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Operational Plan 2015-2016

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Seqwater OperatiOilai Plan 2015-2016 .. .. .. ·r<t-Seq~~i~f---------- - - - ----------- -- - - -----------·--- -··- - ---·~- ... ---- -------.-

Performance agreement Board statement and agreement of Responsible Ministe!'s

Seqwater's Operational Plan for the financial year 20"15-20"16 is presented in accordance with Part 4 of the South East Queensland Water (Restructuring) Act 2007 (Restructuring Act).

This Operational Plan represents a formal performance agreement between the Board of Seqwater and its Responsible Ministers, the Honourable Curtis Pitt, Treasurer, Minister for Employment and Industrial Relations and Minister for Aboriginal and Torres Strait lslancler Partnerships, and the Honourable Mark Bailey, Minister for Main Roads, Road Safety ancl Ports and Minister for Energy and Water Supply with respect to the financial and nonfinancial performance targets specified for the financial year. The Operational Plan also represents an acknowledgement and agreement on major activities, objectives, undertakings, policies, investments and borrowings of Seqwater for the 20·15-2016 financial year.

This Operational Plan is consistent with Seqwater's Strategic Plan 2015~2020. In signing this Operational Plan, Seqwater agrees to take all reasonable steps to ensure the plan is executed, and that all reports to the Responsible Ministers are accurate and timely.

Seqwater will promptly advise the Responsible Ministers of any major changes to the key assumptions and outcomes detailed in this Operational Plan which come to Seqwater's attention during the year.

Any changes to this Operational Plan will be dealt with in accordance with the Restructuring Act.

This Operational Plan is signed by the Chairman on the Board on behalf of all the members in accordance wit~ a unanimous decision of the Board of Seqwater.

The Honourable Curtis Pitt MP Treasurer, Minister for Employment and Industrial Relations and Minister for Aboriginal and Torres Strait Islander Partnerships

Date:

The Honourable Mark Bailey MP Minister for Main Roads, Road Safety and Ports and Minister for Energy and Water Supply

Date:

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~ eqwater o_~eratiorial Plan 2015-2016 water WATER FOR LIFE

Contents Perfonnance agreement. .... .. .......................................................................... ......... ............................................ ...................... 2

Contents ............................................... ..................................................................................................................................... 3

Part 1: Objectives ...................................................................................................................................................................... 4

Seqwater's core business .... .. .... .. .... ........................ ........................ .. .......................... ....... ............................................ ..... .... .... 4

Part 2: Undertakings ................................................................................................................................................................. 5

Strategic outcomes for 2015-2020 ........ ... ...... .................. .. ........ .................. .. .. ........................... ........... ...... .... .............. .............. 5

Strategic choice for 2015-2016 ...... .. .. .. .. ....... ............ ..... ... .... ... .... ......... .... ... ............ ............ .. .. ... ............ ...... ... .. ... .. ....... . ...... . ..... . 5

Key undertakings for 2015-2016 .. .. .................................................... .............. ............... ......... ..... ................ ............................... 6

Measuring success ................................................................................................................................................................... 9

Financial key performance indicators ... ...... ... ............... ........... ... ................. .... ....... .................. ............. .... .. ........... .. .................... 9

Non-financial key performance indicators ....... ..... ....... .......... ... .. .............. ..... .... ........ .. .......... .... ......... ... ............ ....... .. .... .. .. ...... .... 9

Risks to delivery of objectives .......................... .. ..... .. .......................... .............. .............. .. .. ....................................................... 10

Community service obligations .............................................................................................. ................................................ 13

Part 3: Financials .. ................................. .................................................................................................................. ................ 14

Financial performance ............... .............................. ...... .. .............. .... ............... ........ .. ..... ........... ........ .. ......................... ...... ...... 14

Financial statements ......... ... ..... .. .. ....... .. ......... .. ... .... ... .. ......... ... .... ....... ... .. ..................... .................. .................... ........... ...... .... . 15

Assets ... ............... ...... ........ ....... .............. ......... .. ......... ... ... ............ .. ........ .. .. .. .. .... ....................... ... ..... .. ........... .. ....... .. ... ... ......... 18

Operational and capital expenditure program ............ .. .... ...... .................. .......... ... ... ........ ...... .......... ....................... .. ... ..... ... ...... 19

Sponsorship, advertising , corporate entertainment, donations and other activities .......... .. ............................................. .. .......... 22

Part 4: Other undertakings ............................ ......................................................................................................................... 24

Prudent financial information ............. ... .. ... .. ......................... ..... ...................... ....... .................. ...... .... ............................. .......... 24

Capital structure ... ... .. ....... ..... ... ........ ....... .... .. ............ ............ ..... ........... ... .......... .. ...... ....... ............. ...... .. .......... ... .. ...... .. ..... ... .... 24

Weighted Average Cost of Capital (YVACC) ............ .... .. ........... .. ... .. ........... .. ......... ................ .. ................. .. .................... ............ 24

Annual return policy ... ............... ....... ... .. ......... .. .......... .. ... .. ............ .. .... ........ .. ........ ......... .. .... .. ............... ......... .. ..... .. ............ ...... . 24

Corporate governance ......... .............. .... .. ....... .... ......... .. ............ ............... .... .. ..... .... ..................... .................... .. ... ........ .... .... .... 24

Compliance with Government policies .. .. .. .... ... ................ ... ... ... .. ................... .. ....... .............. .. .. ...... .... .................... ...... ...... ....... 25

Risk management ........ .. .. .. ...... ..... .... .. .................... .. ... ..... .. ........... .. .. ..... ................... .. .. ......... .. ........... .. .. ......... ............... .. ..... .. 25

Bulk water pricing .... ...... .... ....... .. ...... .. .............. .. ......... ...................... .... ... .. .................. ..... ... ... .. ... .. ..... ..... ... ....................... ....... 25

Irrigation pricing .......... .. .... .. ... .. ........ .. .. ............. ............ ... .. ..... .. .. .. ... .. ... ... ... ... .. ...... ........... .................... .. ... ......... .... .. ............. .... 25

Network service plans ...... .. .. ... .......... .. .... ...... ... ............ ..... .. .. .. .. .... .. .. ...... ..... ...... .... ... ............ ........ ....... .................... ..... ............ 25

Attachment 1: Strategic Plan ................ ........................................................................................ .......................................... 26

Strategic Plan - Five year financial outlook ................. .............. ............. .. .............. ........... ....................................... .... .. .......... .. 28

Attachment 2: Policies ............................................................................................................................................................ 31

Recreation management framework .... ............... .......... ............. .................... .. ... .. ..... .............. .......... ..... ............. ... ... ....... .. ... .... 31

Treasury policy ...................................................................... ................................ .. ................ .................. ...... ......... ...... ..... .. .... 31

Open data .. .......... .. ..... ............ ......... ......... ..... .. ....... .... ............. ..... .. .. ...... ... ... ... .. .. ..... ..... ...... .............. .... ............... ... ..... ............ 31

Remuneration arrangements ............... ...... ...... .. ............. ...... .. .. ... ... ............ ...... .................. .. ... ..... ... .. ...... .. .............. ... ... .. .......... 31

Industrial relations and employment plan .... ....... ............. ........... ..... .. ... ...... .. .. ...... .......... .. ..... ... .. ........... .. ... ........... ............. .... .... 32

Seqwater Certified Agreement productivity initiative .. .. ....... .. ........... ... ............ ................. ... .. ... .. ... ............. .. .. .. .. .. ...... ................ 33

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Seqwater Operational Plan 2015-2016 _ I ~, seq~~,!~~ j

Part 1: Objectives

Seqwater's core business

Vision

Healthy communities. Prosperous region.

Purpose

Partnering to deliver, safe, secure and cost-effective water and catchment services to our customers and communities.

Values

• We work safe • We deliver

• We work together • We each make a difference.

• We continually improve

Role

Seqwater is the Queensland Government's statutory authority responsible for ensuring a safe, secure and reliable bulk drinking water supply for 3.6 million people across South East Queensland. Seqwater is also responsible for essential flood mitigation services, and provides irrigation services to about 1,200 rural customers in seven water supply schemes. One of Seqwater's key responsibilities is the long term planning of the region's future water supplies.

Seqwater manages recreation facilities that provide more than 50% of the green space in South East Queensland outside of national parks. In 2014, more than 2.75 million people visited Seqwater's recreation areas.

Seqwater is one of Australia's largest water businesses, with the most geographically spread and diverse asset base of any capital city water authority. Operations extend from the New South Wales border to the base of Toowoomba Range and north to Gympie. Assets include dams, weirs, water treatment plants, reservoirs, pumps, pipelines and climate resilient water sources like the Gold Coast Desalination Plant and the Western Corridor Recycled Water Scheme.

Seqwater's only subsidiary is the Australian Water Recycling Centre of Excellence Ltd. The Australian Water Recycling Centre of Excellence is enhancing the management and use of water recycling nationally and internationally through industry, research and government partnerships.

