SA Water Annual Report 2004-05

sa water 04annual report 05

CedunaPort AugustaStreaky BayKimbaIron KnobWhyallaPort PirieKEYEllistonCleve CowellPort NeillCumminsTumby BayCoffin BayKadinaPaskevilleClareGawlerMorgan RenmarkLoxtonSwan ReachTownPort LincolnMajor PipelineMinlatonAdelaideMannumRiver MurrayKingscoteVictorHarborMurray BridgeAldinga BeachTailem BendPinnarooKeithASSETSMost SA Water customers live within the greater Adelaide metropolitan area.However, our network of services stretches across much of the State to numeroussmall towns and rural communities. On behalf of the South Australian Governmentwe are custodians of more than $6 billion worth of assets.RobeNaracoorteServicing the State are:> 20 water treatment plants> 22 wastewater treatment plants> More than 25 000km of water mains> More than 8 000km of sewer mainsMillicentMountGambier

THE 2004-05 SA WATER ANNUALREPORT IS ONE OF A SUITE OFREPORTS PRODUCED TOOUTLINE OUR KEY INITIATIVES,HOW WE ARE PERFORMING ANDCHALLENGES FOR THE FUTURE.INTRODUCTIONAbout SA Water’s annual reportingThe 2004-05 SA Water Annual Report is one of a suiteof reports produced to outline our key initiatives, howwe are performing and challenges for the future.Other SA Water reports include:> Sustainability Report -a companion to the annual report, this summarisesour sustainability performance for both the 2003-04and 2004-05 years. It reports progress against ourBlueprint for Sustainability and the Global ReportingInitiative (GRI). Reflecting our sustainability journeyand key governance arrangements, the report usescase studies to demonstrate SA Water’s sustainabilityapproach to a range of projects and programs. Thereport is included on the enclosed> Drinking Water Quality Report -reports in summary our water quality performance,presenting a comparison against previous years andoutlining water quality improvements and initiatives.This report contains detailed water quality data for arange of water sources in the State.These reports are supported by a wide range ofinformation available from the SA Water website(www.sawater.com.au) and brochures, fact sheets, formsand other information available from SA Water offices.South Australia’s Strategic PlanIn March 2004, the South Australian Premier, theHonourable Mike Rann, unveiled South Australia’sStrategic Plan, with the key objectives of:> Growing prosperity> Improving wellbeing> Attaining sustainability> Fostering creativity> Building communities> Expanding opportunitySA Water is committed to playing a role, with otherState Government agencies and the community, toensure the plan’s targets are achieved. In this annualreport, reference will be made to South Australia’sStrategic Plan and how SA Water is contributing toachieving the plan’s 79 specific targets and the generalaims around growth, innovation and sustainability.South Australia’s Strategic Plan can be downloadedfrom www.stateplan.sa.gov.au.About SA WaterIn 2006, SA Water will celebrate a 150-year associationwith the State of South Australia. In 1856 theWaterworks and Drainage Commission was formed.This later became the Engineering and Water SupplyDepartment and - on 1 July 1995 - the South AustralianWater Corporation (SA Water) was established as abusiness enterprise.Wholly owned by the Government of South Australia,SA Water now provides water, wastewater and relatedservices throughout South Australia to approximately1.4 million people.While our head administration office is in Adelaide,the South Australian capital city, our workforce ofabout 1300 staff, our depots and infrastructure canbe found across the State.In 1996, the State Government awarded United Watera 15.5 year contract to manage and operate themetropolitan Adelaide water and wastewater systemson behalf of SA Water.The State Government’s strategic objectives, prioritiesand requirements for the Corporation are outlined in ourCharter (see enclosed ) and include:> Providing quality water services that promote the healthof the public and are sensitive to the natural environment> Optimising the geographic and population coverageof those services> Providing value-for-money water servicesSA WATER annual report

OUR VISIONWater for growth, development and quality of life for all South Australians.OUR MISSIONWe provide water services for South Australians.OUR CORE VALUES> Honesty, integrity and openness in all our dealings> Always act in the interest of the public, the Government and our people> Recognise that our customers, suppliers and partners are the source of our success> Achieve commercial success while balancing economic, social and environmental responsibility> Recognise and reward our people’s contribution and innovation> Always search for better ways and new opportunitiesSA WATER annual report

CONTENTSAT A GLANCECHAIRMAN’S MESSAGECHIEF EXECUTIVE’S MESSAGECorporate GovernanceBoardOrganisation ChartStrategic PlanStrategic ObjectivesObjective 1Objective 2Objective 3Objective 4Objective 5Objective 6Operations OverviewFacts at a Glance5-Year Statistical ComparisonOverseas TravelConsultanciesContractual ArrangementsFinancial SummaryStatement of Financial PerformanceStatement of Financial PositionStatement of Cash Flows468101218192123273339455155555761626365666768Glossary and AcronymsCD ROM CONTENTSFull Financial ReportOur Charter& Listing of Non-Commercial AssetsOHS and Employee InformationContractual Arrangements - Full DetailsSustainability Report 2005SA WATER annual report

AT A GLANCELaunch of Beautiful Waterwise Gardens, page 29 Bolivar wastewater treatment plant, page 41July 2004> 50 volunteers, including SA Water35October 2004> Work begins on $14.36 million Whyalla41employees, join in national tree plantingwastewater treatment plantefforts at Millbrook Reservoir ReserveAugust 2004> $97.5 million Bolivar High Salinity plantreaches commissioning phase> New SA Water website launched4130November 2004> Water Proofing Adelaide draft strategylaunched> New Centre for Water Science andSystems established in Adelaide at3935September 2004> SA Water wins five Engineering Excellence44UniSA, Mawson Lakes campus> Second assessment against DowJones Sustainability Index undertaken47Awards for a range of projects> New water education campaign - BeautifulWaterwise Gardens - launched to tackle29December 2004> Official launch of $34.8 million41high water use in domestic gardens> Construction begins on the $42 million41Clare Valley Water Supply SchemeVictor Harbour wastewater treatment plantSA WATER annual report

Mannum Adelaide Pipeline celebrations, page 42 Mawson Lakes recycled water system, page 39January 2005> SA Water plays role in Statewide response31April 2005> Celebrations mark 50 years of the Mannum42to devastating Eyre Peninsula bushfires> Damp patches found on Millbrook dam43Adelaide Pipeline bringing water to Adelaide> Annual customer satisfaction survey undertaken28wall, prompting swift engineering andprecautionary responseFebruary 2005> Towards 2010 project launched to24May 2005> New $48.5 million pipeline for EyrePeninsula announced42address key business processes andchallenges for SA WaterJune 2005> Record profit achieved of $288 million -23March 2005> Community Connect series of projectsto strengthen SA Water’s socialcommitments launched> SA Water helps launch WaterAid Australia4950an increase of 8% on 2003-04> $16 million Mawson Lakes recycled watersystem officially launched as SA Water takesover ownership of the scheme39charity at special event in CanberraSA WATER annual report

CHAIRMAN’S REPORTStrong performanceIt is pleasing to report we are forging ahead with astrong financial foundation.Next year, SA Water will celebrate 150 years asSouth Australia’s water utility. We will use theopportunity to reflect on our many innovative andpioneering achievements and the significant rolewe have played in helping build our State.However, as you will see from this annual report,there will be little time to dwell on the past. In 2004-05,a number of significant plans and initiatives weredeveloped and in the coming years we have a greatdeal to deliver.Our Towards 2010 project, launched in early 2005, hasidentified key challenges for the Corporation in the nextfive years and actions required to ensure we continueto efficiently manage the State’s water and wastewaterassets and deliver best value services to our customers.South Australia’s Strategic Plan, the State’s WaterProofing Adelaide strategy and Australian Government’sNational Water Initiative will each have a significantimpact on the way forward for SA Water. This annualreport details how we will help achieve the objectivesof these plans in the years ahead.Our own strategic plan has been revised in the past12 months to include more targets and key performanceindicators. However, we realise more work needs to bedone on how we measure our own performance andthe Towards 2010 project will assist in this.In 2004-05, SA Water once again achieved a record profitresult - $288 million - an increase of 8% on 2003-04.This allowed us to contribute $248 million to the StateGovernment by way of dividend and income tax. Thisexcellent result was largely due to exceptional growthin the South Australian land and housing market and areduction in the pumping demand from the River Murray,down 7%, or 7 gigalitres on the 2003-04 year due toimproved water levels in the Adelaide Hills catchment.Capital expenditure for the year decreased by 35% to$122 million after last year’s record expenditure. Thisdecrease was largely due to the completion of oursignificant environmental improvement program.In the past five years, the Corporation has been able tomeet or exceed all of the financial targets agreed withour owner, the South Australian Government. Financialperformance has continued to improve since 1999-2000.Highlights include:> Improved profit margins and annual profit growthof about 7% per annum> Distribution of approximately 95% of profit before taxto Government by way of dividend, capital repaymentsand tax> Containment of borrowing levels to about $166 million- despite capital investment in infrastructure of almost$660 million.Future suppliesIn 2003-04, SA Water received State Governmentapproval to purchase additional River Murray waterentitlements and, to the end of the 2004-05 financialyear, we had committed to purchase 18.4 gigalitresof water and about 300 hectares of associated land.SA WATER annual report

The long-term aims of purchasing the entitlementsare to help secure a reliable water supply, support theState’s targets for economic and population growth andenable increased environmental flows. But we realise itis just one of the steps we need to take.As the profile of water issues has been elevated inrecent years, we have been heartened by the excellentresponse of the SA community in working with us tobring about greater water efficiency in homes, gardens,schools, businesses and industries.Water Proofing Adelaide - a blueprint for themanagement, conservation and development of waterresources in Adelaide to 2025 - was unveiled in July2005 and includes 63 actions around managing ourexisting resources, responsible water use and securingadditional water supplies.SA Water will be required to play a significant role inthe delivery of these actions, which aim by 2025 to:> Reduce household and industry water useby 35 gigalitres> Double the reuse of wastewater> Increase stormwater reuse tenfoldSimilarly, the Australian Government’s National WaterInitiative will require us to take specific actions to addressthe overall aim of improving productivity and efficiencyof water use, while maintaining healthy water systems.SA Water is up to these challenges. We have alreadytaken significant steps towards achieving the targetsset by the Water Proofing Adelaide strategy and lookforward to reporting our progress in future years.The first full year of permanent water conservationmeasures ended in October 2004 and indications areSouth Australians have a clear understanding of theirroles and responsibilities. Our research shows they alsostrongly support these measures and figures releasedby the Australian Bureau of Statistics show one in fourSouth Australian households undertook some waterconservation actions for the first time during the firstyear of permanent measures.The challenge now is to ensure the momentum is notlost. We realise collaboration is critical.In 2004-05 we continued to work closely with otheragencies and organisations to encourage widespreadwater efficiency in the community. We continued strongpartnerships with the Botanic Gardens of Adelaide and theSA Nursery & Garden Industry Association and establishedvaluable links with the education sector. We also helpedfund and support the State Government’s overarchingWaterCare campaign which focuses on the precious natureof water and the need for all South Australians to play a rolein protecting our valuable water resources.Community linksA high priority for 2004-05 was to build strongerconnections with the South Australian public. Werecognise that building these relationships is not aPR exercise and in early 2005 we approved CommunityConnect - a series of projects to address social issuesfor the Corporation and help us align ourselves moreclosely with our communities.Key projects will look at the development of a hardshippolicy to support our customers who have difficultypaying their accounts, a community engagementframework, ethical trading and a ‘grass roots’ approachto engaging our regional communities.The full range of Community Connect projects will beimplemented in the coming year.AcknowledgementsI would like to thank my fellow Board members for theiroutstanding contributions in setting strategic directionand steering the Corporation through a busy year.In August 2004, we welcomed Annabel Digance tothe SA Water Board to replace Andrew Thomas, whoretired in June 2004. Annabel has brought strongstrategic, human resource and managerial skills tothe Board. Our team remains cohesive and strong.I would also like to thank Chief Executive Anne Howe,her Executive team and our employees for their effortsin delivering excellent results in 2004-05. SA Water’sachievements are a credit to all of you.Philip PledgeCHAIRMANSA WATER annual report

CHIEF EXECUTIVE’S REPORTWorking around the clock to restore supply, ouremployees showed incredible strength under pressure.Many lived and worked in the communities mostaffected and, while they put a major effort into repairingthe pipes and related infrastructure, they also took timeto offer comfort to those most in need.The 2004-05 year was marked by important milestonesand major challenges for SA Water and our employees.In our 10th year as a Corporation, our emergencyresponse capabilities were put to the test, our internalprocesses came under the microscope and millions ofdollars were invested in completing significant capitalprojects across the State.I’m proud to say our people once again met thechallenges head on and helped SA Water deliverexcellent end of year results.Disaster responseOn Boxing Day 2004, the world watched in horror asa tsunami devastated large parts of Asia, leaving morethan 250 000 people dead. SA Water was quick to jointhe national response, with engineering staff on standbyto help if required and employees digging deep to raisefunds for tsunami relief efforts.However, attention soon turned to home when just dayslater, on 11 January 2005, a disaster in South Australiaput our own employees and infrastructure to the test.The lower Eyre Peninsula, in the State’s west, wasthe scene of devastating fires that left 9 people deadand 80 000 hectares of landscape charred. With firetemperatures reaching more than 1000°C, significantSA Water infrastructure - including a major water supplymain - was damaged or destroyed.While our staff continued to work on the recoveryefforts on Eyre, we faced another possible emergencywhen damp patches were detected on the dam wallat Millbrook Reservoir. Once again, our emergencyresponse capabilities were put to the test.This report includes more details on how we tackled theseissues. However, I would like to take this opportunity tothank our employees and the South Australian communityfor their support during these times of crisis.Key projectsAlmost $122 million was invested in major infrastructurethroughout the year and several key projects were launched.Our $16 million Mawson Lakes recycled water systemwas commissioned and is now delivering recycled waterto homes and business in an entire suburb to the northof Adelaide. The system - the result of a partnershipbetween SA Water, the State Government’s LandManagement Corporation, the City of Salisbury andDelfin - will ultimately save about 800 megalitres ofwater being drawn from the River Murray each year.This is an important project for the State as welook more closely at alternative water sources andtechnology to deliver recycled water safely to newdevelopments for non-potable purposes.The $34.8 million Clare Valley water supply scheme wascompleted, allowing many townships and irrigators inthis world-renowned wine region to access reticulatedsupply for the first time. A new $48.5 million pipelinewas announced for Eyre Peninsula to help ease thatregion’s ongoing water supply problems.SA WATER annual report

Our $97.5 million Bolivar High Salinity wastewatertreatment plant was completed and fully commissionedin January 2005 as part of our $240 million programto improve the environmental performance ofAdelaide’s four metropolitan wastewater treatmentplants. Meanwhile, work began on a long-awaited$42 million wastewater treatment plant for thepopular seaside destination of Victor Harbor.One of Australia’s great engineering feats, theMannum–Adelaide pipeline, turned 50 in April 2005and we held an event with past and present employeesand the community to celebrate. It was a greatpersonal honour to pay tribute on the day to thosewho helped build the pipeline and those who hadkept it operating over half a century. It was alsowonderful to hear the many stories of camaraderie,fun and hard work surrounding the project.Changing workforceEnhancing our future workforce capabilities is an issueof great importance for SA Water, particularly giventhe high number of employees we have approachingretirement age.In 2004-05, we completed our three-year WorkforceRefreshment Program - a planning initiative that hassuccessfully addressed challenges in our ageingoperations workforce by allowing older retiring workersto pass on knowledge and skills to young recruits.Planning is now under way for developing strategiesto deal with the same capability and successionissues in our professional and technical workforce.In planning for the future, we have also sharpened ourfocus on diversity and we continue to work on ways toencourage more young people, women and indigenousAustralians to join SA Water’s ranks. Our diversitystrategy is an important means of ensuring we can trulyrepresent the South Australian community and respondto the broad spectrum of community needs.Significant work has been undertaken in the pastyear in planning for a new building to consolidatethree of our metropolitan sites into an iconicminimum 5-Green star building. This is the corecomponent of an accommodation strategy whichwill embrace all staff and improve workingenvironments for our regional employees.While the ‘bricks and mortar’ part of theseaccommodation projects has yet to begin, we haveinvested time and resources into involving our staff andseeking their input into the kind of environments theyconsider will foster greater collaboration and successand allow SA Water to better engage our customers.Customer surveyOur annual customer survey again showed excellentoverall satisfaction in SA Water in 2005, steady onlast year’s result of 8.2 out of 10. We continued tocommand a strong reputation, driven particularly bythe attributes of trust and reliability. However, therewere steady declines in satisfaction ratings for someSA Water activities, most markedly ‘long term planningfor plentiful supplies’.The survey results will assist us in planning customereducation campaigns and improving service delivery.Our Customer Contact Centre continued to performexceptionally well and, soon after the end of thefinancial year, was announced State winner in theAustralian Teleservices Association awards, whichrecognise excellence within the call centre industry.In 2004-05, the centre received more than 322 000 callsand dealt with more than 90% of these inquiries at firstpoint of contact. It also achieved a target average waittime of 20 seconds for customer calls - 68% faster thanthe average of all other utilities surveyed in a nationalbenchmarking study.AcknowledgementsIn a year when so many unplanned events demanded ourattention, SA Water’s people once again demonstrateda strong commitment to our organisation, our customersand the broader SA community. I am proud of the effortsof all employees.I would like to thank the Board for its leadership inthe past year and my Executive team for its supportin delivering another excellent result for SA Waterand the State.Anne HoweCHIEF EXECUTIVESA WATER annual report

CORPORATE GOVERNANCEIn 2004-05 SA Water reached a significant milestone.The 30th June marked the end of the first 10 years ofSA Water’s existence under the South Australian WaterCorporation Act 1994.SA Water is a wholly-owned government tradingenterprise. The South Australian Government’soversight of the Corporation is led by the Ministerfor Administrative Services, the Honourable MichaelWright MP, whose portfolio also includes industrialrelations, gambling, recreation, sport and racing.The Department of Administrative andInformation Services (DAIS) is also responsibleto the Minister. SA Water maintains significantrelationships with the sections of DAIS whichmanage whole-of-government functions.Under the Public Corporations Act, the SA WaterCharter sets out the Government’s strategicobjectives, priorities and requirements for theCorporation. See the enclosedIn 2004-05, the Government introduced a “PublicNon-Financial Corporations Ownership Framework”which provides the Government’s policy framework forCommunity Service Obligations (CSOs), dividends andcapital structure for public non-financial corporations.This framework applies to SA Water.SA Water BoardThe Board governs SA Water on behalf of the SouthAustralian Government.The Board comprises six Government-appointed nonexecutivedirectors and SA Water’s Chief Executive.The South Australian Water Corporation Act requiresthat Board appointees must together have, in theMinister’s opinion, the abilities and experience requiredfor the effective performance of SA Water’s functionsand the proper discharge of its business and managementobligations. At least two members of the Board must bewomen and at least two members must be men.The current directors have expertise in legal, financial,commercial and operational management.The Board is responsible for:> Setting the strategic direction of the Corporationconsistent with the Charter and Performance Statement> Approving and monitoring SA Water’s structure,Strategic Plan, business plans, performance and values> Ensuring appropriate systems and practices areestablished for management, financial planning and control> Ensuring the highest standards of corporate conduct,business ethics and accountability in accordance withbest practice principles of corporate governanceThe Board meets monthly and papers, includingperformance reports, are dispatched five days priorto each meeting. Senior managers attend meetingswhen required to report on issues relating to theirareas of business.The Board regularly reports to the Minister onSA Water’s performance and, pursuant to Section 8of the Public Corporations Act, the Minister hasappointed a representative to attend Board meetings.On appointment, all Board members undergo aninduction process which covers SA Water’s legislativebasis, structure and activities as well as informationabout the duties of directors. During their term of office,directors visit different areas of SA Water’s operationsand, when appropriate, Board meetings are held atlocations outside Adelaide.10 SA WATER annual report

CORPORATE GOVERNANCEDelegation of functionsUnder Section 18 of the South Australian WaterCorporation Act, the Minister may delegate any ofthe Minister’s powers or functions under any Act toSA Water. The Minister has delegated to the Boardauthority to incur expenditure up to $4 million.The Board has established financial delegations toofficers for expenditure up to $1 million. Officersexercise (and can sub-delegate) these delegationsin accord with the policies and guidelines of SA Water.There are no delegations to Board committees.Directors’ interests in contractsFor the financial year ending 30 June 2005, no Directorhad an interest in any contract or proposed contract withSA Water other than contracts in the ordinary course ofthe organisation’s business and at arm’s length.Directors’ benefitsIn 2004-05 no contract involving Directors’ interesthas arisen. No Director of SA Water has received,or become entitled to receive, a benefit (other than aremuneration benefit) by virtue of a contract that theDirector, or a firm of which the Director is a member,or an entity in which the Director has a substantialfinancial interest, had made with SA Water, other thandealings in the normal course of business as set outin Note 30 of the Financial Statements.DirectorsPhilip PledgeBEc, FCA, MAICDChairman of the Board since March 2002Chairman of the Asset Management CommitteeChairman of the Remuneration CommitteePhilip was a Partner of Ernst & Young from its formationin 1989 until his retirement in 2001, and served asthe National Chairman of Ernst & Young from 1992 to1994. From January 1996 to September 1998 he wasChairman of SA’s Totaliser Agency Board (TAB), aswell as President of the SA State Council of the Instituteof Company Directors from October 1996 until 1998.He serves in many honorary positions within the State.His particular skills are financial management advice,business planning and corporate restructuring.Dr Graham AllisonFTSE, BSc (Hons), PhD (Chem)Non-Executive Director since July 2001Graham has many years of involvement with hydrologyin Australia and overseas and has been involved withmany water and environment related organisations.These include Cooperative Research Centres forWaste Management and Pollution Control, CatchmentHydrology and Freshwater Ecology. Prior to his currentconsulting role, he was Chief of the CSIRO Division ofWater Resources, a national research body. Graham is amember of the Board’s Asset Management Committee.Susan DoyleBA (Acc)Non-Executive Director since August 2002Deputy Chairman from 1 July 2004Chairman of the Audit CommitteeSusan enjoyed a long and successful career in the fundsmanagement and insurance industry working withCommonwealth Funds Management, Suncorp Metwayand IAG. She is currently Chairman of the Public SectorSuperannuation Scheme and the CommonwealthSuperannuation Scheme.Hon Frank BlevinsNon-Executive Director since December 2002Frank was elected to the SA Legislative Councilin 1975 and to the House of Assembly in 1985. Heserved the State as Deputy Premier and across a rangeof Ministerial portfolios including Treasury, MineralResources, Transport and Agriculture and Fisheriesfor 10 years of his 22 years in Parliament. Having heldsenior government Ministries over many years, FrankSA WATER annual report 11

CORPORATE GOVERNANCEbrings valuable knowledge and experience, particularlyin the field of economics and finance. Frank is a memberof the Board’s Audit Committee.Rosemary OwensBA (Hons), Dip Ed, LLB (Hons)Non-Executive Director since January 2003Rosemary has a long association with the Universityof Adelaide where she is a Reader in Law. She hasundertaken a number of research studies and publishedwidely in the areas of Labour and Industrial RelationsLaw, Australian Constitutional Law and Feminist LegalTheory. She has served on many law school, universityand community-based committees. Rosemary bringsa strong legal, research and analytical background tothe SA Water Board. She is a member of the Board’sAudit Committee and the Remuneration Committee.Annabel DiganceMMgt (Health Services), GDC, BN, FAICDNon-executive director since August 2004Annabel has extensive senior managerial experience withgovernment sectors at both State and Commonwealthlevel. She also has extensive senior managementexperience in the private sector, specialising in strategicplanning, human resource management and financialmanagement. Practiced in public policy, Annabel has abalance of sound financial and business managementprinciples and brings strong strategic and evaluation skillsto the Board. Annabel is a member of the Board’s AssetManagement Committee and Remuneration Committee.Anne HoweChief ExecutiveAnne was appointed Chief Executive in March 2001following a period as Acting Chief Executive. In herprevious role as Chief Executive of Services SA andmore recently as Deputy Chief Executive in theDepartment of Administrative and Information Services,Anne achieved significant benefits for the Governmentin the development of partnerships between the publicand private sectors in the delivery of Governmentservices. She has also provided national leadership as theChairman of the Australian Procurement and ConstructionCouncil sponsoring such initiatives as the National Codeof Practice for the building and construction industry. Sheis currently Deputy Commissioner of the Murray DarlingBasin Commission and Chair of the Water ServicesAssociation of Australia. Anne is a member of the Board’sAsset Management Committee.Board committeesThree committees have been established by the Board toassist with the discharge of its responsibilities.Audit CommitteeAs required under the Public Corporations Act 1993,SA Water has established and maintained an AuditCommittee and an internal audit function.In 2004–05 Ernst & Young was contracted to manage theinternal audit process with the full-time assistance of anumber of SA Water staff. This unit reports regularly tothe Audit Committee which comprises up to four Boardmembers. A charter guides the functions and duties ofthe Committee, which in turn reports to the Board.Internal audit serves a key role in providing independentand objective analysis of SA Water’s business processesand internal control systems.The Audit Committee also monitors SA Water’s riskmanagement framework (including treasury risk) andits legal and trade practices compliance programs.In 2004-05 the Audit Committee Directors were:> Susan Doyle> Frank Blevins> Rosemary Owens12 SA WATER annual report

The SA Water Board in our award-winning Customer ContactCentre. Standing from the left, Rosemary Owens, Frank Blevins,Graham Allison, Annabel Digance. Seated from the left,Philip Pledge, Susan Doyle and Anne Howe.SA WATER annual report 13

