ANNUAL REPORT - Victorian Ports Corporation · 6 Vict ) 201-1 Annual Report From the Chairman 2017-18 was the first full year of operations for Victorian Ports Corporation (Melbourne)

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Victorian Ports Corporation (Melbourne)

Street addressLevel 5, 530 Collins StreetMelbourne Victoria 3000

Australia

Postal addressGPO Box 261

Melbourne VIC 3001Australia

Tel: +61 3 8347 8300 Fax: +61 3 8347 8301

www.vicports.vic.gov.au Victorian Ports C

orporation (Melbourne) 2017-18 A

nnual Report

ANNUAL REPORT2017-18

1Victorian Ports Corporation (Melbourne) 2017-18 Annual Report

The Hon. Luke Donnellan MP Minister for Ports1 Spring StreetMelbourne Victoria 3000

The Hon. Tim Pallas MP Treasurer1 Treasury PlaceEast Melbourne Victoria 3002

Dear Ministers,

Victorian Ports Corporation (Melbourne) 2017-18 Annual Report

I have much pleasure in submitting to you the Annual Report of Victorian Ports Corporation (Melbourne) for the period 1 July 2017 to 30 June 2018, in accordance with the provisions of the Transport Integration Act 2010 (Vic) and the Financial Management Act 1994 (Vic).

Yours sincerely,

James CainChairman

29 August 2018

Responsible Body’s declaration

2 Victorian Ports Corporation (Melbourne) 2017-18 Annual Report


Responsible Body’s declaration 1Section 1: Year in review 5 From the Chairman 6 FromtheChiefExecutiveOfficer 7 Mission, vision and values 8 An overview of VPCM 9 Manner of establishment 9 Purpose and responsibilities 9 Functions, objects and powers 10 Significantlegislativechanges 11 Operations review 12 Financial information summary 17Section 2: Governance and organisational structure 21 Corporate governance 22 Directors 23 Board and Committee meetings 26 Organisational structure 27 Executive Management Team 28 OH&S and employment principles 29Section 3: Workforce data 31 Our people 32 Comparative workforce data 32Section 4: Other disclosures 35 Local Jobs First – Victorian Industry Participation Policy 36 Disclosure of government advertising expenditure 36 Consultancy expenditure 36 Information and Communication Technology expenditure 37 Disclosure of major contracts 37 Freedom of Information 37 Compliance with building and maintenance provisions of Building Act 1993 (Vic) 38 Competitive Neutrality Policy 39 Compliance with the Protected Disclosure Act 2012 (Vic) 39 Privacy 40 Statement of availability of other information 40 AttestationforfinancialmanagementcompliancewithMinisterialStandingDirection5.1.4 41Section 5: Financial statements 43Section 6: Appendices 105 A - Disclosure index 106 B - Statement of Corporate Intent 108

Contents



Section 1:

Year in review


From the Chairman

2017-18wasthefirstfullyearofoperationsforVictorian Ports Corporation (Melbourne) (VPCM) following the long-term lease of the port in November 2016.

The Board is now focused on consolidating and growing the business in a sustainable manner to ensure it continues to meet the needs of its customers, stakeholders and the Victorian community. To do this, VPCM must adapt to ensure it meets the technological and industry challenges that arise. This will ensure the port of Melbourne continues to be the gateway for trade in Victoria and home to the state’s premier cruise ship and interstate ferry facility at Station Pier.

With this in mind, VPCM is pursuing two major initiatives: the upgrade of the Vessel TrafficServices(VTS)navigationsystemand investigations into whether the port can accommodate some of the larger container vessels now being deployed by the shipping lines.

The work reinforces our focus on marine safety and navigation and will enhance our service delivery and the safety of the shipping operations in Port Phillip Bay. The larger vessel investigations are a collaborative effort with Port of Melbourne aimed at meeting emerging industry needs with the shipping lines.

In May 2018, VPCM received funding in the Victorian Government budget to enable planning to accommodate the growing maritime passenger industry at Station Pier. This is in response to the increasing number of cruise ships and cruise passengers visiting Melbourne each season and the announcement by the Tasmanian Government that TT-Line is purchasing two new, larger vessels for its domestic ferry service.

I want to thank my fellow Board members for their work during the year in establishing the foundation and direction for VPCM. I also wish to recognise James Chen, whose term as a Director concluded on 31 January 2018.

On behalf of the Board, I would like to thank the ChiefExecutiveOfficer,RachelJohnson,andhermanagement and staff for their dedication and work during another very busy year.

James CainChairman


From the Chief Executive Officer

The 2017-18 year has seen Victorian Ports Corporation (Melbourne) (VPCM) move forward confidentlyandsetafirmfoundationforthefuture.

Wecontinuedtodeliversafeandefficientservicesto all of our customers during 2017-18. This included facilitating 3795 ship visits to Port Phillip Bay which ensured the smooth continuation of trade through the ports of Melbourne and Geelong.

With safety one of our highest priorities, a new fully revised edition of our major marine and navigation publication, the Port Information Guide, was published in March 2018. This followed a similar revision of the Harbour Master’s Directions in June 2017. Together, these two publications set out the rules and protocols for safe navigation in Port Phillip Bay.

We are also concerned with the safety of recreational users of the bay and to spread the safety messages to more people we have increased our support activities for our ongoing Steer Clear boating safety patrols.

Those support activities included the production of two educational safety videos, courtesy of a grant from the Minister for Ports, and an ongoing program of visits by senior staff members to boating, yachting and angling clubs around Port Phillip Bay.

We successfully catered for the largest cruise shipping season ever seen in Melbourne – a record 108 cruise ship visits to Station Pier with a record 331,614 passengers and crew using the pier between October 2017 and June 2018.

We have restructured our fees and charges to betterreflecttheactualuseofStationPierbyvisiting cruise ships. This involved removing the time-based berth hire fee and introducing the new Site Occupation Charge. Increases to other fees and charges were kept to a modest 1.9% in line with CPI.

Successful negotiations were concluded during the year for a new staff Enterprise Agreement (EA) which has been approved by the Australian Fair Work Commission. The EA sets out a range of contemporary terms and conditions of employment for VPCM staff covering a period of four years.

While Port Phillip Bay is the gateway for commercial shipping it is also a much-loved communityassetusedforboating,fishing,yachtingand other aquatic pastimes. With this in mind, we are supporting The Nature Conservancy with its programofre-establishingshellfishreefsinthebayandtheirpopulationsofwaterpurifyingshellfish.

I would like to thank the Chairman and Board of Directors for their guidance and support throughout the year, which has enabled us to move forward withconfidence.Ialsowanttoexpressmyappreciation to the Executive Management Team and the staff of VPCM for their commitment and work and thank them for all of our achievements in 2017-18.

Rachel JohnsonChief Executive Officer


Mission, vision and values

Our missionWe contribute to the enhancement of the economic and social prosperity for the people of Victoria by providing vital infrastructure and services for trade and tourism. We do this by: •ensuringsafeandefficientnavigationofvessels • providing essential connectivity to Tasmania • realising Victorian trade and tourism opportunities for seaborne passengers and freight.

Our visionWe will be recognised for providing Victoria’s premier gateways for trade and tourism.

Our values• Safety - we lead the way in the provision of safe navigation and services.• Innovation - we deliver excellence in sustainable and practical solutions.• People - we support, respect, and challenge each other – we value diversity.• Customers and communities - we put our customers and communities at the centre of everything we do. • Integrity - always.


An overview of VPCM

Manner of establishmentVictorian Ports Corporation (Melbourne) (VPCM) is a Victorian Government statutory authority. Established on 1 November 2016, VPCM’s statutory objectives, powers and functions are carried out under the Transport Integration Act 2010 (Vic).

VPCM is part of Victoria’s integrated transport portfolio, led by Transport for Victoria (TfV).

TfV leads a user-centred, outcomes focussed and integrated approach that guides smart, long-term investments that support the state’s connectivity, prosperity and liveability.

TfV has a strategic approach to designing and managing the network and is building a modern transport system.

The integrated transport portfolio is working to enable an optimised network where transport modes work in harmony to move people and freight inthemosteffectiveandefficientway,witheachmode being used when and where it is best suited.

Purpose and responsibilities VPCM is responsible for: • channel management and safe navigation in

Melbourne’s port waters • waterside emergency and marine pollution

response • the management of Station Pier as Victoria’s

premier cruise shipping and interstate passenger ferry facility.

Shipping and navigation VPCM engages a licensed Harbour Master for the port waters of the port of Melbourne in accordance with Chapter 6 of the Marine Safety Act 2010 (Vic). It is also empowered to authorise persons to act as Assistant Harbour Masters, in accordance with section 229 of the Marine Safety Act.

VPCMoperatesmodernvesseltrafficservices(VTS) at the Port Operations Control Centre in Port Melbourne (Melbourne VTS) and at the Point Lonsdale Lighthouse (Lonsdale VTS). The VTS operates 24-hours a day, seven days a week to support safe navigation services in the port waters of the port of Melbourne.

Tourism gateway VPCM manages Station Pier as Victoria’s premier cruise shipping gateway. The pier also accommodates TT-Line’s Spirit of Tasmania passenger ferries and other visiting ships including Australian and international navy vessels.

Infrastructure VPCM is responsible for maintaining the heritage-listed Station Pier and the historic Point Lonsdale Lighthouse building at the Heads that houses Lonsdale VTS.

Trade Station Pier provides a vital trade link with Tasmania with the Spirit of Tasmania ferries carrying cargo between Devonport and Melbourne.


Functions, objects and powers Transport Integration Act 2010 (Vic) The Transport Integration Act 2010 (Vic) (TIA) commenced on 1 July 2010. Its purpose is to create a new framework for the provision of an integrated and sustainable transport system in Victoria consistent with the vision statement contained in section 6 which reads:

‘The Parliament recognises the aspirations of Victorians for an integrated and sustainable transport system that contributes to an inclusive, prosperous and environmentally responsible State.’

VPCMisdefinedasa‘transportbody’undertheTIA.

Under section 24 of the TIA, VPCM is required to haveregardtothe‘transportsystemobjectives’,‘decisionmakingprinciples’andanyapplicable‘specifiedpolicyprinciples’whenperformingitsfunctions or exercising its powers under any ‘transportlegislation’.Transportlegislationincludesthe Port Management Act 1995 (Vic) and the Marine Safety Act 2010 (Vic).

The transport system objectives provide for: • Social and economic inclusion • Economic prosperity • Environmental sustainability • Integration of transport and land use •Efficiency,coordinationandreliability • Safety, health and wellbeing

The decision making principles provide for: • Integrated decision making • Triple bottom line assessment • Equity • Transport system user perspective • The precautionary principle • Stakeholder engagement and community

participation • Transparency

Section 141D: ObjectThe main objects of VPCM are: a. to ensure that port of Melbourne waters and

channels in port of Melbourne waters are managed for use on a fair and equitable basis consistent with the vision statement and the transport system objectives; and

b. to manage and develop Station Pier and West Finger Pier consistent with the vision statement and the transport system objectives.

Section 141E: FunctionsThe functions of VPCM are: a. to promote and market the port of Melbourne; b. to establish and manage and to dredge

and maintain channels in port of Melbourne waters;

c. to provide and maintain navigation aids in connection with navigation in port of Melbourne waters;

d. to publish information about the depths and configurationsofchannelsandberthsinportof Melbourne waters;

e. to provide or maintain systems related to navigation in port of Melbourne waters includingsystemsformanagingvesseltrafficand vessel communications and scheduling and allocating vessels to berths in those waters;

f. to generally direct and control, in accordance with the Marine Safety Act 2010, the movement of vessels in port of Melbourne waters;

g. to regulate towage services in accordance with the Port Management Act 1995;

h. in relation to Station Pier and West Finger Pier:

• to plan for the development and operation of the piers;

• to provide land, waters and infrastructure necessary for the development and operation of the piers;

• to develop, or enable and control the development by others of, the whole or any part of the piers;

• to manage, or enable and control the management by others of, the whole or any part of the piers;

• to provide, or enable and control the provision by others of, services for the operation of the piers;

• to facilitate the integration of infrastructure and logistics systems in the piers with the transport system and other relevant systems outside the piers;

i. to perform functions in accordance with a direction given by the Minister under section 141H of the Act;


j. to perform any other functions or duties conferred on VPCM under a Transport Restructuring Order or by or under the TIA any other Act or any regulations under the TIA or any other Act.

In performing its functions, VPCM must: a. carry out its functions consistently with State

policies and strategies for the development of the Victorian port and freight networks; and

b. to the extent that it is possible to do so consistently with paragraph (a) above, operate in a commercially sound manner having regard to:

i. thebenefitsofincreasedcompetitionbetween persons and bodies that provide services related to the operation of the port of Melbourne;

ii. the persons living or working in the immediate neighbourhood of the port of Melbourne;

iii. the need to conduct research and collect information relating to the performance of the functions and the operation of the port of Melbourne so as to enable VPCM to meet its primary object;

iv. theneedtodealefficientlywithanycomplaints relating to the performance of its functions.

Section 152: PowersAsa‘transportcorporation’undertheTIA,VPCMhas power to do all things that are necessary or convenient to be done for or in connection with, or as incidental to, the achievement of its object and the performance of its functions.

Significant legislative changesDuring2017-18thereweretwosignificantlegislative changes relevant to VPCM.

Ports and Marine Legislation Amendment Act 2017 (Vic)The Ports and Marine Legislation Amendment Act 2017 (Vic) received royal assent on 8 November 2017 and the majority of its provisions commenced in late 2017/early 2018. The legislation made a number of improvements to marine and port legislation with the primary purpose of addressing safety gaps and improving public safety outcomes.

Security of Critical Infrastructure Act 2018 (Cwlth)The Security of Critical Infrastructure Act 2018 (Cwlth) received royal assent on 11 April 2018 and came into force on 11 July 2018. The purpose of this Commonwealth legislation is to provide for the management of the national security risks of espionage, sabotage and coercion arising from foreign involvement in Australian critical infrastructure. The legislation will regulate the highest risk sectors of ports, electricity, gas and water.

Ministerial DirectionsDuring 2017-18, VPCM received no Ministerial Directions.


Operations review

Key achievementsDuring the reporting period 2017-18: • Facilitated 3795 ship visits to Port Phillip Bay. • Ensured Victoria’s premier gateway for trade

and tourism remained open for business every day of the year.

• Conducted successful simulations for larger container ships, leading to approval for incremental trials.

• Accommodated a record 108 cruise ship visits to Station Pier including a record 50 turnaround visits.

• Restructured the Reference Tariff Schedule to introduce a Site Occupation Charge to recover a greater contribution to the maintenance of Station Pier.

Marine and navigationVPCM facilitated 3795 ship visits to Port Phillip Bay during 2017-18, keeping Victoria’s premier gateway for trade and passengers open for business every day.

Vessel traffic services system upgradeA program is underway to replace and upgrade thevesseltrafficservices(VTS)systemusedtoprovide navigational safety services to vessels calling at Melbourne. The geographical scope of the proposed system remains unchanged from the currentone,however,thespecificationsprovideforexpansion as required and the ability to interface with future innovations as they become available.

While the performance level of a VTS system is mandated through international standards, the ability of the new system to take advantage of features of the previously installed advanced radars will provide a level of detection not previously attainable.

Second pilotage service providerSince 1834, pilotage services in Port Phillip Bay have been provided by the private sector and for the last 150 years by a single company, Port Phillip Sea Pilots.

In March 2018 a second private pilotage service provider, Australian Pilotage Group (APG), started operations in the port of Melbourne. VPCM has worked with APG to ensure their smooth entry into the port community.

Larger container shipsShipping lines are deploying increasingly larger container ships worldwide and VPCM is working with Port of Melbourne to assess the opportunities for these larger vessels to be accommodated in Melbourne. The ongoing assessment is through a series of simulations and computer-based analyses which has led to a series of incremental staged trials.

Larger ships will give Victorian exporters and primary producers access to more competitive freightratesandimprovedefficiencyforoverseasmarkets as well as delivering cheaper goods for consumers.

Harbour Master’s DirectionsThe fully revised and rewritten 10th edition of Harbour Master’s Directions took effect from 1 August 2017. To give industry time to prepare for the changes, the document was published in June 2017.

The document is available on the VPCM website, www.vicports.vic.gov.au.

Port Information GuideA fourth edition of the Port Information Guide was published on, and effective from, 23 March 2018. This edition is fully revised, rewritten and laid out in the format recommended by the International Harbour Master’s Association.

The document is available on the VPCM website, www.vicports.vic.gov.au.

SafetyVPCM maintains a high level of maritime and workplace safety through the continuous review of risks and risk mitigation strategies. Changes to the riskprofileareaddressedbyrevisionofoperationalprocedures and the provision of appropriate additional treatments in order to mitigate the identifiedrisks.

Liaison with stakeholders ensures an important two-wayflowofinformationwhichassistsinriskidentificationandmitigationprocesses.


Theongoing‘SteerClear’boatingsafetyprogramaddresses the risk of interaction between commercial shipping and small recreational vessels. Details of this program are given on page 15.

Naval visits Station Pier hosted the United States Navy’s amphibious assault ship USS Bonhomme Richard from 28 August to 3 September 2017. The Melbourne visit followed the ship’s participation in a joint military training exercise with Australian defence forces off the coast of Queensland.

In March 2018, the Royal Australian Navy’s HMAS AdelaideberthedatStationPieronherfirstreturntothecitywhereshewasfittedout(attheWilliamstown dockyards).

Cruise shippingA record 108 cruise vessels berthed at Station Pier over the 2017-18 season with a record 331,614 passengers and crew using the pier. Inclement weather caused the cancellation of two other visits during the season.

A record 50 of the visits were turnarounds in which all passengers disembarked and a new complement embarked. There were also 15 overnightstaysatthepier.InanotherfirstforStation Pier, four vessels homeported for the season – Golden Princess, Pacific Jewel, Pacific Eden and Carnival Legend.

FivevesselsmadetheirfirstvisitstoMelbourneand, in keeping with tradition, VPCM provided commemorative plaques for each of them to mark the occasion.

The Melbourne Cup weekend in November saw all three cruise berths in use at Station Pier and because of the high demand during the racing carnival, a fourth cruise vessel berthed at Victoria Dock for the Cup (another 5122 passengers and crew).