Statement of Obligations

The Statement of Obligations is issued by the Responsible Ministers pursuant to 51A of the South East Queensland Water (Restructuring) Act 2007 and outlines Seqwater's strategic priorities and functions that must be performed to meet the requirements of the Responsible Ministers. The Operational Plan 2015-2016 is aligned with the Statement of Obligations and articulates the activities that Seqwater will undertake to meet its commitments under the Statement of Obligations.

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~-------------- ------ --l 'Seqwater Operational Plan 2015-2016

Part 2: Undertakings

Strategic outcomes for 2015-2020

Seqwater's objectives for 2015-2016 align with its Strategic Plan 2015-2020, in particular the following strategic outcome areas:

Strategic outcome area Description Skilled and committed Our workforce is motivated, empowered and agile, driving change and workforce delivering for our customers and communities.

Knowledgeable and We engage with our customers and communities providing opportunities

engaged communities to understand what we do and seeking feedback to improve our services.

Trusted and respected We work collaboratively with partners to improve performance and partner explore new opportunities across the region.

Optimised water and We take every opportunity to optimise the way we deliver water and catchment services catchment services to benefit customers and communities.

Sustainable financial Stakeholders have confidence in the efficiency and long-term performance sustainability of our business.

Seqwater's priorities and key performance indicators are outlined in its Strategic Plan 2015-2020 (Attachment 1 ).

Strategic choice for 2015-2016

To deliver on its commitments and drive value for customers in 2015-2016, Seqwater has implemented an improved approach to enterprise performance management.

Seqwater assesses the cost, risk, impact and benefit of all significant business initiatives as part of its strategic management system. Visibility of this information enables the business to make more informed choices about resource allocation and invest in initiatives that will return measurable benefits to the organisation, shareholders and customers. This process increases transparency and accountability. This improved approach helps Seqwater to execute its commitments and continually improve core service delivery.

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r eqwater Operational Plan 2015-2016 _- ,

Key undertakings for 2015-2016

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: Skilled and committed workforce I Timeframe KPI Link ---

Seqwater will:

• continue to make safety our number one priority across Ongoing Lost time injury frequency all aspects of the business through Seqwater's positive throughout 2015- rate safety, cultural, behavioural and wellbeing programs 2016 Significant injury

• implement an updated permit access safety system to By December 2015 frequency rate

support positive safety behaviours and streamline the Completion of incident site access process investigation outcomes to

schedule

• engage the workforce and align its culture to support Ongoing Workforce availability strategy execution throughout 2015- Workforce turnover

2016 (cumulative)

• complete capability assessments for all employees to By June 2016 ensure a capable and skilled workforce

• drive a culture of performance through extending By December 2015 performance plans to include all employees covered by the Seqwater Certified Agreement

• commission a business intelligence system to improve By June 2016 Capital expenditure the transparency and quality of planning and decision (CAPEX) spend against making budget

Capital efficiencies achieved (against estimated costs of approved projects)

• decommission information systems that no longer serve Ongoing Operational expenditure the business. throughout 2015- against budget (excluding

2016 efficiencies achieved)

Knowledgeable and engaged communities Timeframe KPI Link

Seqwater will:

• implement our customer engagement framework Ongoing Community awareness or throughout 2015- understanding of high 2016 impact projects

• implement a long term program to engage with Ongoing Unprompted brand

customers about Seqwater projects, programs and throughout 2015- awareness

initiatives to earn their trust and respect 2016

• commence community engagement on the Water Ongoing Security Program (Version 1) in preparation for throughout 2015-completion of Version 2 in 2017 2016

• hold biannual two-way information sharing forums for Six monthly Partner engagement irrigation customers rating

• provide a range of recreation opportunities at our water Ongoing Community awareness or supply lakes. throughout 2015- understanding of high

2016 impact projects

Unprompted brand awareness

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'Seqwater Operational Plan 201-5~-20-16 -~Tf f Seqwater I ' , WATER FOR LIFE - ·----- _____ , ____ ··---

i Trusted and respected partner Timeframe . KPI Link

Seqwater will:

• finalise the Water Security Program (Version 1) for By 4 July 2015 Community awareness or South East Queensland to meet the Water Act 2000 understanding of high

commence Water Security Program (Version 2 - By July 2017 impact projects

• Unprompted brand Drought Response Plan) for South East Queensland ready for submission in 2017 awareness

• implement an integrated water quality management By June 2016 Zones compliant with the system from catchment to tap (Partnership Water Quality Australian Drinking Water Plan) with all SEQ water service providers Guidelines

Planned savings achieved from Water Service Providers' Partnership initiatives

• as part of its Catchment Greenprint program, provide Ongoing Catchment risk reduction resources to support the collaborative project team throughout 2015- actions implemented developing regional catchment action plans in 2016 Partner engagement partnership with government and other stakeholders. rating

i Optimised water and catchment services Timeframe KPI Link

Seqwater will:

• optimise its overall system operation to improve water Ongoing Zones compliant with the quality from the raw product and minimise operating throughout 2015- Australian Drinking Water costs 2016 Guidelines

Operational expenditure against budget (excluding efficiencies achieved)

• deliver efficiencies in the use of energy, chemicals and Ongoing Variable operating cost of resources throughout 2015- water supplied from the

2016 seven major WTPs

• continue execution of works to improve the water supply Ongoing Compliance with bulk resilience of the Mt Crosby water treatment plants throughout 2015- water agreements

2016

• operate North Pine, Somerset and Wivenhoe dams in Ongoing Compliance with dam accordance with the approved flood operation manuals throughout 2015- safety manuals and other

2016 requirements

• manage other dams in the portfolio in accordance with Ongoing dam safety legislation, in particular provisions relating to throughout 2015-Emergency Action Plans 2016

• continue the design of the dam improvement upgrade of Ongoing Lake Macdonald (Six Mile Creek Dam) throughout 2015-

2016

• plan and deliver a program that will enable Seqwater to By June 2016 Compliance with bulk more efficiently and reliably monitor and control the water agreements operation of its asset base

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r . Seqwater OperatiorialPlan 2015-2016 water WATER FOR LIFE

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Optimised water and catchment services I KPI Link ' I

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• enhance asset and investment information systems to Ongoing Benchmark maintenance deliver reliable and accurate infrastructure and project throughout 2015- costs against like water data to make informed management and investment 2016 industry organisations decisions about Seqwater's assets

• develop and implement a new strategy that clearly By June 2016 All future KPls demonstrates the value, prudency and efficiency of Seqwater's research programs

• deliver a water treatment plant performance dashboard By December 2015 Operational expenditure that will further enable operational staff to monitor and against budget (excluding improve the efficiency of their assets efficiencies achieved)

• ensure continued operation of the Flood Operations Ongoing Emergency preparedness Centre with required staff and training in accordance throughout 2015- exercises completed with the Annual Statement of Preparedness. 2016

• deliver an Environmental Education Program to 80% of By June 2016 Community awareness or all target personnel areas understanding of high

impact projects

Unprompted brand awareness

• develop and deliver Stormwater Management plans for By June 2016 Compliance with all operational WTP Assets environment protection

obligations

Sustainable financial performance '1 Timeframe ' KPI Link

- --- -- - - - ---Seqwater will:

• achieve efficiency targets as provided in the Seqwater Six monthly Workforce availability Certified Agreement 2013-2016 contingent wage Workforce turnover increase (cumulative)

Operational expenditure against budget (excluding efficiencies achieved)

• continue to improve asset management practices and Ongoing Capital efficiencies integrate longer planning horizons throughout 2015- achieved (against

2016 estimated costs of approved projects)

• finalise and implement the strategic asset management By June 2016 Benchmark maintenance plan, including reliability targets and performance costs against like water monitoring measures industry organisations

• actively manage and better understand Seqwater's risk Ongoing Completion of enterprise profile and appetite. throughout 2015- risk mitigation actions to

2016 schedule

Completion of internal audit actions to schedule

Emergency preparedness exercises completed

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[ 'SeciwaterOperation-al Plan 2015-2016 ~~ __ _ l Measuring success The below strategic key performance indicators will be used to transparently monitor and assess Seqwater's success.