CORPORATE GOVERNANCEAsset Management CommitteeThe Asset Management Committee has a particularfocus on issues arising from SA Water’s stewardshipof substantial and essential infrastructure. Its primaryconcern is with the condition and performance ofSA Water’s assets, both in absolute terms and interms of comparison with other water utilities.In 2004-05 the Asset Management CommitteeDirectors were:> Philip Pledge> Graham Allison> Annabel Digance> Anne HoweRemuneration CommitteeThe Remuneration Committee reviews and makesrecommendations to the Board on the conditions ofemployment including the level of remuneration paidto the Chief Executive and other Senior Executives.In 2004-05 the Remuneration CommitteeDirectors were:> Philip Pledge> Rosemary Owens> Annabel Digance> Anne HoweDirectors’ MeetingsThe number of meetings of the Board of Directors(including meetings of committees of Directors)held in 2004-05 was:> Board of Directors - 15 meetings (including4 meetings by phone)> Audit Committee - 4 meetings> Remuneration Committee - 3 meetings> Asset Management Committee - 4 meetingsThe number of meetings attended by each of theDirectors during the financial year is shown in thefollowing table.BoardDIRECTOR A B A B A B A BPhilip Pledge 15 15 - - 3 3 4 4Annabel Digance 13 13 - - 3 3 3 3Graham Allison 15 15 - - - - 4 4Susan Doyle 15 12 4 4 - - - -Frank Blevins 15 15 4 4 - - - 1Rosemary Owens 15 13 4 4 3 3 - -Anne Howe 15 14 - - 3 3 4 4A = number eligible to attendAuditCommitteeAssetRemunerationCommitteeB = number attendedManagementCommitteeSustainability Advisory GroupThe Sustainability Advisory Group was establishedby the Board in 2003, with members appointed for athree-year term commencing in August 2003. Membersare predominantly external, except for a representativeof the SA Water Board. In 2004-05 this representativewas Dr Graham Allison.Directors’ RemunerationDetails of Directors’ Remuneration can be found infinancial note 29 on the enclosedThe aim of this group is to support the Board withexpert advice on working through the significant andcomplex sustainability issues facing SA Water.14 SA WATER annual report

CORPORATE GOVERNANCELegislationPublic Corporations ActSA Water has been made subject to the PublicCorporations Act 1993. Accordingly, SA Wateroperates as a commercial entity providing services inaccordance with prudent commercial principles andstriving to provide a commercial return to Government.Non-commercial operations may be carried out, butmust be provided in an efficient and effective manner.The Acts committed to the Minister for AdministrativeServices which directly relate to SA Water are:South Australian Water Corporation Act 1994:Establishes SA Water and makes it subject to the PublicCorporations Act 1993. SA Water’s functions are set outin Section 7 of the Act.Waterworks Act 1932: Empowers SA Water toconstruct and operate water supply systems.Sewerage Act 1929: Empowers SA Water toconstruct and operate sewerage systems.Metropolitan Drainage Act 1935: Provides for floodmitigation works on the River Torrens, Sturt River,and the Brownhill and Keswick Creeks. SA Wateradministers this Act on behalf of the Minister forAdministrative Services.Rates and Land Tax Remission Act 1986: Providesfor rates concessions for various rates to be granted toeligible pensioners. The remission scheme is fundedby the Government but administered by SA Water.As of 30 June 2005, there were more than 120 Actsimpacting on SA Water’s operations.Freedom of InformationSA Water is committed to openness, transparencyand accountability as a Corporation, while respectingthe privacy of its stakeholders. We operate within theFreedom of Information Act and the Government ofSouth Australia’s Information Privacy Principles. Weencourage use of our comprehensive website, wherea range of educational and informative material isavailable to members of the public.During 2004-05, SA Water received 13 Freedom ofInformation (FOI) applications. All of the applicationsrelated to SA Water activities with none relating topersonal records of SA Water employees.One application refused in the 2003-04 period wasthe subject of an internal review in 2004-05 and thenan external review by the Ombudsman with the matterbeing resolved.Eight applications were granted in full, one applicationwas granted in part, one application was refused, oneapplication was resolved informally and two applicationswere carried into the next period.Insurance and IndemnificationSection 22 of the Public Corporations Act 1993 providesthat “... a director of a public corporation incurs no civilliability for an honest act or omission in the performanceor discharge, or purported performance or discharge, offunctions or duties as such a director”.SA Water has agreed to indemnify and keep indemnifiedits Directors for the reporting period against all liabilities(other than to SA Water or a related body corporate)that may arise from their position as a Director of theorganisation, except where the liability arises out ofconduct involving a lack of good faith.SA Water has in place a Directors’ and Officers’insurance policy. In accordance with commercialpractice, the insurance policy prohibits disclosure of theterms of the policy, including the nature of the liabilityinsured against and the amount of the premium.SA WATER annual report 15

CORPORATE GOVERNANCERisk managementThe SA Water Board’s Audit Committee has beendelegated responsibility, via the Audit CommitteeCharter, for the overall review and evaluation of riskmanagement processes within SA Water.This high-level focus on risk recognises thecritical role risk management plays in ensuringthe Board can fulfil its corporate governanceand supervisory responsibilities.The Audit Committee’s roles include:> Understanding the risks of the business> Monitoring risk management activities on anannual basis> Endorsing and contributing to the identificationof SA Water’s annual risk profile> Endorsing SA Water’s Risk Management Policyand FrameworkTo assist both the Chief Executive and theAudit Committee:> A General Manager Business Assurance & Riskhas been appointed who reports, via the CorporationSecretary, to the Audit Committee on a bi-monthlybasis and to the Chief Executive as required. Arisk management team is responsible for providingpolicies and procedures, systems and tools, training,coordination and facilitation services and monitoringmechanisms related to risk management activity> All personnel within SA Water, including executive,management or other employees and our key partnersplay a role in the identification, assessment andmanagement of risks.The SA Water Risk Management Policy and Framework,as approved by the Audit Committee, formallyestablishes the process of assessing the businessrisks and opportunities we face, as well as developingand implementing strategies to proactively transfer,manage and/or mitigate these risks.This policy was developed in conjunction with a leadingconsulting firm in 1998 and has been revisited andre-approved by the Audit Committee on a biennialbasis since this time. The Policy is consistent with theAustralian/New Zealand Risk Management StandardAS/NZS 4360: 2004 and the South AustralianGovernment Risk Management Policy Statement, 2003.The policy principles are applied across SA Water and riskassessments have become a key component of strategicand business unit planning, capital and asset planning,emergency response and business continuity planning.Business Assurance & Risk also plays a key role inmonitoring effective management of risk. BusinessAssurance & Risk and External Audit report to the AuditCommittee directly on specific control issues identified.FraudSA Water has in place a code of conduct which informsstaff members on what activities might constitute fraudand warns them against committing fraud. There is alsoa specific fraud policy and fraud guidelines, dealing withthe treatment of any detected frauds.Extensive strategies are in place to control andprevent fraud in terms of the controls exercisedover SA Water’s accounting policies and thephysical security of assets. There is also a regularlyconducted internal audit process which targetsthe areas identified as high risk. There was oneinstance of fraud detected in SA Water in 2004-05.Policy DevelopmentSA Water maintains a policy framework with morethan 50 policies and a suite of associated guidelines.These cover a range of SA Water activities andprocesses including environmental responsibilities,financial management, procurement, human resourcemanagement and OHS issues. During 2004-05 ourpolicy framework was revised and updated.16 SA WATER annual report

CORPORATE GOVERNANCEIn 2004-05, SA Water began developing a suiteof policies to reflect the South Australian Government’sand our own commitment to sustainability. Anoverarching Sustainability Policy will be supported bypolicies to specifically address environmental, economicand social principles. SA Water’s 2005 SustainabilityReport includes more details about the development ofthese policies and our understanding of sustainability.Inquiries about policy documents can, in the firstinstance, be made to SA Water’s Corporate Counsel,77 Grenfell Street, Adelaide. SA Water’s policydocuments may be inspected at the same address,by appointment, during business hours.ManagementIn 2004-05, SA Water’s executive team consisted ofthe Chief Executive and six business division Heads.While there was no major restructuring in 2004-05,some business units were moved between divisionsto improve collaboration and ensure the structure betterreflected the core business activities of the organisation,as identified in the revised SA Water Strategic Plan.The focus on corporate governance in the Corporationwas strengthened. The former Secretariat and AuditDivision was renamed Corporate Governance Divisionand units were relocated so that the key governancefunctions could be better coordinated in one division.The Corporate Governance Division includes regulationand pricing, risk management, ministerial liaison, legalcounsel and internal audit.Each division is resourced to ensure all SA Wateractivities are undertaken efficiently and effectivelyand the strategic objectives are achieved.SA WATER annual report 17

ORGANISATION CHART [AT JUNE 2005]MINISTER FORADMINISTRATIVE SERVICESThe Honourable Michael Wright MPSA WATER BOARDCHIEF EXECUTIVEAnne HoweCHIEF OPERATINGOFFICERJohn RinghamBSc (Hons), MBA,Dip Geotech (UK)Key Responsibilities> Retail> Infrastructure> Operations> Engineering & Projects> Australian Water Quality CentreHEAD OF BUSINESSSERVICESJeremy RandellBEng (Hons), MBA,Dip Log Mgt, MIE AustKey Responsibilities> Procurement> Economic Development> Shared Services> Information Services> Energy ServicesHEAD OF STRATEGY& CHANGEPeter WardAF-AHRI, FAIMKey Responsibilities> Human Resources> Corporate Communications> Change Management> Security & EmergencyHEAD OF INNOVATION &BUSINESS DEVELOPMENTJack McKeanMA (Hons), DipEd, FAICDKey Responsibilities> Sustainable Business> Business Development> Intellectual Property> Research & DevelopmentCHIEF FINANCIALOFFICERPeter MendoBComm, CPAKey Responsibilities> Specialised Financial Services> Budgeting and PerformanceManagement> Decision Support> Strategic Investment> Business Process ReviewHEAD OF CORPORATEGOVERNANCEGeoff HenstockKey Responsibilities> Regulation & Pricing> Ministerial Liaison> Legal Counsel> Business Assurance & Risk18 SA WATER annual report

STRATEGIC PLANIn 2004, significant work was undertaken to refreshSA Water’s 2001-2006 Strategic Plan and refineobjectives in the key areas of water quality, water andwastewater operations, customer, employee, businessperformance and sustainability.SA Water’s revised Strategic Plan 2005-09 reflects anevolution - not revolution - in the continuous journeyof improvement to fulfil the organisation’s vision: waterfor growth, development and quality of life for allSouth Australians.> Business unit plans and position descriptionsincluding individual key accountabilities andbehavioural competencies.> Financial plan (covering capital and operating budgets).The representation of the six strategic objectives(below) reflects the balanced scorecard approachtaken in updating the strategic plan to clarify thelinks between the business value, stakeholders,internal processes and people, learning and growthperspectives of the business.The plan is impacted and influenced by South Australia’sStrategic Plan, SA Water’s Charter (see enclosed )and various Acts under which SA Water operates,including the South Australian Water Corporation Actand the Public Corporations Act.Further improvement in the strategic plan, its measuresand SA Water’s planning process is under way as partof the Towards 2010 project (see page 24). An updateon the improvements will be available in SA Water’s2005-06 annual report.Internally, the plan is influenced and impacted bySA Water’s culture, past performance, future forecastingand scenario planning. It is also supported by:> Themed plans covering specialist and/or crossfunctional business activities (eg. Asset MasterPlan, Corporate Environmental Management Plan,Dow Jones Sustainability Index Action Plan, DisasterRecovery Plan, Emergency Management Plan, RiskManagement Plan, Occupational Health and SafetyPlan, Human Resource Plan).Our new Strategic Plan 2005-2009 maps SA Water’sdirection for the next four years. It defines our goals,priorities and responsibilities, guides our progressand helps us evaluate our performance against clearlydefined objectives.OUR VISION:Water for growth, development & qualityof life for all South AustraliansBUSINESS VALUE[INCLUDING FINANCE]OBJECTIVE 1:We will be commercially successful, competitive andoptimise business value.STAKEHOLDERS[INCLUDING CUSTOMERS]OBJECTIVE 2:We will deliver services valued by our customers.INTERNALBUSINESSPROCESSESOBJECTIVE 3: OBJECTIVE 4: OBJECTIVE 5:We will be a leaderin water qualityand wastewatermanagement.We will plan & developwater and wastewaterassets and secure thewater supply for the Statenow and into the future.We will play aleading role in asustainable futurefor South Australiancommunities.LEARNING &GROWTHOBJECTIVE 6:We will continue to build and aspire to be a best practicehigh achieving culture.SA WATER annual report 19

20 SA WATER annual reportCorey takes a break fromplaying in the garden.

STRATEGICOBJECTIVESThis section of our Annual Report outlinesour performance and achievementsagainst our Strategic Plan’s six strategicobjectives, as well as challenges weface and actions planned for the future.Objective 1We will be commercially successful,competitive and optimise business value.23Objective 227We will deliver servicesvalued by our customers.Objective 3We will be a leader in water qualityand wastewater management.33Objective 4We will plan and develop water andwastewater assets and secure water supplyfor the State now and into the future.39Objective 5We will play a leading role in a sustainablefuture for South Australian communities.45Objective 6We will continue to build and aspire to bea best practice high achieving culture.51SA WATER annual report 21

22 SA WATER annual reportRenee from SA Water’s Finance Group.

We will be commerciallysuccessful, competitiveand optimise business value.OBJECTIVE 1End of year resultsIn 2004-05, SA Water achieved a record profit of$288 million - an increase of 8% on 2003-04. Thishas enabled us to deliver a $248 million contributionto the South Australian Government (up 5% from $236million in 2003-04) consisting of dividend and incometax payments and supporting the South AustralianStrategic Plan (Objective 1: Growing Prosperity).Key factors in the end of year results were:> Exceptional growth in the South Australian land andhousing development industries. This was partly offsetby operational costs associated with improving thelevel of treatment at our wastewater treatment plantsand maintaining our assets in an optimum condition.> Draw on the River Murray decreased by7% (7 gigalitres) over 2003-04 due to an improvedwater harvest in the Adelaide Hills catchment.This lowered our pumping demand.> Operating cash flows increased to $276 million,up 1% on last year ($272 million).> Capital expenditure for the year amounted to$122 million, a decrease of 35% on 2003-04 mainlydue to completion of the substantial environmentalimprovement program to improve the performanceof our metropolitan wastewater treatment plants.The financial achievements of SA Water over thepast five years are:2000-01 2001-02 2002-03 2003-04 2004-05 TotalRevenue ($m) 613.3 639.8 702.3 722.9 775.9 3 453.7Profit before tax ($m) 207.7 223.3 258.0 266.9 288.2 1 240.7Contribution to Government* ($m) 225.3 206.2 243.4 236.2 247.8 1 158.9Capital Expenditure ($m) 102.7 117.4 131.4 187.4 121.9 660.8Return on Assets (%) 5.1 5.2 5.3 5.2 5.4 -* Contributions to the State Government consist of the dividend paid, income tax payments and repayments of capital.2004 – 2005 Revenue 2004 – 2005 Operating ExpenditureWater & wastewater rates 46%Water sales 23%CSOs 13%Developer contributions 9%Recoverable works 6%Other revenue 3%Depreciation & amortisation 26% Borrowing costs 16%Services & supplies 19%Salaries & benefits 15%Operational & service contracts 18% Electricity 6%SA WATER annual report 23

OBJECTIVE 1Towards 2010Towards 2010 - one of the most comprehensivebusiness improvement projects undertaken bySA Water - was launched in early 2005 to ensurewe are prepared for future business challenges.After a rigorous tender process, leading management,systems and technology consulting firm PA Consultingwas employed to guide the project. A number of keySA Water employees, led by Chief Operating OfficerJohn Ringham, were seconded to a special six-monthproject team to work with PA.In the first half of the year, the team undertookcomprehensive interviews, data collection andbenchmarking to come up with a diagnosis ofSA Water’s current state and identify key issues forthe Corporation and challenges for the next five years.By the end of June, the project had set about designingSA Water’s “future state” and developing solutions andproject plans we believe will help us deliver better valueto our customers and ensure greater efficiency in ourmanagement and operation of the State’s water andwastewater assets.The project is expected to be completed by the endof August 2005, with actions to be agreed by theBoard before a scheduled implementation plan is putin place. The 2005-06 annual report will provide detailsof the outcomes.Towards 2010 aligns with South Australia’s StrategicPlan target for the SA public sectors to lead the nationin cost-effectiveness of government services within5 years (Objective 1: Growing Prosperity).Water and Sewerage PricingThe South Australian Government sets prices for waterand sewerage (wastewater) services in the context ofnational guidelines formed by the Council of AustralianGovernments (COAG). The guidelines ensure pricesare reasonable relative to the costs of providing waterand wastewater services. When setting prices, theGovernment seeks to achieve a balance betweeneconomic efficiency, community benefits, social justice,environmental and regional issues.Under arrangements introduced in 2003 theGovernment has continued to expose to public scrutinythe processes by which it sets prices through thepreparation and publication of transparency statements.The first of these statements addressing 2004-05 waterpricing was released in June 2004.Two further statements have since been released -one addressing 2004-05 wastewater prices, releasedin November 2004 and one addressing 2005-06 waterand wastewater prices, released in May 2005. Thesedocuments are available from the Department ofTreasury and Finance’s website www.treasury.sa.gov.au.These price setting processes are independentlyreviewed by the Essential Services Commission ofSouth Australia whose reports are incorporated in thepublished transparency statements. The processes24 SA WATER annual report

OBJECTIVE 1and documentation also include a rigorous assessmentof the relative efficiency of SA Water’s operations toensure that the prices charged are fair and reasonable.Procurement savingsSA Water acquires more than $280 million in goodsand services annually and to deliver value to ourcustomers and stakeholders we strive for best practiceperformance in procurement and contract management.In 2004-05 we focused on strengthening our centralisedprocurement processes to ensure all SA Waterbusiness units, including those in regional areas, hadthe necessary support to purchase best value goodsand services. We delivered ongoing training for staffto raise awareness of procurement issues and ensureour coordinated approach continued to deliver benefits.It is estimated our centralised system saved more than$600,000 in 2004-05.Our specialised procurement staff also manageda range of strategic contracts, including thecontract for the supply of bulk chemicals toSA Water, United Water and Riverland Waterrequired for the provision of safe drinking water forour customers. Negotiation of strategic contractssaved SA Water more than $1 million in 2004-05.SA WATER annual report 25

26 SA WATER annual reportUrsula takes cool tapwater out to the kids.

We will deliverservices valuedby our customersOBJECTIVE 2Customer CouncilSA Water’s Customer Council - which was establishedin 2003 - continued to discuss and promote importantcustomer-related issues and develop an understandingof the challenges facing the organisation and the State.The Council was established to help us betterunderstand and deliver on our customers’ needs andexpectations and comprises key industrial, commercial,rural and residential customer groups. It met 5 timesin 2004-05 and issues addressed included:> Draft SA Water Sustainability Policy> SA Water’s Environmental Management Plan> Security of water supply for the State> Water restrictions> Regulation> Water education and conservation campaigns> Community Connect program> Home Service emergency plumbing initiativeThe awards capped off another outstanding year for thecontact centre, which received more than 322 000 callsand dealt with more than 90% of inquiries at first pointof contact.Customer surveys undertaken during the year found92% of customers who had contacted us in the monthsprior to the surveys were satisfied with our services.Chaired by horticulture expert, commentator andjournalist Jon Lamb, the Council:> Advises on policies relating to all areasof customer service> Reviews and advises on SA Water’s performanceagainst stated service commitments> Advises on methods for obtaining customer feedback> Reviews and makes suggestions on SA Water’scommunity engagement programsThrough its chairman, the Customer Council reportsto the Minister for Administrative Services. Its rolesand responsibilities are set out in the CustomerCouncil Charter.Customer Contact CentreSA Water’s Customer Contact Centre was announcedState winner in the Australian Teleservices Associationawards in early July 2005, acknowledging itscommitment to excellence within the industry forcall centres under 50 seats.In 2004-05 we achieved our target average wait timeof 20 seconds for customer calls to be answered bya call centre staff member. A national benchmark studyshowed our response time for answering calls was68% faster than the average of all other utilitiessurveyed - 20 seconds compared to 64 seconds.Key call inquiries for the year included about 10 000calls relating to the permanent water conservationmeasures. This was a reduction of about 75% onthe previous year as South Australians became morefamiliar with the measures and their obligations.Correspondence received by the Customer ContactCentre by email, fax, letter and the SA Water websiteincreased by 14% on 2003-04, or 44% on 2002-03and all customer service targets continued to be met.Above right: Danny, Monika andMary from SA Water’s CustomerConnections team.SA WATER annual report 27

4000035000Customer Contact Centre - Calls Received2002/032003/042004/0530000Number of calls2500020000150001000050000JulAugSepOctNovDecJanFebMarAprMayJun10HouseholdCustomer Contact Centre - Calls Received9Business400002002/03Customer 8 satisfaction surveyThe results showed most ratings remained fairly 2003/04SA Water 7 undertook its fifth annual customerhigh for the scope of our service, including for our 2004/0535000benchmarking 6 study in early 2005 to measureresponsiveness and ease of access. Satisfaction alsosatisfaction 5 with service delivery and performance remained high in SA Water ‘delivering a high quality30000across a 4 broad range of areas.essential service’ (7.6, up from 7.2 in 2001).250003Each year, about 900 random households andSatisfaction levels slipped marginally on last year in2businesses 20000 are selected from metropolitan andseveral activity areas. The most significant of these1regional areas for the survey. In 2005, a further sample related to ‘long term planning for plentiful supplies’0of 350 15000 customers who had recently made contact and was most likely due to media speculation over20052004200320022001with SA Water and United Water - our metropolitan the availability of water into the future.contractor 10000 - were interviewed within seven days ofhaving made contact with either organisation.Of those who had recently made contact with SA Water,5000overall 85% were completely satisfied with how theNumber of callsRating out of 10Overall customer satisfaction remained highinquiry was handled.0(8.2 out of a Jul possible Aug 10). Sep Oct Nov Dec Jan Feb Mar Apr May Jun109HouseholdBusiness87Rating out of 1065432102005200420032002200128 SA WATER annual report

OBJECTIVE 2Water awarenessIn September 2004, SA Water launched two campaignsto reinforce the State’s permanent water conservationmeasures and encourage water efficiency in domesticgardens. Again, South Australians have shown they areready and willing to support measures to use water wisely.Research of more than 500 metropolitan and regionalhouseholds undertaken through the life of thecampaigns showed:> Consistently high level of awareness ofpermanent water conservation measures(88%-90% of respondents)> Ongoing exceptionally high support for thepermanent measures (about 95%)> More than 75% said they had taken specificaction to reduce water use.Both campaigns supported the South AustralianGovernment’s overarching WaterCare campaign whichpromotes broad messages about the precious natureof water. SA Water also contributes to this campaign.Encouragement and enforcementThroughout 2004-05, our Water Conservation Officersalso continued to educate the community aboutpermanent water conservation measures and enforcethe measures through warning and expiation notices.The officers undertook 2336 site inspections, comparedto 3202 the previous year and issued:2004-05 2003-04Friendly reminder notices 1 533 2 019Warning notices 647 427Expiation notices 20 15The friendly reminders included information about thepermanent water conservation measures to ensureall those found in breach of the measures were fullybriefed on their responsibilities.Our research was supported by figures released bythe Australian Bureau of Statistics in April 2005 whichshowed one in four South Australian householdsundertook some water conservation actions for thefirst time during the first year of permanent measures.Above: SA gardening celebrityMichael Keelan helped launchSA Water’s Beautiful WaterwiseGardens campaign.SA WATER annual report 29

OBJECTIVE 2Emergency plumbing serviceIn mid-2004 SA Water entered into a five-yearagreement with Home Service Direct (HSD) Pty Ltdto introduce an emergency plumbing service, HomeService, to our residential customers.Website redevelopedA stronger customer focus and improved accessibilitywere key drivers behind a major redevelopment of theSA Water website in 2004.The redevelopment came after considerable internal andexternal consultation on the existing site, feedback fromstakeholders and benchmarking against best practicewebsites in the public and private sectors.This service allowed customers to pay an annualmembership fee to cover expenses for plumbing anddrainage emergencies, within contract limits. HomeService has been operating successfully in the UK fora number of years and we believe this will add valuefor our customers.Following an initial test mailing in October 2004, anumber of questions were raised in the media andto SA Water chiefly relating to:> Our handling of customer data> Potential confusion over whether the servicewas being offered by SA Water or HSD> Possible impact on the plumbing industryThe new site was launched at the end of August 2004 andinitial feedback has been overwhelmingly positive. Thetotal number of website hits recorded for the year was273 602, compared to 252 928 the previous year (up 8%).Key areas of the site accessed included informationabout permanent water conservation measures andhow to save water in the home, reservoir levels,account information and customer contact details.By making our website more useful to our customers, weaim to encourage greater internet use, in line with theSouth Australian Strategic Plan target of increasing internetuse in SA by 20% (Objective 4: Fostering Creativity).Since the first mailing, we have been working closelywith the Plumbing Industry Association to address itsconcerns and build stronger ties with plumbers. Wealso modified marketing materials to ensure greater clarityabout the relationship between SA Water and HSD.The Crown Solicitor’s Office advised that disclosure ofcustomer information to a third party, as was the casewith the test mailout, constituted a technical breachof the South Australian Information Privacy Principles.All subsequent mailings were coordinated throughSA Water’s contracted mailing house to ensure fullcompliance with the privacy principles.30 SA WATER annual report

OBJECTIVE 2Black Tuesday disaster responseSouth Australia’s Eyre Peninsula was the scene ofhorrific bushfires on 11 January 2005, when ninepeople were killed, dozens of homes and farms weredestroyed, livestock was lost and 80 000 hectares ofEyre Peninsula farming land and bush were blackened.The Black Tuesday fires required swift response by theSouth Australian Government and emergency crews.SA Water - which employs more than 50 people onEyre Peninsula and manages extensive infrastructurein the fire-ravaged areas - mobilised staff from acrossthe State and took on numerous roles during and afterthe fires.Fire temperatures reached more than 1000°C in somelocations and significant damage was inflicted on thewater supply network, including the Uley Wanilla trunkmain. SA Water staff worked tirelessly to re-establishsupply for more than 1000 customers, repair the mainand to encourage other Peninsula residents to conservewater. Temporary water tanks were established,about 8000 litres of bottled water were deliveredand SA Water continued to play an active role in theState Emergency Operations Centre with other StateGovernment agencies.While our crews battled the environmental andinfrastructure damage, they also took time to reachout to local residents, offering support to farmers andothers who had been affected.After the fires, work was also required to addresssignificant vegetation loss in the Tod Reservoircatchment area. With little or no understoreyvegetation remaining, the catchment had beenleft vulnerable to erosion and increased nutrientloads entering the waterway.Another response to the bushfires came in March 2005,when about 150 bales of hay harvested from SA Watersites was trucked over 700km to Eyre Peninsula to helpfarmers feed their stock. A decision also was made towaive water use and supply charges for 236 customersaffected by the fires.In all, about 60km of mains were affected and staffattended hundreds of bursts.Above: Fire damage on Eyre PeninsulaSA WATER annual report 31