The cruise industry markets Melbourne’s major events as an opportunity for interstate visitors to cruise to Melbourne. These events include the Melbourne Cup weekend in November, the Australian Open tennis tournament in January and,

forthefirsttime,theRugbyLeagueStateofOrigingame held in June 2018.

VPCM continues to work with the cruise lines to ensureMelbournecontinuestobenefitfromthisgrowing tourism sector.

Passenger ferriesTT-LineTT-Line continued to operate the ferry service between Melbourne and Devonport in Tasmania. This is a daily service with double sailings during some school holiday periods and during summer.

The Tasmanian Government announced that the current Spirit of Tasmania ferries will be replaced by new vessels in 2021. These new vessels will be larger and have more capacity for passengers and freight.

Port Phillip FerriesPort Phillip Ferries operates a daily high speed passenger ferry service between Portarlington on the Bellarine Peninsula and Docklands in Melbourne.

The ferries transit the Yarra River between its mouth at Williamstown and the Bolte Bridge. For safety reasons, vessel speed limits apply in this stretch of the river due to the risk of interaction with other river users, both recreational and commercial. VPCM is assisting the ferry company by facilitating a controlled trial with an increased speed limit in the river between the entrance beacons and the West Gate Bridge.

Planning for passenger growthIn 2017, VPCM was granted $1.35 million by the Premier’s Job and Investment Fund to write a Step 1 Business Case outlining concepts for redeveloping Station Pier to accommodate the growing maritime passenger industry. This included engagement with industry to understand the needs.

The Victorian Government allocated a further $5.8 million in the 2018-19 Budget for VPCM to undertake both planning and cruise-related capital infrastructure works to grow the domestic ferry and cruise ship operations in Victoria. This funding will be spread across planning and works over a two-year period.


Alongside the infrastructure work, the funds will enable a Step 2 Business Case to be developed to meet next year’s budget cycle. VPCM will conduct extensive community and industry consultation to inform this document to achieve the best outcomes for industry and the community.

InfrastructureMaintenanceVPCM’s ongoing maintenance program at Station Pier continued between the cruise seasons.

• The works started in May 2017 to strengthen existing mooring and fendering installations at the outer end of the pier were completed in readiness for the 2017-18 cruise season. These works involved replacement of the pier’s concrete deck in some locations, reinforcing of selected piles, installation of 30 new piles and installing stronger mooring bollards. Also, new rubber fenders were installed on the last 50 m of the berth face on both the Outer West and Outer East berths.

• In May-June 2018, maintenance works were carried out on the cruise terminal’s balcony roof frame.

• The next phase of the ongoing pile rehabilitation project is underway and due for completion before the start of the 2018-19 cruise season. At the same time, routine maintenance and repairs will be carried out on the structure.

As a heritage-listed facility, all maintenance works are carried out in close consultation with Heritage Victoria.

Asset managementAsset management is a major focus for VPCM. It is responsible for a range of assets, extending from the heritage-listed Station Pier to the advanced navigation systems used to ensure safe navigation in Port Phillip Bay.

The locations are as diverse and challenging as the assets themselves – on both land and water, in and around the bay, along the southern Victorian coast and in the waters of Bass Strait.

During 2017-18, a four-year asset management improvement plan was developed with the goal of achieving full compliance with the Victorian Government’s Asset Management Accountability Framework as well as with the Asset Management ISO 55000 standard.

PricingAs a designated State Port Entity under section 74AB of the Port Management Act 1995 (Vic), VPCM may set fees and charges for its services. These are set out in the Reference Tariff Schedule (RTS) and reviewed annually.

Reference Tariff Schedule 2018A new RTS detailing fees and charges effective from 1 July 2018 was issued in May 2018 to give industry time to prepare for the changes.

To keep price increases on wharfage and anchorage fees to a minimum, a modest increase of1.9%wasset.ThisreflectstheConsumerPriceIndex for the year ending March Quarter 2018, as published by the Australian Bureau of Statistics, based on the weighted average of eight capital cities.

This increase, approved by the Governor-in-Council, was gazetted on 24 April 2018.

Other fees and charges were also increased by 1.9%

Restructure of fees and chargesIn a restructure of the RTS, the time-based berth hire fee at Station Pier was removed and a new fee, the Site Occupation Charge (SOC), was introduced.

TheSOCbetterreflectscruisevessels’actualuseof Station Pier than the previous berth hire fee. It includes a consideration for use of the cruise terminal building, facilities, cleaning and use of gangways and will help VPCM recover a greater proportion of the costs of maintaining and operating the cruise terminal and cruise berths at the pier.

The Reference Tariff Schedule 2018 is available on the VPCM website, www.vicports.vic.gov.au.


CommunityMelbourne is a port city with urban communities bordering the areas of VPCM’s operations and landside links. Recognising the amenity expectations of neighbouring communities, VPCM liaises and meets regularly with residents, businesses and local government in the Port Melbourne area.

‘Steer Clear’ boating safety campaignVPCMexpandeditslong-running‘SteerClear’boating safety campaign during the year.

Senior staff are conducting an ongoing series of visits and presentations to boating, yachting and angling clubs around Port Phillip Bay to spread the safety message.

The Boating Industry Association of Victoria Melbourne Boat Show provided another opportunity for staff to interact with the boating public. Senior management from the Marine and Navigation Division staffed VPCM’s stand at the show which ran from 28 June to 1 July 2018.

VPCM produced two boating safety videos, courtesy of a grant provided by the Minister for Ports. One video addresses safety when boating or yachting near the shipping channels and the other educates boaters about waves, the different ways they can be produced and how to safely navigate them. The videos form a key part of VPCM’s safety presentations.

At an operational level, our Transport Safety Officerscontinuetheirworktokeeptheshippingchannels clear of recreational boats through patrolling the bay in our two patrol boats.

Queenscliffe Maritime MuseumVPCM supports the Queenscliffe Maritime Museum by enabling it to conduct paid public tours of the Point Lonsdale Lighthouse, hosted by knowledgeable Museum volunteers. These tours are available from 10 am to 1 pm every Sunday and by appointment, for groups, on other days.

Cruise shipping information sessionIn October 2017, VPCM organised a cruise shipping information session at Station Pier for local Port Melbourne and St Kilda traders. The speaker, Michael Mihajlov, Director of Destination Management at Carnival Australia, gave valuable insights into what cruise passengers look for and like to do when they arrive at a destination. The information was well received with positive feedback.

Waterfront WelcomersThe City of Port Phillip Waterfront Welcomers were recognised and thanked at a special function in April 2018. These volunteer workers provide a warm welcome for cruise passengers at Station Pier during the cruise seasons.

Volvo Ocean RaceVPCM assisted organisers of the Volvo Ocean Race when contestants visited Melbourne for a stopover, departing on 2 January 2018. Essential communications equipment was located at Station Pier to enable the broadcast of the start of Leg 4 of the race.


EnvironmentEnhancing the health of the bayDemonstrating commitment to the wellbeing of the natural environment, VPCM is supporting The Nature Conservancy Australia in its work in re-establishingshellfishreefsinPortPhillipBay.VPCM’s $25,000 donation will enable The Nature Conservancytobuyaround25,000mature‘angasi’oystersfromlocalshellfishgrowerstoseedthenewly created reefs in Hobsons Bay.

These reefs are replacing those that have been lost as a result of human activities in the bay. The reintroductionofoysters,andothershellfishwhichpurify water, will enhance the overall health of the bay.

Air monitoringVPCM conducted an air quality monitoring program at Station Pier, from January 2016 until February 2018,tounderstandtheinfluenceofshippingand terminal activities on the local air quality. The program was designed in consultation with Environment Protection Authority Victoria (EPA).

The collected data was compared with the requirements for Victorian State Environment Protection Policy Guidelines (SEPP) and the National Environment Measure for Ambient Air Quality (National). It was also compared with the two closest EPA air quality monitoring stations located at Altona North and Footscray.

The data indicates that recorded concentrations for NOx, SO2 and Particulate Matter (PM 10 and PM 2.5)aregenerallyconsistentwithinthefluctuationsof concentrations recorded at the local EPA monitoring stations and are well within the SEPP and National guidelines and requirements.

Emergency responseVPCM provides operational capability for marine pollution and casualty management for the area from Cape Schanck to Cape Otway and for Port Phillip Bay.

Staff continue to participate in state and national emergency response exercises and workshops in the areas of marine pollution and casualty response. During the reporting period, VPCM conducted an all hazard exercise at the port of Melbourne, participated in exercises at the ports of Hastings and Portland and took part in training for the Australian Maritime Safety Authority’s National Plan for Maritime Environmental Emergencies.

Safety and Environment Management PlanVPCM operated under its Safety and Environment Management Plan, independently audited in 2015-16. The plan is prepared in accordance with Ministerial Guidelines Port Safety and Environment Management Plans (November 2012), as required by section 91G of the Port Management Act 1995 (Vic).

Employee relationsDuring the year, VPCM successfully completed negotiations for a new enterprise agreement with staff. The agreement was approved by all the relevant Victorian Government authorities and the Australian Fair Work Commission gave its approval in June 2018. It sets out a range of contemporary terms and conditions of employment for VPCM staff.


Financial information summary

OverviewThefinancialstatementspresentedinthisreportare prepared in accordance with the Financial Management Act 1994 (Vic) and applicable Australian accounting standards.

VPCM’s scope of business activities reduced from the prior year as a result of the Port of Melbourne LeaseTransaction(PLT).Thefinancialstatementsfor the year ended 30 June 2017 represent the four months of the consolidated entity known as the Port of Melbourne Corporation Group and eight months operations of the stand-alone entity, VPCM.

The 2017-18 Annual Report includes VPCM’s firstfullyearfinancialstatementsasanindividualreporting entity.

VPCMdeliveredaprofitaftertaxof$1.7millionforthe year ended 30 June 2018.

Financial performance – operating statementVPCM’soperatingprofitaftertaxfor2017-18 was $1.7 million against the previous year total of $30.4 million.

VPCM’s income tax expense decreased to $0.8millionprimarilyduetoalowerprofit before income tax generated in 2017-18.

Operating revenue for 2017-18 totalled $34.1 million compared to $146.9 million in the previous year. The decrease of $112.8 million is due to the principal revenue-generating activities transferring to the new port operator post 1 November 2016.

Revenue from continuing operations in 2017-18 of $34.1 million increased by $4.9 million on the previous year ($29.2 million) with modest increases across most revenue items.

Five-year financial summaryThetablebelowshowsVPCM’sfive-yearfinancialsummary.

(i) In accordance with directions given by the Premier to the Port Corporation pursuant to section 20(2) of the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016(Vic),thefinancialsummaryrepresentsconsolidatedfinancialinformationfor: Port of Melbourne Operations Pty Ltd (Port Manager) for the period 1 July 2016 - 31 October 2016, Melbourne Port Lessor Pty Ltd (Port Lessor) for the period 1 July 2016 - 31 October 2016, Port of Melbourne Corporation (renamed Victorian Ports Corporation (Melbourne) on 1 November 2016) for the period 1 July 2016 - 30 June 2017. (ii)ThefinancialsummaryrepresentsconsolidatedfinancialinformationforPortofMelbourneCorporation.

2018 $m

2017 (i)

$m 2016 (ii)

$m 2015 (ii)

$m 2014 (ii)

$m

Income from transactions 34.1 146.9 394.2 381.7 368.4

Expenses from transactions 31.6 101.0 266.8 330.4 266.1

Operatingprofitaftertax 1.7 30.4 95.8 45.9 72.8

Net result for the period 4.3 106.8 4,225.5 1,046.2 79.9

Netcashflowfromoperatingactivities 16.5 21.8 258.6 105.6 130.7

Total assets 151.3 145.7 10,225.0 4,245.9 2,549.2

Total liabilities 38.9 42.6 110.9 880.5 849.2


Operating expenses for 2017-18 totalled $31.6 million compared to $100.9 million in the previous year. As noted previously, this decrease was primarily the result of a change in operations following the PLT.

Expenses from continuing operations in 2017-18 of $31.6 million decreased by $7.2 million on the previous year ($38.8 million). This variance is primarily due to a one-off cost for debt forgiven (Port Lessor) of $7.2 million in 2016-17 and $3.9 million lower contractors and consultant expenses offset by a $3.8 million increase in employeebenefitexpenses.

Finance costsVPCM had interest revenue of $0.2 million for 2017-18 on cash reserves of $19.9 million. During the year, VPCM took on and repaid $4.0 million of short-term debt with Treasury Corporation of Victoria.

Capital expenditureVPCM’s capital expenditure for 2017-18 was approximately $7.5 million on projects such as Station Pier Piles Rehabilitation, Station Pier Outer West Bollards and Outer Terminal Building Corrosion Protection Program.

Cash flowNetcashinflowsfromoperatingactivitieswere$16.5 million compared with $21.8 million in 2016-17. This decrease was primarily due to the four months of trading of the consolidated entity known as the Port of Melbourne Corporation Group in 2016-17.

Cashoutflowsfrominvestingactivitieswere $7.5 million compared to $4.0 million in 2016-17.

Cashinflowsfromfinancingactivitieswere$5.0 million in 2017-18 as a result of a capital contribution from the Department of Treasury and Finance (DTF).

Balance sheetThe balance sheet of VPCM as at 30 June 2018 reports net assets of $112.4 million (2017: $103.2 million).

Total assets increased by $5.5 million over the year to $151.3 million. This is due to the following: • Cash and cash equivalents have increased by

$14.1 million primarily due to the receipt of the 2016-17 tax refund of approximately $11.9 million and a $5.0 million equity injection from DTF.

• Property, plant and equipment assets of $118.7 million including Station Pier land, buildings, infrastructure assets and capital works in progress has increased by $2.5 million (2017: $116.2 million). The key movements related to the revaluation of land during 2017-18 by $2.1 million.

• Current tax assets have decreased by $11.6 million as a tax refund of $11.9 million was received during 2017-18.

Total liabilities decreased by $3.7 million over the year to $38.8 million. This is due to a decrease of $3.9 million in amounts payable by VPCM to creditors at year-end.

Statements of Changes in EquityThe statement of changes in equity records an increase of $9.3 million to $112.4 million. The movementinthisstatementreflectsthecurrentyear’s result, a $5.0 million capital contribution from DTF and a $2.1 million increase in reserves due to the revaluation of land.


Significant changes in financial positionTherewerenosignificantmatterswhichchangedVPCM’sfinancialpositionduringthereportingperiod.

Significant changes or factors affecting performanceTherewerenosignificantchangesorfactorswhichaffected VPCM’s performance during the reporting period.

Capital projectsIn 2017–18 VPCM did not have any capital projects with a total estimated investment of $10 million or more.

Subsequent eventsThere have been no events subsequent to the balance date at 30 June 2018 which may significantlyaffectoperationsinsubsequentreporting periods.



Section 2:

Governance and organisational structure


Corporate governance

Board of ManagementThe VPCM Board of Management is established under the Transport Integration Act 2010 (Vic). The Board consists of not less than three and not more than nine members, each of whom is appointed by the Governor in Council. It is the duty of the Board to act consistently with the functions and objectives of VPCM, act as a sounding base for good corporate governance and to act honestly, fairly and diligently in accordance with the applicable legislation. Management of the operations and administration is delegated by the Board to the ChiefExecutiveOfficer.

VPCM reported to the following Ministers during the reporting period: • The Hon. Luke Donnellan MP, Minister for Ports • The Hon. Tim Pallas MP, Treasurer

The primary responsibility of the VPCM Board is to ensure that the port of Melbourne waters and channels in port of Melbourne waters are managed for use on a fair and reasonable basis and to manage and develop Station Pier and West Finger Pier consistent with the vision statement and transport system objectives as set out in the Transport Integration Act 2010 (Vic) (TIA).

With the aim of achieving best practice, the Board has developed and endorsed a set of governance principles which are in line with its responsibilities under the TIA. As a result, the primary focus of the Board is on: • setting the strategic direction of VPCM including the approval and oversight of the corporate plan,

annual operating and capital budgets, risk management framework and policy and strategy, corporate policiesandalldelegationsofauthority(includingfinancialdelegations)madepursuanttosection170ofthe TIA

• having regard to the transport system objectives, the decision-making principles and any relevant statement of policy principles in carrying out its functions and exercising its powers

• ensuring accountabilities to the Minister for Ports and the Treasurer of Victoria under the legislation are understood by VPCM

• approving capital projects where the total project value exceeds $1 million (or any other capital projects ofstrategicsignificance)

• monitoring compliance with legislative and regulatory requirements, ethical standards and external commitments

• monitoring VPCM’s operational performance •overseeingtheadequacyofVPCM’sfinancialcontrols • approving and overseeing VPCM’s operating and capital budgets •appointingandreviewingtheperformanceoftheChiefExecutiveOfficer • promoting safety as a matter of priority having regard to the safety and security of the port of Melbourne.

Conflict of interestTheDirectorsaregovernedinrespectofconflictsofinterestbytherelevantprovisionsofthePublic Administration Act 2004 (Vic) and binding codes issued by the Victorian Public Sector Commission. They are required to declare any pecuniary interest in any matter being considered by the Board or in any other matter in which VPCM is concerned. The Board is provided at each of its meetings a consolidated list of registered interests disclosed by Directors.


Directors

James Cain, ChairmanJames Cain was appointed Chairman of Victorian Ports Corporation (Melbourne) on 2 November 2016 and reappointed on 1 February 2018.

James was Deputy Chair of Port of Melbourne Corporation from July 2010 until the medium-term lease of the port of Melbourne became effective in November 2016.

He has an extensive background in project development management in property and infrastructure, in both the public and private sectors.

James’ professional experience includes 12 years with property and construction company Lend Lease in various roles including General Manager forVictoria,TasmaniaandSouthAustralia,andfiveyears with the Victorian Government as Executive Director of Major Projects Victoria, the Victorian Government’s major capital works agency.

Since 2006, James has developed his interests in commercial, infrastructure and property areas through his own consulting business.

James was Chair of the Industry Superannuation Property Trust (ISPT) between 2009 and April 2018. He was also Chair of Port of Hastings Corporation until September 2010 and was a Director of Victorian Rail Track (VicTrack) between April 2008 and July 2010.

