-100 years

Water infrastructure

Storages 40 years to perpetual

Distribution network 40-100 years

Treatment plants 12-100 years

Wastewater infrastructure

Distribution network 20-100 years

Treatment plants 25-100 years

Service concession assets 44 years

Plant and equipment 3-20 years

Motor vehicles 8-15 years

The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, and adjustments made where appropriate. The impacts of COVID-19 and climate-related emerging risks were considered when estimating the useful life of these assets.

Land, earthworks, land under declared roads, and core cultural assets, which are considered to have an indefinite life, are not depreciated. Depreciation is not recognised in respect of these assets because their service potential has not, in any material sense, been consumed during the reporting period.

Impairment

Non-financial assets, including items of infrastructure, property, plant and equipment, are tested for impairment whenever there is an indication that the asset may be impaired.

The assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written off, except to the extent that it can be debited to an asset revaluation surplus amount applicable to that class of asset.

If there is an indication that there has been a reversal in impairment, the carrying amount shall be increased to its recoverable amount. However, this reversal should not increase the asset’s carrying amount above what would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years.

The recoverable amount for most assets is measured at the higher of current replacement cost and fair value less costs to sell. The impact of climate risk is not a key assumption in the current replacement cost and fair value less costs to sell. The current replacement cost of an asset is its cost measured by reference to the lowest cost at which the gross future economic benefits of that asset could currently be obtained in the normal course of business.

The recoverable amount of specialised non-cash-generating assets which are held for continuing use of their service capacity, is expected to be materially the same as fair value determined under AASB 13 Fair Value Measurement.

While the potential risks and related opportunities from climate-related change are considered as part of the Corporation’s asset impairment review methodology and processes, based on what is currently known, it is not expected that climate risks will have a significant impact on the Corporation’s principal activities, particularly from an asset impairment standpoint.

4.1.5 Net loss on disposal of non-current assets

The loss from ordinary activities includes the following specific net gains and expenses:

2021$'000

2020$'000

Proceeds on sale of infrastructure, property, plant and equipment 575 202

Less written down value (747) (913)

Net loss on disposal (172) (711)


4.2 Intangible assets

Water entitlements

$'000

Computer software

$'000

Total

$,000


Opening net book amount 31,438 4,678 36,116

Additions 5 2,791 2,796

Amortisation - (635) (635)

Closing net book amount 31,443 6,834 38,277

At 30 June 2020

Cost or fair value 31,443 15,491 46,934

Accumulated amortisation - (8,657) (8,657)

Net book amount 31,443 6,834 38,277


Opening net book amount 31,443 6,834 38,277

Additions - 1,786 1,786

Amortisation - (656) (656)

Closing net book amount 31,443 7,964 39,407

At 30 June 2021

Cost or fair value 31,443 15,973 47,416

Accumulated amortisation - (8,009) (8,009)

Net book amount 31,443 7,964 39,407

Recognition and measurement

Intangible assets represent identifiable non-monetary assets without physical substance.

Purchased intangible assets are initially recognised at cost. When the recognition criteria in AASB 138 Intangible Assets is met, internally generated intangible assets are recognised at cost.

CHW has no intangible assets in respect to:

• Service concession arrangements

• Internally generated assets

Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with finite useful lives are amortised as an expense on a systematic basis (typically straight-line), commencing from the time the asset is available for use (when it is in the location and condition necessary for it to be capable of operating in the manner intended by management). The amortisation periods are reviewed and adjusted if appropriate at each balance date. Intangible assets with indefinite useful lives are not amortised. However, all intangible assets are assessed for impairment annually as outlined below.

A summary of the policies applied to the Corporation’s intangible assets is as follows:

Water Share Entitlements

Software costs

Useful lives Indefinite Finite

Amortisation method used

Not amortised Straight-line

Internally generated/acquired

Acquired Acquired

Impairment test/recoverable amount testing

Annually and where an indicator of impairment exists

Amortisation method reviewed each year-end: reviewed annually for indicators of impairment


Permanent water entitlements

Permanent water entitlements are recognised as an intangible asset on the Balance Sheet at cost (in accordance with AASB 138 Intangible Assets and FRD 109A Intangible Assets), and will not be subject to amortisation, as the permanent water entitlements have an indefinite life. Permanent water entitlements are tested annually for impairment.

Software costs

Software costs are capitalised to intangible assets based on the costs incurred to acquire, and to bring to use, the specific software. Software is amortised when the product is put in operation using the straight-line method, based on its estimated useful life.

Impairment of intangible assets

Intangible assets with indefinite useful lives (and intangible assets not yet available for use) are tested annually for impairment and whenever there is an indication that the asset may be impaired. Intangible assets with finite useful lives are tested for impairment whenever an indication of impairment is identified.

The policy in connection with testing for impairment is outlined in section 4.1.4.

4.3 Non-financial physical assets classified as held for sale

2021$'000

2020$'000

Freehold land held for sale 234 501

Total 234 501

Assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell, as their carrying amount will be recovered principally through a sale transaction, rather than through continuing use. The Corporation considers that the sale is highly probable, the asset is available for immediate sale in its present condition and the sale is expected to be completed within 12 months from the date of classification. Assets are not depreciated or amortised while they are classified as held for sale. Assets classified as held for sale are classified as current assets.

5. OTHER ASSETS AND LIABILITIESIntroduction

This section sets out those assets and liabilities that arose from the Corporation’s operations and the delivery of services.

5.1 Receivables2021

$'0002020$'000

Current

Contractual


Provision for doubtful debts (1,491) (579)

Other receivables 1,681 790

Statutory

GST input tax credit receivables 726 776

Total current receivables 6,064 3,679

Non-current

Contractual

Other receivables 173 174

Total non-current receivables 173 174

Total receivables 6,237 3,853

Receivables consist of:

Receivable Initial measurement Subsequent measurement

Contractual receivables (other receivable)

Recognised at fair value plus any directly attributable transaction costs. The Corporation holds contractual receivables with the objective of collecting the contractual cash flows.

Classified as financial instrument and measured at amortised cost using the effective interest method, less any impairment.

Contractual receivables (service and usage charges)

Measured at transaction price, unless they contain a significant financing component, when they are recognised at fair value. CHW does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year.

Classified as financial instrument and measured at amortised cost less any expected credit loss.

Statutory receivables

Recognised at fair value plus any directly attributable transaction costs.

Amortised cost less any expected credit loss.

The carrying amount at amortised cost is the reasonable approximation of fair value.


5.1.1 Impairment of contractual receivables

The Corporation applies the AASB 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for contractual receivables.

On that basis, the loss allowance as at 30 June 2021 was determined as follows for receivables – service and usage charges and other receivables:

Current

$'000

More than 30 days past due

$'000


$'000


$'000

Total

$'000

2021

Expected loss rate - 0% 44% 88% -

Net carrying amount – receivables from service and usage charges 2,428 916 558 1,246 5,148

Net carrying amount – other receivables 1,681 - - 173 1,854

Loss allowance - - (248) (1,243) (1,491)

2020

Expected loss rate - - 10% 74% -

Net carrying amount – receivables from service and usage charges 1,129 423 615 525 2,692

Net carrying amount – other receivables 790 - - 174 964

Loss allowance - - (64) (515) (579)

Receivables from service and usage charges are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan, and a failure to make contractual payments for a period of greater than 90 days past due.

Loss allowance on receivables from service and usage charges are presented in administrative and other operating expenses within the comprehensive operating statement.

The average credit period for sales of goods / services and for other receivables is 62 days. There are no material financial assets that are individually determined to be impaired.

5.1.2 Reconciliation of the expected credit loss allowance

2021$'000

2020$'000

Opening balance 1 July (579) (212)

Expected credit losses from transactions (1,491) (579)

Expected credit losses written off 324 124

Net provision movements including expected credit losses recovered 255 88

Balance as at 30 June (1,491) (579)

The expected credit loss allowance is calculated based on debtor days and we then apply an expected default rate based on historical expected credit losses and forward-looking estimates.

As a result, we have increased the allowance for doubtful debts by $0.9 million to reflect risks and uncertainties brought about by the COVID-19 pandemic. Should the macroeconomic assumptions change in the future, it could have a material impact on our allowance for doubtful debts in the subsequent years.

Contractual receivables are written off when there is no reasonable expectation of recovery and impairment losses are classified as a transaction expense. Subsequent recoveries of amounts previously written off are credited against the same line item.

5.2 Contract assets

2021$'000

2020$'000

Current


Total contract assets 14,500 16,556

Service and usage

charges$'000

Total

$'000

Opening balance as at 1 July 2020 16,556 16,556

Less: Amounts billed during the year (16,556) (16,556)

Add: Amount accrued at year end (to be billed) 14,500 14,500

Carrying amount as at 30 June 2021 14,500 14,500

Contract asset

Description Recognition

Contract assets relating to service and usage charges – Accrued revenue

Accrued revenue is recognised for water and sewerage usage as well as other works and services that have been provided to customers at balance date, but not yet billed.