Financial key performance indicators - - - ---- --- -

J Rationale

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'I [ indicator Annual target

I I i YTD

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Operational expenditure Facilitate tracking against OPEX O to -5% of approved budget

against budget (excluding commitments $11,854,000

efficiencies achieved)

Variable operating cost of Facilitate tracking against OPEX water supplied from the seven reduction commitments based on $73/ML majorWTPs medium raw water quality

Provides a means for early Capital expenditure (CAPEX) indication of over or under spend $97.0M to $107.?M spend against budget against the capital budget - target

0-10% of quarterly forecast

Tracks achievement of CAPEX $5.36M

Capital efficiencies achieved savings target specified in QCA submission and included as a

(against estimated costs of negative item in Other

approved projects) Infrastructure in table of assets under construction

Non-financial key performance indicators -

I

Indicator Rationale Annual target - --------~~- : - -- - l - - -

Lost time injury frequency rate Provides a broadly accepted S4.0 industry metric related to safety performance

Significant injury frequency rate Provides a broadly accepted S2.0 industry metric related to safety performance

Completion of incident Provides an indication of the timely 100% investigation outcomes to implementation of improvements schedule identified following incidents

Workforce availability Provides an indication of workforce 96% engagement levels

Workforce turnover (cumulative) Provides an indication of the <10% turnover of staff from establishment positions

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J 'Seqwater Operational Plan~20~5~·~016

I Rationale II

Indicator ' Annual target --

Completion of enterprise risk Provides an indication of the timely 100% mitigation actions to schedule implementation of actions to reduce

major organisational risks

Completion of internal audit Measures the timely response to 100% actions to schedule audit findings

Community awareness or Provides an indication of Establish baseline understanding of high impact knowledgeable and engaged projects community

Report on individual projects

Unprompted brand awareness1 Provides an indication of the 26% success of our advertising and engagement campaigns

Partner engagement rating1 Provides an indication of the 75% effectiveness of our engagement with partners

Planned savings achieved from Provides an indication of the ~90% delivered against plan Water Service Providers' partnership's effectiveness at Partnership initiatives reducing whole of supply chain

costs

Compliance with bulk water Measurement of service standards No breaches agreements

Zones compliant with the Measurement of service standards 100% Australian Drinking Water Guidelines

Scheduled maintenance tasks Provides an indication of adherence ~95% of tasks completed within delivered on time to the scheduled maintenance scheduled quarter

program

Benchmark maintenance costs Provides an indication of Benchmarking against like water against like water industry performance against like water industry organisations completed organisations industry organisations

Catchment risk reduction Provides an indication of the ~90% actions implemented delivery of high priority catchment

improvement initiatives

Emergency preparedness Provides an indication of 100% exercises completed commitment to emergency

readiness

'Measured by independent customer research.

Risks to delivery of objectives The following summarises the enterprise risks potentially impacting on the achievement of Seqwater's performance outcomes in 2015-2016, as well as the mitigation strategies in place to respond to these risks. These risks are assessed, managed and monitored through the application of Seqwater's Enterprise Risk Management Framework. Seqwater's risks are continually reviewed to align with the internal and external environment.

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'Seqwater Operational Plan 2015-2016

Seqwater's enterprise risks and key mitigation strategies are as follows:

Risk Key mitigation strategies

Fatality or serious injury to an • Seqwater's certified Workplace Health and Safety Management employee or contractor System is continuously reviewed to ensure the organisation meets

its legislative requirements and adopts a best practice approach to safety.

• A Safety Culture and Behaviour Program has been designed to continuously improve positive safety behaviours in the workplace to prevent unsafe acts by addressing workers attitudes through training, consultation and communication.

• A Health and Wellbeing Program has been designed to continuously improve employee wellbeing, assist in injured worker's return-to-work and rehabilitation and reduces workers health risk factors through programmed activities.

Fatality or serious injury to a member • Seqwater has implemented a community information campaign, of the public Play it safe, dedicated to raising awareness of the importance of

safety at recreational sites.

• Seqwater maintains a comprehensive scheduled recreation maintenance plan.

• Seqwater actively monitors and responds to feedback received from the public about recreational areas.

Failure to maintain an efficient • Effective board and business governance to ensure longer term sustainable business financial planning and future pricing both support balance sheet

management.

• Seqwater has established an Enterprise Portfolio Office to drive the efficiency and effectiveness of internal projects and the execution of strategy.

Unable to attract and retain capable • Seqwater has developed a cultural alignment program to drive a people culture that engages and empowers staff.

• Seqwater conducts an annual employee survey and follows an extensive improvement planning process in response to the survey results.

• Seqwater is developing an employee attraction and retention strategy.

• To retain appropriately qualified and talented staff, Seqwater has adopted a succession planning process.

Failure to deliver a long term economic • Seqwater is committed to appropriately engaging with the Board water supply for South East and Department of Energy and Water Supply during the Queensland development of the Water Security Program.

• Seqwater engages with an independent review panel for review and feedback on the Water Security Program.

• Seqwater is developing a community engagement strategy for subsequent stages of the project.

Unable to maintain water quality and I • Seqwater's management tools (i.e. Drinking Water Quality or continuity of water supply Management Plan and supporting programs) are mature and are

comprehensively applied across the business.

• Seqwater has secured ISO certification for additional four sites (Drinking Water Quality Management System).

Major asset failure • Seqwater routinely reviews relevant operational procedures and maintenance schedules.

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Risk Key mitigation strategies

Failure to effectively manage an emergency situation

-- ---- --- -

• Seqwater has an integrated asset management plan, dedicated to the detection and treatment of risks to the asset base.

• Seqwater has a dam safety improvement program that addresses any identified risks.

• Seqwater's emergency management capability is predicated on a philosophy of continual improvement. Using a combination of risk identification of emerging risks and lessons learnt from actual disruption events plans, procedures are reviewed and updated to increase organisational resilience to emergencies.

• Establishment of a new integrated Emergency Control Centre (linking Flood Operation Centre, Network Control Room and Emergency Management Centre).

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Community service obligations The Community Service Obligations (CSOs) Agreement for the period 7 July 2014 to 28 August 2017 has been agreed between Seqwater and the State of Queensland.

The CSOs apply to Water Supply Schemes operated and managed by Seqwater where the price received for water provided for irrigation purposes is, by direction, less than the cost of the provision of the water. The table below sets out the amounts of CSO payment, by Tariff Group, that the Department of Energy and Water Supply will pay to Seqwater for the period 1 July 2015 to 30 June 2016.

I Tariff group CSO payment

Cedar Pocket Dam $134,972

Central Brisbane River $14,210

Central Lockyer Valley $713,231

Logan River $1, 172

Lower Lockyer Valley $856,744

Mary Valley $11,532

Morton Vale Pipeline $88,672

Pie Creek $265,020 + ($113 x Water UsaQe (ML))


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Part 3: Financials Financial performance

In accordance with the medium to long-term objectives of the Plan, Seqwater undertakes to achieve, t th f II . f . I rf t t . 20152016 I I I ~~~~~~~~-- - ---~~ -

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2015-16 I 2014-15 2014-15 2013-14 ,, Performance Targets I I

I

I Unit Budget Budget ' Forecast 'i Actual :I ., ·' Statement of Comprehensive Income

- Operating Re\.enue ($000) 827,632 796,746 811,304 720,499

- EBIT ($000) 341 ,181 305,551 331,936 136, 161

- Interest Expense ($000) 534,617 542,406 544,482 536,316

-NPBT ($000) (193,436) (236,856) (212,546) (400, 155)

Statement of Financial Performance

- Total Net Assets I Equity ($000) 1,060,728 335,543 1,254, 164 1,459,745

Statement of Cash Flows

- Net Cash Flow ($000) 40,000 10,000 (4,281) (149,866)

) i - , 2014-15 - T I 2015-16 I 2014-15 2013-14 I I

Ratios I , ' I

I Unit ' I Budget Budget 1l Forecast I Actual I I ' '. l~ - - -- - -Ratios

- Current Ratio 2.6 2.1 2.0 1.8

- Debt to Equity Ratio 8.8 28.2 7.4 6.3

- Time interest earned 0.6 0.6 0.6 0.3

- Debt Ratio 0.9 0.9 0.8 0.8

- Return on Assets % (2%) (2%) (2%) (4%)

- Equity Ratio % 10% 3% 11% 13%

- Return on Equity % (18%) (71%) (17%) (27%)

Seqwater's undertaking to achieve its financial performance outcomes is predicated upon the following assumptions:

~. Assumf)tion-s .- l r .; ___ ._. .·• 9~ ff;1

Economic Indices

- CPI 2.5% less 2.5% efficiency target

- Wage Growth 2.5% (certified agreement)

- Long Term Interest Rates Range 4.89% to 6.21%

Revenue - Water Sales Distribution I retail revenue is calculated using the Queensland Competition

Authority draft report SEQ Bulk Water Price Path 2015-2018 November 2014 for 2015-16 year and forward vears estimates.

Operating Expenses • Seqwater The operational forecast using a zero base line basis.

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~ eqwater Operational Plan~ 015·2016 J Financial statements

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,! I I 2015-16 2014-15 2014-15 2013-14 I ,, I J'

II Unit ' 1 Budget 11 Budget ,I Forecast Actual i I . - ,I ,1 - .