Board Committee membership:• Chair, Remuneration and People Committee• Risk Committee• Audit and Finance Committee

Janice van Reyk, Deputy ChairJanice van Reyk was appointed Deputy Chair of Victorian Ports Corporation (Melbourne) on 2 November 2016 and reappointed on 1 February 2018.

Janice was a Director of Port of Melbourne Corporation from 2011 until the medium-term lease of the Port of Melbourne became effective in November 2016.

She is an experienced non-executive Director with broad based business skills gained as a senior executive in listed industrial companies.

She is a non-executive Director of Lochard Energy Group, Chair of its Audit Committee; a non-executive Director of Citywide, Chair of its Safety Risk and Environment Committee and a member of its Audit and Finance Committee; a non-executive Director of Tennis Australia, Chair of its Audit & Risk Committee; a trustee of Melbourne & Olympic Parks Trust; a member of the Northern Territory Environment Protection Authority; and a member of the VicRoads Risk Audit & Governance Committee.

Janice has an extensive professional background inmajorcapitalprojects,infrastructure,financeand capital markets, mergers and acquisitions, commercial negotiations, risk management, environmental management and stakeholder engagement.

Janice also holds a Master of Commerce, a Master of Environment (Hons), Bachelor of Laws (Hons) and a Bachelor of Arts (Economics). Janice is a Fellow of the Australian Institute of Company Directors, a CPA and a Leadership Victoria Fellow.

Board Committee membership:• Chair, Audit and Finance Committee• Risk Committee


Deb Beale Deb Beale was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November 2016 and reappointed on 1 February 2018.

Deb’s broad experience includes the areas of finance,corporategovernance,publicrelationsandrisk management. She has served, and continues to serve, on a number of government, public, privateandnot-for-profitboards.

Shebeganherworkingcareerinthefinanceindustry where she was employed by Merrill Lynch for over a decade. She then moved to Ernst & Young where she specialised in risk management, government relations and governance.

Deb has a Bachelor of Commerce from the University of Melbourne, a Graduate Diploma from the Securities Institute of Australia and a Masters of Business Administration from Melbourne Business School.

Board Committee membership:• Chair, Risk Committee• Remuneration and People Committee

Peter Tuohey Peter Tuohey was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November 2016 and reappointed on 1 February 2018.

Peterisafifthgenerationgrain,woolandprimelamb producer whose experience in freight and logistics has seen him appointed to a number of advisory roles.

Peter is Chair of the Victorian Government’s Grains Logistics Taskforce, Chairman of Melbourne Market Authority, Chairman of V/Line Rail Freight Advisory Council, a member of the Ministerial Freight Advisory Council and a member of the Victorian Water Board Selection Panel.

He continues to represent the interest of farmers at a state level as a representative on the Victorian Agricultural Advisory Council. At the Victorian Farmers Federation (VFF) he served as President from 2012 to 2016 and Vice President from 2009 to 2012. He was also Chair of the VFF’s Farm Business and Regional Development Committee from 2010 to 2013. At the national level, Peter was a Board Director of the National Farmers Federation from 2012 to 2016 and served on its Economics Committee.

Peter was also a member of the Victorian Freight and Logistics Council from 2009 to 2012.

Board Committee membership:• Audit and Finance Committee• Remuneration and People Committee


James Chen James Chen was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November 2016 and held this position until 31 January 2018.

James has over 25 years’ corporate and consulting experience, predominantly within the shipping and logistics sector but also in infrastructure, resources and telecommunication industries in Australia and Asia.

In the shipping and logistics sector, James established JPC Containers and built the organisation to become one of the largest shipping container management service providers in Victoria. In 2002, he established a new towage company (Australian Maritime Services P/L), operating in the ports of Melbourne, Sydney and Brisbane.

James continues to be involved in port development strategies and opportunities where improved efficiencies,growthandeconomicbenefitscanbemaximised and realised for the key stakeholders.

James holds a Bachelor of Science degree. He is a member of the Australia-China Business Association.

Board Committee membership:• Audit and Finance Committee• Risk Committee


Board and Committee meetings

Audit and Finance Committee membership and roles The Audit and Finance Committee consisted of the following members in 2017-18: Ms Janice van Reyk, Chairperson (independent) Mr Peter Tuohey (independent) MrJamesCain(exofficiomember) Mr James Chen (term expired on 31 January 2018)

The responsibilities of the Audit and Finance Committee are set out in Standing Direction 3.2.1.1. The key responsibilities of the committee are to: •reviewandreportindependentlytotheboardontheannualreportandallotherfinancialinformation

published by VPCM • assist the board in reviewing the effectiveness of VPCM’s internal control environment covering: –effectivenessandefficiencyofoperations –reliabilityoffinancialreporting – compliance with applicable laws and regulations • determine the scope of the internal audit function and ensure its resources are adequate and used

effectively, including coordination with the external auditors • maintain effective communication with external auditors • consider recommendations made by internal and external auditors and review the implementation of

actions to resolve issues raised.

Remuneration and People CommitteeTheRemunerationandPeopleCommitteeassiststheBoardtofulfilitsgovernanceresponsibilitiesbyensuring that VPCM has executive remuneration policies guidelines and practices that are consistent with government policy and by reviewing policies and processes relating to the development of VPCM’s people and its culture.

Risk Committee The primary role of the Risk Committee to is to oversee the effective operation of the risk management frameworktoassisttheBoardinfulfillingitsgovernanceresponsibilities.Thecommitteealsoevaluatestheeffectivenessofriskidentificationandmanagementandensurescompliancewithinternalguidelinesandexternal requirements.

Attendance at Board and Board Committee meetings Number attended/eligible to attend

Chairman / Director Board CommitteeAudit and Finance Remuneration and

PeopleRisk

J Cain (Chairman) 15/15 5/5 2/2 4/4

J van Reyk (Deputy Chair) 15/15 5/5 - 3/4

D Beale 12/15 - 2/2 4/4

P Tuohey 15/15 5/5 2/2 -

J Chen* 7/9 0/3 - 1/2

*James Chen’s term of appointment expired on 31 January 2018.


Organisational structure

Assets and Infrastructure

Major Projects

Strategy and Risk

Contract Management

Infrastructure

Finance

Legal

Board Secretariat

People and CultureSecurity

Corporate Affairs

Business Support

Finance and Corporate Support

Station Pier /Cruise Shipping

Information Technology

Property Management

Business, Information and Strategy

Marine and Navigation

Business Resilience

Health and Safety

Marine and Navigation

Chief Executive Officer

Remuneration and People Committee Risk CommitteeAudit and Finance

Committee

Board


Executive Management Team

Rachel Johnson, Chief Executive OfficerRachelJohnsontookuptheroleofinauguralChiefExecutiveOfficerofVPCMinNovember2016.

Rachel has wide ranging experience of Australian freight and logistics businesses and the development and operation of transport infrastructure in both the public and private sectors. She has held senior positions in NewSouthWalesgovernmentbodiesaswellasinanumberofhighprofileprivatesectorcompanies.

Captain Roy Stanbrook, Harbour Master/ Executive General Manager – Marine and NavigationRoy is the Harbour Master of the port of Melbourne and leads the Marine and Navigation division. His divisionisresponsibleforsafenavigationintheportwatersoftheportofMelbournethroughVesselTrafficServices as well as emergency management, health and safety and security.

Jeff Bazelmans, Executive General Manager – Business, Information and StrategyJeff leads a diverse division that includes the management of Victoria’s premier cruise shipping facility at Station Pier, cruise tourism, tenant management, environment, information technology services, business strategy and risk.

Matthew Beattie, Executive General Manager – Finance and Corporate SupportMatthewleadsthedivisionresponsibleforfinanceandthecorporatesupportareasofBoardsecretariat,legal counsel, corporate affairs, human resources and business support.

David Henderson, Acting Executive General Manager – InfrastructureDavid has been engaged to lead the division that is responsible for the organisation’s infrastructure and assets including maintenance programs and to manage VPCM’s major projects.


OH&S and employment principles

Occupational health and safetyAs an integral part of its safety culture, VPCM takes a proactive approach to managing its occupational health and safety responsibilities and delivers initiatives and programs designed to prevent safety incidents and injuries.

Workplace Health and Safety Representatives give staff a voice through the OHS Committee which meets throughout the year.

Initiatives for staff included activities such as ergonomic assessments of work stations and mental health awareness sessions delivered by WorkSafe Victoria.

Alongside its safety inductions for employees and contractors, VPCM also uses the automated Port Incident and Emergency Response System (PIER) to report and address hazards, incidents and injuries.

In 2017-18, there were no reportable injuries and no lost time injuries.

Performance against OHS management measures

FTE = Full-time equivalent staff

* Due to the Victorian Government’s lease of the commercial operations of the port of Melbourne, VPCM began operations on 1 November 2016. Therefore, the 2016-17 reporting period included four months of Port of Melbourne Corporation operations.

Employment and conduct principlesVPCM is committed to applying merit and equity principles when appointing staff. The selection processes ensure that applicants are assessed and evaluated fairly and equitably on the basis of the key selection criteriaandotheraccountabilitieswithoutdiscrimination.Employeeshavebeencorrectlyclassifiedinworkforce data collections.

Measure KPI 2017-18 2016-17

IncidentsNumber of hazards/incidents 0 2

Rate per 100 FTE 0 3.6

Claims

Number of lost time standard claims 0 0

Rate per 100 FTE 0 0

Average cost per standard claim 0 0

Fatalities Fatality claims 0 0

*



Section 3:

Workforce data


Public sector values and employment principlesWe aspire to be an effective, sustainable, diverse and fair organisation, with a culture that creates high levels of employee engagement and performance.

Our strategic intent is to: •developandmaintainacontemporaryorganisationdesignandfit-for-purposepeoplepolicies,

procedures and enabling systems • drive engaged leadership that motivates and inspires employees • develop a strong employee value proposition that attracts and retains people with the right capabilities • create and sustain market-leading capabilities in the workforce through workforce planning, professional

development and succession planning • build a culture of innovation, growth, engagement, high performance, inclusivity and wellbeing.

These objectives align with our corporate plan objectives which are to provide an effective workplace and portcommunityorganisationandtodelivervaluetocustomersandstakeholdersthroughefficientinternalsystems, processes and innovation.

Industrial relationsThere was no time lost through industrial relations accidents or injuries.

Comparative workforce dataAnnualised total salary, by $20,000 bands, for executives

Our people

Income band (salary) Executives< $160,000 1$160,000 - $179,999 2$180,000 - $199,999 2$200,000 - $219,999 3$220,000 - $239,999 1$240,000 - $259,999 1$260,000 - $279,999 0$280,000 - $299,999 1$300,000 - $319,999 1Total 12


Details of employment levels in 2017 and 2018The following table discloses the headcount and full-time staff equivalent (FTE) of all VPCM employees, employed in the last full pay period in June of the current reporting period, and in the last full pay period in the previous reporting period.

Dem

ogra

phic

data

Dem

ogra

phic

data

Cla

ssifi

catio

nda

taC

lass

ifica

tion

data

June 2018All employees Ongoing Fixed term and

casualNumber

(headcount)FTE Full-time

(headcount)Part-time

(headcount)FTE Number

(headcount)FTE

GenderMale 45 42.8 28 0 28 17 14.8Female 14 13.8 4 0 4 10 9.8Age15-24 0 0.0 0 0 0 0 0.025-34 3 3.0 0 0 0 3 3.035-44 18 17.8 10 0 10 8 7.845-54 13 12.1 8 0 8 5 4.155-64 24 22.7 13 0 13 11 9.765+ 1 1.0 1 0 1 0 0.0

EBA employees 47 45.2 32 0 32 15 13.2Senior employeesExecutives 12 11.4 0 0 0 12 11.4Total employees 59 56.6 32 0 32 27 24.6

June 2017All employees Ongoing Fixed term and

casualNumber

(headcount)FTE Full-time

(headcount)Part-time

(headcount)FTE Number

(headcount)FTE

GenderMale 42 42 29 0 29 13 13Female 14 14 5 0 5 9 9Age15-24 0 0 0 0 0 0 025-34 6 6 0 0 0 6 635-44 14 14 11 0 11 3 345-54 14 14 8 0 8 6 655-64 21 21 14 0 14 7 765+ 1 1 1 0 1 0 0

EBA employees 46 46 34 0 34 12 12Senior employeesExecutives 10 10 0 0 0 10 10Total employees 56 56 34 0 34 22 22



Section 4:

Other disclosures


Local jobs first – Victorian Industry Participation Policy (VIPP)The Victorian Industry Participation Policy Act 2003 (Vic) requires public sector bodies to report on the implementation of the Local Jobs First - Victorian Industry Participation Policy (Local Jobs First - VIPP). Public sector bodies are required to apply the Local Jobs First - VIPP in all procurement activities valued at $3 million or more in metropolitan Melbourne and for state-wide projects, or $1 million or more for procurement activities in regional Victoria.

• During 2017-18, VPCM commenced one contract totalling $5.66 million to which a VIPP Plan or Local Industry Development Plan (LIDP) was required.

• During 2017-18 VPCM did not commence any other contracts valued at $3 million or more. • During 2017-18, eight small to medium-sized businesses prepared a VIPP Plan. • During 2017-18, one contract was commenced to which a VIPP Plan was required, occurred in

metropolitan Melbourne, representing 100 per cent of estimated local content. • The total VIPP Plan or LIDP commitments achieved as a result of the contract commenced include: – local content of 100 per cent of the total value of the contract expended to date – two new jobs and four retained jobs (AEE) – one new apprenticeship/traineeship and three retained apprenticeships/traineeships. • During 2017-18, no contracts to which a VIPP Plan or an LIDP applied were completed. • During 2017-18, one contract which commenced on or after 1 September, had the minimum formal

weighting of 10 per cent applied for local content in the tender evaluation of the VIPP Plan or LIDP.

Disclosure of government advertising expenditureIn 2017-18 VPCM did not undertake any advertising campaigns with a total media spend of $100,000 or greater (exclusive of GST).

Consultancy expenditureDetails of consultancies under $10,000Duringtheperiod1July2017to30June2018,fiveconsultantswereengagedwherethevalueoftheconsultancywaslessthan$10,000.Thetotalexpenditureonthesefiveconsultancieswas$18,760excludingGST.

Details of consultancies over $10,000 During the period 1 July 2017 to 30 June 2018, 15 consultants were engaged where the value of the consultancy was greater than $10,000.

The total value of consultancies for the 12 months ended 30 June 2018 was $1,076,809 excluding GST.

Details of individual consultancies can be found on VPCM’s website at www.vicports.vic.gov.au.


All operational ICT expenditure

ICT expenditure related to projects to create or enhance ICT capabilities

Business As Usual (BAU) ICT expenditure

Non-Business as Usual (non-BAU) ICT expenditure Total = OPEX + CAPEX

Operational expenditure (OPEX)

Capital expenditure (CAPEX)

$2.6 million $0.6 million Nil $0.6 million

Information and Communication Technology (ICT) expenditureFor the 2017-18 reporting period, Victorian Ports Corporation (Melbourne) had a total ICT expenditure of $3.2 million, with the details shown below.

Note: • ICT expenditure refers to VPCM’s costs in providing business enabling ICT services within the current

reporting period. It comprises Business As Usual (BAU) ICT expenditure and Non-Business As Usual (Non-BAU) ICT expenditure.

• Non-BAU ICT expenditure relates to extending or enhancing VPCM’s current ICT capabilities. • BAU ICT expenditure is all remaining ICT expenditure which primarily relates to ongoing activities to

operate and maintain the current ICT capability.

Disclosure of major contractsVPCM did not award any major contracts (valued at $10 million or more) during 2017-18.

Freedom of informationThe Freedom of Information Act 1982 (Vic) (FOI Act) enables members of the public to obtain information held by VPCM.

Making a request FOI requests to VPCM should be addressed to:

FreedomofInformationOfficerVictorian Ports Corporation (Melbourne) GPO Box 261Melbourne VIC 3001

FOI requests can also be lodged electronically to [email protected].

An application fee of $28.90 applies. Access charges may also be payable if the document pool is large and the search for material is time consuming.

When making an FOI request, applicants should ensure requests are in writing and clearly identify what types of material/documents are being sought.


FOI statistics/timelines During 2017-18, VPCM received four FOI requests. All four requests came directly from the general public.

VPCM made four FOI decisions during the 12 months ended 30 June 2018. All four decisions were made withinthestatutory30-daytimeperiod.Theaveragetimetakentofinalisetherequestswas28days.

In relation to three of the requests received in 2017-18, no documents could be found that met the terms of the requests and a decision was issued accordingly in relation to each request.

TheotherrequestwasallowedinpartandtheapplicantsoughtreviewfromtheOfficeoftheVictorianInformation Commissioner. That review remains in progress.

Further information Further information regarding the operation and scope of FOI can be found in the FOI Act, the regulations madeundertheFOIActandfromtheOfficeoftheVictorianInformationCommissioner(OVIC): www.ovic.vic.gov.au.

Further information regarding the process for making an FOI request to VPCM can be found on VPCM’s website: www.vicports.vic.gov.au.

Compliance with building and maintenance provisions of the Building Act 1993 (Vic)Buildings were maintained in accordance with relevant building and maintenance provisions in the Building Act 1993 (Vic) and Building Regulations 2006.

To ensure buildings conform with building standards, VPCM retains experienced building maintenance contractors who are required to be up to date with all relevant standards.

VPCM uses an asset management system for recording maintenance requests, essential service inspections,reporting,scheduling,andrectificationandmaintenanceworksonexistingbuildings.

During the reporting period the following applied to buildings owned by VPCM: • There were two major works projects (greater than $50,000). •Twobuildingpermitsandtwocertificatesoffinalinspectionwereissued. • No emergency orders or building orders were issued. • No buildings were brought into conformity with building standards.


Competitive Neutrality PolicyUnder the Competitive Neutrality Policy (CNP), the guiding legislative principle is that legislation, including future legislative proposals, should not restrict competition unless it can be demonstrated that: • thebenefitsoftherestrictiontothecommunityasawholeoutweighthecosts • the objectives of the legislation can only be achieved by restricting competition.

VPCM continues to comply with the requirements of the CNP.