Usage charges are all recognised as revenue when the service or other goods have been provided. The contract assets are transferred to contractual receivables when the rights become unconditional. This usually occurs when the Corporation issues a bill to the customer.


5.3 Payables

2021$'000

2020$'000

Current payables

Contractual

Trade creditors 1,905 2,424

Sundry creditors 2,379 1,390

Accrued expenses 5,580 4,589

Accrued expenses capex 6,361 2,001

Total contractual 16,225 10,404

Statutory

GST payable (15) 23

Payroll tax 48 43

Total statutory 33 66

Total trade and other payables 16,258 10,470

Payables for supplies and services have an average credit period for 10 days.

The terms and conditions of amounts payable to the government and agencies vary according to the particular agreements and as they are not legislative payables, statutory payables are not classified as financial instruments.

Accrued expenses capex, relate to the acquisition of goods and services associated with the implementation of capital infrastructure, where an invoice has not yet been received.

5.3.1 Ageing analysis of contractual payables

CarryingAmount

$’000

NominalAmount

$’000

Maturity Dates

Less than 1 month

$’000

1-3 months$’000

3 months - 1 year$’000

2021

Financial liabilities

Payables 16,225 16,225 7,485 6,361 2,379

Total 16,225 16,225 7,485 6,361 2,379

2020


Payables 10,404 10,404 7,013 2,001 1,390

Total 10,404 10,404 7,013 2,001 1,390

5.4 Contract liabilities

2021$'000

2020$'000

Grants

Contractual liability 1,252 1,400

Total contract liabilities 1,252 1,400

Contract liabilities Description Recognition

Contract liabilities relating to grants

Payments received for grants where the performance obligations are outstanding at balance date.

Recognised as revenue, once it has performed the performance obligations associated with the payments.


5.5 Inventories

2021$'000

2020$'000

Current

Stock – at cost 597 571

Total inventories 597 571

Inventories comprise stores and materials used in the construction of new works and for the repair and maintenance of existing assets. These inventories are held for consumption in the ordinary course of business operations and measured at the lower of cost and net realisable value. Costs are assigned to inventory quantities on hand at balance date on a weighted average cost (WAC) basis.

Inventories also include goods held for distribution at no or nominal cost. Inventories held for distribution are measured at cost, adjusted for any loss of service potential. Where inventories are acquired for no cost or nominal consideration, they are measured at current replacement cost at the date of acquisition.

Bases used in assessing loss of service potential for inventories held for distribution include current replacement cost and technical or functional obsolescence. Technical obsolescence occurs when an item still functions for some or all of the tasks it was originally acquired to do, but no longer matches existing technologies. Functional obsolescence occurs when an item no longer functions the way it did when it was first acquired.

5.6 Other financial assets

2021$’000

2020$’000

Non-current

Investment in ZEW Ltd 30 -

Total other financial assets 30 -

Amounts held by CHW with a maturity of three months or more are disclosed as ‘Other financial assets'.

5.6.1 Investment in ZEW Ltd

The Corporation is one of 13 water corporation Members of Zero Emissions Water Limited (ZEW Ltd), a public company limited by guarantee. ZEW Ltd’s substantial objective is to acquire electricity, contracts for difference and other derivative products in relation to electricity, and/or green products from an energy and emissions reduction facilities in Victoria and in turn supply these products to its Members. This vehicle provides the opportunity for water corporation members to collaboratively promote energy and emissions reduction initiatives in Victoria and to reduce emissions.

On 30 October 2018, a Members’ Agreement was entered into between the water corporations and ZEW Ltd in order to regulate their rights and obligations as members of ZEW Ltd and as participants in the project. The Members’ Agreement establishes the operating activities of ZEW Ltd and the decision-making responsibilities of the ZEW Ltd Directors.

Under the Members’ Agreement the Corporation as a member is limited to $10 in the event of a winding up. As required by Australian accounting standards, the Corporation has assessed the nature of its relationship with ZEW Ltd, and has concluded that it does not have control, joint control or significant influence over ZEW Ltd. The Corporation will account for its investment in ZEW Ltd as a financial

instrument within the scope of AASB 9 Financial Instruments. ZEW Ltd is a related party of the Corporation.

On 30 October 2018, ZEW Ltd entered into an 11-year Power Purchasing Agreement (PPA) with a solar farm energy generator. In relation to the PPA, ZEW Ltd will act as a central intermediary between the energy generator and the water corporations. The PPA contains a contract for difference (CFD) payment mechanism in respect of electricity generated by the facility and the sale and supply of large-scale generation certificates (LGCs) from the facility. The PPA contains certain conditions precedent which were due to be satisfied during the 2019-20 financial year.

The solar farm energy generator experienced a construction delay due to redesign of electrical infrastructure and a connection delay relating to generator restrictions and revised connection procedures advised by the Australian Electricity Market Operator (AEMO). Renegotiated terms resulted in an extension of the target commercial operation date to 1 October 2020 and a compensation settlement to ZEW Ltd for the delay. The Corporation’s share of the settlement was $258,455 which has been recognised in the Statement of Comprehensive Income as other income in the 2019-20 financial year (refer to Note 2.3).

Further extensions were granted until 31 January 2021 as a result of delays in commissioning ZEW Ltd’s section of the solar farm which delayed the meeting of the conditions precedents. The Corporation share of the settlement for these further delays was $106,194 which was recognised in the Statement of Comprehensive Income as other income in the 2020-21 financial year (refer to Note 2.3).

On 22 January 2021, the conditions precedent in the PPA was completed and the CFD derivative was recognised as a financial liability measured at its fair value. Subsequent changes in the derivative’s fair value have been recognised in profit and loss. Refer to Note 7.3 for more information about the judgements and assumptions used in measuring fair value determination of derivative financial instruments.

The Corporation now has an obligation to purchase its percentage of energy allocation under the Members’ Agreement, via the CFD derivative. The financial impact of the Members’ Agreement with ZEW Ltd has resulted in increased revenue and expenses, and the recognition of a derivative financial instruments and LGCs as intangible assets.

The Members’ Agreement specifies that ZEW Ltd may call on the Corporation to make a loan available to ZEW Ltd amounting to $30,367. The loan, if requested by ZEW Ltd, would meet the definition of a financial asset as it gives rise to a contractual right for us to receive cash from ZEW Ltd at the end of the loan term. At 30 June 2021, ZEW Ltd had requested and received a loan payment of $30,367. As this loan is concessional, it has been treated as an investment in ZEW Ltd and measured at amortised cost.

5.7 Other non-financial assets

2021$’000

2020$’000

Current

Prepayments 1,151 1,520

Total other non-financial assets 1,151 1,520

Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.


5.8 Biological assetsBiological assets comprise nature forests and their quantities and measurement bases are disclosed below.

Biological asset Measurement basis Quantities Carrying amount

2021 2020 2021$’000

2020$’000

Timber volume Hectares 1,365 1,363 5,555 6,946

Total 1,365 1,363 5,555 6,946

Biological assets are measured at fair value less costs to sell, with any changes recognised in the comprehensive operating statement – other economic flows. Costs to sell include all costs that would be necessary to sell the assets, including freight and direct selling costs.

The fair value of a biological asset is based on its present location and condition. If an active market exists for a biological asset in its present location and condition, the quoted price in that market is the appropriate basis for

determining the fair value of that asset. Where access exists to different markets then the most relevant market is referenced.

In the event that market determined prices or values are not available for a biological asset in its present condition, the present value of the expected net cash flows from the asset, discounted at a current market determined rate is utilised to determine fair value. Refer to Note 7.3 Fair value determination for fair value disclosures.

5.8.1 Reconciliation of movement in carrying amounts

2021$’000

2020$’000

Carrying amount at beginning of period 6,946 5,805

Gains arising from changes in fair value less estimated point of sale costs attributable to physical changes 2,244 1,879

Gains/(loss) arising from changes in fair value less estimated point of sale costs attributable to price changes (2,070) 538

Decreases due to harvest (1,565) (1,276)

Carrying amount at end of period 5,555 6,946

See Note 7.3.2 for fair value assessment of these assets.

5.8.2 Cost of biological assets sold

2021$’000

2020$’000

Cost of biological assets sold – Nature forests 1,565 1,276

Total cost of biological assets sold 1,565 1,276


6. HOW WE FINANCED OUR OPERATIONSIntroduction

This section provides information on the sources of finance utilised by the Corporation during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of the Corporation.

This section includes disclosures of balances that are financial instruments (such as borrowings and cash balances). Notes 7.1 provide additional, specific financial instrument disclosures.