Operating Revenue

Water services ($000) 805, 195 778,064 778,064 686,818

Interest Income ($000) 1,678 1,253· 1,236 2,415

Other Re1.enue ($000) 4,056 5,717 14,993' 9,977

Irrigation I CSO Rewnue ($000) 4,991 ~ 5,169 4,455

Hydro Rewnue ($000) 330 330 330 428

Grant Rewnue ($000) 11,382 11,382. 11,512 16,400

TOTAL OPERATING REVENUE ($000) 827,632 796,746 811,304 720,499

Operating Expenses

Employee expenses ($000) 76,818 79,737 77,817 79,550

Supplies and services ($000) 160,261 191,123 164,648 162,255

TOTAL OPERATING EXPENSES ($000) 237,079 270,860 242,465 241,805

Depreciation and Amortisation ($000) 249,372' 220,335 236,903 259,077

Revaluation decrement ($000) 0 0 0 83,456

Finance/Borrowing costs ($000) 534,617 542,406 544,482 536,316

TOTAL EXPENSES ($000) 1,021,068 1,033,601 1,023,850 1,120,654

PROFIT (LOSS) BEFORE INCOME TAX ($000) (193,436) (236,855) (212,546) (400,155) • Please note rounding applies to Table above $ ooo

Notes to the comprehensive income statement:

• Water sales - distribution I retail revenue is calculated using the Queensland Competition Authority final report SEQ Bulk Water Price Path 2015-2018 for 2015-2016 year and forward years estimates. The prices have been recommended from QCA for the period 2015-2016 to 2019-2020 with a 2.5% p.a. increase from 2020-2028; unless stated otherwise by QCA.

• Water sales - power stations I Toowoomba Regional Council (TRC) sales include only the fixed charges for and TRC $5M.

• The TRC fixed charge to access Wivenhoe water has been escalated by CPI each year. No variable revenue for Toowoomba has been included at this point.

• Please note the change in financial position in year 2018-2019, where the forecast changes from a repeated loss to a profit before tax.

• The Employee Expenses 2015-2016 budget has reduced by $2.9M in comparison to the 2014-2015 Original Budget, primarily due to the decrease in other employee related expenditure such as overtime, allowances, training and professional development and bonus payments.

• The Supplies and Services 2015-2016 Budget has reduced by $30.9M in comparison to the 2014-2015 Original Budget, predominantly due to:

Doc no. FINAL Version elate: 31 May 2015 Trim ID: 015/80'187 Doc owner: CEO Doc approver: The Board Rev no. of 15



a. A reduction in external contractor costs - relating to the Western Corridor Recycled Water Scheme (WCRWS). Fixed expenses reduced by $8.2M (consisting of $5.5M for the care and maintenance program and $2. 7M for the decommissioning) compared to the original 2014-2015 Budget of $17.6M, mainly due to reduction of employee costs and various repairs and maintenance works.

b. The desalination plant (GCDP) fixed expenses have reduced by $1 M mainly due to the reduction of employee costs and preventative maintenance works.

c. The 'Maintaining our Future' (MOF) project has identified a $5M reduction in the 2015-2016 budget and forecast years. The MOF project has targeted a sustainable reduction in maintenance costs through a better understanding of our assets as well as implementing initiatives that allow more efficient maintenance service delivery. Scheduled maintenance, reactive maintenance and planned maintenance costs have reduced due to the reduction of full time contractors utilised from the maintenance panel, reducing it from 33 to 22.

d. The supply system O&M contract - fixed expenses budget consists of a $2.BM reduction in lump sum fee for scheduled maintenance (due to better understanding of our assets) and variable fees for unplanned (reactive) services work, mainly due to the unpredictable nature of reactive maintenance work.

e. The water source operations and management budget 2015-2016 has reduced by $2.4M due to major effort to reduce consultant costs to a minimum by using internal resources and training staff to complete work otherwise outsourced. There were a number of studies and inspections that were conducted and completed in 2014-2015.

f. Water quality and environment has reduced their costs by $1 M; this result is mainly driven by dissolution of the catchment water quality team and the costs have been absorbed by other teams in the group.

g. Asset capability and sustainability has reduced costs by $1M compared to the 2014-15 budget. These reductions are due to the newly created team for source protection planning which looks after the natural assets planning program. This restructure has enabled the works with the asset capability team to use only inhouse resourcing for their programs and eliminate all consultancy costs.

h. Natural Asset Maintenance Projects (NAMP) the required maintenance budget for NAMPS in 2015-2016 was reduced by $1 M after consultation with other areas of the organisation. Seasonal impacts and dependency on the completion of NAMPS capital projects that require on-going maintenance will impact this budget item.

i. The renewal and minor works program has been reduced by $2.6M compared to the 2014-2015 budget in line with updated business cases and revised priorities.

j. Variable costs decrease of $3.3M is due to a combination of improved efficiencies including anticipated optimisation of chemical and energy contracts. Variable costs include costs relating to sludge removal, chemical treatment.cleaning chemicals (i.e. chemical costs) and variable energy costs. These costs are solely related to water treatment and desalination activities and include costs associated with outsourced operational arrangements.

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ff' . I •• • -- - - - - ,1 -

i! -

11 :1 11 2015-16 2014-15 2014-15 2013-14 I '

I Unit )[ Budget 'I _ Budget I Forecast Actual : - :, I - - I I .. -

Current assets

Cash and cash equivalent ($000) 80,000 70,000 40,000 44,281

Trade and other recei1rc1ble ($000) 130,522 126, 169 126,330 98,282

lnwntories ($000) 6,863 6,445 6,863 6,863

Other current assets ($000) 3,811 4,042 3,811 22,810

Total current assets ($000) 221,196 206,656 177,004 172,236

Property, plant and equipment ($000) 10,533,450 10,024,783 10,678,095 10,813,001

Other Non-Current Assets ($000) 170,121 852, 141 157,837 144,751

Total non-current assets ($000) 10,703,570 10,876,924 10,835,932 10,957,752

TOTAL ASSETS ($000) 10,924,766 11,083,580 11,012,936 11, 129,988

Current liabilities

Trade and other payables ($000) 32,566 44,673 31,415 43,577

Employee Benefits ($000) 8,320 7,741 8,320 8,320

Interest bearing liabilities ($000) 34,387 35,193 35,683 34,648

Other current liabilities ($000) 11,382 11,382 11,382 11,548

Total current liabilities ($000) 86,655 98,989 86,800 98,093

Non-current liabilities

Employee Benefits ($000) 11,327 11,876 10,328 9,327

Loan - interest bearing liabilities ($000) 9,386,419 9,445,973 9,270,626 9, 160,072

Deferred tax liabilities ($000) 51,961 852, 141 51,961 51,961

Other non current liabilities ($000) 327,676 339,058 339,058 350,790

Total non-current liabilities ($000) 9,777,383 10,649,048 9,671,973 9,572,150

TOTAL LIABILITIES ($000) 9,864,038 10,748,037 9,758,772 9,670,243

NET ASSETS/(LIABILITIES) ($000) 1,060,728 335,543 1,254,164 1,459,745

Equity

Contributed Equity ($000) (715,888) (722,854) (715,888) (722,854

Accumulated Profit I (Losses) ($000) (239,700) (287,412) (46,263) 166,283

Asset Revaluation Resen.e ($000) 2,016,316 1,345,809 2,016,316 2,016,316

TOTAL EQUITY/(DEFICIENCY) ($000) 1,060,728 335,543 1,254, 164 1,459,745

Notes to the statement of financial position:

• Prudent cash management of working capital provides for the lowest possible cash balances month-to-month, thus providing optimal investment and financing savings.


The controlled version of this document is registered. All other versions are uncontrolled .

' I

'

[' Seqwaler Operationa(Plan 2015-2016

Statement of cash flows

ii I 2015-16 I 2014-15 Ii

2014-15 'I 2013-14 I ___ ;! _!.)nit Jf _ Budg~t _,~ Budg!_t

<I Forecast Actual .

,[ -- - l - - I Cash flows from operating activities

/nf/01M>:

Receipts from water ser.,ices ($000) 803,909 764,384 753,009 691,484

Receipts from leases, rentals and other (incl. CNF) ($000) 6,472 3,500 6,720 15,877

Interest recei\ed ($000) 1,678 1,253 1,236 2,407

Outf/01M>: ($000)

Payments to suppliers and employees ($000) (234,930) (255,400) (254,143) (255,487)

Interest paid ($000) (535,913) (541,990) (543,447) (617,254)

Net operating cash flows ($000) 41,216 (28,253) (36,625) (162,973)

Cash flow from investing activities

/nf/01M>:

Proceeds from sale of plant and equipment ($000) 29,908 1,232

OulflolM>:

Payments for acquisition of property, plant and equipment ($000) (117,009) (122,444) (108, 118) (92,904

Net Investing cash flows ($000) (117,009) (122,444) (78,210) (91,672

Cash flows from financing activities

Jnf/01M>:

QTC Borrowings I Capitalised Interest ($000) 115,793 110,697 110,554 104,779

Outflows

QTC Borrowings - Redemption ($000) - 50,000

Net financing cash flows ($000) 115,793 160,697 110,554 104,ng

Net increase (decrease) in cash held ($000) 40,000 10,000 (4,281) (149,866)

Cash at the beginning of the financial period ($000) 40,000 70,000 44,281 194, 147

Cash at the end of the financial period ($000) 80,000 80,000 40,000 44,281

Financials: parent entity

Not applicable (see above).

Financials: subsidiary (Australian Water Recycling Centre of Excellence)


Assets

Major assets

The following major assets are 100% owned by Seqwater:

• Dams

• Weirs

• Water treatment plants

• Water pump stations

• Recycled water treatment plants

Doc 110. FINAL Version date: 31 May 2015 Trim ID: 015/80187 Doc owner : CEO Doc approver: The Board Rev 110. of 18


'Seqwater Operational Plan 2015-2016 water WATER FOR LI FE

• Desalination plant

• Pipeline network

• Recycled water pipelines

• Irrigation channel.