Competitive neutrality requires government businesses to ensure where services compete, orpotentially compete with the private sector, any advantage arising solely from their governmentownership be removed if it is not in the public interest. Government businesses are required tocost and price these services as if they were privately owned. Competitive neutrality policysupports fair competition between public and private businesses and provides governmentbusinesses with a tool to enhance decisions on resource allocation. This policy does not overrideotherpolicyobjectivesofgovernmentandfocusesonefficiencyintheprovisionofservice.

VPCMisworkingtoensurethatVictoriafulfilsitsrequirementsoncompetitiveneutralityreporting for technological based businesses against the enhanced principles as required underthe Competition and Infrastructure Reform Agreement.

Compliance with the Protected Disclosure Act 2012 (Vic)The purpose of the Protected Disclosure Act 2012 (Vic) (PDA) is to encourage and facilitate disclosure of improperconductbypublicofficersandpublicbodiesandtoprovideprotectionforpersonswhomakethosedisclosures.

VPCM is a public body and disclosures under the PDA can therefore be made about VPCM or VPCM’s members,officersoremployees.

Reporting proceduresDisclosuresofimproperconductordetrimentalactionbyVPCMoranyofitsmembers,officersoremployeesmust be made directly to the Independent Broad-based Anti-corruption Commission (IBAC) at:

Independent Broad-based Anti-corruption CommissionLevel 1, North Tower, 459 Collins StreetMelbourne VIC 3001

Tel: 1300 735 135Internet: www.ibac.vic.gov.auEmail: See the IBAC website for the secure email disclosure process which also provides for anonymous disclosures.


Further informationVPCM’s Protected Disclosure Procedures which outline the system for reporting disclosures of improper conductordetrimentalactionbyVPCMoranyofitsmembers,employeesorofficersareavailableonVPCM’s website: www.vicports.vic.gov.au.

PrivacyThe Privacy and Data Protection Act 2014 (Vic) (PDPA) requires the responsible collection and handling of personal information in the Victorian public sector. The PDPA applies to VPCM and VPCM has responsibilities under the PDPA which include: • to collect, use and disclose personal information only in accordance with the Information Privacy

Principles set out in the PDPA • to provide individuals with access to information about them held by VPCM and by its contracted service

providers • to provide individuals with the right to request VPCM to correct information about them held by VPCM

and its contracted service providers • to set out in a document clearly expressed policies on its management of personal information and

making the document available to anyone on request.

During 2017-18, there were no complaints by an individual to VPCM about an act or practice of VPCM that may be an interference with the privacy of an individual. There were also no complaints to the Commissioner forPrivacyandDataProtection(fortheperiod1July2017to31August2017)ortheOfficeoftheVictorianInformation Commissioner (for the period 1 September 2017 to 30 June 2018) about an act or practice of VPCM that may be an interference with the privacy of an individual.

Statement of availability of other informationAdditional information available on requestThe following information relating to VPCM, relevant to the period 1 July 2017 to 30 June 2018, has been prepared and is available to the Ministers, Members of Parliament and the public on request: • Details of publications produced by VPCM about VPCM and how these can be obtained. • Details of changes in prices, fees, charges, rates and levies charged by VPCM. • Details of any major external reviews carried out on VPCM. • Details of major research and development activities undertaken by VPCM. • Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit. • Details of major promotional, public relations and marketing activities undertaken by VPCM to develop

community awareness of the organisation and its services. • Details of assessments and measures undertaken to improve the occupational health and safety of

employees. • A list of major committees sponsored by VPCM, the purposes of each committee and the extent to which

the purposes have been achieved. • Details of all consultancies and contractors including consultants/contractors engaged, services

provided; and expenditure committed to for each engagement.

Additional information included in the reportThe following details are included in the Annual Report on the pages indicated: •Astatementthatdeclarationsofpecuniaryinterestshavebeendulycompletedbyallrelevantofficers.

See page 22. • A general statement on industrial relations within VPCM and details of time lost through industrial

accidents and disputes. See page 32.

Information that is not applicable to VPCM •Detailsofsharesheldbyaseniorofficerasnomineeorheldbeneficiallyinastatutoryauthorityor

subsidiary.


Attestation for financial management compliance with Ministerial Standing Direction 5.1.4Victorian Ports Corporation (Melbourne) Financial Management Compliance Attestation StatementI James Cain, on behalf of the Responsible Body, certify that Victorian Ports Corporation (Melbourne) has complied with the applicable Standing Directions of the Minister for Finance under the Financial Management Act 1994 (Vic) and Instructions.

James CainChairman



Section 5:

Financial Statements


Victorian Ports Corporation (Melbourne)Table of contentsFor the year ended 30 June 2018

How this report is structured

Comprehensive operating statement 49Balance sheet 50Statement of changes in equity 51Cash flow statement 53

1. About this report 54

2. Funding delivery of our services

2.1 Revenue 562.2 Other income 57

3. The cost of delivering services

3.1 Summary of expenses incurred in delivery of services 583.2 Employee benefits 583.3 Other operating expenses 67

4. Key assets available to support output delivery

4.1 Property, plant and equipment 68

5. Other assets and liabilities

5.1 Receivables 735.2 Payables 745.3 Other non-financial assets 755.4 Intangible assets 755.5 Other liabilities 76

6. How we financed our operations

6.1 Borrowings 776.2 Leases 786.3 Cash flow information and balances 796.4 Commitments for expenditure 80

Operating expenses of the entity

Victorian Ports Corporation (Melbourne) (VPCM) has presented its audited general purpose financial statements for the financial year ended 30 June 2018 in the following structure to provide users with the information about VPCM's stewardship of resources entrusted to it.

Financial statements

The basis on which the financial statements have been prepared and compliance with reporting regulations

Notes to the financial statements

Revenue recognised from taxes, grants, sales of goods and services and other sources

Land, property, infrastructure, plant and equipment, intangible assets and joint operations

Working capital balances and other key assets and liabilities

Borrowings, cash flow information, leases, trusts and commitments


Victorian Ports Corporation (Melbourne)Table of contentsFor the year ended 30 June 2018

7. Taxation and transactions with the State

7.1 Income tax 817.2 Deferred tax 837.3 Dividends 84

8. Risks, contingencies and valuation judgements

8.1 Financial instruments specific disclosures 858.2 Contingent assets and contingent liabilities 908.3 Fair value determination 91

9. Other disclosures9.1 Ex-gratia expenses 949.2 Equity disclosure 959.3 Responsible persons 989.4 Remuneration of executives 999.5 Related parties 1009.6 Remuneration of auditors 1029.7 Subsequent events 1029.8 Australian Accounting Standards issued that are not yet effective 103

Notes to the financial statements (continued)

Items subject to taxation and transactions with the State

Financial risk management, contingent assets and liabilities as well as fair value determination

2


Victorian Ports Corporation (Melbourne)Certification of Financial Statements30 June 2018

Mr J Cain Ms R Johnson Mr M BeattieChairman Chief Executive Officer Executive General Manager29 August 2018 29 August 2018 Finance and Corporate Support

29 August 2018

We certify that the attached financial statements for Victorian Ports Corporation (Melbourne) have been prepared in accordance with the Direction 5.2 of the Standing Directions of the Minister for Finance under the Financial Management Act 1994 (Vic), applicable Financial Reporting Directions, Australian Accounting Standards, including Interpretations and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the Comprehensive Operating Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2018 and financial position of Victorian Ports Corporation (Melbourne) as at 30 June 2018.

At the time of signing, we are not aware of any circumstances which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on 29 August 2018.

4


Independent Auditor’s Report To the Board of the Victorian Ports Corporation (Melbourne)

Opinion I have audited the financial report of the Victorian Ports Corporation (Melbourne) (the entity) which comprises the:

• balance sheet as at 30 June 2018 • comprehensive operating statement for the year then ended • statement of changes in equity for the year then ended • cash flow statement for the year then ended • notes to the financial statements, including significant accounting policies • certification of financial statements.

In my opinion the financial report presents fairly, in all material respects, the financial position of the entity as at 30 June 2018 and their financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

Basis for Opinion

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

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

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

Board’s responsibilities for the financial report

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

In preparing the financial report, the Board is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.


2

Auditor’s responsibilities for the audit of the financial report

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

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

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

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

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board

• conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern.

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

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

MELBOURNE 29 August 2018

Simone Bohan as delegate for the Auditor-General of Victoria


Victorian Ports Corporation (Melbourne)Comprehensive Operating StatementFor the year ended 30 June 2018

2018 2017Notes $'000 $'000

Revenue 2.1 32,559 28,977 Other Income 2.2 1,554 234 Total revenue 34,112 29,211

Expenses 3.1 (31,558) (38,636) Finance costs (9) (134) Total expenses (31,567) (38,770)

Profit/(Loss) before income tax 2,545 (9,559) Income tax benefit /(expense) 7.1 (799) 304

Profit/(Loss) after income tax 1,745 (9,255) Gain from disposal of discontinued operations after tax - 107,965 Profit/(loss) for the period after income tax 1,745 98,710

Other comprehensive incomeItems that will not be reclassified to profit after income taxAsset revaluation reserve movement 9.2.2 (a) 3,046 - Income tax on items that will not be reclassified to profit after income tax

9.2.2 (a) (914) -

Employee benefits reserve movement 9.2.2 (a) 380 8,066 Other comprehensive income/(loss) for the year, net of tax 2,512 8,066

Total comprehensive income/(loss) for the year 4,257 106,776

The above Comprehensive Operating Statement should be read in conjunction with the accompanying notes.

5


Victorian Ports Corporation (Melbourne)Balance SheetAs at 30 June 2018

2018 2017Notes $'000 $'000

Financial assetsCash and cash equivalents 6.3 19,914 5,845 Receivables 5.1 5,585 5,345

25,499 11,190

Non-financial assetsProperty, plant and equipment 4.1.2 118,719 116,199 Intangible assets 5.4 309 62 Other non-financial assets 5.3 843 584 Current tax assets 7.1 - 11,641 Deferred tax assets 7.2 5,914 6,058

125,784 134,544

Total assets 151,283 145,734

LiabilitiesPayables 5.2 2,498 6,396 Provisions - employee benefits 3.2.2 19,346 19,347 Other provisions 75 - Other liabilities 5.5 430 75 Current tax liabilities 7.1 353 - Deferred tax liabilities 7.2 16,155 16,750 Total liabilities 38,858 42,568

NET ASSETS 112,425 103,166

EquityContributed capital 9.2.1 6,000 1,000 Reserves 9.2.2 43,856 41,344 Retained profits 9.2.2 (b) 62,569 60,822

TOTAL EQUITY 112,425 103,166

The above Balance Sheet should be read in conjunction with the accompanying notes.

6


Victorian Ports Corporation (Melbourne)Statement of Changes in EquityFor the year ended 30 June 2018

Notes

Contributedcapital

$'000

Asset revaluation

reserve$'000

Employee benefits reserve

$'000

Retained profits

$'000

Total equity

$'000

Balance at 1 July 2017 1,000 38,327 3,018 60,821 103,166

Profit for the year 9.2.2 (b) - - - 1,745 1,745

Other comprehensive income - 2,132 380 - 2,512

Total comprehensive incomefor the year

- 2,132 380 1,745 4,257

Transactions with ownersin their capacity as owners:Contributions/(distributions) of equity, net of transaction costs

9.2.1 5,000 - - - 5,000

5,000 - - - 5,000

Balance at 30 June 2018 6,000 40,459 3,398 62,568 112,425

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

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Victorian Ports Corporation (Melbourne)Statement of Changes in EquityFor the year ended 30 June 2018

Contributedcapital

$'000

Asset revaluation

reserve$'000

Employee benefits reserve

$'000

Retained profits

$'000

Total equity

$'000

Balance at 1 July 2016 1,508,071 8,281,748 (5,048) 329,365 10,114,136 Profit for the year - - - 98,710 98,710 Other comprehensive income - - 8,066 - 8,066 Total comprehensive income for the year

- - 8,066 98,710 106,776

Transactions with owners in their capacity as owners:Contributions/(distributions) of equity, net of transaction costs

55,000 - - - 55,000

Reclassifications of reserve and retained profits to contributed capital under FRD 119A

8,521,685 (8,243,422) - (278,263) -

Derecognised assets and liabilitiesof Port Manager

- - - (107,965) (107,965)

Transfer to contributed capital under FRD 119A

35,000 - - (35,000) -

Capital contribution to Subsidiary/(Port Manager)

(90,000) - - - (90,000)

Transfer of net asset to Port Manager via contributed capital under FRD 119A

(55,608) - - - (55,608)

Distribution from subsidiary - - - 53,975 53,975

Transfer of net asset to Port Lessor via contributed capital under FRD 119A

(9,973,148) - - - (9,973,148)

(1,507,071) (8,243,422) - (367,253) (10,117,746) Balance at 30 June 2017 1,000 38,326 3,018 60,821 103,166

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

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Victorian Ports Corporation (Melbourne)Cash flow StatementFor the year ended 30 June 2018

2018 2017Notes $'000 $'000

Cash flows from operating activitiesReceipts from customers 37,085 47,486 Payments to suppliers and employees (29,399) (48,505) Interest received 174 172 Interest paid (9) (134) Income tax instalments (paid)/refund 9,830 (4,692) Goods and Services Tax (paid)/refund (1,136) 1,052 Port Licence Fee - (20,056) Net cash inflow/(outflow) from operating activities 6.3.1 16,544 (24,677)

Cash flows from investing activitiesPayments for property, plant and equipment 4.1.2 (7,474) (8,303) Proceeds from disposal of intangible assets - 4,294 Net cash (outflow) from investing activities (7,474) (4,009)

Cash flows from financing activitiesRepayment of borrowings (4,000) (18,000) Proceeds from borrowings 4,000 18,000 Capital contribution from Owner 9.2.1 5,000 55,000 Divestment of subsidiary - 40,005 Capital contribution to Port Manager 9.2.1 - (90,000) Net cash inflow/(outflow) from financing activities 5,000 5,005

Net increase/(decrease) in cash and cash equivalents 14,070 (23,681)

Cash and cash equivalents at the beginning of the financial year

6.3 5,845 29,526

Cash and cash equivalents at end of the financial year 6.3 19,914 5,845

The above Cash flow Statement should be read in conjunction with the accompanying notes.

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Victorian Ports Corporation (Melbourne)Cash flow StatementFor the year ended 30 June 2018

2018 2017Notes $'000 $'000

Cash flows from operating activitiesReceipts from customers 37,085 47,486 Payments to suppliers and employees (29,399) (48,505) Interest received 174 172 Interest paid (9) (134) Income tax instalments (paid)/refund 9,830 (4,692) Goods and Services Tax (paid)/refund (1,136) 1,052 Port Licence Fee - (20,056) Net cash inflow/(outflow) from operating activities 6.3.1 16,544 (24,677)

Cash flows from investing activitiesPayments for property, plant and equipment 4.1.2 (7,474) (8,303) Proceeds from disposal of intangible assets - 4,294 Net cash (outflow) from investing activities (7,474) (4,009)

Cash flows from financing activitiesRepayment of borrowings (4,000) (18,000) Proceeds from borrowings 4,000 18,000 Capital contribution from Owner 9.2.1 5,000 55,000 Divestment of subsidiary - 40,005 Capital contribution to Port Manager 9.2.1 - (90,000) Net cash inflow/(outflow) from financing activities 5,000 5,005

Net increase/(decrease) in cash and cash equivalents 14,070 (23,681)

Cash and cash equivalents at the beginning of the financial year

6.3 5,845 29,526

Cash and cash equivalents at end of the financial year 6.3 19,914 5,845

The above Cash flow Statement should be read in conjunction with the accompanying notes.

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Victorian Ports Corporation (Melbourne)Notes to the Financial StatementsFor the year ended 30 June 2018

1 ABOUT THIS REPORT

Corporate informationVictorian Ports Corporation (Melbourne) (VPCM) is a Government Business Enterprise established by the Victorian Government under the Transport Integration Act 2010 (Vic) (TIA). The Board of VPCM is directly accountable to the Victorian Government through the Minister for Ports and the Treasurer.

VPCM is responsible for navigation of commercial shipping in Port Phillip Channels, waterside emergency and marine pollution response and the management of Station Pier and West Finger Pier as Victoria's premier cruise shipping and Tasmanian passenger ferry facility. VPCM has responsibility for Harbour Master, Station Pier and West Finger Pier, relevant safety and environmental regulation, waterside emergency management and marine pollution response.

These financial statements incorporate all activities of VPCM.

Basis of preparationThe financial statements have been prepared on an accruals and a historical cost basis, except for property, plant and equipment which, subsequent to acquisition, are measured at a revalued amount being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Cost is based on the fair values of the consideration given in exchange for assets. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

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

Judgements, estimates and assumptions are required to be made about financial information being presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Critical judgements that management has made in the process of applying VPCM’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements are:

(i) Recovery of deferred tax assetsDeferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise these temporary differences.

(ii) Fair value of property, plant and equipmentAll non-current physical assets are measured initially at cost and subsequently revalued at fair value in accordance with FRD 103F.

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(iii) Defined benefit superannuation planThe value of the defined benefit superannuation plan has been calculated using the Projected Unit Credit method, as required by AASB 119. The objective under this method is to expense each member's benefits in the Fund as they would accrue, taking into consideration future salary increases and the benefit allocation formula. Thus the total benefit to which each member is expected to become entitled is broken down into units, each associated with a year of past or future credited service.

The financial statements have been prepared on a going concern basis.

Statement of complianceThe financial statements of VPCM are general purpose financial statements in accordance with the Financial Management Act 1994 (Vic) and applicable Australian Accounting Standards and Interpretations (AAS). VPCM has been designated a "for profit" entity.

The annual financial statements were authorised for issue by the Board of VPCM on 29 August 2018.

Compliance with International Financial Reporting Standards (IFRS)The Board of VPCM is of the view that the 2017-18 financial statements of VPCM also comply with IFRS as issued by the International Accounting Standards Board (IASB).

Rounding of amountsAmounts in the financial statements have been rounded to the nearest $1,000, unless otherwise stated. Discrepancies in tables between totals and sums of components reflect rounding. Percentage variations in all tables are based on the underlying unrounded amounts.