6.1 Interest bearing liabilities

2021$'000

2020$'000

Current

Financial liabilities – service concession arrangements 3,197 2,894

Loans from TCV 16,000 16,000

Total current interest bearing liabilities 19,197 18,894

Non-current

Financial liabilities – service concession arrangements 12,947 16,144

Loans from TCV 79,000 93,000

Total non-current interest bearing liabilities 91,947 109,144

Total interest bearing liabilities 111,144 128,038

Interest bearing liabilities are initially recognised at the fair value of the consideration received less directly attributable transaction costs. Interest bearing liabilities are subsequently measured at amortised cost. Any difference between the initial amount recognised (net of transaction costs) and the redemption amount is recognised in the Comprehensive Operating Statement over the period of the interest-bearing liabilities, using the effective interest method.

Interest bearing liabilities are classified as current liabilities unless the Corporation has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

The Corporation has classified borrowings which mature within 12 months as non-current liabilities on the basis that the Corporation will and has discretion to refinance or rollover these loans with the Treasury Corporation of Victoria (TCV), pursuant to section 8 of the Borrowings and Investment Powers Act 1987.

6.1.1 Maturity analysis of interest-bearing liabilities

Carryingamount$'000

Nominalamount$'000

0-3 months$'000

3 months - 1 year$'000

1-5 years$'000

5+years$'000

2021


Financial liabilities – service concession arrangements 16,144 16,144 770 2,427 12,947 -

Loans from TCV 95,000 95,000 2,000 14,000 40,000 39,000

Total 111,144 111,144 2,770 16,427 52,947 39,000

- -

2020


Financial liabilities – service concession arrangements 19,038 19,038 696 2,198 14,763 1,381

Loans from TCV 109,000 109,000 - 16,000 45,000 48,000

Total 128,038 128,038 696 18,198 59,763 49,381


6.1.2 Interest expense

2021$’000

2020$’000

Interest on loans from TCV 4,174 4,670

Interest on financial liabilities – service concession arrangements 1,332 1,540

Financial accommodation levy 1,102 1,183

Total 6,608 7,393

Interest expense includes costs incurred in connection with the borrowing of funds. Interest costs include interest on bank overdrafts, short-term and long-term borrowings, financial liabilities recognised for service concession arrangements, amortisation of discounts or premiums relating to borrowings and lease charges.

Interest expense is recognised in the period in which it is incurred and measured at fair value.

6.2 Leases

The Corporation’s leasing activities

The Corporation leases IT equipment. The lease contracts are typically made for fixed periods of one to five years with an option to renew the lease after that date.

Leases of IT equipment with contract terms of 1-5 years are either short-term and/or leases of low-value items. The Corporation has elected not to recognise right-of-use assets and lease liabilities for these leases.

At 30 June 2021, the Corporation was committed to short term and/or leases of low-value leases and the total commitment at that date was $16,594.

Service concession arrangements

The Corporation sometimes enters into arrangements with private/public sector participants to design and construct or upgrade assets used to provide public services. These arrangements usually include the provision of operational and maintenance services for a specified period of time. These arrangements are often referred to as public private partnerships (PPPs).

The Corporation has adopted AASB 1059 Service Concession Arrangements: Grantors to account for PPP arrangements that meet the definition of a service concession arrangements (SCAs) in accordance with AASB 1059. Where a PPP is not considered a SCA, the Corporation determines whether the arrangement is a lease (and accounted for under AASB 16) or a construction contract (and accounted for under AASB 116 and AASB 9) and accounts for them under those relevant standards.

SCAs usually take one of two main forms. In the more common form, the ‘financial liability’ model, Corporation pays the operator over the arrangement period, subject to specified performance criteria being met. At the date of commitment to the principal provisions of the arrangement, these estimated periodic payments are allocated between a component related to the design and construction or upgrading of the asset, and the components related to the ongoing operation and maintenance of the asset.

The other form of SCAs, the ‘grant of a right to the operator’ (GORTO) model, is one in which the Corporation grants to an operator, for a specified period of time, the right to collect fees from users of the SCA asset, in return for which the operator constructs the asset and has the obligation to supply agreed upon services, including maintenance of the asset for the period of the concession. These private sector entities typically lease [land] from the Corporation and construct infrastructure. At the end of the concession period, the [land] together with the constructed facilities, will be returned to the Corporation.

The accumulation of costs incurred during construction results in a progressive build-up of the Service Concession Arrangement asset (see section 4.1.2 for the initial and subsequent measurement of SCA assets). A corresponding liability would be progressively recognised in line with the fair value of the SCA asset. The nature of the liability and the subsequent accounting depends on the consideration exchanged in reference to the contract arrangements between the grantor and the operator. An exception to this principle occurs when the grantor reclassifies an existing asset to a SCA.

The Corporation in a service concession arrangement recognises a service concession liability (SCL) at the same amount as the SCA asset, adjusted by the amount of any other consideration from the grantor to the operator, or from the operator to the grantor. Therefore, any State contributions made prior to the recognition of the liability would reduce this amount (see Note 4.1.1 for SCA assets).

However, when the Corporation reclassifies an existing asset as a SCA, no liability is recognised unless additional consideration is provided by the operator. Instead, the Corporation will recognise a SCA asset and a corresponding SCL for the amounts spent on upgrade/expansion work.

After initial recognition, the Corporation will determine if the liability represents a financial liability. Where the Corporation has a contractual obligation to pay to the operator as compensation for providing the SCA. It is measured as a liability in accordance with AASB 9 Financial Instruments. Interest is charged on the liability of some SCAs, refer to Note 6.1.2 Interest expense. The liability will be increased by interest charges, based on the interest rate implicit in the arrangement. Where the interest rate is not specified in the arrangement, prevailing market rate of interest for a similar instrument with similar credit ratings should be used. Refer to Note 6.1 Interest bearing liabilities for the amounts disclosed as financial liability.

Subsequently, the liability will also be reduced by any payments made by the State to the operator if required by the contract.


The table below illustrates commitments for service concession arrangements.

Notes Minimum future financial payments

Present value of minimum future financial payments

2021$'000

2020$'000

2021$'000

2020$'000

Less than 1 year 4,301 4,226 3,197 2,894

Between 1 and 5 years 14,676 17,570 12,947 14,763

Over 5 years - 1,407 - 1,381

Minimum financial payments 18,977 23,203 16,144 19,038

Less future interest charged in accounts (2,833) (4,165)

Total future financial liabilities payments 16,144 19,038

Representing financial liabilities service concession arrangements

Current 6.1 3,197 2,894

Non-current 6.1 12,947 16,144

Total financial liabilities 16,144 19,038

6.4 Cash flow information and balancesCash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits at call and those highly liquid investments with an original maturity of three months or less, which are held for the purpose of meeting short-term cash commitments rather than for investment purposes, and which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

For cash flow statement presentation purposes, cash and cash equivalents include bank overdrafts, which are included as current borrowings on the balance sheet, as indicated in the reconciliation below.

2021$'000

2020$'000

Cash and cash equivalents

Cash at bank and on hand 1,245 3,963

Balance as per cash flow statement 1,245 3,963

6.4.1 Reconciliation of net result for the period to cash flow from operating activities

2021$'000

2020$'000

Net result for the period 19,527 15,853

Non-cash movements:

(Profit)/loss on sale of non-current assets 172 711

Depreciation and amortisation 26,848 25,248

(Profit)/loss from other economic flows 1,391 18

Gifted assets income (21,887) (14,540)

Movements in assets and liabilities:

Decrease/(increase) in receivables (326) 3,183

Decrease/(increase) in inventory and biological assets 1,361 (1,077)

Decrease/(increase) in prepayments 369 (958)

(Decrease)/increase in payables 1,477 293

(Decrease)/increase in provisions 166 562

(Decrease)/increase in deferred tax liabilities 8,380 6,797

Net cash flows from operating activities 37,478 36,090


6.5 Commitments for expenditureCommitments for future expenditure include operating and capital commitments arising from contracts.

These commitments are recorded below at their nominal value and inclusive of GST. Where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are stated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

6.5.1 Total commitments payable

Less than 1 year$'000

Between 1 and 5 years

$'000

Over 5 years$'000

Total

$'000

Nominal amounts 2021

Service concession arrangement commitments 3,197 12,947 - 16,144

Capital commitments payable 12,057 220 - 12,277

Other commitments payable 5,931 - - 5,931

Total commitments (inclusive of GST) 21,185 13,167 - 34,352

Less GST recoverable (1,635) (20) - (1,655)

Total commitments (exclusive of GST) 19,550 13,147 - 32,697

Nominal amounts 2020

Service concession arrangement commitments 2,894 14,763 1,381 19,038

Capital commitments payable 4,667 4,613 - 9,280

Other commitments payable 2,793 - - 2,793

Total commitments (inclusive of GST) 10,354 19,376 1,381 31,111

Less GST recoverable (601) (419) - (1,020)

Total commitments (exclusive of GST) 9,753 18,957 1,381 30,091

7. RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS Introduction

The Corporation is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for the Corporation related mainly to fair value determination.