Seqwater will continue to seek opportunities to derive the maximum value from water assets, including decommissioned assets and those in standby modes.

Subsidiary entities: assets


Operational and capital expenditure program

Repairs and maintenance

The following table relates to the operating expenditure programs for catchment, recycled water, desalination and network assets for the 2015-2016 financial years:

2015-2016 Repair and maintenance activity Budget Description

' ($'000)

Provision of tactical and natural asset maintenance Strategic maintenance planning program 2,130 planning and strategic asset maintenance

enQineerina.

Scheduled, planned and reactive maintenance Provision of asset maintenance and repairs to ensure

15,090 facility and system operability, maintainability, safety programs and oroduct aualilv.

Provision of land maintenance activities for dams and Catchment and land maintenance program 7,969 WTPs and other catchment maintenance activities

associated with ooerational assets.

Minor works 4,970 Asset refurbishment to sustain asset performance and make minor imorovements.

Repairs and maintenance (recycled water and 6,613 Overall maintenance expenditure for manufactured

desalination) water sources.

Budget total 36,772


The controlled version of this document is registered . Al l other versions are uncontrolled .

'Seqwater Operational Plan 2015-2016 water WATER FO R LIFE

Business development

Seqwater reports on business development matters as requested via the ad hoc Ministerial reporting process.

Assets under construction and proposed capital expenditure

The table below includes projects expected to be approved and commence either the design or construction phase in 2015-2016.

I - -- - . . . --- - - - ·r 1i -- -

J I 2015-16

I Asset Class I

I ' Unit Budget I I

- - - - - -- - - _ 4 ,.__,_ _ _ _ _

Irrigation ($000) 1,348

Natural ($000) 5,563

Purified Recycled Water ($000) 722

Recreation ($000) 885

Water Storage ($000) 13,961

Water Transport ($000) 17,067

Water Treatment Plant ($000) 67,047

Other Infrastructure ($000) 6,442

Management Efficiency Target and Unforeseen ($000) (16,081)

lmoacts

Total ($000) 96,954

Notes to the proposed capital expenditure:

• The proposed asset investment program is based on a sound planning process, together with information available and is therefore recommended as deliverable, comprehensive and efficient.

• The proposed asset investment program is less than that endorsed by the Queensland Competition Authority for 2015-2016 in its draft report (Queensland Competition Authority Draft Report SEQ Bulk Water Price Path 2015-2018, November 2014). Some expenditure has been deferred to later years, providing time for refined planning and increased community engagement.

• An independent assessment of the 26 regulated dams has identified a program of works and planning work needed to ensure the dams continue to meet national standards into the future. Dam upgrades and planning work have been prioritised to design a staged work program that is scoped and scheduled to ensure security of water supply while delivering the best value for money. The Dam Improvement Program will drive significant capital investment during the next 1 O years. Planning work currently underway will resolve the quantum and timing of these investments.

Based on Seqwater's proposed long-term asset operating strategy, there is an increasing reliance on using the capacity of all of the key water treatment plants as demand increases. The capacity of water treatment plants to supply peak demands and maintain water quality will be a key investment driver in the future, particularly under adverse raw water conditions.

More detailed planning for Seqwater's transport assets is underway. Based on current information, investment in this asset class is likely to be driven by renewals rather than significant capacity increases.

Doc no. FI NAL Version date : 31 May 2015 Trim ID: 01 5/801 87 Doc owner: CEO Doc approver: The Board Rev no. of 20

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---- -....----..------- - ·-·-·---

[' Seqwater operational Plan 2015-2016 ] e water WATER FOR LIFE

Overall, ensuring a reliable and safe water supply with projected growth under a range of operating conditions will drive substantial future investments in treatment, transport and catchments. The drivers will continue to be compliance and renewals with potential increases in efficiency investments.

Planning priorities to ensure an efficient future investment profile across these assets include:

• Better understanding of asset capability, operational flexibility and least cost options to meet demands under variable conditions.

• Better understanding of the council owned water business expectations and continuity of supply requirements.

• Prioritising and optimising the investments across the asset categories.

• Better understanding the organisation and community risk tolerance.

Proposed borrowings for 2015-2016

I ·, Proposed Borrowing Program 2015-16 1

I ($0005) I

QTC Borrowing {Capitalised Interest) 115,793

Repay/Redraw, Working Capital/Short Term Funding Facilities1 20,000

Total Borrowing 135,793

1 Increases limit from $180M to $200M.


The controllecl version of this clocurnent is registered . All other versions are uncontrolled.

Sponsorship, advertising , corporate entertainment, donations and other activities Table 3: Sponsorship, advertising, corporate entertainment, donations - details of individual expenditure items over $5,000 and below $5,000.

2014-15 2014-15 2015-16 Activity Description I . d

benefit budget ($) estimate budget ($) _ _ _ act~I ($) _ _

Sponsorship

Healthy Waterways Awards

WaterAid Australia events

Total over $5,000

Other (total) below $5,000

TOTAL

*2015-2016 sponsorships still under consideration.

Advertising

Public information campaigns (e.g. Play it safe)

Dam release notification service public information campaign

Weir safety public information campaign

Total over $5,000

Other (total) below $5,000

TOTAL

Corporate entertainment

Total over $5,000

a.

b.

c.

d.

e.

34,000 34,000

6,000 2,500

40,000 36,500

7,560 40,000

40,000 44,060 40,000*

770,000 770,000 750,000

32,000 32,000 10,000

5,000 5,450 5,000

807,000 807,450 765,000

5,000 5,000 15,000

812,000 812,450 780,000

Other (total) below $5,000 10,000 10,000 10,000 ------- --- --- -- ------- -- ---- ----- ----- -------- ------- -------- ------ ------- - ----- ----- --------------------TOTAL 10,000 10,000 10,000

Donations

Total over $5,000

Other (total) below $5,000 5,000 260. ------- ---------------- ----------------------- --------------- --- ---- --- ---- ------------------------------TOTAL 5,000 260

Description I benefit notes a. Seqwater sponsored three categories of the Healthy Waterways Awards to support

individuals, volunteers and researchers who contribute to improving SEQ catchments and waterways. 2015 was the final year of a three-year awards sponsorship.

b. As part of its corporate social responsibility program, Seqwater supports WaterAid Australia through an annual membership and sponsorship of events to raise funds to improve poor people's access to safe water, hygiene and sanitation. Seqwater staff also contributed to WaterAid through payroll and support of activities.

Doc no. FINAL Version date: 31 May 2015 Trim ID: 01 5/80187 Doc owner: CEO Doc approver: Tile Board Rev no. of 22

The controlled version of this document is regislered . All olher versions are unconlrolled.

JSeqwater Operational Plan 2015-2016 I i & se~Water-L _ -~ '11 WATER r-GR LIF E - - - ------

c. The Play it safe public information campaign promotes visitor safety at Seqwater dams and recreation assets. Seqwater research showed many people do not have the same level of awareness about safety around lakes as they do in pools or at the beach. More than a third of all drowning deaths (35%) in Australia are on inland waterways -rivers, creeks and dams; that is more than beaches and pools combined (31%). More than 100 people drowned in Queensland last year. The public information campaign includes television, radio, online and outdoor advertising to remind the more than two and a half million people who visit Seqwater's lakes, dams and parks each year to plan ahead and follow safety rules.

d. The dam release notification service public information campaign encourages the community to register for Seqwater's dam release notification service ahead of the annual wet season. There is an ongoing investment program into this campaign with funding increased in 2014-15 year to communicate changes to the manuals for operational procedures for flood mitigation for North Pine, Wivenhoe and Somerset dams.

e. The weir safety public information campaign urges the public, especially young people, to be aware of the potentially fatal consequences of swimming in weirs and flooded waterways.

Definitions

Sponsorship - The association of Seqwater's name with a sponsored organisation's service, product or activity, in return for negotiated and specific benefits.

Corporate entertainment - Seqwater hospitality offered to corporate customers, key stakeholders and interest groups.

Advertising - Messages paid for by Seqwater intended to educate or inform the people who receive them.

Donations - A voluntary transfer of money or property by Seqwater for which the organisation receives no material benefit or advantage.

Doc no. FINAL Version date: 31 May 2015 Trim ID: 015/80187 Doc owner: CEO Doc approver: Tile Board Rev no. of 23

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Part 4: Other undertakings As part of its performance agreement with its Responsible Ministers, Seqwater provides the following additional undertakings.

Prudent financial information The CEO, subject to the direction of the Board, takes full responsibility to ensure that prudent financial practices will be applied both within Seqwater and within its subsidiary.

Capital structure Seqwater will prudently manage within the capital structure parameters approved by the government.

Weighted Average Cost of Capital (WACC) Seqwater adopts the price path set by the government for charging distributor retailers. The price path is determined by the Responsible Minister, following recommendations from the Queensland Competition Authority.