32 SA WATER annual reportAnthony working in theAustralian Water QualityCentre laboratory.

We will be a leaderin water qualityand wastewatermanagement.OBJECTIVE 3Water qualityMicrobiological and chemical performance of drinkingwater remained excellent in 2004-05.Samples from customer taps in the metropolitanand country regions continuing to exceed AustralianDrinking Water Guidelines (ADWG) compliance targets.Customer tap samples free from E.coli bacteria:2004-05 2003-04 2002-03Metropolitan 100% 100% 99.96%Country 99.91% 99.95% 99.9%The first phase of our Drinking Water QualityManagement System was completed in June 2005.So far the project has delivered:> Catchment to tap water quality system analysisfor all country and metropolitan systems> Water quality risk assessments for all countryand metropolitan systems> Comprehensive water quality management plansfor five country systems> Water quality improvement plans for all countryand metropolitan systems> Corporate water quality monitoring handbook> Improved water quality documentation and arecords management system> Water quality skills trainingBy mid-2006 phase 2 will be well under way andadditional outputs will include:> Improved water quality management plansfor all country systems> Implementation of the high priority actionsfrom the water quality improvement plans> Establishment and phased delivery of a water qualityskills training program for operators and managers> Enhanced management of incidents and emergencies,community involvement and awareness programs andcontinued research and development applications> Establishment of an evaluation and audit process fordrinking water quality managementDespite excellent compliance with ADWG healthguidelines for drinking water supplies, and progressiveimprovements in general water quality supplied to ourcustomers, Adelaide’s water supply has been subjectto claims its quality is worse than other capital cities.These claims relate to the aesthetic water characteristics(taste, odour, colour), which have no health impacts,but which are obvious to consumers and consequentlyattract public attention.In SA Water customer satisfaction surveys chlorinoustastes have been found to be the major water qualityconcern. However, the surveys also indicate increasingsatisfaction:> Of those who said they were more satisfied withSA Water now than they were 12 months ago,13% indicated this was due to better quality water> The percentage of people expressing concerns abouttap water fell 14% from 2002 (to 21%), while thepercentage with no real concern rose from 63% to 77%> Mean ratings for taste have consistently improvedin the past three years> 92% of respondents were confident in the healthstandards applied to tap waterSA WATER annual report 33

OBJECTIVE 3Catchment careOur $3 million project to revegetate 450 hectaresof SA Water land in the Mount Bold Reservoir andClarendon Weir catchment, south of Adelaide,remained on track in 2004-05.Parcels of SA Water’s landholdings adjacentto Mount Bold reservoir had historically beenmanaged by leasing them to local landholdersfor agriculture, predominantly cattle grazing withsome hay cutting. Of the 730 hectares under thisarrangement, SA Water identified 450 hectaresof land parcels within the water supply catchmentwhich should be retired, with land managementundertaken to ensure best practice catchment care.Extensive woody weed control has been successfullyundertaken and, in the first half of 2005, remnantbushland restoration was undertaken on 107 hectaresof former lease land, including a 20 hectare site activelymanaged on a weekly basis by volunteers through ourpartnership with Bush for Life.In late 2005 we are scheduled to plant about 230 000seedlings over 82 hectares of cleared land with plantsgrown from locally collected seed.Along with establishing a self-sustained nativevegetation landscape, the project will:> Control invasive noxious weeds on both SA Waterland and ecologically sensitive neighbouring sites> Assist in improving the quality of run-off waterfrom SA Water land> Provide a buffer for the diversity of wildlifein neighbouring reserves> Increase the absorption of carbon dioxide fromthe atmosphere through revegetationSA Water continues to work closely with the State’scatchment water management boards (CWMBs) toaddress issues relating to source water and ensure ourcatchments are kept in good shape. SA Water made thefollowing contributions to the boards in 2004-05:River Murray $1 500 000Eyre Peninsula $160 000Onkaparinga $335 000Torrens $180 000Northern Adelaide $139 000South East $87 000TOTAL: $2 401 00034 SA WATER annual reportAbove: Seedlings destinedfor Mount Bold Reservoir.

OBJECTIVE 3Research in the spotlightSA Water continued to deliver cutting edge waterquality research and development in 2004-05, primarilythrough our Australian Water Quality Centre (AWQC).One example - a new method for assessing the threatof the water parasite Cryptosporidium in source watersupplies - was found to be so successful that it will beused in an international trial in 2006.Several collaborative projects dealing with water qualityand allocation issues continued in 2004-05, including:> Torrens Catchment Risk Assessment - working withthe Torrens CWMB and other community groups toidentity and determine the relative significance ofpollution sources within the River Torrens catchment.Detailed studies have determined specific sources ofpathogens and nutrients. These will enable targetedcompliance, education and catchment improvementprograms to be implemented.> Cox Creek - a collaborative project between theOnkaparinga CWMB, SA Water and the EPA exploringoptions to minimise nutrients entering Cox Creek,in the southern outskirts of Adelaide, in an effortto reduce the occurrence of algal blooms in HappyValley Reservoir.Chlorination of the Mannum-Adelaide pipeline wasphased out by the end of February 2005, ensuring anend to the discharge of chlorinated water into severalwatercourses, including the River Torrens.In July 2004, 50 volunteers planted 2000 native shrubsand trees at Millbrook Reservoir Reserve as part ofNational Tree Day. Volunteers included members ofthe local community, Trees for Life, the South ParaBiodiversity Project, National Parks and Wildlife SouthAustralia and SA Water staff. All plants were suppliedfree of charge through the South Para BiodiversityProject nursery located at our South Para depot.There have long been problems in discerning whetherCryptosporidium detected in source waters is alive ordead and laboratory infection of mice has been thestandard test. The Microbiology Research team at theAWQC has developed a method of growing the parasitein cell culture followed by quantitative analysis of itsDNA. The test has been found to be highly accurate andwill be used in a trial involving the AWQC and renownedlaboratories in Europe and the United States next year.The work undertaken by SA Water may lead to a newinternational ‘gold standard’ for Cryptosporidium testing.During 2004-05, SA Water sponsored and launched aCentre for Water Science and Systems at the Universityof South Australia to foster links between the waterindustry and education.The centre’s purpose is to advance the science andtechnology of sustainable water management throughfundamental and applied research, focussing on sixkey areas:> Water and wastewater treatment> Water and wastewater reuse> Urban water resource management> Desalinisation> Water use from the River Murray> Water services for rural and desert communitiesAbove: SA Water Chief Executive AnneHowe and Associate Professor BillRichards at the launch of the Centrefor Water Science and Systems.SA WATER annual report 35

OBJECTIVE 3SA Water also continued its support for the CooperativeResearch Centre (CRC) for Water Quality and Treatment,which celebrated its 10th anniversary on 1 July 2005.Our research and innovation programs support theobjectives of the South Australian Strategic Plan, inparticular targets under Objective 1: Growing Prosperityand Objective 4: Fostering Creativity.Remote communitiesSA Water works in collaboration with Federal and Stateagencies and Aboriginal Land Holding Authorities andcommunities to help promote innovative ways to dealwith water management in arid, remote regions ofSouth Australia.In 2004-05, our memorandum of understanding withthe Department for Aboriginal Affairs and Reconciliation(DAARe) continued to ensure the efficient managementand monitoring of water related infrastructure across18 communities, including 9 in the Anangu PitjantjatjaraYankunytjatjara (APY) lands in the State’s far north-west.Twelve of these communities depend on bore water,often supplemented with separate rainwater tanks.Others are supplied via the River Murray or throughCouncil systems.Throughout the year, SA Water continued to undertakemonthly and quarterly water quality and effluentsampling and analysis. In 2003 we established alaboratory in the outback town of Marla to ensurequick turnaround times for microbiological analysis.As a result of our water quality monitoring program,SA Water secured funding through the StateGovernment’s APY Task Force to install ultraviolet(UV) disinfection systems at six APY communities.DAARe also commissioned SA Water to projectmanage two significant water supply projects inthe APY lands in 2004-05:> $790,000 replacement of two 243 kilolitre tanksand redevelopment of Mimili tank compound> $800,000 redevelopment of water supply andreticulation system at KalkaWe are also managing a range of projects worth morethan $6 million on behalf of the Federal Departmentfor Families and Community Services (FACS).These projects are in line with the South AustralianStrategic Plan’s targets for addressing Aboriginalwellbeing (Objective 6: Expanding Opportunity).36 SA WATER annual reportAbove: SA Water’s work inremote communities continuedin 2004-05

New infrastructure for remotecommunities in SA.SA WATER annual report 37

We will plan and developwater and wastewaterassets and secure watersupply for the State nowand into the future.OBJECTIVE 4Water Proofing AdelaideIn 2003, the South Australian Government announcedWater Proofing Adelaide - a plan to work with the SAcommunity to create a blueprint for the management,conservation and development of water resources inAdelaide and near-City rural areas to 2025.The project involved 18 months of consultation, researchand review to assess a broad range of options based onenvironmental, economic and social considerations.In July 2005 the strategy - A Thirst for Change - wasunveiled by the Government, outlining 63 actions inkey areas of:> Managing our existing resources> Responsible water use> Additional water suppliesThe overall aim is to ensure that, as Adelaide grows anddevelops, water supply will remain reliable. By 2025 thestrategy aims for:> A reduction in water use by households and industryby 35 gigalitres> A doubling in the reuse of wastewater> Reuse of 10 times as much stormwaterSA Water will play a lead role in delivering many ofthese actions, which also support the South AustralianStrategic Plan’s Objective 3: Attaining Sustainability.We will establish a rolling implementation planspecifically for the project.Mawson Lakes Recycled WaterA $16 million recycled water system at Mawson Lakesin Adelaide’s north was launched in June 2005 and willeventually deliver recycled water to about 4000 homesin the area and save about 800 megalitres of mainswater being drawn from the River Murray each year.The scheme distributes a mixture of highly treatedwastewater from SA Water’s Bolivar WastewaterTreatment Plant and stormwater harvested in Salisburythat has been cleansed and treated through a seriesof engineered wetlands.The recycled water is delivered to Mawson Lakes viaa new pumping station and reticulation system, definedby purple coloured pipes, mains, meters and taps to beused for watering parks and gardens, car washing andtoilet flushing.SA Water managed the project and engaged UnitedWater to undertake the engineering, procurement andconstruction management services on our behalf.The system has been jointly funded by the StateGovernment’s Land Management Corporation andSA Water, Delfin Lend Lease and the City of Salisbury.It is now owned by SA Water and United Wateroperates the system on our behalf.National Water InitiativeSouth Australia is a signatory to the National WaterInitiative (NWI) - a comprehensive Commonwealthstrategy to improve water management across thecountry.Above: Laying of purple pipesas part of the Mawson Lakesrecycled water system.SA WATER annual report 39

OBJECTIVE 4We also project managed, on behalf of the Departmentof Water, Land & Biodiversity Conservation, the Murraymouth dredging project and a project to incorporatefishways into lock and weir structures to allow upstreammovement of native fish.Industry developmentThe NWI was agreed to and signed at the 25 June 2004meeting of the Council of Australian Governments(COAG) which noted the imperative of increasing theproductivity and efficiency of water use and the healthof river and groundwater systems in Australia.At the meeting, the Prime Minister and Premiers ofNew South Wales, Victoria and South Australia and theChief Minister of the Australian Capital Territory alsosigned the Murray-Darling Basin Water Agreement.This sets out the arrangements for investing $500million over five years to improve the river’s health,permanently returning 500 billion litres of water tothe river. Water returned to the river will be directedtowards improving the health of six significantecological assets across the Basin, including threesites in South Australia:> Chowilla floodplain: providing water to importantwetlands and to maintain the health of river redgumsand black box trees.> Murray Mouth-Coorong and Lower Lakes: keepingthe Murray mouth open, to provide conditions for fishspawning and enhance migratory wading bird habitat.> The river channel: enhancing fish habitat along theentire length of the river.SA Water’s major sponsorship of the Water IndustryAlliance (WIA) continued in 2004-05 as part ofour effort to grow the State’s water industry bystrengthening links between key public agenciesand private companies.The WIA is a highly successful industry clusterestablished in 1998 to bring together all SouthAustralian companies with an interest in the waterindustry, with the objective of winning national andinternational business through effective commercialcollaboration. It now has membership of more than150 SA companies, who between them export productsand services to more than 25 countries.SA Water has continued to play a key role within theWIA, through Board membership, participation inproject action teams, financial support and housing theWIA office in the SA Water Australia Asia Water Centre.During 2004-05 we contributed $520,000, including$185,000 towards resourcing and the remaindersupporting a range of innovation and business projects.The WIA continued to progress its strategic plan forthe development of the water industry over the period2002-2007, targeting a doubling of exports to $400million per annum by 2007.The South Australian Government introduced a Save theRiver Murray levy to help fund the State’s contributionto the agreement and SA Water collects the levy onits behalf.Above: Dredging in theMurray mouth.40 SA WATER annual report

OBJECTIVE 4Major wastewater projectsSA Water’s significant investment in wastewaterinfrastructure continued in 2004-05, with thecompletion of number of projects as part of our$240 million Environment Improvement Program(EIP) to improve the performance of Adelaide’smetropolitan wastewater treatment plants.In October 2004, the $97.5 million Bolivar highsalinity wastewater treatment plant was brought online and by January 2005 had been fully commissioned- ahead of time and within budget.The new Bolivar plant will remove much of the nitrogennutrient from wastewater to be discharged intoGulf St Vincent and ultraviolet light will be usedfor disinfection instead of chlorine, so potentialenvironmental impacts will be further minimised.Construction of a new $42 million wastewatertreatment plant at the popular seaside destination ofVictor Harbour began in the second half of 2004 andis on schedule to be commissioned by the end of 2005.SA Water has let the contract to finance and buildthe plant to United Utilities Victor Harbour Pty Ltd(UUVH) which will design and construct the plantand associated pipelines and pumping stations,as well as operate and maintain the facilities for20 years. The infrastructure assets will be transferredto SA Water at the end of the contract term.The new plant will incorporate the use of the latestmembrane filtration technology and will provide‘Class A’ reclaimed water suitable for irrigation offarmlands, parks and gardens.Another new wastewater treatment plant - in the upperSpencer Gulf town of Whyalla - neared completionin 2004-05. The $14.36 million Whyalla project isexpected to be commissioned in late 2005 and aims tolower the level of nitrogen in the treated wastewaterand reduce the amount of discharge into the Gulf.Water for Clare ValleyTownships in the world famous Clare Valley wine regiontapped into a reticulated water supply for the first timein late 2004 thanks to a $34.8 million water supplyscheme delivered by SA Water.SA Water had been working with the Clare ValleyWater Supply Committee and the community since1999 to develop a viable option for improved supplyto the region.Despite concerns about the delivery of River Murraywater to the region, detailed environmental studiesindicate the scheme is sustainable and can be wellmanaged with the cooperation of irrigators in thesensitive Clare Valley subcatchments.Above Left: Bolivar high salinity plant. Right: At the launch of theVictor Harbour wastewater treatment plant (from left) SA WaterChief Executive Anne Howe, Minister for Administrative Services,the Hon Michael Wright MP, United Utilities Australia ManagingDirector Graham Dooley and Finniss MP, the Hon Dean Brown.SA WATER annual report 41

OBJECTIVE 4New pipeline for Eyre PeninsulaIn May 2005, a new 90 kilometre $48.5 million pipelinewas announced for Eyre Peninsula in the State’s westto help ease the region’s water crisis.The pipeline is expected to be completed in 2007 andwill initially deliver up to 1.4 gigalitres of water to thepeninsula. Eyre Peninsula - which sources most ofits supplies from groundwater - has been on a morestringent regime of water restrictions than the restof the State since December 2002 due to decliningavailability of supply.It is planned the water will be sourced throughpurchasing water entitlements from existingRiver Murray users to supplement local waterresources on the Peninsula. In the longerterm, the supply could be augmented withwater from a proposed desalination plant.Mannum to Adelaide, over the Mt Lofty ranges. Despitematerial, plant and staff shortages, the E&WS builtthe pipeline in less than 6 years. It was the first majorpipeline built from the River Murray to secure a reliablewater supply for South Australia’s capital city.About 250 former pipeline workers, current SA Wateremployees and guests attended the celebration.The decision to build a pipeline was made afterconsiderable social, environmental and economic analysis.Desalination of brackish water from Tod Reservoir anda separate small seawater desalination plant werethoroughly investigated and were found to be unviable.Our extensive work in delivering water and wastewaterprojects supports the South Australian Strategic Plan,in particular targets relating to investing in strategicinfrastructure (Objective 1: Growing Prosperity)and building and maintaining regional infrastructure(Objective 5: Building Communities).Dam safetyOn 18 and 19 January 2005, damp areas were foundon a section of the Millbrook dam wall, prompting arapid response from SA Water. We worked with theSouth Australian Government to quickly notify the publicand implemented contingency plans while a dam safetyexpert determined the nature and extent of the problem.As a precaution, steps were immediately taken to lowerthe water level at the reservoir and SA Police weredeployed to key locations to divert traffic if required.A 24-hour monitoring regime was also established.Pipeline celebrationOne of Australia’s great engineering feats, the MannumAdelaide pipeline, turned 50 in April 2005 and SA Waterheld an event in the riverside town of Mannum to celebrate.Revolutionary for its time, the above ground pipeline- built by the Engineering & Water Supply Department(E&WS) from 1949 to 1955 - travels 60 kilometres fromA dam safety report showed the risk was lower thanfirst thought. However, in line with expert advice, wetook a number of interim steps to continue loweringwater levels and protect damp areas with filtermembrane and rock. The Millbrook dam was scheduledfor an upgrade at the time of the incident and permanentupgrade to contemporary standards is expected to becompleted in December 2006.42 SA WATER annual reportAbove: Mannum Adelaide pipeline50 years celebration with formeremployees and friends.

OBJECTIVE 4Water TradingIn 2003-04, SA Water received State Governmentapproval to purchase River Murray water entitlementsand - to the end of the 2004-05 - we had committedto purchase 18.4 gigalitres of entitlements and about300 hectares of associated land for almost $27 million.SA Water owns and operates 17 large reservoirs acrossthe State and has an established program to meetnational and international standards for best practicemanagement and safety of dam structures.In August 2004, a $20 million upgrade at one of ourmajor reservoirs, at Happy Valley, was completed aheadof schedule. The upgrade brought the reservoir intoline with current world standards for dam construction,improving the safety of the dam and increasingprotection to the structure from earthquake and flood.Torrens Valley aqueductA major project to replace the Torrens Valley aqueduct -a 5km open-channel built in 1870 in the north-easternsuburbs of Adelaide - was subject to communityconsultation in late 2004.The ageing aqueduct is prone to cracking and damagefrom tree roots, and water is lost to leakage andevaporation. A key community concern has been thefuture use of the aqueduct reserve, which is currentlyclosed to the public, and the desire for land to be savedas open space.The project must pass through a number of approvalprocesses before work can commence and furthercommunity consultation on the future land uses willbe required.The long-term aims of purchasing the additionalwater entitlements are to ensure reliability ofwater supply for the State, support economic andpopulation growth, enable increased environmentalflows, compensate for the effect of climate changeand assist in dealing with possible future waterrestrictions imposed on SA Water’s licences.These aims support the South Australian StrategicPlan’s objectives of growing prosperity, attainingsustainability and building communities.Initially, we were approached by a group of dairyfarmers who wished to sell their land and water butwanted to keep the entitlements within the State.Additional entitlements have since been purchased,predominantly from irrigators and dairy farmers inthe Lower Murray swamps who have decided toretire or exit dairying under a State Governmentrestructuring program.These purchases have resulted in a win-win-win:> SA Water has been able to acquire waterentitlements for the State’s future> Inefficient irrigation land has been retired> Farmers have been able to take the opportunityto retire debt, fund their retirement, or securemoney to reinvest on other farming operations.To the end of the financial year little of the waterpurchased had been extracted and therefore the bulkof our purchases contributed to the environmental flowreaching the mouth of the River Murray.Above: Torrens Valley AqueductSA WATER annual report 43

44 SA WATER annual reportCleo shares her drink witha native seedling.

we will play a leadingrole in a sustainablefuture for southaustralian communities.OBJECTIVE 5Sustainability journeyIn 2004-05 significant progress was made in developingour understanding of sustainability and how we couldintegrate sustainability principles into our planning,decision making and operations.Rather than develop a complex blueprint, we lookedto our revised strategic plan to guide our approachto sustainability and devised a six-point plan aroundthree themes:How we are changing> Cultural change: develop a shared understandingand culture that drives sustainability across SA Water> Sustainable decisions: ensure all our decisionsoptimise economic, social and environmental benefitfor long term sustainabilityHow we are delivering> Engage our communities: establish and maintainquality relationships with our stakeholders> Promote sustainable development: promotesustainability as a driver for economic prosperity> Minimise our ecological footprint: minimise theenvironmental impacts of our operationsHow we will know> Monitor and report: measure, benchmark, analyseand publicly report our sustainability performanceOur sustainability efforts support the South AustralianStrategic Plan’s Objective 3: Attaining Sustainability.Dow Jones Sustainability IndexSA Water took part in its second sustainabilityassessment against the Dow Jones Sustainability Index(DJSI) in November 2004, comparing our performanceagainst leading global sustainability corporations acrossenvironmental, economic and social dimensions.In December 2003, we engaged Melbourne-basedSustainable Asset Management (SAM) to benchmarkour sustainability performance against local andinternational utilities and to identify performance gaps.An initial DJSI survey was undertaken and the results,released in 2004, identified SA Water had strengths inthe areas of procurement practices, financial robustnessand gender balance of our Board.Areas for improvement were also identified. Theseincluded our performance in community engagement,corporate citizenship, talent attraction and retention,labour practice indicators and some aspects ofcorporate measurement and monitoring systems.In the first survey SA Water ranked fourth out ofeight compared with other Australian utilities surveyed.A draft plan to improve the Corporation’s performanceagainst the DJSI was developed, with a range ofinitiatives integrated into our 2004-05 business plansto address recognised weak areas. For instance, wedeveloped a Community Connect suite of projects(see page 47) to address social gaps.Our 2005 Sustainability Report can be found onthe enclosed and includes more informationabout the initiatives outlined above.SA WATER annual report 45

OBJECTIVE 5The latest DJSI results, released in 2005, show animprovement in our overall score (58.41 up from 53.6).This increase improved our position from 4th to 2nd onthe Australian Index (known as the AuSSI), just behindthe leader on 59.99.For the DJSI, SA Water was compared with eight globalprivate water utilities which own and operate, or justoperate, water and wastewater infrastructure. For theAuSSI, there were no other water utilities listed and wewere compared with energy utilities.However, the increase in score was not enough toimprove our position on the global DJSI when comparedto the global water industry sector. Our ranking fellfrom 5th to 7th as the leaders’ performance improvedproportionally.Our 2005 Sustainability Report includes a moredetailed analysis of results in the survey’s economic,environmental and social dimensions.A summary of the key results are:Total DJSI Results - Global Water Utilities (%)Industry Average20052004SA WaterBest Company0 10 20 30 40 50 60 70 80Total AuSSI Results - Australian Utilities (%)Industry Average20052004SA WaterBest Company0 10 20 30 40 50 60 70 8046 SA WATER annual report

OBJECTIVE 5Community ConnectSA Water has implemented a range of projects toaddress social issues for the Corporation and playa leadership role in corporate social responsibility.As our understanding and appreciation of sustainabilityhas broadened, there has been a growing recognitionof the need for SA Water to place a greater focus onthe social elements of sustainability.In the Dow Jones Sustainability Index (DJSI) assessmentundertaken in December 2003 (see page 46), SA Waterscored below average in the social dimension ofsustainability and a number of areas for improvementwere identified including social policy, corporatecitizenship and social reporting.A Social Impact on Pricing study was undertakenin late 2004 and this recommended a number ofactions we could undertake to better connect withour communities. The report looked at the impact ofour pricing and billing policies and procedures andhighlighted the need to develop a corporate socialresponsibility strategy.A workshop was conducted and series of action plansprepared in consultation with key employees to addresseach of the areas identified as significant ‘social’ concernsfor SA Water. These ‘Community Connect’ projectsinclude:> A social policy to articulate our social responsibilitiesas part of SA Water’s sustainability policy> Rejuvenating SA Water’s corporate values and, withemployees, developing strategies to better integratethe values into planning> Best practice ethical standards in ourbusiness operations> Grassroots connections with our communities,particularly in the regions> Access and equity in service provision to smallerisolated communities> Hardship policy and strategies to formalise SA Water’sapproach to working with customers experiencinghardship in bill payments> A formal policy and guidelines to enable SA Waterto build and enhance quality relationships withour stakeholders based on robust and transparentcommunity engagement and to integrate communityengagement processes and activities into capitalworks project delivery.By undertaking the suite of Community Connectprojects, SA Water aims to build stronger relationshipswith customers, stakeholders, staff and the broadercommunity. We are also supporting the SouthAustralian Strategic Plan’s targets around improvingquality of life and well-being in the State and buildingcommunities.A report card will be included in the 2005-06 annualreport to show how we are tracking against these projects.Water plays a crucial role in thecommunity. SA Water is working onthe social elements of our role witha Community Connect Strategy.SA WATER annual report 47

OBJECTIVE 5Partnerships and sponsorshipsSA Water’s community investment program recognisesthe importance of leveraging sponsorships andpartnerships to promote water education and raiseawareness of key water issues facing our State.Several key programs focussed on supportingenvironmental initiatives with an emphasis onsustainable use of water resources:Botanic Gardens of Adelaide: SA Water and theBotanic Gardens of Adelaide have been workingtogether for a number of years and in October 2003we signed a memorandum of understanding based onthe mutual goal of demonstrating and engaging thecommunity in efficient water use. A number of projectsin 2004-05 continued to achieve this goal, including theSustainable Landscapes project - a two-year projectdemonstrating best practice water use and sustainablepublic and private landscapes to SA communities.Trees for Life: SA Water became Trees for Life’s (TFL)inaugural Golden Wattle sponsor in 2004. TFL is a nonprofit,community organisation which aims to promoteand assist in the revegetation of South Australian landand the protection of remnant vegetation.National Trust Overland Corner rehabilitation:SA Water is one of the conservation partnersworking with the National Trust to rehabilitate theenvironmentally and culturally significant OverlandCorner wetlands, near Kingston-on-Murray.Other programs based on solid partnerships in2004-05 included:WaterAID Australia: SA Water was a foundingmember of Australian WaterAID, an international agencydedicated to empowering poor communities to secureaccess to clean water for life. This is based on a UKwater industry charity which has allowed AustralianWaterAID to share expertise.Science@work classroom: In January 2005, SA Waterjoined forces with United Water and the InvestigatorScience & Technology Centre to launch a newclassroom and program aimed at teaching water andwastewater issues to young South Australians.Our partnerships and sponsorships program supportthe South Australian Strategic Plan’s targets aroundimproving quality of life and well-being in the Stateand building communities.Adelaide Zoo South East Asian Rainforest:support for the Adelaide Zoo’s new world class exhibitto provide protection and breeding for endangeredspecies. The South East Asian Rainforest Stage Twowill create a rainforest in the heart of the city, with anemphasis on sustainable use of water.48 SA WATER annual reportAbove: Students enjoying theSA Water Quiz Trail at the BotanicGardens of Adelaide.