7.1 Interest bearing liabilitiesFinancial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

These financial instruments include:

Financial assets Financial liabilities

Cash and deposits

Receivables:– service and usage charges – other receivables

Investment in Zero Emission Water Limited (ZEW Ltd).

Payables:– contractual payables

(e.g. trade creditors, sundry creditors, accrued expenses, and other expenses)

Interest bearing liabilities:– loans from TCV

Service concession liability.

Due to the short-term nature of the financial assets and liabilities held by the Corporation, their carrying value is assumed to approximate their fair value.

Categories of financial instruments

Financial instrument

Initial measurement

Subsequent measurement

Financial assets at amortised cost

Financial assets include: • cash and

deposits• receivables.

Fair value plus or minus any directly attributable transaction costs.

Amortised cost only using the effective interest rate method less impairment if both of the following criteria are met:• the asset is held within a

business model whose objective is to collect the contractual cash flows, and

• the contractual terms give rise to cash flows that are solely payments of principal and interest.

Financial assets at fair value through net results

Investments in ZEW Ltd

Fair value through net result.

Fair value through net result.

Financial liabilities at amortised cost

Financial liabilities include:• payables

(excluding statutory payables)

• borrowings (including lease liabilities)

• service concession liability.

Fair value, plus or minus any directly attributable transaction costs subsequent to initial recognition.

Amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the profit and loss, over the period of the interest-bearing liability using the effective interest rate method.


Offsetting financial instruments

Financial instrument assets and liabilities are offset, and the net amount presented in the consolidated balance sheet when, and only when, the Corporation concerned has a legal right to offset the amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Some master netting arrangements do not result in an offset of balance sheet assets and liabilities. Where the Corporation does not have a legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of future events such as default, insolvency or bankruptcy, they are reported on a gross basis.

Derecognition of financial assets and liabilities

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired; or

• the Corporation retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or

• the Corporation has transferred its rights to receive cash flows from the asset and either:

– has transferred substantially all the risks and rewards of the asset; or

– has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

Where the Corporation has neither transferred nor retained substantially all the risks and rewards or transferred control, the asset is recognised to the extent of the Corporation’s continuing involvement in the asset.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same

lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised as an ‘other economic flow’ in the comprehensive operating statement.

Impairment of financial assets

At the end of each reporting period, the Corporation assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment.

The Corporation records the allowance for expected credit loss for the relevant financial instruments applying AASB 9’s Expected Credit Loss approach. Subject to AASB 9’s impairment assessment includes the Corporation’s contractual receivables, statutory receivables and its investment in debt instruments. Although not a financial asset, contract assets recognised applying AASB 15 (refer to Note 5.2) are also subject to impairment [however it is immaterial]. Equity instruments are not subject to impairment under AASB 9. While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the identified impairment loss was immaterial.

The allowance is the difference between the financial asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. In assessing impairment of statutory (non-contractual) financial assets, which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets. Impairment losses are recognised in the Comprehensive Operating Statement. Impairment losses recognised in the comprehensive operating statement on equity instruments classified as available for sale are not reversed through comprehensive operating statement.

7.1.1 Financial instruments: categorisation

2021 Contractual financial assets – loans and

receivables and cash

$’000

Financial assets designated at fair

value through profit/loss (FVTPL)

$’000

Contractual liabilities

at amortised cost

$’000

Total

$’000

Contractual financial assets

Cash and deposits 1,245 - - 1,245

Receivables

Service and usage charges 5,511 - - 5,511

Investments in ZEW Ltd - 30 - 30

Total contractual financial assets 6,756 30 - 6,786

Contractual financial liabilities

Payables

Supplies and services - - 16,225 16,225

Borrowings

Service concessions liability - - 16,144 16,144

TCV loans - - 95,000 95,000

Total contractual financial liabilities - - 127,369 127,369


2020 Contractual financial assets – loans and receivables

and cash$’000

Contractual liabilities at amortised cost

$’000

Total

$’000


Cash and deposits 3,963 - 3,963

Receivables

Service and usage charges 3,077 - 3,077

Total contractual financial assets 7,040 - 7,040


Payables

Supplies and services - 10,404 10,404

Borrowings

Service concessions liability - 19,038 19,038

TCV loans - 109,000 109,000

Total contractual financial liabilities - 138,442 138,442

7.1.2 Financial instruments: Net holding gain/(loss) on financial instruments by category

Total interest income / (expense)

$’000

Total

$’000

2021


Financial assets at amortised cost – other than on derecognition 2 2

Total contractual financial assets 2 2


Financial liabilities at amortised cost (6,608) (6,608)

Total contractual financial liabilities (6,608) (6,608)

2020


Financial assets at amortised cost – other than on derecognition 11 11

Total contractual financial assets 11 11


Financial liabilities at amortised cost (7,393) (7,393)

Total contractual financial liabilities (7,393) (7,393)

7.1.3 Financial risk management objectives and policies

The Corporation’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk. As a whole, the Corporation’s financial risk management program seeks to manage these risks and the associated volatility of its financial performance. The main purpose in holding financial instruments is to prudentially manage the Corporation’s financial risks within the government policy parameters.

Risk management is carried out by a central treasury Corporation (Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Corporation’s operating units. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Credit risk

Credit risk is the risk of financial loss to the Corporation as a result of a customer or counterparty to a financial instrument failing to meet its contractual obligations. Credit risk arises principally from the Corporation’s receivables.

The Corporation’s exposure to credit risk is influenced by the individual characteristics of each customer. The receivable balance consists of a large number of residential and business customers which are spread across a diverse range of industries. Receivable balances are monitored on an on-going basis to ensure that exposure to credit losses is not significant. The Corporation applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all receivables (refer to section 5.1).

Financial assets (e.g. receivables) are written off against the carrying amount when there is no reasonable expectation of recovery.


Impairment loss written off by mutual consent is classified as a transaction expense. Credit losses following a unilateral decision is recognised as other economic flows in the net result.

Except as otherwise detailed, the carrying amount of contractual financial assets recorded in the financial statements, net of any allowances for losses, represents the Corporation’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

The Corporation is continuously monitoring and assessing its credit risk profile due to the current economic impacts affecting customers. As a result, the Corporation has adjusted the credit risk profile in assessing the expected loss allowance in 2020-21 (refer to Note 5.1.1).

At 30 June 2021, the Corporation has no other significant credit risk. There has been no material change to the Corporation’s credit risk profile in 2020-21.

Credit quality of financial assets

Financial institution

(triple-A credit rating)

$'000

Other (min triple-B credit rating)

$'000

Total

$'000

2021

Financial assets

Cash and deposits (not assessed for impairment due to materiality) 1,245 - - 1,245

Statutory receivables (with no impairment loss recognised) - 726 - 726

Contractual receivables applying the simplified approach for impairment - - 5,511 5,511

Total financial assets 1,245 726 5,511 7,482

2020

Financial assets

Cash and deposits (not assessed for impairment due to materiality) 3,963 - - 3,963

Statutory receivables (with no impairment loss recognised) - 776 - 776

Contractual receivables applying the simplified approach for impairment - - 3,077 3,077

Total financial assets 3,963 776 3,077 7,816

Climate related risk

Climate change is a risk to the Corporation. Climate change risk includes the physical risk which can cause direct damage to assets or property as a result of rising global temperatures as well as transition risks which arise from the transition to low-carbon economy.

The Corporation is primarily exposed to climate change risk through regulations, its corporate emissions reduction pledge and the impacts of increased severe weather events.

The internal Environment Committee which reports to the Board’s Sustainability Committee, oversees work in this area.

The Corporation will further enhance the understanding of exposure of climate change risk in the process of executing the Corporation’s climate change action plan over the next 29 years. As at 30 June 2021, the Directors considered climate-related risk in the preparation of the financial statements.

Liquidity risk

Liquidity risk arises from being unable to meet financial obligations as they fall due. The Corporation’s policy is to settle financial obligations within 30 days and in the event of dispute make payments within 30 days from the date of resolution.

The Corporation manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecasts and actual cash flows and matching the maturity profiles of financial assets and financial liabilities.

The Corporation manages its liquidity risk by:

• close monitoring of its short-term and long-term borrowings by senior management, including monthly reviews on current and future borrowing levels and requirements

• maintaining an adequate level of uncommitted funds that can be drawn at short notice to meet its short-term obligations

• careful maturity planning of its financial obligations based on forecasts of future cash flows

• a high credit rating for the State of Victoria (Moody’s Investor Services and Standard & Poor’s triple-A, which assists in accessing debt market at a lower interest rate).

The Corporation’s exposure to liquidity risk is deemed insignificant based on prior periods’ data and current assessment of risk. Cash for unexpected events is generally sourced from liquidation of available-for-sale financial investments. The carrying amount in table of contractual financial liabilities recorded in the financial statements represents the Corporation’s maximum exposure to liquidity risk.

Market risk

Market risk is the risk that changes in market prices will affect the fair value or future cash flows of the Corporation’s financial instruments.