However, Seqwater will also set a WACC for use as a discount rate in project assessment, and to enable a Maximum Allowable Revenue (MAR) cap to be calculated for comparative purposes, and to allow a reconciliation of the price path revenues to the MAR. The price path calculation (pending final determination by the Responsible Minister) will be based on the Queensland Treasury Corporation Cost of Debt.

Seqwater also uses WACC calculations for fair value (using the income based approach) and for annual impairment testing. The WACC calculations are provided by an independent expert.

Further details on the breakdown of the WACC assumptions can be provided upon request.

Annual return policy Pursuant to section 53 of the South East Queensland Water (Restructuring) Act 2007, Seqwater is required to pay the State an annual return as determined by the Responsible Ministers within six months of the end of each financial year.

To determine the amount to be paid, between 1 May and 15 May Seqwater must give the Responsible Ministers an estimate of their net profit for the year, and a recommendation on the amount of annual return to be paid. By the end of the financial year, the Responsible Ministers must either accept the recommendation, or direct Seqwater to pay another amount (though not more than the estimate of net profit).

Corporate governance Seqwater will continually monitor and review its corporate governance arrangements to reflect good practice, having regard to the Government Owned Corporations guidelines as directed by the Responsible Ministers.

In conjunction with the Responsible Ministers' departments, Seqwater will continue to review its existing governance arrangements to cut red tape, and to deliver improved effectiveness and efficiency.

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Compliance with Government policies Seqwater and its subsidiaries will comply with all relevant government policies and guidelines. In particular, Seqwater and its subsidiaries will comply with the approval, notification, reporting and other requirements of those policies and guidelines.

Risk management Seqwater will implement and maintain an Enterprise Risk Management System based on the Australian/New Zealand Standard AS/NZS ISO 31000: Risk Management Principles and Guidelines. The Enterprise Risk Management System comprises a Risk Management Policy statement, Risk Management Framework, and Risk Management Procedure. The system outlines a process for the identification, analysis, evaluation, treatment and monitoring of risks, with the intention of providing stakeholders with a high level of confidence that Seqwater has a reliable basis for decision-making that improves loss prevention and maximises relevant business opportunities.

Bulk water pricing Seqwater will work closely with the Queensland Government to implement the Determination on bulk water pricing once it is made by the Responsible Ministers in response to the Queensland Competition Authority's Final report: South East Queensland bulk water prices 2015-2018. Seqwater will continue to support Government in understanding future bulk water prices and price impacts on customers.

Irrigation pricing Seqwater has commenced preparations for the 2017-2022 irrigation price review in consultation with DEWS and Queensland Treasury. Seqwater will continue to advance its plans, liaising with Government, peak industry bodies and customers.

Network service plans Seqwater will continue to prepare and publish network service plans for each of its irrigation water supply schemes and to consult biannually with customers.



Attachment 1: Strategic Plan

Our vision Heafthy communities. Prosperous region.

Our purpose Partnering to deriver safe. secure and cost-effective water and catchment services to our customers and communities.

Partnering -working collaboratively with customers. communities. governments and industry. Safe. SECUra and cost effuctive -continuing to ensure water security. meeting regulated standards and minimising costs for businesses and cooununities. Wai.er services - effectively managing our catchments and infrastructure to source. store and supply water that is fit for purpose. Catchment services - providing water source improvement. flood mitigation. recreation and land management services.

Our values • We wc,rk safe • We w1:,rJc together • We c:011ti11ually improve • We deliver • We r,a,;h make a cliffereoce.

Our role in the water sector We are part of South East Queensland's regional water supply network, which includes council-owned water entities, local governments and private sector agencies. Our role is to sourt:e, store and supply treated water from catchments and alternative sources, ensuring a high quality and reliable water supply for our customers.

We work v.~th our inclustry partners to achieve the bE1st whole-ofsystem solutions and provide industry leadership in our region.

The Queensland Government has set perfonnance standards for our business through a Statement of Obligations. This provides a comprehensive framework for performance. requiring us to: • Focus on core business (safe. secure. resilient and reriable

water supplies) • Be an effective and efficient business • Communicate, consult and collaborate • Achieve long-term business sustainability • Be innovative • Support government objectives and directions.

Our contribution to regional prosperity Water is funllamental to regional prosperity. By providing safe. secure and cost-effective water and catchment services, we fuel the econwny and enhance the lives and livelihoods of the people living and wor'ring in the region.

We work with our customers. communities. governments and industry to understand their needs and to assist us in meeting those needs.

The affordability of water is a key issue for our customers. We continue to reduce our costs by: • Maximising the productivity of our existing water supply

infrastructure • Taking a whole-of-water-cycle approach • Wor'ring with our industry partners to meet customer needs

in the most cost-effective way.

We support the ongoing growth and prosperity of our region by planning for the future. We develop long-tenn water supply plans that seek to meet community expectations and needs in the most efficient way possible.

Doc no. FINAL Vers ion date: 31 May 2015 Trim ID: 015/80187 Doc owner: CEO Doc approver: The Board Rev no. of 26

Critical issues for reg ional water supply The issues most criticil to our lonq-term business performance include: • Affordable water for our customers • Attraction and retention of a skilleif and committed workforce • A customer focused workforce that understands and meets

customer expectations • Planning and operating water supply assets in a variable

cl imate and during extreme weather events • Collaborative whole-of-water-cycle management • Partnering to improve catchment health • Influencing the long-term regional planning agenda

Seqwater in 2020 Our CtJstomers are at the heart of everyd!ing we do. We are trusted and re:;pectecl b~ customers. communities. government and industry.

Our skilled aml corMlitted workforce is driving improvement Seqwater is recognised as a high performing business and a great place to work.

We are continuing to work proactively with our partners to deliver safe, secure and more cost-effective watBr and catchment services. and we have shaped our long-term water future. We are an industry leader in water source management storage. treatment and supply.

Water is valued-customers understand and value the water we provide and we understand our customers' expectations and are dE1livering the services they require.

We are at the table as a trusted advisor to inform regional planning and regulatory decisions. Our smart competitive bIBiness is contnbuting to a healthier. more prosperous South East Queensland.

The controlled vers ion of this document is registered. All other versions are uncontrolled

Strategic Plan 2015 - 2020

..... ~~ <...) .... .... a: ::, < Q

Cll ... E a: 0 a: ~

en a: =-::

Skilled ad anmitcd wortfon:e Our v.crliorte is motivaied. empow111ecl and agile. drivirg changa and dalivoring far our customers and communities.

A :ale worqilace • Continuously improve our salaly

mana!lllment syslilm

• Om-a ~\aldurca behaviaLrS th3t support a S1rong salilty cullll:re

• fos!Sr woMoroe health and v,ellbeing. 01-galliatioal lmmewvdt • lmplemant ~w cp;ratitlns and

m:iintooa= de6\'Ul'f moc!als • Enhance perloonance managamenl Positive 11tg1111isatiolllll atllme • Attr.ict and ratlin the right people • Build an effectr.-a la:idership team • S.rengti)an skills in laadarship.

empuwennant and accountability • lrMlst in tha skills and cap;ibility of

IJlJ" people to build an .igi)e. pro3etiw. GJ'lgaged and custoroer·lccusad •Mllldo:te

• O.Mllop 3 baserni for Oii" organisational cultura

• Recognise and reward parforrnan:a . Alm information IIIIBbled lmsiaess • lmplomiant IIIC!ir.clagy solutions to

make O\J" worlcforce mere effi:i211 and rnsponsjw

• Enhance our information. !DOis and

• inxussas to SUJ1lX)!t docisicn-m:wng l.Gwrage gecgraphic informi!lian S)'Stem caJ)3bifrty to suppat cur ficild workforce.

• lost time iniUJY frequency rate

\: Significant injury frequency ratg Completion of incident im•estigation outcomes to schedule

• Warilarce ~-ailabifity • Wordcrce tlJmo\'Bf •

laawledgeallle

Wa engage with our customel3 and COflflltntiBS providing opponuiities to unda!stand wl131 we do aJX! sooking feedback to irr1JrtMl our sosvicas.

&gagi11g cm1Dmeismut cammuities • Proattiwly engage and lismn ID

customers and respond ta tbair needs • Strengthen community partmrships • Implement our customer engagement

frame-.wnc and d;velcp a lang-tlllm customer &ngaglllllentplan

• Engage with custnm91S about selVice kr.o;il expectatians and lcnger tlllT1l w.itw supply plans

• Exploru oppcxtunities ID engag;iwizh cust1l111ers and tolTlll1lllitias through tracfitional and digital communicatiln channGls

• Ocr,;ilop a CUSIDlller saivice banchmatk so we can measure our performance.

Slrppcctiog amdoor reaee1ioa • l'ro¥ide a range of recreation

opporrunitias at our water supply lalals.. lalpnrri11g access ID iafonnri• • lnctease aJStolner aa:ess to information

about !hair water, and water and catchment sarvi=-

• Co:nmtmity awarnness or UldelstJnding of high impact pmjectli.