OBJECTIVE 5Building relationships in IndiaSA Water is providing engineering advice and supportto a large community in Rajasthan, India, to help itspeople deal with the severe drought that has affectedthe region for a number of years.At the request of the South Australian Government, twoSA Water employees travelled to the ashram, located ina rural area 80km south of the city of Jodhpur. SA Wateris providing the assistance to the Shree Vishwa DeepGurukul Maheshwarananda organisation which operatesthe ashram.A number of community facilities demonstratingefficient water harvesting practices have beenpartially completed and the community is seekingsupport on the best ways to manage local watersupply and quality. The hospital, school andaccommodation facilities require a reticulated potablewater supply and wastewater collection and treatmentfacilities and SA Water will provide expertise indesigning these facilities.Environmental initiativesKey environmental actions undertaken in2004-05 included:> South Australia’s 1.8MW mini-hydro plant, whichwas commissioned in September 2003, released505 400 kilowatt hours of electricity back into thegrid - enough green energy to power more than600 homes and reduce greenhouse gas emissionsby about 4850 tonnes. The plant harnesses theenergy from water flowing into SA Water’s terminalstorage tank after treatment from the Anstey Hillwater treatment plant and was developed through ajoint venture between SA Water and Hydro Tasmania.> A major project was initiated in 2004 to revegetatea portion of the SA Water’s Thebarton depot, whichis in a prominent parklands site on the outskirts ofthe CBD. About 8000 plants will be planted as part ofthe $70,000 project, which has involved collaborationwith the Botanic Gardens, Urban Forests One MillionTrees project, Adelaide City Council and Transport SA.On the ashram a large in-ground reservoir has beenconstructed to intercept and store surface run-offduring the brief monsoon period. As a first step, wewill prepare a monitoring program to identify the scaleand location of leakage from this reservoir. This may befollowed by on-site guidance on engineering solutionsto minimise the leakage. SA Water is also providingelectronic weather monitoring equipment.SA WATER annual report 49

50 SA WATER annual reportYolanda repairing a brokenpump at Happy Valley depot.

We will continue tobuild and aspire to bea best practice highachieving culture.OBJECTIVE 6Cultural improvements and skills developmentIn 2004-05, SA Water focussed on teams,individuals and leadership in our ongoing culturalimprovement program.Acknowledging the importance of leadership ininfluencing culture, we:> Increased our focus on Individual LeadershipImprovement Plans.> Implemented an Applied Leadership Program forsenior managers. With a strong emphasis on workbasedlearning, participants have been expected tokeep learning journals, contribute to their individuallearning plans and implement a change project.By June 30, almost 40 leaders had completed twomodules of the program and developed leadershipskills to be used in their teams.> Continued our Front Line Management Program -a Certificate 4 Business Management course run inconjunction with Leadership Management Australia.Piloted in our Spencer/Eyre Region two years ago,the program has extended to all areas and 46 staffundertook the course in 2004-05.Planning for a new staff satisfaction survey begantowards the end of the year and we believe the resultsof this survey - the most comprehensive of its kindundertaken at SA Water - will further drive culturalimprovement initiatives.In 2004-05 work progressed on a corporate trainingand development system that will ultimately provideSA Water with the ability to plan, budget and implementdevelopment requirements more effectively.About 50% of our employees have documentedindividual plans which have identified their trainingand development needs. We do not keep records orreport on development plans in relation to salary packet.However, we are currently implementing changes to ourhuman resource reporting systems to address this.Approximately 3% of remuneration expenditure ison direct training costs across SA Water, includingcorporate and business unit expenditure.Culture focus of ‘green’ buildingThe accommodation we provide to our people helpsfulfil our strategic objective around high achievingculture and plays an important role in assisting ouremployees to deliver services efficiently and effectively.In 2003-04 we carried out a strategic review of ouraccommodation needs for the next 5-10 years andfound an opportunity existed to integrate our threemetropolitan sites to remove duplication, reducerunning costs and improve productivity and employeesatisfaction. There was also a need to addressaccommodation requirements for regional sites.With SA Water’s regional accommodation spreadacross the State, the project entails a thoroughassessment of the properties and development ofa comprehensive set of standards and guidelines.Once completed, a long-term maintenanceand redevelopment plan will be prepared andimplemented to ensure our regional employeeshave the right accommodation for their needs.The metropolitan accommodation strategy beganin earnest in October 2004 following approval fromCabinet for us to consolidate our metropolitan sitesinto a new minimum five-green-star ecologicallysustainable building and to seek expressions ofinterest from the property development market.It is expected final building designs and costs willbe fully evaluated in the second half of 2005 priorto recommendations to Cabinet.SA WATER annual report 51

OBJECTIVE 6Indigenous employmentIn 2004-05, there were a number of highlights with ourindigenous employment program.This program offers four 12-month training anddevelopment opportunities each year and, as at 30 June2005, 6 young indigenous people had joined our ranksthrough the program. Of the 4 who have completed theprogram, 2 have gained further employment with us.Throughout the year we continued to build relationshipswith other government agencies, indigenous bodies andcommunities to raise our understanding of indigenousissues, as well as promote opportunitiesfor employment within SA Water.The program will now begin to focus on linking trainingand employment opportunities with homelandsinfrastructure management, as well as opportunities foradministration traineeships and professional sponsorships.The indigenous employment initiative aims to worktowards the South Australian Government’s long-termtarget of 2% Aboriginal representation in the workforceand support the South Australia Strategic Plan targetsaround Aboriginal wellbeing (Objective 6: ExpandingOpportunity).Ageing workforceIn 2002, the operations arm of SA Water began a 3-yearprogram designed to address significant capability andsuccession planning issues confronting our regionalfield workforce.A large number of our operational employees werereaching retirement age and we needed to preparefor the loss of their knowledge and skills. A WorkforceRefreshment Program was introduced to allowcertain employees to register their interest in TargetedVoluntary Early Retirement and for them to pass ontheir know-how to employees new to the organisation.The Workforce Refreshment Program was successfullycompleted in 2005, with nearly 25% of our operationalworkforce ‘refreshed’. The benefits of the programinclude:> Transition of critical knowledge and skills> Development of opportunities for remaining staff> Generation of significant rural and regional youthemployment opportunities> Reduction in our operations age profile> Significant contribution to efficiency, cultural andmorale improvementsWhile the program has made huge strides in tacklingthe operational workforce issues, the program is onlya first step towards addressing wider and longer termcapability issues.The same concerns facing our operational workforcewhen refreshment program planning commenced alsoconfront other sections of SA Water. For instance,we need to ensure we maintain and enhance ourprofessional and technical skills and knowledge.Workforce analysis and strategy development inthis area is already under way.Our Graduate Program is an early response to the issueof future capability but more work needs to be done inthe next 12 months to help meet our future professionaland technical resourcing and capability challenges.Graduate programYoung South Australians are gaining valuable insightsinto a range of disciplines within the water industrythanks to SA Water’s highly successful Graduate Program.Now in its third year, the program is also assisting theCorporation in planning for the future and ensuringthe challenges of our ageing workforce are met.52 SA WATER annual report

OBJECTIVE 6Whilst taking on only seven new graduates in 2005,SA Water had up to 27 graduates on the program atany point in time throughout the year and 13 of thesehave secured employment either within SA Water orwith one of our partner companies. It is expected atthe completion of their graduate program, most of theremaining 14 graduates will also gain employment.Graduates are assigned to projects across a rangeof disciplines, including engineering, operations andinformation services. The aim is to build their skills,experiences and understanding of the Corporationand the water industry over the two-year program and,where possible, open career paths for them withinSA Water or partner companies.The graduates also undertake courses such ascommercial acumen and project management to betterequip them for work either within SA Water or thebroader water, engineering or management fields.The program has taken one of the graduates, 27-yearoldTim McKenzie, from the far north of the Stateassisting with water supply testing to the State’ssouth-east, where he has since secured a position asMechanical and Electrical Engineer in Mount Gambier.Tim says he began learning “from day one” andwhile the graduate program has helped him hone hisengineering skills, it has also broadened his knowledgein a range of other areas.“Often people are unaware of the big picture withinwhich they operate,” he said. “I find the more Iunderstand how the business works, the moreeffective I can work, and the greater influence myideas seem to have.”The program supports the South Australian StrategicPlan target of equal or better youth employment inthe State compared to the Australian average within5 years (Objective 1: Growing Prosperity).OHS and injury managementSA Water continues to make progress in theimplementation of a management systemsapproach to occupational health and safety (OHS),rehabilitation and workers’ compensation. TheCorporation has a robust OHS system and localin-house expertise continues to be used forreview and update of the system as required.We performed well against our strategic OHS targetsfor 2004-05. While we fell short of achieving the LostTime Injury Frequency Rate (LTIFR) target, this was animprovement on last year’s LTIFR (4.96). The severity ofthe injuries that resulted in lost time during the year wasless, with the severity rate falling to 7.4 days per injury.Key Outcome Target ActualInternal Audits Conducted 53 53LTIFR 4.5 4.72Severity Rate 10.0 7.4Nine consultative groups and two OHS committeesmeet frequently and continue to provide the mainmechanism for consultation between managementand employees across SA Water.Above: Steve from SAWater’s Graduate Programwith Narelle from SA Water’sHuman Resources team.SA WATER annual report 53

OBJECTIVE 6We have also engaged external consultants in a limitedcapacity to undertake specialist tasks associatedwith operational issues. The total cost attributable toconsultants for these tasks is $30,000.During the year, eight OHS expert working parties wereconvened to review and improve current work practicesin SA Water and reflect any associated legislativechange. Expert working parties draw on the skills andknowledge of SA Water employees from across theState and these employees, with external advice asrequired, make practical recommendations for improvedsystems of work. Some of the work practices reviewed,or currently under review, include:> Operation of cranes> Legislation on working in a confined space> Contractor management> High voltage switching> Welding in hazardous work environmentsIn our efforts to ensure continuous improvement inperformance outcomes, the internal OHS audit processcontinued in 2004-05. A total of 53 audits, assessing14 different high risk work practices, were undertakenover 24 worksites across the State. Auditing of workpractices at individual sites reflects key risk areas forthe various sites and is undertaken in consultationwith local managers.External audits were also undertaken during the year,focussing on high risk processes associated with highvoltage switching work and diving operations.SA Water’s strategic plan includes an initiative toachieve world class OHS performance by 2008. A smallsenior level working party has been endorsed to identifythe actions necessary for us to achieve this ambitioustarget and it is expected the working party will haverecommendations in the coming financial year.Rehabilitation and workers’ compensationFour SA Water employees participated in rehabilitationand return-to-work plans during 2004-05. The followingoutcomes were achieved:> Two employees were rehabilitated back tonormal duties> Two employees with restrictions were reassignedto alternative dutiesIn addition, rehabilitation programs were made availableto two employees with non-work related injuries andillnesses, allowing a safe, earlier return to work.Our three-year workforce refreshment program forthe operational areas of SA Water has now ended (seepage 52). While the program has brought forward somefuture workers’ compensation costs into the 2004-05budget, significant reductions in our outstanding liabilityhave been achieved.There has been a 34% reduction in outstanding workers’compensation liability over the past 3 years, amountingto $1.7 million. Settlement of long-term claims withsignificant cost liability and/or high administrativedemands will remain a priority for case managementin 2005-06.The continuing positive trend in a number of keyoutcome areas for workers’ compensation during2004-05 is illustrated below:Key Outcome 2004-2005 2001-2002Number of new claims 77 81Total cost of new claims $213 000 $116 000Average cost of new claims $2 763 $1 432Outstanding liability $3.335 million $5.090 millionLTFIR 4.72 6.0For information on our OHS and injury managementperformance and employee statistics please refer tothe enclosed54 SA WATER annual report

OPERATIONS OVERVIEWFacts At A Glance 2004-05Water mains total length (km) 25 522Metropolitan 8 773Country 16 749Major pipeline lengths (km)Murray Bridge to Onkaparinga 48Morgan to Whyalla- 1 via Port Augusta 356- 2 undersea from Baroota 281Mannum to Adelaide 60Swan Reach to Paskeville 183Tailem Bend to Keith 133Major pipeline rated capacities (ML/day)Murray Bridge to Onkaparinga 514Morgan to Whyalla 206Mannum to Adelaide 380Accounts billed 662 886Number of water treatment plants 20Number of wastewater treatment plants 22*Percentage wastewater reuseMetropolitan 20.7%Country 14.8%Population served Water WastewaterMetropolitan 1 095 000 1 062 000Country 418 000 145 200Average volume of water delivered Statewide - past 5 years (ML)Metropolitan 175 330Country 85 370*The Port Adelaide plant was decommissioned in October 2004.Please note: wastewater data in this report had not been externallyverified at the time the report was prepared.Swan Reach to Stockwell 80Tailem Bend to Keith 31Length of sewers (km) 8 314Metropolitan 6 973Country 1 341SA WATER annual report 55

OPERATIONS OVERVIEWFacts At A Glance 2004-05 (continued)Water consumption factsStatewide Total volume delivered (ML) 251 347Average residential consumption per household (kL) 234Metropolitan Total volume delivered (ML) 165 640Average daily consumption (ML) 454Annual residential consumption per household (kL) 235Country Total volume delivered (ML) 85 707Annual residential consumption per household (kL) 233Water sourcesTotal water (ML) 251 347% provided by River Murray 44%% provided by surface water 50%% provided by ground water 6%Note: Kilolitre (kL) = 1000 litres, Megalitre (ML) = 1000 Kilolitres56 SA WATER annual report

OPERATIONS OVERVIEW5 Year Statistical ComparisonWater supply 2000-01 2001-02 2002-03 2003-04 2004-05Adelaide areaVolume delivered (ML) 194 400 173 400 178 385 165 548 165 640Highest 24hr volume delivered (ML) 1 146 985 1 036 1 113 947Average daily volume delivered (ML) 526 484 489 452 454Average daily consumptionper person (L)Estimated population supplied(At June 30)498 455 454 415 4141 053 000 1 064 000 1 077 000 1 090 000 1 095 000Length of mains 8 583 8 642 8 695 8 739 8 773CountryConsumption (ML) 94 400 92 576 103 396 80 200 85 707Estimated population served 415 900 423 100 415 000 416 000 418 000Length of mains (km) 16 438 16 476 16 547 16 616 16 749Wastewater 2000-01 2001-02 2002-03 2003-04 2004-05Adelaide AreaNumber of WWTPs 4 4 4 4 3*Number of drainage units 453 686 N/A N/A N/A N/AEst. population served (June 30) 1 032 000 1 034 700 1 047 000 1 057 000 1 062 000Length of sewers 6 758 6 808 6 855 6 903 6 973CountryNumber of WWTPs 19 19 19 19 19Number of drainage units 57 578 N/A N/A N/A N/AEstimated population served 141 600 142 200 144 000 144 500 145 200Length of sewers 1 300 1 306 1 311 1 321 1 341*The Port Adelaide plant was decommissioned in October 2004.Please note: wastewater data in this report had not been externally verified at the time the report was prepared.SA WATER annual report 57

OPERATIONS OVERVIEW5 Year Statistical Comparison (continued)Finance 2000-01 2001-02 2002-03 2003-04 2004-05Revenue:$000 $000 $000 $000 $000Water sales and rates 261 884 259 228 293 682 278 250 288 294Sewerage rates 198 195 208 209 219 668 232 062 240 160Contributions and grants 24 450 29 127 42 811 45 262 72 140CSO funding 86 104 90 358 91 706 101 556 103 440Sundries 42 704 52 926 54 471 65 265 71 820Total revenue 613 337 639 848 702 338 722 395 775 854Operating expenditureOperations and services 209 412 218 055 250 084 259 615 280 931Interest 91 421 89 723 82 948 78 577 80 907Depreciation 103 753 107 582 110 322 117 288 125 811Total operating expenditure 404 586 415 360 443 354 455 480 487 649Capital expenditureWater supply 43 686 43 281 54 788 83 784 60 637Sewerage 47 969 56 788 55 678 82 463 40 510Other 10 783 17 292 20 916 21 004 20 784Total capital expenditure 102 438 117 361 131 382 187 251 121 93158 SA WATER annual report

OPERATIONS OVERVIEW5 Year Statistical Comparison (continued)Water and wastewater services 2000-01 2001-02 2002-03 2003-04 2004-05Total expenses per customer $607 $610 $630 $632 $657Expenses recoveryRevenue as a % of expenses 154.7% 157.4% 165.3% 160.0% 166.1%Customer servicePercentage of developer contractsprepared within 90 days100% 100% 100% 100% 100%Improving water qualityPercentage of filtered waterdistributed into Adelaide system100% 100% 100% 100% 100%Water 2000-01 2001-02 2002-03 2003-04 2004-05Adelaide metropolitan areaService calls per 1000 customers 117 109 129 165 149Number of priority calls, bursts,leaks per 1000 customersService interruptions restored in5 hours (target 80%)Water quality complaints per1000 customers% of samples with faecalcoliforms absent2.8 3.2 4.1 3.8 2.592% 92% 92% 99% 96%2.5 1.8 1.6 0.9 1.2100% 100% 100% 100% 100%Total expenses per customer $293 $289 $305 $295 $298CountryMainbreaks per 1000 customers 12.3 10.5 12.3 9.3 8.7Mainbreaks per 100 km of main 12.9 11.2 13.2 10.1 9.3% interruptions responded towithin 1 hour86% 84% 78% N/A 77.6%*% of samples free from E.Coli 99.8% 99.9% 99.9% 99.9% 99.9%Total expenses per customer $727 $745 $762 $747 $802* Estimate based on available data at 30 June 2004SA WATER annual report 59

OPERATIONS OVERVIEW5 Year Statistical Comparison (continued)Wastewater 2000-01 2001-02 2002-03 2003-04 2004-05Adelaide metropolitan areaChokes in sewer mains per 100km of main 39 38 47 47 53Chokes in sewer mains per 1000 customers 6.0 5.9 7.2 7.2 8Chokes in property connections per 1000 customers 33 32 36 37 38.6Interruptions to service, mains & connections % restored in8 hrs (target >75%)Restoration of service, mains and connections (full loss of service)restored within 5 hours (target>75%)-revised performance standardRestoration of service, mains and connections (partial loss of service)restored within 18 hours (target>90%)- revised performance standard84% N/A N/A N/A N/A98% 98% 98% 99% 98%94% 92% 92% 99% 98%Wastewater overflows reported, % attended within 4 hours 100% 100% 100% 99% 100%Average treated wastewater BOD (activated sludge plants- Christies Beach, Glenelg, Port Adelaide) mg/L (target

OPERATIONS OVERVIEWOverseas travelNumber ofEmployeesDestination(s)1 United States1 United States1 United States / OtherReasonsPresent paper at conference and meet California WaterInfrastructure agenciesSpeaking at International Water Association’s LeadingEdge Conference - Strategic Asset Management OpeningWater Services Association of Australia’s Australian BestPractices WorkshopParticipate in Recycled Water Tour 05, visiting leadingrecycled water facilities (Singapore, Florida, Mexico andCalifornia). Attend the American Water Works AssociationAnnual Conference & ExpositionTotal cost toSA Water4 76123 50922 2031 United Kingdom Study of six UK water authorities 17 6632 United States Water Quality Technology Conference 7 2581 Morocco IWA Conference Marrakech 10 8831 United Kingdom WaterAid - UK 3392 India1 United StatesTo identify local water issues for which SA Water andthe State Government could offer practical support andestablish relationship with Rajasthan.Water Environment Research Foundation (WERF)‘Microbial Source Tracking Workshop’11 3723 1199 TOTAL 101 107**The total cost includes labour costs of $39 291, which previously was not recorded. In addition to the travel recorded above,there were a number of externally funded trips and one trip to New Zealand.Account payment performance 2004-05ParticularsNumber ofaccounts paid% of accountspaid (by number)Value in $A ofaccounts paid% of accountspaid (by value)Paid by due date 39 806 76.51% $313 604 255 80%Paid within 30 days or less from due date 7 617 14.64% $60 173 092 15%Paid more than 30 days from due date 4 606 8.85% $16 998 769 4%SA WATER annual report 61

EXTERNAL CONSULTANTSIn 2004-05, there were four consultancies withexpenditure less than $10 000. The total expenditurefor these consultancies was $27 000.Consultancies with expenditure between $10 000 and $50 000:Brief SummaryProvide advice in relation to the Jervois Water Supply ProjectPhone surveys of a randomly selected group of South Australian residents in relationto permanent water conservation measuresIndependent advice on the appropriate methodology to determine the optimal capitalstructure for SA WaterTreasury risk management reviewStrategic accommodation reviewEconomic analysis - Eyre Peninsula Water Supply SchemeFurther develop the roles & understanding of accounting and commercial management staffDevelopment of corporate telecommunications strategy and investment planRepresentation of the Clare region growers with respect to allocation of imported waterfor irrigation useReview of SA Water’s print copy devicesConsultancy FirmHDD-Consult.comMcGregor Tan ResearchDeloitte Touche TohmatsuDeloitte Touche TohmatsuHassell Pty LtdSA Centre for EconomicStudiesCentra ConsultingGibson QuaiRural Solutions SADocument ManagementProfessionalsThe total expenditure for these consultancies was $270 000.Consultancies with expenditure greater than $50 000:Brief SummaryBusiness continuity planning for business systemsProvide advice & assistance to SA Water in regard to the Bolivar Aquaculture ProjectSupport the definition, development and execution of the initial stage of a businesstransformation programConsultancy FirmMarsh Risk ConsultingErnst & YoungPA Consulting ServicesThe total expenditure for these consultancies was $1 087 000.The total expenditure on all consultancies by SA Waterduring the 2004-05 financial year was $1 384 000.62 SA WATER annual report

CONTRACTUAL ARRANGEMENTSThe following contracts exceeded $4 million in valueand one year in duration. This is an abridged versionof the full text, which can be found on the enclosedin breach of contract and thereby entitled SA Water toterminate the contract and take ownership and controlof the project.Water meter replacement contractActaris Pty Ltd (formerly SchlumbergerMeasurement & Systems Pty Ltd)Stage 1: commenced in July 1998 and ended in July2004. During July 2004, approximately 4900 new watermeters were delivered to SA Water for new servicesand replace damaged meters as part of a six-year,$22 million Stage 1 Meter Replacement Program toreplace 440 000 water meters across South Australia.Stage 2: commenced in September 2004 for the supplyof a major proportion of the water meters required aspart of the three-year, $8 million Meter ReplacementProgram Stage 2. From September 2004 to June 2005,approximately 41 500 water meters were delivered byActaris to SA Water for new services and to replacedamaged meters. Stage 2 will replace 150 000 meters.SA Water assessed its options and decided thatterminating the contract and assuming control overthe assets was the most commercially advantageoussolution. The process to terminate the contract was stillunder way at the time this report was being prepared.Information Technology ServicesEDS AustraliaUnder this nine-year whole-of-Government contractthe Corporation transferred its IT assets and supportstaff to the State’s contractor, EDS Australia Ltd, on5 July 1996. SA Water now acquires the majority of itsIT processing and networking requirements from EDSunder the State Government’s services contract. TheCorporation has received $207 000 in supplementationfrom Treasury and Finance to compensate for additionalcosts incurred as a result of the EDS contract.Wastewater treatment plant and re-usescheme at AldingaHenry Walker Environmental (HWE)Provision of treated water to the Adelaide Hills,Barossa Valley, Mid-North and River Murray townsRiverland Water Pty LtdThis plant serves the wastewater collection systemfor the Aldinga Beach and Port Willunga area. HWE,a subsidiary of the Henry Walker Group, completedthe successful design, construction and commissioningof the plant in July 1997 and had been operating theplant since that time. All reclaimed wastewater fromthe plant has been used by HWE for commercial andenvironmentally sustainable irrigation.Under the terms of the contract HWE was to havecontinued to operate the facility for 25 years. However,administrators were appointed to the Henry WalkerGroup of companies in February 2005. This placed HWEIn August 1996 the Water Treatment and EconomicDevelopment Agreement (WTEDA) was signed betweenthe then Minister responsible for State economicdevelopment, SA Water and Riverland Water Pty Ltd.Riverland Water has financed, designed, constructedand will operate and maintain for the period to 2025,a total of 10 water treatment plants. Ancillary worksby SA Water, totalling $24 million, for the distributionof filtered water into local water supply systems, werecompleted to support this project.SA WATER annual report 63