Market risk comprises of interest rate risk, foreign exchange risk and other price risk. The Corporation’s exposure to market risk is primarily though interest rate risk, there is no exposure or insignificant exposure to foreign exchange risk and insignificant exposure to other price risks.


Objectives, policies and processes used to manage these risks are disclosed in the paragraphs below:

a. Interest rate risk

The Corporation minimises its exposure to interest rate changes on its long-term borrowings by holding a mix of fixed and floating rate debt. Debt is sourced from TCV and is

managed within a range of Board approved limits with debt levels and interest rates being monitored regularly.

The Corporation has minimal exposure to interest rate risk through its holding of cash assets and other financial assets. The Corporation manages its interest rate risk by maintaining a diversified investment portfolio.

The carrying amounts of financial assets and financial liabilities that are exposed to interest rates are set out in the following table.

2021 Carrying amount

$'000

Interest rate exposure

Weighted average interest rate %

Fixed interest

rate$'000

Variable interest

rate$'000

Non- interest bearing$'000


Cash and deposits 1,245 0.27% - 1,245 -

Receivables 5,511 0% - - 5,511

Investments in ZEW Ltd 30 0% - - 30

Total financial assets 6,786 - - 1,245 5,541


Payables 16,225 0% - - 16,225

Service concession arrangements 16,144 7.77% 16,144 - -

TCV loans 95,000 3.63% 93,000 2,000 -

Total financial liabilities 127,369 - 109,144 2,000 16,225


$'000

Interest rate exposure

Weighted average interest rate %

Fixed interest rate

$'000

Variable interest rate

$'000

Non- interest bearing$'000


Cash and deposits 3,963 0.9% - 3,963 -

Receivables 3,077 0% - - 3,077

Total financial assets 7,040 - - 3,963 3,077

Contractual financial liabilities -

Payables 10,404 0% - - 10,404

Service concession arrangements 19,038 7.77% 19,038 - -

TCV loans 109,000 3.80% 100,000 9,000 -

Total financial liabilities 138,442 - 119,038 9,000 10,404

Interest rate risk sensitivity

Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates. The Corporation does not hold any interest-bearing financial instruments that are measured at fair value, and therefore has no exposure to fair value interest rate risk.

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Corporation has minimal exposure to cash flow interest rate risks through cash and deposits, term deposits and bank overdrafts that are at floating rate.

The Corporation’s sensitivity to market risk is determined based on the observed range of actual historical data for the preceding five-year period, with all variables other than the primary risk variable held constant. The Corporation cannot be expected to predict movements in market rates and prices. Sensitivity analyses shown are for illustrative purposes only. A movement of 50 basis points up and down in market interest rates (AUD) is ‘reasonably possible’.

The tables that follow show the impact on the Corporation’s net result and equity for each category of financial instrument held by the Corporation at the end of the reporting period, if the above movements were to occur.



$'000


-0.50% 0.50%

Net result

$'000

Equity

$'000

Net result

$'000

Equity

$'000


Cash and deposits 1,245 (6) (6) 6 6

Receivables 5,511 - - - -

Investments in ZEW Ltd 30 - - - -

Total financial assets 6,786 (6) (6) 6 6


Payables 16,225 - - - -

Service concession arrangements 16,144 - - - -

TCV loans 95,000 (10) (10) 10 10

Total financial liabilities 127,369 (10) (10) 10 10


$'000


-0.50% 0.50%

Net result

$'000

Equity

$'000

Net result

$'000

Equity

$'000


Cash and deposits 3,963 (20) (20) 20 20

Receivables 3,077 - - - -

Total financial assets 7,040 (20) (20) 20 20


Payables 10,404 - - - -

Service concession arrangements 19,038 - - - -

TCV loans 109,000 (45) (45) 45 45

Total financial liabilities 138,442 (45) (45) 45 45

b. Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. The Corporation has no exposure to changes in the foreign exchange rate.

c. Other price risk

The Corporation has no significant exposure to other price risk.

7.2 Contingent assets and liabilities Contingent assets are not recognised in the balance sheet, but are disclosed and, if quantifiable, are measured at nominal value. Contingent assets are presented inclusive of GST receivable or payable respectively.

7.2.1 Contingent assets

Contingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

2021$'000

2020$'000

Gifted assets 500 2,400

Total contingencies 500 2,400

7.2.2 Contingent liabilities

At the date of this report the authority has no known contingent liabilities.


7.3 Fair value determinationThis section sets out information on how the Corporation determined fair value for financial reporting purposes.

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

The following assets and liabilities are carried at fair value:

• financial assets and liabilities at fair value through operating result or other comprehensive income

• land, buildings, infrastructure, plant and equipment

• investment properties

• biological assets.

In addition, the fair values of other assets and liabilities that are carried at amortised cost, also need to be determined for disclosure purposes.

The Corporation determines the policies and procedures for determining fair values for both financial and non-financial assets and liabilities as required.

Fair value hierarchy

In determining fair value, a number of inputs are used. To increase consistency and comparability in the financial statements, these inputs are categorised into three levels, also known as the fair value hierarchy. The levels are as follows:

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

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

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

The Corporation determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Valuer-General Victoria (VGV) is the Corporation’s independent valuation agency (or) the Corporation, in conjunction with VGV [and other external valuers, if applicable], monitors changes in the fair value of each asset and liability through relevant data sources to determine whether revaluation is required.

How this section is structured

For those assets and liabilities for which fair values are determined, the following disclosures are provided:

• carrying amount and the fair value (which would be the same for those assets measured at fair value);

• which level of the fair value hierarchy was used to determine the fair value; and

• in respect of those assets and liabilities subject to fair value determination using Level 3 inputs:

– a reconciliation of the movements in fair values from the beginning of the year to the end; and

– details of significant unobservable inputs used in the fair value determination.

This section is divided between disclosures in connection with fair value determination for financial instruments (refer to Note 7.3.1) and non-financial physical assets (refer to Note 7.3.2).

7.3.1 Fair value of financial instruments measured at amortised cost

Carrying amount

2021$'000

Fair value2021

$'000

Carrying amount

2020$'000

Fair value2020$'000

Financial assets

Receivables 5,511 5,511 3,077 3,077

ZEW Ltd investment 30 30 - -


Service concession financial liability 16,144 16,144 19,038 19,038

Loans from TCV 95,000 95,000 109,000 109,000


7.3.2 Fair value determination – Non-financial physical assets

Carrying amount as at30/06/2021

$'000

Fair value measurement at end of reporting period using:

Level 1$'000

Level 2$'000

Level 3$'000

Land at fair value

Specialised land 70,822 - - 70,822

Total of land at fair value 70,822 - - 70,822

Buildings at fair value

Specialised buildings 34,580 - - 34,580

Total of buildings at fair value 34,580 - - 34,580

Plant, equipment and vehicles at fair value

Vehicles 2,575 - - 2,575

Plant and equipment 11,655 - - 11,655

Total of plant, equipment and vehicles at fair value 14,230 - - 14,230

Service concession assets at fair value

Service concession assets 50,307 - - 50,307

Total service concession assets 50,307 - - 50,307

Water infrastructure at fair value

Water treatment plants 18,381 - - 18,381

Water mains 663,609 - - 663,609

Reservoirs 236,732 - - 236,732

Water infrastructure – other 102,791 - - 102,791

Total of water infrastructure at fair value 1,021,513 - - 1,021,513

Wastewater infrastructure at fair value

Wastewater treatment plants 116,766 - - 116,766

Wastewater sewer mains 126,090 - - 126,090

Other 96,896 - - 96,896

Total of wastewater infrastructure at fair value 339,752 - - 339,752

Biological assets

Nature forests 5,555 - 5,555 -

Total biological assets 5,555 - 5,555 -


Carrying amount as at30/06/2020

$'000

Fair value measurement at end of reporting period using:

Level 1$'000

Level 2$'000

Level 3$'000

Land at fair value

Specialised land 51,909 - - 51,909

Total of land at fair value 51,909 - - 51,909

Buildings at fair value

Specialised buildings 20,410 - - 20,410

Total of buildings at fair value 20,410 - - 20,410

Plant, equipment and vehicles at fair value

Vehicles 3,156 - - 3,156

Plant and equipment 6,277 - - 6,277

Total of plant, equipment and vehicles at fair value 9,433 - - 9,433

Service concession assets at fair value

Service concession assets 40,236 - - 40,236

Total service concession assets 40,236 - - 40,236

Water infrastructure at fair value

Water treatment plants 15,495 - - 15,495

Water mains 338,288 - - 338,288

Reservoirs 208,283 - - 208,283

Water infrastructure – other 128,356 - - 128,356

Total of water infrastructure at fair value 690,421 - - 690,421

Wastewater infrastructure at fair value

Wastewater treatment plants 117,004 - - 117,004

Wastewater sewer mains 125,444 - - 125,444

Other 94,963 - - 94,963

Total of wastewater infrastructure at fair value 337,411 - - 337,411

Biological assets

Nature forests 6,946 - 6,946 -

Total Biological assets 6,946 - 6,946 -

There have been no transfers between levels during the period. There were no changes in valuation techniques throughout the period to 30 June 2021. The property and infrastructure assets were re-valued in June 2021, in line with the 5-year re-valuation requirements.