Tmn:d ad l'ft1IK1lld psrmwr We work collaboratively wi1h partners 1D ilnpra 1oa perfonnanca and explore new oppununities across 1ho region.

Ad~11 a=amity priorities • Wari with custornalS and partness to

in!ormnd custo1ner expectations and develop dam.ind management stralllgias

• Coordinats iniegr:itad v.nale-of-w3lllr· grid ellllll!lOllCf and flood m:!113gQ111Dnl planning

• Develop an ildustry·wide drought management apprc;ich.

Oplimisiq indm1Jy perlarmua, • Orr.'13 South East Oueenserd"s water

SQMCQ proviclass" parmarship 10 impmw whole of SIJJJll!y m3113gement processes and efficiB!X:'(.

MuimisiJlg illlbiucc • Shape and infuence cur extamal

environment through smkaltolder

• engagement So= appropriato inl1uancn :it st!te and nati002l levals

• Contribuie to long-term local and state QC\'all1!11Bnt ragilnal planning through onhantlld relationships with SEO rouncils and govamm211t agl!llcies

• Partner 1D alMlta!e for and imptaw catchment haalth and SOOltll \'131nr quality

• Col ~ta ID daliver :;o-year water sec:unty program.

Builmg Dll1 brud • lncrnase cur understzncftng of customer.

community, QO\'!llllment and industry noods and 9llllectations

• Continoo to implement brand stramgy • Undertake Cl!getad public infurmatm

t:llllpaigns.

• Ulll)!ompted brand .nvarnnsss • Parm; engagement rating • Planned savings and other iml)I0\'9111Bnts

achim'ad from \'l:ltllr service pro\oiders' parUlelshjp initiatives.

m CSll:iam:mlsenicc We lake G\'QI)' O))pOl1lJnity to op1irnise the ~ \W d;fiver water and catdunant services 111 beoolit aistomm and C0111111uni1ias.

Acaaiq a,entioal ex:ellnce • Provide a safa, secure and cost effocti\'il

water Sl.'J>Ply that mee1S cus10mer and ccmmunity requiremenlS

• Optimise the use al energy. chemicals and othar l'QSO\IICBS 111 redute cha cost of producing watar

• Understand !Uj)BCtnicns and acc;ptabla risk l~o;ils fur Yr.lW quality and reliabi~ty

• lrwast in raal-tima bast approprialll r;ctice mooiumg and con~I systems

wa111r supply infrastructure and process OJ)21'3tions and pmiormance.

E*Ki1lg Cllldl-=t 1enica • f.ontinue ID enhance mcreation

opparnmities • Understand haw catchment imJll(Mllllent

initiali\-es can oontn"bute to i;ai.roe water risk reduction

• Ad\'OCatll and SElClG inwstnKmt fer catl:t,men, imprC\'ament

• Build rtJ!alionshil)S with landhald;rs m improve catchment health.

Enelliag ill lood mili,ain • Grow our expertise in dam m~t

and flood mitigation • Continue ID SUJll)Olt a uilled Hood

DIXITTlOOIIS taain that uses in1emalional best prattica medals and processes, and opera:es our dams in accordance wiih Bood manuals .

• fllmpftami with bu De water supply agre11119111S

• WatEir supply :mnes compfiant vnth the AustraGan Drinking Watar Guidefinas

• Catchment risk ruductioo actions implemanmd

• Emergency prepl!ll!dness exmtises camplmsd

• Scheduled mainrananca tasks delivered an time.

Doc no. Doc owner:

FINAL CEO

Version date: 31 May 2015 Trim ID: 015/80187 Doc approver: The Board Rev no. of 27


Samimsble imacial pedanmace Staoholdeis have confidante in the llfficiooc:y :ind long-1Eml SUS!ain.ibili1y of our businass.

r..,..,,,.11 c:oimRn:ial paf,,..-ce • Achiew efficientoparating costs • Develop arganis:itional cammmcial

ca~6ty and accountability • Optimjsa cash flaw ~enl

inclucfing rupormg • Ensure etfactivg risk managem;mt

precesses • 81111Chmar1c operating and mainmn:ince

cos1S agains.: other utilities. Oplilrtisiog asset petf-• Driva 1ha mast \-alue out of our water

SUJ)ply inifrastrucrure through leaclm;i edge asset management and strn111gic optimisation of asset use

• Improve asset managmnont pio,;esses and S)'St6mS

• Optimise asset lll!la'/131 and mainlQnance programs

• Ensure asset ill\oas1ments are ~ and effici;nt

• Invest in long-tarm asset plannilr;i • OewlOJ) certified and integrated

manaQ11111ent systams • Develop a sUSlalinable capital s11UC11J111.. Adii~ eco11omic rqalmiDI objedms • l93d 1he way in driving value fur

lllS 1DmlllS • 00\'IIIOJ) sus:ainablo boll: V,'alar price

path proposals • Wort with agencies to achi;ivo 3

rggulatDry environrnant trot driv;s value for cusmrn=.

• Operational expend"rtum against budgat • Bonchmark mainmnanoo costS against

'N3tllr industry • Variabla cost of water supplied from

major wat!r !Jeatrnsnt plants • Capital expendilll:re against budget • Capital efficiencies adlievad [against

estimamd costs al apprm<ed Jlllliec!SI • Completion of enterprise risk mitigation

actions • Ccmpluticn of illalml i!Udit actions to

schedule.

,-·seqwater Operational Plan 2015-2016~-

Strategic Plan - Five year financial outlook

The Seqwater five-year financial outlook is based upon the current bulk water price path for sales to South East Queensland council-owned water businesses.

Income statement

Period Beginning Date

Period Ending Date

:st~tement of Comprehensive Income

Operating revenue

Water Services - Distribution I Retail Revenue

Water Services - Power Stations/ TRC Sales

Irrigation/ CSO

Hydro revenue

Grant revenue

Interest income

Other revenue

Gain on disposal

Total operating revenue

Operating expenses

Employee Expenses

Supplies and Services

Total operating expenses

Earnings before interest, tax and depreciation (EBITDA)

Depreciation and amortisation expenses

Earnings before interest and tax (EBIT)

Interest expenses

Net profit before tax (NPBT)

Taxation (Expense) I Benefit

Net profit after tax

Notes to income statement:

Revenue:

Ol-Jul-15

30-Jun-16

$000

783,129

22,066

4,991

330

11,382

1,678

4,056

827,632

76,818

160,261

237,079

590,553

249,372

341,181

534,617

(193,436)

01-Jul-16

30-Jun-17

$000

845,503

22,618

4,777

338

11,382

1,458

4,033

890,109

80,691

160,332

241,023

649,087

241,355

407,732

511,908

(104,177)

(193,436) (104,177)

Ol-Jul-17

30-Jun-18

$000

910,737

23,169

4,853

347

11,382

1,193

981

Ol-Jul-18

30-Jun-19

$000

978,640

5,363

4,962

355

11,382

1,468

1,004

Ol-Jun-19

30-Jun-20

$000

1,052,183

5,488

5,070

363

11,382

1,108

1,025

952,662 1,003,174 1,076,618

83,407

159,275

242,681

709,981

241,051

468,931

493,869

(24,939)

(24,939)

84,995

161,682

246,677

756,496

241,863

514,633

476,723

37,910

37,910

87,796

165,546

253,342

823,276

242,814

580,462

460,642

119,820

119,820

• Water sales - distribution I retail revenue is calculated using the Queensland Competition Authority final report SEQ Bulk Water Price Path 2015-2018 for 2015-2016 year and forward

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years estimates. The prices have been recommended from QCA for the period 2015-2016 to 2019-2020 with a 2.5%p.a. increase from 2020-2028; unless stated otherwise.

• Water sales - power stations I Toowoomba Regional Council (TRC) sales include only the fixed charges for and TRC $5.0M. The TRC fixed charge to access Wivenhoe water has been escalated by CPI each year. No variable revenue for Toowoomba has been included at this point.

• Please note the change in financial position in year 2018-2019, where the forecast changes from a repeated loss to a profit before tax.

Taxation expense:

No Taxation Expense has been forecast due to the uncertainty of the asset revaluation movement.