CONTRACTUAL ARRANGEMENTSRiverland Water is paying for significant capitalimprovements to 6 of the 10 Riverland plants, operatingall 10 plants to more stringent performance standardsand bearing the additional operating costs over theremainder of the contract (until 2025). Both RiverlandWater and United Utilities Australia will maintain theirhead offices in South Australia: Riverland Water until24 January 2025 and United Utilities until 30 June 2013.Adelaide ContractUnited Water InternationalUnited Water is to manage the operations andmaintenance of metropolitan Adelaide water andwastewater systems (including the delivery ofcapital works for rehabilitation and augmentation)for a period of 15.5 years from 1 January 1996,and to develop a world-class water industry.Ownership of the water and wastewaterinfrastructure (assets) remained with SA Waterwhich is also responsible for the collection ofall revenue from customers in accordance withthe rates determined by the South AustralianGovernment. All decisions related to customerservice standards and capital upgrading requirementsfor the assets are the prerogative of SA Water.In 2000, SA Water entered into a strategic alliancewith Kaz Technology Services to secure access tomodern software application methods, tools,techniques and skills at reduced cost. In 2002Cabinet approved the renewal of the alliance up to atotal contract value of $7.8 million. Up to the originalexpiry date of the contract on 31 January 2005 theexpenditure was $5.67 million, with an additional$234,000 being spent over the extension periodup to 30 April 2005. In September 2004, the SA WaterExecutive agreed to terminate the overall StrategicAlliance Agreement with Kaz and not to renew thecurrent support contract upon its expiry (extendedto 30 April 2005). The Strategic Alliance Agreementwas replaced in April 2005 by a support andmaintenance contract with Hewlett Packard thatcovers the CSIS application and all other RetailSystems applications of SA Water.Victor Harbor Wastewater Treatment PlantUU Victor Harbor Pty Ltd (UUVH)In February 2004, SA Water executed a build, own,operate and transfer contract with UUVH, for theconstruction and 20-year operation to 2025 of a newwastewater treatment plant and associated facilitiesfor the southern seaside town of Victor Harbor.The key objectives of this contract are:> Achievement of a significant reduction of coststhrough the introduction of efficiency improvementsin the provision of the services> Improvements in the quality of services to customers> Development of a viable, export-focused, vigorouswater industry in SA.IT Application Development andMaintenance ServicesKaz Technology Services(formerly Aspect Computing)The contract obligations on UUVH are specifiedmainly in terms of performance requirements,which apply principally to the quality of treatedwastewater produced, storage of treatedwastewater at Hindmarsh Valley reservoir andsurplus water discharge into the Inman River.The new WWTP will be at the forefront in Australiafor application of membrane filtration technology inmunicipal wastewater treatment. Knowledge transferto SA Water, particularly regarding the design, operationand maintenance of the membrane filtration process, isa stated objective.64 SA WATER annual report

FINANCIAL SUMMARYStatement of Financial PerformanceStatement of Financial PositionStatement of Cash Flows666768CD InformationThe information provided in this section is a briefsummary of SA Water’s full Financial Report. The fullaudited 2004-05 Financial Report - including notesreferred to in the following pages - is on the enclosedHard copies of the Financial Report are available,on request, from SA Water. Phone 1300 650 950.SA WATER annual report 65

STATEMENT OF FINANCIALPERFORMANCE[FOR THE YEAR ENDED 30 JUNE 2005]Note 2005 2004$’000 $’000Revenue from ordinary activities 2 775,854 722,365Expenses from ordinary activitiesSalaries and employee benefits expense 73,425 66,454Electricity expense 27,780 27,215Operational and service contracts 87,499 80,726Services and supplies 92,226 85,220Borrowing costs expense 3 80,907 78,577Depreciation and amortisation expense 3, 11 125,812 117,288Total expenses from ordinary activities 487,649 455,480Profit from ordinary activities before income tax expense 288,205 266,885Income tax expense relating to ordinary activities 4(a) (91,337) (87,544)Profit from ordinary activities after income tax expense 19 196,868 179,341Net increase in asset revaluation reserve 18 159,994 187,655Total valuation adjustments recognised directly in equity 159,994 187,655Total changes in equity other than those resulting from transactionswith the State Government as owner356,862 366,996The Statement of Financial Performance should be read in conjunction with the notes to the financial report66 SA WATER annual report

STATEMENT OF FINANCIAL POSITION[AS AT 30 JUNE 2005]Note 2005 2004$’000 $’000Current assetsCash assets 16(a) - 906Receivables 6 121,708 129,064Inventories 7 4,180 4,114Other 8 1,141 865Total current assets 127,029 134,949Non-current assetsOther financial assets 9 6,831 6,325Infrastructure, plant and equipment 11 6,859,325 6,671,214Deferred tax assets 4(d) 11,004 11,126Intangible assets 10 25,369 13,858Other 8 2,859 3,289Total non-current assets 6,905,388 6,705,812Total assets 7,032,417 6,840,761Current liabilitiesBank overdraft 16(a) 744 -Payables 12 67,648 75,891Interest-bearing liabilities 13 64,016 58,393Current tax liabilities 4(b) 31,707 30,217Provisions 14 9,237 11,026Other 15 1,255 1,812Total current liabilities 174,607 177,339Non-current liabilitiesPayables 12 1,222 1,159Interest-bearing liabilities 13 1,228,521 1,243,579Deferred tax liabilities 4(c) 71,496 64,409Provisions 14 20,909 20,286Other 15 497 497Total non-current liabilities 1,322,645 1,329,930Total liabilities 1,497,252 1,507,269Net assets 5,535,165 5,333,492EquityContributed equity 17 247,950 247,950Reserves 18 5,121,211 4,961,217Retained profits 19 166,004 124,325Total equity 5,535,165 5,333,492The Statement of Financial Position should be read in conjunction with the notes to the financial report.SA WATER annual report 67

STATEMENT OF CASH FLOWS[FOR THE YEAR ENDED 30 JUNE 2005]ConsolidatedNote 2005 2004$’000 $’000Cash flows from operating activitiesReceipts from customers 632,239 613,031Payments to suppliers and employees (315,282) (301,962)Receipts from Community Service Obligation funding 1(c) 104,800 100,196Receipts from contributions 25,456 21,675Interest received 59 171Borrowing costs paid (88,982) (88,658)Income tax paid 4(b) (82,638) (72,082)Net cash provided by operating activities 16(b) 275,652 272,371Cash flows from investing activitiesPayments for construction and purchase of infrastructure, plant and equipment (105,095) (174,016)Payments for intangible assets (10,861) (13,159)Proceeds from sale of infrastructure, plant and equipment 1,343 2,882Net cash used in investing activities (114,613) (184,293)Cash flows from financing activitiesProceeds from borrowings 484,500 598,800Repayment of borrowings (482,000) (523,000)Dividends paid (165,189) (164,110)Net cash used in financing activities (162,689) (88,310)Net (decrease) in cash held (1,650) (232)Cash at the beginning of the financial year 906 1,138Cash at the end of the financial year 16(a) (744) 906The Statement of Cash Flows should be read in conjunction with the notes to the financial report.68 SA WATER annual report

GLOSSARY AND ACRONYMSAWQCAustralian Water Quality CentrekLKilolitreCRCCooperative Research CentreLTIFRLost Time Injury Frequency RateCSOCommunity Service ObligationMDBCMurray Darling Basin CommissionDAAREDAISDWLBCE&WSEIPEMSEPAFTEGISGLDepartment for Aboriginal Affairsand ReconciliationDepartment for Administration andInformation ServicesDepartment of Water, Land andBiodiversity ConservationEngineering and Water Supply DepartmentEnvironment Improvement ProgramEnvironmental Management SystemEnvironment Protection AuthorityFull Time Equivalent (employee)Geographic Information SystemsGigalitreMLNHMRCOHS&WMegalitreNational Health and Medical Research CouncilOccupational Health, Safety and WelfareOHS&IM Occupational Health, Safety andInjury ManagementSCADATVERWIAWSAAWTPWWTPSupervisory Control, Automationand Data AcquisitionTargeted Voluntary Early Retirement PackageWater Industry AllianceWater Services Association of AustraliaWater Treatment PlantWastewater Treatment PlantNEW CD FORMATThis CD includes more detailedinformation to support thisAnnual Report, including:> Complete auditedfinancial statement> Our Charter> Employee information> 2005 Sustainability ReportWe have chosen this formatto reduce paper usage.If hard copies of this materialare required, please contact theSA Water Customer ContactCentre on 1300 650 950.

Head OfficeSA Water CorporationABN 69 336 525 01977 Grenfell Street, Adelaide SA 5000GPO Box 1751, Adelaide SA 5001Telephone 08 8204 1000www.sawater.com.auSA Water Customer Contact Centre1300 650 950Australian Water Quality CenterHodgson Road, Bolivar SA 5110Telephone 08 8259 0215ISBN 0-9757958-0-59 780975 795804ISSN 1832-8296 This report is printed on 100% recycled, Australian-made paper with vegetable-based inks. 4460_1105

FINANCIAL REPORTDirectors’ DeclarationIndependent Audit ReportStatement of Financial PerformanceStatement of Financial PositionStatement of Cash FlowsNotes To and Forming Part of the Financial Report234567SA WATER financial report

DIRECTORS’ DECLARATIONThe Directors’ of South Australian Water Corporation declare that:(a) The financial statements are in accordance with the accounts and records of the Corporation andgive an accurate indication of the financial transactions of the authority for the year then ended;(b) The financial statements have been prepared in accordance with the Statements of Accounting Concepts,Australian Accounting Standards, Urgent Issues Group Consensus Views and the Treasurer’s Instructionsissued pursuant to the Public Finance and Audit Act, 1987;(c) The financial statements and notes are drawn up so as to fairly present the Corporation’s state of affairsas at 30 June 2005 and its profit for the financial year ended on that date;(d) In the director’s opinion;(i) at the date of this statement, there are reasonable grounds to believe the Corporation will be ableto pay its debts as and when they become due and payable;(ii) internal controls over financial reporting have been effective throughout the reporting period.Signed in accordance with a resolution of the Board of Directors.P.W. PledgeChairmanA. HoweChief Executive5 September, 2005SA WATER financial report

Governmentof South AustraliaINDEPENDENT AUDIT REPORTTO THE CHAIRMANSOUTH AUSTRALIAN WATER CORPORATIONGovernmentof South AustraliaSCOPEAs required by section 31 of the Public Finance and Audit Act 1987 and subsection 32(4) of the Public CorporationsAct 1993, I have audited the financial report of the South Australian Water Corporation for the financial year ended30 June 2005. The financial report comprises:• A Statement of Financial Performance;• A Statement of Financial Position;• A Statement of Cash Flows;• Notes to and forming part of the Financial Statements;• Directors’ Declaration.The Directors of the South Australian Water Corporation are responsible for the financial report. I have conductedan independent audit of the financial report in order to express an opinion on it to the Chairman.The audit has been conducted in accordance with the requirements of the Public Finance and Audit Act 1987 andAustralian Auditing and Assurance Standards to provide reasonable assurance whether the financial report is freeof material misstatement.Audit procedures included examination, on a test basis, of evidence supporting the amounts and otherdisclosures in the financial report and the evaluation of accounting policies and significant accounting estimates.These procedures nave been undertaken to form an opinion whether, in all material respects, the financial reportis presented fairly in accordance with Treasurer’s Instructions promulgated under the provisions of the PublicFinance and Audit Act 1987, Accounting Standards and other mandatory professional reporting requirementsin Australia so as to present a view which is consistent with my understanding of the South Australian WaterCorporation’s financial position, the results of its operations and its cash flows.The audit opinion expressed in this report has been formed on the above basis.AUDIT OPINIONIn my opinion, the financial report presents fairly in accordance with the Treasurer’s Instructions promulgatedunder the provisions of the Public Finance and Audit Act 1987, applicable Accounting Standards and othermandatory professional reporting requirements in Australia, the financial position of the South AustralianWater Corporation as at 30 June 2005, the results of its operations and its cash flows for the year then ended.K I MacPhersonAUDITOR-GENERAL14 September 2005SA WATER financial report

STATEMENT OF FINANCIALPERFORMANCE[FOR THE YEAR ENDED 30 JUNE 2005]Note 2005 2004$’000 $’000Revenue from ordinary activities 2 775,854 722,365Expenses from ordinary activitiesSalaries and employee benefits expense 73,425 66,454Electricity expense 27,780 27,215Operational and service contracts 87,499 80,726Services and supplies 92,226 85,220Borrowing costs expense 3 80,907 78,577Depreciation and amortisation expense 3, 11 125,812 117,288Total expenses from ordinary activities 487,649 455,480Profit from ordinary activities before income tax expense 288,205 266,885Income tax expense relating to ordinary activities 4(a) (91,337) (87,544)Profit from ordinary activities after income tax expense 19 196,868 179,341Net increase in asset revaluation reserve 18 159,994 187,655Total valuation adjustments recognised directly in equity 159,994 187,655Total changes in equity other than those resulting from transactionswith the State Government as owner356,862 366,996The Statement of Financial Performance should be read in conjunction with the notes to the financial report.SA WATER financial report

STATEMENT OF FINANCIAL POSITION[AS AT 30 JUNE 2005]Note 2005 2004$’000 $’000Current assetsCash assets 16(a) - 906Receivables 6 121,708 129,064Inventories 7 4,180 4,114Other 8 1,141 865Total current assets 127,029 134,949Non-current assetsOther financial assets 9 6,831 6,325Infrastructure, plant and equipment 11 6,859,325 6,671,214Deferred tax assets 4(d) 11,004 11,126Intangible assets 10 25,369 13,858Other 8 2,859 3,289Total non-current assets 6,905,388 6,705,812Total assets 7,032,417 6,840,761Current liabilitiesBank overdraft 16(a) 744 -Payables 12 67,648 75,891Interest-bearing liabilities 13 64,016 58,393Current tax liabilities 4(b) 31,707 30,217Provisions 14 9,237 11,026Other 15 1,255 1,812Total current liabilities 174,607 177,339Non-current liabilitiesPayables 12 1,222 1,159Interest-bearing liabilities 13 1,228,521 1,243,579Deferred tax liabilities 4(c) 71,496 64,409Provisions 14 20,909 20,286Other 15 497 497Total non-current liabilities 1,322,645 1,329,930Total liabilities 1,497,252 1,507,269Net assets 5,535,165 5,333,492EquityContributed equity 17 247,950 247,950Reserves 18 5,121,211 4,961,217Retained profits 19 166,004 124,325Total equity 5,535,165 5,333,492The Statement of Financial Position should be read in conjunction with the notes to the financial report.SA WATER financial report

STATEMENT OF CASH FLOWS[FOR THE YEAR ENDED 30 JUNE 2005]Cash flows from operating activitiesConsolidatedNote 2005 2004$’000 $’000Receipts from customers 632,239 613,031Payments to suppliers and employees (315,282) (301,962)Receipts from Community Service Obligation funding 1(c) 104,800 100,196Receipts from contributions 25,456 21,675Interest received 59 171Borrowing costs paid (88,982) (88,658)Income tax paid 4(b) (82,638) (72,082)Net cash provided by operating activities 16(b) 275,652 272,371Cash flows from investing activitiesPayments for construction and purchase of infrastructure, plant and equipment (105,095) (174,016)Payments for intangible assets (10,861) (13,159)Proceeds from sale of infrastructure, plant and equipment 1,343 2,882Net cash used in investing activities (114,613) (184,293)Cash flows from financing activitiesProceeds from borrowings 484,500 598,800Repayment of borrowings (482,000) (523,000)Dividends paid (165,189) (164,110)Net cash used in financing activities (162,689) (88,310)Net (decrease) in cash held (1,650) (232)Cash at the beginning of the financial year 906 1,138Cash at the end of the financial year 16(a) (744) 906The Statement of Cash Flows should be read in conjunction with the notes to the financial report.SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]NOTE 1 STATEMENT OF SIGNIFICANTACCOUNTING POLICIESThe South Australian Water Corporation (SA Water orthe Corporation) was incorporated on 1 July 1995, asa state owned statutory Corporation pursuant to theSouth Australian Water Corporation Act 1994, to whichthe provisions of the Public Corporations Act 1993 apply.Property, rights, powers and liabilities of the Minister forGovernment Enterprises, arising from the operation ofthe Sewerage Act 1929 and the Waterworks Act 1932,were vested in the Corporation, with the exception ofcertain assets, mainly in relation to the operation of theIrrigation Act 1994.The significant policies which have been adopted in thepreparation of this financial report are:(a) Basis of PreparationThe financial report is a general purpose financial reportwhich has been prepared in accordance with AustralianAccounting Standards, Statements of Accounting Concepts,Urgent Issues Group (UIG) Consensus Views, otherauthoritative pronouncements of the Australian AccountingStandards Board and the Treasurer’s Instructions andAccounting Policy Statements issued pursuant to thePublic Finance and Audit Act 1987. Additionally, theCorporation has undertaken to prepare its financialreport in accordance with the Corporations Act 2001.The financial report has been prepared in accordance withthe historical cost convention, except for infrastructure,land, buildings and other non-current financial assetswhich are stated using fair value as detailed in note 1(e).(b) Change of Accounting Policy: Pensioner ConcessionsSA Water is responsible for the administration of LocalGovernment concession payments. The Corporation hasadopted a revised approach to accounting for PensionerConcessions in accordance with AAS 29 FinancialReporting by Government Departments. Refer to note1(w). Pensioner Concessions are separately disclosed inNote 33 as an administered item.(c) Principles of ConsolidationControlled EntitiesThe financial statements of the Corporation werepreviously prepared on a consolidated basis. Controlof the subsidiary entities Crichbee Pty Ltd, SA WaterInternational Pty Ltd and PT SA Water International PtyLtd has now ceased and the financial statements are nolonger prepared on a consolidated basis.Joint Venture OperationThe joint venture operation is jointly controlled bythe consolidated entity. The consolidated entity’sinterest in the joint venture operation is brought toaccount by including its proportionate share of jointventures’ assets, liabilities, expenses and revenues ona line-by line basis. See Note 24 for disclosure of theCorporation’s interest in the joint venture operation.(d) Revenue RecognitionRates and ChargesRates and other charges billed, but not yet received atbalance date, are recognised as revenue for the period.Water consumption recorded in unread meters as at30 June 2005 is not taken into account in determiningrevenue for the year ended 30 June 2005.Community Service Obligations (CSOs)The Corporation provides services to the communityon behalf of the Government at a lower thancommercial rate of return. The government providesfunding for CSOs in recognition of the non-commercialimpact of these services provided to the community.The main CSOs are for the pricing of country waterand wastewater services, the administration of thepensioner concession scheme and the provisionof water and wastewater concessions to exemptproperties, which include charities, churches and publicschools. A CSO has also been recognised to fund aCommunity Education Program to assist and encouragecustomers to adopt water conservation practices.SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]These amounts are recognised as revenue for the periodwhen advice is received from Government on the levelof funding.Contributed AssetsContributed assets principally arise from:(i) consumers who make a contribution where a serviceor connection has been requested which requiresconstruction of a new main; and(ii) subdividers who make contributions where either:a) water and sewerage infrastructures areconstructed by the subdivider within yet tobe completed subdivisions. The contributionrecognised is equivalent to the Corporation’sestimated cost of construction; orb) the Corporation constructs the infrastructure atthe subdivider’s request.Contributed assets and contributions to assist in theconstruction of assets are recognised as revenue at thefair value of the asset received when the Corporationgains control of the asset.Sale of Non-Current AssetsThe gross proceeds of non-current asset sales areincluded as revenue at the date control of the assetpasses to the buyer. The gain or loss on disposal iscalculated as the difference between the carryingamount of the asset at the time of the disposal and netproceeds from the sale.Recoverable WorksRevenue derived from the provision of services toexternal parties is recognised to the extent that it isprobable that the economic benefits will flow to theCorporation and the revenue can be reliably measured.(e) Non-Current Assets Infrastructure,Plant and EquipmentAcquisitionItems of infrastructure, plant and equipment are initiallyrecorded at cost, including capitalised borrowing costs,in accordance with AASB 1036 Borrowing Costs, andare depreciated as outlined below. Assets acquiredunder Build Own Operate Transfer (BOOT) Agreementsare brought to account when commissioned andaccounted for as outlined in Note 1(f).ValuationsTo comply with Treasury Accounting Policy StatementAPS 3 Valuation of Non-Current Assets and AASB 1041Revaluation of Non-Current Assets the Corporationhas adopted the fair value method for measuring andreporting land and buildings and infrastructure assets inthe Statement of Financial Position.To reflect the change in values, the Corporation annuallyrevalues its non-current assets at Directors’ valuationor independent valuation, with effect from 1 July eachyear. The Directors’ valuation is performed using theGeneral Cost Index (GCI) or current contract supplyrates. The CGI is calculated by the Corporation’s ChiefEstimator from supporting indices maintained by theAustralian Bureau of Statistics. The GCI is a calculationof the material and labour index for the constructionindustry in South Australia.Additionally, the Corporation’s valuation methodologiesfor all major classes of infrastructure assets are subjectto a triennial review by Hunter Water CorporationPty Ltd. The most recent independent review wascompleted in November 2004. The review concludedthat there was, in general, a good correlation betweenthe two organisations in terms of the methodologyused and the modern equivalent replacement assettypes adopted.SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Accordingly the Corporation has adopted the followingasset valuations:Infrastructure assetsThe fair value of an asset is determined by its writtendowncurrent cost. The Corporation determines thewritten-down current cost as the lower of reproductionor replacement cost. The cost of replacing orreproducing excess capacity or over-engineeringof the asset is excluded.Other assets and plant and equipmentOther assets, plant and equipment are brought toaccount at historical cost.DepreciationInfrastructure, buildings, plant and equipment and otherassets are depreciated using the straight-line methodover their estimated useful lives ranging from 5 to 160years. The useful lives of assets are reviewed annuallyand have been assessed as follows:To determine the fair value of infrastructure assets theCorporation has utilised the following methodologies:a) Water mains, water services, water meters, sewermains, sewer connections - Directors’ valuationspredominantly based on current contract rates.These rates are applied to the actual lengths ofpre-defined modern equivalent asset types.b) Water tanks were independently revalued byCurrie & Brown for the current financial year to30 June 2005.c) Other Infrastructure Assets – Directors’ valuationsbased on the current construction cost data. Theseassets are indexed in between comprehensivevaluations, using the GCI.The cost of infrastructure assets constructed by theCorporation includes all materials used in construction,direct labour, an appropriate proportion of variableand fixed overheads and contract payments. Interestis capitalised to capital works in progress using fundsborrowed generally at a weighted average capitalisationrate as outlined in Note 1(i).Land and buildingsLand is brought to account at market value usingvaluations provided from the State Valuer-General.Buildings were independently revalued by Adderly &Partners Pty Ltd, Currie & Brown, Rider Hunt, Terotechand State Valuer-General for the current financial year30 June 2005.The method of depreciation has regard to the underlyingnature of the assets and their expected use inoperations of the Corporation. Work in progress is notdepreciated until assets are completed and have beencommissioned for operation.Other Financial Assets2005 2004Water and sewer assets 7-160 yrs 7-160 yrsWater and sewerleased assets40-50 yrs 40-50 yrsBuildings 50 yrs 50 yrsOther 5-50 yrs 5-50 yrsPlant and equipment 5-15 yrs 5-15 yrsThe Corporation’s investment in non-voting class BShares as part of the BOOT arrangements for theVirginia Pipeline Scheme have been measured atfair value, in accordance with APS 3 Valuation ofNon-Current Assets and AASB 1041 Revaluationof Non-Current Assets (refer Note 9). Due to thenexus between the class B shares and the pipelineassets, the value of the shares has been determinedusing the written-down current cost of the pipelineassets in 2018 discounted to their net present value.SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]IntangiblesWater AllocationsThe Corporation has purchased a series of tradeablewater allocations during the 2004-05 financial year. Theallocations are accumulated onto a single licence issuedby the South Australian Government.Water allocations are measured at cost on the date ofacquisition. Subsequent to initial recognition, they willbe measured at fair value with reference to the currentmarket price. The water allocations have an indefiniteuseful life and as such, are not subject to amortisation.(f) LeasesLeases are classified at their inception as eitheroperating or finance leases based on the economicsubstance of the agreement so as to reflect the risksand benefits incidental to ownership.Operating LeasesMinimum lease payments of operating leases, wherethe lessor effectively retains substantially all of therisks and benefits of ownership of the leased items,are recognised as an expense in the Statement ofFinancial Performance. Payments are made in equalinstalments over the accounting periods covered by thelease term, except where an alternative basis is morerepresentative of the pattern of benefits to be derivedfrom the leased property.Finance LeasesLeases for infrastructure assets, where substantiallyall the risks and benefits incidental to ownership of theasset, but not the legal ownership, are assumed by theCorporation, are classified as finance leases. Financeleases are capitalised and depreciated over the usefullife of the asset in accordance with AASB 1008 Leasesand the Corporation obtains ownership of the asset atthe end of the lease term.The Corporation has entered into BOOT agreementsfor a number of infrastructure facilities. These BOOTagreements include the requirement for an ongoingavailability tariff, as escalated over time by certainindices, for the term of the agreement.BOOT agreements have been classified as financeleases, with a lease asset and lease liability beingrecognised upon commissioning of the underlying asset(refer Note 11). The lease asset is brought to account atthe fair value of the underlying assets constructed. Theequivalent liability is recognised at the present valueof the future availability charges. These have beendetermined at the inception of the lease and do not takeaccount of any future estimated escalation.Variation between the availability charges determinedat the inception of the lease and the actual availabilitycharges are brought to account as contingent rentalsin accordance with AASB 1008 Leases. Availabilitycharges are allocated between interest expense and areduction in the lease liability, with the interest expensecalculated using the interest rate implicit in the leaseand charged directly to the Statement of FinancialPerformance.(g) InvestmentsAs at 30 June 2005, the Corporation no longer has acontrolling interest in its subsidiaries (Crichbee PtyLtd, SA Water International Pty Ltd and PT SA WaterInternational). The subsidiaries were in liquidation as atbalance date.(h) Expenditure on Behalf of State GovernmentCertain expenditure is incurred from time to time whichis considered to be outside the normal course of theCorporation’s business and for which no recovery ismade or reimbursement received. These payments aremade on behalf of the South Australian Government andare disclosed in Note 3.10 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005](i) TaxesTaxation EquivalentsThe Corporation is subject to the payment of incometax equivalents, land tax equivalents and council rateequivalents. From 1 July 2001, the Corporation hasoperated under the National Tax Equivalent Regime(NTER) pursuant to the Memorandum of Understandingon NTER between the Commonwealth of Australia,the Commissioner of Taxation and all of the States andTerritories. The NTER is administered by the AustralianTaxation Office.The Corporation has adopted the liability method of taxeffect accounting for income tax equivalents, wherebyincome tax is regarded as an expense and is calculatedon the accounting profit after allowing for permanentdifferences. To the extent timing differences occurbetween the time items are recognised in accountingprofit and when items are taken into account indetermining taxable income, the net taxation benefit orliability, calculated at current rates, is carried forward inthe Statement of Financial Position as a future incometax benefit or a provision for deferred income tax.Future income tax benefits relating to timing differencesare not brought to account unless realisation of theasset is assured beyond reasonable doubt.Receivables and payables are stated with the amount ofGST included. The net amount of GST recoverable from,or payable to, the ATO is included as part of receivablesor payables in the Statement of Financial Position.Cash flows are included in the Statement of CashFlows on a gross basis and the GST component ofcash flows arising from investing activities, which isrecoverable from or payable to the ATO, is classified asan operating cash flow in accordance with UIG Abstract31 Accounting for the Goods and Services Tax (GST).(j) Borrowing CostsBorrowing costs include interest, amortisation ofdiscounts or premiums relating to borrowings andfinance lease charges.Borrowing costs are expensed as incurred unlessthey relate to the construction of a qualifying asset.Qualifying assets are assets which take more than 12months to complete. In these circumstances, borrowingcosts are capitalised to the cost of the assets.Interest was capitalised to capital works in progressusing funds borrowed generally at a weighted averagecapitalisation rate of 6.32% (2004: 6.26%) (Note 1(e)).The charge for land tax and council rate equivalentshas been calculated by Revenue SA – Department ofTreasury and Finance, based on valuations supplied bythe Valuer-General.Goods and Services TaxRevenue, expenses and assets are recognised net ofthe amount of Goods and Services Tax (GST), exceptwhere the amount of GST incurred is not recoverablefrom the Australian Taxation Office (ATO). In thesecircumstances, the GST is recognised as a part of thecost of acquisition of the asset or as part of an itemof expense.(k) CashCash on hand and at bank is stated at nominal value.For the purposes of the Statement of Cash Flows,cash includes cash on hand, at bank and overdraft.(l) ReceivablesReceivables for rates and charges are normally settledwithin 21 days, with sundry debtors settled within30 days. These are recognised in the accounts at amountsdue. An allowance for doubtful debts is established basedon a review of outstanding amounts at balance date. Baddebts are written off when they are identified.SA WATER financial report11