Specialised land and specialised buildings

The market approach is also used for specialised land, although is adjusted for the Community Service Obligation (CSO) to reflect the specialised nature of the land being valued.

The CSO adjustment reflects the Valuer’s assessment of the impact of restrictions associated with an asset to the extent that is also equally applicable to market participants. This approach is in light of the highest and best use consideration required for fair value measurement and considers the use of the asset that is physically possible, legally permissible, and

financially feasible. As adjustments of CSO are considered as significant unobservable inputs, specialised land would be classified as Level 3 assets.

For the majority of the Corporation’s specialised buildings, the current replacement cost method is used, adjusting for the associated depreciations. As depreciation adjustments are considered as significant, unobservable inputs in nature, specialised buildings are classified as Level 3 fair value measurements.

An independent valuation of the Corporation’s specialised land and specialised buildings was performed by Liquid Pacific. The valuation was performed using the market approach adjusted for CSO. The effective date of the valuation is 30 June 2021.


Plant and equipment

Plant and equipment are held at fair value. When plant and equipment is specialised in use, such that it is rarely sold other than as part of a going concern, fair value is determined using the current replacement cost method.

There were no changes in valuation techniques throughout the period to 30 June 2021.

For all assets measured at fair value, the current use is considered the highest and best use.

Infrastructure assets

Infrastructure assets are valued using the current replacement cost method less all forms of obsolescence and depreciation. This cost represents the replacement cost of the building/component after applying depreciation rates on a useful life basis. Replacement costs relate to costs to replace the current service capacity of the asset. Economic obsolescence has also been factored into the current replacement cost calculation. However, for some heritage and iconic assets, the cost may be the reproduction cost rather than the replacement cost if those assets’ service potential could only be replaced by reproducing them with the same materials.

Where it has not been possible to examine hidden works such as structural frames and floors, the use of reasonable materials and methods of construction have been assumed bearing in mind the age and nature of the building. The estimated cost of reconstruction includes structure services and finishes as applicable.

An independent valuation of the Corporation’s water and wastewater infrastructure was carried out by KPMG on behalf of the Valuer General Victoria as at 30 June 2021. These assets are classified as Level 3 fair value as the lowest level input, the absence of an active market, has a significant impact on the fair value which is unobservable.

The KPMG analysis of the value of the Subject Assets at the Valuation Date is based upon a number of assumptions which are discussed below:

• The infrastructure assets were valued on an “as-is, where is” basis and valued on the basis that they will be continue to be used at their present location for the continuation of business operations for their useful life.

• The asset type classification has been completed based on the asset facility location and this could result in some, likely non-material, misrepresentation of some asset types.

• The fixed asset register used for the fair value analysis was dated as at 27 November 2020.

• Management have provided a listing of decommissioned assets which we have valued at $0.

• The indices sourced from Australian Bureau of Statistics used within the valuation were as at 31 December 2021.

• Based on discussions with managers on site during the site inspections, and subsequent discussions with Management, we have applied fair value adjustments at a number of sites, based on assets which are no longer in use or removed.

• Whilst neither we nor CHW has performed a detailed inspection, KPMG has undertaken site inspection of assets and based on visual inspections we have considered the replacement timing and condition of the assets as part of our valuation work.

• Certain reservoirs where no information was able to be provided have been carried at net book value. This represents less than 1% of the total replacement cost.

• As discussed with the Management, we have not applied any functional obsolescence or economic obsolescence due to excess operating cost, overcapacity at site or overcapacity due to demand.

• Discussions with Management in regard to condition of assets did not signify any condition issues that would have an adverse effect on the valuation. We have however considered and adopted the visual inspections.

• We have valued the assets based on age/life only as no condition ratings were provided by Management.

• For certain water treatment plant and tanks which had a capacity between those presented within the Marsh report and had their Replacement cost new (RCN) determined using numbers within the Marsh report we have applied cost to capacity formula to determine the appropriate RCN:

– As confirmed by the Management, we have adopted the following assumptions when calculating the unit cost build up for the below ground assets.

– The wastewater and water pipelines have been constructed within the minimum depth and therefore no premium has been applied within the unit cost build up.

– For certain diameters of modern equivalent piping that exceeded those expressed in Marsh we have determined the price per meter of the piping based on a proportional increase of the largest Marsh category.

– We have assumed all length, diameter and material information for linear assets provided in the Geographic information systems extracts to be correct.

– We have excluded the following assets from the valuation; general plant and equipment, computer equipment, management systems, buildings, depots, land improvement, and leasehold improvements as they are not part of the work scope.

Service concession arrangements

Service concession assets are valued using the current replacement cost method adjusted for the associated depreciations. Service concession assets are classified as Level 3 fair value measurements as they contain significant unobservable inputs and adjustments.

Biological assets

The fair value of a biological asset is based on its present location and condition. If an active market exists for a biological asset in its present location and condition, the quoted price in that market is the appropriate basis for determining the fair value of that asset. Where access exists to different markets then the most relevant market is referenced.

In the event that market-determined prices or values are not available for a biological asset in its present condition, the present value of the expected net cash flows from the asset, discounted at a current market determined rate is utilised to determine fair value.

Nature forests

The fair value for nature forests is determined using a discounted cash flow method whereby expected net future cash flows are discounted at a current market determined rate. After harvest, productive trees are treated as inventories.


7.3.3 Reconciliation of Level 3 fair value movements

A reconciliation from the opening balances to the closing balances for fair value measurements categorised within Level 3 of the fair value hierarchy, disclosing separately changes during the period.

Specialised land

$'000

Specialised buildings

$'000

Plant and equipment

$'000

Service concession

assets$'000

Water infrastructure

$'000

Wastewater infrastructure

$'000

Total

$'000

2021

Opening balance 51,909 20,410 9,433 40,236 690,421 337,411 1,149,820

Purchases (sales) 599 272 7,497 5,797 5,559 21,071 40,795

Revaluation 18,314 14,478 (631) 11,521 331,893 (8,794) 366,781

Depreciation - (580) (2,069) (7,247) (6,360) (9,936) (26,192)

Closing balance 70,822 34,580 14,230 50,307 1,021,513 339,752 1,531,204

2020

Opening balance 50,278 19,756 8,705 41,693 678,260 327,073 1,125,765

Purchases (sales) 1,631 1,260 2,523 - 23,543 19,711 48,668

Depreciation - (606) (1,795) (1,457) (11,382) (9,373) (24,613)

Closing balance 51,909 20,410 9,433 40,236 690,421 337,411 1,149,820

Description of significant unobservable inputs to Level 3 valuations

2021 and 2020 Valuation technique Significant unobservable inputs

Specialised land Market approach Community Service Obligations (CSO)

Specialised buildings Current replacement cost Average cost per assetUseful life of specialised buildings

Plant and equipment Current replacement cost Cost per square metreUseful life

Infrastructure – wastewater treatment Wastewater retic mains infrastructure

Current replacement cost Average cost per square metreUseful life of the infrastructure

Wastewater rising mains infrastructure Current replacement cost Average cost per square metreUseful life of the infrastructure

Number of wastewater pump stations infrastructure

Current replacement cost Average cost per facilityUseful life of the infrastructure

Wastewater treatment plants Current replacement cost Average cost per facilityNumber of treatment plantsUseful life of the infrastructure

Wastewater treatment plants mechanical/electrical

Current replacement cost Average cost per assetUseful life of the infrastructure

Reticulation mains Current replacement cost Average cost per square metreUseful life of the infrastructure

Service basins & tanks Current replacement cost Average cost per facilityNumber of facilitiesUseful life of the infrastructure

Infrastructure – water treatment Wastewater treatment plants

Current replacement cost Average cost per facilityNumber of treatment plantsUseful life of the infrastructure

Wastewater treatment plants mechanical/electrical

Current replacement cost Average cost per assetUseful life of the infrastructure

Reticulation mains Current replacement cost Average cost per square metreUseful life of the infrastructure

Service basins & tanks Current replacement cost Average cost per facilityNumber of facilitiesUseful life of the infrastructure

Service concession assets Current replacement cost Average cost per facilityUseful life of the infrastructure

Other assets Current replacement cost Average cost per facilityNumber of facilitiesUseful life of the assets

Biological assets Nature forests

Current replacement cost Average revenue and cost per tonne Useful life of the coupe


8. STATUTORY OBLIGATIONS Introduction

This section included disclosures in relation to the Corporation’s statutory obligations.