Period Ending Date

Cash flows from operating activities

Inflows:

Receipts from water services

Receipts from leases, rentals and other

Interest received

Outflows:

Payments for operating expenses

Interest payment

Net cash provided by operating activities

Cash flows from investing activities

Inflows:

Proceeds from sale of plant and equipments

Outflows:

Payments for PPE and intangibles

Net cash provided in investing activities

Cash flows from financing activities

Inflows:

QTC borrowings/ Capitalised Interest

Outflows:

QTC Borrowing redemptions

Net cash provided by financing activities

Net increase in cash and cash equivalents

30-Jun-16

$000

803,909

6,472

1,678

(234,930)

(535,913)

41,216

(117,009)

(117,009)

115,793

115,793

40,000

30-Jun-17

$000

860,765

6,108

1,458

(238,905)

(504,163)

125,264

(155,264)

(155,264)

(30,000)

30-Jun-18

$000

926,151

3,065

1,193

(246,949)

(495,452)

188,008

(138,878)

(138,878)

{39,130)

(39,130)

10,000

30-Jun-19

$000

975,912

3,095

1,468

(242,058)

(478,363)

260,054

(117,953)

(117,953)

(162,101)

(162,101)

(20,000)

30-Jun-20

$000

1,048,748

3,125

1,108

(252,963)

(461,979)

338,038

(151,623)

(151,623)

(171,415)

(171,415)

15,000

Cash and cash equivalents at the beginning of the financial---'------'-------'-------'--=---=-::.,==40,000 80,000 50,000 60,000 40,000 Cash and cash equivalents at the end of the financial year 80,000 50,000 60,000 40,000 55,000

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---~

'Seqwater Operational Plan 2015-2016 J

Balance sheet

Period Beginning Date Ol-Jul-15 01-Jul-16 Ol-Jul-17 Ol-Jul-18 01-Jun-19 Period Ending Date 30-Jun-16 30-Jun-17 30-Jun-18 30-Jun-19 30-Jun-20

$000 $000 $000 $000 $000

!Statement of Financial Position

Current assets

Cash and cash equivalents 80,000 50,000 60,000 40,000 55,000

Trade and other receivables 130,522 140,917 151,790 163,107 175,364

Inventories 6,863 6,863 6,863 6,863 6,863

Other current assets 3,811 3,811 3,811 3,811 3,811

Total current assets 221,196 201,591 222,464 213,781 241,038

Non current assets

Property, plant and equipment 10,533,450 10,450,803 10,353,571 10,234,077 10,147,037

Intangible assets 170,121 166,676 161,735 157,320 153,169

Total non current assets 10,703,570 10,617,479 10,515,307 10,391,397 10,300,206

Total assets 10,924,766 10,819,070 10,737,770 10,605,178 10,541,244

Current liabilities

Trade and other payables 32,566 33,684 28,417 33,037 33,417

Employee benefits 8,320 8,320 8,320 8,320 8,320

Interest bearing liabilities 34,387 42,132 40,549 38,909 37,572

Unearned revenue and other 11,382 11,382 11,382 11,382 11,382

Total current liabilities 86,655 95,518 88,668 91,648 90,691

Non current liabilities

Employee benefits 11,327 12,327 13,327 13,327 13,327

Interest bearing liabilities 9,386,419 9,386,419 9,347,289 9,185,188 9,013,773

Deferred tax liabilities 51,961 51,961 51,961 51,961 51,961

Unearned revenue and other 327,676 316,294 304,912 293,530 282,148

Total non current liabilities 9,777,383 9,767,001 9,717,489 9,544,006 9,361,209

Total Liabilities 9,864,038 9,862,519 9,806,157 9,635,654 9,451,900

Net assets 1,060,728 956,552 931,613 969,523 1,089,344

Equity

Contributed equity (715,888) (715,888) (715,888) (715,888) (715,888)

Asset revaluation surplus 2,016,316 2,016,316 2,016,316 2,016,316 2,016,316

Accumulated surplus/(deficit) (239,700) (343,876) (368,815) (330,904) (211,084) Total equity 1,060,728 956,552 931,613 969,523 1,089,344

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I 'Seqwater Operational Pfiill~ 2015-2016

Attachment 2: Policies Recreation management framework Seqwater manages all of the major water storages in South East Queensland. These water storages provide the majority of sites in South East Queensland for recreation on or in freshwater. Collectively these water storages provide a 'recreational landscape' of regional significance, attracting more than 2.75 million visitors to the region in the 2014 calendar year.

Consistent with the requirements of section 51 (d) (ii) of the South East Queensland Water Restructuring Act 2007, a Recreation Management Framework (the Framework) has been established to guide decision making. A key element of the implementation of the Framework is the development of site specific recreation management plans. Following extensive consultation with SEQ communities, Seqwater released recreation guides and associated management plans for 20 lakes as part of its Recreation Review.

Seqwater's recreation assets play an important role in a growing and liveable region. Provision of recreation provides a unique opportunity for Seqwater to be customer connected.

The Framework is available via the Seqwater website (seqwater.com.au) along with all site specific Recreation Management Plans and the rules governing the use of recreational assets.

Treasury policy Seqwater has policies in place for minimising any risk of investments and borrowings that may adversely affect its financial stability.

Consistent with the requirements of Section 51 (c) (IV) of the South East Queensland Water (Restructuring) Act 2007, POL-00069 Treasury Policy has been implemented by Seqwater to ensure the prudent, orderly and efficient approach to the management of assets and liability associated with the financing of Seqwater's business.

Open data Seqwater's Open Data Strategy complies with the Queensland Government Open Data Policy. Seqwater is committed to supporting the Queensland Government goals to:

• make data accessible and easy to find

• publish data in line with the Open Data Policy Principles

• inform its stakeholders and key service delivery areas of data for impending release

• ensure data is fit-for-purpose

• work with stakeholders to realise the benefits of open data. A copy of the Strategy is available on Seqwater's website (seqwater.com.au). Information published pursuant to the Strategy will be available on the Seqwater website and the Queensland Government Open Data website (qld.gov.au/data).

Remuneration arrangements Seqwater is governed by an independent Board of highly regarded professionals appointed by the Queensland Government. The Board has primary responsibility for strategic guidance and monitoring Seqwater operations.


The controlled version of this document is registered. All other versions are uncontrolled .

'Seqwater Operational Plan 2015-2016 I

Seqwater's Board members are:

• Noel Faulkner (Chairman)

• Jenny Parker

• Leith Boully

• Michael Arnett

• Shane McGrath.

The remuneration arrangements for Board members are in line with the remuneration arrangements as advised by the Responsible Ministers. Final 2014-2015 remuneration amounts will be available at the end of June 2015 and included in Seqwater's 2014-2015 Annual Report.

Industrial relations and employment plan Seqwater remains committed to having an open, consultative approach with employees, creating a safe working environment and consulting with staff on the implementation of workplace changes. Employment arrangements within Seqwater are based on the vision, purpose and values of the business, with a desired culture that supports strategy execution.

Seqwater's primary employment and industrial relations goals for 2015-2016 include:

• Planning, negotiation and certification of a replacement Seqwater Certified Agreement (2016-2019).

• Development of a number of technical capability frameworks to define the technical skills that drive organisational success within different functions. The technical capability frameworks will be used to underpin recruitment and selection, learning and development, performance management and talent management decisions and activity at both the individual, functional, and organisational level. There is also the opportunity for targeted learning spend towards the most important technical capability gaps.

• Implementation of Talent Management Program which involves ensuring identified High Potentials receive targeted development that they need for readiness to fill critical roles when required.

• Implementation of performance indicators for all Enterprise Bargaining Agreement (EBA) covered staff through individual My Achievement Plans (MAPs). MAPs also include individual capability assessments against Seqwater's Core Capability Framework and an individual development plan for each employee within Seqwater.

• Design and implementation of an on-boarding program for employees who are new to a leadership role within Seqwater. The program will enable the understanding and capture of new leader needs in relation to on-boarding, the expectations held of new supervisors across various functions within the organisation and the development of tools and resources to assist hiring managers and new leaders to understand organisational requirements and expectations.

Seqwater engages employees under two employment modes:

• An Seqwater contract of employment (where the wage rate is determined by a work evaluation and falls outside the EBA classification structure); and,

• Seqwater Certified Agreement 2013-2016.

Doc no. FINAL Version date: 31 May 2015 Trim ID: 0·15/80187 Doc owner: CEO Doc approver: The Board Rev no. of 32

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1 ·seqwater Operational Plan 2015-2016 ----~-----

water WATER FOH LIFE

Seqwater is also committed to complying with the State Government's Public Sector Wages Policy and any other State Government employment and industrial relations policies.

f -~ ~~-=-=-~-~~-~-~~·~ ~~-~~=~~ ~-·-. ~:_~::·~ Permanent FTE's - Employment category:

Permanent full time 523

Permanent part time 24

Fixed-term full time 40

Fixed-term part time 0

Casuals 1

Total directly employed workforce: 588

Apprentices (Contractors) 3

Trainees (non-FTE) 6

Graduates (non-FTE) 11

TOTAL WORKFORCE: 608

Vacancies 32 1

workforce breakdown figures are as at 25 May 2015.

Seqwater Certified Agreement productivity initiative

Seqwater's innovative EBA has been structured to facilitate and identify business related savings across Seqwater. These savings are then used to fund the contingent wage increases available to staff. In the 2015-2016 period, there are two contingent wage offers available to employees. Employees will be eligible to achieve the contingent increases upon successfully achieving the required savings as summarised in the table below.

January 2015 - 30 June 2015 $496,605

July 2015 - 30 December 2016 $288,628

In the period since the Agreement's certification in September 2013, Seqwater employees have met each target to achieve the contingent wage increase available. At the time of certification a total of $2.2 million was expected to be saved through the life of the Agreement. This would ensure each contingent wage increase was made available for employees. The Agreement has laid a foundation for an efficiency focused workforce and employees have exceeded each savings target to date. Since July 2013, employees have identified and Seqwater has realised more than $4.6 million in savings.

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