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2 FUNDING DELIVERY OF OUR SERVICES

Introduction

Structure2.1 Revenue2.2 Other income

2.1 Revenue 2018 2017$'000 $'000

Charges on goods (wharfage fees) 10,564 10,088 Rent and licence fees 879 1,195 Land tax recovered from tenants - 21 Charges for berth and area hire 2,579 2,354 Port Manager contribution 15,290 15,011 Other charges for services 3,148 2,520 Recoverable works 100 (2,212) Total operating revenues 32,559 28,977

Charges on goods (wharfage fees)

Charges for berth and area hire

Rent and licence fees

Port Manager contribution

Other charges for services

Contribution by the Port Manager under the Port Concession Deed and Port Operations Service Deed. Revenue is recognised over a straight line basis over the term of the Deed.

This section provides additional information about how VPCM is funded and the accounting policies that are relevant for an understanding of the items recognised in the financial statements.

Revenue is measured at the fair value of the consideration received or receivable.

VPCM recognises revenue when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to VPCM and specific criteria have been met for each of VPCM's activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the revenue have been resolved. VPCM bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

Wharfage fees are charged per unit of quantity, volume or weight of cargo for all cargoes loaded on or discharged from vessels or between vessels in the Port of Melbourne. Revenue is recognised at the time of the related vessel’s departure from its designated berth.

Berthage fees are charged to vessels per unit of berth occupancy. Revenue is recognised at the time of the vessels departure from its occupied berth.

Revenue from operating leases is recognised when earned and accrued in accordance with the terms and conditions implicit in the leasing contract.

Other charges for services is recognised at the time the service to which the revenue relates is provided or work is undertaken and the revenue is receivable.

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2.2 Other income

2018 2017$'000 $'000

Interest revenue 174 172 Government project funding 1,213 - Other revenue 167 62 Total other incomes 1,554 234

Total revenues 34,112 29,211

Interest revenue

Other revenueAll other revenue from major business activities is recognised at the time the service to which the revenue relates is provided or work is undertaken and the revenue is receivable.

Interest revenue is recognised as the interest accrues to the net carrying amount of the financial asset using the effective interest rate method.

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3 THE COST OF DELIVERING SERVICES

Introduction

Structure3.1 Summary of expenses incurred in delivery of services3.2 Employee benefits3.3 Other operating expenses3.4 Income tax expense

3.1 Summary of expenses incurred in delivery of services2018 2017

Notes $'000 $'000Employee benefits expense 3.2.1 11,924 8,093 Depreciation and amortisation 4.1.1 7,829 7,697 Other operating expenses 3.3 11,805 22,846 Total expense incurred in delivery of services 31,558 38,636

3.2 Employee benefits

3.2.1 Employee benefits in the comprehensive operating statement 2018 2017

$'000 $'000Defined contribution superannuation expense 1,103 1,272 Defined benefit superannuation expense 948 1,445 Salaries and employee benefits expenses 9,873 5,376 Total employee expenses 11,924 8,093

3.2.2 Employee benefits in the balance sheetProvision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave (LSL) for services rendered to the reporting date and recorded as an expense during the period the services are delivered.

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

Employee benefits expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, redundancy payments, WorkCover premiums, defined benefits superannuation plans, and defined contribution superannuation plans. VPCM does not recognise any defined benefit liability in respect of the State Superannuation Scheme. Department of Treasury and Finance (DTF) recognises and discloses the defined benefit liabilities for the State Superannuation Scheme in its financial report.

This section provides additional information about how VPCM's funding is applied and the accounting policies that are relevant for an understanding of the items recognised in the financial statements.

Defined Benefits under the Port of Melbourne Superannuation Fund is disclosed under Note 3.2.3

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3.2.2 Employee benefits in the balance sheet (continued) 2018 2017$'000 $'000

Current employee benefits:Annual leave entitlementsUnconditional and expected to wholly settle within 12 months 482 498 Long service leave entitlementsUnconditional and expected to wholly settle within 12 months 357 170 Unconditional and expected to wholly settle after 12 months 1,091 1,245 Defined benefits superannuation fund liability 16,878 16,900

Provision for on-costsUnconditional and expected to wholly settle within 12 months 112 83 Unconditional and expected to wholly settle after 12 months 167 191 Total current employee benefits and on-costs 19,086 19,086

Non-current employee benefitsLong service leave entitlements 226 226 On-costs 35 35 Total non-current employee benefits and on-costs 260 261 Total employee benefits and related on-costs 19,346 19,347

Reconciliation of movement in on-cost provision

Opening balance 308 1,064 Additional provision recognised 259 72 Reductions arising from payments (254) (284) Reductions transfer out - (533) Un-wind of discount and effect of changes in discount rate - (11) Closing balance 313 308

Current 279 273 Non-current 35 35

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3.2.2 Employee benefits in the balance sheet (continued)

Wages, salaries and sick leave

Annual leave

Long service leave

Unconditional long service leave is disclosed as a current liability even when the liability is not expected to settle within 12 months as VPCM does not have an unconditional right to defer the settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled beyond 12 months are measured at present value.

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

Liabilities for wages and salaries, expected to be settled within 12 months of the reporting date, are measured at their nominal amounts (including on-costs) using the remuneration rates expected to apply at the time of the settlement and are recognised as current liabilities. VPCM does not have an unconditional right to defer settlement of these liabilities. No liability is recognised for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will not be used.

Long service leave entitlements are assessed at balance date having regard to expected employees’ remuneration rates on settlement, employment related on-costs and other factors including expected accumulated years of employment on settlement and past experience. Commonwealth bond rates are used for discounting future cash flows.

Annual leave entitlements are accrued on a pro-rata basis in respect of services provided by employees up to the reporting date, having regard to rates expected to apply when the liabilities are settled. The entire obligation has been recognised as a current liability as VPCM does not have an unconditional right to defer settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled within 12 months are also recognised in the provision for employee benefits as current liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement.

16



THE COST OF DELIVERING SERVICES

3.2.3 Defined benefit superannuation

Defined benefit superannuation plan

Contribution recommendations

The Fund’s Trustee is responsible for the governance of the Fund. The Trustee has a legal obligation to act solely in the best interests of Fund beneficiaries. The Trustee has the following roles: - Administration of the Fund and payment to the beneficiaries from Fund assets when required in accordance with the Fund rules;- Management and investment of the Fund assets; and- Compliance with superannuation law and other applicable regulations.

The Fund is regulated by the Australian Prudential Regulation Authority (APRA). The prudential regulator, APRA, licenses and supervises regulated superannuation plans.

Employer contributions to the defined benefit superannuation plan are based on recommendations by the plan’s actuary. Actuarial assessments are made annually and the last such assessment was made at 30 June 2018. The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. VPCM has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions.

A liability in respect of the Port of Melbourne Superannuation Fund (Fund) is recognised in the Statement of Financial Position, and is measured as the present value of the Defined Benefit Obligation at 30 June 2018 less the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The value of the defined benefit superannuation plan has been calculated using the Projected Unit Credit method, as required by AASB 119. The objective under this method is to expense each member's benefits in the Fund as they would accrue, taking into consideration future salary increases and the benefit allocation formula. Thus the total benefit to which each member is expected to become entitled is broken down into units, each associated with a year of past or future credited service.

Future taxes, such as taxes on investment income and employer contributions, are taken into account in the actuarial assumptions used to determine the relevant components of VPCM’s defined benefit liability.

The Fund only has defined benefit members and is closed to new members. Members receive pension benefits on retirement, death and disablement. On withdrawal, members have a choice of receiving a lump sum benefit and/or a deferred pension benefit.

As at 30 June 2018, the Fund has 3 active members (2017: 6), 1 deferred pension member (2017: 2) and 28 members drawing a pension (2017: 24).

The Superannuation Industry Supervision (SIS) legislation governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions.

17




3.2.3 Defined benefit superannuation (continued)

Funding method

Nature of asset/liability

The defined benefit assets are invested in the BT Institutional Retirement PST and the Schroder Balanced Fund Standard Class. The assets are diversified within these investment options and therefore the Fund has no significant concentration of investment risk.

There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year. No other post retirement benefits are provided to the employees who are members of the Fund.

The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate funding method. The method adopted affects the timing of the cost to VPCM.

The Port of Melbourne Superannuation Fund does not impose a legal liability on VPCM to cover any deficit that exists in the fund. If the fund were wound up, there would be no legal obligation on VPCM to make good any shortfall. The Trust Deed of the fund states that if the fund winds up, the remaining assets are to be distributed by the Trustee of the fund in an equitable manner as it sees fit.

The Fund typically exposes VPCM to actuarial risks such as legislative risk, pension risk and inflation risk as outlined in more detail below:

Pension risk - the risk that, firstly pensioner mortality will be lighter than expected, resulting in pensions being paid for a longer period. Secondly, that a greater proportion of eligible members will elect to take a pension benefit, which is generally more valuable than the corresponding lump sum benefit.

Inflation risk - the risk that inflation is higher than anticipated, increasing pension payments, and thereby requiring additional employer contributions.

Legislative risk - the risk that legislative changes could be made which increase the cost of providing the defined benefits.

VPCM may, at any time by notice to the Trustee, terminate its contributions. VPCM has a liability to pay the contributions due before the effective date of the notice, but there is no requirement for it to pay further contributions, irrespective of the financial condition of the fund. However, VPCM does have a constructive obligation for the fund and therefore has recognised a current liability in the Statement of Financial Position in respect of its defined benefit superannuation arrangements. Refer to Note 3.2.2.

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(a)

2018 2017$'000 $'000

Net defined benefit liability/(asset) at start of the year 16,900 23,842 Current services cost 471 919 Net interest 469 585 Actual return on Fund assets less interest income (1,639) (2,750) Actuarial losses/(gain) arising from changes in financial assumptions 2,408 (3,523) Actuarial gain arising from changes in liability experience (1,149) (1,792)

(582) (381) 3.2.3 (a) 16,878 16,900

(b) Reconciliation of Fair Value of Defined Benefit Fund Assets

Movements in the fair value of the Defined Benefit Fund assets were as follows:2,018 2,017 $'000 $'000

Fair value of Fund assets at beginning of the year 30,513 28,051 Interest income 992 799 Actual return on Fund assets less interest income 1,639 2,750 Employer contributions 582 381 Contributions by Fund participants 36 71 Benefits paid (1,641) (1,176) Taxes, premiums and expenses paid (394) (363) Fair value of Fund assets at end of the year 3.2.3 (d) 31,727 30,513

(c)

2018 2017$'000 $'000

47,413 51,893 Current service cost 471 919 Interest cost 1,461 1,384 Contributions by Fund participants 36 71 Actuarial losses /(gain) arising from changes in financial assumptions 2,408 (3,523) Actuarial gain arising from changes in liability experience (1,149) (1,792) Benefits paid (1,641) (1,176) Taxes, premiums and expenses paid (394) (363) Present value of Defined Benefit Obligation at end of the year 3.2.3 (g) 48,605 47,413

Reconciliation of Defined Benefit Obligation

Movements in the defined benefit obligation were as follows:

Present value of Defined Benefit Obligation at beginning of the year

Reconciliation of the Net Defined Benefit Liability/(Asset)

Movements in the net defined benefit liability/(asset) were as follows:

Employer contributionsNet defined benefit liability/(asset) at end of the year

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(d)

As at 30 June Level 1 Level 2 Level 3

Asset category $'000 $'000 $'000 $'000Investment funds - Growth Fund 31,727 - 31,727 - Total 31,727 - 31,727 -

(e) The percentage invested in each asset class at reporting date 2018 2017% %

Australian equity 33 33 International equity 24 23 Fixed income 15 20 Property 3 3 Alternatives/Other 14 11 Cash 11 10

100 100

(f) Significant actuarial assumptions at the reporting date 2018 2017Assumptions to determine Defined Benefit Cost % %Discount rate 3.3 2.9 Expected salary increase rate 3.000 3.125 Expected pension increase rate 2.5 2.5 Pension mortality Mercer Mercer

Assumptions to determine Defined Benefit Obligation 2018 2017% %

Discount rate 3.0 3.3 Expected salary increase rate 3.000 3.000 Expected pension increase rate 2.5 2.5 Pension mortality Mercer Mercer

The fair value of the Fund assets does not include amounts relating to VPCM's own financial instruments or any property occupied, or other assets used.

Fair value of Defined Benefit Fund assets

Fair value measurement at reporting period Carrying amount

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(g) Sensitivity AnalysisThe Defined Benefit Obligation as at 30 June 2018 under several scenarios is presented below.Scenario A: 0.5% per annum lower discount rate sensitivityScenario B: 0.5% per annum higher discount rate sensitivityScenario C: 0.5% per annum lower salary increase rate sensitivityScenario D: 0.5% per annum higher salary increase rate sensitivityScenario E: 90% per annum of the Mercer Standard pensioner mortality sensitivityScenario F: 110% per annum of the Mercer Standard pensioner mortality sensitivityScenario G: 0.5% per annum lower pension increase rate sensitivityScenario H: 0.5% per annum higher pension increase rate sensitivity

Base Case

ScenarioA

ScenarioB

ScenarioC

ScenarioD

Discount rate 3.0% pa -0.5% pa +0.5% paSalary increase rate 3.0% pa -0.5% pa +0.5% paPension increase rate 2.5% pa

Mercer Standard

48,605 53,011 44,682 48,525 48,688

Base Case

ScenarioE

ScenarioF

ScenarioG

ScenarioH

Discount rate 3.0% paSalary increase rate 3.0% paPension increase rate 2.5% pa -0.5% pa +0.5% pa

Mercer Standard

-10% pa +10% pa

48,605 50,021 47,351 44,836 52,788

Pensioner mortality assumption

Pensioner mortality assumption

Defined Benefit Obligation ($'000)

Defined Benefit Obligation ($'000)

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(h) Funding arrangements

(i) Expected contributions 2019$'000

Expected employer contributions 320

(j) Maturity profile of Defined Benefit Obligations

$'00030 June 2019 1,535 30 June 2020 1,753 30 June 2021 1,790 30 June 2022 1,826 30 June 2023 1,862 Following 5 years 10,130

(k) Asset-Liability matching strategies

There are no asset and liability matching strategies adopted by the Fund.

For the year ended 30 June 2018, based on the actuary's recommendation, VPCM contributed the following to the Fund: - 20% (2017: 20%) of superannuation salaries; and - additional lump sum contributions of $25,000 per month (2017: $25,000) to finance expected administration and insurance costs. - additional contribution of $20,000 per month (2017: $20,000) to address a projected funding gap from FY 2018-19 onwards.

The weighted average duration of the defined benefit obligation as at 30 June 2017 was 16 years.

The financing objective adopted for the year ended 30 June 2018 was for the Fund to maintain the value of its assets at least equal to: - for defined benefits, the greater of 110% (2017: 110%) of Vested Benefits and 100% (2017: 100%) of the Actuarial Value of Accrued Benefits; and - to achieve, as far as possible, a stable level of future Employer contributions.

The weighted average duration of the defined benefit obligation as at 30 June 2018 is 16 years.

22




3.3 Other operating expenses2018 2017

$'000 $'000Contractors and consultant expenses 8,562 12,458 Land tax (recovery)/expenses - (1,523) Operating lease expenses - minimum lease payments 520 429 Debt forgiven (Port Lessor) - 7,173 Other expenses 2,722 3,491 Total operating expenses (i) 11,805 22,028

Other expensesLoss on disposal of property, plant and equipment - 818

- 818

Total expenses 11,805 22,846

(i) Total operating expenses for the current reporting period include $Nil (2017: $4.4 million) of costs incurred on the Port of Melbourne Lease Transaction.

Other operating expenses from transactions are recognised as they are incurred and reported in the financial year to which they relate. Operating expenses generally represent day-to-day running costs incurred in normal operations.

23



4. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY

Introduction

Structure4.1 Property, plant and equipment4.1.1 Depreciation and impairment4.1.2 Reconciliation of movements in carrying amount

4.1 Property, plant and equipment

2018 2017 2018 2017 2018 2017Total$'000

Total$'000

Total$'000

Total$'000

Total$'000

Total$'000

Land at fair value 16,951 13,905 - - 16,951 13,905 Infrastructure 102,801 88,754 (17,094) (11,255) 85,707 77,499 Plant and equipment & vehicles at fair value

21,184 20,626 (5,772) (3,861) 15,411 16,765

Capital works in progress 649 8,030 - - 649 8,030 Net carrying amount 141,585 131,315 (22,866) (15,116) 118,719 116,199

Initial recognition

VPCM controls land, infrastructure and other plant and equipment that are utilised in fulfilling its objectives and conducting its activities. They represent the resources that have been entrusted to VPCM for delivery of those outputs.

Property, plant and equipment represent non-current assets comprising land, buildings and improvements, and plant and equipment used by VPCM in its operations. All non-current physical assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment.

Gross carrying amount Accumulated depreciation Net carrying amount

24




4.1 Property, plant and equipment (continued)

Initial recognition (continued)

4.1.1 Depreciation and amortisation2018 2017

DepreciationTotal$'000

Total$'000

Infrastructure (5,838) (5,648) Plant and equipment & vehicles at fair value (1,911) (1,952) Total depreciation (7,749) (7,600)

AmortisationIntangible Assets (80) (97) Total amortisation (80) (97) Total depreciation and amortisation (7,829) (7,697)

Non-current physical assets measured at fair value are revalued in accordance with Financial Reporting Direction (FRD) 103F Non-Financial Physical Assets . This revaluation process occurs every five years, based upon the asset’s classification under the Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Revaluation increments or decrements arise from differences between an asset’s carrying value and fair value.

If an asset's carrying amount is increased as a result of a revaluation, the increase is credited directly to equity under the heading of asset revaluation reserve net of applicable tax. However, the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease previously recognised in profit or loss in respect of that asset.

If an asset's carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is debited directly to equity under the heading of asset revaluation reserve to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

Gains and losses on disposals of assets are determined by comparing proceeds from sale with the carrying amount and selling costs. These are included in profit or loss. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being sold or written off is transferred to retained profits.

25





4.1.1 Depreciation and impairment (continued)

Depreciation expense

2018 2017Infrastructure 2 - 85 years 2 - 85 yearsPlant and equipment 1 - 25 years 1 - 25 yearsIntangible assets 4 years 4 years

Change in accounting estimates

Acquisition

Land held by VPCM is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives (or, in the case of leasehold improvements and certain leased plant and equipment, the lease term if shorter) as follows:

The estimated useful lives, residual values and depreciation method are reviewed at the end of each financial reporting period and, where revised, are accounted for as a change in an accounting estimate. Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method.