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005](m) InventoriesInventory is valued on a weighted average cost basis.Costs have been assigned to inventory manufacturedby the Corporation, including work in progress, on afull absorption cost basis. Inventories are valued at thelower of cost and net realisable value.Inventories are held for purposes of maintenance andconstruction and not for resale.(n) Employee BenefitsWages, Salaries, Annual Leave and Sick LeaveLiabilities for wages, salaries and annual leave aremeasured and recognised at undiscounted amountsbased on remuneration rates that the Corporationexpects to pay when the liability is settled. The relatedon-costs for annual leave have been recognised in theStatement of Financial Position as payables.No provision is made for sick leave as entitlements donot vest and it is considered that sick leave is takenfrom the current year’s accrual.Long Service LeaveLiabilities arising in respect of long service leaveexpected to be settled within twelve months of balancedate are measured at their nominal rates. All other longservice leave entitlements are measured as the presentvalue of expected future payments to be made in respectof services provided by employees up to the reportingdate. Consideration is given to anticipated future wageand salary levels, experience of employee departuresand periods of service. Expected future payments arediscounted using interest rates on negotiable governmentguaranteed securities with terms of maturity thatmatch, as closely as possible, the estimated future cashflows. The related on-costs have been recognised in theStatement of Financial Position as payables.The Corporation’s long service leave liability is valuedby Mr. C. Papanicolas BSc, (Ma) (Hons), ASIA, FIAA ofProfessional Financial Consulting Pty Ltd.SuperannuationContributions are made by the Corporation to severalsuperannuation schemes operated by the StateGovernment. These contributions are treated as anexpense when they occur. There is no liability forpayments to beneficiaries as they have been assumedby the superannuation schemes. The only liabilityoutstanding at balance date relates to any contributiondue but not yet paid to the superannuation schemes.(o) Workers CompensationThe Corporation is registered with WorkCover as anexempt employer and is responsible for paymentof workers compensation claims. The Corporationestablishes a provision for any claims arising under theWorkers Rehabilitation and Compensation Act, 1986and the repealed Workers Compensation Act, 1971outstanding at year-end. The Corporation’s outstandingclaims liability is valued by Mr. L. Brett BSc FIA, FIAA ofBrett & Watson Pty Ltd.(p) InsuranceThe South Australian Government Captive InsuranceCorporation (SAICORP) has assumed responsibilityand liability for, and will indemnify SA Water against,damage suffered to the Corporation’s property orclaims made against the Corporation and/or theSouth Australian Government. In addition, insurancearrangements are in place for construction works,travel insurance and Directors’ and Officers’ liability.Workers compensation risks for which the Corporationis responsible are excluded from these arrangements.12 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005](q) PayablesLiabilities, whether or not billed to the Corporation, arerecognised at amounts to be paid in the future for goodsand services received, including any related GST. Tradeaccounts payable are normally settled within 30 days.Dividends payable are recognised in the reportingperiod in which the dividends are declared or have beenspecifically determined and approved in consultationwith the Treasurer and the Corporation’s Minister.(r) ProvisionsProvisions are recognised when the Corporation has alegal, equitable or constructive obligation to make futuresacrifice of economic benefits to a third party as a resultof past transactions or other past events. The amountis recognised in the Statement of Financial Positionwhen it is probable that a future sacrifice of economicbenefits will be required to settle the obligation and thetiming or amount is significantly uncertain.Where the effect is material, a provision is determinedby discounting the expected future cash flows requiredto settle the obligation using interest rates on negotiablegovernment guarantee securities with terms of maturitythat match, as closely as possible, the estimated futurecash flows.Removal of Bio-solidsA provision is recognised for the disposal andmanagement of a prior accumulation of bio-solidproducts resulting from the operation of the BolivarWastewater Treatment Plant.The Corporation has a present obligation under theEnvironmental Protection Act (EPA) Act to ensureno harm is caused to the environment. The removalof bio-solids is administered in accordance with the1996 Bio-solids Guidelines issued by the EPA.Estimated future cash flows are based on theprocessing and administration costs associated with thepreparation and loading of bio-solids from the stockpilefor disposal offsite. These costs have been determinedbased on current costs, current legal requirements andcurrent technology.Significant uncertainties exist as to the amount andtiming of expected future obligations required to settlethe obligation due to the uncertainty as to the quantityof bio-solids expected to be disposed off-site and theimpact of changes in environmental legislation andtechnology.Damages and ClaimsA provision is recognised for claims against theCorporation relating to property damage, personalinjury and civil liability.The amounts measured and recorded for claimsare based on estimates of specified claims and theprobability that the Corporation will be required to settlethe obligation. Previous claims history and Crown Lawadvice are used in the determination of the liability.Asset Disposal & Site RehabilitationA provision for the disposal and abandonment of assetsis recognised when there is a present obligation toundertake further work to decommission surplus assetsand ensure they are safe to the public and do not causeharm to the environment.The estimated costs of decommissioning non-currentassets are based on past experience and current marketprices. Obligations associated with the retirement ordisposal of long lived assets are excluded from thescope of AASB 1044 Provisions, Contingent Liabilitiesand Contingent Assets.SA WATER financial report13

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005](s) CommoditiesThe Corporation’s exposure to commodities is managedthrough a natural hedge. This exposure is monitored,and if any conditions arise that changes the exposureprofile of commodity prices, appropriate hedgetransactions will be entered into.(t) Interest Bearing LiabilitiesAll loans are measured at the principal amount.Short-term borrowings are carried in the Statementof Financial Position at their face value. Long-termborrowings are valued at their historical yield. Interestexpense is accrued at the contracted rates on a dailybasis and includes costs incurred in restructuringborrowings. The Government provides a guarantee inrespect of these borrowings pursuant to the provisionsof the Public Finance and Audit Act, 1987.(u) DerivativesThe Corporation manages exposures to changes ininterest rates, foreign exchange rates and commodityprices as per the Board approved Treasury RiskManagement Policy. Derivative financial instruments asapproved by the Board are used by the Corporation toimplement strategies for the management of the debtportfolio, or the hedge of specific debt.To assist in managing these exposures, the followingderivative financial instruments are utilised from timeto time to hedge the exposure.Interest Rate SwapsInterest payments and receipts under interest rate swaps arerecognised on an accrual basis in the Statement of FinancialPerformance as an adjustment to interest expense. Gains orlosses on early termination of the swap transaction will berecognised immediately as an adjustment to interest expensein the Statement of Financial Performance. Only if the swaptransaction is designated specifically to an underlying line ofdebt will gains or losses on early termination be deferred andamortised over the life of the debt.Forward Rate AgreementsAny realised gains or losses on forward rate agreementsare recognised immediately in the Statement ofFinancial Performance as an adjustment to interestexpense during the period in which settlement occurs.Only if the agreement is designated specifically to anunderlying line of debt will gains or losses be deferredand amortised over the life of the debt.(v) Segment ReportingSegment results, assets and liabilities include itemsdirectly attributable to a segment as well as those that canbe allocated on a reasonable basis. Unallocated assetsand liabilities mainly comprise tax assets, borrowings, taxliabilities and corporate assets and liabilities that cannot beallocated to segments on a reasonable basis.Segment capital expenditure is the total cost recognisedduring the period to acquire and construct segmentassets that are expected to be used for more than oneannual reporting period.(w) Administered ItemsDuring the reporting period the Corporation wasresponsible for administering the Save the River MurrayLevy. The River Murray Levy billed and collectedon behalf of Government is not controlled by theCorporation and the administered item is not recognisedin the Statement of Financial Performance, Statement ofFinancial Position and Statement of Cash Flows, but isseparately disclosed in Note 33 as an administered item.14 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]SA Water is responsible for the administration of LocalGovernment concession payments. An amount isreceived from SA Government which is used to makepayments to Local Government Councils. The amountcollected on behalf of Government is not controlled by theCorporation and the administered item is not recognisedin the Statement of Financial Performance, Statement ofFinancial Position and Statement of Cash Flows, but isseparately disclosed in Note 33 as an administered item.(x) Impact of Adopting Australian Equivalents toInternational Financial Reporting StandardsAustralia will be adopting Australian equivalents toInternational Financial Reporting Standards (IFRS) forreporting periods commencing on or after 1 January2005. SA Water Corporation (the Corporation) willadopt these standards for the first time in the publishedfinancial report for the year ended 30 June 2006.It should be noted that the figures disclosed aremanagement’s current and best assessment of theimpact of IFRS as at the date of preparing the 30 June2005 financial report. The actual effects on transitionto IFRS may differ due to (a) ongoing work beingundertaken by the IFRS project team; (b) potentialamendments to IFRSs and Interpretations thereofbeing issued by the standard-setters and InternationalFinancial Reporting Interpretations Committee (IFRIC);and (c) emerging accepted practice in the interpretationand application of IFRS and UIG Interpretations.The Corporation is in the process of transitioning itsaccounting policies and financial reporting from currentAustralian Accounting Standards (AGAAP) to Australianequivalents of International Financial Reporting Standards(IFRS) which will be applicable for the financial yearended 30 June 2006. In 04-05 the Corporation allocatedinternal resources to review IFRS and identify key areasthat would be impacted by the transition to IFRS. As aresult, SA Water established a project team to addresseach of the areas identified for review.Set out below are the key areas where accountingpolicies are expected to change on adoption ofIFRS and our best estimate of the quantitativeimpact of the changes on total equity as at thedate of transition and 30 June 2005 and on netprofit for the year ended 30 June 2005.SA WATER financial report15

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Reconciliation of equity as presented under AGAAP to that under IFRS 30 June 2005** 1 July 2004*$’000 $’000Total equity under AGAAP 5,535,165 5,333,492Adjustments to retained earningsRecognise taxation implications of AASB 112 a (11,624) (17,501)Derecognise capitalised interest in accordance with AASB 123 # b (22,922) (18,466)Derecognise provision balances in accordance with AASB 137# c 596 596(33,950) (35,371)Adjustments to other reservesTax effect of revaluation of assets a (436,950) (402,997)Derecognise capitalised interest on revalued assets b - 4,647(436,950) (398,350)Total equity under IFRS 5,064,265 4,899,771* this column represents the adjustments as at the date of transition to IFRS.**this column represents the cumulative adjustments as at the date of transition to IFRS and those for the year ended 30 June 2005.# net of tax16 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Reconciliation of equity as presented underAGAAP to that under IFRSa. Under AASB112 Income Taxes requires theCorporation to use a balance sheet liability method,rather than the current income statement methodwhich recognises deferred tax balances where thereis a difference between the carrying value of an assetor liability and its tax base. This would result in therecognition of a deferred tax liability in relation to therevalued assets. Under AGAAP, the tax effects of assetrevaluations are not recognised.b. Under AASB123 Borrowing Costs the Corporationis required to elect to capitalise or expense interest. Inline with the Department of Treasury and Finance’spreference as stated within the Accounting PolicyStatements, the Corporation has elected to expenseborrowing costs.c. According to AASB137 Provisions, ContingentLiabilities and Contingent Assets the Corporation mustonly recognise provisions that are supported by a legalor constructive obligation. The provision for abandonedassets and others have been assessed as having nospecific legal or constructive obligation and have beenderecognised on this basis.d. Under AASB 136 Impairment of Assets, if thereis an indication that assets may be impaired as atthe date of transition the Corporation is required toestimate the recoverable amount of assets which isdetermined as the higher of its selling price and valuein use. If the carrying amount of the asset exceeds itsrecoverable amount, the Corporation must write downthe carrying amount of the assets to its recoverableamount. Any resulting adjustment shall be recogniseddirectly in retained earnings. SA Water’s currentaccounting policy is to determine the recoverableamount of an asset on the basis of discounted cashflows. The Corporation’s assets have been testedagainst the impairment triggers on transition under theassumption of consisting of two cash generating units.The Corporation has subsequently been tested at the30 June 2005 reporting date and no impairment losseshave been identified under IFRS. Any future impairmentlosses will be recognised in the income statement.e. Management has decided to apply the exemptionprovided in AASB 1 First-time Adoption of AustralianEquivalents to International Financial ReportingStandards which permits entities not to apply therequirements of AASB 132 Financial Instruments:Presentation and Disclosure and AASB 139 FinancialInstruments: Recognition and Measurement for thefinancial year ended 30 June 2005. These standardswill be applied from 1 July 2005 and not from the dateof transition. Accordingly there are no quantitativeimpacts on the 30 June 2005 financial statements.Reconciliation of net profit under AGAAP to thatunder IFRS for the year ended 30 June 200530 June 2005$’000Net profit as reported under AGAAP 196,868Adjustment for capitalised interest (6,365)Adjustment to income tax expenseCapitalised interest 1,910Depreciation on revalued assets 5,654Recognise pre NTER contributed assets 374Recognise temporary difference on VPS (152)Net profit as calculated under IFRS 198,289Restated IFRS Statement of Cash Flows for the yearended 30 June 2005No material impacts are expected to the cash flowspresented under AGAAP on adoption of IFRS.SA WATER financial report17

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 2Revenue from ordinary activities 2005 2004$’000 $’000Revenue from operating activitiesRates and charges 530,429 510,311Community service obligations 103,440 101,556Contributed assets 72,140 45,262Recoverable works 48,562 42,864Fees and charges 16,872 15,885Miscellaneous 1,201 1,857772,644 717,735Revenue from outside operating activitiesGross proceeds from sale of infrastructure, plant & equipment 1,408 2,882Interest received 118 53Rents 1,178 1,227Revaluation of investment in unlisted shares 506 4683,210 4,630Total revenue from ordinary activities 775,854 722,36518 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 3Profit from ordinary activities before income tax expense 2005 2004$’000 $’000Profit from ordinary activities before income tax expense has been arrived at after charging/(crediting) the following items:Depreciation:Infrastructure assets - Water 74,957 70,162Infrastructure assets - Sewer 37,955 36,549Buildings 807 491Other 9,283 7,733Plant and equipment 2,810 2,295Amortisation:Water licences - 58125,812 117,288Borrowing costs:Interest expense 74,737 72,592Finance charges on capitalised leases 12,536 12,763Less: Capitalised borrowing costs (6,366) (6,778)80,907 78,577Finance lease contingent rentals 1,894 1,438Operating lease rental expense 3,096 3,030Net bad and doubtful debts expense including movements inallowance for doubtful debts(22) (25)Net gain/(loss) on disposal of infrastructure, plant and equipment 368 26Write off in value of Infrastructure, plant and equipment 524 4Write off in value of capital works in progress 597 79Write off in value of preliminary investigations - 200Write off in investment in controlled entities - 402Write off loan to controlled entities - 7Expenditure on behalf of State Government:Water Industry Best Practice Program 518 119Cooperative Research Centre 150 150668 269SA WATER financial report19

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 4Income tax 2005 2004a) Income tax expense$’000 $’000The difference between income tax expense provided in the financial report and the prima facieincome tax expense is reconciled as follows:Operating profit 288,205 266,885Prima facie income tax expense calculated at 30% (2004: 30%) 86,462 80,066add/(deduct) Tax-effect of permanent differences:Non-deductible accounting depreciation on revalued assets 5,392 4,038Non-deductible accounting depreciation on contributedassets374 374Non-deductible amortisation on intangible assets - 17Net gain on sale of land and buildings 31 48Non-deductible amortisation on leased assets 43 21Write-down of loan to controlled entities - (37)Write-down of investments in controlled entities - (121)Upward revaluation of investment in unlisted shares (152) (141)Net write up infrastructure, plant & equipment 230 -Additional deduction for research and developmentexpenditure(358) (221)92,022 84,286Amounts under/(over) provided in prior years (685) 3,258Income tax expense attributable to operating profit 91,337 87,544The income tax expense comprises movements in:Provision for income tax 84,819 76,288Provision for deferred income tax* 7,086 8,618Future income tax benefit* 117 (620)Amounts under/(over) provided in prior year (685) 3,25891,337 87,544* This has been calculated at the current company tax rate of 30% (2004: 30%)20 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 4 (Continued)Income tax 2005 2004$’000 $’000b) Current tax liabilitiesProvision for current income taxMovements during the year were as follows:Balance at beginning of year 30,217 30,219Income tax paid (82,638) (72,082)Current years income tax provision 84,819 76,288Amounts (over)/under provided in prior year (691) (4,208)31,707 30,217c) Deferred tax liabilitiesProvision for deferred income taxProvision for deferred income tax comprises the estimated at the applicable rate of30% (2004: 30%) on the following items:Prepayments 156 161Prepaid futures contract - 42Interest receivable 18 -Difference in depreciation of infrastructure assets foraccounting and income tax purposes.71,322 64,20671,496 64,409d) Deferred tax assetsFuture income tax benefitFuture income tax benefit comprises the estimated future at the applicable rate of30% (2004: 30%) on the following items:ProvisionsEmployee benefits 8,024 7,921Damages and claims 177 240Removal of biosolids 339 501Site rehabilitation 174 47Asset disposal - 322Allowance for obsolete stock 171 152Allowance for bad debts 49 72Sundry items 156 122Capitalised finance leases 1,914 1,74911,004 11,126SA WATER financial report21

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 5Note 5 segment reporting Metro Water Country Water Metro SewerBusiness segments 2005 2004 2005 2004 2005 2004Revenue$’000 $’000 $’000 $’000 $’000 $’000Rates and charges 195,643 193,672 92,650 84,578 217,857 209,173Community service obligations 2,083 2,584 76,233 74,582 7,568 7,804Contributed assets 21,077 12,282 17,906 7,524 26,487 21,520Other revenue 10,930 11,960 6,665 8,108 8,364 7,035Total segment revenue 229,733 220,498 193,454 174,792 260,276 245,532Unallocated interest revenueTotal revenue from ordinary activitiesResultSegment result 104,394 101,355 70,588 60,246 157,558 149,901Unallocated interest expense net ofunallocated interest revenueProfit from ordinary activities before income taxIncome tax expenseProfit from ordinary activities after income taxAssetsSegment assets 2,161,657 2,102,797 2,258,680 2,314,522 2,152,947 1,977,651Unallocated corporate assetsTotal assetsLiabilitiesSegment liabilities 24,215 21,243 133,730 138,715 24,992 27,403Unallocated corporate liabilitiesTotal liabilitiesOther segment information:Acquisition and construction of noncurrentassets30,507 42,989 29,680 43,449 26,268 73,234Depreciation and amortisation 40,208 37,706 43,568 39,708 35,704 34,124Non cash expenses other thandepreciation and amortisation(703) 397 1,684 542 (274) (21)22 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 5 (Continued)Country Sewer Other Total Total2005 2004 2005 2004 2005 2004$’000 $’000 $’000 $’000 $’000 $’00024,279 22,888 - - 530,429 510,31117,039 16,019 517 567 103,440 101,5566,670 3,936 - - 72,140 45,2621,349 1,496 42,419 36,584 69,727 65,18349,337 44,339 42,936 37,669 775,736 722,830118 53775,854 722,36527,455 23,941 (3,537) (2,799) 356,458 332,644(68,253) (65,759)288,205 266,885(91,337) (87,544)196,868 179,341424,905 407,474 18,585 807 7,016,774 6,814,25115,643 26,5107,032,417 6,840,7616,806 5,557 10,156 877 199,899 201,7951,297,353 1,305,4741,497,252 1,507,26913,548 11,102 16,059 16,581 116,062 187,3556,332 5,750 - - 125,812 117,28866 135 71 18 844 1,071Business segmentsThe consolidated entity comprises thefollowing main business segments basedon the consolidated entity’s managementreporting system:Metropolitan Water - Manage, operateand maintain metropolitan water filtrationplants and pipelines that deliver water tocustomers.Country Water - Manage, operate andmaintain country reservoirs, pipelines andwater filtration plants delivering peak andoff-peak water to customers.Metropolitan Sewer - Manage, operateand maintain metropolitan wastewatertreatment plants and pipelines thatremove wastewater from customerproperties.Country Sewer - Manage, operate andmaintain country wastewater treatmentplants and pipelines that removewastewater from customer properties.Other - Revenue and expensesassociated with the Murray Darling BasinCommission, the Australian Water QualityCentre, engineering workshops and waterindustry business development.SA WATER financial report23

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 6Receivables Note 2005 2004$’000 $’000CurrentCommunity service obligations 83,357 84,717Rates receivable (water and wastewater) 19,649 19,700Allowance for doubtful debts (100) (100)19,549 19,600Sundry debtors 18,864 16,333Allowance for doubtful debts (62) (140)18,802 16,193Minister for Government Enterprises - Irrigation 31 - 8,554121,708 129,064Note 7InventoriesRaw materials and stores 3,809 3,560Allowance for slow moving and obsolete inventory (571) (507)3,238 3,053Work in Progress - Sundry Debtors 942 10614,180 4,114Note 8Other assetsCurrentPrepayments 1,082 865Interest receivable 59 -1,141 865Non-CurrentPreliminary investigations 2,859 3,2892,859 3,28924 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 9Other financial assets 2005 2004$’000 $’000Non-CurrentOther CorporationsUnlisted shares at fair value 6,831 6,3256,831 6,325The Corporation was a participant to the funding arrangements for the Virginia Pipeline Scheme(VPS). Its involvement in this scheme will result in an option at the end of the contract to acquirethe scheme. The scheme distributes “Class A” reclaimed water from the Bolivar wastewatertreatment plant throughout the Virginia region for irrigation of seasonal crops and fixed plantings.As part of the arrangement, the Corporation made advances to the operating Company of VPS,Water Reticulation Systems (Virginia) Pty Ltd (WRS), a subsidiary of Euratech Limited. Advancesto WRS were converted to non-voting B Class shares, issued at a price of $1 per share.Note 10Intangible assetsWater allocations - at cost 25,369 13,85825,369 13,858SA WATER financial report25

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 11Infrastructure, plant and equipment 2005 2004$’000 $’000Infrastructure assets - WaterWater infrastructure 6,922,188 6,591,190Accumulated depreciation (3,000,708) (2,747,005)3,921,480 3,844,185Leased water infrastructure 133,563 124,327Accumulated depreciation (17,616) (14,136)115,947 110,191Infrastructure assets - SewerSewer infrastructure 3,459,761 3,247,843Accumulated depreciation (1,180,046) (1,076,289)2,279,715 2,171,554Leased sewer infrastructure 3,571 3,469Accumulated depreciation (640) (595)2,931 2,874Land and buildingsLand 226,748 187,836Buildings 36,805 25,773Accumulated depreciation (21,543) (4,664)15,262 21,109Other 99,237 94,185Accumulated depreciation (60,064) (48,509)39,173 45,676Plant and equipment 37,654 35,549Accumulated depreciation (19,211) (19,788)18,443 15,761Capital works in progress 239,626 272,028Total infrastructure, plant and equipment 6,859,325 6,671,21426 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 11 (Continued)Infrastructure, plant and equipment 2005 2004ReconciliationsReconciliations of the carrying amounts for each class ofinfrastructure, plant and equipment are set out below:$’000 $’000Water InfrastructureCarrying amount at beginning of year 3,844,186 3,683,492Additions 60,451 65,150Depreciation (72,230) (67,675)Write down (372) -Transfer to other assets - (71)Net revaluation increment 89,446 163,289Carrying amount at end of year 3,921,480 3,844,185Leased Water InfrastructureCarrying amount at beginning of year 110,191 109,621Additions 5,576 -Depreciation (2,727) (2,487)Net revaluation increment 2,907 3,057Carrying amount at end of year 115,947 110,191Sewer InfrastructureCarrying amount at beginning of year 2,171,555 2,144,989Additions 110,534 39,461Depreciation (37,865) (36,462)Net revaluation increment 35,492 23,566Carrying amount at end of year 2,279,715 2,171,554Leased Sewer InfrastructureCarrying amount at beginning of year 2,874 2,878Depreciation (90) (87)Net revaluation increment 147 83Carrying amount at end of year 2,931 2,874SA WATER financial report27