8.1 Tax

8.1.1 Income tax

The Corporation is subject to the National Tax Equivalent Regime (NTER), pursuant to section 88(1) of the State Owned Enterprises Act 1992, which is administered by the Australian Taxation Office. The income tax expense or revenue for the period is the expected tax payable or receivable on the current period’s taxable income based on the national corporate income tax rate of 30%, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

The differences are reconciled as follows:

(a) Income tax on net result

2021$’000

2020$’000

Deferred income tax expense

Temporary differences (4,323) 314

Utilisation of losses (4,057) (7,111)

Income tax reported in the comprehensive operating statement (8,380) (6,797)

2021$’000

2020$’000

Tax reconciliation

Net result before income tax expense 27,907 22,650

Tax at the Australian tax rate of 30% (2020: 30%) (8,372) (6,795)

Non-deductible items (8) (2)

Income tax on profit before tax (8,380) (6,797)

(b) Income Tax on other comprehensive income

2021$’000

2020$’000

Changes in physical asset revaluation reserve 366,781 -

Tax at the Australian tax rate of 30% (2020: 30%) 110,034 -

Income tax on other comprehensive income 110,034 -

8.1.2 Deferred tax assets and liabilities

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.

No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.


8.2 Environmental contributionThe Water Industry (Environmental Contributions) Act 2004 (the Act) amended the Water Industry Act 1994 to make provision for environmental contributions to be paid by water corporations. The Act establishes an obligation for corporations to pay into a consolidated fund annual contribution for the first period, from 1 October 2004 to 30 June 2008 in accordance with the pre-established schedule of payments, which sets out the amounts payable by each Corporation. The contribution period has been extended to 30 June 2024.

The purpose of the environmental contribution is set out in the Act, and the funding may be used for financing initiatives that seek to promote the sustainable management of water or address water-related initiatives.

The Corporation has a statutory obligation to pay an environmental contribution to the Department of Environment, Land, Water and Planning. This contribution is recognised as an expense during the reporting period as incurred.

8.2.1 Environmental contribution expense

2021$’000

2020$’000

Environmental contribution levy 4,472 3,967

Deferred tax assets 2021$’000

2020$’000

Amounts recognised in comprehensive operating statement

Doubtful debts 447 174

Employee benefits 1,874 1,854

Tax losses 28,190 32,247

Other 412 170

Total deferred tax assets 30,923 34,445

Movements

Opening balance at 1 July 34,445 41,274

Credited/(debited) to the Comprehensive Operating Statement (3,522) (6,829)

Ending balance at 30 June 30,923 34,445

Deferred tax asset to be recovered after more than 12 months 28,190 32,247

Deferred tax asset to be recovered within 12 months 2,733 2,198


Deferred tax liabilities 2021$’000

2020$’000

Amounts recognised in comprehensive operating statement

Depreciation 80,056 75,201

Amounts recognised directly in equity

Revaluation of infrastructure property, plant and equipment 193,642 83,607

Total deferred tax liabilities 273,698 158,808

Movements

Opening balance at 1 July 158,808 158,839

Credited/(debited) to the net result 114,890 (31)


Deferred tax liabilities to be recovered after more than 12 months 273,698 158,808

Deferred tax liabilities to be recovered within 12 months - -


Net deferred tax liability 242,775 124,363


9. OTHER DISCLOSURES Introduction

This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this financial report.

9.1 Reserves

2021$’000

2020$’000

Physical asset revaluation surplus

Balance at beginning of financial year 253,925 253,925

Revaluation increments net of income tax 256,747 -

Balance at end of financial year 510,672 253,925

Total reserves 510,672 253,925

9.2 Other economic flows included in net resultsOther economic flows are changes in the volume or value of an asset or liability that do not result from transactions. Other gains/(losses) from other economic flows include the gains or losses from:

• the revaluation of the present value of the long service leave liability due to changes in the bond interest rates; and

• reclassified amounts relating to available-for-sale financial instruments from the reserves to net result due to a disposal or derecognition of the financial instrument. This does not include reclassification between equity accounts due to machinery of government changes or ‘other transfers’ of assets.

2021$’000

2020$’000

Net gain/(loss) on non-financial assets

Net gain/(losses) arising from changes in fair value less estimated point-of-sale costs of biological assets (1,391) 1,141

Work in progress right off related to duplicated gifted asset capitalisation - (1,159)

Total net gain/(loss) on non-financial assets (1,391) (18)

Other gains/(losses) from economic flows

Net gain/(loss) arising from revaluation of long service liability 237 134

Total other gains/(losses) from economic flows 237 134

Total other gains/(losses) from other economic flows (1,154) 116

9.3 Events occurring after the balance date

No matters or circumstances have arisen since the end of the reporting period which significantly affected or may significantly affect the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation in future financial years. While COVID impacts from 2020-21 continue into 2021-22, there have been no changes to the operations since balance date.


9.4 Responsible personsIn accordance with the Ministerial Directions issued by the Assistant Treasurer under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period, as required by AASB 124 Related Party Disclosure. The names of persons who held the positions of Ministers and Accountable Officers in the Corporation are as follows:

Name Title Period of appointment

The Hon. Lisa Neville MP Minister for Water Since May 2016

The Hon. Richard Wynne MP Acting Minister for Water 15 February 2021 to 30 June 2021

Paul O'Donohue MD Since July 2012

Jeremy Johnson Chair Since July 2010

Peter Le Lievre Board Since October 2015

Rachel Thomson Board Since October 2015

Jim Hallam Board Since October 2017

Jodi Heath Board Since October 2017

Angeleen Jenkins Board Since October 2017

Mark McKenzie Board Since October 2019

Remuneration

Remuneration received or receivable by the Responsible Persons in connection with the management of the Corporation during the reporting period was in the range: $30,000 – $389,000 ($0 – $389,000 in 2019-20).

Income band Number2021

Number2020

$0 - $9,999 - 1

$20,000 - $29,999 - 1

$30,000 - $39,999 6 6

$60,000 - $69,000 1 1

$360,000 - $369,999 - -

$380,000 - $389,999 1 1

Total responsible persons 8 10

Total remuneration ($'000) 680 704

9.5 Remuneration of executives The number of executive officers, other than Responsible Persons, and their total remuneration during the reporting period are shown in the table below. Total annualised employee equivalents provide a measure of full time equivalent executive officers over the reporting period.

Remuneration comprises employee benefits (as defined in AASB 119 Employee Benefits) in all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered. Accordingly, remuneration is determined on an accrual basis, and is disclosed in the following categories.

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased. Other long-term benefits include long service leave, other long-service benefit or deferred compensation.

Termination benefits include termination of employment payments, such as severance packages.

Remuneration 2021$’000

2020$’000

Short-term employee benefits 1,300 1,559

Post-employment benefits 111 127

Other long-term benefits 17 16

Total remuneration 1,428 1,702

Total number of executives 8 8

Total annualised employee equivalents 6 7


9.6 Related parties The Corporation is a wholly owned and controlled entity of the State of Victoria.

Related parties of the Corporation include:

• all key management personnel and their close family members and personal business interests (controlled entities, joint ventures and entities they have significant influence over)

• all cabinet ministers and their close family members

• all departments and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.

All related party transactions have been entered into on an arm’s length basis.

Key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Corporation, directly or indirectly. Key management personnel (as defined in AASB 124 Related Party Disclosures) includes the Portfolio Minister and all Directors listed under responsible persons in Note 9.4 who have the authority and responsibility for planning, directing and controlling the activities of the Corporation directly or indirectly, during the financial year.

Remuneration of key management personnel

The compensation detailed below excludes the salaries and benefits the Portfolio Minister receives. The Minister’s remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the Department of Parliamentary Services’ financial report.

Compensation of key management personnel

2021$’000

2020$’000

Short-term employee benefits 1,680 1,859

Post-employment benefits 143 149

Other long-term benefits 20 23

Total 1,843 2,031

Significant transactions with government-related entities

During the year, the Corporation had the following government-related entity transactions:

Government-related entity receipts

2021$’000

2020$’000

Significant funds received

Department of Environment, Land, Water and Planning (DELWP)

- 232

Department of Families, Fairness and Housing (DFFH)

1,884 -

Department of Health and Human Services (DHHS)

3,354 4,062

Total significant funds received 5,238 4,294

Government-related entity payments

2021$’000

2020$’000

Significant payments

Department of Treasury and Finance (DTF)

1,117 1,504

Department of Environment, Land, Water and Planning (DELWP)

5,013 3,356

Coliban Water 1,110 1,063

Treasury Corporation of Victoria (TCV)

4,174 4,623

Total significant payments 11,414 10,546

Transactions with key management personnel and other related parties

Given the breadth and depth of Corporation activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public e.g. stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occur on terms and conditions consistent with the Public Administration Act 2004 and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Procurement Board requirements.

Outside of normal citizen type transactions with the Corporation, there were no related party transactions that involved key management personnel and their close family members. No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

ZEW Ltd transactions

ZEW Ltd is a related party of the Corporation. Below is a summary of transactions and holdings with ZEW Ltd.