The purchase method of accounting is used for all acquisitions of assets, being the fair value of the assets provided as consideration at the date of acquisition plus any incidental costs attributable to the acquisition. Where assets are constructed by VPCM, the costs at which they are initially recorded include an appropriate share of labour costs incurred directly in the construction of the asset.All items with a cost or value in excess of $1,000 (2017: $1,000) and with a useful life greater than one year are recognised as assets. All items within the threshold of $91 to $1,000 (2017: $91 to $1,000) and with a useful life greater than one year are grouped and recognised as assets within the Low Value Asset Pool. All other items are expensed as acquired.

26





4.1.1 Depreciation and impairment (continued)

4.1.2 Reconciliation of movements in carrying amount

Year ended 30 June 2018

Land

$'000

Infrastructure

$'000

Plant and equipment

$'000

Capital works

in progress$'000

Total

$'000

Carrying amount 1 July 2017 13,905 77,499 16,765 8,030 116,199 Transfer of capital works in progress - 13,971 558 (14,855) (327) Additions 75 7,474 7,550 Revaluation adjustments 3,046 - - - 3,046 Depreciation charge - (5,838) (1,911) - (7,749) Carrying amount 30 June 2018 16,951 85,707 15,411 649 118,719

At 30 June 2018Fair value 2018 16,951 102,801 21,184 - 140,936 Cost - 649 649 Accumulated depreciation - (17,094) (5,772) - (22,866) Net book amount 16,951 85,707 15,411 649 118,719

Recoverable amount: An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (impairment of assets). Where an asset’s carrying value exceeds its recoverable amount, the difference is written off by a charge to profit or loss except to the extent that the write-down can be debited to an asset revaluation reserve amount applicable to that specific asset. The recoverable amount for an asset is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.

Repairs and maintenance: Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Where the repair relates to the replacement of a component of an asset and the cost exceeds the capitalisation threshold, the cost is capitalised and depreciated.

27





4.1.2 Reconciliation of movements in carrying amount (continued)


Channels

$'000

Land

$'000

Infrastructure

$'000

Plant and equipment

$'000

Capital works

in progress$'000

Total

$'000

Carrying amount 1 July 2016 5,747,876 3,091,857 970,665 35,188 299,386 10,144,972 Transfer from capital works in progress - - 435 2,871 (3,306) - Additions - - - - 8,909 8,909 Disposals - - - (1,325) - (1,325) Transfers to Port Manager and Port Lessor under FRD 119A

(5,747,876) (3,077,952) (887,954) (18,017) (296,959) (10,028,757)

Depreciation charge - - (5,648) (1,952) - (7,600) Carrying amount 30 June 2017 - 13,905 77,498 16,765 8,030 116,199

At 30 June 2017Fair value 2017 - 13,905 88,754 20,626 - 13,905 Cost - - - - 8,030 117,410 Accumulated depreciation - - (11,255) (3,861) - (15,116) Net book amount - 13,905 77,499 16,765 8,030 116,199

28



5 OTHER ASSETS AND LIABILITIES

IntroductionThis section sets out any other assets and liabilities that arose from VPCM's operations.

Structure5.1 Receivables5.2 Payables5.3 Other non-financial assets5.4 Intangible assets5.5 Other liabilities

5.1 Receivables2018 2017

$'000 $'000CurrentContractualTrade receivables (i) 5,214 4,780

5,214 4,780

StatutoryGST Input tax credit recoverable 370 566

370 566

5,585 5,345

(i) Ageing analysis of contractual receivables0 - 30 days 5,162 4,780 31 - 60 days 7 - 61 - 90 days 38 - 91 - 120 days 7 -

5,214 4,780

Receivables consist of contractual receivables and statutory receivables. Contractual receivables mainly include trade receivables in relation to goods and services. Statutory receivables include amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax credits recoverable. Contractual receivables are classified as financial instruments in Note 8. Statutory receivables are not classified as financial instruments as they do not arise from a contract.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 15 to 30 days. VPCM’s trading terms allow for interest to be charged on unpaid amounts that are not settled within the normal trading terms.

29




5.1 Receivables (continued)

5.2 Payables2018 2017

$'000 $'000Current

ContractualTrade payables (i) 1,186 4,748 Accrued expenses (i) 672 1,277

1,858 6,025 Statutory

FBT (receivable)/payable 28 (120) GST payable 613 492

640 371

2,498 6,396

(i) Maturity analysis of contractual payablesLess than 1 month 1,752 6,025 1 - 3 months 106 - 3 months - 1 year - - 1 - 5 years - - 5+ years - -

1,858 6,025

Payables consist of contractual payables and statutory payables. Contractual payables include mainly trade payables' creditors in relation to goods and services. Statutory payables include GST payable, fringe benefits tax and other tax payable. Contractual payables are classified as financial instruments in Note 8. Statutory payables are not classified as financial instruments as they do not arise from a contract.

Trade payables are carried at amortised cost. Due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to VPCM prior to the end of the financial year that are unpaid as at year end. The amounts are unsecured and are usually paid within 30 days of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectable are written off when identified. An impairment provision is recognised when there is objective evidence that VPCM may not be able to collect the receivable. Financial difficulties of the debtor or debts more than 120 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable's carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

30




5.3 Other non-financial assets2018 2017

$'000 $'000CurrentPrepayments 814 561 Other assets 29 23

843 584

5.4 Intangible assets2018 2017

$'000 $'000Software and systemsAt cost 704 377 Accumulated depreciation (395) (315)

309 62

Movement in intangible assets:Carrying amount - 30 June 2017 62 1,722 Transfer from capital works in progress 327 - Amortisation expense (80) (97) Transfer in/(out) to other classes - cost transferred PLT - (4,614)

- 3,051

Carrying amount - 30 June 2018 309 62

Intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to VPCM.

Other non-financial assets include prepayments which represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.

Transfer in/(out) to other classes - accumulated depreciation transferred PLT

31



5.5 Other liabilities2018 2017

$'000 $'000CurrentIncome in advance 176 75 Lease incentive 53 -

229 75

Non-currentLease incentive 201 -

201 -

430 75

Lease incentives are recognised as a reduction of rental expense over the lease term, on a straight-line basis.

32



5.5 Other liabilities2018 2017

$'000 $'000CurrentIncome in advance 176 75 Lease incentive 53 -

229 75

Non-currentLease incentive 201 -

201 -

430 75

Lease incentives are recognised as a reduction of rental expense over the lease term, on a straight-line basis.

32


6 HOW WE FINANCED OUR OPERATIONS

IntroductionThis section provides information on the sources of finance utilised by VPCM during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of VPCM.

Structure6.1 Borrowings6.2 Leases6.3 Cash flow information and balances6.4 Commitments for expenditure

6.1 Borrowings

6.1.1 Interest bearing liabilitiesVPCM borrowed $4,000,000 from Treasury Corporation Victoria (TCV) in October 2017 and subsequently repaid the whole of the balance in December 2017. As at balance date, its interest bearing liabilities remains Nil (2017: Nil).

All interest bearing liabilities are initially recognised at fair value of the consideration received less directly attributable transaction costs. The measurement basis subsequent to initial recognition depends on whether VPCM has classified the debt as financial liabilities designated at fair value through profit and loss or financial liabilities at amortised cost.

Interest bearing liabilities are fixed rate facility loans and are recorded at amortised cost. Interest bearing liabilities are classified as current liabilities unless VPCM has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

33




6.2 Leases2018 2017

$'000 $'000Operating leasesNon-cancellable operating lease receivable- within one year 826 827 - later than one year but not later than five years 2,554 2,814 - later than five years - 284

3,380 3,925

2018 2017$'000 $'000

Non-cancellable operating lease payable- within one year 397 437 - later than one year but not later than five years 1,604 182 - later than five years 367 402

2,367 1,021

As lessor

As lessee

VPCM has entered into a number of short-term leases and preferential berthing licences for land, buildings and infrastructure. The leases and licences terms range from one year to five years.

Generally, rental income under leases was reviewed to market at two or three-yearly intervals. Some leases provide for annual or biennial CPI reviews or an agreed fixed increase.

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense in the year in which they are incurred. This reflects the pattern of benefits derived by VPCM.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease agreement.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

34




6.3 Cash flow information and balances

2018 2017$'000 $'000

Cash and cash equivalentsCash at bank and in hand (i) 1,414 1,595 Deposits (ii) 18,500 4,250

19,914 5,845

(i) Cash at bank earns a weighted average interest rate of 1.00% at 30 June 2018 (2017: 1.25%).(ii) Deposits earn a weighted average interest rate of 1.45% at 30 June 2017 (2017: 1.45%).

6.3.12018 2017

$'000 $'000Net result for the period 1,745 98,710

Non-cash movements in income and expenseDepreciation and amortisation 7,829 7,697 Loss on sale of non-current assets - 818 (Gain)/loss on disposal of discontinued operations - (107,965) Defined Benefit Superannuation Scheme adjustment 358 1,124 Revaluation of long service leave liability - (56) Debt forgiveness - 7,173

Change in operating assets and liabilities(Increase) in receivables (258) 15,714 Decrease in deferred tax assets 144 11,920 (Increase) in other operating assets (67) 4,103 (Decrease) in payables (3,873) (37,503) Increase in provision for income taxes payable 11,640 (11,641) (Decrease) in deferred tax liabilities (1,508) (1,677) Increase in current provisions 375 (8,548) Increase in non-current provisions 234 (3,612) (Decrease) in other liabilities (75) (934)

Net cash 16,544 (24,677)

Cash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits at call and those highly liquid investments with an original maturity of three months or less, which are held for the purpose of meeting short-term cash commitments rather than for investment purposes, and are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Reconciliation of profit after income tax to net cash inflow from operating activities




6.4 Commitments for expenditure

(a) Commitments for expenditure2018 2017

$'000 $'000Capital expenditure commitmentsCommitments for the construction and acquisition of property, plant and equipment, contracted for at balance date but not incurred or recognised as liabilities

288 6,498 Total capital expenditure commitments 288 6,498

Operating expenditure commitmentsCommitments for the payments of operating expenditure excluding lease commitments contracted for at balance date but not incurred or recognised as liabilities

9,746 8,295 Total operating expenditure commitments 9,746 8,295

Total commitments for expenditure 10,034 14,793

(b) Commitments for expenditure payable

Capital expenditure commitments payable- within one year 288 6,107 - later than one year but not later than five years - 391 - later than five years - - Total capital expenditure commitments 288 6,498

Operating expenditure commitments payable (excluding lease commitments)- within one year 6,975 8,222 - later than one year but not later than five years 2,771 73 - later than five years - -

9,746 8,295

Total commitments for expenditure payable 10,034 14,793

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are recorded below at their nominal value and inclusive of GST. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

Total operating expenditure commitments(excluding lease commitments)

36



7 Taxation and transactions with the State

Structure7.1 Income tax7.2 Deferred tax7.3 Dividends

7.1 Income tax2018 2017

$'000 $'000(a) Income tax expense

Current tax/(benefit) 7.1(c) 2,196 (13,155) Movement in deferred tax (1,356) 10,991 Current tax effect in subsidiaries - 3,180 Deferred tax - research and development tax credit - (1,320) Under/(over) (41) - Income tax expense/(benefit) recognised in the statement of comprehensive income

799 (304)

Deferred income tax (benefit)/expense included in income tax expense comprises:(Increase)/decrease in deferred tax assets 7.2(a) 145 12,668 (Decrease) in deferred tax liabilities 7.2 (b) (1,501) (1,677)

(1,357) 10,991

VPCM is subject to the National Tax Equivalent Regime (NTER). In accordance with this legislation, VPCM is required to pay to the State Government Consolidated Fund, amounts determined to be equivalent to the amounts that would be payable by VPCM if it was subject to the Income Tax Assessment Act 1936 (Cwlth) and Income Tax Assessment Act 1997 (Cwlth).

The tax expenses or income represents the tax payable on the current year's taxable income or tax loss based on the prevailing income tax rate, adjusted for changes in deferred tax assets and liabilities.

37



7 Taxation and transactions with the State

7.1 Income tax expense (continued)2018 2017

$'000 $'000(b) Numerical reconciliation of income tax expense

to prima facie tax payableProfit/(loss) before income tax expense 2,545 (9,559) Tax at the Australian tax rate of 30% (2017 - 30%) 763 (2,868) Deferred tax - research and development tax credit 7.1(c) - (1,320) Under/(over) (41) - Tax effect of sundry amounts which are not deductible/(taxable) 77 3,884 Income tax (benefit)/expense 799 (304)

(c)Asset revaluation reserve 914 -

914 -

Current tax asset - 11,641 Income tax liabilities 353 -

353 11,641

Movement in current tax (assets)/liabilities:Carrying amount 1 July (11,641) 3,598 Charged to income tax expense 7.1(a) 2,196 (13,155) Charged to income tax expense - discontinued operations - 19,032 Research and development tax incentive offset (i) 7.1(b) - (1,320) Under/(over) provision in prior year (33) - Income tax instalment (paid)/refund 9,830 (19,796) Carrying amount 30 June 353 (11,641)

(i) The research and development tax incentive offset for the current reporting period was nil (2017: $1.32 million) based on eligible research and development expenditure of nil (2017: $3.43 million) that was undertaken as part of the Port Capacity Project.

Tax expense/(income) relating to items of other comprehensive income

38



7 Taxation and transactions with the State (continued)2018 2017

$'000 $'0007.2 Deferred tax

(a) The balance comprises temporary differences attributable to:Employee benefits 5,803 5,804 Provision (35) (35) Income received in advance 53 53 Accrued expenses 92 236

5,914 6,058

Movement in deferred tax assets:Carrying amount 1 July 6,058 18,726 Credited/(charged) to Comprehensive Operating Statement 7.1(a) (145) (12,668) Carrying amount 30 June 5,914 6,058

(b) Deferred tax liabilities

The balance comprises temporary differences attributable to:Depreciation 15,242 16,740 Revalued land 914 - Prepayments - 10

16,155 16,750

Movement in deferred tax liabilities:Carrying amount 1 July 16,750 18,427 (Credited)/charged to Comprehensive Operating Statement 7.1 (a) (1,501) (1,677) Under/(over) (7) - (Credited)/charged to Statement of Equity 913 - Carrying amount 30 June 16,155 16,750

39



7 Taxation and transactions with the State (continued)

7.2 Deferred tax (continued)

7.3 Dividends

Deferred income tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise these temporary differences.

Deferred income tax liabilities are recognised for all taxable temporary differences.

VPCM pays dividends in accordance with a determination of the Treasurer of Victoria under the Transport Integration Act 2010 (Vic). The obligation to pay a dividend arises after consultation between VPCM’s Board, the Minister for Ports and the Treasurer of Victoria. Following this consultation process, the Treasurer makes a formal determination. Only dividends declared on or before reporting date are recognised as a liability.

For the current reporting period, the dividends declared was nil.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and VPCM intends to settle its current tax assets and liabilities on a net basis.

No deferred tax assets and liabilities will be recognised from the initial recognition of an asset or liability, excluding a business combination where there is no effect on accounting or taxable profit or loss.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

40



8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS

Introduction

Structure8.1 Financial instruments specific disclosures8.2 Contingent assets and contingent liabilities8.3 Fair value determination

8.1 Financial instruments specific disclosures

Introduction

Categories of financial instruments

- cash and deposits; and- receivables (excluding statutory receivables)

VPCM is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for VPCM related mainly to fair value determination.

Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of the VPCM’s activities, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes, fines and penalties). Such assets and liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation.

Loans and receivables and cash are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets and liabilities are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, loans and receivables are measured at amortised cost using the effective interest method (and for assets, less any impairment). VPCM recognises the following assets in this category:

41




8.1 Financial instruments specific disclosures (continued)

Financial liabilities at amortised costFinancial instrument liabilities are initially recognised on the date they are originated. They are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest-bearing liability, using the weighted average interest rate method.

Financial instrument liabilities measured at amortised cost include VPCM's leased motor vehicles, contractual payables, deposits held and advances received, and interest-bearing arrangements other than those designated at fair value through profit or loss.

Impairment of financial assetsAt the end of each reporting period, VPCM assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment.

Receivables are assessed for bad and doubtful debts on a regular basis. Those bad debts considered as written off by mutual consent are classified as a transaction expense. Bad debts not written off by mutual consent and the allowance for doubtful receivables are classified as 'other economic flows' in the net result.

The amount of the allowance is the difference between the financial asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.

In assessing impairment of statutory (non-contractual) financial assets which are not financial instruments, professional judgement is applied in assessing materiality and using estimates, averages and computational shortcuts in accordance with AASB 136 Impairment of Assets .

42



8 RISKS, CONTINGENCIES AND VALUATION JUDGEMENTS2018 2017

$'000 $'0008.1.1 Financial instruments: Categorisation

Contractual financial assetsCurrent assetsCash and cash equivalents 19,914 5,845 Receivables - Trade receivables 5,214 4,780 Total contractual financial assets 25,129 10,625

Contractual financial liabilitiesLiabilities at amortised costCurrent liabilitiesPayables 1,858 6,025 Total contractual financial liabilities 1,858 6,025

8.1.2 Financial instruments: Net holding gain/(loss)on financial instruments by category

174 172 (9) (134)

Total 164 38

8.1.3 Financial risk management objectives and policies

Interest income on contractual financial assets (i)Interest expense on contractual financial liabilities (ii)

(i) The net holding gain/(loss) on contractual financial assets equates to the interest income on cash and cash equivalents.

(ii) The net holding gain/(loss) on contractual financial liabilities equates to the interest expense on interest bearing liabilities.

As a whole, VPCM’s financial risk management program seeks to manage these risks and the associated volatility of its financial performance.

The main purpose in holding financial instruments is to prudentially manage VPCM's financial risks within the State Government's policy parameters. VPCM's main financial risks include liquidity risk and interest rate risk. VPCM manages these financial risks in accordance with its Treasury Management Policy.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each class of financial asset, financial liability and equity instrument above are disclosed in Note 8.3 to the financial statements.