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 11 (Continued)Infrastructure, plant and equipment 2005 2004$’000 $’000LandCarrying amount at beginning of year 187,836 191,299Additions 2,237 516Disposals (508) (798)Net revaluation (decrement)/increment 37,183 (3,181)Carrying amount at end of year 226,748 187,836BuildingsCarrying amount at beginning of year 21,109 20,438Additions 984 1,641Depreciation (807) (491)Disposals 7 (773)Net revaluation increment (6,031) 294Carrying amount at end of year 15,262 21,109OtherCarrying amount at beginning of year 45,676 39,702Additions 1,937 13,946Depreciation (9,283) (7,733)Disposals - (853)Net revaluation increment 850 547Asset value write-down (7) (4)Transfer from water assets - 71Carrying amount at end of year 39,173 45,676Plant and EquipmentCarrying amount at beginning of year 15,761 13,879Additions 5,986 4,577Depreciation (2,810) (2,295)Disposals (349) (400)Asset value write-down (145) -Carrying amount at end of year 18,443 15,76128 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 11 (Continued)Infrastructure, plant and equipment 2005 2004$’000 $’000Capital works in progressBalance at beginning of year 272,028 197,935Additions 120,977 186,450Transfers (152,782) (112,278)Write down (597) (79)Closing balance at end of year 239,626 272,028Total infrastructure, plant and equipment 6,859,325 6,671,214SA WATER financial report29

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 12Payables Note 2005 2004$’000 $’000CurrentTrade creditors 42,099 40,101Interest payable 11,765 11,327Dividends payable - 10,000Other creditors 13,784 14,46367,648 75,891Non-CurrentOther creditors 1,222 1,1591,222 1,159Note 13Interest bearing liabilities Note 2005 2004CurrentShort term borrowings 58,688 56,188Lease liability 21 5,328 2,20564,016 58,393The Corporation has a $75 million short term borrowing facility with the Department of Treasuryand Finance bearing interest at the daily cash rate charged by the South Australian GovernmentFinancing Authority.Non-CurrentLong term borrowings 1,120,678 1,130,408Lease liability 21 107,843 113,1711,228,521 1,243,579The Corporation has a fully utilised long term borrowing facility with the Department of Treasuryand Finance. The loan is denominated in Australian dollars and carries both fixed and floatinginterest rates.30 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 14Provisions Note 2005 2004$’000 $’000CurrentEmployee benefits 23 7,268 7,988Asset disposal 245 735Workers compensation 23 667 846Damages and claims 591 799Removal of biosolids 466 500Site rehabilitation - 1589,237 11,026Non-CurrentEmployee benefits 23 17,238 16,239Workers compensation 23 2,668 2,540Removal of biosolids 666 1,170Asset disposal 337 33720,909 20,286ReconciliationsReconciliations of the carrying amounts of each class of provision, except for employee benefits,asset disposal and site rehabilitation, are set out below:Removal of Biosolids - currentCarrying amount at the beginning of the year 500 488Payments made during the year (383) (424)Transfer from non-current provision 395 500Re-measurement adjustments (46) (64)Carrying amount at end of year 466 500Removal of Biosolids - non-currentCarrying amount at the beginning of the year 1,170 1,526Transfer to current provision (395) (500)Re-measurement adjustments (109) 144Carrying amount at end of year 666 1,170Damages and ClaimsCarrying amount at the beginning of the year 799 703Payments made during the year (246) (111)Re-measurement adjustments 38 207Carrying amount at end of year 591 799SA WATER financial report31

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 15Other liabilities 2005 2004$’000 $’000CurrentDeposits from contractors 1,088 1,282Unearned income 167 5301,255 1,812Non- CurrentAdvances for work carried out on behalf of MurrayDarling Basin Commission497 497497 497Note 16Notes to the statement of cash flows 2005 2004(a) Reconciliation of CashFor the purposes of the Statement of Cash Flows, cash includes cash on hand and at bank. Cash asat the end includes cash on hand and at bank. Cash as at the end of the financial year as shown in theStatement of Cash Flows is reconciled to the items in the Statement of Financial Position as follows:Cash assets - 906Overdraft* (744) -(744) 906* At 30 June 2005 cash assets includes cash at bank $1.6m less unpresented cheques $0.8m.(b) Reconciliation of profit from ordinary activities after income tax to net cash providedby operating activitiesProfit from ordinary activities after income tax 196,868 179,341Add/(less) items classified as investing activities:(Profit)/loss on sale of infrastructure, plant andequipment(492) (57)Contributed assets (45,332) (24,014)32 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 16 (Continued)Notes to the statement of cash flows 2005 2004$’000 $’000Add/(less) non-cash items:Depreciation 125,812 117,230Amortisation - 58Write-down of capitalised expenditure 1,121 283Write-down in loan to controlled entities - (128)Write-down investments in controlled entities - 402Revaluation of investment in unlisted shares (506) (468)Provision for employee benefits 278 1,750Provision for workers compensation (51) (365)Adjustment for non-business operations - 18Decrease in future income tax benefit 122 3,264Increase/(decrease) in current tax liability 1,490 (2)Increase in deferred tax liability 7,087 12,200Net cash provided by operating activities beforechange in assets and liabilities286,397 289,512Changes in assets and liabilities:(Increase) in rates and sundry receivables (388) (2,247)(Increase) in prepayments (382) (177)(Increase)/decrease in inventories (311) 243Decrease/(increase) in other operating assets 800 (211)(Decrease)/increase in trade creditors (3,740) 745(Decrease) in other operating liabilities (6,556) (15,620)(Decrease)/increase in other provisions (168) 126Net cash provided by operating activities 275,652 272,371SA WATER financial report33

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 17Contributed equity Note 2005 2004$’000 $’000Balance at beginning of year 247,950 247,950Repayment of capital - -Balance at end of year 247,950 247,950Note 18Reserves Note 2005 2004(a) Asset revaluation reserveBalance at beginning of year 4,961,217 4,773,562Add: Revaluation increment on infrastructure, plantand equipment assets159,994 187,655Balance at end of year 5,121,211 4,961,217The asset revaluation reserve is the cumulative balance of asset revaluation increments anddecrements.Note 19Retained profits Note 2005 2004Retained profits at the beginning of the year 124,325 119,094Foreign currency translation reserve - (44)Net profit from ordinary activities after income tax 196,868 179,341321,193 298,435Dividends provided for and paid 29 (155,189) (174,110)Retained profits at the end of the year 166,004 124,32534 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 20Additional financial instruments disclosure(a) Objectives of Holding Derivative Financial InstrumentsThe Corporation is exposed to the risk of adverse movements in interest rates. The Corporation uses derivative financialinstruments solely to hedge against interest rate risks.Interest rate swap agreements are used to convert interest rate exposures on certain debt from floating to fixed rates and viceversa. These swaps entitle the Corporation to either receive/pay floating interest quarterly or semi annually and receive/pay fixedinterest semi annually.Forward rate agreements are utilised by the Corporation to hedge interest rate exposures on borrowings.(b) Interest Rate Risk ExposuresThe Corporation’s financial assets and financial liabilities are exposed to interest rate risk. The following table summarises interestrate risk for the Corporation, together with effective weighted average interest rates as at balance date.2005 NoteFloatingInterest RateFixed interest maturing in:1 yearor lessover 1 to5 yearsmore than5 yearsNon interestbearingFinancial Assets $’000 $’000 $’000 $’000 $’000 $’000TotalWeighted averageinterest rateCurrent receivables 6 - - - - 38,351 38,351 -CSO receivable 6 - 0 - - 83,357 83,357 -Other financial assets 9 - - - - 6,831 6,831 -Other 8 - - - - 59 59 5.40%0 0 0 0 128,598 128,598Financial LiabilitiesBank overdraft 16 (a) 744 - - - - 744 4.99%Short term borrowings 13 58,688 - - - - 58,688 5.58%Long term borrowings 13 190,641 224,064 505,148 200,825 - 1,120,678 5.89%Payables 12 - - - - 66,439 66,439 -Deposits with SA Water 12,15 - 1,209 - - 1,088 2,297 5.72%Non-business advances 15 - - - - 497 497 -Lease liabilities 13 - 5,328 12,646 95,197 - 113,171 -Interest rate swaps* 41,500 - 17,500 (59,000) - - 1.37%**290,085 230,601 535,294 237,022 68,024 1,362,514*notional principal amount** Net weighted average interest rateSA WATER financial report35

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 20 (Continued)Additional financial instruments disclosure2004 NoteFloatingInterest RateFixed interest maturing in:1 yearor lessover 1 to5 yearsmore than5 yearsNon interestbearingFinancial Assets $’000 $’000 $’000 $’000 $’000 $’000TotalWeighted averageinterest rateCash 16 (a) 906 - - - - 906 4.92%Current receivables 6 - - - - 44,347 44,347CSO receivable 6 - - - - 84,717 84,717 -Other financial assets 9 - - - - 6,325 6,325 -906 - - - 135,389 136,295Financial LiabilitiesShort term borrowings 13 56,188 - - - - 56,188 5.40%Long term borrowings 13 444,342 116,598 393,642 175,826 - 1,130,408 6.14%Payables 12 - - - - 73,464 73,464Deposits with SA Water 12,15 - 2,427 - - 1,282 3,709 5.33%Non-business advances 15 - - - - 497 497Lease liabilities 13 - 2,205 11,664 101,507 - 115,376 10.96%Interest rate swaps* (219,500) 10,000 42,500 167,000 - - 0.81%**281,030 131,230 447,806 444,333 75,243 1,379,642*notional principal amount**net weighted average interest rateInterest Rate SensitivityIn relation to borrowings, a 1% change in interest rates would impact on interest expense by $1.6 million (2004: $3.39 million) forthe year to 30 June 2005. A 1% increase in interest rates would decrease the market value of the debt portfolio by $23.2 million asat 30 June 2005 (2004: $24.7 million). This analysis is based on interest rates as at 30 June 2005.36 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 20 (Continued)Additional financial instruments disclosure(c) Credit Risk ExposuresCredit risk represents the loss that would be recognised if counterparties to the Corporation fail to meet their obligations.The Corporation minimises concentrations of credit risk by undertaking transactions with a large number of counterparties withlow outstanding amounts and/or credit worthy counterparties.The credit risk on futures contracts is minimised as transactions are made through a recognised futures exchange.SA Water undertakes all foreign exchange, interest rate risk management and commodity risk management transactionswith SAFA as an eligible counterparty without limit. There is no credit risk exposure as SAFA is an entity guaranteed by theGovernment of South Australia.Recognised Financial InstrumentsThe credit risk on financial assets recognised in the Statement of Financial Position is the carrying amount, net of any allowancefor doubtful debts.Non-Recognised Financial InstrumentsThe credit risk on swap contracts is limited to the amount to be received from counter parties on contracts that are favourable tothe Corporation. The amount due to the Corporation as at 30 June 2005 was $1.29 million (2004: $0.29 million).There was no credit risk exposure on the forward rate agreements as at 30 June 2005 (2004: Nil).(d) Net Fair Values of Financial Assets and LiabilitiesNet fair value is the amount at which the asset could be exchanged, or liability settled, in a current transaction between willingparties after allowing for transaction costs.Recognised Financial InstrumentsThe carrying amounts and estimated net fair values of financial assets and financial liabilities held at balance date are given below.The net fair value of cash and cash equivalents, non-interest bearing monetary financial assets and financial liabilities of theCorporation approximate their carrying value and are therefore not disclosed below.The net fair value of other monetary financial liabilities is based upon market prices where a market exists or by discounting theexpected future cash flows at 30 June 2005 interest rates.SA WATER financial report37

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 20 (Continued)Additional financial instruments disclosure(d) Net Fair Values of Financial Assets and Liabilities (continued)Note 2005 2004Carrying Amount Net Fair Value Carrying Amount Net Fair ValueFinancial Liabilities $’000 $’000 $’000 $’000Long term borrowings 13 1,120,678 1,134,823 1,130,408 1,149,148Lease liabilities 13 113,171 113,171 115,376 115,376Non-Recognised Financial InstrumentsThe net fair value of non-recognised financial instruments held at the reporting date is:Net Fair Value$’0002005 2004Net Fair Value$’000Interest rate swaps (8,942) (10,623)The net fair value for interest rate swaps and swaptions is estimated by discounting the anticipated future cash flows to their present value,based on current market interest rates at the respective balance dates.38 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 21Expenditure commitments Note 2005 2004Capital CommitmentsTotal capital expenditure contracted for at balance datebut not recognised in the financial report and payable:$’000 $’000not later than one year 27,393 11,059later than one year and not later than five years 2,758 -30,151 11,059Finance lease commitmentsFinance lease commitments are payable:not later than one year 22,496 16,566later than one year and not later than five years 65,508 66,585later than five years 201,746 221,240289,750 304,391Less: Future lease finance charges and contingent rentals 176,579 189,015Total Lease Liabilities 113,171 115,376Lease liabilities provided for in the financial statements:Current 12 5,328 2,205Non-Current 12 107,843 113,171113,171 115,376Future finance lease payments are amounts contracted private sector providers to construct, ownand operate water and wastewater treatment facilities. The leases comprise a base amount plusan incremental contingent rental. Contingent rentals are based on the Consumer Price and relatedindexes. The amount of contingent rentals paid and payable during the year is disclosed in Note 3.Other finance lease commitmentsFinance lease contracted for at balance date but notrecognised in the financial report as liabilities, payable:not later than one year 2,190 -later than one year and not later than five years 10,513 10,076later than five years 53,009 55,63665,712 65,712Other finance lease expenditure commitments contracted for at balance date include amountscontracted with a private sector company to construct, own and operate a wastewater treatment facilitywhich is expected to be commissioned in September 2005. The lease commitment is represented bytotal minimum lease payments of $66 million which includes future finance charges of $46.8 million.SA WATER financial report39

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 21 (Continued)Expenditure commitments 2005 2004Operating leases and other expenditure commitmentsFuture operating leases and other expenditure commitmentsnot provided for in the financial report and payable:$’000 $’000not later than one year 74,106 63,464later than one year and not later than five years 244,762 235,147later than five years 29,156 89,856348,024 388,467The operating lease commitments relate to property leases which are non cancellable leases. Therental is payable monthly with reviews indexed every two years. These bi-annual reviews alternatebetween CPI indexation and Market Value. Options exist to renew the leases at the end of theterm of the leases.Other expenditure commitments include commitments pursuant to the contract to operate,manage and maintain the Adelaide metropolitan water and wastewater networks and treatmentplants. The costs for the commitments include the service charge payable to United WaterInternational Pty Ltd and the costs incurred by United Water International Pty Ltd in performingservices which are reimbursed by the Corporation. The costs are reported for the total period ofthe contract and include an estimate for escalation charges.40 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 22Interest in joint venture operation 2005 2004$’000 $’000The Corporation holds an interest of 50% in the output of the joint venture operation named SAWater - Hydro Joint Venture whose principal activity is the generation of electricity from the useof water energy stored in and by the Corporation’s infrastructure at Mt Bold and Hope Valley.Included in the assets and liabilities of the Corporation and the consolidated entity are thefollowing items which represent the Corporation’s and the consolidated entity’s interest in theassets and liabilities employed in the joint venture, recorded in accordance with the accountingpolicies described in Note 1(b).Current assetsCash assets 3 47Receivables 24 27Other - -Total current assets 27 74Non-current assetsInfrastructure assets 1,424 1,420Capital works in progress - 47Total non-current assets 1,424 1,467Total assets 1,451 1,541Current liabilitiesPayables 21 22Total current liabilities 21 22Total liabilities 21 22Net assets 1,430 1,519Refer to Note 20 for details of joint venture capital commitments.SA WATER financial report41

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 23Employee benefits Note 2005 2004$’000 $’000Aggregate liability for employee benefits, including on-costsCurrentAccrued wages and salaries including oncosts includedin other creditors2,745 1,474Workers compensation 14 667 846Annual LeaveOncosts included in other creditors 902 846Provision for employee benefits 14 5,412 4,8766,314 5,722Long Service LeaveOncosts included in other creditors 118 173Provision for employee benefits 14 1,856 3,1121,974 3,285Total current employee benefits 11,700 11,327Non-CurrentWorkers compensation 14 2,668 2,540Long Service LeaveOncosts included in other creditors 1,222 1,159Provision for employee benefits 14 17,238 16,23918,460 17,398Total non-current employee benefits 21,128 19,938Total employee benefits 32,828 31,26542 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 24Contingent liabilitiesThe Corporation has no material contingent liabilities as at 30 June 2005.Note 25Auditor’s remuneration 2005 2004Amounts received and receivable by the auditors for auditing theaccounts. The auditors received no other benefits.250 245Note 26Consultancy costsDuring the year ended 30 June 2005, the Corporation paid $1.4 million (2004: $0.4 million) asa result of engaging consultants. Assignments undertaken by consultants included work foroperating and capital projects.Note 27Dividends Note 2005 2004$’000 $’000Dividends paid 155,189 164,110Dividends payable 12 - 10,00019 155,189 174,110Dividends paid during 2004-05 of $155.2 million relate to the current year which have been paidto the South Australian Government Consolidated Account on 30 June 2005 based upon therecommendation of the Board to the Treasurer pursuant to Section 30 of the Public CorporationsAct 1993. An additional $10 million was paid during 2004-05 for the special dividend that waspayable at 30 June 2004.SA WATER financial report43

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 28Remuneration of employees 2005 2004$ $ Number of employeesThe number of employees whose remuneration received andreceivable falls within the following bands is:100,000 - 109,999 24 17110,000 - 119,999 15 10120,000 - 129,999 5 4130,000 - 139,999 3 3140,000 - 149,999 2 2150,000 - 159,999 2 4160,000 - 169,999 4 4170,000 - 179,999 3 2180,000 - 189,999 2 -190,000 - 199,999 1 -200,000 - 209,999 - 2210,000 - 219,999 1 2220,000 - 229,999 1 -230,000 - 239,999 - 1240,000 - 249,999 1 -250,000 - 259,999 - 1270,000 - 279,999 1 -300,000 - 309,999 - 1310,000 - 319,999 1 -The total remuneration received and receivable by thoseemployees was $8.9 million (2004: $7.4 million). This amountincludes fringe benefits and superannuation payments madeto the Department of Treasury and Finance.Note 29Remuneration of directors 2005 2004$ $ Number of DirectorsThe number of Directors of the Corporation whoseremuneration received and receivable falls within thefollowing bands is:30,000 - 39,999 1 -40,000 - 49,999 4 580,000 - 89,999 1 1300,000 - 309,999 - 1310,000 - 319,999 1 -The total remuneration received and receivable by those Directorswas $0.62 million (2004: $0.61 million) which includes fringebenefits and superannuation contributions. These figures include theChief Executive Ms Anne Howe who is also included in Note 28.Note 30Related party disclosuresThe following persons held the position of Director of theCorporation during the financial yearG.B. AllisonF.T. BlevinsS.M. DoyleP.W. PledgeA.D. HoweR.J. OwensA.C. Digance (appointed 26 August 2004)Dr Allison is a Director and Partner of the Cape d’EstaingGroup, a Partner of GB and JD Allison, a Principal of AllisonPartners P/L, is on the Investment Committee of theAustralian Water Infrastructure Fund and a 15% shareholder inEnvironmental Solutions (Aust) Pty Ltd. He is also a Director ofthe Kangaroo Island Natural Resources Management Board.Ms Digance is a director of Australian Central Credit Union, and amember of the Dental Professional Conduct Tribunal.Ms Doyle is the Chairman of the Public Sector SuperannuationScheme and the Commonwealth Superannuation Scheme.Ms Howe is a director of the Water Services Association ofAustralia (WSAA).Ms Owens is a member of the National Executive of the AustralianLabour Law Association Inc, Chair of the Working Women’s CentreSA Inc. and a Trustee of the ASKM Adelaide Recitals Trust.Mr Pledge is a consultant to Ernst & Young and Sportsmed SA,and Chairman of the Adelaide Chamber Orchestra.All Financial benefits provided by SA Water to related parties areprovided on arm’s length terms.44 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 31Irrigation assets and liabilitiesAssets and liabilities arising from the Irrigation Act 1994 which were controlled by the formerEngineering and Water Supply Department were not vested in the Corporation. Governmentpolicy is for self-management of Government Irrigation Districts which resulted in the transfer ofassets to trusts formed under the Irrigation Act on 1 July 1997 for the Highland Irrigation Areas.During this transitional period, the Corporation continues to manage the irrigation activities forthe reclaimed areas on behalf of the Minister for Government Enterprises. In order to reflect thisarrangement, the assets and liabilities associated with the irrigation function have been excludedfrom the Corporation’s financial statements. Agreement has been reached whereby the funding ofcapital works and operations for irrigation activities will be assumed by the Treasurer.Under this arrangement, the Corporation is able to account for these amounts as advances duefrom the Minister for Government Enterprises. These amounts are recorded in a separate account,Minister for Government Enterprises - Irrigation Assets.2005 2004$’000 $’000Balance due from the Minister for Government Enterprises 8,554 8,336Return of revenue - Lower Murray operations - 218Payment received (8,554) -- 8,554Note 32Targeted separation packages (tvsps & tvers)In accordance with Government policy, 16 employees (2004: 6 employees) were paid a TargetedVoluntary Separation Package (TVSP) at a total value of $1.8 million (2004: $0.6 million) with anadditional $0.7 million paid (2004:$0.2 million) in accrued annual leave and long service leaveentitlements. There were 48 employees (2004: 30 employees) that were paid a Targeted VoluntaryEarly Retirement (TVER) package during the period, at a total value of $3.2 million (2004: $1.6million) with an additional $2.0 million paid (2004:$0.8 million) in accrued annual leave and longservice leave entitlements.SA WATER financial report45

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 33Statement of administered items 2005 2005 2004 2004RiverMurray LevyPensionerConcessionsTotalTotal$’000 $’000 $’000 $’000Administered RevenuesRevenue 19,240 29,000 48,240 41,566Total Administered Revenues 19,240 29,000 48,240 41,566Administered Expenses:Expenses 19,240 29,000 48,240 41,566Total Administered Expenses 19,240 29,000 48,240 41,566Operating Surplus - - - -Current AssetsCash 246 1,342 1,588 478Receivables 935 - 935 935Total Administered Assets 1,181 1,342 2,523 1,413Current LiabilitiesPayables 1,181 1,342 2,523 1,413Total Administered Liabilites 1,181 1,342 2,523 1,413Net Assets - - - -EquityAccumulated Surplus - - - -Total Administered Equity - - - -46 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 33 (Continued)Statement of administered itemsRiver Murray LevyThe Waterworks Act 1932 has been amended in State Parliament to include the Save theRiver Murray Levy,effective from 1st October 2003. The component of rates collected by theCorporation under the Act and attributable to the Save the River Murray Levy is paid into theConsolidated Account at Treasury and Finance on a quarterly basis.Pensioner ConcessionsSA Water is responsible for the administration of Local Government concession payments.An amount is received from SA Government which is used to make payments to LocalGovernment Councils.Cash Flows from operating activitiesRiverMurray Levy2005 2005 2004 2004PensionerConcessionsTotalTotal$’000 $’000 $’000 $’000Cash inflows 19,240 29,000 48,240 40,631Total cash inflows 19,240 29,000 48,240 40,631Cash outflows 19,352 27,778 47,130 40,163Total cash outflows 19,352 27,778 47,130 40,163Net cash inflows (outflows) fromoperating activities(112) 1,222 1,110 468Net (increase) decrease in cash held (112) 1,222 1,110 468Cash at the beginning of thereporting period358 120 478 10Cash at the end of thereporting period246 1,342 1,588 478SA WATER financial report47

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 34Revenue / expenses from SA Government /non-SA Government2005 2004$’000 $’000(a) RevenueRevenue received/receivable from entities external to the SA GovernmentRates and charges 496,598 479,080Contributed assets 72,140 45,262Recoverable works 45,684 40,298Fees and charges 16,872 15,885Miscellaneous 591 620Gross proceeds from sale of infrastructure, plant and equipment 1,058 2,882Interest received 47 47Rents 887 813Revaluation of investment in unlisted shares 506 468Total revenue - Non SA Government entities 634,383 585,355Revenue received/receivable from entities within the SA GovernmentRates and charges 33,831 31,231Community service obligations 103,440 101,556Recoverable works 2,878 2,566Miscellaneous 610 1,237Gross proceeds from sale of infrastructure 350 -Interest received 71 6Rents 291 414Total revenue - SA Government entities 141,471 137,010Total revenue 775,854 722,36548 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 34 (Continued)Revenue / expenses from SA Government /non-SA Government2005 2004$’000 $’000(b) Expenses - Supplies and ServicesSupplies and Services provided by entities external to the SA GovernmentOperational services 36,392 32,158Materials & other 11,251 11,670Administration 16,041 16,484Total Supplies and Services - Non SA Government entities 63,684 60,312Supplies and Services provided by entities within the SA GovernmentOperational services 17,731 15,252Materials & other 9,646 8,268Administration 1,165 1,388Total Supplies and Services - SA Government entities 28,542 24,908Total Supplies and Services 92,226 85,220Expenses - Operational and Service ContractsPovided by entities external to the SA GovernmentOperational and Service Contracts 86,840 80,342Total - Non SA Government entities 86,840 80,342Provided by entities within the SA GovernmentOperational and Service Contracts 659 384Operational and Service Contracts provided by entitieswithin the SA Government659 384Total Operational and Service Contracts 87,499 80,726SA WATER financial report49

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 34 (Continued)Revenue / expenses from SA Government /non-SA Government2005 2004$’000 $’000Borrowing CostsBorrowing Costs provided by entities external to the SA GovernmentInterest Expense 124 152Finance Lease Charges 12,535 12,763Total Borrowing Costs provided by entities externalto the SA Government12,659 12,915Borrowing Costs provided by entities external within the SA GovernmentInterest Expense 68,248 65,662Borrowing Costs provided by entities external withinthe SA Government68,248 65,662Total Borrowing Costs 80,907 78,577(c) Receivables - Government/Non Government ReceivablesReceivables from SA Government entitiesCommunity service obligations 83,357 84,717Rates receivable (water and wastewater) 335 362Sundry debtors 2,485 1,251Minister for Government Enterprises - Irrigation - 8,55486,177 94,884Receivables from Non SA Government entitiesRates receivable (water and wastewater) 19,214 19,238Sundry debtors 16,317 14,94235,531 34,180Total Receivables 121,708 129,06450 SA WATER financial report