2021$’000

2020$’000

Sales to ZEW Ltd 43 -

Purchases from ZEW Ltd 46 -

Loans to ZEW Ltd 30 -

9.7 Remuneration of auditors

2021$’000

2020 $’000

Victorian Auditor-General’s Office

Audit or review of the financial statements 84 87

Total remuneration of auditors 84 87


9.8 Australian Accounting Standards issued that are not yet effective The following AASs become effective for reporting periods commencing after the operative dates stated:

Certain new Australian Accounting Standards (AASs) have been published that are not mandatory for the 30 June 2021 reporting period. DTF assesses the impact of all these new standards and advises the Corporation of their applicability and early adoption where applicable.

Topic Key requirements Effective date Estimated impact

AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current

Amends AASB 101 to require a liability to be classified as current when companies do not have a substantive right to defer settlement at the end of the reporting period.

1 January 2023 The Corporation does not expect these amendments to have a substantial direct or indirect impact on the business or competition.

AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments

Amendments to existing accounting standards. particularly in relation to:

AASB 1 – simplifies the application of AASB 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.

AASB 3 – to update a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.

AASB 9 – to clarify the fees an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability.

AASB 116 – to require an entity to recognise the sales proceeds from selling items produced while preparing infrastructure, property, plant and equipment for its intended use and the related cost in profit or loss, instead of deducting the amounts received from the cost of the asset.

AASB 137 Provisions, Contingent Liabilities and Contingent Assets – to specify the costs that an entity includes when assessing whether a contract will be loss-making.

AASB 141 Investment Property – to remove the requirement to exclude cash flows from taxation when measuring fair value. thereby aligning the fair value measurement requirements in AASB 141 with those in other Australian Accounting Standards.

1 January 2022 The Corporation does not expect these amendments to have a substantial direct or indirect impact on the business or competition.


The attached financial statements for Central Highlands Water Corporation have been prepared in accordance with Direction 5.2 of the Standing Directions of the Assistant Treasurer under the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including interpretations, and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, statement of changes in equity, cash flow statement and accompanying notes, presents fairly the financial transactions during the year ended 30 June 2021 and financial position of the Corporation at 30 June 2021.

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

We authorise the attached financial statements for issue on 29 September 2021.

Paul O’Donohue Managing Director Central Highlands Region Water Corporation

Anthony O’Brien General Manager Business Services Central Highlands Region Water Corporation

Dr Jeremy Johnson AM Board Chair Central Highlands Region Water Corporation

DECLARATION IN THE FINANCIAL STATEMENTS


VICTORIAN AUDITOR-GENERAL’S REPORT

Independent Auditor’s Report To the Board of the Central Highlands Region Water Corporation

Opinion I have audited the financial report of the Central Highlands Region Water Corporation (the corporation) which comprises the:

• balance sheet as at 30 June 2021 • comprehensive operating statement for the year then ended • statement of changes in equity for the year then ended • cash flow statement for the year then ended • notes to the financial statements, including significant accounting policies • declaration in the financial statements.

In my opinion, the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2021 and its financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Auditing Standards. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report. My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Victoria. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other Information

The Board of the corporation is responsible for the "other information" included in the corporation’s Annual Report for the year ended 30 June 2021. The other information in the Annual Report does not include the financial report, performance report and my auditor’s reports thereon. My opinion on the financial report does not cover the other information included in the Annual Report. Accordingly, I do not express any form of assurance conclusion thereon. In connection with my audit of the financial report, my responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a materially misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

Board’s responsibilities for the financial report

The Board of the corporation is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Financial Management Act 1994, and for such internal control as the Board determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Board is responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.


2

Auditor’s responsibilities for the audit of the financial report

As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

• identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the corporation’s internal control

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board

• conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the corporation’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the corporation to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

MELBOURNE 1 October 2021

Paul Martin as delegate for the Auditor-General of Victoria

PART 7

DISCLOSUREINDEX

92 PART 7 DISCLOSURE INDEX

Legislation requirement Page reference

MINISTERIAL DIRECTIONS & FINANCIAL REPORTING DIRECTIONS REPORT OF OPERATIONS

Charter and purpose

FRD 22I Manner of establishment and the relevant Minister 3

FRD 22I Purpose, functions, powers and duties 4

FRD 22I Key initiatives and projects 9

FRD 22I Nature and range of services provided 6, 8

Management and structure

FRD 22I Organisational structure 16

Financial and other information

FRD 10A Disclosure Index 92

FRD 12B Disclosure of major contracts 25

FRD 22I Employment and conduct principles 20

FRD 22I Occupational health and safety 22

FRD 22I Summary of the financial results for the year 7

FRD 22I Significant changes in financial position during the year 7

FRD 22I Major changes or factors affecting performance 7

FRD 22I Subsequent events 85

FRD 22I Application and operation of Freedom of Information Act 1982 24

FRD 22I Compliance with building and maintenance provisions of Building Act 1993 25

FRD 22I Statement on Competitive Neutrality Policy 25

FRD 22I Application and operation of the Public Interest Disclosures Act 2012 25

FRD 22I Details of consultancies over $10,000 23

FRD 22I Details of consultancies under $10,000 23

FRD 22I Disclosure of government advertising expenditure 23

FRD 22I Disclosure of ICT expenditure 23

FRD 22I Statement of availability of other information 24

FRD 22I Asset Management Accountability Framework 26-27

FRD 24D Reporting of office-based environmental impacts 38

FRD 25D Local Jobs First Act 2003 25

FRD 27C Presentation and reporting of performance information

FRD 29C Workforce Data Disclosures 20

SD 3.2.1 Audit Committee membership and role 19

SD 5.2 Specific requirements under Standing Direction 5.2 89

SPF Social Procurement Framework 38

Compliance attestation and declaration

SD 5.1.4 Attestation for compliance with Ministerial Standing Direction 5.1.4 7

SD 5.2.3 Responsible Body Declaration 3

The annual report of the Corporation is prepared in accordance with all relevant Victorian legislations and pronouncements. This index has been prepared to facilitate identification of the Corporation’s compliance with statutory disclosure requirements.

Central Highlands Water 2020-21 Annual Report PART 7 DISCLOSURE INDEX 93

FINANCIAL STATEMENTS

Declaration

SD 5.2.2 Declaration in financial statements 89

Other requirements under Standing Directions 5.2

SD 5.2.1(a) Compliance with Australian accounting standards and other authoritative pronouncements 89

SD 5.2.1(a) Compliance with Ministerial Directions 11-45

SD 5.2.1(b) Compliance with Model Financial Report 46-89

Other disclosures as required by FRDs in notes to the financial statements (a)

FRD 21C Disclosures of Responsible Persons, Executive Officers and other Personnel (Contractors with Significant Management Responsibilities) in the Financial Report 83

FRD 110A Cash Flow Statements 48

FRD 112D Defined Benefit Superannuation Obligations 56-57

Note:(a) References to FRDs have been removed from the Disclosure Index if the specific FRDs do not contain requirements that are of the nature

of disclosure.

MINISTERIAL REPORTING DIRECTIONS

MRD 01 Performance Reporting 40-41

MRD 02 Water Consumption and Drought Response Reporting 28-30

MRD 03 Environmental and Social Sustainability Reporting 31-40

MRD 04 Disclosure of Information on Bulk Entitlements and Compliance Activities 34-35

MRD 05 Major Non-Residential Water Users Reporting 28

MRD 06 Greenhouse Gas and Energy Reporting 36-37

MRD 07 Disclosure of Information on Letter of Expectations 10-15

LEGISLATION

Water Act 1989 (Vic) 3

Water Industry Act 1994 (Vic) 3

Freedom of Information Act 1982 (Vic) 24

Building Act 1993 (Vic) 25

Public Interest Disclosures Act 2012 (Vic) 25

Local Jobs First Act 2003 (Vic) 25

DataVic Access Policy 2021 25

Financial Management Act 1994 (Vic) 3, 7, 52, 89

GLOSSARYAASs Australian Accounting StandardsCHW Central Highlands WaterCMAs Catchment Management AuthoritiesDELWP Department of Environment, Land, Water and PlanningEPA Environment Protection AuthorityFTE Full-time equivalentIWM Integrated Water ManagementKilolitre (kL) One thousand litresMegalitre (ML) One million litresGigalitre (GL) One thousand megalitresNGERS National Greenhouse and Energy Reporting System MeasurementOHS Occupational health and safetyPWSR Permanent water saving rulestCO2-e Tonnes of CO2 equivalentVWES Victorian Water Efficiency Strategy

CH

W-2

1-0

7-0

1

Central Highlands Water7 Learmonth Rd Wendouree Vic 3355PO Box 152 Ballarat Vic 3353T 1800 061 514 F 03 5320 3299E [email protected] chw.net.au

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