43




8.1.3 Financial risk management objectives and policies (continued)

Financial risk management

Financial instruments: Liquidity risk

VPCM's maximum exposure to liquidity risk is the carrying amount of financial liabilities as disclosed in the Statement of Financial Position.

Liquidity risk is the risk that VPCM will be unable to meet its financial obligations as and when they fall due. VPCM, cognisant of the seasonal nature of the cruise industry, manages its liquidity risk to ensure that adequate cash funds are available at all times to meet its commitments as they arise. This objective is met through:- sound cash management practices;- regular identification and monitoring of the maturity profile of liquid assets and liabilities together with regular cash flow forecasting;- having sufficient temporary purpose financial accommodation from Treasury Corporation of Victoria; and- investments that are limited to highly liquid and secure assets.

VPCM maintains a comprehensive Risk Management System which is integrated with its business planning processes. There is a formally documented Risk Management Policy, Risk Management Procedures and a framework which are consistently applied across all levels of the business. A Financial Risk Management Assessment is presented to the Audit and Finance Committee of the Board on an annual basis in line with the requirements of the Standing Directions of the Minister for Finance, under the Financial Management Act 1994 (Vic). In addition, a quarterly risk status report is presented to the Risk Committee and the Board outlining VPCM's significant material risks including financial risks. Each risk is reviewed regularly against the risk matrix to ensure the level of risk is appropriate and the treatment and controls are adequate.

44




Interest rate risk and financial liability and financial asset maturity analysis

2018 Floating interest

Non-interest bearing

1 year or less

Total

$'000 $'000 $'000Financial assetsCash and cash equivalents 19,914 - 19,914 Receivables - Trade receivables - 5,214 5,214

19,914 5,214 25,129 Weighted average interest rate 1.43% -% -%

Financial liabilitiesPayables - 1,858 1,858

- 1,858 1,858 Weighted average interest rate -% -% -%

Net financial assets/(liabilities) 19,914 3,357 23,271



1 year or less

Total





Net financial assets/(liabilities) 5,845 (1,245) 4,600

The exposure to interest rate risks, the effective weighted average interest rates for financial assets and financial liabilities and their maturity profiles at the reporting date are as follows:

45





Interest rate risk and financial liability and financial asset maturity analysis



1 year or less

Total





Net financial assets/(liabilities) 19,914 3,357 23,271



1 year or less

Total





Net financial assets/(liabilities) 5,845 (1,245) 4,600

The exposure to interest rate risks, the effective weighted average interest rates for financial assets and financial liabilities and their maturity profiles at the reporting date are as follows:

45




8.2 Contingent assets and contingent liabilitiesContingent assets and contingent liabilities are not recognised in the balance sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are presented inclusive of GST receivable or payable respectively.

Contingent assetsContingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.These are classified as either quantifiable, where the potential economic benefit is known, or non-quantifiable.

VPCM has no contingent assets as at the reporting date (2017: $Nil).

Contingent liabilitiesContingent liabilities are:- possible obligations that arise from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or- present obligations that arise from past events but are not recognised because:

- it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligations, or

- the amount of the obligations cannot be measured with sufficient reliability.

VPCM has no contingent liabilities as at the reporting date (2017: $Nil).

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8.3 Fair value determination

8.3.1 Fair value determination of financial assets and liabilities

Comparison betweencarrying amount and fair value

Carrying amount

Fair valueCarrying amount

Fair value

2018 2018 2017 2017$'000 $'000 $'000 $'000

Contractual financial assets Current assetsCash and cash equivalents 19,914 19,914 5,845 5,845 Receivables - Trade receivables 5,214 5,214 4,780 4,780

25,129 25,129 10,624 10,624 Contractual financial liabilitiesCurrent liabilitiesPayables 1,858 1,858 6,025 6,025

1,858 1,858 6,025 6,025

There is no financial instrument where its fair value is different from its carrying amount.

VPCM's property, plant and equipment assets are measured and disclosed at fair value for financial reporting purposes as per Note 4.1. VPCM's financial assets and liabilities are disclosed at fair value for financial reporting purposes as per Note 8.3.2. In order to determine fair value of an asset or a liability, VPCM uses market-observable data to the extent it is available.

The net fair value of VPCM’s financial instruments assets and liabilities is determined with reference to market prices where a market exists or the net present value of expected future cash flows using a discount factor of the current interest rate applicable to liabilities with a similar risk profile as follows:

Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.

The net fair value of VPCM’s cash and deposits and non-interest bearing financial assets and liabilities is equal to their carrying value.

47




8.3 Fair value determination

8.3.1 Fair value determination of financial assets and liabilities

Comparison betweencarrying amount and fair value

Carrying amount

Fair valueCarrying amount

Fair value

2018 2018 2017 2017$'000 $'000 $'000 $'000

Contractual financial assets Current assetsCash and cash equivalents 19,914 19,914 5,845 5,845 Receivables - Trade receivables 5,214 5,214 4,780 4,780

25,129 25,129 10,624 10,624 Contractual financial liabilitiesCurrent liabilitiesPayables 1,858 1,858 6,025 6,025

1,858 1,858 6,025 6,025

There is no financial instrument where its fair value is different from its carrying amount.

VPCM's property, plant and equipment assets are measured and disclosed at fair value for financial reporting purposes as per Note 4.1. VPCM's financial assets and liabilities are disclosed at fair value for financial reporting purposes as per Note 8.3.2. In order to determine fair value of an asset or a liability, VPCM uses market-observable data to the extent it is available.

The net fair value of VPCM’s financial instruments assets and liabilities is determined with reference to market prices where a market exists or the net present value of expected future cash flows using a discount factor of the current interest rate applicable to liabilities with a similar risk profile as follows:

Level 1 - the fair value of financial instrument with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.

The net fair value of VPCM’s cash and deposits and non-interest bearing financial assets and liabilities is equal to their carrying value.

47




8.3.2 Net fair value of non-financial physical assets

Land, infrastructure assets and plant and equipment

Level 1 Level 2 Level 3Asset class $'000 $'000 $'000 $'000Land 16,951 - 16,951 - Infrastructure 85,707 - - 85,707 Plant and equipment 15,411 - - 15,411 Total 118,069 - 16,951 101,118

Infrastructure

$'000

Plant and equipment

$'000Opening balance - 1 July 2017 77,498 16,765 Transfer from Capital Work-In-Progress (CWIP) 14,046 558 Depreciation (5,838) (1,911) Closing balance - 30 June 2018 85,707 15,411

VPCM engages external, independent and qualified valuers to determine the fair value of its fixed assets every five years. The last full independent valuation was performed as at 30 June 2015.

In accordance with FRD103F: Non-Financial Physical Assets requirements , as at each balance date, management assesses the compounded impact of movement in the fair value inputs since the last full revaluation date. To the extent that the compounded movement in the fair value inputs is greater than 10 % but not in excess of 40%, a managerial revaluation will be performed. To the extent that the compounded movement in the fair value inputs equals or exceeds 40%, a full revaluation by external, independent and qualified valuers will be performed. No adjustment to carrying amount is required if the compounded movement in the fair value inputs is less than or equal to 10%.

As at 30 June 2018, a managerial revaluation was completed for Land as the compounded movement in the fair value inputs since the last full revaluation date was between 10 % and 40 %. As the compounded movement in the fair value inputs for Infrastructure and Plant and equipment was less than 10 %, management assessed that no adjustment to carrying amount is required. Values calculated during the 30 June 2015 full independent valuation were escalated to 30 June 2018 with relevant consumer price indices and depreciation rates to estimate the magnitude of the compound movement in the fair value inputs.

(a) Fair value measurement hierarchy for assets as at 30 June 2018

Fair value measurement at reporting period using

It should be noted that the infrastructure asset class has been moved from Level 2 in 2017 to Level 3 in the current year as there has been no formal valuation conducted in the past two years. Since the fair value of the Land has been determined on the basis of market-based evidence its classification with respect to the fair value hierarchy has been determined as being Level 2 in nature. This is consistent with the prior year.

Reconciliation of Level 3 fair value as at 30 June 2018:

Carrying amount

48




8.3.2 Net fair value of non-financial physical assets (continued)

Carrying amount

Level 1 Level 2 Level 3Asset class $'000 $'000 $'000 $'000Land 13,905 - 13,905 - Infrastructure 77,498 - 77,498 - Plant and equipment 16,765 - - 16,765 Total 108,169 - 91,404 16,765

Channels

$'000

Plant andequipment

$'000Opening balance - 1 July 2016 5,747,876 35,188 Disposals (5,747,876) (18,423) Closing balance - 30 June 2017 - 16,765

Reconciliation of Level 3 fair value as at 30 June 2017:

(b) Fair value measurement hierarchy for assets as at 30 June 2017

It should be noted that since the fair value of the Land and Infrastructure asset classes has been determined on the basis of market-based evidence their classification with respect to the fair value hierarchy has been determined as being Level 2 in nature. The Land and Infrastructure classes were classified as Level 3 in 2016.

Fair value measurement at reporting period using

49



9 OTHER DISCLOSURES

Introduction

Structure9.1 Ex-gratia expenses9.2 Equity disclosure9.3 Responsible persons9.4 Remuneration of executives9.5 Related parties9.6 Remuneration of auditors9.7 Subsequent events9.8 Australian Accounting Standards issued that are not yet effective

9.1 Ex-gratia expenses

This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this financial report.

In accordance with FRD 11A Disclosure of Ex-Gratia Expenses VPCM must disclose in aggregate the total amount of material (greater than $5,000) expenses.

For 2017-18, VPCM incurred no ex-gratia expenses (2016-17: $0).

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9 OTHER DISCLOSURES

9.2 Equity disclosure

9.2.1 Contributed capital

2018 2017$'000 $'000

Carrying amount 1 July 1,000 1,508,071 Capital contribution from the Department of Treasury and Finance

5,000 55,000

Capital contribution to Subsidiary (Port Manager) - (90,000) Reclassification of retained profits to contributed capital under FRD 119A

- 8,521,685

Distribution to Department of Economic Development, Jobs, Transport and Resources

- (55,608)

Distribution to Victorian Transport Fund - (9,973,148) Transfer from Retained Earnings under FRD 119A - 35,000 Carrying amount 30 June 6,000 1,000

Capital management

Consistent with applicable Australian reporting requirements and the Financial Management Act 1994 (Vic) , transfers and appropriation for additions of net assets between VPCM and State Government Departments designated as contributed capital, are recognised as capital transactions.Transfers of net assets arising from administrative restructures and/or from all other arrangements which are deemed to be contributions by owners, where there is insufficient contributed capital for distribution, are recognised as an expense by the transferor and income by the transferee in accordance with FRD 119A - Transfers through Contributed Capital. Alternatively, if the transferor has approval to reclassify sufficient accumulated funds to contributed capital prior to, or at, the time of the asset transfer date then a distribution from contributed capital can occur.

VPCM manages capital risk through the monitoring and reporting of key ratios to the Board on a monthly basis including: interest cover ratio, gearing ratio, leverage ratio, liquidity ratio.The key ratios monitored are based on DTF's Treasury Management Guidelines and that future decisions regarding capital investment and funding requirements ensure that VPCM does not breach these key ratios. Target maximum gearing is between 0% - 35%.As at year end 30 June 2018, the majority of VPCM's financial ratios are consistent with those at year end 30 June 2017.There have been no changes to the general processes and procedures that are applied by VPCM in managing capital risk since 2017.VPCM does not have any externally imposed debt-related covenants, financial ratios or any other capital requirements.

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9 OTHER DISCLOSURES

9.2.1 Contributed capital (continued)

9.2.2 Reserves and retained profits2018 2017

$'000 $'000(a) Reserves

Asset revaluation reserve 40,458 38,326 Employee benefits reserve 3,398 3,018

43,856 41,344

Movement in asset revaluation reserve:Carrying amount 1 July 38,326 8,281,748 Transfer to retained earnings on assets disposed (624) Reclassification of reserves to retained profitsunder FRD 119A

- (8,242,798)

Gain from asset revaluation 3,046 Tax effect from asset revaluation (914) - Carrying amount 30 June 40,458 38,326

Movement in employee benefits reserve:Carrying amount 1 July 3,018 (5,048) Movements in actuarial gains/losses 380 8,066 Carrying amount 30 June 3,398 3,018

VPCM’s Treasury Management Policy and procedures are in compliance with the Borrowing and Investment Powers Act 1987 (Vic), the DTF's Treasury Management Guidelines and Standing Direction 4.5.6 Treasury Risk Management.

In accordance with the Borrowings and Investment Powers Act 1987 (Vic), the Treasurer granted a temporary purpose financial accommodation of $20 million to VPCM for the reporting period 1 July 2017 to 30 June 2018 (2017: $20 million). $4 million of this facility was used in 2017-18.

This reserve has been set up in accordance with the revised AASB 119 Employee Benefits to capture the movements in the actuarial gains and losses in respect of the Port of Melbourne Superannuation Fund. Refer to Note 3.2.3 for further details.

VPCM has a separate asset revaluation reserve for Land, Infrastructure and Plant and equipment. The reserves record the increments and decrements in the fair value of the assets net of the tax effect.

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9 OTHER DISCLOSURES

9.2.2 Reserves and retained profits (continued)2018 2017

$'000 $'000(b) Retained profits

Carrying amount 1 July 60,823 329,365 Profit after income tax 1,745 98,710 Reclassification of reserves to retained profits under FRD 119A - 8,242,798

- (8,521,685)

Derecognised assets and liabilities of Port Manager - (107,965) Distribution from subsidiary - Port Manager - 53,975 Transfer from asset revaluation reserve on assets disposed - 624 Transfer to Contributed Capital under FRD 119A - (35,000) Carrying amount 30 June 62,569 60,822

Reclassification of retained profits to contributed capital under FRD 119A

53



OTHER DISCLOSURES

9.3 Responsible persons

(a) Names

Responsible Ministers:The Hon. Luke Donnellan MP Minister for PortsThe Hon. Tim Pallas MP Treasurer of Victoria

Directors Mr J CainMs J van Reyk Ms D BealeMr J Chen Until 31 January 2018Mr P Tuohey

Accountable Officer: Ms R Johnson Chief Executive Officer

(b) Remuneration

Income band 2018 2017$10,000 to $19,999 - 3 $20,000 to $29,999 1 3 $30,000 to $39,999 - 4 $50,000 to $59,999 3 1 $70,000 to $79,999 - 1 $80,000 to $89,999 1 - $210,000 to $219,999 - 1 $230,000 to $239,999 - 1 $320,000 to $329,000 1 - Total number of responsible persons 6 14 Total remuneration ($ 000s) $ 513 $ 863

In comparison to 2018, the Directors and Accountable Officer held their positions for only part of the 2017 year.

In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994 , the following disclosures are made regarding responsible persons for the reporting period.

The names of persons who held the positions of Ministers and Accountable Officers in VPCM at any time during the financial year were:

Chairman Deputy Chair

Remuneration received or receivable by responsible persons in connection with the management of VPCM during the reporting period was:

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9 OTHER DISCLOSURES

9.4 Remuneration of executives

2018$'000

2017$'000

Short-term employee benefits 2,348 4,579 Post-employment benefits 173 505 Other long-term benefits 49 51 Total remuneration 2,570 5,135 Total number of executives (i) 13 56Total annualised employee equivalents (ii) 10.2 24.5

(i) The total number of executive officers includes persons who meet the definition of Key Management Personnel (KMP) of the entity under AASB 124 Related Party Disclosures and are also reported within the related parties note disclosure.

(ii) Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over the 52 weeks for a reporting period.

The number of executive officers, other than ministers and accountable officers, and their total remuneration during the reporting period are shown in the table below. Total annualised employee equivalents provides a measure of full-time equivalent executive officers over the reporting period. Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered, and is disclosed in the following categories.

Other long-term benefits include long service leave, other long service benefits or deferred compensation.

Termination benefits include termination of employment payments, such as severance packages.

Some executive officers were eligible for a retention payment arrangement associated with the PLT. This arrangement was approved by the then Treasurer on 4 November 2014. Retention payments are for key executives critical to the continuing effective operation of the business and the provision of full support in the period of preparing the business for the lease of the Port of Melbourne. These payments also encourage the retention of the executives until transaction close. Payments were made by VPCM in instalments between completion of due diligence and transaction close. In 2017-18, retention payments of $Nil (2017: $508,641) were made.

Remuneration of executive officers(Including Key Management Personnel - see related parties note)

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

55



9 OTHER DISCLOSURES

9.5 Related party transactions

2018 2017$'000 $'000

Operating revenue 1,235 440 Operating expenses (3,286) (9,929) Finance charges (9) (134) Port Licence Fee - (47,163) Income tax instalments refund/(paid) 9,830 (19,796) Assets - 15,924 Liabilities - 450

5,000 55,000

VPCM is a wholly owned and controlled entity of the State of Victoria.Related parties of VPCM include:- all key management personnel and their close family members and personal business interests (controlled entities, joint ventures and entities they have significant influence over);- all Cabinet Ministers and their close family members; and- all departments and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.

All related party transactions have been entered into on an arm’s length basis.

Significant transactions with government-related entitiesThe Victorian State Government prepares consolidated financial statements relating to its controlled entities. For the purpose of preparing the State Government's Annual Financial Report (AFR), transactions which VPCM has undertaken with other State Government controlled entities will be eliminated in the State Government's AFR.The aggregate amounts of VPCM's transactions conducted during the year and its assets and liabilities at the end of the year which relate to State Government controlled entities are as follows:

Capital contribution from the Department of Treasury and Finance

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9 OTHER DISCLOSURES

9.5 Related party transactions (continued)

Mr J Cain - Chairman Ms J van Reyk - Deputy Chair Ms D Beale - Director Mr J Chen - Director (to 31 January 2018) Mr P Tuohey - Director

Ms R Johnson - Chief Executive Officer Mr J Bazelmans - EGM Strategy, Risk, Environment and Infrastructure Mr J Bell - EGM Finance and Corporate Support (to 22 September 2017) Captain R Stanbrook - EGM Marine and Navigation Mr M Beattie - EGM Finace and Corporate Support (from 23 October 2017)

2018 2017$'000 $'000

Short-term employee benefits 1,426 1,922 Post-employment benefits 77 122 Other long-term benefits 32 17 Total 1,535 2,061

No transactions have occurred with KMP and their related parties. There are no outstanding balances, including commitments, with such parties.