NOTES TO AND FORMING PARTOF THE FINANCIAL STATEMENTS[FOR THE YEAR ENDED 30 JUNE 2005]Note 34 (Continued)Revenue / expenses from SA Government /non-SA Government2005 2004$’000 $’000(d) Payables - Government / Non Government PayablesPayables to SA Government entitiesTrade creditors 2,284 1,173Interest payable 11,765 11,327Dividends payable - 10,000Other creditors 6,311 4,94220,360 27,442Payables to Non SA Government entitiesTrade creditors 39,815 38,808Other creditors 7,473 9,64147,288 48,449Total Payables 67,647 75,891Non-currentPayables to SA Government entitiesOther creditors 1,222 1,159Total Non-current Payables 1,222 1,159SA WATER financial report51

OUR CHARTER1. INTRODUCTION1.1. PreparationThis Charter sets out the Government’s strategicobjectives, priorities and requirements for the Corporation.It has been prepared by the Minister for GovernmentEnterprises and the Treasurer, following consultationwith the South Australian Water Corporation, inaccordance with Section 12 of the Public CorporationsAct 1993.1.2. Statutory contextThis Charter should be read in conjunction with:> The Public Corporations Act 1993;> The South Australian Water Corporation Act 1994; and> The Public Finance and Audit Act 1987.1.3. DefinitionsExpressions used in this Charter have the samemeaning as in the Public Corporations Act 1993.In this Charter, the South Australian Water Corporationis referred to as “the Corporation”.In this Charter, unless the context indicates otherwise,references to:> “water” also refer to wastewater and trade waste;> “water services” also refer to wastewater and tradewaste services; and> “water industry” or “water systems” also referto wastewater and trade waste products, servicesand systems.In this Charter, “systems management” activitiesinclude planning, developing, brokering, managing,operating and maintaining some or all of an area’swater systems and water resources management. Theoperations and maintenance may be provided by thesystems manager or through the engagement of otherentities in contractual or partnership arrangements.PART 1: THE FOUNDATIONS -GOVERNMENT DIRECTIONS AND SAWATER’S STRATEGIC POSITION2. STRATEGIC DIRECTIONS2.1. The Government requires the Corporation, infulfilling its statutory functions as set out in theSouth Australian Water Corporation Act 1994, to bea leading government-owned water business, andpursue the following strategic directions:2.1.1 be a systems manager providing value-formoneywater services within South Australia;2.1.2 develop and commercialise leading water andrelated services, including technology solutions;2.1.3 assist in promoting economic development inSouth Australia;2.1.4 manage the assets (including intellectualproperty) of the Corporation prudently andeffectively, and provide agreed returns toGovernment; and2.1.5 optimise the value of the Corporation whilstachieving other key requirements of Government.3. GOVERNMENT DIRECTIONSIn pursuing the strategic directions, and undertaking itsfunctions and exercising its powers, the Corporationshall take account of the Government’s vision anddirection.3.1. Water systemsThe Government seeks to ensure that South Australianshave access to quality water services that promotethe health of the public and are sensitive to the naturalenvironment.To this end, the Corporation shall:3.1.1. within commercial and environmental constraints:> provide quality water services; and> optimise the geographic and population coverageof those services;52 SA WATER financial report

OUR CHARTER3.1.2. observe the requirements of the Government’senvironmental and health regulators; and3.1.3. cooperate with water resource managerspromoting improvement to the flow and qualityof raw water supplies used by the Corporation,such as from the Murray Darling Basin and theMount Lofty Ranges Catchment.3.2. Economic developmentThe Government is committed to ongoing developmentof the South Australian economy through mechanismsthat foster:> economic growth, investment and reinvestmentin South Australia;> development of exports and entry to overseas markets;> research, development and commercialisationof technology; and> development of a strong information economy base.To this end, the Corporation shall:3.2.1 within commercial constraints, maintain andactively promote water services such that thecost of water services is not an impedimentto enterprises being attracted to or retained inSouth Australia;3.2.2 participate in and facilitate the developmentof a viable export-focussed South Australianwater industry;3.2.3 foster investment in the water industry, fromwithin and beyond the State; and3.2.4 research, develop, utilise and commercialisewater or related technology, including informationtechnologies.4. GOVERNMENT POLICIES4.1. In pursuing the strategic objectives in the contextof the Government’s directions, and undertakingits functions and exercising its powers,the Corporation shall act in accordance withthe Government’s:4.1.1. governance framework for public corporations;4.1.2. policies generally applying to its commercialagencies; and4.1.3. policies specifically applying to the Corporation.4.2. The Corporation in developing its operatingpolicies shall have regard to other Governmentpolicies and strategies, and the interests of otherGovernment agencies.PART 2: THE CORPORATION’SOPERATIONS5. COMMERCIAL OPERATIONS5.1. For the purposes of the Public Corporations Act1993, all operations of the Corporation arecommercial operations, except for thoseoperations referenced as non-commercialoperations in Section 6.5.2. Within South Australia5.2.1. The Corporation, in addition to owning waterand wastewater assets, shall be a systemsmanager ensuring the provision of value-formoney water services within South Australia;5.2.2. Subject to this section, the Corporation mayundertake other commercial operations withinSouth Australia where such operations:5.2.2.1. support or are ancillary to or utilise byproductsof its primary operations; and5.2.2.2. relate to research and development tosupport primary or ancillary operations.SA WATER financial report53

OUR CHARTER5.3. Beyond South AustraliaSubject to this section, the Corporation may pursueopportunities beyond South Australia.The Corporation may investigate but shall not enterinto a contract or make a commitment in relation to theundertaking of system management activity beyondSouth Australia without the written approval of theMinister and the Treasurer, or Cabinet.5.4. Subsidiaries, joint ventures and otherarrangementsWith the approval of the Treasurer and the Minister,the Corporation may pursue commercial opportunitiesthrough subsidiaries, joint ventures or other appropriatearrangements, provided that the services deliveredunder the arrangements relate to water or ancillaryservices.5.5. Other operationsIn addition to its statutory functions, the Corporationshall, until otherwise notified by the Minister, providethe services listed in the Schedule.6. NON-COMMERCIAL OPERATIONS6.1. The Corporations non-commercial operations,in terms of the Public Corporation Act 1993,include those operations;6.1.1. listed in the Schedule to this Charter;6.1.2. subject to a Community Service agreementbetween the Corporation and a purchasingMinister; or6.1.3. agreed to be non-commercial by the Ministerand the Treasurer.6.2. The Corporation is required to perform allnon-commercial operations so as to minimisetheir cost to the State.6.3. Non-commercial operations are to be costedand funded in accordance with arrangementsdetermined by the Minister and Treasurer.6.4. The Corporation may undertake approved noncommercial operations within or outside the State.7. ECONOMIC DEVELOPMENT5.6. Commercial activitiesThe Corporation may undertake:5.6.1. development and continuation of theCorporation’s business, consistent with it’sStrategic Business Plan and directly related toits legislative functions;5.6.2. commercial operations beyond South Australia, inaccordance with clause 5.3, and riskmanagement and other financial arrangementsagreed with the Minister and the Treasurer; and5.6.3. investment of surplus funds so as to maximisethe return in accordance with sound investmentpractices appropriate to the nature of thefunds invested.7.1. General competitivenessThe Corporation shall ensure that the cost of its servicesto industry is not a general impediment to industryattraction to and retention in South Australia.7.2. Water industry developmentThe Corporation shall encourage, foster and facilitate anexport-focussed water industry in South Australia by:7.2.1. leveraging the Corporation’s expertise,relationships and projects to promoteopportunities for South Australian industryparticipants;7.2.2. assisting South Australian industry participantsto develop capabilities for and access to interstateand overseas markets;54 SA WATER financial report

OUR CHARTER7.2.3. supporting industry initiatives which fosterindustry development, best practice and strategicalliances including water industry clusters; and7.2.4. supporting the attraction, engagement andretention of leading global water industryand related firms to the State and thedevelopment of relationships which fosterinvestment, promote technology transfer intothe State and, through their corporate networks,increase access to overseas markets for SouthAustralian entities.7.3. Other economic developmentThe Corporation shall also contribute to economicdevelopment of the State by:7.3.1. implementing progressive research anddevelopment, service delivery andcommercialisation strategies;7.3.2. facilitating the development of the waterinfrastructure of the State; and7.3.3. administering the economic developmentobligations under service, procurement andsupply contracts administered by the Corporation.PART 3: FINANCIAL AND COMMERCIALMANAGEMENT8. FINANCIAL AND COMMERCIALMANAGEMENT8.1. Customer service standards8.1.1. The Corporation shall develop, in consultationwith the community, service standards that shallbe approved by the Minister.8.1.2. The Corporation shall revise the customer servicestandards every three years.8.2. Form and content of accounts and financialstatementsThe Corporation must prepare financial statementsbased on Australian Accounting Standards, generallyaccepted accounting principles and practices, includingthe Financial Management Framework and otherapplicable instructions of the Treasurer issued under thePublic Finance and Audit Act 1987.8.3. Accounting and internal auditing systemsand practicesThe Corporation must establish and maintain:8.3.1. financial and accounting processes, practicesand systems in accordance with appropriatestandards of practice; and8.3.2. effective internal auditing of its operationsin accordance with appropriate standards ofpractice and the Public Corporations Act 1993.8.4. Reports on operationsIn addition to statutory reporting, the Corporationmust provide the following reports to the Ministerand the Treasurer:8.4.1. quarterly performance monitoring report,including Statement of Financial Position, Profitand Loss Account, capital investment andStatement of Cash Flows;8.4.2. quarterly Forward Estimates reports coveringthe Budget year and the three out years;8.4.3. quarterly reports on any commercial operationsbeyond South Australia;8.4.4. annual reports on performance against customerservice standards; and8.4.5. other information as requested from time-to-timeby the Minister or the TreasurerSA WATER financial report55

OUR CHARTER8.5. Asset management8.5.1. The Corporation must develop AssetManagement Plans reflecting prudentcommercial practice.8.5.2. The Corporation shall:> put in place processes to identify surplus assetswhich ensure that the Corporation does not,without the prior consent of the Minister, sell,transfer or otherwise release control over assets,including land and buildings, which will berequired for the provision of water services; and> consult other agencies and take account of anyGovernment requirements in the disposal ofsurplus land (excluding easements) and buildings.8.6. PricingRates and other charges are set as follows:8.6.1. Rates: Waterworks Act 1932 and SewerageAct 1929;8.6.2. Charges: by the Governor in Executive Council; and8.6.3. Charges for Supply by Agreement: WaterworksAct 1932 and Sewerage Act 1929.8.6.4. The rates set under 8.6.1.1 shall apply to allconnections other than those for which anagreement for supply has been concluded.8.6.5. In cases not covered by 8.6.1 and 8.6.2,SA Water may apply commercial tariffsand charges.9. BorrowingThe Corporation shall maintain an optimal level of debtconsistent with benchmark organisations and havingregard to prudent commercial practice.10. Date of operationThis Charter comes into operation upon the signatureof the Minister and the Treasurer, and is binding onthe Corporation.56 SA WATER financial report

LISTING OF NON-COMMERCIAL ASSETSUntil further notice from the Minister, the Corporationis required to provide the non-commercial operationslisted in this Schedule.Services for which funding is provided by Governmentor other agencies:> Provision of country water and wastewater services> Manage and apply pensioners remissions> Provide exemptions to properties in accord with theWaterworks Act 1932 and the Sewerage Act 1929> Provide water and wastewater services toemergency services at no cost> Maintain free water services to the City of Adelaideand, for certain uses, the City of Port Adelaideand EnfieldServices that are funded by the South AustralianWater Corporation:> Plumbing standards administration> Flood mitigation and environmental schemes> Water services pursuant to the Water Conservation Act> Constructing authority services to the Murray DarlingBasin Commission (MDBC) in South Australia andupstream to Lock 9> Manage and operate assets on behalf of the MDBC> Irrigation and drainage services within GovernmentReclaimed Irrigation Districts> Works management under the River Torrens LinearPark and the South West Suburbs Drainage Act> Management and administration of water industryeconomic development agreements on behalf ofthe Government of South Australia> In cooperation with the economic developmentagencies of Government, facilitate and fund theWater Industry Development Program and theWater Industry Alliance> Fluoride dosing of water supplies where appropriateSA WATER financial report57

OHS AND EMPLOYEE INFORMATIONOHS and injury management summary:2004-05 2003-04 2002-031 OH&S legislative requirements> Number of notifiable occurrences pursuant to OHS&W Regulations, Division 6.6 0 2 3> Number of notifiable injuries pursuant to OHS&W Regulations, Division 6.6 2 3 1> Number of notices served pursuant to OHS&W Act, Sections 35, 39 and 40(Default, improvement and prohibition notices)1 1 02 Injury management legislative requirements> Total number of employees who participated in rehabilitation 4 7 6> Total number of employees rehabilitated and reassigned to alternative duties 2 1 2> Total number of employees rehabilitated back to their original work 2 4 13 WorkCover action limits> The number of open claims as at 30 June 69 74 93> Percentage of workers compensation expenditure over gross annualremuneration (as declared for WorkCover purposes).675 1.03 2.014 Number of injuries> Number of new workers compensation claims in the financial year 77 71 68> Number of fatalities (F) 0 0 0> Number of lost time injuries (LTI) 11 11 8> Number of medical treatment only (MTO) 65 60 60> Total number of whole working days lost 81 118 965 Cost of workers compensation> Cost of new claims for the financial year 213 000 128 000 84 000> Cost of all claims excluding lump sum payments 283 000 292 000 420 000> Amount paid for lump sum payments (WRC Act) Total 259 000 418 000 810 000S42 89 000 - -S43 170 000 - -S44 nil - -> Total amount recovered from external sources S54 of the WRC Act 6000 2000 0> Budget allocation for workers compensation 846 000 750 000 1.1m6 Trends> Injury frequency rate (calculated from Australian Standard AS1885) for newlost-time injury/disease for each one million hours worked4.72 4.96 3.81> Most frequent cause (mechanism) of injury Manual Handling Manual Handling Manual Handling> Most expensive cause (mechanism) of injury Manual Handling Manual Handling Manual Handling7 Meeting the organisation’s strategic targets> Targets, indicators and results from the organisation’s action plan areprovided in the annual report text.All targetsreportedAll targetsreportedAll targetsreported58 SA WATER financial report

OHS AND EMPLOYEE INFORMATIONEmployee StatisticsEmployee numbers 2004 - 05Persons 1 283FTEs Total 1 236.12Male 75% Persons 76% FTEFemale 25% Persons 24% FTENumber of persons separated from the agency during 2004-05 financial year 158Number of persons recruited to the agency during 2004-05 financial year 159Number of persons on leave without pay at 30 June 2005 15Employee numbers by salary bracket 2004-05Salary Bracket Male Female Total$0 - $38 599 356 133 489$38 600 - $49 999 249 106 355$50 000 - $65 999 184 45 229$66 000 - $85 999 110 28 138$86 000+ 60 12 72TOTAL 959 324 1 283Status of employees in current positionPERSONSOngoingShort-termContractLong-termContractCasualTotalFemale 260 24 13 20 317Male 842 28 79 2 951TOTAL 1 102 52 92 22 1 268**Excludes 15 employees on leave without pay.FTEsOngoingShort-termContractLong-termContractCasualTotalFemale 243.07 21.9 12.4 9.32 286.69Male 841.60 28 78.8 1.03 949.43TOTAL 1 084.67 49.9 91.2 10.35 1 236.12**Excludes 15 employees on leave without pay.SA WATER financial report59

OHS AND EMPLOYEE INFORMATIONEmployee StatisticsExecutives: position, gender & classificationClassification Ongoing Contract Tenured Contract Untenured TotalMale Female Male Female Male Female Male Female TotalELO1 2* 1* 2* - - 1* 2 1 3ELO2 1* - 1* - - - 1 - 1EX A - - 2 - 5 2 7 2 9EX B - - 2 - 4 - 6 - 6EX C - - - - 5 - 5 - 5EX D - - - - 1 - 1 - 1EX E - - - 1 - - - 1 1TOTAL 3* 1* 7* 1 15 3* 22 4 26*Employees falling into 2 categories (change of status)60 SA WATER financial report

OHS AND EMPLOYEE INFORMATIONWorkforce DiversityEmployee numbers by age bracket, genderAge Bracket Male Female Total% of all agencyemployeesSA WorkforceBenchmark (%)*15-19 14 10 24 1.9 7.420-24 83 36 119 9.38 11.325-29 90 56 146 11.52 1030-34 66 38 104 8.2 10.735-39 99 40 139 10.96 11.140-44 90 41 131 10.33 12.245-49 153 46 199 15.69 12.350-54 202 27 229 18.06 11.355-59 129 21 150 11.83 8.160-64 25 1 26 2.05 4.065+ 0 1 1 0.08 1.6Total 951 317 1268 100.0 100.0* Note: Benchmark as at February 2005 from ABS Supertable LM8Number of employees using voluntary flexible working arrangementsLeave Type Male Female Total% of all agencyemployeesPurchased leave 3 1 4 0.31Flexitime 827 269 1096 86.4Compressed weeks 0 0 0 0.0Part-time 5 57 62 4.89Working from home 0 0 0 0.0* Currently, SA Water does not actively seek information relating to cultural backgrounds, linguistic diversity or disability. However,improvements being made to our human resource reporting systems will address this and, and once available, the information will beincluded in our annual report.SA WATER financial report61

OHS AND EMPLOYEE INFORMATIONLeave ManagementAverage days leave taken per FTE employeeDescription 2004-05 2003-04 2002-03 2001-02Sick leave days taken 5.36 5.01 4.46 4.53Family carer’s leave days taken 0.38 0.31 0.26 0.30Special leave with pay days taken* 0.05 0.04 0.01 0.02* Note: Special leave with pay is outlined in PSM Act Determination 6 and includes leave for unscheduled absences other than for thefollowing reasons: sick leave, industrial disputes, workers compensation, maternity paid leave, adoption leave and family carer’s leave.Five-year leave comparisonLeave management 2004-05 2003-04 2002-03 2001-02 2000-01Average number of sick leavehours taken per FTEAverage number of family carerleave hours taken per FTEAverage number of special leavewith pay hours taken per FTE40.20 37.58 33.42 33.95 33.932.85 2.33 1.96 2.25 2.320.38 .30 0.10 0.13 0.1462 SA WATER financial report

CONTRACTUAL ARRANGEMENTSThe following contracts exceeded $4 millionin value and one year in duration:Water meter replacement contractActaris Pty Ltd (formerly SchlumbergerMeasurement & Systems Pty Ltd)Stage 1: commenced in July 1998 and ended in July2004. During July 2004, approximately 4 900 new watermeters were delivered to SA Water for new servicesand replace damaged meters as part of a six-year,$22 million Stage 1 Meter Replacement Program toreplace 440 000 water meters across South Australia.The contract resulted in the relocation of Actaris’ metermanufacturing headquarters from Victoria to SouthAustralia. Its factory at Wingfield manufactures watermeters, gas meters and regulators.Stage 2: commenced in September 2004 for the supplyof a major proportion of the water meters required aspart of the three-year, $8 million Meter ReplacementProgram Stage 2. From September 2004 to June 2005,approximately 41 500 water meters were delivered byActaris to SA Water for new services and to replacedamaged meters. Stage 2 will replace 150 000 meters.Under the terms of the contract HWE was to havecontinued to operate the facility for 25 years. However,administrators were appointed to the Henry WalkerGroup of companies in February 2005. This placed HWEin breach of contract and thereby entitled SA Water toterminate the contract and take ownership and controlof the project.SA Water assessed its options and decided thatterminating the contract and assuming control overthe assets was the most commercially advantageoussolution. The process to terminate the contract was stillunder way at the time this report was being prepared.Information Technology ServicesEDS AustraliaUnder this nine-year whole-of-Government contract theCorporation transferred its IT assets and support staff tothe State’s contractor, EDS Australia Ltd, on 5 July 1996.SA Water now acquires the majority of its IT processingand networking requirements from EDS under the StateGovernment’s services contract. The Corporation hasreceived $207 000 in supplementation from Treasuryand Finance to compensate for additional costs incurredas a result of the EDS contract.Wastewater treatment plant and re-usescheme at AldingaHenry Walker Environmental (HWE)Provision of treated water to the Adelaide Hills,Barossa Valley, Mid-North and River Murray townsRiverland Water Pty LtdThis plant serves the wastewater collection systemfor the Aldinga Beach and Port Willunga area. HWE, asubsidiary of the Henry Walker Group, completed thesuccessful design, construction and commissioningof the plant in July 1997 and had been operating theplant since that time. All reclaimed wastewater fromthe plant has been used by HWE for commercial andenvironmentally sustainable irrigation.In August 1996 the Water Treatment and EconomicDevelopment Agreement (WTEDA) was signed betweenthe then Minister responsible for State economicdevelopment, SA Water and Riverland Water Pty Ltd.SA WATER financial report63

CONTRACTUAL ARRANGEMENTSRiverland Water has financed, designed, constructedand will operate and maintain for the period to 2025,a total of 10 water treatment plants to treat water fromthe River Murray at Summit Storage, Swan Reach,Waikerie, Barmera, Mannum, Berri, Tailem Bend,Renmark, Murray Bridge and Loxton. Ancillary worksby SA Water, totalling $24 million, for the distributionof filtered water into local water supply systems, werecompleted to support this project. Now that all 10 plantshave been commissioned, more than 150,000 peopleliving in over 90 communities in parts of the AdelaideHills, the Barossa Valley, Mid-North, Yorke Peninsula,the Upper South East and the larger River Murray townsare benefiting from the greatly improved water quality.The economic development aspects of theAgreement require Riverland Water to make asignificant contribution to the development of thewater industry in South Australia and to generatespecified levels of net exports and local purchases.In view of difficulties in delivery of the economicdevelopment component of the Riverland contract,SA Water and the Minister concluded an agreementwith Riverland Water in July 2003 to remove theeconomic development undertakings and replacethem with alternative undertakings which SAWater has valued at approximately $30 million.Adelaide ContractUnited Water InternationalUnited Water is to manage the operations andmaintenance of metropolitan Adelaide water andwastewater systems (including the delivery ofcapital works for rehabilitation and augmentation)for a period of 15.5 years from 1 January 1996,and to develop a world-class water industry.Ownership of the water and wastewaterinfrastructure (assets) remained with SA Waterwhich is also responsible for the collection ofall revenue from customers in accordance withthe rates determined by the South AustralianGovernment. All decisions related to customerservice standards and capital upgrading requirementsfor the assets are the prerogative of SA Water.The key objectives of this contract are:> Achievement of a significant reduction of coststhrough the introduction of efficiency improvementsin the provision of the services> Improvements in the quality of services to customers> Development of a viable, export-focused, vigorouswater industry in SA.Under the agreement, Riverland Water is payingfor significant capital improvements to 6 of the 10Riverland plants, operating all 10 plants to morestringent performance standards and bearing theadditional operating costs over the remainder ofthe contract (until 2025). Both Riverland Water andUnited Utilities Australia will maintain their headoffices in South Australia: Riverland Water until 24January 2025 and United Utilities until 30 June 2013.64 SA WATER financial report

CONTRACTUAL ARRANGEMENTSIT Application Development andMaintenance ServicesKaz Technology Services(formerly Aspect Computing)In 2000, SA Water entered into a strategic alliance withKaz Technology Services to secure access to modernsoftware application methods, tools, techniques andskills at reduced cost. In 2002 Cabinet approved therenewal of the alliance up to a total contract valueof $7.8 million. Up to the original expiry date of thecontract on 31 January 2005 the expenditure was$5.67 million, with an additional $234,000 being spentover the extension period up to 30 April 2005. InSeptember 2004, the SA Water Executive agreed toterminate the overall Strategic Alliance Agreement withKaz and not to renew the current support contract uponits expiry (extended to 30 April 2005). The StrategicAlliance Agreement was replaced in April 2005 by asupport and maintenance contract with Hewlett Packardthat covers the CSIS application and all other RetailSystems applications of SA Water.Victor Harbor Wastewater Treatment PlantUU Victor Harbor Pty Ltd (UUVH)In February 2004, SA Water executed a build, own,operate and transfer contract with UUVH, for theconstruction and 20-year operation to 2025of a new wastewater treatment plant and associatedfacilities for the southern seaside town of Victor Harbor.UUVH is a wholly owned entity within the UnitedUtilities plc group of companies which includes UnitedUtilities Australia. The project is on schedule to becommissioned in late 2005.The existing wastewater treatment plant, commissionedin 1972, is no longer adequate to meet the needs of thegrowing town and has been operated at its maximumcapacity during peak periods. The treatment processwas also not designed for nutrient reduction.The contract obligations on UUVH are specifiedmainly in terms of performance requirements, whichapply principally to the quality of treated wastewaterproduced, storage of treated wastewater at HindmarshValley reservoir and surplus water discharge intothe Inman River. The existing Hindmarsh Valleyreservoir (which has been taken out of water supplyservice) will be utilised by UUVH for storage oftreated wastewater. SA Water owns, or has pipelineeasement rights for, the sites on which works will beconstructed and existing assets utilised by UUVH.SA Water has retained responsibility to manage reuse,which includes establishing commercial and operationalarrangements for the supply of reuse water to thirdparties. Key expected outcomes of the contract are:> Better value for money compared with in-houseprovision of the service.> Use of latest membrane bioreactor (MBR) wastewatertreatment process technology. Under the contract,significant design, construction, maintenance andoperational risks for performance are transferred to UUVH.> The infrastructure assets transfer to SA Water at theexpiration of the term at no consideration and in asatisfactory condition.> The new WWTP will be at the forefront in Australiafor application of membrane filtration technologyin municipal wastewater treatment. Knowledgetransfer to SA Water, particularly regarding the design,operation and maintenance of the membrane filtrationprocess, is a stated objective.SA WATER financial report65