(i) Note that KMPs are also reported in the disclosure of remuneration of responsible persons (Note 9.4) and executive officers (Note 9.5).

Given the breadth and depth of State government activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public e.g. stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occur on terms and conditions consistent with the Public Administration Act 2004 (Vic) and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Procurement Board requirements.The terms and conditions of transactions entered into with responsible persons’ related entities occurred within a normal customer and supplier relationship on terms and conditions no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to other entities on an arm’s length basis.

Transactions and balances with key management personnel and other related parties

Key management personnel (KMP) are those who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities of VPCM. This includes responsible Ministers, Directors, Chief Executive Officer and Executive General Mangers. KMP for 2018 are detailed as follows:

The compensation detailed below excludes the salaries and benefits the Portfolio and Shareholder Ministers receive. The Ministers' remuneration and allowances are set by the Parliamentary Salaries and Superannuation Act 1968 (Vic) and are reported within the Department of Parliamentary Services' Financial Report.

Compensation of KMP (i)

57



9 OTHER DISCLOSURES

9.5 Related party transactions (continued)


9.6 Remuneration of auditors

Victorian Auditor-General's Office 2018 2017$'000 $'000

Audit of financial reports 56,000 78,800

9.7 Subsequent events

Assets and liabilities transfers between public sector entities

During 2016-17, assets and liability transfers between public sector entities related solely to the PLT. These transfers relate to: - Port Lessor transferred its Lonsdale Consortium lease premium receivable to the State of Victoria and ultimately the Victorian Transport Fund,- VPCM transferred its Port Manager sale proceeds receivable to the State of Victoria and ultimately the Victorian Transport Fund. - VPCM transferred its interest in Port Lessor to the Department of Economic Development, Jobs, Transport and Resources (DEDJTR).

During the year the following fees were paid or payable for services provided by the auditors of VPCM:

Since 30 June 2018 to the date of this report, no matter or circumstance has arisen that, in the opinion of the Directors, has significantly affected or may significantly affect the operations of VPCM, the results of those operations, or the state of affairs of VPCM in future financial years.

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9 OTHER DISCLOSURES

9.8 Australian Accounting Standards issued that are not yet effective

Reference SummaryApplication

date Impact on VPCM’s financial statements

AASB 9 Financial Instruments

The key changes include the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1 Jan 2018 The assessment has identified that the financial impact of available for sale (AFS) assets will now be reported through other comprehensive income (OCI) and no longer recycled to the profit and loss. The initial application of AASB 9 is not expected to have a material impact on the financial position however there will be a change to the way financial instruments are classified and new disclosure requirements.

AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.

1 Jan 2018 The assessment has indicated that there will be no significant impact to VPCM.

AASB 16 Leases

The key changes introduced by AASB 16 include the recognition of most operating leases (which are currently not recognised) on balance sheet.

1 Jan 2019 The assessment has indicated that most operating leases will come on balance sheet. Rather than expensing the lease payments, depreciation of right-of-use assets and interest on lease liabilities will be recognised in the income statement with marginal impact on the operating surplus for VPCM.No change for lessors.

VPCM's assessment of the impact of these new standards and interpretations is set out below:

Certain new accounting standards and interpretations that are deemed relevant to VPCM have been published, but are not mandatory for the 30 June 2018 reporting period. VPCM has not adopted these standards early in accordance with DTF stating that entities must not early adopt.

59



Section 6:

Appendices


A: Disclosure index

Legislation Requirement Page

Ministerial Directions and Financial Reporting Directions (FRD)

Report of operations

Charter and purposeFRD 22H Manner of establishment and the relevant Ministers 9, 22FRD 22H Purpose, functions, powers and duties 9, 10FRD 22H Nature and range of services provided 9

Management and structureFRD 22H Organisational structure 27

Financial and other informationFRD 10A Disclosure index 106FRD 10A Application and operation of the Privacy and Data Protection Act 2014 (Vic) 40FRD 10A Statement of Corporate Intent pursuant to section 79Q of the Transport Integration Act

2010 (Vic)108

FRD 12B Disclosure of major contracts 19, 37FRD 15E Executiveofficerdisclosures 33FRD 22H Occupational health and safety policy 28FRD 22H Employment and conduct principles 28FRD 22H Summaryofthefinancialresultsfortheyear 17

FRD 22H Significantchangesinfinancialpositionduringtheyear 19FRD 22H Major changes or factors affecting performance 19FRD 22H Subsequent events 19FRD 22H Application and operation of Freedom of Information Act 1982 (Vic) 37FRD 22H Compliance with building and maintenance provisions of Building Act 1993 (Vic) 38FRD 22H Statement on Competitive Neutrality Policy 39FRD 22H Application and operation of the Protected Disclosure Act 2012 (Vic) 39FRD 22H Details of consultancies over $10,000 36FRD 22H Details of consultancies under $10,000 36FRD 22H Disclosure of government advertising expenditure 36FRD 22H Disclosure of ICT expenditure 37FRD 22H Statement of availability of other information 40FRD 25C Victorian Industry Participation Policy disclosures 36FRD 29C Workforce data disclosures 32FRD 30D Standard Requirements for the design and print of annual reports 1-114

Compliance attestation and declarationSD 5.1.4 Attestation for compliance with Ministerial Standing Direction 41SD 5.2.3 Declaration in report of operations 1

Financial statementsSD 5.2.2 Declarationinfinancialstatements 46

The annual report of VPCM is prepared in accordance with all relevant Victorian legislations and pronouncements.ThisindexhasbeenpreparedtofacilitateidentificationofVPCM’scompliancewithstatutory disclosure requirements.


Legislation Requirement Page

Ministerial Directions and Financial Reporting Directions (FRD)

Other requirements under Standing Direction 5.2SD 5.2.1 (a) Compliance with Ministerial Directions 55SD 5.2.1 (a) Compliance with Australian accounting standards and other authoritative pronouncements 55SD 5.2.a Compliance with Model Financial Report 55

Other disclosures as required by FRDs in the notes to the financial statementsFRD 03A Accounting for Dividends 84FRD 17B LongServiceLeave,WageInflationandDiscountRates 60FRD 21C ResponsiblepersonsandExecutiveofficersintheFinancialReport 98, 99FRD 103G Non-Financial Physical Assets 68-72FRD 100A Financial Reporting Directions - Framework 46FRD 105B Borrowing Costs 77FRD 106B Impairment of Assets 71FRD 108C ClassificationofEntitiesasFor-Profit 55FRD 109A Intangible Assets 75FRD 110A Statement of Cash Flows 79FRD 112D DefinedBenefitSuperannuationObligations 61-66FRD 114B Financial Instruments 85-89FRD 119A Contributions by Owners 95-96FRD 120L Accounting and Reporting Pronouncements applicable to the 2017-18 Reporting Period 103

LegislationBorrowing and Investment Powers Act 1987 (Vic) 96Building Act 1993 (Vic) 38Financial Management Act 1994 (Vic) VariousFreedom of Information Act 1982 (Vic) 37Marine Safety Act 2010 (Vic) 9, 10Parliamentary Salaries and Superannuation Act 1968 (Vic) 101Port Management Act 1995 (Vic) 10, 14, 16Privacy and Data Protection Act 2014 (Vic) 40Protected Disclosure Act 2012 (Vic) 39Public Administration Act 2004 (Vic) 22, 101Transport Integration Act 2010 (Vic) VariousVictorian Industry Participation Policy Act 2003 (Vic) 36Income Tax Assessment Act 1936 (Cwlth) 81Income Tax Assessment Act 1997 (Cwlth) 81


B: Statement of Corporate Intent

VPCM has been required to prepare the following Statement of Corporate Intent under the Transport Integration Act 2010 (Vic).

VPCMcontinuestoundergoaperiodofconsolidationandgrowthfollowingasuccessfulfirstyearandahalfof operations as a new statutory authority. As a result of the Port of Melbourne Lease Transaction (PLT), VPCMbecameresponsibleforamodifiedsetofportfunctionsandactivitiesfromitspredecessor,PortofMelbourne Corporation. This new mode of operation is now well embedded within the organisational culture, strategy and activities.

VPCM overview and assetsVPCM commenced operations as a statutory authority on 1 November 2016.

VPCM assumed responsibility for those functions and activities which remain with the State, including Vessel TrafficServicesforsafenavigation,watersideemergencymanagement,towageregulationandmanagementof the Station Pier terminal and West Finger Pier. Station Pier is Victoria’s primary cruise vessel and Tasmanian passenger ferry terminal.

VPCM is a transport sector agency of Transport for Victoria (TfV). TfV was established in April 2017 as the umbrella entity and lead agency responsible for the planning, management and coordination of Victoria’s transportsystemandhasalsojustcompletedasuccessfulfirstyearofconsolidationanddelivery.

Corporate planning frameworkVPCM has developed an integrated corporate planning framework which is presented in Table A1. The framework involves the consideration of corporate strategy and is primarily driven by policies, legislation and the external and internal environment. This framework provides direction and strategic choice for each level of business planning.

Table A1 – VPCM corporate planning framework

External Guiding direction Government legislation, regulation and policiesOperating and strategic environment

External and internal environmental factors that affect VPCM’s strategic considerations and direction

Internal Corporate strategic direction

Ministerial strategic directions

Board strategic directions

Corporate mission, vision and values

Corporate planning framework

Corporate Plan Statement of Corporate Intent

Implementation framework

Strategic initiatives delivery and outcomes

Collaborative initiatives with Government

Ongoing operational plans, policies and processes

Performance monitoring and reporting

Quarterly Business Performance Reports

VPCM key performance indicators and benchmarks


Corporate opportunities and challengesVPCM continues to face challenges and opportunities resulting from the changes to its structure and responsibilities following the PLT, including the active pursuit of new commercial activities. Key opportunities for the coming period include:

• Focus on customers - the entire organisation is working on the opportunities afforded by a more concentrated focus on our key customers for marine and navigation services and the growing cruise industry.

• Focus on stakeholders - VPCM is working to actively engage and collaborate with its wide range of Government, industry and community stakeholders through a number of key activities and projects in 2018-19.


Corporate planning framework mapVPCM has developed an integrated, time-sensitive corporate planning framework map that is presented in TableA2.Themapinvolvesaligningthefivekeystrategicobjectiveswithspecificcorporatedeliverablestobeachievedover2018-19.Itclearlyidentifiestheinterrelationshipofstrategicobjectivesandbusinessprojectsandactivities,andoutlineskeymilestonestobeachievedinfinancialyear2018-19.Table A2 – Select VPCM corporate planning framework map elements

Strategic objectives Corporate delivery focus Major 2018-19 activities, projects and deliverables

Objective 1:Safety, security & sustainability

Prioritising safety in all activities and ensuring that the port is physically secure and operations are conducted in a sustainable manner.

Provide a safe VPCM working environment for VPCM people and network users and protect the port environment from environmental and security threats and hazards.ProgressiveexpansionofVesselTrafficServices (VTS) to enhance on-water safety in all jurisdictions, including VTS equipment upgrade.Respond to and implement government-wide cybersecurity strategy.

Objective 2:Commercial focus

Maintainingfinancialsustainabilityso VPCM is positioned to pay a dividend to the State in accordance with s161 of the TIA.Ensuring VPCM is structured and resourced to operate on a commercialbasisandmakeaprofitto pay the required level of dividend when directed.

Deliver a dividend to the State as directed.Explore new revenue initiatives including user pays systems to leverage on the growth of the cruise industry.As part of the Station Pier redevelopment, undertake an interim project management plan including a business case by November 2018.

Objective 3:Customer focus

Focusing on stakeholder needs and requirements, particularly regarding Station Pier, marine and navigation services and contractual relationships with Port of Melbourne.

Station Pier redevelopment, and pile rehabilitation projects to improve the amenity of this important asset.Improve service delivery of marine, navigation and port services to transport network users.

Objective 4:Productivity focus

Delivering value to our customers andstakeholdersthroughefficientinternal systems, processes and innovation.

Manage port of Melbourne waters and channels in port of Melbourne waters on afairandreasonablebasisandefficientlymanage Station Pier and the West Finger Pier.Implement the asset management accountability framework, including development of a strategic asset management plan and development of good asset management governance, training and culture procedures.

Objective 5:People, culture and community focus

Focusing on VPCM people, culture and our community responsibilities.

Provide a safe VPCM working environment for VPCM people and network users and protect the port environment from environmental and security threats and hazards.


Strategic initiativesForthe2018-19financialyear,VPCMwillconcentrateonfourstrategicinitiativeswhichreflectouractivitiesand objectives resulting from the PLT.

• Station Pier redevelopment - Station Pier has been granted $5.8 million in the 2018-19 State Budget to undertake planning and capital works to grow both domestic ferry and cruise ship operations in Victoria. This will involve community and industry consultation activities.

• Asset management framework - in implementing its new asset management framework, VPCM will strive to achieve ISO 55000 accreditation. This will include developing a strategic asset management plan, taking into consideration stakeholder requirements, levels of service and future assets required by VPCM.

• New revenue initiatives - VPCM will introduce a Site Occupation Charge on a per passenger basis to all cruise passengers from 1 July 2018. This charge is in line with passenger charges introduced by other cruise terminals to capture the growing number of passengers.

•TheVesselTrafficService(VTS)monitorsthepassageofshipstoenabletheHarbourMastertoensuresafe navigation of commercial vessels in the port waters of the port of Melbourne. The VTS systems comprises numerous subsystems (e.g. radar, radio communications, tracking systems). VPCM has initiatedasignificantVTSupgradeprojecttoreplacehardwareandsoftwarecomponentstoaddressoperational issues stemming from lack of system integration, ageing equipment, compliance with current standards and to provide for disaster recovery and redundancy. The project will be completed during 2019. The upgrade will enhance VPCM’s VTS capability and increase its geographic coverage.

Risk managementVPCM maintains a comprehensive corporate risk management framework which is integrated into all business planning and activities, including corporate planning. The key elements of the VPCM risk management framework include the: • Risk Management Policy - the policy provides a structured and consistent approach to risk management

across the corporation which aligns strategy, processes, people, technology and knowledge. The purpose of the policy is to evaluate and manage the uncertainties which VPCM is facing

• Risk Management Plan and procedures – the plan and procedures include details regarding the applicationofriskmanagementatcorporateanddivisionallevelsandalsoforsignificantprojects.VPCMuses the processes and procedures outlined within these documents to evaluate and prioritise the risk within the VPCM operating and business context

• corporate and project/program risk registers – the registers hold the risk management information relevant to the respective business level and activity and are informed by annual risk management assessments.

VPCMcontinuouslyundertakesinternalreviews,updatesandrefinementsofthisriskmanagementframework which are complemented with external strategic reviews as required.

Performance indicators and metricsVPCM has developed an integrated set of Key Performance Indicators (KPIs) and metrics which are used to assesstheeffectivenessandefficiencyoftheoperationsofVPCM.TheKPIsaremetricswhicharelargelyorfully under the control of VPCM.


Table A3 – Summary of VPCM Key Performance Indicators

Key Performance Indicators Definitions Reporting frequency

Strategic objective 1 – Safety, security and sustainability focusAll Injury Frequency Rate (AIFR) The AIFR is calculated as the total injuries in a set period.

Injury categories included are lost time injuries, medical treatment injuries, and restricted work injuries.

Quarterly

Reportable security regulation breaches

Number of VPCM reportable security regulation breaches during the period.

Quarterly

Reportable environmental regulation breaches

Number of VPCM reportable environmental regulation breaches during the period.

Quarterly

Strategic objective 2 – Commercial focusOperatingprofit VPCMwillachieveanoperatingprofit. Annually

Return on Capital Employed (ROCE) Adjustednetoperatingprofitaftertaxdividedbytheaveragetotal capital employed at the end of the period.

Annually

Debtor management VPCM will maintain strict trading terms with its customers and maintain no outstanding debts receivable greater than 60 days.

Quarterly

Revenue initiatives VPCM is exploring additional revenue generating and productivity improvement opportunities to leverage on the growth of the cruise industry while maximising TT-Line commercial outcomes.

Quarterly

VPCM gearing ratio Total adjusted borrowings divided by equity at the end of the period.

Quarterly

VPCM interest cover ratio Freefundsfromoperationsdividedbynetfinancecharge. Quarterly

VPCM leverage ratio Calculated as: Total adjusted borrowing divided by (free fundsfromoperationsplusnetfinancechargespluscapitalised lease interest).

Quarterly

Board approval of annual risk attestation

Board approval of the annual risk attestation. Annually

Board approval of critical infrastructure annual Statement of Assurance

Board approval of submission of annual Statement of Assurance to the Minister for Ports.

Annually

Strategic objective 3 – Customer focusCustomer reputation The reputation of VPCM with customers will be calculated

from customer survey data to be collected annually.Annually

Paymentoffinancialpenalties The Port Operations Service Deed between VPCM and Port of Melbourne includes provision for payment of penalties for non-compliance in delivery of services to the Port of Melbourne.

Annually


Key Performance Indicators Definitions Reporting frequency

Strategic objective 4 – Productivity focusPercentage of critical VPCM marine and navigational system availability – Dynamic Under Keel Clearance (DUKC)

Percentage availability of the DUKC during the period. Quarterly

Percentage of critical VPCM marine and navigational system availability – VTS system

Percentage availability of the VTS during the period. Quarterly

Trade volume The volume of cargo transhipped through VPCM facilities. Annually

Strategic objective 5 – People, culture and community focusEmployee engagement and alignment

VPCM employee engagement and alignment with the corporate goals.

Annually

Community reputation VPCM reputation in the community. Annually

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Victorian Ports Corporation (Melbourne)

Street addressLevel 5, 530 Collins StreetMelbourne Victoria 3000

Australia

Postal addressGPO Box 261

Melbourne VIC 3001Australia

Tel: +61 3 8347 8300 Fax: +61 3 8347 8301

www.vicports.vic.gov.au Victorian Ports C

orporation (Melbourne) 2017-18 A

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ANNUAL REPORT2017-18

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ANNUAL REPORT - Victorian Ports Corporation · 6 Vict ) 201-1 Annual Report From the Chairman 2017-18 was the first full year of operations for Victorian Ports Corporation (Melbourne)